Before joining DynCorp, Burke was the Executive Vice President of Prism Public Affairs, which was occasionally paid by the hour by DynCorp to do work for it.
Among its services Prism offers strategic positioning, crisis and issue management, litigation communications, and congressional investigations and hearings. Given DynCorp’s sometimes controversial work history it is easy to see why it would use Prism.
Good luck to Ms. Burke. She is going to need it. To paraphrase Charles Dickens’ A Tale of Two Cities this is not the best of times, albeit more in terms of perception than reality, for DynCorp.
To explain why, a little history is necessary. Burke is the permanent replacement for Doug Ebner who was Senior Director, Media and Marketing Communications. He left DynCorp International on April 1 “to take on new professional challenges and opportunities.” During his tenure DynCorp actually had a very good reputation in terms of media relations. While DynCorp might come in for criticism for its activities in Iraq or Afghanistan it had a well deserved reputation for openness and transparency, especially in terms of dealing with the media. Any reporter could call and be confident their call would be returned and, assuming it did not violate client rules about releasing information that was considered confidential, would have their questions answered. That may not sound like much but compared to many other similar contractors, dealing with DynCorp during Ebner’s time was like dealing with the people who support the Freedom of Information Act. If DynCorp could answer a question it would.
After he left an interim replacement was Jason Rossbach, Senior. Director of Government Affairs. He was only temporary; he was never expected to take on the spokesman role for the long term.
But shortly before Ebner left, Newsweek and ProPublica published a story on alleged serious problems with DynCorp’s contract to train the Afghan National Police.
Regardless of the ultimate truth of the story, which is still being investigated it caused lots of consternation at DynCorp. Rossbach, for example, took exception to a post I wrote about it.
CEO Bill Ballhaus sent a March 23 statement to DynCorp employees, writing “Over the last week we have all seen a number of articles about DynCorp International’s police training and mentoring contract in Afghanistan. Most of the coverage, including this week’s Newsweek cover story, fails to reflect the good work we are performing for our customer.” He went on to say, “We will actively challenge mischaracterizations of our performance in the media.” although he did not specifically challenge any assertions in the Newsweek story.
DynCorp shares were weighed down in the past year. Some within the company think it is due to critical headlines stemming from some of its work for the military, and by contract renewal fears.
In fact, while DynCorp may have problems, recent critical press is not the reason. As academics say correlation is not proof of causation.
True, DynCorp shares declined substantially since the secondarily public offering last fall ($18.50 a share, and was trading in the $11–12 range when the Cerberus offer was announced. But since then, it’s been in the $16.75–17.50 range, mostly due to people doing short‐term speculation. In February, when it reported its third quarter FY 2010 financial results it reported that revenue for the first nine months of fiscal year 2010 increased by 10.2% to $2,521.5 million from $2,288.3 million for the first nine months of fiscal year 2009.
A more accurate read is that the results are mixed and a bit confusing. There’s both good and bad news.
Revenue is on target compared to guidance, but EBITDA (i.e., margin) is way down and so are earnings per share. So they are making less money on more business and aren’t earning what they told investors they would earn. Most of the increased business is from its LOGCAP work.
DynCorp’s financial statements require careful reading because like any company it always tries to put the best foot forward on such statements. When you compare the year to date with last year, it shows increases; revenue, earnings per share and EBITDA are all up over last year. But when you compare it to what it forecast for FY2010, it has problems. Notice that when it lowers the forecast, it says they are adjusting or revising, but when it increases, it says increase. However, the failure to meet guidance and the continual revision of guidance raises eyebrows. And the revision of guidance upward just before the public offering, and after only one quarter of the fiscal year, only to reduce it later, also raised eyebrows. People will say it shows at best a lack of competence, or worse, deception.
To illustrate the above consider the following taken from past quarterly earning statements. After the first quarter, DyCorp said: