Dyncorp · 10-Q/A · For 3/27/97

Filed On 6/13/97   ·   SEC File 0-17209   ·   Accession Number 30770-97-23

Amendment to Quarterly Report   ·   Form 10-Q
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Document/Exhibit                   Description                      Pages   Size 

 1: 10-Q/A      Amendment to Quarterly Report                         16±    77K 
 2: EX-11       Statement re: Computation of Earnings Per Share        1      4K 
 3: EX-27       Financial Data Schedule                                1      7K 

10-Q/A   ·   Amendment to Quarterly Report
Document Table of Contents

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FORM 10-Q/A 

SECURITIES AND EXCHANGE COMMISSION  
Washington, D.C. 20549

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

For the quarterly period ended            March 27, 1997

OR

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

For the transition period from       to   

Commission file number            1-3879  

   DynCorp
    (Exact name of registrant as specified in its charter)

    Delaware                            36-2408747
(State or other jurisdiction of           (I.R.S.  Employer   
incorporation or organization)          Identification  No.)

2000 Edmund Halley Drive, Reston, VA             20191-3436       
(Address of principal executive offices)           (Zip Code)         

(703) 264-0330  
(Registrant's telephone number, including area code)

 (Former name, former address and former fiscal year, if changed since
last report)    

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

         Indicate  the  number of  shares  outstanding  of each of the  issuer's
classes of common stock, as of the latest practicable date.  9,009,636 shares of
common stock having a par value of $0.10 per share were outstanding at March 27,
1997.                                                                           

                 DYNCORP

                 INDEX

PART I.  FINANCIAL INFORMATION                                                  

Consolidated Condensed Balance Sheets -                               
March 27, 1997 and December 31, 1996                          

Consolidated Condensed Statements of Operations -                     
Three Months Ended March 27, 1997 and March 28, 1996          

Consolidated Condensed Statements of Cash Flows -                     
Three Months Ended March 27, 1997 and March 28, 1996          

Consolidated Statement of Permanent Stockholders' Equity              

Notes to Consolidated Condensed Financial Statements                  

Management's Discussion and Analysis of Financial Condition           
and Results of Operations                                     

PART II.  OTHER INFORMATION                                                     

Item 1.  Legal Proceedings                                            

Item 6.  Exhibits and Reports on Form 8-K                             

Signatures                                                            

Exhibit 11 - Computations of Earnings Per Common Share                

 PART I. FINANCIAL INFORMATION

                                                                · Download Table


                            DYNCORP AND SUBSIDIARIES                                
                      CONSOLIDATED CONDENSED BALANCE SHEETS                         
                      MARCH 27, 1997 AND DECEMBER 31, 1996                          
                             (Dollars in thousands)                                 

                                                            March 27,               
                                                              1997      December 31,
                                                            Unaudited       1996    
                                                                                    
Current Assets:                                                                     
 Cash and cash equivalents                                 $   64,138  $   25,877   
 Accounts receivable and contracts in process (Note 2)        186,893     187,679   
 Inventories of purchased products and supplies,                                    
     at lower of cost (first-in, first-out) or market             873       1,030   
 Other current assets                                          15,633      10,009   
     Total current assets                                     267,537     224,595   

Property and Equipment (net of accumulated depreciation                             
 and amortization of $18,034 in 1997 and $16,737 in 1996)      19,294      19,084   

Intangible Assets (net of accumulated amortization                                  
 of $43,577 in 1997 and $43,028 in 1996)                       48,379      48,927   

Other Assets (Notes 2, 5 and 8)                                79,202      76,146   

Total Assets                                               $  414,412  $  368,752   

<FN>                                                                                
See accompanying notes to consolidated condensed financial statements.              
</FN>                                                                               

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                            DYNCORP AND SUBSIDIARIES                                   
                      CONSOLIDATED CONDENSED BALANCE SHEETS                            
                      MARCH 27, 1997 AND DECEMBER 31, 1996                             
                (Dollars in thousands, except per share amounts)                       

                                                             March 27,                 
                                                               1997        December 31,
                                                             Unaudited        1996     
                                                                                       
Liabilities and Stockholders' Equity                                                   
Current Liabilities:                                                                   
 Notes payable and current portion of long-term debt       $       523   $       628   
 Accounts payable                                               37,431        42,716   
 Advances on contracts in process                                6,381         6,002   
 Accrued liabilities                                            96,191        99,499   
     Total current liabilities                                 140,526       148,845   

Long-Term Debt  (Notes 5 and 9)                                202,551       103,555   

Other Liabilities and Deferred Credits  (Note 8)                79,621        79,513   

Contingencies and Litigation  (Note 8)                               -             -   

Temporary Equity (Note 3):                                                             
 Redeemable Common Stock -                                                             
   ESOP Shares, 6,670,442 and 6,165,957                                                
     shares issued and outstanding in 1997 and 1996,                                   
     respectively, subject to restrictions                     146,433       136,343   
   Other, 125,714 shares issued and outstanding in                                     
     1997 and 1996, respectively                                 2,979         2,979   

Permanent Stockholders' Equity (Note 4):                                               
 Preferred Stock, Class C 18% cumulative,  convertible,                                
   $24.25 liquidation value (liquidation  value                                        
   including  unrecorded  dividends  of  $14,147  in 1996),                            
   123,711 shares authorized,                                                          
   issued and outstanding in 1996                                    -         3,000   
 Common Stock, par value ten cents per share, authorized                               
   20,000,000 shares; issued 3,856,218 shares in 1997                                  
   and 3,315,673 shares in 1996                                    386           332   
 Common Stock Warrants                                           3,925        11,139   
 Paid-in Surplus                                               122,766       148,234   
 Reclassification to temporary equity for redemption value                             
   greater than par value                                     (148,734)     (138,694)  
 Deficit                                                       (98,948)     (101,259)  
 Common Stock Held in Treasury,  at cost;  1,642,738 shares                            
   and 170,716 warrants in 1997 and 1,514,482 shares and                               
   170,716 warrants in 1996                                    (28,012)      (25,235)  
 Unearned ESOP Shares                                           (9,081)            -   

Total Liabilities and Stockholders' Equity                 $   414,412   $   368,752   

<FN>                                                                                   
See accompanying notes to consolidated condensed financial statements.                 
</FN>                                                                                  

DYNCORP AND SUBSIDIARIES
 CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
(Dollars in thousands, except per share amounts)

 UNAUDITED

                                              Three Months Ended
                                               March 27,       March 28,
                                               1997           1996
Revenues:                                                                       
Information and Engineering Technology            $  63,956      $ 71,012     
Aerospace Technology                                104,594        85,530     
Enterprise Management                               102,587        85,184     
Total revenues                                  271,137       241,726 

Costs and expenses:                                                             
Cost of services                                    259,794       230,997     
Corporate selling and administrative                  4,439         4,460     
Interest income                                        (361)         (614)    
Interest expense                                      2,983         2,580     
Other                                                   277           566     
Total costs and expenses                        267,132       237,989 

Earnings before income taxes and minority interest     4,005         3,737      
Provision for income taxes (Note 6)                 1,286         1,200   

Earnings before minority interest                      2,719         2,537      
Minority interest                                     408           296   

Net earnings                                      $    2,311      $  2,241      

Preferred Class C dividends not declared                                  
or recorded (Note 4)                                   -          (534) 

Common stockholders' share of earnings             $    2,311    $   1,707      

Weighted average number of common shares                                        
outstanding and dilutive common stock                                         
equivalents (Note 7)                              11,078,153   12,231,005     

Common stockholders' share of earnings                                          
per common share - primary and fully diluted    $       0.21    $    0.14     

See accompanying notes to consolidated condensed financial statements.          

  DYNCORP AND SUBSIDIARIES
 CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(Dollars in thousands)
 UNAUDITED

                                                          Three Months Ended
                                                          March 27,    March 28,
                                                          1997          1996
Cash Flows from Operating Activities:                                           
Net earnings                                            $   2,311    $    2,241 
Adjustments to reconcile net earnings from operations                           
to net cash used:                                                           
Depreciation and amortization                               2,650         2,145 
Payment of income taxes on gain on sale of                                      
  Commercial Aviation business                                  -       (13,990)
Other                                                           9          (485)
Changes in current assets and liabilities, net of                               
acquisitions:                                                               
Increase in current assets except                                           
    cash, cash equivalents and notes receivable            (4,912)       (3,659)
Decrease in current liabilities except notes payable                        
    and current portion of long-term debt                  (8,195)      (11,801)
     Cash used by operating activities                     (8,137)      (25,549)

Cash Flows from Investing Activities:                                           
Sale of property and equipment                                 23             1 
Purchase of property and equipment                         (1,360)       (1,502)
Decrease in cash on deposit for letters of credit               -         2,070 
Other                                                        (116)          (14)
   Cash (used) provided by investing activities           (1,453)          555

Cash Flows from Financing Activities:                                           
Treasury stock purchased                                     (268)       (3,153)
Payment on indebtedness                                      (595)         (313)
Proceeds from issuance of Senior Notes (Note 5)            99,484             - 
Stock released to Employee Stock Ownership Plan             1,297           503 
Loan to Employee Stock Ownership Plan (Note 4)            (10,379)            - 
Deferred financing expenses (Note 5)                       (3,502)       (1,209)
Common stock and warrants purchased from                                        
 investors (Note 4)                                      (37,819)            -
Other                                                        (367)            1 
    Cash provided (used) from financing activities         47,851        (4,171)

Net Increase (Decrease) in Cash and Cash Equivalents       38,261       (29,165)
Cash and Cash Equivalents at Beginning of the Period       25,877        31,151 
Cash and Cash Equivalents at End of the Period          $  64,138    $    1,986 

Supplemental Cash Flow Information:                                             
 Cash paid for income taxes                            $     804    $   14,040
 Cash paid for interest                                $   4,169    $    2,106

See accompanying notes to consolidated condensed financial statements.          

