Document And Entity Information
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Document And Entity Information (USD $)
12 Months Ended
Dec. 31, 2011
Apr. 09, 2012
Document And Entity Information [Abstract]    
Document Type 10-K  
Amendment Flag false  
Document Period End Date Dec. 30, 2011  
Document Fiscal Period Focus FY  
Document Fiscal Year Focus 2011  
Entity Registrant Name Delta Tucker Holdings, Inc.  
Entity Central Index Key 0001514226  
Current Fiscal Year End Date --12-30  
Entity Filer Category Non-accelerated Filer  
Entity Common Stock, Shares Outstanding   100
Entity Current Reporting Status Yes  
Entity Voluntary Filers No  
Entity Well-known Seasoned Issuer No  
Entity Public Float $ 0  

Consolidated Statements Of Operations
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Consolidated Statements Of Operations (USD $)
In Thousands, unless otherwise specified
9 Months Ended 12 Months Ended 3 Months Ended 12 Months Ended 9 Months Ended 12 Months Ended
Dec. 31, 2010
Dec. 30, 2011
Jul. 02, 2010
DynCorp International Inc. [Member]
Apr. 02, 2010
DynCorp International Inc. [Member]
Dec. 31, 2010
Global Linguist Solutions LLC [Member]
Dec. 30, 2011
Global Linguist Solutions LLC [Member]
Revenue $ 1,697,706 $ 3,721,465 $ 944,713 $ 3,572,459 $ 435,074 $ 359,568
Cost of services (1,544,184) (3,409,222) (856,974) (3,225,250) (398,470) (325,143)
Selling, general and administrative expenses (78,024) (149,551) (38,513) (106,401) (8,244) (7,764)
Merger expenses incurred by Delta Tucker Holdings, Inc. (51,722)          
Depreciation and amortization expense (25,776) (50,773) (10,263) (41,639)    
Earnings from equity method investees 10,337 12,800        
Impairment of equity method investment   (76,647)        
Impairment of goodwill   (33,768)        
Operating income 8,337 14,304 38,963 199,169 28,360 26,661
Interest expense (46,845) (91,752) (12,585) (55,650) (832)  
Bridge commitment fee (7,963)          
Loss on early extinguishment of debt   (7,267)   (146)    
Interest income 420 205 51 542    
Other income, net 1,872 6,071 658 5,194 64 4
Income/(loss) before income taxes (44,179) (78,439) 27,087 149,109    
Provision/(benefit) for income taxes 7,881 20,122 (9,279) (47,035)    
Net income/(loss) (36,298) (58,317) 17,808 102,074 27,592 26,665
Noncontrolling interest (1,361) (2,625) (5,004) (24,631)    
Net income/(loss) attributable to Delta Tucker Holdings, Inc. $ (37,659) $ (60,942) $ 12,804 $ 77,443    

Consolidated Balance Sheets
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Consolidated Balance Sheets (USD $)
In Thousands, unless otherwise specified
Dec. 30, 2011
Dec. 31, 2010
Apr. 02, 2010
DynCorp International Inc. [Member]
Dec. 30, 2011
Global Linguist Solutions LLC [Member]
Dec. 31, 2010
Global Linguist Solutions LLC [Member]
ASSETS          
Cash and cash equivalents $ 70,205 $ 52,537 $ 122,433 $ 9,982 $ 30,915
Restricted cash 10,773 9,342 15,265    
Accounts receivable, net of allowances 752,756 782,095 849,489 53,993 92,003
Prepaid expenses and other current assets 88,877 150,613 101,971 4,096 928
Total current assets 922,611 994,587 1,089,158 68,071 123,846
Property and equipment, net 24,084 26,497 55,233    
Goodwill 645,603 679,371 457,090    
Tradename, net 43,660 43,839 18,976    
Other intangibles, net 310,740 355,129 122,040    
Deferred income taxes     6,521    
Other assets, net 67,723 163,932 31,876 94 94
Total assets 2,014,421 2,263,355 1,780,894 68,165 123,940
LIABILITIES AND EQUITY          
Current portion of long-term debt   5,700 44,137    
Accounts payable 275,068 297,821 347,068 21,534 62,429
Accrued payroll and employee costs 129,027 99,295 138,382 8,470 10,425
Deferred income taxes 78,912 90,726 19,269    
Accrued insurance       1,639 1,274
Accrued liabilities 149,175 147,859 120,662 354 199
Income taxes payable 1,077 3,471 11,408    
Total current liabilities 633,259 644,872 680,926 31,997 74,327
Long-term debt, less current portion 872,909 1,018,512 508,010    
Long-term deferred taxes 23,136 36,900      
Other long-term liabilities 27,632 45,745 8,434    
Total liabilities 1,556,936 1,746,029 1,197,370 31,997 74,327
Commitments and contingencies               
Equity:          
Common stock       570    
Additional paid-in capital 550,951 550,492 367,487    
Retained earnings (Accumulated deficit) (98,593) (37,659) 219,708    
Treasury stock     (8,942)    
Accumulated other comprehensive income/(loss) (59) 142 (1,121)    
Total equity attributable to Delta Tucker Holdings, Inc. 452,299 512,975 577,702    
Noncontrolling interest 5,186 4,351 5,822    
Total equity 457,485 517,326 583,524 36,168 49,613
Total liabilities and equity $ 2,014,421 $ 2,263,355 $ 1,780,894 $ 68,165 $ 123,940

Consolidated Balance Sheets (Parenthetical)
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Consolidated Balance Sheets (Parenthetical) (USD $)
In Thousands, except Share data, unless otherwise specified
Dec. 30, 2011
Dec. 31, 2010
Apr. 02, 2010
DynCorp International Inc. [Member]
Accounts receivable, allowances $ 1,947 $ 558 $ 68
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  

Consolidated Statements Of Cash Flows
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Consolidated Statements Of Cash Flows (USD $)
In Thousands, unless otherwise specified
9 Months Ended 12 Months Ended 3 Months Ended 12 Months Ended
Dec. 31, 2010
Dec. 30, 2011
Jul. 02, 2010
DynCorp International Inc. [Member]
Apr. 02, 2010
DynCorp International Inc. [Member]
Dec. 30, 2011
Global Linguist Solutions LLC [Member]
Dec. 31, 2010
Global Linguist Solutions LLC [Member]
Dec. 30, 2011
McNeil Technologies [Member]
Global Linguist Solutions LLC [Member]
Dec. 31, 2010
McNeil Technologies [Member]
Global Linguist Solutions LLC [Member]
Dec. 30, 2011
DynCorp International LLC [Member]
Global Linguist Solutions LLC [Member]
Dec. 31, 2010
DynCorp International LLC [Member]
Global Linguist Solutions LLC [Member]
Cash flows from operating activities                    
Net income (loss) $ (36,298) $ (58,317) $ 17,808 $ 102,074 $ 26,665 $ 27,592        
Adjustments to reconcile net income to net cash provided by operating activities:                    
Depreciation and amortization 26,225 52,494 10,524 42,578            
Loss on early extinguishment of debt, net   7,267   146            
Amortization of deferred loan costs 4,167 8,383 963 3,894            
Allowance for losses on accounts receivable 43 2,125 33 24            
Loss on impairment or disposition of assets, net   896                
Loss on impairment of equity method investment   76,647                
Loss on impairment of goodwill   33,768                
Earnings from equity method investees (12,877) (17,367) (709) (5,202)            
Distributions from affiliates 10,963 17,040   2,988            
Deferred income taxes 7,033 (25,579) 8,645 17,497            
Equity-based compensation     3,518 2,863            
Other 1,120 958 557 4,062            
Changes in assets and liabilities:                    
Restricted cash (1,159) (1,431) 7,082 (9,330)            
Accounts receivable (69,590) 27,214 8,483 (277,986) 38,010 29,740        
Prepaid expenses and other current assets (39,635) (9,380) (14,909) 21,189 (3,168) 1,742        
Accounts payable         (40,895) (18,706)        
Accrued payroll and employee costs         (1,955) (3,339)        
Accounts payable and accrued liabilities 39,497 1,813 (11,820) 183,817            
Accrued insurance         365 (5,247)        
Income taxes receivable 43,422 51,455                
Income taxes payable     (8,452) 1,859            
Other         155 (803)        
Net cash provided by (used in) operating activities (27,089) 167,986 21,723 90,473 19,177 30,979        
Cash flows from investing activities                    
Merger consideration for shares (869,043)                  
Purchase of property and equipment, net (4,639) (2,186) (1,809) (39,335)            
Proceeds from sale of property, plant, and equipment   45                
Purchase of software (3,684) (2,701) (1,065) (6,711)            
Cash paid for acquisitions, net of cash acquired       (42,889)            
Deconsolidation of GLS (938)                  
Payments received from GLS on note receivable 204,114                  
Disbursements made to GLS on note receivable (183,028)                  
Return of capital from equity method investees   9,147                
Contributions to equity method investees (21,000) (7,308)                
Other investing activities       60            
Net cash (used in) provided by investing activities (878,218) (3,003) (2,874) (88,875)            
Cash flows from financing activities                    
Borrowings from DynCorp International LLC           317,376        
Loan repayments to DynCorp International LLC           (330,410)        
Borrowings on long-term debt 1,537,000 366,700 85,600 193,500            
Payments on long-term debt (1,090,268) (518,003) (85,600) (242,126)            
Equity contribution from Affiliates of Cerberus (Note 2) 550,927                  
(Return of captial) Equity contribution         (15,000) 40,000        
Payments of deferred financing cost (49,092) (3,282)   13            
Borrowings under other financing arrangements 15,756 44,819                
Payments under other financing arrangements (5,868) (36,904)   (2,011)            
Purchases of treasury stock       (712)            
Receipt of proceeds on note receivable from DIFZ sale                      
Capital contribution from noncontrolling interest   500                
Payment of dividends to noncontrolling interest (611) (1,145) (5,416) (28,086)            
Other financing activities     (17) 35            
Payments of dividends             (12,304) (13,852) (12,806) (14,417)
Net cash (used in) provided by financing activities 957,844 (147,315) (5,433) (79,387) (40,110) (1,303)        
Net (decrease) increase in cash and cash equivalents 52,537 17,668 13,416 (77,789) (20,933) 29,676        
Cash and cash equivalents, beginning of period   52,537 122,433 200,222 30,915 1,239        
Cash and cash equivalents, end of period 52,537 70,205 135,849 122,433 9,982 30,915        
Income taxes received/paid, net 31,733 44,773 8,001 18,686            
Interest paid (19,738) (82,198) 3,181 52,824   963        
Non-cash sale of DIFZ, including related financing                      

