<PAGE> 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 MARCH 31, 1998
or
[X] 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:
Outstanding at
Class March 31, 1998
Common Stock, $.01 par value 9,872,070
<PAGE> 2
SIMULA, INC.
INDEX
PART I - FINANCIAL INFORMATION
PAGE
Item 1 - Financial Statements
Consolidated Balance Sheets
March 31, 1998 and December 31, 1997.........................2
Consolidated Statements of Operations
Three Months Ended March 31, 1998 and 1997...................3
Consolidated Statement of Shareholders' Equity
Three Months Ended March 31, 1998............................4
Consolidated Statements of Cash Flows
Three Months Ended March 31, 1998 and 1997...................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 6 - Exhibits and Reports.............................................11
SIGNATURE.................................................................12
1
<PAGE> 3
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements.
SIMULA, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
March 31, December 31,
1998 1997
----------------- -----------------
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 6,751,034 $ 9,367,031
Contract and trade receivables - Net 36,399,300 34,025,485
Inventories 28,399,190 27,506,094
Deferred income taxes 3,763,000 3,763,000
Prepaid expenses and other 1,456,352 1,641,081
----------------- -----------------
Total current assets 76,768,876 76,302,691
PROPERTY, EQUIPMENT AND LEASEHOLD IMPROVEMENTS - Net 25,238,302 24,854,227
DEFERRED INCOME TAXES 4,473,000 4,477,000
DEFERRED FINANCING COSTS 2,967,457 3,136,898
INTANGIBLES - Net 10,314,160 10,525,533
OTHER ASSETS 803,232 981,827
----------------- -----------------
TOTAL $ 120,565,027 $ 120,278,176
================= =================
LIABILITIES & SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Revolving line of credit $ 3,700,000
Trade accounts payable 8,645,167 $ 12,007,287
Other accrued liabilities 6,117,878 6,380,273
Advances on contracts 1,508,499 1,163,109
Current portion of long-term debt 8,114,485 8,097,242
----------------- -----------------
Total current liabilities 28,086,029 27,647,911
LONG-TERM DEBT - Less current portion 46,381,873 46,987,859
----------------- -----------------
Total liabilities 74,467,902 74,635,770
----------------- -----------------
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 9,872,070 (1998) and 9,850,832 (1997) shares 98,721 98,508
Additional paid-in capital 51,383,168 51,109,830
Retained deficit (5,501,121) (5,505,822)
Currency translation adjustment 116,357 (60,110)
----------------- -----------------
Total shareholders' equity 46,097,125 45,642,406
----------------- -----------------
TOTAL $ 120,565,027 $ 120,278,176
================= =================
</TABLE>
See notes to interim consolidated financial statements.
2
<PAGE> 4
SIMULA, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Three Months Ended March 31,
--------------------------------------
1998 1997
----------------- -----------------
<S> <C> <C>
Revenue $ 28,003,702 $ 17,825,823
Cost of revenue 20,945,119 12,764,105
----------------- -----------------
Gross margin 7,058,583 5,061,718
Administrative expenses 5,656,939 5,055,215
----------------- -----------------
Operating income 1,401,644 6,503
Interest expense (1,455,505) (951,640)
Interest income 62,562
----------------- -----------------
Income (loss) before taxes 8,701 (945,137)
Income tax (expense) benefit (4,000) 379,000
----------------- -----------------
Net earnings (loss) $ 4,701 $ (566,137)
================= =================
Earnings (loss) per common share - basic $ - $ (0.06)
================= =================
Earnings (loss) per common share - assuming dilution $ - $ (0.06)
================= =================
</TABLE>
See notes to interim consolidated financial statements.
3
<PAGE> 5
SIMULA, INC.
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
THREE MONTHS ENDED MARCH 31, 1998
<TABLE>
<CAPTION>
Common Stock Additional Currency Total
---------------------------- Paid-in Retained Translation Shareholders'
Shares Amount Capital (Deficit) Adjustment Equity
-------------- ------------ -------------- ----------------- -------------- ----------------
<S> <C> <C> <C> <C> <C> <C>
BALANCE, January 1, 1998 9,850,832 $ 98,508 $ 51,109,830 $ (5,505,822) $ (60,110) $ 45,642,406
Net earnings 4,701 4,701
Issuance of common shares 21,238 213 273,338 273,551
Currency translation adjustment 176,467 176,467
-------------- ------------ -------------- ----------------- -------------- ----------------
BALANCE, March 31, 1998 9,872,070 $ 98,721 $ 51,383,168 $ (5,501,121) $ 116,357 $ 46,097,125
============== ============ ============== ================= ============== ================
</TABLE>
See notes to interim consolidated financial statements.
