-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, RlqyvbU5U94DScE9ifNVyH+Zjojnqw+xeya5Oi8eVDamkYvrTsrzeGPSFk04Q1gu r/L44W7+D96DAyO5V6m8Rg== 0000950153-97-000738.txt : 19970814 0000950153-97-000738.hdr.sgml : 19970814 ACCESSION NUMBER: 0000950153-97-000738 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 19970630 FILED AS OF DATE: 19970813 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: SIMULA INC CENTRAL INDEX KEY: 0000885080 STANDARD INDUSTRIAL CLASSIFICATION: PUBLIC BUILDING AND RELATED FURNITURE [2531] IRS NUMBER: 860320129 STATE OF INCORPORATION: AZ FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-12410 FILM NUMBER: 97657820 BUSINESS ADDRESS: STREET 1: 2700 NORTH CENTRAL AVE STREET 2: STE 1000 CITY: PHOENIX STATE: AZ ZIP: 85004 BUSINESS PHONE: 6027528918 MAIL ADDRESS: STREET 1: 2700 NORTH CENTRAL AVE STREET 2: STE 1000 CITY: PHOENIX STATE: AZ ZIP: 85004 10-Q 1 FORM 10-Q FOR PERIOD ENDING 6-30-97 1 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, DC 20549 FORM 10-Q (Mark One) --- X Quarterly report pursuant to Section 13 or 15(d) of the --- Securities Exchange Act of 1934 For the quarterly period ended JUNE 30, 1997 or ------------- --- Transition report pursuant to Section 13 or 15(d) of the --- Securities Exchange Act of 1934 For the transition period from ___________ to _________ Commission file number 1-12410 ------------------------------------------------ SIMULA, INC. - -------------------------------------------------------------------------------- (Exact Name of Registrant as Specified in Its Charter) ARIZONA 86-0320129 - ----------------------------------- ---------------------------- (State or Other Jurisdiction of (I.R.S. Employer Incorporation or Organization) Identification No.) 2700 N. CENTRAL AVENUE, SUITE 1000, PHOENIX, ARIZONA 85004 - -------------------------------------------------------------------------------- (Address of Principal Executive Offices) (Zip Code) (602) 631-4005 - -------------------------------------------------------------------------------- (Registrant's Telephone Number, Including Area Code) - -------------------------------------------------------------------------------- (Former Name, Former Address and Former Fiscal Year, 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) Yes X No -------- -------- (2) has been subject to such filing requirements for the past 90 days. Yes X No -------- -------- Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date: Class Outstanding at June 30, 1997 ------------------------- ---------------------------- Common Stock, $.01 par value 9,063,280 2 SIMULA, INC. INDEX
PART I - FINANCIAL INFORMATION PAGE Item 1 - Financial Statements Consolidated Balance Sheets June 30, 1997 and December 31, 1996................................................2 Consolidated Statements of Operations Three and Six Months Ended June 30, 1997 and 1996..................................3 Consolidated Statement of Shareholders' Equity Six Months Ended June 30, 1997 ....................................................4 Consolidated Statements of Cash Flows Six Months Ended June 30, 1997 and 1996............................................5 Notes to Interim Consolidated Financial Statements .......................................6 Item 2 - Management's Discussion and Analysis of Results of Operations and Financial Condition......................................7 - 10 PART II - OTHER INFORMATION Item 4 - Submission of Matters to a Vote of Security Holders ............................................11 Item 5 - Other - Recent Events ..........................................................................11 Item 6 - Exhibits and Reports............................................................................12 - 13 SIGNATURE ..........................................................................................14
1 3 PART I - FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS. SIMULA, INC. CONSOLIDATED BALANCE SHEETS
JUNE 30, DECEMBER 31, 1997 1996 ------------- ------------ ASSETS CURRENT ASSETS Cash and cash equivalents $ 13,115,244 $ 1,298,741 Contract and trade receivables - Net 28,199,475 25,016,156 Inventories 23,703,695 15,644,157 Income taxes receivable 158,963 1,089,564 Deferred income taxes 3,763,000 3,763,000 Prepaid expenses and other 1,196,081 1,050,215 ------------- ------------ Total current assets 70,136,458 47,861,833 PROPERTY, EQUIPMENT AND LEASEHOLD IMPROVEMENTS - Net 26,515,714 23,356,025 DEFERRED INCOME TAXES 2,147,000 1,782,000 DEFERRED FINANCING COSTS 3,966,931 928,728 INTANGIBLES - Net 10,665,899 10,964,139 OTHER ASSETS 1,988,851 1,647,537 ------------- ------------ TOTAL $ 115,420,853 $ 86,540,262 ============= ============ LIABILITIES & SHAREHOLDERS' EQUITY CURRENT LIABILITIES Revolving line of credit $ 6,900,000 Trade accounts payable $ 9,647,532 9,200,214 Other accrued liabilities 5,584,998 4,019,534 Current portion of long-term debt 4,249,933 4,536,508 ------------- ------------ Total current liabilities 19,482,463 24,656,256 LONG-TERM DEBT - Less current portion 58,548,977 24,696,509 ------------- ------------ Total liabilities 78,031,440 49,352,765 ------------- ------------ SHAREHOLDERS' EQUITY Preferred stock, $.05 par value - authorized 50,000,000 shares; no shares issued or outstanding Common stock, $.01 par value - authorized 50,000,000 shares; issued 9,063,280 and 8,992,598 shares 90,633 89,926 Additional paid-in capital 39,775,204 39,031,453 Retained deficit (2,514,132) (1,966,296) Currency translation adjustment 37,708 32,414 ------------- ------------ Total shareholders' equity 37,389,413 37,187,497 ------------- ------------ TOTAL $ 115,420,853 $ 86,540,262 ============= ============