Consolidated Statements Of Equity
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Consolidated Statements Of Equity (USD $)
In Thousands, except Share data, unless otherwise specified
McNeil Technologies [Member]
Global Linguist Solutions LLC [Member]
DynCorp International LLC [Member]
Global Linguist Solutions LLC [Member]
Parent Company [Member]
Common Stock [Member]
Parent Company [Member]
Additional Paid-In Capital [Member]
Parent Company [Member]
Retained Earnings (Accumulated Deficit) [Member]
Parent Company [Member]
Accumulated Other Comprehensive Income [Member]
Parent Company [Member]
Total Equity Attributable To Delta Tucker Holdings, Inc.
Parent Company [Member]
Noncontrolling Interest [Member]
Parent Company [Member]
DynCorp International Inc. [Member]
Common Stock [Member]
DynCorp International Inc. [Member]
Additional Paid-In Capital [Member]
DynCorp International Inc. [Member]
Retained Earnings (Accumulated Deficit) [Member]
DynCorp International Inc. [Member]
Treasury Shares [Member]
DynCorp International Inc. [Member]
Accumulated Other Comprehensive Income [Member]
DynCorp International Inc. [Member]
Total Equity Attributable To Delta Tucker Holdings, Inc.
DynCorp International Inc. [Member]
Noncontrolling Interest [Member]
DynCorp International Inc. [Member]
Global Linguist Solutions LLC [Member]
Total
Balance at Apr. 03, 2009                   $ 570 $ 366,620 $ 142,265 $ (8,618) $ (4,424) $ 496,413 $ 10,736 $ 507,149    
Balance (shares) at Apr. 03, 2009                   56,307                  
Comprehensive income (loss):                                      
Net income (loss)                       102,074     102,074   102,074    
Interest rate swap, net of tax                           3,244 3,244   3,244    
Currency translation adjustment, net of tax                           59 59   59    
Comprehensive (loss) income                       102,074   3,303 105,377   105,377    
Noncontrolling interest                       (24,631)     (24,631)   (24,631)    
Comprehensive income (loss)                       77,443   3,303 80,746   80,746    
Net income and comprehensive income attributable to noncontrolling interests                               24,631 24,631    
DIFZ financing, net of tax                     399       399   399    
Treasury share repurchases, shares                   (55)                  
Treasury share repurchases                         (712)   (712)   (712)    
Treasury shares issued to settle RSU liability, shares                   34                  
Treasury shares issued to settle RSU liability                     92   388   480   480    
Equity-based compensation                     341       341   341    
Tax benefit associated with equity-based compensation                     35       35   35    
Dividends declared to noncontrolling interests                               (29,545) (29,545)    
Balance at Apr. 02, 2010                   570 367,487 219,708 (8,942) (1,121) 577,702 5,822 583,524    
Balance, (shares) at Apr. 02, 2010                   56,286                  
Balance at Dec. 31, 2009                                      
Comprehensive income (loss):                                      
Net income (loss)                                   27,592  
Balance at Dec. 31, 2010                                   49,613  
Balance at Mar. 31, 2010                                             
Balance (shares) at Mar. 31, 2010                                       
Equity investment in connection with Merger (Note 2)        550,927     550,927   550,927                    
Acquisition accounting - fair value adjustment to noncontrolling interests                4,216 4,216                    
Comprehensive income (loss):                                      
Net income (loss)          (36,298)   (36,298)   (36,298)                   (36,298)
Currency translation adjustment, net of tax            142 142   142                    
Comprehensive (loss) income          (36,298) 142 (36,156)   (36,156)                    
Noncontrolling interest          (1,361)   (1,361)   (1,361)                   (1,361)
Comprehensive income (loss)          (37,659) 142 (37,517)   (37,517)                    
Net income and comprehensive income attributable to noncontrolling interests                1,361 1,361                    
DIFZ financing, net of tax        (435)     (435)   (435)                    
Dividends declared to noncontrolling interests                (1,226) (1,226)                    
Balance at Dec. 31, 2010        550,492 (37,659) 142 512,975 4,351 517,326                   517,326
Balance, (shares) at Dec. 31, 2010                                      100
Balance at Apr. 02, 2010                   570 367,487 219,708 (8,942) (1,121) 577,702 5,822 583,524    
Balance (shares) at Apr. 02, 2010                   56,286                  
Comprehensive income (loss):                                      
Net income (loss)                       17,808     17,808   17,808    
Interest rate swap, net of tax                           717 717   717    
Currency translation adjustment, net of tax                           (324) (324)   (324)    
Comprehensive (loss) income                       17,808   393 18,201   18,201    
Noncontrolling interest                       (5,004)     (5,004)   (5,004)    
Comprehensive income (loss)                       12,804   393 13,197   13,197    
Net income and comprehensive income attributable to noncontrolling interests                               5,004 5,004    
DIFZ financing, net of tax                     109       109   109    
Treasury shares issued to settle RSU liability, shares                   22                  
Treasury shares issued to settle RSU liability                     124   245   369   369    
Equity-based compensation                     57       57   57    
Tax benefit associated with equity-based compensation                     (17)       (17)   (17)    
Dividends declared to noncontrolling interests                               (5,884) (5,884)    
Balance at Jul. 02, 2010                   570 367,760 232,512 (8,697) (728) 591,417 4,942 596,359    
Balance, (shares) at Jul. 02, 2010                   56,308                  
Balance at Apr. 02, 2010                                   10,290  
Comprehensive income (loss):                                      
Net income (loss)                                   27,592  
Equity contribution                                   40,000  
Dividends paid (13,852) (14,417)                                  
Balance at Dec. 31, 2010        550,492 (37,659) 142 512,975 4,351 517,326                 49,613 517,326
Balance (shares) at Dec. 31, 2010                                      100
Comprehensive income (loss):                                      
Net income (loss)          (58,317)   (58,317)   (58,317)                 26,665 (58,317)
Currency translation adjustment, net of tax            (201) (201)   (201)                    
Comprehensive (loss) income          (58,317) (201) (58,518)   (58,518)                    
Noncontrolling interest          (2,625)   (2,625)   (2,625)                   (2,625)
Comprehensive income (loss)          (60,942) (201) (61,143)   (61,143)                    
Net income and comprehensive income attributable to noncontrolling interests                2,625 2,625                    
Issuance of shares to non-controlling interest                500 500                    
DIFZ financing, net of tax        459 8   467   467                    
Dividends declared to noncontrolling interests                (2,290) (2,290)                    
Return of capital                                   (15,000)  
Dividends paid (12,304) (12,806)                                  
Balance at Dec. 30, 2011        $ 550,951 $ (98,593) $ (59) $ 452,299 $ 5,186 $ 457,485                 $ 36,168 $ 457,485
Balance, (shares) at Dec. 30, 2011                                      100

Basis Of Presentation And Accounting Policies
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Basis Of Presentation And Accounting Policies (Global Linguist Solutions LLC [Member])
12 Months Ended
Dec. 30, 2011
Global Linguist Solutions LLC [Member]
 
Basis Of Presentation And Accounting Policies

Note 1—Basis of Presentation and Accounting Policies

General

Global Linguist Solutions LLC ("the Company" or "GLS" or "Our" or "We" or "Us") was incorporated on July 12, 2006 under the laws of the state of Delaware, with corporate headquarters in Falls Church, Virginia and is 51% owned by DynCorp International LLC ("DI") and 49% owned by McNeil Technologies ("MT").

INSCOM Contract

In December 2006, we were awarded the Intelligence and Security Command ("INSCOM") contract by the U.S. Army for the management of linguist and translation services in support of the military mission known as Operation Iraqi Freedom ("OIF"). Under the contract, we provide rapid recruitment, deployment, and on-site management of interpreters and translators in-theater for a wide range of foreign languages in support of the U.S. Army, unified commands, attached forces, combined forces, joint elements executing the OIF mission, and other U.S. government agencies supporting the OIF mission. We earn revenue on the INSCOM contract based on allowable cost plus a 1.5% base fee plus estimated or actual award fee. Allowable costs associated with the contract include both direct and indirect costs. Award fees are awarded quarterly for a maximum of 6% of allowable costs and are based on four major components. These components are (i) fill-rate, (ii) quality of personnel, (iii) cost control management and (iv) small business participation. The award fee dollars are based on a graduated schedule of award fee score.

In July 2011, we were awarded, by the Department of the Army, a multiple-award Indefinite Delivery Indefinite Quantity ("IDIQ") contract. We will be one of six providers that will compete for task orders on the $9.7 billion Defense Language Interpretation Translation Enterprise ("DLITE") contract providing translation and interpretation services worldwide for Army personnel, among other services.

In October 2011, President Obama announced the end of the war in Iraq. The drawdown of troops began in the fourth quarter and was complete as of December 30, 2011. We have provided continued support of the OIF mission and historically have had no other operations outside of the INSCOM contract. As this mission comes to an end, we continue to pursue other business opportunities. Additionally, the DCAA issued a Form 1 in the amount of $95.9 million pertaining to potential inconsistencies of certain contractual requirements for the fiscal year ended April 3, 2009. As a result of the Form 1, our customer informed us it would withhold 15% of the amount of the Form 1 and has in fact withheld $14.1 million until this issue 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. We do not expect that recent events will impact our ability to successfully win task orders under the DLITE contract. We are working through the Form 1s issues and will continue to do so through the remainder of the calendar year 2012.

