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DynCorp International Inc. Reports Fourth Quarter and Fiscal 2008 Year-End Financial Results.

* 2008 Revenue Increased $57.5 Million to $2.14 Billion, or 2.8%, Year-over-Year

* Earnings Per Share Increased to $0.84, or 71.4%, Year-over-Year

* EBITDA was $174.8 Million, an Increase of $11.4 Million over Fiscal 2007

FALLS CHURCH, Va. -- DynCorp International Inc. (NYSE: DCP), a leading provider of specialized mission-critical technical services to civilian and military government agencies, today reports fiscal 2008 fourth quarter and fiscal 2008 full year financial results.

Fiscal 2008 Fourth Quarter Results

Revenue for the fiscal 2008 fourth quarter ended March 28, 2008 increased $20.6 million, or 3.7%, to $572.9 million, compared to revenue of $552.3 million for the fiscal 2007 fourth quarter. Revenue from the Government Services (GS) segment for the fourth quarter increased $17.6 million, or 4.9% over the comparable period in fiscal 2007. The higher GS revenue for the fourth quarter was attributable primarily to increased construction projects in Africa and Afghanistan. Revenue from the Maintenance and Technical Support Services (MTSS) segment increased $3.0 million, or 1.6% over the fiscal 2007 fourth quarter. The higher MTSS revenue was attributable to additional work associated with the Mine Resistant and Ambush Protected (MRAP) vehicle program and continued increases in support service levels for overhaul of aviation assets deployed primarily to Iraq and Afghanistan.

Operating income for the fiscal 2008 fourth quarter decreased 46.3% to $23.0 million, compared to operating income of $42.9 million for the fiscal 2007 fourth quarter. Operating margin for the fiscal 2008 fourth quarter was 4.0%, compared to operating margin of 7.8% in the fiscal 2007 fourth quarter. The decline in operating margin was primarily due to increased ongoing operating performance net of the recognition of $10.4 million in operating income related to claims on two aviation contracts during the fourth quarter of fiscal 2007. In addition, in the first quarter of fiscal 2009, the Company received an adverse decision in a lawsuit brought by a former subcontractor, which the Company intends to appeal. Combined with an increase in other unrelated legal reserves, this resulted in a $12.5 million reduction in operating income. During the fourth quarter, our support of transition activities under the linguist and translation services contract awarded in February 2008 to Global Linguist Solutions (GLS), the Company's majority-owned joint venture, did not result in additional revenue due to the protest filed by the incumbent contractor and an associated stop-work order issued by the customer. As a result, the Company's fourth quarter operating income was negatively impacted by GLS losses totaling $6.7 million, including $3.3 million of minority interest-related losses.

Net income for the fiscal 2008 fourth quarter was $9.8 million, or $0.17 per share, compared to net income of $18.9 million, or $0.33 per share, for the comparable period in fiscal 2007. The decrease in 2008 fourth quarter net income was due to the decline in operating income, discussed above, offset by lower net interest costs in fiscal year 2008.

Earnings before interest, taxes, depreciation, and amortization (EBITDA) for the 2008 fourth quarter decreased to $39.6 million, or 6.9% of revenue, from $55.8 million, or 10.1% of revenue, for the comparable period in fiscal 2007. The reduction in EBITDA was primarily due to the decline in operating income, discussed above.

Fiscal 2008 Full Year Results

Revenue for the fiscal year ended March 28, 2008 increased by $57.5 million, or 2.8%, to $2.14 billion, compared to revenue of $2.08 billion for the Company's fiscal year ended March 30, 2007. Of the $57.5 million increase, $26.1 million was attributable to the GS segment and $31.4 million was attributable to the MTSS segment.