See notes to interim consolidated financial statements. 2 4 SIMULA, INC. CONSOLIDATED STATEMENTS OF OPERATIONS
THREE MONTHS ENDED JUNE 30, SIX MONTHS ENDED JUNE 30, -------------------------------- -------------------------------- 1997 1996 1997 1996 ------------ ------------ ------------ ------------ REVENUE $ 20,065,365 $ 19,615,830 $ 37,891,188 $ 36,358,342 COST OF REVENUE 13,663,941 15,478,516 26,428,046 27,794,969 ------------ ------------ ------------ ------------ GROSS MARGIN 6,401,424 4,137,314 11,463,142 8,563,373 ADMINISTRATIVE EXPENSES 5,078,744 4,186,174 10,133,959 8,076,618 ------------ ------------ ------------ ------------ OPERATING INCOME (LOSS) 1,322,680 (48,860) 1,329,183 486,755 INTEREST EXPENSE (1,463,706) (459,568) (2,415,346) (791,251) INTEREST INCOME 173,327 173,327 ------------ ------------ ------------ ------------ INCOME (LOSS) BEFORE TAXES 32,301 (508,428) (912,836) (304,496) INCOME TAX (EXPENSE) BENEFIT (14,000) 203,000 365,000 121,000 ------------ ------------ ------------ ------------ INCOME (LOSS) BEFORE CUMULATIVE EFFECT OF A CHANGE IN ACCOUNTING PRINCIPLE 18,301 (305,428) (547,836) (183,496) CUMULATIVE EFFECT ON PRIOR YEARS (TO DECEMBER 31, 1995) OF CHANGING ACCOUNTING FOR PRE-CONTRACT COSTS (3,239,948) ------------ ------------ ------------ ------------ NET INCOME (LOSS) $ 18,301 ($ 305,428) ($ 547,836) ($ 3,423,444) ============ ============ ============ ============ Per share amounts: Income (loss) before cumulative effect of a change in accounting principle $ -- ($ 0.03) ($ 0.06) ($ 0.02) Cumulative effect on prior years (to December 31, 1995) of changing accounting for pre-contract costs (0.36) ------------ ------------ ------------ ------------ Net income (loss) $ -- ($ 0.03) ($ 0.06) ($ 0.38) ============ ============ ============ ============ Weighted average shares outstanding 9,423,286 8,939,346 9,020,105 8,916,287 ============ ============ ============ ============
See notes to interim consolidated financial statements. 3 5 SIMULA, INC. CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY SIX MONTHS ENDED JUNE 30, 1997
Class A ---------------------------- Additional Currency Total Issued Common Stock Paid-in Retained Translation Shareholders' Shares Amount Capital Deficit Adjustment Equity ------------ ------------- ------------- --------------- ----------- -------------- BALANCE, JANUARY 1, 1997 8,992,598 89,926 $ 39,031,453 ($1,966,296) $ 32,414 $ 37,187,497 Issuance of common shares 70,682 707 743,751 744,458 Currency translation adjustment 5,294 5,294 Net loss (547,836) (547,836) ----------- ------------- ------------ ------------- ----------- -------------- BALANCE, JUNE 30, 1997 9,063,280 $ 90,633 $ 39,775,204 $ (2,514,132) $ 37,708 $ 37,389,413 =========== ============= ============ ============= =========== ==============
See notes to interim consolidated financial statements. 4 6 SIMULA, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS
SIX MONTHS ENDED -------------------------------- JUNE 30, 1997 JUNE 30, 1996 ------------ ------------ OPERATING ACTIVITIES: Net loss ($ 547,836) ($ 3,423,444) Adjustment to reconcile net loss to net cash used by operating activities: Depreciation and amortization 2,060,680 1,375,119 Deferred income taxes (365,000) Currency translation adjustment 5,294 Cumulative effect of change in accounting 5,399,948 Changes in net assets and liabilities: Contract and trade receivables - net (3,183,319) (6,108,298) Inventories (8,059,538) (4,944,680) Income taxes receivable 930,601 (2,281,000) Prepaid expenses and other (145,866) (567,325) Other assets (341,314) 14,753 Trade accounts payable 447,318 621,349 Other accrued liabilities 1,565,464 1,809,532 ------------ ------------ Net cash used by operating activities (7,633,516) (8,104,046) ------------ ------------ INVESTING ACTIVITIES: Purchase of property and equipment (4,502,062) (3,481,464) Costs incurred to obtain intangibles (144,396) (384,579) ------------ ------------ Net cash used in investing activities (4,646,458) (3,866,043) ------------ ------------ FINANCING ACTIVITIES: Net (repayments) borrowings under line of credit (6,900,000) 6,700,000 Issuance of 8% Notes - net of expenses 31,186,126 Borrowings under other debt arrangements 2,444,200 Principal payments under other debt arrangements (934,107) (756,735) Issuance of common shares 744,458 782,856 ------------ ------------ Net cash provided by financing activities 24,096,477 9,170,321 ------------ ------------ NET INCREASE (DECREASE) IN CASH 11,816,503 (2,799,768) CASH, BEGINNING OF PERIOD 1,298,741 3,175,172 ------------ ------------ CASH, END OF PERIOD $ 13,115,244 $ 375,404 ============ ============ SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: Taxes paid $ 110,900 $ 277,700 ============ ============ Interest paid $ 1,702,788 $ 437,081 ============ ============
