SEC Info - Decrane Aircraft Holdings Inc - ‘SC 14D9/A’ on 8/20/98 re: Decrane Aircraft Holdings Inc

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Decrane Aircraft Holdings Inc – ‘SC 14D9/A’ on 8/20/98 re: Decrane Aircraft Holdings Inc – EX-8

As of: Thursday, 8/20/98 · Accession #: 1047469-98-32236 · File #: 5-52423

  As Of                Filer                Filing    For·On·As Docs:Size              Issuer               Agent

 8/20/98  Decrane Aircraft Holdings Inc     SC 14D9/A              4:126K Decrane Aircraft Holdings Inc     Merrill Corp/New/FA

Amendment to Tender-Offer Solicitation/Recommendation Statement — Schedule 14D-9
Filing Table of Contents

Document/Exhibit                   Description                      Pages   Size 

 1: SC 14D9/A   Amendment to Tender-Offer                              9     48K 
                          Solicitation/Recommendation Statement                  
 2: EX-8        Opinion re: Tax Matters                               19    106K 
 3: EX-9        Voting Trust Agreement                                15     38K 
 4: EX-10       Material Contract                                      8     26K

EX-8 — Opinion re: Tax Matters
Exhibit Table of Contents

Page	(sequential)	\|	(alphabetic)	Top
			Alternative Formats (Word, et al.) Avtech Condensed Notes to Consolidated Financial Statements Dettmers Exhibits and Reports on Form 8-K Extraordinary loss from debt refinancing Financial Statements Gross profit Legal Proceedings Management's Discussion and Analysis of Financial Condition and Results of Operations Net income (loss) Net income (loss) applicable to common stockholders Other Information Provision for income taxes Revenues Submission of Matters to A Vote of Security Holders (Unaudited)
1	1st Page - Filing Submission
2	Item 1. Financial Statements
"	Item 6. Exhibits and Reports on Form 8-K
7	Condensed Notes to Consolidated Financial Statements
"	(Unaudited)
9	Avtech
"	Dettmers
13	Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations
"	Revenues
"	Gross profit
"	Provision for income taxes
"	Extraordinary loss from debt refinancing
"	Net income (loss)
14	Net income (loss) applicable to common stockholders
17	Item 1. Legal Proceedings
"	Item 4. Submission of Matters to A Vote of Security Holders
"	Item 5. Other Information

EX-8 1st Page of 19 TOC ↑Top Previous Next ↓Bottom Just 1st
 
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UNITED STATES 
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

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

FORM 10-Q 

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

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 1998

Commission File Number 0-22371

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

DECRANE AIRCRAFT HOLDINGS, INC. 

(Exact name of registrant as specified in its charter)

                                                                [Download Table]
                                                                       
            DELAWARE                                     34-1645569    
(State or other jurisdiction of                       (I.R.S. Employer 
 incorporation or organization)                     Identification No.)

2361 ROSECRANS AVENUE, SUITE 180, EL SEGUNDO, CA 90245
(Address, including zip code, of principal executive offices) 

(310) 725-9123
(Registrant's telephone number, including area code)

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

(NOT APPLICABLE)

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

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

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

The number of shares of Registrant's Common Stock, $.01 par value,      
outstanding as of July 31, 1998 was 7,524,740 shares.                           

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DECRANE AIRCRAFT HOLDINGS, INC. 
INDEX 

                                                        [Enlarge/Download Table]

                                                                                                           PAGE   
                                                                                                           -----  
                                                                                                                  
                                           PART I--FINANCIAL INFORMATION                                          

ITEM 1. FINANCIAL STATEMENTS                                                                                      

        Consolidated Balance Sheets as of June 30, 1998 and December 31, 1997............................        1

        Consolidated Statements of Operations for the three months and six months ended June 30, 1998 and         
          1997...........................................................................................        2

        Consolidated Statements of Stockholders' Equity for the six months ended June 30, 1998...........        3

        Consolidated Statements of Cash Flows for the six months ended June 30, 1998 and 1997............        4

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

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS............       11

                                            PART II--OTHER INFORMATION                                            

ITEM 1. LEGAL PROCEEDINGS................................................................................       15

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS..............................................       15

ITEM 5. OTHER INFORMATION................................................................................       15

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K                                                                          

        Exhibits.........................................................................................       16

        Reports on Form 8-K..............................................................................       16

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ITEM 1. FINANCIAL STATEMENTS                                                    

    DECRANE AIRCRAFT HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS 
(IN THOUSANDS, EXCEPT SHARE DATA) 

                                                                [Download Table]

                                           JUNE 30,     DECEMBER 31,
                                             1998           1997    
                                          -----------   ------------
                                          (UNAUDITED)               
                                                                    
                               ASSETS                               
Current assets                                                      
  Cash and cash equivalents.............   $  2,337       $    206  
  Accounts receivable, net..............     25,857         18,152  
  Inventories...........................     35,109         25,976  
  Income taxes refundable...............      4,368         --      
  Prepaid expenses and other current                                
    assets..............................      2,875            782  
                                          -----------   ------------
    Total current assets................     70,546         45,116  
Property and equipment, net.............     23,815         14,054  
Other assets, principally intangibles,                              
  net...................................    101,248         39,967  
                                          -----------   ------------
      Total assets......................   $195,609       $ 99,137  
                                          -----------   ------------
                                          -----------   ------------

                LIABILITIES AND STOCKHOLDERS' EQUITY                
Current liabilities                                                 
  Short-term borrowings.................   $     90       $    568  
  Current portion of long-term                                      
    obligations.........................        857            858  
  Accounts payable......................      8,157          8,032  
  Accrued expenses......................     11,597          6,911  
  Income taxes payable..................      3,175          3,975  
                                          -----------   ------------
    Total current liabilities...........     23,876         20,344  
                                          -----------   ------------
Long-term liabilities                                               
  Long-term obligations.................     93,027         37,412  
  Other long-term liabilities...........        523             96  
  Deferred income taxes.................        521          1,758  
                                          -----------   ------------
    Total long-term liabilities.........     94,071         39,266  
                                          -----------   ------------

Commitments and contingencies...........     --             --      

Stockholders' equity                                                
  Undesignated preferred stock, $.01 par                            
    value, 10,000,000 shares authorized;                            
    none issued and outstanding.........     --             --      
  Common stock, $.01 par value,                                     
    9,924,950 shares authorized;                                    
    7,524,740 and 5,318,563 shares                                  
    issued and outstanding as of June                               
    30, 1998 and December 31, 1997,                                 
    respectively........................         75             53  
  Additional paid-in capital............     85,928         51,057  
  Accumulated deficit...................     (8,084)       (11,444) 
  Accumulated other comprehensive income                            
    (deficit)...........................       (257)          (139) 
                                          -----------   ------------
    Total stockholders' equity..........     77,662         39,527  
                                          -----------   ------------
      Total liabilities and                                         
        stockholders' equity............   $195,609       $ 99,137  
                                          -----------   ------------
                                          -----------   ------------

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

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DECRANE AIRCRAFT HOLDINGS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS 

(IN THOUSANDS, EXCEPT PER SHARE DATA) 

                                                        [Enlarge/Download Table]

                                             THREE MONTHS ENDED                               
                                                                         SIX MONTHS ENDED     
                                                  JUNE 30,                   JUNE 30,         
                                          -------------------------   ----------------------- 
                                             1998          1997          1998         1997    
                                          -----------   -----------   ----------   ---------- 
                                                 (UNAUDITED)                (UNAUDITED)       
                                                                                              
Revenues................................  $    29,854   $    28,130   $   58,982   $   54,248 
Cost of sales...........................       20,134        20,916       40,275       41,023 
                                          -----------   -----------   ----------   ---------- 
    Gross profit........................        9,720         7,214       18,707       13,225 
                                          -----------   -----------   ----------   ---------- 
Operating expenses                                                                            
  Selling, general and administrative                                                         
    expenses............................        5,302         3,838       10,181        7,222 
  Amortization of intangible assets.....          382           203          761          410 
                                          -----------   -----------   ----------   ---------- 
    Total operating expenses............        5,684         4,041       10,942        7,632 
                                          -----------   -----------   ----------   ---------- 
Income from operations..................        4,036         3,173        7,765        5,593 
Other expenses (income)                                                                       
  Interest expense......................          383           692        1,169        2,284 
  Terminated debt offering expenses.....          600       --               600       --     
  Other expenses (income)...............          (41)          132          (70)          14 
  Minority interest.....................           28            24           40           55 
                                          -----------   -----------   ----------   ---------- 
Income before provision for income taxes                                                      
  and extraordinary item................        3,066         2,325        6,026        3,240 
Provision for income taxes..............        1,394           871        2,666        1,157 
                                          -----------   -----------   ----------   ---------- 
Income before extraordinary item........        1,672         1,454        3,360        2,083 
Extraordinary loss from debt                                                                  
  refinancing, net of income tax                                                              
  benefit...............................      --              2,078       --            2,078 
                                          -----------   -----------   ----------   ---------- 
Net income (loss).......................        1,672          (624)       3,360            5 
Adjustment to redemption value of                                                             
  mandatorily redeemable common stock                                                         
  warrants..............................      --             (2,203)      --           (2,203)
Cumulative convertible preferred stock                                                        
  dividends.............................      --                (62)      --             (442)
                                          -----------   -----------   ----------   ---------- 
Net income (loss) applicable to common                                                        
  stockholders..........................  $     1,672   $    (2,889)  $    3,360   $   (2,640)
                                          -----------   -----------   ----------   ---------- 
                                          -----------   -----------   ----------   ---------- 
Income per common share                                                                       
  Basic                                                                                       
    Income (loss) before extraordinary                                                        
      item..............................  $       .23   $      (.18)  $      .53   $     (.25)
    Extraordinary loss from debt                                                              
      refinancing.......................      --               (.47)      --             (.91)
                                          -----------   -----------   ----------   ---------- 
    Net income (loss)...................  $       .23   $      (.65)  $      .53   $    (1.16)
                                          -----------   -----------   ----------   ---------- 
                                          -----------   -----------   ----------   ---------- 
  Diluted                                                                                     
    Income (loss) before extraordinary                                                        
      item..............................  $       .22   $      (.18)  $      .50   $     (.25)
    Extraordinary loss from debt                                                              
      refinancing.......................      --               (.47)      --             (.91)
                                          -----------   -----------   ----------   ---------- 
    Net income (loss)...................  $       .22   $      (.65)  $      .50   $    (1.16)
                                          -----------   -----------   ----------   ---------- 
                                          -----------   -----------   ----------   ---------- 
  Weighted average number of common and                                                       
    dilutive common equivalent shares                                                         
    outstanding                                                                               
    Basic...............................        7,421         4,442        6,376        2,276 
    Diluted.............................        7,734         4,442        6,687        2,276 
Pro forma for the Recapitalization, as                                                        
  adjusted for the Initial Public                                                             
  Offering                                                                                    
  Income applicable to common                                                                 
    stockholders........................  $     1,672   $     1,568   $    3,360   $    2,983 
  Income per common share                                                                     
    Basic...............................  $       .23   $       .30   $      .53   $      .56 
    Diluted.............................  $       .22   $       .28   $      .50   $      .53 
Weighted average number of common and                                                         
  dilutive common equivalent shares                                                           
  outstanding                                                                                 
  Basic.................................        7,421         5,302        6,376        5,302 
  Diluted...............................        7,734         5,576        6,687        5,576 

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

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DECRANE AIRCRAFT HOLDINGS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY 

(IN THOUSANDS, EXCEPT SHARE DATA) 

                                                        [Enlarge/Download Table]

                                    PREFERRED STOCK             COMMON STOCK                                                   
                               --------------------------  ----------------------  ADDITIONAL                 ACCUMULATED OTHER
                                 NUMBER OF                 NUMBER OF                 PAID-IN    ACCUMULATED     COMPREHENSIVE  
                                  SHARES        AMOUNT      SHARES      AMOUNT       CAPITAL      DEFICIT     INCOME (DEFICIT) 
                               -------------  -----------  ---------  -----------  -----------  ------------  -----------------
                                                                                                                               
Balance, December 31, 1997....      --         $  --       5,318,563   $      53    $  51,057    $  (11,444)      $    (139)   
Comprehensive income                                                                                                           
  Net income (Unaudited)......      --            --          --          --           --             3,360          --        
  Translation adjustment                                                                                                       
    (Unaudited)...............      --            --          --          --           --            --                (118)   
Stock option compensation                                                                                                      
  expense (Unaudited).........      --            --          --          --               78        --              --        
Sale of common stock                                                                                                           
  (Unaudited).................      --            --       2,206,177          22       34,793        --              --        
                                       ---         -----   ---------         ---   -----------  ------------          -----    
Balance, June 30, 1998                                                                                                         
  (Unaudited).................      --         $  --       7,524,740   $      75    $  85,928    $   (8,084)      $    (257)   
                                       ---         -----   ---------         ---   -----------  ------------          -----    
                                       ---         -----   ---------         ---   -----------  ------------          -----    



                                 TOTAL                                                                                         
                               ---------                                                                                       
                                                                                                                               
Balance, December 31, 1997.... $  39,527                                                                                       
                               ---------                                                                                       
Comprehensive income                                                                                                           
  Net income (Unaudited)......     3,360                                                                                       
  Translation adjustment                                                                                                       
    (Unaudited)...............      (118)                                                                                      
                               ---------                                                                                       
                                   3,242                                                                                       
Stock option compensation                                                                                                      
  expense (Unaudited).........        78                                                                                       
Sale of common stock                                                                                                           
  (Unaudited).................    34,815                                                                                       
                               ---------                                                                                       
Balance, June 30, 1998                                                                                                         
  (Unaudited)................. $  77,662                                                                                       
                               ---------                                                                                       
                               ---------                                                                                       

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

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DECRANE AIRCRAFT HOLDINGS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS 

(IN THOUSANDS)

                                                        [Enlarge/Download Table]

                                                                                              SIX MONTHS ENDED    
                                                                                                  JUNE 30,        
                                                                                           ---------------------- 
                                                                                              1998        1997    
                                                                                           ----------  ---------- 
                                                                                                (UNAUDITED)       
                                                                                                                  
