Document And Entity Information
v0.0.0.0
Document And Entity Information
3 Months Ended
Mar. 30, 2012
May 14, 2012
Common Class A [Member]
Document Type 10-Q  
Amendment Flag false  
Document Period End Date Mar. 30, 2012  
Document Fiscal Period Focus Q1  
Document Fiscal Year Focus 2012  
Entity Registrant Name Delta Tucker Holdings, Inc.  
Entity Central Index Key 0001514226  
Current Fiscal Year End Date --12-28  
Entity Filer Category Non-accelerated Filer  
Entity Common Stock, Shares Outstanding   100

Condensed Consolidated Statements Of Operations
v0.0.0.0
Condensed Consolidated Statements Of Operations (USD $)
In Thousands, unless otherwise specified
3 Months Ended
Mar. 30, 2012
Apr. 01, 2011
Condensed Consolidated Statements Of Operations [Abstract]    
Revenue $ 1,047,066 $ 884,324
Cost of services (966,610) (806,191)
Selling, general and administrative expenses (38,151) (37,527)
Depreciation and amortization expense (12,560) (13,131)
Earnings from equity method investees 210 4,726
Operating income 29,955 32,201
Interest expense (21,690) (23,506)
Loss on early extinguishment of debt   (2,397)
Interest income 38 75
Other income, net 3,373 2,848
Income before income taxes 11,676 9,221
Provision for income taxes (4,797) (3,575)
Net income 6,879 5,646
Noncontrolling interest (1,304) (738)
Net income attributable to Delta Tucker Holdings, Inc. $ 5,575 $ 4,908

Condensed Consolidated Statements Of Comprehensive Income
v0.0.0.0
Condensed Consolidated Statements Of Comprehensive Income (USD $)
In Thousands, unless otherwise specified
3 Months Ended
Mar. 30, 2012
Apr. 01, 2011
Condensed Consolidated Statements Of Comprehensive Income [Abstract]    
Net income $ 6,879 $ 5,646
Other comprehensive income:    
Currency translation adjustment 196 440
Other comprehensive income, before tax 196 440
Income tax expense related to items of other comprehensive income (61) (164)
Other comprehensive income 135 276
Comprehensive income 7,014 5,922
Noncontrolling interest (1,304) (738)
Comprehensive income attributable to Delta Tucker Holdings, Inc. $ 5,710 $ 5,184

Condensed Consolidated Balance Sheets
v0.0.0.0
Condensed Consolidated Balance Sheets (USD $)
In Thousands, unless otherwise specified
Mar. 30, 2012
Dec. 30, 2011
ASSETS    
Cash and cash equivalents $ 138,565 $ 70,205
Restricted cash 1,659 10,773
Accounts receivable, net of allowances of $1,701 and $1,947, respectively 799,392 752,756
Prepaid expenses and other current assets 71,626 88,877
Total current assets 1,011,242 922,611
Property and equipment, net 23,426 24,084
Goodwill 645,603 645,603
Tradename, net 43,615 43,660
Other intangibles, net 299,300 310,740
Other assets, net 68,143 67,723
Total assets 2,091,329 2,014,421
LIABILITIES AND EQUITY    
Accounts payable 265,677 275,068
Accrued payroll and employee costs 138,657 129,027
Deferred income taxes 76,017 78,912
Accrued liabilities 135,939 149,175
Income taxes payable 2,073 1,077
Total current liabilities 618,363 633,259
Long-term debt 962,909 872,909
Long-term deferred taxes 30,672 23,136
Other long-term liabilities 16,633 27,632
Total liabilities 1,628,577 1,556,936
Commitments and contingencies      
Equity:    
Common stock, $0.01 par value - 1,000 shares authorized and 100 shares issued and outstanding at March 30, 2012 and December 30, 2011, respectively.      
Additional paid-in capital 549,056 550,951
Accumulated deficit (93,018) (98,593)
Accumulated other comprehensive income (loss) 76 (59)
Total equity attributable to Delta Tucker Holdings, Inc. 456,114 452,299
Noncontrolling interest 6,638 5,186
Total equity 462,752 457,485
Total liabilities and equity $ 2,091,329 $ 2,014,421

Condensed Consolidated Balance Sheets (Parenthetical)
v0.0.0.0
Condensed Consolidated Balance Sheets (Parenthetical) (USD $)
In Thousands, except Share data, unless otherwise specified
Mar. 30, 2012
Dec. 30, 2011
Condensed Consolidated Balance Sheets [Abstract]    
Accounts receivable, allowances $ 1,701 $ 1,947
Common stock, par value $ 0.01 $ 0.01
Common stock, shares authorized 1,000 1,000
Common stock, shares issued 100 100
Common stock, shares outstanding 100 100

Condensed Consolidated Statements Of Cash Flows
v0.0.0.0
Condensed Consolidated Statements Of Cash Flows (USD $)
In Thousands, unless otherwise specified
3 Months Ended
Mar. 30, 2012
Apr. 01, 2011
Cash flows from operating activities    
Net income $ 6,879 $ 5,646
Adjustments to reconcile net income to net cash provided by operating activities:    
Depreciation and amortization 12,956 13,523
Loss on early extinguishment of debt   2,397
Amortization of deferred loan costs 1,945 2,134
Loss on disposition of assets, net 15 656
Earnings from equity method investees (3,519) (6,790)
Distributions from affiliates 418 7,043
Deferred income taxes 3,337 2,473
Other (2,056) 614
Changes in assets and liabilities:    
Restricted cash 9,114 (14,683)
Accounts receivable (46,434) (61,508)
Prepaid expenses and other current assets 15,309 18,336
Accounts payable and accrued liabilities (11,142) 7,930
Income taxes receivable 3,226 48,061
Net cash (used in) provided by operating activities (9,952) 25,832
Cash flows from investing activities    
Purchase of property and equipment, net (1,784) (862)
Proceeds from sale of property, plant, and equipment 7 41
Purchase of software   (957)
Return of capital from equity method investees   1,497
Contributions to equity method investees (818)  
Net cash used in investing activities (2,595) (281)
Cash flows from financing activities    
Borrowings on long-term debt 285,700 55,600
Payments on long-term debt (195,700) (105,600)
Borrowings related to financed insurance 5,041  
Payments related to financed insurance (13,860) (5,933)
Payment of dividends to noncontrolling interest (274) (415)
Net cash provided by (used in) financing activities 80,907 (56,348)
Net increase (decrease) in cash and cash equivalents 68,360 (30,797)
Cash and cash equivalents, beginning of period 70,205 52,537
Cash and cash equivalents, end of period 138,565 21,740
Income taxes received, net payments 1,475 46,672
Interest paid $ 31,235 $ 32,320

Condensed Consolidated Statement Of Equity
v0.0.0.0
Condensed Consolidated Statement Of Equity (USD $)
In Thousands, except Share data
Common Stock [Member]
Additional Paid-In Capital [Member]
Accumulated Deficit [Member]
Accumulated Other Comprehensive Income [Member]
Total Equity Attributable To Delta Tucker Holdings, Inc.
Noncontrolling Interest [Member]
Total
Balance at Dec. 30, 2011    $ 550,951 $ (98,593) $ (59) $ 452,299 $ 5,186 $ 457,485
Balance (shares) at Dec. 30, 2011              100
Comprehensive income attributable to Delta Tucker Holdings, Inc.      5,575 135 5,710   5,710
Noncontrolling interests            1,304 1,304
DIFZ financing, net of tax    103     103   103
Distribution to affiliates of Parent    (1,998)     (1,998) 696 (1,302)
Dividends declared to noncontrolling interest            (548) (548)
Balance at Mar. 30, 2012    $ 549,056 $ (93,018) $ 76 $ 456,114 $ 6,638 $ 462,752
Balance, (shares) at Mar. 30, 2012              100

Basis Of Presentation And Accounting Policies
v0.0.0.0
Basis Of Presentation And Accounting Policies
3 Months Ended
Mar. 30, 2012
Basis Of Presentation And Accounting Policies [Abstract]  
Basis Of Presentation And Accounting Policies

Note 1 — Basis of Presentation and Accounting Policies

Basis of Presentation

Delta Tucker Holdings, Inc., ("Holdings"), the parent of DynCorp International Inc., through its subsidiaries (together, "the Company"), provides defense and technical services and government outsourced solutions primarily to U.S. government agencies domestically and internationally. The Company was incorporated in the state of Delaware on April 1, 2010. Primary customers include the U.S. Department of Defense ("DoD"), the U.S. Department of State ("DoS"), and other government agencies, including foreign governments and commercial customers. Unless the context otherwise indicates, references herein to "we," "our," "us," or "the Company" refer to Delta Tucker Holdings, Inc. and our consolidated subsidiaries.

The unaudited condensed consolidated financial statements include the accounts of the Company and our domestic and foreign subsidiaries. These consolidated financial statements have been prepared, without audit, pursuant to accounting principles generally accepted in the United States of America ("GAAP") for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X.

Certain information and footnote disclosures normally included in financial statements, prepared in accordance with GAAP, have been condensed or omitted pursuant to such rules and regulations. However, we believe that all disclosures are adequate to make the information presented not misleading. These unaudited condensed consolidated financial statements should be read in conjunction with our audited consolidated financial statements and the related notes thereto included in the Company's 2011 Annual Report.

In the opinion of management, all adjustments, consisting of normal recurring adjustments, necessary to fairly present our financial position as of March 30, 2012 and December 30, 2011, the results of operations for the three months ended March 30, 2012 and April 1, 2011 and cash flows for the three months ended March 30, 2012 and April 1, 2011 have been included. The results of operations and the cash flows for the three months ended March 30, 2012 are not necessarily indicative of the results to be expected for the full calendar year or for any future periods. We use estimates and assumptions required for preparation of the financial statements. The estimates are primarily based on historical experience and business knowledge and are revised as circumstances change. However, actual results could differ from the estimates.

