- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
--------------
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
August 5, 1999
Date of Report
(Date of earliest event reported)
--------------
DECRANE AIRCRAFT HOLDINGS, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 333-70365 34-1645569
(State or other jurisdiction (Commission File Number) (I.R.S. Employer
of incorporation) Identification No.)
2361 ROSECRANS AVENUE, SUITE 180, EL SEGUNDO, CA 90245
(Address, including zip code, of principal executive offices)
(310) 725-9123
(Registrant's telephone number, including area code)
--------------
NOT APPLICABLE
(Former address and telephone number of principal executive offices, if changed
since last report)
--------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
EXPLANATORY NOTE
On August 6, 1999, DeCrane Aircraft Holdings, Inc. filed its Form 10-Q
for the quarter ended June 30, 1999. In Item 5 of that Form 10-Q, we
described our August 5, 1999 acquisition of Custom Woodwork & Plastics, Inc.
At the time of filing, the Regulation S-X compliant audited financial
statements of Custom Woodwork and the pro forma consolidated financial
information required by the Securities Exchange Act of 1934 were not
available. The purpose of this Form 8-K is to provide the required financial
statements and pro forma financial information.
In October 1998, we also acquired PCI NewCo, Inc. and International
Custom Interiors, Inc. Item 2 of this Form 8-K includes a description of
these acquisitions. The Regulation S-X compliant audited financial statements
and pro forma consolidated financial information required in Item 7 are not
available at this time and will be filed by amendment to this Form 8-K by no
later than December 20, 1999.
DOCUMENTS REFERRED TO IN THIS REPORT
DeCrane Aircraft has filed documents with the Securities and Exchange
Commission that we refer to in this report. The documents we refer to and the
information they contain are described below:
- - Our Registration Statement No. 333-70365 on Form S-1 effective May 14,
1999, and the prospectus it contains. The prospectus includes our audited
1998 financial statements, descriptions of previously completed
acquisitions and the DLJ acquisition, audited financial statements of
previously acquired companies and unaudited pro forma consolidated
financial information reflecting the previously acquired companies.
- - Our Form 10-Q for the quarter ended June 30, 1999. The Form 10-Q includes
our historical consolidated financial statements, updated information for
previously acquired companies and information on the Custom Woodwork's
acquisition.
You may read and copy any reports, statements or other information we
file at the SEC's reference room in Washington D.C. Please call the SEC at
(202) 942-8090 for further information on the operation of the reference
rooms. You can also request copies of these documents, upon payment of a
duplicating fee, by writing to the SEC, or review our SEC filings on the
SEC's EDGAR web site, which can be found at http:\\www.sec.gov. You may also
write or call us at our corporate office located at 2361 Rosecrans Avenue,
Suite 180, El Segundo, California 90245. Our telephone number is (310)
725-9123.
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS
ACQUISITION OF CUSTOM WOODWORK & PLASTICS, INC.
On August 5, 1999 we acquired substantially all of the assets, subject
to accounts payable and accrued expenses assumed, of Custom Woodwork &
Plastics, Inc. Custom Woodwork is a Georgia-based designer and manufacturer
of interior furniture components for middle- and high-end corporate aircraft.
We intend to continue to use the acquired assets to manufacture products
similar to those previously manufactured by Custom Woodwork.
The total purchase price was $13.8 million, including an estimated $0.5
million of acquisition related costs. The acquisition will be accounted for
as a purchase and the assets acquired and liabilities assumed will be
recorded at their estimated fair values. Based on historical values as of
June 30, 1999, it is estimated that the historical value of inventory will be
increased by $0.5 million and the $11.7 million difference between the
purchase price and the fair value of the net assets acquired will be recorded
as goodwill and amortized on a straight-line basis over thirty years. The
purchase price allocation is preliminary and may change upon the completion
of the final valuation of the net assets acquired. Our consolidated financial
statement will include Custom Woodwork's financial position and its results
of operations for periods subsequent to the acquisition date.
The acquisition was funded with borrowings under our senior credit
facility.
1
ACQUISITION OF PCI NEWCO, INC.
On October 6, 1999 we acquired substantially all of the assets, subject
to accounts payable and accrued expenses assumed, of PCI NewCo, Inc. PCI
NewCo is a Kansas-based manufacturer of composite material and components for
middle- and high-end corporate aircraft. We intend to continue to use the
acquired assets to manufacture products similar to those previously
manufactured by PCI NewCo.
The total purchase price was $8.8 million, plus $1.5 million of
contingent consideration payable in 2000 based on future attainment of
defined performance criteria. The total purchase price includes an estimated
$0.3 million of acquisition related costs. The acquisition will be accounted
for as a purchase and the difference between the purchase price and the fair
value of the net assets acquired will be recorded as goodwill and amortized
on a straight-line basis over thirty years. The amount of contingent
consideration paid in the future, if any, will increase goodwill and will be
amortized prospectively over the remaining period of the initial thirty-year
term. Our consolidated financial statements will include PCI NewCo's
financial position and its results of operations for periods subsequent to
the acquisition date.
The acquisition was funded with borrowings under our senior credit
facility.
ACQUISITION OF INTERNATIONAL CUSTOM INTERIORS, INC.
On October 8, 1999 we acquired all of the common stock of International
Custom Interiors, Inc. Custom Interiors is a Florida-based provider of
upholstery services and manufacturer of furniture for middle- and high-end
corporate aircraft. We intend to continue to use the acquired assets to
manufacture products similar to those previously manufactured by Custom
Interiors.
The total purchase price was $3.2 million, including an estimated $0.4
million of acquisition related costs. The acquisition will be accounted for
as a purchase and the difference between the purchase price and the fair
value of the net assets acquired will be recorded as goodwill and amortized
on a straight-line basis over thirty years. Our consolidated financial
statements will include Custom Interiors' financial position and its results
of operations for periods subsequent to the acquisition date.
The acquisition was funded with borrowings under our senior credit
facility.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial statements of businesses acquired.