Going Concern

The accompanying financial statements have been prepared assuming we will continue as a going concern which contemplates the realization of assets and satisfaction of liabilities in the ordinary course of business. The issuance of the Form 1s on the INSCOM contract and the continued uncertainty around our ability to win future task orders under the DLITE contract raises substantial doubt about our ability to continue as a going concern. The financial statements do not include any adjustments to the carrying amount and classification of recorded assets and liabilities should we be unable to continue operations. As mentioned above, we do not agree with the findings resulting in the issuance of the Form 1s and intend to continue to work with the DCAA towards a resolution of the issues. We plan to continue to compete for additional task orders under the DLITE contract.

Fiscal Periods

Our fiscal year is comprised of twelve consecutive fiscal months ending on the Friday closest to December 31. During fiscal year 2011, our Board of Directors approved the change in our fiscal year from a fiscal year comprised of twelve consecutive fiscal months ending on the Friday closest to March 31. This change was made to better align our financial reporting period, as well as our annual planning and budgeting process, to the fiscal year end dates of our two owners.

This report reflects our financial results for the year ended December 30, 2011 and for the nine month period beginning April 3, 2010, the day following the end of our 2010 fiscal year, and ended on December 31, 2010, which we refer to as fiscal year 2011. The fiscal period ended December 31, 2010 was a 39 week fiscal period.

 

Revenue Recognition

Revenue is recognized when persuasive evidence of an arrangement exists, services or products have been provided to the customer, costs are identifiable, determinable, reasonable and allowable, and a reasonable contractual basis for recovery exists. We expense pre-contract costs as incurred for an anticipated contract until the contract is awarded. Throughout the life of the contract, indirect costs, including general and administrative costs, are expensed as incurred. When revenue recognition is deferred relative to the timing of cost incurred, costs that are direct and incremental to a specific transaction are deferred and charged to expense in proportion to the revenue recognized.

Management regularly reviews project profitability and underlying estimates. Revisions to the estimates are reflected in results of operations as a change in accounting estimate in the period in which the facts that give rise to the revision become known by management. Contract costs on U.S. federal government contracts, including indirect costs, are subject to audit and adjustment by negotiations between the Company and government representatives.

Major factors we consider in determining total estimated revenue and cost include the basic contract price, contract options, change orders (modifications of the original contract), back charges and claims, and contract provisions for penalties, award fees and performance incentives. All of these factors and other special contract provisions are evaluated throughout the life of our contracts when estimating total contract revenue under the percentage-of-completion method of accounting.

Award fees are excluded from estimated total contract revenue until a historical basis has been established for their receipt or the award criteria have been met including the completion of the award fee period at which time the award amount is included in revenue.

Operating Segments

GLS operates as a single operating segment.

Cash and Cash Equivalents

For purposes of reporting cash and cash equivalents, we consider all highly liquid investments purchased with an original maturity of three months or less to be cash equivalents.

Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America ("GAAP") requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Management evaluates these estimates and assumptions on an ongoing basis, including but not limited to, those relating to award fees and allowances for doubtful accounts. Actual results could differ from those estimates.

Allowance for Doubtful Accounts

GLS reports receivables at the net realizable value. We establish an allowance for doubtful accounts against specific billed receivables based upon the latest information available to determine whether invoices are ultimately collectible. This evaluation involves subjective judgments and changes in this evaluation may cause an increase to our estimated allowance for doubtful accounts, which could significantly impact our financial statements by incurring bad debt expense.

Dividends Paid to Owners

Throughout the year, GLS declares and pays dividends to its owners, DI and MT, based on their respective ownership percentages.

Fair Value of Cash

The carrying amount of cash approximates fair value.

Income Taxes

We have elected to be treated as a partnership for U.S. income tax purposes which provides that, in lieu of corporate income taxes, the members of the LLC separately account for their pro rata share of the Company's items of income, deductions, losses and credits. Consequently, we are not liable for federal or state income taxes. Accordingly, no provision or liability for income taxes is included in our financial statements.

 

Concentration

GLS currently and historically has had no other operations outside of performance on the INSCOM contract. 100% of our revenue and 100% of our receivables are from a single customer, the U.S. Army.


Significant Accounting Policies And Accounting Developments
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Significant Accounting Policies And Accounting Developments
12 Months Ended 3 Months Ended
Dec. 30, 2011
Parent Company [Member]
Jul. 02, 2010
DynCorp International Inc. [Member]
Significant Accounting Policies And Accounting Developments

Note 1 — Significant Accounting Policies and Accounting Developments

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 Company was incorporated in the state of Delaware on April 1, 2010. On July 7, 2010, DynCorp International Inc. ("DynCorp International"), completed a merger with Delta Tucker Sub, Inc., a wholly owned subsidiary of the Company. Pursuant to the Agreement and Plan of Merger dated as of April 11, 2010, Delta Tucker Sub, Inc. merged with and into DynCorp International, with DynCorp International becoming the surviving corporation and a wholly-owned subsidiary of the Company (the "Merger"). Holders of DynCorp International's stock received $17.55 in cash for each outstanding share and since Cerberus indirectly owns all of our outstanding equity, DynCorp International's stock is no longer publicly traded as of the Merger.

These consolidated financial statements have been prepared, pursuant to accounting principles generally accepted in the United States of America ("GAAP").

Fiscal Year

We report the results of our operations using a 52-53 week basis. The Company's fiscal year is comprised of twelve consecutive fiscal months ending on the Friday closest to December 31. These financial statements reflect our financial results for the year ended December 30, 2011, referred to as "calendar year 2011" and for the period from April 1, 2010 (Inception) through December 31, 2010, referred to as "calendar year 2010" and "inception year" throughout the financial statements.

DynCorp International's historic fiscal year presentation was comprised of twelve consecutive fiscal months ended on the Friday closest to March 31 of each year. DynCorp International's last completed fiscal year, prior to the merger on July 7, 2010, ended on April 2, 2010 ("fiscal year 2010"). The three month period, prior to the merger on July 7, 2010, ended July 2, 2010 is referred to as the "first quarter of fiscal year 2011." The financial statements of Delta Tucker Holdings, Inc. include stub period (July 3 through July 7, 2010) activity related to DynCorp International. We evaluated the transactions during the stub period and concluded that they were immaterial and did not warrant separate presentation.

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 Codification ("ASC") 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 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, 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.

The Company classifies its 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 Business Area Teams ("BATs"), 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, the share of the joint venture's net earnings is reported in Other income, net in the consolidated statement of operations.

Economic rights in active joint ventures that are operationally integral are indicated by the ownership percentages in the table listed below.

 

Partnership for Temporary Housing LLC ("PaTH")

     40%   

Contingency Response Services LLC ("CRS")

     45%   

Global Response Services LLC ("GRS")

     51%   

Mission Readiness LLC

     36%   

Global Linguist Solutions LLC ("GLS")

     51%   

 

Economic rights in an active joint venture that the Company does not consider operationally integral are indicated by the ownership percentage in the table listed below.

 

Babcock DynCorp Limited

     44 %   

Global Linguist Solutions Deconsolidation

After the implementation of Accounting Standards Update ("ASU") 2009—17, Improvements to Financial Reporting by Enterprises Involved with Variable Interest Entities, through the date of the Merger, DynCorp International continued to consolidate GLS based on the related party relationship between DynCorp International and McNeil Technologies Inc. ("McNeil"), our GLS joint venture partner. Through the date of the Merger, DynCorp International's largest stockholder, Veritas Capital LP ("Veritas"), owned McNeil. This related party relationship ended on the date of Merger resulting in the deconsolidation of GLS on that date and we now share the power with McNeil to direct the activities that most significantly impact the economic performance of GLS.

While we do not have control over the performance of GLS, 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. See Note 11 and Note 12 for further discussion on our GLS operating segment.

Noncontrolling Interest

We record the impact of our partner's interest in consolidated joint ventures as noncontrolling interest. Currently DynCorp International FZ-LLC ("DIFZ") is our only consolidated joint venture. 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 12 for further information regarding DIFZ.

Revenue Recognition and Cost Estimation on Long-Term Contracts

General — We are predominantly a services provider and only include products or systems when necessary for the execution of the service arrangement, and as such, systems, equipment or materials are not generally separable from services. Revenue is recognized when persuasive evidence of an arrangement exists, services or products have been provided to the customer, the sales price is fixed or determinable (for non-U.S. government contracts) or costs are identifiable, determinable, reasonable and allowable (for our U.S. government contracts), and collectibility is reasonably assured (for non-U.S. government contracts) or a reasonable contractual basis for recovery exists (for U.S. government contracts). Our contracts typically fall into four categories with the first representing substantially all of our revenue. The categories are federal government contracts, construction-type contracts, software contracts and other contracts. We apply the appropriate guidance consistently to similar contracts.

We consider many factors in determining total estimated revenue and cost including the base contract price, contract options, change orders (modifications of the original contract), back charges and claims, and contract provisions for penalties, award fees and performance incentives. All of these factors and other special contract provisions are evaluated throughout the life of our contracts when estimating total contract revenue under the percentage-of-completion or proportional performance methods of accounting. We inherently have risks as it relates to our estimates with long term contracts. Actual amounts could differ from these estimates and could differ materially. We believe the following are inherent to the risk of estimation: (a) assumptions are uncertain and inherently judgmental at the time of the estimate; (b) use of reasonably different assumptions could have changed our estimates, particularly with respect to estimates of contract revenues and costs, and recoverability of assets, and (c) changes in the estimate could have a material effect on our financial condition or results of operations. The impact of all of these factors could contribute to a material cumulative adjustment.

For contracts containing award fees, we accrue these fees when we can make reasonably determinable estimates of award fees to consider them in determining total estimated contract revenue. We do not consider the mere existence of potential award fees as presumptive evidence that award fees are to be included in determining total estimated revenue. In some cases, we may not be able to reliably predict whether performance targets will be met and, consequently we exclude the award fees from the determination of total revenue in such instances. Our accrual of award fees may require adjustments from time to time. We continue to monitor our estimates around all contract performance.

 

We expense pre-contract costs as incurred for an anticipated contract until the contract is awarded. Throughout the life of the contract, indirect costs, including general and administrative costs, are expensed as incurred. Management regularly reviews project profitability and underlying estimates, including total cost to complete a project. For each project, estimates for total project costs are based on such factors as a project's contractual requirements and management's assessment of current and future pricing, economic conditions, political conditions and site conditions. Estimates can be impacted by such factors as additional requirements from our customers, a change in labor markets impacting the availability or price of a skilled workforce, regulatory changes both domestically and internationally, political unrest, or security issues at project locations. Revisions to estimates are reflected in results of operations as a change in accounting estimate in the period in which the facts that give rise to the revision become known by management.

We believe long-term contracts, contracts in a loss position and contracts with material award fees drive the significant potential changes in estimates in our contracts. These estimates are reviewed and assessed quarterly and could result in favorable or unfavorable adjustments.

Federal Government Contracts — For all non-construction and non-software U.S. federal government contracts or contract elements, we apply the guidance in ASC 912—Contractors—Federal Government. We apply the combination and segmentation guidance in ASC 605-35 Revenue—Construction-Type and Production-Type Contracts, under the guidance of ASC 912, in analyzing the deliverables contained in the applicable contract to determine appropriate profit centers. Revenue is recognized by profit center using the percentage-of-completion method or completed contract method. The completed contract method is sometimes used when reliable estimates cannot be supported for percentage-of-completion method recognition or for short duration projects when the results of operations would not vary materially from those resulting from use of the percentage-of-completion method. Until complete, project costs may be maintained in work-in-progress, a component of inventory.

Projects under our U.S. federal government contracts typically have different pricing mechanisms that influence how revenue is earned and recognized. These pricing mechanisms are classified as cost-plus-fixed-fee, fixed-price, cost-plus-award-fee or time-and-materials (including unit-price/level-of-effort contracts). Any of these contract types can be executed under an IDIQ contract, which does not represent a firm order for services. As a result, the exact timing and quantity of delivery and pricing mechanism for IDIQ profit centers are generally not known at the time of contract award, but they can contain any type of pricing mechanism.

Revenue on projects with a fixed-price or fixed-fee, including award fees, is recognized based on progress towards completion over the contract period, measured by either output or input methods appropriate to the services or products provided. For example, "output measures" can include period of service, such as for aircraft fleet maintenance, and units delivered or produced, such as aircraft for which modification has been completed. "Input measures" can include a cost-to-cost method, such as for procurement-related services.

Revenue on time-and-materials projects is recognized at contractual billing rates for applicable units of measure (e.g. labor hours incurred, units delivered). Revenue related to our unconsolidated joint ventures, where a shared service agreement exists, is recognized equal to the costs incurred to provide these services.

Construction Contracts or Contract Elements — For all construction contracts or contract elements, revenue is recognized by profit center using the percentage-of-completion method.

Software Contracts or Contract Elements — It is our policy to review any arrangement containing software or software deliverables using applicable GAAP for software revenue recognition. We have not historically sold software on a separate, standalone basis. As a result, software arrangements are typically accounted for as one unit of accounting and are recognized over the service period, including the period of post-contract customer support. We had no new software contracts or contracts with software elements in 2011 or 2010.

Other Contracts or Contract Elements — Our contracts with non-federal government customers are predominantly service arrangements. Multiple-element arrangements involve multiple obligations in various combinations to perform services, deliver equipment or materials, grant licenses or other rights, or take certain actions. We evaluate all deliverables in an arrangement to determine whether they represent separate units of accounting and arrangement consideration is allocated among the separate units of accounting based on the guidance applicable for the multiple-element arrangement. Many of our arrangements were entered into prior to January 1, 2011. For these arrangements, arrangement considerations are allocated to those identified as multiple-element arrangements based on their relative fair values. Fair values are established by evaluating vendor specific objective evidence ("VSOE") or third-party evidence if available. Due to the customized nature of our arrangements, VSOE and third-party evidence is generally not available resulting in applicable arrangements being accounted for as one unit of accounting. For arrangements that are entered into or materially modified after January 1, 2011, arrangement considerations are allocated to those identified as multiple-element arrangements based on relative selling price. Relative selling price is established through VSOE, third-party evidence, or management's best estimate of selling price. Due to the customized nature of our arrangements, VSOE and third-party evidence is generally not available and therefore, relative selling price is generally allocated to multiple-element arrangements utilizing management's best estimate of selling price.

 

Cash and Cash Equivalents

For purposes of reporting cash and cash equivalents, we consider all highly liquid investments purchased with an original maturity of three months or less to be cash equivalents.

Restricted Cash

Restricted cash represents cash restricted by certain contracts and available for use to pay specified costs and vendors on work performed on specific contracts. On some contracts, advance payments are not available for use and cash is to be disbursed for specified costs for work performed on the specific contract. Changes in restricted cash related to our contracts are included as operating activities.

Use of Estimates

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Management evaluates these estimates and assumptions on an ongoing basis, including but not limited to, those relating to allowances for doubtful accounts, fair value and impairment of intangible assets and goodwill, income taxes, profitability on contracts, anticipated contract modifications, contingencies and litigation. Actual results could differ from those estimates. See our discussion above in the Revenue Recognition and Cost Estimation on Long-Term Contracts for further discussion regarding our estimate process and recognition of award fees.

Allowance for Doubtful Accounts

We establish an allowance for doubtful accounts against specific billed receivables based upon the latest information available to determine whether invoices are ultimately collectible. Such information includes the historical trends of write-offs and recovery of previously written-off accounts, the financial strength of the respective customer and projected economic and market conditions. The evaluation of these factors involves subjective judgments and changes in these factors may cause an increase to our estimated allowance for doubtful accounts, which could significantly impact our consolidated financial statements by incurring bad debt expense. Given that we primarily serve the U.S. government, we believe the risk is low that changes in our allowance for doubtful accounts would have a material impact on our financial results.

Property and Equipment

The cost of property and equipment, less applicable residual values, is depreciated using the straight-line method. Depreciation commences when the specific asset is complete, installed and ready for normal use. Depreciation related to equipment purchased for specific contracts is typically included within Cost of services, as this depreciation is directly attributable to project costs. We evaluate property and equipment for impairment quarterly by examining factors such as existence, functionality, obsolescence and physical condition. In the event that we experience impairment, we revise the useful life estimate and record the impairment as an addition to depreciation expense and accumulated depreciation. Our standard depreciation and amortization policies are as follows:

 

Computer and related equipment

   3 to 5 years

Furniture and other equipment

   2 to 10 years

Leasehold improvements

   Shorter of lease term or useful life

Impairment of Long Lived Assets

Our long lived assets are primarily made up of customer related intangibles. The initial values assigned to customer-related intangibles were the result of fair value calculations associated with business combinations. The values were determined based on estimates and judgments regarding expectations for the estimated future after-tax cash flows from those assets over their lives, including the probability of expected future contract renewals and sales, less a cost-of-capital charge, all of which was discounted to present value. We evaluate the carrying value of our customer-related intangibles whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. The customer related intangible carrying value is considered impaired when the anticipated undiscounted cash flows from such asset is less than its carrying value. In that case, a loss is recognized based on the amount by which the carrying value exceeds the fair value.

 

Indefinite-Lived Assets

Indefinite-lived assets, including goodwill and indefinite-lived tradename, are not amortized but are subject to an annual impairment test. The first step of the goodwill impairment test compares the fair value of each of our reporting units with its carrying amount, including indefinite-lived assets. If the fair value of a reporting unit exceeds its carrying amount, the indefinite-lived assets of the reporting unit are not considered impaired, and the second step of the impairment test is unnecessary. If the carrying amount of a reporting unit exceeds its fair value, the second step of the goodwill impairment test is performed to measure the amount of the impairment loss, if any. We evaluate goodwill for impairment annually in the first month of the fourth quarter of each fiscal year and when an event occurs or circumstances change to suggest that the carrying value may not be recoverable. Our performance of the goodwill impairment test determined that the carrying value of the goodwill associated two reporting units within our GSDS reporting segment exceeded the fair value. As a result, we recorded an impairment charge of $33.8 million for the year ended December 30, 2011. See Note 3 for further discussion.

Income Taxes

We file income, franchise, gross receipts and similar tax returns in many jurisdictions. Our tax returns are subject to audit by the Internal Revenue Service, most states in the U.S., and by various government agencies representing many jurisdictions outside the U.S.

We use the asset and liability approach for financial accounting and reporting for income taxes in accordance with the Financial Accounting Standards Board ("FASB") Codification. Deferred income tax assets and liabilities are computed annually for differences between the financial statement and tax bases of assets and liabilities that will result in taxable or deductible amounts in the future based on enacted tax laws and rates applicable to the periods in which the differences are expected to affect taxable income. Income tax expense is made up of current expense which includes both permanent and temporary differences and deferred expense which only includes temporary differences. Income tax expense is the amount of tax payable for the period plus or minus the change in deferred tax assets and liabilities during the period.

We make a comprehensive review of our portfolio of uncertain tax positions regularly. The accounting for uncertainty in income taxes requires a more-likely-than-not threshold for financial statement recognition and measurement of tax positions taken or expected to be taken in a tax return. A liability is recorded when a benefit is recognized for a tax position and it is not more-likely-than-not that the position will be sustained on its technical merits or where the position is more-likely-than-not that it will be sustained on its technical merits, but the largest amount to be realized upon settlement is less than 100% of the position. To the extent that our assessment of such tax positions changes, the change in estimate is recorded in the period in which the determination is made. Tax-related interest is classified in interest expense and tax-related penalties are classified in income tax expense. See Note 4 for additional detail regarding uncertain tax positions.