4
<PAGE> 6
SIMULA, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Three Months Ended March 31,
--------------------------------------
1998 1997
------------------ -----------------
<S> <C> <C>
Cash flows used for operating activities:
Net earnings (loss) $ 4,701 $ (566,137)
Adjustment to reconcile net earnings (loss) to net cash used by
operating activities:
Depreciation and amortization 1,439,958 924,731
Deferred income taxes 4,000 (379,000)
Currency translation adjustment 176,467 (53,479)
Changes in net assets and liabilities:
Contract and trade receivables - net of advances (2,028,425) (472,215)
Inventories (898,502) (2,353,608)
Prepaid expenses and other 184,729 152,033
Other assets 153,084 (117,706)
Trade accounts payable (3,362,120) (473,594)
Other accrued liabilities (262,395) (109,745)
------------------ -----------------
Net cash used by operating activities (4,588,503) (3,448,720)
------------------ -----------------
Cash flows used by investing activities:
Purchase of property and equipment (1,385,304) (2,400,583)
Costs incurred to obtain intangibles (26,998) (27,968)
------------------ -----------------
Net cash used in investing activities (1,412,302) (2,428,551)
------------------ -----------------
Cash flows from financing activities:
Net borrowings under line of credit 3,700,000 6,025,000
Principal payments under other debt arrangements (588,743) (432,298)
Issuance of common shares 273,551 252,072
------------------ -----------------
Net cash provided by financing activities 3,384,808 5,844,774
------------------ -----------------
Net decrease in cash and cash equivalents (2,615,997) (32,497)
Cash and cash equivalents at beginning of period 9,367,031 1,298,741
------------------ -----------------
Cash and cash equivalents at end of period $ 6,751,034 $ 1,266,244
================== =================
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Interest paid $ 1,856,849 $ 940,432
================== =================
Taxes paid $ - $ 60,000
================== =================
</TABLE>
See notes to interim consolidated financial statements.
5
<PAGE> 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
months ended March 31, 1998 are not necessarily indicative of the
results that may be expected for the year ending December 31, 1998.
NOTE 2 - INVENTORIES:
At March 31, 1998 and December 31, 1997, inventories consisted of the
following.
<TABLE>
<CAPTION>
March 31, December 31,
1998 1997
----------------- -----------------
<S> <C> <C>
Raw materials $ 15,263,618 $ 15,193,271
Work in process 11,194,759 11,195,128
Finished goods 1,940,813 1,117,695
----------------- -----------------
Total inventories $ 28,399,190 $ 27,506,094
================= =================
</TABLE>
NOTE 3 - EARNINGS PER SHARE:
The following is a reconciliation of the numerators and denominators of
basic and diluted per share computations for income from continuing
operations for the three month period ended March 31, 1998 as required
by Statement of Financial Accounting Standards No. 128, Earnings Per
Share, ("SFAS No. 128"). For the three month period ended March 31,
1998, the effects of 2,245,812 total shares to be issued upon
conversion of the Company's 8% Senior Subordinated Convertible Notes
(the "8% Notes") and the Series C 10% Senior Subordinated Convertible
Notes (the "10% Notes") were not used for computing diluted earnings
per share because the result would be anti-dilutive. Earnings per share
amounts for the three months ended March 31, 1997 is calculated using
only weighted average outstanding shares of 8,996,495. For the three
month period ended March 31, 1997, the effects of 2,543,787 total
shares related to options to purchase common stock and shares to be
issued upon conversion of the 10% Notes were not used for computing
diluted earnings per share because the result would be anti-dilutive.
<TABLE>
<CAPTION>
Three months ended March 31, 1998
----------------------------------------------------------
Income Shares Per-Share
(Numerator) (Denominator) Amounts
----------------- ----------------- -----------------
<S> <C> <C> <C>
Basic earnings per share:
Net earnings $ 4,701 9,851,392 $ --
=================
Effect of dilutive securities:
Stock options 280,071
----------------- -----------------
Diluted earnings per share $ 4,701 10,131,463 $ --
================= ================= =================
</TABLE>
NOTE 4 - COMPREHENSIVE INCOME:
The Company adopted Financial Accounting Standards No. 130, Reporting
Comprehensive Income, on January 1, 1998. Comprehensive income includes
adjustments made for foreign currency translation. Comprehensive income
(loss) for the three months ended March 31, 1998 and 1997 was $110,581
and ($598,224), respectively.
6
<PAGE> 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 month period ended March 31, 1998 compared to the same period 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 and
aircraft crashes.
Since its founding in 1975, the Company's historic business has been as
a government and defense contractor. Additionally, commencing with acquisitions
and commercial products development since 1993, 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 and inflatable restraints for automobiles. Utilizing
its proprietary safety technology, the Company has introduced crashworthy
systems for a variety of vehicles and aircraft including its 16g commercial
airliner passenger seat ("16g Seat") and various inflatable restraint systems
for automobiles including the Inflatable Tubular Structure ("ITS").
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. The 1994 Acquisitions'
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 are being utilized in the production
of its 16g Seat for airliners.
In 1994, the Company made a strategic decision to enter the inflatable
restraint market for automobiles utilizing its proprietary technology, the ITS.
Through 1996, the Company completed its development of this technology and
start-up of its manufacturing facilities. In 1997, the Company began
manufacturing the ITS for sale to BMW, a major European automobile manufacturer,
which began including it in certain models of its automobiles in 1997.
The Company's revenue has historically been derived principally from
sales of Company manufactured products. A substantial portion of its current
revenue is generated from long-term production contracts which 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 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.
7
<PAGE> 9
SIMULA, INC.
The Company is a holding company for wholly owned subsidiaries which
operate in three primary business segments. The Commercial Transportation
Seating segment includes operations which primarily manufacture seating systems
for domestic and foreign passenger airlines, rail and other mass transit. The
Government and Defense segment includes operations that design and manufacture
crash resistant components, energy absorbing devices, ballistic armor and
composites principally in connection with branches of the United States armed
forces procurement. The Automobile Safety Systems segment includes operations
encompassing inflatable restraints, principally the ITS, and related technology
for automobiles. In addition, the Company maintains general corporate
operations.
RESULTS OF OPERATIONS
Three Months Ended March 31, 1998 Compared to 1997
Revenue for the three months ended March 31, 1998 increased 57% to
$28.0 million from $17.8 million for the comparable period in 1997. This
increase was due to increased sales of 16g Seats and the ITS.
Gross margin for the three months ended March 31, 1998 increased 39% to
$7.1 million from $5.1 million for the comparable period in 1997. The increase
in gross margin was due to the increase in revenue noted above. As a percent of
sales, gross margin for the three months ended March 31, 1998 decreased to 25%
from 28% for the comparable period in 1997. The decrease in gross margin
percentage is principally due to the transition from airline refurbishment to
high volume manufacturing of the Company's new 16g Seat. Airline refurbishment,
which has historically achieved higher gross margin percentages at relatively
low volumes, constituted a greater proportion of the Company's business in the
three months ended March 31, 1997. In addition, the significant increase in
deliveries of the 16g Seat has resulted in various cost inefficiencies and
production related expenses. Gross margin percentages were also negatively
impacted by certain Government and Defense developmental programs initiated in
the first quarter of 1998. These negative impacts were substantially offset by
the significant improvement in the gross margin percentage for the ITS. The
Company did not recognize significant revenue from the ITS in the first quarter
of 1997 while incurring pre-contract costs related to the final pre-production
development of the ITS and start-up costs related to its manufacturing
facilities in Arizona and the United Kingdom.
Administrative expenses for the three months ended March 31, 1998
increased 12% to $5.7 million from $5.1 million for the comparable period in
1997. This increase was primarily attributable to the expansion of the corporate
and sales infrastructure related to the commercial introduction of the ITS,
including resources being utilized for sales and administration versus
pre-contract activities and research and development related to the expansion of
ITS technologies.
Interest expense for the three months ended March 31, 1998 increased
53% to $1.5 million from approximately $952,000 for the comparable period in
1997. This increase was principally due to the issuance of $34.5 million of the
8% Senior Subordinated Convertible Notes (the "8% Notes") in April 1997. These
borrowings were made to fund the Company's growth in working capital and fixed
assets necessary to support the anticipated growth in revenues for 1997 and
subsequent years. The increase in interest expense due to the 8% Notes was
partially offset by lower borrowing on the Company's line of credit and the
conversion during the third quarter of 1997 of $9.6 million of the Series C 10%
Senior Subordinated Convertible Notes (the "10% Notes") into common stock of the
Company.
Interest income for the three months ended March 31, 1998 represents
income from the investment by the Company of available cash in high quality
government and short-term investment grade, interest bearing securities.
The effective income tax rate for the three month periods ended March
31, 1998 and 1997 approximated the Company's combined statutory rate of 40%.
8
<PAGE> 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 $2.0 million for the three months ended March 31, 1998
due principally to the throughput on certain Government and Defense contracts
and a rail contract for which substantial production was initiated in the first
quarter of 1998.
Operating activities required the use of $4.6 million of cash during
the three months ended March 31, 1998, compared to the use of $3.4 million of
cash during the same period in 1997. Cash used by operating activities in the
1998 period was primarily used to reduce accounts payable by $3.4 million and to
fund the increase in contract receivables noted above. The reduction in accounts
payable was principally made in connection with price negotiations with
suppliers of components for the Company's 16g Seat. The Company negotiated
certain material price reductions with these vendors in exchange for reduced
terms and increased volumes. In addition, inventories increased approximately
$900,000. This increase was due to an increase in 16g Seat and ITS inventory
necessary to support anticipated future deliveries offset by reductions in
inventory for the Government and Defense and rail operations as certain
contracts began production.
Investing activities required the use of $1.4 million of cash during
the three months ended March 31, 1998 primarily for the purchase of
manufacturing equipment for the ITS located at the Company's operations in
Arizona and the United Kingdom and certain improvements to these facilities.
Financing activities provided $3.4 million of cash during the three
months ended March 31, 1998 principally from $3.7 million in net borrowings
under the Company's $20 million revolving line of credit offset by principal
payments under other debt arrangements for scheduled maturities.
Included in current portion of long-term debt are the 12% Senior
Subordinated Notes (the "12% Notes"), which total $5.7 million and are due in
November 1998. The Company is currently evaluating various alternatives to repay
or refinance these notes on a long term basis prior to their maturity.
The Company believes it has sufficient manufacturing capacity in place
at March 31, 1998 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 demand for the Company's technologies and products.
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
The Company does not believe that it is currently significantly
impacted by seasonal factors.
9
<PAGE> 11
SIMULA, INC.
FORWARD LOOKING INFORMATION AND RISKS OF THE BUSINESS
Commencing in fiscal 1997, the Company entered large scale production
of the ITS and 16g Seat. Significant investments to transition to high volume
manufacturing for these products were also made in 1997, which affected
earnings. The Company began to realize significant revenues from the
introduction of these products in 1997 and anticipates continued growth in 1998
and 1999. During this period, the other core businesses of the Company are
expected to remain at current revenue levels. The Company's current focus is on
controlling costs and eliminating inefficiencies resulting from the faster than
anticipated rate of growth in its new product lines, principally the 16g Seat,
and this focus should result in a positive impact on earnings.
In 1997, the Company experienced some parts and raw materials
shortages, vendor delays and quality problems that caused delays in production
and deliveries. The Company has addressed these issues and believes that it has
established an adequate multiple source supplier base that is industry standard.
However, certain components of the Company's products are proprietary or highly
regulated, including certain types of foam, hydrolocks and woven materials, and
shortages of these components could cause disruptions of production from time to
time. In 1998, the Company will focus on further broadening it vendor base and
reliability.
In 1997, one customer, Continental Airlines, accounted for 16% of the
Company's revenue. The Company anticipates that it will fulfill current delivery
requirements to Continental Airlines in early 1998 and it will not represent as
significant of a customer in 1998 and following years. The Company believes that
in the ordinary course of its airline seating business, the programs with
Continental Airlines will be replaced by programs with other customers. Because
of the significant growth in its airline seat business, management believes that
in 1998, the Company can focus on broadening its customer base and scheduling
production slots across a wider range of customers.
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. In addition to
the factors described above, the other factors include manufacturing capacity
and yield; costs of labor, raw materials, supplies, and equipment; reliability
of vendor base; contract mix and shifting production and delivery schedules
among the Company's three business segments; amount of resources committed to
independent research and development from time to time; 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; 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
<PAGE> 12
SIMULA, INC.
ITEM 6. EXHIBITS AND REPORTS.
(a) The following Exhibits are included pursuant to Item 601 of Regulation S-K.
<TABLE>
<CAPTION>
NO. DESCRIPTION REFERENCE
--- ----------- ---------
<S> <C>
3.1 Articles of Incorporation of Simula, Inc., as amended and restated.......................... (4)
3.2 Bylaws of Simula, Inc., as amended and restated............................................. (1)
4.2 Indenture dated December 17, 1993, as amended............................................... (2)
4.5 Supplemental Indenture No. 2 dated September 12, 1996, entered into in connection with the
Company's issuance of Series C 10% Senior Subordinated Convertible Notes.................... (6)
4.6 Supplemental Indenture No.3, effective March 14, 1997, amending the Indenture of
Simula, Inc. dated December 17, 1993........................................................ (7)
4.7 Indenture dated April 1, 1997, in connection with the Company's issuance of the 8% Senior
Subordinated Convertible Notes due May 1, 2004.............................................. (7)
10.11 1992 Stock Option Plan...................................................................... (1)
10.12 1992 Restricted Stock Plan.................................................................. (1)
10.21 1994 Stock Option Plan...................................................................... (3)
10.24 Amended Loan Agreement with Wells Fargo Bank, N.A. dated December 20, 1996.................. (6)
10.26 Simula, Inc. Employee Stock Purchase Plan................................................... (4)
*10.29 Form of Change of Control Agreements, as amended and restated, between the Company and
Donald W. Townsend, Bradley P. Forst, Sean K. Nolen, James A. Saunders, Donald Rutter, and
Randall L. Taylor ..........................................................................
10.30 Form of Employment Agreements between the Company and Donald W. Townsend, Bradley P. Forst,
Sean K. Nolen, James A. Saunders, and Randall L. Taylor..................................... (8)
18. Preference Letter re: change in accounting principles....................................... (5)
*21. Subsidiaries of the Company
24. Powers of Attorney - Directors.............................................................. (8)
*27. Financial Data Schedule
</TABLE>
- ----------
* Filed herewith.
(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 Registration Statement on Form SB-2, No. 33-61028 under
the Securities Act of 1933, effective December 10, 1993.
(3) Filed with Registration Statement on Form SB-2, No. 33-87582, under
the Securities Act of 1933, effective December 28, 1994.
(4) Filed with Definitive Proxy on May 14, 1996, for the Company's
Annual Meeting of Shareholders held on June 20, 1996.
(5) Filed with Report on Form 10-Q/A for the quarter ended June 30,
1996.
(6) Filed with Report on Form 10-K for the year ended December 31, 1996.
(7) Filed with Registration Statement on Form S-3, No. 333-13499, under
the Securities Act of 1993, effective April 24, 1997.
(8) Filed with Report on Form 10-K for the year ended December 31,
1997.
(b) No reports on Form 8-K have been filed during the reporting period.
11
<PAGE> 13
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, 1998 to be signed on its behalf by the undersigned thereunto duly
authorized.
SIMULA, INC.
DATE: May 13, 1998 /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
12
<PAGE> 14
SIMULA, INC.
ITEM 6. EXHIBITS AND REPORTS.
(a) The following Exhibits are included pursuant to Item 601 of Regulation S-K.
<TABLE>
<CAPTION>
NO. DESCRIPTION REFERENCE
--- ----------- ---------
<S> <C>
3.1 Articles of Incorporation of Simula, Inc., as amended and restated.......................... (4)
3.2 Bylaws of Simula, Inc., as amended and restated............................................. (1)
4.2 Indenture dated December 17, 1993, as amended............................................... (2)
4.5 Supplemental Indenture No. 2 dated September 12, 1996, entered into in connection with the
Company's issuance of Series C 10% Senior Subordinated Convertible Notes.................... (6)
4.6 Supplemental Indenture No.3, effective March 14, 1997, amending the Indenture of
Simula, Inc. dated December 17, 1993........................................................ (7)
4.7 Indenture dated April 1, 1997, in connection with the Company's issuance of the 8% Senior
Subordinated Convertible Notes due May 1, 2004.............................................. (7)
10.11 1992 Stock Option Plan...................................................................... (1)
10.12 1992 Restricted Stock Plan.................................................................. (1)
10.21 1994 Stock Option Plan...................................................................... (3)
10.24 Amended Loan Agreement with Wells Fargo Bank, N.A. dated December 20, 1996.................. (6)
10.26 Simula, Inc. Employee Stock Purchase Plan................................................... (4)
*10.29 Form of Change of Control Agreements, as amended and restated, between the Company and
Donald W. Townsend, Bradley P. Forst, Sean K. Nolen, James A. Saunders, Donald Rutter, and
Randall L. Taylor ..........................................................................
10.30 Form of Employment Agreements between the Company and Donald W. Townsend, Bradley P. Forst,
Sean K. Nolen, James A. Saunders, and Randall L. Taylor..................................... (8)
18. Preference Letter re: change in accounting principles....................................... (5)
*21. Subsidiaries of the Company
24. Powers of Attorney - Directors.............................................................. (8)
*27. Financial Data Schedule
</TABLE>
- ----------
* Filed herewith.
(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 Registration Statement on Form SB-2, No. 33-61028 under
the Securities Act of 1933, effective December 10, 1993.
(3) Filed with Registration Statement on Form SB-2, No. 33-87582, under
the Securities Act of 1933, effective December 28, 1994.
(4) Filed with Definitive Proxy on May 14, 1996, for the Company's
Annual Meeting of Shareholders held on June 20, 1996.
(5) Filed with Report on Form 10-Q/A for the quarter ended June 30,
1996.
(6) Filed with Report on Form 10-K for the year ended December 31, 1996.
(7) Filed with Registration Statement on Form S-3, No. 333-13499, under
the Securities Act of 1993, effective April 24, 1997.
(8) Filed with Report on Form 10-K for the year ended December 31,
1997.
(b) No reports on Form 8-K have been filed during the reporting period.
11
<PAGE> 1
EXHIBIT 10.29
[FORM]
SIMULA, INC.
AMENDED AND RESTATED
CHANGE OF CONTROL
EMPLOYMENT AGREEMENT
- --------------------------------------------------------------------------------
Name of Employee (herein "Employee"): [Name]
Position: [Position]
Date: June 20, 1996, as amended and restated
January 1, 1998
Termination Date: [Termination of Employment]
- --------------------------------------------------------------------------------
THIS AGREEMENT is entered into between Simula, Inc. and its controlled
affiliates ("Company" or "Employer"), and Employee for the following purposes
and upon the following conditions:
1. PURPOSE. In order to attract and retain key employees, the Company
believes it is necessary to provide for the fulfillment of the expectation of
long-term employment with the Company (i) by providing a financial benefit to
Employee in the case of employment termination after a Change of Control of the
Company, and to (ii) protect against employees' distraction or departure, to the
detriment of the Company, in the event of a proposed or pending Change of
Control transaction.
2. TERM. This Agreement shall be effective as of the date stated above
and shall terminate concurrently with the Employee's termination from employment
with the Company. This Agreement creates no obligation on behalf of the Company
other than as specified herein. In the event Employee terminates voluntarily or
involuntarily from the Company under any circumstances other than a Change of
Control, this Agreement shall confer no rights upon Employee.
3. CHANGE OF CONTROL. For purposes of this Agreement "Change of
Control" shall be deemed to have occurred when any of the following events
occur:
<PAGE> 2
(i) the direct or indirect acquisition by any person or
related group of persons (other than a trustee or other fiduciary
holding securities under an employee benefit plan of the Company) of
beneficial ownership (within the meaning of Rule 13-d-3 of the
Securities Exchange Act of 1934, as amended) of securities possessing
in excess of 20% of the total combined voting power of the Company's
outstanding securities pursuant to a tender or exchange offer made
directly to the Company's stockholders or other transaction; or
(ii) a change in the composition of the Board of Directors
over a period of 36 consecutive months or less, such that a majority of
the Board members (rounded up to the next whole numbers) ceases, by
reason of one or more contested elections for Board membership, to be
comprised of individuals who either (A) have been Board members
continuously since the beginning of such period, or (B) have been
elected or nominated for election as Board members during such period
by at least a majority of the Board members described in clause (A) who
were still in office at the time such election or nomination was
approved by the Board; or
(iii) a merger or consolidation approved by the stockholders
of the Company, other than a merger or consolidation which would result
in the voting securities of the Company outstanding immediately prior
thereto continuing to represent (either by remaining outstanding or by
being converted into voting securities of the surviving entity) at
least 80% of the total voting power represented by voting securities of
the Company or such surviving entity outstanding immediately after such
merger or consolidation; or
(iv) The sale, transfer, or other disposition (in one
transaction or a series of transactions) of all or substantially all of
the assets of the Company approved by the stockholders or the complete
liquidation or dissolution of the Company approved by the stockholders.
4. COMPENSATION. Severance compensation ("Compensation") will be
paid to Employee in the event of a Change of Control where:
(i) Employee is terminated by the acquiring person or
surviving entity within one year of the effective date of the Change of
Control; or
(ii) Employee voluntarily resigns from his position within a
period of 180 days after the effective date of the Change of Control.
Compensation shall be calculated and paid as follows:
(i) Employee's then current annual base salary, plus the
equivalent dollar value for one year of all benefits (including
insurance, defined benefit plan contributions by the Company in
qualified and unqualified plans, and similar benefits) multiplied by
_____;
2
<PAGE> 3
(ii) the dollar amount necessary for payment of all taxes on
such Compensation including, without limitation, all employment taxes,
income taxes and alternative minimum income taxes, if any, payable with
respect to a lump sum payment in that year, grossed up by an amount
necessary to pay all such taxes on the amounts paid under this
subparagraph (ii), and as further provided in Section 7; and
(iii) the Compensation shall be paid in a lump sum within
ten (10) days of the termination of employment.
5. STOCK OPTIONS. In the event of a Change of Control, in
addition to the Compensation set forth above:
(i) all unexercised stock purchase options in the name of
Employee on the effective date of the Change of Control shall be
subject to accelerated vesting and shall thereupon be deemed fully
exercisable and shall be exercised and paid for by the Employer,
acquiring person, or surviving entity, on behalf of Employee and the
total number of shares of Common Stock represented by the total number
of options shall be fully paid, nonassessable, and validly issued to
Employee, without payment of monetary consideration by Employee.
Alternatively, the optionee may elect in lieu of the receipt of shares,
to relinquish his options with respect to all or any of such shares and
receive a payment equal to the price paid for common share in such
merger, tender offer, or similar transaction multiplied by the number
of common shares the optionee could have purchased with the options;
(ii) in connection with Employee's receipt of the foregoing
option shares or consideration, Employer will pay full tax assistance
to keep Employee whole due to this immediate income, including payment
of all relevant employment taxes, income taxes, capital gains taxes,
and alternative minimum income taxes, grossed up by an amount necessary
to pay all such taxes on the amounts paid under this subparagraph (ii),
and as further provided in Section 7; and
(iii) in the event of a Change of Control of the Company by
the exchange of securities or issuance of stock in a merger or
otherwise, Employer and the acquiring person or surviving entity shall
extend to Employee the opportunity to sell or exchange the option
shares issued under provisions (i) and (ii) in a manner and at a time
that will allow Employee to benefit, at his election, from the exchange
or issuance of stock in the merger, exchange, or other transaction.
6. CONDITION. Notwithstanding any other provision in this
Agreement, or unless the operation of this paragraph shall expressly and
voluntarily be waived or modified by the Employee in a written instrument signed
by the Employee specifically for that purpose, the remuneration under Sections 4
and 5 required to be paid by Employer to Employee under this Agreement shall be
paid by the Employer or by the acquiring person or surviving entity as a
condition to the acquisition, merger, exchange, or other transaction.
3
<PAGE> 4
7. EXCISE TAXES. The Internal Revenue Code of 1986, as amended (the
"Code), will impose significant tax on Employee and the Company if the total
amounts received by the Employee due to a Change of Control exceed prescribed
limits. This includes a 20% excise tax on certain amounts received in excess of
the prescribed limits and a loss of deduction for the Company. If, as a result
of these Code provisions, the Employee is required to pay such excise tax, then
upon written notice from the Employee to the Company, the Company shall pay the
Employee an amount equal to the total excise tax imposed on the Employee
(including the excise taxes on any excise tax reimbursements due pursuant to
this sentence and the excise taxes on any income tax reimbursements due pursuant
to the next sentence). If the Company is obligated to pay taxes for the Employee
pursuant to the preceding sections, the Company also shall pay the Employee an
amount equal to the "total presumed federal and state taxes" that could be
imposed on the Employee with respect to the excise tax reimbursements due to the
Employee pursuant to the preceding sentence and the income tax reimbursements
due to the Employee pursuant to this sentence. For purposes of the preceding
sentence, the "total presumed federal and state taxes" that could be imposed on
the Employee shall be conclusively calculated using a combined tax rate equal to
the sum of the then prevailing maximum marginal federal and state income tax
rates. No adjustments will be made in this combined rate for the deduction of
state taxes on the federal return, the loss of itemized deductions or
exemptions, or for any other purpose. The Employee shall be responsible for
paying the actual taxes. The amounts payable to the Employee pursuant to this or
any other agreement or arrangement with Company shall not be limited in any way
by the amount that may be paid pursuant to the Code without the imposition of an
excise tax or the loss of Company deductions.