Audited financial statements of Custom Woodwork & Plastics, Inc.,
including related notes and independent accountants' report, are attached
hereto as follows:
Page
------
Report of Independent Accountants ......................................................................... F-1
Balance Sheets as of December 31, 1997 and 1998 and June 30, 1999 (unaudited) ............................. F-2
Statements of Income for the years ended December 31, 1997 and 1998 and
the six months ended June 30, 1998 and 1999 (unaudited) ................................................. F-3
Statements of Stockholders' Equity for years ended December 31, 1997 and 1998 and
the six months ended June 30, 1999 (unaudited) .......................................................... F-4
Statements of Cash Flows for the years ended December 31, 1997 and 1998 and
the six months ended June 30, 1998 and 1999 (unaudited) ................................................. F-5
Notes to the Financial Statements ......................................................................... F-6
PCI NewCo, Inc. Regulation S-X compliant audited financial statements
are not available at this time. The audited financial statements for the
appropriate periods will be filed by amendment to this Form 8-K as soon as
practicable, but in no event later than December 20, 1999. Because
International Custom Interiors, Inc. does not constitute a significant
subsidiary, the filing of Regulation S-X compliant audited financial
statements is not required.
2
(b) Pro forma financial information.
Unaudited pro forma financial information reflecting the Custom Woodwork &
Plastics, Inc. acquisition, including related explanatory notes, are attached
hereto as follows:
Page
------
Basis of Presentation ..................................................................................... P-1
Unaudited Pro Forma Consolidated Statement of Operations for the year ended December 31, 1998 ............. P-2
Unaudited Pro Forma Consolidated Statement of Operations for the six months ended June 30, 1999 ........... P-3
Unaudited Pro Forma Consolidated Balance Sheet as of June 30, 1999 ........................................ P-4
Notes to Unaudited Pro Forma Consolidated Financial Information ........................................... P-5
Unaudited pro forma financial information reflecting the PCI NewCo, Inc.
and International Custom Interiors, Inc. acquisitions is not available at
this time. The pro forma financial information will be filed by amendment to
this Form 8-K as soon as practicable, but in no event later than December 20,
1999.
(c) Exhibits.
Exhibit
No. Exhibit Description
------- ---------------------------------------------------------------------------------------------
13.19.1 Articles of Incorporation of CWP Acquisition, Inc. *
13.19.2 By Laws of CWP Acquisition, Inc. *
13.20.1 Articles of Incorporation of PCI Acquisition Co., Inc. **
13.20.2 By Laws of PCI Acquisition Co., Inc. **
13.21.1 Articles of Incorporation of International Custom Interiors, Inc. **
13.21.2 By Laws of International Custom Interiors, Inc. **
20.1 Prospectus of DeCrane Aircraft Holdings, Inc. dated May 14, 1999 (incorporated by reference to
the Company's Registration Statement No. 333-70365 on Form S-1 effective May 14, 1999) *
21.1 List of Subsidiaries of Registrant **
- --------------
* Previously filed
** Filed herewith
3
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.
DECRANE AIRCRAFT HOLDINGS, INC.
(Registrant)
October 19, 1999 By: /s/ RICHARD J. KAPLAN
-------------------------------------
Name: Richard J. Kaplan
Title: Senior Vice President, Chief
Financial Officer,
Secretary and Treasurer
4
FINANCIAL STATEMENTS OF BUSINESS ACQUIRED
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors
and Stockholders of
Custom Woodwork & Plastics, Inc.
In our opinion, the accompanying balance sheets and the related
statements of income, of stockholders' equity and of cash flows present
fairly, in all material respects, the financial position of Custom Woodwork &
Plastics, Inc. at December 31, 1997 and 1998 and the results of its
operations and its cash flows for the years then ended, in conformity with
generally accepted accounting principles. These financial statements are the
responsibility of the Company's management; our responsibility is to express
an opinion on these financial statements based on our audits. We conducted
our audits of these statements in accordance with generally accepted auditing
standards which require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements, assessing
the accounting principles used and significant estimates made by management,
and evaluating the overall financial statement presentation. We believe that
our audits provide a reasonable basis for the opinion expressed above.
PRICEWATERHOUSECOOPERS LLP
Los Angeles, California
October 1, 1999
F-1
CUSTOM WOODWORK & PLASTICS, INC.
BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE DATA)
DECEMBER 31, JUNE 30,
------------------------ ------------
1997 1998 1999
----------- ----------- ------------
(UNAUDITED)
ASSETS
Current assets
Cash and cash equivalents ....................................................... $ 452 $ 776 $ 873
Trade accounts receivable ....................................................... 209 269 642
Inventories ..................................................................... 197 434 400
Note receivable ................................................................. 50 - -
----------- ----------- -----------
Total current assets .......................................................... 908 1,479 1,915
Property, plant and equipment, net ................................................. 737 793 731
----------- ----------- -----------
Total assets ................................................................ $ 1,645 $ 2,272 $ 2,646
----------- ----------- -----------
----------- ----------- -----------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Trade accounts payable .......................................................... $ 15 $ 95 $ 100
Accrued expenses and other liabilities........................................... 10 17 39
----------- ----------- -----------
Total current liabilities ..................................................... 25 112 139
----------- ----------- -----------
Commitments and contingencies (Note 8).............................................. - - -
----------- ----------- -----------
Stockholders' equity
Common stock, $1 par value, 50,000 shares authorized; 500 shares
issued and outstanding at December 31, 1997 and 1998 and June 30, 1999......... 1 1 1
Retained earnings ............................................................... 1,619 2,159 2,506
----------- ----------- -----------
Total stockholders' equity .................................................... 1,620 2,160 2,507
----------- ----------- -----------
Total liabilities and stockholders' equity .................................. $ 1,645 $ 2,272 $ 2,646
----------- ----------- -----------
----------- ----------- -----------
The accompanying notes are an integral part of the financial statements.
F-2
CUSTOM WOODWORK & PLASTICS, INC.
STATEMENTS OF INCOME
(IN THOUSANDS)
YEAR ENDED SIX MONTHS ENDED
DECEMBER 31, JUNE 30,
------------------------ ------------------------
1997 1998 1998 1999
----------- ----------- ----------- -----------
(UNAUDITED)
Sales ................................................................. $ 3,235 $ 4,480 $ 2,034 $ 4,002
Cost of sales ......................................................... 1,877 2,358 1,104 1,843
----------- ----------- ----------- -----------
Gross profit .......................................................... 1,358 2,122 930 2,159
Operating expenses
Selling, general and administrative ................................ 365 397 169 198
----------- ----------- ----------- -----------
Income from operations ................................................ 993 1,725 761 1,961
Other income
Interest income, net ............................................... 27 35 18 9
Other (expense) income, net ........................................ (5) 2 - -
----------- ----------- ----------- -----------
Net income ............................................................ $ 1,015 $ 1,762 $ 779 $ 1,970
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
The accompanying notes are an integral part of the financial statements.