Cash flows from operating activities                                                                              
  Net income.............................................................................. $    3,360  $        5 
  Adjustments to reconcile net income to net cash (used for) provided by operating                                
    activities                                                                                                    
    Depreciation and amortization.........................................................      2,966       2,656 
    Extraordinary loss from debt refinancing..............................................     --           2,078 
    Deferred income taxes.................................................................     (1,219)        439 
    Unrealized (gain) loss on forward foreign exchange contracts..........................        (71)        302 
    Other, net............................................................................        (88)         55 
    Changes in assets and liabilities                                                                             
      Accounts receivable.................................................................     (2,154)       (946)
      Inventories.........................................................................     (3,058)     (2,265)
      Prepaid expenses and other assets...................................................       (643)        368 
      Accounts payable....................................................................     (1,451)      1,278 
      Accrued expenses....................................................................      2,316        (940)
      Income taxes payable................................................................       (778)        (62)
                                                                                           ----------  ---------- 
        Net cash (used for) provided by operating activities..............................       (820)      2,968 
                                                                                           ----------  ---------- 
Cash flows from investing activities                                                                              
  Purchase of stock of Avtech Corporation, net of cash acquired...........................    (83,599)     --     
  Purchase of net assets of Dettmers Industries Inc., net of cash acquired................     (2,145)     --     
  Capital expenditures....................................................................     (1,102)     (2,253)
  Other, net..............................................................................        175      --     
                                                                                           ----------  ---------- 
        Net cash used for investing activities............................................    (86,671)     (2,253)
                                                                                           ----------  ---------- 

Cash flows from financing activities                                                                              
  Sale of common stock and application of the net proceeds                                                        
    Net proceeds from the sale of common stock............................................     34,815      29,220 
    Net borrowings (repayments) under senior credit facility..............................    (34,815)     12,334 
    Repayment of debt.....................................................................     --         (42,160)
  Revolving line of credit borrowings to finance acquisitions.............................     85,744      --     
  Net borrowings under revolving line of credit agreements................................      5,358       1,879 
  Principal payments on capitalized lease and other long-term obligations.................     (1,156)     (1,048)
  Promissory note principal payments......................................................     --            (956)
  Payment of deferred financing costs.....................................................       (311)     --     
  Other, net..............................................................................        (18)         31 
                                                                                           ----------  ---------- 
        Net cash provided by (used for) financing activities..............................     89,617        (700)
                                                                                           ----------  ---------- 
Effect of foreign currency translation on cash............................................          5         (34)
                                                                                           ----------  ---------- 
Net increase (decrease) in cash and cash equivalents......................................      2,131         (19)
Cash and cash equivalents at beginning of period..........................................        206         320 
                                                                                           ----------  ---------- 
Cash and cash equivalents at end of period................................................ $    2,337  $      301 
                                                                                           ----------  ---------- 
                                                                                           ----------  ---------- 

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

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DECRANE AIRCRAFT HOLDINGS, INC. AND SUBSIDIARIES

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED) 

NOTE 1--CONSOLIDATED FINANCIAL STATEMENTS                                       

The information included in this Form 10-Q should be read in conjunction
with Management's Discussion and Analysis of Financial Condition and Results of 
Operations and the audited financial statements and notes thereto included in   
the Company's Form 10-K for the year ended December 31, 1997.                   

    The consolidated financial information as of June 30, 1998 and for the three
months and six months ended June 30, 1998 and 1997 is unaudited. In the opinion 
of the Company, the unaudited financial information is presented on a basis     
consistent with the audited financial statements and contains all adjustments,  
consisting only of normal recurring adjustments, necessary for a fair statement 
of the results for such interim periods. The results of operations for interim  
periods are not necessarily indicative of results of operations for the full    
year. Certain reclassifications have been made to prior periods' financial      
information to conform to the 1998 presentation.                                

NOTE 2--SALE OF COMMON STOCK                                                    

   In April 1998, the Company sold 2,206,177 shares of common stock for $17.00
per share ("Follow-On Equity Offering"). Net proceeds from the Follow-On Equity 
Offering of $34,815,000 were used to partially repay borrowings outstanding     
under the Company's senior credit facility.                                     

NOTE 3--INCOME PER COMMON SHARE                                                 

As described in the Company's Form 10-K for the year ended December 31, 
1997, the holders of certain securities agreed to a plan for the                
recapitalization of the Company (the "Recapitalization") during 1997. Completion
of the Recapitalization was a condition to the consummation of the Company's    
initial public offering (the "IPO") and, was effective concurrent therewith. The
IPO was consummated on April 16, 1997. Since the Company's historical capital   
structure is not indicative of its structure after the Recapitalization and IPO,
pro forma income per share is presented for 1997 and reflects the               
Recapitalization, the IPO and the application of the proceeds therefrom, as if  
both had occurred January 1, 1997.                                              

    Income per common share ("EPS") has been computed pursuant to the provisions
of Statement of Financial Accounting Standards No. 128, "Earnings Per Share,"   
which became effective after December 15, 1997; all periods prior thereto have  
been restated to conform with the provisions of this statement.                 

   The following table provides a reconciliation of both income and the number
of common shares used in the computations of "basic" EPS, which utilizes the    
weighted average number of common shares                                        

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DECRANE AIRCRAFT HOLDINGS, INC. AND SUBSIDIARIES

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(UNAUDITED) 

NOTE 3--INCOME PER COMMON SHARE (CONTINUED)                                     
outstanding without regard to dilutive potential common shares, and "diluted"   
EPS, which includes all such shares. All amounts are in thousands, except per   
share data, and are unaudited.                                                  

                                                        [Enlarge/Download Table]

                                                          THREE MONTHS ENDED JUNE 30,         SIX MONTHS ENDED JUNE 30,     
                                                       ---------------------------------  --------------------------------- 
                                                                           1997                               1997          
                                                                  ----------------------             ---------------------- 
                                                         1998     AS REPORTED  PRO FORMA    1998     AS REPORTED  PRO FORMA 
                                                       ---------  -----------  ---------  ---------  -----------  --------- 
                                                                                                                            
Income (loss) applicable to common shares-- Numerator                                                                       
  Before extraordinary item..........................  $   1,672   $   1,454   $   1,568  $   3,360   $   2,083   $   2,983 
  Adjustment to redeemable warrant redemption                                                                               
    value............................................     --          (2,203)     --         --          (2,203)     --     
  Preferred stock dividends..........................     --             (62)     --         --            (442)     --     
                                                       ---------  -----------  ---------  ---------  -----------  --------- 
    Income (loss) applicable to common shares                                                                               
      (basic)........................................      1,672        (811)      1,568      3,360        (562)      2,983 

  Cumulative convertible preferred stock dividends...     --          --          --         --          --          --     
                                                       ---------  -----------  ---------  ---------  -----------  --------- 
    Income (loss) applicable to common shares                                                                               
      (diluted)......................................  $   1,672   $    (811)  $   1,568  $   3,360   $    (562)  $   2,983 
                                                       ---------  -----------  ---------  ---------  -----------  --------- 
                                                       ---------  -----------  ---------  ---------  -----------  --------- 
Shares--Denominator                                                                                                         
  Weighted average common shares outstanding                                                                                
    (basic)..........................................      7,421       4,442       5,302      6,376       2,276       5,302 
  Add dilutive effect of                                                                                                    
    Preferred stock outstanding prior to                                                                                    
      conversion.....................................     --             320      --         --           1,126      --     
    Common stock options.............................        313         274         274        311         274         274 
    Warrants outstanding prior to cancellation,                                                                             
      conversion or exercise.........................     --             198          71     --             445          71 
  Less antidilutive effect of potential common                                                                              
    shares...........................................     --            (792)        (71)    --          (1,845)        (71)
                                                       ---------  -----------  ---------  ---------  -----------  --------- 
    Weighted average common shares outstanding                                                                              
      (diluted)......................................      7,734       4,442       5,576      6,687       2,276       5,576 
                                                       ---------  -----------  ---------  ---------  -----------  --------- 
                                                       ---------  -----------  ---------  ---------  -----------  --------- 
EPS--Income (loss) before extraordinary item                                                                                
  Basic..............................................  $     .23   $    (.18)  $     .30  $     .53   $    (.25)  $     .56 
  Diluted............................................  $     .22   $    (.18)  $     .28  $     .50   $    (.25)  $     .53 

   Pro forma for the Recapitalization and IPO assumes each occurred on January
1, 1997. Therefore, pro forma income per common share is computed using pro     
forma income before adjustment to redemption value of redeemable warrants and   
preferred stock dividends. Pro forma income also reflects the sale by the       
Company of 2,700,000 shares of common stock in the IPO and the application of   
the net proceeds therefrom.                                                     

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DECRANE AIRCRAFT HOLDINGS, INC. AND SUBSIDIARIES

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(UNAUDITED) 

NOTE 4--ACQUISITIONS                                                            

AVTECH                                                                          

On June 26, 1998, the Company purchased substantially all of the common 
stock of Avtech Corporation ("Avtech"). Avtech is a manufacturer of avionics    
components and an avionics systems integrator for the commercial and high-end   
corporate jet aircraft industries.                                              

 The total purchase price was $84,693,000 in cash at closing, including an
estimated $1,250,000 of acquisition related costs. The acquisition was financed 
with borrowings under the Company's senior credit facility. The acquisition was 
accounted for as a purchase and the $57,911,000 difference between the purchase 
price and the fair value of the net assets acquired was recorded as goodwill and
is being amortized on a straight-line basis over 30 years.                      

The consolidated balance sheet as of June 30, 1998 reflects the Avtech  
assets and liabilities acquired and the consolidated results of operations      
include the operating results of Avtech subsequent to June 25, 1998.            

DETTMERS                                                                        

  On June 30, 1998, the Company purchased certain assets, subject to certain
liabilities assumed, of Dettmers Industries Inc. ("Dettmers"). Dettmers is a    
manufacturer of seats for high-end corporate jet aircraft.                      

The total purchase price was $2,314,000 in cash at closing, including an
estimated $141,000 of acquisition related costs, plus contingent consideration  
aggregating a maximum $2,000,000 payable over four years based on future        
attainment of defined performance criteria during each of the years in the four-
year period ending December 31, 2002. The acquisition was financed with         
borrowings under the Company's senior credit facility. The acquisition was      
accounted for as a purchase and the $2,068,000 difference between the purchase  
price, excluding contingent consideration, and the fair value of the net assets 
acquired was recorded as goodwill and is being amortized on a straight-line     
basis over 30 years. The amount of contingent consideration paid in the future, 
if any, will increase goodwill and will be amortized prospectively over the     
remaining period of the initial 30-year term.                                   

The consolidated balance sheet as of June 30, 1998 reflects the Dettmers
assets and liabilities acquired and the consolidated results of operations      
include the operating results of Dettmers subsequent to June 29, 1998.          

PRO FORMA RESULTS OF OPERATIONS FOR ACQUISITIONS, RECAPITALIZATION, IPO AND     
FOLLOW-ON EQUITY OFFERING                                                   

   Unaudited pro forma consolidated results of operations are presented in the
table below for the year ended December 31, 1997 and the six months ended June  
30, 1997 and 1998. For all periods presented, the results of operations are pro 
forma for the Recapitalization, the IPO, the Follow-On Equity Offering (Note 2),
and the application of the net proceeds therefrom. For the year ended December  
31, 1997 and six months ended June 30, 1997, the results are also pro forma as  
if the Avtech and Dettmers acquisitions, and the Audio International acquisition
(which occured on November 14, 1997), were consummated on January 1, 1997. For  
the six months ended June 30, 1998, the results are pro forma as if the Avtech  
and                                                                             

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DECRANE AIRCRAFT HOLDINGS, INC. AND SUBSIDIARIES

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(UNAUDITED) 

NOTE 4--ACQUISITIONS (CONTINUED)                                                
Dettmers acquisitions were consummated on January 1, 1997. Amounts are in       
thousands, except per share data.                                               

                                                        [Enlarge/Download Table]

                                                                                          PRO FORMA             
                                                                              ----------------------------------
                                                                                              SIX MONTHS ENDED  
                                                                               YEAR ENDED         JUNE 30,      
                                                                              DECEMBER 31,  --------------------
                                                                                  1997        1998       1997   
                                                                              ------------  ---------  ---------
                                                                                                                
Revenues.....................................................................  $  160,054   $  81,846  $  79,590
Income before extraordinary item.............................................       5,279       4,356      2,877
Income applicable to common stockholders, before extraordinary item..........       5,279       4,356      2,877
Pro forma income per common share, before extraordinary item                                                    
  Basic......................................................................  $      .70   $     .58  $     .38
  Diluted....................................................................         .68         .56        .37
Pro forma weighted average number of common shares outstanding                                                  
  Basic......................................................................       7,510       7,525      7,509
  Diluted....................................................................       7,812       7,836      7,782

  The above information reflects adjustments for depreciation, amortization,
general and administrative expenses and interest expense based on the new cost  
basis and debt structure of the Company. In 1997, income excludes the effect of 
a $2,078,000 extraordinary loss incurred in connection with the Company's debt  
refinancing.                                                                    

NOTE 5--INVENTORIES                                                             

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

                                                                [Download Table]

                                                         DECEMBER 31,
                                                             1997    
                                            JUNE 30,     ------------
                                              1998                   
                                          ------------               
                                          (UNAUDITED)                
                                                                     
Raw material............................    $21,440        $14,224   
Work-in process.........................      5,072          4,655   
Finished goods..........................      8,597          7,097   
                                          ------------   ------------
    Total inventories...................    $35,109        $25,976   
                                          ------------   ------------
                                          ------------   ------------

NOTE 6--LONG-TERM OBLIGATIONS; SENIOR CREDIT FACILITY                           

  In April 1998, the Company used the net proceeds from the Follow-On Equity
Offering to partially repay borrowings outstanding under the Senior Credit      
Facility. In May 1998, the Senior Credit Facility was amended to provide for a  
$105 million revolving line of credit. The revolving line of credit is subject  
to automatic reductions of up to $45 million upon the incurrence of additional  
indebtedness permitted under the loan plus $500,000 per month from October 31,  
1998 through May 31, 1999 and $1 million per month thereafter. The maximum      
interest rate margins were increased 0.25% to 1.00% above the prime rate or     
2.25% above the IBOR rate and the maximum commitment fee was increased to 0.425%
on the unused portion of the Senior Credit Facility. In June 1998, the Company  
borrowed funds under the Senior Credit Facility to finance the Avtech and       
Dettmers acquisitions.                                                          

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DECRANE AIRCRAFT HOLDINGS, INC. AND SUBSIDIARIES

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(UNAUDITED) 

NOTE 7--INCOME TAXES                                                            

During the three months and six months ended June 30, 1998, the Company 
reduced its deferred tax asset valuation allowance by $68,000 and $115,000,     
respectively, to reflect the book benefit of federal net operating loss         
carryforwards not previously recognized. Approximately $2,205,000 of the        
Company's loss carryforwards remained at June 30, 1998 for federal income tax   
purposes. No benefit for the remaining loss carryforwards has been recognized in
the consolidated financial statements.                                          

NOTE 8--COMPREHENSIVE INCOME                                                    

  In June 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 130, "Reporting Comprehensive Income" ("SFAS 
130"). Comprehensive income is defined as the change in equity of a business    
enterprise during a period from transactions and other events and circumstances 
from non-owner sources. For the Company, comprehensive income consists of its   
reported net income or loss and the change in the foreign currency translation  
adjustment during a period. The Company adopted SFAS 130 for the year ending    
December 31, 1998 and has reclassified earlier periods to reflect application of
the statement.                                                                  

NOTE 9--RECENTLY ISSUED ACCOUNTING PRONOUNCEMENT                                

  In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 133, "Accounting for Derivative Instruments  
and Hedging Activities" ("SFAS 133"). SFAS 133 requires companies to record     
derivatives on the balance sheet as assets or liabilities, measured at fair     
value. It also requires that gains or losses resulting from changes in the      
values of those derivatives be accounted for depending on the use of the        
derivative and whether it qualifies for hedge accounting. The Company is        
required to adopt SFAS 133 for its fiscal year beginning January 1, 2000.       
Management believes the adoption of SFAS 133 will not have a material impact on 
the Company's consolidated financial position or results of operations.         

NOTE 10--DEFINITIVE MERGER AGREEMENT; TENDER OFFER                              

On July 17, 1998, the Company announced that it had signed a definitive 
merger agreement (the "Merger Agreement") with an affiliate of DLJ Merchant     
Banking Partners II, which contemplates a cash tender offer by the affiliate for
all of the shares of common stock of the Company at $23.00 per share. As a      
result of the pending tender offer, the Company terminated a debt offering and  
recorded a $600,000 pre-tax charge as of June 30, 1998 for the estimated costs  
incurred.                                                                       

On July 21, 1998, TAAM Associates, Inc. commenced an action in Delaware 
Chancery Court on behalf of a purported class of stockholders of the Company    
against the Company, its directors, Donaldson, Lufkin & Jenrette, Inc. and      
certain of its affiliates, alleging, among other things, that the directors had 
breached their fiduciary duties by entering into the Merger Agreement without   
engaging in an auction or "active market check" and, therefore, did not         
adequately inform themselves in agreeing to terms that are unfair and inadequate
from the standpoint of the Company's stockholders. On July 24, 1998, the        
plaintiffs amended the complaint by repeating the allegations in the initial    
complaint and adding allegations that: (i) the Company's                        
Solicitation/Recommendation Statement of Schedule 14D-9 (the "14D-9") contained 
material misstatements or omissions including: (a) inadequate disclosure of any 
future equity participation by management after the transaction is consummated; 
(b) no disclosure of any efforts to shop the Company; (c) incomplete financial  
information and projections; and (d) incomplete disclosure of the basis         

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DECRANE AIRCRAFT HOLDINGS, INC. AND SUBSIDIARIES

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(UNAUDITED) 

NOTE 10--DEFINITIVE MERGER AGREEMENT; TENDER OFFER (CONTINUED)                  
for the fairness opinion delivered by the Company's financial advisor; (ii) the 
termination fees are unreasonable; and (iii) the directors who approved the     
Merger Agreement had conflicts of interest. The complaint seeks a preliminary   
and permanent injunction barring defendants from proceeding with the transaction
or, if the transaction is consummated, an order rescinding it or awarding       
damages, together with interest, and an award of attorneys' fees and litigation 
expenses. The Company believes the action is without merit.                     

The Company expects to incur various expenses estimated to range between
$1.5 million and $2.0 million (pre-tax) if the tender offer and acquisition are 
consummated. Under certain circumstances, the Company may incur an additional   
$6.9 million (pre-tax) of fees if the Company terminates the tender offer and   
proposed acquisition. While the exact timing, nature and amount of these        
expenses are subject to change, the Company anticipates a one-time pre-tax      
charge will be recorded in the quarter in which the tender offer is either      
consummated or terminated, possibly resulting in a net loss for such quarter.   

NOTE 11--LITIGATION                                                             

  On August 5, 1998, the Company and its chief executive officer were served
in an action filed in state court in California by the Company's chief financial
officer and secretary claiming that he is due additional compensation in the    
form of stock options, and claiming fraud, negligent misrepresentation and      
breach of contract in connection therewith. The action seeks not less than $1.5 
million plus punitive damages and costs. The action is in the early stages of   
development and discovery has not yet been conducted; the Company intends to    
vigorously defend against the claim.                                            

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

RESULTS OF OPERATIONS 

THREE MONTHS ENDED JUNE 30, 1998 COMPARED TO THREE MONTHS ENDED JUNE 30, 1997   

 REVENUES.  Revenues increased $1.7 million, or 6.1%, to $29.8 million for
the three months ended June 30, 1998 from $28.1 million for the three months    
ended June 30, 1997. Revenues increased primarily due to the inclusion of $4.3  
million of revenues from Audio International, Inc. which was acquired on        
November 14, 1997. This sales increase was somewhat offset by the sales decrease
to Boeing of $0.7 million, which management believes is related primarily to    
Boeing's production problems, and the sales decrease of $0.8 million to         
Matsushita.                                                                     

GROSS PROFIT.  Gross profit increased $2.5 million, or 34.7%, to $9.7   
million for the three months ended June 30, 1998 from $7.2 million for the three
months ended June 30, 1997. Gross profit as a percentage of revenues increased  
to 32.6% for the three months ended June 30, 1998 from 25.6% for the three      
months ended June 30, 1997. This increase was attributable to an improvement in 
gross profit as a percentage of revenues from increased sales of higher margin  
product and lower material costs, as well as $0.8 million realized on the bulk  
sale of certain inventory items.                                                

