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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

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FORM 10-Q

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

For the quarterly period ended June 30, 1999

Commission File Number 333-70365

-------------------

DECRANE AIRCRAFT HOLDINGS, INC.
(Exact name of registrant as specified in its charter)

DELAWARE 34-1645569
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) 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)

-------------------

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.
[X] Yes [ ] No

The number of shares of Registrant's Common Stock, $.01 par value,
outstanding as of August 2, 1999 was 100 shares.

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DECRANE AIRCRAFT HOLDINGS, INC.
INDEX

PAGE

PART I - FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

Consolidated Balance Sheets as of June 30, 1999 and December 31, 1998 ............................ 1

Consolidated Statements of Operations for the three months and
six months ended June 30, 1999 and 1998 ...................................................... 2

Consolidated Statements of Stockholder's Equity for the six months ended June 30, 1999 ........... 3

Consolidated Statements of Cash Flows for the six months ended June 30, 1999 and 1998 ............ 4

Condensed Notes to Consolidated Financial Statements ............................................. 5

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS ............ 15

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK ........................................ 20

PART II - OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS ................................................................................ 22

ITEM 5. OTHER INFORMATION ................................................................................ 22

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

Exhibits ......................................................................................... 23

Reports on Form 8-K .............................................................................. 23

PART I - FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

DECRANE AIRCRAFT HOLDINGS, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE DATA)

JUNE 30, DECEMBER 31,
1999 1998
----------- ------------
(UNAUDITED)

ASSETS

Current assets
Cash and cash equivalents .................................................................. $ 3,489 $ 3,518
Accounts receivable, net ................................................................... 43,786 30,441
Inventories ................................................................................ 49,323 34,281
Deferred income taxes ...................................................................... 3,630 4,300
Prepaid expenses and other current assets................................................... 3,186 3,897
----------- -----------
Total current assets ..................................................................... 103,414 76,437

Property and equipment, net ................................................................... 35,670 28,160
Other assets, principally intangibles, net .................................................... 307,691 226,330
----------- -----------
Total assets ........................................................................... $ 446,775 $ 330,927
=========== ===========

LIABILITIES AND STOCKHOLDER'S EQUITY

Current liabilities
Short-term borrowings ...................................................................... $ 489 $ 283
Current portion of long-term obligations ................................................... 3,368 1,529
Accounts payable ........................................................................... 9,308 6,383
Accrued expenses ........................................................................... 26,934 18,466
Income taxes payable ....................................................................... 5,107 3,743
----------- -----------
Total current liabilities ................................................................ 45,206 30,404
----------- -----------

Long-term liabilities
Long-term obligations ...................................................................... 271,508 184,953
Deferred income taxes ...................................................................... 16,418 16,990
Other long-term liabilities ................................................................ 4,815 659
----------- -----------
Total long-term liabilities .............................................................. 292,741 202,602
----------- -----------

Commitments and contingencies

Stockholder's equity
Cumulative convertible preferred stock, $.01 par value, 8,314,018 shares authorized;
none issued and outstanding as of June 30, 1999 and December 31, 1998 .................... - -
Undesignated preferred stock, $.01 par value, 10,000,000 shares authorized;
none issued and outstanding as of June 30, 1999 and December 31, 1998 .................... - -
Common stock, $.01 par value, 9,924,950 shares authorized; 100 shares
issued and outstanding as of June 30, 1999 and December 31, 1998 ......................... - -
Additional paid-in capital ................................................................. 112,700 100,200
Accumulated deficit ........................................................................ (2,736) (2,553)
Accumulated other comprehensive income (loss)............................................... (1,136) 274
----------- -----------
Total stockholder's equity ............................................................... 108,828 97,921
----------- -----------
Total liabilities and stockholder's equity ............................................. $ 446,775 $ 330,927
=========== ===========

The accompanying notes are an integral part of the consolidated financial statements.

DECRANE AIRCRAFT HOLDINGS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS)

THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
-------------------------- --------------------------
1999 1998 1999 1998
(SUCCESSOR) (PREDECESSOR) (SUCCESSOR) (PREDECESSOR)
------------- ------------ ------------ -------------
(UNAUDITED) (UNAUDITED) (UNAUDITED) (UNAUDITED)

Revenues ..................................................... $ 62,703 $ 29,854 $ 112,598 $ 58,982
Cost of sales ................................................ 42,079 20,134 75,974 40,275
----------- ---------- ----------- -----------
Gross profit ............................................ 20,624 9,720 36,624 18,707
----------- ---------- ----------- -----------
Operating expenses
Selling, general and administrative expenses .............. 9,079 5,302 17,250 10,181
Amortization of intangible assets ......................... 2,894 382 5,458 761
----------- ---------- ----------- -----------
Total operating expenses ................................ 11,973 5,684 22,708 10,942
----------- ---------- ----------- -----------
Income from operations ....................................... 8,651 4,036 13,916 7,765
Other expenses (income)
Interest expense .......................................... 6,978 383 12,729 1,169
Terminated debt offering expenses ......................... - 600 - 600
Other income............................................... (223) (13) (367) (30)
----------- ---------- ----------- -----------
Income before provision for income taxes ..................... 1,896 3,066 1,554 6,026
Provision for income taxes ................................... 1,804 1,394 1,737 2,666
----------- ---------- ----------- -----------
Net income (loss) ............................................ $ 92 $ 1,672 $ (183) $ 3,360
=========== ========== =========== ===========

The accompanying notes are an integral part of the consolidated financial statements.

DECRANE AIRCRAFT HOLDINGS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF STOCKHOLDER'S EQUITY
(IN THOUSANDS, EXCEPT SHARE DATA)

PREFERRED STOCK COMMON STOCK ACCUMULATED
----------------- ----------------- OTHER
NUMBER NUMBER ADDITIONAL COMPREHENSIVE
OF OF PAID-IN ACCUMULATED INCOME
SHARES AMOUNT SHARES AMOUNT CAPITAL DEFICIT (LOSS) TOTAL
------- ------- ------- ------- -------- ---------- --------- ---------

Balance, December 31, 1998 ...... - $ - 100 $ - $100,200 $ (2,553) $ 274 $ 97,921
Comprehensive income (loss)
Net loss ..................... - - - - - (183) - (183)
Translation adjustment ....... - - - - - - (1,410) (1,410)
---------
(1,593)
---------
Capital contribution ............ - - - - 12,500 - - 12,500
-------- -------- -------- -------- -------- --------- --------- ---------
Balance, June 30, 1999 (Unaudited) - $ - 100 $ - $112,700 $ (2,736) $ (1,136) $ 108,828
======== ======== ======== ======== ======== ========= ========= =========

The accompanying notes are an integral part of the consolidated financial statements.