See notes to interim consolidated financial statements. 5 7 SIMULA, INC. NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS NOTE 1 - BASIS OF PRESENTATION: The accompanying interim consolidated financial statements of Simula, Inc. (the "Company") have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q. Accordingly, they do not include all of the information and notes required by generally accepted accounting principles for complete financial statements. In the opinion of Management, all adjustments and reclassifications considered necessary for a fair and comparable presentation have been included and are of a normal recurring nature. Operating results for the three and six months ended June 30, 1997 are not necessarily indicative of the results that may be expected for the year ending December 31, 1997. NOTE 2 - INVENTORIES: At June 30, 1997 and December 31, 1996, inventories consisted of the following.
JUNE 30, DECEMBER 31, 1997 1996 ------------ ------------ Raw materials $ 8,834,320 $ 4,959,810 Work in process 14,236,961 9,822,859 Finished goods 632,414 861,488 ------------ ------------ Total inventories $23,703,695 $15,644,157 ============ ============
NOTE 3 - ISSUANCE OF 8% SENIOR SUBORDINATED CONVERTIBLE NOTES: During the second quarter of 1997, the Company completed the public offering of $34.5 million of its 8% Senior Subordinated Convertible Notes (the "8% Notes"). The 8% Notes are due May 1, 2004 and bear interest at 8% per annum, payable semi-annually. The 8% Notes are convertible into shares of the Company's common stock at a price of $17.55 per share of common stock. The 8% Notes may be redeemed at the Company's option in whole or in part on a pro rata basis, on and after May 1, 1999, at certain specified redemption prices plus accrued interest payable to the redemption date. However, on or after May 1, 1999 and prior to April 30, 2000, the 8% Notes will not be redeemable unless the closing price of the Company's common stock has equaled or exceeded $23.625 for 20 trading days within a period of 30 consecutive trading days. The indenture relating to the 8% Notes contains certain covenants including limitations on the incurrence of additional indebtedness, the sale of assets, liens securing indebtedness other than senior indebtedness, payment restrictions affecting subsidiaries, transactions with affiliates, future senior subordinated indebtedness and mergers and consolidations. In accordance with the indenture, the Company may incur indebtedness under senior credit facilities up to $50 million and may incur other indebtedness based upon a specified ratio of cash flow, as defined, to interest expense. NOTE 4 - SHAREHOLDERS' EQUITY: Weighted average shares used to compute per share amounts for the three month period ended June 30, 1996 and the six month periods ended June 30, 1997 and 1996 do not include common stock equivalents because their effect would be anti-dilutive. In addition, fully diluted earnings per share reflecting the effect of the 8% Notes and the Series C 10% Senior Subordinated Convertible Notes is not presented because the effect would also be anti-dilutive. NOTE 5 - ACCOUNTING CHANGE: During 1996, the Company adopted a new method of accounting for pre-contract costs. These costs were previously deferred and recovered over the revenue streams from these customers. Beginning January 1, 1996, the Company expenses these costs as they are incurred. NOTE 6 - NEW ACCOUNTING STANDARDS: In February 1997, the Financial Accounting Standards Board ("FASB") issued Statement of Financial Accounting Standards ("SFAS") No. 128 "Earnings Per Share," which is effective for both interim and annual periods ending after December 15, 1997. The Company does not believe the adoption of this standard will have a significant effect on previously reported per share data. FASB also recently issued SFAS No. 130 on "Reporting Comprehensive Income" and SFAS No. 131 on "Disclosures about Segments of an Enterprise and Related Information." The "Reporting Comprehensive Income" standard is effective for fiscal years beginning after December 15, 1997. This standard changes the reporting of certain items currently reported in the common stock equity section of the balance sheet. The "Disclosure about Segments of an Enterprise and Related Information" standard is also effective for fiscal years beginning after December 15, 1997. This standard requires that public companies report certain information about operating segments in their financial statements. It also establishes related disclosures about products and services, geographic areas, and major customers. The Company is currently evaluating what impact these standards will have on its financial statements. 6 8 SIMULA, INC. ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION. GENERAL The following discussion and analysis provides information that management of Simula, Inc. (the "Company") believes is relevant to an assessment and understanding of the Company's results of operations and financial condition for the three and six months ended June 30, 1997 compared to the same periods of the prior year. This discussion should be read in conjunction with the Interim Consolidated Financial Statements and the Notes thereto included elsewhere in this Form 10-Q. This Form 10-Q contains certain forward-looking statements and information. The cautionary statements should be read as being applicable to all related forward-looking statements wherever they appear. See "Forward Looking Information and Risks of the Business." OVERVIEW The Company designs and manufactures occupant safety systems and devices engineered to safeguard human life in a wide range of air, ground, and sea transportation vehicles. Utilizing its substantial proprietary technology in energy-absorbing seating, inflatable restraints, and composite materials, the