F-3
CUSTOM WOODWORK & PLASTICS, INC.
STATEMENTS OF STOCKHOLDERS' EQUITY
(IN THOUSANDS, EXCEPT SHARE DATA)
COMMON STOCK
----------------------
NUMBER
OF RETAINED
SHARES AMOUNT EARNINGS TOTAL
--------- ----------- ----------- -----------
Balance, December 31, 1996 ............................................ 500 $ 1 $ 1,268 $ 1,269
Net income ......................................................... - - 1,015 1,015
Distributions to stockholders ...................................... - - (664) (664)
--------- ----------- ----------- -----------
Balance, December 31, 1997 ............................................ 500 1 1,619 1,620
Net income ......................................................... - - 1,762 1,762
Distributions to stockholders ...................................... - - (1,222) (1,222)
--------- ----------- ----------- -----------
Balance, December 31, 1998 ............................................ 500 1 2,159 2,160
Net income (Unaudited) ............................................. - - 1,970 1,970
Distributions to stockholders (Unaudited) .......................... - - (1,623) (1,623)
--------- ----------- ----------- -----------
Balance, June 30, 1999 (Unaudited) .................................... 500 $ 1 $ 2,506 $ 2,507
--------- ----------- ----------- -----------
--------- ----------- ----------- -----------
The accompanying notes are an integral part of the financial statements.
F-4
CUSTOM WOODWORK & PLASTICS, INC.
STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
YEAR ENDED SIX MONTHS ENDED
DECEMBER 31, JUNE 30,
------------------------ ------------------------
1997 1998 1998 1999
----------- ----------- ----------- -----------
(UNAUDITED)
Cash flows from operating activities
Net income ......................................................... $ 1,015 $ 1,762 $ 779 $ 1,970
Adjustments to reconcile net income to net cash
provided by operating activities
Depreciation ................................................... 35 40 22 17
Changes in operating assets and liabilities
Trade accounts receivable ........................................ (209) (60) 158 (373)
Inventories ...................................................... 2 (237) 14 34
Trade accounts payable ........................................... - 80 33 5
Accrued expenses and other liabilities ........................... - 7 15 22
----------- ----------- ----------- -----------
Net cash provided by operating activities ...................... 843 1,592 1,021 1,675
----------- ----------- ----------- -----------
Cash flows from investing activities
Purchases of property, plant and equipment ......................... (38) (96) (64) -
(Issuance) payment of note receivable .............................. (50) 50 - -
----------- ----------- ----------- -----------
Net cash used for investing activities ......................... (88) (46) (64) -
----------- ----------- ----------- -----------
Cash flows from financing activities
Distributions paid to stockholders ................................. (664) (1,222) (322) (1,578)
----------- ----------- ----------- -----------
Net cash used for financing activities ......................... (664) (1,222) (322) (1,578)
----------- ----------- ----------- -----------
Net increase in cash and cash equivalents ............................. 91 324 635 97
Cash and cash equivalents at beginning of period ...................... 361 452 452 776
----------- ----------- ----------- -----------
Cash and cash equivalents at end of period ............................ $ 452 $ 776 $ 1,087 $ 873
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
The accompanying notes are an integral part of the financial statements.
F-5
CUSTOM WOODWORK & PLASTICS, INC.
NOTES TO FINANCIAL STATEMENTS
NOTE 1 - THE COMPANY
Custom Woodwork & Plastics, Inc. (the "Company") designs and
manufactures interior furniture components for middle- and high-end corporate
aircraft. The Company operates in the U.S. market and 100% and 74% of the
Company's sales for fiscal 1998 and 1997 were to Gulfstream Aerospace
Corporation, respectively. The Company's customers are principally
concentrated in the corporate aircraft industry.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
CASH AND CASH EQUIVALENTS
The Company considers all highly liquid investments with an original
maturity of three months or less when purchased to be cash equivalents.
It is the policy of the Company to deposit its cash and cash equivalents
in federally insured financial institutions. From time to time deposits may
exceed Federal Deposit Insurance Corporation ("FDIC") limits. At December 31,
1998, the Company had $476,000 on deposit in excess of the FDIC limits.
INVENTORIES
Inventories are valued at the lower of cost or market, cost being
determined using the first-in, first-out (FIFO) method.
PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment are stated at cost less accumulated
depreciation. Major renewals and betterments are capitalized and ordinary
repairs and maintenance are charged against operations in the year incurred.
Depreciation is computed using the straight-line method for buildings and
building improvements and the double-declining balance method for machinery
and equipment, vehicles and furniture and fixtures. Estimated useful lives
are 40 years for buildings and building improvements and 5 to 7 years for
machinery and equipment, vehicles and furniture and fixtures.
REVENUE RECOGNITION
Revenue is recognized when products are shipped.
INCOME TAXES
The Company elected to have its income taxed as an S corporation under
provisions of the Internal Revenue Code; therefore, taxable income or loss is
reported to the individual stockholders for inclusion in their tax returns,
and no provision for Federal and state income tax is included in these
statements.
FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying amounts of financial instruments including cash,
receivables, accounts payable and accrued expenses and other liabilities do
not significantly differ from fair values as of December 31, 1997 and 1998.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
F-6
CUSTOM WOODWORK & PLASTICS, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
UNAUDITED INTERIM RESULTS
The financial information as of June 30, 1999 and for the six months
ended June 30, 1998 and 1999 is unaudited. In the opinion of the Company, the
unaudited financial information is presented on a basis consistent with the
audited financial statements and contains all adjustments, consisting only of
normal recurring adjustments, necessary for a fair statement of the results
for such interim periods. The results of operations for the interim periods
are not necessarily indicative of results of operations for the full year.
