<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------------
FORM 8-K / A
(AMENDMENT NO. 1)
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
June 30, 2000
Date of Report
(Date of earliest event reported)
----------------------
DECRANE HOLDINGS CO.
(Exact name of registrant as specified in its charter)
DELAWARE 333-70363 13-4019703
State or other jurisdiction (Commission File Number) (I.R.S. Employer
of incorporation) 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)
----------------------
<PAGE>
EXPLANATORY NOTE
On July 13, 2000, DeCrane Holdings Co. filed a Form 8-K describing our
acquisition of ERDA, Inc. on June 30, 2000. At the time of the filing, certain
of the financial statements of ERDA compliant with Regulation S-X were not yet
available. As a result, the pro forma consolidated financial information
required by the Securities Exchange Act of 1934 could not be prepared. The
purpose of this Form 8-K / A is to amend our initial filing with respect to the
ERDA acquisition and provide the required audited financial statements and pro
forma financial information reflecting the acquisition.
DOCUMENTS REFERRED TO IN THIS REPORT
DeCrane Holdings has filed documents with the Securities and Exchange
Commission that we refer to in this report. The documents we refer to and the
information they contain are described below.
- Our Form 10-K for the year ended December 31, 1999. The Form 10-K includes
our audited 1999 financial statements and descriptions of companies we
acquired during 1999.
- Our Form 10-Q for the three months ended March 31, 2000. The Form 10-Q
includes our unaudited financial statements for the three months ended
March 31, 2000.
- Our Form 8-K / A (Amendment No. 1) dated December 17, 1999. Exhibit 20.2 of
the Form 8-K contains our prospectus dated February 10, 2000 and includes
audited financial statements of the companies we acquired during 1999.
- Our Form 8-K and Form 8-K / A (Amendment No. 1) dated May 11, 2000. The
Form 8-K's includes information about our May 2000 acquisition of Carl
Booth, including its audited financial statements.
- Our Form 8-K dated June 30, 2000. The Form 8-K includes information about
our June 2000 acquisition of ERDA, which we are amending, in part, in this
Form 8-K / A (Amendment No. 1).
You may read and copy any reports, statements or other information we file
at the SEC's reference room in Washington D.C. Please call the SEC at (202)
942-8090 for further information on the operation of the reference rooms. You
can also request copies of these documents, upon payment of a duplicating fee,
by writing to the SEC, or review our SEC filings on the SEC's EDGAR web site,
which can be found at http:\\www.sec.gov. You may also write or call us at our
corporate office located at 2361 Rosecrans Avenue, Suite 180, El Segundo,
California 90245. Our telephone number is (310) 725-9123.
ITEM 5. OTHER EVENTS
PRIVATE PLACEMENT OF SECURITIES
The ERDA acquisition was funded, in part, with $25.0 million of proceeds
from the sale of DeCrane Aircraft 16% preferred stock and warrants to purchase
139,257 shares of DeCrane Holdings common stock at $0.01 per share. Documents
pertaining to the private placement of these securities are filed as exhibits to
this Form 8-K / A (Amendment No. 1).
REORGANIZATION
Two of our subsidiaries were reorganized as limited liability
companies. The certificates of formation and operating agreements are filed
as exhibits to this Form 8-K / A (Amendment No. 1).
1
<PAGE>
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial statements of businesses acquired.
Our Form 8-K filed on July 13, 2000 is hereby amended by deleting the
paragraph in Item 7(a) and replacing it with the following:
<TABLE>
<CAPTION>
<S> <C>
Consolidated financial statements of ERDA, Inc. are attached hereto as follows:
PAGE
AUDITED FINANCIAL STATEMENTS
Report of Independent Accountants ......................................................................... F-1
Consolidated Balance Sheets as of June 30, 1998 and 1999 .................................................. F-2
Consolidated Statements of Income for the years ended June 30, 1998 and 1999 .............................. F-3
Consolidated Statements of Stockholders' Equity (Deficit) for years ended June 30, 1998 and 1999 .......... F-4
Consolidated Statements of Cash Flows for the years ended June 30, 1998 and 1999 .......................... F-5
Notes to the Consolidated Financial Statements ............................................................ F-6
UNAUDITED INTERIM FINANCIAL STATEMENTS
Consolidated Balance Sheets as of June 30, 1999 and unaudited March 31, 2000 .............................. F-15
Unaudited Consolidated Statements of Income for the nine months ended March 31, 1999 and 2000 ............. F-16
Unaudited Consolidated Statements of Stockholders' Equity (Deficit) for the
nine months ended March 31, 2000 ........................................................................ F-17
Unaudited Consolidated Statements of Cash Flows for the nine months ended March 31, 1999 and 2000 ......... F-18
Condensed Notes to the Unaudited Consolidated Financial Statements ........................................ F-19
</TABLE>
(b) Pro forma financial information.
Our Form 8-K filed on July 13, 2000 is hereby amended by deleting the
paragraph in Item 7(b) and replacing it with the following:
Unaudited pro forma consolidated financial information reflecting our
acquisition of ERDA, Inc., including related explanatory notes, are attached
hereto as follows:
<TABLE>
<CAPTION>
PAGE
---------
<S> <C>
Basis of Presentation ..................................................................................... P-1
Unaudited Pro Forma Consolidated Balance Sheet as of March 31, 2000 ....................................... P-2
Unaudited Pro Forma Consolidated Statement of Operations for the:
Year ended December 31, 1999 ............................................................................ P-3
Three months ended March 31, 2000 ....................................................................... P-4
Notes to Unaudited Pro Forma Consolidated Financial Data .................................................. P-5
</TABLE>
2
<PAGE>
(c) Exhibits.
<TABLE>
<CAPTION>
Exhibit
NO. EXHIBIT DESCRIPTION
----------- ---------------------------------------------------------------------------------------------
<S> <C>
3.3.1 Certificate of Formation and Certificate of Merger for Aerospace Display Systems, LLC **
3.3.2 Limited Liability Company Operating Agreement for Aerospace Display Systems, LLC **
3.19.1 Certificate of Formation and Certificate of Merger for Custom Woodwork & Plastics, LLC **
3.19.2 Limited Liability Company Operating Agreements for Custom Woodwork & Plastics, LLC **
3.26.1 Restated Articles of Incorporation of ERDA, Inc. **
3.26.2 Bylaws of ERDA, Inc. (formerly ERDA Acquisition Co., Inc.) **
4.3.1 Form of Class B Warrant for the Purchase of Common Stock of DeCrane Holdings Co. **
4.5.1 Amendment No. 1 to the Certificate of Designations, Preferences and Rights of 14% Senior
Redeemable Exchangeable Preferred Stock Due 2008, effective June 29, 2000 **
10.1 Securities Purchase Agreement dated as of June 30, 2000 among DeCrane Aircraft Holdings,
Inc., DeCrane Holdings Co. and the purchasers named therein **
10.2 Amended and Restated Investors' Agreement dated as of June 30,
2000 by and among DeCrane Holdings Co., DeCrane Aircraft
Holdings, Inc. and the stockholders named therein **
21.1 List of Subsidiaries of Registrant **
</TABLE>
-----------------------
* Previously filed
** Filed herewith
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
DECRANE HOLDINGS CO.
(Registrant)
August 2, 2000 By: /s/ RICHARD J. KAPLAN
----------------------------------
Name: Richard J. Kaplan
Title: Assistant Secretary and
Assistant Treasurer
(chief accounting officer)
3
<PAGE>
FINANCIAL STATEMENTS OF BUSINESS ACQUIRED
REPORT OF INDEPENDENT ACCOUNTANTS
Board of Directors
ERDA, Inc. and Subsidiary
We have audited the consolidated balance sheets of ERDA, Inc. and
Subsidiary as of June 30, 1999 and 1998, and the related consolidated statements
of income, stockholders' equity (deficit) and cash flows for the years then
ended. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with auditing standards generally
accepted in the United States. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audit provides a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of ERDA, Inc. and
Subsidiary as of June 30, 1999 and 1998, and the consolidated results of their
operations and their consolidated cash flows for the years then ended, in
conformity with accounting principles generally accepted in the United States.