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DYNCORP AND SUBSIDIARIES                                                                                                            
CONSOLIDATED STATEMENT OF PERMANENT STOCKHOLDERS' EQUITY                                                                            
(Dollars in thousands)                                                                                                              

                                                                          UNAUDITED                                                 

                                                                                     Adjustment for                                 
                                                                 Common             Redemption Value                        Unearned
                                       Preferred      Common      Stock     Paid-in   Greater than               Treasury     ESOP  
                                           Stock       Stock   Warrants     Surplus    Par Value      Deficit     Stock      Shares 
                                                                                                                                    
Balance, December 31, 1996               $ 3,000      $  332    $11,139    $148,234    $(138,694)   $(101,259) $ (25,235)  $      - 
   Stock issued under                                                                                                               
     Restricted Stock Plan                                 8                     93                                                 
   Treasury stock issued                                                                                             233            
   Treasury stock purchased                                                    (665)                                (231)           
   Stock warrants and options exercised                    1        (17)        105                                                 
   Loans to the Employee Stock                                                                                                      
       Stock Ownership Plan (Note 4)                                                                                        (10,379)
   Payment received on ESOP note                                                                                              1,298 
   Class C Preferred Stock converted                                                                                                
        and warrants exercised (Note 4)   (3,000)         95     (2,007)      5,119                                                 
   Common stock and warrants                                                                                                        
        purchased (Note 4)                                       (5,190)    (30,120)                              (2,779)           
   Net earnings                                                                                         2,311                       
   Reclassification to Redeemable                                                                                                   
     Common Stock                                       ( 50)                            (10,040)                                   
Balance, March 27, 1997                  $     -      $  386    $ 3,925    $122,766    $(148,734)   $ (98,948) $ (28,012)  $ (9,081)


DYNCORP AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

 UNAUDITED

1.    The unaudited consolidated condensed financial statements included herein 
    have been prepared by the Company pursuant to the rules and  regulations
of the Securities and Exchange  Commission.  Certain information and
    footnote  disclosures normally included in financial statements prepared
 in accordance with generally accepted accounting principles have been
     condensed or omitted pursuant to such rules and regulations, although the
      Company believes that the disclosures are adequate to make the information
    presented not misleading. It is suggested that these condensed financial
    statements be read in conjunction  with the financial statements and the
      notes thereto included in the Company's latest annual report on Form 10-K.
In the opinion of the Company, the unaudited consolidated condensed 
     financial statements included herein reflect all adjustments necessary to
    present fairly the financial position, the results of operations and the
    cash flows for such interim periods.  The results of operations for such
 interim periods are not necessarily indicative of the results for the
full year.                                                          

2.    At March 27, 1997,  $109,670,000 of accounts  receivable are restricted as
      collateral  for  the  Contract  Receivable  Collateralized  Notes,  Series
      1992-1.  Additionally,  $3,000,000 of cash is restricted as collateral for
      the Notes and has been  included in Other  Assets on the balance  sheet at
March 27, 1997.                                                     

      The Notes are scheduled to begin  principal  amortization on May 30, 1997;
      however,  the  Company  has  secured  financing  to satisfy  the  maturing
      obligations  of the debt (see Notes 4 and 9). At March 27, 1997,  the debt
remains classified as long-term.                                    

      Accounts  receivable  are net of an  allowance  for  doubtful  accounts of
$229,000 in 1997 and 1996.                                          

3.    Common stock which is redeemable has been reflected as Temporary Equity at
each balance sheet date and consists of the following:              

                                    Balance at                      Balance at
                         Redeemable   March 27,          Redeemable December 31,
              Shares   Value        1997       Shares   Value       1996
  ESOP Shares  3,520,037  $23.70 $  83,424,877  3,520,037 $23.70 $  83,424,877
               3,150,405  $20.00    63,008,100  2,645,920 $20.00    52,918,400
               6,670,442         $ 146,432,977  6,165,957        $ 136,343,277

  Other Shares   125,714  $23.70 $   2,979,422    125,714 $23.70 $   2,979,422

4.    In February  1997,  the Employee  Stock  Ownership  Trust  purchased  from
      certain investors in Capricorn Investors,  L.P. all of the Company's Class
      C Preferred  Stock. The purchase price for the securities was $18,567,000,
      of which  $10,290,000  was a note from the ESOP that was guaranteed by the
      Company.  The ESOP subsequently  converted the Class C Preferred Stock and
      exercised the attached  warrants,  upon which the Company  issued  949,642
      shares  of  common  stock to the  ESOP.  The  unpaid  balance  on the note
      receivable from the ESOP,  representing  455,473 shares, is reflected as a
reduction in stockholders equity at March 27, 1997.                 

      Concurrent  with the ESOP's purchase of the Class C Preferred  Stock,  the
      Company  purchased  128,345  shares of common stock and  1,806,147  common
      stock warrants from the other investors in Capricorn  Investors,  L.P. The
      purchase price for these securities was $37,819,000,  of which $18,910,000
was paid in cash and short-term notes were issued for the balance.  

5.    0n March 17, 1997, the Company closed on the issuance of  $100,000,000  of
      9.5%  Senior   Subordinated  Notes  due  2007.  The  notes  are  unsecured
      obligations of the Company and will be subordinated in right of payment to
      all  existing and future  senior debt of the Company.  Interest is payable
      semi-annually  on March 1 and  September  1 of each  year,  commencing  on
September 1, 1997.                                                  

      The proceeds received,  $99,484,000,  net of a discount, were used to fund
      the  Company's   purchase  of  common  stock  and  warrants  from  outside
      investors,  to make a loan to the ESOP to repay the note to certain of the
      Capricorn  investors (plus accrued interest) for the purchase of the Class
      C Preferred  Stock (see Note 4), to fund  partially the  retirement of the
      Contract  Receivable  Collateralized  Notes (see Notes 2 and 9) and to pay
transaction fees.                                                   

6.    The provision for income taxes in 1996 and 1995 is based upon an estimated
      annual effective tax rate, including the impact of differences between the
      book value of assets and  liabilities  recognized for financial  reporting
purposes and the basis recognized for tax purposes.                 

7.   The weighted average number of common shares outstanding includes issued   
     shares or shares issuable under the Restricted Stock Plan, less shares held
  in treasury and any unallocated ESOP shares.  For the three months ended
  March 27, 1997, approximately 2,321,000 unexercised warrants and 129,000
  stock options have been included as share equivalents using the treasury
stock method.                                                         

SFAS No. 128, "Earnings per Share," was issued in February 1997 and is
effective  for financial statements issued after December 15, 1997.   
The statement establishes new standards for computing and presenting  
 earnings per share ("EPS") and will require restatement of prior years.
This statement simplifies the standards for computing EPS previously  
found in APB Opinion 15. It replaces the presentation of primary      
and fully diluted EPS with a presentation of basic and diluted EPS,   
requires a dual presentation on the face of the income statement and  
requires a reconciliation of basic EPS computation to diluted EPS.    
Had SFAS No. 128 been effective for financial statements issued       
March 27, 1997, basic and diluted EPS would have been $0.27           
and $0.21, respectively.                                              

8.   The Company and its subsidiaries and affiliates are involved in various    
claims and lawsuits,  including  contract disputes and claims based on
  allegations  of negligence  and other tortious  conduct.  The Company is
 also potentially liable for certain personal injury, tax, environmental
 and contract dispute issues related to the prior operations of divested
    businesses.  In addition,  certain  subsidiary  companies are  potentially
    liable for environmental, personal injury and contract and dispute claims.
 In most cases, the Company and its subsidiaries have denied, or believe
they have a basis to deny liability, and in some cases have offsetting
claims against  the plaintiffs,  third parties or insurance  carriers.
  The total amount of damages currently claimed by the plaintiffs in these
     cases is estimated to be approximately $127,000,000 (including compensatory
   punitive  damages and  penalties).  The Company  believes that the amount
that will actually be recovered in these cases will be substantially  
less than the amount claimed. After taking into account available     
   insurance, the Company  believes it is adequately  reserved  with respect
  to the  potential  liability for such claims.  The  estimates  set forth
  above do not reflect claims that may have been incurred but have not yet
been filed. The Company has recorded such damages and penalties       
that are considered to be probable  recoveries  against the Company or
its subsidiaries.                                                     

Asbestos Claims                                                       

     An acquired  and  inactive  subsidiary,  Fuller-Austin  Insulation  Company
     ("Fuller-Austin"),  which discontinued its business activities in 1986, has
     been  named as one of many  defendants  in civil  lawsuits  which have been
     filed in certain state courts beginning in 1986 (principally Texas) against
     manufacturers, distributors and installers of products allegedly containing
asbestos. Fuller-Austin was a non-manufacturer that installed and     
     occasionally distributed industrial insulation products.  Fuller-Austin had
discontinued the use of asbestos-containing products prior to being   
acquired by the Company in 1974. These claims are not part of a class 
action.                                                               

     The  claimants   generally  allege  injuries  to  their  health  caused  by
     inhalation of asbestos fibers.  Many of the claimants seek punitive damages
     as well as compensatory  damages.  The amount of damages sought is impacted
     by a multitude  of  factors.  These  include  the type and  severity of the
     disease sustained by the claimant (i.e.,  mesothelioma,  lung cancer, other
     types of cancer,  asbestosis  or pleural  changes);  the  occupation of the
     claimant;  the duration of the claimant's  exposure to  asbestos-containing
     products;  the  number  and  financial  resources  of the  defendants;  the
     jurisdiction in which the claim is filed;  the presence or absence of other
     possible  causes  of the  claimant's  illness;  the  availability  of legal
     defenses,  such as the  statute of  limitations;  and whether the claim was
made on an individual basis or as part of a group claim.              