NOTE 3 - INVENTORIES
Inventories consist of the following (amounts in thousands):
DECEMBER 31, JUNE 30,
------------------------ ------------
1997 1998 1999
----------- ----------- ------------
(UNAUDITED)
Raw material ....................................................................... $ 14 $ 24 $ 47
Work-in-process .................................................................... 183 410 353
----------- ----------- ------------
Total inventories ............................................................... $ 197 $ 434 $ 400
----------- ----------- ------------
----------- ----------- ------------
NOTE 4 - PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment consists of the following (amounts in
thousands):
DECEMBER 31,
------------------------
1997 1998
----------- -----------
Land ............................................................................................ $ 75 $ 75
Buildings and building improvements ............................................................. 644 644
Machinery and equipment ......................................................................... 113 113
Vehicles ........................................................................................ 90 163
Furniture and fixtures .......................................................................... 16 16
----------- -----------
Total cost ................................................................................... 938 1,011
Accumulated depreciation and amortization .................................................... (201) (218)
----------- -----------
Net property and equipment ................................................................... $ 737 $ 793
----------- -----------
----------- -----------
Depreciation expense for the years ended December 31, 1997 and 1998 was
$35,000 and $40,000, respectively.
NOTE 5 - LINE OF CREDIT
The Company had a $200,000 revolving line of credit with a bank,
collaterialized by all of the assets of the Company. Loans under the line of
credit bear interest at the rate of 8.75% per annum. All borrowings under the
line of credit were used for working capital purposes. The line of credit
matured in February 1999 and was not renewed. As of December 31, 1997 and
1998, the Company had no borrowings outstanding under the line of credit.
NOTE 6 - RELATED PARTY TRANSACTIONS
At December 31, 1997, the Company had a $50,000 note receivable from a
related party. The note was repaid in full in 1998.
F-7
CUSTOM WOODWORK & PLASTICS, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOTE 7 - EMPLOYEE BENEFIT PLANS
The Company has a savings and retirement plan which qualifies under
Section 401(k) of the Internal Revenue Code in which all full-time employees
are eligible to participate. In accordance with the terms of the plan,
employees may elect to contribute up to 15% of their annual compensation to
the plan, subject to certain limitations. The Board of Directors may elect to
declare a discretionary matching contribution to the Plan of 50% of all
contributions made up to 6% of each employee's salary. The Company did not
make any matching contributions for 1997 or 1998.
NOTE 8 - COMMITMENT AND CONTINGENCIES
The Company is involved in routine legal and administrative proceedings
incidental to the normal conduct of business. Management believes the
ultimate disposition of these matters will not have a material adverse effect
on the Company's financial position, results of operations or cash flows.
NOTE 9 - SUBSEQUENT EVENT
In August 1999, substantially all of the Company's net assets were
acquired by DeCrane Aircraft Holdings, Inc. for a purchase price of $13.3
million.
F-8
UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL INFORMATION
BASIS OF PRESENTATION
The following unaudited pro forma consolidated financial information for
DeCrane Aircraft is based on its historical financial statements adjusted to
reflect the 1998 Avtech, Dettmers and DLJ acquisitions and the 1999 PATS, PPI
and Custom Woodwork acquisitions. For additional information on the 1998
Avtech, Dettmers and DLJ acquisitions, see the notes to DeCrane Aircraft's
1998 consolidated financial statements included in the prospectus. For
additional information on the 1999 PATS, PPI and Custom Woodwork
acquisitions, see the notes to DeCrane Aircraft's Form 10-Q.
Unaudited pro forma consolidated statements of operations are presented
for the year ended December 31, 1998 and the six months ended June 30, 1999.
The statements reflect the acquisitions as if they had occurred as of January
1, 1998. The unaudited pro forma consolidated balance sheet reflects the
Custom Woodwork acquisition as of June 30, 1999; all of the 1998 acquisitions
and the 1999 PATS and PPI acquisitions had occurred by that date and are
therefore reflected in the historical balance sheet.
The pro forma adjustments are based upon available information and
assumptions management believes are reasonable under the circumstances. The
unaudited pro forma consolidated financial information and accompanying notes
should be read in conjunction with the historical financial statements and
related notes of:
- - DeCrane Aircraft included in the prospectus and Form 10-Q;
- - Avtech, PATS and PPI included in the prospectus; and
- - Custom Woodwork included in this Form 8-K.
The pro forma financial information does not purport to represent what
DeCrane Aircraft's actual results of operations or actual financial position
would have been if the transactions described above in fact occurred on such
dates or to project DeCrane Aircraft's results of operations or financial
position for any future period or date.
P-1
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1998
COMPANIES ACQUIRED (2)
DECRANE AIRCRAFT -------------------------------------------------
HISTORICAL (1) PREVIOUSLY
----------------------- REPORTED CUSTOM
PREDECESSOR SUCCESSOR ACQUISITIONS (3) WOODWORK (4) ADJUSTMENTS PRO FORMA
----------- ----------- ---------------- ------------ ----------------- -----------
(DOLLARS IN THOUSANDS)
Revenues ............................. $ 90,077 $ 60,356 $ 94,059 $ 4,480 $ (133) (5) $ 248,839
Cost of sales ........................ 60,101 42,739 63,418 2,358 755 (6) 169,371
----------- ----------- ------------ ------------ ----------- -----------
Gross profit ......................... 29,976 17,617 30,641 2,122 (888) 79,468
Selling, general and administrative
expenses .......................... 15,719 10,274 11,579 397 (1,728) (7) 36,241
Nonrecurring acquisition expenses .... 3,632 - 1,479 - (5,111) (8) -
Nonrecurring bonuses and
employment contract
termination expenses .............. - - 4,072 - (4,072) (9) -
ESOP contribution .................... - - 530 - (530) (10) -
Amortization of intangible assets .... 1,347 3,148 328 - 7,893 (11) 12,716
----------- ----------- ------------ ------------ ----------- -----------
Operating income .................... 9,278 4,195 12,653 1,725 2,660 30,511
Interest expense (income) ............ 2,350 6,852 1,345 (35) 20,371 (12) 30,883
Other expenses (income) .............. 847 335 (30) (2) (600) (13) 550
----------- ----------- ------------ ------------ ----------- -----------
Income (loss) before provision for
income taxes and extraordinary
item .............................. 6,081 (2,992) 11,338 1,762 (17,111) (922)
Provision for income taxes (benefit) . 2,892 (2,668) 691 - 1,098 (14) 2,013
----------- ----------- ------------ ------------ ----------- -----------
Income (loss) before extraordinary
item (15) ......................... $ 3,189 $ (324) $ 10,647 $ 1,762 $ (18,209) $ (2,935)
----------- ----------- ------------ ------------ ----------- -----------
----------- ----------- ------------ ------------ ----------- -----------
See accompanying notes to the Unaudited Pro Forma Consolidated Financial Information.