Principles of Consolidation

The consolidated financial statements include the accounts of both our domestic and foreign subsidiaries. All intercompany transactions and balances have been eliminated in consolidation. The Company has investments in joint ventures that are variable interest entities ("VIEs"). The VIE investments are accounted for in accordance with Financial Accounting Standards Board ("FASB") Codification ("ASC") 810 — Consolidation. In cases where the Company has (i) the power to direct the activities of the VIE that most significantly impact its economic performance and (ii) the obligation to absorb losses or the right to receive benefits from the entity that could potentially be significant to the VIE, the Company consolidates the entity. Alternatively, in cases where all of the aforementioned criteria are not met, the investment is accounted for under the equity method.

We classify our equity method investees in two distinct groups based on management's day-to-day involvement in the operations of each entity and the nature of each joint venture's business. If the joint venture is deemed to be an extension of one of our strategic business Groups and operationally integral to the business, our share of the joint venture's earnings is reported within operating income in "Earnings from equity method investees" in the consolidated statement of operations. If the Company considers our involvement less significant, our share of the joint venture's net earnings is reported in "Other income, net" in the consolidated statement of operations.

Noncontrolling interest

We record the impact of our partners' interest in less than wholly owned consolidated joint ventures as noncontrolling interest. Currently DynCorp International FZ-LLC ("DIFZ") is our only consolidated joint venture for which we do not own 100% of the entity. On March 15, 2012, we entered into a non-cash dividend distribution transaction with Cerberus Series Four Holdings, LLC and Cerberus Partners II, L.P., in which we distributed half of our 50% ownership in DIFZ. We now hold 25% ownership interest in DIFZ. We continue to consolidate DIFZ as we still exercise power over activities that significantly impact DIFZ's economic performance and have the obligation to absorb losses or receive benefits of DIFZ that could potentially be significant to DIFZ. Noncontrolling interest is presented on the face of the statement of operations as an increase or reduction in arriving at "Net income attributable to Delta Tucker Holdings, Inc." Noncontrolling interest on the balance sheet is located in the equity section. See Note 10 to our unaudited condensed consolidated financial statements included in this Quarterly Report on Form 10-Q for further information regarding DIFZ.

 

Accounting Policies

There have been no material changes to our significant accounting policies, as compared to the significant accounting policies described in our 2011 Annual Report, except for the adoption of ASU No. 2011-04—Fair Value Measurements and ASU No. 2011-05—Presentation of Comprehensive Income as discussed in "Accounting Developments" below.

Accounting Developments

Pronouncements Implemented

On May 12, 2011, the FASB issued ASU No. 2011-04—Fair Value Measurements. The ASU was issued as a joint effort by the FASB and International Accounting Standards Board ("IASB") to develop a single converged fair value framework. The ASU provides guidance on how and when to measure fair value and the required disclosures. There are few differences between the ASU and the international counterpart. While the ASU is largely consistent with existing fair value measurement principles under U.S. GAAP, it expands ASC 820's existing disclosure requirements for fair value measurements and makes other amendments. Many of these amendments are being made to eliminate unnecessary wording differences between U.S. GAAP and IFRS. However, some could change how the fair value measurement guidance in ASC 820 is applied. The ASU is effective for interim and annual periods beginning after December 15, 2011, for public entities. We adopted ASU No. 2011-04 during the quarter ended March 30, 2012.

In June 2011, the FASB issued ASU No. 2011-05—Presentation of Comprehensive Income. The ASU amends FASB ASC 220, Comprehensive Income, to eliminate the option to present components of other comprehensive income ("OCI") as part of the statement of changes in stockholders' equity, require presentation of each component of net income and each component of OCI (and their respective totals) either in a single continuous statement or in two separate statements, and require presentation of reclassification adjustments on the face of the statement. The amendments do not change the option to present components of OCI either before or after related income tax effects; they do not change the items that must be reported in OCI, when an item of OCI should be reclassified to net income, or the computation of earnings per share. On October 21, 2011, the FASB issued a deferral of the new requirement to present reclassifications of OCI on the face of the income statement. Companies were still required to adopt the other requirements contained in the new accounting standard for the presentation of comprehensive income. The amendments made are applied retrospectively and are effective for SEC registrants for fiscal years and interim periods beginning after December 15, 2011, with early adoption permitted. We adopted ASU No. 2011-05 during the quarter ended March 30, 2012 and chose to present comprehensive income as two separate but consecutive statements. See the Statements of Operations and Statements of Comprehensive Income.


Composition Of Certain Financial Statement Captions
v0.0.0.0
Composition Of Certain Financial Statement Captions
3 Months Ended
Mar. 30, 2012
Composition Of Certain Financial Statement Captions [Abstract]  
Composition Of Certain Financial Statement Captions

Note 2 — Composition of Certain Financial Statement Captions

The following tables present financial information of certain consolidated balance sheet captions.

Prepaid expenses and other current assets — Prepaid expenses and other current assets were:

 

     As Of  
(Amounts in thousands)    March 30, 2012      December 30, 2011  

Prepaid expenses

   $ 29,051       $ 38,092   

Prepaid income taxes

     1,241         2,236   

Inventories

     6,700         7,005   

Assets held for sale

     10,987         11,084   

Work-in-process

     6,745         10,223   

Joint venture receivables

     1,132         3,959   

Favorable contracts

     3,596         4,825   

Other current assets

     12,174         11,453   
  

 

 

    

 

 

 

Total prepaid expenses and other current assets

   $ 71,626       $ 88,877   
  

 

 

    

 

 

 

Prepaid expenses include prepaid insurance, prepaid vendor deposits, and prepaid rent, none of which individually exceed 5% of current assets. Prepaid income taxes represent refunds expected through the remainder of the year.

 

Assets held for sale is made up of seven helicopters, valued at $8.2 million, that were not deployed on existing programs as of March 30, 2012, as well as aircraft parts inventory related to our former Life Cycle Support Services ("LCCS") Navy contract.

Property and equipment, net — Property and equipment, net were:

 

     As Of  
(Amounts in thousands)    March 30, 2012     December 30, 2011  

Helicopters

   $ 8,087      $ 8,087   

Computers and other equipment

     10,106        9,524   

Leasehold improvements

     9,479        9,367   

Office furniture and fixtures

     4,744        4,738   
  

 

 

   

 

 

 

Gross property and equipment

     32,416        31,716   

Less accumulated depreciation

     (8,990     (7,632
  

 

 

   

 

 

 

Total property and equipment, net

   $ 23,426      $ 24,084   
  

 

 

   

 

 

 

Depreciation expense was $1.4 million and $1.4 million during the three months ended March 30, 2012 and April 1, 2011, respectively, including certain depreciation amounts classified as Cost of services.

Other assets, net — Other assets, net were:

 

     As Of  
(Amounts in thousands)    March 30, 2012      December 30, 2011  

Deferred financing costs, net

   $ 30,765       $ 32,710   

Investment in affiliates

     31,146         27,700   

Palm promissory notes, long-term portion

     4,980         5,307   

Other

     1,252         2,006   
  

 

 

    

 

 

 

Total other assets

   $ 68,143       $ 67,723   
  

 

 

    

 

 

 

Deferred financing cost is amortized through interest expense. Amortization related to deferred financing costs was $1.9 million and $2.1 million during the three months ended March 30, 2012 and April 1, 2011, respectively. Deferred financing costs were reduced during the three months ended April 1, 2011 by $2.4 million related to the pro rata write–off of financing costs to loss on early extinguishment of debt as a result of the prepayment on the term loan in prior year. No prepayments have been made during the three months ended March 30, 2012. See Note 7 to our unaudited condensed consolidated financial statements included in this Quarterly Report on Form 10-Q for further discussion of our debt.

Accrued payroll and employee costs — Accrued payroll and employee costs were:

 

     As Of  
(Amounts in thousands)    March 30, 2012      December 30, 2011  

Wages, compensation and other benefits

   $ 117,258       $ 102,427   

Accrued vacation

     20,503         26,077   

Accrued contributions to employee benefit plans

     896         523   
  

 

 

    

 

 

 

Total accrued payroll and employee costs

   $ 138,657       $ 129,027   
  

 

 

    

 

 

 

 

Other accrued liabilities — Accrued liabilities were:

 

     As Of  
(Amounts in thousands)    March 30, 2012      December 30, 2011  

Deferred revenue and customer liability

   $ 15,382       $ 12,084   

Insurance expense

     46,756         48,715   

Interest expense

     12,645         24,480   

Unfavorable contract liability

     6,497         6,867   

Contract losses

     11,295         6,456   

Legal matters

     4,607         4,782   

Subcontractor retention

     8,804         5,927   

Financed insurance

     8,984         17,804   

Other

     20,969         22,060   
  

 

 

    

 

 

 

Total other accrued liabilities

   $ 135,939       $ 149,175   
  

 

 

    

 

 

 

Deferred revenue is primarily due to payments in excess of revenue recognized related to customer advances. Other is comprised of Accrued Rent and Workers Compensation related claims and other individual balances that are not individually material to the consolidated financial statements.

Other liabilities — Other long-term liabilities were:

 

     As Of  
(Amounts in thousands)    March 30, 2012      December 30, 2011  

Unfavorable contract liability

   $ 4,051       $ 6,761   

Unrecognized tax benefit

     2,614         2,614   

Unfavorable lease accrual

     6,826         14,631   

Other

     3,142         3,626   
  

 

 

    

 

 

 

Total other liabilities

   $ 16,633       $ 27,632   
  

 

 

    

 

 


Goodwill And Other Intangible Assets
v0.0.0.0
Goodwill And Other Intangible Assets
3 Months Ended
Mar. 30, 2012
Goodwill And Other Intangible Assets [Abstract]  
Goodwill And Other Intangible Assets

Note 3 — Goodwill and Other Intangible Assets

In January of 2012, our organizational structure was amended. As part of these changes, we re-aligned our BATs into strategic business "Groups" reporting directly to the President of the Company. The prior three operating segments, Global Stabilization and Development Solutions ("GSDS"), Global Platform Support Solutions (GPSS") and Global Linguist Solutions ("GLS") were re-aligned into six operating segments which include the LOGCAP ("LOGCAP") Group, Aviation ("Aviation") Group, Training and Intelligence Solutions ("TIS") Group, Global Logistics & Development Solutions ("GLDS") Group, Security Services ("Security") Group and the GLS Group. GLS is a 51% owned unconsolidated joint venture. We do not have control over the operational performance of GLS, however, our senior management, including our chief executive officer, who is our chief operating decision maker, regularly reviews GLS operating results and metrics to make decisions about resources to be allocated to the segment and assess performance; thus GLS is classified as an operating segment. The change in presentation of our goodwill balance by operating segment from December 30, 2011 to March 30, 2012 is as follows:

 

(Amounts in thousands)    Aviation      GLDS      TIS      LOGCAP      Security      GLS      Total  

Goodwill balance as of December 30, 2011

   $ 439,350       $ 120,636       $ 71,882       $ —         $ 13,735       $ —         $ 645,603   

Changes between December 30, 2011 and March 30, 2012

     —           —           —           —           —           —           —     
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Goodwill balance as of March 30, 2012

   $ 439,350       $ 120,636       $ 71,882       $ —         $ 13,735       $ —         $ 645,603   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

The following tables provide information about changes relating to certain intangible assets:

 

     As of March 30, 2012  
(Amounts in thousands, except years)    Weighted
Average
Remaining
Useful Life
(Years)
     Gross
Carrying
Value
     Accumulated
Amortization
    Net  

Other intangible assets:

          

Customer-related intangible assets

     7.3       $ 350,912       $ (69,248   $ 281,664   

Other

     4.9         30,598         (12,962     17,636   
     

 

 

    

 

 

   

 

 

 

Total other intangibles

      $ 381,510       $ (82,210   $ 299,300   
     

 

 

    

 

 

   

 

 

 

Tradenames:

          

Finite-lived

     3.1       $ 869       $ (312   $ 557   

Indefinite-lived

        43,058         —          43,058   
     

 

 

    

 

 

   

 

 

 

Total tradenames

      $ 43,927       $ (312   $ 43,615   
     

 

 

    

 

 

   

 

 

 

 

     As of December 30, 2011  
(Amounts in thousands, except years)    Weighted
Average
Remaining
Useful Life
(Years)
     Gross
Carrying
Value
     Accumulated
Amortization
    Net  

Other intangible assets:

          

Customer-related intangible assets

     7.6       $ 350,912       $ (59,399   $ 291,513   

Other

     5.0         30,500         (11,273     19,227   
     

 

 

    

 

 

   

 

 

 

Total other intangibles

      $ 381,412       $ (70,672   $ 310,740   
     

 

 

    

 

 

   

 

 

 

Tradenames:

          

Finite-lived

     3.4       $ 869       $ (267   $ 602   

Indefinite-lived

        43,058         —          43,058   
     

 

 

    

 

 

   

 

 

 

Total tradenames

      $ 43,927       $ (267   $ 43,660   
     

 

 

    

 

 

   

 

 

 

Amortization expense for customer-related intangibles, other intangibles and finite-lived tradenames was $11.5 million and $12.1 million during the three months ended March 30, 2012 and April 1, 2011, respectively. Other intangibles is primarily representative of our capitalized software which had a net value of $10.2 million and $11.2 million as of March 30, 2012 and December 30, 2011, respectively and various non-compete agreements.

The following table outlines an estimate of future amortization based upon the finite-lived intangible assets owned as of March 30, 2012:

 

(Amounts in thousands)    Amortization Expense  (1)  

Estimate for nine month period ending December 28, 2012

   $ 34,268   

Estimate for calendar year 2013

     43,445   

Estimate for calendar year 2014

     42,787   

Estimate for calendar year 2015

     41,225   

Estimate for calendar year 2016

     38,925   

Thereafter

     99,207   

 

(1) The future amortization is inclusive of the finite-lived intangible-assets and finite-lived tradenames.

Income Taxes
v0.0.0.0
Income Taxes
3 Months Ended
Mar. 30, 2012
Income Taxes [Abstract]  
Income Taxes

Note 4 — Income Taxes

The provision for income taxes consists of the following:

 

December 30, 2011 December 30, 2011
(Amounts in thousands)    Three Months
Ended
March 30, 2012
   

Three Months

Ended
April 1, 2011

 

Current portion:

    

Federal

   $ —        $ —     

State

     135        167   

Foreign

     1,055        778   
  

 

 

   

 

 

 
   $ 1,190      $ 945   
  

 

 

   

 

 

 

Deferred portion:

    

Federal

   $ 3,569      $ 2,586   

State

     43        72   

Foreign

     (5     (28
  

 

 

   

 

 

 
     3,607        2,630   
  

 

 

   

 

 

 

Provision for income taxes

   $ 4,797      $ 3,575   
  

 

 

   

 

 

 

Deferred tax assets and liabilities are reported as:

 

December 30, 2011 December 30, 2011
     As Of  
(Amounts in thousands)    March 30, 2012     December 30, 2011  

Current deferred tax liabilities

   $ (76,017   $ (78,912

Non-current deferred tax liabilities

     (30,672     (23,136
  

 

 

   

 

 

 

Deferred tax liabilities, net

   $ (106,689   $ (102,048
  

 

 

   

 

 

 

A reconciliation of the statutory federal income tax rate to our effective rate is provided below:

 

     Three Months
Ended
March 30, 2012
    Three Months
Ended
April 1, 2011
 

Statutory rate

     35.0     35.0

State income tax, less effect of federal deduction

     1.5     2.2

Noncontrolling interests

     (2.3 )%      3.9

Nondeductible expenses

     1.5     (2.4 )% 

Other

     5.4     0.1
  

 

 

   

 

 

 

Effective tax rate

     41.1     38.8
  

 

 

   

 

 

 

As of March 30, 2012, we had U.S. federal and state net operating losses of approximately $42.4 million and $179.2 million, respectively. As of December 30, 2011 we had approximately $60.8 million and $197.4 million in U.S. federal and state net operating losses, respectively. Our federal net operating losses will begin to expire in 2030, and our state net operating losses will begin to expire in 2015. Approximately $1.3 million of the state net operating loss expires in 2015. The remainder will not begin to expire until 2020 or later. Additionally, at March 30, 2012 and December 30, 2011, we had foreign tax credit carry forwards of approximately $22.0 million and $20.9 million that will begin to expire in 2017. We expect to fully utilize our federal and state net operating losses as well as our foreign tax credit carry forwards prior to their expiration.

In evaluating our deferred tax assets, we assess the need for any related valuation allowances or adjust the amount of any allowances, if necessary. We assess such factors as the scheduled reversal of deferred tax liabilities (including the impact of available carry back and carry forward periods), projected future taxable income and available tax planning strategies in determining the need for or sufficiency of a valuation allowance. Based on this assessment, we concluded that no valuation allowance was necessary as of March 30, 2012.

As of March 30, 2012 and December 30, 2011, we had $11.2 million and $11.2 million of total unrecognized tax benefits, respectively, of which $6.1 million and $6.1 million, respectively, would impact our effective tax rate if recognized. It is expected that of the $11.2 million of unrecognized tax benefits $1.0 million will change in the next twelve months.


Accounts Receivable
v0.0.0.0
Accounts Receivable
3 Months Ended
Mar. 30, 2012
Accounts Receivable [Abstract]  
Accounts Receivable

Note 5 — Accounts Receivable

Accounts receivable, net consisted of the following:

 

     As Of  
(Amounts in thousands)    March 30, 2012      December 30, 2011  

Billed

   $ 277,761       $ 291,780   

Unbilled

     521,631         460,976   
  

 

 

    

 

 

 

Total accounts receivable

   $ 799,392       $ 752,756   
  

 

 

    

 

 

 

Unbilled receivables as of March 30, 2012 and December 30, 2011 include $28.5 million and $25.8 million, respectively, related to costs incurred on projects for which we have been requested by the customer to begin work under a new contract or extend work under an existing contract and for which formal contracts or contract modifications have not been executed at the end of the respective periods. There were no contract claims included in the amount as of March 30, 2012 or December 30, 2011. The balance of unbilled receivables consists of costs and fees billable immediately, upon contract completion or other specified events. All of the unbilled receivables are expected to be billed and collected within one year, except items that may result in a request for equitable adjustment or a formal claim.


Fair Value Of Financial Assets And Liabilities
v0.0.0.0
Fair Value Of Financial Assets And Liabilities
3 Months Ended
Mar. 30, 2012
Fair Value Of Financial Assets And Liabilities [Abstract]  
Fair Value Of Financial Assets And Liabilities

Note 6—Fair Value of Financial Assets and Liabilities

ASC 820 – Fair Value Measurements and Disclosures establishes a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value. These tiers include:

 

   

Level 1, defined as observable inputs such as quoted prices in active markets;

 

   

Level 2, defined as inputs other than quoted prices in active markets that are either directly or indirectly observable; and

 

   

Level 3, defined as unobservable inputs in which little or no market data exists, therefore requiring an entity to develop its own assumptions.

