DECRANE HOLDINGS CO, 10-Q, 1999-08-06

DECRANE HOLDINGS CO
10-Q, 1999-08-06
AIRCRAFT PARTS & AUXILIARY EQUIPMENT, NEC

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<PAGE>
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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 June 30, 1999

Commission File Number 333-70363

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

DECRANE HOLDINGS CO.
(Exact name of registrant as specified in its charter)

DELAWARE 13-4019703
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)

C/O DLJ MERCHANT BANKING PARTNERS II, L.P.
277 PARK AVENUE, NEW YORK, NY 10172
(Address, including zip code, of principal
executive offices)

(212) 892-3000
(Registrant's telephone number, including area code)

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

(NOT APPLICABLE)

(Former address and telephone number of principal executive offices,
if changed since last report)

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

Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
[X] Yes [ ] No

The number of shares of Registrant's Common Stock, $.01 par value,
outstanding as of August 2, 1999 was 3,389,663 shares.

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

<PAGE>

DECRANE HOLDINGS CO.
INDEX

PART I - FINANCIAL INFORMATION

PAGE
<S> <C>
ITEM 1. FINANCIAL STATEMENTS

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

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

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

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

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

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

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

PART II - OTHER INFORMATION

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

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

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

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

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

</TABLE>
i

<PAGE>

PART I - FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

DECRANE HOLDINGS CO. AND SUBSIDIARY

CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
1999 1998
----------- ------------
(UNAUDITED)
<S> <C> <C>
ASSETS

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

Property and equipment, net ................................................................... 35,670 28,160
Other assets, principally intangibles, net .................................................... 307,331 225,978
----------- -----------
Total assets ........................................................................... $ 446,415 $ 330,575
=========== ===========

LIABILITIES, MANDATORILY REDEEMABLE PREFERRED STOCK AND STOCKHOLDERS' EQUITY

Current liabilities
Short-term borrowings ...................................................................... $ 489 $ 283
Current portion of long-term obligations ................................................... 3,368 1,529
Accounts payable ........................................................................... 9,308 6,383
Accrued expenses ........................................................................... 26,740 18,272
Income taxes payable ....................................................................... 5,107 3,743
----------- -----------
Total current liabilities ................................................................ 45,012 30,210
----------- -----------

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

Commitments and contingencies
Mandatorily redeemable preferred stock ........................................................ 38,440 35,884
----------- -----------

Stockholders' equity
Undesignated preferred stock, $.01 par value, 1,140,000 shares authorized;
none issued and outstanding as of June 30, 1999 and December 31, 1998 .................... - -
Common stock, $.01 par value, 4,500,000 and 3,500,000 shares authorized as of
June 30, 1999 and December 31, 1998, respectively; 3,389,663 and 2,846,185
shares issued and outstanding as of June 30, 1999 and December 31, 1998, respectively .... 34 28
Additional paid-in capital ................................................................. 74,435 64,497
Notes receivable for shares sold ........................................................... (360) (352)
Accumulated deficit ........................................................................ (2,751) (2,568)
Accumulated other comprehensive income (loss)............................................... (1,136) 274
----------- -----------
Total stockholders' equity ............................................................... 70,222 61,879
----------- -----------
Total liabilities, mandatorily redeemable preferred stock and stockholders' equity ..... $ 446,415 $ 330,575
=========== ===========

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

</TABLE>

1
<PAGE>

DECRANE HOLDINGS CO. AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS)
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
---------------------------- --------------------------
1998 1998
1999 (PREDECESSOR) 1999 (PREDECESSOR)
----------- ------------ ----------- ----------------
(UNAUDITED) (UNAUDITED) (UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C>
Revenues ..................................................... $ 62,703 $ 29,854 $ 112,598 $ 58,982
Cost of sales ................................................ 42,079 20,134 75,974 40,275
----------- ---------- ----------- -----------

Gross profit ............................................ 20,624 9,720 36,624 18,707
----------- ---------- ----------- -----------

Operating expenses
Selling, general and administrative expenses .............. 9,079 5,302 17,250 10,181
Amortization of intangible assets ......................... 2,894 382 5,458 761
----------- ---------- ----------- -----------
Total operating expenses ................................ 11,973 5,684 22,708 10,942
----------- ---------- ----------- -----------

Income from operations ....................................... 8,651 4,036 13,916 7,765

Other expenses (income)
Interest expense .......................................... 6,978 383 12,729 1,169
Terminated debt offering expenses ......................... - 600 - 600
Other income............................................... (223) (13) (367) (30)
----------- ---------- ----------- -----------

Income before provision for income taxes ..................... 1,896 3,066 1,554 6,026
Provision for income taxes ................................... 1,804 1,394 1,737 2,666
----------- ---------- ----------- -----------

Net income (loss) ............................................ $ 92 $ 1,672 $ (183) $ 3,360
=========== ========== =========== ===========

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

</TABLE>

<PAGE>

DECRANE HOLDINGS CO. AND SUBSIDIARY

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

<TABLE>
<CAPTION>
COMMON STOCK ACCUMULATED
------------------- NOTES OTHER
NUMBER ADDITIONAL RECEIVABLE COMPREHENSIVE
OF PAID-IN FOR SHARES ACCUMULATED INCOME
SHARES AMOUNT CAPITAL SOLD DEFICIT (LOSS) TOTAL
--------- -------- ---------- ---------- ----------- ------------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance, December 31, 1998 ................. 2,846,185 $ 28 $ 64,497 $ (352) $ (2,568) $ 274 $ 61,879

Comprehensive income (loss)
Net loss ................................ - - - - (183) - (183)
Translation adjustment .................. - - - - - (1,410) (1,410)
---------
(1,593)
---------
Sale of common stock ....................... 543,478 6 12,494 - - - 12,500

Non-cash dividend accretion on mandatorily
redeemable preferred stock .............. - - (2,556) - - - (2,556)

Notes receivable interest .................. - - - (8) - - (8)
--------- -------- -------- -------- --------- --------- ---------
Balance, June 30, 1999 (Unaudited) ......... 3,389,663 $ 34 $ 74,435 $ (360) $ (2,751) $ (1,136) $ 70,222
========= ======== ======== ======== ========= ========= =========

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

</TABLE>

<PAGE>

DECRANE HOLDINGS CO. AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE 30,
--------------------------
1998
1999 (PREDECESSOR)
----------- -----------
(UNAUDITED) (UNAUDITED)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss) ........................................................................ $ (183) $ 3,360
Adjustments to reconcile net income (loss) to
net cash used for operating activities
Depreciation and amortization ........................................................ 8,785 2,966
Deferred income taxes ................................................................ 161 (1,219)
Other, net ........................................................................... 131 (159)
Changes in assets and liabilities, net of effect from acquisitions
Accounts receivable ................................................................ (7,130) (2,154)
Inventories ........................................................................ 2,399 (3,058)
Prepaid expenses and other assets .................................................. (757) (643)
Accounts payable ................................................................... (1,384) (1,451)
Accrued expenses ................................................................... 228 2,316
Income taxes payable ............................................................... 2,511 (778)
Other long-term liabilities ........................................................ (55) -
----------- -----------
Net cash provided by (used for) operating activities ............................. 4,706 (820)
----------- ------------