Company focuses on reducing injury and increasing survivability in vehicle crashes. The Company's historic core business has been as a government contractor. Additionally, through recent acquisitions, the Company has become the largest North American-based supplier of seating systems for rail and other mass transit vehicles and a successful new entrant in the manufacture of new commercial airliner seating. Utilizing its proprietary safety technology, customer relationships, and manufacturing capacity expertise, recently enhanced through acquisitions, the Company has introduced crashworthy seating systems for a variety of aircraft, various inflatable restraint systems for automobiles, a bulkhead airbag system for commercial airliners, and two cockpit inflatable restraint systems for military aircraft. In 1993, management made a strategic decision to enter the commercial aircraft seating market to bring its proprietary energy-absorbing technologies to a new industry and take advantage of positive industry trends. To implement its decision, the Company completed three acquisitions that allowed it to develop the necessary infrastructure to support future growth. In August 1993, the Company acquired Airline Interiors, Inc. (the "Airline Acquisition"), which was primarily involved with the refurbishment, reupholstery, reconditioning and reconfiguring of existing passenger seats. The Airline Acquisition provided certain FAA certifications, enhanced the Company's management team and customer base, and provided substantial assembly capacity. During 1994, the Company acquired Coach and Car Equipment Corporation ("Coach and Car") and Artcraft Industries Corp. ("Artcraft"). The acquisitions of Coach and Car and Artcraft are collectively referred to as the 1994 Acquisitions. Coach and Car and Artcraft's existing operations included providing a majority of all manufacturing and refurbishment of rail and mass transit seating systems in North America. The 1994 Acquisitions also provided the Company with substantial large-scale manufacturing capacity and synergies, which will be utilized in the production of its 16g seat (the "16g Seat") for airliners. Simula's revenue has historically been derived from three sources: sales of Company manufactured products; contract research and development for third parties; and technology sales and royalties. A substantial portion of its current revenue is accounted for under the percentage of completion method of accounting. Under this method, revenue is recorded as production progresses so that revenue less costs incurred to date yields the percentage of gross margin estimated for each contract. Overall gross margin percentages can increase or decrease based upon changes in estimated gross margin percentages over the lives of individual contracts. The Company is a holding company for wholly owned subsidiaries, including Simula Government Products, Inc., the principal entity conducting the Company's "Government and Defense" business, and Simula Transportation Equipment Corporation ("SimTec" - formerly known as Intaero), an entity conducting the Company's commercial seating businesses. In addition, the Company maintains general corporate operations and subsidiaries engaged in technology development including Simula Automotive Safety Devices, Inc. ("Simula ASD") which was established in 1995 and conducts substantially all of the Company's operations encompassing inflatable restraints for automobiles including the Inflatable Tubular Structure (the "ITS"). Through 1996, Simula ASD did not have significant revenue. 7 9 SIMULA, INC. RESULTS OF OPERATIONS Three and Six Months Ended June 30, 1997 Compared to 1996 Revenue for the three months ended June 30, 1997 increased 2% to $20.1 million from $19.6 million for the comparable period in 1996. Revenue for the six months ended June 30, 1997 increased 4% to $37.9 million from $36.4 million for the comparable period in 1996. Revenue for the three and six months ended June 30, 1996 included approximately $4.6 million in incremental revenue from an armor contract which represented non-recurring business. Excluding this contract from the 1996 periods, revenues increased 33% and 19% for the three and six month periods ended June 30, 1997, respectively, versus the comparable periods in 1996. These increases are primarily due to increased sales of the 16g Seat and the ITS and increased contract revenue for rail and mass transit. Gross margin for the three months ended June 30, 1997 increased 55% to $6.4 million from $4.1 million for the comparable period in 1996. For the six months ended June 30, 1997, gross margin increased 34% to $11.5 million from $8.6 million. The increase in gross margin was primarily due to the reduction in pre-contract and start-up costs. As a percent of sales, gross margin for the three months ended June 30, 1997 increased to 32% from 21%, and for the six months ended June 30, 1997 increased to 30% from 24%, for the comparable periods in 1996. The increase in gross margin percentage was due to the increased sales volume of the 16g Seat and the ITS and the reduction in pre-contract costs and start-up costs. Revenue from the 16g Seat and ITS is now available to cover certain fixed manufacturing costs. Administrative expenses for the three months ended June 30, 1997 increased 21% to $5.1 million from $4.2 million for the comparable period in 1996. Administrative expenses for the six months ended June 30, 1997 