UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)


þ		QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended ~~January~~July 23, 2009


o		TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from _______ to _______

Commission File Number: 333-127343

DYNCORP INTERNATIONAL LLC

(Exact name of registrant as specified in its charter)

Delaware		52-2287126
(State or other jurisdiction of		(I.R.S. Employer
incorporation or organization)		Identification No.)


Delaware (State or other jurisdiction of incorporation or organization)		52-2287126 (I.R.S. Employer Identification No.)

3190 Fairview Park Drive, Suite 700, Falls Church, Virginia 22042 (571) 722-0210 (Address, including zip code, and telephone number, including area code, ~~of registrant’s principal executive offices)~~

of registrant’s principal executive offices)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes þ No o

Indicate by check mark whether the registrant ishas asubmitted ~~large~~electronically ~~accelerated~~and ~~filer,~~posted anon ~~accelerated~~its ~~filer,~~corporate aWeb ~~non-accelerated~~site, ~~filer~~if orany, aevery ~~smaller~~Interactive ~~reporting~~Data ~~company.~~File ~~See~~required ~~the~~to ~~definitions~~be ofsubmitted ~~“large~~and posted ~~accelerated~~pursuant ~~filer,”~~to ~~“accelerated~~Rule 405 ~~filer”~~of ~~and~~Regulation S-T ~~“smaller~~during ~~reporting~~the ~~company”~~preceding ~~in Rule~~12 ~~12b-2~~months of(or ~~the~~for such shorter period ~~Exchange~~that ~~Act.~~the ~~(Check~~registrant ~~one~~was required to submit and post such files):. Yes o No o

~~Large~~Indicate by check mark whether the registrant is a large accelerated filer, oan ~~Accelerated~~ accelerated filer, oa ~~Non~~non-accelerated filer, þor ~~Smaller~~a smaller reporting company. oSee the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):


Large accelerated filer o		Accelerated filer o		Non-accelerated filer þ (Do not check if a smaller reporting company)		Smaller Reporting Company o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No þ

~~The~~As ~~registrant~~of ~~has~~August 3, ~~one~~2009, ~~class~~all ofoutstanding member units. As of ~~January 2~~DynCorp International LLC, ~~2009~~which consisted of 100 member units, were owned by DynCorp International Inc. ~~held~~ ~~100%~~None of the ~~member~~ units are publicly traded.

DYNCORP INTERNATIONAL LLC
TABLE OF CONTENTS

	Page
PART I. FINANCIAL INFORMATION
Forward-Looking Statements		2
Item 1. Financial Statements (unaudited)		3
Unaudited Condensed Consolidated Statements of Income—Three Months Ended January 2, 2009 and December 28, 2007		3
Unaudited Consolidated Statements of Income—Fiscal Quarters Ended July 3, 2009 and July 4, 2008		3
Unaudited Condensed Consolidated Statements of Income—Nine Months Ended January 2, 2009 and December 28, 2007		4
Unaudited Consolidated Balance Sheets—July 3, 2009 and April 3, 2009		4
Unaudited Condensed Consolidated Balance Sheets—January 2, 2009 and March 28, 2008		5
Unaudited Consolidated Statements of Cash Flows—Fiscal Quarters Ended July 3, 2009 and July 4, 2008		5
Unaudited Condensed Consolidated Statements of Cash Flows—Nine Months Ended January 2, 2009 and December 28, 2007		6
Unaudited Consolidated Statements of Member’s Equity—Fiscal Quarters Ended July 3, 2009 and April 3, 2009		6
Notes to Condensed Consolidated Financial Statements (unaudited)		7
Notes to Consolidated Financial Statements (unaudited)		7
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations		3128
Item 3. Quantitative and Qualitative Disclosures About Market Risk		4639
Item 4. Controls and Procedures		4739
PART II. OTHER INFORMATION
Item 1. Legal Proceedings		4739
Item 1A. Risk Factors		4740
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds		4840
Item 3. Defaults Upon Senior Securities		4840
Item 4. Submission of Matters to a Vote of Security Holders		4840
Item 5. Other Information		4840
Item 6. Exhibits		4841
Exhibit 10.1
Exhibit 31.1
Exhibit 31.2
Exhibit 32.1
Exhibit 32.2

Disclosure Regarding Forward-Looking Information

This Quarterly Report on Form 10-Q contains various forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Forward-looking statements, written, oral or otherwise made, represent our expectation or belief concerning future events. Without limiting the foregoing, the words “believes,” “thinks,” “anticipates,” “plans,” “expects” and similar expressions are intended to identify forward-looking statements. Forward-looking statements involve risks and uncertainties. Statements regarding the amount of our backlog, estimated remaining contract values and estimated total contract values are other examples of forward-looking statements. We caution that these statements are further qualified by important economic, competitive, governmental and technological factors that could cause our business, strategy or actual results or events to differ materially, or otherwise, from those in the forward-looking statements. These factors, risks and uncertainties include, among others, the following: our substantial level of indebtedness; policy and/or spending changes implemented by the new Presidential administration; termination of key U.S. government contracts; changes in the demand for services that we provide; work awarded under our contracts, including without limitation, the Civilian Police, International Narcotics and Law Enforcement and LOGCAP IV contracts; pursuit of new commercial business in the U.S. and abroad; activities of competitors; bid protests; changes in significant operating expenses; changes in availability of or cost of capital; general political, economic and business conditions in the U.S.; acts of war or terrorist activities; variations in performance of financial markets; the inherent difficulties of estimating future contract revenue; anticipated revenue from indefinite delivery, indefinite quantity contracts; expected percentages of future revenue represented by fixed-price and time-and-materials contracts, including increased competition with respect to task orders subject to such contracts; and statements covering our business strategy, those described in “Risk Factors” and other risks detailed from time to time in our reports filed with the SEC. Accordingly, such forward-looking statements do not purport to be predictions of future events or circumstances and therefore there can be no assurance that any forward-looking statement contained herein will prove to be accurate. We assume no obligation to update the forward-looking statements.

PART I — FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

DYNCORP INTERNATIONAL LLC

UNAUDITED ~~CONDENSED~~ CONSOLIDATED STATEMENTS OF INCOME (Amounts in thousands)

(Amounts in thousands)


	For the Fiscal Quarter Ended
	July 3, 2009			July 4, 2008

Revenue	$	785,177		$	716,794

Cost of services		(699,093	)		(638,389	)
Selling, general and administrative expenses		(23,438	)		(27,851	)
Depreciation and amortization expense		(10,145	)		(10,560	)

Operating income		52,501			39,994
Interest expense		(14,610	)		(14,215	)
Earnings from affiliates		1,054			1,117
Interest income		339			344
Other (loss)/income, net		(213	)		705

Income before income taxes		39,071			27,945
Provision for income taxes		(12,627	)		(9,316	)

Net income		26,444			18,629
Noncontrolling interests		(5,799	)		(649	)

Net income attributable to DynCorp International LLC	$	20,645		$	17,980

	For the Three Months Ended
	January 2, 2009			December 28, 2007
Revenue	$	792,327		$	523,071
Cost of services		(704,210	)		(452,341	)
Selling, general and administrative expenses		(26,505	)		(28,995	)
Depreciation and amortization expense		(10,029	)		(10,910	)
Operating income		51,583			30,825
Interest expense		(15,322	)		(14,052	)
Loss on early extinguishment of debt		—			—
Earnings from affiliates		1,319			1,253
Interest income		730			522
Other income, net		(856	)		380
Income before income taxes		37,454			18,928
Provision for income taxes		(11,639	)		(6,968	)
Income before minority interest		25,815			11,960
Minority interest		(6,062	)		—
Net income	$	19,753		$	11,960

See notes to consolidated financial statements.

See notes to condensed consolidated financial statements.

DYNCORP INTERNATIONAL LLC

UNAUDITED ~~CONDENSED~~ CONSOLIDATED ~~STATEMENTS~~BALANCE OFSHEETS (Amounts ~~INCOME~~in thousands)

(Amounts in thousands)


	As of
	July 3, 2009			April 3, 2009
ASSETS
Current assets:
Cash and cash equivalents	$	159,293		$	200,222
Restricted cash		5,700			5,935
Accounts receivable, net of allowances of $348 and $68, respectively		639,470			564,432
Prepaid expenses and other current assets		110,025			124,214

Total current assets		914,488			894,803
Property and equipment, net		18,481			18,338
Goodwill		420,180			420,180
Tradename		18,318			18,318
Other intangibles, net		133,763			142,719
Deferred income taxes		8,430			12,788
Other assets, net		31,965			32,068

Total assets	$	1,545,625		$	1,539,214

LIABILITIES AND MEMBER’S EQUITY
Current liabilities:
Current portion of long-term debt	$	—		$	30,540
Accounts payable		196,198			160,419
Accrued payroll and employee costs		120,500			137,993
Deferred income taxes		9,615			8,278
Other accrued liabilities		117,381			111,590
Income taxes payable		5,437			5,986

Total current liabilities		449,131			454,806

Long-term debt, less current portion		566,383			569,372
Other long-term liabilities		5,618			6,779

Total Liabilities		1,021,132			1,030,957

Commitments and contingencies

Member’s equity:
Member’s units, 100 outstanding		331,298			331,008
Retained earnings		200,200			179,555
Purchases of Parent’s common stock		(9,330	)		(8,618	)
Accumulated other comprehensive loss		(3,510	)		(4,424	)

Total member’s equity attributable to DynCorp International LLC		518,658			497,521
Noncontrolling interests		5,835			10,736

Total equity		524,493			508,257

Total liabilities and member’s equity	$	1,545,625		$	1,539,214

	For the Nine Months Ended
	January 2, 2009			December 28, 2007
Revenue	$	2,288,272		$	1,566,853
Cost of services		(2,039,118	)		(1,358,062	)
Selling, general and administrative expenses		(80,350	)		(79,916	)
Depreciation and amortization expense		(30,594	)		(31,901	)
Operating income		138,210			96,974
Interest expense		(44,442	)		(42,247	)
Loss on early extinguishment of debt		(4,443	)		—
Earnings from affiliates		3,959			3,320
Interest income		1,751			2,202
Other income, net		809			(162	)
Income before income taxes		95,844			60,087
Provision for income taxes		(30,086	)		(21,916	)
Income before minority interest		65,758			38,171
Minority interest		(15,154	)		—
Net income	$	50,604		$	38,171

See notes to consolidated financial statements.

See notes to condensed consolidated financial statements.

DYNCORP INTERNATIONAL LLC

UNAUDITED ~~CONDENSED~~ CONSOLIDATED ~~BALANCE~~STATEMENTS ~~SHEETS~~OF CASH FLOWS (Dollars in thousands)

(Amounts in thousands)


	For the Fiscal Quarter Ended
	July 3, 2009			July 4, 2008
Cash flows from operating activities
Net income	$	26,444		$	18,629
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Depreciation and amortization		10,424			10,811
Amortization of deferred loan costs		1,000			821
Allowance for losses on accounts receivable		264			—
Earnings from affiliates		(1,054	)		(1,117	)
Deferred income taxes		8,229			(1,609	)
Equity-based compensation		866			(803	)
Other		(4	)		(256	)
Changes in assets and liabilities:
Restricted cash		235			5,236
Accounts receivable		(75,302	)		(138,958	)
Prepaid expenses and other current assets		14,035			(25,560	)
Accounts payable and accrued liabilities		23,131			56,382
Income taxes payable		(2,820	)		5,293

Net cash provided by (used in) operating activities		5,448			(71,131	)

Cash flows from investing activities
Purchase of property and equipment		(780	)		(1,208	)
Purchase of computer software		(514	)		(608	)
Other assets		—			365

Net cash used in investing activities		(1,294	)		(1,451	)

Cash flows from financing activities
Payments on long-term debt		(34,337	)		(1,548	)
Purchases of Parent’s common stock		(712	)		—
Borrowings under other financing arrangements		—			22,319
Payments of dividends to noncontrolling interests		(10,034	)		—
Other financing activities		—			(68	)

Net cash (used in) provided by financing activities		(45,083	)		20,703

Net decrease in cash and cash equivalents		(40,929	)		(51,879	)
Cash and cash equivalents, beginning of period		200,222			85,379

Cash and cash equivalents, end of period	$	159,293		$	33,500

Income taxes paid (net of refunds)	$	614		$	7,023
Interest paid	$	4,599		$	10,866
Non-cash investing activities	$	—		$	4,265

	As of
	January 2, 2009			March 28, 2008
ASSETS
Current assets:
Cash and cash equivalents	$	150,580		$	85,379
Restricted cash		18,039			11,308
Accounts receivable, net of allowances of $8 and $268, respectively		634,924			513,312
Prepaid expenses and other current assets		125,756			109,027
Deferred income taxes		—			17,341
Total current assets		929,299			736,367
Property and equipment, net		18,022			15,442
Goodwill		420,180			420,180
Tradename		18,318			18,318
Other intangibles, net		151,151			176,146
Deferred income taxes		5,773			18,168
Other assets, net		31,506			18,088
Total assets	$	1,574,249		$	1,402,709
LIABILITIES AND MEMBER’S EQUITY
Current liabilities:
Current portion of long-term debt	$	—		$	3,096
Accounts payable		209,116			148,787
Accrued payroll and employee costs		111,579			85,186
Deferred income taxes		1,927			—
Other accrued liabilities		121,582			129,240
Income taxes payable		5,347			8,245
Total current liabilities		449,551			374,554
Long-term debt, less current portion		615,903			590,066
Other long-term liabilities		12,121			13,804
Commitments and contingencies
Minority interest		11,848			—
Member’s equity:
Member’s units, 100 outstanding		330,275			321,414
Retained earnings		160,389			109,785
Accumulated other comprehensive loss		(5,838	)		(6,914	)
Total member’s equity		484,826			424,285
Total liabilities and member’s equity	$	1,574,249		$	1,402,709

See notes to consolidated financial statements.

See notes to condensed consolidated financial statements.

DYNCORP INTERNATIONAL LLC

UNAUDITED ~~CONDENSED~~ CONSOLIDATED STATEMENTS OF ~~CASH~~MEMBER’S ~~FLOWS~~EQUITY (~~Amounts~~Dollars in ~~thousands~~Thousands)

	For the Nine Months Ended
													Total Member’s
	January 2, 2009			December 28, 2007
													Equity
Cash flows from operating activities
													Attributable to
Net income	$	50,604		$	38,171
										Accumulated Other			DynCorp
Adjustments to reconcile net income to net cash provided by operating activities:
	Member’s			Retained			Parent’s			Comprehensive			International			Noncontrolling
Depreciation and amortization		31,388			32,924
	Units			Earnings			Common Stock			Income (Loss)			LLC			Interests			Total Equity
Amortization of deferred loan costs		2,696			2,261
Balance at April 3, 2009	$	331,008		$	179,555		$	(8,618	)	$	(4,424	)	$	497,521		$	10,736		$	508,257
(Recovery) for losses on accounts receivable		(283	)		(1,127	)
Comprehensive income (loss):
Earnings from affiliates		(3,959	)		(3,320	)
Net income		—			26,444			—			—			26,444			—			26,444
Dividends from affiliates		2,439			2,652
Interest rate swap, net of tax		—			—			—			566			566			—			566
Deferred income taxes		32,193			313
Currency translation adjustment, net of tax		—			—			—			348			348			—			348
Equity-based compensation		2,385			3,360
Comprehensive income		—			26,444			—			914			27,358			—			27,358
Minority interest		15,154			—
Noncontrolling interest		—			(5,799	)		—			—			(5,799	)		—			(5,799	)
Loss on early extinguishment of debt		4,443			—
Comprehensive income attributable to DynCorp International LLC		—			20,645			—			914			21,559			—			21,559
Other		(772	)		(138	)
Net income and comprehensive income attributable to noncontrolling interests																	5,799			5,799
Changes in assets and liabilities:
DIFZ financing, net of tax		112			—			—			—			112			—			112
Restricted cash (see Note 1)		8,429			10,133
Purchases of Parent’s common stock		—			—			(712	)		—			(712	)		—			(712	)
Accounts receivable		(121,329	)		(120,018	)
Equity-based compensation		191			—			—			—			191			—			191
Prepaid expenses and other current assets		(20,711	)		(22,546	)
Tax benefit associated with equity-based compensation		(13	)		—			—			—			(13	)		—			(13	)
Accounts payable and accrued liabilities		68,957			11,832
Dividends declared to noncontrolling interests		—			—			—			—			—			(10,700	)		(10,700	)
Income taxes payable		(1,439	)		(3,753	)
Balance at July 3, 2009	$	331,298		$	200,200		$	(9,330	)	$	(3,510	)	$	518,658		$	5,835		$	524,493
Net cash provided by (used in) operating activities		70,195			(49,256	)
Cash flows from investing activities
Purchase of property and equipment		(3,407	)		(2,822	)
Purchase of computer software		(1,634	)		(996	)
Change in cash restricted as collateral on letters of credit (see Note 1)		(15,160	)		—
Contributions to affiliates		(2,231	)		(3,366	)
Other investing activities		362			(57	)
Net cash (used in) investing activities		(22,070	)		(7,241	)
Cash flows from financing activities
Borrowings under debt agreements (see Note 5)		323,751			13,500
Repayments on debt agreements (see Note 5)		(301,129	)		(37,058	)
Net borrowings (payments) under other financing arrangements		4,299			(8,957	)
Payments of deferred financing cost		(9,834	)		—
Other net financing activities		(11	)		138
Net cash provided by (used in) financing activities		17,076			(32,377	)
Net increase in cash and cash equivalents		65,201			(88,874	)
Cash and cash equivalents, beginning of period		85,379			102,455
Cash and cash equivalents, end of period	$	150,580		$	13,581
Income taxes paid (net of refunds)	$	18,622		$	21,949
Interest paid	$	34,354		$	33,231
Non-cash sale of DIFZ including related financing (see Note 8)	$	8,296		$	—

See notes to ~~condensed~~ consolidated financial statements.

DYNCORP INTERNATIONAL LLC

NOTES TO ~~CONDENSED~~ CONSOLIDATED FINANCIAL STATEMENTS

Note 1—Basis of Presentation and Accounting Policies

Basis of Presentation

DynCorp International LLC, through its subsidiaries, is a leading provider of specialized mission-critical professional and support services ~~outsourced~~for by the U.S. military, non-military U.S. governmental agencies and foreign governments. Our specific global expertise is in law ~~enforcement~~ enforcement training and support, security services, base and logistics operations, construction management, aviation services and operations and linguist services. We also provide logistics support for all our services. References herein to “DynCorp International”, the “Company”, “we”, “our”, or “us” or “LLC” refer to DynCorp International LLC and its subsidiaries unless otherwise stated or ~~indicated~~ indicated by the context. DynCorp International Inc., our direct parent (~~the~~our “Parent”), has no ~~operations~~ operations independent of our Company, DynCorp International LLC ~~(“LLC”)~~.

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

Certain information and footnote disclosures normally included in financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to such rules and regulations. However, ~~the~~we ~~Company~~believe ~~believes~~ that all disclosures are adequate to make the ~~information~~ information presented not misleading. These ~~condensed~~ consolidated financial statements should be read in conjunction with ~~the~~our ~~Company’s~~ audited consolidated financial statements and the related notes thereto included in the Company’s ~~2008~~fiscal 2009 Annual Report on Form 10-K, filed with the Securities and Exchange Commission (the “SEC”) on June 1011, ~~2008~~2009.

~~The~~We ~~Company~~report ~~reports~~our ~~its~~ results on a 52/53- week fiscal year with the fiscal year ending on the ~~Friday~~ Friday closest to March 31 of such year (April 32, ~~2009~~2010 for fiscal year ~~2009~~2010 which is a ~~53-~~52 week ~~fiscal~~ fiscal year). The ~~nine-month~~ fiscal ~~period~~quarter ended ~~January~~July 23, 2009 was a 4013-week period from ~~March 29~~April 4, ~~2008~~2009 to ~~January~~July 23, 2009. The ~~nine-month~~ fiscal ~~period~~quarter ended ~~December~~July 284, ~~2007~~2008 was a 3914-week period from March 3129, ~~2007~~2008 to ~~December~~July 284, ~~2007~~ 2008.

In the opinion of management, all adjustments necessary to fairly present ~~the~~our ~~Company’s~~ financial position at ~~January~~July 23, 2009 and ~~March~~April 283, ~~2008~~2009, the results of operations for the ~~three and~~fiscal ~~nine~~quarters ~~months~~ ended ~~January~~ July 23, 2009 and ~~December~~July 284, ~~2007~~2008, and cash flows for the ~~nine~~fiscal ~~months~~ quarters ended ~~January~~July 23, 2009 and ~~December 28~~July 4, ~~2007~~2008, have been included ~~and are of a normal and recurring nature~~. The results of operations for the ~~three~~fiscal ~~and~~quarter ~~nine months~~ ended ~~January~~July 23, 2009 are not necessarily indicative of the results to be expected for the full fiscal year or for any ~~future~~ future periods. ~~The~~We ~~Company~~use ~~uses~~ estimates and assumptions required for preparation of the financial statements. The estimates are primarily based on historical experience and business knowledge and are revised as circumstances change. However, actual results could differ from the estimates.

~~For purposes~~As ofa ~~comparability,~~result ~~certain~~of ~~prior~~the ~~year~~implementation ~~amounts,~~of ~~specifically our~~Statement ~~segment~~of ~~reporting~~Financial ~~structure~~Standards as(the ~~further~~“FASB”) ~~discussed~~No. 160 “Noncontrolling Interests in ~~Note~~Consolidated 14Financial Statements” (“SFAS No. 160”), certain prior year amounts have been reclassified to conform to the current year presentation. ~~Such~~This included moving the $10.7 million noncontrolling interests balance (previously “Minority Interest”) as of April 3, 2009 out of the mezzanine section of the balance sheet and into the equity section. Such reclassifications have no impact on previously reported net income attributable to DynCorp International LLC.

Principles of Consolidation

The consolidated financial statements include the accounts of ~~the~~both ~~Company~~our ~~and its~~ domestic and ~~foreign~~ foreign subsidiaries. All intercompany transactions and balances have been eliminated in consolidation. Generally, investments in which ~~the~~we ~~Company~~own ~~owns~~ a 20% to 50% ownership interest are accounted for by the equity method. These investments are in business entities in which ~~the~~we ~~Company does~~do not have control, but ~~has~~ have the ability to exercise significant influence over operating and financial policies and isare not the primary beneficiary as defined in ~~Financial Accounting Standards Board (the “~~FASB”) Interpretation No. 46R (Revised 2003), “Consolidation of Variable Interest Entities” (“FIN No. 46R”). ~~The~~We ~~Company~~have ~~has~~ no investments in business entities of less than 20%.

We have ownership interests in three active joint ventures that are not consolidated into our financial statements as of July 3, 2009, and are accounted for using the equity method. We also have open joint venture agreements in inactive entities that are not material to our financials. Economic rights in active joint ventures are indicated by the ownership percentages in the table listed below.


Contingency Response Services LLC	45.0	%
Babcock DynCorp Limited	44.0	%
Partnership for Temporary Housing LLC	40.0	%

~~The~~In ~~following~~fiscal ~~table~~year ~~sets~~2009, ~~forth~~we ~~the~~sold ~~Company’s~~50% of our ownership interest in ~~joint~~our ~~ventures~~previously ~~and~~wholly ~~companies~~owned subsidiary, ~~that~~DynCorp International FZ-LLC (“DIFZ”), for approximately $9.7 million. DIFZ was ~~are~~previously ~~not~~a wholly owned subsidiary and, therefore, consolidated into ~~the~~our ~~Company’s~~ financial statements. The sale was accounted for as a capital transaction reflected in member’s units. We have financed the transaction by accepting three promissory notes provided by the purchaser. Repayment of ~~January~~the notes included a $0.5 2,million dollar payment in fiscal year 2009, ~~and~~with ~~are~~the remainder to be repaid ~~accounted~~through ~~for~~a byportion of the ~~equity~~purchaser’s ~~method~~DIFZ quarterly dividends. ~~Economic~~A ~~rights~~dividend ~~are~~was ~~indicated~~declared byin June 2009, a portion of which reduced our note receivable balance. This dividend is expected to be paid in our second quarter of fiscal year 2010. Additionally, the ~~ownership~~next ~~percentages~~dividend is scheduled to be ~~listed~~declared ~~below~~and paid during the second quarter ending October 2, 2009. As of the date of the transaction, it was determined that we were the primary beneficiary as defined in FIN No. 46R.

DynEgypt LLC	50.0	%
TSDI Pty Ltd.	50.0	%
Dyn Puerto Rico Corporation	49.9	%
Contingency Response Services LLC	45.0	%
Babcock DynCorp Limited	44.0	%
Partnership for Temporary Housing LLC	40.0	%
DCP Contingency Services LLC	40.0	%

The following table sets forth our ownership in joint ventures that are consolidated into our financial statements as of July 3, 2009. For the entities listed below, we are the primary beneficiary as defined in FIN No. 46R.

On July 31, 2008, the Company sold 50% of its ownership interest in its previously wholly owned subsidiary, DynCorp International FZ-LLC (“DIFZ”), for approximately $8.2 million. DIFZ was previously a wholly owned subsidiary and therefore consolidated into the Company’s financial statements. No gain has been recognized on the sale as of January 2, 2009 as the Company completely financed the transaction by accepting three promissory notes provided by the purchaser. As a result, the sale was accounted for as a capital transaction reflected in member’s units. Repayment of the notes to the Company is to be made through a single cash payment of $500,000 with the remainder to be repaid through the purchaser’s portion of DIFZ quarterly dividends. The sale price is contingent upon a revaluation based on actual DIFZ results through January 31, 2009, with any adjustments to the purchase price to be reflected by an increase or decrease in the notes. Additionally, the interest component of the three notes receivable held by the Company will also increase member’s units due to the structure of this transaction and will not impact the Company’s consolidated statements of income. The sale agreement governing the transaction provides indemnification to the buyer for losses arising out of tax related matters specific to DIFZ. After the transaction, it was determined that the Company was the primary beneficiary as defined in FIN No. 46R.

The following table sets forth the Company’s ownership in joint ventures that are consolidated into the Company’s financial statements as of January 2, 2009. For the entities list below, the Company is the primary beneficiary as defined in FIN No. 46R.


Global Linguist Solutions LLC	51.0	%
DynCorp International FZ-LLC	50.0	%

~~Minority~~Noncontrolling ~~Interest~~Interests

We ~~record~~hold ~~the~~various ~~impact~~ownership ofinterests ~~our~~in a number of joint ~~venture~~ventures ~~partners’~~as ~~interests~~disclosed in ~~consolidated~~Note ~~joint~~1 ~~ventures~~to asour ~~minority~~fiscal ~~interest.~~2009 ~~Minority~~Annual ~~interest~~Report ison ~~presented~~Form on10-K ~~the~~as ~~face~~filed ofwith the ~~income~~SEC ~~statement~~on asJune 11, an2009. We are required ~~increase~~by orGAAP ~~reduction~~to inconsolidate ~~arriving~~certain atjoint ~~net~~ventures ~~income.~~for ~~The~~which ~~presentation~~we ofdo ~~minority~~not hold a 100% interest. onWe ~~the~~record ~~balance~~the ~~sheet~~impact isof ~~typically~~our ~~located~~joint inventure apartners’ ~~mezzanine~~interests ~~account~~in ~~between~~these ~~liabilities~~consolidated ~~and~~joint ~~equity.~~ventures ~~As of~~as ~~March 28,~~noncontrolling ~~2008,~~interests. ~~the~~Noncontrolling ~~minority~~interests ~~interest~~is ~~balance~~presented ~~related~~on tothe ~~Global~~face ~~Linguist~~of ~~Solutions~~the ~~LLC~~income ~~(“GLS”) was~~statement ~~recorded~~ as an ~~asset~~increase ~~within~~or ~~prepaid~~reduction ~~expenses~~in ~~and~~arriving ~~other~~at ~~current~~net ~~assets,~~income ~~due~~attributable to ~~cumulative~~DynCorp ~~losses incurred~~International LLC. The Aspresentation of ~~January 2,~~noncontrolling ~~2009,~~interests ~~all~~on ~~minority~~the ~~interest,~~balance ~~including~~sheet ~~minority~~is ~~interest~~located ~~related~~in ~~to DIFZ,~~the ~~were recorded as mezzanine~~ equity section.

~~Restricted~~Property ~~Cash~~and Equipment

~~Restricted~~Depreciation ~~cash~~expense ~~represents~~was ~~cash~~$1.0 million ~~restricted by certain contracts in which advance payments are not available for use except to pay specified costs~~ and ~~vendors~~$0.8 million for ~~work performed on~~ the ~~specific contract~~quarters ~~and~~ended ~~cash~~July 3, ~~restricted~~2009 and July 4, ~~invested~~2008, asrespectively. ~~collateral~~Accumulated asdepreciation ~~required~~was by$9.4 million ~~our~~and ~~letters of credit~~$8. ~~Changes~~6 million inat ~~restricted cash related to our contracts are included as operating activities whereas~~July 3, ~~changes~~2009 inand ~~restricted~~April 3, ~~cash~~2009, ~~for funds invested as collateral are included as investing activities in the consolidated statements of cash flows~~respectively.

The following table reconciles our restricted cash to the cash flow statement:

	As of				Cash provided
(Amounts in thousands)	January 2, 2009		March 28, 2008		by/(used in)
Type of restricted cash
Contract related	$	2,879	$	11,308	$	8,429
Required as collateral		15,160		—		(15,160	)
Total	$	18,039	$	11,308	$	(6,731	)

Accounting Policies

There have been no material changes to our significant accounting policies as detailed in Note 1 of our ~~2008~~fiscal 2009 Annual Report on Form 10-K filed with the SEC on June 1011, ~~2008~~2009, except for the accounting rule changes associated with noncontrolling interests, which only affects presentation and disclosure. See Pronouncements Implemented below.