Fair Value of Financial Instruments

Our financial instruments include cash and cash equivalents, accounts and notes receivable, accounts payable, and borrowings. Because of the short-term nature of cash and cash equivalents, accounts and notes receivable and accounts payable, the fair value of these instruments approximates the carrying value. Our estimate of the fair value of our long-term debt is based on market data or inputs other than quoted prices in active markets obtained from sources independent to the Company, which are Level 1 and Level 2 inputs, respectively, as defined above.

 

                                 
     March 30, 2012      December 30, 2011  

(Amounts in thousands)

   Carrying
Amount
     Fair
Value
     Carrying
Amount
     Fair
Value
 

10.375% senior unsecured notes

   $ 455,000       $ 398,125       $ 455,000       $ 395,850   

Senior secured credit facility

     417,272         411,013         417,272         408,927   

9.5% senior subordinated notes

     637         628         637         622   

Outstanding revolver borrowings

     90,000         90,000         —           —     
    

 

 

    

 

 

    

 

 

    

 

 

 

Total long-term debt

   $ 962,909       $ 899,766       $ 872,909       $ 805,399   
    

 

 

    

 

 

    

 

 

    

 

 

 

Long-Term Debt
v0.0.0.0
Long-Term Debt
3 Months Ended
Mar. 30, 2012
Long-Term Debt [Abstract]  
Long-Term Debt

Note 7 — Long-Term Debt

Long-term debt consisted of the following:

 

     As of  
(Amounts in thousands)    March 30, 2012      December 30, 2011  

9.5% Senior subordinated notes

   $ 637       $ 637   

Term loan

     417,272         417,272   

10.375% Senior unsecured notes

     455,000         455,000   

Outstanding revolver borrowings

     90,000         —     
  

 

 

    

 

 

 

Total indebtedness

     962,909         872,909   

Less current portion of long-term debt

     —           —     
  

 

 

    

 

 

 

Total long-term debt

   $ 962,909       $ 872,909   
  

 

 

    

 

 

 

The total due on the Term Loan is included in Long-term debt, in our consolidated balance sheet as of March 30, 2012 and December 30, 2011.

Senior Credit Facility

On July 7, 2010, we entered into a senior secured credit facility (the "Original Senior Credit Facility"), with a banking syndicate and Bank of America, NA as Agent. On August 10, 2011, DynCorp International Inc. entered into an amendment to the Senior Credit Facility (the "Amendment" and, together with the Original Senior Credit Facility, the "Senior Credit Facility").

Our Senior Credit Facility is secured by substantially all of our assets and is guaranteed by substantially all of our subsidiaries. It provides for a six year, $570 million term loan facility ("Term Loan") and a four year, $150 million revolving credit facility ("Revolver"), including a $100 million letter of credit subfacility. As of March 30, 2012 and December 30, 2011, the additional available borrowing capacity under the Senior Credit Facility was approximately $20.2 million and $109.6 million, respectively, which gives effect to $39.8 million and $40.4 million, respectively, in letters of credit. The maturity date on the Term Loan is July 7, 2016 and the maturity date on the Revolver is July 7, 2014. Amounts borrowed under our Revolver are used to fund operations. We had Revolver borrowings of $90.0 million as of March 30, 2012. As of March 30, 2012 we were in default under our Revolver for failing to deliver annual financial statements and other related documents by March 29, 2012. Because of the default we did not have access to borrow additional funds under the Revolver. We filed our annual financial statements on April 9, 2012 curing the default and restoring full access to the Revolver.

Interest Rates on Term Loan & Revolver

Both the Term Loan and Revolver bear interest at one of two options, based on our election, using either the (i) base rate ("Base Rate") as defined in the Senior Credit Facility plus an applicable margin or the (ii) London Interbank Offered Rate ("Eurocurrency Rate") as defined in the Senior Credit Facility plus an applicable margin. The applicable margin for the Term Loan is fixed at 3.5% for the Base Rate option and 4.5% for the Eurocurrency Rate option. The applicable margin for the Revolver ranges from 3.0% to 3.5% for the Base Rate option or 4.0% to 4.5% for the Eurocurrency Rate option based on our outstanding Secured Leverage Ratio at the end of the quarter. The Secured Leverage Ratio is calculated by the ratio of total secured consolidated debt (net of up to $50 million of unrestricted cash and cash equivalents) to consolidated earnings before interest, taxes, and depreciation & amortization ("Consolidated EBITDA"), as defined in the Senior Credit Facility. Interest payments on both the Term Loan and Revolver are payable at the end of the interest period as defined in the Senior Credit Facility, but not less than quarterly.

The Base Rate is equal to the higher of (a) the Federal Funds Rate plus 1/2 of 1% and (b) the rate of interest in effect for such day as publicly announced from time to time by Bank of America as its prime rate; provided that in no event shall the Base Rate be less than 1.00% plus the Eurocurrency Rate applicable to one month interest periods on the date of determination of the Base Rate. The variable Base Rate has a floor of 2.75%.

The Eurocurrency Rate is the rate per annum equal to the British Bankers Association London Interbank Offered Rate ("BBA LIBOR") as published by Reuters (or other commercially available source providing quotations of BBA LIBOR as designated by the Administrative Agent from time to time) two Business Days prior to the commencement of such interest period. The variable Eurocurrency rate has a floor of 1.75%. As of March 30, 2012 and December 30, 2011, the applicable interest rate for our Term Loan was 6.25%.

Interest Rates on Letter of Credit Subfacility and Unused Commitment Fees

The letter of credit subfacility bears interest at the applicable margin for Eurocurrency Rate Loans, which ranges from 4.0% to 4.5%. The unused commitment fee on our Revolver ranges from 0.50% to 0.75% depending on the Secured Leverage Ratio, as defined in the Senior Credit Facility. Payments on both the letter of credit subfacility and unused commitments are payable quarterly in arrears. As of March 30, 2012 and December 30, 2011, the applicable interest rates for our letter of credit subfacility were 4.50%. As of March 30, 2012 and December 30, 2011, the applicable interest rates for our unused commitment fees were 0.75%. All of our letters of credit are also subject to a 0.25% fronting fee.

 

Principal Payments

There is an annual excess cash flow requirement, which is defined in the Senior Credit Facility. This excess cash flow requirement began in 2012, based on our annual financial results from 2011. We are not required in 2012, to make an additional principal payment related to this excess cash flow requirement. Certain other transactions can trigger mandatory principal payments such as tax refunds, a disposition of a portion of the business or a significant asset sale. We had no such transactions for the quarter ended March 30, 2012.

During the three months ended March 30, 2012, there were no principal prepayments or quarterly principal payments on the Term Loan facility. During the three months ended April 1, 2011, we made a $48.6 million principal prepayment pursuant to our Term Loan facility, and a $1.4 million quarterly principal payment. Our Term Loan facility provided for quarterly principal payments of $1.4 million that began in December 2010. In October 2011, the principal prepayment of $48.7 million that was made on our Term Loan was applied to all future schedule maturities and satisfied our responsibility to make quarterly principal payments through July 7, 2016. Deferred financing costs associated with the prepayment totaling $2.4 million were expensed and are included in Loss on early extinguishment of debt in our consolidated statement of operations for the three months ended April 1, 2011.

Covenants

The Senior Credit Facility contains financial, as well as non-financial, affirmative and negative covenants that we believe are usual and customary. The negative covenants in the Senior Credit Facility include, among other things, limits on our ability to:

 

   

declare dividends and make other distributions;

 

   

redeem or repurchase our capital stock;

 

   

prepay, redeem or repurchase certain of our indebtedness;

 

   

grant liens;

 

   

make loans or investments (including acquisitions);

 

   

incur additional indebtedness;

 

   

modify the terms of certain debt;

 

   

restrict dividends from our subsidiaries;

 

   

change our business or business of our subsidiaries;

 

   

merge or enter into acquisitions;

 

   

sell our assets;

 

   

enter into transactions with our affiliates; and

 

   

make capital expenditures.

In addition, the Senior Credit Facility stipulates a maximum total leverage ratio and a minimum interest coverage ratio that must be maintained.

The total leverage ratio is the Consolidated Total Debt as defined in the Senior Credit Facility, less unrestricted cash and cash equivalents (up to $50 million) to Consolidated EBITDA as defined in the Senior Credit Facility, for the applicable period. Our total leverage ratio could not be greater than 5.5 to 1.0 for the period of July 3, 2010 to June 29, 2012. After June 29, 2012, the maximum total leverage ratio diminishes either quarterly or semi-annually.

The interest coverage ratio is the ratio of Consolidated EBITDA to Consolidated Interest Expense, as defined in the Senior Credit Facility. The interest coverage ratio must not be less than 1.7 to 1.0 for the period of July 3, 2010 to June 29, 2012. The minimum interest ratio increases either quarterly or semi-annually beginning June 29, 2012.

In the event we fail to comply with the covenants specified in the Senior Credit Facility and the Indenture governing our Senior Unsecured Notes, we may be in default. On March 30, 2012, we notified Bank of America N.A. (the "Administrative Agent") of a default in connection with the failure to deliver to the Administrative Agent the financial statements, reports and other documents under the Senior Credit Facility with respect to the fiscal year ended December 30, 2011. The default was cured with the filing of the 2011 Annual Report to the SEC on April 9, 2012.

 

Senior Unsecured Notes

On July 7, 2010, DynCorp International Inc. completed an offering of $455 million in aggregate principal of 10.375% senior unsecured notes due 2017 (the "Senior Unsecured Notes"). The initial purchasers were Bank of America Securities LLC, Citigroup Global Markets Inc., Barclays Capital Inc. and Deutsche Bank Securities Inc. The Senior Unsecured Notes were issued under an indenture dated July 7, 2010 (the "Indenture"), by and among us, the guarantors party thereto (the "Guarantors"), including DynCorp International, and Wilmington Trust FSB, as trustee. The Senior Unsecured Notes mature on July 1, 2017. Interest on the Senior Unsecured Notes is payable on January 1 and July 1 of each year, and commenced on January 1, 2011.