increased 25% to $10.1 million from $8.1 million for the comparable period in 1996. This increase was attributable to the expansion of the corporate and sales infrastructure related to the commercial introduction of the Company's technologies, principally the 16g Seat and certain commercial helicopter seat programs, and increased Government and Defense and new technology bid and proposal costs. Interest expense for the three months ended June 30, 1997 increased 219% to $1.5 million from approximately $460,000 for the comparable period in 1996. Interest expense for the six months ended June 30, 1997 increased 205% to $2.4 million from approximately $800,000 for the comparable period in 1996. These increases were due to increased borrowings on the Company's bank credit facilities, the issuance of $34.5 million of the 8% Senior Subordinated Convertible Notes (the "8% Notes") in April 1997 and the issuance of $14.3 million of the Series C 10% Senior Subordinated Convertible Notes in September 1996. These borrowings were made to fund its growth in working capital and fixed assets necessary to support the anticipated growth in revenues for 1997 and subsequent years. The Company's revolving line of credit was repaid with the proceeds from the issuance of the 8% Notes and has no outstanding balance at June 30, 1997. Interest income for the three and six months ended June 30, 1997, was approximately $174,000. This income results from the investment by the Company of the excess proceeds received upon the issuance of the 8% Notes. These excess proceeds have been invested in high quality government and short-term investment grade, interest bearing securities. The effective income tax rate for the three and six month periods ended June 30, 1997 and 1996 approximated the Company's combined statutory rate of 40%. 8 10 SIMULA, INC. LIQUIDITY AND CAPITAL RESOURCES The Company's liquidity is greatly impacted by the nature of the billing provisions under its contracts. Generally, in the early period of contracts, cash expenditures and accrued profits are greater than allowed billings while contract completion results in billing previously unbilled costs and profits. Contract and trade receivables, net of advances on contracts, increased approximately $3.2 million for the six months ended June 30, 1997, principally due to certain rail programs initiated in the first six months of 1997 and trade receivables from 16g Seat customers. Operating activities required the use of $7.6 million of cash during the six months ended June 30, 1997, compared to the use of $8.1 million of cash during the same period in 1996. Cash used by operating activities in 1997 was primarily used to fund an increase in inventories of $8.1 million and the increase in contract and trade receivables noted above. The increase in inventories was primarily related to the 16g Seat and ITS and represents the buildup necessary to support anticipated future deliveries. This buildup includes increases in purchased components to be used in the assembly process, raw materials to be used in the manufacture of 16g Seat components by Coach and Car and composite seat backs produced by the Company's subsidiary, Viatech. Investing activities required the use of $4.6 million of cash during the six months ended June 30, 1997 primarily for the purchase of manufacturing equipment for the ITS to be located at the Company's operation in the United Kingdom. In addition, the Company acquired tooling fixtures for future rail programs and certain enhancements to its 16g Seat machining cell at Coach and Car. Financing activities provided $24.1 million of cash during the six months ended June 30, 1997 principally from approximately $31.2 million in net proceeds received from the issuance of the 8% Notes offset by the net repayment of $6.9 million under the Company's revolving line of credit. During the second quarter of 1997, the Company completed the public offering of $34.5 million of the 8% Notes. The 8% Notes are due May 1, 2004 and bear interest at 8% per annum, payable semi-annually. The 8% Notes are convertible into shares of the Company's common stock at a price of $17.55 per share of common stock. The 8% Notes may be redeemed at the Company's option in whole or in part on a pro rata basis, on and after May 1, 1999, at certain specified redemption prices plus accrued interest payable to the redemption date. However, on or after May 1, 1999 and prior to April 30, 2000, the 8% Notes will not be redeemable unless the closing price of the Company's common stock has equaled or exceeded $23.625 for 20 trading days within a period of 30 consecutive trading days. The indenture relating to the 8% Notes contains certain covenants including limitations on the incurrence of additional indebtedness, the sale of assets, liens securing indebtedness other than senior indebtedness, payment restrictions affecting subsidiaries, transactions with affiliates, future senior subordinated indebtedness and mergers and consolidations. In accordance with the indenture, the Company may incur indebtedness under senior credit facilities up to $50 million and may incur other indebtedness based upon a specified ratio of cash flow, as defined, to interest expense. Included in current portion of long-term debt is a mortgage of $2.6 million on one of the Company's facilities that is due in March 1998. The Company is currently pursuing various alternatives for this property and believes it will be able to repay or refinance the mortgage on a long-term basis prior to its maturity. The Company believes it has sufficient manufacturing capacity in place at June 30, 1997 to meet its foreseeable delivery requirements. The Company anticipates cash on hand, cash provided by operating activities once the 16g Seat and ITS reach full scale production and the availability under its bank credit facilities will be sufficient to meet its current and foreseeable working capital requirements. The Company may, however, seek to obtain additional capital should demand for its products exceed current capacity. The raising of additional capital in public markets will be primarily dependent upon prevailing market conditions and the demand for the Company's technologies and products. 