P-2
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
SIX MONTHS ENDED JUNE 30, 1999
COMPANIES ACQUIRED (2)
DECRANE --------------------------------------------------
AIRCRAFT PREVIOUSLY
HISTORICAL REPORTED CUSTOM
(SUCCESSOR) (1) ACQUISITIONS (3) WOODWORK (4) ADJUSTMENTS PRO FORMA
--------------- ---------------- ------------ ----------- ----------
(DOLLARS IN THOUSANDS)
Revenues .......................................... $ 112,598 $ 13,208 $ 4,002 $ - $ 129,808
Cost of sales ..................................... 75,974 9,664 1,843 (1,093) (6) 86,388
----------- ----------- ---------- --------- ---------
Gross profit ...................................... 36,624 3,544 2,159 1,093 43,420
Selling, general and administrative expenses ...... 17,250 1,235 198 - 18,683
Nonrecurring acquisition expenses ................. - 200 - (200) (8) -
Nonrecurring bonuses and employment contract
termination expenses ........................... - 120 - (120) (9) -
Amortization of intangible assets ................. 5,458 124 - 746 (11) 6,328
----------- ----------- ---------- --------- ---------
Operating income ................................. 13,916 1,865 1,961 667 18,409
Interest expense (income) ......................... 12,729 150 (9) 1,588 (12) 14,458
Other income ...................................... (367) (22) - - (389)
----------- ----------- ---------- --------- ---------
Income (loss) before provision for
income taxes and extraordinary item ............ 1,554 1,737 1,970 (921) 4,340
Provision for income taxes (benefit) .............. 1,737 (1,244) - 2,504 (14) 2,997
----------- ----------- ---------- --------- ---------
Income (loss) before extraordinary item ........... $ (183) $ 2,981 $ 1,970 $ (3,425) $ 1,343
----------- ----------- ---------- --------- ---------
----------- ----------- ---------- --------- ---------
See accompanying notes to the Unaudited Pro Forma Consolidated Financial Information.
P-3
UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET
JUNE 30, 1999
COMPANY ACQUIRED (18)
DECRANE -----------------------------------
AIRCRAFT CUSTOM
HISTORICAL WOODWORK
(SUCCESSOR) (17) HISTORICAL (19) ADJUSTMENTS PRO FORMA
---------------- --------------- ---------------- ----------
(DOLLARS IN THOUSANDS)
ASSETS
Current assets
Cash and cash equivalents ................................... $ 3,489 $ 873 $ (873) (20) $ 3,489
Accounts receivable, net .................................... 43,786 642 - 44,428
Inventories ................................................. 49,323 400 513 (21) 50,236
Deferred income taxes ....................................... 3,630 - - 3,630
Prepaid expenses and other current assets ................... 3,186 - - 3,186
----------- ----------- -------- ----------
Total current assets ...................................... 103,414 1,915 (360) 104,969
----------- ----------- -------- ----------
Property and equipment, net .................................... 35,670 731 - 36,401
----------- ----------- -------- ----------
Other assets, principally intangibles, net
Goodwill and other intangibles .............................. 295,847 - 11,668 (22) 307,515
Deferred financing costs .................................... 11,131 - - 11,131
Other assets ................................................ 713 - - 713
----------- ----------- -------- ----------
Net other assets, principally intangibles ................. 307,691 - 11,668 319,359
----------- ----------- -------- ----------
Total assets .......................................... $ 446,775 $ 2,646 $ 11,308 $ 460,729
----------- ----------- -------- ----------
----------- ----------- -------- ----------
LIABILITIES AND STOCKHOLDER'S EQUITY
Current liabilities
Short-term borrowings ....................................... $ 489 $ - $ - $ 489
Current portion of long-term obligations .................... 3,368 - - 3,368
Accounts payable ............................................ 9,308 100 - 9,408
Accrued expenses ............................................ 26,934 39 - 26,973
Income taxes payable ........................................ 5,107 - - 5,107
----------- ----------- -------- ----------
Total current liabilities ................................. 45,206 139 - 45,345
----------- ----------- -------- ----------
Long-term obligations
Senior revolving credit facility ............................ 3,000 - 13,815 (23) 16,815
Senior term facility ........................................ 166,725 - - 166,725
Senior subordinated notes ................................... 100,000 - - 100,000
Other long-term obligations ................................. 1,783 - - 1,783
----------- ----------- -------- ----------
Total long-term obligations ............................... 271,508 - 13,815 285,323
Deferred income taxes .......................................... 16,418 - - 16,418
Other long-term liabilities .................................... 4,815 - - 4,815
----------- ----------- -------- ----------
Total long-term liabilities ............................. 292,741 - 13,815 306,556
----------- ----------- -------- ----------
Stockholder's equity ........................................... 108,828 2,507 (2,507) (24) 108,828
----------- ----------- -------- ----------
Total liabilities and stockholder's equity ............ $ 446,775 $ 2,646 $ 11,308 $ 460,729
----------- ----------- -------- ----------
----------- ----------- -------- ----------
See accompanying notes to the Unaudited Pro Forma Consolidated Financial Information.
P-4
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL INFORMATION
(1) For the year ended December 31, 1998, reflects DeCrane Aircraft's
historical results of operations for the eight months ended August 31,
1998 prior to the DLJ acquisition (predecessor) and the four months ended
December 31, 1998 subsequent to the DLJ acquisition (successor). For the
six months ended June 30, 1999, reflects DeCrane Aircraft's historical
results of operations subsequent to the DLJ acquisition (successor).
(2) Reflects the results of operations for companies acquired and DLJ
acquisition adjustments for the periods not included in the historical
columns.