Claim Exposure                                                        

     As  of  May  2,  1997,   14,111   plaintiffs   have  filed  claims  against
     Fuller-Austin  and various other  defendants.  Of these claims,  3,203 have
     been dismissed,  3,690 have been resolved without an admission of liability
     at an average cost of $3,590 per claim  (excluding legal defense costs) and
     an additional 618 claims have been settled in principle  (subject to future
processing and funding) at a average cost of $2,019 per claim.        

     The  following is a summary of claims filed against  Fuller-Austin  through
May 2, 1997:                                                          

                                 Y   e   a   r   s
1993          
                              & Prior   1994    1995    1996  1997(1)  Total
    Claims Filed               2,921   1,136   4,522   4,122   1,410  14,111
     Claims Dismissed             (79)    (21) (1,035) (1,459)   (609) (3,203)
     Claims Resolved           (1,224)   (394)   (182) (1,828)    (62) (3,690)
     Settlements in process                                              (618)
    Claims Outstanding at May 2, 1997                                  6,600
(1)  As of May 2, 1997                                              

     In connection with these claims, Fuller-Austin's primary insurance carriers
     have  incurred  approximately  $21,400,000  (including  $9,400,000 of legal
     defense  costs,  but excluding  $1,250,000  for  settlements in process) to
     defend and settle the claims and, in addition,  judgments have been entered
     against  Fuller-Austin  for jury verdicts of $6,500,000 which have not been
     paid and which are under appeal by  Fuller-Austin.  Through March  27,1997,
     the  Company  and  Fuller-Austin  have  charged  to  expense  approximately
     $12,500,000 consisting of $6,200,000 of charges under retrospectively rated
     insurance policies and $6,300,000 of reserves for potential uninsured legal
     and settlement costs related to these claims.  These charges  substantially
     eliminate  any further  exposure  for  retrospectively  determined  premium
payments under the retrospectively rated insurance policies.          

     Fuller-Austin  has  continued  its  strategy to require  direct  proof that
     claimants  had  exposure to  asbestos-containing  products as the result of
     Fuller-Austin's  operations.  This has  resulted  in an  increase  in claim
     settlements  and a decrease  in  litigation  defense  activities.  However,
     perceived   changes  in  the  nature  of  new  claims   filed  have  caused
     Fuller-Austin  and its insurers to reevaluate  Fuller-Austin's  approach to
     claims  settlement.  Consequently,  there is a potential  for an  increased
     level of trial  activity  which  Fuller-Austin  believes  will  reduce  the
     overall  cost  of  asbestos  personal  injury  claims  in the  long  run by
     requiring  claimants  to present  and prove clear  evidence of  substantial
     asbestos-related impairment and exposure to Fuller-Austin's operations, and
     by denying  recovery to claimants  who are  unimpaired  or who did not have
significant exposure to Fuller-Austin's operations.                   

     Further,  the level of filed claims has become significant only since 1992,
     and therefore,  Fuller-Austin  has a relatively brief history  (compared to
     manufacturers  and suppliers) of claims volume and a limited data file upon
     which to estimate the number or costs of claims that may be received in the
     future.  Also,  effective September 1, 1995, the State of Texas (where most
     of these  claims have been filed)  enacted  tort reform  legislation  which
     Fuller-Austin    believes   will   ultimately   curtail   the   number   of
unsubstantiated asbestos claims filed against the subsidiary in Texas.

    The Company and its defense counsel have analyzed the 14,111 claim filings
incurred  through May 2, 1997.  Based on this                         
     analysis and consultation with its professional advisors, Fuller-Austin has
     estimated its cost,  including  legal defense costs,  to be $16,350,000 for
     claims filed and still unsettled and $38,500,000 as its minimum estimate of
     future costs of unasserted claims,  including legal defense costs. No upper
     limit of  exposure  can  presently  be  reasonably  estimated.  The Company
     cautions  that these  estimates are subject to  significant  uncertainties,
     including the future effect of tort reform legislation enacted in Texas and
     other states, the success of Fuller-Austin's  litigation strategy, the size
     of jury verdicts,  success of appeals in process,  the number and financial
     resources of future plaintiffs, and the actions of other defendants. During
     1996,  approximately 40 claims,  with approximately 700 more being prepared
     for filing, were filed in another state where Fuller-Austin had performed a
     significant  amount of its  business.  Although  the claims  filed  against
   Fuller-Austin in states other than Texas have been included in the claims
summary table set forth above, exposure for these claims has not been 
     included in the Company's estimates and neither the Company nor its defense
  counsel are able to reasonably predict the outcome of these cases or the
    incidence of the 700 or other future claims that may be filed.  Therefore,
actual claim experience may vary significantly from such estimates,   
especially if certain Texas appeals are decided unfavorably to        
     Fuller-Austin and/or the level of claims filed in other  states  increases.
 At March  27,  1997 and  December  31,  1996, Fuller-Austin recorded an
estimated liability for future indemnity payments                     
     and  defense  costs  related to  currently  unsettled  claims  and  minimum
   estimated future claims of $55,000,000 (recorded as long-term liability).