9 11 SIMULA, INC. INFLATION The Company does not believe that it is significantly impacted by inflation. RESEARCH AND DEVELOPMENT The Company's research and development occurs under fixed-price, government-funded contracts and Company-sponsored efforts. Historically, research and development efforts have fluctuated based upon available government-funded contracts and available Company funding. The Company anticipates that future fluctuations may also occur as a result of efforts to expand its inflatable restraint, commercial airliner and helicopter seating, and rail seating technologies. SEASONALITY As the Company has diversified its operations into new commercial products, the impact of seasonal variations in deliveries by suppliers which have historically resulted in higher revenue in the fourth quarter and lower revenue in the first quarter has diminished. The Company does not believe that it is currently significantly impacted by seasonal factors. FORWARD LOOKING INFORMATION AND RISKS OF THE BUSINESS Commencing in fiscal 1997, the Company entered large scale production of the ITS and 16g Seat. The Company expects that in late 1997 and in 1998, it will begin to realize significant revenues from the introduction of these products. During this period, the other core businesses of the Company are expected to remain at current revenue levels. Projected operating results and capital needs will be affected by a wide variety of factors which could adversely impact revenues, profitability and cash flows, many of which are beyond the control of the Company. The factors include the availability and utilization of manufacturing capacity; fluctuations in manufacturing yield; the availability and cost of raw materials, equipment, and other supplies; the Company's ability to design and introduce new products on a timely basis; market acceptance and demand of both the Company's and its customers' products; success in building strategic alliances with large prime contractors and first tier suppliers to OEMs; the level of orders which are received and can be shipped and invoiced in a quarter; customer order patterns and seasonality; levels of accounts receivable; changes in product mix; product performance and reliability; product obsolescence; the cyclical nature of the airline, rail and automobile industries and other markets addressed by the Company's products; the level and makeup of military expenditures; technological changes; competition and competitive pressures on pricing; and economic conditions in the United States and worldwide markets served by the Company. The Company's products are incorporated into a variety of transportation vehicles. A slowdown in demand for new transportation vehicles or modifications services to transportation vehicles as a result of economic or other conditions in the United States or worldwide markets served by the Company and its customers or other broad-based factors could adversely affect the Company's operating results or financial condition. 10 12 SIMULA, INC. PART II - OTHER INFORMATION ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS. The Company's Annual Meeting of Shareholders was held on June 12, 1997. Proxies were solicited for votes on matters proposed at such meeting pursuant to Section 14 of the Securities Exchange Act of 1934. The Company's Proxy Statement for the Annual Meeting was filed with the Securities and Exchange Commission on April 23, 1997. April 11, 1997 was fixed as the record date for voting on matters presented at the Annual Meeting. As of such date, 9,022,348 shares of Common Stock were outstanding and eligible to be voted. The first matter submitted for Shareholder vote was the election of directors. 9,022,348 shares were eligible to be voted on the matter and 4,511,175 shares constituted a quorum for voting purposes. Votes for individual directors were tabulated as follows:
Name Votes For Votes Withheld - ------------------- ------------- ------------- Stanley P. Desjardins 8,544,523 250,276 Donald W. Townsend 8,547,898 246,901 Bradley P. Forst 8,547,898 246,901 Sean K. Nolen 8,547,598 247,201 James C. Withers 8,547,598 247,201 Robert D. Olliver 8,547,698 247,101 Scott E. Miller 8,547,598 247,201 John M. Leinonen 8,544,948 249,851