Accounting Developments

Pronouncements Implemented

In ~~September~~December ~~2006~~2007, the ~~Financial Accounting Standards Board (“~~FASB”) issued ~~Statement of Financial Accounting Standard (“~~SFAS”) No. ~~157~~160, “~~Fair~~Noncontrolling ~~Value~~Interests ~~Measurements”~~in ~~(“SFAS~~Consolidated Financial ~~No. 157~~Statements”)., ~~SFAS No. 157~~which ~~establishes~~is aan ~~single~~amendment ~~definition~~ of ~~fair~~Accounting ~~value~~Research ~~and~~Bulletin ~~a framework for measuring fair value under GAAP and expands disclosures about fair value measurements. SFAS~~ No. ~~157~~51. ~~applies~~This ~~under other~~statement ~~accounting~~covers ~~pronouncements~~several ~~that~~areas ~~require~~including or(i) defining ~~permit~~the ~~fair~~way ~~value~~the ~~measurements;~~noncontrolling ~~however,~~interests itshould ~~does not~~be ~~require~~presented ~~any~~in ~~new~~the ~~fair value measurements. SFAS No. 157 is effective for~~ financial statements ~~issued for~~and ~~fiscal years beginning after November 15~~notes, ~~2007. In February~~(ii) ~~2008,~~clarifies ~~the~~that ~~FASB~~all ~~issued~~transactions ~~FASB~~between ~~Staff~~a ~~Position~~parent ~~No. 157-2,~~and ~~“Effective~~subsidiary ~~Date~~are ofto ~~FASB~~be ~~Statement~~accounted ~~No. 157”,~~for ~~which~~as ~~provides~~equity atransactions ~~one~~if ~~year deferral of~~ the ~~effective~~parent ~~date~~retains ofits controlling ~~SFAS~~financial ~~No. 157~~interest ~~for~~in ~~non-financial~~the ~~assets~~subsidiary and ~~non-financial~~(iii) requires ~~liabilities, except~~that ~~those~~a ~~that~~parent ~~are~~recognize ~~recognized~~a gain or ~~disclosed~~loss in ~~the~~net ~~financial~~income ~~statements~~when ata ~~fair~~subsidiary ~~value~~is ~~at least annually~~deconsolidated. InThis ~~October 2008,~~statement ~~the~~is ~~FASB~~effective ~~issued~~for ~~Staff Position No. FAS 157-3, “Determining~~ the ~~Fair~~ ~~Value~~fiscal ofyears, aand ~~Financial~~interim ~~Asset~~periods inwithin athose ~~Market~~fiscal ~~That Is Not Active”~~years, ~~which~~beginning ~~clarifies~~on ~~the~~or ~~application~~after ~~of FAS~~December 15, ~~157~~2008. inWe aadopted ~~market~~this ~~that~~statement isin ~~not~~the ~~active~~first ~~and~~quarter ~~defines~~of ~~additional~~fiscal ~~key~~year ~~criteria~~2010, inwhich ~~determining~~changed ~~the fair~~our ~~value~~presentation of anoncontrolling ~~financial~~interests ~~asset~~on ~~when~~our ~~the~~consolidated ~~market~~statements ~~for~~of ~~that~~income, ~~financial~~consolidated balance ~~asset~~sheets isand ~~not~~consolidated ~~active~~statements of member’s equity. ~~The~~We ~~adoption~~have of applied SFAS No. ~~157~~160 retrospectively ~~did~~to ~~not~~the ~~have~~presentation aof ~~material~~our ~~impact~~balance onsheets, ~~our~~statements ~~consolidated~~of ~~financial~~income ~~condition~~ and ~~results~~statements of ~~operations~~equity. ~~See Note 12 for the applicable fair value disclosures.~~

~~In February 2007, the FASB issued SFAS No. 159, “The Fair Value Option for Financial Assets~~8 and Financial Liabilities — Including an amendment of FASB Statement No. 115” (“SFAS No. 159”). SFAS No. 159 permits entities to choose to measure many financial instruments and certain other items at fair value that are not currently required to be measured at fair value. It provides entities with the opportunity to mitigate volatility in reported earnings caused by measuring related assets and liabilities differently without having to apply complex hedge accounting provisions. SFAS No. 159 is effective for fiscal years beginning after November 15, 2007. The adoption of SFAS No. 159 did not impact our consolidated financial condition and results of operations as we did not elect to apply the fair value option to items that have previously been measured at historical cost.

In December 2007, the FASB issued SFAS No. 141 (revised 2007), “Business Combinations” (“SFAS No. 141(R)”). This statement replaces FASB Statement No. 141, “Business Combinations.” This statement retains the fundamental requirements in SFAS No. 141 that the acquisition method of accounting (which SFAS No. 141 called the purchase method) be used for all business combinations and for an acquirer to be identified for each business combination. This statement defines the acquirer as the entity that obtains control of one or more businesses in the business combination and establishes the acquisition date as the date that the acquirer achieves control. Additionally, this statement requires an acquirer to recognize the assets acquired, the liabilities assumed, and any noncontrolling interests in the acquiree at the acquisition date, measured at their fair values as of that date, with limited exceptions specified in the statement. Furthermore, this statement also requires acquisition related costs to be expensed as incurred. This statement has been adopted in the first quarter of fiscal year 2010.

In December 2007, the FASB ratified EITF 07-1, “Accounting for Collaborative Arrangements”. EITF 07-1 provides guidance for determining if a collaborative arrangement exists and establishes procedures for reporting revenue and costs generated from transactions with third parties, as well as between the parties within the collaborative arrangement, and provides guidance for financial statement disclosures of collaborative arrangements. EITF 07-1 became effective for us in the first quarter of fiscal year 2010. The adoption of EITF 07-1 did not have a material effect on our consolidated financial position or results of operations. We have included additional disclosure on a collaborative arrangement in Note 12.

In April 2008, the FASB issued Staff Position No. 142-3, “Determination of the Useful Life of Intangible Assets” (“FSP No. 142-3”). FSP No. 142-3 amends the factors that should be considered in developing renewal or extension assumptions used to determine the useful life of a recognized intangible asset under SFAS No. 142, “Goodwill and Other Intangible Assets” (“SFAS No. 142”). FSP No. 142-3 is effective for fiscal years beginning after December 15, 2008, and interim periods within those fiscal years. We will apply FSP No. 142-3 for any applicable events and transactions in fiscal year 2010.

In May 2009, the FASB issued Statement of Financial Standards No. 165 “Subsequent Events (as amended)” (“SFAS No. 165”), which provides guidance on management’s assessment of subsequent events. The new standard clarifies that management must evaluate, as of each reporting period, events or transactions that occur after the balance sheet date “through the date that the financial statements are issued or are available to be issued.” Management must perform its assessment for both interim and annual financial reporting periods. SFAS No. 165 requires management to disclose, in addition to the disclosures in Auditing Standards Section 560, the date through which subsequent events have been evaluated and whether that is the date on which the financial statements were issued or were available to be issued. SFAS No. 165 is effective prospectively for interim or annual financial periods ending after June 15, 2009. We have adopted this guidance through enhanced disclosures for any applicable events and transactions as further described in Note 15.

Pronouncements Not Yet Implemented

In ~~December~~April ~~2007~~2009, the FASB issued ~~SFAS~~FSP ~~No. 141~~FAS 141(~~revised 2007~~R), – “Accounting for Assets Acquired and Liabilities Assumed in a Business ~~Combinations”~~Combination that Arise from Contingencies (“~~SFAS No. 141R~~FSP FAS 141(R)”). This ~~statement~~clarifies ~~replaces~~guidance ~~FASB~~pertaining ~~Statement~~to Nocontingencies. ~~141,~~ ~~“Business~~FSP ~~Combinations”~~FAS 141(~~“SFAS~~R) ~~No.~~states that an acquirer shall ~~141”).~~recognize ~~This~~at ~~statement~~fair ~~retains~~value, at the ~~fundamental~~acquisition ~~requirements~~date, an asset acquired or a liability assumed in ~~SFAS~~a business ~~No. 141~~combination that arises from a contingency if the acquisition ~~method~~-date fair value of ~~accounting~~that asset ~~(which~~or ~~SFAS~~liability Nocan be determined during the measurement period. ~~141~~ ~~called~~If the acquisition-date fair ~~purchase~~value ~~method)~~of bean ~~used~~asset ~~for~~acquired ~~all~~or a liability assumed in a business ~~combinations~~combination ~~and~~that ~~for~~arises from a contingency cannot be determined during the measurement period, an ~~acquirer~~asset toor a liability shall be recognized ~~identified~~at the acquisition date if both of the following criteria are met which are (i) information available before the end of the measurement period indicates that it is probable that an asset existed or that a liability had been incurred at the acquisition date and (ii) the amount of the asset or liability can be reasonably estimated. We will apply FSP FAS 141 (R) for ~~each~~any applicable ~~business~~events ~~combination~~and transactions in fiscal year 2010.

In June 2009, the FASB issued Statement of Financial Standards No. 167, “Amendments to FASB Interpretation 46(R)” (“SFAS No. 167”). This statement amends the guidance for (i) determining whether an entity is a variable interest entity (“VIE”), (ii) the determination of the primary beneficiary of a variable interest entity, (iii) requires ongoing reassessments of whether an enterprise is the primary beneficiary of a variable interest entity and (iv) changes the disclosure requirements in FIN 46(R)-8. This Statement is effective as of our first annual reporting period that begins after November 15, 2009, for interim periods within that first annual reporting period, and for interim and annual reporting periods thereafter. We are currently evaluating the future impact to SFAS No. 167 on our financial statements.

~~This~~In ~~statement~~June 2009, ~~defines~~ the ~~acquirer~~FASB asissued ~~the~~SFAS ~~entity~~No. 168, ~~that~~The ~~obtains control~~“FASB ofAccounting ~~one~~Standards orCodification ~~more businesses in the business combination~~ and ~~establishes~~ the ~~acquisition~~Hierarchy ~~date as~~of ~~the~~Generally ~~date~~Accepted ~~that~~Accounting ~~the~~Principles” ~~acquirer~~(“SFAS ~~achieves control~~No. 168”). This ~~statement~~standard ~~requires an acquirer to recognize~~will ~~the~~replace ~~assets~~SFAS ~~acquired~~No. 162, ~~the~~“The ~~liabilities~~Hierarchy ~~assumed,~~of Generally ~~and~~Accepted ~~any~~Accounting ~~noncontrolling~~Principles ~~interest~~(“SFAS ~~in the acquiree at the acquisition date~~No. 162”), ~~measured~~and atestablishes ~~their~~only ~~fair~~two ~~values~~levels as of ~~that date~~ GAAP, ~~with~~authoritative ~~limited~~and ~~exceptions specified in the statement~~non-authoritative. ~~This~~The ~~statement~~codification ~~applies~~will ~~prospectively~~become tothe ~~business~~source ~~combinations for which~~of ~~the~~authoritative, ~~acquisition~~nongovernmental ~~date~~GAAP, isexcept onfor orrules ~~after~~and ~~the~~interpretive ~~beginning~~releases of the ~~first~~SEC, ~~annual reporting period beginning on~~which orare ~~after~~sources ~~December 15, 2008, with the exception~~ of ~~the~~authoritative ~~accounting~~GAAP for ~~valuation~~SEC ~~allowances~~registrants. ~~on deferred~~As ~~taxes~~the ~~and~~codification ~~acquired~~was ~~tax~~not ~~contingencies~~intended ~~associated~~to change ~~with~~or ~~acquisitions.~~alter ~~SFAS~~existing ~~No. 141R amends SFAS No. 109~~GAAP, ~~“Accounting~~it ~~for~~will ~~Income~~not ~~Taxes”~~have ~~such~~any ~~that~~impact ~~adjustments~~on ~~made~~our toconsolidated ~~valuation allowances on~~financial ~~deferred~~statements. ~~taxes~~All ~~and~~other ~~acquired~~non-grandfathered, ~~tax~~non-SEC ~~contingencies~~accounting ~~associated~~literature ~~with~~not ~~acquisitions~~included ~~that~~in ~~closed prior to~~ the ~~effective~~codification ~~date~~will ofbecome ~~SFAS No~~non-authoritative. ~~141R~~ ~~would~~This ~~also~~standard ~~apply~~is ~~the~~effective ~~provisions~~for offinancial ~~SFAS~~statements ~~No. 141R.~~for interim Weor doannual ~~not~~reporting ~~expect the~~periods ~~provisions~~ending ofafter ~~SFAS No.~~September ~~141R~~15, ~~to have a material impact on our consolidated financial statements unless we complete a business combination~~2009.

InNote ~~December 2007,~~2— ~~the~~Composition ~~FASB~~of ~~issued~~Certain ~~SFAS No. 160, “Noncontrolling Interests in Consolidated~~ Financial ~~Statements”,~~Statement ~~which is an amendment of Accounting Research Bulletin No. 51. This statement~~Captions clarifies that a noncontrolling interest in a subsidiary is an ownership interest in the consolidated entity that should be reported as equity in the consolidated financial statements. This statement changes the way the consolidated income statement is presented, thus requiring consolidated net income to be reported at amounts that include the amounts attributable to both parent and the noncontrolling interest. This statement is effective for the fiscal years, and interim periods within those fiscal years, beginning on or after December 15, 2008. We are currently evaluating the potential impact of SFAS No. 160 on our consolidated financial statements.

InThe ~~March 2008,~~following ~~the~~tables ~~FASB~~present ~~issued~~financial ~~Statement~~information of ~~Financial~~certain ~~Accounting~~consolidated ~~Standards~~balance ~~No. 161,~~sheet ~~“Disclosures~~captions ~~about Derivative Instruments and Hedging Activities”~~ (~~“SFAS~~dollars ~~No. 161”~~in thousands). ~~SFAS No. 161 is~~ intended to improve financial reporting about derivative instruments and hedging activities by requiring enhanced disclosures to enable investors to better understand their effects on an entity’s financial position, financial performance, and cash flows. The provisions of SFAS No. 161 are effective for financial statements issued for fiscal years and interim periods beginning after November 15, 2008, with early application encouraged. We do not expect the provisions of SFAS No. 161 to have a material impact on our consolidated financial statements.

InPrepaid ~~April 2008,~~expenses the FASB issued Staff Position No. 142-3, “Determination of the Useful Life of Intangible Assets” (“FSP No. 142-3”). FSP No. 142-3 amends the factors that should be considered in developing renewal or extension assumptions used to determine the useful life of a recognized intangible asset under SFAS No. 142, “Goodwill and ~~Other~~other ~~Intangible~~current ~~Assets”~~assets ~~(“SFAS~~— ~~No. 142”).~~Prepaid ~~FSP No. 142-3~~expenses ~~is effective for financial statements issued for fiscal years beginning after December 15, 2008,~~ and ~~interim~~other ~~periods~~current ~~within~~assets ~~those fiscal years; however, early adoption is not permitted.~~were: ~~We are currently evaluating the potential impact of FSP No. 142-3 on our consolidated financial statements.~~

Note 2—Composition of Certain Financial Statement Captions


	July 3,		April 3,
	2009		2009
Prepaid expenses	$	53,959	$	61,570
Inventories		11,332		10,840
Work-in-process		32,606		33,885
Joint Venture Receivables		3,746		2,491
Other current assets		8,382		15,428

Total	$	110,025	$	124,214

~~The~~Prepaid ~~following~~expenses ~~tables~~include ~~present~~prepaid ~~financial~~insurance, ~~information~~prepaid ofvendor ~~certain~~deposits, ~~consolidated~~and ~~balance~~prepaid ~~sheet~~rent, none of ~~captions~~which individually exceed 5% of current assets.

~~Prepaid~~Other ~~expense and other current~~ assets, net — ~~Prepaid~~Other ~~expense and other current~~ assets, net were:

	January 2,		March 28,
	July 3,		April 3,
(Amounts in thousands)	2009		2008
	2009		2009
Prepaid expenses	$	40,160	$	43,205
Deferred financing costs, net	$	12,665	$	13,828
Inventories		9,927		8,463
Investment in affiliates		10,111		8,982
Work-in-process inventories		38,570		45,245
Palm promissory notes, long-term portion		6,808		6,631
Minority interest		—		3,306
Other		2,381		2,627
Income taxes receivable		19,203		—
Total	$	31,965	$	32,068
Joint venture receivables		8,878		2,076
Other current assets		9,018		6,732
	$	125,756	$	109,027

Deferred financing cost is amortized to interest expense. Amortization related to deferred financing costs was $1.1 million and $0.8 million as of the quarters ended July 3, 2009 and July 4, 2008, respectively.

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


	July 3,		April 3,
	2009		2009
Wages, compensation and other benefits ⁽¹⁾	$	90,752	$	108,879
Accrued vacation		26,670		26,329
Accrued contributions to employee benefit plans		3,078		2,785

Total	$	120,500	$	137,993


(1)		Includes RSUs accounted for as liability awards presented in Note 9.

Other accrued liabilities — Accrued liabilities were:


	July 3,		April 3,
	2009		2009
Deferred revenue	$	30,514	$	30,739
Insurance expense		30,190		28,061
Interest expense and short-term swap liability		21,113		11,688
Contract losses		5,730		11,730
Legal matters		18,507		16,993
Other		11,327		12,379

Total	$	117,381	$	111,590

~~Prepaid~~Deferred ~~expenses~~revenue ~~include~~is ~~prepaid~~primarily ~~insurance,~~due ~~prepaid~~to ~~vendor~~payments ~~deposits,~~in ~~and~~excess ~~prepaid rent, none~~ of ~~which~~ ~~individually~~revenue ~~exceed 5% of current assets~~recognized. AsContract ~~of March 28, 2008, the minority interest~~losses ~~resulted~~relate into aaccrued ~~net~~losses ~~debit~~recorded ~~balance~~on ~~due~~certain toAfghanistan ~~the~~construction ~~accumulated net loss in GLS~~contracts.

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

	January 2,		March 28,
(Amounts in thousands)	2009		2008
Wages, compensation and other benefits	$	82,621	$	57,940
Accrued vacation		26,037		24,760
Accrued contributions to employee benefit plans		2,921		2,486
	$	111,579	$	85,186

Other accrued liabilities — Other accrued liabilities were:

	January 2,		March 28,
(Amounts in thousands)	2009		2008
Deferred revenue	$	31,308	$	53,083
Accrued insurance		24,539		36,260
Accrued interest		15,888		9,885
Contract losses and customer liabilities		12,793		134
Legal matters		18,478		19,851
Short-term swap liability		5,787		5,783
Other notes payable		4,674		374
Other		8,115		3,870
	$	121,582	$	129,240

Deferred revenue is primarily due to payments in excess of services provided for certain contracts in addition to payments received for services that must be deferred as a result of multiple element arrangements being recorded as a single unit of accounting. Included in the contract losses and customer liabilities balance is $10.1 million of estimated future losses associated with an Afghanistan construction project.

Note 3—Goodwill and Other Intangible Assets

~~Goodwill~~As announced on April 6, 2009, we changed from reporting financial results on our three segments utilized in fiscal year 2009 to reporting under three new segments, beginning with fiscal year 2010. Under the new organizational alignment, the three prior business segments of International Security Services (“ISS”), Logistics and Construction Management (“LCM”) and Maintenance and Technical Support (“MTSS”) are realigned into three 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.

The ~~Company~~goodwill ~~conducts~~carrying ~~its~~value ~~annual~~was ~~goodwill~~reallocated ~~impairment~~to ~~test~~the asthree ofnew ~~the~~operating ~~end~~segments ofusing ~~February~~a relative offair ~~each fiscal~~value ~~year.~~approach ~~During~~based on the ~~second~~new ~~quarter~~reporting ofunit ~~fiscal~~structure. ~~year~~The ~~2009,~~GLS ~~indictors~~segment ofhas ~~potential impairment,~~no ~~specifically~~goodwill ~~the~~carrying ~~operational~~value ~~results~~as ofthis ~~the~~distinct ~~Afghanistan~~service ~~construction~~line ~~business,~~came ~~caused~~into ~~the~~existence ~~Company to~~after ~~conduct~~the anlegacy ~~interim~~goodwill carrying ~~impairment~~value ~~test~~was established. The ~~result~~change ofin ~~this~~presentation ~~impairment~~of ~~test~~our ~~did~~goodwill ~~not~~balance ~~indicate~~by operating ~~impairment~~segment ~~had~~from ~~occurred~~April 3, at2009 ~~that~~to ~~time.~~July 3, 2009 is as follows:

During the third quarter of fiscal year 2009, the Company determined that a second interim impairment analysis as of January 2, 2009 would be prudent due to the continued challenges in its Afghanistan construction business. In accordance with SFAS No. 142, the Company completed step one of the impairment analysis and concluded that, as of January 2, 2009, the fair value of the Operations Maintenance and Construction Management (“OMCM”) reporting unit was greater than the respective carrying value, including goodwill indicating the reporting unit’s goodwill was not impaired.


(Dollars in thousands)	ISS		LCM		MTSS		Total
Goodwill balance as of April 3, 2009	$	300,094	$	39,935	$	80,151	$	420,180

~~The~~All ~~Company~~of ~~used~~the ~~income~~contracts ~~and~~that ~~market~~made ~~based~~up ~~approaches,~~the ~~which~~ISS ~~involved a discounted cash flow analysis~~ and aLCM ~~valuation~~operating ~~analysis.~~segments ~~The~~were ~~estimates~~realigned ~~and~~into ~~assumptions used in assessing~~ the GSDS ~~fair value~~operating ofsegment ~~the~~except ~~reporting~~for ~~unit~~GLS, ~~and~~which ~~the~~became ~~valuation~~a ofunique ~~the~~operating ~~underlying~~segment ~~assets~~ and ~~liabilities~~the ~~are~~Specialty ~~inherently~~Aviation & ~~subject~~Counter toDrug ~~significant~~strategic ~~uncertainties.~~business ~~These~~area ~~analyses~~(“SBA”), ~~also~~which ~~require~~was ~~management~~realigned tointo ~~make~~the ~~assumptions and~~GPSS ~~estimates~~operating ~~and review relevant industry and market data~~segment. In ~~The~~addition ~~contracts~~to in the ~~OMCM~~Specialty ~~reporting unit~~Aviation ~~not~~& ~~related~~Counter toDrug ~~Afghanistan Construction~~SBA, asall ~~well~~legacy asMTSS ~~forecasted~~programs ~~new business,~~ were ~~among the~~realigned ~~significant~~into ~~factors in~~ the ~~OMCM~~GPSS ~~impairment~~operating ~~analysis~~segment.


(Dollars in thousands)	GSDS		GPSS		GLS	Total
Goodwill balance as of July 3, 2009	$	209,073	$	211,107	$—	$	420,180

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


	July 3, 2009
	Weighted
	Average
	Useful Life		Gross		Accumulated
(Amounts in thousands, except years)	(Years)		Carrying Value		Amortization			Net
Finite-lived intangible assets:
Customer-related intangible assets		8.5	$	290,716	$	(163,793	)	$	126,923
Other		5.4		15,865		(9,025	)		6,840

			$	306,581	$	(172,818	)	$	133,763


Indefinite-lived intangible assets — Tradename			$	18,318	$	—		$	18,318


	April 3, 2009
	Weighted
	Average
	Useful Life		Gross		Accumulated
(Amounts in thousands, except years)	(Years)		Carrying Value		Amortization			Net
Finite-lived intangible assets:
Customer-related intangible assets		8.5	$	290,716	$	(155,142	)	$	135,574
Other		5.5		15,351		(8,206	)		7,145

			$	306,067	$	(163,348	)	$	142,719


Indefinite-lived intangible assets — Tradename			$	18,318	$	—		$	18,318

Amortization expense for customer-related and other intangibles was $9.5 million and $10.1 million for the fiscal quarters ended July 3, 2009 and July 4, 2008, respectively.

The ~~changes~~following inschedule ~~the~~outlines ~~carrying~~an ~~amount~~estimate of ~~goodwill~~future ~~for~~amortization based upon the ~~nine~~finite-lived intangible ~~months~~assets owned ~~ended~~at ~~January~~July 23, 2009 ~~are as follows~~:

(Amounts in thousands)	ISS(1)			LCM		MTSS		Total
	Amortization
Balance as of March 28, 2008	$	340,029		$	—	$	80,151	$	420,180
	Expense
Transfer between reporting segments(2)		(39,935	)		39,935		—		—
	(Dollars in thousands)
Balance as of January 2, 2009	$	300,094		$	39,935	$	80,151	$	420,180
Nine month period ended April 2, 2010	$	28,255
Estimate for fiscal year 2011		33,618
Estimate for fiscal year 2012		22,986
Estimate for fiscal year 2013		19,308
Estimate for fiscal year 2014		8,184
Thereafter		21,412

(1)		Balance as of March 28, 2008 represents the goodwill balance of the Government Services (“GS”) segment. International Security Services (“ISS”) and Logistics and Construction Management (“LCM”) did not exist as reportable segments at that date. On April 1, 2008, the Company announced it would change from reporting financial results of two segments, GS and Maintenance and Technical Support Services (“MTSS”), to reporting three segments, beginning with the first fiscal quarter of 2009. This was accomplished by splitting GS into two distinct reporting segments, ISS and LCM.
(2)		Transfer between reporting segments as described further in Note 14, is the result of a reorganization of the Company’s reporting structure within its segments and a contemporaneous independent fair value analysis of the reporting units within the Company’s reporting segments, in the manner required by SFAS No. 142.

Note 4— Income Taxes

~~Intangible~~The ~~Assets~~provision for income taxes consists of the following:

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


	Fiscal Quarter Ended
	July 3,		July 4,
	2009		2008
	(Dollars in thousands)
Current portion:
Federal	$	3,162	$	9,589
State		393		807
Foreign		843		2,539

		4,398		12,935


Deferred portion:
Federal		7,959		(3,496	)
State		266		(117	)
Foreign		4		(6	)

		8,229		(3,619	)

Provision for income taxes	$	12,627	$	9,316

	January 2, 2009
	Weighted
	Average
	Useful Life		Gross		Accumulated
(Amounts in thousands, except years)	(Years)		Carrying Value		Amortization			Net
Finite-lived intangible assets:
Customer-related intangible assets		8.5	$	290,716	$	(146,492	)	$	144,224
Other		5.2		14,978		(8,051	)		6,927
			$	305,694	$	(154,543	)	$	151,151
Indefinite-lived intangible assets — Tradename			$	18,318	$	—		$	18,318

Deferred tax assets and liabilities are reported as:

	March 28, 2008
	July 3,			April 3,
	Weighted
	2009			2009
	Average
	(Dollars in thousands)
	Useful Life			Gross			Accumulated
Current deferred tax liabilities	$	(9,615	)	$	(8,278	)
(Amounts in thousands, except years)	(Years)			Carrying Value			Amortization			Net
Non-current deferred tax assets		8,430			12,788
Finite-lived intangible assets:
Deferred tax (liabilities)/assets, net	$	(1,185	)	$	4,510
Customer-related intangible assets		8.5		$	290,716		$	(119,997	)	$	170,719
Other		4.2			10,887			(5,460	)		5,427
				$	301,603		$	(125,457	)	$	176,146
Indefinite-lived intangible assets — Tradename				$	18,318		$	—		$	18,318

~~Amortization~~As ~~expense~~of ~~for~~July 3, ~~customer-related~~2009 and ~~other~~April 3, ~~intangibles~~2009, ~~was~~we have $9.53 million and $106.4 1 million, ~~for~~respectively, ~~the~~of total ~~three~~unrecognized ~~months~~tax ~~ended~~benefits. ~~January 2,~~The ~~2009~~amount ~~and~~of ~~December 28,~~unrecognized ~~2007~~tax benefits that, ~~respectively~~if recognized, ~~and~~would affect the effective tax rate was $290.1 2 million and $300.41 million for ~~the nine months ended January~~July 23, 2009 and ~~December~~April 283, ~~2007~~2009, respectively.

It is reasonably possible that in the next 12 months the gross amount of unrecognized tax benefits will increase by $0.2 million. However, we do not expect any material changes to its effective tax rate as a result.

We recognize interest accrued related to uncertain tax positions in interest expense and penalties in income tax expense in our unaudited Consolidated Statements of Income, which is consistent with the recognition of these items in prior periods. We have recorded a liability of approximately $0.3 million and $0.2 million for the payment of interest and penalties as of July 3, 2009 and April 3, 2009, respectively.

We file income tax returns in U.S. federal and state jurisdictions and in various foreign jurisdictions. The statute of limitations is open for federal and state examinations for our fiscal year 2005 forward and, with few exceptions, foreign income tax examinations for the calendar year 2005 forward.

For the fiscal quarter ended July 3, 2009 our effective tax rate was 32.3% as compared to 33.3% for the fiscal quarter ended July 4, 2008. The reduction in the effective tax rate below the U.S. marginal federal statutory rate of 35% was primarily due to the impact of our consolidated joint ventures such as GLS and DIFZ. These are consolidated for financial reporting purposes; but, are considered unconsolidated entities for U.S. income tax purposes.

~~The~~Note ~~following~~5— ~~schedule~~Accounts ~~outlines an estimate of future amortization based upon the finite-lived~~Receivable ~~intangible assets owned at January 2, 2009:~~

	Amortization
(Amounts in thousands)	Expense
Three month period ended April 3, 2009	$	9,506
Estimate for fiscal year 2010		37,550
Estimate for fiscal year 2011		33,240
Estimate for fiscal year 2012		22,654
Estimate for fiscal year 2013		19,123
Thereafter		29,078
Total	$	151,151

Note 4—Accounts Receivable

Accounts Receivable, net consisted of the following:

	January 2,		March 28,
(Dollars in thousands)	July 3, 2009		April 3, 2009
(Amounts in thousands)	2009		2008
Billed, net	$	272,344	$	220,501
Billed	$	265,132	$	193,337
Unbilled		367,126		343,931
Unbilled		369,792		319,975
Total	$	639,470	$	564,432
Total	$	634,924	$	513,312

Unbilled receivables at ~~January~~July 23, 2009 and ~~March~~April 283, ~~2008~~2009 include $3831.36 million and $5230.8 7 million, respectively, related to costs incurred on projects for which ~~the~~we ~~Company~~have ~~has~~ been ~~requested~~ requested by the customer to begin work under a new contract or extend work under an existing contract, and for which formal contracts or contract modifications have not been executed at the end of the respective ~~fiscal period~~periods. These amounts include $5.3 million related to contract claims at ~~January 2~~July 3, 2009 and ~~March~~April 283, ~~2008~~2009. The balance of unbilled receivables consists of costs and fees billable immediately, on contract completion or other specified events, ~~substantially~~the ~~all~~majority of which is expected to be be billed and collected within one year.

Note 56—Long-Term Debt

Long-term debt consisted of the following:

	January 2,		March 28,
	July 3,		April 3,
(Amounts in thousands)	2009		2008
	2009		2009
Term loans	$	200,000	$	301,130
	(Dollars in thousands)
9.5% Senior subordinated notes(1)		415,903		292,032
Term loans	$	176,637	$	200,000
		615,903		593,162
9.5% Senior subordinated notes(1)		389,746		399,912
Less current portion of long-term debt		—		(3,096	)
		566,383		599,912
Total long-term debt	$	615,903	$	590,066
Less current portion of long-term debt		—		(30,540	)
Total long-term debt	$	566,383	$	569,372

(1) ~~Senior~~This ~~subordinated~~includes ~~notes~~the ~~are~~impact ~~net~~ of athe ~~$1.1~~discount ~~million~~which ~~unamortized~~had ~~discount~~a ascarrying value of ~~January~~($0.9) 2,million ~~2009~~($1.0) ~~There~~million ~~was~~of noJuly ~~unamortized~~3, ~~discount~~2009 asand ofApril ~~March~~3, 282009, ~~2008~~respectively.

~~Future~~For ~~maturities~~a description of ~~long~~our indebtedness, see Note 7, Long-~~term~~Term ~~debt~~Debt, ~~for~~to the ~~three~~consolidated financial ~~months~~statements ~~ending~~in ~~April 3,~~our fiscal 2009 ~~and~~Annual ~~each~~Report ofon ~~the fiscal~~Form ~~years~~10-K ~~subsequent~~filed towith ~~April 3,~~the ~~2009~~SEC ~~were~~on ~~as follows:~~June 11, 2009.

(Amounts in thousands)
Three months ending April 3, 2009	$	—
2010		16,875
2011		50,625
2012		55,500
2013		494,032
Thereafter		—
Total long-term debt (including current portion)(1)	$	617,032

Senior Secured Credit Facility

~~(1)~~We ~~Future~~are ~~maturities~~required, under certain circumstances as defined in our credit agreement, to use a percentage of ~~long-~~excess cash generated from operations to reduce the outstanding principal of the term loans ~~debt~~in ~~include~~the following year. Such payments are due near the end of the first quarter of the following fiscal year. We paid $123.14 million under the excess cash flow requirement in June 2009 stemming from our fiscal year 2009 results. This payment was lower than the $30.5 million ~~unamortized~~estimate in ~~discount~~our fiscal year 2009 annual report as several members of ~~January~~our 2banking syndicate waived their excess cash flow principal payment option. The excess cash flow measurement is an annual requirement of the credit agreement and, ~~2009~~as a result, ~~which~~we iscannot ~~presented~~predict ~~net~~with incertainty the ~~financial~~excess cash ~~statements~~flow that will be generated, if any, for the results related to the fiscal year ending April 2, 2010.

All of our senior secured credit facility borrowings are considered long term as principal payments do not start to occur until September 2010. At July 3, 2009, availability under the revolving credit facility for additional borrowings was approximately $170.5 million (which gives effect to approximately $29.5 million of outstanding letters of credit, which reduced our availability by that amount). The credit agreement requires an unused line fee equal to 0.5% per annum, payable quarterly in arrears, for the unused portion of the revolving credit facility. The fair value of our borrowings under our senior secured credit facility approximates 98% of the carrying amount based on market quotes as of July 3, 2009. Borrowings under the credit facility are guaranteed by the Parent and each of our subsidiaries, subject to limited exceptions. We are secured by substantially all of our Parent’s assets.

Senior Secured Credit Facility

On July 28, 2008 the Company entered into a senior secured credit facility (the “Credit Facility”) consisting of a revolving credit facility of $200.0 million (including a letter of credit sub facility of $125.0 million) (the “Revolving Facility”) and a senior secured term loan facility of $200.0 million (the “Term Loan Facility”). The maturity date of the Revolving Facility and the Term Loan Facility is August 15, 2012. Quarterly principal payments will begin on September 22, 2009 and end on the maturity date of August 15, 2012. The scheduled quarterly Term Loan Facility payments beginning on September 22, 2009, are considered long term since the Company has the intent and ability to make a revolver borrowing equal to or greater than the quarterly payments in order to maintain hedge accounting on the full $200.0 million through May 22, 2010, as disclosed in Note 10. The Credit Facility is subject to various financial covenants, including a total leverage ratio, an interest coverage ratio, maximum capital expenditures and certain limitations based upon eligible accounts receivable. Borrowings under the Credit Facility are guaranteed by the Parent and each of our subsidiaries, subject to limited exceptions, and are secured by substantially all of our Parent’s assets.

On July 28, 2008, the Company borrowed $200.0 million under the Term Loan Facility at the applicable three-month LIBOR (“London Interbank Offered Rate”) plus the applicable margin then in effect to refinance certain existing indebtedness and pay certain transaction costs related to the Credit Facility and the offering of additional senior subordinated notes, as described below. The applicable margin for LIBOR as of January 2, 2009 was 2.5% per annum, resulting in an effective interest rate under the Term Loan Facility of 4.3% per annum. This rate is fully hedged through the Company’s swap agreements as disclosed in Note 10.

Borrowings under the Revolving Facility bear interest at a rate per annum equal to either the Alternate Base Rate plus an applicable margin determined by reference to the leverage ratio, as set forth in the Credit Facility (“Applicable Margin”) or LIBOR plus the Applicable Margin. As of both January 2, 2009 and March 28, 2008, the Company had no outstanding borrowings under the Revolving Facility.

Our available borrowing capacity under the Revolving Facility totaled $185.8 million at January 2, 2009, which gives effect to $14.2 million of outstanding letters of credit under the letter of credit sub facility. With respect to each letter of credit, a quarterly commission in an amount equal to the face amount of such letter of credit multiplied by the Applicable Margin and a nominal fronting fee are required to be paid. The combined rate as of January 2, 2009 was 2.6%.

As of January 2, 2009, the Company also had $14.4 million of letters of credit outstanding that were not part of the Revolving Facility. These letters of credit are collateralized by $15.2 million of restricted cash, which is recorded as such in the Company’s consolidated balance sheet as of January 2, 2009.

The Company is required, under certain circumstances as defined in the Credit Facility, to use a percentage of cash generated from operations to reduce the outstanding principal of the Term Loan Facility in the year after the excess cash flow is generated. The actual amount of the required repayment if any, in respect to fiscal year 2009, could vary significantly based on such factors as the timing of cash receipts and cash payments near fiscal year end. Because of this, the Company cannot make a reasonable estimate of the required repayment if any, in respect to fiscal year 2009. In the event a repayment is required to be made, which would be paid during the first quarter of fiscal year 2010, the Company anticipates utilizing borrowings under the Revolving Facility to make such payment.

On July 28, 2008, upon entering in to the Credit Facility, the Company’s pre-existing Senior Secured Credit Facility was extinguished. Deferred financing fees totaling $4.4 million were expensed in the current reporting period. Deferred financing fees associated with the Credit Facility totaling $5.0 million were recorded in other assets on the Company’s consolidated balance sheet.

9.5% Senior Subordinated Notes

InThe ~~February 2005,~~senior ~~the~~subordinated ~~Company~~notes ~~completed~~are angeneral ~~offering~~unsecured obligations of ~~$320~~our Company and certain guarantor subsidiaries.~~0 million~~ inThese ~~aggregate~~contain ~~principal~~certain covenants and restrictions, which limit our ability ~~amount~~to ofpay ~~its~~dividends 9to our Parent.5% We can redeem the senior subordinated notes, ~~due~~in ~~2013.~~whole ~~Interest~~or isin ~~payable~~part, at ~~semi-annually~~defined onredemption prices, plus accrued interest to the redemption date. In ~~February~~June 152009, ~~and~~our ~~August 15~~Parent’s board of ~~each~~directors ~~year.~~added ~~Proceeds~~a ~~from~~requirement that repurchases of our Parent’s common stock could only occur if the ~~original~~price ~~issuance~~was ofless than or equal to $14.00 per share. In the ~~senior~~first ~~subordinated~~quarter ~~notes~~of fiscal year 2010, ~~net~~we ofpurchased ~~fees~~54,900 ~~were~~shares for $~~310.~~0.7 million ~~and~~at ~~were~~an ~~used~~average toprice ~~pay~~of $12.93 ~~the~~per ~~consideration~~share. ~~for, and~~In ~~fees~~the ~~and~~first ~~expenses~~quarter ~~relating~~of tofiscal ~~our~~year ~~2005~~2010, ~~formation~~under asa anboard ~~independent~~authorized ~~company~~program, ~~from Computer~~we ~~Science~~repurchased ~~Corporation~~$10.3 million ~~The~~of face value of our senior subordinated notes ~~are~~for ~~general~~$10.0 million, including ~~unsecured~~applicable ~~obligations~~fees. When including the impact of the applicable portion of the discount and ~~Company~~deferred financing fees, ~~and~~the ~~certain~~redemption ofresulted ~~its~~in ~~guarantor~~an ~~subsidiaries~~insignificant gain.

The fair value of the senior subordinated notes is based on their quoted market value. As of July 3, 2009, the quoted market value of the senior subordinated notes was approximately 97% of stated value.

Note 7— Interest Rate Derivatives

At April 3, 2009, our derivative instruments consisted of two interest rate swap agreements. The $168.6 million dollar derivative is designated as a cash flow hedge that effectively fixes the interest rate on the applicable notional amount of our variable rate debt. The $31.4 million swap derivative no longer qualifies for hedge accounting as it was fully dedesignated as of July 3, 2009.

Fixed

Variable

Notional

Interest

Interest Rate

Date Entered

Amount

Rate Paid*

Received

Expiration Date

April 2007

168,620

4.975

3-month LIBOR

May 2010

April 2007

31,380

4.975

3-month LIBOR

May 2010


*		Plus applicable margin (2.5% at July 3, 2009).

During the quarter ended July 3, 2009, we paid $1.9 million in net settlements and incurred $2.1 million of expenses, of which $1.9 million was recorded to interest expense and $0.2 million was recorded to other (loss)/income. In the quarter ended July 4, 2008, we paid $1.6 million in net settlements and incurred $1.9 million of expenses, of which $1.5 million was recorded to interest expense and $0.4 million was recorded to other (loss)/income.

Amounts are reclassified from accumulated other comprehensive income into earnings as net cash settlements occur, changes from quarterly derivative valuations are updated, new circumstances dictate the disqualification of hedge accounting and adjustments for cumulative ineffectiveness are recorded.

The fair values of our derivative instruments and the line items on the Consolidated Balance Sheet to which they were recorded as of July 3, 2009 and April 3, 2009 are summarized as follows (in thousands):


		Fair Value at		Fair Value at
Derivatives designated as hedges under SFAS No. 133	Balance Sheet Location	July 3, 2009		April 3, 2009
Interest Rate Swaps	Other accrued liabilities	$	5,565	$	5,259
Interest Rate Swaps	Other long-term liabilities		—		957

	Total	$	5,565	$	6,216


		Fair Value at		Fair Value at
Derivatives not designated as hedges under SFAS No. 133	Balance Sheet Location	July 3, 2009		April 3, 2009
Interest Rate Swaps	Other accrued liabilities	$	1,028	$	893
Interest Rate Swaps	Other long-term liabilities		—		182

	Total	$	1,028	$	1,075


Total Derivatives		$	6,593	$	7,291

InThe ~~July 2008,~~effects ~~the Company completed an offering in a private placement pursuant to Rule 144A under the Securities Act~~ of ~~1933,~~our asderivative ~~amended,~~instruments ofon ~~$125.0 million~~other incomprehensive ~~aggregate~~income ~~principal~~(“OCI”) ~~amount~~and ofour ~~additional~~Consolidated ~~9.5%~~Statements ~~senior subordinated notes under the same indenture as the senior subordinated notes issued in February 2005. Net proceeds from the additional offering~~ of ~~senior~~Income ~~subordinated~~for ~~notes were used to refinance~~ the ~~then~~quarter ~~existing~~ended ~~Senior Secured Credit Facility, to pay related fees and expenses and for general corporate purposes. The additional senior subordinated notes mature on February~~July 153, 2013. The additional senior subordinated notes were issued at approximately a 1.0% discount totaling $1.2 million. Deferred financing fees associated with this offering totaled $4.6 million. The Company’s registration statement with respect to these notes was declared effective on January 13, 2009. ~~The~~are ~~Company~~summarized ~~has~~as ~~launched~~follows ~~an exchange offer for the notes that is expected to end~~(in ~~on or about February 11, 2009.~~thousands):

Prior to February 15, 2009, the Company may redeem the senior subordinated notes, in whole or in part, at a price equal to 100% of the principal amount of the senior subordinated notes plus a defined make-whole premium, plus accrued interest to the redemption date. After February 15, 2009, the Company can redeem the senior subordinated notes, in whole or in part, at defined redemption prices, plus accrued interest to the redemption date. While the Company is restricted under the terms of Credit Facility from redeeming the senior subordinated notes, the holders of the senior subordinated notes may require the Company to repurchase the senior subordinated notes at defined prices in the event of certain specified triggering events, including but not limited to certain asset sales, change-of-control events, and debt covenant violations.

GAINS (LOSSES) RECOGNIZED

Gains (Losses)

GAINS (LOSSES) RECLASSIFIED FROM

IN INCOME ON DERIVATIVES

Derivatives Designated as

Recognized in OCI

ACCUMULATED OCI INTO INCOME

(INEFFECTIVE PORTION)

Cash Flow Hedging

on Derivatives

(EFFECTIVE PORTION)

Line Item

Instruments under SFAS

(Effective Portion)

Line Item in Statements

in Statements

No. 133

Quarter ended July 3, 2009

of Income

Amount

of Income

Amount

Interest rate derivatives

(5,319

)

Interest expense

(1,898

)

Other (loss)/income, net

—

Total

(5,319

)

(1,898

)

—

The ~~fair~~effects ~~value~~ of ~~the~~our ~~senior~~derivative ~~subordinated~~instruments ~~notes is based~~ on ~~their~~OCI ~~quoted~~and ~~market~~our ~~value.~~Consolidated AsStatements of ~~January 2,~~Income ~~2009,~~for the ~~quoted~~quarter ~~market~~ended ~~value~~July 4, of2008 ~~the~~are ~~senior~~summarized ~~subordinated~~as ~~notes~~follows ~~was~~(in ~~approximately 87% of~~thousands): ~~stated value.~~

Note 6—Commitments and Contingencies

GAINS (LOSSES) RECOGNIZED

Gains (Losses)

GAINS (LOSSES) RECLASSIFIED FROM

IN INCOME ON DERIVATIVES

Derivatives Designated as

Recognized in OCI

ACCUMULATED OCI INTO INCOME

(INEFFECTIVE PORTION)

Cash Flow Hedging

on Derivatives

(EFFECTIVE PORTION)

Line Item

Instruments under SFAS

(Effective Portion)

Line Item in Statements

in Statements

No. 133

Quarter ended July 4, 2008

of Income

Amount

of Incomes

Amount

Interest rate derivatives

(5,627

)

Other (loss)/income, net

(1,812

)

Interest expense

308

Total

(5,627

)

(1,812

)

308

We had a hedge dedesignation event in the quarter ended July 4, 2008. We did not have any hedge dedesignation events in the quarter ended July 3, 2009. The effects of our derivative instruments not designated as hedging instruments under SFAS No. 133 on our Consolidated Statement of Income for the quarter ended July 3, 2009 and quarter ended July 4, 2008 are summarized as follows (in thousands):


	AMOUNT OF GAIN OR
	(LOSS) RECOGNIZED IN
Derivatives not Designated	INCOME ON DERIVATE
as Hedging Instruments	Line Item in Statements	July 3, 2009			July 4, 2008
under SFAS No. 133	of Income	Amount			Amount
Interest rate derivatives	Other (loss)/ income, net	$	(188	)	$	(404	)

Total		$	(188	)	$	(404	)

As of July 3, 2009, we estimate that approximately $5.3 million of losses associated with the interest rate swap related to $168.6 million of notional debt included in accumulated other comprehensive income will be reclassified into earnings over the remaining life of the derivative which expires in May 2010. The other interest rate swap does not qualify for hedge accounting and has been marked to market, which generated a $1.0 million liability at July 3, 2009. See Note 14 for fair value disclosures associated with these hedges.

Note 8—Commitments and Contingencies

Commitments

~~The~~We ~~Company~~have ~~has~~ operating leases for the use of real estate and certain property and equipment, which are either non-cancelable, cancelable only by the payment of penalties or cancelable upon one month’s notice. All lease payments are based on the lapse of time but include, in some cases, payments for insurance, maintenance and property taxes. There are no purchase options on operating leases at favorable terms, but most leases have one or more renewal options. Certain leases on real estate are subject to annual escalations for increases in base rents, utilities and property taxes. Lease rental expense amounted to $1513.1 million and $1413.67 million for ~~the~~ ~~three months ended January 2, 2009 and December 28, 2007, respectively, and $38.8 million and $39.3 million for~~ the ~~nine~~fiscal ~~months~~ quarters ended ~~January~~July 23, 2009 and ~~December~~July 284, ~~2007~~2008, respectively.

Contingencies

General Legal Matters

~~The~~We ~~Company and its subsidiaries and affiliates~~ are involved in various lawsuits and claims that have arisen in the normal course of business. In most cases, ~~the~~we ~~Company~~have ~~has~~ denied, or ~~believes~~ itbelieve ~~has~~we have a basis to deny any liability. Related to these matters, ~~the~~we ~~Company~~have ~~has~~ recorded a reserve of approximately $18.5 million ~~for~~as ~~pending~~of ~~litigation~~July 3, ~~and claims~~2009. While it is not possible to predict with certainty the outcome of litigation and other matters discussed below, itwe isbelieve ~~the opinion~~that ofliabilities ~~the~~in ~~Company’s~~excess ~~management~~of ~~that~~those recorded, ~~reserves~~if ~~are~~any, ~~sufficient~~arising tofrom ~~cover~~such matters ~~known~~would ~~matters based~~not onhave ~~information~~a ~~available~~material asadverse effect on our results of ~~this~~operations, ~~Quarterly~~consolidated financial ~~Report~~condition or liquidity over the long term.

Pending ~~Litigation~~litigation and ~~Claims~~claims

On May 14, 2008, a jury in the Eastern District of Virginia found against ~~the~~us ~~Company~~ in a case ~~brought~~ brought by a former subcontractor, Worldwide Network Services (“WWNS”), on two Department of State ~~Department~~(“DoS”) contracts, in which WWNS alleged racial discrimination, ~~tortious~~tortuous interference and certain other claims. The jury awarded WWNS approximately $15.7 million in compensatory and punitive damages and awarded ~~the~~us ~~Company~~ approximately $200,000 on a counterclaim. In addition to the jury award, the ~~court~~ court awarded WWNS approximately $3.0 million in connection with certain contract claims. On September 22, 2008, WWNS was awarded approximately $1.8 million in attorneys’ fees. On February 2, 2009, ~~the~~ ~~Company~~we filed an appeal with respect to this matter. As of ~~January~~July 23, 2009, ~~the~~we ~~Company believes~~believe itwe ~~has~~ have adequate reserves recorded for this matter.

15On April 24, 2007, March 14, 2007, December 29, 2006 and December 4, 2006, four lawsuits were served, seeking unspecified monetary damages against the Company and several of its former affiliates in the U.S. District Court for the Southern District of Florida, concerning the spraying of narcotic plant crops along the Colombian border adjacent to Ecuador. Three of the lawsuits, filed on behalf of the Provinces of Esmeraldas, Sucumbíos, and Carchi in Ecuador, allege violations of Ecuadorian law, international law, and statutory and common law tort violations, including negligence, trespass, and nuisance. The fourth lawsuit, filed on behalf of citizens of the Ecuadorian provinces of Esmeraldas and Sucumbíos, alleges personal injury, various counts of negligence, trespass, battery, assault, intentional infliction of emotional distress, violations of the Alien Tort Claims Act, and various violations of international law. The four lawsuits were consolidated, and based on our motion granted by the court, the case was subsequently transferred to the U.S. District Court for the District of Columbia. On March 26, 2008, a First Amended Consolidated Complaint was filed that identified 3,266 individual plaintiffs. The amended complaint does not demand any specific monetary damages; however, a court decision against us, although we believe to be remote, could have a material adverse effect on our results of operations and financial condition. The aerial spraying operations were and continue to be managed by us under a DoS contract in cooperation with the Colombian government. The DoS contract provides indemnification to us against third-party liabilities arising out of the contract, subject to available funding. The DoS has reimbursed us for all legal expenses to date.

A lawsuit filed on September 11, 2001, and amended on March 24, 2008, seeking unspecified damages on behalf of twenty-six residents of the Sucumbíos Province in Ecuador, was brought against us and several of our former affiliates in the U.S. District Court for the District of Columbia. The action alleges violations of the laws of nations and United States treaties, negligence, emotional distress, nuisance, battery, trespass, strict liability, and medical monitoring arising from the spraying of herbicides near the Ecuador-Colombia border in connection with the performance of the DoS, International Narcotics and Law Enforcement contract for the eradication of narcotic plant crops in Colombia. The terms of the DoS contract provide that the DoS will indemnify us against third-party liabilities arising out of the contract, subject to available funding. The DoS has reimbursed us for all legal expenses to date. We are also entitled to indemnification by Computer Sciences Corporation in connection with this lawsuit, subject to certain limitations. Additionally, any damage award would have to be apportioned between the other defendants and us. We believe that the likelihood of an unfavorable judgment in this matter is remote and that, even if that were to occur, the judgment is unlikely to result in a material adverse effect on our results of operations or financial condition as a result of the third party indemnification and apportionment of damages described above.

OnArising ~~April 24,~~out ~~2007,~~of ~~March 14, 2007, December 29, 2006 and December 4, 2006, four lawsuits were served, seeking unspecified monetary damages against~~ the ~~Company~~litigation ~~and~~described ~~several of its former affiliates~~ in the ~~U.S.~~preceding ~~District~~two ~~Court for the Southern District of Florida~~paragraphs, ~~concerning~~we ~~the~~filed ~~spraying of~~a ~~narcotic plant crops along the Colombian border adjacent to Ecuador. Three of the lawsuits,~~separate ~~filed~~lawsuit onagainst ~~behalf~~our ofaviation ~~the~~insurance ~~Providences~~carriers ofseeking ~~Esmeraldas,~~defense ~~Sucumbíos,~~ and ~~Carchi~~coverage ~~in Ecuador, allege violations~~ of ~~Ecuadorian~~the ~~law, international law, and statutory and~~referenced ~~common tort law violations, including negligence, trespass, and nuisance~~claims. The ~~fourth~~carriers ~~lawsuit,~~ filed ona ~~behalf~~lawsuit ofagainst ~~citizens~~us ~~of the~~on ~~Ecuadorian provinces of Esmeraldas and Sucumbíos~~February 5, ~~alleges~~2009 ~~personal~~seeking ~~injury,~~rescission ~~various counts~~ of ~~negligence,~~ ~~trespass, battery, assault, intentional infliction of emotional distress, violations of~~certain ~~the~~aviation ~~Alien~~insurance ~~Tort~~policies ~~Claims Act, and various violations of international law. The four lawsuits were consolidated, and~~ based on ~~the~~an ~~Company’s~~alleged ~~motion~~misrepresentation ~~granted~~ by ~~the~~us ~~court,~~concerning the ~~case~~existence ~~was subsequently transferred to the U.S. District Court for the District~~ of ~~Columbia. On March 26, 2008, a First~~ ~~Amended~~certain Consolidated Complaint was filed that identified 3,266 individual plaintiffs. The amended complaint does not demand any specific monetary damages; however, a court decision against the Company, although believed by the Company to be remote, could have a material adverse effect on its results of ~~operations and financial condition. The aerial spraying operations were and continue to be managed by~~ the ~~Company~~lawsuits ~~under~~relating ~~a Department of State (“DoS”) contract in cooperation with the Colombian government. The DoS contract provides indemnification~~ to the ~~Company~~eradication ~~against third-party liabilities arising out~~ of ~~the~~narcotic ~~contract,~~plant ~~subject to available funding~~crops. ~~The DoS has reimbursed the Company for all legal expenses to~~ ~~date.~~

A lawsuit filed on September 11, 2001, and amended on March 24, 2008, seeking unspecified damages on behalf of twenty-six residents of the Sucumbíos Province in Ecuador, was brought against the Company and several of its former affiliates in the U.S. District Court for the District of Columbia. The action alleges violations of the laws of nations and United States treaties, negligence, emotional distress, nuisance, battery, trespass, strict liability, and medical monitoring arising from the spraying of herbicides near the Ecuador-Colombia border in connection with the performance of the DoS, International Narcotics and Law Enforcement contract for the eradication of narcotic plant crops in Colombia. The terms of the DoS contract provide that the DoS will indemnify the Company against third-party liabilities arising out of the contract, subject to available funding. The DoS has reimbursed the Company for all legal expenses to date. The Company is also entitled to indemnification by Computer Sciences Corporation in connection with this lawsuit, subject to certain limitations. Additionally, any damage award would have to be apportioned between the other defendants and the Company. The Company believes that the likelihood of an unfavorable judgment in this matter is remote and that, even if that were to occur, the judgment is unlikely to result in a material adverse effect on the results of operations or financial condition of the Company as a result of the third party indemnification and apportionment of damages described above.

Arising out of the litigation described in the preceding two paragraphs, the Company filed a separate lawsuit against the Company’s aviation insurance carriers seeking defense and coverage of the referenced claims. The carriers filed a lawsuit against the Company on February 5, 2009 seeking rescission of certain aviation insurance policies based on an alleged misrepresentation by the Company concerning the existence of certain of the lawsuits relating to the eradication of narcotic plant crops.

On May 29, 2003, Gloria Longest, a former accounting manager for the Company, filed suit against the company and a subsidiary of Computer Sciences Corporation under the False Claims Act and the Florida Whistleblower Statute, alleging that the defendants submitted false claims to the U.S. government under the International Narcotics & Law Enforcement contract with the DoS. The U.S. Department of Justice approved the terms of the confidential settlement between the parties and the court entered an order of dismissal on September 26, 2008. The terms of the settlement did not have a material adverse effect on the Company’s results of operations or financial condition.

U.S. Government Investigations

We also are occasionally the subject of investigations by various agencies of the U.S. government. Such investigations, whether related to our U.S. government contracts or conducted for other reasons, could result in administrative, civil or criminal liabilities, including repayments, fines or penalties being imposed upon us, or could lead to suspension or debarment from future U.S. government contracting.

On January 30, 2007, the Special Inspector General for Iraq Reconstruction (“SIGIR”) issued a report on one of our task orders concerning the Iraqi Police Training Program. Among other items, the report raises questions about our work to establish a residential camp in Baghdad to house training personnel. Specifically, the SIGIR report recommends that the DoS seek reimbursement from us of $4.2 million paid by the DoS for work that the SIGIR maintains was not contractually authorized. In addition, the SIGIR report recommends that the DoS request the Defense Contract Audit Agency (“DCAA”) to review two of our invoices totaling $19.1 million. On June 28, 2007, we received a letter from the DoS contracting officer requesting our repayment of approximately $4.0 million for work performed under this task order, which the letter claims was unauthorized. We responded to the DoS contracting officer in letters dated July 7, 2007 and September 4, 2007, explaining that the work for which we were paid by DoS was appropriately performed and denying DoS’ request for repayment of approximately $4.0 million. By letter dated April 30, 2008, the DoS contracting officer responded to our July 7, 2007 and September 4, 2007 correspondence by taking exception to the explanation set forth in our letters and reasserting the DoS’ request for a refund of approximately $4.0 million. On May 8, 2008, we replied to the DoS letter dated April 30, 2008 and provided additional support for our position.

On September 17, 2008, the U.S. Department of State Office of Inspector General (“OIG”) served us with a records subpoena for the production of documents relating to our Civilian Police Program in Iraq. Among other items, the subpoena seeks documents relating to our business dealings with a former subcontractor, Corporate Bank. We are cooperating with the OIG’s investigation and, based on information currently known to management, do not believe this matter will have a material adverse effect on our operating performance.

U.S. Government Audits

Our contracts are regularly audited by the DCAA and other government agencies. These agencies review our contract performance, cost structure and compliance with applicable laws, regulations and standards. The DCAA also reviews the adequacy of, and our compliance with, our internal control systems and policies, including our purchasing, property, estimating, compensation and management information systems. Any costs found to be improperly allocated to a specific contract will not be reimbursed. In addition, government contract payments received by us for allowable direct and indirect costs are subject to adjustment after audit by government auditors and repayment to the government if the payments exceed allowable costs as defined in the government contracts.

The Defense Contract Management Agency (“DCMA”) formally notified ~~the~~us ~~Company~~ of non-compliance with Cost Accounting Standard 403, Allocation of Home Office Expenses to Segments, on April 11, 2007. ~~The Company~~ We issued a response to the DCMA on April 26, 2007 with a proposed solution to resolve the area of non-compliance, which related to the allocation of corporate general and administrative costs between ~~the~~our ~~Company’s~~ divisions. On August 13, 2007, the DCMA notified ~~the Company~~us that additional information would be necessary to justify the proposed solution. ~~The Company~~We issued responses on September 17, 2007 and April 28, 2008 and the matter is pending resolution. InBased ~~management’s opinion and based~~ on facts currently known, we do not believe the ~~above-~~matters described ~~matters~~in this ~~will~~and ~~not~~the preceding paragraph will have a material adverse effect on ~~the~~our ~~Company’s~~ results of operations or financial condition.

The Company, currently, is under audit by the Internal Revenue Service (“IRS”) for employment taxes covering the calendar years 2005 through 2007. In the course of the audit process, the IRS has questioned the Company’s treatment of exempting from U.S. employment taxes all U.S. residents working abroad for a foreign subsidiary. While the Company believes its treatment with respect to employment taxes, for these employees, was appropriate, a negative outcome on this matter could result in a potential liability, including penalties, of approximately $113.8 million related to these calendar years.

Contract Matters

During the first fiscal quarter we terminated for cause a contract to build the Akwa Ibom International Airport for the State of Akwa Ibom in Nigeria. Consequently, we terminated certain subcontracts and purchase orders the customer advised us it did not want to assume. Based on our experience with this particular Nigerian state government customer, we believe it likely the customer will challenge our termination of the contract for cause and initiate legal action against us. Our termination of certain subcontracts not assumed by the customer, including our actions to recover against advance payment and performance guarantees established by the subcontractors for our benefit, is being challenged in certain instances.

~~Note~~We 7—are ~~Income~~currently ~~Taxes~~under audit by the Internal Revenue Service (“IRS”) for employment taxes covering the calendar years 2005 through 2007. In the course of the audit process, the IRS has questioned our treatment of exempting from U.S. employment taxes all U.S. residents working abroad for a foreign subsidiary. While we believe our treatment with respect to employment taxes, for these employees, was appropriate, a negative outcome on this matter could result in a potential liability, including penalties, of approximately $113.8 million related to these calendar years.

~~The~~Contract ~~provision for income taxes consists of the following:~~Matters

	Three Months Ended
	January 2,			December 28,
(Amounts in thousands)	2009			2007
Current portion:
Federal	$	(27,825	)	$	1,752
State		(1,397	)		222
Foreign		1,046			973
Total current portion of tax provision		(28,176	)		2,947
Deferred portion:
Federal		38,586			3,872
State		1,290			149
Foreign		(61	)		—
Total deferred portion of tax provision		39,815			4,021
Total income tax provision	$	11,639		$	6,968

During the first quarter of fiscal year 2009 we terminated for cause a contract to build the Akwa Ibom International Airport for the State of Akwa Ibom in Nigeria. Consequently, we terminated certain subcontracts and purchase orders the customer advised us it did not want to assume. Based on our experience with this particular Nigerian state government customer, we believe it likely the customer will challenge our termination of the contract for cause and initiate legal action against us. Our termination of certain subcontracts not assumed by the customer, including our actions to recover against advance payment and performance guarantees established by the subcontractors for our benefit is being challenged in certain instances. Although we believe our right to terminate this contract and such subcontracts was justified and permissible under the terms of the contracts, and we intend to rigorously contest any claims brought against us arising out of such terminations, if courts were to conclude that we were not entitled to terminate one or more of the contracts and damages were assessed against us, such damages could have a material adverse effect on our results of operations or financial condition.

	Nine Months Ended
	January 2,			December 28,
(Amounts in thousands)	2009			2007
Current portion:
Federal	$	(7,217	)	$	16,896
State		253			1,124
Foreign		4,857			3,045
Total current portion of tax provision		(2,107	)		21,065
Deferred portion:
Federal		31,218			819
State		1,044			(33	)
Foreign		(69	)		65
Total deferred portion of tax provision		32,193			851
Total income tax provision	$	30,086		$	21,916

Note 9—Equity-Based Compensation

~~Deferred~~As ~~tax~~of ~~assets~~July 3, 2009, our Parent had provided equity-based compensation through the grant of Class B interests in DIV Holding LLC, the majority holder of our Parent’s common stock and ~~liabilities~~the grant ~~are~~of ~~reported~~restricted ~~as:~~stock units (“RSUs”) and performance stock units (“PSUs”) under our Parent’s 2007 Omnibus Incentive Plan (the “2007 Plan”). All of our equity-based compensation is accounted for under SFAS No. 123(R), “Share-Based Payment”. Under this method, we recorded equity-based compensation expense of $0.9 million and a credit of ($0.8) million for the quarters ended July 3, 2009 and July 4, 2008, respectively.

	January 2,			March 28,
(Amounts in thousands)	2009			2008
Current deferred tax assets (liabilities)	$	(1,927	)	$	17,341
Non-current deferred tax assets (liabilities)		5,773			18,168
Deferred tax assets, net	$	3,846		$	35,509

Class B Equity

AsDuring ofthe ~~January 2,~~fiscal ~~2009 and March 28~~quarter, ~~2008,~~our weParent ~~have~~had ~~$4.0 million~~no ~~and~~new ~~$2.7 million,~~grants ~~respectively, of~~but; ~~total~~had ~~unrecognized~~one ~~tax~~forfeiture ~~benefits~~event. Consequently, ~~The~~the ~~amount~~expenses ofrecognized ~~unrecognized~~were ~~tax~~the ~~benefits~~result ~~that,~~of ~~if recognized, would affect~~ the ~~effective~~quarterly ~~tax~~amortization ~~rate~~from ~~was~~the ~~$1.3 million~~graded vesting ~~and~~schedule, ~~$1.2 million~~partially ~~for~~offset ~~January 2,~~by ~~2009~~the ~~and~~impact ~~March 28,~~of ~~2008,~~the ~~respectively~~forfeited shares.

ItA issummary ~~reasonably possible that in the next 12 months the gross amount~~ of ~~unrecognized tax benefits will decrease by $2.2~~Class ~~million~~B ~~due~~activity toduring ~~settlements with taxing authorities. However,~~ the ~~Company~~ ~~does~~first ~~not~~quarter ~~expect~~of ~~any~~fiscal ~~material~~year ~~changes~~2010 tois ~~its effective tax rate~~ as ~~a result of such~~follows: ~~settlements.~~

The Company recognizes interest accrued related to uncertain tax positions in interest expense and penalties in income tax expense in its unaudited Condensed Consolidated Statements of Income, which is consistent with the recognition of these items in prior periods. The Company has recorded a liability of approximately $0.8 million and $0.6 million for the payment of interest and penalties as of January 2, 2009 and March 28, 2008, respectively.


	% Interest in			Grant Date
	DIV Holding			Fair Value

Balance April 3, 2009		4.71	%		9,669
First quarter fiscal year 2010 grants		0.00	%		—
First quarter fiscal year 2010 forfeitures		(0.03	%)		(37	)

Balance July 3, 2009		4.68	%	$	9,632
April 3, 2009 vested		3.69	%	$	6,950
First quarter fiscal year 2010 vesting		0.04	%		174

July 3, 2009 vested		3.73	%	$	7,124
April 3, 2009 nonvested		1.02	%	$	2,718
July 3, 2009 nonvested		0.95	%	$	2,508

Assuming each grant outstanding, net of estimated forfeitures, as of July 3, 2009 fully vest, we will recognize the related non-cash compensation expense as follows (in thousands):


Nine month period ending April 2, 2010	$	438
Fiscal year ending April 1, 2011		229
Fiscal year ending March 30, 2012 and thereafter		62


Total	$	729

~~The~~Restricted ~~Company~~Stock ~~and its subsidiaries file income tax returns in U.S. federal and state~~Units jurisdictions and in various foreign jurisdictions. The Company currently is under audit by the Internal Revenue Service for fiscal years 2005 through 2007. In addition, the statute of limitations is open for federal and state examinations for the Company’s fiscal year 2005 forward and, with few exceptions, foreign income tax examinations for the calendar year 2004 forward.

~~For~~Our RSUs vest based on the ~~three~~passage of time and ~~nine~~our ~~months~~PSUs ~~ended~~vest ~~January 2,~~based ~~2009,~~on the ~~Company’s~~achievement ~~effective~~of performance ~~tax~~criteria. ~~rate~~During ~~was 31.1%~~the ~~and~~first ~~31.4%~~quarter of fiscal year 2010, ~~respectively~~our Parent had no RSU grants. However, asour ~~compared~~Parent issued 12,500 PSUs to ~~36.8%~~our ~~and~~Chief ~~36.5%~~Executive ~~for~~Officer ~~the~~(“CEO”) ~~respective~~as ~~three~~a ~~and~~result ~~nine~~of fiscal ~~months~~year ~~ended~~2009 ~~December 28~~performance, ~~2007.~~with ~~The~~one ~~reduction~~third investing ~~the~~on ~~effective~~his ~~tax~~employment ~~rate~~anniversary ~~was~~date ~~primarily~~in ~~due~~fiscal ~~to the~~year ~~impact~~2010, offiscal ~~GLS~~year 2011 and ~~DIFZ,~~fiscal ~~which~~year ~~are~~2012. ~~consolidated~~During ~~joint~~the ~~ventures~~first ~~for~~quarter ~~financial~~ended ~~reporting~~July 3, ~~purposes~~2009, ~~but~~37,500 ~~are~~RSU ~~unconsolidated~~awards ~~entities~~vested ~~for~~but ~~U.S.~~were ~~income~~not ~~tax~~settled ~~purposes~~as of July 3, 2009.

~~During~~In ~~the~~accordance ~~third~~with ~~quarter~~SFAS ofNo. 123(R) ~~fiscal~~and ~~year~~our ~~2009~~policy, ~~the~~we ~~Company~~recognize ~~filed~~compensation ~~an Application for Change in~~expense ~~Accounting~~related ~~Method~~to ~~(“CIAM”)~~the ~~with~~RSUs ~~the~~and ~~IRS~~PSUs on ~~form~~a ~~3115.~~graded ~~The~~schedule ~~application~~over ~~was~~the ~~for~~requisite aservice ~~change~~period, innet ~~the tax~~of ~~accounting~~estimated ~~method~~forfeitures. ~~that~~Compensation ~~the~~expense ~~Company~~related ~~uses~~ to ~~recognize~~RSUs ~~income~~and ~~with~~PSUs ~~respect~~was toapproximately ~~unbilled receivables~~$0.7 million ~~Prior~~for to the ~~method~~quarter ~~change~~ended ~~request~~July 3, ~~the~~2009. ~~Company’s~~Additionally, ~~tax~~all ~~accounting~~RSUs ~~method~~and ~~generally~~PSUs ~~followed~~have ~~the financial~~been ~~accounting~~determined ~~treatment~~to ~~which~~be liability ~~recognizes~~awards; ~~income~~therefore, onthe ~~unbilled~~fair ~~receivables~~value ~~under~~of the ~~percentage~~RSUs and PSUs are re-measured at each financial ofreporting ~~completion~~date ~~method,~~as ~~with~~long ~~the~~as ~~exception~~they ofremain ~~award~~liability ~~fees~~awards. ~~which~~The ~~for~~estimated ~~tax~~fair ~~purposes~~value ~~were~~of ~~not~~the ~~recognized~~RSUs and ~~until~~PSUs ~~they~~was ~~became~~approximately ~~billable~~$5.3 million, Ifnet ~~accepted~~of byforfeitures, ~~the~~based ~~IRS,~~on the ~~CIAM~~closing ~~will allow~~market ~~the~~price ~~Company~~of toour Parent’s ~~defer,~~common ~~for~~stock ~~tax purposes,~~on the ~~financial~~grant ~~reported~~date. ~~income~~The onestimated ~~unbilled~~fair ~~receivables~~value ~~until~~of ~~such~~all ~~receivables~~RSUs ~~become fixed~~ and ~~determined~~PSUs, ~~for~~net ~~tax~~of forfeitures, ~~purposes.~~was ~~The~~approximately ~~Company~~$5.1 million ~~has~~based ~~recorded~~on the ~~amount~~closing ~~believed~~market toprice beof our Parent’s ~~more-likely-than-not~~common asstock ofon ~~January~~July 23, 2009.

~~Note~~A summary of the combined RSU and PSU activity during the first quarter of fiscal year 2010 is ~~8—Member’s~~as ~~Equity~~follows:

Member’s Equity — The following table presents the changes to shareholders’ equity during the nine months ended January 2, 2009:


				Weighted
	Outstanding			Average
	Restricted			Grant Date
	Stock Units			Fair Value

Outstanding, April 3, 2009		345,895		$	16.71
Units granted		12,500			13.86
Units forfeited		(40,300	)		16.32
Units vested and settled⁽¹⁾		—			—

Outstanding, July 3, 2009		318,095		$	16.65

						Accumulated
						Other			Total
	Member’s					Comprehensive			Member’s
(Amounts in thousands)	Units			Retained Earnings		(Loss) Income			Equity
Balance at March 28, 2008	$	321,414		$	109,785	$	(6,914	)	$	424,285
Comprehensive income:
Net income		—			50,604		—			50,604
Interest rate swap, net of tax $1.0 million							1,710			1,710
Currency translation adjustment, net of tax $0.4 million		—			—		(634	)		(634	)
Comprehensive income		—			50,604		1,076			51,680
Equity-based compensation		575			—		—			575
Tax benefit/(liability) associated with equity-based compensation		(10	)		—		—			(10	)
Sale of non-controlling interest of DIFZ		8,190			—		—			8,190
DIFZ financing, net of tax		106			—		—			106
Balance at January 2, 2009	$	330,275		$	160,389	$	(5,838	)	$	484,826


(1)		During the first quarter ended July 3, 2009, 37,600 RSU awards vested but were not settled as of July 3, 2009.

AsAssuming ~~described~~each ingrant ~~Note~~outstanding 1,as onof July 313, ~~2008~~2009, ~~the~~net ~~Company sold 50%~~ of ~~its~~estimated ~~ownership~~forfeitures, ~~interest~~fully ~~in DIFZ for approximately $8.2 million. No gain has been recognized on the sale as of January 2~~vests, ~~2009,~~ aswe ~~the~~will ~~Company~~recognize ~~completely financed~~ the ~~transaction~~related byequity-based ~~accepting~~compensation ~~three~~expense ~~promissory notes provided by the purchaser. As a result, the sale was accounted for~~ as afollows ~~capital~~based ~~transaction~~on ~~reflected in member’s units. Additionally,~~ the ~~interest~~value ~~component~~ of ~~the three notes receivable held by the Company is also~~ ~~reflected~~these inliability ~~member’s~~awards ~~units shown above~~ as ~~“DIFZ financing”, and has not impacted the Company’s consolidated statements~~ of ~~income as of January~~July 23, 2009. (in thousands):


Nine month period ended April 2, 2010	$	1,208
Fiscal year ended April 1, 2011		1,037
Fiscal year ended March 30, 2012 and thereafter		413

Total	$	2,658

Note 10—Consolidating Financial Statements of Subsidiary Guarantors

As of July 3, 2009, we had outstanding $389.7 million aggregate principal amount of 9.5% senior subordinated notes due 2013, net of unamortized discount. These senior subordinated notes are fully and unconditionally guaranteed, jointly and severally, on a senior subordinated unsecured basis by our following subsidiaries: DTS Aviation Services LLC, DynCorp Aerospace Operations LLC, DynCorp International Services LLC, Dyn Marine Services LLC, Dyn Marine Services of Virginia LLC, Global Linguist Solutions LLC, Services International LLC, Worldwide Humanitarian Services LLC and Worldwide Recruiting and Staffing Services LLC.

~~Note~~The ~~9—Equity-Based~~following ~~Compensation~~supplemental consolidating financial statements present:

~~As of January~~1. 2,Unaudited ~~2009,~~condensed ~~the~~consolidating ~~Parent~~balance ~~had~~sheets ~~provided~~as ~~equity-based compensation through the grant~~ of ~~Class B~~ ~~interests in DIV Holding LLC~~July 3, ~~the~~2009 ~~majority~~and ~~holder~~April of3. ~~the~~2009 ~~Parent’s common stock~~ and ~~the~~ ~~grant of Restricted Stock Units (“RSUs”) under~~ the ~~Parent’s~~related ~~2007~~unaudited ~~Omnibus~~condensed ~~Incentive~~consolidating ~~Plan~~statements ~~(the “2007 Plan”). All~~ of ~~the Company’s equity-based compensation is accounted for under SFAS No. 123(R),~~ ~~“Share-Based~~operations ~~Payment”.~~and ~~Under~~statements ~~this method, the Company recorded equity-based compensation expense~~ of ~~$1.2 million~~ ~~and~~cash ~~$1.1 million~~ flows for the ~~three~~fiscal ~~months~~quarters ended ~~January~~July 23, 2009 and ~~December~~July ~~28, 2007, respectively, and $2.~~4 ~~million and $3.4 million for the nine months ended January 2~~, ~~2009 and December 28, 2007, respectively~~2008.

~~Class~~2. BLLC, ~~Interests~~the combined subsidiary guarantors and the combined subsidiary non-guarantors account for their investments in subsidiaries using the equity method of accounting; therefore, the LLC column reflects the equity income (loss) of its subsidiary guarantors and subsidiary non-guarantors, which are also separately reflected in the stand-alone subsidiary guarantors and subsidiary non-guarantors column. Additionally, the subsidiary guarantors column reflects the equity income (loss) of its subsidiary non-guarantors, which are also separately reflected in the stand-alone subsidiary non-guarantors column.

~~During the first quarter of fiscal year 2009, the Company’s former CEO, Herbert J~~3. ~~Lanese, was terminated without cause in accordance with the conditions of his employment agreement, which resulted in the forfeiture of his unvested Class~~ BElimination ~~interests~~entries innecessary ~~DIV Holding LLC granted~~ to ~~him~~consolidate ~~as an employee of~~ the ~~Company.~~LLC ~~Mr. Lanese~~and ~~was~~all ~~subsequently issued additional Class B interests for his continued service on the Board. In addition, his separation resulted in severance liabilities~~ of ~~approximately~~ ~~$4.1 million~~its ~~recorded in the first fiscal quarter of 2009, which will be paid in installments over the twelve months following the date of his termination~~subsidiaries.

During the third quarter of fiscal year 2009, the Company’s former Executive Vice President, General Anthony Zinni (USMC Ret.), resigned which resulted in the forfeiture of his unvested Class B interests in DIV Holding LLC granted to him as an employee of the Company.

A summary of Class B interest activity during fiscal year 2009 is as follows:

	% Interest in			Grant Date
(Dollar amounts in thousands)	DIV Holding			Fair Value
Balance March 28, 2008		6.24	%	$	13,248
First Quarter Fiscal Year 2009 Grants		0.20	%		867
First Quarter Fiscal Year 2009 Forfeitures		(1.20	%)		(2,530	)
Balance July 4, 2008		5.24	%	$	11,585
Second Quarter Fiscal Year 2009 Grants		0.00	%		—
Second Quarter Fiscal Year 2009 Forfeitures		0.00	%		—
Balance October 3, 2008		5.24	%	$	11,585
Third Quarter Fiscal Year 2009 Grants		0.00	%		—
Third Quarter Fiscal Year 2009 Forfeitures		(0.01	%)		(73	)
Balance January 2, 2009		5.23	%	$	11,512
March 28, 2008 Vested		2.82	%	$	4,641
First Quarter Fiscal Year 2009 Vesting		0.12	%		520
July 4, 2008 Vested		2.94	%		5,161
Second Quarter Fiscal Year 2009 Vesting		0.05	%		73
October 3, 2008 Vested		2.99	%		5,234
Third Quarter Fiscal Year 2009 Vesting		0.34	%		1,282
January 2, 2009 Vested		3.33	%	$	6,516
March 28, 2008 Nonvested		3.42	%	$	8,607
January 2, 2009 Nonvested		1.90	%	$	4,996

~~Assuming~~DynCorp ~~each~~International ~~grant~~LLC ~~outstanding,~~and ~~net of estimated forfeitures, as of January 2, 2009 fully~~Subsidiaries ~~vests, the Company will recognize the related non-cash compensation expense as follows (amounts in thousands):~~

Three month period ended April 3, 2009	$	369
Fiscal year ended April 2, 2010		1,139
Fiscal year ended April 1, 2011 and thereafter		566
Total	$	2,074

Unaudited Condensed Consolidating Statement of Operations Information
For the Fiscal Quarter Ended July 3, 2009

Restricted Stock Units


				Subsidiary			Subsidiary
	Parent			Guarantor			Non-Guarantors			Elimination			Consolidated
	(Dollars in thousands)
Revenue	$	540,372		$	244,806		$	100,245		$	(100,246	)	$	785,177
Cost of services		(470,138	)		(229,966	)		(99,235	)		100,246			(699,093	)
Selling, general and administrative expenses		(21,719	)		(1,586	)		(133	)		—			(23,438	)
Depreciation and amortization expense		(10,128	)		(1	)		(16	)		—			(10,145	)

Operating income		38,387			13,253			861			—			52,501
Interest expense		(14,162	)		(448	)		—			—			(14,610	)
Earnings from affiliates		1,054			—			—			—			1,054
Equity in income of subsidiaries		5,049			24			—			(5,073	)		—
Interest income		(113	)		448			4			—			339
Other, net		(125	)		(15	)		(73	)		—			(213	)

Income before income taxes		30,090			13,262			792			(5,073	)		39,071
Provision for income taxes		(9,445	)		(2,860	)		(322	)		—			(12,627	)

Net income		20,645			10,402			470			(5,073	)		26,444
Noncontrolling interests		—			(5,135	)		(664	)		—			(5,799	)

Net income attributable to DynCorp International LLC	$	20,645		$	5,267		$	(194	)	$	(5,073	)	$	20,645

During the first nine months of fiscal year 2009, our Parent awarded service-based and performance-based RSUs to certain key employees (“Participants”). The grants were made pursuant to the terms and conditions of our Parent’s 2007 Plan and are subject to award agreements between the Parent and each Participant.

During the first nine months of fiscal year 2009, 186,800 performance-based RSUs were granted to certain key employees. These performance-based awards are tied to the Company’s financial performance, specifically fiscal year 2011 EBITDA (earnings before interest, taxes, depreciation and amortization), and cliff vest upon achievement of this target. Based on current estimates, the costs of these awards are being accrued with the expectation of a 100% achievement of the performance goal.

In addition to employee grants, 22,425 service-based RSUs were granted to our Parent’s Board members. These awards vest within one year of grant, but include a post-vesting restriction of six months after the applicable directors’ Board service ends. The RSUs have assigned value equivalent to the Parent’s common stock and may be settled in cash or shares of our Parent’s common stock at the discretion of the Compensation Committee of the Board.

As of January 2, 2009, 100,000 RSUs have been awarded to our current CEO. Half of these awards are service-based and vest ratably over a three year period on the anniversary of the CEO’s employment commencement date. The remaining 50,000 RSUs are performance-based and are tied to specific performance goals for fiscal year 2009. If the performance measures are achieved for fiscal year 2009, the awards will vest over a three-year service period with one third vesting each year on the anniversary of the CEO’s employment commencement date. Based on current estimates, the costs of these awards are being accrued with the expectation of a 100% achievement of the performance goal.

The RSUs have been determined to be liability awards; therefore, the fair value of the RSUs are re-measured at each financial reporting date as long as they remain liability awards. The estimated fair value of all RSUs net of estimated forfeitures, based on the closing market price of the our Parent’s stock on the grant date of each respective award, was approximately $6.1 million, based on the closing market price of our Parent’s stock on January 2, 2009. During the nine months ended January 2, 2009, 53,250 RSU awards vested and 52,250 of these awards were subsequently settled for $0.8 million in cash.

A summary of RSU activity during the nine months ended January 2, 2009 is as follows:

				Weighted
	Outstanding			Average
	Restricted			Grant Date
	Stock Units			Fair Value
Outstanding, March 28, 2008		159,600		$	21.49
Units granted		309,225			15.54
Units cancelled		(32,350	)		20.25
Units vested and settled		(52,250	)		21.19
Outstanding, January 2, 2009(1)		384,225		$	16.85

(1) Total outstanding includes 1,000 RSUs vested and unsettled as of January 2, 2009.

~~Assuming~~DynCorp ~~each~~International ~~grant~~LLC ~~outstanding~~and ~~as of January 2, 2009, net of estimated forfeitures, fully~~Subsidiaries vests (assuming 100% for performance-based awards), the Company will recognize the related equity-based compensation expense as follows based on the value of these liability awards as of January 2, 2009 (amounts in thousands):

Three month period ended April 3, 2009	$	614
Fiscal year ended April 2, 2010		2,180
Fiscal year ended April 1, 2011 and thereafter		1,718
Total	$	4,512

Unaudited Condensed Consolidating Statement of Operations Information
For the Fiscal Quarter Ended July 4, 2008

Note 10—Interest Rate Derivatives


				Subsidiary			Subsidiary
	Parent			Guarantor			Non-Guarantors			Eliminations			Consolidated
	(Dollars in thousands)
Revenue	$	542,958		$	173,836		$	96,688		$	(96,688	)	$	716,794
Cost of services		(474,553	)		(166,119	)		(94,405	)		96,688			(638,389	)
Selling, general and administrative expenses		(22,126	)		(5,499	)		(226	)		—			(27,851	)
Depreciation and amortization expense		(10,525	)		—			(35	)		—			(10,560	)

Operating income		35,754			2,218			2,022			—			39,994
Interest expense		(14,215	)		—			—			—			(14,215	)
Earnings from affiliates		1,117			—			—			—			1,117
Equity in income of subsidiaries		3,367			(106	)		—			(3,261	)		—
Interest income		331			6			7						344
Other, net		600			110			(5	)		—			705

Income before income taxes		26,954			2,228			2,024			(3,261	)		27,945
Provision for income taxes		(8,974	)		—			(342	)		—			(9,316	)

Net income		17,980			2,228			1,682			(3,261	)		18,629
Noncontrolling interests		—			(649	)		—			—			(649	)

Net income attributable to DynCorp International LLC	$	17,980		$	1,579		$	1,682		$	(3,261	)	$	17,980

At January 2, 2009, the Company’s derivative instruments consisted of two interest rate swap agreements, designated as cash flow hedges, that effectively fix the interest rate on the applicable notional amounts of the Company’s variable rate debt as follows (dollar amounts in thousands):

Fixed

Variable

Notional

Interest

Interest Rate

Date Entered

Amount

Rate Paid(1)

Received

Expiration Date

April 2007

168,620

4.975

3-month LIBOR

May 2010

April 2007

31,380

4.975

3-month LIBOR

May 2010

(1) Plus applicable margin (2.5% at January 2, 2009).

The fair value of the interest rate swap agreements was a liability of $8.7 million at January 2, 2009, of which $2.9 million was considered long term. Unrealized net loss from the changes in fair value of the interest rate swap agreements of $1.7 million, net of tax, for the nine months ended January 2, 2009 is included in other comprehensive income (loss). There was no material impact on earnings due to hedge ineffectiveness for the three and nine months ended January 2, 2009.

Note 11—Consolidating Financial Statements of Subsidiary Guarantors

As of January 2, 2009, the Company had outstanding $415.9 million aggregate principal amount of 9.5% senior subordinated notes due 2013, net of a $1.1 million unamortized discount. These senior subordinated notes are fully and unconditionally guaranteed, jointly and severally, on a senior subordinated unsecured basis by the following subsidiaries of the Company: DTS Aviation Services LLC, DynCorp Aerospace Operations LLC, DynCorp International Services LLC, Dyn Marine Services LLC, Dyn Marine Services of Virginia LLC, Global Linguist Solutions LLC, Services International LLC, Worldwide Humanitarian Services LLC and Worldwide Recruiting and Staffing Services LLC.

The following supplemental consolidating financial statements present:

1. Unaudited condensed consolidating balance sheets as of January 2, 2009 and March 28, 2008 and the related unaudited condensed consolidating statements of operations for the three and nine months ended January 2, 2009 and December 28, 2007, and the statements of cash flows for the nine months ended January 2, 2009 and December 28, 2007.

2. LLC, the combined subsidiary guarantors and the combined subsidiary non-guarantors account for their investments in subsidiaries using the equity method of accounting; therefore, the LLC column reflects the equity income (loss) of its subsidiary guarantors and subsidiary non-guarantors, which are also separately reflected in the stand-alone subsidiary guarantors and subsidiary non-guarantors column. Additionally, the subsidiary guarantors column reflects the equity income (loss) of its subsidiary non-guarantors, which are also separately reflected in the stand-alone subsidiary non-guarantors column.

3. Elimination entries necessary to consolidate LLC and all of its subsidiaries.

DynCorp International LLC and Subsidiaries

Unaudited Condensed Consolidating ~~Statements~~Balance ofSheet ~~Operations~~ Information ~~For the Three Months Ended January~~July 23, 2009

				Subsidiary			Subsidiary
(Amounts in thousands)	LLC			Guarantors			Non-Guarantors			Eliminations			Consolidated
	LLC			Guarantors			Non-Guarantors			Elimination			Consolidated
Revenue	$	540,113		$	252,214		$	101,253		$	(101,253	)	$	792,327
	(Dollars in thousands)
Cost of services		(472,080	)		(233,157	)		(100,226	)		101,253			(704,210	)
ASSETS
Selling, general and administrative expenses		(19,434	)		(7,000	)		(71	)		—			(26,505	)
Current assets:
Depreciation and amortization expense		(10,015	)		—			(14	)		—			(10,029	)
Cash and cash equivalents	$	151,447		$	1,949		$	5,897		$	—		$	159,293
Operating income		38,584			12,057			942			—			51,583
Restricted cash		5,700			—			—			—			5,700
Interest expense		(15,322	)		—			—			—			(15,322	)
Accounts receivable, net		452,325			184,940			2,205			—			639,470
Loss on extinguishment of debt		—			—			—			—			—
Prepaid expenses and other current assets		69,266			39,392			1,367			—			110,025
Earnings from affiliates		1,319			—			—			—			1,319
Total current assets		678,738			226,281			9,469			—			914,488
Equity in income of subsidiaries, net of tax		3,951			(51	)		—			(3,900	)		—
Property and equipment, net		14,897			3,250			334			—			18,481
Interest income		726			—			4			—			730
Goodwill		398,559			21,621			—			—			420,180
Other, net		(500	)		(267	)		(89	)		—			(856	)
Tradename		18,318			—			—			—			18,318
Income before income taxes		28,758			11,739			857			(3,900	)		37,454
Other intangibles, net		119,878			13,885									133,763
Provision for income taxes		(9,005	)		(2,229	)		(405	)		—			(11,639	)
Investment in subsidiaries		75,031			614			—			(75,645	)		—
Minority interest		—			(4,694	)		(1,368	)		—			(6,062	)
Other assets, net		40,301			94			—			—			40,395
Net income	$	19,753		$	4,816		$	(916	)	$	(3,900	)	$	19,753
Intercompany receivables		45,672			—			59,069			(104,741	)		—
Total assets	$	1,391,394		$	265,745		$	68,872		$	(180,386	)	$	1,545,625
LIABILITIES AND MEMBER’S EQUITY
Current liabilities:
Current portion of long-term debt	$	—		$	—		$	—		$	—		$	—
Accounts payable		101,761			92,676			1,761						196,198
Accrued payroll and employee costs		48,459			27,445			44,596			—			120,500
Other accrued liabilities		63,440			43,893			10,048			—			117,381
Income taxes payable and deferred income taxes		14,169			23			860			—			15,052
Total current liabilities		227,829			164,037			57,265			—			449,131
Long-term debt, less current portion		566,383			—			—			—			566,383
Other long-term liabilities		5,618			—			—			—			5,618
Intercompany payables		67,071			37,670			—			(104,741	)		—
Total equity		524,493			64,038			11,607			(75,645	)		524,493
Total liabilities and member’s equity	$	1,391,394		$	265,745		$	68,872		$	(180,386	)	$	1,545,625

DynCorp International LLC and Subsidiaries

Unaudited Condensed Consolidating Statements of Operations Information For the Three Months Ended December 28, 2007

				Subsidiary			Subsidiary
(Amounts in thousands)	LLC			Guarantors			Non-Guarantors			Eliminations			Consolidated
Revenue	$	468,086		$	54,985		$	79,000		$	(79,000	)	$	523,071
Cost of services		(402,324	)		(52,040	)		(76,977	)		79,000			(452,341	)
Selling, general and administrative expenses		(25,873	)		(2,486	)		(636	)		—			(28,995	)
Depreciation and amortization expense		(10,857	)		—			(53	)		—			(10,910	)
Operating income		29,032			459			1,334			—			30,825
Interest expense		(14,052	)		—			—			—			(14,052	)
Earnings from affiliates		1,253			—			—			—			1,253
Equity in income of subsidiaries, net of tax		1,466			125			—			(1,591	)		—
Interest income		489			33			—			—			522
Other, net		380			—			—			—			380
Income before income taxes		18,568			617			1,334			(1,591	)		18,928
Provision for income taxes		(6,608	)		(296	)		(64	)		—			(6,968	)
Minority interest		—			—			—			—			—
Net income	$	11,960		$	321		$	1,270		$	(1,591	)	$	11,960

DynCorp International LLC and Subsidiaries

Unaudited Condensed Consolidating ~~Statements~~Balance ofSheet ~~Operations~~ Information ~~For the Nine Months Ended January~~April 23, 2009

				Subsidiary			Subsidiary
(Amounts in thousands)	LLC			Guarantors			Non-Guarantors			Eliminations			Consolidated
	LLC			Guarantor			Non-Guarantors			Eliminations			Consolidated
Revenue	$	1,603,886		$	684,386		$	296,721		$	(296,721	)	$	2,288,272
	(Dollars in thousands)
Cost of services		(1,417,739	)		(630,607	)		(287,493	)		296,721			(2,039,118	)
ASSETS
Selling, general and administrative expenses		(60,614	)		(19,249	)		(487	)		—			(80,350	)
Current assets:
Depreciation and amortization expense		(30,529	)		—			(65	)		—			(30,594	)
Cash and cash equivalents	$	192,968		$	2,534		$	4,720		$	—		$	200,222
Operating income		95,004			34,530			8,676			—			138,210
Restricted cash		5,935			—			—			—			5,935
Interest expense		(44,442	)		—			—			—			(44,442	)
Accounts receivable, net		389,715			172,900			1,817			—			564,432
Loss on extinguishment of debt		(4,443	)		—			—			—			(4,443	)
Prepaid expenses and other current assets		112,024			10,952			1,238			—			124,214
Earnings from affiliates		3,959			—			—			—			3,959
Total current assets		700,642			186,386			7,775			—			894,803
Equity in income of subsidiaries, net of tax		21,951			(201	)		—			(21,750	)		—
Property and equipment, net		14,582			3,400			356			—			18,338
Interest income		1,729			6			16			—			1,751
Goodwill		398,559			21,621			—			—			420,180
Other, net		904			(111	)		16			—			809
Tradename		18,318			—			—			—			18,318
Income before income taxes		74,662			34,224			8,708			(21,750	)		95,844
Other intangibles, net		128,833			13,886									142,719
Provision for income taxes		(24,058	)		(3,339	)		(2,689	)		—			(30,086	)
Investment in subsidiaries		64,380			589			—			(64,969	)		—
Minority interest		—			(13,156	)		(1,998	)		—			(15,154	)
Other assets, net		44,762			94			—			—			44,856
Net income	$	50,604		$	17,729		$	4,021		$	(21,750	)	$	50,604
Intercompany receivables		48,786			—			43,663			(92,449	)		—
Total assets	$	1,418,862		$	225,976		$	51,794		$	(157,418	)	$	1,539,214
LIABILITIES AND MEMBER’S EQUITY
Current liabilities:
Current portion of long-term debt	$	30,540		$	—		$	—		$	—		$	30,540
Accounts payable		96,574			63,132			713						160,419
Accrued payroll and employee costs		69,220			32,965			35,808			—			137,993
Other accrued liabilities		94,333			14,711			2,546			—			111,590
Income taxes payable and deferred income taxes		13,615			—			649			—			14,264
Total current liabilities		304,282			110,808			39,716			—			454,806
Long-term debt, less current portion		569,372			—			—			—			569,372
Other long-term liabilities		6,744			35			—			—			6,779
Intercompany payables		30,207			62,242			—			(92,449	)		—
Total equity		508,257			52,891			12,078			(64,969	)		508,257
Total liabilities and member’s equity	$	1,418,862		$	225,976		$	51,794		$	(157,418	)	$	1,539,214