The Senior Unsecured Notes contain various covenants that restrict our ability to:

 

   

incur additional indebtedness;

 

   

make certain payments including declaring or paying certain dividends;

 

   

purchase or retire certain equity interests;

 

   

retire subordinated indebtedness;

 

   

make certain investments;

 

   

sell assets;

 

   

engage in certain transactions with affiliates;

 

   

create liens on assets;

 

   

make acquisitions; and

 

   

engage in mergers or consolidations.

The aforementioned restrictions are considered to be in place unless we achieve investment grade ratings by both Moody's Investor Services and Standard and Poor's.

We can redeem the Senior Unsecured Notes, in whole or in part, at defined call prices, plus accrued interest through the redemption date. The Indenture requires us to repurchase the Senior Unsecured Notes at defined prices in the event of certain asset sales and change of control events.

Call and Put Options

We can voluntarily settle all or a portion of the Senior Unsecured Notes at any time prior to July 1, 2014. Such a voluntary settlement would require payment of 100% of the principal amount plus the applicable premium (or make-whole premium), and accrued and unpaid interest and additional interest, if any, as of the applicable redemption date. The applicable premium with respect to the Senior Unsecured Notes on any applicable redemption date is the greater of (1) 1.0% of the then outstanding principal amount of the Senior Unsecured Notes; and (2) the excess of (a) the present value at such redemption date of (i) the redemption price of the Senior Unsecured Notes at July 1, 2014 plus (ii) all required interest payments due on the Note through July 1, 2014 (excluding accrued but unpaid interest), computed using a discount rate equal to the treasury rate, as defined in the Indenture, as of such redemption date plus 50 basis points; over (b) the then outstanding principal amount of the Senior Unsecured Notes.

In the event of a change in control, each holder of the Senior Unsecured Notes will have the right to require the Company to repurchase some or all of the Senior Unsecured Notes at 101% of their face amount, plus accrued and unpaid interest to the repurchase date.


Commitments And Contingencies
v0.0.0.0
Commitments And Contingencies
3 Months Ended
Mar. 30, 2012
Commitments And Contingencies [Abstract]  
Commitments And Contingencies

Note 8 — Commitments and Contingencies

Commitments

We have operating leases for the use of real estate and certain property and equipment which are either non-cancelable or cancelable only by the payment of penalties or cancelable upon one month's notice. All lease payments are based on the lapse of time but include, in some cases, payments for insurance, maintenance and property taxes. There are no purchase options on operating leases at favorable terms, but most leases have one or more renewal options. Certain leases on real estate are subject to annual escalations for increases in base rents, utilities and property taxes. Lease rental expense was $66.7 million and $26.7 million during the three months ended March 30, 2012 and April 1, 2011, respectively. We have no significant long-term purchase agreements with service providers.

 

Contingencies

General Legal Matters

We are involved in various lawsuits and claims that arise in the normal course of business. We have established reserves for matters in which it is believed that losses are probable and can be reasonably estimated. Reserves related to these matters have been recorded in "Other accrued liabilities" totaling approximately $4.6 million and $4.8 million as of March 30, 2012 and December 30, 2011, respectively. None of our reserves as of March 30, 2012 were individually material. We believe that appropriate accruals have been established for such matters based on information currently available; however, some of the matters may involve compensatory, punitive, or other claims or sanctions that if granted, could require us to pay damages or make other expenditures in amounts that could not be reasonably estimated at March 30, 2012. These accrued reserves represent the best estimate of amounts believed to be our liability in a range of expected losses. In addition to matters that are considered probable and can be reasonably estimated, we also have certain matters considered reasonably possible. Other than matters disclosed below, we believe the aggregate range of possible loss related to matters considered reasonably possible was not material as of March 30, 2012. Litigation is inherently unpredictable and unfavorable resolutions could occur. Accordingly, it is possible that an adverse outcome from such proceedings could (i) exceed the amounts accrued for probable matters; or (ii) require a reserve for a matter we did not originally believe to be probable or could be reasonably estimated. Such changes could be material to our financial condition, results of operations and cash flows in any particular reporting period. Our view of the matters not specifically disclosed could possibly change in future periods as events thereto unfold.

Pending Litigation and Claims

On December 4, 2006, December 29, 2006, March 14, 2007 and April 24, 2007, four lawsuits were served, seeking unspecified monetary damages against DynCorp International LLC and several of its former affiliates in the U.S. District Court for the Southern District of Florida, concerning the spraying of narcotic plant crops along the Colombian border adjacent to Ecuador. Three of the lawsuits, filed on behalf of the Provinces of Esmeraldas, Sucumbíos, and Carchi in Ecuador, allege violations of Ecuadorian law, international law, and statutory and common law tort violations, including negligence, trespass, and nuisance. The fourth lawsuit, filed on behalf of citizens of the Ecuadorian provinces of Esmeraldas and Sucumbíos, alleges personal injury, various counts of negligence, trespass, battery, assault, intentional infliction of emotional distress, violations of the Alien Tort Claims Act and various violations of international law. The four lawsuits were consolidated, and based on our motion granted by the court, the case was subsequently transferred to the U.S. District Court for the District of Columbia. On March 26, 2008, a First Amended Consolidated Complaint was filed that identified 3,266 individual plaintiffs. As of January 12, 2010, 1,256 of the plaintiffs have been dismissed by court orders and, on September 15, 2010, the Provinces of Esmeraldas, Sucumbíos, and Carchi were dismissed by court order. We have filed multiple motions for summary judgment which are pending. The amended complaint does not demand any specific monetary damages; however, a court decision against us could have a material effect on our results of operations and financial condition, if we are unable to obtain reimbursement from the DoS. The aerial spraying operations were and continue to be managed by us under a DoS contract in cooperation with the Colombian government. The DoS contract provides indemnification to us against third-party liabilities arising out of the contract, subject to available funding. At this time, we believe the likelihood of an unfavorable outcome in this case is remote; however, estimation of potential damages is not possible as there is potential apportionment of damages to multiple defendants and possible indemnification available to us from the DoS.

A lawsuit filed on September 11, 2001, and amended on March 24, 2008, seeking unspecified damages on behalf of twenty-six residents of the Sucumbíos Province in Ecuador, was brought against our operating company and several of its former affiliates in the U.S. District Court for the District of Columbia. The action alleges violations of the laws of nations and U.S. treaties, negligence, emotional distress, nuisance, battery, trespass, strict liability, and medical monitoring arising from the spraying of herbicides near the Ecuador-Colombia border in connection with the performance of the DoS, International Narcotics and Law Enforcement contract for the eradication of narcotic plant crops in Colombia. As of January 12, 2010, fifteen of the plaintiffs have been dismissed by court order. We have filed multiple motions for summary judgment which are pending. The terms of the DoS contract provide that the DoS will indemnify our operating company against third-party liabilities arising out of the contract, subject to available funding. We are also entitled to indemnification by Computer Sciences Corporation in connection with this lawsuit, subject to certain limitations. Additionally, any damage award would have to be apportioned between the other defendants and our operating company. We believe that the likelihood of an unfavorable judgment in this matter is remote; however, estimation of potential damages is not possible as there is potential apportionment of damages to multiple defendants and indemnification available to us from multiple sources, including the DoS and Computer Sciences Corporation.

Arising out of the litigation described in the preceding two paragraphs, on September 22, 2008, we filed a separate lawsuit against our aviation insurance carriers seeking defense and coverage of the referenced claims. On November 9, 2009, the court granted our Partial Motion for Summary Judgment regarding the duty to defend, and the carriers have paid the majority of the litigation expenses. In a related action, the carriers filed a lawsuit against us on February 5, 2009, seeking rescission of certain aviation insurance policies based on an alleged misrepresentation by us concerning the existence of certain of the lawsuits relating to the eradication of narcotic plant crops. On May 19, 2010, our aviation insurance carriers filed a complaint against us seeking reformation of previously provided insurance policies and the elimination of coverage for aerial spraying. The Company believes that the claims asserted by the insurance carriers are without merit and unlikely to result in a material effect on our results of operations or financial condition.

 

In November 2009, a U.S. grand jury indicted one of our subcontractors on the Logistics Civil Augmentation Program ("LOGCAP IV") contract, Agility, on charges of fraud and conspiracy, alleging that it overcharged the U.S. Army on contracts to provide food to soldiers in Iraq, Kuwait and Jordan. These allegations were in no way related to the work performed under LOGCAP IV. Effective December 16, 2009, we removed Agility as a subcontractor on the LOGCAP IV contract and terminated the work under existing task orders. In April 2010, Agility filed an arbitration demand, asserting claims for breach of a joint venture agreement, breach of fiduciary duty and unjust enrichment. Through the arbitration Agility was seeking a declaration that it was entitled to a 30% share of the LOGCAP IV fees over the life of the contract. In November 2011, the arbitrators issued a decision granting Agility 30% share of the LOGCAP IV fees through August 2010. We recorded a liability and subsequently paid the calculated immaterial amount to Agility in December 2011.

In 2009, we terminated for cause a contract to build the Akwa Ibom International Airport for the State of Akwa Ibom in Nigeria. Consequently, we terminated certain subcontracts and purchase orders the customer advised us it did not want to assume. Our termination of certain subcontracts not assumed by the customer, including our actions to recover against advance payment and performance guarantees established by the subcontractors for our benefit, was challenged in certain instances. In December 2011, the customer filed arbitration alleging fraud, gross negligence, contract violations, and conversion of funds and asserted damages of approximately $150 million. We believe our right to terminate this contract was justified and permissible under the terms of the contract, and we intend to vigorously contest the claims brought against us. Additionally, we believe the contract limits any damages to a maximum of $3 million, except in situations of gross negligence and willful misconduct. We are not able to determine the likely outcome of the arbitration nor can we estimate a range of potential loss, if any.