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

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

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

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

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

</TABLE>

4
<PAGE>

DECRANE HOLDINGS CO. AND SUBSIDIARY

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)

NOTE 1 - CONSOLIDATED FINANCIAL STATEMENTS

The consolidated interim financial statements included in this report are
unaudited. The Company believes the interim financial statements are presented
on a basis consistent with the audited financial statements. The Company also
believes that the interim financial statements contain all adjustments necessary
for a fair presentation of the results for such interim periods. All of these
adjustments are normal recurring adjustments. The results of operations for
interim periods do not necessarily predict the operating results for the full
year. The consolidated balance sheet as of December 31, 1998 has been derived
from audited financial statements but does not include all disclosures required
by generally accepted accounting principles as permitted by interim reporting
requirements. The information included in this report should be read in
conjunction with Management's Discussion and Analysis of Financial Condition and
Results of Operations and the 1998 audited financial statements and related
notes included in the Company's prospectus. The prospectus is part of the
Company's Registration Statement No. 333-70363 on Form S-1 filed with the
Securities and Exchange Commission effective May 14, 1999. The Company has made
some reclassifications to prior periods' financial statements to conform to the
1999 presentation.

As described in the 1998 audited financial statements, DeCrane Aircraft
Holdings, Inc. became a wholly-owned subsidiary of DeCrane Holdings Co. in
August 1998 as a result of the acquisition by DLJ Merchant Banking Partners II,
L.P. and affiliated funds and entities. DeCrane Aircraft is the predecessor of
DeCrane Holdings, and the financial information for DeCrane Aircraft is
presented for periods prior to the DLJ acquisition.

NOTE 2 - ACQUISITIONS

PATS

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

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

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

PPI

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

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

<PAGE>

NOTE 2 - ACQUISITIONS (CONTINUED)

The acquisition was funded with borrowings under the Company's senior
credit facility as described in Note 5 and $12,500,000 of proceeds from the sale
of common stock as described in Note 7.

CUSTOM WOODWORK - SUBSEQUENT EVENT

On August 5, 1999 the Company acquired substantially all of the assets,
subject to accounts payable and accrued expenses assumed, of Custom Woodwork &
Plastics, Inc. Custom Woodwork is a Georgia-based designer and manufacturer of
interior furniture components for middle- and high-end corporate aircraft.

The total purchase price was $13,750,000, plus $2,000,000 of contingent
consideration payable over two years based on future attainment of defined
performance criteria. The total purchase price includes an estimated $500,000 of
acquisition related costs. The acquisition will be accounted for as a purchase
and the estimated $11,000,000 difference between the purchase price and the fair
value of the net assets acquired will be recorded as goodwill and amortized on a
straight-line basis over thirty years. The amount of contingent consideration
paid in the future, if any, will increase goodwill and will be amortized
prospectively over the remaining period of the initial thirty-year term. The
purchase price allocation is preliminary and may change upon the completion of
the final valuation of the net assets acquired. The Company's consolidated
financial statements will include Custom Woodwork's financial position and its
results of operations for periods subsequent to the acquisition date.

The acquisition was funded with borrowings under the Company's senior
credit facility as described in Note 5.

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

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

<TABLE>
<CAPTION>
PRO FORMA FOR THE
SIX MONTHS ENDED
JUNE 30,
-------------------
1999 1998
--------- ---------
(IN THOUSANDS)
<S> <C> <C>

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

</TABLE>

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

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

<TABLE>
<CAPTION>
PRO FORMA FOR THE
SIX MONTHS ENDED
JUNE 30,
-------------------
1999 1998
--------- ---------
<S> <C> <C>
Boeing .................................................... 24.2% 24.0%
Textron ................................................... 15.2% 10.0%

</TABLE>

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

<PAGE>

NOTE 4 - INVENTORIES

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

<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
1999 1998
----------- -----------
(UNAUDITED)
<S> <C> <C>
Raw material .............................................. $ 27,362 $ 19,221
Work-in process ........................................... 13,979 7,231
Finished goods ............................................ 7,982 7,829
----------- -----------
Total inventories ...................................... $ 49,323 $ 34,281
=========== ===========

</TABLE>

NOTE 5 - BORROWINGS

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

<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
1999 1998
----------- ------------
(UNAUDITED)
<S> <C> <C>
Senior credit facility
$25 million working capital revolving line of credit ... $ 3,000 $ 5,800
$25 million acquisition revolving line of credit ....... - -
Term loans ............................................. 169,388 79,888
12% senior subordinated notes ............................. 100,000 100,000
Capital lease obligations and equipment term financing .... 1,931 367
Other .................................................... 557 427
----------- -----------
Total long-term obligations ............................ 274,876 186,482
Less current portion ................................... (3,368) (1,529)
----------- -----------
Long-term obligations, less current portion .......... $ 271,508 $ 184,953
=========== ===========
</TABLE>

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

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

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

NOTE 6 - INCOME TAXES

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

<PAGE>

NOTE 7 - CAPITAL STRUCTURE

MANDATORILY REDEEMABLE PREFERRED STOCK

During the six months ended June 30, 1999, the liquidation preference of
the preferred stock increased by $2,556,000 to reflect non-cash dividend
accretion. The dividend accretion was charged to additional paid-in capital. The
preferred stock has a total liquidation value of $38,440,000 as of June 30,
1999.

COMMON STOCK

In April 1999, the Company increased the number of authorized common shares
to 4,500,000 shares. In conjunction with the PPI acquisition financing, the
Company sold 543,478 shares to DLJ and its affiliates at $23.00 per share.

NOTE 8 - CONSOLIDATED STATEMENTS OF CASH FLOWS

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

<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE 30,
--------------------------
1998
1999 (PREDECESSOR)
----------- -----------
(UNAUDITED) (UNAUDITED)
<S> <C> <C>
1999 and 1998 acquisitions
Fair value of assets acquired .......................... $ 117,528 $ 91,575
Liabilities assumed .................................... (15,308) (4,569)
----------- -----------
Cash paid ............................................ 102,220 87,006
Less cash acquired ................................... (2,245) (1,262)
----------- -----------
Net cash paid for 1999 and 1998 acquisitions ....... 99,975 85,744

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

</TABLE>

NOTE 9 - SUPPLEMENTAL CONDENSED CONSOLIDATING FINANCIAL INFORMATION

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

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

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

<PAGE>

NOTE 9 - SUPPLEMENTAL CONDENSED CONSOLIDATING FINANCIAL INFORMATION (CONTINUED)

BALANCE SHEETS

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

<S> <C> <C> <C> <C> <C>
ASSETS

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

Property and equipment, net ....................... 1,239 32,176 2,255 - 35,670
Other assets, principally intangibles, net ........ 14,172 280,586 12,573 - 307,331
Investments in subsidiaries ....................... 345,752 20,516 - (366,268)(1) -
Intercompany receivables .......................... 44,210 331 4,039 (48,580)(2) -
----------- ----------- ---------- ----------- -----------
Total assets ................................. $ 411,621 $ 427,317 $ 22,325 $ (414,848) $ 446,415
=========== =========== ========== =========== ===========