DynCorp International LLC and Subsidiaries

Unaudited Condensed Consolidating Statements of Operations Information For the Nine Months Ended December 28, 2007

				Subsidiary			Subsidiary
(Amounts in thousands)	LLC			Guarantors			Non-Guarantors			Eliminations			Consolidated
Revenue	$	1,375,276		$	191,577		$	243,694		$	(243,694	)	$	1,566,853
Cost of services		(1,185,687	)		(178,103	)		(237,966	)		243,694			(1,358,062	)
Selling, general and administrative expenses		(70,416	)		(7,949	)		(1,551	)		—			(79,916	)
Depreciation and amortization expense		(31,603	)		—			(298	)		—			(31,901	)
Operating income		87,570			5,525			3,879			—			96,974
Interest expense		(42,247	)		—			—			—			(42,247	)
Earnings from affiliates		3,320			—			—			—			3,320
Equity in income of subsidiaries, net of tax		7,628			136			—			(7,764	)		—
Interest income		2,149			53			—			—			2,202
Other, net		(162	)		—			—			—			(162	)
Income before income taxes		58,258			5,714			3,879			(7,764	)		60,087
Provision for income taxes		(20,087	)		(1,587	)		(242	)		—			(21,916	)
Minority interest		—			—			—			—			—
Net income	$	38,171		$	4,127		$	3,637		$	(7,764	)	$	38,171

DynCorp International LLC and Subsidiaries

Unaudited Condensed Consolidating ~~Balance~~Statement ~~Sheet~~of Cash Flow Information ~~January~~For the Fiscal Quarter Ended July 23, 2009

				Subsidiary			Subsidiary
(Amounts in thousands)	LLC			Guarantors			Non-Guarantors			Eliminations			Consolidated
	Parent			Guarantor			Non-Guarantors			Eliminations			Consolidated
ASSETS
	(Dollars in thousands)
Current assets:
Net cash provided by (used in) operating activities	$	(45,156	)	$	34,021		$	16,583		$	—		$	5,448
Cash and cash equivalents	$	140,549		$	5,205		$	4,826		$	—		$	150,580
Cash flows from investing activities:
Restricted cash		18,039			—			—			—			18,039
Purchase of property and equipment		(1,294	)		—			—			—			(1,294	)
Accounts receivable, net		447,494			185,098			2,332			—			634,924
Other investing cash flows		—			—			—			—			—
Prepaid expenses and other current assets		116,973			8,087			696			—			125,756
Net cash used in investing activities		(1,294	)		—			—			—			(1,294	)
Total current assets		723,055			198,390			7,854			—			929,299
Cash flows from financing activities:
Property and equipment, net		14,199			3,555			268			—			18,022
Net transfers from (to) Parent		39,978			(24,572	)		(15,406	)		—			—
Goodwill		398,559			21,621			—			—			420,180
Payments on long term debt		(34,337	)		—			—			—			(34,337	)
Tradename		18,318			—			—			—			18,318
Other financing activities		(712	)		(10,034	)		—			—			(10,746	)
Other intangibles, net		137,265			13,886			—			—			151,151
Net cash used in financing activities		4,929			(34,606	)		(15,406	)		—			(45,083	)
Investment in subsidiaries		56,299			3,877			—			(60,176	)		—
Net decrease in cash and cash equivalents		(41,521	)		(585	)		1,177			—			(40,929	)
Other assets, net		37,067			212			—			—			37,279
Cash and cash equivalents, beginning of period		192,968			2,534			4,720			—			200,222
Intercompany receivables		23,665			—			75,114			(98,779	)		—
Cash and cash equivalents, end of period	$	151,447		$	1,949		$	5,897		$	—		$	159,293
Total assets	$	1,408,427		$	241,541		$	83,236		$	(158,955	)	$	1,574,249
LIABILITIES AND MEMBER’S EQUITY
Current liabilities:
Current portion of long-term debt	$	—		$	—		$	—		$	—		$	—
Accounts payable		111,036			96,794			1,286			—			209,116
Accrued payroll and employee costs		56,945			27,201			27,433			—			111,579
Deferred income taxes		1,927			—			—			—			1,927
Other accrued liabilities		71,181			10,737			39,664			—			121,582
Income taxes payable		4,326			—			1,021			—			5,347
Total current liabilities		245,415			134,732			69,404			—			449,551
Long-term debt, less current portion		615,903			—			—			—			615,903
Other long-term liabilities		12,060			53			8			—			12,121
Intercompany payables		38,375			60,404			—			(98,779	)		—
Minority interest		11,848			—			—			—			11,848
Member’s equity		484,826			46,352			13,824			(60,176	)		484,826
Total liabilities and member’s equity	$	1,408,427		$	241,541		$	83,236		$	(158,955	)	$	1,574,249

Unaudited Condensed Consolidating Statement of Cash Flow Information
For the Fiscal Quarter Ended July 4, 2008


				Subsidiary			Subsidiary
	Parent			Guarantor			Non-Guarantors			Eliminations		Consolidated
	(Dollars in thousands)
Net cash provided by (used in) operating activities	$	(32,823	)	$	(50,962	)	$	12,654		$	—	$	(71,131	)

Cash flows from investing activities:
Purchase of property and equipment		(1,208	)		—			—			—		(1,208	)
Other investing cash flows		(243	)		—			—			—		(243	)

Net cash used in investing activities		(1,451	)		—			—			—		(1,451	)
Cash flows from financing activities:
Net transfers from (to) Parent		(40,890	)		50,139			(9,249	)		—		—
Payments on long term debt		(1,548	)		—			—			—		(1,548	)
Other financing activities		22,251			—			—			—		22,251

Net cash used in financing activities		(20,187	)		50,139			(9,249	)		—		20,703
Net decrease in cash and cash equivalents		(54,461	)		(823	)		3,405			—		(51,879	)
Cash and cash equivalents, beginning of period		79,484			3,835			2,060			—		85,379

Cash and cash equivalents, end of period	$	25,023		$	3,012		$	5,465		$	—	$	33,500

Note 11 — Related Parties, Joint Ventures and Variable Interest Entities

Management Fee

We pay Veritas Capital an annual management fee of $0.3 million plus expenses to provide us with general business management, financial, strategic and consulting services. We paid $0.1 million to Veritas in the quarters ended July 3, 2009 and July 4, 2008.

Joint Ventures

Amounts due from our unconsolidated joint ventures totaled $3.7 million and $2.5 million as of July 3, 2009 and April 3, 2009, respectively. These receivables are a result of items purchased and services rendered by us on behalf of our unconsolidated joint ventures. We have assessed these receivables as having minimal collection risk based on our historic experience with these joint ventures and our inherent influence through our ownership interest. The change in these receivables from April 3, 2009 to July 3, 2009 resulted in a use of operating cash for the quarter ended July 3, 2009 of approximately $1.2 million. The related revenue associated with our unconsolidated joint ventures totaled $1.3 million and $2.6 million for the quarters ended July 3, 2009 and July 4, 2008, respectively. Additionally, we earned $0.9 and $1.1 million in equity method income from the Babcock joint venture in the first quarter ended July 3, 2009 and the first quarter ended July 4, 2008, respectively.

~~DynCorp~~As ~~International~~a ~~LLC~~result of the DIFZ sale, we currently hold three promissory notes from Palm which had an initial value of $9.7 million as a result of the sales price. The notes are included in Prepaid expenses and ~~Subsidiaries~~other current assets and in Other assets on our consolidated balance sheet for the short and long term portions, respectively. As of July 3, 2009, the loan balance outstanding with Palm was $8.7 million, reflecting the initial value plus accrued interest, less payments against the promissory notes.

~~Unaudited~~Variable ~~Condensed~~Interest ~~Consolidating Balance Sheet Information~~Entities ~~March 28, 2008~~

			Subsidiary		Subsidiary
(Amounts in thousands)	LLC		Guarantors		Non-Guarantors			Eliminations			Consolidated
ASSETS
Current assets:
Cash and cash equivalents	$	79,484	$	3,835	$	2,060		$	—		$	85,379
Restricted cash		—		11,308		—			—			11,308
Accounts receivable, net		481,810		30,804		698			—			513,312
Prepaid expenses and other current assets		85,822		40,503		43			—			126,368
Total current assets		647,116		86,450		2,801			—			736,367
Property and equipment, net		11,087		4,049		306			—			15,442
Goodwill		398,559		21,621		—			—			420,180
Tradename		18,318		—		—			—			18,318
Other intangibles, net		162,261		13,885		—			—			176,146
Investment in subsidiaries		39,880		739		—			(40,619	)		—
Other assets, net		36,236		20		—			—			36,256
Intercompany receivables		—		—		59,466			(59,466	)		—
Total assets	$	1,313,457	$	126,764	$	62,573		$	(100,085	)	$	1,402,709
LIABILITIES AND MEMBER’S EQUITY
Current liabilities:
Current portion of long-term debt	$	3,096	$	—	$	—		$	—		$	3,096
Accounts payable		132,146		16,533		108			—			148,787
Accrued payroll and employee costs		43,102		13,612		28,472			—			85,186
Other accrued liabilities		64,538		40,028		24,674			—			129,240
Income taxes payable		5,485		2,789		(29	)		—			8,245
Total current liabilities		248,367		72,962		53,225			—			374,554
Long-term debt, less current portion		590,066		—		—			—			590,066
Other long-term liabilities		9,510		4,282		12			—			13,804
Intercompany payables		41,229		18,034		203			(59,466	)		—
Member’s equity		424,285		31,486		9,133			(40,619	)		424,285
Total liabilities and member’s equity	$	1,313,457	$	126,764	$	62,573		$	(100,085	)	$	1,402,709

Our population of variable interest entities, associated primary beneficiary assessments, and our joint venture ownership percentages have not changed from the information disclosed on our fiscal year 2009 annual report. Additionally, our Parent’s controlling shareholder continues to be the majority owner of McNeil Technologies, our GLS partner.

GLS assets and liabilities were $161.1 million and $119.0 million at July 3, 2009, as compared to $150.5 million and $129.6 million at April 3, 2009. Additionally, GLS revenue was $198.4 million for the quarter ended July 3, 2009 as compared to $118.4 million for the quarter ended July 4, 2008.

DIFZ assets and liabilities were $54.2 million and $52.7 million, respectively, as of July 3, 2009, as compared to $38.0 million and $36.5 million at April 3, 2009. Additionally, DIFZ revenue was $94.6 million for the quarter ended July 3, 2009.

Note 12—Collaborative Arrangement

We participate in a collaborative arrangement with two of our partners on the Logistics Civil Augmentation Program (“LOGCAP IV”). The purpose of this arrangement is to share some of the risks and rewards associated with this contract. We receive working capital contributions to mitigate the risks associated with the timing of cash inflows and outflows. We also share in the profits. We account for this collaborative arrangement under EITF 07-1 “Accounting for Collaborative Arrangements”. We record revenue gross as the prime contractor. The cash inflows, outflows, as well as expenses incurred impact cost of services in the period realized or incurred. The expenses incurred from our profit sharing arrangement were not material for the quarters ended July 3, 2009 and July 4, 2008.

Note 13—Segment Information

As discussed in Note 3, we have a new organizational realignment which resulted in three new operating segments. The purpose of the realignment is to support our transition, as we become an integrated global enterprise, by more closely aligning our organization with our strategic markets and continuing to streamline our infrastructure to facilitate growth. This new structure better reflects our market focus and we believe better positions us to achieve our goal of becoming the leading global government services provider and a high-performing integrated global enterprise.

The three segments are as follows:

Global Stabilization and Development Solutions, or GSDS segment provides a diverse collection of outsourced services primarily to government agencies worldwide. GSDS consists of the International Civilian Police Program (“CivPol”) SBA, the Security & Training SBA, the LOGCAP IV SBA, the Operations SBA, and the Infrastructure SBA.

Global Platform Support Solutions, or GPSS segment provides a wide range of technical, engineering, logistics and maintenance support services primarily to government agencies worldwide. Additionally, GPSS provides services including drug eradication and host nation pilot and crew training. GPSS consists of the Aviation Life Cycle Support SBA, the Domestic Aviation Operations and Support SBA, the Field Service Operations SBA, the International Aviation Operations & Support SBA, the International Narcotics and Law Enforcement (“INL Air Wing”) SBA and the Land Systems SBA.

Global Linguist Solutions, or GLS segment provides rapid recruitment, deployment and on-site management of in-theatre interpreters and translators to the U.S. military for a wide range of foreign languages. GLS consists of the linguist service line SBA.

~~DynCorp~~The ~~International~~following ~~LLC~~is ~~and~~a ~~Subsidiaries~~summary of the financial information of the reportable segments reconciled to the amounts reported in the consolidated financial statements. All prior periods presented have been recast to reflect the new segment reporting.

Unaudited Condensed Consolidating Statement of Cash Flow Information For the Nine Months Ended January 2, 2009


	Fiscal Quarter Ended
	July 3, 2009			July 4, 2008
Revenue
Global Stabilization and Development Solutions	$	284,085		$	269,554
Global Platform Support Solutions		303,648			329,736
Global Linguist Solutions		198,354			118,422
Other/Elimination		(910	)		(918	)

Total revenue	$	785,177		$	716,794

Operating Income	$	15,874		$	22,971
Global Stabilization and Development Solutions
Global Platform Support Solutions		25,910			15,742
Global Linguist Solutions		10,717			1,281

Total operating income	$	52,501		$	39,994

Depreciation and amortization	$	4,940		$	5,176
Global Stabilization and Development Solutions
Global Platform Support Solutions		5,009			5,238
Global Linguist Solutions		196			146

Total depreciation and amortization	$	10,145		$	10,560

				Subsidiary			Subsidiary
	As of
(Amounts in thousands)	LLC			Guarantors			Non-Guarantors			Eliminations		Consolidated
	July 3, 2009			April 3, 2009
Net cash provided by operating activities	$	92,578		$	(41,000	)	$	18,617		$	—	$	70,195
Assets
Cash flows from investing activities:
Global Stabilization and Development Solutions	$	648,382		$	594,207
Purchase of property and equipment		(3,407	)		—			—			—		(3,407	)
Global Platform Support Solutions		513,705			510,583
Other investing cash flows		(18,663	)		—			—			—		(18,663	)
Global Linguist Solutions		161,073			152,090
Net cash used in investing activities		(22,070	)		—			—			—		(22,070	)
Other/Elimination (1)		222,465			282,334
Cash flows from financing activities:
Total assets	$	1,545,625		$	1,539,214
Net transfers from (to) Parent		(26,519	)		42,370			(15,851	)		—		—
Borrowing under revolving line of credit		323,751			—			—			—		323,751
Payments on credit facilities		(301,129	)		—			—			—		(301,129	)
Other financing activities		(5,546	)		—			—			—		(5,546	)
Net cash used in financing activities		(9,443	)		42,370			(15,851	)		—		17,076
Net decrease in cash and cash equivalents		61,065			1,370			2,766			—		65,201
Cash and cash equivalents, beginning of period		79,484			3,835			2,060			—		85,379
Cash and cash equivalents, end of period	$	140,549		$	5,205		$	4,826		$	—	$	150,580


(1)		Assets primarily include cash, deferred income taxes, and deferred debt issuance cost.

Note 14—Fair Value of Financial Assets and Liabilities

SFAS No. 157 establishes a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value. These tiers include:

•

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

•

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

•

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

~~DynCorp~~As ~~International~~of ~~LLC~~July 3, 2009, we held certain assets that are required to be measured at fair value on a recurring basis. These included cash equivalents (including restricted cash) and ~~Subsidiaries~~interest rate derivatives. Cash equivalents consist of petty cash, cash in-bank and short-term, highly liquid, income-producing investments with original maturities of 90 days or less. Our interest rate derivatives, as further described in Note 7, consist of interest rate swap contracts. The fair values of the interest rate swap contracts are determined based on inputs that are readily available in public markets or can be derived from information available in publicly quoted markets. Therefore, we have categorized these interest rate swap contracts as Level 2. We have consistently applied these valuation techniques in all periods presented.

~~Unaudited~~Our ~~Condensed~~assets ~~Consolidating~~and ~~Statement~~liabilities ofmeasured ~~Cash~~at ~~Flow~~fair ~~Information For~~value on a recurring basis subject to the disclosure ~~Nine~~requirements ~~Months~~of ~~Ended~~SFAS ~~December~~No. 28157 at July 3, ~~2007~~2009, were as follows:

				Subsidiary			Subsidiary
Fair Value Measurements at Reporting Date Using
(Amounts in thousands)	LLC			Guarantors			Non-Guarantors			Eliminations		Consolidated
	Book value of			Quoted Prices in
Net cash provided by operating activities	$	(26,056	)	$	(9,970	)	$	(13,230	)	$	—	$	(49,256	)
	financial			Active Markets			Significant Other			Significant
Cash flows from investing activities:
	assets/(liabilities)			for Identical			Observable Inputs			Unobservable
Purchase of property and equipment		(2,822	)		—			—			—		(2,822	)
(amounts in thousands)	as of July 3, 2009			Assets (Level 1)			(Level 2)			Inputs (Level 3)
Other investing cash flows		(4,419	)		—			—			—		(4,419	)
Assets
Net cash used in investing activities		(7,241	)		—			—			—		(7,241	)
Cash equivalents(1)	$	164,993		$	164,993		$	—		$	—
Cash flows from financing activities:
Total assets measured at fair value	$	164,993		$	164,993		$	—		$	—
Net transfers from (to) Parent		(21,081	)		7,273			13,808			—		—
Liabilities
Borrowing under revolving line of credit		13,500			—			—			—		13,500
Interest rate derivatives	$	6,593		$	—		$	6,593		$	—
Payments on credit facility		(37,058	)		—			—			—		(37,058	)
Total liabilities measured at fair value	$	6,593		$	—		$	6,593		$	—
Other financing activities		(8,819	)		—			—			—		(8,819	)
Net cash used in financing activities		(53,458	)		7,273			13,808			—		(32,377	)
Net decrease in cash and cash equivalents		(86,755	)		(2,697	)		578			—		(88,874	)
Cash and cash equivalents, beginning of period		95,458			5,212			1,785			—		102,455
Cash and cash equivalents, end of period	$	8,703		$	2,515		$	2,363		$	—	$	13,581

~~Note~~(1) ~~12—Fair~~Includes ~~Value~~cash ofand ~~Financial~~cash ~~Assets~~equivalents and ~~Liabilities~~ restricted cash

~~Effective~~Note ~~March 29,~~15—Subsequent ~~2008, the Company adopted SFAS No. 157. In February 2008, the FASB issued~~Events FASB Staff Position No. 157-2, “Effective Date of FASB Statement No. 157”, which provides a one year deferral of the effective date of SFAS No. 157 for non-financial assets and non-financial liabilities, except those that are recognized or disclosed in the financial statements at fair value at least annually. Therefore, the Company has adopted the provisions of SFAS No. 157 with respect to its financial assets and liabilities only. Although the adoption of SFAS No. 157 did not materially impact the Company’s financial condition, results of operations, or cash flow, the Company is required to provide additional disclosures as part of its financial statements.

~~SFAS~~We evaluated ~~No. 157~~subsequent ~~establishes~~events athat ~~three-tier~~occurred ~~fair~~after ~~value~~the ~~hierarchy~~period end date through August 6, ~~which~~2009, ~~prioritizes~~the date the ~~inputs~~financial ~~used~~statements were inavailable ~~measuring~~to ~~fair~~be ~~value~~issued. We ~~These~~concluded ~~tiers~~that ~~include:~~no subsequent events have occurred that require recognition on our financial statements for the period ended July 3, 2009. However, we determined that the two items discussed below merited disclosure.

• ~~Level~~In 1,July ~~defined~~2009 aswe ~~observable~~completed ~~inputs~~the ~~such~~repurchase asof ~~quoted~~an ~~prices~~additional in$14.5 ~~active~~million ~~markets;~~of •face ~~Level~~value 2,of ~~defined~~our assenior ~~inputs~~subordinated ~~other~~notes ~~than~~for ~~quoted~~$14.3 ~~prices~~million, inincluding ~~active~~applicable ~~markets~~fees. ~~that~~The ~~are~~total ~~either~~amount ~~directly~~of orboth ~~indirectly~~our ~~observable;~~Parent’s common stock and •senior ~~Level~~subordinated 3,notes ~~defined~~repurchased asfor ~~unobservable~~the ~~inputs~~fiscal inyear totaled approximately $25 million, which ~~little~~is orthe noallowable ~~market~~repurchase ~~data~~basket ~~exists,~~per ~~therefore~~our ~~requiring~~current anauthorization ~~entity~~as tomore ~~develop~~fully ~~its~~described ~~own~~in ~~assumptions~~Note 6.

As• ofIn ~~January 2,~~July 2009, ~~the~~we ~~Company~~obtained ~~held~~a ~~certain~~consent ~~assets~~from ~~and~~our ~~had~~lenders ~~incurred~~under ~~certain~~our ~~liabilities that~~senior ~~are~~secured ~~required~~credit facility to beallow ~~measured~~us atto ~~fair~~expand ~~value~~our oncapability ato ~~recurring~~purchase ~~basis.~~capital ~~These~~assets ~~included~~by ~~cash equivalents~~an ~~(including~~additional ~~restricted~~$52 ~~cash)~~million ~~and~~during ~~interest~~fiscal ~~rate~~year ~~derivatives~~2010. ~~Cash~~The ~~equivalents~~purpose ~~consist~~ of ~~petty~~ ~~cash,~~obtaining ~~cash~~this ~~in-bank~~consent ~~and~~was ~~short-term,~~to ~~highly~~enable ~~liquid,~~us ~~income-producing~~to ~~investments~~acquire ~~with~~certain ~~original maturities~~capital ofassets ~~90 days or less. The Company’s interest rate derivatives, as further described~~ in ~~Note~~ ~~10,~~support ~~consist~~ of ~~interest~~a ~~rate~~new ~~swap~~program ~~contracts.~~requiring ~~The~~the ~~fair~~purchase ~~values~~ of ~~the~~certain ~~interest~~capital ~~rate swap contracts are determined based on inputs that are readily available in public markets or can be derived from information available in publicly quoted markets. Therefore~~assets, ~~the~~including ~~Company has categorized these interest rate swap contracts as Level 2~~helicopters. ~~The Company has consistently applied these valuation techniques in all periods presented.~~


ITEM 2.		MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion and analysis of our consolidated financial condition and results of operations should be read in conjunction with the consolidated financial statements, and the notes thereto, and other data contained elsewhere in this Quarterly Report. The following discussion and analysis should also be read in conjunction with our audited consolidated financial statements, and notes thereto, and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in our Annual Report on Form 10-K filed with the SEC on June 11, 2009. References to “DynCorp International”, the “Company”, “we”, “our”, or “us” refer to DynCorp International LLC and its subsidiaries unless otherwise stated or indicated by context. DynCorp International Inc., our direct parent (the “Parent”), has no operations independent of our Company, DynCorp International LLC.

~~The~~COMPANY ~~Company’s assets and liabilities measured at fair value on a recurring basis subject to~~OVERVIEW ~~the disclosure requirements of SFAS 157 at January 2, 2009, were as follows:~~

~~Fair~~We ~~Value~~are ~~Measurements~~a atleading ~~Reporting~~provider ~~Date~~of ~~Using~~specialized mission-critical professional and support services for the U.S. military, non-military U.S. governmental agencies and foreign governments. Our specific global expertise is in law enforcement training and support, security services, base and logistics operations, construction management, aviation services and operations, and linguist services. We also provide logistics support for all our services, including those services provided under the recently-awarded LOGCAP IV contract. We have provided essential services to numerous U.S. government departments and agencies since 1951. Our current customers include the U.S. Department of Defense (“DoD”), the DoS, foreign governments, commercial customers and certain other U.S. federal, state and local government departments and agencies. Revenue from U.S. government contracts accounted for approximately 96% of our total revenue in fiscal year 2009 and we were the prime contractor on contracts representing approximately 96% of our total revenue in fiscal year 2009. As of July 3, 2009, we had over 25,100 employees in more than 30 countries, approximately 58 active contracts ranging in duration from three to ten years and 110 task orders.

	Book value of
	financial		Quoted Prices in
	assets/(liabilities)		Active Markets		Significant Other		Significant
	as of January 2,		for Identical		Observable Inputs		Unobservable
(Amounts in thousands)	2009		Assets (Level 1)		(Level 2)		Inputs (Level 3)
Assets
Cash equivalents(1)	$	168,619	$	168,619	$	—	$	—
Total assets measured at fair value	$	168,619	$	168,619	$	—	$	—
Liabilities
Interest rate derivatives	$	8,727	$	—	$	8,727	$	—
Total liabilities measured at fair value	$	8,727	$	—	$	8,727	$	—

SBAs & Service Offerings

We utilize Strategic Business Areas (1“SBAs”) ~~Includes~~to ~~cash~~manage, review, and ~~cash~~assess ~~equivalents~~our business performance at a program level. We also aggregate our SBAs into service offerings to manage our business based on what constitutes our primary lines of business. We aggregate SBAs that provide similar services and ~~restricted~~utilize ~~cash~~similar methods to provide these services.

~~Note~~Global ~~13—Joint~~Stabilization ~~Ventures~~ and ~~Related~~Development ~~Parties~~Solutions

~~Amounts~~GSDS ~~due~~provides ~~from~~a ~~the~~diverse ~~Company’s~~collection ~~unconsolidated joint ventures totaled $8.9 million and $2.1 million as~~ of ~~January 2,~~outsourced ~~2009 and March 28, 2008, respectively. These receivables are a result of items purchased and~~ services ~~rendered~~primarily by the Company on behalf of the Company’s unconsolidated joint ventures. The Company has assessed these receivables as having minimal collection risk based on the historic experience with these joint ventures and the Company’s inherent influence through its ownership interest. The change in these receivables from March 28, 2008 to ~~January 2,~~government ~~2009~~agencies ~~resulted in a use of operating cash for the nine months ended January 2, 2009 of $6~~worldwide.~~8 million.~~ ~~The related~~GSDS ~~revenue~~includes ~~associated with the Company’s unconsolidated joint ventures totaled $2.1 million and $16.1 million for the~~ three ~~and~~service ~~nine~~offerings ~~months~~as ~~ended~~described ~~January 2, 2009, respectively, and $3.2~~below: ~~million and $5.1 million for the three and nine months ended December 28, 2007.~~

AsSecurity ~~discussed~~& inTraining ~~Note~~— 1,This ~~the~~service ~~Company~~offering ~~sold~~is ~~half~~comprised of its previously wholly owned subsidiary, DIFZ, on July 31, 2008 to Palm Trading Investment Corp. (“Palm”). DIFZ provides leased contract employees, back office staff and outsourced payroll and human resource support services through its approximately 4,100 employees. Currently, all DIFZ revenue and costs are eliminated through the ~~Company’s~~ ~~consolidation~~following ~~process.~~SBAs:

As• aCivPol— ~~result~~This ofSBA ~~the~~provides ~~DIFZ~~international ~~sale,~~policing ~~the~~and ~~Company~~police ~~currently~~training, ~~holds~~judicial ~~three~~support, ~~promissory~~immigration ~~notes~~support ~~from~~and ~~Palm~~base ~~for the~~operations. ~~purchase~~• ~~price~~Security ~~which~~& ~~totaled~~Training ~~$8.2 million.~~— ~~The~~This ~~notes~~SBA ~~are~~provides ~~included~~senior inadvisors ~~Prepaid expenses~~ and ~~other assets~~mentors ~~and~~to inforeign ~~Other~~governmental ~~assets on our consolidated balance sheet for the short and long term portions, respectively~~agencies. AsIn ~~of January 2~~addition, ~~2009,~~it ~~the~~provides ~~loan~~security ~~balance outstanding~~and ~~with~~personal ~~Palm~~protection ~~was~~for ~~$8.3 million, including~~diplomats ~~accrued~~and ~~interest~~governmental ofsenior $0officials.~~1 million. As indicated in Note 8, accrued interest is recorded in member’s units.~~

~~Note~~Contingency 14Support and Operations —~~Segment~~ ~~Information~~This service offering is comprised of the following SBAs:

On• ~~April 1~~LOGCAP IV — This SBA supports U.S. military operations and maintenance support, ~~2008~~including but not limited to: construction services, ~~the~~facilities ~~Company~~management, ~~announced~~electrical itpower, ~~would~~water, ~~change~~sewage ~~from~~and ~~reporting~~waste ~~financial~~management, ~~results~~laundry ~~on two~~operations, ~~segments~~food services and transportation motor pool operations. • Contingency Support & Operations — This SBA provides peace-keeping logistics support, GShumanitarian relief, weapons removal and ~~MTSS~~abatement, toworldwide ~~reporting~~contingency ~~three~~planning ~~segments~~and other rapid response services. In addition, ~~beginning~~it ~~with~~offers ~~the~~inventory ~~first~~procurement ~~fiscal~~and ~~quarter~~tracking ~~of 2009~~services, property control, data entry and mobile repair services. ~~This~~Furthermore, ~~was~~this ~~accomplished~~SBA byprovides ~~splitting~~facility GSand ~~into~~equipment ~~two~~maintenance ~~distinct~~and ~~reporting~~control ~~segments~~and custodial and administrative services.

~~The~~Infrastructure ~~three~~— ~~segments~~This ~~are~~service asoffering ~~follows~~is comprised of a single SBA:

~~International~~• ~~Security~~Infrastructure ~~Services,~~— orThis ~~ISS~~SBA ~~segment,~~provides ~~which consists of the Law Enforcement and Security~~civil, ~~or LES~~electrical, ~~business~~environmental ~~unit, the Specialty Aviation~~ and ~~Counter~~mechanical ~~Drug~~engineering ~~, or SACD, business unit,~~ and ~~Global~~construction ~~Linguist~~management ~~Solutions, or GLS~~services.