Currency Translation

The assets and liabilities of our subsidiaries, that are outside the U.S. and that have a functional currency that is not the U.S. dollar, are translated into U.S. dollars at the rates of exchange in effect at the balance sheet dates. Income and expense items, for these subsidiaries, are translated at the average exchange rates prevailing during the period. Gains and losses resulting from currency transactions and the remeasurement of the financial statements of U.S. functional currency foreign subsidiaries are recognized currently in Cost of services and Other income, net and those resulting from translation of financial statements are included in accumulated other comprehensive income. Our foreign currency transactions were not material for the calendar year ended December 30, 2011.

Operating Segments

Our business is aligned into three operating segments, two of which, Global Stabilization and Development Solutions ("GSDS") and Global Platform Support Solutions ("GPSS"), are wholly-owned. Our third segment, GLS, is a 51% owned joint venture and accounted for as an operationally integral unconsolidated equity method investee. Our reporting segments are identical to our operating segments. Each segment, with the exception of GLS, is comprised of numerous contracts. Our segments are more fully described in Note 11.

Accounting Developments

Pronouncements Implemented

In September 2011, the FASB issued ASU No. 2011-09—Disclosures about an Employer's Participation in a Multiemployer Plan, which amends FASB ASC 715-80, Compensation-Retirement Benefits-Multiemployer Plans, requiring additional disclosures about the commitments an employer has made to a multiemployer plan and the potential future cash flow implication of participation in such a plan. Specifically, the additional disclosures require information concerning (1) identification of the multiemployer plans in which an employer participates, (2) the level of employer participation, including the amount of contributions made, (3) the financial condition of the plans, and (4) the nature of an employer's commitments to the plans. Additional disclosures are required in respect to plans for which information is not publicly available from the plan's annual report filed with the Internal Revenue Service. The amendments to FASB ASC 715-80 do not alter existing recognition and measurement guidance under the provisions of FASB ASC 450, Contingencies, if it is probable or reasonably possible that withdrawal from a plan could give rise to an obligation, or that the contribution to a plan would be increased to cover a shortfall in funds necessary to maintain the required level of benefit coverage. The revised disclosure requirements are applied retrospectively for fiscal years ending after December 15, 2011, for public entities. Early application is permitted. We adopted ASU No. 2011-09 as of December 30, 2011. The adoption of this ASU did not have a material effect on our consolidated financial position and results of operations. See further discussion in Note 6.

In October 2009, the FASB issued ASU No. 2009-13—Revenue Recognition Multiple-Deliverable Revenue Arrangements. This update (i) removes the objective-and-reliable-evidence-of-fair-value criterion from the separation criteria used to determine whether an arrangement involving multiple deliverables contains more than one unit of accounting, (ii) replaces references to "fair value" with "selling price" to distinguish from the fair value measurements required under the fair value measurements and disclosures guidance, (iii) provides a hierarchy that entities must use to estimate the selling price, (iv) eliminates the use of the residual method for allocation, and (v) expands the ongoing disclosure requirements. The impact of this ASU is limited to new or materially modified non-U.S. government contracts. The amendments in this update are effective prospectively for revenue arrangements entered into or materially modified in fiscal years beginning on or after June 15, 2010, with early adoption permitted. We adopted ASU No. 2009-13 as of January 1, 2011. The adoption of this ASU did not have a material effect on our consolidated financial position and results of operations.

In October 2009, the FASB issued ASU No. 2009-14—Certain Revenue Arrangements That Include Software Elements, which updates ASC 985—Software, and clarifies which accounting guidance should be used for purposes of measuring and allocating revenue for arrangements that contain both tangible products and software, and where the software is more than incidental, to the tangible product as a whole. The amendments in this update are effective prospectively for revenue arrangements entered into or materially modified in fiscal years beginning on or after June 15, 2010, with early adoption permitted. We adopted ASU No. 2009-14 as of January 1, 2011.The adoption of this ASU did not have a material effect on our consolidated financial position and results of operations.

Pronouncements Not Yet 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 do not believe that the adoption of this ASU will have a material effect on our consolidated financial position and results of operations.

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 would still be required to adopt the other requirements contained in the new accounting standard for the presentation of comprehensive income. The amendments made should be applied retrospectively and become effective for SEC registrants for fiscal years and interim periods beginning after December 15, 2011, with early adoption permitted. We do not believe that the adoption of this ASU will have a material effect on our consolidated financial position and results of operations.

On September 15, 2011, the FASB issued ASU No.2011-08—Testing Goodwill for Impairment, which gives entities testing goodwill for impairment the option of performing a qualitative assessment before calculating the fair value of a reporting unit in step 1 of the goodwill impairment test. If entities determine, on the basis of qualitative factors, that the fair value of a reporting unit is more-likely-than-not less than the carrying amount, the two-step impairment test would be required. Otherwise, further testing would not be needed. The ASU is effective for all entities for annual and interim goodwill impairment tests performed for fiscal years beginning after December 15, 2011. Early adoption is permitted. We do not believe that the adoption of this ASU will have a material effect on our consolidated financial position and results of operations.

Note 1 — Significant Accounting Policies and Accounting Developments

Unless the context otherwise indicates, references herein to "we," "our," "us" or "DynCorp International" refer to DynCorp International Inc. and our consolidated subsidiaries. DynCorp International Inc., through its subsidiaries (together, the "Company"), provides defense and technical services and government outsourced solutions primarily to United States ("U.S.") government agencies domestically and internationally. Primary customers include the U.S. Department of Defense ("DoD") and U.S. Department of State ("DoS"), but also include other government agencies, foreign governments and commercial customers.

These consolidated financial statements have been prepared, pursuant to accounting principles generally accepted in the United States of America ("GAAP").

Fiscal Periods

On December 16, 2010, our board of directors approved a change in our fiscal year from a fiscal year comprised of twelve consecutive fiscal months ending on the Friday closest to March 31 to a fiscal year comprised of the twelve consecutive fiscal months ending on the Friday closest to December 31.

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 Codification ("ASC") 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 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, 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 have ownership interests in three active joint ventures that are not consolidated into our financial statements as of April 2, 2010, and are accounted for using the equity method. Economic rights in active joint ventures are indicated by the ownership percentages in the table listed below.

 

Babcock DynCorp Limited

     44.0 

Partnership for Temporary Housing LLC

     40.0

Contingency Response Services LLC

     45.0

The following table sets forth our ownership in joint ventures that are consolidated into our financial statements as of April 2, 2010. For the entities listed below, we are the primary beneficiary as defined in ASC 810 — Consolidation.

 

Global Linguist Solutions, LLC

     51.0

DynCorp International FZ-LLC

     50.0

Noncontrolling interests

We record the impact of our consolidated joint venture partners' interests as noncontrolling interests. Noncontrolling interests is presented on the face of the income statement as an increase or reduction in arriving at Net income attributable to DynCorp International, Inc. Noncontrolling interests on the balance sheet is located in the equity section.

Revenue Recognition and Cost Estimation on Long-Term Contracts

General — We are predominantly a service provider and only include products or systems when necessary for the execution of the service arrangement and as such, systems, equipment or materials are not generally separable from services. Revenue is recognized when persuasive evidence of an arrangement exists, services or products have been provided to the customer, the sales price is fixed or determinable (for non-U.S. government contracts) or costs are identifiable, determinable, reasonable and allowable (for our U.S. government contracts), and collectibility is reasonably assured (for non-U.S. government contracts) or a reasonable contractual basis for recovery exists (for U.S. government contracts). Our contracts typically fall into four categories with the first representing the vast majority of our revenue. The categories are federal government contracts, construction type contracts, software contracts and other contracts. We apply the appropriate guidance consistently to similar contracts. Each arrangement is unique and revenue recognition is evaluated on a contract by contract basis. We apply the appropriate principles under GAAP consistently to similar contracts.

The evaluation of the separation and allocation of an arrangement fee to each deliverable within a multiple-deliverable arrangement is dependent upon the principles applicable to the specific arrangement.

We expense pre-contract costs as incurred for an anticipated contract until the contract is awarded. Throughout the life of the contract, indirect costs, including general and administrative costs, are expensed as incurred. When revenue recognition is deferred relative to the timing of cost incurred, costs that are direct and incremental to a specific transaction are deferred and charged to expense in proportion to the revenue recognized.

Management regularly reviews project profitability and underlying estimates. Revisions to the estimates are reflected in the results of operations as a change in accounting estimate in the period in which the facts that give rise to the revision become known by management. When estimates of total costs to be incurred on a contract exceed estimates of total revenue to be earned, a provision for the entire loss on the contract is recorded to cost of services in the period the loss is determined. Loss provisions are first offset against costs that are included in inventoried assets, with any remaining amount reflected in liabilities.

Major factors we consider in determining total estimated revenue and cost include the basic contract price, contract options, change orders (modifications of the original contract), back charges and claims, and contract provisions for penalties, award fees and performance incentives. All of these factors and other special contract provisions are evaluated throughout the life of our contracts when estimating total contract revenue under the percentage-of-completion or proportional methods of accounting.

Federal Government Contracts — For all non-construction and non-software U.S. federal government contracts or contract elements, we apply the guidance in the ASC 912 — Contractors Federal Government ("ASC 912"). We apply the combination and segmentation guidance in the ASC 605-35- Revenue-Construction Type and Production Type Contracts ("ASC 605-35") as directed in ASC 912, in analyzing the deliverables contained in the applicable contract to determine appropriate profit centers. Revenue is recognized by profit center using the percentage-of-completion method or completed contract method.

Projects under our U.S. federal government contracts typically have different pricing mechanisms that influence how revenue is earned and recognized. These pricing mechanisms are classified as cost-plus-fixed-fee, fixed-price, cost-plus-award-fee, time-and-materials (including unit-price/level-of-effort contracts), or Indefinite Delivery, Indefinite Quantity ("IDIQ"). The exact timing and quantity of delivery and pricing mechanism for IDIQ profit centers are not known at the time of contract award, but they can contain any type of pricing mechanism.

Revenue on projects with a fixed-price or fixed-fee, including award fees, is generally recognized based on progress towards completion over the contract period measured by either output or input methods appropriate to the services or products provided. For example, "output measures" can include period of service, such as for aircraft fleet maintenance, and units delivered or produced, such as aircraft for which modification has been completed. "Input measures" can include a cost-to-cost method, such as for procurement-related services.

