10-Q 1 a2029395z10-q.txt 10-Q =============================================================================== UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ----------- FORM 10-Q QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September 30, 2000 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 October 31, 2000 was 100 shares. =============================================================================== DECRANE AIRCRAFT HOLDINGS, INC. INDEX
PAGE PART I - FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS (UNAUDITED) Consolidated Balance Sheets as of December 31, 1999 and September 30, 2000 ........................................ 1 Consolidated Statements of Operations for the three months and nine months ended September 30, 1999 and 2000 ...... 2 Consolidated Statements of Stockholder's Equity for the nine months ended September 30, 2000 ...................... 3 Consolidated Statements of Cash Flows for the nine months ended September 30, 1999 and 2000 ...................... 4 Condensed Notes to Consolidated Financial Statements .......... 5 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS ........................... 17 ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK .... 24 PART II - OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS ............................................ 26 ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K Exhibits ..................................................... 26 Reports on Form 8-K .......................................... 27
i PART I - FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS DECRANE AIRCRAFT HOLDINGS, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (IN THOUSANDS, EXCEPT SHARE DATA)
DECEMBER 31, SEPTEMBER 30, 1999 2000 ------------ ------------ (UNAUDITED) ASSETS Current assets Cash and cash equivalents .................................................................... $ 7,918 $ 1,848 Accounts receivable, net ..................................................................... 39,580 64,869 Inventories .................................................................................. 58,721 81,074 Deferred income taxes ........................................................................ 5,592 4,759 Prepaid expenses and other current assets..................................................... 2,114 1,420 ----------- ----------- Total current assets ....................................................................... 113,925 153,970 Property and equipment, net ..................................................................... 37,700 55,840 Other assets, principally intangibles, net ...................................................... 374,111 414,335 ----------- ----------- Total assets ............................................................................. $ 525,736 $ 624,145 =========== =========== LIABILITIES, MANDATORILY REDEEMABLE PREFERRED STOCK AND STOCKHOLDER'S EQUITY Current liabilities Current portion of long-term debt ............................................................ $ 5,070 $ 8,273 Accounts payable ............................................................................. 14,948 18,662 Accrued liabilities .......................................................................... 61,082 36,818 Income taxes payable ......................................................................... 3,576 3,903 ----------- ----------- Total current liabilities .................................................................. 84,676 67,656 Long-term debt .................................................................................. 310,581 380,316 Deferred income taxes ........................................................................... 21,249 32,078 Other long-term liabilities ..................................................................... 2,989 2,324 Commitments and contingencies (Note 10) Mandatorily redeemable preferred stock .......................................................... - 26,000 ----------- ----------- Stockholder's equity Cumulative convertible preferred stock, $.01 par value, 8,314,018 shares authorized; none issued and outstanding as of December 31, 1999 and September 30, 2000 ................. - - Undesignated preferred stock, $.01 par value, 10,000,000 and 9,300,000 shares authorized as of December 31, 1999 and September 30, 2000, respectively; none issued and outstanding as of December 31, 1999 and September 30, 2000 ................. - - Common stock, $.01 par value, 35,000,000 shares authorized; 100 shares issued and outstanding as of December 31, 1999 and September 30, 2000 ...................... - - Additional paid-in capital ................................................................... 117,158 124,190 Notes receivable for shares sold ............................................................. (2,468) (2,519) Accumulated deficit .......................................................................... (6,923) (3,291) Accumulated other comprehensive loss ......................................................... (1,526) (2,609) ----------- ----------- Total stockholder's equity ................................................................. 106,241 115,771 ----------- ----------- Total liabilities, mandatorily redeemable preferred stock and stockholder's equity ....... $ 525,736 $ 624,145 =========== ===========
The accompanying notes are an integral part of the consolidated financial statements. 1 DECRANE AIRCRAFT HOLDINGS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (IN THOUSANDS)
THREE MONTHS ENDED NINE MONTHS ENDED SEPTEMBER 30, SEPTEMBER 30, ----------------------- ----------------------- 1999 2000 1999 2000 ---------- ----------- ---------- ----------- (UNAUDITED) Revenues .............................................................. $ 65,238 $ 93,149 $ 177,836 $ 254,421 Cost of sales ......................................................... 42,107 62,018 118,081 169,527 ----------- ----------- ----------- ----------- Gross profit ..................................................... 23,131 31,131 59,755 84,894 ----------- ----------- ----------- ----------- Operating expenses Selling, general and administrative ................................ 10,031 11,526 27,281 32,465 Amortization of intangible assets .................................. 4,048 4,699 9,506 12,949 ----------- ----------- ----------- ----------- Total operating expenses ......................................... 14,079 16,225 36,787 45,414 ----------- ----------- ----------- ----------- Income from operations ................................................ 9,052 14,906 22,968 39,480 Other expenses Interest expense ................................................... 7,155 11,264 19,884 29,977 Other expenses (income) ............................................ 282 55 (85) 228 ----------- ----------- ----------- ----------- Income before provision for income taxes .............................. 1,615 3,587 3,169 9,275 Provision for income taxes ............................................ 932 2,697 2,669 5,643 ----------- ----------- ----------- ----------- Net income ............................................................ 683 890 500 3,632 Accrued preferred stock dividends ..................................... - (1,000) - (1,000) ----------- ----------- ----------- ----------- Net income (loss) applicable to common stockholder .................... $ 683 $ (110) $ 500 $ 2,632 =========== =========== =========== ===========
The accompanying notes are an integral part of the consolidated financial statements. 2 DECRANE AIRCRAFT HOLDINGS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF STOCKHOLDER'S EQUITY (IN THOUSANDS, EXCEPT SHARE DATA)
NOTES ACCUMULATED CONVERTIBLE UNDESIGNATED COMMON STOCK ADDITIONAL RECEIVABLE OTHER PREFERRED PREFERRED -------------- PAID-IN FOR SHARES ACCUMULATED COMPREHENSIVE STOCK STOCK SHARES AMOUNT CAPITAL SOLD DEFICIT LOSS TOTAL ----------- ----------- ------ ------ ---------- ----------- ----------- ------------- -------- Balance, December 31, 1999 $ -- $ -- 100 $ -- $ 117,158 $ (2,468) $ (6,923) $ (1,526) $106,241 Comprehensive income Net income ............ -- -- -- -- -- -- 3,632 -- 3,632 Translation adjustment. -- -- -- -- -- -- -- (1,083) (1,083) -------- 2,549 -------- Capital contribution ... -- -- -- -- 7,976 -- -- -- 7,976 Accrued mandatorily redeemable preferred stock dividends ....... -- -- -- -- (1,000) -- -- -- (1,000) Mandatorily redeemable preferred stock issuance costs ........ -- -- -- -- (100) -- -- -- (100) Repurchase of common stock and cancellation of related note receivable ............ -- -- -- -- (101) 51 -- -- (50) Compensatory stock option expense ........ -- -- -- -- 257 -- -- -- 257 Notes receivable interest accrued ...... -- -- -- -- -- (102) -- -- (102) ----------- ----------- ------ ------ ---------- ----------- ----------- ------------- -------- Balance, September 30, 2000 (Unaudited) ...... $ -- $ -- 100 $ -- $ 124,190 $ (2,519) $ (3,291) $ (2,609) $115,771 ----------- ----------- ------ ------ ---------- ----------- ----------- ------------- --------
The accompanying notes are an integral part of the consolidated financial statements. 3 DECRANE AIRCRAFT HOLDINGS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (IN THOUSANDS)
