DECRANE HOLDINGS CO - 10-Q Quarterly Report

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)

OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2002

Commission File Number 333-70363

DECRANE HOLDINGS CO.

(Exact name of registrant as specified in its charter)

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

c/o Credit Suisse First Boston / DLJ Merchant Banking Partners II, L.P.
Eleven Madison Avenue, New York, NY 10010
(Address, including zip code, of principal executive offices)

(212) 325-2000
(Registrant’s telephone number, including area code)

(Not Applicable)

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

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

ý Yes o No

The number of shares of Registrant’s Common Stock, $.01 par value, outstanding as of August 9, 2002 was 3,899,235 shares.

Table of Contents

Part I - Financial Information

Item 1.	Financial Statements (Unaudited)

	Consolidated Balance Sheets as of June 30, 2002 and December 31, 2001

	Consolidated Statements of Operations for the three months and six months ended June 30, 2002 and 2001

	Consolidated Statements of Stockholders’ Equity for the six months ended June 30, 2002

	Consolidated Statements of Cash Flows for the six months ended June 30, 2002 and 2001

	Condensed Notes to Consolidated Financial Statements

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations

	Industry Overview and Trends

	Results of Operations

	Restructuring, Asset Impairment and Other Nonrecurring Charges

	Liquidity and Capital Resources

	Recent Accounting Pronouncements

Item 3.	Quantitative and Qualitative Disclosure About Market Risk

	Interest Rate Risk

	Foreign Currency Exchange Risk

Part II - Other Information

Item 1.	Legal Proceedings

Item 6.	Exhibits and Reports on Form 8-K

	Exhibits

	Reports on Form 8-K

Signatures

PART I — FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

DECRANE HOLDINGS CO. AND SUBSIDIARY

Consolidated Balance Sheets

*(In thousands, except share data)*	June 30, 2002			December 31, 2001
	(Unaudited)

Assets
Current assets:
Cash and cash equivalents	$	8,995		$	9,794
Accounts receivable, net	49,276			58,451
Inventories	84,279			86,498
Deferred income taxes	10,428			14,063
Prepaid expenses and other current assets	3,821			2,559
Total current assets	156,799			171,365

Property and equipment, net	55,033			61,073
Other assets, principally intangibles, net	410,155			413,273
Total assets	$	621,987		$	645,711

Liabilities, Mandatorily Redeemable Preferred Stock and Stockholders’ Equity
Current liabilities:
Current portion of long-term debt	$	17,609		$	13,899
Accounts payable	17,431			19,051
Accrued liabilities	37,001			56,626
Income taxes payable	222			133
Total current liabilities	72,263			89,709

Long-term debt	386,979			386,351
Deferred income taxes	26,696			33,597
Other long-term liabilities	7,744			7,438

Commitments and contingencies (Note 10)

Minority interest in preferred stock of subsidiary	31,055			28,240
Mandatorily redeemable preferred stock	58,085			54,223

Stockholders’ equity:
Undesignated preferred stock, $.01 par value, 1,140,000 shares authorized; none issued and outstanding as of June 30, 2002 and December 31, 2001	—			—
Common stock, $.01 par value, 10,000,000 shares authorized; 3,899,235 and 3,914,274 shares issued and outstanding as of June 30, 2002 and December 31, 2001, respectively	39			39
Additional paid-in capital	71,364			75,542
Notes receivable for shares sold	(2,532		)	(2,668		)
Accumulated deficit	(29,007		)	(24,658		)
Accumulated other comprehensive loss	(699		)	(2,102		)
Total stockholders’ equity	39,165			46,153
Total liabilities and stockholders’ equity	$	621,987		$	645,711

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

DECRANE HOLDINGS CO. AND SUBSIDIARY

Consolidated Statements of Operations

*(In thousands)*	Three Months Ended June 30,				Six Months Ended June 30,
	2002		2001		2002		2001
	(Unaudited)
Revenues	$	86,332	$	102,780	$	172,495	$	201,931
Cost of sales	64,494		70,204		124,942		134,310

Gross profit	21,838		32,576		47,553		67,621

Operating expenses: