<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For Quarter Ended March 31, 1996
Commission File Number 0-20003
SIMULA, INC.
(Exact name of registrant as specified in its charter)
Arizona 86-0320129
(State of Incorporation) (I.R.S. Employer Identification No.)
401 W. Baseline, Suite 204, Tempe, Arizona 85283
(Address of principal executive office) (Zip Code)
(602) 752-8918
(Registrant's telephone number,
including area code)
829206 10 1
(CUSIP Number)
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 past 90 days.
(1) YES X NO
----- -----
(2) 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:
<TABLE>
<CAPTION>
Outstanding at
Class March 31, 1996
----- --------------
<S> <C>
Common Stock, $.01 par value 8,896,127
</TABLE>
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SIMULA, INC.
INDEX
PART I - FINANCIAL INFORMATION
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Item 1 - Financial Statements
Consolidated Balance Sheets
March 31, 1996 and December 31, 1995 ....................... 2
Consolidated Statements of Earnings
Three Months Ended March 31, 1996 and 1995.................. 3
Consolidated Statement of Shareholders' Equity
Three Months Ended March 31, 1996 .......................... 4
Consolidated Statements of Cash Flows
Three Months Ended March 31, 1996 and 1995.................. 5
Notes to Financial Statements.................................... 6
Item 2 - Management's Discussion and Analysis of
Results of Operations and Financial Condition...............7-9
PART II - OTHER INFORMATION
Item 6 - Exhibits ....................................................... 9
SIGNATURE ................................................................ 10
</TABLE>
1
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PART I - FINANCIAL INFORMATION
ITEM 1 - FINANCIAL STATEMENTS
SIMULA, INC.
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------
ASSETS March 31, 1996 December 31, 1995
-------------- -----------------
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 205,876 $ 3,175,172
Contract and trade receivables - net (Note 2) 26,284,214 25,221,504
Inventories 10,360,068 8,104,194
Prepaid expenses and other 769,979 762,836
------------ ------------
Total current assets 37,620,137 37,263,706
PROPERTY, EQUIPMENT AND LEASEHOLD
IMPROVEMENTS - NET 17,278,765 15,778,819
DEFERRED COSTS 7,521,993 6,385,328
PATENTS AND LICENSES 570,900 518,644
INTANGIBLES - NET 13,087,372 13,351,361
OTHER ASSETS 1,602,142 1,441,278
------------ ------------
TOTAL ASSETS $ 77,681,309 $ 74,739,136
============ ============
LIABILITIES & SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Revolving line of credit $ 3,000,000
Trade accounts payable 7,496,280 $ 7,884,141
Other accrued liabilities 3,529,580 2,607,849
Advances on contracts 2,194,718 3,920,533
Deferred income taxes 8,000 8,000
Current portion of long-term debt 4,019,639 1,367,187
------------ ------------
Total current liabilities 20,248,217 15,787,710
LONG-TERM DEBT - Less current portion 9,031,852 11,261,365
DEFERRED INCOME TAXES 158,000 158,000
------------ ------------
TOTAL LIABILITIES 29,438,069 27,207,075
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 8,978,627 and
8,970,627 shares 89,786 89,706
Additional paid-in capital 38,007,679 37,981,759
Retained earnings 10,425,613 9,740,434
Treasury stock, at cost - 82,500 shares (279,838) (279,838)
------------ ------------
Total shareholders' equity 48,243,240 47,532,061
------------ ------------
TOTAL LIABILITIES & SHAREHOLDERS' EQUITY $ 77,681,309 $ 74,739,136
============ ============
</TABLE>
See notes to consolidated financial statements.
2
<PAGE> 4
SIMULA, INC.
CONSOLIDATED STATEMENTS OF EARNINGS
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------
THREE MONTHS ENDED
MARCH 31, 1996 MARCH 31, 1995
-------------- ------------------
<S> <C> <C>
REVENUE $16,742,512 $13,580,842
COST OF REVENUE 11,378,206 8,954,807
----------- -----------
GROSS MARGIN 5,364,306 4,626,035
ADMINISTRATIVE EXPENSES 3,890,444 3,057,386
----------- -----------
OPERATING INCOME 1,473,862 1,568,649
INTEREST EXPENSE 331,683 555,172
----------- -----------
INCOME BEFORE TAXES 1,142,179 1,013,477
INCOME TAXES (Note 3) 457,000 397,400
----------- -----------
NET EARNINGS $ 685,179 $ 616,077
=========== ===========
NET EARNINGS PER COMMON AND
EQUIVALENT SHARE $ 0.08 $ 0.09
=========== ===========
WEIGHTED AVERAGE SHARES
OUTSTANDING 9,109,955 6,650,024
=========== ===========
</TABLE>
See notes to consolidated financial statements.
3
<PAGE> 5
SIMULA, INC.
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
THREE MONTHS ENDED MARCH 31, 1996
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------------
Class A
------------------------- Additional Total
Issued Common Stock Paid-in Retained Treasury Shareholders'
Shares Amount Capital Earnings Stock Equity
--------- ------------ ----------- ----------- ---------- -------------
<S> <C> <C> <C> <C> <C> <C>
BALANCE, JANUARY 1, 1996 8,970,627 $89,706 $37,981,759 $ 9,740,434 $(279,838) $47,532,061
Issuance of common shares for options 8,000 80 25,920 26,000
Net earnings 685,179 685,179
--------- ------- ----------- ----------- --------- -----------
BALANCE, MARCH 31, 1996 8,978,627 $89,786 $38,007,679 $10,425,613 $(279,838) $48,243,240
========= ======= =========== =========== ========= ===========
</TABLE>
See notes to consolidated financial statements.
4
<PAGE> 6
SIMULA, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------
THREE MONTHS ENDED
---------------------------------
MARCH 31, 1996 MARCH 31, 1995
-------------- --------------
<S> <C> <C>
OPERATING ACTIVITIES:
Net Earnings $ 685,179 $ 616,077
Adjustment to reconcile net earnings to net cash used by operating activities:
Depreciation and amortization 902,188 652,407
Changes in assets and liabilities:
Contract and trade receivables (2,788,525) (1,786,831)
Inventories (2,255,874) 245,761
Prepaid expenses and other (7,143) (11,325)
Deferred costs (1,419,474) (1,273,386)
Other assets (160,864) (163,941)
Trade accounts payable (387,861) (213,691)
Other accrued liabilities 921,731 (495,776)
----------- -----------
Net cash used by operating activities (4,510,643) (2,430,705)
----------- -----------
INVESTING ACTIVITIES:
Purchase of property and equipment (1,850,314) (552,280)
Costs incurred to obtain patents and licenses (57,278)
----------- -----------
Net cash used in investing activities (1,907,592) (552,280)
----------- -----------
FINANCING ACTIVITIES:
Net borrowings under line of credit 3,000,000
Net borrowings under short term debt 325,000
Borrowings under other debt arrangements 758,470 2,406,998
Principal payments under other debt arrangements (335,531) (440,028)
Issuance of stock under option agreements 26,000 9,507
Prepaid offering costs (369,669)
----------- -----------
Net cash provided in financing activities 3,448,939 1,931,808
----------- -----------
NET DECREASE IN CASH (2,969,296) (1,051,177)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 3,175,172 1,051,177
----------- -----------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 205,876 $ 0
=========== ===========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
TAXES PAID $ 45,000 $ 622,500
=========== ===========
INTEREST PAID $ 175,000 $ 426,151
=========== ===========
</TABLE>
See notes to financial statements.
5
<PAGE> 7
SIMULA, INC.
NOTES TO FINANCIAL STATEMENTS
NOTE 1 - BASIS OF PRESENTATION:
The accompanying financial statements 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 months ended March 31, 1996 are not necessarily indicative of the
results that may be expected for the year ending December 31, 1996.
The Company announced a 3 for 2 split of its common stock to shareholders of
record as of September 15, 1995; which shares were issued on September 28, 1995.
As a result, all shares and related references have been restated for all prior
periods and transactions.
NOTE 2 - CONTRACT RECEIVABLES:
Amounts receivable from the United States Government or receivable under United
States Government related subcontracts are generally billed in the following
month or when the contract and all options thereunder are completed. Amounts due
on other commercial contracts are generally billed as shipments are made.
Intercompany receivables have been eliminated.
NOTE 3 - INCOME TAXES:
The tax provision for the three month periods ended March 31, 1996 and 1995 is
proportionate to the Federal and State combined rate of approximately 40%.
NOTE 4 - SHAREHOLDERS' EQUITY:
The Company completed a secondary offering of common stock which closed and
funded the second quarter of 1995. As a result of this offering, 2,328,750
shares were sold by the Company at $12 per share. The net proceeds from the
offering totaled $25,567,822.
6
<PAGE> 8
SIMULA, INC.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND
FINANCIAL CONDITION.
GENERAL:
Simula, Inc. and subsidiaries (collectively, 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
substantial proprietary technology in energy-absorbing seating, inflatable
restraints, and composite materials which the Company has developed over many
years, the Company focuses on reducing injury and increasing survivability in
vehicle crashes.