Insurance Coverage                                                    

     Defense  has been  tendered  to and  accepted  by  Fuller-Austin's  primary
     insurance  carriers,  and by certain  of the  Company's  primary  insurance
     carriers  that issued  policies  under which  Fuller-Austin  is named as an
     additional  insured;  however,  only one such primary carrier has partially
     accepted defense without a reservation of rights. The Company believes that
     Fuller-Austin has at least $7,725,000 in unexhausted  primary coverage (net
     of  deductibles  and  self-insured   retentions,   but  including  disputed
     coverage)  under its  liability  insurance  policies to cover the unsettled
     claims,  verdicts  and future  unasserted  claims and  defense  costs.  The
     primary carriers also have unlimited liability for defense costs (presently
     running at the annual rate of approximately  $1,500,000) until such time as
     the primary  limits under these  policies are  exhausted.  When the primary
     limits are  exhausted,  liability for both indemnity and legal defense will
     be  tendered  to the  excess  coverage  carriers,  all of which  have  been
     notified  of  the  pendency  of  the  asbestos  claims.   The  Company  and
     Fuller-Austin  have  approximately  $490,000,000  of additional  excess and
     umbrella  insurance that is generally  responsive to asbestos claims.  This
     amount excludes  approximately  $92,000,000 of coverage issued by insolvent
     carriers. After the $7,725,000 of unexhausted primary coverage, the Company
has  $35,700,000 of excess  coverage in place excluding a $35,000,000 
     layer of  insolvent  coverage  for  policy  years  1979  through  1984 (the
     "Insolvent  Layer").  All of the  Company's and  Fuller-Austin's  liability
     insurance  policies cover indemnity  payments and defense fees and expenses
subject to applicable policy terms and conditions.                    

Coverage Litigation                                                   

     The Company and  Fuller-Austin  have  instituted  litigation in Los Angeles
     Superior  Court,  California,  against their  primary and excess  insurance
     carriers,  to obtain  declaratory  judgments  from the court  regarding the
     obligations of the various carriers to defend and pay asbestos claims.  The
     issues in this litigation include the aggregate  liability of the carriers,
     the  triggering  and  drop-down of excess  coverage to cover the  Insolvent
    Layer and allocation of losses among multiple carriers including insolvent
     carriers and various  other  issues  related to the  interpretation  of the
policy contracts. All of the carrier defendants have filed general    
denial answers.                                                       

     Although  there can be no assurances as to the outcome of this  litigation,
     management  believes that it is probable that the Company and Fuller-Austin
     will prevail in obtaining judicial rulings confirming the availability of a
     substantial  portion of the  coverage.  Currently,  the  Company has excess
     coverage  under  policies  issued  by  solvent  carriers  of  approximately
     $497,725,000  ($7,725,000 in primary  coverage and  $490,000,000  in excess
     coverage).  Based on a review of the independent ratings of these carriers,
     the Company  believes  that a  substantial  portion of this  coverage  will
     continue  to be  available  to meet the claims.  Fuller-Austin  recorded in
     Other  Assets   $55,000,000  (not  including  reserves  of  $6,200,000  and
     $6,400,000,  respectively)  at  March  27,  1997  and  December  31,  1996,
     representing  the amount  that it expects  to  recover  from its  insurance
     carriers  for the  payment of  currently  unsettled  and  estimated  future
claims.                                                               

     The Company cautions, however, that even though the existence and aggregate
     dollar  amounts  of  insurance  are  not  generally  being  disputed,  such
     insurance coverage is subject to interpretation by the court and the timing
     of the availability of insurance payments could, depending upon the outcome
     of the  litigation  and/or  negotiation,  delay the  receipt  of  insurance
     company  payments and require  Fuller-Austin to assume  responsibility  for
making interim payment of asbestos defense and indemnity costs.       

     While the  Company  and  Fuller-Austin  believe  that  they  have  recorded
     sufficient  liability  to satisfy  Fuller-Austin's  reasonably  anticipated
     costs of present  and  future  plaintiffs'  suits,  it is not  possible  to
     predict the amount or timing of future suits or the future  solvency of its
     insurers.  In the event that  currently  unsettled and future claims exceed
     the  recorded  liability  of  $55,000,000,  the Company  believes  that the
     judicially  determined  and /or  negotiated  amounts of excess and umbrella
     insurance  coverage that will be available to cover additional  claims will
     be  significant;  however,  it is unable  to  predict  whether  or not such
     amounts will be adequate to cover all  additional  claims  without  further
contribution by Fuller-Austin.                                        

     The Company has recorded its best estimate of the aggregate  liability that
     will result from these  matters.  While it is not  possible to predict with
     certainty the outcome of litigation and other matters  discussed  above, it
     is the opinion of the Company's management,  based in part upon opinions of
     counsel, insurance in force and the facts currently known, that liabilities
     in excess of those  recorded,  if any,  arising from such matters would not
     have a material  adverse effect on the results of operations,  consolidated
     financial position or liquidity of the Company over the long-term. However,
     it is possible that the timing of the resolution of individual issues could
     result in a significant  impact on the operating  results and/or  liquidity
for one or more future reporting periods.                             