Global Platform Support Solutions

GPSS provides a wide range of technical, engineering, logistics and maintenance support services primarily to government agencies worldwide. Additionally, GPSS provides services including drug eradication and host nation pilot and crew training. GPSS includes two service offerings as described below:

~~Logistics~~Aviation ~~and~~— ~~Construction~~Our ~~Management,~~Aviation orservice ~~LCM~~offering ~~segment,~~provides ~~and~~a ishost ~~comprised~~ of ~~the Contingency~~services ~~and~~that ~~Logistics~~primarily ~~Operations, or CLO, business unit and the Operations, Maintenance, and~~features ~~Construction~~either ~~Management,~~aircraft maintenance or ~~OMCM,~~aircraft ~~business unit~~operations. This ~~segment~~includes isthe ~~also~~following ~~responsible for winning and performing new work on our LOGCAP IV~~SBAs: ~~contract.~~

~~Maintenance~~• ~~and~~Aviation ~~Technical~~Life Cycle Support ~~Services~~— Provides worldwide support of U.S. Army, orAir ~~MTSS~~Force ~~segment~~and Navy fixed wing assets. Aircraft are deployed throughout the U.S., ~~consists~~Europe, Asia, South America and the Middle East. This includes flight line and depot level maintenance consisting of ~~its~~scheduled ~~original~~ and unscheduled events. Specific functions include repair, overhaul and procurement of components, and ~~DynMarine~~procurement ~~Services~~of consumable materials and transportation of materials to and from the operating sites. In addition, ~~which~~the ~~was~~team ~~previously~~is ~~reported~~responsible ~~under~~for obsolescence engineering, quality control, inventory management, avionics upgrades and recovery of downed aircraft. • Domestic Aviation Operations and Support — Provides aircraft fleet maintenance and modification services, ground vehicle maintenance and modification services, pilot and maintenance training, logistics support, air traffic control services, base and depot operations, program management and engineering services. Additionally, this SBA provides aerial firefighting services. These services are provided in the GSU.S. ~~segment~~• Field Service Operations — Provides worldwide maintenance, modification, repair, and logistics support on aircraft, weapons systems, and related support equipment to the DoD and other U. S. government agencies. Contract Field Teams (“CFT”) is the most significant program in our Field Service Operations SBA. Our Company and its predecessors have provided CFT services for over 58 years. This program deploys highly mobile, quick-response field teams to customer locations to supplement a customer’s workforce. • International Aviation Operations and Support — Provides aircraft fleet maintenance and modification services, ground vehicle maintenance and modification services, pilot and maintenance training, logistics support, air traffic control services, air transportation, base and depot operations, program management and engineering services. These services are provided internationally. • INL Air Wing — Conducts foreign assistance programs to reduce the flow of international narcotics.

~~The~~Land ~~following~~Systems is— aThis ~~summary~~service ofoffering ~~the~~is ~~financial~~comprised ~~information~~ of ~~the~~a ~~reportable~~single ~~segments reconciled~~SBA: ~~to the amounts reported in the condensed consolidated financial statements. All prior periods presented have been recast to reflect the new segment reporting.~~

	Three Months Ended
(Amounts in thousands)	January 2, 2009			December 28, 2007
Revenue
International Security Services	$	465,757		$	265,722
Logistics and Construction Management		90,423			73,064
Maintenance and Technical Support Services		237,842			184,285
Other/elimination		(1,695	)		—
Total revenue	$	792,327		$	523,071
Operating Income
International Security Services	$	33,167		$	20,576
Logistics and Construction Management		536			5,016
Maintenance and Technical Support Services		17,880			5,233
Total operating income	$	51,583		$	30,825
Depreciation and amortization
International Security Services	$	6,671		$	7,153
Logistics and Construction Management		675			804
Maintenance and Technical Support Services		2,683			2,953
Total depreciation and amortization	$	10,029		$	10,910

•

Land Systems — This SBA provides maintenance, operations, support, life extension, engineering, marine services and program management services primarily for ground vehicles and docked ships. This includes the Mine Resistant Ambush Protected Vehicles Logistics Support (“MRAP”) contract.

	Nine Months Ended
(Amounts in thousands)	January 2, 2009			December 28, 2007
Revenue
International Security Services	$	1,343,467		$	825,134
Logistics and Construction Management		269,351			183,815
Maintenance and Technical Support Services		679,449			557,904
Other/elimination		(3,995	)		—
Total revenue	$	2,288,272		$	1,566,853
Operating Income
International Security Services	$	108,545		$	78,069
Logistics and Construction Management		(16,451	)		4,674
Maintenance and Technical Support Services		46,116			14,231
Total operating income	$	138,210		$	96,974
Depreciation and amortization
International Security Services	$	20,297		$	21,198
Logistics and Construction Management		2,144			2,102
Maintenance and Technical Support Services		8,153			8,601
Total depreciation and amortization	$	30,594		$	31,901

Global Linguist Solutions

	As of
(Amounts in thousands)	January 2, 2009		March 28, 2008
Assets
International Security Services	$	795,198	$	725,775
Logistics and Construction Management		204,975		199,088
Maintenance and Technical Support Services		342,431		336,721
Corporate/other(1)		231,645		141,125
Total assets	$	1,574,249	$	1,402,709

Global Linguist Solutions — This consolidated joint venture between DynCorp International and McNeil Technologies provides rapid recruitment, deployment and on-site management of in-theatre interpreters and translators to the U.S. military for a wide range of foreign languages. Our GLS operating segment is comprised of a single linguist service offering/SBA.

(1) Assets primarily include cash, deferred income taxes, and deferred debt issuance cost.

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion and analysis of our consolidated financial condition and results of operations should be read in conjunction with the condensed consolidated financial statements, and the notes thereto, and other data contained elsewhere in this Quarterly Report. The following discussion and analysis should also be read in conjunction with our audited consolidated financial statements, and notes thereto, and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in our Annual Report on Form 10-K filed with the SEC on June 10, 2008. References herein to “DynCorp International”, the “Company”, “we”, “our”, or “us” refer to DynCorp International LLC and its subsidiaries unless otherwise stated or indicated by the context. DynCorp International Inc., our direct parent (the “Parent”), has no operations independent of our Company, DynCorp International LLC.

COMPANY OVERVIEW

We are a leading provider of specialized mission-critical professional and support services outsourced by the U.S. military, non-military U.S. governmental agencies and foreign governments. Our specific global expertise is in law enforcement training and support, security services, base and logistics operations, construction management, aviation services and operations, and linguist services. We also provide logistics support for all our services, through approximately 47 active contracts ranging in duration from three to ten years and over 100 task orders. As of January 2, 2009, we had approximately 21,000 employees in approximately 30 countries. DynCorp International and its predecessors have provided essential services to numerous U.S. government departments and agencies since 1951.

We operate our business through three segments: ISS; LCM; and MTTS. Each of these segments is described below.

International Security Services

ISS provides various outsourced services primarily to government agencies worldwide. ISS consists of the following strategic business units:

Law Enforcement and Security — This operating unit provides international policing and police training, judicial support, immigration support and base operations. In addition, it provides security and personal protection for diplomats.

Specialty Aviation and Counter-drug Operations — This operating unit’s services include drug eradication and host nation pilot and crew training.

Global Linguist Solutions — This consolidated joint venture between DynCorp International and McNeil Technologies provides rapid recruitment, deployment and on-site management of interpreters and translators in-theatre to the U.S. Army for a wide range of foreign languages.

Logistics and Construction Management

LCM provides technical support services to government agencies and commercial customers worldwide. LCM consists of the following strategic business units:

Contingency and Logistics Operations — This operating unit provides peace-keeping support, humanitarian relief, de-mining, worldwide contingency planning and other rapid response services. In addition, it offers inventory procurement and tracking services, equipment maintenance, property control, data entry and mobile repair services.

Operations Maintenance and Construction Management — This operating unit provides facility and equipment maintenance and control, custodial and administrative services. In addition, it provides civil, electrical, infrastructure, environmental and mechanical engineering and construction management services.

Maintenance and Technical Support Services

MTSS provides a wide range of technical, engineering, logistics and maintenance support services primarily to government agencies worldwide. MTSS consists of the following strategic business areas:

Contract Logistics Support — Provides worldwide support of U.S. Army, Air Force and Navy fixed wing assets. Aircraft are deployed throughout the U.S., Europe, Asia, South America and the Middle East. Contract Logistics Support (“CLS”) provides flight line and depot level maintenance, consisting of scheduled and unscheduled events. Specific functions include repair, overhaul and procurement of components, procurement of consumable materials and transportation of materials to and from the operating sites. In addition, the team is responsible for obsolescence engineering, quality control, inventory management, avionics upgrades and recovery of downed aircraft.

Field Service Operations — Provides worldwide maintenance, modification, repair and logistics support on aircraft, weapons systems, and related support equipment to the Department of Defense (“DoD”) and other U.S. government agencies. Contract Field Teams (“CFT”) is the most significant program in our Field Service Operations SBA. Our company and its predecessors have provided CFT service for over 55 consecutive years. This program deploys highly mobile, quick-response field teams to customer locations to supplement a customer’s workforce.

Aviation and Maintenance Services — Provides aircraft fleet maintenance and modification services, ground vehicle maintenance and modification services, marine services, pilot and maintenance training, logistics support, air traffic control services, base and depot operations, program management and engineering services. These services are offered on a domestic and international basis.

CURRENT OPERATING CONDITIONS AND OUTLOOK

External Factors

Over most of the last two decades, the U.S. government has ~~been~~increased ~~increasing~~ its reliance on the private sector for a wide range of professional and support services. This increased use of ~~outsourcing~~contractors to augment non-combat forces during conflict operations by the U.S. government has been driven by a variety of factors, including: lean-government initiatives launched in the 1990s; surges in demand during times of national crisis; the increased complexity of missions conducted by the U.S. military and the ~~Department of State (“~~DoS”); ~~the~~ increased focus of the U.S. military on war-fighting efforts; and the loss of skills within the government caused by workforce reductions and retirements. ~~These factors lead us~~ to believe that the U.S. government’s growing mission and continued human capital challenges have combined to create a new market dynamic, one that is less directly reflective of overall government budgets and more reflective of the ongoing shift of service delivery from the federal workforce to competent, efficient private sector providers.

3230

WeIn ~~believe~~the current environment of economic uncertainty and market turmoil, developing and implementing spending, tax, and other initiatives to stimulate the ~~following~~faltering ~~industry~~economy ~~trends~~are ~~will~~at ~~result~~the forefront inof ~~continued~~the ~~strong~~U.S. ~~demand~~government’s inactivities. ~~our~~While ~~target~~we ~~markets~~expect to see continued support for defense initiatives under the ~~types~~Obama ofAdministration, ~~outsourced~~we ~~services~~expect that initiatives to address economic stimulus will compete with other national priorities, such as DoD and DoS initiatives. While these dynamics will place pressure on defense spending, we ~~provide:~~believe that, within the defense budget, weapon system acquisitions will be the most likely initial target for budget reductions, and operations and maintenance budgets will remain robust, driven by (i) the need to reset equipment coming out of Iraq, (ii) the logistics and support chain associated with repositioning of forces and the draw down in Iraq and (iii) deployments into Afghanistan.

•There ~~The~~is ~~continued~~increasing ~~transformation~~indication ofby ~~military~~the ~~forces,~~Obama ~~leading~~administration ~~to increased outsourcing~~ of ~~non-combat~~a ~~functions,~~desire ~~including~~for ~~life-cycle~~the ~~asset~~U.S. ~~management~~government to ~~functions~~move ~~ranging~~away from ~~organizational~~private tocontractors ~~depot~~and ~~level~~utilize ~~maintenance;~~military •or Angovernment ~~increase~~personnel in ~~the~~performing support ~~level~~services ~~and~~throughout ~~frequency of overseas deployments and peace-keeping operations for~~ the ~~DoS,~~federal ~~DoD~~government. ~~and~~This ~~United~~“insourcing” ~~Nations;~~of •previously ~~Increased~~contracted support ~~maintenance,~~services ~~overhaul~~could ~~and~~diminish ~~upgrade~~the ~~needs~~U.S. togovernment’s ~~support~~reliance ~~aging~~on ~~military~~private ~~platforms;~~contractors •in ~~Increased~~the future. ~~outsourcing~~While bywe ~~foreign~~continue ~~militaries~~to ofmonitor ~~maintenance,~~this ~~supply~~trend ~~support,~~going ~~facilities management~~forward, ~~training~~we ~~and~~do ~~construction~~not ~~management-related~~believe ~~services;~~that ~~and~~insourcing will •have ~~The~~a ~~shift~~material ~~from~~impact ~~single award~~ to ~~more~~our ~~multiple~~operations ~~award~~in ~~indefinite~~the ~~delivery,~~near ~~indefinite~~term. ~~quantity~~We ~~(“IDIQ”)~~believe ~~contracts,~~the ~~which~~following ~~may~~industry trends ~~offer~~will usresult anin ~~opportunity~~continued tostrong ~~increase~~demand ~~revenue~~in ~~under~~our ~~these~~target ~~contracts~~markets ~~by competing~~ for ~~task orders with~~ the ~~other~~types ~~contract~~of ~~awardees.~~services we provide:

We• ~~believe~~The ~~that~~continued ~~the~~use ~~cost~~ of ~~current~~contractors ~~and~~to ~~proposed~~augment ~~economic~~non-combat ~~stimulus~~forces ~~packages~~during conflict operations, including personnel support, base operations and ~~other initiatives~~logistics, ~~undertaken~~platform bysupport ~~the~~and ~~Federal~~maintenance, ~~government~~and incontingency ~~connection~~operations ~~with~~due ~~the~~to ~~current~~increased ~~economic~~military ~~crisis will~~operational ~~likely~~tempo, ~~have~~equipment anservice ~~eventual~~life ~~negative~~extensions ~~impact~~and economic pressures on the ~~defense~~DoD budget.; We• ~~believe~~Increased use of contractor support in post-conflict rebuilding efforts, ~~however~~including military logistics and equipment reset support, ~~that within~~infrastructure ~~the~~development, ~~defense~~training ~~budget~~and mentoring, ~~weapon~~and ~~system~~capacity ~~acquisitions~~building; ~~will~~• beIncreased ~~the~~outsourcing ~~most~~by ~~likely~~foreign ~~initial~~militaries ~~target~~of ~~for budget~~maintenance, ~~reductions~~supply support, ~~and~~facilities ~~operations~~management and ~~maintenance~~construction ~~budgets~~management-related ~~will~~services; ~~remain~~and ~~robust,~~• ~~driven~~The byshift ~~(i) the need~~from single award to ~~reset~~more ~~equipment~~multiple ~~coming~~award ~~out~~indefinite oforder ~~Iraq,~~indefinite quantity (ii“IDIQ”) ~~the~~ ~~logistics~~contracts, ~~and~~which ~~support~~may ~~chain~~offer ~~associated~~us ~~with repositioning~~an ofopportunity ~~forces~~to ~~and~~increase ~~eventual~~revenue ~~draw~~under ~~down~~these incontracts ~~Iraq~~by ~~and~~competing ~~(iii) deployments~~for ~~into~~task ~~Afghanistan~~orders with the other contract awardees.

~~Initial~~Both ~~statements~~the ~~from~~U.S. ~~the~~and ~~new~~Iraqi ~~Obama~~governments ~~administration~~have ~~indicate~~recently ~~that~~communicated the ~~President~~goal ~~will~~and ~~seek~~intent tofor U.S. ~~withdraw~~troop ~~troops~~reductions from Iraq,. ~~specifically~~The exact timing of the initial withdrawal and amount of time to fully withdraw U.S. ~~combat~~troops ~~forces~~is byuncertain. asHowever, ~~early~~many asindustry ~~mid-2010.~~observers ~~The~~believe ~~new~~that the withdrawal ~~administration~~will ~~also~~commence ~~has~~between ~~indicated~~2010 ~~that~~and it2011. ~~will~~On ~~support~~the another ~~expanded~~hand, ~~presence~~President inObama ~~Afghanistan~~has ofindicated his support ~~additional~~for ~~U.S.~~expanded ~~troops.~~troop ~~Based~~levels onin ~~the~~Afghanistan. ~~foregoing~~As a result, we expect our level of business involving Iraq to be relatively stable over the next few years, ~~with~~assuming ~~demand~~we ~~remaining~~are ~~strong~~successful ~~for~~in ~~logistics,~~winning ~~equipment~~new ~~reset,~~LOGCAP ~~training~~IV ~~and~~task ~~mentoring~~orders ofin ~~Iraqi forces and government agencies and translation services to support security and peacekeeping activities~~Iraq. In Afghanistan, we ~~believe~~aim ~~we are well positioned~~ to capitalize on ~~any~~this ~~increased~~increase in U.S. government focus through many of our service offerings, including police training and mentoring, aircraft logistics and operations, infrastructure development, ~~mine resistant~~MRAP services, and ~~ambush~~logistics services. ~~protected~~Our ~~(“MRAP”)~~recent ~~services,~~LOGCAP ~~poppy~~IV ~~eradication~~award ~~and~~to ~~logistics~~provide services ~~under~~in southern Afghanistan is an example of ~~LOGCAP~~achievements IVin this area.

Current Economic Conditions

We believe that our industry and customer base are less likely to be affected by many of the factors generally affecting business and consumer spending ~~generally~~. Accordingly, we believe that we continue to be well positioned in the current economic environment as a result of historic demand factors affecting our industry, the nature of our contracts and our sources of liquidity. However, we cannot be certain that the economic environment or other factors will not adversely impact our business, financial condition or results of operations in the future.

~~Furthermore,~~We we believe that our current sources of liquidity will enable us to continue to perform under our existing contracts and further grow our business. However, a ~~sustained~~longer term credit crisis could adversely affect our ability to obtain additional liquidity or refinance existing indebtedness on acceptable terms or at all, which could adversely affect our business, financial condition and results of operations.

~~See~~31 ~~“Part II — Other Information — Item 1A. Risk Factors — Current or worsening economic conditions could impact our business.”~~

Internal Factors

~~Our~~We ~~internal~~apply ~~focus~~a ~~for~~focused ~~success~~strategy that centers ~~around~~on ~~five~~a defined strategic framework. The four key ~~principles:~~areas identified by DynCorp’s Strategic Framework are Purpose, Objective, Strategy, and Focus Areas.

• Performance — Through a relentless mind set in meeting our commitments to our customers every day and in operating with absolute integrity and in accordance with our Code of Ethics and Business Conduct in all that we do. • Lean Infrastructure — In order to further fuel our growth and invest in our people, we must generate additional investment capacity by ensuring that our infrastructure is as efficient as possible without jeopardizing our ability to perform. • Strategic Investment — We must have clarity in our strategic priorities, and we must properly focus our investments in people, new program pursuits and efforts to penetrate new segments of the market. • New Business — Growing our business profitably starts with winning new business. This involves having a winning attitude across our enterprise, particularly in satisfying our customers and competing for business. • People — We must be the employer of choice, with strong, trusted leadership, an employee-focused environment and a culture of mutual respect in which our employees are empowered and rewarded for serving our customers and ensuring their success.Purpose

Each word of DynCorp International’s purpose statement “We ~~apply~~serve ~~these~~today ~~key~~for ~~principles~~a ~~continuously~~safe tomorrow.TM” asis rich in meaning. We... DynCorp International is an integrated global enterprise, united by our shared purpose and values. Serve... This is the essence of how we approach ~~assess~~our customers, our ~~operational~~stakeholders and ~~administrative~~our employees. Today... we always work with a strong ~~performance~~sense of immediacy and urgency. Safe... This is the difference we make in the world. We lay the groundwork for millions of people around the world to live safer and better lives by helping to rebuild the institution of civil society in war torn regions, training civilian police, and sustaining peacekeepers. Tomorrow... The difference we make has enduring effect. We are a force for shaping a better future.

~~Current Events~~Objective

~~The~~Driven ~~results~~by of our ~~operations~~purpose, ~~for~~we ~~the~~strive ~~three~~to ~~and~~be ~~nine~~the ~~months~~leading ~~ended~~global ~~January 2,~~government ~~2009~~services ~~exceeded~~provider in ~~expectations~~support ~~across~~of ~~our~~U.S. ~~core~~national ~~business~~security ~~areas~~and ~~with~~foreign ~~the~~policy ~~exception~~objectives. ofWe ~~our~~provide ~~Afghanistan~~services ~~construction~~essential to ~~contracts~~national security, ~~within~~humanitarian ~~our~~operations, ~~LCM~~nation ~~segment~~building, ~~which encountered cost overruns due to significant challenges~~peacekeeping, ~~including~~ ~~the~~and ~~deteriorating security situation~~aviation. ~~Management~~For approximately ~~has~~60 years, ~~determined~~we ~~that~~have ~~several~~sustained of our ~~Afghanistan~~ ~~construction~~reputation ~~contracts~~as ~~will operate at~~ a ~~loss~~trusted orpartner atto ~~margins~~the ~~approaching zero over their~~U.S. ~~contract~~government ~~terms.~~and Weselected doforeign ~~not~~governments ~~expect~~by tosuccessfully ~~bid~~fulfilling ~~any~~the ~~similar~~toughest ~~firm fixed priced contracts without revised~~assignments ~~terms~~across ~~and~~the ~~conditions~~globe.

~~See the Results of Operations section below for further information regarding the financial~~Strategy ~~impact of our construction business on our consolidated financial results.~~

To achieve our objective, we crafted a three-part strategy. First, we continue to seek to defend and grow our core business. Second, we believe that the Obama administration’s emphasis on defense, diplomacy, and development creates significant potential for us to expand our business in stabilization & development. Concurrently, we believe that platform support is a promising source of near-term growth, driven largely by reset of equipment. Finally, after servicing the intelligence services through our GLS joint venture, we plan to selectively service new segments to prudently diversify our portfolio, while also adding differentiation to our current offerings.

Focus Areas

We support the three Strategic Framework elements above by leveraging our worldwide infrastructure through five focus areas. We believe that by combining relentless performance, lean enterprise, clear strategy, a winning culture, and being people’s employer of choice, we are able to quickly organize and deploy an integrated workforce, material, and technology solutions across all our areas of specialty. From rapid-response field assignments to long-term engagements, we believe that we provide the world’s most comprehensive array of integrated solutions for ensuring our customers’ success — regardless of the location or conditions.

CONTRACT TYPES

Our business ~~generally~~ is performed under fixed-price, time-and-materials or cost-reimbursement contracts. Each ofcontract ~~these~~type is described below.

• Fixed-Price Type Contracts: In a fixed-price contract, the price is not subject to adjustment based on costs incurred, which can favorably or adversely impact our profitability depending upon our execution in performing the contracted service. Fixed-price types received by us include firm fixed-price, fixed-price with economic adjustment, and fixed-price incentive. • Time-and-Materials Type Contracts: A time-and-materials type contract provides for acquiring supplies or services on the basis of direct labor hours at fixed hourly/daily rates plus materials at cost. • Cost-Reimbursement Type Contracts: Cost-reimbursement type contracts provide for payment of allowable incurred costs, to the extent prescribed in the contract, plus a fixed-fee, award-fee or incentive-fee. Award-fees or incentive-fees are generally based upon various objective and subjective criteria, such as aircraft mission capability rates and meeting cost targets.

34Any of these three types of contracts discussed above may be executed under an IDIQ contract, which are often awarded to multiple contractors. An IDIQ contract does not represent a firm order for services. Our Civilian Police, Field Teams, and LOGCAP IV programs are three examples of IDIQ contracts.

~~Our~~The ~~historical~~following ~~contract~~table ~~mix~~sets byforth ~~type,~~our asapproximate acontract ~~percentage~~mix as of ~~revenue,~~the isdates indicated ~~in the table~~: ~~below.~~

	Three Months Ended						Nine Months Ended
	Fiscal Quarter Ended
	January 2, 2009			December 28, 2007			January 2, 2009			December 28, 2007
	July 3,			July 4,
Fixed Price		23.6	%		41.2	%		27.6	%		40.4	%
	2009			2008
Time-and-Materials		23.1	%		32.8	%		24.4	%		34.5	%
Fixed Price		26	%		31	%
Cost-Reimbursement		53.3	%		26.0	%		48.0	%		25.1	%
Time-and-Materials		21	%		26	%
		100	%		100	%		100	%		100	%
Cost-Reimbursement		53	%		43	%
		100	%		100	%

Over the last year, we have seen an increase in our revenue attributable to cost-reimbursable contracts with corresponding decreases to fixed price and time-and-materials contracts. This was primarily due to changes from fixed-price to cost-reimbursable task orders on our CivPol program as well as GLS making up a greater percentage of our consolidated revenue in fiscal year 2010 compared to fiscal year 2009. We expect this trend to continue as a result of growth in LOGCAP IV.

BACKLOG

We track backlog in order to assess our current business development effectiveness and to assist us in forecasting our future business needs and financial performance. Our backlog consists of funded and unfunded amounts under contracts. Funded backlog is equal to the amounts actually appropriated by a customer for payment of goods and services less actual revenue recognized as of the measurement date under that appropriation. Unfunded backlog is the actual dollar value of unexercised, priced contract options and the unfunded portion of exercised contract options. Most of our U.S. government contracts allow the customer the option to extend the period of performance of a contract for a period of one or more years. These priced options may or may not be exercised at the sole discretion of the customer. It has been our experience that the customer has typically exercised contract options.

Most of our U.S. government contracts allow the customer the option to extend the period of performance of a contract for a period of one or more years. These priced options may or may not be exercised at the sole discretion of the customer. Historically, it has been our experience that customers have typically exercised contract options.

Firm funding for our contracts is usually made for one year at a time, with the remainder of the contract period consisting of a series of one-year options. As is the case with the base period of our U.S. government contracts, option periods are subject to the availability of funding for contract performance. The U.S. government is legally prohibited from ordering work under a contract in the absence of funding. Our historical experience has been that the government has typically funded the option periods of our contracts.

The following table sets forth our approximate ~~contracted~~ backlog as of the dates indicated (dollars in millions):

	January 2,		March 28,
	July 3, 2009		April 3, 2009
(in millions)	2009		2008
Funded Backlog	$	1,506	$	1,431
Funded Backlog	$	1,485	$	1,164
Unfunded Backlog		5,182		4,867
Unfunded Backlog		5,067		4,797
Total Backlog	$	6,688	$	6,298
Total Backlog	$	6,552	$	5,961

Total backlog as of ~~January~~July 23, 2009 was $6.67 billion, which increased by $0.4 billion as compared to $6.03 billion as of ~~March 28~~April 3, ~~2008~~2009, primarily due to ~~the~~a ~~award~~new ofWorldwide ~~the~~Personal ~~War~~Protective ~~Reserve~~Services (“WPPS”) ~~Materiel~~task ~~recompete~~order ~~during~~which ~~the~~is ~~first~~expected ~~quarter of~~to ~~the~~ramp up on our second fiscal ~~year~~quarter of 2010. As of ~~January 2~~July 3, 2009 and ~~March~~April 283, ~~2008~~2009, total backlog related to GLS was $32.3 9 billion and $3.51 billion, respectively, and is incorporated into the schedule above. Additionally, total backlog related to LOGCAP IV was $79 million at July 3, 2009 and included in the ~~table~~schedule above.

ESTIMATED REMAINING CONTRACT VALUE

Our estimated remaining contract value represents total backlog plus management’s estimate of future revenue under IDIQ contracts for task or delivery orders that have not been awarded. Future revenue represents management’s estimate of revenue that will be recognized from future task or delivery orders through the end of the term of such IDIQ contracts and is based on our experience under such IDIQ contracts and ~~management~~our ~~judgments and~~ estimates as to future performance. Although we believe our estimates are reasonable, there can be no assurance that our existing contracts will result in actual revenue in any particular period or at all. Our estimated remaining contract value could vary or even change significantly depending upon various factors, including government policies, government budgets and appropriations, the accuracy of our estimates of work to be performed under time and material contracts and whether we successfully compete with any multiple bidders in IDIQ contracts. ~~The~~As ~~Company’s~~of ~~estimated~~July 3, ~~remaining~~2009 ~~contract~~and ~~value as of January~~April 23, 2009, ~~increased~~our toestimated remaining contract value was $98.7 billion ~~from~~and $78.54 billion ~~as of March 28~~, ~~2008~~respectively, primarily due to ~~the~~a ~~successful~~new ~~recompete~~World ofWide ~~the~~Protective Services ~~Contract~~(“WPPS”) ~~Field~~task ~~Teams~~order, ~~contract~~which is expected to ramp up in our second fiscal quarter of 2010.

~~RESULTS OF OPERATIONS~~33

The Company reports its results on a 52/53-week fiscal year, with the fiscal year ending on the Friday closest to March 31 of such year (April 3, 2009 for fiscal year 2009, which is a 53-week fiscal year). The nine-month fiscal period ended January 2, 2009 was a 40-week period from March 29, 2008 to January 2, 2009. The nine-month fiscal period ended December 28, 2007 was a 39-week period from March 31, 2007 to December 28, 2007.

RESULTS OF OPERATIONS — Fiscal Quarters Ended July 3, 2009 and July 4, 2008

The fiscal quarter ended July 3, 2009 was a 13-week period from April 4, 2009 to July 3, 2009. The fiscal quarter ended July 4, 2008 was a 14-week period from March 29, 2008 to July 4, 2008.

Consolidated

The following tables set forth, for the periods indicated, our consolidated results of operations, both in dollars and as a percentage of revenue:

	Three Months Ended
	Fiscal Quarter Ended
(Amounts in thousands)	January 2, 2009					December 28, 2007
(Dollars in thousands)	July 3, 2009					July 4, 2008
Revenue	$	~~792~~785,~~327~~177		100.0	%	$	~~523~~716,~~071~~794		100.0	%
Cost of services		(~~704~~699,~~210~~093	)	(8889.90	%)		(~~452~~638,~~341~~389	)	(8689.51	%)
Selling, general and administrative expenses		(2623,~~505~~438	)	(3.30	%)		(2827,~~995~~851	)	(53.59	%)
Depreciation and amortization expense		(10,~~029~~145	)	(1.3	%)		(10,~~910~~560	)	(2.1.5	%)
Operating income		5152,~~583~~501		6.57	%		3039,~~825~~994		5.96	%
Interest expense		(1514,~~322~~610	)	(1.9	%)%		(14,~~052~~215	)	(2.70	%)
Loss on early extinguishment of debt		—		0.0	%		—		0.0	%
Earnings from affiliates		1,054		0.1	%		1,117		0.2	%
Earnings from affiliates		1,319		0.2	%		1,253		0.2	%
Interest income		339		0.0	%		344		0.0	%
Interest income		730		0.1	%		522		0.1	%
Other (loss)/income, net		(213	)	(0.0	)%		705		0.1	%
Other income, net		(856	)	(0.1	%)		380		0.1	%
Income before taxes		39,071		5.0	%		27,945		3.9	%
Income before taxes		37,454		4.7	%		18,928		3.6	%
Provision for income taxes		(12,627	)	(1.6	%)		(9,316	)	(1.3	%)
Provision for income tax (as a percentage of income before tax)		(11,639	)	(31.1	%)		(6,968	)	(36.8	%)
Net Income		26,444		3.4	%		18,629		2.6	%
Income before minority interest		25,815		3.3	%		11,960		2.3	%
Noncontrolling interests		(5,799	)	(0.7	%)		(649	)	(0.1	%)
Minority interest		(6,062	)	(0.8	%)		—		0.0	%
Net income attributable to DynCorp International LLC	$	20,645		2.6	%	$	17,980		2.5	%
Net income	$	19,753		2.5	%	$	11,960		2.3	%

	Nine Months Ended
(Amounts in thousands)	January 2, 2009					December 28, 2007
Revenue	$	2,288,272		100.0	%	$	1,566,853		100.0	%
Cost of services		(2,039,118	)	(89.1	%)		(1,358,062	)	(86.7	%)
Selling, general and administrative expenses		(80,350	)	(3.5	%)		(79,916	)	(5.1	%)
Depreciation and amortization expense		(30,594	)	(1.3	%)		(31,901	)	(2.0	%)
Operating income		138,210		6.0	%		96,974		6.2	%
Interest expense		(44,442	)	(1.9	%)		(42,247	)	(2.7	%)
Loss on early extinguishment of debt		(4,443	)	(0.2	%)		—		0.0	%
Earnings from affiliates		3,959		0.2	%		3,320		0.2	%
Interest income		1,751		0.1	%		2,202		0.1	%
Other income, net		809		0.0	%		(162	)	0.0	%
Income before taxes		95,844		4.2	%		60,087		3.8	%
Provision for income tax (as a percentage of income before tax)		(30,086	)	(31.4	%)		(21,916	)	(36.5	%)
Income before minority interest		65,758		2.9	%		38,171		2.4	%
Minority interest		(15,154	)	(0.7	%)		—		0.0	%
Net income	$	50,604		2.2	%	$	38,171		2.4	%

Revenue — Revenue for the fiscal quarter ended July 3, 2009 of $785.2 million increased by $68.4 million, or 9.5%, as compared with the fiscal quarter ended July 4, 2008. The increase, as more fully described in the results by segment, is primarily due to a full quarter of revenue from the Intelligence and Security Command (“INSCOM”) contract, including award fee, in the current fiscal quarter as compared to the ramp-up period in the quarter ended July 4, 2008.