LIABILITIES, MANDATORILY REDEEMABLE PREFERRED STOCK AND STOCKHOLDERS' EQUITY

Current liabilities
Short-term obligations ......................... $ 3,048 $ 293 $ 516 $ - $ 3,857
Other current liabilities ...................... 11,251 28,410 1,494 - 41,155
----------- ----------- ---------- ----------- -----------
Total current liabilities .................... 14,299 28,703 2,010 - 45,012
----------- ----------- ---------- ----------- -----------
Long-term liabilities
Long-term obligations .......................... 270,790 671 47 - 271,508
Intercompany payables .......................... 873 47,376 331 (48,580)(2) -
Other long-term liabilities .................... 15,861 4,815 557 - 21,233
----------- ----------- ---------- ----------- -----------
Total long-term liabilities .................. 287,524 52,862 935 (48,580) 292,741
----------- ----------- ---------- ----------- -----------
Mandatorily redeemable preferred stock ............ 38,440 - - - 38,440
----------- ----------- ---------- ----------- -----------
Stockholders' equity (deficit)
Paid-in capital ................................ 74,109 286,635 15,440 (302,075)(1) 74,109
Retained earnings (deficit) .................... (2,751) 59,117 5,076 (64,193)(1) (2,751)
Accumulated other comprehensive
income (loss) ................................ - - (1,136) - (1,136)
----------- ----------- ---------- ----------- -----------
Total stockholders' equity (deficit) ......... 71,358 345,752 19,380 (366,268) 70,222
----------- ----------- ---------- ----------- -----------
Total liabilities, mandatorily redeemable
preferred stock and stockholders' equity . $ 411,621 $ 427,317 $ 22,325 $ (414,848) $ 446,415
=========== =========== ========== =========== ===========

</TABLE>

9
<PAGE>

NOTE 9 - SUPPLEMENTAL CONDENSED CONSOLIDATING FINANCIAL INFORMATION (CONTINUED)

BALANCE SHEETS (CONTINUED)

<TABLE>
<CAPTION>
DECEMBER 31, 1998
----------------------------------------------------------------------
DECRANE GUARANTOR NON-GUARANTOR CONSOLIDATING CONSOLIDATED
HOLDINGS CO. SUBSIDIARIES SUBSIDIARIES ADJUSTMENTS TOTAL
----------- ------------ ------------ ------------- ------------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
ASSETS

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

Property and equipment, net ....................... 272 26,170 1,718 - 28,160
Other assets, principally intangibles, net ........ 11,753 200,383 13,842 - 225,978
Investments in subsidiaries ....................... 250,366 20,114 - (270,480)(1) -
Intercompany receivables .......................... 39,012 2,091 3,622 (44,725)(2) -
----------- ----------- ---------- ----------- -----------
Total assets ................................. $ 310,927 $ 311,955 $ 22,898 $ (315,205) $ 330,575
=========== =========== ========== =========== ===========

LIABILITIES, MANDATORILY REDEEMABLE PREFERRED STOCK AND STOCKHOLDERS' EQUITY

Current liabilities
Short-term obligations ......................... $ 892 $ 628 $ 292 $ - $ 1,812
Other current liabilities ...................... 10,573 16,651 1,174 - 28,398
----------- ----------- ---------- ----------- -----------
Total current liabilities .................... 11,465 17,279 1,466 - 30,210
----------- ----------- ---------- ----------- -----------

Long-term liabilities
Long-term obligations .......................... 184,822 131 - - 184,953
Intercompany payables .......................... 873 43,521 331 (44,725)(2) -
Other long-term liabilities .................... 16,278 658 713 - 17,649
----------- ----------- ---------- ----------- -----------
Total long-term liabilities .................. 201,973 44,310 1,044 (44,725) 202,602
----------- ----------- ---------- ----------- -----------

Mandatorily redeemable preferred stock ............ 35,884 - - - 35,884
----------- ----------- ---------- ----------- -----------

Stockholders' equity (deficit)
Paid-in capital ................................ 64,173 210,787 15,440 (226,227)(1) 64,173
Retained earnings (deficit) .................... (2,568) 39,579 4,674 (44,253)(1) (2,568)
Accumulated other comprehensive
income (loss) ................................ - - 274 - 274
----------- ----------- ---------- ----------- -----------
Total stockholders' equity (deficit) ......... 61,605 250,366 20,388 (270,480) 61,879
----------- ----------- ---------- ----------- -----------

Total liabilities, mandatorily redeemable
preferred stock and stockholders' equity . $ 310,927 $ 311,955 $ 22,898 $ (315,205) $ 330,575
=========== =========== ========== =========== ===========

</TABLE>

<PAGE>

NOTE 9 - SUPPLEMENTAL CONDENSED CONSOLIDATING FINANCIAL INFORMATION (CONTINUED)

STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE 30, 1999 (UNAUDITED)
---------------------------------------------------------------------
DECRANE GUARANTOR NON-GUARANTOR CONSOLIDATING CONSOLIDATED
HOLDINGS CO. SUBSIDIARIES SUBSIDIARIES ADJUSTMENTS TOTAL
------------ ------------ ------------- ------------- ------------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Revenues .......................................... $ - $ 110,320 $ 6,247 $ (3,969)(3) $ 112,598
Cost of sales ..................................... - 74,933 5,010 (3,969)(3) 75,974
------------ ------------ ------------ ---------- ------------
Gross profit ...................................... - 35,387 1,237 - 36,624

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

</TABLE>

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

</TABLE>

<PAGE>

NOTE 9 - SUPPLEMENTAL CONDENSED CONSOLIDATING FINANCIAL INFORMATION (CONTINUED)

STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE 30, 1999 (UNAUDITED)
---------------------------------------------------------------------
DECRANE GUARANTOR NON-GUARANTOR CONSOLIDATING CONSOLIDATED
HOLDINGS CO. SUBSIDIARIES SUBSIDIARIES ADJUSTMENTS TOTAL
------------ ------------ ------------- ------------- ------------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss) .............................. $ (183) $ 7,238 $ 496 $ (7,734) $ (183)
Adjustments to net income (loss)
Non-cash net income adjustments .............. 1,154 7,631 292 - 9,077
Equity in earnings of subsidiaries ........... (7,238) (496) - 7,734 (4) -
Changes in working capital ..................... 14,179 (17,583) (784) - (4,188)
----------- ----------- ---------- ----------- ----------
Net cash provided by (used for)
operating activities........................ 7,912 (3,210) 4 - 4,706
----------- ----------- ---------- ----------- ----------

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

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

12
<PAGE>

NOTE 9 - SUPPLEMENTAL CONDENSED CONSOLIDATING FINANCIAL INFORMATION (CONTINUED)

STATEMENTS OF CASH FLOWS (CONTINUED)