Revenue from the GS segment for fiscal year 2008 increased 1.9% over fiscal year 2007 to $1.4 billion. The GS revenue growth was primarily driven by increased construction-management services in regions such as Africa and Afghanistan, and increases in drug-eradication services. These increases were partially offset by a decrease in the Company's law-enforcement and security services due to the transition of Company operations in Iraq from leased facilities to customer-provided facilities during the fiscal year and the conclusion of contingency and logistics services provided after Hurricane Katrina in 2007.

Revenue from the MTSS segment for fiscal year 2008 increased 4.5% over fiscal year 2007 to $734.8 million. MTSS revenue growth was primarily driven by increases in support requirements associated with the Company's Life Cycle Contractor Support programs, primarily for deployments in Iraq and Afghanistan, increased work with MRAP vehicles, and new threat management systems in the Company's Aviation & Maintenance Services unit. The MTSS revenue increase was partially offset by a temporary decline in maintenance and repair services provided by the Company's Field Service Operations, which resulted from longer deployment cycles for equipment in Iraq and Afghanistan.

Operating income for fiscal year 2008 increased 5.7% to $120.0 million, compared to operating income of $113.5 for the Company's fiscal year 2007. This increase represents an operating margin of 5.6% as compared to an operating margin of 5.5% in fiscal year 2007. The increased operating income and operating margin reflect year-over-year revenue growth and improved cost of operations. These increases resulted primarily from: (i) strong contract performance combined with the elimination of non-recurring write-offs from contract losses in fiscal year 2007 in our Law Enforcement & Security services unit, (ii) non-recurring costs associated with severance expenses for certain former executives and bonus compensation related to the Company's IPO from fiscal year 2007, and (iii) lower year-over-year depreciation and amortization. These increases were partially offset by the legal and GLS start-up costs discussed above.

Net income was $48.0 million in fiscal year 2008, compared to $27.0 million in fiscal year 2007. This net income increase of 77.5% was due to the elements positively impacting operating income discussed above, reduced net interest costs, increased affiliate income, and a lower effective tax rate. Earnings per share for fiscal year 2008 increased 71.4% to $0.84 per share from $0.49 per share in fiscal year 2007.

EBITDA in fiscal year 2008 increased 7.0% to $174.8 million, or 8.2% of revenue, compared to EBITDA of $163.4 million, or 7.8% of revenue, in fiscal year 2007. EBITDA growth was primarily driven by our improved operating income, discussed above, which was partially offset by legal and GLS startup costs totaling $15.9 million incurred during the fourth quarter of fiscal year 2008.

Operating cash flow decreased 51.2% to $42.4 million in fiscal year 2008 compared to $86.8 million in fiscal year 2007. The decrease was driven by increases in working capital, primarily increased accounts receivable, offset by higher net income. Days sales outstanding (DSO) was 73 days at the end of fiscal year 2008, compared to 67 days at the end of fiscal year 2007.

Net debt, which is total debt less cash and cash equivalents, was $507.8 million on March 28, 2008, a reduction of $20.7 million year-over-year.

Backlog decreased 2.8% to $6.0 billion as of March 28, 2008. The decrease in backlog is primarily due to a general shift by government customers to Indefinite Delivery/Indefinite Quantity (IDIQ) contracts, which generally consist of short-term task orders that do not typically have as significant an impact on backlog as other contract vehicles.

Fiscal 2009 Guidance

The Company is issuing the following guidance for fiscal year 2009 ending April 3, 2009, based on its current backlog and management's estimate of future contract awards. This guidance represents a significant increase from our fiscal year 2008 results primarily due to the estimated impact from the GLS operation.
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Conference Call

The Company will host a conference call at 8:30 a.m. EDT on Thursday, May 29, 2008 to discuss fourth quarter and full year fiscal 2008 financial results. To participate in the conference call, dial (866) 871-0758 and enter conference ID number 44822839. International callers should dial (706) 634-5249 and enter the same conference ID number above. A telephonic replay will be available from 9:30 a.m. EDT on May 29, 2008, through 11:59 a.m. EDT on June 12, 2008. To access the replay, please dial (800) 642-1687 or (706) 645-9291 and enter ID number 44822839.

