EX-99.1 19 a2040254zex-99_1.txt EXHIBIT 99.1 EXHIBIT 99.1 INDEX TO UNAUDITED PRO FORMA FINANCIAL DATA
PAGE ---- Basis of Presentation .................................................................................... P-2 Pro Forma Consolidated Statement of Operations for the years ended: December 31, 1999 ..................................................................................... P-3 December 31, 2000 ..................................................................................... P-4 Notes to Unaudited Pro Forma Financial Data .............................................................. P-5 Computation of Pro Forma Earnings to Fixed Charges Ratios ................................................ P-12
P-1 UNAUDITED PRO FORMA FINANCIAL DATA BASIS OF PRESENTATION The following unaudited pro forma financial data for DeCrane Aircraft Holdings, Inc. is based on our historical consolidated financial statements, adjusted to reflect our acquisitions of Carl F. Booth & Co. and ERDA, Inc. during the year ended December 31, 2000, as required by Securities and Exchange Commission rules. In addition, the pro forma financial data is also adjusted to reflect three other less significant acquisitions we completed during 2000. Supplementally, we have also provided unaudited pro forma data for the year ended December 31, 1999. The 1999 pro forma data is adjusted to reflect our 2000 acquisitions and our 1999 PATS, Precision Pattern, Custom Woodwork, PCI NewCo., International Custom Interiors and Infinity acquisitions. Our 1999 and 2000 acquisitions are described in the notes accompanying our financial statements. Unaudited pro forma consolidated statements of operations are presented for each of the years in the two-year period ended December 31, 2000. The statements reflect our acquisitions as if they had occurred as of January 1, 1999. All of our 1999 and 2000 acquisitions had occurred by December 31, 2000 and are therefore reflected in our historical balance sheet as of that date. The pro forma adjustments are based upon available information and assumptions management believes are reasonable under the circumstances. The unaudited pro forma financial data and accompanying notes should be read in conjunction with our historical audited financial statements and related notes and the historical audited financial statements and related notes of the companies we have acquired and filed with the Securities and Exchange Commission on Forms 10-K and 8-K. 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-2 UNAUDITED PRO FORMA FINANCIAL DATA CONSOLIDATED STATEMENT OF OPERATIONS YEAR ENDED DECEMBER 31, 1999
HISTORICAL RESULTS ------------------------ DECRANE COMPANIES ACQUISITION AIRCRAFT (1) ACQUIRED (2) ADJUSTMENTS PRO FORMA ----------- ----------- ----------- ----------- (DOLLARS IN THOUSANDS) Revenues .............................................. $ 244,048 $ 94,384 $ (2,890) (3) $ 335,542 Cost of sales ......................................... 165,871 66,091 (2,890) (4) 229,072 ----------- ----------- ----------- ----------- Gross profit ....................................... 78,177 28,293 -- 106,470 Selling, general and administrative expenses .......... 40,157 11,692 (3,769) (5) 48,080 Amortization of intangible assets ..................... 13,073 363 4,404 (6) 17,840 ----------- ----------- ----------- ----------- Operating income ................................... 24,947 16,238 (635) 40,550 Interest expense ...................................... 27,918 1,084 10,519 (7) 39,521 Other expenses (income), net........................... 447 (54) -- 393 ----------- ----------- ----------- ----------- Income (loss) before provision for income taxes ....... (3,418) 15,208 (11,154) 636 Provision for income taxes (benefit) .................. 952 (457) 2,162 (8) 2,657 ----------- ----------- ----------- ----------- Net income (loss) ..................................... (4,370) 15,665 (13,316) (2,021) Accrued preferred stock dividends and redemption value accretion ......................... -- -- (4,714) (9) (4,714) ----------- ----------- ----------- ----------- Net income (loss) applicable to common stockholder ................................. $ (4,370) $ 15,665 $ (18,030) $ (6,735) =========== =========== =========== ===========
See accompanying Notes to Unaudited Pro Forma Financial Data. P-3 UNAUDITED PRO FORMA FINANCIAL DATA CONSOLIDATED STATEMENT OF OPERATIONS YEAR ENDED DECEMBER 31, 2000
