DeCrane Aircraft Holdings Inc.

2361 Rosecrans Avenue, Suite 180
El Segundo, California 90245
U.S.A.
Telephone: (310) 725-9123
Fax: (310) 643-0746
Web site: http://www.decraneaircraft.com

Wholly Owned Subsidiary of Decrane Holdings Co.
Incorporated: 1989
Employees: 2,500
Sales: $244.05 million (1999)
NAIC: 336413 Other Aircraft Parts and Auxiliary Equipment Manufacturing

DeCrane Aircraft Holdings Inc. (DAH) has grown aggressively through focused acquisitions. Originally a supplier to commercial airliners, DeCrane bought its first business jet supplier in 1997 and has since become a dominant player in that field. Clients include virtually all commercial and business jet manufacturers, including Boeing, Airbus, Dassault, Bombardier, and Cessna. New York-based DLJ Merchant Banking Partners II, L.P. owns DAH parent DeCrane Holdings Co.

Origins

R. Jack DeCrane was an executive at B.F. Goodrich from 1986 to 1989. He left to form a new holding company, DeCrane Aircraft Holdings, Inc. (DAH), in December 1989. The first acquisition was Hollingsead, a maker of avionics support structures, which was bought in October 1990 for $9.1 million.

In 1991, DAH purchased the Tri-Star Companies (i.e., Tri-Star including Tri-Star Europe and TST). Tri-Star made contacts and connectors, and TST made wire marking equipment. The purchase cost $10.4 million. That same year, DAH also bought a 75 percent share of Cory Components, which made connectors and harness assemblies, for $2 million. The remaining shareholding was acquired a few years later.

Revenues at Hollingsead increased almost 75 percent from 1992 through 1995. By this time, virtually all airliners in production carried components made by one of the DAH companies. DeCrane’s strategy was to buy complementary businesses, working up from component manufacture to that of complete systems. The company still managed to grow by a third as annual aircraft production fell from 800 to 400 from 1992 to 1995. Profits were hard to come by, though—DAH lost $2.4 million on revenues of $47.1 million in 1994 and $3.4 million on revenues of $55.8 million in 1995.

Two factors weighed significantly in DeCrane’s favor in the mid-1990s. As the recovering commercial airline industry began to replace its aging planes, producers began reducing their vendor lists to better control quality and speed production. Every commercial aircraft had between one million and five million parts, and the industry had supported thousands of suppliers.

As consolidation among suppliers accelerated in 1996, DAH made three more acquisitions: Aerospace Display Systems (ADS), Elsinore L.P.’s Aerospace Services and Engineering Services divisions, and a $7 million facility owned by electronic connector giant AMP. The company paid $13.3 million for ADS, the market leader in dichroic LCD devices and a division of Allard Industries Inc. This promised to raise DAH’s share of original equipment manufacturer (OEM) contracts. Engineering firm Elsinore cost $2.6 million and fortified the company’s systems integration business and brought an important new client: Daimler Benz Aerospace. The AMP plant allowed for the more efficient production of contact blanks. DAH also paid $5.7 million for the remaining 25 percent share of Cory Components. With these purchases, DAH developed Hollingsead into a provider of complete systems, focusing primarily on the retrofit market. Losses for the year were reduced to $817,000 on revenues of $65 million.

Public in 1997

DAH aimed to raise around $40 million to pay off debt in its April 1997 initial public offering on the NASDAQ stock ex-change. Four investment firms had held shares in DAH before the offering: Nassau Capital Partners L.P. (29.3 percent), DSV Partners IV (19.6 percent), Brantley Venture Partners (19.6 percent), and London-based Electra Investment Trust PLC (18 percent).

In August 1997, The Network Connection Inc. (TNCI) contracted with DeCrane’s Hollingsead International unit to integrate in-flight entertainment and information management systems at French start-up carrier Fairlines, which operated McDonnell Douglas MD-80s. Sales of commercial aircraft continued to increase as carriers restored their aging fleets. DAH enjoyed a strong relationship with Boeing as that manufacturer merged with McDonnell Douglas.

Nevertheless, DAH decided to expand its acquisition strategy and enter the business jet market at a time of growth. Deliveries of new business jets were projected to total 2,300 between 1997 and 2001, an increase of 60 percent over the previous five years, spurred by a decline in available used aircraft, an increase in the number of charter operators, and the growing fractional ownership trend led by Executive Jet, Inc. The company bought Audio International Inc., a private, Arkansas-based market leader producing aircraft entertainment and cabin management products for business jets.