DECRANE AIRCRAFT HOLDINGS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)

SIX MONTHS ENDED JUNE 30,
--------------------------
1999 1998
(SUCCESSOR) (PREDECESSOR)
----------- -----------
(UNAUDITED) (UNAUDITED)

CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss) ........................................................................ $ (183) $ 3,360
Adjustments to reconcile net income (loss) to
net cash used for operating activities
Depreciation and amortization ........................................................ 8,785 2,966
Deferred income taxes ................................................................ 161 (1,219)
Other, net ........................................................................... 131 (159)
Changes in assets and liabilities, net of effect from acquisitions
Accounts receivable ................................................................ (7,130) (2,154)
Inventories ........................................................................ 2,399 (3,058)
Prepaid expenses and other assets .................................................. (757) (643)
Accounts payable ................................................................... (1,384) (1,451)
Accrued expenses ................................................................... 228 2,316
Income taxes payable ............................................................... 2,511 (778)
Other long-term liabilities ........................................................ (55) -
----------- -----------
Net cash provided by (used for) operating activities ............................. 4,706 (820)
----------- ------------

CASH FLOWS FROM INVESTING ACTIVITIES
Cash paid for acquisition, net of cash acquired .......................................... (102,975) (85,744)
Capital expenditures ..................................................................... (3,054) (1,102)
Other, net ............................................................................... 78 175
----------- -----------
Net cash used for investing activities ........................................... (105,951) (86,671)
----------- -----------

CASH FLOWS FROM FINANCING ACTIVITIES
Term debt borrowings ..................................................................... 90,000 -
Net borrowings (repayments) under revolving line of credit agreements .................... (2,800) 56,750
Net proceeds from the sale of common stock ............................................... - 34,815
Capital contribution ..................................................................... 12,500 -
Customer advance ......................................................................... 5,000 -
Other long-term borrowings ............................................................... 636 -
Deferred financing costs ................................................................. (3,062) (311)
Principal payments on term debt, capitalized leases and other obligations ................ (1,223) (1,156)
Other, net ............................................................................... 171 (481)
----------- -----------
Net cash provided by financing activities ........................................ 101,222 89,617
----------- -----------

Effect of foreign currency translation on cash .............................................. (6) 5
----------- -----------

Net increase (decrease) in cash and cash equivalents ........................................ (29) 2,131
Cash and cash equivalents at beginning of period ............................................ 3,518 206
----------- -----------
Cash and cash equivalents at end of period .................................................. $ 3,489 $ 2,337
=========== ===========

The accompanying notes are an integral part of the consolidated financial statements.

DECRANE AIRCRAFT HOLDINGS, INC. AND SUBSIDIARIES

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)

NOTE 1 - CONSOLIDATED FINANCIAL STATEMENTS

The consolidated interim financial statements included in this report are
unaudited. The Company believes the interim financial statements are presented
on a basis consistent with the audited financial statements. The Company also
believes that the interim financial statements contain all adjustments necessary
for a fair presentation of the results for such interim periods. All of these
adjustments are normal recurring adjustments. The results of operations for
interim periods do not necessarily predict the operating results for the full
year. The consolidated balance sheet as of December 31, 1998 has been derived
from audited financial statements but does not include all disclosures required
by generally accepted accounting principles as permitted by interim reporting
requirements. The information included in this report should be read in
conjunction with Management's Discussion and Analysis of Financial Condition and
Results of Operations and the 1998 audited financial statements and related
notes included in the Company's prospectus. The prospectus is part of the
Company's Registration Statement No. 333-70365 on Form S-1 filed with the
Securities and Exchange Commission effective May 14, 1999. The Company has made
some reclassifications to prior periods' financial statements to conform to the
1999 presentation.

NOTE 2 - ACQUISITIONS

PATS

On January 22, 1999 the Company acquired all of the common stock of PATS,
Inc. PATS is a Maryland-based designer, manufacturer and installer of auxiliary
fuel tank systems, which significantly extend the flight range of commercial and
corporate aircraft, and a manufacturer of aircraft auxiliary power units.

The total purchase price was $39,042,000, including an estimated $1,340,000
of acquisition related costs. The acquisition was accounted for as a purchase
and the $31,759,000 difference between the purchase price and the fair value of
the net assets acquired was recorded as goodwill and is being amortized on a
straight-line basis over thirty years. The consolidated balance sheet as of June
30, 1999 reflects the financial position of PATS and the consolidated statement
of operations for the six months ended June 30, 1999 includes its operating
results subsequent to the acquisition date.

The acquisition was funded with borrowings under the Company's senior
credit facility as described in Note 5 and a $5,000,000 customer advance for
product to be delivered by PATS in the future.

PPI

On April 23, 1999 the Company acquired all of the common stock of PPI
Holdings, Inc. PPI is a Kansas-based designer and manufacturer of interior
furniture components for middle- and high-end corporate aircraft.

The total purchase price was $63,178,000, plus $19,250,000 of contingent
consideration payable over two years based on future attainment of defined
performance criteria. The total purchase price includes an estimated $1,240,000
of acquisition related costs. The acquisition was accounted for as a purchase
and the assets acquired and liabilities assumed have been recorded at their
estimated fair values. As a result, the historical value of inventory was
increased by $1,093,000 and the $52,896,000 difference between the purchase
price and the fair value of the net assets acquired was recorded as goodwill.
The increase in inventory value was charged to operations as the inventory was
sold during the period ended June 30, 1999 and goodwill is being 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. The
purchase price allocation is preliminary and may change upon the completion of
the final valuation of the net assets acquired. The consolidated balance sheet
as of June 30, 1999 reflects the financial position of PPI and the consolidated
statements of operations for the three months and six months ended June 30, 1999
include its operating results subsequent to the acquisition date.

The acquisition was funded with borrowings under the Company's senior
credit facility as described in Note 5 and a $12,500,000 equity contribution
from DeCrane Holdings.

NOTE 2 - ACQUISITIONS (CONTINUED)

CUSTOM WOODWORK - SUBSEQUENT EVENT

On August 5, 1999 the Company 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.

The total purchase price was $13,750,000, plus $2,000,000 of contingent
consideration payable over two years based on future attainment of defined
performance criteria. The total purchase price includes an estimated $500,000 of
acquisition related costs. The acquisition will be accounted for as a purchase
and the estimated $11,000,000 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. The
purchase price allocation is preliminary and may change upon the completion of
the final valuation of the net assets acquired. The Company's consolidated
financial statements 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 the Company's senior
credit facility as described in Note 5.

NOTE 3 - PRO FORMA RESULTS OF OPERATIONS FOR THE DLJ AND OTHER ACQUISITIONS

Unaudited pro forma consolidated results of operations are presented in the
table below for six months ended June 30, 1999 and 1998. The results of
operations reflect the Company's purchase by DLJ and other 1998 acquisitions
described in the Company's 1998 audited financial statements and the 1999 PATS
and PPI acquisitions as if all of these transactions were consummated as of
January 1, 1998. The pro forma results exclude the effect of the Custom Woodwork
acquisition, which was completed subsequent to June 30, 1999.

PRO FORMA FOR THE
SIX MONTHS ENDED
JUNE 30,
------------------------
1999 1998
----------- -----------
(IN THOUSANDS)

Revenues ...................................................................................... $ 125,806 $ 112,671
Income (loss) before extraordinary item ....................................................... 422 (5,123)

The pro forma results of operations do not purport to represent what actual
results would have been if the transactions described above occurred on such
dates or to project the results of operations for any future period. The above
information reflects adjustments for inventory, depreciation, amortization,
general and administrative expenses and interest expense based on the new cost
basis and debt structure of the Company following the acquisitions. In 1998,
income excludes the effect of a $2,229,000 extraordinary loss incurred in
connection with a debt refinancing.

One customer, the Boeing Company, accounted for more than 10% of the
Company's 1998 consolidated revenues. If the Company had completed its 1998 and
1999 acquisitions at the beginning of 1998, two customers would have accounted
for 10% or more of the Company's consolidated revenues as follows:

PRO FORMA FOR THE
SIX MONTHS ENDED
JUNE 30,
-----------------
1999 1998
------- ------

Boeing ........................................................................................ 24.2% 24.0%
Textron ....................................................................................... 15.2% 10.0%

Complete loss of either customer could have a significant adverse impact on
the results of operations expected in future periods.