U.S. Government Investigations

We primarily sell our services to the U.S. government. These contracts are subject to extensive legal and regulatory requirements, and we are occasionally the subject of investigations by various agencies of the U.S. government who investigate whether our operations are being conducted in accordance with these requirements, including as previously disclosed in our periodic filings, the Special Inspector General for Iraq Reconstruction report regarding certain reimbursements and the U.S. Department of State Office of Inspector General's records subpoena with respect to Civilian Police ("CivPol"). Such investigations, whether related to our U.S. government contracts or conducted for other reasons, could result in administrative, civil or criminal liabilities, including repayments, fines or penalties being imposed upon us, or could lead to suspension or debarment from future U.S. government contracting. U.S. government investigations often take years to complete and many result in adverse action against us. We believe that any adverse actions arising from such matters could have a material effect on our ability to invoice and receive timely payment on our contracts, perform contracts or compete for contracts with the U.S. government and could have a material effect on our operating performance.

As previously disclosed, we identified certain payments made on our behalf by two subcontractors to expedite the issuance of a limited number of visas and licenses from a foreign government's agencies that may raise compliance issues under the U.S. Foreign Corrupt Practices Act. We retained outside counsel to investigate these payments. In November 2009, we voluntarily brought this matter to the attention of the U.S. Department of Justice and the SEC. We are cooperating with the government's review of this matter. We are also continuing our evaluation of our internal policies and procedures. Based on the facts currently known, we believe that this matter will not yield a negative outcome and will not have a material effect on our business, financial condition, results of operations or cash flow.

On August 16, 2005, we were served with a Department of Justice Federal Grand Jury Subpoena seeking documents concerning work performed by a former subcontractor, Al Ghabban in 2002-2005. Specifically, during the 2002-2005 timeframe, Al Ghabban performed line haul trucking work to transport materials throughout the Middle Eastern theater on the War Reserve Materials Program. In response to the subpoena in 2005, we provided the requested documents to the Department of Justice, and the matter was subsequently closed in 2005 without any action taken. In April 2009, we received a follow up telephone call concerning this matter from the Department of Justice Civil Litigation Division. Since that time, we have had several discussions with the government regarding the civil matter. In response to requests, we provided additional information to the Department of Justice Civil Litigation Division. We are fully cooperating with the government's review and believe that the likelihood of an unfavorable judgment resulting from this matter is reasonably possible. If our operations are found to be in violation of any laws or government regulations, we may be subject to penalties, damages or fines, any or all of which could adversely affect our financial results. At this time, an estimate or a range of potential damages is not possible as this matter is still under review by the Department of Justice and no formal complaint has been filed.

U.S. Government Audits

Our contracts are regularly audited by the Defense Contract Audit Agency ("DCAA") and other government agencies. These agencies review our contract performance, cost structure and compliance with applicable laws, regulations and standards. The government also reviews the adequacy of, and our compliance with, our internal control systems and policies, including our purchasing, property, estimating, compensation and management information systems. Any costs found to be improperly allocated to a specific contract will not be reimbursed. The DCAA will in some cases issue a Form 1 representing the non-conformance of such costs or requirements as it relates to our government contracts. If the Company is unable to provide sufficient evidence of the costs in question, the costs could be suspended or disallowed which could be material to our financial statements. Government contract payments received by us for direct and indirect costs are subject to adjustment after government audit and repayment to the government if the payments exceed allowable costs as defined in the government regulations. Since we cannot reasonably estimate the results of a DCAA or other government entity audit, these items represent loss contingencies that we consider reasonably possible. Due to the nature of our business, the continual oversight of and audits by governmental agencies and the number of contracts under which we perform, we cannot, at this time, provide a reasonable estimate of the range of loss for these contingencies.

The Defense Contract Management Agency ("DCMA") formally notified us of non-compliance with Cost Accounting Standard 403, Allocation of Home Office Expenses to Segments, on April 11, 2007. We issued a response to the DCMA on April 26, 2007 with a proposed solution to resolve the area of non-compliance, which related to the allocation of corporate general and administrative costs between our divisions. On August 13, 2007, the DCMA notified us that additional information would be necessary to justify the proposed solution. We issued responses on September 17, 2007, April 28, 2008 and September 10, 2009 and the matter is pending resolution. Based on facts currently known, we believe the likelihood of an unfavorable judgment resulting from this matter is remote and the matters described in this and the preceding paragraph will not have a material effect on our results of operations or financial condition.

We have received several letters from the DCAA with draft audit results related to their examination of certain incurred, invoiced and collected costs on our Civilian Police program for periods ranging from April 17, 2004 through April 2, 2010. During 2012 the DCAA began to formalize their positions articulated in the draft letters by issuing Form 1's and final audit reports. We noted there were no new issues raised in the Form 1's or the final audit reports.

The audit results identified multiple issues where the DCAA has asserted certain instances of potential deviations from the explicit terms of the contract or from certain provisions of government regulations. The audit results apply an extrapolation methodology to estimate a potential exposure amount for the issues which when aggregated for all draft letters, Form 1's and final audit reports total approximately $123.4 million. Although the extrapolated amounts would be material to our results of operations, cash flows and financial condition, we do not believe the DCAA's audit results and resulting extrapolation are an appropriate basis to determine a range of potential exposure. We have provided responses to the DCAA for each letter, in which we have articulated our position on each issue and have attempted to answer their questions and provide clarification of the facts to resolve the issues raised. In the few instances where we believe the issues identified were valid or represent a probable contingency, we have recorded a liability for approximately $0.2 million as of March 30, 2012. There are a number of issues raised by the DCAA for which we believe the DCAA did not consider all relevant facts. We strongly believe these issues will be resolved in our favor and thus represent loss contingencies that we consider remote. For the remaining issues, we believe the DCAA did not consider certain contractual provisions and long- standing patterns of dealing with the customer. Since we cannot reasonably estimate the DCAA's acceptance of our initial responses and the ultimate outcome related to these remaining issues, we believe these items represent loss contingencies that we consider reasonably possible. We continue to work with the DCAA to resolve any remaining questions they may have and provide clarification of the facts and circumstances surrounding the issues.

Credit Risk

We are subject to concentrations of credit risk primarily by virtue of our accounts receivable. Departments and agencies of the U.S. federal government account for all but minor portions of our customer base, minimizing this credit risk. Furthermore, we continuously review all accounts receivable and recorded provisions for doubtful accounts.

Risk Management Liabilities and Reserves

We are insured for domestic worker's compensation liabilities and a significant portion of our employee medical costs. However, we bear risk for a portion of claims pursuant to the terms of the applicable insurance contracts. We account for these programs based on actuarial estimates of the amount of loss inherent in that period's claims, including losses for which claims have not been reported. These loss estimates rely on actuarial observations of ultimate loss experience for similar historical events. We limit our risk by purchasing stop-loss insurance policies for significant claims incurred for both domestic worker's compensation liabilities and medical costs. Our exposure under the stop-loss policies for domestic worker's compensation and medical costs is limited based on fixed dollar amounts. For domestic worker's compensation and employer's liability under state and federal law, the fixed dollar amount of stop-loss coverage is $1.0 million per occurrence on most policies; but, $0.25 million on a California based policy. For medical costs, the fixed dollar amount of stop-loss coverage is from $0.25 million to $0.75 million for total costs per covered participant per calendar year.


Segment Information
v0.0.0.0
Segment Information
3 Months Ended
Mar. 30, 2012
Segment Information [Abstract]  
Segment Information

Note 9 — Segment Information

As of December 30, 2011, we had three operating and reportable segments, GSDS, GPSS and GLS, two of which were wholly-owned. The third segment, GLS, is a 51% owned joint venture. In January of 2012, our organizational structure was amended to better align how the Company addresses the markets we serve, respond to changes in our customers' strategic outlook and better reflect the current economic environment. As part of these changes, we re-aligned our BATs into strategic business "Groups" reporting directly to the President of the Company. Under the new alignment, there are six operating and reportable segments which include LOGCAP, Aviation, Training and Intelligence Solutions, Global Logistics & Development Solutions, Security Services, and GLS. Our Groups will continue to operate principally within a regulatory environment subject to governmental contracting and accounting requirements, including Federal Acquisition Regulations, Cost Accounting Standards and audits by various U.S. federal agencies. We excluded certain costs that are not directly allocable to our reportable segments from the segment results and included these costs in headquarters.

