UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

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

For the quarterly period ended September 27, 2013

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: 333-173746

DELTA TUCKER HOLDINGS, INC.

(Exact name of registrant as specified in its charter)

Delaware	27-2525959
(State or other jurisdiction of incorporation or organization)	(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)

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   ¨No  þ

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).     Yes   þ     No   ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See 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	¨	Accelerated filer	¨
Non-accelerated filer	þ  (Do not check if a smaller reporting company)	Smaller reporting company	¨

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

As of November 12, 2013, the registrant had 100 shares of its Class A common stock outstanding.

Delta Tucker Holdings, Inc.

Table of Contents

		Page
	Disclosure Regarding Forward-Looking Information	3
	Calendar Year	4
PART I. FINANCIAL INFORMATION		5
Item 1.	Financial Statements	5
	Unaudited Condensed Consolidated Statements of Operations - Three and Nine Months Ended September 27, 2013 and September 28, 2012	5
	Unaudited Condensed Consolidated Statements of Comprehensive Income (Loss) -Three and Nine Months Ended September 27, 2013 and September 28, 2012	6
	Unaudited Condensed Consolidated Balance Sheets as of September 27, 2013 and December 31, 2012	7
	Unaudited Condensed Consolidated Statements of Cash Flows - Nine Months Ended September 27, 2013 and September 28, 2012	8
	Unaudited Condensed Consolidated Statements of Equity - Nine Months Ended September 27, 2013 and September 28, 2012	9
	Notes to Unaudited Condensed Consolidated Financial Statements	10
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	42
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	57
Item 4.	Controls and Procedures	57
PART II. OTHER INFORMATION
Item 1.	Legal Proceedings	58
Item 1A.	Risk Factors	58
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	58
Item 3.	Defaults Upon Senior Securities	59
Item 4.	Mine Safety Disclosures	59
Item 5.	Other Information	59
Item 6.	Exhibits	59

2

Disclosure Regarding Forward-Looking Information

This Quarterly Report on Form 10-Q contains various forward-looking statements regarding future events and our future results that are subject to the safe harbors created by the Private Securities Litigation Reform Act of 1995 under the Securities Act of 1933 (the "Securities Act") and the Securities Exchange Act of 1934 (the "Exchange Act"). 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 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, international and technological factors that could cause our business, strategy, projections 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:

• the future impact of mergers, acquisitions, divestitures, joint ventures or teaming agreements;

• our substantial level of indebtedness and changes in availability of capital and cost of capital;

• the outcome of any material litigation, government investigation, audit or other regulatory matters;

• restatement of our financial statements causing credit ratings to be downgraded or covenant violations under our debt agreements;

• policy and/or spending changes implemented by the Obama Administration, any subsequent administration or Congress, including extending the Continuing Resolution ("CR") that the United States ("U.S.") Department of Defense ("DoD") is currently operating under;

• termination or modification of key U.S. government or commercial contracts, including subcontracts;

• changes in the demand for services that we provide or work awarded under our contracts, including without limitation, the International Narcotics and Law ("INL") Enforcement, Contract Field Teams ("CFT") and Logistics Civil Augmentation Program ("LOGCAP IV") contracts;

• changes in the demand for services provided by our joint venture partners;

• pursuit of new commercial business in the U.S. and abroad;

• activities of competitors and the outcome of bid protests;

• changes in significant operating expenses;

• impact of lower than expected win rates for new business;

• general political, economic, regulatory and business conditions in the U.S. or in other countries in which we operate;

• acts of war or terrorist activities, including cyber security threats;

• variations in performance of financial markets;

• the inherent difficulties of estimating future contract revenue and changes in anticipated revenue from indefinite delivery, indefinite quantity ("IDIQ") contracts;

• the timing or magnitude of any award fee granted under our government contracts;

• changes in 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;

• decline in the estimated fair value of a reporting unit resulting in a goodwill impairment and a related non-cash impairment charged against earnings;

• changes in underlying assumptions, circumstances or estimates may have a material adverse effect upon the profitability of one or more contracts and our performance;

• changes in our tax provisions or exposure to additional income tax liabilities that could affect our profitability and cash flows;

• termination or modification of key subcontractor performance or delivery; and

• statements covering our business strategy, those described in "Item 1A. Risk Factors" of this Quarterly Report and under "Item 1A. Risk Factors" in the Company’s Annual Report on Form 10-K for the year ended December 31, 2012 filed with the Securities and Exchange Commission ("SEC") on March 27, 2013 and other risks detailed from time to time in our reports filed with 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 statements contained herein will prove to be accurate. We assume no obligation to update the forward-looking statements.

3

Calendar Year

We report the results of our operations using a basis where each quarterly period ends on the last Friday of the calendar quarter, except for the fourth quarter of the fiscal year, which ends on December 31. Included in this Quarterly Report are our unaudited condensed consolidated statements of operations and comprehensive income for the three and nine months endedSeptember 27, 2013 and September 28, 2012, the related statements of equity and cash flows for the nine months endedSeptember 27, 2013 and September 28, 2012 and the unaudited condensed consolidated balance sheets as of September 27, 2013 and December 31, 2012.

4

PART I. FINANCIAL INFORMATION.

ITEM 1. FINANCIAL STATEMENTS.

Delta Tucker Holdings, Inc.

Unaudited Condensed Consolidated Statements of Operations

	Three Months Ended						Nine Months Ended
(Amounts in thousands)	September 27, 2013			September 28, 2012			September 27, 2013			September 28, 2012
Revenue	$	766,785		$	1,010,314		$	2,575,415		$	3,018,469
Cost of services	(706,308		)	(917,138		)	(2,346,007		)	(2,756,839		)
Selling, general and administrative expenses	(34,179		)	(40,347		)	(103,871		)	(116,822		)
Depreciation and amortization expense	(12,046		)	(12,375		)	(36,167		)	(37,594		)
Earnings from equity method investees	295			315			3,668			538
Impairment of goodwill	(28,824		)	(30,859		)	(28,824		)	(30,859		)
Operating (loss) income	(14,277		)	9,910			64,214			76,893
Interest expense	(19,720		)	(22,011		)	(58,721		)	(65,438		)
Loss on early extinguishment of debt	(230		)	(696		)	(230		)	(1,479		)
Interest income	31			21			77			94
Other income (expense), net	337			68			(124		)	4,768
(Loss) income before income taxes	(33,859		)	(12,708		)	5,216			14,838
Benefit (provision) for income taxes	1,991			(1,393		)	(11,393		)	(11,744		)
Net (loss) income	(31,868		)	(14,101		)	(6,177		)	3,094
Noncontrolling interests	(1,197		)	(1,693		)	(3,546		)	(4,322		)
Net loss attributable to Delta Tucker Holdings, Inc.	$	(33,065	)	$	(15,794	)	$	(9,723	)	$	(1,228	)

See notes to unaudited condensed consolidated financial statements

5

Delta Tucker Holdings, Inc.

Unaudited Condensed Consolidated Statements of Comprehensive Income (Loss)

	Three Months Ended						Nine Months Ended
(Amounts in thousands)	September 27, 2013			September 28, 2012			September 27, 2013			September 28, 2012
Net (loss) income	$	(31,868	)	$	(14,101	)	$	(6,177	)	$	3,094
Other comprehensive loss:
Currency translation adjustment	57			296			(398		)	147
Other comprehensive income (loss), before tax	57			296			(398		)	147
Income tax (provision) benefit related to items of other comprehensive (loss) income	(20		)	(106		)	143			(54		)
Other comprehensive income (loss)	37			190			(255		)	93
Comprehensive (loss) income	(31,831		)	(13,911		)	(6,432		)	3,187
Comprehensive loss attributable to noncontrolling interests	(1,197		)	(1,693		)	(3,546		)	(4,322		)
Comprehensive loss attributable to Delta Tucker Holdings, Inc.	$	(33,028	)	$	(15,604	)	$	(9,978	)	$	(1,135	)

See notes to unaudited condensed consolidated financial statements

6

Delta Tucker Holdings, Inc.

Unaudited Condensed Consolidated Balance Sheets

	As of
(Amounts in thousands, except share data)	September 27, 2013			December 31, 2012
ASSETS
Current assets:
Cash and cash equivalents	$	41,762		$	118,775
Restricted cash	1,659			1,659
Accounts receivable, net of allowances of $2,401 and $1,481 respectively	729,944			780,613
Prepaid expenses and other current assets	71,682			79,223
Total current assets	845,047			980,270
Property and equipment, net	23,189			26,207
Goodwill	575,228			604,052
Tradenames, net	43,510			43,643
Other intangibles, net	236,286			266,534
Other assets, net	41,123			50,010
Total assets	$	1,764,383		$	1,970,716
LIABILITIES
Current liabilities:
Current portion of long-term debt	$	—		$	637
Accounts payable	191,800			287,350
Accrued payroll and employee costs	112,183			127,811
Deferred tax liabilities, net	30,143			59,032
Accrued liabilities	144,115			202,463
Income taxes payable	17,845			4,071
Total current liabilities	496,086			681,364
Long-term debt, less current portion	767,272			782,272
Long-term deferred taxes, net	60,935			50,303
Other long-term liabilities	5,918			11,023
Total liabilities	1,330,211			1,524,962
EQUITY
Common stock, $0.01 par value – 1,000 shares authorized and 100 shares issued and outstanding at September 27, 2013 and December 31, 2012, respectively.	—			—
Additional paid-in capital	549,547			549,322
Accumulated deficit	(121,586		)	(111,863		)
Accumulated other comprehensive (loss) income	(172		)	83
Total equity attributable to Delta Tucker Holdings, Inc.	427,789			437,542
Noncontrolling interests	6,383			8,212
Total equity	434,172			445,754
Total liabilities and equity	$	1,764,383		$	1,970,716

See notes to unaudited condensed consolidated financial statements

7

Delta Tucker Holdings, Inc.

Unaudited Condensed Consolidated Statements of Cash Flows

	Nine Months Ended
(Amounts in thousands)	September 27, 2013			September 28, 2012
Cash flows from operating activities
Net (loss) income	$	(6,177	)	$	3,094
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	37,470			38,785
Loss on early extinguishment of debt	230			1,479
Amortization of deferred loan costs	5,154			5,788
Impairment of goodwill	28,824			30,859
Earnings from equity method investees	(3,013		)	(4,876		)
Distributions from affiliates	5,983			2,267
Deferred income taxes	(18,255		)	7,139
Other	(1,756		)	(4,394		)
Changes in assets and liabilities:
Restricted cash	—			9,114
Accounts receivable	49,415			(24,261		)
Prepaid expenses and other current assets	5,876			(12,537		)
Accounts payable and accrued liabilities	(148,390		)	6,983
Income taxes payable	14,394			5,808
Net cash (used in) provided by operating activities	(30,245		)	65,248
Cash flows from investing activities
Purchase of property and equipment	(1,654		)	(4,543		)
Proceeds from sale of property, plant and equipment	177			7
Heliworks acquisition, net of cash acquired	—			(11,056		)
Purchase of software	(2,681		)	(2,066		)
Return of capital from equity method investees	1,549			9,154
Contributions to equity method investees	(30		)	(1,479		)
Net cash (used in) investing activities	(2,639		)	(9,983		)
Cash flows from financing activities
Borrowings on long-term debt	573,200			304,200
Payments on long-term debt	(588,837		)	(364,200		)
Payment of deferred financing costs	(2,139		)	—
Borrowings related to financed insurance	5,133			62,581
Payments related to financed insurance	(27,902		)	(38,541		)
Payment of dividends to noncontrolling interests	(3,584		)	(2,119		)
Net cash used in financing activities	(44,129		)	(38,079		)
Net (decrease) increase in cash and cash equivalents	(77,013		)	17,186
Cash and cash equivalents, beginning of period	118,775			70,205
Cash and cash equivalents, end of period	$	41,762		$	87,391
Income tax paid/(refund received), net	$	7,942		$	(1,080	)
Interest paid	$	65,285		$	69,017

See notes to unaudited condensed consolidated financial statements

8

Delta Tucker Holdings, Inc.

Unaudited Condensed Consolidated Statements of Equity

(Amounts in thousands)	Common Stock			Additional Paid-in Capital			Accumulated Deficit			Accumulated Other Comprehensive (Loss)			Total Equity Attributable to Delta Tucker Holdings, Inc.			Noncontrolling Interest			Total Equity
Balance at December 30, 2011 As Restated	—	$	—	$	550,951		$	(102,926	)	$	(59	)	$	447,966		$	5,186		$	453,152
Comprehensive (loss) income attributable to Delta Tucker Holdings, Inc.	—	—		—			(1,228		)	93			(1,135		)	—			(1,135		)
Noncontrolling interests	—	—		—			—			—			—			4,322			4,322
DIFZ financing, net of tax	—	—		407			—			—			407			—			407
Distribution to affiliates of Parent	—	—		(1,998		)	—			—			(1,998		)	696			(1,302		)
Dividends declared to noncontrolling interests	—	—		—			—			—			—			(3,316		)	(3,316		)
Balance at September 28, 2012	—	$	—	$	549,360		$	(104,154	)	$	34		$	445,240		$	6,888		$	452,128
(Amounts in thousands)	Common Stock			Additional Paid-in Capital			Accumulated Deficit			Accumulated Other Comprehensive Income (Loss)			Total Equity Attributable to Delta Tucker Holdings, Inc.			Noncontrolling Interest			Total Equity
Balance at December 31, 2012	—	$	—	$	549,322		$	(111,863	)	$	83		$	437,542		$	8,212		$	445,754
Comprehensive (loss) attributable to Delta Tucker Holdings, Inc.	—	—		—			(9,723		)	(255		)	(9,978		)	—			(9,978		)
Noncontrolling interests	—	—		—			—			—			—			3,546			3,546
DIFZ financing, net of tax	—	—		225			—			—			225			—			225
Dividends declared to noncontrolling interests	—	—		—			—			—			—			(5,375		)	(5,375		)
Balance at September 27, 2013	—	$	—	$	549,547		$	(121,586	)	$	(172	)	$	427,789		$	6,383		$	434,172

See notes to unaudited condensed consolidated financial statements

9

Delta Tucker Holdings, Inc.

Notes to Unaudited Condensed Consolidated Financial Statements

Note 1 — Basis of Presentation and Accounting Policies

Basis of Presentation

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

The unaudited condensed consolidated financial statements include the accounts of the Company and our domestic and foreign subsidiaries. These unaudited condensed consolidated financial statements have been prepared pursuant to accounting principles generally accepted in the United States of America ("GAAP") for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X.

Certain information and footnote disclosures normally included in financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to such rules and regulations. However, we believe that all disclosures are adequate and do not make the information presented misleading. These unaudited condensed consolidated financial statements should be read in conjunction with our audited consolidated financial statements and the related notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2012.

In the opinion of management, all adjustments necessary to fairly present our financial position as of September 27, 2013 and December 31, 2012, the results of operations and statements of comprehensive income for the three and nine months endedSeptember 27, 2013 and September 28, 2012 and the statements of equity and cash flows for the nine months endedSeptember 27, 2013 and September 28, 2012 have been included. The results of operations and the statements of comprehensive income for the three and nine months endedSeptember 27, 2013 and September 28, 2012 and the statements of equity and cash flows for the nine months endedSeptember 27, 2013 and September 28, 2012 are not necessarily indicative of the results to be expected for the full calendar year or for any future periods. We use estimates and assumptions required for preparation of the financial statements. The estimates are primarily based on historical experience and business knowledge and are revised as circumstances change. Our actual results may differ from these estimates.

Restatement

As disclosed in Note 1, Significant Accounting Policies and Accounting Developments in our Annual Report on Form 10-K for the year ended December 31, 2012, the Company restated its consolidated financial statements for the fiscal year ended December 30, 2011 and for the period from April 1, 2010 (inception) through December 31, 2010. The balances presented in the accompanying unaudited condensed consolidated Statement of Equity as of December 30, 2011 have been restated. Refer to the Company's Annual Report on Form 10-K for the year ended December 31, 2012 for further discussion.

Principles of Consolidation

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

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

10

Noncontrolling interests

We record the impact of our partners' interest in less than wholly owned consolidated VIEs as noncontrolling interests. Currently, DynCorp International FZ-LLC ("DIFZ") is our only consolidated VIE for which we do not own 100% of the entity. We hold 25% ownership interest in DIFZ. We continue to consolidate DIFZ as we still exercise power over activities that significantly impact DIFZ’s economic performance and have the obligation to absorb losses or receive benefits of DIFZ that could potentially be significant to DIFZ. Noncontrolling interests is presented on the face of the statement of operations as an increase or reduction in arriving at net income attributable to Delta Tucker Holdings, Inc. Noncontrolling interests on the balance sheet is located in the equity section. See Note 10 for further information regarding DIFZ.

Use of Estimates

We prepare our financial statements in conformity with GAAP, which requires us to make estimates and assumptions that affect the amounts reported in the financial statements. Actual results could differ from those estimates. Our estimates and assumptions are reviewed periodically, and the effects of changes, if any, are reflected in the unaudited condensed consolidated statements of operations in the period that they are determined.

The following table presents the aggregate gross favorable and unfavorable adjustments to income before income taxes resulting from changes in estimates for the three and nine months endedSeptember 27, 2013 and September 28, 2012.

	Three Months Ended						Nine Months Ended
(Amounts in millions)	September 27, 2013			September 28, 2012			September 27, 2013			September 28, 2012
Gross favorable adjustments	$	11.2		$	14.4		$	36.5		$	29.4
Gross unfavorable adjustments	(16.6		)	(2.1		)	(37.5		)	(7.7		)
Net adjustments	$	(5.4	)	$	12.3		$	(1.0	)	$	21.7

Accounting Policies

There have been no material changes to our significant accounting policies from those described in our Annual Report on Form 10-K for the year ended December 31, 2012 except for the adoption of ASU No. 2013-02 - Comprehensive Income as discussed below.

Accounting Developments

Pronouncements Implemented

In February 2013, the FASB issued Accounting Standards Update ("ASU") No. 2013-02 - Comprehensive Income that requires new disclosure requirements for items reclassified out of accumulated other comprehensive income ("AOCI"), including: (i) changes in AOCI balances by component and (ii) significant items reclassified out of AOCI. The new disclosure requirements are effective for fiscal years and interim periods beginning after December 15, 2012. We adopted ASU No. 2013-02 as of March 29, 2013. The adoption of this ASU has not had any impact on the Company's financial statements as the Company has not had any reclassifications from accumulated other comprehensive income to net income. Other comprehensive income in each period is comprised solely of foreign currency translation adjustments.