NINE MONTHS ENDED SEPTEMBER 30, ------------------------ 1999 2000 ---------- ----------- (UNAUDITED) CASH FLOWS FROM OPERATING ACTIVITIES Net income ................................................................................... $ 500 $ 3,632 Adjustments to reconcile net income to net cash provided by operating activities Depreciation and amortization ............................................................ 14,875 21,233 Deferred income taxes..................................................................... 462 4,019 Other, net ............................................................................... 176 797 Changes in assets and liabilities, net of effect from acquisitions Accounts receivable .................................................................... (2,598) (15,899) Inventories ............................................................................ 1,423 (9,011) Prepaid expenses and other assets ...................................................... (1,276) (1,162) Accounts payable ....................................................................... (1,967) 904 Accrued liabilities .................................................................... (3,792) (6,602) Income taxes payable ................................................................... 2,342 981 Other long-term liabilities ............................................................ 77 (1,108) ----------- ----------- Net cash provided by (used for) operating activities ................................. 10,222 (2,216) ----------- ----------- CASH FLOWS FROM INVESTING ACTIVITIES Cash paid for acquisitions, net of cash acquired ............................................. (116,790) (87,215) Capital expenditures ......................................................................... (4,752) (17,701) Other, net ................................................................................... 111 71 ----------- ----------- Net cash used for investing activities ............................................... (121,431) (104,845) ----------- ----------- CASH FLOWS FROM FINANCING ACTIVITIES Term debt borrowings ......................................................................... 90,000 55,000 Proceeds from the sale of preferred stock .................................................... - 25,000 Net borrowings (repayments) under revolving credit facility .................................. 7,700 16,400 Capital contribution ......................................................................... 12,500 7,976 Other long-term borrowings ................................................................... 5,636 2,958 Principal payments on term debt, capitalized leases and other debt ........................... (1,824) (4,096) Deferred financing costs ..................................................................... (3,062) (2,000) Other, net ................................................................................... (21) (247) ----------- ----------- Net cash provided by financing activities ............................................ 110,929 100,991 ----------- ----------- Effect of foreign currency translation on cash .................................................. (99) - ----------- ----------- Net decrease in cash and cash equivalents ....................................................... (379) (6,070) Cash and cash equivalents at beginning of period ................................................ 3,518 7,918 ----------- ----------- Cash and cash equivalents at end of period ...................................................... $ 3,139 $ 1,848 =========== ===========
The accompanying notes are an integral part of the consolidated financial statements. 4 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 statement 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, 1999 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 audited financial statements and related notes included in the Company's 1999 Form 10-K. Some reclassifications have been made to prior periods' financial statements to conform to the 2000 presentation. NOTE 2 - ACQUISITIONS During the nine months ended September 30, 2000, the Company acquired: CABIN MANAGEMENT GROUP . substantially all of the assets of Carl F. Booth & Co., Inc., an Indiana-based manufacturer of wood veneer panels primarily used in aircraft interior cabinetry, on May 11, 2000; . all of the common stock of ERDA, Inc., a Wisconsin-based designer and manufacturer of aircraft seating, on June 30, 2000; and SPECIALTY AVIONICS GROUP . all of the common stock of Coltech, Inc., an Arizona-based designer and manufacturer of audio components for commercial and corporate aircraft, on August 31, 2000. The total purchase price was $58,682,000, including certain liabilities assumed of $1,586,000, but not including contingent consideration of $2,000,000 related to one of the acquisitions and an indeterminable amount for another. The contingent consideration is payable over three years based on future attainment of defined performance criteria. The acquisitions were accounted for as purchases and the assets acquired and liabilities assumed have been recorded at their estimated fair values, including $18,936,000 related to identifiable intangible assets. The $31,466,000 difference between the total purchase price and the fair value of the net assets acquired was recorded as goodwill. The purchase price allocations are preliminary and may change upon the completion of the final valuations of the net assets acquired. 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 consolidated balance sheet as of September 30, 2000 reflects the financial position of the companies acquired and the consolidated statements of operations for the three months and nine months ended September 30, 2000 include their operating results subsequent to their respective acquisition dates. The acquisitions were funded with borrowings under the Company's senior credit facility as described in Note 7 and the proceeds from the sale of capital stock described in Note 9. 5 NOTE 3 - UNAUDITED PRO FORMA RESULTS OF OPERATIONS FOR 1999 AND 2000 ACQUISITIONS Unaudited pro forma consolidated results of operations are presented in the table below for nine months ended September 30, 1999 and 2000. The pro forma results of operations reflect the Company's 1999 acquisitions described in the 1999 audited financial statements and the 2000 Carl F. Booth and ERDA acquisitions described in Note 2 as if all of the transactions were consummated as of January 1, 1999. Amounts are in thousands.
PRO FORMA FOR THE NINE MONTHS ENDED SEPTEMBER 30, ------------------------- 1999 2000 ----------- ----------- (UNAUDITED) Revenues ......................................... $ 249,678 $ 275,726 EBITDA, as defined (Note 12) ..................... 55,936 65,971 Net income ....................................... 1,604 4,676
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. NOTE 4 - 1999 RESTRUCTURING OF THE SYSTEMS INTEGRATION GROUP In December 1999, the Company announced a plan to reorganize and restructure the operations of two subsidiaries within its Systems Integration Group. The restructuring was a result of management's decision to exit the manufacturing business at these subsidiaries and consolidate and relocate operations into one facility to more efficiently and effectively manage the business and be more competitive. In 1999, the Company recorded nonrecurring pre-tax charges to operations of $9,935,000 in connection with the restructuring plan as described below: . Inventory write-downs to net realizable value as a consequence of exiting the manufacturing business; . Certain property and equipment asset impairment write-downs to net realizable value related to the closing of a manufacturing facility; . Severance and other compensation costs related to the termination of approximately fifty manufacturing and administrative employees upon closing of the manufacturing facility, which ceased operations on June 2, 2000, and elimination of duplicate administrative personnel following the consolidation of the operations; . Lease termination and other related costs expected to be incurred during the remaining term of a long-term lease agreement at the facility being vacated following the restructuring, net of expected sublease income; and . Other exit costs, principally legal and consulting fees. The Company commenced the restructuring during 1999 and completed the plan in the third quarter of 2000. Of the total charge, $7,242,000 represented a noncash write-down of assets. As of December 31, 1999, $7,754,000 had been incurred and the remaining $2,181,000 was reflected as an accrued liability. Components of the amounts incurred through September 30, 2000 are as follows (amounts in thousands):
BALANCE AT BALANCE AT DECEMBER 31, AMOUNTS SEPTEMBER 30, 1999 INCURRED 2000 ------------ --------- ------------- (UNAUDITED) (UNAUDITED) Severance and other compensation costs ......................... $ 784 $ (784) $ - Lease termination and other related costs ...................... 721 (629) 92 Other exit costs ............................................... 676 (590) 86 ----------- ----------- ----------- Total ....................................................... $ 2,181 $ (2,003) $ 178 =========== =========== ===========
6 NOTE 4 - 1999 RESTRUCTURING OF THE SYSTEMS INTEGRATION GROUP (CONTINUED) Through September 30, 2000, severance and other compensation costs of approximately $1,077,000 have been paid to date to approximately fifty employees, of which $784,000 was incurred during the nine months ended September 30, 2000. The amounts paid to date have been primarily to manufacturing employees either terminated or subject to termination as the Company phases out of the manufacturing business. No significant adjustments have been made to the original estimates. The remaining balance of restructuring costs includes lease termination and other exit costs. The restructuring plan was completed in the third quarter of 2000, however, future cash payments will extend beyond this date due to future lease payments on the vacated facility and the incurrence of other exit costs. The cash payments will be funded from existing cash balances and internally generated cash from operations. NOTE 5 - INVENTORIES Inventories are comprised of the following (amounts in thousands):
DECEMBER 31, SEPTEMBER 30, 1999 2000 ------------ ------------ (UNAUDITED) Raw materials ................................. $ 28,249 $ 48,592 Work-in process ............................... 20,520 23,692 Finished goods ................................ 9,952 8,790 ----------- ----------- Total inventories .......................... $ 58,721 $ 81,074 =========== ===========
Inventoried costs are not in excess of estimated realizable value and include direct engineering, production and tooling costs, and applicable manufacturing overhead. In accordance with industry practice, inventoried costs include amounts relating to programs and contracts with long production cycles. Included above are engineering costs of $5,720,000 at December 31, 1999 and $7,530,000 at September 30, 2000 related to long-term contracts that will be recoverable based on future sales. Periodic assessments are performed to ensure recoverability of engineering costs and adjustments are made, if necessary, to reduce inventoried costs to estimated realizable value. No adjustments were required in 1999 and 2000. NOTE 6 - ACCRUED LIABILITIES Accrued liabilities are comprised of the following (amounts in thousands):
DECEMBER 31, SEPTEMBER 30, 1999 2000 ------------ ------------- (UNAUDITED) Acquisition related contingent consideration ......................... $ 29,825 $ - Salaries, wages, compensated absences and payroll related taxes ...... 8,673 12,095 Customer deposits .................................................... 8,072 11,879 Accrued interest ..................................................... 3,228 362 Other accrued liabilities ............................................ 11,284 12,482 ----------- ----------- Total accrued liabilities ......................................... $ 61,082 $ 36,818 =========== ===========
7 NOTE 7 - LONG-TERM DEBT Long-term debt includes the following amounts (amounts in thousands):
DECEMBER 31, SEPTEMBER 30, 1999 2000 ------------ ------------ (UNAUDITED) Senior credit facility $25 million working capital revolving line of credit ......................... $ - $ 6,900 $25 million acquisition revolving line of credit ............................. - 9,500 Term loans ................................................................... 213,213 265,075 12% senior subordinated notes ................................................... 100,000 100,000 Capital lease obligations and equipment term financing, with interest at 4.7% to 25.7%, secured by equipment .......................................... 2,411 2,452 Other ........................................................................... 27 4,662 ----------- ----------- Total long-term debt ......................................................... 315,651 388,589 Less current portion ......................................................... (5,070) (8,273) ----------- ----------- Long-term debt, less current portion ....................................... $ 310,581 $ 380,316 =========== ===========
During the nine months ended September 30, 2000, the Company amended its senior credit facility and borrowed an additional $55,000,000 under the term loan facility and used the proceeds to partially fund the acquisitions described in Note 2. The amendment increased the prime and Euro-Dollar interest rate margins charged on the loans. Currently, the applicable margins are 1.50% to 2.75% for prime rate borrowings and 2.75% to 4.00% for Euro-Dollar rate borrowings. NOTE 8 - INCOME TAXES The provision for income taxes differs from the amount determined by applying the applicable U.S. statutory federal rate to income before income taxes primarily due to the effects of state and foreign income taxes and non-deductible expenses, principally goodwill and other intangible asset amortization. The difference in the effective tax rates between periods is mostly a result of the relationship of non-deductible expenses to income before income taxes. 8 NOTE 9 - CAPITAL STRUCTURE During the nine months ended September 30, 2000, the Company and its parent company, DeCrane Holdings, sold capital stock and used the net proceeds to partially fund the acquisitions described in Note 2. MANDATORILY REDEEMABLE PREFERRED STOCK The Company is authorized to issue 10,000,000 shares of $.01 par value preferred stock. On June 30, 2000, the Company designated 700,000 of those shares as 16% Senior Redeemable Exchangeable Preferred Stock Due 2009 and sold 250,000 shares for $25,000,000 or $100.00 per share. The preferred stock has a $100.00 per share liquidation preference, plus accrued and unpaid cash dividends, and is non-voting. The Company's preferred stock dividend and redemption obligations rank senior to the DeCrane Holdings preferred stock obligations described in Note 10. Holders of the Company's senior redeemable preferred stock are entitled to receive, when, as and if declared, quarterly dividends at a rate equal to 16% per annum. Prior to June 30, 2005, the Company may, at its option, pay dividends either in cash or by the issuance of additional shares of preferred stock. For the three months ended September 30, 2000, the Company will elect to issue 10,000 additional shares in lieu of a cash dividend payment. The preferred stock is mandatorily redeemable on March 31, 2009. Upon the occurrence of a change in control, as defined, each holder has the right to require the Company to redeem all or part of such holder's shares at a price equal to 101% of the liquidation preference (116% if prior to July 1, 2001), plus accrued and unpaid cash dividends. PAID-IN CAPITAL AND NOTES RECEIVABLE FOR SHARES SOLD During the nine months ended September 30, 2000, the Company received an additional $7,976,000 cash capital contribution from DeCrane Holdings resulting from its sale of capital stock. DeCrane Holdings also repurchased 4,347 shares of its common stock from a former employee at $23.00 per share. NOTE 10 - COMMITMENTS AND CONTINGENCIES FUNDING OF DECRANE HOLDINGS PREFERRED STOCK OBLIGATIONS The Company is a wholly owned subsidiary of DeCrane Holdings whose capital structure also includes mandatorily redeemable preferred stock. Since the Company is DeCrane Holdings' only operating subsidiary and source of cash, the Company may be required to fund DeCrane Holdings' preferred stock dividend and redemption obligations in the future. The DeCrane Holdings preferred stock dividend and redemption obligations are subordinate to the Company's preferred stock obligations. DeCrane Holdings' preferred stock dividends are payable quarterly at a rate of 14% per annum. Prior to September 30, 2005, dividends are not paid in cash but instead accrete to the liquidation value of the preferred stock, which, in turn, increases the redemption obligation. On or after September 30, 2005, preferred stock dividends are paid in cash. The DeCrane Holdings preferred stock has a total redemption value of $45,655,000 as of September 30, 2000, including accumulated dividends. CONTINGENT ACQUISITION CONSIDERATION The maximum determinable contingent consideration payment obligations, resulting from the acquisitions described in Note 2, are as follows as of September 30, 2000:
(IN THOUSANDS) Based on future attainment of defined performance criteria for the year ending December 31, 2000 .............................................................. $ 21,575 2001 .............................................................. 1,450 2002 .............................................................. 1,350 2003 .............................................................. 750 ----------- Total maximum determinable obligation ........................... $ 25,125 ===========
Contingent consideration payable, if any, is payable during the first quarter of the following year. 9 NOTE 11 - CONSOLIDATED STATEMENTS OF CASH FLOWS Assets acquired and liabilities assumed in connection with acquisitions are as follows (amounts in thousands):
NINE MONTHS ENDED SEPTEMBER 30, ------------------------ 1999 2000 ----------- ----------- (UNAUDITED) Fair value of assets acquired .................................................. $ 136,359 $ 77,904 Liabilities assumed ............................................................ (20,324) (20,516) ----------- ----------- Cash paid ................................................................... 116,035 57,388 Less cash acquired .......................................................... (2,245) (292) ----------- ----------- Net cash paid for companies acquired during the period .................... 113,790 57,096 Contingent consideration paid for previously completed acquisitions ............ 3,000 29,825 Additional acquisition related expenses ........................................ - 294 ----------- ----------- Total cash paid for acquisitions ........................................ $ 116,790 $ 87,215 =========== ===========
NOTE 12 - BUSINESS SEGMENT INFORMATION During 1999, the Company reorganized its businesses into three separate groups: Cabin Management, Specialty Avionics and Systems Integration. As prescribed by SFAS No. 131, "Disclosure About Segments of an Enterprise and Related Information," the Company has restated disclosure information for earlier periods to reflect its three separate operating groups. The Company supplies products and services to the general aviation industry. The Company's subsidiaries are organized into three groups, each of which are strategic businesses that are managed separately because each business develops, manufactures and sells distinct products and services. The groups and a description of their businesses are as follows: . Cabin Management - provides interior cabin components for the corporate aircraft market, including furniture, cabinetry, seats and in-flight entertainment systems; . Specialty Avionics - designs, engineers and manufacturers electronic components, display devices and interconnect components and assemblies; and . Systems Integration - provides auxiliary fuel tanks, auxiliary power units and systems integration services. Management utilizes more than one measurement to evaluate group performance and allocate resources, however, management considers EBITDA to be the primary measurement of their overall economic returns and cash flows. Management defines EBITDA as earnings before interest, income taxes, depreciation and amortization, non-cash acquisition related charges and other non-operating costs. This is consistent with the manner in which the Company's lenders and ultimate investors measure its overall performance. 10 NOTE 12 - BUSINESS SEGMENT INFORMATION (CONTINUED)