NOTE 4 - INVENTORIES

Inventories are comprised of the following (amounts in thousands):

JUNE 30, DECEMBER 31,
1999 1998
------------ -----------
(UNAUDITED)

Raw material .................................................................................. $ 27,362 $ 19,221
Work-in process ............................................................................... 13,979 7,231
Finished goods ................................................................................ 7,982 7,829
----------- -----------
Total inventories .......................................................................... $ 49,323 $ 34,281
=========== ===========

NOTE 5 - BORROWINGS

Long-term obligations include the following amounts (amounts in thousands):

JUNE 30, DECEMBER 31,
1999 1998
----------- -----------
(UNAUDITED)

Senior credit facility
$25 million working capital revolving line of credit ....................................... $ 3,000 $ 5,800
$25 million acquisition revolving line of credit ........................................... - -
Term loans ................................................................................. 169,388 79,888
12% senior subordinated notes ................................................................. 100,000 100,000
Capital lease obligations and equipment term financing ........................................ 1,931 367
Other ........................................................................................ 557 427
---------- -----------
Total long-term obligations ................................................................ 274,876 186,482
Less current portion ....................................................................... (3,368) (1,529)
---------- -----------
Long-term obligations, less current portion .............................................. $ 271,508 $ 184,953
========== ===========

In conjunction with the January 1999 PATS acquisition, the Company borrowed
$14,918,000 under its acquisition revolving credit facility and amended its term
loan facility to provide for an additional $20,000,000 of term loan borrowings.
The interest rate margins, the rates charged above the current prime or
Euro-Dollar rates, were increased by 0.50% for all senior credit facility
borrowings. The amended interest rate margins range between 1.50% to 1.75% for
prime rate borrowings and 2.75% to 3.00% for Euro-Dollar borrowings, depending
on the type of borrowing.

In April 1999, the term loan facility was further amended to provide for an
additional $70,000,000 of term loan borrowings. The Company used $50,000,000 of
the proceeds to fund the PPI acquisition and $20,000,000 to repay borrowings
under its acquisition and working capital revolving credit facilities. The
interest rate margins applicable to the $70,000,000 incremental term loan
borrowings are 2.00% for prime rate borrowings or 3.25% for Euro-Dollar
borrowings.

In conjunction with the August 1999 Custom Woodwork acquisition, the
Company borrowed $13,750,000 under its acquisition revolving credit facility.

NOTE 6 - INCOME TAXES

The provision for income taxes differs from the amount determined by
applying the applicable U.S. statutory federal rate to the income (loss) before
income taxes primarily due to the effects of state and foreign income taxes and
non-deductible expenses, principally goodwill amortization. The difference in
the effective tax rates between periods is mostly a result of higher goodwill
amortization.

NOTE 7 - CONSOLIDATED STATEMENTS OF CASH FLOWS

Assets acquired and liabilities assumed in connection with acquisitions are
as follows (amounts in thousands):

SIX MONTHS ENDED JUNE 30,
-----------------------------
1999 1998
(SUCCESSOR) (PREDECESSOR)
----------- -------------
(UNAUDITED) (UNAUDITED)

1999 and 1998 acquisitions
Fair value of assets acquired ............................................................ $ 117,528 $ 91,575
Liabilities assumed ...................................................................... (15,308) (4,569)
----------- ------------
Cash paid .............................................................................. 102,220 87,006
Less cash acquired ..................................................................... (2,245) (1,262)
----------- ------------
Net cash paid for 1999 and 1998 acquisitions ......................................... 99,975 85,744

Contingent consideration paid in conjunction with the 1997 Audio International acquisition .. 3,000 -
----------- ------------
Net cash paid for acquisitions ......................................................... $ 102,975 $ 85,744
=========== ============

NOTE 8 - SUPPLEMENTAL CONDENSED CONSOLIDATING FINANCIAL INFORMATION

In conjunction with the senior credit facility and 12% senior subordinated
notes described in Note 5, the following condensed consolidating financial
information is presented for the Company, segregating guarantor and
non-guarantor subsidiaries. The accompanying financial information in the
"Guarantor Subsidiaries" column reflects the financial position, results of
operations and cash flows for those subsidiaries guaranteeing the senior credit
facility and the notes. The guarantor subsidiaries are wholly-owned subsidiaries
of the Company and their guarantees are full and unconditional on a joint and
several basis. There are no restrictions on the ability of the guarantor
subsidiaries to transfer funds to the issuer in the form of cash dividends,
loans or advances. Separate financial statements of the guarantor subsidiaries
are not presented because management believes that such financial statements
would not be material to investors.

Investments in subsidiaries in the following condensed consolidating
financial information are accounted for under the equity method of accounting.
Consolidating adjustments include the following:

(1) Elimination of investments in subsidiaries.
(2) Elimination of intercompany accounts.
(3) Elimination of intercompany sales between guarantor and non-guarantor
subsidiaries.
(4) Elimination of equity in earnings of subsidiaries.

NOTE 8 - SUPPLEMENTAL CONDENSED CONSOLIDATING FINANCIAL INFORMATION (CONTINUED)

BALANCE SHEETS

JUNE 30, 1999 (UNAUDITED)
----------------------------------------------------------------------
DECRANE
AIRCRAFT GUARANTOR NON-GUARANTOR CONSOLIDATING CONSOLIDATED
HOLDINGS, INC. SUBSIDIARIES SUBSIDIARIES ADJUSTMENTS TOTAL
------------- ------------ ------------- ------------ ------------
(IN THOUSANDS)

ASSETS

Current assets
Cash and cash equivalents ......................... $ 1,705 $ 1,677 $ 107 $ - $ 3,489
Accounts receivable, net ....................... - 42,206 1,580 - 43,786
Inventories .................................... - 47,665 1,658 - 49,323
Other current assets ........................... 4,543 2,160 113 - 6,816
----------- ----------- ---------- ----------- -----------
Total current assets ......................... 6,248 93,708 3,458 - 103,414

Property and equipment, net ....................... 1,239 32,176 2,255 - 35,670
Other assets, principally intangibles, net ........ 14,532 280,586 12,573 - 307,691
Investments in subsidiaries ....................... 345,752 20,516 - (366,268)(1) -
Intercompany receivables .......................... 44,210 331 4,039 (48,580)(2) -
----------- ----------- ---------- ----------- -----------
Total assets ............................... $ 411,981 $ 427,317 $ 22,325 $ (414,848) $ 446,775
=========== =========== ========== =========== ==========

LIABILITIES AND STOCKHOLDER'S EQUITY

Current liabilities
Short-term obligations ......................... $ 3,048 $ 293 $ 516 $ - $ 3,857
Other current liabilities ...................... 11,445 28,410 1,494 - 41,349
----------- ----------- ---------- ----------- -----------
Total current liabilities .................... 14,493 28,703 2,010 - 45,206
----------- ----------- ---------- ----------- -----------

Long-term liabilities
Long-term obligations .......................... 270,790 671 47 - 271,508
Intercompany payables .......................... 873 47,376 331 (48,580)(2) -
Other long-term liabilities .................... 15,861 4,815 557 - 21,233
----------- ----------- ---------- ----------- -----------
Total long-term liabilities .................. 287,524 52,862 935 (48,580) 292,741
----------- ----------- ---------- ----------- -----------