<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE 30, 1998 (PREDECESSOR--UNAUDITED)
---------------------------------------------------------------------
DECRANE
AIRCRAFT GUARANTOR NON-GUARANTOR CONSOLIDATING CONSOLIDATED
HOLDINGS CO. SUBSIDIARIES SUBSIDIARIES ADJUSTMENTS TOTAL
------------ ------------ ------------- ------------- ------------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income ..................................... $ 3,360 $ 3,995 $ 556 $ (4,551) $ 3,360
Adjustments to net income
Non-cash net income adjustments .............. (1,141) 2,314 415 - 1,588
Equity in earnings of subsidiaries ........... (3,995) (556) - 4,551 (4) -
Changes in working capital ..................... (1,563) (3,978) (227) - (5,768)
----------- ----------- ---------- ----------- ----------
Net cash provided by (used for)
operating activities........................ (3,339) 1,775 744 - (820)
----------- ----------- ---------- ----------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES
Cash paid for acquisitions, net of cash acquired (87,006) 1,262 - - (85,744)
Capital expenditures and other ................. (29) (699) (199) - (927)
----------- ----------- ---------- ----------- ----------
Net cash provided by (used for)
investing activities ....................... (87,035) 563 (199) - (86,671)
----------- ----------- ---------- ----------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES
Net revolving line of credit borrowings ........ 56,750 - - - 56,750
Net proceeds from sale of common stock ......... 34,815 - - - 34,815
Principal payments on long-term
debt and leases .............................. (2) (1,128) (26) - (1,156)
Deferred financing costs ....................... (311) - - - (311)
Other, net ..................................... 78 (96) (463) - (481)
----------- ----------- ---------- ----------- ----------
Net cash provided by (used for)
financing activities ....................... 91,330 (1,224) (489) - 89,617
----------- ----------- ---------- ----------- ----------
Effect of foreign currency translation on cash .... - - 5 - 5
----------- ----------- ---------- ----------- ----------
Net increase in cash and equivalents .............. 956 1,114 61 - 2,131
Cash and equivalents at beginning of period ....... 16 109 81 - 206
----------- ----------- ---------- ----------- ----------

Cash and equivalents at end of period ............. $ 972 $ 1,223 $ 142 $ - $ 2,337
=========== =========== ========== =========== ==========
</TABLE>

NOTE 10 - LITIGATION

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

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

<PAGE>

NOTE 10 - LITIGATION (CONTINUED)

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

The Company and its subsidiaries are also involved in other routine legal
and administrative proceedings incident to the normal conduct of business.
Management believes the ultimate disposition of these matters will not have a
material adverse effect on the Company's consolidated financial position,
results of operations or cash flows.

NOTE 11 - RECENTLY ISSUED ACCOUNTING PRONOUNCEMENT

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

<PAGE>

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

DeCrane Holdings is a holding company and does not have any material
operations other than its ownership of all of the capital stock of DeCrane
Aircraft. As described in the notes to the consolidated financial statements
included in this report, DeCrane Aircraft is the predecessor of DeCrane
Holdings, and the financial information presented for periods prior to the DLJ
acquisition is for DeCrane Aircraft.

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

- -- Avtech, acquired on June 26, 1998;

- -- Dettmers, acquired on June 30, 1998;

- -- PATS, acquired on January 22, 1999; and

- -- PPI, acquired on April 23, 1999.

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

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

INDUSTRY OUTLOOK AND TRENDS

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

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

RESULTS OF OPERATIONS

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

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

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

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

<PAGE>

The increases were offset by:

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

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

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

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

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

Offsetting the above favorable factors was:

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

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

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

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

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

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

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

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

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

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

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

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

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

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

<PAGE>

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

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

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

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

The increases were offset by:

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

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

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

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

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

Offsetting the above favorable factors was:

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

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

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

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

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

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

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

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

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

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

<PAGE>

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

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

LIQUIDITY AND CAPITAL RESOURCES

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

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

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

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

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

Net cash provided by financing activities was $101.2 million for the six
months ended June 30, 1999. In January 1999, the senior term loan facility
was amended to provide for an additional $20.0 million of term loan
borrowings. We used the funds obtained from the term loan borrowings, $14.9
million of borrowings under our acquisition revolving credit facility and a
$5.0 million customer advance to acquire all of the common stock of PATS.
In April 1999, we further amended our term loan facility and borrowed an
additional $70 million. We used $50.0 million of the proceeds to partially
fund the PPI acquisition and $20.0 million to repay borrowings under our
acquisition and working capital revolving credit facilities. In April 1999,
we sold 543,478 shares of common stock for $12.5 million and used the
proceeds to fund the remaining portion of the PPI acquisition. Subsequent to
June 30, 1999 we borrowed an additional $13.8 million under our acquisition
revolving credit facility to fund the Custom Woodwork acquisition.

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

RECENTLY ISSUED ACCOUNTING PRONOUNCEMENT

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

<PAGE>

COMPLIANCE OF KEY SYSTEMS WITH YEAR 2000 PERFORMANCE STANDARDS

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

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

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

- -- make and sell our products,

- -- order and receive raw material and supplies, and

- -- pay our employees and vendors.

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

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

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

<PAGE>

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

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

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

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

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

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

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

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

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

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

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

- -- liability and other claims asserted against us;

- -- the ability to attract and retain qualified personnel;

- -- labor disturbances; and

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

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

<PAGE>

INCORPORATION OF DOCUMENTS BY REFERENCE

We have filed with the Securities and Exchange Commission, and are
including within this report by referring to it here, our Registration Statement
No. 333-70363 on Form S-1 effective May 14, 1999, and the prospectus it
contains. That prospectus includes audited 1998 financial statements and risk
factors, which we refer to in this report.

You may read and copy any reports, statements or other information we file
at the SEC's reference room in Washington D.C. Please call the SEC at (202)
942-8090 for further information on the operation of the reference rooms. You
can also request copies of these documents, upon payment of a duplicating fee,
by writing to the SEC, or review our SEC filings on the SEC's EDGAR web site,
which can be found at http:\\www.sec.gov. You may also write or call us at our
corporate headquarters located at 2361 Rosecrans Avenue, Suite 180, El Segundo,
California 90245. Our telephone number is (310) 725-9123.

<PAGE>

PART II - OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

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

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

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

ITEM 5. OTHER INFORMATION

ACQUISITION OF PPI HOLDINGS, INC.

The acquisition is described in Note 2 to consolidated financial
statements included with this report and the Company's prospectus. The
prospectus is part of the Company's Registration Statement No. 333-70363 on
Form S-1 filed with the Securities and Exchange Commission effective May 14,
1999.

ACQUISITION OF CUSTOM WOODWORK & PLASTICS, INC.

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

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

<PAGE>

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

a. Exhibits

<TABLE>
<S> <C>
3.19.1 Articles of Incorporation of CWP Acquisition, Inc. **

3.19.2 By Laws of CWP Acquisition, Inc. **

20.1 Prospectus of DeCrane Aircraft Holdings, Inc. dated May 14, 1999 (incorporated by reference to the Company's
Registration Statement No. 333-70365 on Form S-1 effective May 14, 1999) *

21.1 List of Subsidiaries of Registrant **

27 Financial Data Schedule **
</TABLE>

- --------------
* Previously filed
** Filed herewith

b. Reports on Form 8-K

None.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.

DECRANE HOLDINGS CO.
(Registrant)

August 6, 1999 By: /s/ THOMPSON DEAN
---------------------------------------------
Name: Thompson Dean
Title: Chairman of the Board of Directors,
President and Treasurer
(principal accounting officer)

<PAGE>

EXHIBIT 3.19.1

CERTIFICATE OF INCORPORATION

CWP ACQUISITION, INC.

