DynCorp

1946–1976

DynCorp, one of the largest employee-owned firms in the United States, has not been a very high-profile company, yet its behind-the-scenes logistics support operations for the Defense Department are extensive. The company provides ground support for Air Force One, maintains the State Department's telephones, and contracts coca (cocaine) eradication missions in Colombia. The U.S. Department of Defense accounts for a little less than half of DynCorp's total revenues. Some of DynCorp's earliest customers, such as the White Sands Missile Range in New Mexico, have remained loyal to the company for more than 50 years. CEO Paul Lombardi expects continued growth, most especially in providing services to state and local governments, due to the lack of a dominant player in that highly fragmented market.

War Surplus Origins

California Eastern Airways, Inc. (CEA) was not the only air cargo line started by military pilots returning to the United States after World War II. Nor was it the most enduring, as a purely civil transport enterprise. CEA would diversify, however, into one of the country's most important defense contractors. Within a year of its founding in 1946, California Eastern was serving both coasts. The company participated in the U.S. military airlift during the Korean War.

The purchase of Land-Air, Inc. in the early 1950s brought CEA into a new field of technical services. Land-Air operated missile ranges and modified aircraft for government agencies. In 1951, CEA's total revenues exceeded $6 million. The next year, the company merged with Air Carrier Service Corporation (AIRCAR), which sold commercial aircraft and spare parts to foreign airlines and governments. AIRCAR left the civil aviation business in 1957, focusing instead on defense and aerospace engineering, commercial electronics, and data management.

Dynalectron in 1961

By 1961, CEA needed a new name to more accurately reflect its diversified empire. The name Dynalectron Corporation was culled from 5,000 employee suggestions.

Dynalectron diversified into the energy services business via the 1964 acquisition of Hydrocarbon Research, Inc. At the end of the decade, the company instituted a plan to expand the commercial aviation services business while entering the specialty construction contracting field.

In 1976, Dynalectron established a headquarters in McLean, Virginia. The company restructured into four main operating groups: Specialty Contracting, Energy, Government Services, and Aviation Services. Dynalectron had made 19 acquisitions in its 30 years.

In 1951, CEA's total revenues exceeded $6 million.

1963–1988

CEO Charles G. Gulledge reported that Dynalectron ended 1976 with stockholders' equity of $30 million, assets of $88 million, and a backlog of $250 million, all record numbers. Annual sales were a bit less than $300 million in the mid-1970s. The company posted a $1.5 million loss in 1978 due to write-downs on wastewater treatment plants being built by a subsidiary, AFB Contractors Inc. After this loss, the company ended its diversification program, focusing instead on cost-cutting to reduce debt.

One of the company's smaller subsidiaries provided the prospect of continued growth. Since 1963, the company's Hydrocarbon Research (HRI) unit had been developing a process to liquefy coal to produce a fuel for boilers. This work attracted national attention due to the Arab oil embargos of the 1970s and the public debate over energy policy. By the early 1980s, Texaco Inc., Ruhrkohle of West Germany, and C. Itoh & Co. of Japan had agreed to market Dynalectron's proprietary H-Oil process.

Other projects in which Dynalectron was involved included training helicopter pilots and technicians in Saudi Arabia. By 1981, Dynalectron had acquired another 14 companies, mostly in the aviation services field, which now encompassed cargo handling and aviation fueling. The company also had established a computer component repair business. Two public offerings of stock helped provide the capital for the purchases.

Revenues were $640 million in 1985; a third of the company's business was coming from the Defense Department. Revenues grew to $749 million in 1986.

In April 1987, Dynalectron agreed to pay $1.5 million to settle two bid-rigging cases related to its largest subsidiary, Dynalectric Co. A spokesman maintained the settlement was more a matter of financial expediency than an admission of any wrongdoing.

New Name, New Owners in the Late 1980s

Dynalectron adopted the DynCorp name in 1987. The company had become North America's fourth largest electrical contractor; its defense contracting and aviation services businesses were also considerable.

In early 1988, a management buyout took DynCorp private again and established an Employee Stock Ownership Plan (ESOP) following a hostile takeover attempt from Miami financier Victor Posner. An investment group led by DynCorp Chairman Jorge E. Carnicero paid $246 million for the company.