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES.  Selling, general and     
administrative ("SG&A") expenses increased $1.5 million, or 38.1%, to $5.3      
million for the three months ended June 30, 1998 from $3.8 million for the three
months ended June 30, 1997. SG&A expenses as a percentage of revenues increased 
to 17.8% for the three months ended June 30, 1998 from 13.6% for the three      
months ended June 30, 1997. SG&A expenses increased primarily due to the        
inclusion of SG&A expenses from Audio International, Inc. which was acquired on 
November 14, 1997.                                                              

INTEREST EXPENSE.  Interest expense decreased $0.3 million, or 44.7%, to
$0.4 million for the three months ended June 30, 1998 from $0.7 million for the 
three months ended June 30, 1997. The decrease resulted from the repayment of a 
substantial portion of the Company's debt with the net proceeds from the        
Follow-On Equity Offering in April 1998.                                        

   OTHER EXPENSE, NET.  Other expenses, not including interest, increased $0.4
million to $0.6 million for the three months ended June 30, 1998. The primary   
reason for the increase was the inclusion of costs associated with the          
terminated debt offering.                                                       

 PROVISION FOR INCOME TAXES.  During the three months ended June 30, 1998,
the Company increased its provision for income taxes by $0.5 million primarily  
due to higher income before taxes, net of a reduction in its deferred tax       
valuation allowance of $0.1 million to reflect the book benefit of federal net  
operating loss carryforwards not previously recognized. Approximately $2.2      
million of the net operating loss carryforwards are available at June 30, 1998  
for federal income tax purposes.                                                

EXTRAORDINARY LOSS FROM DEBT REFINANCING.  During the three months ended
June 30, 1998, the Company did not have any extraordinary charges. During the   
three months ended June 30, 1997, the Company incurred a $2.1 million           
extraordinary charge, net of an estimated $1.4 million income tax benefit, as a 
result of refinancing the Company's debt with the net proceeds from its initial 
public offering. The extraordinary charge is comprised of: (i) a $1.9 million   
write-off of deferred financing costs; (ii) a $1.2 million write-off of         
unamortized original issued discounts; (iii) a $0.3 million charge for a        
prepayment penalty and expenses; and (iv) a $0.1 million write-off of the       
unamortized portion of an interest rate cap agreement.                          

 NET INCOME (LOSS).  Net income increased $2.3 million to $1.7 million for
the three months ended June 30, 1998 from a net loss of $0.6 million for the    
three months ended June 30, 1997. The increase is a result of the factors       
described above.                                                                

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   NET INCOME (LOSS) APPLICABLE TO COMMON STOCKHOLDERS.  Net income applicable
to common stockholders increased $4.6 million to $1.7 million for the three     
months ended June 30, 1998 from a net loss applicable to common stockholders of 
$2.9 million for the three months ended June 30, 1997. The increase resulted    
from the factors described above, as well as the absence of the $2.2 million    
increase in the redemption value of mandatorily redeemable common stock warrants
during the three months ended June 30, 1997.                                    

PRO FORMA INCOME, AS ADJUSTED.  Pro forma income, as adjusted before    
extraordinary item, increased $0.1 million to $1.7 million for the three months 
ended June 30, 1998 from $1.6 million for the three months ended June 30, 1997  
as a result of the factors described above. Pro forma income, as adjusted,      
reflects the Recapitalization and the IPO and the application of the net        
proceeds therefrom, as if each had occurred as of January 1, 1997 (Note 3). The 
pro forma results exclude an extraordinary charge incurred in April 1997 as a   
result of the repayment of debt with the net offering proceeds.                 

  BOOKINGS AND BACKLOG.  Bookings increased $4.8 million, or 14.9%, to $33.1
million for the three months ended June 30, 1998 compared to $28.3 million for  
the same period in 1997. The increase in bookings for 1998 includes $4.4 million
attributable to Audio International, Inc., which was acquired in November 1997. 

SIX MONTHS ENDED JUNE 30, 1998 COMPARED TO SIX MONTHS ENDED JUNE 30, 1997       

 REVENUES.  Revenues increased $4.7 million, or 8.7%, to $59.0 million for
the six months ended June 30, 1998 from $54.3 million for the six months ended  
June 30, 1997. Revenues increased primarily due to the inclusion of $9.0 million
of revenues from Audio International, Inc. which was acquired on November 14,   
1997. This revenue increase was partially offset by a decrease in sales to      
Boeing of $2.6 million, which management believes was primarily related to      
Boeing's production difficulties, and a decrease in sales to Matsushita of $2.2 
million.                                                                        

GROSS PROFIT.  Gross profit increased $5.5 million, or 41.5%, to $18.7  
million for the six months ended June 30, 1998 from $13.2 million for the six   
months ended June 30, 1997. Gross profit as a percentage of revenues increased  
to 31.7% for the six months ended June 30, 1998 from 24.4% for the six months   
ended June 30, 1997. The increase in gross profit was attributable to increased 
sales of higher margin products and lower material costs, as well as $0.8       
million realized on the bulk sale of certain inventory items.                   

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES.  Selling, general and     
administrative ("SG&A") expenses increased $3.0 million, or 41.0%, to $10.2     
million for the six months ended June 30, 1998 from $7.2 million for the six    
months ended June 30, 1997. SG&A expenses as a percentage of revenues increased 
to 17.3% for the six months ended June 30, 1998 from 13.3% for the six months   
ended June 30, 1997. SG&A expenses increased primarily due to the inclusion of  
SG&A expenses from Audio International, Inc. which was acquired on November 14, 
1997.                                                                           

  OPERATING INCOME.  Operating income increased $2.2 million to $7.8 million
for the six months ended June 30, 1998 from $5.6 million for the six months     
ended June 30, 1997. Operating income as a percentage of revenues increased to  
13.2% for the six months ended June 30, 1998 from 10.3% for the six months ended
June 30, 1997. The increase in operating income resulted from the factors       
described above.                                                                

INTEREST EXPENSE.  Interest expense decreased $1.1 million, or 48.8%, to
$1.2 million for the six months ended June 30, 1998 from $2.3 million for the   
six months ended June 30, 1997. The decrease resulted from the repayment of a   
substantial portion of the Company's debt with the net proceeds from the        
Follow-On Equity Offering in April 1998.                                        

OTHER EXPENSE, NET.  Other expense, not including interest expense,     
increased $0.5 million to $0.6 million during the six months ended June 30,     
1998. The primary reason for the increase was the inclusion of costs associated 
with the terminated debt offering.                                              

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   PROVISION FOR INCOME TAXES.  During the six months ended June 30, 1998, the
Company increased its provision for income taxes by $1.5 million primarily due  
to higher income before taxes, net of a reduction in its deferred tax valuation 
allowance of $0.1 million to reflect the book benefit of federal net operating  
loss carryforwards not previously recognized. Approximately $2.2 million of the 
net operating loss carryforwards are available at June 30, 1998 for federal     
income tax purposes.                                                            

   EXTRAORDINARY LOSS FROM DEBT REFINANCING.  During the six months ended June
30, 1998, the Company did not have any extraordinary charges. During the six    
months ended June 30, 1997, the Company incurred a $2.1 million extraordinary   
charge, net of an estimated $1.4 million income tax benefit, as a result of     
refinancing the Company's debt with the proceeds from its initial public        
offering.                                                                       

  NET INCOME.  Net income increased $3.4 million to $3.4 million for the six
months ended June 30, 1998 from a nominal net income for the six months ended   
June 30, 1997. The increase is a result of the factors described above.         