8. EFFECT ON OTHER AGREEMENTS. This Change of Control Agreement shall
be supplemental to and will modify a written employment contract between
Employer and Employee, if any. Except as otherwise provided by written contract,
Employee shall remain "at will," and this Change of Control Agreement shall not
confer upon Employee any contractual rights to employment, except as described
in an employment agreement, if any, and as provided in this Change of Control
Agreement. To the extent of any inconsistency between this Agreement and any
other agreements with the employee, the Agreement shall be interpreted and
applied in the way to confer upon Employee the greatest benefit. The agreements
shall be read and applied consistent with each other, but in the event of a
conflict, the terms most favorable to the Employee will be applied from the
various provisions of the agreements in the aggregate.
9. RETURN OF BOOKS AND PAPERS. Upon the termination of Employee's
employment with Employer for any reason, Employee shall deliver promptly to
Employer all manuals and memoranda; all cost, pricing and other financial data;
all customer information; all other written or printed materials which are the
property of the Company (and any copies of them); and all other materials which
may contain confidential information relating to the business of Employer, which
Employee may then have in his possession whether prepared by Employee or not.
4
<PAGE> 5
10. NOTICES. Any notice required or permitted to be given under this
Agreement shall be sufficient if in writing, and if sent by registered mail to
his residence in the case of Employee, or to its principal office in the case of
Employer.
11. WAIVER OF BREACH. The waiver of Employer of a breach of any
provision of this Agreement by Employee shall not operate or be construed as a
waiver of any subsequent breach by Employee.
12. ASSIGNMENT. The rights and obligations of Employer under this
Agreement shall inure to the benefit of and shall be binding upon the successors
and assigns of Employer. Employee may not sell, assign, transfer, or delegate
any duties, rights or interests created under this Agreement without the express
written consent of the Employer.
13. ENTIRE AGREEMENT. This instrument contains the entire agreement of
the parties. It may not be changed orally but only by an agreement in writing
signed by the party against whom enforcement of any waiver, change,
modification, extension or discharge is sought.
IN WITNESS WHEREOF, the parties have executed this Agreement effective
on the _____ day of __________, 19__.
SIMULA, INC.
By______________________________________
"EMPLOYER"
________________________________________
"EMPLOYEE"
5
<PAGE> 1
EXHIBIT 21
LIST OF SUBSIDIARIES
Simula, Inc.
Simula Safety Systems, Inc.
Simula Technologies, Inc.
International Center for Safety Education, Inc.
Simula Transportation Equipment Corporation
Airline Interiors, Inc.
Coach and Car Equipment Corporation
Artcraft Industries Corp.
Intaero, Ltd.
ViaTech, Inc.
Simula Automotive Safety Devices, Inc.
Simula Automotive Safety Devices, Limited
Simula Protective Systems, Limited
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> MAR-31-1998
<EXCHANGE-RATE> 1
<CASH> 6,751,034
<SECURITIES> 0
<RECEIVABLES> 36,399,190
<ALLOWANCES> 0
<INVENTORY> 28,399,190
<CURRENT-ASSETS> 76,768,876
<PP&E> 25,238,302
<DEPRECIATION> 0
<TOTAL-ASSETS> 120,565,027
<CURRENT-LIABILITIES> 28,774,496
<BONDS> 46,381,873
0
0
<COMMON> 98,721
<OTHER-SE> 45,998,404
<TOTAL-LIABILITY-AND-EQUITY> 120,565,027
<SALES> 28,003,702
<TOTAL-REVENUES> 28,003,702
<CGS> 20,945,119
<TOTAL-COSTS> 20,945,119
<OTHER-EXPENSES> 5,656,939
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,455,505
<INCOME-PRETAX> 8,701
<INCOME-TAX> (4,000)
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 4,701
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