Utilizing its proprietary safety technology, customer relationships, and
manufacturing capacity and expertise, recently enhanced through acquisitions,
the Company has developed and is introducing crashworthy seating systems for
commercial airliners, a side-impact inflatable restraint system for automobiles,
a bulkhead airbag system for commercial airliners, and two cockpit inflatable
restraint systems for military aircraft. 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 prominent supplier of repair and
refurbishing services for commercial airliner seating, including the
installation of entertainment and communication systems.
The Company is a holding company for wholly owned subsidiaries, principally
including Simula Government Products, Inc., an entity conducting the Company's
government business, and Intaero, Inc., an entity conducting the Company's
primary commercial businesses through its operating subsidiaries: Airline
Interiors, Inc., Coach & Car Equipment Corporation and Artcraft Industries Corp.
The Company derives a substantial portion of its revenue from contracts that are
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 yield 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.
RESULTS OF OPERATIONS
Revenue of the Company for the three months ended March 31, 1996 increased $ 3.2
million or 23% over the same period in 1995. This increase is primarily
attributable to sales of commercial airline seats by Airline Interiors (which
product was introduced in the fourth quarter of 1995) and increased volume at
Simula Government Products, Inc. and Coach & Car Equipment Corporation.
Gross margins for the three months ended March 31, 1996 increased $ .7 million
or 16% over the same period in 1995. This increase is attributable to increased
revenue noted above. The gross margin percentage decreased to 32% from 34% for
the respective three month periods ending March 31, 1996 and 1995. This decrease
is primarily attributable to lower individual gross margins from the mix of
contracts being worked on at Artcraft Industries Corp. and Coach & Car Equipment
Corporation in the first quarter of 1996. In addition, the gross margin from the
initial deliveries of commercial airliner seats is less than the historic
margins from airliner seat refurbishment services.
Administrative expenses for the three months ended March 31, 1996 increased $ .8
million or 27% over the same period in 1995. This increase is primarily
attributable to the increase in sales and marketing activities focusing on the
introduction of the Company's technologies into the commercial, regulatory, and
research communities. Administrative expenses for the 1996 period also includes
research expenditures related to the development of sensor and composite seat
technologies.
Operating income of the Company for the three months ended March 31, 1996
decreased $ .1 million or 6% over the same period in 1995 due to the lower gross
margins on contracts performed in 1996 and increased sales and marketing costs
discussed above.
Interest expense for the three months ended March 31, 1996 decreased $ .2
million or 40% over the same period in 1995 due to the repayment of debt with
the proceeds from the secondary offering of shares after the first quarter of
1995, partially offset by increased borrowings on the Company's credit
facilities to fund its growth in working capital and fixed assets in 1996.
7
<PAGE> 9
The effective tax rate approximates 40% for both quarterly periods.
Net income for the three months ended March 31, 1996 increased $ .1 million or
11% over the same period in 1995. The increase is the result of the increase in
gross margin and the reduction in interest expense, partially offset by the
increase in administrative expenses noted above.
LIQUIDITY AND CAPITAL RESOURCES
The Company's liquidity is greatly impacted by the nature of the billing
provisions under its government 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 receivables increased $1.1 million and advances on
contracts decreased $1.7 million for the three months ended March 31, 1996,
principally due to the timing of billings and increased volume at Coach & Car
and Artcraft Industries Corp.
Operating activities required the use of $ 4.5 million of cash during the three
months ended March 31, 1996, compared to the use of $ 2.4 million of cash during
the respective period in 1995. This resulted primarily from the working capital
required for growth in contract activity and receivables noted above and to fund
the $1.4 million investment in technologies being adapted to meet our customers'
requirements and recorded as deferred costs at March 31, 1996. These
technologies include most of the Company's new products including the ITS, 16g
seat, and bulkhead airbag system. For the three months ended March 31, 1996 cash
used in investing activities was $1.9 million, which was expended primarily for
the acquisition of fixed assets. Cash provided by financing activities was $3.4
million for the three months ended March 31, 1996, of which $3 million resulted
from borrowings on the revolving credit facility, and the remainder resulted
from additional borrowings, net of the normal repayments.
On October 20, 1995, the Company executed a loan agreement with First Interstate
Bank, N.A. to provide up to $15,000,000 of credit. Ten million dollars of the
facility is available under a revolving credit arrangement to finance working
capital requirements and five million dollars is available under a five-year
amortizing term loan for the financing of U.S. based equipment. Three million
dollars of the revolving credit facility and $2.5 million of the equipment
facility were drawn down as of March 31, 1996.