36Cost of services — Costs of services are comprised of direct labor, direct material, subcontractor costs, other direct costs and overhead. Other direct costs include travel, supplies and other miscellaneous costs. Costs of services for the fiscal quarter ended July 3, 2009 increased by $60.7 million, or 9.5%, compared with the fiscal quarter ended July 4, 2008 and was primarily a result of revenue growth. As a percentage of revenue, costs of services decreased to 89.0% for the fiscal quarter ended July 3, 2009 from 89.1% for the fiscal quarter ended July 4, 2008. This decrease was driven by cost management efforts in the GPSS segment and higher award fees in the GLS segment, partially offset by cost increases relative to revenue resulting from a shift from fixed price to cost reimbursable type contracts in the GSDS segment.

Selling, general and administrative expenses (“SG&A”) — SG&A primarily relates to functions such as management, legal, financial accounting, contracts and administration, human resources, management information systems, purchasing and business development. SG&A was impacted by growth in our underlying business, various initiatives to improve organizational capability, compliance and systems improvements. SG&A for the fiscal quarter ended July 3, 2009 decreased by $4.4 million, or 15.8%, compared with the fiscal quarter ended July 4, 2008. SG&A as a percentage of revenue decreased to 3.0% for the fiscal quarter ended July 3, 2009 compared to 3.9% for the fiscal quarter ended July 4, 2008. This was primarily the result of our former CEO’s severance package being incurred in the fiscal quarter ended July 4, 2008 and lean infrastructure initiatives in place for the full quarter ended July 3, 2009.

~~Revenue~~Depreciation —and ~~Revenue~~amortization ~~for~~— ~~the~~Depreciation ~~three~~ and ~~nine~~amortization ~~months~~for the fiscal quarter ended ~~January~~July 23, 2009 ~~increased~~decreased $~~269~~0.~~3 million, or 51.5%, and $721.~~4 million, or 463.09%, ~~respectively,~~ as compared with the ~~three~~fiscal ~~and~~quarter ~~nine months~~ ended ~~December 28~~July 4, ~~2007~~2008. The ~~increase,~~decrease aswas ~~more~~primarily ~~fully~~attributed ~~described~~to incalculating ~~the~~depreciation ~~results~~and byamortization ~~segment,~~over 13 isweeks ~~principally~~in ~~due~~fiscal toquarter ~~growth~~ended ~~from~~July 3, ~~new~~2009, ~~contracts~~as ~~such~~compared asto ~~the~~14 weeks ~~Intelligence~~for ~~and~~the ~~Security~~quarter ~~Command (“INSCOM”)~~ended ~~contract~~July 4, 2008.

~~Cost~~Interest ofexpense ~~services~~ — ~~Cost~~Interest ofexpense services are comprised of direct labor, direct material, subcontractor costs, other direct costs and overhead. Other direct costs include travel, supplies and other miscellaneous costs. Costs of services for the ~~three~~fiscal ~~and~~quarter ~~nine months~~ ended ~~January~~July 23, 2009 increased by $~~251~~0.94 million, or 552.78% ~~and $681.1 million~~, oras ~~50.1%, respectively~~ compared with the ~~three~~fiscal ~~and~~quarter ~~nine months~~ ended ~~December~~July 284, ~~2007~~2008. ~~and~~The ~~was~~interest ~~primarily~~expense incurred arelates ~~result~~to ofour ~~revenue~~credit ~~growth.~~facility, ~~As a~~senior ~~percentage~~subordinated ofnotes ~~revenue,~~and ~~costs~~amortization of ~~services~~deferred financing ~~increased to 88~~fees.9% ~~and~~The ~~89.1%,~~increase ~~respectively,~~in ~~for~~interest ~~the three~~expense ~~and~~was ~~nine~~primarily ~~months~~driven ~~ended~~by ~~January 2,~~the ~~2009~~senior assubordinated notes ~~compared~~making toup ~~86.5%~~a ~~and~~higher ~~86.7%,~~percentage ~~respectively,~~of ~~for~~our ~~the three~~total ~~and nine months ended December 28~~debt, ~~2007,~~which ~~primarily~~has asconsistently acarried ~~result of~~ a ~~change~~higher interest inrate ~~contract~~than ~~mix, with~~ the ~~INSCOM~~senior ~~contract~~secured ~~and~~credit ~~changes~~facility. inHigher ~~portions~~deferred offinancing ~~the~~fee ~~CIVPOL~~amortization ~~contract~~as ~~increasing~~a result of our ~~percentage of~~July 2008 ~~revenue~~debt ~~from~~refinancing ~~cost~~also ~~type~~contributed ~~contracts~~to this increase. ~~Cost~~This ~~overruns~~was partially offset by ~~our~~the ~~Afghanistan~~lack ~~construction~~of ~~contracts~~revolver ~~as further~~borrowings ~~described~~in ~~below,~~the ~~also~~first ~~contributed~~fiscal toquarter ~~the~~of ~~change~~2010.

~~Selling,~~Income ~~general~~tax ~~and~~expense ~~administrative~~— ~~expenses~~Our ~~(“SG&A”)~~effective —tax ~~SG&A~~rate ~~primarily~~decreased ~~relates~~ to ~~functions such as management, legal, finance, accounting, contracts and administration, human resources, management information systems, purchasing and business development~~32.3% ~~SG&A~~ for the ~~three~~fiscal ~~and~~quarter ~~nine months~~ ended ~~January~~ July 23, 2009 ~~decreased~~from $233.~~5 million, or 8.6~~3%, ~~and~~for ~~increased $0.4 million, or 0.5%, respectively, compared with~~ the ~~three~~fiscal ~~and~~quarter ~~nine months~~ ended ~~December~~July 284, ~~2007~~2008. ~~SG&A~~Our ~~for~~effective ~~the~~tax ~~three months~~rate ~~ended January 2, 2009 decreased primarily as a result of lean infrastructure initiatives~~was ~~focused~~impacted onby ~~controlling SG&A costs. SG&A for~~ the ~~nine~~tax ~~months~~treatment ~~ended January 2, 2009 increased as a result~~ of ~~growth in~~ our ~~underlying~~GLS ~~business, various initiatives to improve organizational capability~~ and ~~compliance,~~DIFZ ~~systems~~joint ~~improvements and severance costs~~ventures, ~~offset in part by implementing lean infrastructure initiatives~~ which ~~controlled~~are ~~SG&A~~not ~~growth~~consolidated ~~relative to revenue growth during the~~for ~~nine~~tax ~~months~~purposes ~~ended~~but ~~January 2,~~are ~~2009.~~instead ~~SG&A~~taxed as a ~~percentage~~partnership ofunder ~~revenue decreased to 3.3% and 3.5% for~~ the ~~three~~Internal ~~and~~Revenue ~~nine months ended January 2, 2009, respectively, compared to 5~~Code.~~5% and 5.1% for the~~ ~~respective three and nine month periods ended December 28, 2007.~~

Interest expense — Interest expense for the three and nine months ended January 2, 2009 increased by $1.3 million, or 9.0%, and $2.2 million, or 5.2%, respectively, as compared with the three and nine months ended December 28, 2007. The interest expense incurred relates to our Credit Facility, senior subordinated notes and amortization of deferred financing fees. The increase in interest expense is primarily due to a higher average outstanding debt balance and higher average interest rates as a result of our new debt financing. In addition to the change in interest expense, deferred financing fees associated with our prior debt were also written-off as further discussed in Note 5. The impact of this write-off is separately disclosed in our consolidated statements of income.

Income tax expense — Our effective tax rate of 31.1% and 31.4% for the three and nine months ended January 2, 2009, respectively, decreased from 36.8% and 36.5% for the respective three and nine months ended December 28, 2007. Our effective tax rate was impacted by the tax treatment of our GLS and DIFZ joint ventures which are not consolidated for tax purposes but rather are taxed as partnerships under the Internal Revenue Code.

Impact of our Afghanistan Construction Contracts

For the three and nine months ended January 2, 2009, revenue from our Afghanistan construction contracts was $15.5 million and $59.9 million, respectively. There was $0.2 million of revenue from Afghanistan construction contracts for the three and nine months ended December 28, 2007. Our remaining revenue through completion of these contracts in our third quarter of fiscal year 2010 is expected to be approximately $125 million.

As discussed in “Current Operating Conditions and Outlook — Current Events” above, our construction business encountered operational difficulties starting in the second quarter of fiscal year 2009, which resulted in higher non-reimbursable delivery costs and contractual milestone delays. As a result, a contract loss reserve and associated provision, specific to a large fixed price type construction contract in Afghanistan, were estimated and recorded during the second quarter of fiscal year 2009 which totaled $18.4 million. During the third quarter of fiscal year 2009, we continued to encounter challenges despite significant progress and improvements on this construction project. Based on our assessment of the current status of this project and considering the current security environment in Afghanistan, an additional contract loss of $2.1 million was recorded in the third quarter of fiscal year 2009. Utilization of the contract loss reserve through January 2, 2009 was $10.4 million.

The recording of the additional loss also triggered an interim assessment of goodwill for potential impairment, as further discussed in Note 3 to our financial statements. As a result of this assessment, we concluded that no goodwill impairment had occurred.

Additionally, revisions were made to the estimated margins on all other fixed priced Afghanistan construction contracts within the OMCM strategic business unit, resulting in a reduction to gross profit of $6.1 million during the second quarter of fiscal year 2009. No further adjustments were made during the third quarter of fiscal year 2009. These fixed price Afghanistan construction contracts are expected to operate with margins at or approaching zero over their remaining contract terms.

The contract loss provision and revisions to estimated margins are based on the best information currently available. Although we believe that these amounts have been estimated appropriately, there can be no assurance that future events will not require us to revise these estimates.

Results by Segment

The following table sets forth the revenue and operating income for our ~~ISS~~GSDS, ~~LCM~~GPSS and ~~MTSS~~GLS operating segments, both in dollars and as a percentage of our consolidated revenue ~~for segment revenue~~ and ~~as a percentage of our consolidated~~ operating ~~income for segment specific operating~~ income, for the ~~three~~fiscal ~~and~~quarter ~~nine months~~ ended ~~January~~July 23, 2009 as compared to the fiscal ~~three~~quarter ~~and nine months~~ ended ~~December~~July 284, ~~2007~~ 2008.

Three Months Ended January 2, 2009 Compared to Three Months Ended December 28, 2007


	For the Fiscal Quarter Ended
(Dollars in thousands)	July 3, 2009					July 4, 2008
Revenue
Global Stabilization and Development Solutions	$	284,085		36.2	%	$	269,554		37.6	%
Global Platform Support Solutions		303,648		38.6	%		329,736		46.0	%
Global Linguist Solutions		198,354		25.3	%		118,422		16.5	%
Other/elimination		(910	)	(0.1	%)		(918	)	(0.1	%)


Consolidated	$	785,177		100.0	%	$	716,794		100.0	%


Operating Income
Global Stabilization and Development Solutions	$	15,874		30.2	%	$	22,971		57.4	%
Global Platform Support Solutions		25,910		49.4	%		15,742		39.4	%
Global Linguist Solutions		10,717		20.4	%		1,281		3.2	%


Consolidated	$	52,501		100.0	%	$	39,994		100.0	%

	Three Months Ended
(Amounts in thousands)	January 2, 2009					December 28, 2007
Revenue
International Security Services	$	465,757		58.8	%	$	265,722	50.8	%
Logistics and Construction Management		90,423		11.4	%		73,064	14.0	%
Maintenance and Technical Support Services		237,842		30.0	%		184,285	35.2	%
Other/elimination		(1,695	)	-0.2	%		—	0.0	%
Consolidated	$	792,327		100.0	%	$	523,071	100.0	%
Operating Income & Margin
International Security Services	$	33,167		7.1	%	$	20,576	7.7	%
Logistics and Construction Management		536		0.6	%		5,016	6.9	%
Maintenance and Technical Support Services		17,880		7.5	%		5,233	2.8	%
Consolidated	$	51,583		6.5	%	$	30,825	5.9	%

Global Stabilization and Development Solutions

~~International~~Revenue ~~Security~~— ~~Services~~Revenue of $284.1 million for the fiscal quarter ended July 3, 2009 increased $14.5 million, or 5.4%, as compared with the fiscal quarter ended July 4, 2008. The increase was primarily the result of the following:

~~Revenue~~Security —& Training: Revenue ~~for~~of ~~the three months ended January~~$190.3 2,million ~~2009~~ increased $~~200~~14.0 million, or 75 7.39%, asprimarily ~~compared~~due to ~~with~~new ~~the~~contracts ~~three~~for ~~months~~WPPS ~~ended~~in ~~December 28,~~Pakistan ~~2007~~and the Multinational Security Transition Command-Iraq (“MNSTC-I”). ~~The~~Revenue ~~increase~~from our CivPol programs declined slightly, primarily ~~resulted~~due to changes in contract type from firm fixed price to cost reimbursable in Afghanistan offset by additional revenue from increased service levels in Iraq. Although our current CivPol contract is set to expire in February 2010, we believe that we will retain either all or a large portion of the services ~~following:~~under this contract upon its renewal.

~~Law~~Contingency ~~Enforcement~~Support and ~~Security~~Operations: Revenue of $74.9 million increased $1326.27 million, or 855.24%, primarily due to increases infrom ~~our~~the ~~security~~Kuwait ~~services~~task inorders ~~Iraq,~~on ~~Palestine,~~our ~~Liberia,~~LOGCAP ~~Haiti~~IV ~~and~~program. ~~Qatar,~~We ~~offset~~expect ~~by a~~future ~~decline~~growth in ~~security~~this ~~services~~service inoffering ~~Afghanistan.~~to ~~Revenue~~be ~~from our civilian police services in Iraq increased $16.4 million~~ primarily ~~due~~driven toby ~~higher~~the ~~personnel~~recently ~~levels.~~awarded AsAfghanistan ~~a result of new contracts~~South ~~started~~task inorder ~~early~~on ~~fiscal~~our ~~year~~LOGCAP ~~2009,~~IV weprogram ~~provided~~that ~~civilian~~carries ~~police~~annual ~~and~~revenue ~~security~~potential ~~services~~of inapproximately ~~Palestine, Haiti and Liberia, which contributed~~ $~~6.2~~ 643 million~~, $1~~.~~1 million~~ ~~and~~Although ~~$0.8 million,~~we ~~respectively,~~have ~~in increased~~started ~~revenue~~work ~~for~~on ~~the~~this ~~period. These increases were offset by a decline in Afghanistan~~program, ~~which was~~due ato ~~result~~the ~~primarily~~timing of athe ~~shift~~award ~~from~~and transition aperiod, ~~fixed~~we ~~price~~do ~~contract~~not ~~structure~~expect ~~in fiscal year 2008~~ to ~~a cost~~achieve ~~reimbursable contract structure~~ in fiscal year ~~2009.~~2010 ~~Revenue also was impacted by fewer supplies and equipment sales to~~ the ~~customer~~full infiscal ~~Afghanistan~~year ~~during the three months ended January~~revenue 2,implied ~~2009~~by ~~as compared to~~ the ~~three~~annual ~~months~~revenue ~~ended December 28, 2007~~potential.

3835

~~Specialty Aviation and Counter-drug Operations~~Infrastructure: Revenue of $18.9 million decreased by $1026.62 million, or 1058.30%, primarily due to the wind down of a large construction project in Afghanistan combined with the termination of an ~~decline~~airport construction contract in ~~our~~Africa, ~~International~~which ~~Narcotics~~occurred ~~Law~~in ~~Enforcement~~the ~~programs~~first ~~resulting~~quarter ~~from~~of ~~scope~~fiscal year 2009. ~~reductions,~~These declines were offset in part by ~~new~~increases from two separate Afghanistan construction projects that have commenced since the first quarter of fiscal year 2009. We do not expect to bid on any similar fixed-price contracts ~~associated~~without ~~with~~revised ~~security~~terms and ~~drug~~conditions. ~~eradication~~This ~~training~~may inimpact future revenue ~~Afghanistan~~in this segment by limiting the construction opportunities available to us.

~~Global~~Operating ~~Linguist~~Income ~~Solutions:~~— ~~Revenue~~Operating ~~was~~income of $~~199~~15.09 million for the ~~INSCOM~~fiscal ~~contract~~quarter ~~through~~ended ~~our GLS~~July 3, ~~joint~~2009 ~~venture~~decreased $7.1 million, ~~which~~or ~~began~~30.9%, inas compared with the ~~fourth~~fiscal quarter ofended ~~fiscal~~July 4, ~~year~~ 2008. Operating ~~Revenue~~income ~~also~~did ~~benefited~~not increase proportionally with the growth in revenue due to lower margins stemming from a shift on our CivPol task orders from fixed price to cost reimbursable in both Afghanistan and Iraq and the ~~recognition~~ramp ofup costs incurred on the ~~GLS~~recently ~~award~~awarded ~~fee~~LOGCAP IV Afghanistan South task order. Also contributing to the decline was additional loss reserves of $73.82 million ~~for~~on our Afghanistan construction contracts recorded during the fiscal quarter. ~~The~~combined ~~award~~with ~~fee~~the isimpact ~~based~~of ~~on achieving~~the ~~specific~~termination of an airport construction contract ~~performance~~in ~~criteria~~Africa, ~~such~~which asoccurred ~~operational~~at ~~fill~~the ~~rates~~end of the first quarter of fiscal year 2009. ~~Based~~This was partially offset by increases in services on both our ~~contract~~ ~~performance~~WPPS ~~history~~programs toin ~~date,~~Iraq weand ~~anticipate~~Pakistan and our MNSTC-I program and increases in the ~~ability~~Somalia totask ~~accrue~~order ~~award~~on ~~fees~~our ~~through~~Africa ~~the~~Peacekeeping Program ~~remaining~~resulting ~~life~~from ofscope ~~the~~increases ~~contract~~in both services and equipment sales coupled with a higher fee structure.

~~Operating~~Global ~~Income~~Platform —Support ~~Operating income for the three months ended January 2, 2009 increased $12.6~~Solutions ~~million, or 61.2%, as compared with the three months ended December 28, 2007. The increase primarily resulted from the following:~~

~~Law~~Revenue ~~Enforcement~~— ~~and~~Revenue ~~Security:~~of ~~Operating~~$303.6 million ~~income~~for the fiscal quarter ended July 3, 2009 decreased $626.30 million, or 227.69%, ~~due~~as ~~to declining~~compared ~~margins,~~with ~~primarily~~the infiscal ~~our~~quarter ~~Civilian~~ended ~~Police~~July 4, ~~services~~2008. ~~This~~The decrease ~~margin~~primarily ~~decline~~ resulted from ~~a shift in portions of our task orders for these services from fixed price type in~~ the ~~prior fiscal year~~following: ~~to cost reimbursable in the current fiscal year.~~

~~Specialty~~ Aviation ~~and Counter-drug Operations~~: ~~Operating~~Revenue ~~income~~of ~~increased~~ $0265.3 million decreased $34.7 million, or 11.6%, for the fiscal quarter ended July 3., 2009, as compared to the fiscal quarter ended July 4%, 2008. The decrease was primarily ~~due~~driven toby ~~higher~~declines ~~margins~~in onINL ~~several~~Air ~~new~~Wing ~~security~~of $31.7 million and ~~drug~~FSO ~~eradication~~of ~~training~~$17.1 million. The revenue ~~contracts~~decline in INL Air Wing revenue was driven by non-recurring equipment sales and construction work in both Camp Alvarado and Camp Valdes in Afghanistan performed in fiscal year 2009. FSO revenue declined due to the loss of several CFT task orders, which was a result of additional competitors in this service space. While this is putting downward pressure on fiscal year 2010 revenue, we do not believe this will limit our long term opportunities under the CFT program. These declines were partially offset by ~~lower~~additional ~~revenue~~services ~~for~~including a new task order as a subcontractor to provide aircraft maintenance to support the ~~fiscal~~Afghanistan ~~quarter~~air force through our Counter Narcotics Technical Program Office (“CNTPO”) program. We also expect continued growth driven by a recent WPPS task order win to provide aircraft maintenance and air transportation services.

~~Global~~Land ~~Linguist Solutions~~Systems: ~~Operating~~Revenue ~~income~~of ~~was~~$38.3 million increased $108.48 million, ~~for~~or ~~GLS~~29.7%, for the ~~three months~~fiscal quarter ended ~~January~~July 23, 2009~~. Operating income benefited from GLS revenue~~, ~~including~~as ~~the~~compared ~~accrual~~to of the ~~GLS~~ ~~award~~fiscal ~~fee~~quarter ofended ~~$7.8~~July ~~million~~4, ~~which~~2008, ~~represents~~primarily ~~the~~due ~~award~~to increased ~~earned~~services orassociated ~~accrued~~with ~~during~~ the ~~quarter~~MRAP contract. ~~The award~~This ~~fee~~was ispartially ~~based~~offset onby ~~achieving~~decreases ~~specific~~in services ~~contract~~provided ~~performance~~under ~~criteria,~~our ~~such~~General asMaintenance ~~operational~~Corps ~~fill rates~~(“GMC”) program.

~~General~~Operating ~~SG&A~~Income ~~Factors:~~— ~~SG&A~~Operating ~~expense~~income ~~declined~~ for the ~~three~~fiscal ~~months~~quarter ended ~~January~~July 23, 2009 increased $10.2 million, or 64.6%, as compared towith the ~~three~~fiscal ~~months~~quarter ended ~~December~~July 284, ~~2007~~2008. The ~~decline~~increase inwas primarily ~~SG&A~~driven ~~expense~~by inbetter ~~the~~cost ~~current period~~management asin ~~compared~~several tokey ~~the~~Aviation ~~prior~~programs ~~period,~~as ~~was~~well ~~primarily~~as agrowth ~~result~~from new ofcontracts ~~improved~~and ~~SG&A~~task ~~cost~~orders ~~management during~~within ~~the~~that ~~current~~service ~~period~~offering. ~~This~~Increased ~~SG&A~~services ~~decline~~under ~~contributed~~our ~~positively~~MRAP program toalso ~~operating~~contributed ~~income~~to ~~growth for~~ the ~~fiscal quarter~~increase.

~~Logistics~~Global ~~and~~Linguist ~~Construction Management~~Solutions

Revenue —of ~~Revenue~~$198.4 million increased $79.9 million, or 67.5%, for the ~~three~~fiscal ~~months~~quarter ended ~~January 2~~July 3, 2009, ~~increased~~as ~~$17.~~compared to the fiscal quarter ended July 4, 2008. This increase was primarily due to the fact that the INSCOM contract was fully operational throughout the quarter ended July ~~million~~3, or2009, ~~23.8%~~whereas INSCOM was ramping up in the quarter ended July 4, as2008. ~~compared~~Revenue ~~with~~was also impacted by the recognition ~~three~~of ~~months~~the INSCOM award fee in the quarter ended ~~December~~July 283, ~~2007~~2009. ~~The~~No ~~increase~~award ~~primarily~~fee ~~resulted from~~was recorded in the ~~following:~~first quarter ended July 4, 2008 as there was not sufficient history at that time to support award fee revenue recognition.

~~Contingency and Logistics Operations: Revenue increased by $1.0 million, or 2.2%, primarily~~36 due to the expansion of operations services in the Philippines, which increased $9.7 million. Revenue also benefited from our continued support services, primarily through providing temporary housing in response to the severe flooding in Iowa during the summer of 2008 and increased services provided in Sudan. These increases were offset by a decline in our Africa Peacekeeping program, primarily a result of reductions in current work levels within this program.

Operations Maintenance and Construction Management: Revenue increased $15.2 million, or 56.3%, primarily due to continued progress on our Afghanistan construction projects and contract closeout activities for a construction project in Nigeria. As discussed above in “—Results of Operations—Consolidated—Impact of our Afghanistan Construction Contracts,” due to significant challenges on several Afghanistan construction contracts resulting partly from the deteriorating security situation in that country, we do not expect to bid on any similar fixed-price contracts without revised terms and conditions. This may impact future revenue in this segment by limiting the construction opportunities available to us.

Operating ~~Income~~income —of ~~Operating~~$10.7 million ~~income~~increased $9.4 million for the ~~three~~fiscal ~~months~~quarter ended ~~January~~July 23, 2009, ~~decreased~~as $compared to the fiscal quarter ended July 4, 2008.5 This is primarily due to the fact that ~~million,~~the orINSCOM ~~89.~~contract was fully operational throughout the quarter ended July 3%, as2009, ~~compared~~whereas ~~with~~GLS was ramping up in the ~~three~~quarter ~~months~~ended July 4, 2008. Operating income was also significantly impacted by the inclusion of the award fee in the quarter ended ~~December~~July 283, ~~2007~~2009. ~~The~~Operating ~~decrease~~income earned by ~~primarily~~GLS ~~resulted~~benefits net income attributable to DynCorp International LLC only by our 51% ownership portion, as 49% of earnings from the ~~following:~~joint venture are reflected in noncontrolling interests as a reduction to net income attributable to DynCorp International LLC

Contingency and Logistics Operations: Operating income decreased by $0.9 million, or 35.7%, for the three months ended January 2, 2009, as compared to the three months ended December 28, 2007. The decrease was primarily driven by higher costs in the current quarter related to the ramp-up of our new LOGCAP IV contract, which was awarded in early fiscal year 2009. Currently, LOGCAP IV does not contribute significantly to revenue but incurs costs associated with contract set-up and other overhead costs. Additionally, several programs which contributed positively to revenue growth in the quarter did not contribute to operating income since we have not yet recognized award fees. We anticipate an increase in operating income associated with these projects once we have completed portions of the projects and recognize award fees as revenue in accordance with our policies.

Operations Maintenance and Construction Management: Operating income increased by $0.2 million, or 21.2%, for the three months ended January 2, 2009, as compared to the three months ended December 28, 2007, primarily due to contract closeout activities for a construction project in Nigeria. Partially offsetting the increase was the additional contract loss provision associated with a specific construction project in Afghanistan, as discussed above in “—Results of Operations—Consolidated—Impact of our Afghanistan Construction Contracts.”

Maintenance and Technical Support Services

Revenue — Revenue for the three months ended January 2, 2009 increased $53.6 million, or 29.1%, as compared with the three months ended December 28, 2007. The increase primarily resulted from the following:

Contract Logistics Support: Revenue increased $18.8 million, or 36.7%, primarily due to higher deliveries of support equipment associated with our C-21 and Life Cycle Contractor Support (“LCCS”) programs. This increase is primarily due to scope increases from the U.S. government for spending related to the global war on terror.

Field Service Operations: Revenue increased $12.6 million, or 15.7%, primarily due to a new contract for logistics services at Fort Campbell, which started in May 2008, and additional revenue from higher personnel levels in our CFT program.

Aviation and Maintenance Services: Revenue increased $22.0 million, or 41.4%, primarily due to increased work associated with MRAP vehicles and increased revenue associated with our General Maintenance Corps contract. These increases were offset by a decline in our marine services and a decrease in threat management systems work.

Operating Income — Operating income for the three months ended January 2, 2009 increased $12.6 million, to $17.9 million, as compared to $5.2 million for the three months ended December 28, 2007. The increase primarily resulted from the following:

Contract Logistics Support: Operating income for the three months ended January 2, 2009 increased by $4.2 million, to $4.8 million, as compared to operating income of $0.6 million for the three months ended December 28, 2007. The positive results were primarily due to improved project management in several key programs.

Field Service Operations: Operating income increased $0.5 million, or 10.4%, for the three months ended January 2, 2009, as compared to the three months ended December 28, 2007, driven primarily by increased revenue.

Aviation and Maintenance Services: Operating income increased $8.6 million, or 193.6%, for the three months ended January 2, 2009, as compared to the three months ended December 28, 2007, primarily due to increased revenue in key high-margin service areas such as our MRAP program.

Nine Months Ended January 2, 2009 Compared to Nine Months Ended December 28, 2007

	Nine Months Ended
(Amounts in thousands)	January 2, 2009					December 28, 2007
Revenue
International Security Services	$	1,343,467		58.7	%	$	825,134	52.7	%
Logistics and Construction Management		269,351		11.8	%		183,815	11.7	%
Maintenance and Technical Support Services		679,449		29.7	%		557,904	35.6	%
Other/elimination		(3,995	)	-0.2	%		—	0.0	%
Consolidated	$	2,288,272		100.0	%	$	1,566,853	100.0	%
Operating Income & Margin
International Security Services	$	108,545		8.0	%	$	78,069	9.5	%
Logistics and Construction Management		(16,451	)	(6.1	)%		4,674	2.5	%
Maintenance and Technical Support Services		46,116		6.8	%		14,231	2.6	%
Consolidated	$	138,210		6.0	%	$	96,974	6.2	%

International Security Services

Revenue — Revenue for the nine months ended January 2, 2009 increased $518.3 million, or 62.8%, as compared with the nine months ended December 28, 2007. The increase primarily resulted from the following:

Law Enforcement and Security: Revenue increased $8.9 million, or 1.7%, primarily due to increases in our security services in Iraq, Palestine, Liberia, Haiti and Qatar, offset by a decline in Afghanistan. Revenue from our civilian police services in Iraq increased $7.5 million primarily due to higher personnel levels offset by non-recurring revenue from fiscal year 2008 related to transition of our operations from leased facilities to customer furnished facilities in May 2007. Revenue also increased $19.7 million under our Palestinian security sector program for which we provide equipment and supplies in addition to security services. We benefited from new contracts started in early fiscal year 2009, through which we provide civilian police and security services in Liberia, Haiti and Qatar. These contracts contributed $3.0 million, $2.8 million and $2.4 million, respectively, in increased revenue for the period. These increases were offset by the decline in Afghanistan which was a result primarily from non-recurring revenue recognized in the prior year associated with our construction of a camp facility, completed in August 2007. Also contributing to the revenue decline in Afghanistan was the shift in contract structure specific to our services providing supplies and equipment, from a fixed price contract structure in fiscal year 2008 to a cost reimbursable contract structure in fiscal year 2009. The impact of the change in contract structure was further amplified by a reduction in the volume of supplies and equipment provided to customers in Afghanistan during the nine months ended January 2, 2009 as compared to the nine months ended December 28, 2007.

Specialty Aviation and Counter-drug Operations: Revenue decreased $7.1 million, or 2.3%, primarily due to declines in our International Narcotics Law Enforcement programs as a result of program scope reductions offset by new contracts associated with security and drug eradication training in Afghanistan.

Global Linguist Solutions: Revenue was $518.7 million for the INSCOM contract, which we perform through our GLS joint venture. Revenue also benefited from the recognition of the GLS award fee of $22.2 million, which represents the award earned or accrued since the contract’s inception. The award fee is based on achieving specific contract performance criteria, such as operational fill rates.