Stockholder's equity (deficit)
Paid-in capital ................................ 112,700 286,635 15,440 (302,075)(1) 112,700
Retained earnings (deficit) .................... (2,736) 59,117 5,076 (64,193)(1) (2,736)
Accumulated other comprehensive
income (loss) ................................ - - (1,136) - (1,136)
----------- ----------- ---------- ----------- -----------
Total stockholder's equity (deficit) ......... 109,964 345,752 19,380 (366,268) 108,828
----------- ----------- ---------- ----------- -----------

Total liabilities and stockholder's equity . $ 411,981 $ 427,317 $ 22,325 $ (414,848) $ 446,775
=========== =========== ========== =========== ===========

NOTE 8 - SUPPLEMENTAL CONDENSED CONSOLIDATING FINANCIAL INFORMATION (CONTINUED)

BALANCE SHEETS (CONTINUED)

DECEMBER 31, 1998
----------------------------------------------------------------------
DECRANE
AIRCRAFT GUARANTOR NON-GUARANTOR CONSOLIDATING CONSOLIDATED
HOLDINGS, INC. SUBSIDIARIES SUBSIDIARIES ADJUSTMENTS TOTAL
------------- ------------ ------------- ------------ ------------
(IN THOUSANDS)

ASSETS

Current assets
Cash and cash equivalents ...................... $ 2,458 $ 762 $ 298 $ - $ 3,518
Accounts receivable, net ....................... - 28,917 1,524 - 30,441
Inventories .................................... - 32,624 1,657 - 34,281
Other current assets ........................... 7,066 894 237 - 8,197
----------- ----------- ---------- ----------- -----------
Total current assets ......................... 9,524 63,197 3,716 - 76,437

Property and equipment, net ....................... 272 26,170 1,718 - 28,160
Other assets, principally intangibles, net ........ 12,105 200,383 13,842 - 226,330
Investments in subsidiaries ....................... 250,366 20,114 - (270,480)(1) -
Intercompany receivables .......................... 39,012 2,091 3,622 (44,725)(2) -
----------- ----------- ---------- ----------- -----------
Total assets ............................... $ 311,279 $ 311,955 $ 22,898 $ (315,205) $ 330,927
----------- ----------- ---------- ----------- -----------
----------- ----------- ---------- ----------- -----------
LIABILITIES AND STOCKHOLDER'S EQUITY

Current liabilities
Short-term obligations ......................... $ 892 $ 628 $ 292 $ - $ 1,812
Other current liabilities ...................... 10,767 16,651 1,174 - 28,592
----------- ----------- ---------- ----------- -----------
Total current liabilities .................... 11,659 17,279 1,466 - 30,404
----------- ----------- ---------- ----------- -----------

Long-term liabilities
Long-term obligations .......................... 184,822 131 - - 184,953
Intercompany payables .......................... 873 43,521 331 (44,725)(2) -
Other long-term liabilities .................... 16,278 658 713 - 17,649
----------- ----------- ---------- ----------- -----------
Total long-term liabilities .................. 201,973 44,310 1,044 (44,725) 202,602
----------- ----------- ---------- ----------- -----------
Stockholder's equity (deficit)
Paid-in capital ................................ 100,200 210,787 15,440 (226,227)(1) 100,200
Retained earnings (deficit) .................... (2,553) 39,579 4,674 (44,253)(1) (2,553)
Accumulated other comprehensive
income (loss) ................................ - - 274 - 274
----------- ----------- ---------- ----------- -----------
Total stockholder's equity (deficit) ......... 97,647 250,366 20,388 (270,480) 97,921
----------- ----------- ---------- ----------- -----------
Total liabilities and stockholder's equity . $ 311,279 $ 311,955 $ 22,898 $ (315,205) $ 330,927
=========== =========== ========== =========== ===========

NOTE 8 - SUPPLEMENTAL CONDENSED CONSOLIDATING FINANCIAL INFORMATION (CONTINUED)

STATEMENTS OF OPERATIONS

SIX MONTHS ENDED JUNE 30, 1999 (SUCCESSOR - UNAUDITED)
----------------------------------------------------------------------
DECRANE
AIRCRAFT GUARANTOR NON-GUARANTOR CONSOLIDATING CONSOLIDATED
HOLDINGS, INC. SUBSIDIARIES SUBSIDIARIES ADJUSTMENTS TOTAL
------------- ------------ ------------- ------------ ------------
(IN THOUSANDS)

Revenues .......................................... $ - $ 110,320 $ 6,247 $ (3,969)(3) $ 112,598
Cost of sales ..................................... - 74,933 5,010 (3,969)(3) 75,974
----------- ----------- ---------- ----------- -----------
Gross profit ...................................... - 35,387 1,237 - 36,624

Selling, general and administrative expenses ...... 2,978 13,551 721 - 17,250
Amortization of intangible assets ................. 78 5,128 252 - 5,458
Interest expense .................................. 12,525 186 18 - 12,729
Intercompany charges .............................. (3,386) 3,290 96 - -
Equity in earnings of subsidiaries ................ (7,238) (496) - 7,734 (4) -
Other expenses (income) ........................... - 75 (442) - (367)
Provision (benefit) for income taxes .............. (4,774) 6,415 96 - 1,737
----------- ----------- ---------- ----------- -----------
Net income (loss) ................................. $ (183) $ 7,238 $ 496 $ (7,734) $ (183)
=========== =========== ========== =========== ===========

SIX MONTHS ENDED JUNE 30, 1998 (PREDECESSOR - UNAUDITED)
----------------------------------------------------------------------
DECRANE
AIRCRAFT GUARANTOR NON-GUARANTOR CONSOLIDATING CONSOLIDATED
HOLDINGS, INC. SUBSIDIARIES SUBSIDIARIES ADJUSTMENTS TOTAL
------------- ------------ ------------- ------------ ------------
(IN THOUSANDS)

Revenues .......................................... $ - $ 56,936 $ 6,702 $ (4,656)(3) $ 58,982
Cost of sales ..................................... - 39,726 5,205 (4,656)(3) 40,275
----------- ----------- ---------- ----------- -----------
Gross profit ...................................... - 17,210 1,497 - 18,707

Selling, general and administrative expenses ...... 2,435 7,238 508 - 10,181
Amortization of intangible assets ................. - 756 5 - 761
Interest expense .................................. 1,120 49 - - 1,169
Intercompany charges .............................. (3,225) 3,129 96 - -
Equity in earnings of subsidiaries ................ (3,995) (556) - 4,551 (4) -
Other expenses (income) ........................... 600 (155) 125 - 570
Provision (benefit) for income taxes .............. (295) 2,754 207 - 2,666
----------- ----------- ---------- ----------- -----------
Net income ........................................ $ 3,360 $ 3,995 $ 556 $ (4,551) $ 3,360
=========== =========== ========== =========== ===========

NOTE 8 - SUPPLEMENTAL CONDENSED CONSOLIDATING FINANCIAL INFORMATION (CONTINUED)

STATEMENTS OF CASH FLOWS

CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss) .............................. $ (183) $ 7,238 $ 496 $ (7,734) $ (183)
Adjustments to net income (loss)
Non-cash net income adjustments .............. 1,154 7,631 292 - 9,077
Equity in earnings of subsidiaries ........... (7,238) (496) - 7,734(4) -
Changes in working capital ..................... 14,179 (17,583) (784) - (4,188)
----------- ----------- ---------- ----------- -----------
Net cash provided by (used for)
operating activities........................ 7,912 (3,210) 4 - 4,706
----------- ----------- ---------- ----------- -----------