 

The following is a summary of the financial information of the reportable segments reconciled to the amounts reported in the condensed consolidated financial statements:

 

(Amounts in thousands)    Three Months
Ended
March 30,
2012
    Three Months
Ended
April 1,

2011
 

Revenue

    

LOGCAP

   $ 478,046      $ 379,857   

Aviation

     306,415        260,626   

Training & Intelligence Solutions

     156,598        153,173   

Global Logistics & Development Solutions

     79,143        71,811   

Security Services

     23,877        14,451   

GLS

     14,990        126,406   
  

 

 

   

 

 

 

Total reportable segments

     1,059,069        1,006,324   

GLS deconsolidation(4)

     (14,990     (126,406

Headquarters (1)

     2,987        4,406   
  

 

 

   

 

 

 

Total Revenue

   $ 1,047,066      $ 884,324   
  

 

 

   

 

 

 

Operating (loss) income

    

LOGCAP

   $ 16,918      $ 11,774   

Aviation

     22,506        12,255   

Training & Intelligence Solutions

     4,947        10,239   

Global Logistics & Development Solutions

     5,312        3,721   

Security Services

     (6,634     1,347   

GLS

     757        9,164   
  

 

 

   

 

 

 

Total reportable segments

     43,806        48,500   

GLS deconsolidation(4)

     (757     (9,164

Headquarters (2)

     (13,094     (7,135
  

 

 

   

 

 

 

Total operating income

   $ 29,955      $ 32,201   
  

 

 

   

 

 

 

Depreciation and amortization

    

LOGCAP

   $ 197      $ 203   

Aviation

     171        166   

Training & Intelligence Solutions

     72        42   

Global Logistics & Development Solutions

     21        10   

Security Services

     —          —     

GLS

     —          —     
  

 

 

   

 

 

 

Total reportable segments

     461        421   

GLS deconsolidation(4)

     —          —     

Headquarters

     12,495        13,102   
  

 

 

   

 

 

 

Total depreciation and amortization (3)

   $ 12,956      $ 13,523   
  

 

 

   

 

 

 

 

  (1) Represents revenue earned on shared services arrangements for general and administrative services provided to unconsolidated joint ventures.
  (2) Headquarters operating expenses primarily relate to amortization of intangible assets and other costs that are not allocated to segments and are not billable to our U.S. government customers.
  (3) Includes amounts included in Cost of services of $0.4 million for the three months ended March 30, 2012 and April 1, 2011.
  (4) We deconsolidated GLS effective July 7, 2010.

 

The following is a summary of the assets of the reportable segments reconciled to the amounts reported in the consolidated financial statements:

 

     As Of  
(Amounts in thousands)    March 30,
2012
    December 30,
2011
 

Assets

    

LOGCAP

   $ 596,864      $ 606,703   

Aviation

     390,550        377,823   

Training & Intelligence Solutions

     342,193        324,020   

Global Logistics & Development Solutions

     153,693        157,367   

Security Services

     69,785        72,010   

GLS

     63,146        68,165   
  

 

 

   

 

 

 

Total reportable segments

     1,616,231        1,606,088   

GLS deconsolidation(2)

     (63,146     (68,165

Headquarters (1)

     538,244        476,498   
  

 

 

   

 

 

 

Total assets

   $ 2,091,329      $ 2,014,421   
  

 

 

   

 

 

 

 

  (1) Assets primarily include cash, investments in unconsolidated subsidiaries, deferred income taxes, intangible assets (excluding goodwill) and deferred debt issuance cost.
  (2) We deconsolidated GLS effective July 7, 2010.

Related Parties, Joint Ventures And Variable Interest Entities
v0.0.0.0
Related Parties, Joint Ventures And Variable Interest Entities
3 Months Ended
Mar. 30, 2012
Related Parties, Joint Ventures And Variable Interest Entities [Abstract]  
Related Parties, Joint Ventures And Variable Interest Entities

Note 10 — Related Parties, Joint Ventures and Variable Interest Entities

Consulting Fee

The Company has a Master Consulting and Advisory Services agreement ("COAC Agreement") with Cerberus Operations and Advisory Company, LLC, where pursuant to the terms of the agreement, they make personnel available to us for the purpose of providing reasonably requested business advisory services. The services are priced on a case by case basis depending on the requirements of the project and agreements in pricing. We incurred $0.6 million and $0.5 million in expenses for Cerberus consulting fees during the three months ended March 30, 2012 and April 1, 2011, respectively.

Joint Ventures and Variable Interest Entities

PaTH is a joint venture formed in May 2006 with two other partners for the purpose of procuring government contracts with the Federal Emergency Management Authority.

CRS is a joint venture formed in March 2006 with two other partners for the purpose of procuring government contracts with the U.S. Navy.

The GRS joint venture was formed in August of 2010 with one partner, for the purpose of procuring government contracts with the U.S. Navy. During the year ended December 30, 2011, this joint venture was selected as one of four contractors for an IDIQ multiple award contract. The total potential value of the contract is $900.0 million over five years.

Mission Readiness is a joint venture formed in September 2010 with three members for the purpose of procuring government contracts with the DoD. Subsequent to formation, a fourth member joined the joint venture. Mission Readiness is currently pursuing a significant contract for which the potential customer requested a 100% performance guarantee from one of the joint venture members. We agreed to provide this guarantee in exchange for similar guarantees from each of the joint venture members. The fair value of our guarantee to the potential customer was determined to be zero at the inception of the contract, thus the related liability was also determined to be zero. There is no value assigned to the guarantees provided to us from the other joint venture members.

GLS is a joint venture formed in August 2006 with one partner, McNeil, for the purpose of procuring government contracts with the U.S. Army. We incur significant costs on behalf of GLS related to the normal operations of the venture. However, these costs typically support revenue billable to our customer. GLS is not a guarantor under our Senior Credit Facility or our Senior Unsecured Notes in accordance with the agreement.

Babcock is a joint venture formed in January 2005 and currently provides services to the British Ministry of Defence.

Receivables due from our unconsolidated joint ventures, including GLS, totaled $1.1 million and $3.9 million as of March 30, 2012 and December 30, 2011, respectively. These receivables are a result of items purchased and services rendered by us on behalf of our unconsolidated joint ventures, including GLS. We have assessed these receivables as having minimal collection risk based on our historic experience with these joint ventures and our inherent influence through our ownership interest. The related revenue we earned from our unconsolidated joint ventures, including GLS, totaled $1.4 million and $3.8 million during the three months ended March 30, 2012 and April 1, 2011, respectively. Additionally, we earned $3.5 million and $6.8 million in equity method income (includes operationally integral and non-integral income) during the three months ended March 30, 2012 and April 1, 2011.

 

GLS' revenue was $15.0 million and $126.4 million during the three months ended March 30, 2012 and April 1, 2011, respectively. GLS' operating income and net income was $0.8 million and $0.8 million, respectively, during the three months ended March 30, 2012. GLS' operating income and net income was $9.2 million and $9.2 million, respectively, during the three months ended April 1, 2011. As a result of the impairment recorded in September 2011, we no longer recognized any earnings related to GLS, until we receive cash through dividend distributions.

On October 5, 2011, the DCAA issued GLS a Form 1 in the amount of $95.9 million which pertains to potential inconsistencies of certain contractual requirements. As a result of the Form 1, the customer informed GLS it would withhold a portion of outstanding invoices until the Form 1 is resolved.

On February 8, 2012, the DCAA issued GLS a second Form 1 in the amount of $102.0 million, asserting inconsistencies with labor related costs for the fiscal year ended April 3, 2009. The customer has withheld $5.0 million, until this issue is resolved. GLS does not agree with the DCAA's findings on either of the Form 1s and is currently working with the DCAA and the customer to provide clarification and resolve both matters.

As of December 30, 2011, we owned 50% of DIFZ. On March 15, 2012, we entered into a non-cash dividend distribution transaction with Cerberus Series Four Holdings, LLC and Cerberus Partners II, L.P., in which we distributed half of our 50% ownership in DIFZ. As a result of the distribution we now hold 25% ownership. We recognized the distribution as an increase in noncontrolling interest and a reduction to our Additional-paid-in-capital, given our Accumulated deficit. The transaction also resulted in the transfer of a portion of DIFZ's deferred tax assets totaling approximately $1.3 million. We continue to consolidate DIFZ as we still exercise power over activities that significantly impact DIFZ's economic performance and have the obligation to absorb losses or receive benefits of DIFZ that could potentially be significant to DIFZ as we continue to incur significant costs on behalf of DIFZ related to our normal operations. The vast majority of these costs are considered direct contract costs and thus billable on several of our contracts supported by DIFZ services.

We currently hold a promissory note from Palm Trading Investment Corp, which had an aggregate initial value of $9.2 million. The note is included in (i) Prepaid expenses and other current assets and in (ii) Other assets on our unaudited condensed consolidated balance sheet for the short and long-term portions, respectively. The loan balance outstanding was $6.0 million and $6.0 million as of March 30, 2012 and December 30, 2011, respectively, reflecting the initial value plus accrued interest, less payments against the promissory notes. The fair value of the notes receivable is not materially different from its carrying value.

The following tables' presents selected financial information for DIFZ as of March 30, 2012 and December 30, 2011 and for the three months ended March 30, 2012 and April 1, 2011:

 

Three Months Ended Three Months Ended
     As of  
(Amounts in millions)    March 30, 2012      December 30, 2011  

Assets

   $ 47.0       $ 31.2   

Liabilities

     42.3         27.3   
               
(Amounts in millions)    Three Months Ended
March 30, 2012
     Three Months Ended
April 1, 2011
 

Revenue

   $ 124.5       $ 116.3   

We account for our investments in VIE's in accordance with ASC 810—Consolidation. In cases where we have (i) the power to direct the activities of the VIE that most significantly impact its economic performance and (ii) the obligation to absorb losses of the VIE that could potentially be significant or the right to receive benefits from the entity that could potentially be significant to the VIE, we consolidate the entity. Alternatively, in cases where all of the aforementioned criteria are not met, the investment is accounted for under the equity method. As of March 30, 2012, we accounted for PaTH, CRS, Babcock, GRS, Mission Readiness LLC and GLS as equity method investments. Alternatively, we consolidated DIFZ based on the aforementioned criteria. We present our share of the PaTH, CRS, GRS, Mission Readiness LCC and GLS earnings in Earnings from unconsolidated affiliates as these joint ventures are considered operationally integral. Alternatively, we present our share of the Babcock earnings in Other income, net as it is not considered operationally integral.