Revenue on time-and-materials projects is recognized at contractual billing rates for applicable units of measure (e.g. labor hours incurred or units delivered).

The completed contract method is sometimes used when reliable estimates cannot be supported for percentage-of-completion method recognition or for short duration projects when the results of operations would not vary materially from those resulting from use of the percentage-of-completion method. Until complete, project costs are maintained in work in progress, a component of inventory reflected within Prepaid expenses and other current assets on the consolidated Balance Sheet.

Contract costs on U.S. federal government contracts, including indirect costs, are subject to audit and adjustment by negotiations between us and government representatives. Substantially all of our indirect contract costs have been agreed upon through 2004. Contract revenue on U.S. federal government contracts have been recorded in amounts that are expected to be realized upon final settlement.

Award fees are recognized based on the guidance in ASC 605-35, as directed by ASC 912. Award fees are excluded from estimated total contract revenue until a historical basis has been established for their receipt or the estimation or award criteria have been met including the completion of the award fee period at which time the award amount is included in the percentage-of-completion estimation.

 

Construction Contracts or Contract Elements — For all construction contracts or contract elements, we apply the combination and segmentation guidance found in ASC 605-35, as directed by ASC 910 Contractors Construction ("ASC-910"), in analyzing the deliverables contained in the contract to determine appropriate profit centers. Revenue is recognized by profit center using the percentage-of-completion method.

Software Contracts or Contract Elements — It is our policy to review any arrangement containing software or software deliverables against the criteria contained in ASC 985 — Software ("ASC 985"). In addition, ASC 605-25- Revenue Multiple Element Arrangements ("ASC 605-25") is also applied to determine if any non-software deliverables are outside of the scope of ASC 985 when the software is more than incidental to the products or services as a whole. Under the provisions of ASC 985, software deliverables are separated and contract value is allocated based on Vendor Specific Objective Evidence ("VSOE"). We have never sold software on a separate standalone basis. As a result, software arrangements are typically accounted for as one unit of accounting and are recognized over the service period, including the period of post-contract customer support. All software arrangements requiring significant production, modification, or customization of the software are accounted for under ASC 605-25 as directed by ASC 985.

Other Contracts or Contract Elements — Our contracts with non-U.S. federal government customers are predominantly multiple-element. Multiple-element arrangements involve multiple obligations in various combinations to perform services, deliver equipment or materials, grant licenses or other rights, or take certain actions. We evaluate all deliverables in an arrangement to determine whether they represent separate units of accounting per the provisions of ASC 605-25 and arrangement consideration is allocated among the separate units of accounting based on their relative fair values. Fair values are established by evaluating VSOE or third-party evidence if available. Due to the customized nature of our arrangements, VSOE and third-party evidence is generally not available resulting in applicable arrangements being accounted for as one unit of accounting under the guidance of ASC 605-25.

We apply the guidance in ASC 605-15 — Revenue Products, or ASC 605-20 — Revenue Services. The timing of revenue recognition for a given unit of accounting will depend on the nature of the deliverable(s) and whether revenue recognition criteria have been met. The same pricing mechanisms found in U.S. federal government contracts are found in our other contracts.

Cash and cash equivalents

For purposes of reporting cash and cash equivalents, we consider all highly liquid investments purchased with an original maturity of three months or less to be cash equivalents.

Restricted cash

Restricted cash represents cash restricted by certain contracts in which advance payments are not available for use except to pay specified costs and vendors for work performed on the specific contract.

Changes in restricted cash related to our contracts are included as operating activities whereas changes in restricted cash for funds invested as collateral are included as investing activities in the consolidated statements of cash flows.

Use of Estimates

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Management evaluates these estimates and assumptions on an ongoing basis, including but not limited to, those relating to allowances for doubtful accounts, fair value and impairment of intangible assets and goodwill, income taxes, profitability on contracts, anticipated contract modifications, contingencies and litigation. Actual results could differ from those estimates.

Allowance for Doubtful Accounts

We establish an allowance for doubtful accounts against specific billed receivables based upon the latest information available to determine whether invoices are ultimately collectible. Such information includes the historical trends of write-offs and recovery of previously written-off accounts, the financial strength of the respective customer, and projected economic and market conditions. The evaluation of these factors involves subjective judgments and changes in these factors may cause an increase to our estimated allowance for doubtful accounts, which could significantly impact our consolidated financial statements by incurring bad debt expense. Given that we primarily serve the U.S. government, management believes the risk is low that changes in our allowance for doubtful accounts would have a material impact on our financial results.

Property and Equipment

The cost of property and equipment, less applicable residual values, is depreciated using the straight-line method. Depreciation commences when the specific asset is complete, installed and ready for normal use. Depreciation related to equipment purchased for specific contracts is typically included within cost of services, as this depreciation is directly attributable to project costs. We evaluate property and equipment for impairment quarterly by examining factors such as existence, functionality, obsolescence and physical condition. In the event that we experience impairment, we revise the useful life estimate and record the impairment as an addition to depreciation expense and accumulated depreciation. Our standard depreciation and amortization policies are as follows:

 

Computer and related equipment

   3 to 5 years

Furniture and other equipment

   2 to 10 years

Leasehold improvements

   Shorter of lease term or useful life

Impairment of Long Lived Assets

Our long lived assets are primarily made up of customer related intangibles. The initial values assigned to customer-related intangibles were the result of fair value calculations associated with business combinations. The values were determined based on estimates and judgments regarding expectations for the estimated future after-tax cash flows from those assets over their lives, including the probability of expected future contract renewals and sales, less a cost-of-capital charge, all of which was discounted to present value. We evaluate the carrying value of our customer-related intangibles on a quarterly basis. The customer related intangible carrying value is considered impaired when the anticipated undiscounted cash flows from such asset is less than its carrying value. In that case, a loss is recognized based on the amount by which the carrying value exceeds the fair value.

Indefinite- Lived Assets

Indefinite-lived assets, including goodwill and indefinite-lived tradename, are not amortized but are subject to an annual impairment test. The first step of the goodwill impairment test compares the fair value of each of our reporting units with its carrying amount, including indefinite-lived assets. If the fair value of a reporting unit exceeds its carrying amount, the indefinite-lived assets of the reporting unit are not considered impaired, and the second step of the impairment test is unnecessary. If the carrying amount of a reporting unit exceeds its fair value, the second step of the goodwill impairment test is performed to measure the amount of the impairment loss, if any.

We evaluate goodwill for impairment annually and when an event occurs or circumstances change to suggest that the carrying value may not be recoverable. Based on the results of these tests, no impairment losses were identified for the fiscal year ended April 2, 2010. See Note 2 to the audited consolidated financial statements for additional discussion on indefinite-lived assets.

Income Taxes

We file income, franchise, gross receipts and similar tax returns in many jurisdictions. Our tax returns are subject to audit by the Internal Revenue Service, most states in the U.S., and by various government agencies representing many jurisdictions outside the U.S.

We use the asset and liability approach for financial accounting and reporting for income taxes in accordance with the Financial Accounting Standards Board ("FASB") Codification. Deferred income tax assets and liabilities are computed annually for differences between the financial statement and tax bases of assets and liabilities that will result in taxable or deductible amounts in the future based on enacted tax laws and rates applicable to the periods in which the differences are expected to affect taxable income. Income tax expense is made up of current expense which includes both permanent and temporary differences and deferred expense which only includes temporary differences. Income tax expense is the amount of tax payable for the period plus or minus the change in deferred tax assets and liabilities during the period.

We make a comprehensive review of our portfolio of uncertain tax positions regularly. The accounting for uncertainty in income taxes requires a more-likely-than-not threshold for financial statement recognition and measurement of tax positions taken or expected to be taken in a tax return. A liability is recorded when a benefit is recognized for a tax position and it is not more-likely-than-not that the position will be sustained on its technical merits or where the position is more-likely-than-not that it will be sustained on its technical merits, but the largest amount to be realized upon settlement is less than 100% of the position. To the extent that our assessment of such tax positions changes, the change in estimate is recorded in the period in which the determination is made. Tax-related interest is classified in interest expense and tax-related penalties are classified in income tax expense. See Note 3 to the audited consolidated financial statements for additional detail regarding uncertain tax positions.

 

Equity-Based Compensation Expense

We have adopted the provisions of, and accounted for equity-based compensation in accordance with ASC 718 — Compensation-Stock Compensation. Under the fair value recognition provisions, equity-based compensation expense is measured at the grant date based on the fair value of the award and is recognized on an graded basis over the requisite service period for each separately vesting portion of the award, adjusted for estimated forfeitures. Our RSUs were determined to be liability awards; therefore, the fair value of the RSUs were remeasured at each financial reporting date as long as they remained liability awards.

Currency Translation

The assets and liabilities of our subsidiaries, that are outside the U.S. and that have a functional currency that is not the U.S. dollar, are translated into U.S. dollars at the rates of exchange in effect at the balance sheet dates. Income and expense items, for these subsidiaries, are translated at the average exchange rates prevailing during the period. Gains and losses resulting from currency transactions and the remeasurement of the financial statements of U.S. functional currency foreign subsidiaries are recognized currently in income and those resulting from translation of financial statements are included in accumulated other comprehensive income.

Operating Segments

On April 4, 2009, we announced a reorganization of our business structure to better align with strategic markets and to streamline our infrastructure. Under the new alignment, our three reportable segments were realigned into three new segments, two of which, Global Stabilization and Development Solutions ("GSDS") and Global Platform Support Solutions ("GPSS"), are wholly-owned, and a third segment, Global Linguist Solutions ("GLS"), is a 51% owned joint venture, which was deconsolidated as of the Merger. The new structure became effective April 4, 2009, the start of our 2010 fiscal year, and is more fully described in Note 16.