CASH FLOWS FROM INVESTING ACTIVITIES
Cash paid for acquisitions, net of cash acquired (105,220) 2,245 - - (102,975)
Capital expenditures and other ................. (22) (2,515) (439) - (2,976)
----------- ----------- ---------- ----------- -----------
Net cash provided by (used for)
investing activities ....................... (105,242) (270) (439) - (105,951)
----------- ----------- ---------- ----------- -----------

CASH FLOWS FROM FINANCING ACTIVITIES
Term debt borrowings ........................... 90,000 - - - 90,000
Capital contribution ........................... 12,500 - - - 12,500
Customer advance ............................... - 5,000 - - 5,000
Other long-term borrowings ..................... 636 - - - 636
Deferred financing costs ....................... (3,062) - - - (3,062)
Net revolving line of credit repayments ........ (2,800) - - - (2,800)
Principal payments on long-term
debt and leases .............................. (697) (511) (15) - (1,223)
Other, net ..................................... - (94) 265 - 171
----------- ----------- ---------- ----------- -----------
Net cash provided by financing activities .... 96,577 4,395 250 - 101,222
----------- ----------- ---------- ----------- -----------
Effect of foreign currency translation on cash .... - - (6) - (6)
----------- ----------- ---------- ----------- -----------
Net increase (decrease) in cash and equivalents ... (753) 915 (191) - (29)
Cash and equivalents at beginning of period ....... 2,458 762 298 - 3,518
----------- ----------- ---------- ----------- -----------
Cash and equivalents at end of period ............. $ 1,705 $ 1,677 $ 107 $ - $ 3,489
=========== =========== ========== =========== ===========

NOTE 8 - SUPPLEMENTAL CONDENSED CONSOLIDATING FINANCIAL INFORMATION (CONTINUED)

STATEMENTS OF CASH FLOWS (CONTINUED)

CASH FLOWS FROM OPERATING ACTIVITIES
Net income ..................................... $ 3,360 $ 3,995 $ 556 $ (4,551) $ 3,360
Adjustments to net income
Non-cash net income adjustments .............. (1,141) 2,314 415 - 1,588
Equity in earnings of subsidiaries ........... (3,995) (556) - 4,551 (4) -
Changes in working capital ..................... (1,563) (3,978) (227) - (5,768)
----------- ----------- ---------- ----------- -----------
Net cash provided by (used for)
operating activities........................ (3,339) 1,775 744 - (820)
----------- ----------- ---------- ----------- -----------

CASH FLOWS FROM INVESTING ACTIVITIES
Cash paid for acquisitions, net of cash acquired (87,006) 1,262 - - (85,744)
Capital expenditures and other ................. (29) (699) (199) - (927)
----------- ----------- ---------- ----------- -----------
Net cash provided by (used for)
investing activities ....................... (87,035) 563 (199) - (86,671)
----------- ----------- ---------- ----------- -----------

CASH FLOWS FROM FINANCING ACTIVITIES
Net revolving line of credit borrowings ........ 56,750 - - - 56,750
Net proceeds from sale of common stock ......... 34,815 - - - 34,815
Principal payments on long-term
debt and leases .............................. (2) (1,128) (26) - (1,156)
Deferred financing costs ....................... (311) - - - (311)
Other, net ..................................... 78 (96) (463) - (481)
----------- ----------- ---------- ----------- -----------
Net cash provided by (used for)
financing activities ....................... 91,330 (1,224) (489) - 89,617
----------- ----------- ---------- ----------- -----------
Effect of foreign currency translation on cash .... - - 5 - 5
----------- ----------- ---------- ----------- -----------
Net increase in cash and equivalents .............. 956 1,114 61 - 2,131
Cash and equivalents at beginning of period ....... 16 109 81 - 206
----------- ----------- ---------- ----------- -----------
Cash and equivalents at end of period ............. $ 972 $ 1,223 $ 142 $ - $ 2,337
=========== =========== ========== =========== ===========

NOTE 9 - LITIGATION

The Canadian Transportation Safety Board has notified the Company that as
part of its investigation of the crash of Swissair Flight 111 on September 2,
1998, burned wire was found which was attached to the in-flight entertainment
system installed on certain Swissair aircraft by a subsidiary of the Company.
The Canadian Transportation Safety Board has advised the Company that it does
not have evidence that the system the Company installed malfunctioned or failed
during the flight. The Company has been requested by attorneys for families of
persons who died aboard the flight to put its insurance carrier on notice of a
potential claim by such families.

On August 3, 1999 families of persons who died aboard the flight filed an
action in federal court in California against one of our subsidiaries and two
other unaffiliated parties allegedly doing business in California, claiming
negligence, strict liability and breach of warranty relating to the installation
and testing of the in-flight entertainment system. The action seeks compensatory
and punitive damages and costs in an unstated amount. Discovery has not yet
commenced. The Company intends to defend vigorously against the claim. Actions
were also previously filed in other jurisdictions against other unaffiliated
parties, including Swissair and Boeing.

NOTE 9 - LITIGATION (CONTINUED)

On August 5, 1998, the Company and its chief executive officer were served
in an action filed in state court in California by the Company's chief financial
officer and secretary claiming that he is due additional compensation in the
form of stock options, and claiming fraud, negligent misrepresentation and
breach of contract in connection therewith. On September 22, 1998, the plaintiff
amended the compliant by repeating the allegations in the initial compliant and
adding allegations of fraudulent misrepresentation in violation of certain
provisions of the California Labor Code (for which doubled damages are sought),
promissory estoppel, and wrongful discharge as a violation of public policy (as
a result of allegations made by the plaintiff of improprieties in connection
with the fairness opinion with respect to the DLJ Acquisition). The plaintiff
further amended his complaint to allege breach of an implied contract as well.
The action seeks not less than $1.5 million plus punitive damages and costs.
Discovery has not been completed. The Company intends to vigorously defend
against such claim. The plaintiff's employment with the Company was terminated.

The Company and its subsidiaries are also involved in other routine legal
and administrative proceedings incident 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 consolidated financial position,
results of operations or cash flows.

NOTE 10 - RECENTLY ISSUED ACCOUNTING PRONOUNCEMENT

In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 133, "Accounting for Derivative Instruments
and Hedging Activities." SFAS No. 133 requires companies to record derivatives
on the balance sheet as assets or liabilities, measured at fair value. It also
requires that gains or losses resulting from changes in the values of those
derivatives be accounted for depending on the use of the derivative and whether
it qualifies for hedge accounting. Adoption of SFAS No. 133, as amended by SFAS
No. 137 in June 1999, is required for the fiscal year beginning January 1, 2001.
Management believes the adoption of SFAS No. 133 will not have a material impact
on the Company's consolidated financial position or results of operations.

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

THE FOLLOWING DISCUSSION SHOULD BE READ IN CONJUNCTION WITH OUR
CONSOLIDATED FINANCIAL STATEMENTS AND RELATED NOTES INCLUDED IN THIS REPORT.

OVERVIEW

Our financial position and results of operations have been affected by our
history of acquisitions. Since our formation in 1989, we have completed fourteen
acquisitions of businesses or assets. As a result, our historical financial
statements do not reflect the financial position and results of operations of
our current businesses. Our most recent acquisitions, which affect the
comparability of the historical financial statements included herein, consist
of:

- - Avtech, acquired on June 26, 1998;
- - Dettmers, acquired on June 30, 1998;
- - PATS, acquired on January 22, 1999; and
- - PPI, acquired on April 23, 1999.

Our historical financial statements included in this report reflect the
financial position and results of operations of the acquired businesses
subsequent to their respective acquisition dates. Additionally, our capital
structure was significantly altered in August 1998 by the financing obtained to
fund the tender offer for our stock in conjunction with the DLJ acquisition.

In August 1999, we purchased substantially all of the assets, subject to
accounts payable and accrued expenses assumed, of Custom Woodwork. Our
historical financial statements do not reflect the Custom Woodwork acquisition
since it was acquired subsequent to June 30, 1999.

INDUSTRY OUTLOOK AND TRENDS

During the first six months of 1999, Boeing, our largest customer,
initiated a program to reduce inventory levels and, in addition, they have
announced lower production rates for some of their models of commercial
aircraft. These factors have resulted in lower sales volume for various products
we supply to Boeing, most notably electrical contacts and connectors. We believe
the demand for these products will continue to be lower over the next twelve
months and possibly beyond.

Offsetting this anticipated weakness in demand for products we supply to
the commercial aircraft market, is the high level of middle- and high-end
corporate aircraft production and consequent strong demand for cabin management
products we manufacture, such as audio and video systems, seats and furniture.
We anticipate this high level of demand for such products to continue for at
least the next twelve months.

RESULTS OF OPERATIONS

THREE MONTHS ENDED JUNE 30, 1999 COMPARED TO THREE MONTHS ENDED JUNE 30, 1998

REVENUES. Revenues increased $32.8 million, or 110.0%, to $62.7 million for
the three months ended June 30, 1999 from $29.9 million for the three months
ended June 30, 1998. Revenues increased due to:

- - the inclusion of $33.4 million of revenues resulting from the Avtech,
Dettmers, PATS and PPI acquisitions; and

- - a $2.4 million increase in entertainment and cabin management products
revenues.

The increases were offset by:

- - a $2.5 million decrease in electrical contact revenues due to weak demand
from our commercial aircraft customers; and

- - a $0.5 million net decrease in revenues from our other products and
services.

GROSS PROFIT. Gross profit increased $10.9 million, or 112.2%, to $20.6
million for the three months ended June 30, 1999. Gross profit as a percent of
revenues increased to 32.9% for the quarter ended June 30, 1999 from 32.6% for
the same period last year. Factors contributing to the gross profit increase
were:

- - a contribution of $13.0 million from the acquired companies; and

- - a $1.3 million increase due to higher entertainment and cabin management
products revenues.

Offsetting the above favorable factors was:

- - a $1.7 million decrease due to lower overall margins for products and
services supplied to commercial aircraft customers;

- - a $1.1 million charge for the portion of the PPI acquisition purchase price
allocated to inventory and charged to operations as the inventory was sold
during the three months ended June 30, 1999; and

- - a $0.6 million decrease due to lower electrical contact revenues, primarily
from commercial aircraft customers.

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative expenses increased $3.8 million, or 71.2%, to $9.1 million for
the three months ended June 30, 1999, from $5.3 million for the same period last
year. SG&A expenses as a percent of revenues decreased to 14.5% for the second
quarter 1999 compared to 17.8% for the same period last year. SG&A expenses
increased as a result of:

- - a $3.4 million increase from the inclusion of expenses from the acquired
companies; and

- - a $0.4 million increase in expenses in support of additional administrative
activity.

OPERATING INCOME. Operating income increased $4.6 million, or 114.3%, to
$8.6 million for the three months ended June 30, 1999, from $4.0 million for the
same period last year. Operating income as a percent of revenues increased to
13.8% for the second quarter of 1999, from 13.5% for the same quarter last year.
An increase in operating income of $9.6 million resulting from the inclusion of
the acquired companies was offset by:

- - $2.5 million of higher amortization expenses associated with the DLJ
acquisition and the Avtech, Dettmers, PATS and PPI acquisitions;

- - a $1.1 million charge for the portion of the PPI acquisition purchase price
allocated to inventory and charged to operations during the period;

- - $1.0 million of lower gross profit and $0.4 higher SG&A expenses due to the
factors described above.

INTEREST EXPENSE. Interest expense increased $6.6 million to $7.0 million
for the three months ended June 30, 1999, from $0.4 million for the same period
last year. Higher debt levels resulting from the tender offer and the Avtech,
Dettmers, PATS and PPI acquisitions caused the increase.

PROVISION FOR INCOME TAXES. The provision for income taxes differs from the
amount determined by applying the applicable U.S. statutory federal rate to the
income (loss) before income taxes primarily due to the effects of state and
foreign income taxes and non-deductible expenses, principally goodwill
amortization. The difference in the effective tax rates between periods is
mostly a result of higher goodwill amortization.

NET INCOME. Net income decreased $1.6 million, to $0.1 million for the
three months ended June 30,1999 compared to $1.7 million for the same period in
1998. The decrease was due to the factors described above.

BOOKINGS AND BACKLOG. Bookings increased $24.0 million, or 72.5%, to $57.1
million for the three months ended June 30, 1999 compared to $33.1 million for
the same period in 1998. Companies acquired contributed $27.7 million of the
increase. Backlog increased $64.8 million, or 85.9%, to $140.2 million as of
June 30, 1999 compared to $75.4 million as of December 31, 1998; $66.9 million
of the increase pertains to the acquired companies.

SIX MONTHS ENDED JUNE 30, 1999 COMPARED TO SIX MONTHS ENDED JUNE 30, 1998

REVENUES. Revenues increased $53.6 million, or 90.9%, to $112.6 million for
the six months ended June 30, 1999 from $59.0 million for the six months ended
June 30, 1998. Revenues increased due to:

- - the inclusion of $53.0 million of revenues resulting from the Avtech,
Dettmers, PATS and PPI acquisitions; and

- - a $4.1 million increase in entertainment and cabin management products
revenues.

The increases were offset by:

- - a $3.2 million decrease in electrical contact revenues due to weak demand
from our commercial aircraft customers; and

- - a $0.3 million net decrease in revenues from our other products and
services.

GROSS PROFIT. Gross profit increased $17.9 million, or 95.8%, to $36.6
million for the six months ended June 30, 1999. Gross profit as a percent of
revenues increased to 32.5% for the six months ended June 30, 1999 from 31.7%
for the same period last year. Factors contributing to the gross profit increase
were:

- - the contribution from the acquired companies of $20.0 million; and

- - a $2.3 million increase due to higher entertainment and cabin management
products revenues.

Offsetting the above favorable factors was:

- - a $2.7 million decrease due to lower overall margins for products and
services supplied to commercial aircraft customers;

- - a $0.6 million decrease due to lower electrical contact revenues, primarily
from commercial aircraft customers.

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative expenses increased $7.1 million, or 69.4%, to $17.3 million for
the six months ended June 30, 1999, from $10.2 million for the same period last
year. SG&A expenses as a percent of revenues decreased to 15.3% for the six
months ended June 30, 1999 compared to 17.3% for the same period last year. SG&A
expenses increased as a result of:

- - a $6.0 million increase from the inclusion of expenses from the acquired
companies; and

- - a $1.1 million increase in expenses in support of additional administrative
activity.

OPERATING INCOME. Operating income increased $6.1 million to $13.9 million
for the six months ended June 30, 1999, from $7.8 million for the same period
last year. Operating income as a percent of revenues decreased to 12.4% for the
six months ended June 30, 1999, from 13.2% for the same period last year. An
increase in operating income of $14.0 million resulting from the acquisitions of
the acquired companies was offset by:

- - $4.7 million of higher amortization expenses associated with the DLJ
acquisition and the Avtech, Dettmers, PATS and PPI acquisitions;

- - a $1.1 million charge for the portion of the PPI acquisition purchase price
allocated to inventory and charged to operations during the period;

- - $1.0 million of lower gross profit and $1.1 higher SG&A expenses due to the
factors described above.

INTEREST EXPENSE. Interest expense increased $11.5 million to $12.7 million
for the six months ended June 30, 1999, from $1.2 million for the same period
last year. Higher debt levels resulting from the tender offer and the Avtech,
Dettmers, PATS and PPI acquisitions caused the increase.

NET INCOME (LOSS). Net income decreased $3.6 million, to a loss of $0.2
million for the six months ended June 30,1999 compared to net income of $3.4
million for the same period in 1998. The decrease was due to the factors
described above.

BOOKINGS AND BACKLOG. Bookings increased $42.7 million, or 69.1%, to $104.5
million for the six months ended June 30, 1999 compared to $61.8 million for the
same period in 1998. Companies acquired contributed $43.3 million of the
increase. Backlog increased $64.8 million, or 85.9%, to $140.2 million as of
June 30, 1999 compared to $75.4 million as of December 31, 1998; $66.9 million
of the increase pertains to the acquired companies.

LIQUIDITY AND CAPITAL RESOURCES

For the six months ended June 30, 1999, we generated $4.7 million of cash
from operating activities which is the net of $8.9 million of cash generated
from operations after adding back depreciation, amortization and other non-cash
items, $4.1 million used for working capital and $0.1 million resulting from a
decrease in other liabilities. The following factors contributed to the $4.1
million working capital increase:

- - accounts receivable increased $7.1 million due to higher sales; and

- - accounts payable and accrued expenses decreased by a net $1.2 million as a
result of payment timing patterns; offset by

- - inventory decreased by $2.4 million as a result of adjustments to inventory
levels based on production forecasts.

Cash used for investing activities during the six months ended June 30,
1999 consisted of $100.0 million for the PATS and PPI acquisitions, $3.0 million
of contingent consideration paid during 1999 related to the 1997 Audio
International acquisition, and $3.1 million for capital expenditures. We
anticipate spending $6.6 million for capital expenditures in 1999.

Net cash provided by financing activities was $101.2 million for the six
months ended June 30, 1999. In January 1999, the senior term loan facility was
amended to provide for an additional $20.0 million of term loan borrowings. We
used the funds obtained from the term loan borrowings, $14.9 million of
borrowings under our acquisition revolving credit facility and a $5.0 million
customer advance to acquire all of the common stock of PATS. In April 1999,
we further amended our term loan facility and borrowed an additional $70
million. We used $50.0 million of the proceeds to partially fund the PPI
acquisition and $20.0 million to repay borrowings under our acquisition and
working capital revolving credit facilities. In April 1999, we also used an
additional $12.5 million capital contribution received from DeCrane Holdings to
fund the remaining portion of the PPI acquisition. Subsequent to June 30, 1999
we borrowed an additional $13.8 million under our acquisition revolving credit
facility to fund the Custom Woodwork acquisition.

At June 30, 1999, senior credit facility borrowings totaling $172.4 million
are at variable interest rates based on defined margins over the current prime
or Euro-Dollar rates. As of June 30, 1999 we had $58.2 million of working
capital, $22.0 million of borrowings available under our working capital senior
credit facility and $25.0 million available under our acquisition senior credit
facility. We believe that the current levels of working capital and amounts
available under our senior credit facilities will enable us to meet our
liquidity requirements for the next several years.

RECENTLY ISSUED ACCOUNTING PRONOUNCEMENT

COMPLIANCE OF KEY SYSTEMS WITH YEAR 2000 PERFORMANCE STANDARDS

We are dependent in part on computer- and date-controlled systems for some
internal functions, particularly inventory control, purchasing, customer billing
and payroll. Similarly, suppliers of components and services on which we rely,
and our customers, may have Year 2000 compliance risks, which would affect their
operations and their transactions with us. Other parties with whom we have
commercial relationships, including raw materials suppliers and service
providers, such as banking and financial services, data processing services,
telecommunications services and utilities, are highly reliant on computer-based
technology.

The costs we have incurred to remediate and test our systems, and evaluate
and address the risks of our key customers and vendors, have been immaterial to
date and we expect to incur less than $1.0 million of costs in the aggregate.
All of our Year 2000 compliance costs have been or are expected to be funded
from our operating cash flow. We believe the number of products manufactured by
us whose functioning is dependent upon computer-controlled or other
date-controlled systems is not significant. We are not aware of any material
customer- or vendor-related Year 2000 issues. Our manufacturing operations and
our products generally are not based upon date-controlled machinery; our
business operations and systems are not so time-sensitive that brief
interruptions, or a shift to backup paper records, should cause significant
losses.

Our Year 2000 compliance efforts are directed primarily towards ensuring
that we will be able to continue to perform three critical functions:

- - make and sell our products,

- - order and receive raw material and supplies, and

- - pay our employees and vendors.

Our assessment of year 2000 performance standards is complete for our
information technology systems and for those systems deemed to be critical to
our operations. Our initial review of third-party compliance risks from our key
vendors and customers has also been completed. We will continue our review of
data from all of those vendors and customers who responded during the second
quarter of 1999 to determine if additional steps are necessary to mitigate
risks. Our management does not anticipate any resulting failures in our systems,
products or supply chain that would disrupt our operations to a material degree
at this time. Between now and the end of the year, we will continue to test our
systems, monitor the readiness of our vendors and suppliers, and take necessary
actions to correct noncompliant systems.

We have completed the renovation, upgrade or replacement of all of our
significant information technology systems for year 2000 performance standards,
except that during the third quarter of 1999 several of our subsidiaries will
complete the installation of an accounting and manufacturing system which
replaces existing systems not compliant with year 2000 performance standards. We
expect to complete this phase in the third quarter of 1999. All of our
significant systems which have been renovated or newly installed have been
tested and are presently operating.

However, the novelty and complexity of the issues presented, and our
dependence on the technical skills of employees and independent contractors and
on the representations and preparedness of third parties, could cause our
efforts to be less than fully effective. Moreover, Year 2000 issues present a
number of risks that are beyond our control, such as the failure of utility
companies to deliver electricity, the failure of telecommunications companies to
provide voice and data services, the failure of financial institutions to
process transactions and transfer funds, the failure of vendors to deliver
materials or perform services required by us and the collateral effects on us of
the effects of Year 2000 issues on the economy in general or on our customers in
particular. Additionally, in view of the mixed results achieved by software
vendors in correcting these problems, we cannot assure you that new systems we
obtain to replace noncompliant systems will themselves prove to be fully
compliant. Although we believe that our compliance efforts are designed to
appropriately identify and address those Year 2000 issues that are subject to
our reasonable control, we cannot assure you that our efforts will be fully
effective, or that Year 2000 issues will not have a material adverse effect on
our business, financial condition or results of operations. In the worst case, a
protracted failure of general business systems among our customers or vendors,
or in our own plant, could cause production delays or canceled orders which
would significantly reduce our revenue for the duration of such a situation. We
have not developed a contingency plan which assumes significant and protracted
Year 2000-related failures of major vendors, customers or systems, and do not
plan to do so.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

We are exposed to various market risks, including interest rates and
changes in foreign currency exchange rates. Market risk is the potential loss
arising from adverse changes in market rates and prices, such as interest rates
and foreign currency exchange rates. From time to time we use derivative
financial instruments to manage and reduce risks associated with these factors.
We do not enter into derivatives or other financial instruments for trading or
speculative purposes.