11

Note 2 — Composition of Certain Financial Statement Captions

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

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

	As Of
(Amounts in thousands)	September 27, 2013		December 31, 2012
Prepaid expenses	$	27,389	$	40,474
Prepaid income taxes	525		376
Inventories	25,706		16,330
Aircraft parts inventory held on consignment	2,430		2,676
Work-in-process inventory	3,311		9,371
Joint venture receivables	2,172		1,248
Other current assets	10,149		8,748
Total prepaid expenses and other current assets	$	71,682	$	79,223

Prepaid expenses include prepaid insurance, prepaid vendor deposits, and prepaid rent, none of which individually exceed 5% of current assets.

Included in inventory as of September 27, 2013 and December 31, 2012, are seven helicopters, valued at $8.2 million, which were not deployed on existing programs. Aircraft parts inventory held on consignment represents $2.4 million and $2.7 million in inventory related to our former Life Cycle Support Services ("LCCS") Navy contract as of September 27, 2013 and December 31, 2012, respectively. Work-in-process inventory includes equipment for vehicle modifications and other deferred costs related to certain contracts. We value our inventory at lower of cost or market.

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

	As Of
(Amounts in thousands)	September 27, 2013			December 31, 2012
Helicopters	$	11,509		$	11,497
Computers and other equipment	13,309			13,045
Leasehold improvements	10,863			10,026
Office furniture and fixtures	4,935			4,877
Gross property and equipment	40,616			39,445
Less accumulated depreciation	(17,427		)	(13,238		)
Total property and equipment, net	$	23,189		$	26,207

Depreciation expense, including certain depreciation amounts classified as Cost of services, was $1.5 million and $4.4 million during the three and nine months endedSeptember 27, 2013, respectively. Depreciation expense, including certain depreciation amounts classified as Cost of services, was $1.4 million and $4.3 million during the three and nine months endedSeptember 28, 2012, respectively.

Other assets, net — Other assets, net were:

	As Of
(Amounts in thousands)	September 27, 2013		December 31, 2012
Deferred financing costs, net	$	19,673	$	22,918
Investment in affiliates	14,835		20,348
Palm promissory note, long-term portion	2,988		4,037
Other	3,627		2,707
Total other assets, net	$	41,123	$	50,010

Deferred financing costs are amortized through interest expense. Amortization related to deferred financing costs was $1.6 million and $5.2 million during the three and nine months endedSeptember 27, 2013, respectively. Amortization related to deferred financing costs was $1.9 million and $5.8 million during the three and nine months endedSeptember 28, 2012, respectively. Deferred financing costs for the nine months endedSeptember 27, 2013 and September 28, 2012 were reduced by $0.2 million and $1.5 million, related to the pro rata write–off of deferred financing costs to loss on early extinguishment of debt as a result of

12

the $15.0 million and $60.0 million in principal prepayments made on the term loan facility during the nine months endedSeptember 27, 2013 and September 28, 2012, respectively. See Note 7 for further discussion of our debt.

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

	As Of
(Amounts in thousands)	September 27, 2013		December 31, 2012
Wages, compensation and other benefits	$	88,758	$	105,293
Accrued vacation	22,354		21,484
Accrued contributions to employee benefit plans	1,071		1,034
Total accrued payroll and employee costs	$	112,183	$	127,811

Accrued liabilities — Accrued liabilities were:

	As Of
(Amounts in thousands)	September 27, 2013		December 31, 2012
Customer liabilities	$	30,355	$	39,954
Accrued insurance	49,748		62,670
Accrued interest	12,838		24,847
Unrecognized tax benefit	8,868		—
Unfavorable contract liability	1,143		4,572
Contract losses	11,130		9,948
Legal matters	4,622		12,772
Subcontractor retention	5,851		8,448
Financed insurance	3,697		26,466
Other	15,863		12,786
Total accrued liabilities	$	144,115	$	202,463

Customer liabilities are primarily due to amounts received from customers in excess of revenue recognized. Other is comprised primarily of accrued rent and workers' compensation related claims and other balances that are not individually material to the consolidated financial statements. Legal matters include reserves related to various lawsuits and claims that arise in the normal course of business. See Note 8 for further discussion.

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

	As Of
(Amounts in thousands)	September 27, 2013		December 31, 2012
Unrecognized tax benefit, net	$	—	$	3,293
Unfavorable lease accrual	1,839		4,504
Other	4,079		3,226
Total other long-term liabilities	$	5,918	$	11,023

During the quarter ended September 27, 2013, we restructured our facilities footprint in Virginia to better position the Company operationally for the future.  In connection with this restructuring plan, the Company entered into a rental agreement to lease property in Tysons Corner, Virginia. 

During the fourth quarter of calendar year 2013, the Company plans to vacate the properties currently occupied at various locations and will consolidate to the new Tysons Corner location. We expect the costs associated with vacating these properties, such as lease vacancy obligations, net of estimated sublease rental assumptions, to be approximately $7.5 million.

As a result of the restructuring plan, we paid $3.2 million in relocation expenses in order to better position our executive presence in our Texas facilities.  We also recorded a postemployment benefit expense of $4.2 million related to severance in accordance with ASC 712 - Compensation. These charges were primarily related to the workforce reduction initiatives implemented during the year. Both charges were included in Selling, general and administrative expenses in the statements of operations.

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Note 3 — Goodwill and Other Intangible Assets

In April 2013, the Company amended its organizational structure to improve efficiencies within existing businesses, capitalize on new opportunities and continue international growth while expanding the commercial business. The Company's previous operating and reporting segments were re-aligned into three reporting and operating segments DynAviation, DynLogistics and DynGlobal. DynAviation and DynLogistics provide services domestically and in foreign countries primarily under contracts with the U.S. government. The initial focus of DynGlobal is the pursuit and growth of international and commercial business.

Our current structure now includes six reporting units for which we assess goodwill for potential impairment. Our DynAviation segment includes two reporting units, our DynLogistics segment includes four reporting units and there is no goodwill recorded at the DynGlobal segment. The amendment in the Company's organizational structure did not result in any reallocation of goodwill.

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

We derive substantially all of our revenue from contracts and subcontracts with the U.S. government and its agencies. Funding for our programs is dependent upon the annual budget and the appropriation decisions assessed by Congress, which are beyond our control. Estimates and judgments made by management, as it relates to the fair value of our reporting units or indefinite-lived intangible assets, could be impacted by the continued uncertainty over the defense industry. As of the nine months endedSeptember 27, 2013, with the US government fiscal year 2014 beginning, Congress reached an impasse in its efforts to bring resolution to the larger budgetary issues related to the debt and deficit that would undo sequestration and provide the desired clarity on defense spending. Congress was only able to agree to a short-term continuing resolution (CR) funding the government at the fiscal year 2013 sequester level through January 15, 2014 and suspended the statutory limit on the amount of permissible federal debt through February 7, 2014. It is unclear when or if annual appropriations bills will be enacted for the fiscal year 2014. The U.S. government may operate under a CR for all of 2014, restricting the start of new contracts or programs that year. Congressional appropriation and authorization of the fiscal year 2014 spending, including defense spending, and the application of sequestration remain marked by significant debate and an uncertain schedule. Congress and the Administration also continue to debate the debt ceiling, among other fiscal issues, as they negotiate plans for long-term national fiscal policy. The outcome of these debates could have a significant impact on future defense spending broadly and the Company's programs and could potentially result in an impairment of our goodwill.

Determining the fair value of a reporting unit or an indefinite-lived intangible asset involves judgment and the use of significant estimates and assumptions, particularly related to future operating results and cash flows. These estimates and assumptions include, but are not limited to, revenue growth rates and operating margins used to calculate projected future cash flows, risk-adjusted discount rates, future economic and market conditions and identification of appropriate market comparable data. Preparation of forecasts and the selection of the discount rate involve significant judgments that we base primarily on existing firm orders, expected future orders, and general market conditions. Significant changes in these forecasts, the discount rate selected, or the weighting of the income and market approach could affect the estimated fair value of one or more of our reporting units and could result in a goodwill impairment charge in a future period. In addition, the identification of reporting units and the allocation of assets and liabilities to the reporting units when determining the carrying value of each reporting unit also requires judgment. All of these factors are subject to change with a change in the defense industry or larger macroeconomic environment.

In accordance with ASC 350 - Intangibles-Goodwill and Other, we assess goodwill and other intangible assets with indefinite lives for impairment annually in October and when an event occurs or circumstances change that would suggest a triggering event. If a triggering event is identified, a step one assessment is performed to identify any possible goodwill impairment in the period in which the event is identified.

During the three months ended September 27, 2013, the Company learned that its pursuit of a significant business opportunity within the Intelligence & Security ("IS") reporting unit of the DynLogistics segment was unsuccessful. This reporting unit's projections included significant estimates related to the new business opportunity. Additionally, other significant new business pursuits became less probable due to competitor protest and other factors. The Company concluded the change in circumstances represented a triggering event and a step one assessment was performed to identify any possible goodwill impairment.

The first step of the impairment test indicated the carrying value of the IS reporting unit was less than the fair value. We performed step two of the impairment test and determined that the goodwill at the IS reporting unit was partially impaired. As a result, a non-cash impairment charge of approximately $28.8 million was recorded during the three months ended September 27,

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2013 to impair the carrying value of the IS reporting unit goodwill. The impairment charge has been presented separately in the unaudited condensed consolidated statement of operations.

Further, the current projections for one of the reporting units within the DynAviation segment, with $293.4 million in goodwill as of September 27, 2013, are currently dependent upon a single contract. Any negative changes to this contract, such as the loss of the contract during re-compete or notification from the customer of de-scoping of work to be performed under the contract, could result in operating results that differ from our projected forecasts, resulting in a triggering event and possible subsequent impairment of the reporting unit. Besides the IS reporting unit discussed above, there were no indicators of goodwill impairment in the remaining reporting units as of September 27, 2013.

In connection with our annual assessment of goodwill during the fourth quarter of calendar year 2013, we will update our key assumptions, including our forecasts of revenue and income for each reporting unit. There can be no assurance that the revenue estimates and assumptions regarding forecasted cash flows, the period or strength of the U.S. defense spending, including the impact of sequestration as well as the uncertainty around the CR or other inputs used in forecasting the present value of forecasted cash flows will prove to be accurate projections of future performance.

The carrying amount of goodwill for each of our segments as of September 27, 2013 was as follows:

(Amounts in thousands)	DynAviation		DynLogistics			Total
Goodwill balance as of December 31, 2012	$	442,393	$	161,659		$	604,052
Changes between January 1, 2013 and September 27, 2013	—		(28,824		)	(28,824		)
Goodwill balance as of September 27, 2013	$	442,393	$	132,835		$	575,228

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

	As of September 27, 2013
(Amounts in thousands, except years)	Weighted Average Remaining Useful Life (Years)	Gross Carrying Value		Accumulated Amortization			Net
Other intangible assets:
Customer-related intangible assets	5.8	$	350,912	$	(128,341	)	$	222,571
Other
Finite-lived	6.3	21,823		(13,167		)	8,656
Indefinite-lived		$	5,059	$	—		$	5,059
Total other intangibles		$	377,794	$	(141,508	)	$	236,286
Tradenames:
Finite-lived	1.6	$	869	$	(580	)	$	289
Indefinite-lived		43,221		—			43,221
Total tradenames		$	44,090	$	(580	)	$	43,510
	As of December 31, 2012
(Amounts in thousands, except years)	Weighted Average Remaining Useful Life (Years)	Gross Carrying Value		Accumulated Amortization			Net
Other intangible assets:
Customer-related intangible assets	6.6	$	350,912	$	(99,119	)	$	251,793
Other
Finite-lived	5.5	24,856		(15,174		)	9,682
Indefinite-lived		5,059		—			5,059
Total other intangibles		$	380,827	$	(114,293	)	$	266,534
Tradenames:
Finite-lived	2.4	$	869	$	(447	)	$	422
Indefinite-lived		43,221		—			43,221
Total tradenames		$	44,090	$	(447	)	$	43,643

Amortization expense for customer-related intangibles, other intangibles and finite-lived tradenames was $11.0 million and $33.0 million for the three and nine months endedSeptember 27, 2013, respectively. Amortization expense for customer-related intangibles, other intangibles and finite-lived tradenames was $11.3 million and $34.5 million for the three and nine months endedSeptember 28, 2012, respectively. Other intangibles are primarily representative of our capitalized software which had a net carrying value of $8.7 million and $9.6 million as of September 27, 2013 and December 31, 2012, respectively.

The following table outlines an estimate of future amortization based upon the finite-lived intangible assets owned and the finite-lived tradenames as of September 27, 2013:

(Amounts in thousands)	Amortization Expense
Estimate for three month period ending December 31, 2013	$	11,197
Estimate for calendar year 2014	43,689
Estimate for calendar year 2015	41,615
Estimate for calendar year 2016	38,299
Estimate for calendar year 2017	36,033
Thereafter	60,683
Total	$	231,516

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Note 4 — Income Taxes

The domestic and foreign components of (Loss) Income before income taxes are as follows:

	Three Months Ended						Nine Months Ended
(Amounts in thousands)	September 27, 2013			September 28, 2012			September 27, 2013			September 28, 2012
Domestic	$	(34,525	)	$	(13,829	)	$	5,845		$	10,659
Foreign	666			1,121			(629		)	4,179
(Loss) Income before income taxes	$	(33,859	)	$	(12,708	)	$	5,216		$	14,838

The provision for income taxes consists of the following:

	Three Months Ended						Nine Months Ended
(Amounts in thousands)	September 27, 2013			September 28, 2012			September 27, 2013			September 28, 2012
Current portion:
Federal	$	9,171		$	—		$	9,171		$	—
State	213			(22		)	588			204
Foreign	9,172			2,297			14,230			3,911
	$	18,556		$	2,275		$	23,989		$	4,115
Deferred portion:
Federal	$	(20,429	)	$	(972	)	$	(12,656	)	$	7,433
State	(113		)	42			62			175
Foreign	(5		)	48			(2		)	21
	(20,547		)	(882		)	(12,596		)	7,629
Provision for income taxes	$	(1,991	)	$	1,393		$	11,393		$	11,744

Deferred tax liabilities, net consist of the following:

	As Of
(Amounts in thousands)	September 27, 2013			December 31, 2012
Current deferred tax liabilities, net	$	(30,143	)	$	(59,032	)
Non-current deferred tax liabilities, net	(60,935		)	(50,303		)
Deferred tax liabilities, net	$	(91,078	)	$	(109,335	)

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

	Three Months Ended				Nine Months Ended
	September 27, 2013		September 28, 2012		September 27, 2013		September 28, 2012
Statutory rate	35.0	%	35.0	%	35.0	%	35.0	%
State income tax, less effect of federal deduction	(0.3	)%	(0.2	)%	12.4	%	2.6	%
Goodwill Impairment	(29.8	)%	(47.6	)%	193.4	%	40.6	%
Noncontrolling interests	1.1	%	1.3	%	(23.1	)%	(6.0	)%
Nondeductible expenses	(1.0	)%	—	%	19.9	%	—	%
Discreet items	0.7	%	—	%	(21.9	)%	—	%
Uncertain tax positions	—	%	—	%	6.0	%	—	%
Other	0.2	%	0.5	%	(3.3	)%	6.9	%
Effective tax rate	5.9	%	(11.0	)%	218.4	%	79.1	%

During the year ended December 31, 2012, we fully utilized our U.S. federal net operating losses. As of September 27, 2013 and December 31, 2012, we had state net operating loss carryforwards of approximately $23.7 million and $123.7 million, respectively, which will begin to expire in 2015. The remainder of our state net operating loss carryforwards will not begin to expire until 2020 or later. Additionally, as of December 31, 2012, we had foreign tax credit carry forwards of $9.3 million which

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we fully utilized. We expect to fully utilize our state net operating losses prior to expiration. During the nine months endedSeptember 27, 2013, we made estimated federal income tax payments of $6.9 million.

In evaluating our deferred tax assets, we assess the need for any related valuation allowances or adjust the amount of any allowances, if necessary. We assess such factors as the scheduled reversal of deferred tax liabilities (including the impact of available carry back and carry forward periods), projected future taxable income and available tax planning strategies in determining the need for or sufficiency of a valuation allowance. Based on this assessment, we concluded that no valuation allowance was necessary as of September 27, 2013.

As of September 27, 2013 and December 31, 2012, we had $8.9 million of total unrecognized tax benefits, of which $2.7 million and $2.4 million, respectively, would impact our effective tax rate if recognized. We anticipate that all $8.9 million of unrecognized tax benefits will be settled in the next twelve months.

Note 5 — Accounts Receivable

Accounts receivable, net consisted of the following:

	As Of
(Amounts in thousands)	September 27, 2013		December 31, 2012
Billed	$	216,298	$	245,678
Unbilled	513,646		534,935
Total accounts receivable, net	$	729,944	$	780,613

Unbilled receivables as of September 27, 2013 and December 31, 2012 include $40.2 million and $36.2 million, respectively, related to costs incurred on projects for which we have been requested by the customer to begin work under a new contract or extend work under an existing contract and for which formal contracts, contract modifications or other contract actions have not been executed at the end of the respective periods. As of September 27, 2013, we had no contract claims outstanding. As of December 31, 2012, we had one contract claim totaling $12.1 million which was subsequently paid by the customer during the three months March 29, 2013. The balance of unbilled receivables consists of costs and fees billable immediately on contract completion or other specified events, all of which are expected to be billed and collected within one year, except items that may result in a request for equitable adjustment or formal claim. We do not believe we have significant exposure to credit risk as our receivables are primarily with the U.S. government. Our largest contract, LOGCAP IV, accounted for approximately 46% and 45% of total unbilled receivables as September 27, 2013 and December 31, 2012, respectively.

Note 6 — Fair Value of Financial Assets and Liabilities

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

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

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

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

Fair Value of Financial Instruments

Our financial instruments include cash and cash equivalents, accounts and notes receivable, accounts payable, and borrowings. Because of the short-term nature of cash and cash equivalents, accounts and notes receivable, accounts payable and a portion of our debt, the fair value of these instruments approximates the carrying value. Our estimate of the fair value of our long-term debt is based on Level 1 and Level 2 inputs, as defined above.  

	September 27, 2013				December 31, 2012
(Amounts in thousands)	Carrying Amount		Fair Value		Carrying Amount		Fair Value
10.375% senior unsecured notes	$	455,000	$	468,650	$	455,000	$	416,325
Term Loan	312,272		313,053		327,272		328,908
Total long-term debt	$	767,272	$	781,703	$	782,272	$	745,233

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Note 7 — Long-Term Debt

Long-term debt consisted of the following:

	As of
(Amounts in thousands)	September 27, 2013		December 31, 2012
9.5% senior subordinated notes	$	—	$	637
10.375% senior unsecured notes	455,000		455,000
Term loan	312,272		327,272
Total indebtedness	767,272		782,909
Less current portion of long-term debt	—		(637		)
Total long-term debt	$	767,272	$	782,272

The current portion of long-term debt as of December 31, 2012 consisted of our 9.5% senior subordinated notes that matured and were paid in full on February 15, 2013. The total due on the Term Loan is included in Long-term debt in our consolidated balance sheet as of September 27, 2013 and December 31, 2012.