Accounting Developments

Pronouncements Implemented

In June 2009, the Financial Accounting Standards Board ("FASB") issued Statement of Financial Standards No. 167-Amendments to FASB Interpretation 46(R) ("SFAS No. 167"). SFAS No. 167 was converted to Financial Accounting Standards Update 2009-17 and was incorporated into Financial Accounting Standards Codification 810 — Consolidation. This statement amends the guidance for (i) determining whether an entity is a VIE, (ii) determining the primary beneficiary of a VIE, (iii) requiring ongoing reassessments of whether an enterprise is the primary beneficiary of a VIE and (iv) changing the disclosure requirements formerly listed in FASB Interpretation 46(R)-8. This statement was effective for us beginning April 3, 2010. The adoption of this statement did not impact our consolidation conclusions in the first quarter of fiscal year 2011.

Pronouncements not yet Implemented

In October 2009, the FASB issued ASU No. 2009-13 — Revenue Recognition Multiple-Deliverable Revenue Arrangements. This update (i) removes the objective-and-reliable-evidence-of-fair-value criterion from the separation criteria used to determine whether an arrangement involving multiple deliverables contains more than one unit of accounting, (ii) replaces references to "fair value" with "selling price" to distinguish from the fair value measurements required under the fair value measurements and disclosures guidance, (iii) provides a hierarchy that entities must use to estimate the selling price, (iv) eliminates the use of the residual method for allocation, and (v) expands the ongoing disclosure requirements. The amendments in this update will be effective prospectively for revenue arrangements entered into or materially modified in fiscal years beginning on or after June 15, 2010, with early adoption permitted. Management does not believe that adoption of this ASU will have a material effect on our consolidated financial position and results of operations.

In October 2009, the FASB issued ASU No. 2009-14 — Certain Revenue Arrangements That Include Software Elements, which updates ASC 985 — Software and clarifies which accounting guidance should be used for purposes of measuring and allocating revenue for arrangements that contain both tangible products and software, and where the software is more than incidental to the tangible product as a whole. The amendments in this update will be effective prospectively for revenue arrangements entered into or materially modified in fiscal years beginning on or after June 15, 2010, with early adoption permitted. Management does not believe that adoption of this ASU will have a material effect on our consolidated financial position and results of operations.

In April 2010, the FASB issued ASU No. 2010-17 — Milestone Method of Revenue Recognition — Consensus of the FASB Emerging Issues Task Force, which amends ASC 605 — Revenue Recognition. This ASU establishes authoritative guidance permitting the use of the milestone method of revenue recognition for research or development arrangements that contain payment provisions or consideration contingent on the achievement of specified events. This guidance is effective for milestones achieved in fiscal years beginning on or after June 15, 2010 and allows for either prospective or retrospective application, with early adoption permitted. Management does not believe that adoption of this ASU will have a material effect on our consolidated financial position and results of operations.


Billed And Unbilled Receivables
v0.0.0.0
Billed And Unbilled Receivables (Global Linguist Solutions LLC [Member])
12 Months Ended
Dec. 30, 2011
Global Linguist Solutions LLC [Member]
 
Billed And Unbilled Receivables

Note 2—Billed and Unbilled Receivables

The balance of unbilled receivables consists of costs and fees billable upon payments being made to our applicable subcontractors or supporting documentation being made available to our customer. Virtually, all unbilled receivables are expected to be billed and collected within one year.

 

(Amounts in thousands)    December 30, 2011      December 31, 2010  

Billed

   $ 17,371       $ 22,336   

Unbilled

     36,622         69,667   
  

 

 

    

 

 

 

Total

   $ 53,993       $ 92,003   
  

 

 

    

 

 

 

Composition Of Certain Financial Statement Captions
v0.0.0.0
Composition Of Certain Financial Statement Captions
12 Months Ended 3 Months Ended
Dec. 30, 2011
Parent Company [Member]
Jul. 02, 2010
DynCorp International Inc. [Member]
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:

 

(Amounts in thousands)    December 30, 2011      December 31, 2010  

Prepaid expenses

   $ 38,092       $ 34,801   

Prepaid income taxes

     2,236         54,927   

Inventories

     7,005         11,034   

Available-for-sale inventory

     11,084         10,485   

Work-in-process

     10,223         5,132   

Joint venture receivables

     3,959         5,005   

Favorable contracts

     4,825         23,096   

Other current assets

     11,453         6,133   

Prepaid expenses and other current assets

   $ 88,877       $ 150,613   
  

 

 

    

 

 

 

Prepaid expenses include prepaid insurance, prepaid vendor deposits, and prepaid rent, none of which individually exceed 5% of current assets. Prepaid income taxes represents refunds expected through calendar year 2012.

Available-for-sale-inventory is made up of seven helicopters, valued at $8.2 million, that were not deployed on existing programs as of December 30, 2011, 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:

 

(Amounts in thousands)    December 30, 2011     December 31, 2010  

Helicopters

   $ 8,087      $ 8,087   

Computers and other equipment

     9,524        9,119   

Leasehold improvements

     9,367        6,953   

Office furniture and fixtures

     4,738        4,598   
  

 

 

   

 

 

 

Gross property and equipment

     31,716        28,757   

Less accumulated depreciation

     (7,632     (2,260
  

 

 

   

 

 

 

Property and equipment, net

   $ 24,084      $ 26,497   
  

 

 

   

 

 

 

Depreciation expense was $5.5 million and $2.3 million for the year ended December 30, 2011 and for the period from April 1, 2010 (Inception) through December 31, 2010, respectively, including certain depreciation amounts classified as Cost of services.

Other assets, net — Other assets, net were:

 

(Amounts in thousands)    December 30, 2011      December 31, 2010  

Deferred financing costs, net

   $ 32,710       $ 45,080   

Investment in affiliates

     27,700         107,217   

Palm promissory notes, long-term portion

     5,307         5,482   

Phoenix retention asset

     —           3,128   

Other

     2,006         3,025   
  

 

 

    

 

 

 

Other assets, net

   $ 67,723       $ 163,932   
  

 

 

    

 

 

 

Deferred financing costs are amortized through interest expense. Amortization related to deferred financing costs was $8.4 million and $4.2 million for the year ended December 30, 2011 and for the period from April 1, 2010 (Inception) through December 31, 2010, respectively. Deferred financing costs were reduced during the year ended December 30, 2011 by $7.3 million related to the pro rata write–off of financing costs to Loss on early extinguishment of debt as a result of the $147.3 million in total prepayments on the term loan in 2011. See Note 7 for further discussion of our prepayments on our debt.

 

The Phoenix retention bonus, recorded at the acquisition date, was reduced to zero as a result of the acceleration of the bonus expense resulting from the realignment of the Phoenix entity during the year ended December 30, 2011. Investment in affiliates was reduced during the year ended December 30, 2011 by a $1.5 million and a $7.7 million return of capital from our CRS joint venture and the GLS joint venture, respectively. Additionally, an impairment was recorded against our investment in affiliates as of September 30, 2011, in the amount of $76.6 million, as our investment in GLS had a loss in value that was other than temporary. See Note 12 for further discussion of the impairment of the investment in affiliates.

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

 

(Amounts in thousands)    December 30, 2011      December 31, 2010  

Wages, compensation and other benefits

   $ 102,427       $ 77,713   

Accrued vacation

     26,077         20,608   

Accrued contributions to employee benefit plans

     523         974   
  

 

 

    

 

 

 

Accrued payroll and employee costs

   $ 129,027       $ 99,295   
  

 

 

    

 

 

 

Accrued liabilities — Accrued liabilities were:

 

(Amounts in thousands)    December 30, 2011      December 31, 2010  

Deferred revenue

   $ 12,084       $ 8,179   

Insurance expense

     48,715         22,342   

Interest expense

     24,480         23,380   

Unfavorable contract liability

     6,867         14,653   

Operating reserves and contract losses

     6,456         21,451   

Legal matters

     4,782         17,403   

Subcontractor retention

     5,927         14,574   

Financed insurance

     17,804         9,888   

Other

     22,060         15,989   
  

 

 

    

 

 

 

Accrued Liabilities

   $ 149,175       $ 147,859   
  

 

 

    

 

 

 

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 long-term liabilities — Other long-term liabilities were:

 

(Amounts in thousands)    December 30, 2011      December 31, 2010  

Unfavorable contract liability

   $ 6,761       $ 19,418   

Unrecognized tax benefit

     2,614         3,098   

Unfavorable lease accrual

     4,827         6,963   

Contract losses

     9,804         11,143   

Other

     3,626         5,123   
  

 

 

    

 

 

 

Other long-term liabilities

   $ 27,632       $ 45,745   
  

 

 

    

 

 

 

Note 11 — 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:

 

(Amounts in thousands)    April 2, 2010  

Prepaid expenses

   $ 37,974   

Prepaid income taxes

     7,391   

Inventories

     14,797   

Available-for-sale inventory

     2,250   

Work-in-process

     20,455   

Joint venture receivables

     5,188   

Other current assets

     13,916   
  

 

 

 

Total

   $ 101,971   
  

 

 

 

Prepaid expenses include prepaid insurance, prepaid vendor deposits, and prepaid rent, none of which individually exceed 5% of current assets. We value our inventory at lower of cost or market. Available-for-sale-inventory is made up of two helicopters that will not be deployed on existing programs. During fiscal year ended April 2, 2010 we recorded $1.2 million of impairment charges to the available-for-sale helicopters on the GPSS segment. The available-for-sale value was based on a preliminary sales price to a potential buyer.

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

 

(Amounts in thousands)    April 2, 2010  

Helicopters

   $ 37,011   

Computers and other equipment

     13,668   

Leasehold improvements

     8,818   

Office furniture and fixtures

     6,697   
  

 

 

 

Gross property and equipment

     66,194   

Less accumulated depreciation

     (10,961
  

 

 

 

Property and equipment, net

   $ 55,233   
  

 

 

 

Depreciation expense was $3.7 million, for the fiscal year ended April 2, 2010, including certain depreciation amounts classified as Cost of services. Accumulated depreciation was $11.0 million as of April 2, 2010. The helicopters that are included within Property and equipment were not placed in service as of April 2, 2010.