GRANT THORNTON LLP
Appleton, Wisconsin
August 18, 1999
F-1
<PAGE>
ERDA, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
JUNE 30,
------------------------
1998 1999
----------- -----------
<S> <C> <C>
ASSETS
Current assets
Cash ........................................................................................ $ 64 $ 29
Accounts receivable, net ..................................................................... 2,633 4,938
Inventories .................................................................................. 4,731 5,548
Deferred income taxes ........................................................................ - 133
Other current assets ......................................................................... 76 53
----------- -----------
Total current assets ....................................................................... 7,504 10,701
Property, plant and equipment, net .............................................................. 3,803 4,301
Other assets, principally intangibles, net ...................................................... 453 2,154
----------- -----------
Total assets ............................................................................. $ 11,760 $ 17,156
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Current portion of long-term debt ............................................................ $ 645 $ 2,016
Accounts payable.............................................................................. 1,311 1,044
Accrued liabilities .......................................................................... 1,128 1,290
Income taxes payable ......................................................................... - 297
----------- -----------
Total current liabilities .................................................................. 3,084 4,647
Long-term debt .................................................................................. 6,443 9,215
Deferred income taxes ........................................................................... - 20
Other long-term liabilities ..................................................................... 268 366
----------- -----------
Commitments and contingencies (Note 12)
Stockholders' equity
Common stock, no par value, 10,000,000 shares authorized; 5,300,746 shares
issued and outstanding at June 30, 1998 and 1999 ........................................... 2,915 2,915
Additional paid-in capital ................................................................... 1,346 1,346
Stock purchase plan notes receivable ......................................................... (191) (191)
Accumulated deficit .......................................................................... (2,105) (1,162)
----------- -----------
Total stockholders' equity ................................................................. 1,965 2,908
----------- -----------
Total liabilities and stockholders' equity ............................................... $ 11,760 $ 17,156
=========== ===========
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements.
F-2
<PAGE>
ERDA, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME
(IN THOUSANDS)
<TABLE>
<CAPTION>
YEAR ENDED
JUNE 30,
------------------------
1998 1999
----------- -----------
<S> <C> <C>
Sales ........................................................................................... $ 19,881 $ 23,918
Cost of sales ................................................................................... 15,678 18,357
----------- -----------
Gross profit ............................................................................. 4,203 5,561
----------- -----------
Operating expenses
Selling expenses ............................................................................. 646 913
General and administrative expenses .......................................................... 1,715 2,096
----------- -----------
Total operating expenses ................................................................... 2,361 3,009
----------- -----------
Income from operations ................................................................... 1,842 2,552
Other expenses
Interest expense ............................................................................. 828 1,053
Minority interest in earnings of subsidiary .................................................. - 28
Other expenses ............................................................................... 73 192
----------- -----------
Income before provision for income taxes ........................................................ 941 1,279
Provision for income taxes ...................................................................... 1 336
----------- -----------
Net income ...................................................................................... $ 940 $ 943
=========== ===========
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements.
F-3
<PAGE>
ERDA, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
(IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
STOCK
COMMON STOCK ADDITIONAL PURCHASE
------------------------ PAID-IN PLAN NOTES ACCUMULATED
SHARES AMOUNT CAPITAL RECEIVABLE DEFICIT TOTAL
----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Balance, July 1, 1997 ...................... 4,689,361 $ 2,406 $ 121 $ (191) $ (3,045) $ (709)
Net proceeds from the issuance of common
stock ................................... 611,385 509 - - - 509
Proceeds from issuance of 699,383
common stock warrants ................... - - 1,225 - - 1,225
Net income ................................. - - - - 940 940
----------- ----------- ----------- ----------- ----------- -----------
Balance, June 30, 1998 ..................... 5,300,746 2,915 1,346 (191) (2,105) 1,965
Net income ................................. - - - - 943 943
----------- ----------- ----------- ----------- ----------- -----------
Balance, June 30, 1999 ..................... 5,300,746 2,915 1,346 (191) (1,162) 2,908
=========== =========== =========== =========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements.
F-4
<PAGE>
ERDA, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
YEAR ENDED
JUNE 30,
------------------------
1998 1999
----------- -----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income ................................................................................... $ 940 $ 943
Adjustments to reconcile net income to net cash provided by
(used for) operating activities
Depreciation and amortization ............................................................ 687 881
Minority interest in earnings of subsidiary .............................................. - 28
Deferred income taxes .................................................................... - (113)
Loss on sale of property, plant and equipment ............................................ 6 -
Changes in assets and liabilities
Accounts receivable .................................................................... (105) (2,305)
Inventories ............................................................................ (425) 428
Other current assets ................................................................... (38) 23
Accounts payable ....................................................................... (174) (267)
Accrued liabilities .................................................................... (1,846) 162
Income taxes payable ................................................................... - 297
Deferred compensation .................................................................. 49 70
----------- -----------
Cash provided by (used for) operating activities ..................................... (906) 147
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures ......................................................................... (883) (897)
Purchase of net assets in acquisition ........................................................ - (3,100)
Increase in other assets ..................................................................... (10) (86)
----------- -----------
Cash used for investing activities ................................................... (893) (4,083)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES
Principal payments on long-term debt and capital leases ...................................... (2,026) (691)
Proceeds from issuance of long-term debt ..................................................... 2,650 4,592
Proceeds from issuance of common stock warrants .............................................. 1,225 -
Proceeds from issuance of common stock ....................................................... 359 -
Debt issuance costs .......................................................................... (378) -
----------- -----------
Cash provided by financing activities ................................................ 1,830 3,901
----------- -----------
Net increase (decrease) in cash ................................................................. 31 (35)
Cash at beginning of period ..................................................................... 33 64
----------- -----------
Cash at end of period ........................................................................... $ 64 $ 29
=========== ===========
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements.
F-5
<PAGE>
ERDA, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
ERDA, Inc. and subsidiary (the "Company") are integrated engineering and
manufacturing companies providing seating and other aids of traveling comfort to
business, government and consumer markets throughout the United States and the
world. The Company also derives a portion of its revenues from providing
subcontracting services to a major medical equipment manufacturer.
BASIS OF PRESENTATION
The consolidated financial statements include the accounts of ERDA, Inc.
and its 80% owned subsidiary, Trident Products, Inc. All significant
intercompany balances and transactions have been eliminated. Certain
reclassifications have been made to the financial statements to conform to the
current presentation.
The preparation of the financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period.
Actual results could differ from those estimates.
INVENTORIES
Inventories are stated at the lower of cost or market. Cost is determined
by the first-in, first-out (FIFO) method.
PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment are stated at cost, less accumulated
depreciation and amortization. Depreciation is provided for in amounts
sufficient to relate the cost of depreciable assets to operations over their
estimated service lives. The estimated service lives used in determining
depreciation are: equipment - 3 to 12 years; furniture and fixtures - 3 to 10
years; shop tools - 3 to 10 years; demonstrator models - 5 to 10 years; and
building and leasehold improvements - 5 to 40 years.
The straight-line method of depreciation is followed for financial
statement purposes, while accelerated methods are used for tax purposes.
INTANGIBLES
Debt issuance costs are being amortized on a straight-line basis over the
terms of the related long-term obligations.
Goodwill obtained in 1999 as a result of the purchase of the assets of
Derlan, Inc. will be amortized on a straight-line basis over 15 years.
INCOME TAXES
The Company accounts for income taxes on the asset and liability method, as
provided by Financial Accounting Standards No. 109. Under the asset and
liability method, deferred income taxes are recognized for the tax consequences
of "temporary differences" by applying enacted statutory tax rates applicable to
future years to differences between the financial statement carrying amounts and
the tax bases of existing assets and liabilities. The effect on deferred taxes
of a change in tax rates is recognized in income in the period that includes the
enactment date.
F-6
<PAGE>
ERDA, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
STOCK OPTIONS
The Company has elected to follow Accounting Principles Board Opinion No.
25, Accounting for Stock Issued to Employees (APB 25) and related
interpretations in accounting for its employee stock options. Under APB 25,
because the exercise price of employee stock options equals the market price of
the underlying stock on the date of grant, no compensation expense is recorded.
The Company has adopted the disclosure-only provisions of Statement of Financial
Accounting Standards No. 123, Accounting for Stock-Based Compensation.
REVENUE RECOGNITION
Revenue is recognized by the Company when goods are shipped.
NOTE 2 - ACCOUNTS RECEIVABLE AND SIGNIFICANT CUSTOMERS
Accounts receivable is net of an allowance for doubtful accounts of $40,000
and $92,000 at June 30, 1998 and 1999, respectively.
Sales to customers representing 10% or more of net revenues consist of the
following:
<TABLE>
<CAPTION>
JUNE 30,
-------------------------
1998 1999
------------ ------------
<S> <C> <C>
Customer A ................................ 17.6% 24.0%
Customer B ................................ 10.9% Less than 10%
Customer C ................................ Less than 10% 12.3%
</TABLE>
NOTE 3 - INVENTORIES
Inventories are comprised of the following (amounts in thousands):
<TABLE>
<CAPTION>
JUNE 30,
------------------------
1998 1999
----------- -----------
<S> <C> <C>
Raw materials and finished components ..................... $ 3,629 $ 4,299
Work in process ........................................... 772 941
Finished goods ............................................ 330 308
----------- -----------
Total inventories ...................................... $ 4,731 $ 5,548
=========== ===========
</TABLE>
F-7
<PAGE>
ERDA, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 4 - PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment includes the following (amounts in
thousands):
<TABLE>
<CAPTION>
JUNE 30,
------------------------
1998 1999
----------- -----------
<S> <C> <C>
Land ............................................................................................ $ 24 $ 24
Equipment ....................................................................................... 2,890 3,033
Building and leasehold improvements ............................................................. 1,498 1,765
Furniture and fixtures .......................................................................... 1,019 1,639
Demonstrator models ............................................................................. 785 924
Shop tools ...................................................................................... 720 817
----------- -----------
Total cost ................................................................................... 6,936 8,202
Accumulated depreciation and amortization .................................................... (3,133) (3,901)
----------- -----------
Net property, plant and equipment .......................................................... $ 3,803 $ 4,301
=========== ===========
</TABLE>
Depreciation expense amounted to approximately $625,000 and $821,000 for
the years ended June 30, 1998 and 1999, respectively.