Senior Credit Facility

On July 7, 2010, we entered into a senior secured credit facility (the "Senior Credit Facility"), with a banking syndicate and Bank of America, NA as Administrative Agent (the "Administrative Agent"). On January 21, 2011 and on August 10, 2011, DynCorp International Inc. entered into amendments to the Senior Credit Facility.

On June 19, 2013, we entered into a third amendment (the “Amendment”) to the Senior Credit Facility. The Amendment, among other things, amends the Senior Credit Facility to extend the maturity date of the revolving credit facility (the "Revolver") to July 7, 2016, increase the amount of the Revolver to $181.0 million and to modify the maximum total leverage threshold test and certain other covenants.

The Senior Credit Facility is secured by substantially all of our assets and is guaranteed by substantially all of our subsidiaries. As of September 27, 2013, the Senior Credit Facility provided for a $312.3 million term loan facility ("Term Loan") and the $181.0 million Revolver resulting from the Amendment, which includes a $100.0 million letter of credit subfacility. As of September 27, 2013 and December 31, 2012, the additional available borrowing capacity under the Senior Credit Facility was approximately $145.3 million and $111.7 million, respectively, which gives effect to $35.7 million and $38.3 million, respectively, in letters of credit. Amounts borrowed under the Revolver are used to fund operations. The maturity date on both the Term Loan and the Revolver is July 7, 2016.

Interest Rates on Term Loan & Revolver

Both the Term Loan and Revolver bear interest at one of two options, based on our election, using either the (i) base rate ("Base Rate") as defined in the Senior Credit Facility plus an applicable margin or the (ii) London Interbank Offered Rate ("Eurocurrency Rate") as defined in the Senior Credit Facility plus an applicable margin. The applicable margin for the Term Loan is fixed at 3.5% for the Base Rate option and 4.5% for the Eurocurrency Rate option. The applicable margin for the Revolver ranges from 3.0% to 3.5% for the Base Rate option or 4.0% to 4.5% for the Eurocurrency Rate option based on our outstanding Secured Leverage Ratio at the end of the quarter. The Secured Leverage Ratio is calculated by the ratio of total secured consolidated debt (net of up to $75.0 million of unrestricted cash and cash equivalents) to consolidated earnings before interest, taxes, and depreciation & amortization ("Consolidated EBITDA"), as defined in the Senior Credit Facility. Interest payments on both the Term Loan and Revolver are payable at the end of the interest period as defined in the Senior Credit Facility, but not less than quarterly.

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

The Eurocurrency Rate is the rate per annum equal to the British Bankers Association London Interbank Offered Rate ("BBA LIBOR") as published by Reuters (or other commercially available source providing quotations of BBA LIBOR as designated by the Administrative Agent from time to time) two business days prior to the commencement of such interest period. The variable Eurocurrency Rate has a floor of 1.75%. As of September 27, 2013 and December 31, 2012, the applicable interest rate on the Term Loan was 6.25%.

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Interest Rates on Letter of Credit Subfacility and Unused Commitment Fees

The letter of credit subfacility bears interest at the applicable margin for Eurocurrency Rate loans, which ranges from 4.0% to 4.5%. The unused commitment fee on our Revolver ranges from 0.50% to 0.75% depending on the Secured Leverage Ratio, as defined in the Senior Credit Facility. Payments on both the letter of credit subfacility and unused commitments are payable quarterly in arrears. As of September 27, 2013 and December 31, 2012, the applicable interest rate for our letter of credit subfacility was 4.25% and 4.50%, respectively. As of September 27, 2013 and December 31, 2012, the applicable interest rate for our unused commitment fees was 0.50% and 0.75%, respectively. All of our letters of credit are also subject to a 0.25% fronting fee.

Principal Payments

Pursuant to our Term Loan facility, quarterly principal payments are required. However, certain principal prepayments made during the year ended December 30, 2011 were applied to the future scheduled maturities and satisfied our responsibility to make quarterly principal payments through July 7, 2016.

During the nine months endedSeptember 27, 2013 and September 28, 2012 we made principal prepayments of $15.0 million and $60.0 million on the Term Loan, respectively. Deferred financing costs associated with the prepayments totaling $0.2 million and $1.5 million were expensed and are included in the Loss on early extinguishment of debt in our consolidated statement of operations for the nine months endedSeptember 27, 2013 and September 28, 2012.

Our Senior Credit Facility contains an annual requirement to submit a portion of our Excess Cash Flow, as defined in the Senior Credit Facility, as additional principal payments. Based on our annual financial results and the additional principal prepayments made during the year ended December 31, 2012, we were not required to make any additional principal payments under the Excess Cash Flow requirement during calendar year 2013. Certain other transactions can trigger mandatory principal payments such as tax refunds, a disposition of a portion of our business or a significant asset sale. We had no such transactions during the nine months endedSeptember 27, 2013.

Covenants

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

• declare dividends and make other distributions;

• redeem or repurchase our capital stock;

• prepay, redeem or repurchase certain of our indebtedness;

• grant liens;

• make loans or investments (including acquisitions);

• incur additional indebtedness;

• modify the terms of certain debt;

• restrict dividends from our subsidiaries;

• change our business or business of our subsidiaries;

• merge or enter into acquisitions;

• sell our assets;

• enter into transactions with our affiliates; and

• make capital expenditures.

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

Effective with the Amendment, total leverage ratio is the Consolidated Total Debt, as defined in the Senior Credit Facility, less unrestricted cash and cash equivalents (up to $75.0 million) to Consolidated EBITDA, as defined in the Senior Credit Facility, for the applicable period.

As of September 27, 2013 our total leverage ratio, cannot be greater than 4.75 to 1.0 after which, the maximum total leverage diminishes quarterly or semi-annually to a maximum of 3.75 to 1.00 beginning September 26, 2015. The Amendment made adjustments to the levels at which the maximum total leverage diminishes over the remainder of the facility.

The interest coverage ratio is the ratio of Consolidated EBITDA to Consolidated Interest Expense, as defined in the Senior Credit Facility. The interest coverage ratio as of September 27, 2013, must not be less than 2.0 to 1.0 through the period ending June 27, 2014, after which, the minimum total interest coverage ratio increases to 2.05 to 1.00 through March 27, 2015 and 2.25 to 1.00 thereafter.

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In the event we fail to comply with the covenants specified in the Senior Credit Facility and the indenture governing our Senior Unsecured Notes, we may be in default. As of September 27, 2013, we were in compliance with our financial covenants.

Senior Unsecured Notes

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

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

• incur additional indebtedness;

• make certain payments, including declaring or paying certain dividends;

• purchase or retire certain equity interests;

• retire subordinated indebtedness;

• make certain investments;

• sell assets;

• engage in certain transactions with affiliates;

• create liens on assets;

• make acquisitions; and

• engage in mergers or consolidations.

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

Call and Put Options

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

The Indenture requires us to offer to repurchase the Senior Unsecured Notes at defined prices in the event of certain asset sales and change of control events. In the case of Asset Sales (as defined in the Indenture), we are required under the Indenture to use the proceeds from such asset sales to either (i) prepay secured debt or nonguarantor debt, (ii) reinvest in our business or (iii) to the extent asset sale proceeds not applied in accordance with clause (i) or (ii) exceed $15 million, make an offer to repurchase the Senior Unsecured Notes at 100% of the principal amount thereof.

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

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Note 8 — Commitments and Contingencies

Commitments

We have no significant long-term purchase agreements with service providers. We have operating leases for the use of real estate and certain property and equipment which are either non-cancelable or cancelable only by the payment of penalties or cancelable upon one month’s notice. All lease payments are based on the lapse of time but include, in some cases, payments for insurance, maintenance and property taxes. There are no purchase options on operating leases at favorable terms, but most leases have one or more renewal options. Certain leases on real estate are subject to annual escalations for increases in base rents, utilities and property taxes. Lease rental expense was $41.5 million and $129.3 million for the three and nine months endedSeptember 27, 2013, respectively. Lease rental expense was $48.2 million and $169.3 million for the three and nine months endedSeptember 28, 2012, respectively. During the three months ended, September 27, 2013, the Company entered into a rental agreement to lease property in Tysons Corner, Virginia. During the fourth quarter of calendar year 2013, the Company plans to vacate the properties currently occupied at various locations and will consolidate to the new Tysons Corner location.  Rent expense on the Tysons Corner property was recognized on a straight line basis over the term of the lease beginning in the third quarter of 2013. Aggregate rent expense over the 11-year, 4-month period will be approximately $25.5 million.

Contingencies

General Legal Matters

We are involved in various lawsuits and claims that arise in the normal course of business. We have established reserves for matters in which it is believed that losses are probable and can be reasonably estimated. Reserves related to these matters have been recorded in Other accrued liabilities totaling approximately $4.6 million and $12.8 million as of September 27, 2013 and December 31, 2012, respectively. Except as disclosed below, none of our reserves as of September 27, 2013 were individually material. We believe that appropriate accruals have been established for such matters based on information currently available; however, some of the matters may involve compensatory, punitive, or other claims or sanctions that if granted, could require us to pay damages or make other expenditures in amounts that could not be reasonably estimated at September 27, 2013. These accrued reserves represent the best estimate of amounts believed to be our liability in a range of expected losses. In addition to matters that are considered probable and that can be reasonably estimated, we also have certain matters considered reasonably possible. Other than matters disclosed below, we believe the aggregate range of possible loss related to matters considered reasonably possible was not material as of September 27, 2013. Litigation is inherently unpredictable and unfavorable resolutions could occur. Accordingly, it is possible that an adverse outcome from such proceedings could (i) exceed the amounts accrued for probable matters; or (ii) require a reserve for a matter we did not originally believe to be probable or could be reasonably estimated. Such changes could be material to our financial condition, results of operations and cash flows in any particular reporting period. Our view of the matters not specifically disclosed could possibly change in future periods as events thereto unfold.

Pending Litigation and Claims

On December 4, 2006, December 29, 2006, March 14, 2007 and April 24, 2007, four lawsuits were served, seeking unspecified monetary damages against DynCorp International LLC and several of its former affiliates in the U.S. District Court for the Southern District of Florida, concerning the spraying of narcotic plant crops along the Colombian border adjacent to Ecuador. Three of the lawsuits, filed on behalf of the Provinces of Esmeraldas, Sucumbíos, and Carchi in Ecuador, allege violations of Ecuadorian law, International law, and statutory and common law tort violations, including negligence, trespass, and nuisance. The fourth lawsuit, filed on behalf of citizens of the Ecuadorian provinces of Esmeraldas and Sucumbíos, alleges personal injury, various counts of negligence, trespass, battery, assault, intentional infliction of emotional distress, violations of the Alien Tort Claims Act and various violations of International law. The four lawsuits were consolidated, and based on our motion granted by the court, the case was subsequently transferred to the U.S. District Court for the District of Columbia. On March 26, 2008, a First Amended Consolidated Complaint was filed that identified 3,266 individual plaintiffs. As of January 12, 2010, 1,256 of the plaintiffs have been dismissed by court orders and, on September 15, 2010, the Provinces of Esmeraldas, Sucumbíos, and Carchi were dismissed by court order. We filed multiple motions for summary judgment and, on February 15, 2013, the court granted summary judgment and dismissed all claims. On March 18, 2013, the plaintiffs filed a notice of appeal with the U.S. Court of Appeals for the District of Columbia. The appeal is currently pending. The amended complaint does not demand any specific monetary damages; however, a court decision against us could have a material effect on our results of operations and financial condition, if we are unable to obtain reimbursement from the DoS. The aerial spraying operations were and continue to be managed by us under a DoS contract in cooperation with the Colombian government. The DoS contract provides indemnification to us against third-party liabilities arising out of the contract, subject to available funding as well as potential apportionment of damages to multiple defendants. At this time, we believe the likelihood of an unfavorable outcome in this case is remote.

A lawsuit filed on September 11, 2001, and amended on March 24, 2008, seeking unspecified damages on behalf of twenty-six residents of the Sucumbíos Province in Ecuador, was brought against our operating company and several of its former affiliates

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in the U.S. District Court for the District of Columbia. The action alleges violations of the laws of nations and U.S. treaties, negligence, emotional distress, nuisance, battery, trespass, strict liability, and medical monitoring arising from the spraying of herbicides near the Ecuador-Colombia border in connection with the performance of the DoS, International Narcotics and Law Enforcement contract for the eradication of narcotic plant crops in Colombia. As of January 12, 2010, fifteen of the plaintiffs have been dismissed by court order. We filed multiple motions for summary judgment and, on February 15, 2013, the court granted summary judgment and dismissed all claims. On March 18, 2013, the plaintiffs filed a notice of appeal with the U.S. Court of Appeals for the District of Columbia. The appeal is currently pending. The terms of the DoS contract provide that the DoS will indemnify our operating company against third-party liabilities arising out of the contract, subject to available funding. We are also entitled to indemnification by Computer Sciences Corporation, the Company's previous owners, in connection with this lawsuit, subject to certain limitations. Additionally, any damage award would have to be apportioned between the other defendants and our operating company. We believe that the likelihood of an unfavorable judgment in this matter is remote.

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

In 2009, we terminated for cause a contract to build the Akwa Ibom International Airport for the State of Akwa Ibom in Nigeria. Consequently, we terminated certain subcontracts and purchase orders the customer advised us it did not want to assume. Our termination of certain subcontracts not assumed by the customer, including our actions to recover against advance payment and performance guarantees established by the subcontractors for our benefit, was challenged in certain instances. In December 2011, the customer filed arbitration alleging fraud, gross negligence, contract violations, and conversion of funds and asserted damages of approximately $150 million. We believe our right to terminate this contract was justified and permissible under the terms of the contract, and we intend to vigorously contest the claims brought against us. Additionally, we believe the contract limits any damages to a maximum of $3 million, except in situations of gross negligence and willful misconduct. As of September 27, 2013 and December 31, 2012, we have recorded an immaterial liability for this matter and believe the likelihood of loss for amounts in excess of this accrual, up to the amount limited by the contract, is reasonably possible.

On July 8, 2009, a lawsuit was filed in the United Arab Emirates ("UAE") Abu Dhabi Court of First Instance, by Al Hamed ITC (hereafter "Al Hamed") concerning an October 2002 business development contract focused on obtaining business directly with the UAE General Military Directorate ("GMD"). Al Hamed was unsuccessful in assisting the company in soliciting business with GMD and, as such, the contract with Al Hamed was terminated in July 2006. We became a subcontractor to the successful bidder, Al Taif, in December 2006. Al Hamed filed a claim seeking $57.0 million in damages under the business development contract. On May 9, 2012, the court awarded Al Hamed 8.2 million in UAE Dirhams ($2.2 million U.S. dollars) plus 5% interest and expenses. The Company and Al Hamed both appealed the judgment. On September 12, 2012, the appellate court altered the judgment stating the amount should not have been in UAE Dirhams rather in U.S. dollars, which amounts to $8.2 million U.S. dollars. As of September 28, 2012, a reserve had been established for the full amount of the judgment. The judgment was further appealed to the Supreme Court in Abu Dhabi, and, on February 27, 2013, we were advised that our appeal was unsuccessful. On April 7, 2013, the judgment was paid and the matter is now closed. During the three months ended September 27, 2013, the Company was made aware of a new case filed by Al Hamed in the UAE Abu Dhabi Court of First Instance seeking $23.3 million U.S. dollars in damages under the same business development contract. The case alleges we obtained additional business with Al Taif. We have not been awarded any new contracts with Al Taif and therefore believe this case is without merit.

U.S. Government Investigations

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

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

On February 24, 2012, we were advised by the Department of Justice Civil Litigation Division that they are conducting an investigation regarding the CivPol and Department of State Advisor Support Mission ("DASM") contracts in Iraq and Corporate Bank, a former subcontractor. The issues include allowable hours worked under a specific task order and invoices to the Department of State for certain hotel leasing, labor rates and overhead within the 2003 to 2008 timeframe. The Department of Justice Civil Litigation Division has requested information from the Company, and we are fully cooperating with the government's review. If our operations are found to be in violation of any laws or government regulations, we may be subject to penalties, damages or fines, any or all of which could adversely affect our financial results. At this time, an estimate or a range of potential damages is not possible as this matter is still under review by the Department of Justice and no formal complaint has been filed.

U.S. Government Audits

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

We have received a series of final audit reports from the DCAA, some of which have resulted in Form 1s, related to their examination of certain incurred, invoiced and reimbursed costs on our CivPol program for periods ranging from April 17, 2004 through April 2, 2010. The Form 1's identify several cost categories where the DCAA has asserted instances of potential deviations from the explicit terms of the contract or from certain provisions of government regulations. The asserted amounts are derived from extrapolation methodologies used to estimate potential exposure amounts for the cost categories which when aggregated for all final audit reports and Form 1's total approximately $141.2 million. Over the past year, the Company has worked with the DCAA in resolving matters inclusive in the Form 1s. We have provided responses to the DCAA for each letter, in which we have articulated our position on each issue and have attempted to answer their questions and provide clarification of the facts to resolve the issues raised. We have also sought to obtain clarification from our customer through formal contract modifications in an attempt to assist the DCAA in closing these issues. We believe the majority of these issues will continue to be resolved and thus represent loss contingencies that we consider remote. For the remaining issues, which total approximately $25.4 million, we believe the DCAA did not consider certain contractual provisions and long standing patterns of dealing with the customer. Since we cannot reasonably estimate the DCAA's acceptance of our initial responses and the ultimate outcome related to these remaining issues we believe these items represent loss contingencies that we consider reasonably possible. We continue to work with the customer and the DCAA to resolve any remaining questions they may have and provide clarification of the facts and circumstances surrounding the issues.

On April 30, 2013, we received several demand Form 1s from DCAA disapproving approximately $152.0 million of cost incurred by the Company for the periods ranging between 2000 to 2011 on the War Reserve Materiel program for concerns on items such as the adequacy of documentation and reasonableness of costs. We are in the process of reviewing the basis of the Form 1s and preparing a response letter as we work with our customer to resolve these questions. Based on our initial assessment, we believe a substantial portion of these items represent loss contingencies that we consider remote. We believe the remaining portion of these items represent loss contingencies that we consider reasonably possible; however, a reasonable estimate of loss or range

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of loss cannot be made at this time as we cannot reasonably estimate the ultimate outcome related to the issues raised in the Form 1s.