THREE MONTHS ENDED NINE MONTHS ENDED SEPTEMBER 30, SEPTEMBER 30, ----------- ----------- ---------- ----------- 1999 2000 1999 2000 ----------- ----------- ---------- ----------- (UNAUDITED, IN THOUSANDS) Revenues Cabin Management ................................................... $ 22,538 $ 50,303 $ 47,975 $ 127,081 Specialty Avionics ................................................. 26,045 28,164 85,783 81,006 Systems Integration ................................................ 17,005 14,870 45,224 47,262 Inter-group elimination (1) ........................................ (350) (188) (1,146) (928) ----------- ----------- ----------- ----------- Consolidated revenues ............................................ $ 65,238 $ 93,149 $ 177,836 $ 254,421 =========== =========== =========== =========== EBITDA (2) Cabin Management ................................................... $ 7,157 $ 12,234 $ 15,594 $ 33,615 Specialty Avionics ................................................. 6,389 7,491 20,902 19,622 Systems Integration ................................................ 3,608 3,925 6,614 10,881 Corporate (3) ...................................................... (1,465) (1,491) (4,289) (4,836) ----------- ----------- ----------- ----------- Consolidated EBITDA .............................................. $ 15,689 $ 22,159 $ 38,821 $ 59,282 =========== =========== =========== =========== Total assets (as of period end date) Cabin Management ............................................................................. $ 118,156 $ 285,372 Specialty Avionics ........................................................................... 225,255 229,198 Systems Integration .......................................................................... 95,273 81,604 Corporate .................................................................................... 20,079 27,971 ----------- ----------- Consolidated total assets .................................................................. $ 458,763 $ 624,145 =========== ===========
------------- (1) Inter-group sales are accounted for at prices comparable to sales to unaffiliated customers, and are eliminated in consolidation. (2) A reconciliation of consolidated EBITDA to income before income taxes is as follows:
THREE MONTHS ENDED NINE MONTHS ENDED SEPTEMBER 30, SEPTEMBER 30, ------------------------- ----------------------- 1999 2000 1999 2000 ----------- ----------- ---------- ----------- (UNAUDITED, IN THOUSANDS) Consolidated EBITDA .............................................. $ 15,689 $ 22,159 $ 38,821 $ 59,282 Depreciation and amortization (a) ................................ (5,633) (7,166) (13,643) (19,537) Non-cash acquisition related charges ............................. (513) - (1,606) - Other non-operating costs ........................................ (491) (87) (604) (265) Interest expense ................................................. (7,155) (11,264) (19,884) (29,977) Other (expenses) income .......................................... (282) (55) 85 (228) ----------- ----------- ----------- ----------- Consolidated income before income taxes ........................ $ 1,615 $ 3,587 $ 3,169 $ 9,275 =========== =========== =========== ===========
(a) Reflects depreciation and amortization of long-lived assets, goodwill and other intangible assets. Excludes amortization of deferred financing costs, which are classified as a component of interest expense, of $457,000 and $593,000 for the three months ended September 30, 1999 and 2000, respectively, and $1,232,000 and $1,696,000 for the nine months ended September 30, 1999 and 2000, respectively. (3) Reflects the Company's corporate headquarters costs and expenses not allocated to the groups. 11 NOTE 13 - SUPPLEMENTAL CONDENSED CONSOLIDATING FINANCIAL INFORMATION In conjunction with the senior credit facility and 12% senior subordinated notes described in Note 7, 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. BALANCE SHEETS
DECEMBER 31, 1999 ------------------------------------------------------------------------ NON- GUARANTOR GUARANTOR CONSOLIDATING CONSOLIDATED ISSUER SUBSIDIARIES SUBSIDIARIES ADJUSTMENTS TOTAL ----------- ------------ ------------ ------------- -------------- (IN THOUSANDS) ASSETS Current assets Cash and cash equivalents ...................... $ 7,839 $ (323) $ 402 $ - $ 7,918 Accounts receivable, net ....................... - 38,201 1,379 - 39,580 Inventories .................................... - 57,072 1,649 - 58,721 Other current assets ........................... 6,645 938 123 - 7,706 ----------- ----------- ---------- ----------- ----------- Total current assets ......................... 14,484 95,888 3,553 - 113,925 Property and equipment, net ....................... 1,282 34,174 2,244 - 37,700 Other assets, principally intangibles, net ........ 17,065 344,986 12,060 - 374,111 Investments in subsidiaries ....................... 360,515 20,305 - (380,820)(1) - Intercompany receivables .......................... 77,566 17,334 2,612 (97,512)(2) - ----------- ----------- ---------- ------------ ----------- Total assets ............................... $ 470,912 $ 512,687 $ 20,469 $ (478,332) $ 525,736 =========== =========== ========== ============ =========== LIABILITIES AND STOCKHOLDER'S EQUITY Current liabilities Current portion of long-term debt .............. $ 4,640 $ 404 $ 26 $ - $ 5,070 Other current liabilities ...................... 10,237 68,691 678 - 79,606 ----------- ----------- ---------- ----------- ----------- Total current liabilities .................... 14,877 69,095 704 - 84,676 Long-term debt .................................... 309,836 712 33 - 310,581 Intercompany payables ............................. 17,797 79,384 331 (97,512)(2) - Other long-term liabilities ....................... 20,635 2,981 622 - 24,238 ----------- ----------- ---------- ----------- ----------- Stockholder's equity Paid-in capital ................................ 114,690 289,415 15,440 (304,855)(1) 114,690 Retained earnings (deficit) .................... (6,923) 71,100 4,865 (75,965)(1) (6,923) Accumulated other comprehensive loss ........... - - (1,526) - (1,526) ----------- ----------- ----------- ----------- ------------ Total stockholder's equity ................... 107,767 360,515 18,779 (380,820) 106,241 ----------- ----------- ---------- ------------ ----------- Total liabilities and stockholder's equity ..................... $ 470,912 $ 512,687 $ 20,469 $ (478,332) $ 525,736 =========== =========== ========== =========== ===========
12 NOTE 13 - SUPPLEMENTAL CONDENSED CONSOLIDATING FINANCIAL INFORMATION (CONTINUED) BALANCE SHEETS (CONTINUED)
SEPTEMBER 30, 2000 (UNAUDITED) ------------------------------------------------------------------------ NON- GUARANTOR GUARANTOR CONSOLIDATING CONSOLIDATED ISSUER SUBSIDIARIES SUBSIDIARIES ADJUSTMENTS TOTAL ----------- ------------ ------------ ------------- -------------- (IN THOUSANDS) ASSETS Current assets Cash and cash equivalents ...................... $ 1,356 $ 273 $ 219 $ - $ 1,848 Accounts receivable, net ....................... - 63,638 1,231 - 64,869 Inventories .................................... - 78,397 2,677 - 81,074 Other current assets ........................... 4,934 1,005 240 - 6,179 ----------- ----------- ---------- ----------- ----------- Total current assets ......................... 6,290 143,313 4,367 - 153,970 Property and equipment, net ....................... 4,519 49,335 1,986 - 55,840 Other assets, principally intangibles, net ........ 17,449 387,073 9,813 - 414,335 Investments in subsidiaries ....................... 394,771 20,803 - (415,574)(1) - Intercompany receivables .......................... 147,984 - 3,352 (151,336)(2) - ----------- ----------- ---------- ----------- ----------- Total assets ............................... $ 571,013 $ 600,524 $ 19,518 $ (566,910) $ 624,145 =========== =========== ========== =========== =========== LIABILITIES, MANDATORILY REDEEMABLE PREFERRED STOCK AND STOCKHOLDER'S EQUITY Current liabilities Current portion on long-term debt .............. $ 6,935 $ 1,314 $ 24 $ - $ 8,273 Other current liabilities ...................... 12,290 46,405 688 - 59,383 ----------- ----------- ---------- ----------- ----------- Total current liabilities .................... 19,225 47,719 712 - 67,656 Long-term debt .................................... 375,634 4,670 12 - 380,316 Intercompany payables ............................. - 151,336 - (151,336)(2) - Other long-term liabilities ....................... 31,774 2,028 600 - 34,402 Mandatorily redeemable preferred stock ............ 26,000 - - - 26,000 ----------- ----------- ---------- ----------- ----------- Stockholder's equity Paid-in capital ................................ 121,671 316,311 15,440 (331,751)(1) 121,671 Retained earnings (deficit) .................... (3,291) 78,460 5,363 (83,823)(1) (3,291) Accumulated other comprehensive loss ........... - - (2,609) - (2,609) ----------- ----------- ---------- ----------- ----------- Total stockholder's equity ................... 118,380 394,771 18,194 (415,574) 115,771 ----------- ----------- ---------- ----------- ----------- Total liabilities, mandatorily redeemable preferred stock and stockholder's equity . $ 571,013 $ 600,524 $ 19,518 $ (566,910) $ 624,145 =========== =========== ========== =========== ===========