Other assets, net — Other assets, net were:

 

(Amounts in thousands)    April 2, 2010  

Deferred financing costs, net

   $ 9,661   

Investment in affiliates

     9,192   

Palm promissory notes, long-term portion

     5,900   

Phoenix retention asset

     4,765   

Other

     2,358   
  

 

 

 

Total

   $ 31,876   
  

 

 

 

Deferred financing cost is amortized through interest expense. Amortization related to deferred financing costs totaled $4.2 million for the fiscal year ended April 2, 2010.

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

 

(Amounts in thousands)    April 2, 2010  

Wages, compensation and other benefits

   $ 109,827   

Accrued vacation

     26,208   

Accrued contributions to employee benefit plans

     2,347   
  

 

 

 

Total

   $ 138,382   
  

 

 

 

Other accrued liabilities — Accrued liabilities were:

 

(Amounts in thousands)    April 2, 2010  

Deferred revenue

   $ 30,524   

Insurance expense

     29,912   

Interest expense and short-term swap liability

     6,681   

Contract losses

     8,615   

Legal matters

     11,402   

Unrecognized tax benefit

     10,211   

Subcontractor retention

     4,365   

Other

     18,952   
  

 

 

 

Total

   $ 120,662   
  

 

 

 

Deferred revenue is primarily due to payments in excess of revenue recognized. Contract losses relate to accrued losses recorded on certain contracts.

Other liabilities — Other long-term liabilities were:

 

(Amounts in thousands)    April 2, 2010  

Unrecognized tax benefit

   $ 2,535   

Long-term accrued compensation

     2,204   

Other

     3,695   
  

 

 

 

Total

   $ 8,434   
  

 

 

 

Goodwill And Other Intangible Assets
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Goodwill And Other Intangible Assets
12 Months Ended 3 Months Ended
Dec. 30, 2011
Parent Company [Member]
Jul. 02, 2010
DynCorp International Inc. [Member]
Goodwill And Other Intangible Assets

Note 3 — Goodwill and other Intangible Assets

We estimate the fair value of our reporting units using a combination of the income approach and the market approach. Under the income approach, we utilize a discounted cash flow model based on several factors including balance sheet carrying values, historical results, our most recent forecasts, and other relevant quantitative and qualitative information. We discount the related cash flow forecasts using the weighted-average cost of capital at the date of evaluation. Under the market approach, we utilize comparative market multiples in the valuation estimate. While the income approach has the advantage of utilizing more company specific information, the market approach has the advantage of capturing market based transaction pricing. We weight the estimates developed under each approach equally in determining the estimated fair value of each reporting unit. The estimates and assumptions used in assessing the fair value of our reporting units and the valuation of the underlying assets and liabilities are inherently subject to significant uncertainties.

As discussed in Note 1, the goodwill carrying value is tested for impairment annually in October and when an event occurs or circumstances change to suggest that the carrying value may not be recoverable using a two step process for each reporting unit. The first step of the annual impairment test indicated the carrying values of the reporting units for Intelligence Training and Solutions ("ITS") and Training and Mentoring ("TM") aggregating $109.6 million, may not be recoverable. The Company performed the second step of the impairment test and determined that the implied goodwill for each of these reporting units was a total of $33.8 million lower than the carrying value amount. A non-cash impairment charge was recorded for this amount for the two reporting units within our GSDS reporting segment, for the year ended December 30, 2011. The goodwill impairment charge was due to the decline in the projected future cash flows of the ITS and TM businesses, resulting from changes in the business environment specific to these reporting units. Specifically, the two reporting units have been subjected to uncertain market trends and shifts in program priorities and funding requirements which has resulted in lower margins. The impairment charge is presented separately in the statement of operations and as mentioned above, relate solely to the GSDS segment. The impairment charge for ITS and TM represents the accumulated impairment recognized since inception.

The following tables provide information about our goodwill balances for our three segments, Global Stabilization and Development Solutions ("GSDS"), Global Platform Support Solutions ("GPSS") and GLS:

 

000000000 000000000 000000000 000000000
(Amounts in thousands)    GSDS      GPSS      GLS      Total  

Balance as of April 1, 2010 (inception)

   $ —         $ —         $ —         $ —     

Goodwill balance as of July 7, 2010 (1)

     119,386         559,985         60,066         739,437   

Changes between July 7, 2010 and December 31, 2010 (2)

     —           —           (60,066)         (60,066)   
  

 

 

    

 

 

    

 

 

    

 

 

 

Goodwill balance as of December 31, 2010

     119,386         559,985         —           679,371   

Changes between December 31, 2010 and December 30, 2011(3)

     (33,768)         —           —           (33,768)   
  

 

 

    

 

 

    

 

 

    

 

 

 

Goodwill balance as of December 30, 2011

   $ 85,618       $ 559,985       $ —         $ 645,603   
  

 

 

    

 

 

    

 

 

    

 

 

 

 

(1) This balance was a result of the Merger on July 7, 2010.
(2) Balance is due to the GLS deconsolidation. Refer to Note 1 for additional information.
(3) Represents the impairment of goodwill recorded as of December 30, 2011.

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

 

     December 30, 2011  
(Amounts in thousands, except years)    Weighted
Average
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   
     

 

 

    

 

 

   

 

 

 

 

     December 31, 2010  
(Amounts in thousands, except years)    Weighted
Average
Useful Life
(Years)
     Gross
Carrying
Value
     Accumulated
Amortization
    Net  

Other intangible assets:

  

Customer-related intangible assets

     9.2       $ 350,913       $ (20,003   $ 330,910   

Other

     6.1         28,093         (3,874     24,219   
     

 

 

    

 

 

   

 

 

 

Total other intangibles

      $ 379,006       $ (23,877   $ 355,129   
     

 

 

    

 

 

   

 

 

 

Tradenames:

  

Finite-lived

     4.8       $ 869       $ (88   $ 781   

Indefinite-lived

        43,058         —          43,058   
     

 

 

    

 

 

   

 

 

 

Total tradenames

      $ 43,927       $ (88   $ 43,839   
     

 

 

    

 

 

   

 

 

 

Amortization expense for customer-related intangibles, other intangibles, and finite-lived tradename was $47.0 million and $24.0 million for the year ended December 30, 2011 and for the period from April 1, 2010 (Inception) through December 31, 2010, respectively. Other intangibles is primarily representative of our capitalized software which had a gross carrying value of $15.9 million and $14.1 million for the year ended December 30, 2011 and for the period from April 1, 2010 (Inception) through December 31, 2010, respectively.

The following table outlines an estimate of future amortization based upon the finite-lived intangible assets owned at December 30, 2011:

 

     Amortization
Expense (1)
 

Estimate for calendar year 2012

   $ 45,381   

Estimate for calendar year 2013

     43,697   

Estimate for calendar year 2014

     42,992   

Estimate for calendar year 2015

     41,203   

Estimate for calendar year 2016

     38,448   

Thereafter

     99,621   

 

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

Note 2 — Goodwill and other Intangible Assets

We evaluate goodwill for impairment annually and when an event occurs or circumstances change to suggest that the carrying value may not be recoverable.

We estimate a portion of the fair value of our reporting units under the income approach by utilizing a discounted cash flow model based on several factors including balance sheet carrying values, historical results, our most recent forecasts, and other relevant quantitative and qualitative information. We discount the related cash flow forecasts using the weighted-average cost of capital at the date of evaluation. We also use the market approach to estimate the remaining portion of our reporting unit valuation. This technique utilizes comparative market multiples in the valuation estimate. We have historically applied a 50%/50% weighting to each approach. While the income approach has the advantage of utilizing more company specific information, the market approach has the advantage of capturing market based transaction pricing. The estimates and assumptions used in assessing the fair value of our reporting units and the valuation of the underlying assets and liabilities are inherently subject to significant uncertainties.

On April 4, 2009, we announced a reorganization of our business structure to better align with strategic markets and streamline our infrastructure. Under this alignment, our three reportable segments were realigned into three new segments, two of which, GSDS and GPSS, are wholly-owned, and a third segment GLS, which is a 51% owned joint venture. The new structure became effective April 4, 2009 and represented the segment structure as of July 2, 2010. See Note 16, for further discussion on segments.

The following tables provide information about our goodwill balances:

 

(Amounts in thousands)    GSDS      GPSS      GLS      Total  

Balance as of April 3, 2009

   $ 211,135       $ 213,189       $ —         $ 424,324   

Phoenix acquisition

     29,308         —           —           29,308   

Casals acquisition

     3,458         —           —           3,458   
  

 

 

    

 

 

    

 

 

    

 

 

 

Goodwill balance as of April 2, 2010

   $ 243,901       $ 213,189       $ —         $ 457,090   
  

 

 

    

 

 

    

 

 

    

 

 

 

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

 

     April 2, 2010  
(Amounts in thousands, except years)    Weighted
Average
Useful
Life
(Years)
     Gross
Carrying
Value
     Accumulated
Amortization
    Net  

Other intangible assets:

  

Customer-related intangible assets

     8.5       $ 293,807       $ (189,847   $ 103,960   

Other

     6.6         29,923         (11,843     18,080   
     

 

 

    

 

 

   

 

 

 

Total other intangibles

      $ 323,730       $ (201,690   $ 122,040   
     

 

 

    

 

 

   

 

 

 

Tradenames

  

Finite-lived

     5.0       $ 706       $ (48   $ 658   

Indefinite-lived

        18,318         —          18,318   
     

 

 

    

 

 

   

 

 

 

Total tradenames

      $ 19,024       $ (48   $ 18,976   
     

 

 

    

 

 

   

 

 

 

Amortization expense for customer-related intangibles, other intangibles, and finite-lived tradename was $9.5 million and $38.9 million for the fiscal quarter ended July 2, 2010 and for the fiscal year ended April 2, 2010, respectively.

The following schedule outlines an estimate of future amortization based upon the finite-lived intangible assets owned at April 2, 2010:

 

(Amounts in thousands)    Amortization
Expense (1)