     The major  portion of the  Company's  business  involves  contracting  with
     departments and agencies of, and prime contractors to, the U.S. Government,
     and such contracts are subject to possible  termination for the convenience
     of the  government  and to audit and possible  adjustment to give effect to
     unallowable  costs  under  cost-type   contracts  or  to  other  regulatory
     requirements affecting both cost-type and fixed-price  contracts.  Payments
     received by the Company for allowable direct and indirect costs are subject
     to adjustment  and repayment  after audit by  government  auditors,  if the
     payments  exceed  allowable  costs.  Audits  have  been  completed  on  the
     Company's  incurred  contract  costs  through 1986 and are  continuing  for
     subsequent  periods.  The Company  has  included  an  allowance  for excess
     billings and contract  losses in its financial  statements that it believes
     is adequate based upon its  interpretation  of contracting  regulations and
     past experience.  There can be no assurance,  however,  that this allowance
     will be adequate.  The Company is aware of various costs  questioned by the
     government,  including issues related to the  recoverability  of certain of
     its ESOP  contributions,  but  cannot  determine  the  outcome of the audit
     findings at this time. In addition, the Company is occasionally the subject
     of  investigations  by the  Department  of Justice and other  investigative
     organizations,  resulting  from  employee and other  allegations  regarding
     business  practices.  In  management's  opinion,  there are no  outstanding
     issues of this nature at March 27, 1997, that will have a material  adverse
     effect  on  the  Company's  consolidated  financial  position,  results  of
operations or liquidity.                                              

9.   Subsequent Events - On April 18,1997, the Company's wholly-owned subsidiary
   Dyn Funding Corporation ("DFC") entered into an agreement with Prudential
   Insurance Company of America and Columbia Life Insurance Company, Inc. to
    purchase from DFC up to $140,000,000 of Contract Receivable Collateralized
     Notes, Series 1997-1. The notes consist of a $50,000,000 Class A Fixed Rate
  Note,  which was issued at closing,  and a $90,000,000  Class B Variable
Rate Note, which has yet to be utilized. These notes contain terms and
conditions substantially identical to those of the Contract Receivable
 Collateralized  Notes, Series  1992-1.  Utilizing the proceeds from the
issuance of the Senior Notes and the proceeds from the new Contract   
    Receivable Collateralized Class A Fixed Rate Note, the Contract Receivable
Collateralized  Notes, Series 1992-1 were retired.                    

Upon the closing of the Series 1997-1 Notes,  the Company reduced the 
available amounts under its term note facility with  Citicorp         
North  America,  Inc.  from  $50,000,000  to $15,000,000.             

 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
 AND RESULTS OF OPERATIONS

The following  discussion of financial  condition and results of  operations    
should be read in  conjunction  with the 1996 Form 10-K.                        

Working  capital at March 27, 1997 was $127.0 million  compared to $75.8 million
at  December  31,  1996,  an  increase of $51.2  million.  This  increase is due
primarily  to the funds from the  closing  of the 9.5%  Senior  Notes  which are
designated to be used to retire the Contract Receivable  Collateralized Notes in
April 1997 (see Note 9 to the  Consolidated  Financial  Statements  and comments
below).                                                                         

At March 27, 1997,  $109.7  million of accounts  receivable  are  restricted  as
collateral for the Contract Receivable Collateralized Notes Series 1992-1.      

Cash used by  operations  was $8.1  million  in the first  quarter  of 1997,  as
compared to $25.5  million in the first  quarter of 1996.  The  decrease in cash
used is attributable to the payment of $14.0 million of income taxes on the gain
on the sale of the Commercial Aviation business in the first quarter of 1996.   

Investing  activities  used funds of $1.5 million in the first  quarter of 1997,
principally for the purchase of property and equipment. During the first quarter
of 1996,  cash  provided by  investing  activities  was $0.6  million  with cash
released from deposit for letters of credit exceeding cash used for the purchase
of property and equipment.                                                      

Financing  activities  provided  funds of $47.9  million in the first quarter of
1997 which  consist  primarily of the proceeds  from the sale of the 9.5% Senior
Notes less funds utilized to make a loan to the Employee Stock Ownership Plan to
fund the purchase of the Class C Preferred Stock, to fund the Company's purchase
of  common  stock  and  warrants  from  investors  and to pay  transaction  fees
associated with the placement of the Notes.                                     

On April 18, 1997, the Company's wholly-owned subsidiary Dyn Funding Corporation
("DFC") entered into an agreement with Prudential  Insurance  Company of America
and Columbia  Life  Insurance  Company,  Inc. to purchase  from DFC up to $140.0
million of Contract  Receivable  Collateralized  Notes, Series 1997-1. The notes
consist of a $50.0 million Class A Fixed Rate Note, which was issued at closing,
and a $90.0 million  Class B Variable  Rate Note,  which has yet to be utilized.
These notes contain terms and conditions substantially identical to those of the
Contract Receivable  Collateralized Notes, Series 1992-1. Utilizing the proceeds
from the  issuance of the Senior  Notes and the  proceeds  from the new Contract
Receivable  Collateralized  Class A Fixed Rate  Note,  the  Contract  Receivable
Collateralized Notes, Series 1992-1 were retired.                               