As of March 31, 1996 and May 13, 1996, the Company has sufficient resources for
meeting its operating requirements. Sufficient resources through the credit
facility also exist to meet the near-term strategic investments and capital
requirements. However, the credit facility may require expansion to address
future working capital requirements of the Company's current operations. To
fully address the potential markets for its technologies and products, the
Company will need to obtain additional capital. The target capital will be used
to construct additional manufacturing and research facilities, fund research and
development of new products directly or by acquisitions, purchase equipment and
support working capital requirements attendant to growth in markets and
revenues.
INFLATION
The Company does not believe that it is significantly impacted by inflation.
RESEARCH AND DEVELOPMENT
The Company's research and development occurs primarily under fixed-price,
government-funded contracts as well as Company-sponsored efforts. The revenue
received under government-funded contracts is recorded under the percentage of
completion method of accounting, and the costs of independent research and
development efforts are expensed as incurred.
Historically, research and development efforts have fluctuated based upon
available government-funded contracts. The Company anticipates that future
fluctuations may also occur as a result of efforts to expand its inflatable
restraint, commercial airliner seating, and rail seating technologies.
SEASONALITY
The Company's operations and financial results are affected by the seasonal
variations in deliveries by suppliers. Historically, the Company has experienced
its highest level of deliveries of materials in the fourth quarter and its
lowest
8
<PAGE> 10
level of deliveries in the first quarter. Accordingly, the Company has
historically recorded its highest revenue in the fourth quarter and lower
revenue in the first quarter.
FORWARD LOOKING INFORMATION AND RISKS OF THE BUSINESS
The Company expects that during fiscal 1996, it will devote significant
resources to complete development and roll-out of new products and technologies,
and to expand its manufacturing capability for such products, including CABS,
BABS, IBAHRS, ITS and 16g airliner seats. The Company expects that in late 1996
and in 1997, it will begin to realize significant revenues from the introduction
of these products. The other core businesses of the Company are expected to
remain at current revenue levels.
The Company's operating results are affected by a wide variety of factors which
could adversely impact its revenues and profitability, many of which are beyond
the control of the Company. The factors include 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; the level of orders which are
received and can be shipped in a quarter; availability and utilization of
manufacturing capacity; the availability and cost of raw material, equipment,
and other supplies; 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.
PART II - OTHER INFORMATION
ITEM 6. EXHIBITS.
Exhibit No. 11 - Earnings per Share.
Exhibit No. 27 - Financial Data Schedule
9
<PAGE> 11
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 March
31, 1996 to be signed on its behalf by the undersigned thereunto duly
authorized.
SIMULA, INC.
/s/ Donald W. Townsend
-----------------------------------
DONALD W. TOWNSEND
President
Chief Operating Officer
DATE: May 13, 1996
----------------------------------
10
<PAGE> 1
EXHIBIT 11
SIMULA, INC.
COMPUTATION OF EARNINGS PER SHARE
<TABLE>
<CAPTION>
Three Months Ended March 31,
----------------------------
1996 1995
---------- ----------
<S> <C> <C>
Income:
Net Earnings $ 685,179 $ 616,077
========== ==========
Number of shares:
Weighted average shares outstanding 8,893,229 6,387,344
Incremental shares for outstanding stock options 216,726 233,553
Incremental shares for outstanding stock warrants 0 29,127
========== ==========
9,109,955 6,650,024
========== ==========
Earnings per share $ 0.08 $ 0.09
========== ==========
</TABLE>
During 1995, the Company's common shares were split 3 for 2. All shares and
related references have been restated for all periods presented.
11
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> MAR-31-1996
<EXCHANGE-RATE> 1
<CASH> 205,876
<SECURITIES> 0
<RECEIVABLES> 26,284,214
<ALLOWANCES> 0
<INVENTORY> 10,360,068
<CURRENT-ASSETS> 37,620,137
<PP&E> 17,278,765
<DEPRECIATION> 0
<TOTAL-ASSETS> 77,681,309
<CURRENT-LIABILITIES> 20,248,217
<BONDS> 9,031,852
0
0
<COMMON> 89,786
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 77,681,309
<SALES> 0
<TOTAL-REVENUES> 16,742,512
<CGS> 0
<TOTAL-COSTS> 11,378,206
<OTHER-EXPENSES> 3,890,444
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 331,683
<INCOME-PRETAX> 1,142,179
<INCOME-TAX> 457,000
<INCOME-CONTINUING> 685,179
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 685,179
<EPS-PRIMARY> .08
<EPS-DILUTED> 0
</TABLE>
