8-K/A 1 a8-ka.txt FORM 8-K/A ================================================================================ UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 8-K / A (AMENDMENDMENT NO. 1) CURRENT REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 May 11, 2000 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 May 25, 2000, DeCrane Aircraft Holdings, Inc. filed a Form 8-K describing our acquisition of Carl F. Booth & Co., Inc. on May 11, 2000. At the time of the filing, audited financial statements of Carl Booth compliant with Regulation S-X were not yet available. As a result, the pro forma consolidated financial information required by the Securities Exchange Act of 1934 could not be prepared. The purpose of this Form 8-K / A is to amend our initial filing with respect to the Carl Booth acquisition and provide the required audited financial statements and pro forma financial information reflecting the acquisition. 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 Form 10-K for the year ended December 31, 1999. The Form 10-K includes our audited 1999 financial statements, descriptions of our acquisition by DLJ and descriptions of companies we have acquired. - Our Form 10-Q for the three months ended March 31, 2000. The Form 10-Q includes our unaudited financial statements for the three months ended March 31, 2000. - Our Form 8-K filed on May 25, 2000. The Form 8-K includes information about our acquisition of Carl Booth. 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 7. FINANCIAL STATEMENTS AND EXHIBITS (a) Financial statements of businesses acquired. Our Form 8-K filed on May 25, 2000 is hereby amended by deleting the paragraph in Item 7(a) and replacing it with the following: Audited financial statements of Carl F. Booth & Co., 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, 1998 and 1999 and March 31, 2000 (unaudited) ............................ F-2 Statements of Income for the years ended December 31, 1998 and 1999 and the three months ended March 31, 1999 and 2000 (unaudited) .............................................. F-3 Statements of Stockholders' Equity for years ended December 31, 1998 and 1999 and the three months ended March 31, 2000 (unaudited) ....................................................... F-4 Statements of Cash Flows for the years ended December 31, 1998 and 1999 and the three months ended March 31, 1999 and 2000 (unaudited) .............................................. F-5 Notes to the Financial Statements ......................................................................... F-6
1 (b) Pro forma financial information. Our Form 8-K filed on May 25, 2000 is hereby amended by deleting the paragraph in Item 7(b) and replacing it with the following: Unaudited pro forma consolidated financial information reflecting our acquisition of Carl F. Booth & Co., Inc., including related explanatory notes, are attached hereto as follows:
Page -------- Basis of Presentation ..................................................................................... P-1 Unaudited Pro Forma Consolidated Balance Sheet as of March 31, 2000 ....................................... P-2 Unaudited Pro Forma Consolidated Statement of Operations for the: Year ended December 31, 1999 ............................................................................ P-3 Three months ended March 31, 2000 ....................................................................... P-4 Notes to Unaudited Pro Forma Consolidated Financial Data .................................................. P-5
(c) Exhibits.
Exhibit No. Exhibit Description --------- --------------------------------------------------------------------------------------------------------- 3.25.1 Certificate of Formation and Certificate of Amendment of Carl F. Booth & Co., LLC * 3.25.2 Limited Liability Company Agreement of Carl F. Booth & Co., LLC * 10.10.3 Third Amended and Restated Credit Agreement dated as of May 11, 2000 among DeCrane Aircraft Holdings, Inc., the lenders listed therein, DLJ Capital Funding, Inc., as syndication agent, and Bank One NA, as administrative agent ** 21.1 List of Subsidiaries of Registrant *
-------------------- * Previously filed with our Form 8-K on May 25, 2000 ** Filed herewith 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) June 16, 2000 By: /s/ RICHARD J. KAPLAN ------------------------------------------------------- Name: Richard J. Kaplan Title: Senior Vice President, Chief Financial Officer, Secretary and Treasurer 2 FINANCIAL STATEMENTS OF BUSINESS ACQUIRED REPORT OF INDEPENDENT ACCOUNTANTS To the Board of Directors and Stockholders of Carl F. Booth & Co., 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 Carl F. Booth & Co., Inc. at December 31, 1998 and 1999 and the results of its operations and its cash flows for the years then ended, in conformity with accounting principles generally accepted in the United States. 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 auditing standards generally accepted in the United States which require that we plan and perform the audits 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 April 14, 2000 F-1 CARL F. BOOTH & CO., INC. BALANCE SHEETS (IN THOUSANDS, EXCEPT SHARE DATA)
DECEMBER 31, MARCH 31, ------------------------ ----------- 1998 1999 2000 ----------- ----------- ----------- (UNAUDITED) ASSETS Current assets Cash and cash equivalents ....................................................... $ 1,202 $ 1,539 $ 2,798 Trade accounts receivable ....................................................... 976 1,340 1,930 Inventories ..................................................................... 2,838 4,259 3,647 ----------- ----------- ----------- Total current assets .......................................................... 5,016 7,138 8,375 Property, plant and equipment, net ................................................. 1,402 1,709 1,734 Other assets ....................................................................... 20 - - ----------- ----------- ----------- Total assets ................................................................ $ 6,438 $ 8,847 $ 10,109 =========== =========== =========== LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities Trade accounts payable .......................................................... $ 400 $ 647 $ 765 Accrued expenses and other liabilities .......................................... 191 460 364 Customer deposits................................................................ 1,308 2,941 2,768 ----------- ----------- ----------- Total current liabilities ..................................................... 1,899 4,048 3,897 ----------- ----------- ----------- Commitments and contingencies (Note 7).............................................. - - - ----------- ----------- ----------- Stockholders' equity Common stock, $1 par value, 1,000 shares authorized; 1,000 shares issued and outstanding at December 31, 1998 and 1999 and March 31, 2000........ 1 1 1 Additional paid-in capital ...................................................... 11 11 11 Retained earnings ............................................................... 4,527 4,787 6,200 ----------- ----------- ----------- Total stockholders' equity .................................................... 4,539 4,799 6,212 ----------- ----------- ----------- Total liabilities and stockholders' equity .................................. $ 6,438 $ 8,847 $ 10,109 =========== =========== ===========
The accompanying notes are an integral part of the financial statements. F-2 CARL F. BOOTH & CO., INC. STATEMENTS OF INCOME (IN THOUSANDS)
YEAR ENDED THREE MONTHS ENDED DECEMBER 31, MARCH 31, ------------------------ ------------------------ 1998 1999 1999 2000 ----------- ----------- ----------- ----------- (UNAUDITED) Sales ................................................................. $ 9,801 $ 13,757 $ 3,148 $ 4,414 Cost of sales ......................................................... 7,244 10,163 2,327 2,172 ----------- ----------- ----------- ----------- Gross profit .......................................................... 2,557 3,594 821 2,242 Operating expenses Selling, general and administrative ................................ 1,061 1,237 258 307 ----------- ----------- ----------- ----------- Income from operations ................................................ 1,496 2,357 563 1,935 Other income Interest income, net ............................................... 32 65 13 22 Other income, net .................................................. 4 25 69 - ----------- ----------- ----------- ----------- Net income ............................................................ $ 1,532 $ 2,447 $ 645 $ 1,957 =========== =========== =========== ===========
The accompanying notes are an integral part of the financial statements. F-3 CARL F. BOOTH & CO., INC. STATEMENTS OF STOCKHOLDERS' EQUITY (IN THOUSANDS, EXCEPT SHARE DATA)
COMMON STOCK ------------------------ NUMBER ADDITIONAL OF PAID-IN RETAINED SHARES AMOUNT CAPITAL EARNINGS TOTAL ----------- ----------- ----------- ----------- ----------- Balance, December 31, 1997 ............................... 1,000 $ 1 $ 11 $ 3,727 $ 3,739 Net income ............................................ - - - 1,532 1,532 Distributions to stockholders ......................... - - - (732) (732) ----------- ----------- ----------- ----------- ----------- Balance, December 31, 1998 ............................... 1,000 1 11 4,527 4,539 Net income ............................................ - - - 2,447 2,447 Distributions to stockholders ......................... - - - (2,187) (2,187) ----------- ----------- ----------- ----------- ----------- Balance, December 31, 1999 ............................... 1,000 1 11 4,787 4,799 Net income (Unaudited) ................................ - - - 1,957 1,957 Distributions to stockholders (Unaudited) ............. - - - (544) (544) ----------- ----------- ----------- ----------- ----------- Balance, March 31, 2000 (Unaudited) ...................... 1,000 $ 1 $ 11 $ 6,200 $ 6,212 =========== =========== =========== =========== ===========
The accompanying notes are an integral part of the financial statements. F-4 CARL F. BOOTH & CO., INC. STATEMENTS OF CASH FLOWS (IN THOUSANDS)
YEAR ENDED THREE MONTHS ENDED DECEMBER 31, MARCH 31, ------------------------ ------------------------- 1998 1999 1999 2000 ----------- ----------- ----------- ------------ (UNAUDITED) Cash flows from operating activities Net income ......................................................... $ 1,532 $ 2,447 $ 645 $ 1,957 Adjustments to reconcile net income to net cash provided by operating activities Depreciation ................................................... 272 312 68 66 Changes in operating assets and liabilities Trade accounts receivable ........................................ (525) (364) (286) (590) Inventories ...................................................... (966) (1,421) (153) 612 Trade accounts payable ........................................... 290 247 (147) 118 Accrued expenses and other liabilities ........................... - 269 67 (96) Customer deposits ................................................ 1,308 1,633 348 (173) ----------- ----------- ----------- ------------ Net cash provided by operating activities ...................... 1,911 3,123 542 1,894 ----------- ----------- ----------- ----------- Cash flows from investing activities Purchases of property, plant and equipment ......................... (458) (691) (205) (91) Proceeds from sale of property, plant and equipment ................ - 92 - - ----------- ----------- ----------- ----------- Net cash used for investing activities ......................... (458) (599) (205) (91) ----------- ----------- ----------- ----------- Cash flows from financing activities Distributions paid to stockholders ................................. (732) (2,187) (495) (544) ----------- ----------- ----------- ----------- Net cash used for financing activities ......................... (732) (2,187) (495) (544) ----------- ----------- ----------- ----------- Net increase (decrease) in cash and cash equivalents .................. 721 337 (158) 1,259 Cash and cash equivalents at beginning of period ...................... 481 1,202 1,202 1,539 ----------- ----------- ----------- ----------- Cash and cash equivalents at end of period ............................ $ 1,202 $ 1,539 $ 1,044 $ 2,798 =========== =========== =========== ===========
The accompanying notes are an integral part of the financial statements. F-5 CARL F. BOOTH & CO., INC. NOTES TO FINANCIAL STATEMENTS NOTE 1 - THE COMPANY Carl F. Booth & Co., Inc. (the "Company") is a New Albany, Indiana based manufacturer of wood veneer panels primarily used in aircraft interior cabinetry. The Company operates in the U.S. and its 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. In addition, one of the banks used by the Company maintains a special insurance policy that covers the first $500,000 of customer's bank balances. From time to time deposits may exceed Federal Deposit Insurance Corporation ("FDIC") and special insurance limits. At December 31, 1999, the Company had approximately $1 million on deposit in excess of the FDIC and special insurance 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 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, 1998 and 1999. 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 CARL F. BOOTH & CO., INC. NOTES TO FINANCIAL STATEMENTS (CONTINUED) NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) UNAUDITED INTERIM RESULTS The financial information as of March 31, 2000 and for the six months ended March 31, 1999 and 2000 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 - ACCOUNTS RECEIVABLE AND SIGNIFICANT CUSTOMERS ACCOUNTS RECEIVABLE The Company is potentially subject to concentration of credit risk as the Company relies heavily on customers operating in the domestic corporate aircraft industry. Generally, the Company does not require collateral or other security to support accounts receivable subject to credit risk. Under certain circumstances, deposits or cash-on-delivery terms are required. If necessary, the Company maintains reserves for potential credit losses and generally, such losses have historically been minimal and within management's expectations. SIGNIFICANT CUSTOMERS Three customers each accounted for more than 10% of the Company's revenues as follows:
DECEMBER 31, ------------------------ 1998 1999 ----------- ---------- Gulfstream ...................................................................................... 24% 24% Falcon Jet ...................................................................................... 19% 16% Precision Pattern, Inc........................................................................... 12% 12%
NOTE 4 - INVENTORIES Inventories consist of the following (amounts in thousands):
DECEMBER 31, MARCH 31, ------------------------ ----------- 1998 1999 2000 ----------- ----------- ----------- (UNAUDITED) Raw material ....................................................................... $ 2,757 $ 4,067 $ 3,451 Work-in-process .................................................................... 81 192 196 ----------- ----------- ----------- Total inventories ............................................................... $ 2,838 $ 4,259 $ 3,647 =========== =========== ===========
F-7 CARL F. BOOTH & CO., INC. NOTES TO FINANCIAL STATEMENTS (CONTINUED) NOTE 5 - PROPERTY, PLANT AND EQUIPMENT Property, plant and equipment consists of the following (amounts in thousands):
DECEMBER 31, ------------------------ 1998 1999 ----------- ----------- Land ............................................................................................ $ 35 $ 35 Buildings and building improvements ............................................................. 749 1,131 Machinery and equipment ......................................................................... 1,678 1,789 Furniture and fixtures .......................................................................... 21 44 ----------- ----------- Total cost ................................................................................... 2,483 2,999 Accumulated depreciation and amortization .................................................... (1,081) (1,290) ----------- ----------- Net property and equipment ................................................................... $ 1,402 $ 1,709 =========== ===========
Depreciation expense for the years ended December 31, 1998 and 1999 was $272,000 and $312,000, respectively. NOTE 6 - 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 8% of each employee's salary. The Company also contributes 3% of all salaries to eligible employees to the plan at year-end. The Company's expense related to its matching contributions to the plan totaled $129,000 and $192,000 during the years ended December 31, 1998 and 1999, respectively. NOTE 7 - 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 8 - SUBSEQUENT EVENT In May 2000, substantially all of the Company's net assets were acquired by DeCrane Aircraft Holdings, Inc. F-8 UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL DATA BASIS OF PRESENTATION The following unaudited pro forma consolidated financial data for DeCrane Aircraft is based on our historical financial statements adjusted to reflect: - our 1999 PATS, PPI, Custom Woodwork, PCI NewCo, International Custom Interiors and Infinity acquisitions; and - our 2000 Carl Booth acquisition, which was completed subsequent to March 31, 2000. For additional information on the 1999 acquisitions, see the notes to our audited consolidated financial statements included in our Form 10-K for the year ended December 31, 1999. For additional information on the Carl Booth acquisition, see our Form 8-K filed on May 25, 2000 and the Carl Booth audited financial statements included elsewhere in this Form 8-K / A. Unaudited pro forma consolidated statements of operations are presented for the year ended December 31, 1999 and the three months ended March 31, 2000. The statements reflect all of our acquisitions as if they had occurred as of January 1, 1999. The unaudited pro forma balance sheet reflects the Carl Booth acquisition as of March 31, 2000; all of the 1999 acquisitions had occurred by that date and are therefore reflected in our 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 data and accompanying notes should be read in conjunction with our historical audited and unaudited financial statements and related notes and the historical audited financial statements and related notes of the companies we have acquired. The pro forma financial data does not purport to represent what our 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 our results of operations or financial position for any future period or date. P-1 UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET MARCH 31, 2000
COMPANY ACQUIRED SUBSEQUENT DECRANE TO MARCH 31, 2000 (2) AIRCRAFT -------------------------------- HISTORICAL (1) HISTORICAL (3) ADJUSTMENTS PRO FORMA ----------- --------------- -------------- ----------- (DOLLARS IN THOUSANDS) ASSETS Current assets Cash and cash equivalents ................................... $ 648 $ 2,798 $ 12,204 (4) $ 15,650 Accounts receivable, net .................................... 42,755 1,930 - 44,685 Inventories ................................................. 62,174 3,647 - 65,821 Deferred income taxes ....................................... 5,452 - - 5,452 Prepaid expenses and other current assets ................... 2,110 - - 2,110 ----------- ---------- ----------- ----------- Total current assets ...................................... 113,139 8,375 12,204 133,718 ----------- ---------- ----------- ----------- Property and equipment, net .................................... 37,223 1,734 - 38,957 ----------- ---------- ----------- ----------- Other assets, principally intangibles, net Goodwill and other intangibles .............................. 356,588 - 16,084 (5) 372,672 Deferred financing costs .................................... 11,517 - 1,900 (6) 13,417 Other assets ................................................ 1,220 - - 1,220 ----------- ---------- ----------- ----------- Net other assets, principally intangibles ................. 369,325 - 17,984 387,309 ----------- ---------- ----------- ----------- Total assets ............................................ $ 519,687 $ 10,109 $ 30,188 $ 559,984 =========== ========== =========== =========== LIABILITIES AND STOCKHOLDER'S EQUITY Current liabilities Current portion of long-term debt ........................... $ 5,544 $ - $ 713 (7) $ 6,257 Accounts payable ............................................ 15,840 765 - 16,605 Accrued liabilities ......................................... 27,976 3,132 - 31,108 Income taxes payable ........................................ 3,994 - - 3,994 ----------- ---------- ----------- ----------- Total current liabilities ................................. 53,354 3,897 713 57,964 ----------- ---------- ----------- ----------- Long-term debt Senior revolving credit facility ............................ 26,100 - (26,100) (8) - Senior term facility ........................................ 207,525 - 54,287 (7) 261,812 Senior subordinated notes ................................... 100,000 - - 100,000 Other long-term obligations ................................. 1,263 - - 1,263 ----------- ---------- ----------- ----------- Total long-term debt ...................................... 334,888 - 28,187 363,075 ----------- ---------- ----------- ----------- Deferred income taxes .......................................... 21,763 - - 21,763 Other long-term liabilities .................................... 3,223 - - 3,223 Stockholder's equity ........................................... 106,459 6,212 1,288 (9) 113,959 ----------- ---------- ----------- ----------- Total liabilities and stockholder's equity .............. $ 519,687 $ 10,109 $ 30,188 $ 559,984 =========== ========== =========== ===========
See accompanying Notes to Unaudited Pro Forma Consolidated Financial Data. P-2 UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS YEAR ENDED DECEMBER 31, 1999
ACQUISITION ADJUSTMENTS (11) DECRANE ----------------------------- AIRCRAFT HISTORICAL HISTORICAL (10) RESULTS (12) ADJUSTMENTS PRO FORMA --------------- ------------ --------------- ------------- (DOLLARS IN THOUSANDS) Revenues ....................................................... $ 244,048 $ 66,591 $ (2,890) (13) $ 307,749 Cost of sales .................................................. 165,871 46,603 (2,890) (13) 209,584 ----------- ---------- ----------- ----------- Gross profit (loss) ....................................... 78,177 19,988 - 98,165 Selling, general and administrative expenses ................... 40,803 6,561 (1,206) (14) 46,158 Amortization of intangible assets............................... 13,073 124 2,327 (15) 15,524 ----------- ---------- ----------- ----------- Operating income .......................................... 24,301 13,303 (1,121) 36,483 Interest expense ............................................... 27,918 87 11,343 (16) 39,348 Other income ................................................... (199) (54) - (253) ----------- ---------- ----------- ----------- Income (loss) before provision for income taxes and extraordinary item .......................................... (3,418) 13,270 (12,464) (2,612) Provision for income taxes (benefit) ........................... 952 (827) 980 (17) 1,105 ----------- ---------- ----------- ----------- Net income (loss) .............................................. $ (4,370) $ 14,097 $ (13,444) $ (3,717) =========== ========== =========== ===========
See accompanying Notes to Unaudited Pro Forma Consolidated Financial Data. P-3 UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS THREE MONTHS ENDED MARCH 31, 2000
ACQUISITION ADJUSTMENTS (11) DECRANE ---------------------------- AIRCRAFT HISTORICAL HISTORICAL (10) RESULTS (12) ADJUSTMENTS PRO FORMA --------------- ----------- ----------------- ----------- (DOLLARS IN THOUSANDS) Revenues ....................................................... $ 79,178 $ 4,414 $ (1,102) (13) $ 82,490 Cost of sales .................................................. 52,463 2,172 (1,102) (13) 53,533 ----------- ---------- ----------- ----------- Gross profit (loss) ....................................... 26,715 2,242 - 28,957 Selling, general and administrative expenses ................... 11,609 307 - (14) 11,916 Amortization of intangible assets............................... 4,213 - 134 (15) 4,347 ----------- ---------- ----------- ----------- Operating income .......................................... 10,893 1,935 (134) 12,694 Interest expense (income)....................................... 8,676 (22) 1,618 (16) 10,272 Other expenses ................................................. 64 - - 64 ----------- ---------- ----------- ----------- Income (loss) before provision for income taxes and extraordinary item .......................................... 2,153 1,957 (1,752) 2,358 Provision for income taxes (benefit) ........................... 1,398 - 92 (17) 1,490 ----------- ---------- ----------- ----------- Net income (loss) .............................................. $ 755 $ 1,957 $ (1,844) $ 868 =========== ========== =========== ===========
See accompanying Notes to Unaudited Pro Forma Consolidated Financial Data. P-4 UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL DATA NOTES TO UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL DATA (1) Reflects our financial position subsequent to our 1999 PATS, PPI, Custom Woodwork, PCI NewCo, International Custom Interiors and Infinity acquisitions. Excludes the effect of our acquisition of Carl Booth that occurred subsequent to March 31, 2000. (2) Reflects our acquisition of Carl Booth subsequent to March 31, 2000. The acquisition was funded with borrowings under our senior credit facility and a capital contribution from DeCrane Holdings. Concurrently with the Carl Booth acquisition financing, we also increased our senior term debt borrowings to refinance other existing senior credit facility indebtedness and to raise additional cash to fund future acquisitions. The sources and uses of funds from the financing were as follows:
CARL SENIOR BOOTH CREDIT ACQUISITION FACILITY FINANCING REFINANCING PRO FORMA ----------- ----------- ----------- (DOLLARS IN THOUSANDS) SOURCES: Acquisition financing: Senior credit facility borrowings ......................................... $ 11,998 $ (11,998) $ - Capital contribution from DeCrane Holdings ................................ 7,500 - 7,500 Senior credit facility refinancing (a): Term A facility ........................................................... - 2,500 2,500 Term D facility ........................................................... - 52,500 52,500 ----------- ----------- ----------- Total sources ........................................................... $ 19,498 $ 43,002 $ 62,500 =========== =========== =========== USES: Acquisition: Purchase of net assets .................................................... $ 18,653 $ - $ 18,653 Acquisition fees and expenses ............................................. 845 - 845 Senior credit facility refinancing (a): Acquisition revolving credit facility (b).................................. - 25,000 25,000 Working capital revolving credit facility (b).............................. - 1,100 1,100 Financing fees and expenses ............................................... - 1,900 1,900 Excess cash (b) ........................................................... - 15,002 15,002 ----------- ----------- ----------- Total uses .............................................................. $ 19,498 $ 43,002 $ 62,500 =========== =========== ===========
------------------ (a) Excludes the conversion of $69.3 million of Term C indebtedness to Term B indebtedness in conjunction with the refinancing. (b) A portion of the proceeds from the financing were used to repay $32.0 million of then existing revolving credit facility borrowings. The pro forma balance sheet reflects the repayment of $26.1 million of revolving credit facility borrowings outstanding as of March 31, 2000 and the excess funds as cash. (3) Reflects the historical financial position of Carl Booth. (4) Reflects $15.0 million of excess cash received in connection with the financing reduced by $2.8 million of Carl Booth cash not acquired. (5) Reflects the excess of the Carl Booth purchase price over the fair value of the assets acquired. For purposes of this pro forma consolidated financial data, we allocated the excess purchase prices to goodwill and amortized the amounts on a straight-line basis over 30 years. Such allocations are preliminary and may change upon completion of the final valuations of the assets acquired. P-5 (6) Reflects financing fees and expenses associated with the financing. (7) Reflects the increase resulting from the senior term debt borrowings in connection with the financing. (8) Reflects the repayment of existing borrowings with a portion of the proceeds from the financing. (9) Reflects the additional capital contribution from DeCrane Holdings, reduced by the elimination of Carl Booth's stockholders' equity upon acquisition. (10) Reflects our historical results of operations for the year ended December 31, 1999 and the three months ended March 31, 2000 derived from our historical audited and unaudited consolidated financial statements. (11) Reflects the historical results of operations of companies we acquired for the periods not included in our historical results. (12) Reflects the results of operations of companies we acquired that are not included in our historical results. The results of operations for the companies we acquired are for the periods from the beginning of the period presented to the dates indicated below. For periods subsequent to those dates, their respective results of operations are included in our historical results. 1999 ACQUISITIONS - PATS - January 21, 1999; - PPI - April 22, 1999; - Custom Woodwork - August 4, 1999; - PCI NewCo - October 5, 1999; - International Custom Interiors - October 7, 1999; - Infinity - December 16, 1999; and 2000 ACQUISITION - Carl Booth - March 31, 2000. A table summarizing the acquired companies' results of operations for the twelve months ended December 31, 1999 appears below. For the three months ended March 31, 2000, the amounts reflect the historical results of operations for Carl Booth.
INTERNATIONAL CUSTOM PCI CUSTOM CARL PATS PPI WOODWORK NEWCO INTERIORS INFINITY BOOTH TOTAL ------- ------- ------ ------ ------- ------- ------ -------- (DOLLARS IN THOUSANDS) YEAR ENDED DECEMBER 31, 1999 Revenues ................................... $ 451 $12,757 $4,972 $6,692 $ 4,753 $23,209 $13,757 $ 66,591 Cost of sales .............................. 1,229 8,435 2,203 4,747 3,057 16,769 10,163 46,603 ------- ------- ------ ------ ------- ------- ------ -------- Gross profit (loss)......................... (778) 4,322 2,769 1,945 1,696 6,440 3,594 19,988 Selling, general and administrative expenses 611 944 262 520 492 2,495 1,237 6,561 Amortization of intangible assets .......... - 124 - - - - - 124 ------- ------- ------ ------ ------- ------- ------ -------- Operating income (loss) .................... (1,389) 3,254 2,507 1,425 1,204 3,945 2,357 13,303 Interest expense (income) .................. 23 127 (11) (2) (19) 34 (65) 87 Other expenses (income) .................... 11 (33) - (3) (4) - (25) (54) ------- ------- ------ ------ ------- ------- ------ -------- Income (loss) before provision for income taxes and extraordinary item ...... (1,423) 3,160 2,518 1,430 1,227 3,911 2,447 13,270 Provision for income taxes (benefit) ....... (1,244) - - - 417 - - (827) ------- ------- ------ ------ ------- ------- ------ -------- Net income (loss) .......................... $ (179) $ 3,160 $2,518 $1,430 $ 810 $ 3,911 $2,447 $ 14,097 ======= ======= ====== ====== ======= ======= ====== ========
P-6 (13) Reflects the elimination of intercompany sales. (14) Reflects the net decrease in selling, general and administrative expenses attributable to the following:
THREE YEAR ENDED MONTHS ENDED DECEMBER 31, MARCH 31, 1999 2000 ----------- ----------- (DOLLARS IN THOUSANDS) Acquisition related expenses (a).......................................................... $ (716) $ - Bonuses and employment contract termination expenses (b).................................. (468) - Other, net (c) ........................................................................... (22) - ----------- ----------- Decrease in selling, general and administrative expenses ............................... $ (1,206) $ - =========== ===========
----------------- (a) Reflects a reduction for non-capitalizable acquisition expenses incurred by PATS and Infinity on behalf of their stockholders related to their respective acquisitions by us. (b) Reflects a reduction in expenses attributable to employment contract termination expenses and nonrecurring bonuses awarded prior to, and in anticipation of, our acquisitions of PATS and Infinity. (c) Reflects cost savings attributable to employee benefit plans implemented at the companies we acquired. (15) Reflects the net increase in amortization expense pertaining to the amortization of goodwill and other intangible assets related to the companies we have acquired as follows:
YEARS THREE INTANGIBLE ESTIMATED YEAR ENDED MONTHS ENDED ASSET USEFUL DECEMBER 31, MARCH 31, AMOUNT LIFE (A) 1999 2000 ----------- ------------ ------------ ------------ (DOLLARS IN THOUSANDS) Elimination of predecessor basis amortization (b)............... $ (124) $ - Amortization attributable to companies acquired (c): Goodwill ..................................................... $ 127,006 30 2,180 134 Customer contracts ........................................... 8,390 7 100 - FAA certifications ........................................... 2,000 15 11 - Engineering drawings ......................................... 2,624 15 25 - Assembled workforce .......................................... 2,327 7 135 - ----------- ----------- Net increase in amortization expense ....................... $ 2,327 $ 134 =========== ===========
---------------- (a) Amortized on a straight-line basis over the respective estimated useful lives. (b) Reflects the elimination of amortization expense recorded by PPI for the period prior to their acquisition. (c) Reflects adjustments for all of our 1999 acquisitions and our 2000 Carl Booth acquisition from the beginning of the period presented to their respective acquisition dates; subsequent to those dates, amortization expense is included in our historical results. (16) Reflects the net increase in interest expense, including deferred financing cost amortization and commitment fees, as a result of our 1999 acquisitions and our 2000 Carl Booth acquisition as if they all had occurred on January 1, 1999. The components of pro forma interest expense are summarized in the table on the following page. P-7
THREE YEAR ENDED MONTHS ENDED DECEMBER 31, MARCH 31, RATE OR TERM AMOUNT 1999 2000 ---------------- ----------- ------------ ------------ (DOLLARS IN THOUSANDS) Senior credit facility (a): Term facilities: Term A .............................................. LIBOR (b) + 3.0% (c) 3,450 897 Term B .............................................. LIBOR (b) + 3.5% (d) 11,930 3,215 Term D .............................................. LIBOR (b) + 4.0% (e) 8,668 2,337 Senior subordinated notes ............................... 12.00% 100,000 12,000 3,000 Customer advance ........................................ 7.50% (f) 380 76 Other long-term obligations ............................. 6.5% to 21.0% (g) 151 60 Deferred financing cost amortization: Senior revolving credit facilities .................... 6 years (h) 1,277 213 53 Senior term facilities: Term A .............................................. 6 years (i) 1,141 343 82 Term B .............................................. 7 years (i) 4,211 679 169 Term D .............................................. 6 years (i) 3,100 481 120 Senior subordinated notes ............................. 10 years (i) 5,810 581 145 Commitment fees and expenses ............................ 472 118 ----------- ----------- Pro forma interest expense (j) ...................... $ 39,348 $ 10,272 =========== ===========