13 NOTE 13 - SUPPLEMENTAL CONDENSED CONSOLIDATING FINANCIAL INFORMATION (CONTINUED) STATEMENTS OF OPERATIONS
NINE MONTHS ENDED SEPTEMBER 30, 1999 (UNAUDITED) ------------------------------------------------------------------------ NON- GUARANTOR GUARANTOR CONSOLIDATING CONSOLIDATED ISSUER SUBSIDIARIES SUBSIDIARIES ADJUSTMENTS TOTAL ----------- ------------ ------------ ------------- -------------- (IN THOUSANDS) Revenues .......................................... $ - $ 174,583 $ 8,591 $ (5,338)(3) $ 177,836 Cost of sales ..................................... - 116,546 6,873 (5,338)(3) 118,081 ----------- ----------- ---------- ----------- ----------- Gross profit ...................................... - 58,037 1,718 - 59,755 Selling, general and administrative expenses ...... 4,755 21,402 1,124 - 27,281 Amortization of intangible assets ................. 116 9,015 375 - 9,506 Interest expense .................................. 17,407 2,444 33 - 19,884 Intercompany charges .............................. (3,603) 3,475 128 - - Equity in earnings of subsidiaries ................ (11,619) (363) - 11,982 (4) - Other expenses (income) ........................... 226 61 (372) - (85) Provision (benefit) for income taxes .............. (7,782) 10,384 67 - 2,669 ----------- ----------- ---------- ----------- ----------- Net income ........................................ $ 500 $ 11,619 $ 363 $ (11,982) $ 500 =========== =========== ========== =========== ===========
NINE MONTHS ENDED SEPTEMBER 30, 2000 (UNAUDITED) ------------------------------------------------------------------------ NON- GUARANTOR GUARANTOR CONSOLIDATING CONSOLIDATED ISSUER SUBSIDIARIES SUBSIDIARIES ADJUSTMENTS TOTAL ----------- ------------ ------------ ------------- -------------- (IN THOUSANDS) Revenues .......................................... $ - $ 252,477 $ 8,838 $ (6,894)(3) $ 254,421 Cost of sales ..................................... - 169,591 6,830 (6,894)(3) 169,527 ----------- ----------- ---------- ----------- ----------- Gross profit ...................................... - 82,886 2,008 - 84,894 Selling, general and administrative expenses ...... 5,535 25,969 961 - 32,465 Amortization of intangible assets ................. 152 12,479 318 - 12,949 Interest expense .................................. 23,051 6,923 3 - 29,977 Intercompany charges .............................. (5,184) 5,184 - - - Equity in earnings of subsidiaries ................ (13,210) (696) - 13,906 (4) - Other expenses (income) ........................... 261 61 (94) - 228 Provision (benefit) for income taxes .............. (14,237) 19,756 124 - 5,643 ----------- ----------- ---------- ----------- ----------- Net income ........................................ $ 3,632 $ 13,210 $ 696 $ (13,906) $ 3,632 =========== =========== ========== =========== ===========
14 NOTE 13 - SUPPLEMENTAL CONDENSED CONSOLIDATING FINANCIAL INFORMATION (CONTINUED) STATEMENTS OF CASH FLOWS
NINE MONTHS ENDED SEPTEMBER 30, 1999 (UNAUDITED) ------------------------------------------------------------------------ NON- GUARANTOR GUARANTOR CONSOLIDATING CONSOLIDATED ISSUER SUBSIDIARIES SUBSIDIARIES ADJUSTMENTS TOTAL ----------- ------------ ------------ ------------- -------------- (IN THOUSANDS) CASH FLOWS FROM OPERATING ACTIVITIES Net income ..................................... $ 500 $ 11,619 $ 363 $ (11,982) $ 500 Adjustments to net income Non-cash net income adjustments .............. 1,851 13,041 621 - 15,513 Equity in earnings of subsidiaries ........... (11,619) (363) - 11,982 (4) - Changes in working capital ..................... 20,073 (25,286) (578) - (5,791) ----------- ----------- ---------- ----------- ----------- Net cash provided by (used for) operating activities........................ 10,805 (989) 406 - 10,222 ----------- ----------- ---------- ----------- ----------- CASH FLOWS FROM INVESTING ACTIVITIES Cash paid for acquisitions, net of cash acquired (119,035) 2,245 - - (116,790) Capital expenditures and other ................. (66) (3,952) (623) - (4,641) ----------- ----------- ---------- ----------- ----------- Net cash used for investing activities ....... (119,101) (1,707) (623) - (121,431) ----------- ----------- ---------- ----------- ----------- CASH FLOWS FROM FINANCING ACTIVITIES Term debt borrowings ........................... 90,000 - - - 90,000 Capital contribution ........................... 12,500 - - - 12,500 Net revolving line of credit borrowings ........ 7,700 - - - 7,700 Customer advance ............................... - 5,000 - - 5,000 Other long-term borrowings ..................... 636 - - - 636 Deferred financing costs ....................... (3,062) - - - (3,062) Principal payments on long-term debt and leases .............................. (1,129) (675) (20) - (1,824) Other, net ..................................... - (180) 159 - (21) ----------- ----------- ---------- ----------- ----------- Net cash provided by financing activities .... 106,645 4,145 139 - 110,929 ----------- ----------- ---------- ----------- ----------- Effect of foreign currency translation on cash .... - - (99) - (99) ----------- ----------- ---------- ----------- ----------- Net increase (decrease) in cash and equivalents ... (1,651) 1,449 (177) - (379) Cash and equivalents at beginning of period ....... 2,458 762 298 - 3,518 ----------- ----------- ---------- ----------- ----------- Cash and equivalents at end of period ............. $ 807 $ 2,211 $ 121 $ - $ 3,139 =========== =========== ========== =========== ===========
15 NOTE 13 - SUPPLEMENTAL CONDENSED CONSOLIDATING FINANCIAL INFORMATION (CONTINUED) STATEMENTS OF CASH FLOWS (CONTINUED)
NINE MONTHS ENDED SEPTEMBER 30, 2000 (UNAUDITED) ------------------------------------------------------------------------ NON- GUARANTOR GUARANTOR CONSOLIDATING CONSOLIDATED ISSUER SUBSIDIARIES SUBSIDIARIES ADJUSTMENTS TOTAL ----------- ------------ ------------ ------------- -------------- (IN THOUSANDS) CASH FLOWS FROM OPERATING ACTIVITIES Net income ..................................... $ 3,632 $ 13,210 $ 696 $ (13,906)(4) $ 3,632 Adjustments to net income (loss) Non-cash net income adjustments .............. 6,467 18,864 718 - 26,049 Equity in earnings of subsidiaries ........... (13,210) (696) - 13,906 (4) - Changes in working capital ..................... (11,146) (19,529) (1,222) - (31,897) ----------- ----------- ---------- ----------- ----------- Net cash provided by (used for) operating activities........................ (14,257) 11,849 192 - (2,216) ----------- ----------- ---------- ----------- ----------- CASH FLOWS FROM INVESTING ACTIVITIES Cash paid for acquisition, net of cash acquired ................................ (87,507) 292 - - (87,215) Capital expenditures and other ................. (3,626) (13,642) (362) - (17,630) ----------- ----------- ---------- ----------- ----------- Net cash used for investing activities ....... (91,133) (13,350) (362) - (104,845) ----------- ----------- ---------- ----------- ----------- CASH FLOWS FROM FINANCING ACTIVITIES Debt financing for acquisitions ................ 55,000 - - - 55,000 Preferred stock financing for acquisitions...... 25,000 - - - 25,000 Line of credit borrowings ...................... 16,400 - - - 16,400 Capital contribution ........................... 7,976 - - - 7,976 Other long-term borrowings ..................... - 2,958 - - 2,958 Principal payments on long-term debt and capital leases ............................... (3,419) (664) (13) - (4,096) Deferred financing costs ....................... (2,000) - - - (2,000) Other, net ..................................... (50) (197) - - (247) ----------- ----------- ---------- ----------- ----------- Net cash provided by (used for) financing activities ....................... 98,907 2,097 (13) - 100,991 ----------- ----------- ---------- ----------- ----------- Effect of foreign currency translation on cash ............................ - - - - - ----------- ----------- ---------- ----------- ----------- Net increase (decrease) in cash and equivalents ................................ (6,483) 596 (183) - (6,070) Cash and equivalents at beginning of period ...................................... 7,839 (323) 402 - 7,918 ----------- ----------- ---------- ----------- ----------- Cash and equivalents at end of period ............. $ 1,356 $ 273 $ 219 $ - $ 1,848 =========== =========== ========== =========== ===========
16 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 positions, results of operations and cash flows have been affected by our history of acquisitions. Since January 1, 1999, we have completed nine acquisitions and, as a result, our historical financial statements do not reflect the financial position, results of operations and cash flows of our current businesses. The companies we have acquired since January 1, 1999, which affect the comparability of the historical financial statements included herein, consist of: CABIN MANAGEMENT GROUP . PPI, acquired on April 23, 1999; . Custom Woodwork, acquired on August 5, 1999; . PCI NewCo, acquired on October 6, 1999; . International Custom Interiors, acquired on October 8, 1999; . The Infinity Partners, acquired on December 17, 1999; . Carl F. Booth, acquired on May 11, 2000; . ERDA, acquired on June 30, 2000; SPECIALTY AVIONICS GROUP . Coltech, acquired on August 31, 2000; and SYSTEMS INTEGRATION GROUP . PATS, acquired on January 22, 1999. Our historical financial statements reflect the financial position, results of operations and cash flows of the companies we acquired subsequent to their respective 1999 and 2000 acquisition dates. RESULTS OF OPERATIONS THREE MONTHS ENDED SEPTEMBER 30, 2000 COMPARED TO THREE MONTHS ENDED SEPTEMBER 30, 1999 REVENUES. Revenues increased $27.9 million, or 42.8%, to $93.1 million for the three months ended September 30, 2000 from $65.2 million for the three months ended September 30, 1999. The increase primarily results from the inclusion of revenues in 2000 from companies we acquired during 1999 and 2000. By segment, revenues changed as follows:
INCREASE (DECREASE) FROM 1999 ------------------------- AMOUNT PERCENT ------------ --------- (IN MILLIONS) Cabin Management ................... $ 27.8 123.6% Specialty Avionics ................. 2.1 8.0 Systems Integration ................ (2.1) (12.4) Inter-group elimination ............ 0.1 - ----------- Total ............................ $ 27.9 ===========
CABIN MANAGEMENT. Revenues increased by $27.8 million, or 123.6% over the prior year, due to: . the inclusion of $23.4 million of revenues resulting from our acquisitions of Custom Woodwork, PCI NewCo, International Custom Interiors and Infinity in 1999 and Carl F. Booth and ERDA in 2000; and . a $4.4 million increase in entertainment and cabin management product revenues primarily relating to volume growth. 17 SPECIALTY AVIONICS. Revenues increased by $2.1 million, or 8.0% over the prior year, due to volume growth for our commercial aircraft interconnect products. SYSTEMS INTEGRATION. Revenues decreased by $2.1 million, or 12.4% from the prior year, primarily due to the timing of when orders are received versus shipped. GROSS PROFIT. Gross profit increased $8.0 million, or 34.7%, to $31.1 million for the three months ended September 30, 2000. The increase primarily results from the inclusion of gross profit in 2000 from companies we acquired in 1999 and 2000. Gross profit as a percent of revenues decreased to 33.4% for the three months ended September 30, 2000 from 35.4% for the same period last year primarily as a result of companies acquired during 2000 and in 1999 that recorded lower margins. By segment, gross profit changed as follows:
INCREASE (DECREASE) FROM 1999 ------------------------ AMOUNT PERCENT ----------- -------- (IN MILLIONS) Cabin Management .......................... $ 6.1 66.4% Specialty Avionics ........................ 1.0 11.8 Systems Integration ....................... 0.9 16.7 ----------- Total ................................... $ 8.0 ===========
CABIN MANAGEMENT. Gross profit increased by $6.1 million, or 66.4% over the prior year, due to: . the inclusion of $7.7 million of gross profit resulting from our 1999 and 2000 acquisitions; offset by . a $1.6 million decrease resulting from higher engineering costs associated with developing of new entertainment system products. SPECIALTY AVIONICS. Gross profit increased by $1.0 million, or 11.8% from the prior year, primarily due to sales volume increases and product mix. SYSTEMS INTEGRATION. Gross profit increased by $0.9 million, or 16.7% over the prior year, due to auxiliary fuel tank manufacturing and installation efficiencies achieved and the 1999 restructuring and exit from the manufacturing business described in Note 4 to the unaudited consolidated financial statements. SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and administrative expenses increased $1.5 million, or 15.0%, to $11.5 million for the three months ended September 30, 2000, from $10.0 million for the same period last year. The increase primarily results from the inclusion of $2.0 million of SG&A expenses in 2000 from companies we acquired during 1999 and 2000. SG&A expenses as a percent of revenues decreased to 12.4% for the three months ended September 30, 2000 compared to 15.3% for the same period last year. By segment, SG&A expenses changed as follows:
INCREASE (DECREASE) FROM 1999 --------------------------- AMOUNT PERCENT ------------- ---------- (IN MILLIONS) Cabin Management ......................... $ 1.5 55.6% Specialty Avionics ....................... 0.1 3.0 Systems Integration ...................... 0.1 5.0 Corporate ................................ (0.2) (10.0) ----------- Total .................................. $ 1.5 ===========
CABIN MANAGEMENT. SG&A expenses increased by $1.5 million, or 55.6% over the prior year, due to: . the inclusion of $2.0 million resulting from our 1999 and 2000 acquisitions; offset by . a $0.5 million decrease in expenses resulting from the centralization of administrative activities. SPECIALTY AVIONICS AND SYSTEMS INTEGRATION. The increases in SG&A expenses were insignificant. CORPORATE. SG&A expenses decreased by $0.2 million, or 10.0% from the prior year due to decreased spending on outside professional services. 18 DEPRECIATION AND AMORTIZATION OF INTANGIBLES. Depreciation and amortization expense, which includes amortization of goodwill and identifiable intangible assets, increased $1.6 million, or 28.6%, for the three months ended September 30, 2000. The increase results from the inclusion of $1.4 million of depreciation and amortization expense in 2000 from companies we acquired during 1999 and 2000 and additional depreciation reflecting our capital expenditures during the period. EBITDA AND OPERATING INCOME. EBITDA increased $6.5 million to $22.2 million, or 41.4%, for the three months ended September 30, 2000, from $15.7 million for the same period last year. The increase primarily results from the contribution to year 2000 results from companies we acquired during 1999 and 2000. EBITDA as a percent of revenues decreased to 23.8% for the three months ended September 30, 2000, from 24.1% for the same period last year. Operating income increased $5.8 million to $14.9 million, or 63.8%, for the three months ended September 30, 2000, from $9.1 million for the same period last year. By segment, EBITDA changed as follows:
INCREASE (DECREASE) FROM 1999 ------------------------- AMOUNT PERCENT ----------- ----------- (IN MILLIONS) EBITDA Cabin Management .................... $ 5.1 70.8% Specialty Avionics .................. 1.1 17.2 Systems Integration ................. 0.3 8.3 ----------- Total EBITDA ...................... 6.5 Depreciation and amortization ......... (1.6) Other non-operating costs ............. 0.9 ----------- Total operating income (loss) ..... $ 5.8 ===========
CABIN MANAGEMENT. EBITDA increased by $5.1 million, or 70.8% over the prior year, due to: . a $7.1 million increase resulting from our acquisitions; offset by . a $2.0 million decrease resulting from higher labor costs associated with developing of new entertainment system products. SPECIALTY AVIONICS. EBITDA increased by $1.1 million, or 17.2% from the prior year, due to: . $1.0 million of growth related to product sales; and . $0.1 million resulting from our acquisitions. SYSTEMS INTEGRATION. EBITDA increased by $0.3 million, or 8.3% over the prior year, due to the timing of when orders are received versus shipped. While not affecting the comparison of 1999 to 2000 results, we charged $0.7 million to the accrued liability established in 1999 for such restructuring; no adjustments have been made to our original 1999 estimates. INTEREST EXPENSE. Interest expense increased $4.1 million to $11.3 million for the three months ended September 30, 2000, from $7.2 million for the same period last year. Interest expense increased: . $3.6 million due to higher debt levels associated with our acquisition of companies during 1999 and 2000; and . $0.5 million due to higher average interest rates charged during 2000. 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 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 the relationship of non-deductible expenses to income before income taxes. NET INCOME. Net income increased $0.2 million to $0.9 million for the three months ended September 30, 2000 compared to $0.7 million for the same period in 1999. 19 NET INCOME (LOSS) APPLICABLE TO COMMON STOCKHOLDER. Net income (loss) applicable to DeCrane Holdings, our common stockholder, decreased $0.8 million to a loss of $0.1 million for the three months ended September 30, 2000 compared to income of $0.7 million for the same period in 1999. The net decrease is attributable to: . a $1.0 million increase in accrued dividends resulting from DeCrane Aircraft's issuance of 16% mandatorily redeemable preferred stock on June 30, 2000; offset by . a $0.2 million increase in net income. BOOKINGS. Bookings increased $34.5 million, or 54.4%, to $97.9 million for the three months ended September 30, 2000 compared to $63.4 million for the same period in 1999. The increase in bookings for 2000 results from: . a $27.0 million increase associated with companies we acquired in 1999 and 2000; and . a $7.5 million increase related to business growth, principally in Cabin Management's furniture product lines. BACKLOG AT END OF PERIOD. Backlog increased $17.2 million, or 11.0%, to $173.3 million as of September 30, 2000 compared to $156.1 million as of December 31, 1999. The increase primarily results from the timing of receipt of customer orders. By segment, backlog changed as follows: . a $10.4 million increase related to Cabin Management companies acquired companies in 2000; . a $5.3 million increase related to Specialty Avionics, reflecting a recovery in demand for some of our commercial aircraft products; and . a $1.5 million increase related to Systems Integration, resulting from the timing of when orders are received versus when they are shipped. NINE MONTHS ENDED SEPTEMBER 30, 2000 COMPARED TO NINE MONTHS ENDED SEPTEMBER 30, 1999 REVENUES. Revenues increased $76.6 million, or 43.1%, to $254.4 million for the nine months ended September 30, 2000 from $177.8 million for the nine months ended September 30, 1999. The increase primarily results from the inclusion of revenues in 2000 from companies we acquired during 1999 and 2000. By segment, revenues changed as follows:
INCREASE (DECREASE) FROM 1999 ------------------------- AMOUNT PERCENT ---------- ---------- (IN MILLIONS) Cabin Management .......................... $ 79.1 165.1% Specialty Avionics ........................ (4.8) (5.6) Systems Integration ....................... 2.1 4.6 Inter-group elimination ................... 0.2 - ----------- Total ................................... $ 76.6 ===========
CABIN MANAGEMENT. Revenues increased by $79.1 million, or 165.1% over the prior year, due to: . the inclusion of $72.4 million of revenues resulting from our acquisitions of PPI, Custom Woodwork, PCI NewCo, International Custom Interiors and Infinity in 1999 and Carl F. Booth and ERDA in 2000; and . a $6.7 million increase in entertainment and cabin management product revenues reflecting primarily a higher volume of corporate jet production by original equipment manufacturers (OEM's). SPECIALTY AVIONICS. Revenues decreased by $4.8 million, or 5.6% from the prior year, due to somewhat lower demand for our commercial aircraft products during the first two quarters of the year. SYSTEMS INTEGRATION. Revenues increased by $2.1 million, or 4.6% over the prior year, due to the inclusion of PATS for the full nine months of 2000; PATS was acquired on January 22, 1999. 20 GROSS PROFIT. Gross profit increased $25.1 million, or 41.9%, to $84.9 million for the nine months ended September 30, 2000. The increase primarily results from the inclusion of gross profit in 2000 from companies we acquired in 1999 and 2000. Gross profit as a percent of revenues decreased to 33.4% for the nine months ended September 30, 2000 from 33.6% for the same period last year primarily as a result of lower margins in Cabin Management entertainment products and Specialty Avionics products. By segment, gross profit changed as follows:
INCREASE (DECREASE) FROM 1999 ----------------------- AMOUNT PERCENT ------------ --------- (IN MILLIONS) Cabin Management ..................... $ 22.6 109.7% Specialty Avionics ................... (3.2) (11.3) Systems Integration .................. 5.7 52.3 ----------- Total .............................. $ 25.1 ===========
CABIN MANAGEMENT. Gross profit increased by $22.6 million, or 109.7% over the prior year, due to: . a $25.0 million increase in gross profit resulting from our 1999 and 2000 acquisitions; offset by . lower margins in our entertainment systems products; and . production startup inefficiencies at a new manufacturing facility. SPECIALTY AVIONICS. Gross profit decreased by $3.2 million, or 11.3% from the prior year, due to somewhat lower demand for our commercial aircraft products as a result of lower commercial jet production by Boeing and price reductions to several large customers. SYSTEMS INTEGRATION. Gross profit increased by $5.7 million, or 52.3% over the prior year, due to: . a $5.2 million increase in gross profit resulting from favorable auxiliary fuel tank manufacturing and installation efficiencies achieved; and . a $0.5 million reduction in engineering costs attributable to project development. SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and administrative expenses increased $5.2 million, or 19.0%, to $32.5 million for the nine months ended September 30, 2000, from $27.3 million for the same period last year. The increase primarily results from the inclusion of $5.2 million of SG&A expenses in 2000 from companies we acquired in 1999 and 2000. SG&A expenses as a percent of revenues decreased to 12.8% for the nine months ended September 30, 2000 compared to 15.4% for the same period last year. By segment, SG&A expenses changed as follows:
INCREASE (DECREASE) FROM 1999 -------------------------- AMOUNT PERCENT ----------- ---------- (IN MILLIONS) Cabin Management ......................... $ 4.4 62.9% Specialty Avionics ....................... (1.2) (11.8) Systems Integration ...................... 1.2 22.2 Corporate ................................ 0.8 17.0 ----------- Total .................................. $ 5.2 ===========
CABIN MANAGEMENT. SG&A expenses increased by $4.4 million, or 62.9% over the prior year, due to: . the inclusion of $4.9 million related to our 1999 and 2000 acquisitions; offset by . a $0.5 million decrease in expenses resulting from the consolidation of administrative activities. SPECIALTY AVIONICS. SG&A expenses decreased by $1.2 million, or 11.8% from the prior year, due to reduced selling costs related to lower sales. SYSTEMS INTEGRATION. SG&A expenses increased by $1.2 million, or 22.2% over the prior year, due to: . a $0.5 million increase in SG&A expenses resulting from an increase in engineering project management. . a $0.7 million increase in expenses from additional sales and program management resources. CORPORATE. SG&A expenses increased by $0.8 million, or 17.0% over the prior year due to increased spending for sales and marketing programs during the first two quarters. 21 DEPRECIATION AND AMORTIZATION OF INTANGIBLES. Depreciation and amortization expense, which includes amortization of goodwill and identifiable intangible assets, increased $5.9 million, or 43.3%, for the nine months ended September 30, 2000. The increase results from the inclusion of $3.7 million of depreciation and amortization expense in 2000 from companies we acquired during 1999 and 2000 and additional depreciation reflecting our capital expenditures during the period. EBITDA AND OPERATING INCOME. EBITDA increased $20.5 million to $59.3 million, or 52.8%, for the nine months ended September 30, 2000, from $38.8 million for the same period last year. The increase primarily results from the contribution to year 2000 results from companies we acquired during 1999 and 2000. EBITDA as a percent of revenues increased to 23.3% for the nine months ended September 30, 2000, from 21.8% for the same period last year. Operating income increased $16.5 million to $39.5 million, or 71.8%, for the nine months ended September 30, 2000, from $23.0 million for the same period last year. By segment, EBITDA changed as follows:
INCREASE (DECREASE) FROM 1999 ------------------------- AMOUNT PERCENT ------------ --------- (IN MILLIONS) EBITDA Cabin Management ...................... $ 18.0 115.4% Specialty Avionics .................... (1.3) (6.2) Systems Integration ................... 4.3 65.2 Corporate ............................. (0.5) (11.6) ------------ Total EBITDA ........................ 20.5 Depreciation and amortization ........... (5.9) Other non-operating costs ............... 1.9 ----------- Total operating income (loss) ....... $ 16.5 ===========
CABIN MANAGEMENT. EBITDA increased by $18.0 million, or 115.4% over the prior year, due to acquisitions and increased production of corporate jets by OEM's. SPECIALTY AVIONICS. EBITDA decreased by $1.3 million, or 6.2% from the prior year, due to somewhat lower demand for our commercial aircraft products as a result of lower commercial jet production by Boeing. SYSTEMS INTEGRATION. EBITDA increased by $4.3 million, or 65.2% from the prior year, due to: . a $1.7 million increase resulting primarily from favorable manufacturing efficiencies of auxiliary fuel tanks and power units; and . a $2.6 million increase resulting, in part, from improved operating results subsequent to our 1999 restructuring which included our exit from the manufacturing business. While not affecting the comparison of 1999 to 2000 results, we charged $2.0 million to the accrued liability established in 1999 for such restructuring; no adjustments have been made to our original 1999 estimates. CORPORATE. EBITDA decreased by $0.5 million, or 11.6% over the prior year, due to increased spending for sales and marketing programs during the first two quarters of 2000. INTEREST EXPENSE. Interest expense increased $10.1 million to $30.0 million for the nine months ended September 30, 2000, from $19.9 million for the same period last year. Interest expense increased: . $8.2 million due to higher debt levels associated with our acquisition of companies during 1999 and 2000; and . $1.9 million due to higher average interest rates charged during 2000. 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 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 the relationship of non-deductible expenses to income before income taxes. NET INCOME (LOSS). Net income increased $3.1 million to $3.6 million for the nine months ended September 30, 2000 compared to $0.5 million for the same period in 1999. 22 NET INCOME APPLICABLE TO COMMON STOCKHOLDER. Net income applicable to DeCrane Holdings, our common stockholder, increased $2.1 million to $2.6 million for the nine months ended September 30, 2000 compared to $0.5 million for the same period in 1999. The net increase is attributable to: . a $3.1 million increase in net income; offset by . a $1.0 million increase in accrued dividends resulting from DeCrane Aircraft's issuance of 16% mandatorily redeemable preferred stock on June 30, 2000 BOOKINGS. Bookings increased $35.6 million, or 15.7%, to $262.0 million for the nine months ended September 30, 2000 compared to $226.4 million for the same period in 1999. The increase in bookings for 2000 results from: . a $15.7 million increase associated with companies we acquired in 1999 and 2000; and . a $19.9 million increase related to business growth, principally in Cabin Management's furniture product lines. LIQUIDITY AND CAPITAL RESOURCES We have required cash primarily to fund acquisitions and, to a lesser extent, to fund capital expenditures and for working capital. Our principal sources of liquidity have been cash flow from operations, third party borrowings and the issuance of common and preferred stock. For the nine months ended September 30, 2000, we used $2.2 million of cash for operating activities, which is the net of $29.7 million of cash generated from operations after adding back depreciation, amortization and other noncash items, $30.8 million used for working capital and $1.1 million resulting from a decrease in other liabilities. The following factors contributed to the $30.8 million working capital