* * * * *

1. The name of the corporation is CWP Acquisition, Inc.

2. The address of its registered office in the State of Delaware is
Corporation Trust Center, 1209 Orange Street in the City of Wilmington,
County of New Castle. The name of its registered agent at such address is The
Corporation Trust Company.

3. The total number of shares of stock which the corporation shall have
authority to issue is 1,000; all of such shares shall have $.01 par value.

To engage in any lawful act or activity for which corporations may
be organized under the General Corporation Law of Delaware.

5. The name and mailing address of each incorporator is as follows:

NAME MAILING ADDRESS
---- ---------------
<S> <C>
T.L. Ford 1209 Orange Street, Wilmington, De. 19805
A.S. Gardner 1209 Orange Street, Wilmington, De. 19805
S.A. Clegg 1209 Orange Street, Wilmington, De. 19805
</TABLE>

The name and mailing address of each person who is to serve as a
director until the first annual meeting of the stockholders or until a
successor is elected and qualified, is as follows:

NAME MAILING ADDRESS
---- ---------------
<S> <C>
R. Jack DeCrane 2361 Rosecrans Ave #180 El Segundo, CA 90245
Charles H. Becker 2361 Rosecrans Ave #180 El Segundo, CA 90245
Richard J. Kaplan 2361 Rosecrans Ave #180 El Segundo, CA 90245
</TABLE>

6. The corporation is to have perpetual existence.

7. In furtherance and not in limitation of the powers conferred by
statute, the board of directors is expressly authorized:

To make, alter or repeal the by-laws of the corporation.

-1-

<PAGE>

8. Elections of directors need not be by written ballot unless the
by-laws of the corporation shall so provide.

9. The corporation reserves the right to amend, alter, change or repeal
any provision contained in this Certificate of Incorporation, in the manner
now or hereafter prescribed by statute, and all rights conferred upon
stockholders herein are granted subject to this reservation.

10. A director of the corporation shall not be personally liable to the
corporation or its stockholders for monetary damages for breach of fiduciary
duty as a director except for liability (i) for any breach of the director's
duty of loyalty to the corporation or its stockholders, (ii) for acts or
omissions not in good faith or which involve intentional misconduct or a
knowing violation of law, (iii) under Section 174 of the Delaware General
Corporation Law, or (iv) for any transaction from which the director derived
any improper personal benefit.

WE, THE UNDERSIGNED, being each of the incorporators hereinbefore named,
for the purpose of forming a corporation pursuant to the General Corporation
Law of the State of Delaware, do make this Certificate, hereby declaring and
certifying that this is our act and deed and the facts herein stated are
true, and accordingly have hereunto set our hands this 19th day of July, 1999.

/s/ T.L. FORD
----------------------------
T.L. Ford

/s/ A.S. GARDNER
----------------------------
A.S. Gardner

/s/ S.A. CLEGG
----------------------------
S.A. Clegg

-2-

<PAGE>

EXHIBIT 3.19.2
BYLAWS
OF
CWP ACQUISITION, INC.

ARTICLE 1 - Offices

Section 1.1 REGISTERED OFFICE. The registered office of the
Corporation shall be in the City of Wilmington, County of New Castle, State
of Delaware.

Section 1.2 OTHER OFFICES. The Corporation may also have offices at
such other places both within and without the State of Delaware as the Board
of Directors may from time to time determine or the business of the
Corporation may require.

ARTICLE 2 - Meetings of Stockholders

Section 2.1 ANNUAL MEETINGS. Annual meetings of stockholders shall be
held on a date set by the Board of Directors in each year for the purpose of
electing directors and transacting such other proper business as may come
before the meeting.

Section 2.2 SPECIAL MEETINGS. Special meetings shall be held solely
for the purpose or purposes specified in the notice of meeting.

Section 2.3 TIME AND PLACE OF MEETINGS. Subject to the provisions of
Section 2.1 each meeting of stockholders shall be held on such date, at such
hour and at such place, either within or without the State of Delaware, as
shall be fixed by the Board of Directors or in the notice of the meeting or,
in the case of an adjourned meeting, as announced at the meeting at which the
adjournment is taken.

Section 2.4 NOTICE OF MEETINGS. A written notice of each meeting of
stockholders, stating the place, date and hour of the meeting and, in the
case of a special meeting, the purpose or purposes for which the meeting is
called, shall be given either personally or by mail to each stockholder
entitled to vote at the meeting. Unless otherwise provided by statute, the
notice shall be given not less than ten nor more than sixty days before the
date of the meeting and, if mailed, shall be deposited in the United States
mail, postage prepaid, directed to the stockholder at his address as it
appears on the records of the Corporation. No notice need be given to any
person with whom communication is unlawful, nor shall there be any duty to
apply for any permit or license to give notice to any such person. If the
time and place of an adjourned meeting of stockholders are announced at the
meeting at which the adjournment is taken, no notice need be given of the
adjourned meeting unless that adjournment is for more than thirty days or
unless, after the adjournment, a new record date is fixed for the adjourned
meeting.

Section 2.5 WAIVER OF NOTICE. Anything herein to the contrary
notwithstanding, notice of any meeting of stockholders need not be given to
any stockholder who in person or by proxy shall have waived in writing notice
of the meeting, either before or after such meeting, or who shall attend the
meeting in person or by proxy, unless he attends for the express purpose of
objecting, at the beginning of the meeting, to the transaction of any
business because the meeting is not lawfully called or convened.

Section 2.6 QUORUM AND MANNER OF ACTING. Subject to the provisions of
these bylaws, the certificate of incorporation and statutes as to the vote
that is required for a specified action, the presence in person or by proxy
of the holders of 50% of the outstanding shares of the Corporation entitled
to vote at any meeting of stockholders, plus one share, shall constitute a
quorum for the transaction of business, and the vote in person or by proxy of
the holders of a majority of the shares constituting such quorum shall be
binding on all stockholders of the Corporation. A majority of the shares
present in person or by proxy and entitled to vote may, regardless of whether

<PAGE>

or not they constitute a quorum, adjourn the meeting to another time and
place. Any business which might have been transacted at the original meeting
may be transacted at any adjourned meeting at which a quorum is present.

Section 2.7 VOTING. Stockholders shall be entitled to cumulative
voting at all elections of directors to the extent provided in or pursuant to
the certificate of incorporation. Stockholders may vote by proxy but no proxy
shall be voted or acted upon after three years from its date, unless the
proxy provides for a longer period.

Section 2.8 INSPECTION OF ELECTION.

(a) The Board of Directors shall appoint an inspector of election to
act at each meeting of stockholders and any adjournment thereof. If an
inspector of election is not so appointed, or the person appointed as
inspector fails or refuses to act, the chairman of the meeting shall appoint
an inspector of election.

(b) The inspector of election shall determine the outstanding stock of
the Corporation and the voting power of each class and series, the stock
represented at the meeting and the existence of a quorum, shall receive votes
or ballots, shall count and tabulate all votes and shall determine the
result; and in connection therewith, the inspector shall determine the
authority, validity and effect of proxies, hear and determine all challenges
and questions, and do such other acts as may be proper to conduct the
election or vote with fairness to all stockholders.