Upon the closing of the Series 1997-1 Notes, the Company reduced the available  
amounts under its term note facility with Citicorp North America, Inc. from     
$50.0 million to $15.0 million.                                                 

At March 27, 1997, backlog (including option years on government  contracts) was
$3.150  billion  compared to $3.002 billion at December 31, 1996, a net increase
of $148.0 million, attributable to contract wins, extensions and add-ons.       

Results of Operations                                                           

Revenues for the first  quarter of 1997 were $271.1  million,  up $29.4  million
(12.2%) from $241.7 million in the first quarter of 1996. Revenues for Aerospace
Technology (AT) and Enterprise Management (EM) for the first quarter were $104.6
million and $102.6 million, respectively, an increase of $19.1 million and $17.4
million  over  the  comparable  period  in  1996.  Information  and  Engineering
Technology's (I&ET) revenues for the first quarter were $63.9 million, down $7.1
million,  from $71.0  million in the first  quarter of 1996.  Increases  in AT's
revenues  were  attributable  to a State  Department  contract in support of the
Bosnian peacekeeping initiative which was awarded in February 1996 and phased in
later in the year, but which was fully  operational in 1997 as well as increases
in the level of effort on  several  existing  contracts.  In EM,  reductions  in
revenue  due to contract  losses were more than offset by revenues  from a large
Department of Energy subcontract which was awarded in August 1996, but which was
fully operational in 1997. In I&ET, revenues  attributable to the acquisition of
Data Management Design, Inc. in June 1996, and new IDIQ type contracts were more
than offset by the decrease in revenues due to the completion and phase-out of a
large contract with the Postal Service in 1996.                                 

Cost of Services was 95.8% of revenue for the first  quarter of 1997 as compared
to 95.6% of  revenue  for the  comparable  period  in 1996,  resulting  in gross
margins of $11.3 million (4.2%) and $10.7 million (4.4%), respectively. The same
contract  wins and losses  which  affected  revenues  similarly  affected  gross
margin.  Additionally,  the Company has charged $0.5 million to Cost of Services
in the first  quarter  of 1997,  representing  a partial  write-off  of  certain
purchased software as the result of net realization concerns.                   

Interest income in the first quarter of 1997 was less than the comparable period
in 1996  due to lower  cash and cash  equivalent  balances  and  related  yields
throughout the quarter.                                                         

Interest  expense was $3.0  million in the first  quarter of 1997,  up from $2.6
million in 1996,  principally  due to the accrual of interest on the 9.5% Senior
Notes  from the  closing  date,  March 17,  1997,  through  the end of the first
quarter.                                                                        

Other expense consists of the following major items (in thousands):             

                                  Three Months Ended
                                    March 27,              March 28,
                                   1997                   1996
Amortization of costs in excess                                     
of net assets acquired             $ 402                  $ 377 
Provision for nonrecovery of                                        
receivables                            1                    106 
Miscellaneous                         (126)                    83   
                                 $  277                  $ 566

The  provision  for  income  taxes in 1996 and 1995 is based  upon an  estimated
annual effective tax rate,  including the impact of differences between the book
value of assets and liabilities  recognized for financial reporting purposes and
the basis recognized for tax purposes.                                          

 PART II - OTHER INFORMATION

ITEM 1.  Legal Proceedings                                                      

  This item is  incorporated  herein by reference to Note 8 to the  Consolidated
Condensed  Financial  Statements  included elsewhere in this quarterly Report on
Form 10-Q.                                                                      

ITEM 6.  Exhibits and Reports on Form 8-K                                       

(a)  Exhibits                                                                   

Exhibit 11 - Computations of Earnings Per Common Share                      

(b)  Reports on Form 8-K                                                        

None filed                                                                  
SIGNATURES

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

 DYNCORP

Date:  May 12, 1997              P.C. FitzPatrick                               
  P.C. FitzPatrick
       Senior Vice President
             and Chief Financial Officer

Date:  May 12, 1997              J.J. Fitzgerald                                
 J.J. Fitzgerald
               Vice President and Controller

Date:  May 12, 1997              G.A. Dunn                                      
G.A. Dunn     
Vice President

Dates Referenced Herein   and   Documents Incorporated By Reference

This 10-Q/A Filing		Date		Other Filings
		9/1/95
		3/28/96		10-Q
		12/31/96		10-K, 10-K/A
		3/17/97
For The Period Ended		3/27/97		10-Q
		4/18/97
		5/2/97
		5/12/97		10-Q
		5/30/97
Filed On / Filed As Of		6/13/97
		9/1/97
		12/15/97
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