increase: . a $15.9 million accounts receivable increase due to higher revenues, timing differences relating to completing of projects and the associated collection; . a $9.0 million increase in inventory due to longer production lead times and inventory level increases to meet current and projected revenue growth; . a $1.2 million increase in prepaid and other assets; and . a $5.7 million net decrease in current liabilities; offset by . a $1.0 million increase in income taxes payable due to higher current taxable income. Cash used for investing activities was $104.8 million for the nine months ended September 30, 2000, and consisted of: . $57.0 million for our Carl Booth, ERDA and Coltech acquisitions; . $30.1 million for contingent consideration earned in 1999 and paid in 2000; and . $17.7 million for capital expenditures, including $5.7 million for the purchase of a furniture manufacturing facility for our Cabin Management Group. We anticipate spending $21.4 million for capital expenditures in 2000. Net cash provided by financing activities was $101.0 million for the nine months ended September 30, 2000 and was primarily used to fund our acquisitions. We obtained these funds by borrowing $71.4 million under our senior credit facility, selling $25.0 million of 16% mandatorily redeemable preferred stock and a $8.0 million capital contribution from DeCrane Holdings. We used $4.1 million to make principal payments on our senior term debt, capitalized leases and other debt, and paid $2.0 million of financing costs. 23 At September 30, 2000, senior credit facility borrowings totaling $281.5 million are at variable interest rates based on defined margins over the current prime or Euro-Dollar rates. At September 30, 2000 we had $86.3 million of working capital and had $18.1 million of borrowings available under our working capital credit facility and $15.5 million available under our acquisition credit facility. Although we cannot be certain, we believe that operating cash flow, together with borrowings under our bank credit facility, will be sufficient to meet our future short- and long-term operating expenses, working capital requirements, capital expenditures and debt service obligations for the next twelve months. However, our ability to pay principal or interest, to refinance our debt and to satisfy our other debt obligations will depend on our future operating performance. We will be affected by economic, financial, competitive, legislative, regulatory, business and other factors beyond our control. In addition, we are continually considering acquisitions that complement or expand our existing businesses or that may enable us to expand into new markets. Future acquisitions may require additional debt, equity financing or both. We may not be able to obtain any additional financing on acceptable terms. 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 September 30, 2000, the current prime rate was 9.50% and the current Euro-Dollar rate was 6.62%. Based on $281.5 million of variable-rate debt outstanding as of September 30, 2000, a hypothetical one percent rise in interest rates, to 10.50% for prime rate borrowings and 7.62% for Euro-Dollar borrowings, would reduce our pre-tax earnings by $2.8 million annually. 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. The estimated fair value of our $100.0 million fixed-rate long-term debt is approximately $92.0 million at September 30, 2000. 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 foreign 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, while we have not entered into any such contracts since 1998 and no such contracts are open as of September 30, 2000, we may do so in the future depending on our assessment of future foreign exchange rate trends. 24 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. We are vulnerable to a variety of risks 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; . our reliance on key customers and the adverse effect a significant decline in business from any one of them would have on our business; . changes in prevailing interest rates and the availability of financing to fund our plans for continued growth; . competition from larger companies; . Federal Aviation Administration prescribed standards and licensing requirements, which apply many of the products and services we provide; . inflation, and other general changes in costs of goods and services; . liability and other claims asserted against us that exceeds our insurance coverage; . 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 Form 10-K for the year ended December 31, 1999. The Form 10-K includes our audited 1999 financial statements, 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 office located at 2361 Rosecrans Avenue, Suite 180, El Segundo, California 90245. Our telephone number is (310) 725-9123. 25 PART II - OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS Refer to the legal proceedings described in Item 3 of our Form 10-K for the year ended December 31, 1999. SWISSAIR All of the actions related to the Swissair matter described in Item 3 of our Form 10-K have been transferred to the United States District Court for the Eastern District of Pennsylvania and assigned under MDL Case No. 1269 to the Honorable James T. Giles for coordinated or consolidated pretrial proceedings. ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
a. Exhibits 3.3.1 Certificate of Formation and Certificate of Merger for Aerospace Display Systems, LLC * 3.3.2 Limited Liability Company Operating Agreement for Aerospace Display Systems, LLC * 3.19.1 Certificate of Formation and Certificate of Merger for Custom Woodwork & Plastics, LLC * 3.19.2 Limited Liability Company Operating Agreements for Custom Woodwork & Plastics, LLC * 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 * 3.26.1 Restated Articles of Incorporation of ERDA, Inc. * 3.26.2 Bylaws of ERDA, Inc. (formerly ERDA Acquisition Co., Inc.) * 3.27.1 Articles of Incorporation of Coltech, Inc. ** 3.27.2 Bylaws of Coltech, Inc. ** 4.1.3 Supplemental Indenture to be dated August 5, 1999 among CWP Acquisition, Inc. d/b/a Custom Woodwork & Plastics, Inc., the other guarantors under the Indenture, DeCrane Aircraft and State Street Bank and Trust Company ** 4.1.4 Supplemental Indenture to be dated October 6, 1999 among PCI Acquisition Co., Inc. d/b/a PCI Newco, Inc., the other guarantors under the Indenture, DeCrane Aircraft and State Street Bank and Trust Company ** 4.1.5 Supplemental Indenture to be dated October 8, 1999 among International Custom Interiors, Inc., the other guarantors under the Indenture, DeCrane Aircraft and State Street Bank and Trust Company ** 4.1.6 Supplemental Indenture to be dated December 17, 1999 among DAH-IP Acquisition, L.P. d/b/a Infinity Partners, L.P., DAH-IP Holdings, Inc., DAH-IP Infinity, Inc., the other guarantors under the Indenture, DeCrane Aircraft and State Street Bank and Trust Company ** 4.1.7 Supplemental Indenture to be dated May 11, 2000 among Booth Acquisition, LLC, the other guarantors under the Indenture, DeCrane Aircraft and State Street Bank and Trust Company ** 4.1.8 Supplemental Indenture to be dated June 16, 2000 among DeCrane Aircraft Furniture Co., L.P., the other guarantors under the Indenture, DeCrane Aircraft and State Street Bank and Trust Company ** 4.1.9 Supplemental Indenture to be dated June 30, 2000 among ERDA, Inc., the other guarantors under the Indenture, DeCrane Aircraft and State Street Bank and Trust Company ** 4.1.10 Supplemental Indenture to be dated August 31, 2000 among Coltech, Inc., the other guarantors under the Indenture, DeCrane Aircraft and State Street Bank and Trust Company ** 4.6 Certificate of Designations, Preferences and Rights of 16% Senior Redeemable Exchangeable Preferred Stock due 2009 * 4.6.1 Amendment to the Certificate of Designations, Preferences and Rights of 16% Senior Redeemable Exchangeable Preferred Stock due 2009 dated October 5, 2000 **
26 4.7 Senior Preferred Stock Registration Rights Agreement dated as of June 30, 2000 among DeCrane Aircraft Holdings, Inc. and the Holders of Senior Preferred Stock * 4.7.1 Amendment No. 1 to the Senior Preferred Stock Registration Rights Agreement dated as of June 30, 2000 among DeCrane Aircraft Holdings, Inc. and the Holders of Senior Preferred Stock dated October 6, 2000 ** 10.1 Securities Purchase Agreement dated as of June 30, 2000 among DeCrane Aircraft Holdings, Inc., DeCrane Holdings Co. and the purchasers named therein * 10.2 Amended and Restated Investors' Agreement dated as of October 6, 2000 by and among DeCrane Holdings Co., DeCrane Aircraft Holdings, Inc. and the stockholders named therein ** 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 * 10.10.3.1 First Amendment to the Third Amended and Restated Credit Agreement dated as of May 11, 2000 among DeCrane Aircraft, the lenders listed therein, DLJ Capital Funding, Inc., as syndication agent, and Bank One NA, as administrative agent ** 10.22 Executive Deferred Compensation Plan * 21.1 List of Subsidiaries of Registrant ** 27 Financial Data Schedule **
---------------- * Previously filed ** Filed herewith b. Reports on Form 8-K . On May 25, 2000, we filed a Form 8-K dated May 11, 2000 regarding our acquisition of Carl F. Booth & Co., Inc. . On June 16, 2000, we filed Amendment No. 1 to our Form 8-K dated May 11, 2000 regarding our acquisition of Carl F. Booth & Co., Inc. . On July 13, 2000, we filed a Form 8-K dated June 30, 2000 regarding our acquisition of ERDA, Inc. . On August 2, 2000 we filed Amendment No. 1 to our Form 8-K dated June 30, 2000 regarding our acquisition of ERDA, Inc. 27 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) November 14, 2000 By: /s/ RICHARD J. KAPLAN --------------------------- Name: Richard J. Kaplan Title: Senior Vice President, Chief Financial Officer, Secretary, Treasurer and Director 28