Credit Risk

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

Risk Management Liabilities and Reserves

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

Note 9 — Segment Information

In April 2013, the Company's previous operating and reporting segments were re-aligned into three reporting and operating segments, DynAviation, DynLogistics and DynGlobal. Our reporting segments will continue to be the same as our operating segments. DynAviation and DynLogistics segments operate principally within a regulatory environment subject to governmental contracting and accounting requirements, including Federal Acquisition Regulations, Cost Accounting Standards and audits by various U.S. federal agencies. The initial focus of DynGlobal is on pursuit and growth of international and commercial business. The current revenue, operating income, depreciation and amortization and assets associated with this segment for the three and nine months ended September 27, 2013 were not material and are presented in Headquarters/ Other.

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

	Three Months Ended						Nine Months Ended
(Amounts in thousands)	September 27, 2013			September 28, 2012			September 27, 2013			September 28, 2012
Revenue
DynLogistics	$	451,416		$	659,501		$	1,518,992		$	2,045,086
DynAviation	313,189			348,560			1,061,283			968,206
Headquarters / Other (1)	2,180			2,253			(4,860		)	5,177
Total revenue	$	766,785		$	1,010,314		$	2,575,415		$	3,018,469
Operating income
DynLogistics	$	(12,741	)	$	(453	)	$	20,116		$	39,732
DynAviation	11,231			30,027			75,850			80,714
Headquarters / Other (2)	(12,767		)	(19,664		)	(31,752		)	(43,553		)
Total operating (loss)/income	$	(14,277	)	$	9,910		$	64,214		$	76,893
Depreciation and amortization
DynLogistics	$	82		$	270		$	531		$	801
DynAviation	459			138			1,080			495
Headquarters / Other	11,932			12,337			35,859			37,489
Total depreciation and amortization (3)	$	12,473		$	12,745		$	37,470		$	38,785

(1) Represents revenue earned on shared services arrangements for general and administrative services provided to unconsolidated joint ventures and elimination of intercompany items between segments. Additionally, operating income for our DynGlobal segment during the three and nine months endedSeptember 27, 2013 is currently included in Headquarter/Other.

(2) Headquarters operating expenses primarily relate to amortization of intangible assets and other costs that are not allocated to segments and are not billable to our U.S. government customers. Additionally, operating income for our DynGlobal segment in support of the development of this business during the three and nine months endedSeptember 27, 2013 are currently included in Headquarters/Other.

(3) Includes amounts included in Cost of services of $0.4 million and $1.3 million for the three and nine months endedSeptember 27, 2013, respectively, and $0.4 million and $1.2 million for the three and nine months endedSeptember 28, 2012, respectively.

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

	As Of
(Amounts in thousands)	September 27, 2013		December 31, 2012
Assets
DynLogistics	$	674,002	$	800,734
DynAviation	733,648		706,646
Headquarters / Other (1)	356,733		463,336
Total assets	$	1,764,383	$	1,970,716

(1) Assets primarily include cash, investments in unconsolidated subsidiaries, deferred tax liabilities, intangible assets (excluding goodwill) and deferred debt issuance costs as well as immaterial assets associated with DynGlobal for the nine months endedSeptember 27, 2013.

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

Consulting Fee

The Company has a Master Consulting and Advisory Services agreement ("COAC Agreement") with Cerberus Operations and Advisory Company, LLC where, pursuant to the terms of the agreement, they make personnel available to us for the purpose of providing reasonably requested business advisory services. The services are priced on a case by case basis depending on the requirements of the project and agreements in pricing. We incurred $1.7 million and $3.8 million in conjunction with the COAC Agreement during the three and nine months endedSeptember 27, 2013, respectively, and $0.9 million and $2.2 million during the three and nine months endedSeptember 28, 2012, respectively.

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Joint Ventures and Variable Interest Entities

We account for our investments in VIEs in accordance with ASC 810 - Consolidation. In cases where we have (i) the power to direct the activities of the VIE that most significantly impact its economic performance and (ii) the obligation to absorb losses of the VIE that could potentially be significant or the right to receive benefits from the entity that could potentially be significant to the VIE, we consolidate the entity. Alternatively, in cases where all of the aforementioned criteria are not met, the investment is accounted for under the equity method. As of September 27, 2013, we accounted for PaTH, CRS, Babcock, GRS and GLS as equity method investments. Alternatively, we consolidated DIFZ based on the aforementioned criteria. We present our share of the PaTH, CRS, GRS and GLS earnings in Earnings from equity method investees as these joint ventures are considered operationally integral. Alternatively, we present our share of the Babcock earnings in Other income, net as it is not considered operationally integral.

PaTH is a joint venture formed in May 2006 with two other partners for the purpose of procuring government contracts with the Federal Emergency Management Authority. On January 18, 2013, we executed an agreement with the two other partners to reduce our ownership percentage in the PaTH joint venture to 30%. The executed agreement stipulated the ownership percentage be reduced retrospectively, effective September 1, 2012.

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

The GRS joint venture was formed in August 2010 with one partner for the purpose of procuring government contracts with the U.S. Navy. This joint venture has been selected as one of four contractors on an indefinite delivery, indefinite quantity ("IDIQ") multiple award contract.

GLS is a joint venture formed in August 2006 between DynCorp International LLC and AECOM’s National Security Programs unit for the purpose of procuring government contracts with the U.S. Army. We incur significant costs on behalf of GLS related to the normal operations of the venture. However, these costs typically support revenue billable to our customer. GLS is not a guarantor under our Senior Credit Facility or our Senior Unsecured Notes in accordance with the agreement.

We own 25% of DIFZ, but exercise power over activities that significantly impact DIFZ's economic performance. We incur significant costs on behalf of DIFZ related to our normal operations. The vast majority of these costs are considered direct contract costs and thus billable on several of our contracts supported by DIFZ services.

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

Receivables due from our unconsolidated joint ventures totaled $2.2 million and $1.2 million as of September 27, 2013 and December 31, 2012, 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 related revenue we earned from our unconsolidated joint ventures totaled $1.9 million and $6.2 million during the three and nine months endedSeptember 27, 2013, respectively, and $0.3 million and $3.5 million during the three and nine months endedSeptember 28, 2012, respectively. The related cost of services was $1.9 million and $6.0 million during the three and nine months endedSeptember 27, 2013, respectively, and $0.3 million and $2.8 million during the three and nine months endedSeptember 28, 2012, respectively. Additionally, we earned $0.6 million and $3.0 million in equity method income (includes operationally integral and non-integral income) during the three and nine months endedSeptember 27, 2013, respectively, and $0.8 million and $4.9 million during the three and nine months endedSeptember 28, 2012, respectively.

GLS’ revenue was $6.0 million and $26.5 million during the three and nine months endedSeptember 27, 2013, respectively, and $13.7 million and $43.4 million during the three and nine months endedSeptember 28, 2012, respectively. GLS’ operating (loss)/income was $(0.8) million and $(0.6) million during the three and nine months endedSeptember 27, 2013, respectively, and $0.8 million and $2.9 million during the three and nine months endedSeptember 28, 2012, respectively. GLS’ net (loss)/income was $(0.8) million and $(0.6) million during the three and nine months endedSeptember 27, 2013, respectively, and $0.8 million and $2.9 million during the three and nine months endedSeptember 28, 2012, respectively. GLS paid cash dividends of $5.0 million during the nine months endedSeptember 27, 2013. Based on our 51% ownership in GLS, the Company recognized $2.6 million in equity method income during the nine months endedSeptember 27, 2013.

We currently hold one promissory note from Palm Trading Investment Corp, which had an aggregate initial value of $9.2 million. The note is included in (i) Prepaid expenses and other current assets and in (ii) Other assets on our unaudited condensed consolidated balance sheet for the short and long-term portions, respectively. The loan balance outstanding was $3.8 million and $5.3 million as of September 27, 2013 and December 31, 2012, respectively, reflecting the initial value plus accrued interest, less payments against the promissory note. The fair value of the note receivable is not materially different from its carrying value.

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As discussed above and in accordance with ASC 810 - Consolidation, we consolidate DIFZ. The following tables present selected financial information for DIFZ as of September 27, 2013 and December 31, 2012 and for the three and nine months endedSeptember 27, 2013 and September 28, 2012:

	As of
(Amounts in millions)	September 27, 2013		December 31, 2012
Assets	$	18.4	$	32.7
Liabilities	14.0		25.9

	Three Months Ended				Nine Months Ended
(Amounts in millions)	September 27, 2013		September 28, 2012		September 27, 2013		September 28, 2012
Revenue	$	101.8	$	128.6	$	324.6	$	378.0

The following tables present selected financial information for our equity method investees as of September 27, 2013 and December 31, 2012 and for the three and nine months endedSeptember 27, 2013 and September 28, 2012:

	As of
(Amounts in millions)	September 27, 2013		December 31, 2012
Current assets	$	98.4	$	115.0
Total assets	98.9		115.1
Current liabilities	51.0		59.9
Total liabilities	51.0		60.4

	Three Months Ended				Nine Months Ended
(Amounts in millions)	September 27, 2013		September 28, 2012		September 27, 2013		September 28, 2012
Revenue	$	40.2	$	46.1	$	163.9	$	186.9
Gross profit	1.8		5.4		13.6		15.6
Net income	1.1		3.5		10.7		10.6

Many of our joint ventures and VIEs only perform on a single contract. The modification or termination of a contract under a joint venture or VIE could trigger an impairment in the fair value of our investment in these entities. In the aggregate, our maximum exposure to losses as a result of our investment consists of our (i) $14.8 million investment in unconsolidated subsidiaries, (ii) $2.2 million in receivables from our unconsolidated joint ventures, (iii) $3.8 million note receivable from Palm Trading Investment Corp. and (iv) contingent liabilities that were neither probable nor reasonably estimable as of September 27, 2013.

Note 11 — Collaborative Arrangements

We participate in a collaborative arrangement with CH2M Hill on the LOGCAP IV program. This arrangement sets forth the sharing of some of the risks and rewards associated with this U.S. government contract. Our current share of profits of the LOGCAP IV program is 70%.

We account for this collaborative arrangement under ASC 808 — Collaborative Arrangements and record revenue gross as the principal participant. The cash inflows and outflows, as well as expenses incurred, are recorded in Cost of services in the period realized. Revenue on LOGCAP IV was $280.5 million and $951.5 million during the three and nine months endedSeptember 27, 2013, respectively, and $438.3 million and $1,333.8 million during the three and nine months endedSeptember 28, 2012, respectively. Cost of services on LOGCAP IV program was $260.0 million and $891.4 million during the three and nine months endedSeptember 27, 2013, respectively, and $407.9 million and $1,244.7 million during the three and nine months endedSeptember 28, 2012, respectively. Our share of the total LOGCAP IV profits was $11.7 million and $29.5 million during the three and nine months endedSeptember 27, 2013, respectively, and $18.0 million and $44.9 million during the three and nine months endedSeptember 28, 2012, respectively.

We also participate in a collaborative arrangement with Logix USA Corporation on the Egypt Personnel Support Services ("EPSS") program that began in June 2012. The purpose of the arrangement is to share risks and rewards associated with this U.S. government contract. Our share of profits is 85%, and as the principal participant, the cash inflows and outflows, as well as expenses incurred are recorded in Cost of services in the period realized. Revenue on the EPSS program was $3.2 million and $11.9 million

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during the three and nine months endedSeptember 27, 2013, respectively, and $3.8 million and $6.6 million during the three and nine months endedSeptember 28, 2012. Cost of services on the EPSS program was $3.1 million and $9.5 million during the three and nine months endedSeptember 27, 2013, respectively, and $3.2 million and $5.6 million during the three and nine months endedSeptember 28, 2012. Our share of the total EPSS program profits was $0.02 million and $2.1 million during the three and nine months endedSeptember 27, 2013, respectively, and $0.5 million and $0.8 million during the three and nine months endedSeptember 28, 2012.

Note 12 — Consolidating Financial Statements of Subsidiary Guarantors

The Senior Unsecured Notes issued by DynCorp International Inc. ("Subsidiary Issuer") and the Senior Credit Facility are fully and unconditionally guaranteed, jointly and severally, by the Company ("Parent") and all of the domestic subsidiaries of Subsidiary Issuer: DynCorp International LLC, DTS Aviation Services LLC, DynCorp Aerospace Operations LLC, DynCorp International Services LLC, DIV Capital Corporation, Dyn Marine Services of Virginia LLC, Services International LLC, Worldwide Humanitarian Services LLC, Worldwide Recruiting and Staffing Services LLC, Heliworks, LLC, Phoenix Consulting Group LLC and Casals and Associates Inc.("Subsidiary Guarantors"). Each of the Subsidiary Issuers and the Subsidiary Guarantors is 100% owned by the Company. Under the indenture governing the Senior Unsecured Notes, a guarantee of a Subsidiary Guarantor will terminate upon the following customary circumstances: (i) the sale of the capital stock of such Subsidiary Guarantor if such sale complies with the indenture; (ii) the designation of such Subsidiary Guarantor as an unrestricted subsidiary; (iii) if such Subsidiary Guarantor no longer guarantees certain other indebtedness of the Subsidiary Issuer or (iv) the defeasance or discharge of the indenture.

The following condensed consolidating financial statements present (i) unaudited condensed consolidating balance sheets as of September 27, 2013 and December 31, 2012, (ii) unaudited condensed consolidating statements of operations and comprehensive income for the three and nine months endedSeptember 27, 2013 and September 28, 2012, (iii) unaudited condensed consolidating statements of cash flows for the nine months endedSeptember 27, 2013 and September 28, 2012 and (iii) elimination entries necessary to consolidate Parent and its subsidiaries.

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

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

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Delta Tucker Holdings, Inc. and Subsidiaries

Unaudited Condensed Consolidating Statement of Operations Information

For the Three Months Ended September 27, 2013

(Amounts in thousands)	Parent			Subsidiary Issuer			Subsidiary Guarantors			Subsidiary Non- Guarantors			Eliminations			Consolidated
Revenue	$	—		$	—		$	767,560		$	110,156		$	(110,931	)	$	766,785
Cost of services	—			—			(709,793		)	(107,717		)	111,202			(706,308		)
Selling, general and administrative expenses	—			—			(33,664		)	(244		)	(271		)	(34,179		)
Depreciation and amortization expense	—			—			(11,896		)	(150		)	—			(12,046		)
Earnings from equity method investees	—			—			295			—			—			295
Impairment of Goodwill	—			—			(28,824		)	—			—			(28,824		)
Operating income	—			—			(16,322		)	2,045			—			(14,277		)
Interest expense	—			(18,684		)	(1,036		)	—			—			(19,720		)
Loss on early extinguishment of debt	—			(230		)	—			—			—			(230		)
Interest income	—			—			24			7			—			31
Equity in (loss) income of consolidated subsidiaries, net of tax	(33,065		)	(20,809		)	695			—			53,179			—
Other (expense) income, net	—			—			378			(41		)	—			337
(Loss) income before income taxes	(33,065		)	(39,723		)	(16,261		)	2,011			53,179			(33,859		)
Benefit (provision) for income taxes	—			6,658			(4,548		)	(119		)	—			1,991
Net (loss) income	(33,065		)	(33,065		)	(20,809		)	1,892			53,179			(31,868		)
Noncontrolling interests	—			—			—			(1,197		)	—			(1,197		)
Net (loss) income attributable to Delta Tucker Holdings, Inc.	$	(33,065	)	$	(33,065	)	$	(20,809	)	$	695		$	53,179		$	(33,065	)

30

Delta Tucker Holdings, Inc. and Subsidiaries

Unaudited Condensed Consolidating Statement of Operations Information

For the Three Months Ended September 28, 2012

(Amounts in thousands)	Parent			Subsidiary Issuer			Subsidiary Guarantors			Subsidiary Non- Guarantors			Eliminations			Consolidated
Revenue	$	—		$	—		$	1,014,838		$	135,627		$	(140,151	)	$	1,010,314
Cost of services	—			—			(924,602		)	(129,880		)	137,344			(917,138		)
Selling, general and administrative expenses	—			—			(40,586		)	(2,568		)	2,807			(40,347		)
Depreciation and amortization expense	—			—			(12,229		)	(146		)	—			(12,375		)
Earnings from equity method investees	—			—			315			—			—			315
Impairment of Goodwill	—			—			(30,859		)	—			—			(30,859		)
Operating income	—			—			6,877			3,033			—			9,910
Interest expense	—			(19,844		)	(2,167		)	—			—			(22,011		)
Loss on early extinguishment of debt	—			(696		)	—			—			—			(696		)
Interest income	—			—			21			—			—			21
Equity in (loss) income of consolidated subsidiaries, net of tax	(15,794		)	(28,662		)	1,008			—			43,448			—
Other income, net	—			—			150			(82		)	—			68
(Loss) income before income taxes	(15,794		)	(49,202		)	5,889			2,951			43,448			(12,708		)
Benefit (provision) for income taxes	—			33,408			(34,551		)	(250		)	—			(1,393		)
Net (loss) income	(15,794		)	(15,794		)	(28,662		)	2,701			43,448			(14,101		)
Noncontrolling interests	—			—			—			(1,693		)	—			(1,693		)
Net (loss) income attributable to Delta Tucker Holdings, Inc.	$	(15,794	)	$	(15,794	)	$	(28,662	)	$	1,008		$	43,448		$	(15,794	)

31

Delta Tucker Holdings, Inc. and Subsidiaries

Unaudited Condensed Consolidating Statement of Operations Information

For the Nine Months EndedSeptember 27, 2013

(Amounts in thousands)	Parent			Subsidiary Issuer			Subsidiary Guarantors			Subsidiary Non- Guarantors			Eliminations			Consolidated
Revenue	$	—		$	—		$	2,582,763		$	350,128		$	(357,476	)	$	2,575,415
Cost of services	—			—			(2,360,345		)	(343,316		)	357,654			(2,346,007		)
Selling, general and administrative expenses	—			—			(103,099		)	(594		)	(178		)	(103,871		)
Depreciation and amortization expense	—			—			(35,722		)	(445		)	—			(36,167		)
Earnings from equity method investees	—			—			1,118			2,550			—			3,668
Impairment of Goodwill	—			—			(28,824		)	—			—			(28,824		)
Operating income	—			—			55,891			8,323			—			64,214
Interest expense	—			(55,670		)	(3,051		)	—			—			(58,721		)
Loss on early extinguishment of debt	—			(230		)	—			—			—			(230		)
Interest income	—			—			57			20			—			77
Equity in (loss) income of consolidated subsidiaries, net of tax	(9,723		)	26,502			4,586			—			(21,365		)	—
Other income, net	—			—			(236		)	112			—			(124		)
(Loss) income before income taxes	(9,723		)	(29,398		)	57,247			8,455			(21,365		)	5,216
Benefit (provision) for income taxes	—			19,675			(30,745		)	(323		)	—			(11,393		)
Net (loss) income	(9,723		)	(9,723		)	26,502			8,132			(21,365		)	(6,177		)
Noncontrolling interests	—			—			—			(3,546		)	—			(3,546		)
Net (loss) income attributable to Delta Tucker Holdings, Inc.	$	(9,723	)	$	(9,723	)	$	26,502		$	4,586		$	(21,365	)	$	(9,723	)