About DynCorp International

DynCorp International is a leading provider of specialized mission-critical technical services to civilian and military government agencies worldwide, and operates major programs in law enforcement training and support, security services, base operations, aviation services, contingency operations, logistics support and linguist services. Headquartered in Falls Church, Va., DynCorp International has approximately 15,000 employees worldwide. For more information, visit www.dyn-intl.com.

Reconciliation to GAAP

In addition to the Company's financial results reported in accordance with accounting principles generally accepted in the United States of America ("GAAP") included in this press release, the Company has provided certain financial measures that are not calculated according to GAAP. Management believes these non-GAAP financial measures are useful in evaluating operating performance and are regularly used by security analysts, institutional investors and other interested parties in reviewing the Company. Non-GAAP financial measures are not intended to be a substitute for any GAAP financial measure and, as calculated, may not be comparable to other similarly titled measures of the performance of other companies.

For a reconciliation of non-GAAP financial measures to the comparable GAAP financial measures and for share amounts used to derive earnings per share, please see the financial schedules accompanying this release.

Forward-looking Statements

Certain statements made in this announcement may constitute "forward-looking statements" within the meaning of Section 27A of the Securities Act, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, regarding the expectations of management with respect to revenue and profitability. All of these forward-looking statements are based on estimates and assumptions made by the Company's management that, although believed by the Company to be reasonable, are inherently uncertain. Forward-looking statements involve risks and uncertainties, including, but not limited to, economic, competitive, governmental, and technological factors outside of the Company's control that may cause its business, strategy or actual results or events to differ materially from the statements made herein. These risks and uncertainties may include, but are not limited to, the following: changes in the demand for services the Company provides; additional work awarded under the Civilian Police and International Narcotics and Law Enforcement contracts; pursuit of new commercial business in the U.S. and abroad; activities of competitors including bid protests; changes in significant operating expenses; changes in availability of capital; general economic and business conditions in the U.S. and abroad; acts of war or terrorist activities; variations in performance of financial markets; and other risks detailed from time to time in the Company's reports filed with the Securities and Exchange Commission. Given these risks and uncertainties, you are cautioned not to place undue reliance on forward-looking statements. The Company's actual results could differ materially from those contained in the forward-looking statements. The Company undertakes no obligation to publicly update or revise any forward-looking statement as a result of new information, future events or otherwise, except as required by law.
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(1) Backlog consists of orders and options under our contracts. We define contracted backlog as the estimated value of contract awards received from customers that have not been recognized as sales. Our backlog consists of funded and unfunded backlog. Funded backlog is based upon amounts actually appropriated by a customer for payment of goods and services less actual revenue recorded as of the measurement date under that appropriation. Unfunded backlog is the actual dollar value of unexercised 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 options may be exercised at the sole discretion of the customer. It has been our historical experience, however, that the customer has exercised contract options.

(2) As of March 28, 2008 and March 30, 2007, the backlog related to GLS was $3.5 billion and $3.3 billion, respectively, and is included in the table above.

(3) Estimated remaining contract value represents the aggregate contract revenue we estimate will be earned over the remaining life of certain contracts. When more than one company is awarded a contract for a given work requirement, we include in estimating remaining contract value only our estimate of the contract revenue we expect to earn over the remaining term of the contract. Funded backlog is based upon amounts actually appropriated by a customer for payment for goods and services. Because the U.S. federal government operates under annual appropriations, agencies of the U.S. federal government typically fund contracts on an incremental basis. Accordingly, the majority of the estimated remaining contract value is not funded backlog. Our estimated remaining contract value is based on our experience under contracts and we believe our estimates are reasonable. However, there can be no assurance that our existing contracts will result in actual revenue in any particular period or at all. These amounts could vary depending upon government policies, government budgets, and appropriations.
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Publication:Business Wire
Article Type:Financial report
Date:May 28, 2008
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