HISTORICAL RESULTS ------------------------ DECRANE COMPANIES ACQUISITION AIRCRAFT (1) ACQUIRED (2) ADJUSTMENTS PRO FORMA ----------- ----------- ----------- ----------- (DOLLARS IN THOUSANDS) Revenues .............................................. $ 347,379 $ 25,512 $ (1,307) (3) $ 371,584 Cost of sales ......................................... 232,048 17,388 (1,936) (4) 247,500 ----------- ----------- ----------- ----------- Gross profit .......................................... 115,331 8,124 629 124,084 Selling, general and administrative expenses .......... 45,394 4,994 (2,659) (5) 47,729 Amortization of intangible assets ..................... 17,948 171 1,237 (6) 19,356 ----------- ----------- ----------- ----------- Operating income ...................................... 51,989 2,959 2,051 56,999 Interest expense ...................................... 41,623 608 617 (7) 42,848 Other expenses, net ................................... 482 -- -- 482 ----------- ----------- ----------- ----------- Income before provision for income taxes .............. 9,884 2,351 1,434 13,669 Provision for income taxes (benefit) .................. 6,282 (308) 2,338 (8) 8,312 ----------- ----------- ----------- ----------- Net income ............................................ 3,602 2,659 (904) 5,357 Accrued preferred stock dividends and redemption value accretion ......................... (2,274) -- (3,162) (9) (5,436) ----------- ----------- ----------- ----------- Net income (loss) applicable to common stockholder ................................. $ 1,328 $ 2,659 $ (4,066) $ (79) =========== =========== =========== ===========
See accompanying Notes to Unaudited Pro Forma Financial Data. P-4 UNAUDITED PRO FORMA FINANCIAL DATA NOTES TO UNAUDITED PRO FORMA FINANCIAL DATA (1) Reflects our historical consolidated results of operations for the years ended December 31, 1999 and 2000 derived from our historical audited financial statements. (2) Reflects the historical 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.
COMPANY ACQUIRED REFLECTS PRO FORMA HISTORICAL RESULTS THROUGH ---------------------------------------------------- ---------------------------------------------------- 1999 ACQUISITIONS PATS January 21, 1999 Precision Pattern April 22, 1999 Custom Woodwork & Plastics August 4, 1999 PCI NewCo October 5, 1999 International Custom Interiors October 7, 1999 Infinity December 16, 1999 2000 ACQUISITION Carl Booth May 1, 2000 ERDA June 30, 2000
Tables summarizing the acquired companies' results of operations for the years ended December 31, 1999 and 2000 appear below.
TOTAL 2000 ACQUISITIONS 1999 CARL -------------------------------------- YEAR ENDED DECEMBER 31, 1999 ACQUISITIONS BOOTH ERDA (a) OTHERS (b) TOTAL ---------------------------- ----------- ----------- ----------- ----------- ----------- (DOLLARS IN THOUSANDS) Revenues ................................. $ 52,834 $ 13,757 $ 21,476 $ 6,317 $ 94,384 Cost of sales ............................ 36,440 10,163 16,783 2,705 66,091 ----------- ----------- ----------- ----------- ----------- Gross profit ............................. 16,394 3,594 4,693 3,612 28,293 Selling, general and administrative Expenses ............................... 5,324 1,237 2,270 2,861 11,692 Amortization of intangible assets ........ 124 -- 239 -- 363 ----------- ----------- ----------- ----------- ----------- Operating income ......................... 10,946 2,357 2,184 751 16,238 Interest expense (income) ................ 152 (65) 997 -- 1,084 Other income, net ........................ (29) (25) -- -- (54) ----------- ----------- ----------- ----------- ----------- Income before provision for income taxes ........................... 10,823 2,447 1,187 751 15,208 Provision for income taxes (benefit) ..... (827) -- 389 (19) (457) ----------- ----------- ----------- ----------- ----------- Net income ............................... $ 11,650 $ 2,447 $ 798 $ 770 $ 15,665 =========== =========== =========== =========== ===========
-------------------------- (a) Excludes the operating results of ERDA's majority owned subsidiary not acquired. (b) Reflects our acquisition of Coltech and two product lines during 2000. P-5 UNAUDITED PRO FORMA FINANCIAL DATA NOTES TO UNAUDITED PRO FORMA FINANCIAL DATA (CONTINUED)
1999 ACQUISITIONS --------------------------------------------------------------------------- CUSTOM INT'L YEAR ENDED DECEMBER 31, 1999 PRECISION WOOD PCI CUSTOM (CONTINUED) PATS PATTERN WORK NEWCO. INTERIORS INFINITY TOTAL --------- --------- --------- --------- --------- --------- --------- (DOLLARS IN THOUSANDS) Revenues ...................... $ 451 $ 12,757 $ 4,972 $ 6,692 $ 4,753 $ 23,209 $ 52,834 Cost of sales ................. 1,229 8,435 2,203 4,747 3,057 16,769 36,440 --------- --------- --------- --------- --------- --------- --------- Gross profit (loss) ........... (778) 4,322 2,769 1,945 1,696 6,440 16,394 Selling, general and administrative expenses ..... 