32

Delta Tucker Holdings, Inc. and Subsidiaries

Unaudited Condensed Consolidating Statement of Operations Information

For the Nine Months EndedSeptember 28, 2012

(Amounts in thousands)	Parent			Subsidiary Issuer			Subsidiary Guarantors			Subsidiary Non- Guarantors			Eliminations			Consolidated
Revenue	$	—		$	—		$	3,033,716		$	399,553		$	(414,800	)	$	3,018,469
Cost of services	—			—			(2,780,570		)	(382,272		)	406,003			(2,756,839		)
Selling, general and administrative expenses	—			—			(116,780		)	(8,839		)	8,797			(116,822		)
Depreciation and amortization expense	—			—			(37,145		)	(449		)	—			(37,594		)
Earnings from equity method investees	—			—			538			—			—			538
Impairment of Goodwill	—			—			(30,859		)	—			—			(30,859		)
Operating income	—			—			68,900			7,993			—			76,893
Interest expense	—			(60,452		)	(4,986		)	—			—			(65,438		)
Loss on early extinguishment of debt	—			(1,479		)	—			—			—			(1,479		)
Interest income	—			—			94			—			—			94
Equity in (loss) income of consolidated subsidiaries, net of tax	(1,228		)	11,740			3,041			—			(13,553		)	—
Other income, net	—			—			4,833			(65		)	—			4,768
(Loss) income before income taxes	(1,228		)	(50,191		)	71,882			7,928			(13,553		)	14,838
Benefit (provision) for income taxes	—			48,963			(60,142		)	(565		)	—			(11,744		)
Net (loss) income	(1,228		)	(1,228		)	11,740			7,363			(13,553		)	3,094
Noncontrolling interests	—			—			—			(4,322		)	—			(4,322		)
Net (loss) income attributable to Delta Tucker Holdings, Inc.	$	(1,228	)	$	(1,228	)	$	11,740		$	3,041		$	(13,553	)	$	(1,228	)

33

Delta Tucker Holdings, Inc. and Subsidiaries

Unaudited Condensed Consolidating Statement of Comprehensive (Loss) Income Information

For the Three Months Ended September 27, 2013

(Amounts in thousands)	Parent			Subsidiary Issuer			Subsidiary Guarantors			Subsidiary Non- Guarantors			Eliminations			Consolidated
Net (loss) income	$	(33,065	)	$	(33,065	)	$	(20,809	)	$	1,892		$	53,179		$	(31,868	)
Other comprehensive income:
Currency translation adjustment	57			57			—			57			(114		)	57
Other comprehensive income (loss), before tax	57			57			—			57			(114		)	57
Income tax income (expense) related to items of other comprehensive income	(20		)	(20		)	—			(21		)	41			(20		)
Other comprehensive income (loss)	37			37			—			36			(73		)	37
Comprehensive (loss) income	(33,028		)	(33,028		)	(20,809		)	1,928			53,106			(31,831		)
Noncontrolling interests	—			—			—			(1,197		)	—			(1,197		)
Comprehensive (loss) income attributable to Delta Tucker Holdings, Inc.	$	(33,028	)	$	(33,028	)	$	(20,809	)	$	731		$	53,106		$	(33,028	)

34

Delta Tucker Holdings, Inc. and Subsidiaries

Unaudited Condensed Consolidating Statement of Comprehensive (Loss) Income Information

For the Three Months Ended September 28, 2012

(Amounts in thousands)	Parent			Subsidiary Issuer			Subsidiary Guarantors			Subsidiary Non- Guarantors			Eliminations			Consolidated
Net (loss) income	$	(15,794	)	$	(15,794	)	$	(28,662	)	$	2,701		$	43,448		$	(14,101	)
Other comprehensive income:
Currency translation adjustment	296			296			171			125			(592		)	296
Other comprehensive income (loss), before tax	296			296			171			125			(592		)	296
Income tax income (expense) related to items of other comprehensive income	(106		)	(106		)	(61		)	(45		)	212			(106		)
Other comprehensive income (loss)	190			190			110			80			(380		)	190
Comprehensive (loss) income	(15,604		)	(15,604		)	(28,552		)	2,781			43,068			(13,911		)
Noncontrolling interests	—			—			—			(1,693		)	—			(1,693		)
Comprehensive (loss) income attributable to Delta Tucker Holdings, Inc.	$	(15,604	)	$	(15,604	)	$	(28,552	)	$	1,088		$	43,068		$	(15,604	)

35

Delta Tucker Holdings, Inc. and Subsidiaries

Unaudited Condensed Consolidating Statement of Comprehensive (Loss) Income Information

For the Nine Months EndedSeptember 27, 2013

(Amounts in thousands)	Parent			Subsidiary Issuer			Subsidiary Guarantors			Subsidiary Non- Guarantors			Eliminations			Consolidated
Net (loss) income	$	(9,723	)	$	(9,723	)	$	26,502		$	8,132		$	(21,365	)	$	(6,177	)
Other comprehensive income:
Currency translation adjustment	(398		)	(398		)	(242		)	(156		)	796			(398		)
Other comprehensive income (loss), before tax	(398		)	(398		)	(242		)	(156		)	796			(398		)
Income tax income (expense) related to items of other comprehensive income	143			143			87			56			(286		)	143
Other comprehensive income (loss)	(255		)	(255		)	(155		)	(100		)	510			(255		)
Comprehensive (loss) income	(9,978		)	(9,978		)	26,347			8,032			(20,855		)	(6,432		)
Noncontrolling interests	—			—			—			(3,546		)	—			(3,546		)
Comprehensive (loss) income attributable to Delta Tucker Holdings, Inc.	$	(9,978	)	$	(9,978	)	$	26,347		$	4,486		$	(20,855	)	$	(9,978	)

36

Delta Tucker Holdings, Inc. and Subsidiaries

Unaudited Condensed Consolidating Statement of Comprehensive (Loss) Income Information

For the Nine Months EndedSeptember 28, 2012

(Amounts in thousands)	Parent			Subsidiary Issuer			Subsidiary Guarantors			Subsidiary Non- Guarantors			Eliminations			Consolidated
Net (loss) income	$	(1,228	)	$	(1,228	)	$	11,740		$	7,363		$	(13,553	)	$	3,094
Other comprehensive income:
Currency translation adjustment	147			147			144			3			(294		)	147
Other comprehensive income (loss), before tax	147			147			144			3			(294		)	147
Income tax income (expense) related to items of other comprehensive income	(54		)	(54		)	(53		)	(1		)	108			(54		)
Other comprehensive income (loss)	93			93			91			2			(186		)	93
Comprehensive (loss) income	(1,135		)	(1,135		)	11,831			7,365			(13,739		)	3,187
Noncontrolling interests	—			—			—			(4,322		)	—			(4,322		)
Comprehensive (loss) income attributable to Delta Tucker Holdings, Inc.	$	(1,135	)	$	(1,135	)	$	11,831		$	3,043		$	(13,739	)	$	(1,135	)

37

Delta Tucker Holdings, Inc. and Subsidiaries

Unaudited Condensed Consolidating Balance Sheet Information

September 27, 2013

(Amounts in thousands)	Parent		Subsidiary Issuer		Subsidiary Guarantors		Subsidiary Non- Guarantors		Eliminations			Consolidated
	ASSETS
Current assets:
Cash and cash equivalents	$	—	$	—	$	27,674	$	14,088	$	—		$	41,762
Restricted cash	—		—		1,659		—		—			1,659
Accounts receivable, net	—		—		740,716		3,559		(14,331		)	729,944
Intercompany receivables	—		—		159,782		11,981		(171,763		)	—
Prepaid expenses and other current assets	—		—		71,058		368		256			71,682
Total current assets	—		—		1,000,889		29,996		(185,838		)	845,047
Property and equipment, net	—		—		22,832		357		—			23,189
Goodwill	—		—		542,829		32,399		—			575,228
Tradenames, net	—		—		43,510		—		—			43,510
Other intangibles, net	—		—		235,086		1,200		—			236,286
Investment in subsidiaries	472,875		1,346,322		45,407		—		(1,864,604		)	—
Other assets, net	1,292		19,667		20,164		—		—			41,123
Total assets	$	474,167	$	1,365,989	$	1,910,717	$	63,952	$	(2,050,442	)	$	1,764,383
	LIABILITIES & EQUITY
Current liabilities:
Accounts payable	—		—		189,776		3,383		(1,359		)	191,800
Accrued payroll and employee costs	—		—		110,340		14,584		(12,741		)	112,183
Intercompany payables	46,378		113,404		11,981		—		(171,763		)	—
Deferred tax liabilities, net	—		—		30,138		5		—			30,143
Accrued liabilities	—		12,438		131,257		395		25			144,115
Income taxes payable	—		—		17,667		178		—			17,845
Total current liabilities	46,378		125,842		491,159		18,545		(185,838		)	496,086
Long-term debt, less current portion	—		767,272		—		—		—			767,272
Long-term deferred taxes, net	—		—		60,935		—		—			60,935
Other long-term liabilities	—		—		5,918		—		—			5,918
Noncontrolling interests	—		—		6,383		—		—			6,383
Equity	427,789		472,875		1,346,322		45,407		(1,864,604		)	427,789
Total liabilities and equity	$	474,167	$	1,365,989	$	1,910,717	$	63,952	$	(2,050,442	)	$	1,764,383

38

Delta Tucker Holdings, Inc. and Subsidiaries

Unaudited Condensed Consolidating Balance Sheet Information

December 31, 2012

(Amounts in thousands)	Parent		Subsidiary Issuer		Subsidiary Guarantors		Subsidiary Non- Guarantors		Eliminations			Consolidated
	ASSETS
Current assets:
Cash and cash equivalents	$	—	$	—	$	74,907	$	43,868	$	—		$	118,775
Restricted cash	—		—		1,659		—		—			1,659
Accounts receivable, net	—		—		781,649		2,548		(3,584		)	780,613
Intercompany receivables	—		—		164,048		—		(164,048		)	—
Prepaid expenses and other current assets	—		—		75,874		2,485		864			79,223
Total current assets	—		—		1,098,137		48,901		(166,768		)	980,270
Property and equipment, net	—		—		25,494		713		—			26,207
Goodwill	—		—		571,653		32,399		—			604,052
Tradenames, net	—		—		43,643		—		—			43,643
Other intangibles, net	—		—		265,014		1,520		—			266,534
Investment in subsidiaries	482,627		1,373,820		42,749		—		(1,899,196		)	—
Other assets, net	1,353		22,911		25,746		—		—			50,010
Total assets	$	483,980	$	1,396,731	$	2,072,436	$	83,533	$	(2,065,964	)	$	1,970,716
	LIABILITIES & EQUITY
Current liabilities:
Current portion of long-term debt	$	—	$	—	$	637	$	—	$	—		$	637
Accounts payable	—		—		284,616		2,944		(210		)	287,350
Accrued payroll and employee costs	—		—		126,122		26,538		(24,849		)	127,811
Intercompany payables	46,438		107,414		—		10,196		(164,048		)	—
Deferred tax liabilities, net	—		—		59,027		5		—			59,032
Accrued liabilities	—		24,418		154,939		767		22,339			202,463
Income taxes payable	—		—		3,737		334		—			4,071
Total current liabilities	46,438		131,832		629,078		40,784		(166,768		)	681,364
Long-term debt, less current portion	—		782,272		—		—		—			782,272
Long-term deferred taxes, net	—		—		50,303		—		—			50,303
Other long-term liabilities	—		—		11,023		—		—			11,023
Noncontrolling interests	—		—		8,212		—		—			8,212
Equity	437,542		482,627		1,373,820		42,749		(1,899,196		)	437,542
Total liabilities and equity	$	483,980	$	1,396,731	$	2,072,436	$	83,533	$	(2,065,964	)	$	1,970,716

39

Delta Tucker Holdings, Inc. and Subsidiaries

Unaudited Condensed Consolidating Statement of Cash Flow Information

For the Nine Months EndedSeptember 27, 2013

(Amounts in thousands)	Parent			Subsidiary Issuer			Subsidiary Guarantors			Subsidiary Non- Guarantors			Eliminations			Consolidated
Net cash provided (used in) by operating activities	$	61		$	9,646		$	(36,379	)	$	11		$	(3,584	)	$	(30,245	)
Cash flows from investing activities:
Purchase of property and equipment	—			—			(1,207		)	(447		)	—			(1,654		)
Proceeds from sale of property, plant and equipment	—			—			177			—			—			177
Purchase of software	—			—			(2,681		)	—			—			(2,681		)
Return of capital from equity method investees	—			—			1,549			—			—			1,549
Contributions to equity method investees	—			—			(30		)	—			—			(30		)
Net cash used in investing activities	—			—			(2,192		)	(447		)	—			(2,639		)
Cash flows from financing activities:
Borrowings on long-term debt	—			573,200			—			—			—			573,200
Payments on long-term debt	—			(588,837		)	—			—			—			(588,837		)
Payments of deferred financing costs	—			—			(2,139		)	—			—			(2,139		)
Borrowings related to financed insurance	—			—			5,133			—			—			5,133
Payments related to financed insurance	—			—			(27,902		)	—			—			(27,902		)
Payments of dividends to Parent	—			—			—			(7,168		)	3,584			(3,584		)
Net transfers (to) from Parent/subsidiary	(61		)	5,991			16,246			(22,176		)	—			—
Net cash (used in) provided by financing activities	(61		)	(9,646		)	(8,662		)	(29,344		)	3,584			(44,129		)
Net decrease in cash and cash equivalents	—			—			(47,233		)	(29,780		)	—			(77,013		)
Cash and cash equivalents, beginning of period	—			—			74,907			43,868			—			118,775
Cash and cash equivalents, end of period	$	—		$	—		$	27,674		$	14,088		$	—		$	41,762

40

Delta Tucker Holdings, Inc. and Subsidiaries

Unaudited Condensed Consolidating Statement of Cash Flow Information

For The Nine Months EndedSeptember 28, 2012

(Amounts in thousands)	Parent			Subsidiary Issuer			Subsidiary Guarantors			Subsidiary Non- Guarantors			Eliminations			Consolidated
Net cash provided by (used in) operating activities	$	743		$	44,048		$	28,941		$	(5,817	)	$	(2,667	)	$	65,248
Cash flows from investing activities:
Purchase of property and equipment	—			—			(4,614		)	71			—			(4,543		)
Proceeds from sale of property, plant and equipment	—			—			7			—			—			7
Heliworks acquisition, net of cash acquired	—			—			(11,056		)	—			—			(11,056		)
Purchase of software	—			—			(2,066		)	—			—			(2,066		)
Return of capital from equity method investees	—			—			9,154			—			—			9,154
Contributions to equity method investees	—			—			(1,479		)	—			—			(1,479		)
Net cash (used in) provided by investing activities	—			—			(10,054		)	71			—			(9,983		)
Cash flows from financing activities:
Borrowings on long-term debt	—			304,200			—			—			—			304,200
Payments on long-term debt	—			(364,200		)	—			—			—			(364,200		)
Borrowings related to financed insurance	—			—			62,581			—			—			62,581
Payments related to financed insurance	—			—			(38,541		)	—			—			(38,541		)
Payments of dividends to Parent	—			—			—			(4,786		)	2,667			(2,119		)
Net transfers from (to) Parent/subsidiary	(743		)	15,952			(28,403		)	13,194			—			—
Net cash (used in) provided by financing activities	(743		)	(44,048		)	(4,363		)	8,408			2,667			(38,079		)
Net increase in cash and cash equivalents	—			—			14,524			2,662			—			17,186
Cash and cash equivalents, beginning of period	—			—			45,724			24,481			—			70,205
Cash and cash equivalents, end of period	$	—		$	—		$	60,248		$	27,143		$	—		$	87,391

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Note 13 — Subsequent Events

We evaluated subsequent events that occurred after the period end date through the date the financial statements were issued and concluded that no subsequent events have occurred that require recognition or disclosure in our financial statements.

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

The following discussion and analysis of our unaudited condensed consolidated financial condition and results of operations should be read in conjunction with the Delta Tucker Holdings, Inc. unaudited condensed consolidated financial statements, and the notes thereto, and other data contained elsewhere in this Quarterly Report on Form 10-Q. 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 for the year ended December 31, 2012. References to "Delta Tucker Holdings", the "Company", "we", "our" or "us" refer to Delta Tucker Holdings, Inc. and its subsidiaries unless otherwise stated or indicated by context.

Company Overview

We are a leading provider of specialized mission-critical professional and support services for the United States ("U.S.") military, non-military U.S. government agencies and foreign governments. Our specific global expertise is in law enforcement training and support, security services, base and logistics operations, intelligence training, rule of law development, construction management, platform services and operations and linguist services. We also provide logistics support for all our services. Through our Predecessor entities, 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 Department of State ("DoS"), foreign governments, commercial customers and certain other U.S. federal, state and local government departments and agencies.

Reportable Segments

In April 2013, the Company amended its organizational structure to improve efficiencies within existing businesses, capitalize on new opportunities, continue international growth and expand commercial business. The Company’s previous six operating and reporting segments, Logistics Civil Augmentation Program ("LOGCAP"), Aviation, Training and Intelligence Solutions ("TIS"), Global Logistics and Development Solutions ("GLDS"), Security Services and Global Linguist Services ("GLS") were realigned into three reporting and operating segments, DynAviation, DynLogistics and DynGlobal. Additionally, as GLS no longer represents a significant portion of our business the chief operating decision maker has determined that GLS will no longer be considered an operating segment or reporting unit. The DynAviation and DynLogistics segments will continue to operate principally within a regulatory environment subject to governmental contracting and accounting requirements, including Federal Acquisition Regulations (“FAR”), Cost Accounting Standards (“CAS”) and audits by various U.S. federal agencies.

DynLogistics

This segment provides best-value mission readiness to its customers through total support solutions including conventional and contingency logistics, operations and maintenance support, platform modification and upgrades, supply chain management and training, security and full spectrum intelligence mission support services. The LOGCAP IV contract is the most significant contract within this segment and operates under a single IDIQ contract. Under the LOGCAP IV contract, the U.S. Army contracts for us to perform selected services in theater to augment U.S. Army forces and to release military units for other missions or to fill U.S. Army resource shortfalls.