Revenues increased by two-thirds to $109 million in 1997 as operating profit nearly doubled to 12 million. The company had about 1,000 employees. Chuck Becker, president of Tri-Star Electronics, was named DAH president and COO in April 1998.

DAH completed a secondary offering by April 1998, leaving the company about $70 million in capital to spend. As Jack DeCrane told CNNfn, DAH typically sought out companies that were not for sale and secretly and quickly developed the deals they felt would enhance both sides’ futures. DAH bought Seattle-based Avtech Corp. in June 1998. The innovative company had been founded in 1963 and produced electronics systems for the civil aerospace industry. The purchase of Dettmers Indus-tries Inc. followed within a month. Dettmers was a fast-growing Florida-based company that built motorized seating for corporate jets. DAH believed the products of its Audio International and Avtech subsidiaries would complement those of Dettmers.

Private in 1998

DeCrane itself agreed to be acquired by DLJ Merchant Banking Partners II, an affiliate of New York investment bank Donaldson, Lufkin & Jenrette, Inc., in July 1998. DLJ agreed to pay $23 per share at a time when the DAH stock was trading for $17 a share; the total price was about $182 million. DLJ also promised to bankroll the company’s ambitious acquisition strategy. Management received a minority share and the company became a private company again. DeCrane shareholder Taam Associates, Inc. had sued, saying the board should have shopped the company around more. Company officials agreed to release more information about the deal before it closed, and the suit was dropped. DLJ organized DeCrane Holdings Co. as a holding company for DeCrane Aircraft Holdings (DAH).

DAH continued to grow its corporate jet business by acquiring PATS Inc., a leading producer of auxiliary fuel tanks. PATS, founded in 1976, also had developed a line of auxiliary power units. It had recently won a seven-year, $180 million contract to install them on the new Boeing Business Jet (BBJ), a derivative of the Boeing 737 airliner.

The buying spree continued with the April 1999 purchase of Precision Pattern Inc. (PPI), based in Wichita, Kansas. The company, founded in 1952, supplied custom furniture for business jets (including the two Air Force One Boeing 747s). PPI had 350 employees and was planning to add 50 a year to keep pace with the business jet industry. Annual sales averaged $24 million. Like other DAH acquisitions, Precision Pattern was not for sale when DeCrane executives approached it. Combined with Audio International and Dettmers, the purchase made DeCrane the largest supplier of interior products to the corporate market.

DAH augmented these purchases that August by buying Custom Woodwork & Plastics Inc. (CWP). CWP made interior furniture components for corporate aircraft. Based in Savannah, Georgia, the 54-person company had been supplying Gulf-stream Aerospace for a dozen years.

Another Wichita company, PCI NewCo Inc., was added in October 1999. PCI made sidewalls and headliners for corporate jet interiors. DAH added the business to its Cabin Management Group. The company, founded in 1978, also made ducting, doors, and flight surfaces. It had been bought by local businessman Russell Bomhoff in 1995 while it was in bankruptcy. Customers included most business jet manufacturers, including Boeing.

Company Perspectives

Whether your requirements are in OEM, modification, or retrofit, and whether you’re concerned with commercial, corporate, or military aircraft systems, DeCrane Aircraft can deliver significant economies, both in time and use of resources. That’s because DeCrane offers the advantages of single-point contact, single-point program management, and single-point accountability. Our goal is to place as many integrated services as possible at our customers’ disposal—in Cabin Management, Specialty Avionics, and Systems Integration. From concept and design through manufacturing, final assembly and FAA certification, our customers entrust the responsibility to DeCrane, instead of coordinating multiple suppliers. Our single-source approach provides efficiencies unmatched by others, and we are constantly working to improve our capabilities to benefit our customers.

Regrouped in 1999

In September 1999, DAH reorganized its ten subsidiaries into three business groups: the Cabin Management Group, the Specialty Avionics Group, and the Systems Integration Group. Jack DeCrane said the new groups would help aircraft manufacturers speed completion times by weeks or months without compromising quality. The Cabin Management Group offered “cabins in a box”—pre-engineered, pre-fitted interior kits. The Specialty Avionics Group supplied components for electronics equipment. Systems Integration provided auxiliary fuel tanks and auxiliary power units as well as engineering and other services.

The Infinity Partners, a maker of pre-engineered interior kits and cabin components for corporate jets, was acquired in December 1999. Bombardier was Infinity’s main customer. Infinity, based in Denton, Texas, had been founded just three years prior to its acquisition by DeCrane. Completing its line of interior products remained a priority for DeCrane entering the new millennium. DAH bought Carl F. Booth & Co. of New Albany, Indiana, in May 2000. Booth supplied wood veneer products for business aircraft.

Soon after came the acquisition of ERDA Inc., a business aircraft seating maker based in Peshtigo, Wisconsin. DeCrane officials announced plans to double production there, potentially adding 100 new jobs in Wisconsin. Employment had already risen by 100 to 250 in the previous year. ERDA, which also operated a plant in Monterrey, Mexico, had recently won a contract with Dassault Falcon Jet. It had been founded in 1979 and itself acquired rival Derlan Industries of Santa Ana, California. DAH also picked up ERDA’s medical imaging division in the deal, but not its interest in San Marcos, California-based Trident Inc., which went to ERDA shareholders. ERDA joined DeCrane’s newly formed Seating Division with Dettmers Industries. The manufacturing operations of the Aviart Group, based in San Antonio, Texas, were also acquired in the spring of 2000. Aviart employed 115 people and produced upholstery, cabinetry, and finishes. It was renamed DeCrane Aircraft Furniture Co., L.P.

DeCrane forecast total sales of $370 million for the year 2000. It was consolidating its Hollingsead International operations in a new facility near Santa Barbara, California. The Teal Group Corp. predicted a 50 percent increase in the corporate jet deliveries over the next ten years. As this segment accounted for more than 40 percent of DAH’s business, the company seemed assured of another successful decade.

Principal Subsidiaries

Audio International; Carl F. Booth & Co., Inc.; Custom Wood-work & Plastics, Inc.; Dettmers Industries, Inc.; Infinity Partners; International Custom Interiors, Inc.; PCI NewCo; Precision Pattern, Inc.; Aerospace Display Systems, Inc.; Avtech Corporation; Cory Components; ERDA Inc.; Tri-Star Electronics International, Inc.; Hollingsead International, Inc.; PATS, Inc.

Principal Divisions

Cabin Management Group; Specialty Avionics Group; Systems Integration Group.

Principal Competitors

AAR Corp.; Aerospace Lighting; Air Show/Pacific Systems; AlliedSignal Inc.; AMP, Inc.; Amphenol; Baker Electronics; B/E Aerospace, Inc.; Becker Avionics; Burnham; Crane ELDEC; Cristalloid; Custom Aircraft Cabinets; Deutsch Engineered Connecting Devices; Diehl GmbH; DPI Labs; Electronic Cable Specialists; Fibre Art; Gables Engineering; Grimes Aero-space; Killer; ITT Cannon; Marshall Engineering; Plastic Fab; Nellcor Puritan Bennett; The Nordam Group; Page Aerospace; Radiall S.A.; Sealed Composites Works.

Key Dates

1989:

Former B.F. Goodrich executive Jack DeCrane starts his own holding company.

1990:

DAH makes its first acquisition, Hollingsead.

1997:

DAH goes public; enters business jet market.

1998:

DLJ buys DAH.

Further Reading

“DeCrane Aircraft Hopes to Launch Public Offering,” Going Public: The IPO Reporter, February 3, 1997, p. 8.

Defterios, John, “Trading Places” (interview of Jack DeCrane), CNNfn, May 22, 1998.

Moriarty, George, “DLJ Merchant Banking Acquires DeCrane Aircraft,” Private Equity Week, July 27, 1998.

Pearce, Dennis, “DeCrane Aircraft Buys Precision Pattern, of Wichita, Kan.,” Wichita Eagle, April 27, 1999.

Prizinsky, David, “DeCrane Aircraft Looking to Soar with IPO Assist,” Grain’s Cleveland Business, Finance Sec., April 7,1997, p. 3.

Savage, Mark, “California Avionics Company to Buy Peshtigo, Wis. Airplane Seat Maker,” Milwaukee Journal Sentinel, May 31, 2000.

Snow, David, “DLJ Flies Higher with DeCrane Add-On,” Buy Outs, May 31, 1999.

Stickel, Amy L, “Booming Aircraft Market Sends Suppliers Soaring,” Mergers & Acquisitions Report, Industry Focus Sec., May 5, 1997, p. 1.

—Frederick C. Ingram