1990–1997

A restructuring grouped the company, which had 16,000 employees, into Government Services and Commercial Aviation Services divisions. DynCorp instituted a strategy to make it less dependent on defense work: by 1995, according to the plan, 40 percent of its contracts would not be defense-related, the professional services business would grow, and the company would achieve annual sales of $1.2 billion.

DynCorp aggressively pursued the emerging information technology (IT) business in the early 1990s, buying ten companies between 1990 and 1993 (Bell Technical Operations; Program Resources, Inc.; Meridian Corporation; Viar & Company; Aerotherm Corporation; Becon Services; B-K Dynamics; Science Management Corporation's Information Systems Division; Technology Applications, Inc.; and Network Management Inc.). A new group, Applied Sciences, was formed to encompass them in 1990.

Another business unit, Information & Engineering Technology (I&ET), was formed in 1994, charged with capturing large IT service contracts. In October of that year, DynCorp bought CBIS Federal Inc., renaming it DynTel Corporation.

DynCorp revenues reached the $1 billion mark in 1994. The company had posted losses, however, for the previous five years. Profits returned as revenues slipped to $909 million in 1995; new contacts worth $1.7 billion pushed the company's backlog toward the $3 billion mark. DynCorp reported receiving six merger proposals after posting the results.

In August 1995, DynAir, the commercial aviation unit, was sold in two pieces to Sabreliner Corp. of St. Louis and London's Alpha Airports Group PLC. DynAir had accounted for 5,000 of DynCorp's 23,000 employees.

Focus on IT in the 1990s

Under CEO Dan Bannister, DynCorp was dedicating itself to its role as one of the fastest growing providers of IT services in the Washington, D.C. area. Still, these services were accounting for less than 20 percent of the company's total revenues. Most of the company's work came from the low-tech "roads and commodes" end of the business.

Dyncorp posted record revenue and backlog figures in 1996, giving ample reason to celebrate during the company's 50th anniversary year. At the beginning of 1997, another banner year, Dan R. Bannister became company chairman while Paul V. Lombardi assumed the titles of president and CEO. Lombardi had joined the firm five years earlier as head of its Governmental Services Group.

1996–2001

Some new businesses were added during the mid-1990s. Data Management Design, Inc., a provider of workflow solutions, was acquired in 1996. DynSolutions, added in 1997, developed information management systems for commercial users. DynCorp Management Resources, also added in 1997, focused on state and local government services.

In February 1998, DynCorp bought FMAS, a health information systems provider. Later in the year, DynCorp entered a unique public-private partnership to operate the Virginia Space Flight Center.

GTE Information Systems was acquired in late 1999 and renamed DynCorp Information Systems. It would soon install a unique, completely wireless computing infrastructure at Virginia Union University. The acquisition was one of DynCorp's more troublesome; the company eventually sued GTE for misinformation regarding the profitability of a phone system for prisoners.

During 1999, DynCorp moved to a new headquarters building in Reston, Virginia. The company's impressive financials continued to grow throughout the late 1990s and into 2000, in large part due to an industry-leading 66 percent contract win rate. Backlog was $6 billion in the spring of 2001.

DynCorp organized its healthcare services business under the new AdvanceMed LLC subsidiary in January 2001. Reve- nues were about $75 million a year; the unit specialized in predictive outcome analysis for large insurers and hospitals.

Lombardi was bullish on the prospect of future growth in services for state and local governments, due to its huge size and lack of dominant players. DynCorp's Management Resources unit had grown 40 percent in 1998 alone. In late 2001, DynCorp planned to merge this business with TekInsight, a public IT company, holding a 40 percent ownership in the new company to be called DynTech.

The September 11 terrorist attacks on the World Trade Center and the Pentagon had implications for a variety of DynCorp's lines of business. The company operated INS stations along the Mexican border. According to the Washington Business Journal, many defense agencies consulted with the firm regarding contingency plans and the government asked DynCorp to make its emergency telephone system completely wireless. DynPort Vaccines, a joint venture with Porton International Ltd., researched biological weapons.