The second matter submitted for vote was the ratification of the selection of Deloitte & Touche, LLP as the independent public accountants for the Company's fiscal year 1997. 9,022,348 shares were eligible to be voted on the matter and 4,511,175 shares constituted a quorum for voting purposes. Votes as tabulated for such matter were 8,717,795 for, 49,586 against, and 27,418 abstaining. The third matter submitted for vote was the amendment of the Company's 1994 Stock Option Plan. Excluding 3,082,536 broker non-votes, the total number of shares eligible to vote on the matter was 5,939,812. Accordingly, under Arizona law, 2,969,907 shares constituted a quorum. Voting as tabulated for this matter were 4,987,535 for, 661,586 against, and 63,142 abstaining. No other matters were voted upon at the meeting. ITEM 5. OTHER - RECENT OFFERING OF SENIOR SUBORDINATED CONVERTIBLE NOTES. During the second quarter of 1997, the Company completed the public offering of $34.5 million of its 8% Senior Subordinated Convertible Notes (the "8% Notes"). The 8% Notes are due May 1, 2004 and bear interest at 8% per annum, payable semi-annually. The 8% Notes are convertible into shares of the Company's common stock at a price of $17.55 per share of common stock. The 8% Notes may be redeemed at the Company's option in whole or in part on a pro rata basis, on and after May 1, 1999, at certain specified redemption prices plus accrued interest payable to the redemption date. However, on or after May 1, 1999 and prior to April 30, 2000, the 8% Notes will not be redeemable unless the closing price of the Company's common stock has equaled or exceeded $23.625 for 20 trading days within a period of 30 consecutive trading days. The indenture relating to the 8% Notes contains certain covenants including limitations on the incurrence of additional indebtedness, the sale of assets, liens securing indebtedness other than senior indebtedness, payment restrictions affecting subsidiaries, transactions with affiliates, future senior subordinated indebtedness and mergers and consolidations. In accordance with the indenture, the Company may incur indebtedness under senior credit facilities up to $50 million and may incur other indebtedness based upon a specified ratio of cash flow, as defined, to interest expense. 11 13 SIMULA, INC. ITEM 6. EXHIBITS AND REPORTS. (a) The following Exhibits are included pursuant to Item 601 of Regulation S-K.
NO. DESCRIPTION REFERENCE --- ----------- --------- 3.1 Articles of Incorporation of Simula, Inc., as amended and restated................................... (9) 3.2 Bylaws of Simula, Inc., as amended and restated...................................................... (1) 4.2 Indenture dated December 17, 1993 (including cross-reference sheet to Trust Indenture Act), as amended........................................................................................ (3) 4.5 Supplemental Indenture No. 2 dated September 12, 1996, entered into in connection with the the Registrant's issuance of Series C 10% Senior Subordinated Convertible Notes................... (12) 4.6 Supplemental Indenture No.3, effective March 14, 1997, amending the Indenture of Simula, Inc. dated December 17, 1993.............................................................. (11) 4.7 Indenture dated April 1, 1997, in connection with the issuance of the 8% Senior Subordinated Convertible Notes due May 1, 2004 (12) 10.8 Employment Agreement between Registrant and Stanley P. Desjardins.................................... (1) 10.9 Employment Agreement between Registrant and Donald W. Townsend....................................... (1) 10.11 1992 Stock Option Plan............................................................................... (1) 10.12 1992 Restricted Stock Plan........................................................................... (1) 10.15 Asset Purchase Agreement dated August 2, 1993 between Simula, Inc. and Airline Interiors, Inc. .......................................................................... (2) 10.16 Asset Purchase Agreement dated June 14, 1994, among Simula, Inc., CCEC Acquisition Corp. and Coach and Car Equipment Corporation...................................................... (4) 10.18 Asset Purchase Agreement dated September 30, 1994, among Simula, Inc., Artcraft Acquisition Corp., and Artcraft Industries Corp................................................... (5) 10.21 1994 Stock Option Plan............................................................................... (6) 10.22 Agreements dated January 27, 1995 with Autoliv AB, including license agreement, frame supply agreement and joint development agreement.................................................. (7) 10.23 Agreement with Jetstream Aircraft Limited............................................................ (7) 10.24 Amended Loan Agreement with Wells Fargo Bank, N.A. dated December 20, 1996........................... (11) 10.25 Asset Purchase Agreement dated November 1, 1995, between Comfab, Inc. and Stanley P. Desjardins, d/b/a Desjardins Engineering; Services Agreement dated November 1, 1995, between Simula, Inc. and Comfab, Inc.; Promissory Note of Stanley P. Desjardins, d/b/a Desjardins Engineering, dated November 1, 1995, for the purchase price of Comfab, Inc. ........... (8) 10.26 Simula, Inc. Employee Stock Purchase Plan............................................................ (9) 10.27 Promissory Note representing $650,000 loan from Stanley P. Desjardins dated August 12, 1996.............................................................................................. (12) 10.28 Promissory Note representing $1,000,000 loan from Stanley P. Desjardins dated August 14, 1996.............................................................................................. (12) 10.29 Form of Change of Control Agreements Between the Company and Key Management Personnel......................................................................................... (11) *11. Earnings Per Share 18. Preference Letter re: change in accounting principles................................................ (10) +24. Powers of Attorney - Directors....................................................................... (11) *27. Financial Data Schedule