NOTE 5 - OTHER ASSETS
Other assets includes the following (amounts in thousands):
<TABLE>
<CAPTION>
JUNE 30,
------------------------
1998 1999
----------- -----------
<S> <C> <C>
Goodwill ........................................................................................ $ - $ 1,675
Debt issuance costs ............................................................................. 442 491
Other non-amortizable assets .................................................................... 38 124
----------- -----------
Total cost ................................................................................... 480 2,290
Accumulated amortization ..................................................................... (27) (136)
----------- -----------
Other assets, net .......................................................................... $ 453 $ 2,154
=========== ===========
</TABLE>
NOTE 6 - ACCRUED LIABILITIES
Accrued liabilities includes the following (amounts in thousands):
<TABLE>
<CAPTION>
JUNE 30,
------------------------
1998 1999
----------- -----------
<S> <C> <C>
Salaries and wages .............................................................................. $ 638 $ 653
Customer deposits ............................................................................... 70 247
Property, payroll and other taxes ............................................................... 126 109
Interest ........................................................................................ 140 72
Other ........................................................................................... 154 209
----------- -----------
Total accrued liabilities .................................................................... $ 1,128 $ 1,290
=========== ===========
</TABLE>
F-8
<PAGE>
ERDA, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 7 - INDEBTEDNESS
Long-term debt includes the following:
<TABLE>
<CAPTION>
JUNE 30,
------------------------
1998 1999
----------- -----------
(IN THOUSANDS)
<S> <C> <C>
Bank Debt Facility
Revolving credit ............................................................................. $ 2,490 $ 4,765
Machinery and equipment term loan ............................................................ 382 500
Real estate loan ............................................................................. 906 839
Term loan payable ............................................................................ - 800
Secured Term Loan ............................................................................... 1,416 1,640
Note payable to Derlan, Inc. in connection with the purchase by the Company of substantially
all the assets of Derlan, Inc.; secured by assets purchased; subordinated to bank loans;
interest at 8% through July 16, 1999 and 12% thereafter; due August 15, 1999 ............... - 750
interest at 12%; due June 2000 ............................................................. - 250
Capital lease obligations related to furniture, office equipment, and machinery
and equipment having a net book value of $948,000 at June 30, 1999; payable
in varying monthly installments of $365 to $7,140 including interest at 4.7% to 25.7%; final
payments in varying dates through August 2003 ................................................ 735 707
Unsecured term note payable to stockholder; interest payable monthly at prime
plus 1.25% (9% at June 30, 1999) with an effective interest rate of 22.4%
over the term of the note in connection with accretion for the detachable
warrants to purchase shares of common stock (Note 10); final payment due April 2003 .......... 400 421
Notes payable in varying monthly installments of $588 to $2,033, including
interest at 8% to 9.75%; collateralized by equipment; final payments in
varying dates through October 2002 ........................................................... 175 192
Note payable to the City of Peshtigo in monthly installments of $3,257, including interest at 5%;
collateralized by certain machinery and equipment and the personal guarantee of the
majority stockholder; final payment due January 2004 ......................................... 191 160
Note payable to the City of Peshtigo in monthly installments of $1,451, including interest at 7%;
collateralized by substantially all assets (subordinate to bank notes), certain machinery and
equipment and the personal guarantee of the majority stockholder; final payment due June 2005. 96 85
Note payable to the City of Peshtigo in monthly installments of $2,121, including interest
at 8%; collateralized by certain machinery and equipment; final payment due July 2001 ........ 70 49
Note payable to the City of Peshtigo in monthly installments of $866, including interest at 7%;
collateralized by certain machinery and equipment and the personal guarantee of the majority
stockholder; final payment due June 2005 ..................................................... 58 51
Note payable to the City of Peshtigo in monthly installments of $971, including interest at 8%;
collateralized by certain machinery and equipment; final payment due June 2001 ............... 31 22
Various loans paid in 1999 ...................................................................... 138 -
----------- -----------
Total long-term debt ......................................................................... 7,088 11,231
Less current maturities ...................................................................... (645) (2,016)
----------- -----------
Long-term debt, less current portion ....................................................... $ 6,443 $ 9,215
=========== ===========
</TABLE>
F-9
<PAGE>
ERDA, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 7 - INDEBTEDNESS (CONTINUED)
BANK DEBT FACILITY
The Company has a financing agreement with their bank. The debt facility,
which is secured by substantially all the assets of the Company, includes the
following:
- $6,000,000 revolving credit note, interest payable monthly at prime
plus .5% on eligible accounts receivable and inventory, due August
2002;
- $500,000 machinery and equipment term loan, monthly principal
installments of $5,952 plus interest at 8.25%, with balance due August
2002;
- $850,000 real estate loan, monthly principal installments of $4,660
plus interest at 8.25%, with balance due August 2002; and
- $800,000 special term loan, monthly principal installments of $33,333
plus interest at prime plus .5%, with balance due June 2001.
The terms of these financing agreements include provisions which require
the maintenance of certain tangible net worth, subordinated debt and debt to
tangible net worth plus subordinated debt levels. The financing agreements also
require that the Company obtain certain levels of profitability for its fiscal
year ended June 30, 1999 and for future periods, among other requirements. In
the event that these levels are not met, all liabilities due the bank are due
and payable immediately at the option of the bank.
SECURED TERM LOAN
In May of 1998, the Company secured a term loan in the face amount of
$2,500,000. The note bears a stated interest rate of 13.5%, with an effective
interest rate of 54.6% over the term of the note in connection with accretion
for the detachable warrants to purchase shares of common stock. The note is
secured by a second lien on substantially all the assets of the Company and is
subordinate to the bank notes. It matures in May 2003. In connection with this
loan, the Company issued to the lender a warrant, which allows for purchase of
7.0% of the diluted outstanding common stock as of May 1998 at $.01 per share.
On the second anniversary of the closing of the loan, additional shares will
accrue at 1% of diluted outstanding common stock as of May 1998 per year until
maturity or prepayment of the loan. For 30 days after maturity of the note, the
lender may put the warrant back to the Company for fair market value, if not
previously exercised (Note 10).
AGGREGATE MATURITIES
Current maturities of indebtedness at June 30, 1999 are as follows (amounts
in thousands):
<TABLE>
<CAPTION>
CAPITAL LEASE OBLIGATIONS
------------------------- NET PRESENT
AMOUNTS VALUE OF
NOTES MINIMUM REPRESENTING LONG-TERM
PAYABLE PAYMENTS INTEREST DEBT
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Year ending June 30,
2000............................................................ $ 1,678 $ 397 $ (59) $ 2,016
2001............................................................ 691 293 (23) 961
2002............................................................ 229 100 (3) 326
2003............................................................ 8,790 2 - 8,792
2004............................................................ 48 - - 48
Thereafter...................................................... 27 - - 27
----------- ----------- ----------- -----------
Total maturities ............................................. 11,463 792 (85) 12,170
Less future accretion of debt issued with stock warrants...... (939) - - (939)
----------- ----------- ----------- -----------
Total long-term debt ....................................... $ 10,524 $ 792 $ (85)$ 11,231
=========== =========== =========== ===========
</TABLE>
F-10
<PAGE>
ERDA, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 8 - INCOME TAXES
Deferred tax assets and liabilities are comprised of the following (amounts
in thousands):
<TABLE>
<CAPTION>
JUNE 30, 1998 JUNE 30, 1999
------------------------ ------------------------
SHORT-TERM LONG-TERM SHORT-TERM LONG-TERM
(LIABILITY) (LIABILITY) (LIABILITY) (LIABILITY)
ASSET ASSET ASSET ASSET
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Accounts receivable reserve ........................................... $ 14 $ - $ 31 $ -
Inventory obsolescence reserve ........................................ 82 - 77 -
Interest accrual ...................................................... 16 - - -
Accrued compensation .................................................. 8 - - -
Other, net ............................................................ 17 - 28 10
Accelerated depreciation .............................................. - (340) - (292)
Federal net operating loss carryforward ............................... - 207 - -
Federal research credits .............................................. - 128 - 91
Alternative minimum tax credits ....................................... - 74 103 -
Deferred compensation ................................................. - 85 - 163
State credit carryovers and net operating loss carryover,
net of federal tax impact .......................................... 32 11 - 8
----------- ----------- ----------- -----------
Gross deferred asset (liability) ................................. 169 165 239 (20)
Valuation allowance .............................................. (169) (165) (106) -
----------- ----------- ----------- -----------
Net deferred tax asset (liability) ............................. $ - $ - $ 133 $ (20)
=========== =========== =========== ===========
</TABLE>
The effective tax rate differs from the U.S. federal statutory rate
principally due to state income taxes and the increase in the valuation
allowance.
The valuation allowance was decreased by $228,000 during 1999 based on
management's reevaluation of the likelihood of realization.
For income tax purposes, the Company has the following items to
carryforward to reduce income taxes in future years through the year of
expiration indicated (amounts in thousands):
<TABLE>
<CAPTION>
FEDERAL FEDERAL STATE
RESEARCH JOBS RESEARCH
CREDIT CREDIT CREDIT
----------- ----------- -----------
<S> <C> <C> <C>
Year of expiration
2000 ................................................................ $ 48 $ 7 $ -
2001 ................................................................ 43 2 8
----------- ----------- -----------
Total ............................................................. $ 91 $ 10 $ 8
=========== =========== ===========
</TABLE>
In addition to the credits listed above, the Company has alternative
minimum tax (AMT) credit carryforwards of approximately $103,000. The AMT
credits do not expire and can be used when the Company's federal tax liability
exceeds the AMT liability.
F-11
<PAGE>
ERDA, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 9 - STOCK OPTIONS AND STOCK APPRECIATION RIGHTS
The Company has three nonqualified stock option plans for certain key
officers, outside directors and other key salaried employees. No compensation
expense related to stock option grants was recorded in 1998 and 1999 as the
option exercise prices were equal to fair market value on the date of grant.
1994 PLAN
The total shares available and granted on July 1, 1994, were 567,415. The
shares are available at a purchase price of $0.35066 per share and vest under
the stock option plan at various dates over a three-year period. On January 2,
1995, options to purchase 543,355 shares were exercised under a stock purchase
agreement. The stock purchase was financed by the Company through a note with
the employees at an annual interest rate of 5.75%. The interest and principal
are due the earlier of July 2004 or upon the sale or transfer of any portion of
the shares or termination of employment. The outstanding balance of the notes of
$191,000 at June 30, 1998 and 1999 has been recorded as a reduction of
stockholders' equity.
1997, 1998 AND 1999 PLANS
The total shares available and granted on July 15, 1997 were 277,800. The
shares are available at a purchase price of $1.75 per share and vest under the
stock option plan over a four-year period.
The total shares available and granted at various dates during 1998 were
70,000. The shares were available initially at a purchase price of $4.25 per
share; this was amended to $2.25 per share in January 1999. Vesting under the
plan varies, with all options fully vested within a four-year period.
The 1997, 1998 and 1999 plans are subject to the disclosure rules of SFAS
123, Accounting for Stock Based Compensation. Management has determined that the
impact of SFAS 123 on the net income and stockholders' equity was not material
as of and for the years ended June 30, 1998 and 1999.
STOCK APPRECIATION RIGHTS
The subsidiary has granted 145,000 shares in a stock appreciation rights
program. A $25,000 expense was recognized related to this program for the year
ended June 30, 1999.
NOTE 10 - STOCK WARRANTS
In November of 1997, the Company issued warrants to purchase common stock.
Proceeds amounted to $300,000. The warrants allow for conversion into 109,092 of
common shares solely at the discretion of the warrant holder at no cost. During
1998, 47,323 shares of common stock were issued under this agreement. The
warrants may be exercised at any time through their expiration date of December
2000.
In April of 1998, the Company issued warrants to an individual to acquire
50,000 shares of common stock at an exercise price of $0.01 per share. The
warrants were issued in conjunction with an unsecured term note payable to
stockholder. Additional paid-in capital was credited for $105,000 to recognize
the fair market value of the total available stock warrants under the agreement.
An additional warrant to acquire 10,000 shares at $0.01 per share will be
available in the event the outstanding principal and interest due is not paid in
full by the second anniversary date. During 1998, 50,000 shares of common stock
were issued to an individual under the agreement.
In May of 1998, the Company issued warrants to purchase 433,130 shares of
common stock. The warrants were issued in conjunction with a secured term loan,
subordinate to the bank notes (Note 7). Additional paid-in capital was credited
for $1,120,000 to recognize the fair market value of the total available stock
warrants under the agreement. On the second anniversary of the closing of the
loan, additional shares will accrue until maturity or prepayment of the loan.
The total shares available are as follows: 2000 - 569,121; and 2001 - 639,383.
The total shares available and granted at various dates during 1999 were
125,000. The shares are available at a purchase price of $2.25 per share.
Vesting under the plan varies, with all options fully vested within a five-year
period.
F-12
<PAGE>
ERDA, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 11 - DEFERRED COMPENSATION
The Company has entered into a deferred compensation agreement with one of
its key officers. Benefits are accrued based on a percentage of gross revenues
in excess of stated amounts. The amount charged to operations for this plan was
$49,000 and $70,000 for the years ended June 30, 1998 and 1999, respectively.
Other long-term liabilities include accrued deferred compensation of $251,000
and $321,000 at June 30, 1998 and 1999, respectively.
NOTE 12 - COMMITMENTS AND CONTINGENCIES
Trident Products, Inc. leases its land and building under a ten year
operating lease expiring on March 31, 2008.
Rental expense for all operating leases was approximately $250,000 and
$270,000 for the years ended June 30, 1998 and 1999, respectively. Future
minimum rental payments required under operating leases having noncancelable
terms in excess of one year as of June 30, 1999 are as follows (amounts in
thousands):
<TABLE>
<CAPTION>
Year ending June 30,
<S> <C>
2000............................................................ $ 289
2001............................................................ 338
2002............................................................ 357
2003............................................................ 347
2004............................................................ 336
Thereafter ..................................................... 1,416
-----------
Total minimum payments ....................................... $ 3,083
</TABLE>
The Company is self-funded for its employees' health benefits. The Company
has "stop-loss" coverage for costs in excess of $20,000 per individual per year.
NOTE 13 - CONSOLIDATED STATEMENTS OF CASH FLOWS
The following information supplements the Company's consolidated statement
of cash flows (amounts in thousands, except share data).
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
------------------------
1998 1999
----------- -----------
<S> <C> <C>
Purchase of substantially all of the assets of Derlan, Inc. as follows:
Inventories ................................................................................ $ - $ 1,245
Equipment .................................................................................. - 180
Goodwill ................................................................................... - 1,675
----------- -----------
Total cash paid for acquisition .......................................................... $ - $ 3,100
=========== ===========
Cash paid during the year for:
Interest.................................................................................... $ 708 $ 1,121
Income taxes................................................................................ - 152
Noncash investing and financing activities:
Equipment acquired under capital lease obligations ......................................... $ 234 $ 242
Unsecured notes payable to stockholders converted to 428,570 shares of common stock ........ 150 -
</TABLE>
F-13
<PAGE>
ERDA, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 14 - RETIREMENT SAVINGS PLAN
The Company has a 401(k) savings plan covering substantially all employees.
As such, the Company's employees may make voluntary contributions to the plan
with a discretionary match made by the Company. The Company's contributions to
the plan amounted to approximately $26,000 and $63,000 for the years ended June
30, 1998 and 1999, respectively.
NOTE 15 - SUBSEQUENT EVENT (UNAUDITED)
On June 30, 2000, all of the Company's common stock was purchased by a
wholly-owned subsidiary of DeCrane Aircraft Holdings, Inc. pursuant to a merger
agreement and related plan of merger approved by the Company's stockholders on
June 23, 2000. Immediately prior to the effective time of the merger, the
Company distributed to each stockholder, on a pro rata basis, the shares of its
Trident Products subsidiary.
F-14
<PAGE>
ERDA, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
JUNE 30, MARCH 31,
1999 2000
----------- -----------
(UNAUDITED)
<S> <C> <C>
ASSETS
Current assets
Cash ........................................................................................ $ 29 $ 21
Accounts receivable, net ..................................................................... 4,938 5,538
Inventories .................................................................................. 5,548 8,595
Deferred income taxes ........................................................................ 133 200
Other current assets ......................................................................... 53 277
----------- -----------
Total current assets ....................................................................... 10,701 14,631
Property, plant and equipment, net .............................................................. 4,301 4,321
Other assets, principally intangibles, net ...................................................... 2,154 2,114
----------- -----------
Total assets ............................................................................. $ 17,156 $ 21,066
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Current portion of long-term debt ............................................................ $ 2,016 $ 2,098
Accounts payable.............................................................................. 1,044 3,143
Accrued liabilities .......................................................................... 1,290 1,640
Income taxes payable ......................................................................... 297 368
----------- -----------
Total current liabilities .................................................................. 4,647 7,249
Long-term debt .................................................................................. 9,215 9,867
Deferred income taxes ........................................................................... 20 -
Other long-term liabilities ..................................................................... 366 500
----------- -----------
Commitments and contingencies (Note 12)
Stockholders' equity
Common stock, no par value, 10,000,000 shares authorized; 5,300,746 shares
issued and outstanding at June 30, 1999 and March 31, 2000.................................. 2,915 2,915
Additional paid-in capital ................................................................... 1,346 1,346
Stock purchase plan notes receivable ......................................................... (191) (191)
Accumulated deficit .......................................................................... (1,162) (620)
----------- -----------
Total stockholders' equity ................................................................. 2,908 3,450
----------- -----------
Total liabilities and stockholders' equity ............................................... $ 17,156 $ 21,066
=========== ===========
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements.
F-15
<PAGE>
ERDA, INC. AND SUBSIDIARY
UNAUDITED CONSOLIDATED STATEMENTS OF INCOME
(IN THOUSANDS)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
MARCH 31,
------------------------
1999 2000
----------- -----------
(UNAUDITED)
<S> <C> <C>
Sales ........................................................................................... $ 17,510 $ 20,525
Cost of sales ................................................................................... 13,721 15,798
----------- -----------
Gross profit ............................................................................. 3,789 4,727
----------- -----------
Operating expenses
Selling expenses ............................................................................. 670 863
General and administrative expenses .......................................................... 1,669 1,842
Nonrecurring start-up costs .................................................................. - 90
----------- -----------
Total operating expenses ................................................................... 2,339 2,795
----------- -----------
Income from operations ................................................................... 1,450 1,932
Other expenses
Interest expense ............................................................................. 632 897
Minority interest in earnings of subsidiary .................................................. - 45
Other expenses ............................................................................... 184 184
----------- -----------
Income before provision for income taxes ........................................................ 634 806
Provision for income taxes ...................................................................... 166 264
----------- -----------
Net income ...................................................................................... $ 468 $ 542
=========== ===========
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements.
F-16
<PAGE>
ERDA, INC. AND SUBSIDIARY
UNAUDITED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
(IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
STOCK
COMMON STOCK ADDITIONAL PURCHASE
------------------------ PAID-IN PLAN NOTES ACCUMULATED
SHARES AMOUNT CAPITAL RECEIVABLE DEFICIT TOTAL
----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Balance, June 30, 1999 ..................... 5,300,746 2,915 1,346 (191) (1,162) 2,908
Net income (unaudited) ..................... - - - - 542 542
----------- ----------- ----------- ----------- ----------- -----------
Balance, March 31, 2000 (unaudited) ........ 5,300,746 $ 2,915 $ 1,346 $ (191) $ (620) $ 3,450
=========== =========== =========== =========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements.
F-17
<PAGE>
ERDA, INC. AND SUBSIDIARY
UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
MARCH 31,
------------------------
1999 2000
----------- -----------
(UNAUDITED)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income ................................................................................... $ 468 $ 542
Adjustments to reconcile net income to net cash provided by (used for) operating activities
Depreciation and amortization .............................................................. 472 765
Minority interest in earnings of subsidiary ................................................ - 45
Deferred income taxes ...................................................................... - (87)
Loss on sale of property, plant and equipment .............................................. - -
Changes in assets and liabilities
Accounts receivable ...................................................................... (1,053) (600)
Inventories .............................................................................. 495 (3,047)
Other current assets ..................................................................... (225) (224)
Accounts payable ......................................................................... (378) 2,099
Accrued liabilities ...................................................................... 415 403
Income taxes payable ..................................................................... 126 71
Deferred compensation .................................................................... 53 104
----------- -----------
Cash provided by operating activities .................................................. 373 71
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures ......................................................................... (752) (785)
Purchase of net assets in acquisition ........................................................ - -
Increase in other assets ..................................................................... 183 42
----------- -----------
Cash used for investing activities ..................................................... (569) (743)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES
Principal payments on long-term debt and capital leases ...................................... (510) (408)
Proceeds from issuance of long-term debt ..................................................... 644 1,072
----------- -----------
Cash provided by financing activities .................................................. 134 664
----------- -----------
Net decrease in cash ............................................................................ (62) (8)
Cash at beginning of period ..................................................................... 64 29
----------- -----------
Cash at end of period ........................................................................... $ 2 $ 21
=========== ===========
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements.
F-18
<PAGE>
ERDA, INC. AND SUBSIDIARY
CONDENSED NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - UNAUDITED CONSOLIDATED INTERIM 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 June 30, 1999 has been derived from
audited financial statements but does not include all disclosures required by
generally accepted accounting principles as permitted by interim reporting
requirements. The information included in this report should be read in
conjunction with the audited financial statements and related notes included
elsewhere herein.
NOTE 2 - NONRECURRING START-UP COSTS
Nonrecurring start-up costs reflect non-capitalizable costs incurred
through March 31, 2000 in connection with establishing a Mexico-based medical
products manufacturing facility.
NOTE 3 - INVENTORIES
Inventories are comprised of the following (amounts in thousands):
<TABLE>
<CAPTION>
JUNE 30, MARCH 31,
1999 2000
----------- -----------
(UNAUDITED)
<S> <C> <C>
Raw materials and finished components ........................................................... $ 4,299 $ 7,542
Work in process ................................................................................. 941 710
Finished goods .................................................................................. 308 343
----------- -----------
Total inventories ............................................................................ $ 5,548 $ 8,595
=========== ===========
</TABLE>
NOTE 4 - ACCRUED LIABILITIES
Accrued liabilities includes the following (amounts in thousands):
<TABLE>
<CAPTION>
JUNE 30, MARCH 31,
1999 2000
----------- -----------
(UNAUDITED)
<S> <C> <C>
Salaries and wages .............................................................................. $ 653 $ 871
Customer deposits ............................................................................... 247 541
Property, payroll and other taxes ............................................................... 109 93
Interest ........................................................................................ 72 120
Other ........................................................................................... 209 15
----------- -----------
Total accrued liabilities .................................................................... $ 1,290 $ 1,640
=========== ===========
</TABLE>
NOTE 5 - SUBSEQUENT EVENTS
On June 30, 2000, all of the Company's common stock was purchased by a
wholly-owned subsidiary of DeCrane Aircraft Holdings, Inc. pursuant to a merger
agreement and related plan of merger approved by the Company's stockholders on
June 23, 2000. Immediately prior to the effective time of the merger, the
Company distributed to each stockholder, on a pro rata basis, the shares of its
Trident Products subsidiary.
F-19
<PAGE>
UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL DATA
BASIS OF PRESENTATION
The following unaudited pro forma consolidated financial data for DeCrane
Holdings is based on our historical financial statements adjusted to reflect:
- our 1999 PATS, PPI, Custom Woodwork, PCI NewCo, International Custom
Interiors and Infinity acquisitions; and
- our 2000 Carl Booth and ERDA acquisitions, which were completed
subsequent to March 31, 2000.
For additional information on the 1999 acquisitions, see the notes to
our audited consolidated financial statements included in our Form 10-K for
the year ended December 31, 1999. For additional information on the Carl
Booth acquisition, see our Form 8-K filed on May 25, 2000 and our Form 8-K /
A (Amendment No. 1) filed on June 16, 2000. For additional information on the
ERDA acquisition, see our Form 8-K filed on July 13, 2000 and Item 7(a)
included elsewhere in this Form 8-K. Unaudited pro forma consolidated
statements of operations are presented for the year ended December 31, 1999
and the three months ended March 31, 2000. The statements reflect all of our
acquisitions as if they had occurred as of January 1, 1999. The unaudited pro
forma balance sheet reflects the Carl Booth and ERDA acquisitions as of March
31, 2000; all of the 1999 acquisitions had occurred by that date and are
therefore reflected in our historical balance sheet.
The pro forma adjustments are based upon available information and
assumptions management believes are reasonable under the circumstances. The
unaudited pro forma consolidated financial data and accompanying notes should
be read in conjunction with our historical audited and unaudited financial
statements and related notes and the historical audited financial statements
and related notes of the companies we have acquired. The pro forma financial
data does not purport to represent what our actual results of operations or
actual financial position would have been if the transactions described above
in fact occurred on such dates or to project our results of operations or
financial position for any future period or date.