Operating Income — Operating income for the nine months ended January 2, 2009 increased $30.5 million, or 39.0%, as compared with the nine months ended December 28, 2007. The increase primarily resulted from the following:

Law Enforcement and Security: Operating income decreased $23.9 million, or 23.9%, primarily due to declining margins in our civilian police services. This margin decline resulted from a shift in portions of our task orders for supplies and equipment related to these services from primarily fixed price type in the prior period to cost reimbursable type contracts in the current period.

Specialty Aviation and Counter-drug Operations: Operating income increased $10.3 million, or 59.0%, primarily due to higher margins on several new security and drug eradication training contracts in Afghanistan.

Global Linguist Solutions: Operating income was $29.4 million for GLS for the nine months ended January 2, 2009. Operating income benefited from GLS revenue, including the accrual of the GLS award fee of $22.2 million, which represents the award earned or accrued since the contract’s inception. The award fee is based on achieving specific contract performance criteria, such as operational fill rates.

General SG&A Factors: SG&A expense declined for the nine months ended January 2, 2009, as compared to the nine months ended December 28, 2007. The decline in SG&A expense in the current period as compared to the prior period, was principally a result of prior period proposal costs associated with the INSCOM contract combined with improved SG&A cost management during the current period. This SG&A decline contributed positively to operating income growth for the fiscal quarter.

Logistics and Construction Management

Revenue — Revenue for the nine months ended January 2, 2009 increased $85.5 million, or 46.5%, as compared with the nine months ended December 28, 2007. The increase primarily resulted from the following:

Contingency and Logistics Operations: Revenue increased by $23.9 million, or 24.8%, for the nine months ended January 2, 2009, as compared to the nine months ended December 28, 2007. This increase was primarily due to the expansion of operations services in the Philippines, which increased $14.9 million. Revenue also benefited from an increase in our support services, primarily through providing temporary housing in response to the severe flooding in Iowa during the summer of 2008, adding $12.0 million in additional revenue as compared to the prior period. These increases were primarily offset by a decline in our Africa Peacekeeping program, primarily a result of reductions in current work levels within this program.

Operations Maintenance and Construction Management: Revenue increased $59.7 million, or 68.3%, for the nine months ended January 2, 2009, as compared to the nine months ended December 28, 2007, primarily due to our construction projects in Africa and Afghanistan. As discussed above in “—Results of Operations—Consolidated—Impact of our Afghanistan Construction Contracts,” due to significant challenges on several Afghanistan construction contracts resulting partly from the deteriorating security situation in that country, we do not expect to bid on any similar fixed-price contracts without revised terms and conditions. This strategic decision may impact future revenue in this segment by limiting the construction opportunities available to us.

Operating Income — Operating income decreased $21.1 million, to an operating loss of $16.5 million, for the nine months ended January 2, 2009, as compared to operating income of $4.7 million for the nine months ended December 28, 2007. The decrease primarily resulted from the following:

Contingency and Logistics Operations: Operating income decreased $1.4 million, or 19.9%, for the nine months ended January 2, 2009, as compared to the nine months ended December 28, 2007. We experienced higher costs in the current period related to the ramp-up of our new LOGCAP IV contract which was awarded in early fiscal year 2009. Currently, LOGCAP IV incurs costs associated with contract set-up and other overhead costs without a significant revenue contribution.

Operations Maintenance and Construction Management: Operating loss was $16.3 million for the nine months ended January 2, 2009, as compared to operating income of $1.7 million for the nine months ended December 28, 2007. As discussed above in “—Results of Operations—Consolidated—Impact of our Afghanistan Construction Contracts,” the operating loss in the current period was the result of a contract loss provision associated with a specific construction project in Afghanistan and adjustment to our estimated margins on several other Afghanistan construction projects.

Maintenance and Technical Support Services

Revenue — Revenue for the nine months ended January 2, 2009 increased $121.5 million, or 21.8%, as compared with the nine months ended December 28, 2007. The increase primarily resulted from the following:

Contract Logistics Support: Revenue increased $35.6 million, or 23.5%, primarily due to higher deliveries of support equipment associated with our C-21 and LCCS programs. This increase is primarily due to scope increases from the U.S. government for spending related to the global war on terror.

Field Service Operations: Revenue increased $27.6 million, or 11.1%, for the nine months ended January 2, 2009, as compared to the nine months ended December 28, 2007, primarily due to a new contract for logistics services at Fort Campbell which started in May 2008 and additional revenue from higher personnel levels in our CFT program.

Aviation and Maintenance Services: Revenue increased $56.8 million, or 36.0%, for the nine months ended January 2, 2009, as compared to the nine months ended December 28, 2007, primarily due to increased work associated with MRAP vehicles and increased revenue associated with our General Maintenance Corps contract. These increases were partially offset by declines in our marine services, Columbus Air Force Base support services and in our threat management systems work.

Operating Income — Operating income for the nine months ended January 2, 2009 increased $31.9 million, to $46.1 million, as compared to $14.2 million for the nine months ended December 28, 2007. The increase primarily resulted from the following:

Contract Logistics Support: Operating income for the nine months ended January 2, 2009 increased by $8.0 million, to $7.2 million as compared to a $0.7 loss for the nine months ended December 28, 2007. The positive results were primarily due to improved project management in several key programs.

Field Service Operations: Operating income increased $2.5 million, or 16.1%, for the nine months ended January 2, 2009, as compared to the nine months ended December 28, 2007, primarily due to increased revenue.

Aviation and Maintenance Services: Operating income increased $23.9 million, or 220.2%, for the nine months ended January 2, 2009, as compared to the nine months ended December 28, 2007, primarily due to increased revenue and improved margins in our MRAP program.

LIQUIDITY AND CAPITAL RESOURCES

Cash generated by operations and borrowings available under our ~~Revolving~~credit ~~Facility~~facility are our primary sources of short-term liquidity. Based on our current level of operations, we believe our cash flow from operations and our available borrowings under our ~~Revolving~~credit ~~Facility~~facility will be ~~adequate~~ adequate to meet our liquidity needs for ~~at least~~ the ~~next~~foreseeable ~~twelve months~~future. However, we cannot ~~assure you~~be assured that our business will generate sufficient cash flow from operations, or that future borrowings will be available to us under our ~~Revolving~~credit ~~Facility~~facility in an amount sufficient to enable us to repay ~~our~~ our indebtedness, including the senior subordinated notes, or to fund our other liquidity needs.

WeTo ~~are~~support ~~required,~~growth ~~under~~related ~~certain~~to ~~circumstances~~potential ascontract ~~defined~~and intask ~~our~~order ~~Credit~~awards ~~Facility,~~that tocould ~~use~~occur aover ~~percentage~~the remainder of ~~cash~~the ~~generated~~fiscal ~~from~~year ~~operations~~and to ~~reduce~~service ~~the outstanding principal of~~ our ~~Term Loan.~~current ~~The actual amount of the required repayment if any~~indebtedness, inwe ~~respect~~may torequire ~~fiscal year 2009, could~~additional ~~vary~~capital ~~significantly~~beyond ~~based~~that oncurrently ~~such~~provided ~~factors~~from asoperations ~~the~~and ~~timing~~by ofour ~~cash~~senior ~~receipts~~secured ~~and~~credit ~~cash payments near~~facility. ~~fiscal~~There ~~year~~can ~~end.~~be ~~Because~~no ofassurance ~~this,~~that wesufficient ~~cannot~~capital ~~make~~will acontinue ~~reasonable estimate~~to ofbe ~~our~~available ~~required repayment if any,~~ in ~~respect to fiscal year 2009. In~~ the ~~event~~future ~~a repayment~~or isthat ~~required~~it towill be ~~made,~~available ~~which~~on ~~would~~terms beacceptable ~~paid~~to ~~during~~us. ~~our~~Failure ~~first~~to ~~quarter~~obtain ofsufficient ~~fiscal~~capital ~~year 2010, we~~could ~~anticipate~~materially ~~utilizing~~affect ~~borrowings under~~ our ~~Revolving~~future ~~Facility~~expansion ~~to make sure payment~~strategies.

We expect that our improved cash collection efforts achieved in fiscal year 2009, evidenced by our reduced days sales outstanding, will be sustainable in fiscal year 2010 and will help facilitate sufficient cash flow from operations to fund our expected growth. We expect significant investment requirements from three new activities during the remainder of fiscal year 2010: (i) the expansion of the LOGCAP IV contract, (ii) a significant fixed asset purchase, and (iii) the potential for one or more acquisitions.

Our recent win of a new LOGCAP IV task order in southern Afghanistan and the potential to win additional sizeable task orders later this fiscal year will produce demands for liquidity to fund growth on this program. We expect cash contributions from our LOGCAP IV collaborative partners and timely cash collections on the project to support the liquidity needed on this program. During the second quarter, we will utilize cash on hand to purchase $52 million of helicopters in order to support the requirements on a new task order received during the fiscal year. While we do not typically invest capital in fixed asset purchases due to the service nature of our operations, such a purchase may be necessary from time to time. Lastly, as part of our business strategy, we may invest in one or more business acquisitions from time to time. We expect to fund our fiscal year 2010 acquisitions from available borrowing capacity and cash on hand.

Cash Flow Analysis

The following table sets forth cash flow data for the periods indicated.


	Fiscal Quarter Ended
(Dollars in thousands)	July 3, 2009			July 4, 2008
Net Cash provided by (used in) operating activities	$	5,448		$	(71,131	)
Net Cash used in investing activities		(1,294	)		(1,451	)
Net Cash (used in) provided by financing activities		(45,083	)		20,703

	Nine Months Ended
(Amounts in thousands)	January 2, 2009			December 28, 2007
Net Cash provided by (used in) operating activities	$	70,195		$	(49,256	)
Net Cash (used in) investing activities		(22,070	)		(7,241	)
Net Cash provided by (used in) financing activities		17,076			(32,377	)

Cash provided by operating activities for the fiscal quarter ended July 3, 2009 was $5.4 million, as compared to $71.1 million of cash used in the fiscal quarter ended July 4, 2008. Cash generated from operations in the quarter ended July 3, 2009 benefited from the combination of our continued net income growth from new contracts and continued focus on working capital management. Net of revenue growth, our accounts receivable improved due to billing and collection efficiencies implemented during fiscal year 2009. As a result of these efforts, Days Sales Outstanding (“DSO”), a key metric utilized by management to monitor collection efforts on accounts receivable, decreased to 71 days for the quarter ended July 3, 2009 as compared to 82 days for the quarter ended July 4, 2008.

43Cash used in investing activities was $1.3 million for the fiscal quarter ended July 3, 2009 as compared to $1.5 million for the fiscal quarter ended July 4, 2008. The cash used was primarily for computer software upgrades and property and equipment additions.

Cash ~~provided~~used byin ~~operating~~financing activities was $45.1 million for the ~~nine~~fiscal ~~months~~quarter ended ~~January~~July 23, 2009 ~~was $70.2~~, ~~million~~ as compared to cash provided of $4920.37 million ~~cash used~~ for ~~operations for~~ the ~~nine~~fiscal ~~months~~quarter ended ~~December 28~~July 4, ~~2007~~2008. ~~Our~~The ~~positive operating~~ cash ~~flow for the period was primarily the result of higher cash~~ ~~generated~~used ~~from operations offset~~ by afinancing ~~reduction~~activities induring ~~cash~~the ~~from~~fiscal anquarter ~~increase~~ended inJuly 3, ~~our~~2009 ~~net working capital. Cash generated from operations benefited from our continued revenue growth from new contracts. The change in net working capital~~ was primarily due to ~~an increase in accounts~~the ~~receivable.~~excess ~~Net~~cash offlow ~~revenue~~principal ~~growth,~~repayment on our ~~accounts~~senior ~~receivable~~secured ~~actually~~credit ~~declined~~facility, ~~due to improved collection efforts implemented during~~ the ~~nine~~repurchases ~~months ended January 2, 2009. As a result~~ of ~~these efforts, days sales outstanding,~~ a ~~key metric utilized by~~ ~~management~~portion toof ~~monitor~~our ~~collection~~senior ~~efforts~~subordinated onnotes ~~accounts~~and ~~receivable,~~payments ~~decreased from 92 days as~~ of ~~December 28,~~ ~~2007~~noncontrolling tointerests ~~69 days as of January 2, 2009~~dividends.

Cash used in investing activities was $22.1 million for the nine months ended January 2, 2009 as compared to $7.2 million for the nine months ended December 28, 2007. This use of cash from investing activities was primarily a result of changes in our cash restricted as collateral on letters of credit of $15.2 million. Additionally, the combination of PP&E and software purchases used approximately $5.0 million for the nine months ended January 2, 2009.

Cash provided by financing activities was $17.1 million for the nine months ended January 2, 2009, as compared to cash used of $32.4 million for the nine months ended December 28, 2007. The cash provided by financing activities during the period was primarily from the $12.8 million net effect of extinguishing debt and issuing new debt discussed below as well as in Note 5 of our financial statements. This also included the $4.3 million in cash provided from net borrowings to finance insurance policies. Cash used of $32.4 in financing activities for the nine months ended December 28, 2007 was due primarily to repayments of principal on debt.

Financing

~~Our~~As ~~Credit Facility consists~~ of ~~a revolving credit facility of $200.0~~July ~~million~~3, ~~(including~~2009, ~~a letter~~no ofbalance ~~credit~~was ~~sub~~outstanding ~~facility~~under ~~of $125.0 million) (~~the “Revolving Facility”), and ~~a term loan facility of~~ $~~200~~176.0 6 million (was outstanding under the “Term Loan Facility”). WeOur ~~have~~available ~~borrowed~~borrowing ~~$200.0 million~~capacity under the ~~Term~~Revolving ~~Loan~~ Facility attotaled ~~the~~$170.5 million ~~LIBOR~~at ~~rate~~July 3, ~~plus~~2009, ~~the~~which ~~applicable~~gives ~~margin then in~~ effect, ~~see~~to ~~“Quantitative~~$29.5 million of ~~and~~outstanding ~~Qualitative~~letters ~~Disclosures~~of ~~About~~credit. ~~Market~~The ~~Risk~~weighted-average —interest ~~Interest~~rate ~~Rate~~at ~~Risk.”~~July 3, ~~The~~2009 ~~maturity~~for ~~date~~our borrowings ofunder the ~~Revolving~~ ~~Facility~~credit ~~and~~facility was 3.66% excluding the ~~Term~~impact ~~Loan~~of ~~Facility~~our isinterest ~~August 15,~~rate ~~2012~~swaps.

AsWe ofhave ~~January 2,~~entered ~~2009,~~into nointerest ~~balance~~rate ~~was~~swap ~~outstanding~~agreements ~~under~~to ~~the~~hedge ~~Revolving~~our ~~Facility,~~exposure ~~and~~to ~~$200.0 million~~interest ~~was outstanding under the Term Loan Facility. Our available borrowing capacity under the~~rate ~~Revolving~~increases ~~Facility~~related ~~totaled $185.8 million at January 2, 2009, which gives effect~~ to ~~$14.2 million of~~our ~~outstanding letters of~~ credit facility. WeThese ~~have~~agreements ~~entered~~are ~~into~~more ~~interest~~fully ~~rate~~described ~~swap~~in ~~agreements~~Note to7 ~~hedge our~~to ~~exposure~~our toconsolidated ~~interest~~financial ~~rate~~statements ~~increases~~included onin athis ~~notional~~Quarterly ~~principal amount of $200~~Report.~~0 million.~~

AsWe ofare ~~January 2~~required, ~~2009~~under certain circumstances as defined in our credit agreement, ~~$415.9 million~~to use a percentage of excess cash generated from operations to reduce the outstanding principal ~~amount~~of the term loans in the following year. Such payments are due near the end of ~~senior~~the ~~subordinated~~first ~~notes~~quarter ~~was~~of the ~~outstanding,~~following ~~net~~fiscal ofyear. aWe paid $123.14 million ~~unamortized~~in ~~discount~~June 2009 to satisfy our fiscal year 2009 requirement. ~~Our~~The ~~senior~~excess ~~subordinated~~cash ~~notes~~flow ~~mature~~measurement is an annual requirement of the credit agreement and, ~~during~~as ~~February 2013.~~a ~~Interest~~result, onwe cannot estimate with certainty the ~~senior~~excess ~~subordinated~~cash ~~notes~~flow isthat ~~payable~~will ~~semi-annually~~be generated, if any, for the fiscal year ending April 2, 2010.

In the first quarter of fiscal year 2010, we repurchased $10.3 million of our senior subordinated notes at a discount resulting in an insignificant gain. As of July 3, 2009, $389.7 million of principal was outstanding under our senior subordinated notes. Our senior subordinated notes mature February 2013. Interest accrues on our senior subordinated notes and is payable semi-annually.

Debt Covenants and Other Matters

~~The~~Our ~~Credit~~credit ~~Facility~~facility ~~contains~~in ~~various~~place ~~financial~~as ~~covenants~~of July 3, ~~including~~2009 acontained ~~total~~various ~~leverage~~financial ~~ratio~~covenants, an ~~interest~~including ~~coverage~~minimum ~~ratio,~~levels ~~limitations~~of onearnings ~~capital~~before ~~expenditures~~interest, ~~and~~taxes, ~~certain~~depreciation ~~limitations~~and ~~based upon~~amortization ~~eligible~~(“EBITDA”), ~~accounts~~minimum ~~receivable.~~interest ~~The~~and ~~Credit~~fixed ~~Facility~~charge ~~and~~coverage ~~the~~ratios, ~~indenture~~and ~~pertaining~~maximum tocapital ~~the~~expenditures ~~senior~~and ~~subordinated~~total ~~notes~~leverage ~~also~~ratio. ~~contain~~Non-financial covenants ~~that~~ restrict ~~the~~our ability ~~of the Company and its subsidiaries~~ to, ~~among other things,~~ dispose of assets; incur additional indebtedness; prepay other indebtedness or amend certain debt instruments; pay dividends; create liens on assets; enter into sale and leaseback transactions; make investments, loans or advances; issue certain equity instruments; make acquisitions; engage in mergers or consolidations or engage in certain transactions with affiliates; and otherwise restrict certain corporate activities. We had no instances of noncompliance with our various financial and non-financial covenants at July 3, 2009.

At January 2, 2009, we were in compliance with the financial and non-financial covenants contained in the Credit Facility and the indenture pertaining to the senior subordinated notes.

OFF BALANCE SHEET ARRANGEMENTS

~~Our~~In ~~off-balance sheet arrangements relate to operating lease obligations and letters of credit, which are excluded from the balance sheet in~~ accordance with ~~GAAP.~~the ~~Our~~definition ~~letters~~under ofSEC ~~credit and lease obligations are described in Notes 5 and 6~~rules, ~~respectively, in~~ the ~~notes~~following toqualify ~~our consolidated~~as ~~financial~~off-balance ~~statements.~~sheet arrangements:

	•		Any obligation under certain guarantee contracts;

	•		A retained or contingent interest in assets transferred to an unconsolidated entity or similar arrangement that serves as credit, liquidity or market risk support to that entity for such assets;

	•		Any obligation under certain derivative instruments; and

	•		Any obligation arising out of a material variable interest held by us in an unconsolidated entity that provides financing, liquidity, market risk or credit risk support to us, or engages in leasing, hedging or research and development services with us.

As of July 3, 2009, we did not have any off balance sheet arrangements as defined above. We recognize all derivatives as either assets or liabilities at fair value in our consolidated balance sheets. Refer to Note 7 of our consolidated financial statements for additional disclosure on derivatives and Note 11 for additional disclosure on variable interest entities.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

Management’s discussion and analysis of financial condition and results of operations are based on our ~~condensed~~ consolidated financial statements and related footnotes contained within ~~this~~ this Quarterly Report. Our more critical accounting policies used in the preparation of the ~~consolidated~~ consolidated financial statements were discussed in our ~~2008~~2009 Annual Report on Form 10-K for the fiscal year ended ~~March~~April 283, ~~2008~~2009, filed with the SEC on June 1011, ~~2008~~2009. There have been no material changes to our critical accounting policies and estimates from the information provided in our Annual Report on Form 10-K for the fiscal year ended ~~March~~April 283, ~~2008~~2009.

The process of preparing financial statements in conformity with GAAP requires the use of estimates and assumptions to determine certain of the assets, liabilities, ~~revenues~~revenue and expenses. These estimates and assumptions are based upon what we believe is the best information available at the time of the estimates or assumptions. The estimates and assumptions could change materially as conditions within and beyond our control change. Accordingly, actual results could differ materially from those estimates.

Based on an assessment of our accounting policies and the underlying judgments and uncertainties affecting the application of those policies, we believe that our ~~condensed~~ consolidated financial statements provide a meaningful and fair perspective of our consolidated ~~financial~~ financial condition and results of operations.

ACCOUNTING DEVELOPMENTS

We have presented the information about accounting pronouncements not yet implemented in Note 1 to our ~~condensed~~ consolidated financial statements included in this Quarterly Report.

DISCLOSURE REGARDING FORWARD-LOOKING INFORMATION

This Quarterly Report on Form 10-Q contains various forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Forward-looking statements, written, oral or otherwise made, represent the Company’s expectation or belief concerning future events. Without limiting the foregoing, the words “believes,” “thinks,” “anticipates,” “plans,” “expects” and similar expressions are intended to identify forward-looking statements. Statements regarding the amount of our backlog, estimated remaining contract values and estimated total contract values are other examples of forward-looking statements. Forward-looking statements involve risks and uncertainties. We caution that these statements are further qualified by important economic, competitive, governmental and technological factors that could cause our business, strategy or actual results or events to differ materially, or otherwise, from those in the forward-looking statements. These factors, risks and uncertainties include, among others, the following: our substantial level of indebtedness; government policies and changes thereto; termination of key U.S. government contracts; changes in the demand for services that we provide; pursuit of new commercial business and foreign government opportunities; activities of competitors; bid protests; changes in significant operating expenses; changes in availability of capital; general economic and business conditions in the U.S.; acts of war or terrorist activities; variations in performance of financial markets; the inherent difficulties of estimating future contract revenue; anticipated revenue from indefinite delivery, indefinite quantity contracts; expected percentages of future revenue represented by fixed-price and time-and-materials contracts; and other risks detailed from time to time in our reports filed with the SEC. Accordingly, such forward-looking statements do not purport to be predictions of future events or circumstances and therefore there can be no assurance that any forward-looking statement contained herein will prove to be accurate. We assume no obligation to update the forward-looking statements.


ITEM 3.		QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

~~The~~There ~~inherent~~have ~~risk~~been no material changes in market risk ~~sensitive~~from ~~instruments~~the ~~and~~information ~~positions~~provided ~~primarily~~in ~~relates to~~Part II, ~~potential~~Item 7A, ~~losses~~“Quantitative ~~arising from adverse changes in interest rates~~ and ~~foreign~~Qualitative ~~currency~~Disclosures ~~exchange rates.~~About ~~For~~Market ~~further discussion of market risks we may encounter, see “~~Risk ~~Factors~~” in the Company’s ~~Annual~~ Annual Report on Form 10-K for the fiscal year ended ~~March~~April 283, ~~2008~~2009, filed with the SEC on June 1011, ~~2008~~ 2009.

Interest Rate Risk

We have interest rate risk relating to changes in interest rates on our variable rate debt. Our policy is to manage interest rate exposure through the use of a combination of fixed and floating rate debt instruments. Borrowings under the Notes are at a fixed rate and represent the largest portion of our debt as of January 2, 2009. Borrowings under the senior secured credit facility bear interest at a rate per annum equal to, at our option, either (1) a base rate or (2) LIBOR, plus, in either case, an applicable margin determined by reference to the leverage ratio, as set forth in the senior secured credit agreement. The applicable margins for the base rate and LIBOR rate as of January 2, 2009 were 1.5% and 2.5% respectively. As of January 2, 2009, we had $615.9 million of indebtedness, including the Notes and excluding accrued interest thereon, of which $200.0 million was secured. On the same date, we had approximately $185.8 million available under our senior secured credit facility (which gives effect to $14.2 million of outstanding letters of credit). Each quarter point change in interest rates results in an approximately $0.5 million change in annual interest expense on the senior secured credit facility.

The table below provides information about our fixed rate and variable rate long-term debt as of January 2, 2009.

	Expected Maturity as of
	Fiscal Year
	2009		2010		2011		2012		2013		Thereafter		Total
Fixed rate	$	—	$	—	$	—	$	—	$	417,032	$	—	$	417,032
Variable rate		—		16,875		50,625		55,500		77,000		—		200,000
Total debt		—		16,875		50,625		55,500		494,032		—		617,032

The fair value of our term loan borrowings under the senior secured credit facility is approximately $200.0 million. The fair value of the Notes is approximately $362.8 million based on their quoted market value. The above table does not give effect to $28.6 million of outstanding letters of credit, $14.4 million of which were collateralized by restricted cash, or unamortized discount of $1.1 million on the Notes, in each case as of January 2, 2009.

During fiscal 2008, in order to mitigate interest rate risk related to our floating rate indebtedness, we entered into interest rate swap agreements with notional amounts totaling $275.0 million. The interest rate swaps effectively fixed the interest rate at 6.96%, including applicable margin of 2% at March 28, 2008, on the first $275.0 million of our floating rate debt. The interest rate on the notional amount of $75.0 million was effectively fixed through September 2008 and the interest rate on the remaining $200.0 million was effectively fixed through May 2010. We concluded that the interest rate swaps qualify as cash flow hedges under the provisions of SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities.”

Foreign Currency Exchange Rate Risk

We are exposed to changes in foreign currency rates. At present, we do not utilize any derivative instruments to manage risk associated with currency exchange rate fluctuations. The functional currency of certain foreign operations is the local currency. Accordingly, these foreign entities translate assets and liabilities from their local currencies to U.S. dollars using year-end exchange rates while income and expense accounts are translated at the average rates in effect during the year. The resulting translation adjustment is recorded as accumulated other comprehensive (loss) income. Management has determined that our foreign currency transactions are not material.

ITEM 4. CONTROLS AND PROCEDURES

(a) Evaluation of Disclosure Controls and Procedures

~~Our~~We ~~management,~~maintain ~~with~~disclosure ~~the~~controls ~~participation~~and ofprocedures ~~our~~designed ~~Chief~~to ~~Executive~~ensure ~~Officer~~that ~~and~~information ~~our~~required ~~Chief Financial~~to ~~Officer,~~be ~~has~~disclosed ~~evaluated~~by ~~our~~us ~~disclosure~~in ~~controls~~reports ~~and~~that ~~procedures~~we ~~(as~~file ~~such~~or ~~term~~submit isunder ~~defined in Rules 13a-15 and 15d-15 of~~ the Exchange Act). ~~Based~~is ~~on that evaluation~~recorded, ~~our Chief Executive Officer~~processed, summarized and ~~Chief~~reported ~~Financial~~within ~~Officer~~the ~~have~~time ~~concluded~~periods ~~that,~~specified asin of the ~~end~~Securities ofand ~~the~~Exchange ~~period~~Commission rules ~~covered~~and byforms. ~~this report~~In addition, ~~our~~the disclosure controls and procedures ~~were effective to~~ ensure that information ~~required~~ required to be disclosed inis ~~reports~~accumulated ~~that~~and wecommunicated ~~file~~to ormanagement, ~~submit~~including ~~under~~ the ~~Exchange~~chief executive ~~Act~~officer ~~are:~~(“CEO”) and chief financial officer (1“CFO”) ~~recorded~~, ~~processed,~~ ~~summarized~~allowing ~~and~~timely ~~reported~~decisions ~~within~~regarding required disclosure. As of the ~~time~~last ~~periods~~fiscal ~~specified~~quarter incovered ~~the~~by ~~SEC’s~~this ~~rules~~report, ~~and~~based ~~forms;~~on an evaluation ~~and~~carried ~~(2) accumulated~~out under the supervision and ~~communicated~~with tothe participation of our management, including the CEO and CFO, of the effectiveness of our ~~Chief~~disclosure ~~Executive~~controls ~~Officer~~and procedures (as such term is defined in Rules 13a-15(e) and ~~Chief~~15(d)-15(e) ~~Financial~~under ~~Officer~~the Exchange Act of 1934), asthe ~~appropriate~~CEO toand ~~allow timely~~CFO ~~decisions~~have ~~regarding~~concluded that ~~required~~our disclosure controls and procedures are effective.

(b) Changes in Internal Controls

There have been no changes in our internal controls over financial reporting that have occurred during the fiscal quarter ended ~~January~~July 23, 2009 that have materially affected, or are reasonably likely to materially affect, our internal controls over financial reporting.

PART II — OTHER INFORMATION

ITEM 1. LEGAL ~~MATTERS~~ PROCEEDINGS

Information related to various commitments and contingencies is described in Note 68 to the ~~condensed~~ consolidated financial statements.

~~ITEM 1A. RISK FACTORS~~39

There have been no material changes in risk factors from those described in Part I, Item 1A, “Risk Factors” in the Company’s Annual Report on Form 10-K for the fiscal year ended March 28, 2008, filed with the SEC on June 10, 2008, except as follows:

Current or worsening economic conditions could impact our business.

Over the last several months, there has been a significant deterioration in the U.S. and global economy, which many economic observers expect to worsen and be prolonged. In addition, liquidity has contracted significantly and borrowing rates have increased. We believe that our industry and customer base are less likely to be affected by many of the factors affecting business and consumer spending generally. Accordingly, we believe that we continue to be well positioned in the current economic environment as a result of historic demand factors affecting our industry, the nature of our contracts and our sources of liquidity. However, we cannot assure you that the economic environment or other factors will not adversely impact our business, financial condition or results of operations in the future. In particular, if the Federal government, due to budgetary considerations, accelerates the expected reduction in combat troops from Iraq, fails to implement expected troop increases in Afghanistan, otherwise reduces the DoD Operations and Maintenance budget or reduces funding for DoS initiatives in which we participate, our business, financial condition and results of operations could be adversely affected.

Furthermore, although we believe that our current sources of liquidity will enable us to continue to perform under our existing contracts and further grow our business, we cannot assure you that will be the case. A longer term credit crisis could adversely affect our ability to obtain additional liquidity or refinance existing indebtedness on acceptable terms or at all, which could adversely affect our business, financial condition and results of operations.


ITEM 1A.		RISK FACTORS

There have been no material changes in risk factors from those described in Part I, Item 1A, “Risk Factors” in the Company’s Annual Report on Form 10-K for the fiscal year ended April 3, 2009, filed with the SEC on June 11, 2009.


ITEM 2.		UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

None.


ITEM 3.		DEFAULTS UPON SENIOR SECURITIES

None.


ITEM 4.		SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

None.


ITEM 5.		OTHER INFORMATION

None.


ITEM 6.		EXHIBITS

The following exhibits are filed as part of, or incorporated by reference into, the Quarterly Report on Form 10-Q.

Exhibit
Number		Description
10.1*		Employment Agreement effective as of December 29, 2008, between DynCorp International LLC and Tony Smeraglinolo.
31.1*		Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2*		Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1*		Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
32.2*		Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002


*		Filed herewith.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	DYNCORP INTERNATIONAL LLC Date: February 10, 2009
	/s/ MICHAEL J. THORNE
	Name:	Michael J. Thorne
	Title:	Senior Vice President and Chief Financial Officer


		DYNCORP INTERNATIONAL LLC

		/s/ Michael J. Thorne
		Michael J. Thorne
		Senior Vice President and Chief Financial Officer
		Date: August 6, 2009

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Filing Compare · DynCorp International LLC