(c) The inspector of election shall make a report in writing of any
challenge or question or other matter determined by him and shall execute a
certificate of any fact found in connection therewith. Any such report or
certificate shall be filed with the record of the meeting.

Section 2.9 LIST OF STOCKHOLDERS. A complete list of the stockholders
entitled to vote at each meeting of stockholders, arranged in alphabetical
order, and showing the address and number of shares registered in the name of
each stockholder, shall be prepared and made available for examination during
regular business hours by any stockholder for any purpose germane to the
meeting. The list shall be available for such examination at the place where
the meeting is to be held for a period of not less than ten days prior to the
meeting and during the whole time of the meeting.

Section 2.10 ACTION WITHOUT A MEETING. Any action required to be
taken at any annual or special meeting of stockholders, or any action which
may be taken at any annual or special meeting of stockholders, may be taken
without a meeting, without prior notice and without a vote, if a consent in
writing, setting forth the action so taken, shall be signed by the holders of
outstanding stock having not less than the minimum number of votes that would
be necessary to authorize or take such action at a meeting at which all
shares entitled to vote thereon were present and voted.

ARTICLE 3 - Board of Directors

Section 3.1 NUMBER. The number of directors shall be no less than one
and no more than five, and shall be set by the Board of Directors by adoption
of a resolution with respect thereto.

Section 3.2 ORGANIZATION MEETINGS. As promptly as practicable after
each annual meeting of stockholders, an organization meeting of the Board of
Directors shall be held for the purpose of organization and the transaction
of other business.

Section 3.3 REGULAR MEETINGS. Regular meetings of the Board of
Directors may be held at such place and time as may be designated by the
Board.

Section 3.4 SPECIAL MEETINGS. Special meetings of the Board of
Directors may be called by the Chairman, the President, any three directors,
or, if less than three, the remaining directors.

<PAGE>

Section 3.5 BUSINESS OF MEETINGS. Except as otherwise expressly
provided in these bylaws, any and all business may be transacted at any
meeting of the Board of Directors; PROVIDED, that if so stated in the notice
of meeting, the business transacted at a special meeting shall be limited to
the purpose or purposes specified in the notice.

Section 3.6 TIME AND PLACE OF MEETINGS. Subject to the provisions of
Section 3.4 each meeting of the Board of Directors shall be held on such
date, at such hour and in such place as fixed by the Board or in the notice
or waivers of notice of the meeting or, in the case of an adjourned meeting,
as announced at the meeting at which the adjournment is taken.

Section 3.7 NOTICE OF MEETINGS. No notice need be given of any
organization or regular meeting of the Board of Directors for which the date,
hour and place have been fixed by the Board. Notice of the date, hour and
place of all other organization and regular meetings, and of all special
meetings, shall be given to each director personally, by telephone or
telegraph or by mail. If by mail, the notice shall be deposited in the United
States mail, postage prepaid, directed to the director at his residence or
usual place of business as the same appear on the books of the Corporation
not later than five days before the meeting. If given by telegraph, the
notice shall be directed to the director at his residence or usual place of
business as the same appear on the books of the Corporation not later than at
any time during the day before the meeting. If given personally or by
telephone, the notice shall be given not later than the day before the
meeting.

Section 3.8 WAIVER OF NOTICE. Anything herein to the contrary
notwithstanding, notice of any meeting of the Board of Directors need not be
given to any director who shall have waived in writing notice of the meeting,
either before or after the meeting, or who shall attend such meeting, unless
he attends for the express purpose of objecting, at the beginning of the
meeting, to the transaction of any business because the meeting is not
lawfully called or convened.

Section 3.9 ATTENDANCE BY TELEPHONE. Directors may participate in
meetings of the Board of Directors by means of conference telephone or
similar communications equipment by means of which all directors
participating in the meeting can hear one another, and such participation
shall constitute presence in person in the meeting.

Section 3.10 QUORUM AND MANNER OF ACTING. A majority of the total
number of directors at the time provided for pursuant to Section 3.1 shall
constitute a quorum for the transaction of business at any meeting of the
Board of Directors and, except as otherwise provided in these bylaws, in the
certificate of incorporation or by statute, the act of a majority of the
directors present at any meeting at which a quorum is present shall be the
act of the Board. A majority of the directors present at any meeting,
regardless of whether or not they constitute a quorum, may adjourn the meeting
to another time or place. Any business which might have been transacted at
the original meeting may be transacted at any adjourned meeting at which a
quorum is present.

Section 3.11 ACTION WITHOUT A MEETING. Any action which could be
taken at a meeting of the Board of Directors may be taken without a meeting
if all of the directors consent to the action in writing and the writing or
writings are filed with the minutes of the Board.

Section 3.12 RESIGNATION OF DIRECTORS. Any director may resign at
any time upon written notice to the Corporation. The resignation shall become
effective at the time specified in the notice and, unless otherwise provided
in the notice, acceptance of the resignation shall not be necessary to make
it effective.

Section 3.13 VACANCIES AND REMOVAL. Vacancies in the Board of
Directors, except vacancies created by removal of a director by the
shareholders, may be filled by a majority of the remaining directors, though
less than a quorum, or by a sole remaining director, and each director so
elected shall hold office until a successor is elected at an annual or a
special meeting of the shareholders in accordance with these Bylaws.

<PAGE>

The shareholders may elect a director or directors at any time to fill
any vacancy or vacancies not filled by the directors. If the Board of
Directors accepts the resignation of a director tendered to take effect at a
future time, the Board or the shareholders may elect a successor to take
office when the resignation is to become effective.

No reduction of the authorized number of directors shall have the
effect of removing any director prior to the expiration of such director's
term of office.

A vacancy or vacancies in the Board of Directors shall be deemed to
exist in case of the death, resignation or removal of any director, or if the
authorized number of directors is increased, or if the shareholders fail at
any annual or special meeting of shareholders at which any director or
directors are elected to elect the full authorized number of directors to be
voted for at that meeting. The Board may declare vacant the office of a
director who has been declared of unsound mind by an order of court or
convicted of a felony.

All the directors, or any individual director or directors, may be
removed from office, without cause, by the vote of the shareholders having
a majority of the voting power entitling them to elect directors in place of
those to be removed.

ARTICLE 4 - Committees of the Board of Directors

Section 4.1 EXECUTIVE COMMITTEE. By resolution adopted by an
affirmative vote of the majority of the whole Board of Directors, the Board
may appoint an Executive Committee consisting of the chief executive officer
of the Corporation, EX OFFICIO, and two or more other directors and, if
deemed desirable, one or more directors as alternate members who may replace
any absentee or disqualified member at any meeting of the Executive
Committee. If so appointed, the Executive Committee shall, when the Board is
not in session, have all the power and authority of the Board in the
management of the business and affairs of the Corporation not reserved to the
Board by Section 4.3 including, but not limited to, the power and authority to
declare dividends, to authorize the issuance of stock and to adopt a
certificate of ownership and merger. The Executive Committee shall keep a
record of its acts and proceedings and shall report the same from time to
time to the Board of Directors.