P-1
<PAGE>
UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET
MARCH 31, 2000
<TABLE>
<CAPTION>
COMPANIES ACQUIRED SUBSEQUENT
DECRANE TO MARCH 31, 2000 (2)
HOLDINGS --------------------------------
HISTORICAL(1) HISTORICAL(3) ADJUSTMENTS PRO FORMA
------------- ------------- ----------------- -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
ASSETS
Current assets
Cash and cash equivalents ................................... $ 648 $ 2,798 $ 8,489 (4) $ 11,935
Accounts receivable, net .................................... 42,755 7,177 - 49,932
Inventories ................................................. 62,174 11,590 - 73,764
Deferred income taxes ....................................... 5,452 200 - 5,652
Prepaid expenses and other current assets ................... 2,110 103 - 2,213
------------- ------------ ----------- -----------
Total current assets ...................................... 113,139 21,868 8,489 143,496
------------- ------------ ----------- -----------
Property and equipment, net .................................... 37,223 5,631 - 42,854
------------- ------------ ----------- -----------
Other assets, principally intangibles, net
Goodwill and other intangibles .............................. 356,588 1,591 31,858 (5) 390,037
Deferred financing costs .................................... 11,517 188 1,712 (6) 13,417
Other assets ................................................ 1,220 334 - 1,554
------------- ------------ ----------- -----------
Net other assets, principally intangibles ................. 369,325 2,113 33,570 405,008
------------- ------------ ----------- -----------
Total assets ............................................ $ 519,687 $ 29,612 $ 42,059 $ 591,358
============= ============ =========== ===========
LIABILITIES, MANDATORILY REDEEMABLE PREFERRED STOCK AND STOCKHOLDERS' EQUITY
Current liabilities
Current portion of long-term debt ........................... $ 5,544 $ 2,000 $ (1,047) (7) $ 6,497
Accounts payable ............................................ 15,840 3,771 - 19,611
Accrued liabilities ......................................... 27,976 4,651 (119) (8) 32,508
Income taxes payable ........................................ 3,994 366 - 4,360
------------- ------------ ----------- -----------
Total current liabilities ................................. 53,354 10,788 (1,166) 62,976
------------- ------------ ----------- -----------
Long-term debt
Senior revolving credit facility ............................ 26,100 - (26,100) (7) -
Senior term facility ........................................ 207,525 - 54,287 (7) 261,812
Senior subordinated notes ................................... 100,000 - - 100,000
Other long-term obligations ................................. 1,263 9,795 (8,881) (7) 2,177
------------- ------------ ----------- -----------
Total long-term debt ...................................... 334,888 9,795 19,306 363,989
------------- ------------ ----------- -----------
Deferred income taxes .......................................... 21,763 - - 21,763
Other long-term liabilities .................................... 3,223 448 - 3,671
Mandatorily redeemable preferred stock ......................... 42,619 - 25,000 (9) 67,619
Stockholders' equity ........................................... 63,840 8,581 (1,081) (10) 71,340
------------- ------------ ----------- -----------
Total liabilities, mandatorily redeemable preferred
stock and stockholders' equity ........................ $ 519,687 $ 29,612 $ 42,059 $ 591,358
============= ============ =========== ===========
</TABLE>
See accompanying Notes to Unaudited Pro Forma Consolidated Financial Data.
P-2
<PAGE>
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1999
<TABLE>
<CAPTION>
ACQUISITION ADJUSTMENTS (12)
DECRANE -----------------------------------
HOLDINGS HISTORICAL
HISTORICAL (11) RESULTS (13) ADJUSTMENTS PRO FORMA
----------------- --------------- ----------------- -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
Revenues ................................................. $ 244,048 $ 88,067 $ (2,890) (14) $ 329,225
Cost of sales ............................................ 165,871 63,386 (2,890) (14) 226,367
----------------- --------------- ------------ -----------
Gross profit ........................................ 78,177 24,681 - 102,858
Selling, general and administrative expenses ............. 40,803 8,831 (1,206) (15) 48,428
Amortization of intangible assets......................... 13,073 363 2,667 (16) 16,103
----------------- --------------- ------------ -----------
Operating income .................................... 24,301 15,487 (1,461) 38,327
Interest expense ......................................... 27,903 1,084 10,461 (17) 39,448
Other income ............................................. (199) (54) - (253)
----------------- --------------- ------------ -----------
Income (loss) before provision for income taxes and
extraordinary item .................................... (3,403) 14,457 (11,922) (868)
Provision for income taxes (benefit) ..................... 952 (438) 1,802 (18) 2,316
----------------- --------------- ------------ -----------
Net income (loss) ........................................ $ (4,355) $ 14,895 $ (13,724) $ (3,184)
================= =============== ============ ===========
</TABLE>
See accompanying Notes to Unaudited Pro Forma Consolidated Financial Data.
P-3
<PAGE>
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
THREE MONTHS ENDED MARCH 31, 2000
<TABLE>
<CAPTION>
ACQUISITION ADJUSTMENTS (12)
DECRANE -----------------------------------
HOLDINGS HISTORICAL
HISTORICAL (11) RESULTS (13) ADJUSTMENTS PRO FORMA
----------------- --------------- ----------------- -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
Revenues ................................................. $ 79,178 $ 11,876 $ (1,102) (14) $ 89,952
Cost of sales ............................................ 53,026 7,716 (1,102) (14) 59,640
----------------- --------------- ------------ -----------
Gross profit ........................................ 26,152 4,160 - 30,312
Selling, general and administrative expenses ............. 11,046 1,152 - (15) 12,198
Amortization of intangible assets......................... 4,213 84 195 (16) 4,492
----------------- --------------- ------------ -----------
Operating income .................................... 10,893 2,924 (195) 13,622
Interest expense ......................................... 8,676 285 1,342 (17) 10,303
Other expenses ........................................... 64 - - 64
----------------- --------------- ------------ -----------
Income (loss) before provision for income taxes and
extraordinary item .................................... 2,153 2,639 (1,537) 3,255
Provision for income taxes ............................... 1,398 223 299 (18) 1,920
----------------- --------------- ------------ -----------
Net income (loss) ........................................ $ 755 $ 2,416 $ (1,836) $ 1,335
================= =============== =========== ===========
</TABLE>
See accompanying Notes to Unaudited Pro Forma Consolidated Financial Data.
P-4
<PAGE>
UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL DATA
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL DATA
(1) Reflects our financial position subsequent to our 1999 PATS, PPI, Custom
Woodwork, PCI NewCo, International Custom Interiors and Infinity
acquisitions. Excludes the effect of our acquisition of Carl Booth and
ERDA, which occurred subsequent to March 31, 2000.
(2) Reflects our acquisitions of Carl Booth and ERDA subsequent to March 31,
2000. The acquisitions were funded with borrowings under our senior
credit facility and proceeds from the sale of preferred and common stock.
Concurrently with the Carl Booth acquisition financing, we also increased
our senior term debt borrowings to refinance other existing senior credit
facility indebtedness and to raise additional cash to fund future
acquisitions. The sources and uses of funds were as follows:
<TABLE>
<CAPTION>
CARL BOOTH SENIOR
AND CREDIT
ERDA FACILITY
ACQUISITIONS REFINANCING PRO FORMA
------------ ----------- -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
SOURCES:
Acquisition financing:
Senior credit facility borrowings ......................................... $ 15,713 $ (15,713) $ -
Proceeds from sale of preferred stock ..................................... 25,000 - 25,000
Proceeds from sale of common stock ........................................ 7,500 - 7,500
Senior credit facility refinancing (a):
Term A facility ........................................................... - 2,500 2,500
Term D facility ........................................................... - 52,500 52,500
------------ ----------- -----------
Total sources ........................................................... $ 48,213 $ 39,287 $ 87,500
============ =========== ===========
USES:
Carl Booth acquisition:
Purchase of net assets .................................................... $ 18,653 $ - $ 18,653
Acquisition fees and expenses ............................................. 845 - 845
ERDA acquisition:
Purchase of common stock .................................................. 14,955 - 14,955
Debt repaid at acquisition, including accrued interest .................... 10,760 - 10,760
Acquisition fees and expenses ............................................. 3,000 - 3,000
Senior credit facility refinancing (a):
Acquisition revolving credit facility (b).................................. - 25,000 25,000
Working capital revolving credit facility (b).............................. - 1,100 1,100
Financing fees and expenses ............................................... - 1,900 1,900
Excess cash (b) ........................................................... - 11,287 11,287
------------ ----------- -----------
Total uses .............................................................. $ 48,213 $ 39,287 $ 87,500
============ =========== ===========
</TABLE>
-----------------------
(a) Excludes the conversion of $69.3 million of Term C indebtedness to
Term B indebtedness in conjunction with the refinancing.
(b) A portion of the proceeds from the financing were used to repay $32.0
million of then existing revolving credit facility borrowings. The
pro forma balance sheet reflects the repayment of $26.1 million of
revolving credit facility borrowings outstanding as of March 31, 2000
and the excess funds as cash.
P-5
<PAGE>
(3) Reflects the historical financial position of Carl Booth and ERDA, which
we acquired subsequent to March 31, 2000 and therefore are not included
in our historical amounts. A table summarizing their financial position
as of March 31, 2000 appears below.
<TABLE>
<CAPTION>
ERDA AND SUBSIDIARY
-------------------------
CARL NOT
BOOTH TOTAL (A) ACQUIRED (B) TOTAL
----------- ----------- ------------ -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
ASSETS
Current assets
Cash and cash equivalents .................................... $ 2,798 $ 21 $ (21) $ 2,798
Accounts receivable, net ..................................... 1,930 5,538 (291) 7,177
Inventories .................................................. 3,647 8,595 (652) 11,590
Deferred income taxes ........................................ - 200 - 200
Prepaid expenses and other current assets .................... - 277 (174) 103
----------- ----------- ------------ -----------
Total current assets ....................................... 8,375 14,631 (1,138) 21,868
----------- ----------- ------------ -----------
Property and equipment, net .................................... 1,734 4,321 (424) 5,631
----------- ----------- ------------ -----------
Other assets, principally intangibles, net
Goodwill and other intangibles ............................... - 1,591 - 1,591
Deferred financing costs ..................................... - 188 - 188
Other assets ................................................. - 335 (1) 334
----------- ----------- ------------ -----------
Net other assets, principally intangibles .................. - 2,114 (1) 2,113
----------- ----------- ------------ -----------
Total assets ............................................ $ 10,109 $ 21,066 $ (1,563) $ 29,612
=========== =========== ============ ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Current portion of long-term debt ............................ $ - $ 2,098 $ (98) $ 2,000
Accounts payable ............................................. 765 3,143 (137) 3,771
Accrued liabilities .......................................... 3,132 1,640 (121) 4,651
Income taxes payable ......................................... - 368 (2) 366
----------- ----------- ------------ -----------
Total current liabilities .................................. 3,897 7,249 (358) 10,788
Long-term debt ................................................. - 9,867 (72) 9,795
Other long-term liabilities .................................... - 500 (52) 448
Stockholders' equity ........................................... 6,212 3,450 (1,081) 8,581
----------- ----------- ------------ -----------
Total liabilities and stockholders' equity .............. $ 10,109 $ 21,066 $ (1,563) $ 29,612
=========== =========== ============ ===========
</TABLE>
-----------------------
(a) Reflects the financial position of ERDA and its majority-owned
subsidiary.