(3) Reflects the results of operations of companies acquired and previously
reported in our prospectus as follows (dollars in thousands):
AVTECH (a) DETTMERS (b) PATS (c) PPI (d) TOTAL
----------- ------------ ----------- ----------- -----------
YEAR ENDED DECEMBER 31, 1998
Revenues .......................................... $ 20,984 $ 2,013 $ 33,348 $ 37,714 $ 94,059
Cost of sales ..................................... 13,267 1,454 24,321 24,376 63,418
----------- ----------- ----------- ----------- -----------
Gross profit ...................................... 7,717 559 9,027 13,338 30,641
Selling, general and administrative expenses ...... 3,695 760 4,906 2,218 11,579
Nonrecurring acquisition expenses ................. 1,229 - 250 - 1,479
Nonrecurring bonuses and employment
contract termination expenses ................... 3,592 - 480 - 4,072
ESOP contribution ................................. 300 - 230 - 530
Amortization of intangible assets ................. - - - 328 328
----------- ----------- ----------- ----------- -----------
Operating income (loss) ........................... (1,099) (201) 3,161 10,792 12,653
Interest expense (income) ......................... (60) 13 296 1,096 1,345
Other expenses (income) ........................... (35) - - 5 (30)
----------- ----------- ----------- ----------- -----------
Income (loss) before provision for
income taxes and extraordinary item ............. (1,004) (214) 2,865 9,691 11,338
Provision for income taxes (benefit) .............. (322) - 1,013 - 691
----------- ----------- ----------- ----------- -----------
Income (loss) before extraordinary item ........... $ (682) $ (214) $ 1,852 $ 9,691 $ 10,647
----------- ----------- ----------- ----------- -----------
----------- ----------- ----------- ----------- -----------
SIX MONTHS ENDED JUNE 30, 1999
Revenues .......................................... $ - $ - $ 451 $ 12,757 $ 13,208
Cost of sales ..................................... - - 1,229 8,435 9,664
----------- ----------- ----------- ----------- -----------
Gross profit (loss) ............................... - - (778) 4,322 3,544
Selling, general and administrative expenses ...... - - 291 944 1,235
Nonrecurring acquisition expenses ................. - - 200 - 200
Nonrecurring bonuses and employment
contract termination expenses ................... - - 120 - 120
Amortization of intangible assets ................. - - - 124 124
----------- ----------- ----------- ----------- -----------
Operating income (loss) ........................... - - (1,389) 3,254 1,865
Interest expense .................................. - - 23 127 150
Other expenses (income) ........................... - - 11 (33) (22)
----------- ----------- ----------- ----------- -----------
Income (loss) before provision for
income taxes and extraordinary item ............. - - (1,423) 3,160 1,737
Provision for income taxes (benefit) .............. - - (1,244) - (1,244)
----------- ----------- ----------- ----------- -----------
Income (loss) before extraordinary item ........... $ - $ - $ (179) $ 3,160 $ 2,981
----------- ----------- ----------- ----------- -----------
----------- ----------- ----------- ----------- -----------
-----------------
Notes (a) through (d) appear on the next page.
P-5
(a) Avtech - For the year ended December 31, 1998, reflects the period
from January 1, 1998 to June 25, 1998; for periods subsequent to June
25, 1998, its results are included in the historical columns.
(b) Dettmers - For the year ended December 31, 1998, reflects the period
from January 1, 1998 to June 29, 1998; for periods subsequent to June
29, 1998, its results are included in the historical columns.
(c) PATS - For the year ended December 31, 1998, reflects the period from
January 1, 1998 to December 31, 1998; for the six months ended June
30, 1999, reflects the period from January 1, 1999 to January 21,
1999; subsequent to January 21, 1999, its results are included in the
historical column.
(d) PPI - For the year ended December 31, 1998, reflects the period from
January 1, 1999 to December 31, 1998; for the six months ended June
30, 1999, reflects the period from January 1, 1999 to April 22, 1999;
subsequent to April 22, 1999, its results are included in the
historical column.
(4) Reflects the results of operations of Custom Woodworks for the year ended
December 31, 1998 and the six months ended June 30, 1999.
(5) Reflects the elimination of intercompany sales.
(6) Reflects the net change in cost of sales attributable to the following
(dollars in thousands):
YEAR SIX MONTHS
ENDED ENDED
DECEMBER 31, JUNE 30,
1998 1999
------------ -----------
Increase (decrease) in cost of goods sold (a) ............................................ $ 1,606 $ (1,093)
Decrease in depreciation expense (b) ..................................................... (658) -
Elimination of intercompany sales ........................................................ (133) -
Work force reductions attributable to merging the companies acquired ..................... (60) -
----------- -----------
Net increase (decrease) in cost of sales ............................................... $ 755 $ (1,093)
----------- -----------
----------- -----------
---------------
(a) To reflect cost of goods sold based on the fair value of inventory
acquired in conjunction with the PPI and Custom Woodwork acquisitions
as if they were acquired on January 1, 1998.
(b) To reflect a decrease in depreciation expense resulting from the fair
value and remaining economic useful lives of depreciable assets
acquired in connection with the DLJ acquisition.
(7) Reflects the net decrease in selling, general and administrative expenses
attributable to the following (dollars in thousands):
YEAR SIX MONTHS
ENDED ENDED
DECEMBER 31, JUNE 30,
1998 1999
------------ -----------
Decrease in compensation expense (a) ..................................................... $ (1,775) $ -
Decrease in investor relations expenses (b) .............................................. (221) -
Other, net (c) ........................................................................... 268 -
----------- ----------
Net decrease in selling, general and administrative expenses ........................... $ (1,728) $ -
----------- ----------
----------- ----------
---------------
(a) To reflect the resignation of some former employees and changes to
employment agreements for remaining employees of the companies
acquired.
(b) To reflect the decrease in investor relations expenses associated
with becoming a privately held company as a result of the DLJ
acquisition.
(c) To reflect an increase in depreciation expense resulting from the
fair value and remaining economic useful lives of depreciable assets
acquired in connection with the DLJ acquisition, net of cost savings
attributable to employee benefit plans implemented at the companies
acquired.
P-6
(8) Reflects a reduction for nonrecurring charges incurred by DeCrane Aircraft
on behalf of its stockholders related to the DLJ acquisition, and by Avtech
and PATS on behalf of their stockholders related to their respective
acquisitions by DeCrane Aircraft.
(9) Reflects a reduction in expense attributable to employment contract
termination expenses and nonrecurring bonuses awarded prior to, and in
anticipation of, the acquisitions of Avtech and PATS by DeCrane Aircraft.