Section 4.2 OTHER COMMITTEES. By resolution adopted by an affirmative
vote of the majority of the whole Board of Directors, the Board may from time
to time appoint such other committees of the Board, consisting of one or more
directors and, if deemed desirable, one or more directors who shall act as
alternate members and who may replace any absentee or disqualified member at
any meeting of the committee, and may delegate to each such committee any of
the powers and authority of the Board in the management of the business and
affairs of the Corporation not reserved to the Board pursuant to Section 4.3.
Each such committee shall keep a record of its acts and proceedings.

Section 4.3 POWERS RESERVED TO THE BOARD. No committee of the Board
shall take any action to amend the certificate of incorporation (except that
a committee may, to the extent authorized in the resolution or resolutions
providing for the issuance of shares of stock adopted by the Board, fix any
of the preferences or rights of such shares relating to dividends,
redemption, dissolution, any distribution of assets of the Corporation or the
conversion into, or the exchange of such shares for, shares of any other
class or classes or any other series of the same or any other class or
classes of stock of the Corporation) or these bylaws, adopt any agreement to
merge or consolidate the Corporation, or recommend to the stockholders a
sale, lease or exchange of all or substantially all of the property and
assets of the Corporation, a dissolution of the Corporation or a revocation
of a dissolution of the Corporation; nor shall any committee of the Board
take any action which is required in these bylaws, in the certificate of
incorporation or by statute to be taken by a vote of a specified proportion
of the whole Board of Directors.

Section 4.4 ELECTION OF COMMITTEE MEMBERS; VACANCIES. So far as
practicable, members of the committees of the Board and their alternates (if
any) shall be appointed at each organization meeting of the Board of
Directors and, unless sooner discharged by an affirmative vote of the
majority of the whole Board, shall hold office until the next organization
meeting of the Board and until their respective successors are appointed. In
the

<PAGE>

absence or disqualification of any member of a committee of the Board, the
member or members (including alternates) present at any meeting of the
committee and not disqualified from voting, whether or not he or they
constitute a quorum, may unanimously appoint another director to act at a
meeting in place of any absent or disqualified member. Vacancies in committees
of the Board created by death, resignation or removal may be filled by an
affirmative vote of a majority of the whole Board of Directors.

Section 4.5 MEETINGS. Each committee of the Board may provide for
regular meetings of such committee. Special meetings of each committee may be
called by any two members of the committee (or, if there is only one member,
by that member in concert with the chief executive officer) or by the chief
executive officer of the Corporation. The provisions of Section 3 regarding
the business, time and place, notice and waivers of notice of meetings,
attendance at meetings and action without a meeting shall apply to each
committee of the Board, except that the references in such provisions to the
directors and the Board of Directors shall be deemed respectively to be
references to the members of the committee and to the committee.

Section 4.6 QUORUM AND MANNER OF ACTING. A majority of the members of
any committee of the Board shall constitute a quorum for the transaction of
business at meetings of the committee, and the act of a majority of the
members present at any meeting at which a quorum is present shall be the act
of the committee. A majority of the members present at any meeting,
regardless of whether or not they constitute a quorum, may adjourn the meeting
to another time or place. Any business which might have been transacted at
the original meeting may be transacted at any adjourned meeting at which a
quorum is present.

ARTICLE 5 - Officers

Section 5.1 ELECTION AND APPOINTMENT. The elected officers of the
Corporation shall consist of a Chief Executive Officer, one or more Vice
Presidents, a Treasurer, a Secretary and such other elected officers as shall
from time to time be designated by the Board of Directors. The Board shall
designate from among such elected officers a chief executive officer and a
chief financial officer of the Corporation, and may from time to time make,
or provide for, other designations it deems appropriate. The Board may also
appoint, or provide for the appointment of, such other officers and agents as
may from time to time appear necessary or advisable in the conduct of the
affairs of the Corporation. Any number of offices may be held by the same
person, except no person may at the same time be both the Chief Executive
Officer and the chief financial officer.

Section 5.2 DUTIES OF CHIEF EXECUTIVE OFFICER. The chief executive
officer of the Corporation shall preside at all meetings of stockholders and
(unless the Board of Directors elects a separate Chairman) at all meetings of
the Board of Directors and the Executive Committee and, except to the extent
otherwise provided in these bylaws or by the Board, shall have general
authority to execute any and all documents in the name of the Corporation and
general and active supervision and control of all of the business and affairs
of the Corporation. In the absence of the chief executive officer, his duties
shall be performed and his powers may be exercised by the chief financial
officer or by such other officer as shall be designated either by the chief
executive officer in writing or (failing such designation) by the Executive
Committee or Board of Directors.

Section 5.3 DUTIES OF OTHER OFFICERS. The other officers of the
Corporation shall have such powers and duties not inconsistent with these
bylaws as may from time to time be conferred upon them in or pursuant to
resolutions of the Board of Directors, and shall have such additional powers
and duties not inconsistent with such resolutions as may from time to time be
assigned to them by any competent superior officer. The Board shall assign to
one or more of the officers of the Corporation the duty to record the
proceedings of the meetings of the stockholders and the Board of Directors in
a book to be kept for that purpose.

Section 5.4 TERM OF OFFICE AND VACANCY. So far as practicable, the
elected officers shall be elected at each organization meeting of the Board,
and shall hold office until the next organization meeting of the Board and
until their respective successors are elected and qualified. If a vacancy
shall occur in any elected office, the Board

<PAGE>

of Directors may elect a successor for the remainder of the term. Appointed
officers shall hold office at the pleasure of the Board. Any officer may
resign by written notice to the Corporation.

Section 5.5 REMOVAL OF ELECTED OFFICERS. Elected officers may be
removed at any time, either for or without cause, by the affirmative vote of
a majority of the whole Board of Directors at a meeting called for that
purpose.

Section 5.6 COMPENSATION OF ELECTED OFFICERS. The compensation of all
elected officers of the Corporation shall be fixed from time to time by the
Board of Directors.

ARTICLE 6 - Shares and Transfer of Shares

Section 6.1 CERTIFICATES. Every stockholder shall be entitled to a
certificate signed by the Chairman or Vice Chairman of the Board of
Directors, or the Chief Executive Officer or the President, and by the Chief
Financial Officer or the Treasurer or an Assistant Treasurer, or the
Secretary or an Assistant Secretary of the Corporation, certifying the class
and number of shares owned by him in the Corporation; PROVIDED that, any and
all signatures on a certificate may be a facsimile. In case any officer,
transfer agent or registrar who has signed or whose facsimile signature has
been placed upon a certificate shall have ceased to be such officer, transfer
agent or registrar before such certificate is issued, it may be issued by the
Corporation with the same effect as if he or it were such officer, transfer
agent or registrar at the date of issue.

Section 6.2 TRANSFER AGENTS AND REGISTRARS. The Board of Directors
may, in its discretion, appoint one or more responsible banks or trust
companies in the City of New York or in such other city or cities (if any) as
the Board may deem advisable, from time to time, to act as transfer agents
and registrars of shares of the Corporation; and, when such appointments
shall have been made, no certificate for shares of the Corporation shall be
valid until countersigned by one of such transfer agents and registered by one
of such registrars.

Section 6.3 TRANSFERS OF SHARES. Shares of the Corporation may be
transferred by delivery of the certificates therefor, accompanied either by
an assignment in writing on the back of the certificates or by written power
of attorney to sell, assign and transfer the same, signed by the record
holder thereof, but no transfer shall affect the right of the Corporation to
pay any dividend upon the shares to the holder of record thereof, or to treat
the holder of record as the holder in fact thereof for all purposes, and no
transfer shall be valid, except between the parties thereto, until such
transfer shall have been made upon the books of the Corporation.