(b) Reflects the effect of a dividend ERDA paid to its stockholders in
the form of the stock of its majority-owned subsidiary immediately
prior to acquisition.
(4) Reflects $11.3 million of excess cash received in connection with the
financing reduced by $2.8 million of Carl Booth cash not acquired.
(5) Reflects the excess of the total purchase price over the fair value of
the Carl Booth & ERDA assets acquired. For purposes of this pro forma
consolidated financial data, we allocated the excess purchase price to
goodwill and amortized the amounts on a straight-line basis over 30
years. Such allocations are preliminary and may change upon completion of
the final valuations of the assets acquired.
P-6
<PAGE>
(6) Reflects $1.9 million of fees and expenses associated with the financing,
reduced by a $188,000 write-off of financing costs related to debt repaid
upon acquisition of ERDA.
(7) Reflects the net increase resulting from the senior credit facility
borrowings in connection with the financing, reduced by debt repaid upon
acquisition of ERDA as follows:
<TABLE>
<CAPTION>
LONG-TERM DEBT
-------------------------------------
CURRENT LONG-TERM TOTAL
----------- ----------- -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Senior term debt borrowings ................................................. $ 713 $ 54,287 $ 55,000
Senior revolving credit facility repayment .................................. - (26,100) (26,100)
Debt repaid upon acquisition of ERDA......................................... (1,760) (8,881) (10,641)
----------- ----------- -----------
Net increase (decrease).................................................... $ (1,047) $ 19,306 $ 18,259
=========== =========== ===========
</TABLE>
(8) Reflects accrued interest paid upon repayment of ERDA's debt at
acquisition.
(9) Reflects proceeds from the sale of preferred stock.
(10) Reflects the proceeds from the sale of common stock, reduced by the
elimination of Carl Booth's and ERDA's stockholders' equity upon
acquisition.
(11) Reflects our historical results of operations for the year ended December
31, 1999 and the three months ended March 31, 2000 derived from our
historical audited and unaudited consolidated financial statements.
(12) Reflects the historical results of operations of companies we acquired
for the periods not included in our historical results.
(13) Reflects the results of operations of companies we acquired that are not
included in our historical results. The results of operations for the
companies we acquired are for the periods from the beginning of the
period presented to the dates indicated below. For periods subsequent to
those dates, their respective results of operations are included in our
historical results.
<TABLE>
<CAPTION>
1999 ACQUISITIONS 2000 ACQUISITION
<S> <C>
- PATS - January 21, 1999 - Carl Booth - March 31, 2000
- PPI - April 22, 1999 - ERDA - March 31, 2000, 2000
- Custom Woodwork - August 4, 1999;
- PCI NewCo - October 5, 1999;
- International Custom Interiors - October 7, 1999
- Infinity - December 16, 1999
</TABLE>
Tables summarizing the acquired companies' results of operations for the
twelve months ended December 31, 1999 and the three months ended
March 31, 2000 appear below.
P-7
<PAGE>
<TABLE>
<CAPTION>
2000 ACQUISITIONS
TOTAL 1999 -----------------
ACQUISI- CARL
TIONS BOOTH ERDA (a) TOTAL
---------- ------- -------- ---------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
YEAR ENDED DECEMBER 31, 1999
Revenues ........................................................................ $ 52,834 $13,757 $ 21,476 $ 88,067
Cost of sales ................................................................... 36,440 10,163 16,783 63,386
---------- ------- -------- ---------
Gross profit .................................................................... 16,394 3,594 4,693 24,681
Selling, general and administrative expenses .................................... 5,324 1,237 2,270 8,831
Amortization of intangible assets ............................................... 124 - 239 363
---------- ------- -------- ---------
Operating income ................................................................ 10,946 2,357 2,184 15,487
Interest expense (income) ....................................................... 152 (65) 997 1,084
Other income .................................................................... (29) (25) - (54)
---------- ------- -------- ---------
Income before provision for income taxes and extraordinary item ................. 10,823 2,447 1,187 14,457
Provision for income taxes (benefit) ............................................ (827) - 389 (438)
---------- ------- -------- ---------
Net income ...................................................................... $ 11,650 $ 2,447 $ 798 $ 14,895
========== ======= ======== =========
</TABLE>
<TABLE>
<CAPTION>
1999 ACQUISITION
--------------------------------------------------------------------------
INTERNATIONAL
CUSTOM PCI CUSTOM
PATS PPI WOODWORK NEWCO INTERIORS INFINITY TOTAL
-------- ------- -------- ------- --------- -------- ---------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
YEAR ENDED DECEMBER 31, 1999
Revenues ....................................... $ 451 $12,757 $ 4,972 $ 6,692 $ 4,753 $ 23,209 $ 52,834
Cost of sales .................................. 1,229 8,435 2,203 4,747 3,057 16,769 36,440
-------- ------- -------- ------- --------- -------- ---------
Gross profit (loss)............................. (778) 4,322 2,769 1,945 1,696 6,440 16,394
Selling, general and administrative expenses ... 611 944 262 520 492 2,495 5,324
Amortization of intangible assets .............. - 124 - - - - 124
-------- ------- -------- ------- --------- -------- ---------
Operating income (loss) ........................ (1,389) 3,254 2,507 1,425 1,204 3,945 10,946
Interest expense (income) ...................... 23 127 (11) (2) (19) 34 152
Other expenses (income) ........................ 11 (33) - (3) (4) - (29)
-------- ------- -------- ------- --------- -------- ---------
Income (loss) before provision for
income taxes and extraordinary item .......... (1,423) 3,160 2,518 1,430 1,227 3,911 10,823
Provision for income taxes (benefit) ........... (1,244) - - - 417 - (827)
-------- ------- -------- ------- --------- -------- ---------
Net income (loss) .............................. $ (179) $ 3,160 $ 2,518 $ 1,430 $ 810 $ 3,911 $ 11,650
======== ======= ======== ======= ========= ======== =========
</TABLE>
<TABLE>
<CAPTION>
2000 ACQUISITIONS
-----------------
CARL
BOOTH ERDA (a) TOTAL
------- -------- ---------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
THREE MONTHS ENDED MARCH 31, 2000
Revenues ..................................................................................... $ 4,414 $ 7,462 $ 11,876
Cost of sales ................................................................................ 2,172 5,544 7,716
------- -------- ---------
Gross profit ................................................................................. 2,242 1,918 4,160
Selling, general and administrative expenses ................................................. 307 845 1,152
Amortization of intangible assets ............................................................ - 84 84
------- -------- ---------
Operating income ............................................................................. 1,935 989 2,924
Interest expense (income) .................................................................... (22) 307 285
------- -------- ---------
Income before provision for income taxes and extraordinary item .............................. 1,957 682 2,639
Provision for income taxes ................................................................... - 223 223
------- -------- ---------
Net income ................................................................................... $ 1,957 $ 459 $ 2,416
------- -------- ---------
</TABLE>
-----------------------
(a) Excludes the operating results of ERDA's majority owned subsidiary
not acquired.
P-8
<PAGE>
(14) Reflects the elimination of intercompany sales.
(15) Reflects the net decrease in selling, general and administrative expenses
attributable to the following:
<TABLE>
<CAPTION>
THREE
YEAR ENDED MONTHS ENDED
DECEMBER 31, MARCH 31,
1999 2000
------------ ------------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Acquisition related expenses (a).......................................................... $ (716) $ -
Bonuses and employment contract termination expenses (b).................................. (468) -
Other, net (c) ........................................................................... (22) -
------------ ------------
Decrease in selling, general and administrative expenses ............................... $ (1,206) $ -
============ ============
</TABLE>
-----------------------
(a) Reflects a reduction for non-capitalizable acquisition expenses
incurred by PATS and Infinity on behalf of their stockholders related
to their respective acquisitions by us.
(b) Reflects a reduction in expenses attributable to employment contract
termination expenses and nonrecurring bonuses awarded prior to, and
in anticipation of, our acquisitions of PATS and Infinity.