INTEREST RATE RISK. A significant portion of our capital structure is
comprised of long-term variable- and fixed-rate debt.

Market risk related to our variable-rate debt is estimated as the potential
decrease in pre-tax earnings resulting from an increase in interest rates. The
interest rates applicable to variable-rate debt are, at our option, based on
defined margins over the current prime or Euro-Dollar rates. At June 30, 1999,
the current prime rate was 7.75% and the current Euro-Dollar rate was 5.1%.
Based on $172.4 million of variable-rate debt outstanding as of June 30, 1999, a
hypothetical one percent rise in interest rates, to 8.75% for prime rate
borrowings and 6.1% for Euro-Dollar borrowings, would reduce our pre-tax
earnings by $1.7 million annually. Subsequent to June 30, 1999, we increased our
variable-rate debt by $13.8 million. Prior to December 31, 1997, we purchased
interest rate cap contracts to limit our exposure related to rising interest
rates on our variable-rate debt. While we have not entered into similar
contracts since that date, we may do so in the future depending on our
assessment of future interest rate trends.

At June 30, 1999, the carrying value of our fixed-rate long-term debt
approximated its fair value. Market risk related to our fixed-rate debt is
deemed to be the potential increase in fair value resulting from a decrease in
interest rates. For example, a hypothetical ten percent decrease in the interest
rates, from 12.0% to 10.8%, would increase the fair value of our fixed-rate debt
by approximately $7.0 million.

FOREIGN CURRENCY EXCHANGE RATE RISK. Our customers are located in various
parts of the world, primarily Western Europe, the Far East and Canada, and two
of our subsidiaries operate in Western Europe. To limit our foreign currency
exchange rate risk related to sales to our customers, orders are primarily
valued and sold in U.S. dollars. From time to time we have entered into forward
foreign exchange contracts to limit our exposure related to foreign inventory
procurement and operating costs. However, we have not entered into any such
contracts during the six months ended June 30, 1999 and no such contracts are
open as of that date.

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

Some of the statements in this report discuss future expectations, beliefs
or strategies, projections or other "forward-looking" information. These
statements are subject to known and unknown risks. Many factors could cause
actual company results, performance or achievements, or industry results, to be
materially different from the projections expressed or implied by this report.
Some of those risks are specifically described in the "Risk Factors" section in
our prospectus dated May 14, 1999, but we are also vulnerable to a variety of
elements that affect many businesses, such as:

- - fuel prices and general economic conditions that affect demand for aircraft
and air travel, which in turn affect demand for our products and services;

- - changes in prevailing interest rates and the availability of financing to
fund our plans for continued growth;

- - inflation, and other general changes in costs of goods and services;

- - liability and other claims asserted against us;

- - the ability to attract and retain qualified personnel;

- - labor disturbances; and

- - changes in operating strategy, or our acquisition and capital expenditure
plans.

We cannot predict any of the foregoing with certainty, so our
forward-looking statements are not necessarily accurate predictions. Also, we
are not obligated to update any of these statements, to reflect actual results
or report later developments. You should not rely on our forward-looking
statements as if they were certainties.

INCORPORATION OF DOCUMENTS BY REFERENCE

We have filed with the Securities and Exchange Commission, and are
including within this report by referring to it here, our Registration Statement
No. 333-70365 on Form S-1 effective May 14, 1999, and the prospectus it
contains. That prospectus includes audited 1998 financial statements and risk
factors, which we refer to in this report.

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 headquarters located at 2361 Rosecrans Avenue, Suite 180, El Segundo,
California 90245. Our telephone number is (310) 725-9123.

PART II - OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

As part of its investigation of the crash off the Canadian coast on
September 2, 1998 of Swissair Flight 111, the Canadian Transportation Safety
Board notified us that they recovered burned wire which was attached to the
in-flight entertainment system installed on some of Swissair's aircraft by one
of our subsidiaries. Attorneys for families of persons who died aboard the
flight requested that we put our insurance carrier on notice of a potential
claim by those families, and we did so. The Transportation Safety Board has
advised us that it has no evidence that the system we installed malfunctioned or
failed during the flight. We are fully cooperating with the investigation.

On August 3, 1999 families of persons who died aboard the flight filed an
action in federal court in California against our subsidiary Hollingsead and two
other unaffiliated parties allegedly doing business in California, claiming
negligence, strict liability and breach of warranty relating to the installation
and testing of the in-flight entertainment system. The action seeks compensatory
and punitive damages and costs in an unstated amount. Discovery has not yet
commenced. We intend to defend vigorously against the claim. Actions were also
previously filed in other jurisdictions against other unaffiliated parties,
including Swissair and Boeing.

In August 1998, DeCrane Aircraft and R. Jack DeCrane, its chief
executive officer, were served in an action filed in state court in
California by Robert A. Rankin, claiming that he was due additional
compensation in the form of stock options, and claiming fraud, negligent
misrepresentation and breach of contract in connection therewith, fraudulent
misrepresentation in violation of provisions of the California Labor Code for
which doubled damages are sought, promissory estoppel, and wrongful discharge
in violation of public policy as a result of his allegations of improprieties
in connection with the DLJ acquisition transactions. The plaintiff later
amended his complaint to allege breach of an implied contract as well. The
action seeks not less than $1.5 million plus punitive damages and costs.
Discovery has not been completed. We intend to vigorously defend against the
claim. Mr. Rankin's employment with DeCrane Aircraft was terminated.

ITEM 5. OTHER INFORMATION

ACQUISITION OF PPI HOLDINGS, INC.

The acquisition is described in Note 2 to consolidated financial statements
included with this report and the Company's prospectus. The prospectus is part
of the Company's Registration Statement No. 333-70365 on Form S-1 filed with the
Securities and Exchange Commission effective May 14, 1999.

ACQUISITION OF CUSTOM WOODWORK & PLASTICS, INC.

The acquisition is described in Note 2 to consolidated financial statements
included with this report.

Regulation S-X compliant audited financial statements of Custom Woodwork
are not available at this time. As a result, Regulation S-X compliant pro forma
consolidated financial information cannot be prepared at this time. The
appropriate audited financial statements and pro forma consolidated financial
information will be filed on Form 8-K as soon as practicable, but in no event
later than October 20, 1999.

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

a. Exhibits

3.19.1 Articles of Incorporation of CWP Acquisition, Inc. **

3.19.2 By Laws of CWP Acquisition, 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 **

27 Financial Data Schedule **

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* Previously filed
** Filed herewith

b. Reports on Form 8-K

None.

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)

August 6, 1999 By: /s/ RICHARD J. KAPLAN
-------------------------------------
Name: Richard J. Kaplan
Title: Senior Vice President, Chief
Financial Officer,
Secretary and Treasurer