DynAviation

This segment provides full spectrum aerospace, aviation and air operations solutions worldwide under contracts with the U.S. government and foreign customers. The INL Air Wing program and the CFT program are the most significant programs in the DynAviation segment. The INL Air Wing program supports governments in multiple Latin American countries and provides support and assistance with interdiction services in Afghanistan. This program also provides intra-theater transportation services for DoS personnel throughout Iraq and Afghanistan. The CFT program deploys highly mobile and quick-response field teams to customer locations globally to supplement a customer’s workforce.

DynGlobal

This segment focuses resources and energy behind the pursuit and growth of international and commercial business. Initial activities of this segment are focused on the development and growth of this business.

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Current Operating Environment and Outlook

The following discussion is a supplement to and should be read in conjunction with the accompanying unaudited financial statements and related notes included elsewhere in this Quarterly Report on Form 10-Q and with our Annual Report on Form 10-K for the year ended December 31, 2012.

External Factors

Since 2001, the overall level of U.S. defense spending has doubled. These historically high defense expenditures were driven in part to support operations in Iraq and Afghanistan and were funded through an account supplemental to the base defense budget called Overseas Contingency Operations ("OCO"). However, as a result of the U.S. military withdrawal from Iraq in December of 2011 as well as the subsequent drawdown of forces in Afghanistan, there has been a proportional and expected decline in the OCO account.

In August 2011, Congress enacted the Budget Control Act of 2011 ("BCA"), which specified an immediate $917 billion of cuts over ten years, including $487 billion from defense spending. Additionally, the BCA established the Joint Select Committee on Deficit Reduction, or the "super committee", to produce an additional deficit reduction of at least $1.5 trillion over the coming 10 years that was to be passed by December 23, 2011. Because Congress failed to produce such a bill with at least $1.2 trillion in cuts, across-the-board cuts were triggered, through a "sequestration of appropriations" that was equally split between security and non-security programs.

This sequestration of appropriations was scheduled to begin in January 2013 but was delayed by two months through the American Taxpayer Relief Act of 2012. Sequestration was ultimately triggered on March 1, 2013. On March 21, 2013, Congress passed a modified Continuing Resolution ("CR") that included a number of the negotiated fiscal year 2013 spending bills, including defense. The modified CR for the fiscal year 2013 defense appropriations bill funded Operations and Maintenance ("O&M") accounts at nearly the amount budgeted by the President, or approximately $273 billion in the base and OCO accounts. This bill has allowed the military and the contractor and subcontractor community to continue their vital work in a timely manner. In addition, the bill provides the DoD with more flexibility, especially within the O&M accounts and has assisted with better mandate of cuts. However, due to unexpected costs related to transportation, security and logistics support for operations in Afghanistan, the DoD was confronted with a substantial shortfall in the fiscal year 2013 OCO O&M funds. Mitigation of the negative effects of the mandated cuts and OCO shortfall resulted in the DoD exercising $9 billion in reprogramming authority which resulted in a net increase of $6.5 billion in the fiscal year 2013 O&M accounts.

In October of 2013, with the fiscal year 2014 beginning, Congress once again reached an impasse in its efforts to bring resolution to the larger budgetary issues related to the debt and deficit that would undo sequestration and provide the desired clarity on defense spending. Congress was only able to agree to a short-term CR funding the government at the fiscal year 2013 sequester level through January 15, 2014 and suspended the statutory limit on the amount of permissible federal debt through February 7, 2014. It is unclear when or if annual appropriations bills will be enacted for the fiscal year 2014. The U.S. Government may operate under a continuing resolution for all of 2014, restricting the start of new contracts or programs that year. 

In order to reconcile the fiscal year 2014 budget and return the appropriations process to “regular order,” Congress has appointed a Budget Conference Committee ("BCC"). Additionally, in an effort to bring some predictability to defense budget planning, the DoD recently completed the Strategic Choices and Management Review ("SCMR"). The SCMR proposes options for implementing a range of defense cuts required by the BCA and highlights the negative dramatic impacts of sequestration cuts going forward if the continued stalemate between the President and Congress yields no changes.

Congressional appropriation and authorization of the fiscal year 2014 spending, including defense spending, and the application of sequestration remain marked by significant debate and an uncertain schedule. Congress and the Administration also continue to debate the debt ceiling, among other fiscal issues, as they negotiate plans for long-term national fiscal policy. The outcome of these debates could have a significant impact on future defense spending broadly and the Company's programs, in particular.

Funding for our programs is dependent on annual budget and appropriation decisions, as well as geo-political and macroeconomic conditions, which are beyond our control. While there is uncertainty around these domestic and international factors, the final agreed upon appropriated funding levels for national security programs will remain historically high with plenty of opportunity to continue supporting our customers. We believe the O&M budgets will remain relatively robust. At almost 40% of all defense spending, we believe the O&M accounts are, and will continue to be, the largest category within the defense budget.  The base O&M accounts have a year over year growth rate of 2.8%, when removing the conflict related O&M spending increases and subsequent peacetime declines since World War II.  As services see the compounding negative impacts of sequestration and budget cuts on the modernization accounts, we believe the DoD will need to ensure existing platforms are able to meet requirements and achieve mission success.  Additionally, for the fiscal year 2014, the Administration has reiterated its position to not shortchange the warfighter to meet budgetary constraints. As such the fiscal year 2014 budget of $64 billion for the O&M OCO request actually reflects a 2% increase. This is of particular importance to the programs we execute as the Army O&M OCO budget request grows by 12% and the Air Force by 8%. 

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While the previously mentioned challenges could adversely impact our business on a short term basis, we believe the following longer term industry trends are positive and will result in continued demand in our target markets for the types of services we provide:

• Realignment of the military force structure, leading to increased outsourcing of non-combat functions, including life-cycle asset management functions ranging from organizational to depot-level maintenance;

• Continued focus on smart power initiatives by the DoS, U.S. Agency for International Development ("USAID"), the United Nations and the DoD, including development and smaller-scale stability operations;

• Increased maintenance, overhaul and upgrade needs to support returning rolling stock and aging military platforms;

• Growth in outsourcing by foreign allies of maintenance, supply support, facilities management, infrastructure upgrades and construction management-related services; and

• Further efforts by the U.S. government to move from single award to multiple award IDIQ contracts, which offer an opportunity to increase revenue by competing for task orders with the other contract awardees.

With the expected signing of a Bilateral Security Agreement (BSA) and the end of the North Atlantic Treaty Organization ("NATO") combat mission in Afghanistan in 2014, we anticipate significant opportunities to support not only the enduring U.S. and NATO presence, but also to support the DoS presence, which is expected to expand and include the U.S. embassy in Kabul and four consulates around the country. Additionally, we anticipate that there will be a continued need to advise, assist and help professionalize Afghan National Security Forces for many years, as specified in the U.S. Afghanistan Strategic Partnership Agreement.

In the Middle East, instability and challenges to our regional relationships will persist. However, U.S. defense ties and presence throughout the region will continue to be of vital strategic interest to the U.S. and our allies. We believe that base operations and support and maintenance capacity will be key enablers in this environment and we are especially well positioned to provide these services to both U.S. forces and Allied nations. Finally, the re-balance to Asia reflects the increased importance of the Asia-Pacific regions, in both security and economic terms for the U.S. As the U.S. revitalizes and reinforces its presence in this vital region, we expect to see increased demand for base operations support, logistics support and capacity building, all of which we provide best in class.

The investments and acquisitions we have made over the past three years have been focused on aligning our business to address areas that have high growth potential, including intelligence training and rule of law development, as well as parallel and evolving customer requirements.

Notable Events for the Nine Months EndedSeptember 27, 2013

• In January 2013, GLS, our equity method investee, was awarded a task order under the DLITE contract with the U.S. Army Intelligence and Security Command to provide linguists to support CENTCOM operations at several locations in the Middle East. The task order has one base year and three, one-year options and a total potential value of $88.4 million.

• In February 2013, DynAviation was awarded a contract with the U.S. Army Aviation and Missile Life Cycle Management Command to provide aviation field and sustainment level maintenance services under the Army Field Maintenance contract throughout the Regional Aviation Sustainment Maintenance - West Region ("RASM-W). The hybrid firm-fixed-price, cost-plus-incentive-fee contract has one base year and four, one-year options and a total potential contract value of $388.5 million.

• In March 2013, DynLogistics was awarded a contract with the U.S. Army to provide training, deprocessing, fielding, general maintenance support and other services to military units in the U.S. and abroad. The fixed-price level of effort contract has one base year and two, one-year options and a total potential contract value of $35.3 million.

• In April 2013, DynLogistics was awarded a task order with the U.S. DoS Bureau of International Narcotics and Law Enforcement Affairs under the Criminal Justice Program Support Contract ("CJPS") to recruit and support the U.S. contingent to the United Nations Police in Haiti and provide logistics support to the Haitian National Police. The hybrid firm-fixed price, labor hour, and cost-reimbursable task order has one base year and three, one-year options and a total potential contract value of $48.6 million.

• In June 2013, DynLogistics was awarded a contract with the Defense Logistics Agency to provide logistics support for the agency's equipment in Afghanistan. The fixed-price task order has one base year and two, one-year options and a total potential contract value of $11.2 million.

• In June 2013, the Company entered into an amendment (the “Amendment”) to the Credit Agreement dated as of July 7, 2010, among DynCorp International, the Company, the other Guarantors party thereto, several banks and other financial institutions or entities from time to time parties thereto and Bank of America, N.A., as administrative agent and collateral agent. The Amendment amended the Credit Agreement to extend the maturity date with respect to the revolving credit

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facility to July 7, 2016 and increased the amount of the revolving credit commitment to $181.0 million. The Amendment also amended the Credit Agreement to, among other things, modify certain of the covenants, including the leverage ratio.

• In June 2013, DynLogistics was awarded a position on a multiple award IDIQ contract under which work will be awarded through separately issued task orders to provide supplies and support services to the U.S. Marine Corps. The multiple award IDIQ has a one base year and four, one-year options and a total potential contract value of $854.6 million.

• In August 2013, DynLogistics was awarded a task order with the U.S. Air Force through the Air Force Contract Augmentation Program III (AFCAP) to provide installation services at Al Udeid Air Base, Qatar. The one year base period with two, one-year options and a total contract value of $20.4 million, if all options are exercised.

• In September 2013, DynLogistics was awarded a new task order with the U.S. Army under the Enhanced Army Global Logistics Enterprise ("EAGLE") Basic Ordering Agreement to provide support to the Directorate of Logistics at Fort Campbell, Ky. The fixed-fee task order has a nine month base period with four, one-year options and a total contract value of $122.0 million, if all options are exercised.

• In September 2013, DynAviation was awarded a subcontract to provide contractor logistics support in Kandahar, Afghanistan as part of the Multi Sensor Aerial Intelligence Surveillance and Reconnaissance ("MAISR") Operations and Sustainment program. The Company will serve as a subcontractor to AASKI Technologies. The sub contract has a one-year option, with a total contract value of up to $86.6 million.

• In September 2013, DynLogistics won a task order on the Africa Peacekeeping Program ("AFRICAP") to provide training for personnel in Mali. The task order, awarded by the U.S. Department of State’s Bureau of African Affairs, has one base year with a total potential value of $42.4 million.

• In September 2013, we made principal prepayments of $15.0 million, on our Term Loan. The payment caused the acceleration of unamortized deferred financing fees of $0.2 million, which were recorded as a Loss on extinguishment of debt within our Statement of Operations.

Contract Types

Our business generally is performed under fixed-price, time-and-materials or cost-reimbursement contracts. Each of these 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. Our fixed-price contracts may include firm fixed-price, fixed-price with economic adjustment and fixed-price incentive elements.

• Time-and-Materials Type Contracts: Time-and-materials type contracts provide 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 or a combination. Award-fees and incentive-fees are generally based on various objective and subjective criteria, such as aircraft mission capability rates and meeting cost targets. Award fees are excluded from estimated total contract revenue until a reasonably determinable estimate of award fees can be made.

A single contract may be performed under one or more of the contracts discussed above. Any of these three types of contracts 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 CFT and LOGCAP IV programs are two examples of IDIQ contracts. When a customer wishes to order services under an IDIQ contract, the customer issues a task order request for proposal to the contract awardees. The contract awardees then submit proposals to the customer and task orders are typically awarded under a best-value approach. However, many IDIQ contracts permit the customer to direct work to a particular contractor.

Our historical contract mix by type, as a percentage of revenue, is indicated in the table below.

	Three Months Ended				Nine Months Ended
	September 27, 2013		September 28, 2012		September 27, 2013		September 28, 2012
Fixed-Price	21	%	18	%	21	%	17	%
Time-and-Materials	11	%	12	%	12	%	11	%
Cost-Reimbursement	68	%	70	%	67	%	72	%
Total	100	%	100	%	100	%	100	%

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Cost-reimbursable type contracts typically perform at lower margins than other contract types but carry lower risk of loss. Because the LOGCAP IV contract, within our DynLogistics segment, is predominantly a cost-reimbursable type contract, we anticipate that our revenue from this contract type will continue to represent a large portion of our business for the remainder of 2013.

Under many of our contracts, we may rely on subcontractors to perform all or a portion of the services we are obligated to provide to our customers. We use subcontractors primarily for specialized, technical labor and certain functions such as construction and catering. We also enter into subcontract arrangements to meet government requirements that certain categories of services be awarded to small businesses.

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. These priced options may or may not be exercised at the sole discretion of the customer. Historically, it has been our experience that the customer has 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. 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. 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 associated with our contracts.

The following table sets forth our approximate backlog as of the dates indicated:

	As Of
(Amounts in millions)	September 27, 2013		December 31, 2012
Funded backlog	$	1,898	$	1,642
Unfunded backlog	3,199		3,636
Total	$	5,097	$	5,278

The decrease in backlog was primarily due to revenue outpacing current orders for the nine months endedSeptember 27, 2013.

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Results of Operations

Consolidated Three Months Ended September 27, 2013 compared to the Three Months Ended September 28, 2012

The following tables set forth our unaudited consolidated results of operations, both in dollars and as a percentage of revenue, for the three months ended September 27, 2013 and September 28, 2012:

	Three Months Ended
(Amounts in thousands)	September 27, 2013					September 28, 2012
Revenue	$	766,785		100.0	%	$	1,010,314		100.0	%
Cost of services	(706,308		)	(92.1	)	(917,138		)	(90.8	)
Selling, general and administrative expenses	(34,179		)	(4.5	)	(40,347		)	(4.0	)
Depreciation and amortization expense	(12,046		)	(1.6	)	(12,375		)	(1.2	)
Earnings from equity method investees	295			—		315			—
Impairment of goodwill	(28,824		)	(3.8	)	(30,859		)	(3.1	)
Operating (loss) income	(14,277		)	(1.9	)	9,910			1.0
Interest expense	(19,720		)	(2.6	)	(22,011		)	(2.2	)
Loss on early extinguishment of debt	(230		)	—		(696		)	(0.1	)
Interest income	31			—		21			—
Other income, net	337			—		68			—
Loss before income taxes	(33,859		)	(4.4	)	(12,708		)	(1.3	)
Benefit (provision) for income taxes	1,991			0.3		(1,393		)	(0.1	)
Net loss	(31,868		)	(4.2	)	(14,101		)	(1.4	)
Noncontrolling interests	(1,197		)	(0.2	)	(1,693		)	(0.2	)
Net loss attributable to Delta Tucker Holdings, Inc.	$	(33,065	)	(4.3	)	$	(15,794	)	(1.6	)

Revenue — Revenue for the three months ended September 27, 2013 was $766.8 million, a decrease of $243.5 million, or 24.1%, compared to the three months ended September 28, 2012. The decrease was primarily driven by reduced service need in Iraq for DoS, affecting both the INL Air Wing and WPS contracts; the accelerated pace of drawdown in Afghanistan, which impacted the demand for services under the Company's LOGCAP IV contract and caused reduced training needs under the Afghanistan Ministry of Defense Program ("AMDP") contract; and the delays in new business awards caused by United States budget uncertainty and sequestration. See further discussion of our revenue results in the "Results by Segment" section below.

Cost of services — Cost of services are comprised of direct labor, direct material, overhead, subcontractors, travel, supplies and other miscellaneous costs. Cost of services for the three months ended September 27, 2013 was $706.3 million, a decrease of $210.8 million, or 23.0%, compared to the three months ended September 28, 2012. The decrease in Cost of services was primarily driven by the reduction in volume as discussed above. Cost of services as a percentage of revenue increased to 92.1% for the three months ended September 27, 2013 compared to 90.8% for the three months ended September 28, 2012 as a result of operational challenges presented within our DynAviation segment. See further discussion of the impact of program margins in the "Results by Segment" section below.

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 decreased by $6.2 million, or 15.3%, to $34.2 million during the three months ended September 27, 2013 primarily as a result of reductions in legal fees associated with ongoing litigation, reductions in employee compensation, bonuses accrued under the Management Incentive Plan and the reduction in costs incurred for contract labor. SG&A as a percentage of revenue increased for the three months ended September 27, 2013 compared to the three months ended September 28, 2012 primarily as a result of the reduction in revenue out pacing general and administrative cost containment efforts. We continue to focus on effective cost containment measures, including the restructuring of our facilities footprint in Virginia to better position the Company operationally for the future.

Depreciation and amortization — Depreciation and amortization during the three months ended September 27, 2013 was $12.0 million, a decrease of $0.3 million, or 2.7%, compared to the three months ended September 28, 2012. The decrease was primarily the result of certain internally developed software becoming fully amortized and the impairment of certain intangible assets during the fourth quarter of the year ended December 31, 2012.

Earnings from equity method investees — Earnings from equity method investees include our proportionate share of the income of our equity method investees deemed to be operationally integral to our business, such as Partnership for Temporary

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Housing LLC (“PaTH”), Contingency Response Services LLC (“CRS”), Global Response Services LLC (“GRS”) and GLS. Earnings from operationally integral unconsolidated affiliates for the three months ended September 27, 2013 was $0.3 million, and remained relatively flat compared to the three months ended September 28, 2012.

Impairment of goodwill — Impairment of goodwill for the three months ended September 27, 2013 was $28.8 million. We recognized an impairment charge on our goodwill associated with our Intelligence & Security ("IS") reporting unit within our DynLogistics segment as a result of our assessment of a triggering event in the quarter. During the three months ended September 28, 2012, $30.9 million was recognized as an impairment charge on our goodwill associated within our Training & Mentoring ("TM") reporting unit as a result of our assessment of a triggering event. See Note 3 to our unaudited condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q for further discussion.