- ---------- * Filed herewith. + Power of Attorney for John M. Leinonen, elected to the Company's Board of Directors for the first time on June 12, 1997 is filed herewith; all other Powers of Attorney for Directors were filed as referenced. 12 14 SIMULA, INC. (1) Filed with Registration Statement on Form S-18, No. 33-46152-LA, under the Securities Act of 1933, effective April 13, 1992. (2) Filed with current Report on Form 8-K, dated August 2, 1993. (3) Filed with Registration Statement on Form SB-2, No. 33-61028 under the Securities Act of 1933, effective December 10, 1993. (4) Filed with current Report on Form 8-K, dated June 14, 1994. (5) Filed with current Report on Form 8-K, dated September 30, 1994. (6) Filed with Registration Statement on Form SB-2, No. 33-87582, under the Securities Act of 1933, effective December 28, 1994. (7) Filed with Registration Statement on Form S-1, No. 33-89186, under the Securities Act of 1933, effective March 28, 1995, as amended by Post-Effective Amendment No. 1, effective March 31, 1995. (8) Filed with Report on Form 10-K for the year ended December 31, 1995. (9) Filed with Definitive Proxy on May 14, 1996, for the Company's Annual Meeting of Shareholders held on June 20, 1996. (10) Filed with Report on Form 10-Q/A for the quarter ended June 30, 1996. (11) Filed with Report on Form 10-K for the year ended December 31, 1996. (12) Filed with Registration Statement on Form S-3, No. 333-13499, under the Securities Act of 1993, effective April 24, 1997. (b) No reports on Form 8-K have been filed during the reporting period. 13 15 SIMULA, INC. SIGNATURE Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report on Form 10-Q for the quarter ended June 30, 1997 to be signed on its behalf by the undersigned thereunto duly authorized. SIMULA, INC. DATE: August 13, 1997 /s/ Donald W. Townsend ---------------- ------------------------ DONALD W. TOWNSEND President Chief Operating Officer /s/ Sean K. Nolen ------------------------- SEAN K. NOLEN Vice President of Finance Chief Financial Officer 14 EX-11 2 EARININGS PER SHARE 1 EXHIBIT 11 SIMULA, INC. AND SUBSIDIARIES COMPUTATION OF EARNINGS PER SHARE
Three Months Ended June 30, Six Months Ended June 30, ------------------------------ ------------------------------ 1997 1996 1997 1996 ----------- ----------- ----------- ----------- Income (loss) before cumulative effect of a change in accounting principle $ 18,301 $ (305,428) $ (547,836) $ (183,496) Cumulative effect on prior years (to December 31, 1995) of changing accounting for pre-contract costs (3,239,948) ----------- ----------- ----------- ----------- Net income (loss) $ 18,301 $ (305,428) $ (547,836) $(3,423,444) =========== =========== =========== =========== Number of shares: Weighted average shares outstanding 9,044,186 8,939,346 9,020,105 8,916,287 Incremental shares for outstanding stock options 379,100 -- -- -- ----------- ----------- ----------- ----------- 9,423,286 8,939,346 9,020,105 8,916,287 =========== =========== =========== =========== Per share amounts: Income (loss) before cumulative effect of a change in accounting principle $ -- $ (0.03) $ (0.06) $ (0.02) Cumulative effect on prior years (to December 31, 1995) of changing accounting for pre-contract costs (0.36) ----------- ----------- ----------- ----------- Net income (loss) $ -- $ (0.03) $ (0.06) $ (0.38) =========== =========== =========== ===========
15 EX-24 3 POWERS OF ATTORNEY 1 Exhibit 24 POWER OF ATTORNEY The undersigned officer and/or director of SIMULA, INC. (the "Company") does hereby constitute and appoint Bradley P. Forst and Sean K. Nolen with full power of substitution, my true and lawful attorney and agent, to do any and all acts and things in my name in the capacity indicated below, and to execute any and all instruments for me and in my name in the capacities indicated below that he may deem necessary or advisable to enable the Company to register securities and comply with the Securities Act of 1933, the Securities Exchange Act of 1934, and any rules, regulations and requirements of the Securities and Exchange Commission in connection with periodic reports on Form 3, Form 4, Form 5, or Form 144, covering such shares of preferred stock, common stock, options, warrants, or other securities of the Company that I may acquire or dispose of, including specifically, but not limited to, the power and authority to sign for me in the capacity indicated below any and all amendments thereto; and I do hereby ratify and confirm all that Bradley P. Forst or Sean K. Nolen shall do or cause to be done by virtue hereof. Dated this 12th day of June, 1997. /s/ John M. Leinonen --------------------------- John M. Leinonen, Director EX-27 4 FINANCIAL DATA SCHEDULE
5 1 U.S. DOLLARS 3-MOS DEC-31-1997 APR-01-1997 JUN-30-1997 1 13,115,244 0 28,199,475 0 23,703,695 70,136,458 26,515,714 0 115,420,853 19,482,463 58,548,977 0 0 90,633 37,298,780 115,420,853 20,065,365 20,065,365 13,663,941 13,663,941 5,078,744 0 1,463,706 32,301 14,000 18,301 0 0 0 18,301 .00 .00
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