 

The following tables presents selected financial information for our equity method investees as of March 30, 2012 and December 30, 2011 and for the three months ended March 30, 2012 and April 1, 2011:

 

Three Months Ended Three Months Ended
     As of  
(Amounts in millions)    March 30, 2012      December 30, 2011  

Current assets

   $ 152.5       $ 146.3   

Total assets

     152.6         146.4   

Current liabilities

     78.1         76.6   

Total liabilities

     79.1         77.0   
               
(Amounts in millions)    Three Months Ended
March 30, 2012
     Three Months Ended
April 1, 2011
 

Revenue

   $ 90.8       $ 191.9   

Net income

     4.6         11.8   

Many of our VIEs only perform on a single contract. The modification or termination of a contract under a VIE could trigger an impairment in the fair value of our investment in unconsolidated subsidiaries. In the aggregate, our maximum exposure to losses as a result of our investment consists of our (i) $31.1 million investment in unconsolidated subsidiaries, (ii) $1.1 million in receivables from our unconsolidated joint ventures, (iii) $6.0 million note receivable from Palm Trading Investment Corp. ("Palm") and (iv) contingent liabilities that were neither probable nor reasonably estimable as of March 30, 2012.


Collaborative Arrangements
v0.0.0.0
Collaborative Arrangements
3 Months Ended
Mar. 30, 2012
Collaborative Arrangements [Abstract]  
Collaborative Arrangements

Note 11 — Collaborative Arrangements

We participate in a collaborative arrangement with CH2M Hill on the LOGCAP IV program. During 2008, we executed a subcontract and teaming agreement with CH2M Hill with respect to operations on the LOGCAP IV program, which is considered a collaborative arrangement under GAAP. The purpose of this arrangement is to share some of the risks and rewards associated with this U.S. government contract. Our current share of profits is 70%.

We account for this collaborative arrangement under ASC 808 — Collaborative Arrangements and record revenue gross as the prime contractor. The cash inflows and outflows, as well as expenses incurred, are recorded in Cost of services in the period realized. Revenue on LOGCAP IV was $478.0 million and $379.3 million during the three months ended March 30, 2012 and April 1, 2011, respectively. Cost of services on LOGCAP IV program was $446.8 million and $355.0 million during the three months ended March 30, 2012 and April 1, 2011, respectively. Our share of the total LOGCAP IV profits was $11.8 million and $11.8 million during the three months ended March 30, 2012 and April 1, 2011, respectively.


Consolidating Financial Statements Of Subsidiary Guarantors
v0.0.0.0
Consolidating Financial Statements Of Subsidiary Guarantors
3 Months Ended
Mar. 30, 2012
Consolidating Financial Statements Of Subsidiary Guarantors [Abstract]  
Consolidating Financial Statements Of Subsidiary Guarantors

Note 12 — Consolidating Financial Statements of Subsidiary Guarantors

The Senior Unsecured Notes issued by DynCorp International Inc. ("Subsidiary Issuer") and the Senior Credit Facility are fully and unconditionally guaranteed, jointly and severally, by the Company ("Parent") and all of the domestic subsidiaries of Subsidiary Issuer: DynCorp International LLC, DTS Aviation Services LLC, DynCorp Aerospace Operations LLC, DynCorp International Services LLC, DIV Capital Corporation, Dyn Marine Services of Virginia LLC, Services International LLC, Worldwide Humanitarian Services LLC, Worldwide Recruiting and Staffing Services LLC, Phoenix Consulting Group LLC and Casals & Associates Inc. ("Subsidiary Guarantors"). Each of the Subsidiary Issuers and the Subsidiary Guarantors is 100% owned by the Company.

The following condensed consolidating financial statements present (i) the unaudited condensed consolidating statements of operations for the three months ended March 30, 2012 and April 1, 2011, (ii) the unaudited condensed consolidating balance sheets as of March 30, 2012 and December 30, 2011, (iii) the unaudited condensed consolidating statements of cash flows for the three months ended March 30, 2012 and April 1, 2011 and (iv) elimination entries necessary to consolidate Parent and its subsidiaries.

The Parent company, the Subsidiary Issuer, the combined Subsidiary Guarantors and the combined subsidiary non-guarantors account for their investments in subsidiaries using the equity method of accounting; therefore, the Parent column reflects the equity income of the subsidiary and its subsidiary guarantors, and subsidiary non-guarantors. Additionally, the Subsidiary Guarantors' column reflects the equity income of its subsidiary non-guarantors.

DynCorp International, Inc. is considered the Subsidiary Issuer as it issued the Senior Unsecured Notes.

 

Delta Tucker Holdings, Inc. and Subsidiaries

Unaudited Condensed Consolidating Statement of Operations Information

For the Three Months Ended March 30, 2012

 

(Amounts in thousands)    Parent      Subsidiary
Issuer
    Subsidiary
Guarantors
    Subsidiary
Non-
Guarantors
    Eliminations     Consolidated  

Revenue

   $ —         $ —        $ 1,051,732      $ 131,564      $ (136,230   $ 1,047,066   

Cost of services

     —           —          (973,945     (125,963     133,298        (966,610

Selling, general and administrative expenses

     —           —          (37,981     (3,102     2,932        (38,151

Depreciation and amortization expense

     —           —          (12,408     (152     —          (12,560

Earnings from equity method investees

     —           —          210        —          —          210   
  

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Operating income

     —           —          27,608        2,347        —          29,955   

Interest expense

     —           (20,306     (1,384     —          —          (21,690

Interest income

     —           —          38        —          —          38   

Equity in income of consolidated subsidiaries, net of tax

     5,575         17,539        820        —          (23,934     —     

Other income (loss), net

     —           —          3,426        (53     —          3,373   
  

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Income (loss) before taxes

     5,575         (2,767     30,508        2,294        (23,934     11,676   

Benefit (provision) for income taxes

     —           8,342        (12,969     (170     —          (4,797
  

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net income

     5,575         5,575        17,539        2,124        (23,934     6,879   

Noncontrolling interest

     —           —          —          (1,304     —          (1,304
  

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net income attributable to Delta Tucker Holdings, Inc.

   $ 5,575       $ 5,575      $ 17,539      $ 820      $ (23,934   $ 5,575   
  

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

Delta Tucker Holdings, Inc. and Subsidiaries

Unaudited Condensed Consolidating Statement of Operations Information

For the Three Months Ended April 1, 2011

 

(Amounts in thousands)    Parent      Subsidiary
Issuer
    Subsidiary
Guarantors
    Subsidiary
Non-
Guarantors
    Eliminations     Consolidated  

Revenue

   $ —         $ —        $ 889,767      $ 125,820      $ (131,263   $ 884,324   

Cost of services

     —           —          (814,164     (120,400     128,373        (806,191

Selling, general and administrative expenses

     —           —          (37,287     (3,130     2,890        (37,527

Depreciation and amortization expense

     —           —          (12,970     (161     —          (13,131

Earnings from equity method investees

     —           —          4,726        —          —          4,726   
  

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Operating income

     —           —          30,072        2,129        —          32,201   

Interest expense

     —           (23,453     (53     —          —          (23,506

Loss on early extinguishment of debt

     —           (2,397     —          —          —          (2,397

Equity in income of consolidated subsidiaries, net of tax

     4,908         20,736        1,084        —          (26,728     —     

Other income (loss), net

     —           —          2,926        (3     —          2,923   
  

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Income (loss) before income taxes

     4,908         (5,114     34,029        2,126        (26,728     9,221   

Benefit (provision) for income taxes

     —           10,022        (13,293     (304     —          (3,575
  

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net income

     4,908         4,908        20,736        1,822        (26,728     5,646   

Noncontrolling interest

     —           —          —          (738     —          (738
  

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net income attributable to Delta Tucker Holdings, Inc.

   $ 4,908       $ 4,908      $ 20,736      $ 1,084      $ (26,728   $ 4,908   
  

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

Delta Tucker Holdings, Inc. and Subsidiaries

Unaudited Condensed Consolidating Statement of Comprehensive Income Information

For the Three Months Ended March 30, 2012

 

(Amounts in thousands)    Parent     Subsidiary
Issuer
    Subsidiary
Guarantors
    Subsidiary
Non-
Guarantors
    Eliminations     Consolidated  

Net income

   $ 5,575      $ 5,575      $ 17,539      $ 2,124      $ (23,934   $ 6,879   

Other comprehensive income:

            

Currency translation adjustment

     196        196        123        73        (392     196   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Other comprehensive income, before tax

     196        196        123        73        (392     196   

Income tax expense related to items of other comprehensive income

     (61     (61     (45     (16     122        (61
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Other comprehensive income

     135        135        78        57        (270     135   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Comprehensive income

     5,710        5,710        17,617        2,181        (24,204     7,014   

Noncontrolling interest

     —          —          —          (1,304     —          (1,304
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Comprehensive income attributable to Delta Tucker Holdings, Inc.

   $ 5,710      $ 5,710      $ 17,617      $ 877      $ (24,204   $ 5,710   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

Delta Tucker Holdings, Inc. and Subsidiaries

Unaudited Condensed Consolidating Statement of Comprehensive Income Information

For the Three Months Ended April 1, 2011

 

(Amounts in thousands)    Parent     Subsidiary
Issuer
    Subsidiary
Guarantors
    Subsidiary
Non-
Guarantors
    Eliminations     Consolidated  

Net income

   $ 4,908      $ 4,908      $ 20,736      $ 1,822      $ (26,728   $ 5,646   

Other comprehensive income:

            

Currency translation adjustment

     440        440        116        324        (880     440   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Other comprehensive income, before tax

     440        440        116        324        (880     440   

Income tax expense related to items of other comprehensive income

     (164     (164     (42     (122     328        (164
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Other comprehensive income

     276        276        74        202        (552     276   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Comprehensive income

     5,184        5,184        20,810        2,024        (27,280     5,922   

Noncontrolling interest

     —          —