(c) Reflects cost savings attributable to employee benefit plans
implemented at the companies we acquired.
(16) Reflects the net increase in amortization expense pertaining to the
amortization of goodwill and other intangible assets related to the
companies we have acquired as follows:
<TABLE>
<CAPTION>
YEARS THREE
INTANGIBLE ESTIMATED YEAR ENDED MONTHS ENDED
ASSET USEFUL DECEMBER 31, MARCH 31,
AMOUNT LIFE (a) 1999 2000
---------- --------- ------------ ------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
Elimination of predecessor basis amortization (b)............... $ (363) $ (84)
Amortization attributable to companies acquired (c):
Goodwill ..................................................... $ 144,371 30 2,759 279
Customer contracts ........................................... 8,390 7 100 -
FAA certifications ........................................... 2,000 15 11 -
Engineering drawings ......................................... 2,624 15 25 -
Assembled workforce .......................................... 2,327 7 135 -
------------ ------------
Net increase in amortization expense ....................... $ 2,667 $ 195
============ ============
</TABLE>
-----------------------
(a) Amortized on a straight-line basis over the respective estimated
useful lives.
(b) Reflects the elimination of amortization expense recorded by PPI and
ERDA for periods prior to their acquisition.
(c) Reflects adjustments for all of our 1999 and 2000 acquisitions from
the beginning of the period presented to their respective acquisition
dates; subsequent to those dates, amortization expense is included in
our historical results.
(17) Reflects the net increase in interest expense, including deferred
financing cost amortization and commitment fees, as a result of our 1999
and 2000 acquisitions as if they all had occurred on January 1, 1999.
The components of pro forma interest expense are summarized in the table
on the following page.
P-9
<PAGE>
<TABLE>
<CAPTION>
THREE
YEAR ENDED MONTHS ENDED
DECEMBER 31, MARCH 31,
RATE OR TERM AMOUNT 1999 2000
--------------- ------ ------------ ------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
Senior credit facility (a):
Term facilities:
Term A .............................................. LIBOR (b) + 3.0% (c) 3,450 897
Term B .............................................. LIBOR (b) + 3.5% (d) 11,930 3,215
Term D .............................................. LIBOR (b) + 4.0% (e) 8,668 2,337
Senior subordinated notes ............................... 12.00% 100,000 12,000 3,000
Customer advance ........................................ 7.50% (f) 380 76
Other long-term obligations ............................. 4.7% to 25.7% (g) 251 91
Deferred financing cost amortization:
Senior revolving credit facilities .................... 6 years (h) 1,277 213 53
Senior term facilities:
Term A .............................................. 6 years (i) 1,141 343 82
Term B .............................................. 7 years (i) 4,211 679 169
Term D .............................................. 6 years (i) 3,100 481 120
Senior subordinated notes ............................. 10 years (i) 5,810 581 145
Commitment fees and expenses ............................ 472 118
------------ ------------
Pro forma interest expense (j) ...................... $ 39,448 $ 10,303
============ ============
</TABLE>
-----------------------
(a) Reflects our senior credit facility as amended for all of our 1999
and 2000 acquisitions and the 2000 debt refinancing, as if all events
had occurred on January 1, 1999.
(b) Calculations based on the historical LIBOR rates charged during the
respective periods. The weighted average historical LIBOR rates were
as follows:
<TABLE>
<CAPTION>
THREE
YEAR ENDED MONTHS ENDED
DECEMBER 31, MARCH 31,
1999 2000
------------ ------------
<S> <C> <C>
Term A facility ............................. 5.368% 6.111%
Term B facility ............................. 5.369% 6.119%
Term D facility ............................. 5.396% 6.191%
</TABLE>
(c) Reflects Term A facility borrowings of $34.5 million at December 31,
1998 plus $7.5 million pro forma additional borrowings as of January
1, 1999 for our Infinity and Carl Booth acquisitions, reduced by
quarterly principal payments of $500,000 on March 31, 1999, $531,000
on June 30 and September 30, 1999 and $1.1 million on December 31,
1999 and March 31, 2000. The pro forma weighted average borrowings
outstanding under the Term A facility were $41.2 million for the
twelve months ended December 31, 1999 and $39.4 million for the three
months ended March 31, 2000.
(d) Reflects Term B facility borrowings of $44.9 million at December 31,
1998 plus $90.0 million pro forma additional borrowings as of January
1, 1999 for our PATS and PPI acquisition, reduced by quarterly
principal payments of $163,000 on March 31, 1999 and $338,000
commencing June 30, 1999. The pro forma weighted average borrowings
outstanding under the Term B facility were $134.5 million for the
twelve months ended December 31, 1999 and $133.7 million for the
three months ended March 31, 2000.
(e) Reflects Term D facility pro forma additional borrowings of $92.5
million as of January 1, 1999 for our Infinity and Carl Booth
acquisitions and to repay then existing revolving credit facility
borrowings as of January 1, 1998, reduced by quarterly principal
payments of $100,000 on March 31, 1999 and $231,000 commencing June
30, 1999. The pro forma weighted average borrowings outstanding under
the Term D facility were $92.3 million for the twelve months ended
December 31, 1999 and $91.7 million for the three months ended March
31, 2000.
(f) Reflects a $5.0 million customer advance related to our PATS
acquisition, pro forma as of January 1, 1999, reduced by principal
payments of $975,000 on November 30, 1999. The pro forma weighted
average advance outstanding was $4.9 million for the twelve months
ended December 31, 1999 and $4.0 million for the three months ended
March 31, 2000.
P-10
<PAGE>
(g) Reflects historical interest expense related to capital lease
obligations and equipment term debt financing.
(h) Deferred financing costs are amortized on a straight-line basis over
the term of the agreement.
(i) Deferred financing costs are amortized using the effective interest
method.
(j) A 0.125% change in the interest rates charged on variable rate
borrowings would change interest expense and net income (loss) by:
<TABLE>
<CAPTION>
THREE
YEAR ENDED MONTHS ENDED
DECEMBER 31, MARCH 31,
1999 2000
------------ ------------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Interest expense ........................... $ 340 $ 83
Net income (loss) .......................... 206 50
</TABLE>
-----------------------
(18) Represents an increase in the provision for income taxes as a result of
reflecting a pro forma provision for income taxes on the income of PPI,
Custom Woodwork, PCI NewCo, Infinity and Carl Booth which were taxed as S
Corporations or partnerships prior to their acquisitions, partially
offset by a decrease in pro forma taxable income. The effective tax rate
differs from the U.S. federal statutory rate primarily due to goodwill
amortization related to acquisitions not deductible for income tax
purposes and state and foreign income taxes.
(19) Supplemental pro forma financial information is as follows:
<TABLE>
<CAPTION>
THREE
YEAR ENDED MONTHS ENDED
DECEMBER 31, MARCH 31,
1999 2000
------------ ------------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Net cash provided by (used for):
Operating activities ................................... $ 23,902 $ (2,996)
Investing activities ................................... (206,709) (78,219)
Financing activities ................................... 191,227 84,282
EBITDA (a) ............................................... 75,136 20,629
Depreciation and amortization (b) ........................ 23,770 6,828
Capital expenditures:
Paid in cash ........................................... 9,276 1,827
Financed with capital lease obligations ................ 2,388 58
Cash interest expense .................................... 37,151 9,734
Ratio of earnings to fixed charges (c) ................... -- 1.3x
</TABLE>
(a) EBITDA equals operating income plus depreciation, amortization, the
1999 Systems Integration Group non-recurring restructuring charge,
non-recurring charges, DLJ advisory fees, non-cash acquisition
related charges and other non-operating costs. EBITDA is not a
measure of performance or financial condition under generally
accepted accounting principles. EBITDA is not intended to represent
cash flow from operations and should not be considered as an
alternative to income from operations or net income computed in
accordance with generally accepted accounting principles, as an
indicator of our operating performance, as an alternative to cash
flow from operating activities or as a measure of liquidity. The
funds depicted by EBITDA are not available for our discretionary use
due to funding requirements for working capital, capital
expenditures, debt service, income taxes and other commitments and
contingencies. We believe that EBITDA is a standard measure of
liquidity commonly reported and widely used by analysts, investors
and other interested parties in the financial markets. However, not
all companies calculate EBITDA using the same method, and the EBITDA
numbers set forth above may not be comparable to EBITDA reported by
other companies.
(b) Reflects depreciation and amortization of plant and equipment,
goodwill and other intangible assets. Excludes amortization of
deferred financing costs, which are classified as a component of
interest expense.
P-11
<PAGE>
(c) For purposes of calculating the ratio of earnings to fixed charges,
earnings represent net income before income taxes, minority interest
in the income of majority-owned subsidiaries, extraordinary items and
fixed charges. Fixed charges consist of:
- interest, whether expensed or capitalized;
- amortization of debt expense and discount relating to any
indebtedness, whether expensed or capitalized; and
- one-third of rental expense under operating leases which is
considered to be a reasonable approximation of the interest
portion of such expense.
There were deficiencies of earnings to fixed charges of $671,000 for
the year ended December 31, 1999.
P-12