(a) Reflects our senior credit facility as amended for all of our 1999 acquisitions, our 2000 acquisition of Carl Booth and the concurrent debt refinancing, as if all events had occurred on January 1, 1999. (b) Calculations based on the historical LIBOR rates charged during the respective periods. The weighted average historical LIBOR rates were as follows:
THREE YEAR ENDED MONTHS ENDED DECEMBER 31, MARCH 31, 1999 2000 ------------ ------------ Term A facility ...................................................................... 5.368% 6.111% Term B facility ...................................................................... 5.369% 6.119% Term D facility ...................................................................... 5.396% 6.191%
(c) Reflects Term A facility borrowings of $34.5 million at December 31, 1998 plus $7.5 million pro forma additional borrowings as of January 1, 1999 for our Infinity and Carl Booth acquisitions, reduced by quarterly principal payments of $500,000 on March 31, 1999, $531,000 on June 30 and September 30, 1999 and $1.1 million on December 31, 1999 and March 31, 2000. The pro forma weighted average borrowings outstanding under the Term A facility were $41.2 million for the twelve months ended December 31, 1999 and $39.4 million for the three months ended March 31, 2000. (d) Reflects Term B facility borrowings of $44.9 million at December 31, 1998 plus $90.0 million pro forma additional borrowings as of January 1, 1999 for our PATS and PPI acquisition, reduced by quarterly principal payments of $163,000 on March 31, 1999 and $338,000 commencing June 30, 1999. The pro forma weighted average borrowings outstanding under the Term B facility were $134.5 million for the twelve months ended December 31, 1999 and $133.7 million for the three months ended March 31, 2000. (e) Reflects Term D facility pro forma additional borrowings of $92.5 million as of January 1, 1999 for our Infinity and Carl Booth acquisitions and to repay then existing revolving credit facility borrowings as of January 1, 1998, reduced by quarterly principal payments of $100,000 on March 31, 1999 and $231,000 commencing June 30, 1999. The pro forma weighted average borrowings outstanding under the Term D facility were $92.3 million for the twelve months ended December 31, 1999 and $91.7 million for the three months ended March 31, 2000. (f) Reflects a $5.0 million customer advance related to our PATS acquisition, pro forma as of January 1, 1999, reduced by principal payments of $975,000 on November 30, 1999. The pro forma weighted average advance outstanding was $4.9 million for the twelve months ended December 31, 1999 and $4.0 million for the three months ended March 31, 2000. P-8 (g) Reflects historical interest expense related to capital lease obligations and equipment term debt financing. (h) Deferred financing costs are amortized on a straight-line basis over the term of the agreement. (i) Deferred financing costs are amortized using the effective interest method. (j) A 0.125% change in the interest rates charged on variable rate borrowings would change interest expense and net income (loss) by:
THREE YEAR ENDED MONTHS ENDED DECEMBER 31, MARCH 31, 1999 2000 ------------ ------------ (DOLLARS IN THOUSANDS) Interest expense ......................................................................... $ 340 $ 83 Net income (loss) ........................................................................ 207 51
(17) Represents an increase in the provision for income taxes as a result of reflecting a pro forma provision for income taxes on the income of PPI, Custom Woodwork, PCI NewCo, Infinity and Carl Booth which were taxed as S Corporations or partnerships prior to their acquisitions, partially offset by a decrease in pro forma taxable income. The effective tax rate differs from the U.S. federal statutory rate primarily due to goodwill amortization related to acquisitions not deductible for income tax purposes and state and foreign income taxes. (18) Supplemental pro forma financial information is as follows:
THREE YEAR ENDED MONTHS ENDED DECEMBER 31, MARCH 31, 1999 2000 ------------ ------------ (DOLLARS IN THOUSANDS) Net cash provided by (used for): Operating activities ................................................................... $ 24,050 $ (1,953) Investing activities ................................................................... (174,411) (29,858) Financing activities ................................................................... 147,494 23,014 EBITDA (a) ............................................................................... 71,833 19,183 Depreciation and amortization (b) ........................................................ 22,311 6,400 Capital expenditures: Paid in cash ........................................................................... 8,793 1,679 Financed with capital lease obligations ................................................ 1,865 58 Cash interest expense .................................................................... 37,051 9,703 Ratio of earnings to fixed charges (c) ................................................... -- 1.2x
-------------------- (a) EBITDA equals operating income plus depreciation, amortization, the 1999 Systems Integration Group non-recurring restructuring charge, DLJ advisory fees, non-cash acquisition related charges and other non-operating costs. 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, which are classified as a component of interest expense. P-9 (c) For purposes of calculating the ratio of earnings to fixed charges, 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 were deficiencies of earnings to fixed charges of $2.4 million for the year ended December 31, 1999. P-10