(10) Reflects a reduction in expense attributable to the termination of the
Employee Stock Ownership Plans in conjunction with the acquisitions of
Avtech and PATS.
(11) Reflects a net increase in amortization expense pertaining to the
amortization of goodwill and other intangible assets related to the DLJ,
PATS, PPI and Custom Woodwork acquisitions on a straight-line basis as
follows (dollars in thousands):
AMORTIZATION EXPENSE
-------------------------
YEARS YEAR SIX MONTHS
INTANGIBLE ESTIMATED ENDED ENDED
ASSET USEFUL DECEMBER 31, JUNE 30,
AMOUNT LIFE 1998 1999
----------- --------- ------------ ------------
Elimination of predecessor basis amortization:
DeCrane Aircraft ............................................. $ (1,347) $ -
PPI .......................................................... (328) (124)
DLJ acquisition amortization (a):
Goodwill ..................................................... $ 166,674 30 3,704 -
FAA certifications ........................................... 30,391 15 1,351 -
Engineering drawings ......................................... 9,138 15 406 -
Assembled workforce .......................................... 6,588 7 627 -
Tradenames, trademarks and patents ........................... 3,908 5 to 12 269 -
Goodwill amortization attributable to 1999 acquisitions (b):
PATS (c) ..................................................... 31,759 30 1,059 88
PPI (d) ...................................................... 52,896 30 1,763 588
Custom Woodwork (e) .......................................... 11,668 30 389 194
----------- ---------
Net increase in amortization ............................... $ 7,893 $ 746
----------- ---------
----------- ---------
---------------
(a) For the year ended December 31, 1998, reflects amortization for the
period from January 1, 1998 to August 31, 1998. Subsequent to August
31, 1998, amortization is included in the historical column.
(b) Amortization expense may change upon completion of the final
valuations of the net assets acquired.
(c) For the year ended December 31, 1998, reflects amortization for the
period from January 1, 1998 to December 31, 1998. For the six months
ended June 30, 1999, reflects amortization for the period from
January 1, 1999 to January 21, 1999; subsequent to January 21, 1999,
amortization is included in the historical column.
(d) For the year ended December 31, 1998, reflects amortization for the
period from January 1, 1999 to December 31, 1998. For the six months
ended June 30, 1999, reflects amortization for the period from
January 1, 1999 to April 22, 1999; subsequent to April 22, 1999,
amortization is included in the historical column.
(e) Reflects amortization for the year ended December 31, 1998 and the
six months ended June 30, 1999.
P-7
(12) Reflects the net increase in interest expense, including deferred financing
cost amortization and commitment fees, as a result of the 1998 Avtech,
Dettmers and DLJ acquisitions and the 1999 PATS, PPI and Customer Woodwork
acquisitions as if they all had occurred on January 1, 1998.
Pro forma interest expense consists of the following (dollars in
thousands):
INTEREST EXPENSE
------------------------
YEAR SIX MONTHS
ENDED ENDED
DECEMBER 31, JUNE 30,
RATE OR TERM AMOUNT 1998 1999
----------------- ----------- ------------ -----------
Senior credit facility (a):
Revolving credit facilities ....................... LIBOR (b) + 2.75% $ (c) $ 1,621 $ 303
Term facilities:
Term A .......................................... LIBOR (b) + 2.75% (d) 2,955 1,376
Term B .......................................... LIBOR (b) + 3.00% (e) 5,615 2,613
Term C .......................................... LIBOR (b) + 3.25% (f) 6,220 2,897
Senior subordinated notes ........................... 12.00% 100,000 12,000 6,000
Customer advance .................................... 7.50% (g) 380 146
Other long-term obligations ......................... 4.34% to 18.08% (h) 148 109
Deferred financing cost amortization:
Senior revolving credit facilities ................ 6 years (i) 1,277 213 106
Senior term facilities:
Term A .......................................... 6 years (j) 894 196 98
Term B .......................................... 7 years (j) 2,043 313 156
Term C .......................................... 7 years (j) 2,168 336 167
Senior subordinated notes ......................... 10 years (j) 5,810 581 290
Commitment fees and expenses ........................ 305 197
----------- -----------
Pro forma interest expense (k) .................. $ 30,883 $ 14,458
----------- -----------
----------- -----------
---------------
(a) Reflects the senior credit facility established in conjunction with
the DLJ acquisition, as amended for the PATS, PPI and Custom Woodwork
acquisitions, as if all events had occurred January 1, 1998.
(b) Calculations based on the historical LIBOR rates charged during the
respective periods. The weighted average historical LIBOR rates were
as follows:
YEAR SIX MONTHS
ENDED ENDED
DECEMBER 31, JUNE 30,
1998 1999
------------ ----------
Revolving credit facilities .......................................................... 5.593% 4.978%
Term A facility ...................................................................... 5.694% 5.147%
Term B facility ...................................................................... 5.666% 5.124%
Term C facility ...................................................................... 5.669% 5.121%
(c) Reflects revolving credit facility borrowings for the DLJ, PATS, PPI
and Custom Woodwork acquisitions as of January 1, 1998. The pro forma
weighted average borrowings outstanding under the revolving credit
facilities were $19.5 million for the twelve months ended December
31, 1998 and $7.9 million for the six months ended June 30, 1999.
(d) Reflects Term A facility borrowings of $35.0 million for the DLJ
acquisition as of January 1, 1998 reduced by quarterly principal
payments of $438,000 commencing March 31, 1999. The pro forma
weighted average borrowings outstanding under the Term A facility
were $35.0 million for the twelve months ended December 31, 1998 and
$34.9 million for the six months ended June 30, 1999.
(e) Reflects Term B facility borrowings of $65.0 million for the DLJ and
PATS acquisitions as of January 1, 1998 reduced by quarterly
principal payments of $163,000 commencing March 31, 1998. The pro
forma weighted average borrowings outstanding under the Term B
facility were $64.8 million for the twelve months ended December 31,
1998 and $64.3 million for the six months ended June 30, 1999.
P-8
(f) Reflects Term C facility borrowings of $70.0 million for the PPI
acquisition and to refinance acquisition related revolving credit
facility borrowings as of January 1, 1998 reduced by quarterly
principal payments of $175,000 commencing March 31, 1998. The pro
forma weighted average borrowings outstanding under the Term C
facility were $69.7 million for the twelve months ended December 31,
1998 and $69.2 million for the six months ended June 30, 1999.