Section 6.4 LOST CERTIFICATES. In case any certificate for shares of
the Corporation shall be lost, stolen or destroyed, the Board of Directors,
in its discretion, or any transfer agent thereunto duly authorized by the
Board, may authorize the issue of a substitute certificate in place of the
certificate so lost, stolen or destroyed, any may cause such substitute
certificate to be countersigned by the appropriate transfer agent (if any)
and registered by the appropriate registrar (if any); PROVIDED that, in each
such case, the applicant for a substitute certificate shall furnish to the
Corporation and to such of its transfer agents and registrars as may require
the same, evidence to their satisfaction, in their discretion, of the loss,
theft or destruction of such certificate and of the ownership thereof, and
also such security or indemnity as may by them be required.

Section 6.5 RECORD DATES. In order that the Corporation may determine
the stockholders entitled to notice of or to vote at any meeting of
stockholders, or any adjournment thereof, or to express consent to action in
writing without a meeting, or entitled to receive payment of any dividend or
other distribution or allotment of any rights, or entitled to exercise any
rights in respect of any change, conversion or exchange of shares or for the
purpose of any other lawful action, the Board of Directors may fix, in
advance, a record date which shall be not more than sixty nor less than ten
days before the date of any meeting of stockholders, and not more than sixty
days prior to any other action. In such case, those stockholders, and only
those stockholders, who are stockholders of record on the date fixed by the
Board of Directors shall, notwithstanding any subsequent transfer of shares
on the books of the Corporation, be entitled to notice of and to vote at such
meeting of stockholders, or any adjournment thereof, or to

<PAGE>

express consent to such corporate action in writing without a meeting, or
entitled to receive payment of such dividend or other distribution or
allotment of rights, or entitled to exercise rights in respect of any such
change, conversion or exchange of shares or to participate in any such other
lawful action.

ARTICLE 7 - Miscellaneous

Section 7.1 FISCAL YEAR. The fiscal year of the Corporation shall be
fixed by resolution of the Board of Directors.

Section 7.2 SIGNATURE ON NEGOTIABLE INSTRUMENTS. All bills, notes,
checks or other instruments for the payment of money shall be signed or
countersigned in such manner as from time to time may be prescribed by
resolution of the Board of Directors.

Section 7.3 INDEMNIFICATION OF OFFICERS, DIRECTORS, EMPLOYEES, AGENTS
AND FIDUCIARIES; INSURANCE.

(a) The Corporation may indemnify, in accordance with and to the full
extent permitted by the laws of the State of Delaware, as such laws may be
amended from time to time, and shall so indemnify to the full extent
permitted by such laws, any person (and the heirs and legal representatives
of any such person) made or threatened to be made a party to any threatened,
pending, or completed action, suit, or proceeding, whether civil, criminal,
administrative, or investigative, by reason of the fact that such person is
or was a director, officer, employee, agent, or fiduciary of the Corporation
or any constituent corporation absorbed in a consolidation or merger,
or serves or served as such with another corporation, partnership, joint
venture, trust or other enterprise at the request of the Corporation or any
such constituent corporation.

(b) By action of the Board of Directors notwithstanding any interest of
the directors in such action, the Corporation may purchase and maintain
insurance in such amounts as the Board of Directors deems appropriate on
behalf of any person who is or was a director, officer, employee, agent or
fiduciary of the Corporation, or is or was serving at the request of the
Corporation as a director, officer, employee, agent or fiduciary of another
corporation, partnership, joint venture, trust or other enterprise against
any liability asserted against him and incurred by him in any such capacity,
or arising out of his status as such, whether or not the Corporation shall
have power to indemnify him against such liability under the provisions of
this Section.

ARTICLE 8 - Bylaw Amendments

Section 8.1 BY THE STOCKHOLDERS. These bylaws may be amended by the
stockholders at a meeting called for the purpose in any manner not
inconsistent with any provision of law or of the certificate of incorporation.

Section 8.2 BY THE DIRECTORS. These bylaws may be amended by the
affirmative vote of a majority of the whole Board of Directors in any manner
not inconsistent with any provision of law or of the certificate of
incorporation.

August, 1999

<PAGE>

EXHIBIT 21.1
LIST OF SUBSIDIARIES OF REGISTRANT

SUBSIDIARIES OF DECRANE HOLDINGS CO.

DECRANE AIRCRAFT HOLDINGS, INC., a Delaware corporation.

SUBSIDIARIES OF DECRANE AIRCRAFT HOLDINGS, INC.

AEROSPACE DISPLAY SYSTEMS, INC., a Delaware corporation.
AUDIO INTERNATIONAL, INC., an Arkansas corporation.
AUDIO INTERNATIONAL SALES, INC., a U. S. Virgin Islands corporation.
AVTECH CORPORATION, a Washington corporation.
CORY COMPONENTS, INC., a California corporation.
CWP ACQUISITION, INC., a Delaware corporation.
DETTMERS INDUSTRIES, INC., a Delaware corporation.
ELSINORE AEROSPACE SERVICES, INC., a California corporation.
ELSINORE ENGINEERING, INC., a Delaware corporation.
FLIGHT REFUELING, INC., a Maryland corporation.
HOLLINGSEAD INTERNATIONAL, INC., a California corporation.
HOLLINGSEAD INTERNATIONAL, LTD., a UK company.
PATRICK AIRCRAFT TANK SYSTEMS, INC., a Maryland corporation.
PATS, INC., a Maryland corporation.
PATS AIRCRAFT AND ENGINEERING CORPORATION, a Maryland corporation.
PATS SUPPORT, INC., a Maryland corporation.
PPI HOLDINGS, INC., a Kansas corporation.
PRECISION PATTERN, INC., a Kansas corporation.
TRI-STAR ELECTRONICS EUROPE S.A., a Swiss company.
TRI-STAR ELECTRONICS INTERNATIONAL, INC., a California corporation.
TRI-STAR TECHNOLOGIES, a California general partnership.

<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
ACCOMPANYING CONSOLIDATED FINANCIAL STATEMENTS AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000

<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> JUN-30-1999
<CASH> 3,489
<SECURITIES> 0
<RECEIVABLES> 45,436
<ALLOWANCES> 1,650
<INVENTORY> 49,323
<CURRENT-ASSETS> 103,414
<PP&E> 40,009
<DEPRECIATION> 4,339
<TOTAL-ASSETS> 446,415
<CURRENT-LIABILITIES> 45,012
<BONDS> 271,508
38,440
0
<COMMON> 34
<OTHER-SE> 70,188
<TOTAL-LIABILITY-AND-EQUITY> 446,415
<SALES> 112,598
<TOTAL-REVENUES> 112,598
<CGS> 75,974
<TOTAL-COSTS> 98,682
<OTHER-EXPENSES> (367)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 12,729
<INCOME-PRETAX> 1,554
<INCOME-TAX> 1,737
<INCOME-CONTINUING> (183)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (183)
<EPS-BASIC> 0
<EPS-DILUTED> 0

</TABLE>