611 944 262 520 492 2,495 5,324 Amortization of intangible assets ...................... -- 124 -- -- -- -- 124 --------- --------- --------- --------- --------- --------- --------- Operating income (loss) ....... (1,389) 3,254 2,507 1,425 1,204 3,945 10,946 Interest expense (income) ..... 23 127 (11) (2) (19) 34 152 Other expenses (income), net .. 11 (33) -- (3) (4) -- (29) --------- --------- --------- --------- --------- --------- --------- Income (loss) before provision for income taxes ....................... (1,423) 3,160 2,518 1,430 1,227 3,911 10,823 Provision for income taxes (benefit) ............. (1,244) -- -- -- 417 -- (827) --------- --------- --------- --------- --------- --------- --------- Net income (loss) ............. $ (179) $ 3,160 $ 2,518 $ 1,430 $ 810 $ 3,911 $ 11,650 ========= ========= ========= ========= ========= ========= =========
2000 ACQUISITIONS --------------------------------------------------- CARL BOOTH ERDA (a) OTHERS (b) TOTAL ----------- ----------- ----------- ----------- (DOLLARS IN THOUSANDS) Revenues .............................................. $ 5,983 $ 14,354 $ 5,175 $ 25,512 Cost of sale .......................................... 3,110 11,984 2,294 17,388 ----------- ----------- ----------- ----------- Gross profit .......................................... 2,873 2,370 2,881 8,124 Selling, general and administrative expenses .......... 588 2,499 1,907 4,994 Amortization of intangible assets ..................... -- 171 -- 171 ----------- ----------- ----------- ----------- Operating income (loss) ............................... 2,285 (300) 974 2,959 Interest expense (income) ............................. (33) 641 -- 608 ----------- ----------- ----------- ----------- Income (loss) before provision for income taxes ....... 2,318 (941) 974 2,351 Provision for income taxes (benefit) .................. -- (308) -- (308) ----------- ----------- ----------- ----------- Net income (loss) ..................................... $ 2,318 $ (633) $ 974 $ 2,659 =========== =========== =========== ===========
------------------------ (a) Excludes the operating results of ERDA's majority owned subsidiary not acquired. (b) Reflects our acquisition of Coltech and two product lines during 2000. P-6 UNAUDITED PRO FORMA FINANCIAL DATA NOTES TO UNAUDITED PRO FORMA FINANCIAL DATA (CONTINUED) (3) Reflects the elimination of intercompany sales. (4) Reflects a net decrease in cost of sales attributable to the follow:
YEAR ENDED DECEMBER 31, ------------------------- 1999 2000 ----------- ----------- (DOLLARS IN THOUSANDS) Elimination of intercompany sales ............................................... $ (2,890) $ (1,307) Reorganization of manufacturing process (a)...................................... -- (529) Reversal of intercompany profit in inventory (b) ................................ -- (100) ----------- ----------- Decrease in cost of sales.................................................... $ (2,890) $ (1,936) =========== ===========
------------------------ (a) Reflects costs incurred, subsequent to the acquisition date, for a reorganization of the manufacturing process at ERDA. We planned for the reorganization prior to acquisition and began implementing the plan immediately after acquisition. The reorganization was completed during 2000. (b) Eliminated in our historical results. (5) Reflects the net decrease in selling, general and administrative expenses attributable to the following:
YEAR ENDED DECEMBER 31, ------------------------- 1999 2000 ----------- ----------- (DOLLARS IN THOUSANDS) Bonuses and employment contract termination expenses (a) ........................ $ (3,031) $ (1,708) Acquisition related expenses (b) ................................................ (716) (951) Other, net (c) .................................................................. (22) -- ----------- ----------- Decrease in selling, general and administrative expenses ...................... $ (3,769) $ (2,659) =========== ===========
---------------------------- (a) 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, Infinity and Coltech. (b) Reflects a reduction for non-capitalizable acquisition expenses incurred by PATS, Infinity and ERDA on behalf of their stockholders related to their respective acquisitions by us. (c) Reflects cost savings attributable to employee benefit plans implemented at the companies we acquired. P-7 UNAUDITED PRO FORMA FINANCIAL DATA NOTES TO UNAUDITED PRO FORMA FINANCIAL DATA (CONTINUED) (6) 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:
INTANGIBLE ESTIMATED YEAR ENDED DECEMBER 31, ASSET USEFUL ------------------------- AMOUNT LIFE (a) 1999 2000 ----------- ----------- ----------- ----------- (DOLLARS IN THOUSANDS) Elimination of predecessor basis amortization (b)..................................... $ (363) $ (171) Amortization attributable to companies acquired (c): Goodwill ............................................ $ 152,543 30 3,031 675 FAA certifications .................................. 15,425 15 906 448 Customer contracts .................................. 8,390 7 100 -- Engineering drawings ................................ 5,482 15 216 95 Assembled workforce ................................. 4,980 7 514 190 ----------- ----------- Net increase in amortization expense .............. $ 4,404 $ 1,237 =========== ===========
-------------------------- (a) Amortized on a straight-line basis over the respective estimated useful lives. (b) Reflects the elimination of amortization expense recorded by Precision Pattern and ERDA for periods prior to their acquisition. (c) Reflects adjustments for all of our 1999 and 2000 acquisitions from the beginning of the period presented to their respective acquisition dates; subsequent to those dates, amortization expense is included in our historical results. (7) Reflects the net increase in interest expense, including deferred financing cost amortization and commitment fees, as a result of our 1999 and 2000 acquisitions as if they all had occurred on January 1, 1999. The components of pro forma interest expense are summarized in a table on the next page. P-8 UNAUDITED PRO FORMA FINANCIAL DATA NOTES TO UNAUDITED PRO FORMA FINANCIAL DATA (CONTINUED) The components of pro forma interest expense are summarized in the table below.
YEAR ENDED DECEMBER 31, ------------------------- RATE OR TERM AMOUNT 1999 2000 -------------------------- ----------- ----------- ----------- (DOLLARS IN THOUSANDS) Senior credit facility (a): Revolving credit facilities .......... LIBOR (b) + 2.75% (c) $ 84 $ 28 Term facilities: Term A ............................. LIBOR (b) + 2.75% (d) 3,345 3,526 Term B ............................. LIBOR (b) + 3.5% (e) 11,930 13,458 Term D ............................. LIBOR (b) + 4.0% (f) 8,668 9,717 Senior subordinated notes .............. 12.00% $ 100,000 12,000 12,000 Customer advance ....................... 7.50% (g) 380 247 Other long-term obligations ............ 4.7% to 25.7% (h) 251 1,042 Deferred financing cost amortization: Senior revolving credit facilities ... 6 years (i) 1,277 213 213 Senior term facilities: Term A ............................. 6 years (j) 1,141 343 314 Term B ............................. 7 years (j) 4,211 679 672 Term D ............................. 6 years (j) 3,100 481 477 Senior subordinated notes ............ 10 years (j) 6,317 632 632 Commitment fees and expenses ........... 515 522 ----------- ----------- Pro forma interest expense (k) ..... $ 39,521 $ 42,848 =========== ===========
---------------------------- (a) Reflects our senior credit facility as amended for all of our 1999 and 2000 acquisitions, 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:
YEAR ENDED DECEMBER 31, ----------------------- 1999 2000 --------- -------- Revolving credit facilities .............................................. 5.374% 6.709% Term A facility .......................................................... 5.365% 6.582% Term B facility .......................................................... 5.369% 6.603% Term D facility .......................................................... 5.396% 6.636%
(c) Reflects revolving credit facility borrowings of $5.8 million at December 31, 1998 plus $2.7 million pro forma additional borrowings as of January 1, 1999 for our 1999 and 2000 acquisitions. The pro forma weighted average borrowings outstanding under the revolving credit facilities were $1.0 million for the year ended December 31, 1999 and $296,000 for the year ended December 31, 2000. (d) 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 commencing December 31, 1999. The pro forma weighted average borrowings outstanding under the Term A facility were $41.2 million for the year ended December 31, 1999 and $37.8 million for the year ended December 31, 2000. P-9 UNAUDITED PRO FORMA FINANCIAL DATA NOTES TO UNAUDITED PRO FORMA FINANCIAL DATA (CONTINUED) (e) 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 Precision Pattern 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 year ended December 31, 1999 and $133.2 million for the year ended December 31, 2000. (f) 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 year ended December 31, 1999 and $91.4 million for the year ended December 31, 2000. (g) 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 and $1.2 million on May 31 and November 30, 2000. The pro forma weighted average advance outstanding was $4.9 million for the year ended December 31, 1999 and $3.2 million for the year ended December 31, 2000. (h) Reflects historical interest expense related to capital lease obligations and equipment term debt financing. (i) Deferred financing costs are amortized on a straight-line basis over the term of the agreement. (j) Deferred financing costs are amortized using the effective interest method. (k) A 0.125% change in the interest rates charged on variable rate borrowings would change interest expense and net income (loss) by:
YEAR ENDED DECEMBER 31, ------------------------- 1999 2000 ----------- ----------- (DOLLARS IN THOUSANDS) Interest expense......................................................... $ 341 $ 343 Net income (loss)........................................................ 207 208
(8) 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 Precision Pattern, 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. The difference in effective tax rates between periods is mostly a result the relationship of non-deductible expense to income before taxes. (9) Reflects an increase in accrued preferred stock dividends and redemption value accretion. We sold 16% mandatorily redeemable preferred stock and used the proceeds to partially fund the ERDA acquisition. P-10 UNAUDITED PRO FORMA FINANCIAL DATA NOTES TO UNAUDITED PRO FORMA FINANCIAL DATA (CONTINUED) (10) Supplemental pro forma financial information is as follows:
YEAR ENDED DECEMBER 31, ------------------------- 1999 2000 ----------- ----------- (DOLLARS IN THOUSANDS) Net cash provided by (used for): Operating activities .......................................................... $ 26,701 $ 20,725 Investing activities .......................................................... (214,882) (53,896) Financing activities .......................................................... 187,693 33,549 EBITDA (a) ...................................................................... 78,455 89,160 Depreciation and amortization (b) ............................................... 25,512 29,212 Capital expenditures: Paid in cash .................................................................. 9,283 23,492 Financed with capital lease obligations ....................................... 2,388 109 Cash interest expense ........................................................... 37,173 40,540 Ratio of earning to fixed charges (c) ........................................... 1.0x 1.3 x
------------------------- (a) EBITDA is defined as earnings before interest, income taxes, depreciation and amortization, restructuring and asset impairment charges, acquisition related charges and other noncash and nonoperating charges. EBITDA, as defined, is the primary measurement we use to evaluate our operating groups' performance and is consistent with the manner in which our lenders and ultimate investors measure our overall performance. 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 we report 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. (c) For purposes of calculating the ratio of earnings to fixed charges, earnings represent net income before income taxes, minority interests 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 or premium relating to any indebtedness, whether expensed or capitalized; and - one-third of rental expenses under operating leases which is considered to be a reasonable approximation of the interest portion of such expense. P-11 UNAUDITED PRO FORMA FINANCIAL DATA COMPUTATION OF PRO FORMA EARNING TO FIXED CHARGES RATIOS
YEAR ENDED DECEMBER 31, ------------------------- 1999 2000 ----------- ----------- (DOLLARS IN THOUSANDS) EARNINGS: Income before provision for income taxes ............................................... $ 636 $ 13,669 Minority interest in income of subsidiary with fixed charges ........................... 197 228 Fixed charges .......................................................................... 40,901 44,148 ----------- ----------- Total earnings .................................................................... $ 41,734 $ 58,045 =========== =========== FIXED CHARGES: Interest expense, including amortization of debt discounts and issuance costs (1) .............................................................. $ 39,521 $ 42,848 Interest component of rentals (2) ...................................................... 1,380 1,300 ----------- ----------- Total fixed charges ............................................................... $ 40,901 $ 44,148 =========== =========== RATIO OF EARNINGS TO FIXED CHARGES: Ratio .................................................................................. 1.0x 1.3x Deficiency ............................................................................. $ -- $ --
--------------------------- (1) None capitalized. (2) Reflects one-third of rental expense under operating leases considered to represent interest costs. P-12