Interest expense — Interest expense for the three months ended September 27, 2013 was $19.7 million, a decrease of $2.3 million, or 10.4%, compared to the three months ended September 28, 2012. The decrease is the result of the reduction of the principal balance of our Term Loan as a result of principal prepayments of $90.0 million during the year ended December 31, 2012. An additional principal prepayment of $15.0 million was made during the three months ended September 27, 2013.

Other income, net — Other income, net of $0.3 million consists primarily of gains/losses from foreign currency and asset sales for the three months ended September 27, 2013. Other income, net during the three months ended September 28, 2012 of $0.1 million consisted of our share of earnings from unconsolidated joint ventures that are not operationally integral.

Income taxes — Our effective tax rate consists of federal and state statutory rates, certain permanent differences and discreet items. The effective tax rate for the three months ended September 27, 2013 was 5.9%, as compared to (11.0)% for the three months ended September 28, 2012. The change in the effective tax rate was primarily due to the permanent differences impact of the goodwill impairments and certain discrete items primarily related to the remeasurement of prior tax positions during both comparable three month periods.

Consolidated Nine Months EndedSeptember 27, 2013 compared to the Nine Months EndedSeptember 28, 2012

The following tables set forth our unaudited consolidated results of operations, both in dollars and as a percentage of revenue, for the nine months endedSeptember 27, 2013 and September 28, 2012:

	Nine Months Ended
(Amounts in thousands)	September 27, 2013					September 28, 2012
Revenue	$	2,575,415		100.0	%	$	3,018,469		100.0	%
Cost of services	(2,346,007		)	(91.1	)	(2,756,839		)	(91.3	)
Selling, general and administrative expenses	(103,871		)	(4.0	)	(116,822		)	(3.9	)
Depreciation and amortization expense	(36,167		)	(1.4	)	(37,594		)	(1.2	)
Earnings from equity method investees	3,668			0.1		538			—
Impairment of goodwill	(28,824		)	(1.1	)	(30,859		)	(1.0	)
Operating income	64,214			2.5		76,893			2.5
Interest expense	(58,721		)	(2.3	)	(65,438		)	(2.2	)
Loss on early extinguishment of debt	(230		)	—		(1,479		)	—
Interest income	77			—		94			—
Other (expense) income, net	(124		)	—		4,768			0.2
(Loss) income before income taxes	5,216			0.2		14,838			0.5
Provision for income taxes	(11,393		)	(0.4	)	(11,744		)	(0.4	)
Net (loss) income	(6,177		)	(0.2	)	3,094			0.1
Noncontrolling interests	(3,546		)	(0.1	)	(4,322		)	(0.1	)
Net loss attributable to Delta Tucker Holdings, Inc.	$	(9,723	)	(0.4	)	$	(1,228	)	—

Revenue — Revenue for the nine months endedSeptember 27, 2013 was $2,575.4 million, a decrease of $443.1 million, or 14.7%, compared to the nine months endedSeptember 28, 2012. The decrease was primarily driven by reduced service needs in Iraq for the DoS, affecting both the INL Air Wing and WPS contracts; the accelerated pace of the drawdown in Afghanistan, which impacted the demand for services under the Company's LOGCAP IV contract and caused reduced training needs under the AMDP contract; and the delay in business awards caused by the U.S. budget uncertainty and sequestration. See further discussion of our revenue results in the "Results by Segment" section below.

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Cost of services — Cost of services are comprised of direct labor, direct material, overhead, subcontractors, travel, supplies and other miscellaneous costs. Cost of services for the nine months endedSeptember 27, 2013 was $2,346.0 million, a decrease of $410.8 million, or 14.9%, compared to the nine months endedSeptember 28, 2012. The decrease in Cost of services was due primarily to the decrease in revenue driven by the reduction in volume as discussed above. The reduction in volume also drove a slight decrease in Cost of services as a percentage of revenue to 91.1% for the nine months endedSeptember 27, 2013 compared to 91.3% for the nine months endedSeptember 28, 2012. The reduction in Cost of services as a percentage of revenue was offset by a customer contract dispute within our DynAviation segment. See further discussion of the impact of program margins in the "Results by Segment" section below.

Selling, general and administrative expenses — 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 decreased by $13.0 million, or 11.1%, to $103.9 million during the nine months endedSeptember 27, 2013 primarily as a result of a reduction in legal fees associated with ongoing litigation and the decrease in costs incurred for contract labor. SG&A as a percentage of revenue increased to 4.0% for the nine months endedSeptember 27, 2013 compared to 3.9% for the nine months endedSeptember 28, 2012. The slight increase for the nine months endedSeptember 28, 2012 was primarily a result of the reduction in revenue out pacing general and administrative cost containment efforts.

Depreciation and amortization — Depreciation and amortization during the nine months endedSeptember 27, 2013 was $36.2 million, a decrease of $1.4 million, or 3.8%, compared to the nine months endedSeptember 28, 2012. The decrease was primarily the result of the impairment of certain intangible assets during the fourth quarter of the year ended December 31, 2012 partially offset by additional depreciation expense on fixed assets, including those acquired in conjunction with the acquisition of Heliworks, Inc. during the third quarter of the year ended December 31, 2012.

Earnings from equity method investees — Earnings from equity method investees include our proportionate share of the income of our equity method investees deemed to be operationally integral to our business, such as PaTH, CRS, GRS and GLS. Earnings from operationally integral unconsolidated affiliates for the nine months endedSeptember 27, 2013 was $3.7 million, an increase of $3.1 million compared to the nine months endedSeptember 28, 2012. The increase was primarily the result of equity method income recognized upon the receipt of a $2.6 million dividend distribution from GLS during the nine months endedSeptember 27, 2013.

Interest expense — Interest expense for the nine months endedSeptember 27, 2013 was $58.7 million, a decrease of $6.7 million, or 10.3%, compared to the nine months endedSeptember 28, 2012. The decrease is the result of the reduction of the principal balance of our Term Loan as a result of principal prepayments of $90.0 million during the year ended December 31, 2012. An additional principal prepayment of $15.0 million was made during the three months ended September 27, 2013.

Other (expense) income, net — Other (expense) income, net consists primarily of our share of earnings from Babcock, as well as gains/losses from foreign currency and asset sales. Other expense, net during the nine months endedSeptember 27, 2013 was $0.1 million, a reduction of $4.9 million or 102.6% compared to Other income net of $4.8 million for the nine months endedSeptember 28, 2012. The decrease was the result of a reduction in earnings from Babcock.

Income taxes — Our effective tax rate consists of federal and state statutory rates, certain permanent differences and discreet items. The effective tax rate for the nine months endedSeptember 27, 2013 was 218.4%, as compared to 79.1% for the nine months endedSeptember 28, 2012. The decrease in the tax rates was due primarily to the permanent differences impact of the goodwill impairments and certain discrete items primarily related to the remeasurement of prior tax positions during both comparable nine month periods.

Results by Segment – Three Months Ended September 27, 2013 Compared to Three Months Ended September 28, 2012

The following tables set forth the revenue, both in dollars and as a percentage of our consolidated revenue, operating income and operating margin for our operating segments for the three months ended September 27, 2013 and September 28, 2012. The following amounts agree to our segment disclosures in Note 9 to the Delta Tucker Holdings, Inc. unaudited condensed consolidated financial statements included elsewhere in the Quarterly Report on Form 10-Q.

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	Three Months Ended
	September 27, 2013					September 28, 2012
(Amounts in thousands)	Revenue			% of Total Revenue		Revenue			% of Total Revenue
DynLogistics	$	451,416		58.9	%	$	659,501		65.3	%
DynAviation	313,189			40.8		348,560			34.5
Headquarters / Other (1)	2,180			0.3		2,253			0.2
Consolidated revenue	$	766,785		100.0		$	1,010,314		100.0
	Operating Income (Loss)			Profit Margin		Operating Income (Loss)			Profit Margin
DynLogistics	$	(12,741	)	(2.8	)%	$	(453	)	(0.1	)%
DynAviation	11,231			3.6		30,027			8.6
Headquarters / Other (2)	(12,767		)			(19,664		)
Consolidated operating (loss) / income	$	(14,277	)			$	9,910

(1) Headquarters revenue primarily represents revenue earned on shared service arrangements for general and administrative services provided to unconsolidated joint ventures. The DynGlobal associated revenue for the three months ended September 27, 2013 is also included in Headquarters/Other in support of the bidding and proposal process of business development. The amount of revenue for DynGlobal represented less than 1% of total revenue for the period.

(2) Headquarters operating expenses primarily relate to amortization of intangible assets and other costs that are not allocated to segments and are not billable to our U.S. government customers, partially offset by equity method investee income. The DynGlobal associated costs for the three months ended September 27, 2013 are also included in Headquarters/Other.

DynLogistics

Revenue of $451.4 million decreased $208.1 million, or 31.6%, for the three months ended September 27, 2013 compared to the three months ended September 28, 2012 primarily as a result of reductions in manning, materials and other direct costs under the Afghan Area of Responsibility ("AOR") task order under the LOGCAP IV program consistent with the continued drawdown of troops in Afghanistan. Additionally, a decline in scope on the AMDP contract, a reduction in the level of effort on our Navistar Defense and Oshkosh Defense vehicle maintenance programs and the wind-down of the Worldwide Protective Services ("WPS") program in Iraq contributed to the reduction in revenue over this period. As efforts in Afghanistan and Iraq continue to be de-scoped at an accelerated pace and with the uncertainty related to U.S. defense budgets and sequestration, we expect our revenue for the DynLogistics segment to continue to decline during the remainder of the year ended December 31, 2013.

Operating losses of $12.7 million and $0.5 million for the three months ended September 27, 2013 and September 28, 2012 were related to the goodwill impairments recorded for the Intelligence & Security and the Training & Mentoring reporting units, respectively. See Note 3 to our unaudited condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q for further discussion. Excluding the impact of the goodwill impairments, Operating income decreased primarily as a result of the decline in revenue discussed above.

DynAviation

Revenue of $313.2 million decreased $35.4 million, or 10.1%, for the three months ended September 27, 2013 compared to the three months ended September 28, 2012 primarily as a result of the decrease in demand resulting from the de-scoping of the INL-Air Wing program in Iraq in addition to a reduction in volume of certain task orders under the Contract Field Teams (“CFT”) program and the completion of the G222 contract. The decrease in revenue was partially offset by the new Regional Aviation Sustainment Maintenance - West Region ("RASM-W) contract.

Operating income of $11.2 million decreased $18.8 million, or 62.6%, for the three months ended September 27, 2013 compared to the three months ended September 28, 2012 primarily as a result of the decrease in revenue coupled with the unfavorable adjustment related to a customer contract dispute. This adjustment further drove Operating income as a percentage of revenue to 3.6% for the three months ended September 27, 2013 compared to 8.6% for the three months ended September 28, 2012 coupled with the reduced profitability on the Counter Narcoterrorism Technology Program Office ("CNTPO") contract and additional cost incurred to expand Heliworks, Inc., which we acquired in July 2012. The decrease in operating income was partially offset by margin improvements under the CFT program.

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Results by Segment – Nine Months EndedSeptember 27, 2013 Compared to Nine Months EndedSeptember 28, 2012

The following tables set forth the revenue, both in dollars and as a percentage of our consolidated revenue, operating income and operating margin for our operating segments for the nine months endedSeptember 27, 2013 and September 28, 2012.

The following amounts agree to our segment disclosures in Note 9 to the Delta Tucker Holdings, Inc. unaudited condensed consolidated financial statements included elsewhere in the Quarterly Report on Form 10-Q.

	Nine Months Ended
	September 27, 2013					September 28, 2012
(Amounts in thousands)	Revenue			% of Total Revenue		Revenue			% of Total Revenue
DynLogistics	$	1,518,992		59.0	%	$	2,045,086		67.8	%
DynAviation	1,061,283			41.2		968,206			32.1
Headquarters / Other (1)	(4,860		)	(0.2	)	5,177			0.2
Consolidated revenue	$	2,575,415		100.0		$	3,018,469		100.0
	Operating Income (Loss)			Profit Margin		Operating Income (Loss)			Profit Margin
DynLogistics	$	20,116		1.3	%	$	39,732		1.9	%
DynAviation	75,850			7.1		80,714			8.3
Headquarters / Other (2)	(31,752		)			(43,553		)
Consolidated operating income	$	64,214				$	76,893

(1) Headquarters revenue primarily represents revenue earned on shared service arrangements for general and administrative services provided to unconsolidated joint ventures. The DynGlobal associated revenue for the nine months ended September 27, 2013 is also included in Headquarters/Other in support of the bidding and proposal process of business development. The amount of revenue for DynGlobal represented less than 1% of total revenue for the period.

(2) Headquarters operating expenses primarily relate to amortization of intangible assets and other costs that are not allocated to segments and are not billable to our U.S. government customers, partially offset by equity method investee income. The DynGlobal associated costs for the nine months ended September 27, 2013 are also included in Headquarters/Other.

DynLogistics

Revenue of $1,519.0 million decreased $526.1 million, or 25.7%, for the nine months endedSeptember 27, 2013 compared to the nine months endedSeptember 28, 2012 primarily as a result of reductions in manning, materials and other direct costs under the Afghan AOR task order under the LOGCAP IV program consistent with our expectation of reduced volume resulting from the continued drawdown of troops in Afghanistan. Additionally, a decline in the scope of the AMDP program, the completion of the CivPol task order in Iraq, a reduction in the level of effort on the Navistar Defense and Oshkosh Defense programs and the wind-down of the WPS program in Iraq further contributed to the reduction in revenue over this period. These reductions were partially offset by operations under the Philippines Operations Support 2 ("POS 2"), the Medium Tactical Vehicles ("MTV") contract and the Egyptian Personnel Support Services (“EPSS”) contract.  As efforts in Afghanistan and Iraq continue to be de-scoped at an accelerated pace and with the uncertainty related to the U.S. defense budgets and sequestration, we expect our revenue for the DynLogistics segment to continue to decline during the remainder of the year ended December 31, 2013.

Operating income of $20.1 million decreased $19.6 million, or 49.4%, for the nine months endedSeptember 27, 2013 compared to the nine months endedSeptember 28, 2012 primarily as a result of the decline in revenue discussed above partially offset by an increase in vehicle deliveries under the Palestinian Security Sector task order under the CivPol contract coupled with operations under the EPSS contract performing at higher margins than the overall contract mix in the prior year. Additionally, goodwill impairments were recorded for the Intelligence & Security and the Training & Mentoring reporting units, respectively for both comparable periods. See Note 3 to our audited condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q for further discussion.

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DynAviation

Revenue of $1,061.3 million increased $93.1 million, or 9.6%, for the nine months endedSeptember 27, 2013 compared to the nine months endedSeptember 28, 2012. The change was primarily the result of operations under new programs, including the NASA AMOS and T-6 COMBS contracts, as well as operations under new task orders awarded under the CFT program, including the Robins Air Force Base, 160th SOAR-A task orders. Additionally, increased demand for flight hours under the CNTPO contract as well as an increase in manning levels under the CFT TASM-E task order contributed to the overall increase in revenue. These increases were partially offset by the reduction in demand under the INL-Air Wing program in Iraq.

Operating income of $75.9 million decreased $4.9 million, or 6.0%, for the nine months endedSeptember 27, 2013 compared to the nine months endedSeptember 28, 2012 primarily as a result of additional cost incurred to expand Heliworks, Inc. and an unfavorable adjustment related to a customer contract dispute. We are currently working with the customer in effort to resolve the issues related to this contract. The decrease in operating income was partially offset by margin improvements under the CFT program.

Liquidity and Capital Resources

Cash generated by operations and borrowings available under our Senior Credit Facility are our primary sources of short-term liquidity (refer to Note 7 to the Delta Tucker Holdings, Inc. unaudited condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q for more detail). We believe our cash flow from operations and our available borrowings will be adequate to meet our liquidity needs for the next twelve months. However, access to our Revolver is dependent upon our meeting financial and non-financial covenants, summarized below, and our cash flow from operations is heavily dependent upon billing and collection of our accounts receivable. At different periods throughout 2013, we have seen delays and other disruptions in the ability of our customers to make timely payments on our accounts receivable. Significant changes, such as an additional CR, a future government shutdown, further cuts mandated by sequestration or any other limitations in collections or loss of our ability to access our revolver, could materially impact liquidity and our ability to fund our working capital needs. Our primary use of short-term liquidity includes debt service and working capital needs sufficient to pay for materials, labor, services or subcontractors prior to receiving payments from our customers. There can be no assurance that sufficient capital will continue to be available in the future or that it will be available at terms acceptable to us. Failure to meet covenant obligations would result in elimination of access to our Senior Credit Facility, which would materially affect our future expansion strategies and our ability to meet our operational obligations. Although we operate internationally, virtually all of our cash is held by either U.S. entities or by foreign entities, which are structured as pass through entities. As a result, we do not have significant risk associated with our ability to repatriate cash.

Management believes Days Sales Outstanding ("DSO") is an appropriate way to measure our billing and collections effectiveness. DSO measures the efficiency in collecting our receivables as of the period end date and is calculated based on average daily revenue for the most recent quarter and accounts receivable, net of customer advances, as of the balance sheet date. DSO was 83 days and 69 days as of September 27, 2013 and December 31, 2012, respectively. The increase in DSO was primarily driven by reduced revenues coupled with inconsistent payment cycles by certain of our customers.

We expect our cash position to strengthen during the remainder of the year ending December 31, 2013 as our customers return to normal payment cycles with the start of the new government fiscal year, the end of the government shutdown and our continued focus on working capital management and growth in our business. We expect cash to continue to be impacted by operational working capital needs, potential acquisitions and interest payments on the Senior Credit Facility and the Senior Unsecured Notes.

In addition, we anticipate using an additional $35.0 million, subject to operations, for principal prepayments, on the Senior Credit Facility during the remainder of the year ending December 31, 2013. Interest payments throughout the year ending December 31, 2013 are expected to be lower relative to the year ended December 31, 2012 as a result of the $90.0 million in principal payments made during 2012 and $15.0 million made during 2013.

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Cash Flow Analysis

	Nine Months Ended
(Amounts in thousands)	September 27, 2013			September 28, 2012
Net cash (used in) provided by operating activities	$	(30,245	)	$	65,248
Net cash used in investing activities	(2,639		)	(9,983		)
Net cash used in financing activities	(44,129		)	(38,079		)

Cash Flows

Cash used in operating activities during the nine months endedSeptember 27, 2013 was $30.2 million as compared to cash provided by operating activities of $65.2 million during the nine months endedSeptember 28, 2012. Cash used by operations for the nine months endedSeptember 27, 2013 was due to a lower net income for the nine months ended coupled with a reduction in accrued liabilities primarily related to payroll timing and insurance, payments of legal settlements, along with increased cash expenditures to reduce accounts payable while experiencing an increase in DSO. Cash provided by operating activities during the nine months endedSeptember 28, 2012 was primarily the result of improvements in working capital coupled with the release of restricted cash from prior years.