   NET INCOME (LOSS) APPLICABLE TO COMMON STOCKHOLDERS.  Net income applicable
to common stockholders increased $6.0 million to $3.4 million for the six months
ended June 30, 1998 from a net loss applicable to common stockholders of $2.6   
million for the six months ended June 30, 1997. The increase resulted from the  
factors described above, as well as the absence of the $2.2 million increase in 
the redemption value of mandatorily redeemable common stock warrants during the 
six months ended June 30, 1997.                                                 

PRO FORMA INCOME, AS ADJUSTED.  Pro forma income, as adjusted before    
extraordinary item, increased $0.4 million to $3.4 million for the six months   
ended June 30, 1998 from $3.0 million for the six months ended June 30, 1997 as 
a result of the factors described above. Pro forma income, as adjusted, reflects
the Recapitalization and the IPO and the application of the net proceeds        
therefrom, as if each had occurred as of January 1, 1997 (Note 3). The pro forma
results exclude an extraordinary charge incurred in April 1997 as a result of   
the repayment of debt with the net offering proceeds.                           

  BOOKINGS AND BACKLOG.  Bookings increased $6.1 million, or 11.0%, to $61.8
million for the six months ended June 30, 1998 compared to $55.7 million for the
same period in 1997. The increase in bookings for 1998 includes $9.4 million    
attributable to Audio International Inc., which was acquired in November 1997.  
As of June 30, 1998, the Company had a sales order backlog of $84.5 million     
which includes $31.4 million from Avtech Corporation, compared to $49.0 million 
as of December 31, 1997.                                                        

LIQUIDITY AND CAPITAL RESOURCES 

   For the six months ended June 30, 1998, the Company used cash for operating
activities of $0.8 million. The Company used $5.8 million in cash for working   
capital. The Company's accounts receivable consist of trade receivables and     
unbilled receivables, which are recognized pursuant to the percentage of        
completion method of accounting for long-term contracts. Accounts receivable    
increased $2.2 million for the six months ended June 30, 1998 due to higher     
sales. Inventories increased by $3.1 million for the six months ended June 30,  
1998, primarily in anticipation of higher sales during the remainder of 1998.   
Accounts payable decreased by $1.5 million for the six months ended June 30,    
1998, primarily as a result of a change to a new gold supplier that offered     
substantial discounts for prompter payment.                                     

Net cash used in investing activities was $86.7 million during the six  
months ended June 30, 1998. Of this amount, $83.6 was used for the Avtech       
acquisition and $2.1 million for the Dettmers acquisition (both net of cash     
acquired). The total purchase price for the Dettmers acquisition included       
additional contingent consideration with a maximum of $2.0 million payable      
between 1999 and 2002.                                                          

  Capital expenditures of $1.1 million were made during the six months ended
June 30, 1998. The Company anticipates total capital expenditures of            
approximately $4.5 million in 1998.                                             

Net cash provided by financing activities was $89.6 million for the six 
months ended June 30, 1998. On April 1, 1998, the Company completed the         
Follow-On Equity Offering and sold 2,206,117 shares of                          

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common stock for $17.00 per share. Net proceeds from the Follow-On Equity       
Offering totaled $34.8 million. The Company also increased its borrowings under 
its revolving line of credit by $85.7 million for the six months ended June 30, 
1998 to finance the acquisitions of Avtech Corporation and Dettmers Industries  
Inc. on June 26, 1998 and June 30, 1998, respectively.                          

 Cash increased $2.1 million for the six months ended June 30, 1998 due to
the factors described above. In May 1998, the Company amended its existing      
Credit Facility, which expires in 2002, to further increase the revolving line  
to $105.0 million. The amendment was subject to the fulfillment of certain      
conditions, including the consummation of the Avtech acquisition, with mandatory
reductions of up to $45.0 million from the proceeds of certain indebtedness, and
automatic reductions on the last day of each month in the monthly amount of $0.5
million from October 31, 1998 through May 31, 1999 and $1.0 million thereafter  
(See Note 6 to the consolidated financial statements). Availability under the   
Credit Facility was $12.2 million and working capital aggregated $46.7 million  
as of June 30, 1998. The Company believes that the current levels of working    
capital and amounts available under the Credit Facility will enable it to meet  
its foreseeable short-term and long-term liquidity requirements.                

ANTICIPATED CHARGE FOR DEFINITIVE MERGER AGREEMENT AND TENDER OFFER FEES AND
EXPENSES

The Company expects to incur various expenses estimated to range between
$1.5 million and $2.0 million (pre-tax) if the tender offer and acquisition are 
consummated (See Note 10 to the consolidated financial statements). Under       
certain circumstances, the Company may incur an additional $6.9 million         
(pre-tax) of fees if the Company terminates the tender offer and proposed       
acquisition. While the exact timing, nature and amount of these expenses are    
subject to change, the Company anticipates a one-time pre-tax charge will be    
recorded in the quarter in which the tender offer is either consummated or      
terminated, possibly resulting in a net loss for such quarter. The Company      
believes the fees and expenses will not have a significant adverse effect on its
liquidity or working capital.                                                   

FORWARD-LOOKING STATEMENTS

  Management's discussion and analysis of financial condition and results of
operations that are not historical facts are forward-looking statements. Such   
forward-looking statements in this document are made pursuant to the safe harbor
provisions of the Securities Act of 1933 and the Securities Exchange Act of     
1934. Forward-looking statements involve a number of risks and uncertainties.   
For a discussion of certain risks and uncertainties that may affect the actual  
results of any forward-looking information contained herein, refer to the       
section entitled "Risk Factors" included in Item 1, "Description of Business,"  
in the Company's Form 10-K for the year ended December 31, 1997.                

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PART II--OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS                                                       

On August 5, 1998, the Company and R. Jack DeCrane, its Chief Executive 
Officer, were served in an action filed in state court in California by Robert  
A. Rankin claiming that he is due additional compensation in the form of stock  
options, and claiming fraud, negligent misrepresentation and breach of contract 
in connection therewith. The action seeks not less than $1.5 million plus       
punitive damages and costs. The action is in the early stages of development and
discovery has not yet been conducted; the Company intends to vigorously defend  
against the claim. Mr. Rankin has been placed on administrative leave with pay. 
The Company's board of directors has appointed John R. Hinson, the Company's    
Vice President of Planning & Business Development, as the interim Chief         
Financial Officer and acting Secretary of the Company.                          

On July 21, 1998, TAAM Associates, Inc. commenced an action in Delaware 
Chancery Court on behalf of a purported class of stock holders of the Company   
against the Company, its directors, Donaldson, Lufkin & Jenrette, Inc., and     
certain of its affiliates, alleging, among other things, that the directors had 
breached their fiduciary duties in connection with entering into the Merger     
Agreement described in Item 5, "Other Information," below. See Item 5 for a     
description of the action.                                                      

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS                     

   On June 17, 1998 the Company held its annual meeting of stockholders. R. G.
MacDonald and Mitchell I. Quain, incumbent members of the board of directors,   
were re-elected as Class I directors for a term of three years (or until their  
respective successors are duly elected and qualified). The terms of office of   
each of the remaining directors, James R. Bergman, Paul H. Cascio, R. Jack      
DeCrane and Jonathan A. Sweemer, continued after the meeting. A total of        
5,422,672 shares were voted at the meeting, in person or by proxy, as follows:  

                                                                [Download Table]

     ELECTION OF MR. MACDONALD              ELECTION OF MR. QUAIN       
-----------------------------------  -----------------------------------
                                                                        
For                       5,412,572  For                       5,422,472
Withhold                     10,100  Withhold                        200
                         ----------                           ----------
Total                     5,422,672  Total                     5,422,672
                         ----------                           ----------
                         ----------                           ----------

    No other business was submitted to the stockholders for a vote at the annual
meeting.                                                                        

ITEM 5. OTHER INFORMATION                                                       

DEFINITIVE MERGER AGREEMENT; TENDER OFFER                                       

On July 17, 1998, the Company announced that it had signed a definitive 
merger agreement (the "Merger Agreement") with an affiliate of DLJ Merchant     
Banking Partners II, which contemplates a cash tender offer by the affiliate for
all of the shares of common stock of the Company at $23.00 per share. As a      
result of the pending tender offer, the Company terminated a debt offering and  
recorded a $600,000 pre-tax charge as of June 30, 1998 for the estimated costs  
incurred.                                                                       

On July 21, 1998, TAAM Associates, Inc. commenced an action in Delaware 
Chancery Court on behalf of a purported class of stockholders of the Company    
against the Company, its directors, Donaldson, Lufkin & Jenrette, Inc. and      
certain of its affiliates, alleging, among other things, that the directors had 
breached their fiduciary duties by entering into the Merger Agreement without   
engaging in an auction or "active market check" and, therefore, did not         
adequately inform themselves in agreeing to terms that are unfair and inadequate
from the standpoint of the Company's stockholders. On July 24, 1998, the        
plaintiffs amended the complaint by repeating the allegations in the initial    
complaint and adding allegations that:                                          

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(i) the Company's Solicitation/Recommendation Statement of Schedule 14D-9 (the  
"14D-9") contained material misstatements or omissions including: (a) inadequate
disclosure of any future equity participation by management after the           
transaction is consummated; (b) no disclosure of any efforts to shop the        
Company; (c) incomplete financial information and projections; and (d)          
incomplete disclosure of the basis for the fairness opinion delivered by the    
Company's financial advisor; (ii) the termination fees are unreasonable; and    
(iii) the directors who approved the Merger Agreement had conflicts of interest.
The complaint seeks a preliminary and permanent injunction barring defendants   
from proceeding with the transaction or, if the transaction is consummated, an  
order rescinding it or awarding damages, together with interest, and an award of
attorneys' fees and litigation expenses. The Company believes the action is     
without merit.                                                                  

The Company expects to incur various expenses estimated to range between
$1.5 million and $2.0 million (pre-tax) in connection with the tender offer.    
Under certain circumstances, the Company may incur an additional $6.9 million   
(pre-tax) of fees if the Company terminates the tender offer and proposed       
acquisition. While the exact timing, nature and amount of these expenses are    
subject to change, the Company anticipates a one-time pre-tax charge will be    
recorded in the quarter in which the tender offer is either consummated or      
terminated, possibly resulting in a net loss for such quarter.                  

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K                                        

a.  Exhibits                                                                    

                                                                [Download Table]
                                                                                    
20.1  Final Prospectus of the Company dated April 2, 1998 (incorporated by reference
        to the Company's Form 10-Q filed May 14 1998, Registration No. 333-47457) * 

27    Financial Data Schedule **                                                    

99.7  Solicitation/Recommendation Statement dated July 22, 1998 (incorporated by    
        reference to the Company's Schedule 14D-9 filed July 22, 1998) *            

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

*  Previously filed                                                           

**  Filed herewith                                                              

b.  Reports on Form 8-K                                                         

    On June 5, 1998, the Company filed a Form 8-K Current Report with respect to
the signing of a definitive agreement to acquire Avtech Corporation.    

  On July 10, 1998, the Company filed a Form 8-K Current Report with respect
  to its consummation of the acquisitions of Avtech Corporation and Dettmers
Industries, Inc.                                                        

  On July 21, 1998, the Company filed a Form 8-K Current Report with respect
 to the Company signing a definitive merger agreement with an affiliate of
   DLJ Merchant Banking Partners II, which contemplates a cash tender offer by
    the affiliate for all of the shares of common stock of the Company at $23.00
per share.                                                              

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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.                                          

                                                                [Download Table]
                                                                               
                                DECRANE AIRCRAFT HOLDINGS, INC.                
                                                 (Registrant)                  

August 11, 1998                 By:  /s/ JOHN R. HINSON                        
                                     ----------------------------------------- 
                                     Name: John R. Hinson                      
                                     Title: INTERIM CHIEF FINANCIAL OFFICER AND
                                           ACTING SECRETARY                    

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Dates Referenced Herein and Documents Incorporated by Reference

		Referenced-On Page
This ‘SC 14D9/A’ Filing	Date	First	Last	Other Filings

	12/31/02	9		10-K, 10-K/A, NT 10-K
	1/1/00	11
	5/31/99	10	16
	12/31/98	11
	10/31/98	10	16
Filed on:	8/20/98			SC 14D1/A
	8/11/98	19		10-Q
	8/5/98	12	17
	7/31/98	1
	7/24/98	11	17
	7/22/98	18		SC 14D1, SC 14D9
	7/21/98	11	18	8-K
	7/17/98	11	17
	7/10/98	18		8-K
	6/30/98	1	17	10-Q
	6/29/98	9
	6/26/98	9	16	8-K
	6/25/98	9
	6/17/98	17		DEF 14A
	6/5/98	18		8-K
	4/2/98	18		424B1
	4/1/98	15
	12/31/97	2	16	10-K
	12/15/97	7
	11/14/97	9	14	8-K, 8-K/A
	6/30/97	2	15	10-Q
	4/16/97	7
	1/1/97	7	15
				List all Filings

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Filing Submission 0001047469-98-032236 – Alternative Formats (Word / Rich Text, HTML, Plain Text, et al.)

Decrane Aircraft Holdings Inc – ‘SC 14D9/A’ on 8/20/98 re: Decrane Aircraft Holdings Inc – EX-8

As of: Thursday, 8/20/98 · Accession #: 1047469-98-32236 · File #: 5-52423

Previous ‘SC 14D9’: ‘SC 14D9’ on 7/22/98 · Latest ‘SC 14D9’: This Filing

Amendment to Tender-Offer Solicitation/Recommendation Statement — Schedule 14D-9Filing Table of Contents

EX-8 — Opinion re: Tax MattersExhibit Table of Contents

Dates Referenced Herein and Documents Incorporated by Reference

Amendment to Tender-Offer Solicitation/Recommendation Statement — Schedule 14D-9
Filing Table of Contents

EX-8 — Opinion re: Tax Matters
Exhibit Table of Contents