(g) Reflects a $5.0 million customer advance related to the PATS
acquisition as of January 1, 1998 reduced by principal payments of
$975,000 on November 30, 1998 and $1.2 million on May 31, 1999. The
pro forma weighted average advance outstanding was $4.9 million for
the twelve months ended December 31, 1998 and $3.8 million for the
six months ended June 30, 1999.
(h) Reflects historical interest expense related to capital lease
obligations and equipment term debt financing.
(i) Deferred financing costs are amortized on a straight-line basis over
the term of the agreement.
(j) Deferred financing costs are amortized using the effective interest
method.
(k) A 0.125% change in the interest rates charged on variable rate
borrowings would change interest expense by $245,000 for the twelve
months ended December 31, 1998 and $121,000 for the six months ended
June 30, 1999. Income (loss) before extraordinary item would change
by $148,000 for the twelve months ended December 31, 1998 and $73,000
for the six months ended June 30, 1999.
(13) Reflects adjustment for nonrecurring charges associated with a terminated
debt offering in June 1998. Such offering was terminated upon initiation of
the DLJ acquisition.
(14) Represents an increase in the provision for income taxes as a result of a
change in pro forma taxable income, a provision for income taxes on the
income of Dettmers, PPI and Custom Woodwork which were taxed as S
Corporations prior to their acquisitions, and elimination of the $2.6
million one time benefit caused by reversal of DeCrane Aircraft's deferred
tax valuation allowance. The effective tax rate differs from the U.S.
federal statutory rate due to goodwill amortization related to acquisitions
not deductible for income tax purposes and state income taxes.
(15) In conjunction with the DLJ acquisition, deferred financing costs of
$347,000, net of income tax benefit, were written off as an extraordinary
charge as a result of the termination of DeCrane Aircraft's prior senior
credit facility. In conjunction with the sale of the senior subordinated
notes described in the prospectus, deferred financing costs of $1.9
million, net of income tax benefit, were written off as an extraordinary
charge as a result of the termination of the bridge notes. These amounts
have not been reflected in the unaudited pro forma consolidated statement
of operations for the year ended December 31, 1998.
(16) Supplemental pro forma financial information is as follows (dollars in
thousands):
YEAR SIX MONTHS
ENDED ENDED
DECEMBER 31, JUNE 30,
1998 1999
------------ ----------
Net cash provided by (used for)
Operating activities ................................................................... $ 2,216 $ 12,977
Investing activities ................................................................... (204,031) (6,091)
Financing activities ................................................................... 203,492 (8,943)
EBITDA (a) ............................................................................... 54,528 27,463
Depreciation and amortization (b) ........................................................ 17,963 9,054
Capital expenditures
Paid in cash ........................................................................... 6,789 3,169
Financed with capital lease obligations ................................................ 164 1,323
Cash interest expense .................................................................... 29,244 13,641
Ratio of earnings to fixed charges (c) ................................................... - 1.3x
---------------
Notes (a) through (c) appear on the next page.
P-9
(a) EBITDA equals operating income plus depreciation, amortization,
parent company management fees and certain non-cash and acquisition
related charges. EBITDA is not a measure of performance or financial
condition under generally accepted accounting principles. EBITDA is
not intended to represent cash flow from operations and should not be
considered as an alternative to income from operations or net income
computed in accordance with generally accepted accounting principles,
as an indicator of our operating performance, as an alternative to
cash flow from operating activities or as a measure of liquidity. The
funds depicted by EBITDA are not available for our discretionary use
due to funding requirements for working capital, capital
expenditures, debt service, income taxes and other commitments and
contingencies. We believe that EBITDA is a standard measure of
liquidity commonly reported and widely used by analysts, investors
and other interested parties in the financial markets. However, not
all companies calculate EBITDA using the same method and the EBITDA
numbers set forth above may not be comparable to EBITDA reported by
other companies.
(b) Reflects depreciation and amortization of plant and equipment,
goodwill and other intangible assets. Excludes amortization of
deferred financing costs and debt discounts, which are classified as
a component of interest expense.
(c) For purposes of calculating the earnings to fixed charges ratio,
earnings represent net income before income taxes, minority interest
in the income of majority-owned subsidiaries, extraordinary items
and fixed charges. Fixed charges consist of:
- interest, whether expensed or capitalized;
- amortization of debt expense and discount relating to any
indebtedness, whether expensed or capitalized; and
- one-third of rental expense under operating leases which is
considered to be a reasonable approximation of the interest
portion of such expense.
There was a $792,000 deficiency of earnings to fixed charges for the
year ended December 31, 1998.
(17) Reflects DeCrane Aircraft's financial position subsequent to the 1998
Avtech, Dettmers and DLJ acquisitions and the 1999 PATS and PPI
acquisitions.
(18) Reflects DeCrane Aircraft's purchase of substantially all of the assets,
subject to accounts payable and accrued liabilities assumed, of Custom
Woodwork in August 1999. Sources and uses of funds for the acquisition,
had it occurred on June 30, 1999, are as follows (dollars in thousands):
AMOUNT
-----------
SOURCES
Senior revolving credit facility borrowings ........................................................... $ 13,815
-----------
-----------
USES
Purchase of assets, net of accounts payable and accrued liabilities assumed ........................... $ 13,315
Estimated acquisition fees and expenses ............................................................... 500
-----------
Total uses .......................................................................................... $ 13,815
-----------
-----------
(19) Reflects the financial position of Custom Woodworks as of June 30, 1999.
(20) Reflects the elimination of Custom Woodwork's cash and cash equivalents not
acquired.
(21) Reflects the increase in Custom Woodwork's inventory to its estimated fair
value as of the acquisition date.
(22) Reflects the excess of the Custom Woodwork purchase price over the fair
value of the assets acquired. For purposes of this pro forma consolidated
financial information, we allocated the excess purchase price to goodwill
and amortized it on a straight-line basis over 30 years. Such allocation is
preliminary and may change upon the completion of the final valuations of
the assets acquired.
(23) Reflects the senior credit facility borrowings for the Custom Woodwork
acquisition. The terms of the senior credit facility are described in our
historical consolidated financial statements included in the prospectus.
(24) Reflects the elimination of Custom Woodwork's stockholders' equity upon
acquisition.
P-10