Cash used in investing activities during the nine months endedSeptember 27, 2013 was $2.6 million as compared to cash used in investing activities during the nine months endedSeptember 28, 2012 of $10.0 million. Cash used in investing activities during the nine months endedSeptember 27, 2013 was primarily due to the purchase of fixed assets and software. Cash used in investing activities during the nine months endedSeptember 28, 2012 was primarily the result of the acquisition of Heliworks, Inc. and investments in fixed assets partially offset by the return of capital from our Partnership for Temporary Housing ("PaTH") joint venture.

Cash used in financing activities during the nine months endedSeptember 27, 2013 was $44.1 million compared to $38.1 million of cash provided by financing activities during the nine months endedSeptember 28, 2012. Cash used in financing activities during the nine months endedSeptember 27, 2013 was primarily the result of payments related to financed insurance and a $15 million prepayment on the Term Loan. Cash used in financing activities during the nine months endedSeptember 28, 2012 was primarily the result of a $60.0 million prepayment on our Term Loan.

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Financing

As of September 27, 2013, our debt was comprised of (i) $455.0 million of Senior Unsecured Notes and (ii) $312.3 million of the term loan facility (the "Term Loan") principal associated with our Senior Credit Facility. The Senior Credit Facility also contains a $181.0 million revolving credit facility (the "Revolver") under which we had borrowings during the nine months endedSeptember 27, 2013 with the maximum amount borrowed of $87.0 million. These borrowings were for working capital requirements resulting primarily from the timing of customer collections and vendor disbursements. As of September 27, 2013 and December 31, 2012, we had no outstanding Revolver borrowings. As of September 27, 2013 and December 31, 2012, the additional available borrowing capacity under the Senior Credit Facility was approximately $145.3 million and $111.7 million, respectively, which gives effect to $35.7 million and $38.3 million, respectively, in letters of credit.

As of September 27, 2013, the Senior Credit Facility includes the $312.3 million Term Loan and the $181.0 million Revolver running from July 7, 2010 through July 7, 2016. Pursuant to the Senior Credit facility, quarterly principal payments on the Term Loan are required. However, certain principal prepayments made during the year ended December 30, 2011 were applied to the future scheduled maturities and satisfied our responsibility to make quarterly principal payments through maturity.

We incur quarterly interest payments on both the Term Loan and the Revolver comprised of (i) interest for Term Loan and Revolver borrowings, (ii) letter of credit commitments and (iii) unused commitment fees. See Note 7 to our unaudited condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q for additional information related to the Senior Credit Facility.

The Senior Unsecured Notes carry $455.0 million of principal with a 10.375% interest rate. This Indenture runs from July 7, 2010 through July 1, 2017 with the entire principal balance due on July 1, 2017. The interest payments are payable semi-annually on January 1st and July 1st. The first interest payment was made in January 2011.

We or our affiliates may, from time to time, purchase our Senior Unsecured Notes. Any such future purchases may be made through open market or privately negotiated transactions with third parties or pursuant to one or more tender or exchange offers or otherwise, upon such terms and at such prices as we or any such affiliates may determine.

In addition to the Senior Credit Facility and Senior Unsecured Notes, $0.6 million of our pre-merger 9.5% senior subordinated notes remained outstanding as of December 31, 2012. The pre-merger notes matured and were paid in full on February 15, 2013.

The weighted-average interest rate as of September 27, 2013 for our debt was 8.6%, excluding the impact of deferred financing fees. There were no interest rate hedges in place during the three months ended September 27, 2013.

Debt Covenants and Other Matters

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

• declare dividends and make other distributions;

• redeem or repurchase our capital stock;

• prepay, redeem or repurchase certain of our indebtedness;

• grant liens;

• make loans or investments (including acquisitions);

• incur additional indebtedness;

• modify the terms of certain debt;

• restrict dividends from our subsidiaries;

• change our business or business of our subsidiaries;

• merge or enter into acquisitions;

• sell our assets;

• enter into transactions with our affiliates; and

• make capital expenditures.

In addition, the Senior Credit Facility stipulates a maximum total leverage ratio, as defined in the Senior Credit Facility, and a minimum interest coverage ratio, as defined in the Senior Credit Facility, that must be maintained. As of September 27, 2013 and December 31, 2012, we were in compliance with our financial covenants.

The total leverage ratio is the Consolidated Total Debt, as defined in the Senior Credit Facility, less unrestricted cash and cash equivalents (up to $75.0 million) to Consolidated Earnings Before Interest Taxes Depreciation and Amortization ("Consolidated EBITDA"), as defined in the Senior Credit Facility, for the applicable period. Our total leverage ratio cannot be greater than 4.75 to 1.0 through the period ending September 27, 2013, after which, the maximum total leverage diminishes quarterly or semi-annually.

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The interest coverage ratio is the ratio of Consolidated EBITDA to Consolidated Interest Expense, as defined in the Senior Credit Facility. The interest coverage ratio must not be less than 2.0 to 1.0 through the period ending June 27, 2014, after which, the minimum total interest coverage ratio increases periodically thereafter.

In the event we fail to comply with the covenants specified in the Senior Credit Facility and the Indenture governing our Senior Unsecured Notes, we may be in default. As of September 27, 2013 and December 31, 2012, the Company was in compliance with all of its debt agreements.

Non-GAAP Measures

We define EBITDA as Generally Accepted Accounting Principles ("GAAP") net income (loss) attributable to Delta Tucker Holdings, Inc. adjusted for interest expense, taxes and depreciation and amortization. Adjusted EBITDA is calculated by adjusting EBITDA for the items described in the table below. We use EBITDA and Adjusted EBITDA as supplemental measures in the evaluation of our business and believe that EBITDA and Adjusted EBITDA provide a meaningful measure of operational performance on a consolidated basis because it eliminates the effects of period to period changes in taxes, costs associated with capital investments and interest expense and is consistent with one of the measures we use to evaluate management’s performance for incentive compensation. In addition, Adjusted EBITDA as presented in the table below corresponds to the definition of Consolidated EBITDA used in the Senior Secured Credit Facilities and the definition of EBITDA used in the Indenture governing the Senior Unsecured Notes to test the permissibility of certain types of transactions, including debt incurrence. Neither EBITDA nor Adjusted EBITDA is a financial measure calculated in accordance with GAAP. Accordingly, they should not be considered in isolation or as substitutes for net income attributable to Delta Tucker Holdings, Inc. or other financial measures prepared in accordance with 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. When evaluating EBITDA and Adjusted EBITDA, investors should consider, among other factors, (i) increasing or decreasing trends in EBITDA and Adjusted EBITDA, (ii) whether EBITDA and Adjusted EBITDA have remained at positive levels historically, and (iii) how EBITDA and Adjusted EBITDA compare to our debt outstanding. The non-GAAP measures of EBITDA and Adjusted EBITDA do have certain limitations. They do not include interest expense, which is a necessary and ongoing part of our cost structure resulting from the incurrence of debt. EBITDA and Adjusted EBITDA also exclude tax, depreciation and amortization expenses. Because these are material and recurring items, any measure, including EBITDA and Adjusted EBITDA, which excludes them has a material limitation. To mitigate these limitations, we have policies and procedures in place to identify expenses that qualify as interest, taxes, loss on debt extinguishments and depreciation and amortization and to approve and segregate these expenses from other expenses to ensure that EBITDA and Adjusted EBITDA are consistently reflected from period to period. Our calculation of EBITDA and Adjusted EBITDA may vary from that of other companies. Therefore, our EBITDA and Adjusted EBITDA presented may not be comparable to similarly titled measures of other companies. EBITDA and Adjusted EBITDA do not give effect to the cash we must use to service our debt or pay income taxes and thus does not reflect the funds generated from operations or actually available for capital investments.

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The following table provides a reconciliation of net income (loss) attributable to Delta Tucker Holdings, Inc. and EBITDA and Adjusted EBITDA for the periods included below:

Delta Tucker Holdings, Inc. Unaudited Adjusted EBITDA
	Three Months Ended						Nine Months Ended
(Amounts in thousands)	September 27, 2013			September 28, 2012			September 27, 2013			September 28, 2012
Net (loss) attributable to Delta Tucker Holdings, Inc.	$	(33,065	)	$	(15,794	)	$	(9,723	)	$	(1,228	)
Provision (benefit) for income taxes	(1,991		)	1,393			11,393			11,744
Interest expense, net of interest income	19,689			21,990			58,644			65,344
Depreciation and amortization (1)	12,473			12,745			37,470			38,785
EBITDA	(2,894		)	20,334			97,784			114,645
Non-recurring or unusual gains or losses or income or expenses and non-cash impairments (2)	29,173			31,920			29,765			33,681
Changes due to fluctuation in foreign exchange rates	36			22			(284		)	(77		)
Earnings (loss) from affiliates not received in cash (3)	545			138			1,395			(969		)
Employee non-cash compensation, severance, and retention expense (6)	3,206			165			4,603			1,475
Management fees (4)	671			419			1,490			864
Acquisition accounting and Merger-related items (5)	(1,092		)	(1,262		)	(3,054		)	(4,571		)
Other	7			9			(128		)	(83		)
Adjusted EBITDA	$	29,652		$	51,745		$	131,571		$	144,965

(1) Amount includes certain depreciation and amortization amounts which are classified as Cost of services in our Unaudited Condensed Consolidated Statements of Operations.

(2) Includes the impairment of goodwill of the IS and TM reporting units, as well as certain unusual income and expense items, as defined in the Indenture and Senior Credit Facility.

(3) Represents the difference between trailing twelve months of income booked from unconsolidated affiliates and the cash received from the affiliates during the same period.

(4) Amount includes management fees paid to Cerberus Operations and Advisory Company.

(5) Includes the amortization of intangibles arising pursuant to ASC 805 - Business Combination.

(6) Includes postemployment benefit expense related to severance in accordance with ASC 712 - Compensation and relocation expense related to restructure costs.

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Off Balance Sheet Arrangements

During the three months ended September 27, 2013, we restructured our facilities footprint in Virginia to better position the Company operationally for the future.  The Company entered into a rental agreement to lease property in Tysons Corner, Virginia and will vacate the properties currently occupied at various locations during the fourth quarter of 2013, to consolidate to the new Tysons Corner location. The non-cancelable lease term expires on December 31, 2024. As a result we expect our estimated total rentals on all non-cancelable operating leases to be as follows: $20.2 million in 2014; $14.8 million in 2015; $11.0 million in 2016; $10.1 million in 2017; $8.8 million in 2018 and $18.6 million thereafter.

Critical Accounting Policies and Estimates

The process of preparing financial statements in conformity with GAAP requires the use of estimates and assumptions to determine reported amounts of certain assets, liabilities, revenues and expenses and the disclosure of related contingent assets and liabilities. These estimates and assumptions are based on information available at the time of the estimates or assumptions, including our historical experience, where relevant. Significant estimates and assumptions are reviewed quarterly by management. The evaluation process includes a thorough review of key estimates and assumptions used in preparing our financial statements. Because of the uncertainty of factors surrounding the estimates, assumptions and judgments used in the preparation of our financial statements, actual results may materially differ from the estimates.

Our critical accounting policies and estimates are those policies and estimates that are both most important to our financial condition and results of operations and require the most difficult, subjective or complex judgments on the part of management in their application, often as a result of the need to make estimates about the effect of matters that are inherently uncertain.

For a discussion of our critical accounting policies and estimates please refer to "Management’s Discussion and Analysis of Financial Condition and Results of Operations" and the notes to the Delta Tucker Holdings, Inc. consolidated financial statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2012. Any material changes to our accounting policies and estimates, including estimates related to goodwill, from those described in our Annual Report on Form 10-K for the year ended December 31, 2012 are further discussed in Note 1 and Note 3 to the Delta Tucker Holdings, Inc. unaudited condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q.

Accounting Developments

The information regarding recent accounting pronouncements is included in Note 1 to the Delta Tucker Holdings, Inc. unaudited condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

There has been no significant change in our exposure to market risk during the three months ended September 27, 2013. For discussion of our exposure to market risk, refer to Item 7A. Quantitative and Qualitative Disclosures about Market Risk contained in the Company’s Annual Report on Form 10-K for the year ended December 31, 2012.

ITEM 4. CONTROLS AND PROCEDURES.

Disclosure Controls and Procedures. The Company maintains disclosure controls and procedures designed to provide reasonable assurance that information required to be disclosed in reports filed under the Securities Exchange Act of 1934 (the "Exchange Act") is recorded, processed, summarized and reported within the specified time periods and accumulated and communicated to management, including its Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.

Our management, with the participation of the Company’s Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of its disclosure controls and procedures, as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act, as of the end of the period covered in this Quarterly Report on Form 10-Q. Based on the evaluation performed, the Company’s Chief Executive Officer and Chief Financial Officer concluded that the Company’s disclosure controls and procedures are effective.

Changes in Internal Control Over Financial Reporting. There have been no changes in our internal control over financial reporting (as such term is defined in rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the fiscal quarter to which this report relates that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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PART II. OTHER INFORMATION.

ITEM 1. LEGAL PROCEEDINGS.

Information related to various commitments and contingencies is described in Note 8 to the Delta Tucker Holdings, Inc. unaudited condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q.

ITEM 1A. RISK FACTORS.

There have been no material changes in risk factors from those described in "Risk Factors" disclosed in our Annual Report on Form 10-K for the year ended December 31, 2012 except as described below.

We may not be able to continue to deploy or sell our helicopter assets.

We have approximately $8.2 million in helicopter assets comprised of seven UH-1HP “Huey” helicopters that are not deployed on existing programs. Additionally, six of the deployed Huey helicopters under the LOGCAP program were returned from the program during the three months ended September 27, 2013, due to the accelerated ramp down of the program.

We plan to sell all thirteen Huey helicopters or utilize them on other existing programs. We have no guarantee that we will be able to successfully sell these assets or utilize them on other programs. The inability to sell or deploy the helicopters could lead to an impairment charge in the future.

A decline or reprioritization of funding in the U.S. defense budget or delays in the budget process could adversely affect our

operating performance and our ability to generate cash flow to fund our operations.

Our government contracts and sales are highly correlated and dependent upon the U.S. defense budget which is subject to the congressional budget authorization and appropriations process. Defense budgets are a function of several factors beyond our control, including, but not limited to, changes in U.S. procurement policies, budget considerations, current and future economic conditions, presidential administration priorities, changing national security and defense requirements, geo-political developments and actual fiscal year congressional appropriations for defense budgets. Congress usually appropriates funds for a given program on a September 30 fiscal year basis, even though contract periods of performance may extend over many years. Consequently, at the beginning of a major program, the contract is usually partially funded, and additional monies are normally committed to the contract by the procuring agency only as appropriations are made by Congress for future fiscal years.

In October of 2013, with the fiscal year 2014 beginning, Congress convened and agreed to a short-term CR funding the government at the fiscal year 2013 sequester level through January 15, 2014 and suspended the statutory limit on the amount of permissible federal debt through February 7, 2014. It is unclear when or if annual appropriations bills will be enacted for the fiscal year 2014. The U.S. government may operate under a continuing resolution for all of 2014, restricting the start of new contracts or programs that year. 

Congressional appropriation and authorization of the fiscal year 2014 spending, including defense spending, and the application of sequestration remain marked by significant debate and an uncertain schedule. Congress and the Administration also continue to debate the debt ceiling. The outcome of these debates could have a significant impact on future defense spending broadly and the Company's programs, in particular. These or other factors could result in a significant decline in, or redirection of, current and future budgets and could adversely affect our operating performance, including the possible continued loss of revenue and reduction in our operating cash flow.

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

None.

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ITEM 3. DEFAULTS UPON SENIOR SECURITIES.

None.

ITEM 4. MINE SAFETY DISCLOSURES.

Not applicable.

ITEM 5. OTHER INFORMATION.

As previously announced, Chris Bernhardt, age 57 was appointed as President of the Company on November 6, 2013. Mr. Bernhardt joined the Company in September 2013 as Senior Vice President of Corporate Development. Prior to joining the Company he was Executive Vice President of Exelis Inc. and President of ITT Electronic Systems.

Mr. Bernhardt's more than 30 years in the defense industry include a broad array of leadership positions in the areas of general management, program management, business development, strategy development, M&A and operations, with leadership emphasis on team building, strategic repositioning and execution, innovation, process improvement, business transformation, talent development and customer satisfaction.

Mr. Bernhardt will receive a base salary of $550,000, payable in accordance with customary payroll practices of the Company. Mr. Bernhard will also be eligible to receive an annual bonus with a target amount of one hundred percent (100%) of his base salary and a potential of up to two hundred percent of base salary (200%) to be paid at the discretion of the Board or, if so delegated by the Board, the Compensation Committee based on meeting or exceeding the Company's annual goals.

Mr. Bernhardt's employment agreement, which was executed on November 11, 2013, but was effective November 7, 2013, provides for (i) severance termination benefits (prior to change in control), (ii) change in control termination benefits (on or after a change in control), and (iii) death and disability benefits. As a condition of receipt of these benefits (other than the death and disability benefits), Mr. Bernhardt must first execute a release and full settlement agreement. The agreement contains customary confidentiality, noncompetition, and nonsolicitation covenants. The employment agreement for Mr. Bernhardt is filed hereto as Exhibit 10.1.

ITEM 6. EXHIBITS.

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

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Exhibit No.	Description
10.1*	Employment Agreement dated as of November 7, 2013 by and between DynCorp International LLC (the "Company") and Christopher Bernhardt (the "Executive") (each a "Party" and together, the "Parties")
31.1*	Certification of the Chief Executive Officer of Delta Tucker Holdings, Inc. pursuant to Rule 13a-14(a) or 15d-14(a) of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2*	Certification of the Chief Financial Officer of Delta Tucker Holdings, Inc. pursuant to Rule 13a-14(a) or 15d-14(a) of the Securities Exchange Act of 1934, as adopted 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
101.INS XBRL	Instance document
101.SCH XBRL	Taxonomy Extension Schema
101.CAL XBRL	Taxonomy Extension Calculation Linkbase
101.DEF XBRL	Taxonomy Extension Definition Linkbase
101.LAB XBRL	Taxonomy Extension Labels Linkbase
101.PRE XBRL	Taxonomy Extension Presentation Linkbase
*	Filed herewith

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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.

Date:	November 12, 2013	DELTA TUCKER HOLDINGS, INC.
		/s/ William T. Kansky
		William T. Kansky
		Senior Vice President and Chief Financial Officer

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