Simula Inc. Predicts Enhanced Profitability in 2001 Following Planned Debt Refinancing
PHOENIX--April 17, 2001--"We've Never Missed, and See No Prospect of Missing a Loan Payment,"
Says CEO Forst, Regarding Loan Dispute With Current Lender
Simula Inc. (AMEX:SMU) today announced that it has received from its investment banker a "highly confident" indication about the ability to complete a financing and a commitment letter and preliminary term sheet from a prospective lender that should result in a new senior debt financing in the second quarter.
This new financing would replace the Company's outstanding $20 million of Senior Notes, resolving Simula's dispute with its current lender and reducing the Company's overall cost of debt. Simula declined to name the prospective lender, pending further negotiations.
Brad Forst, President and Chief Executive Officer, said, "Although an agreement remains subject to negotiation, we expect that the resulting refinancing will improve our financing terms and earnings for 2001 beyond our previous guidance."
In a statement following the company's release that details fourth quarter and year-2000 results, Mr. Forst described the Company's current relationship with Levine Leichtman Partners LP, Beverly Hills, CA. That firm holds the two Senior Secured Notes with a face value of $20 million, whose replacement Simula is negotiating.
Levine Leichtman did not grant waivers of non-monetary covenant violations incurred primarily as a result of the loss, one-time charges and write-downs the Company posted in the fourth quarter 2000 as part of its restructuring program. There has never been a default in payment, and the Company said that cash flow is more than adequate to cover operations. Although Levine Leichtman has not declared Simula in default or accelerated the Company's schedule of payments, it has asserted the right to receive additional monthly interest payments at a default rate due to covenant violations. As a result, Simula's auditors have issued an opinion that contains a "going concern" expression (as described more fully in a separate press release issued earlier today).
Mr. Forst said, "We were unable to reach an agreement on covenant waivers with Levine Leichtman Capital Partners, whose demands for payments for such waivers, in our judgement, considerably exceeded a commercially reasonable level. Management and our Board concluded that this demand was and not in the best interests of shareholders."
As a condition of waiving the Company's covenant violation, Levine Leichtman demanded in excess of $2 million, comprising cash payments as well as further dilutive equity. In addition, Levine Leichtman requested an additional $2 million in cash upon refinancing in exchange for certain residual equity rights under its warrant agreement with Simula.
"Let's make it clear: our top priority is to enhance shareholder value, we had to draw the line," said Mr. Forst. "We are determined to recapitalize with a new lender, and in doing so, strengthen our relationship with our business partners and, of course, our shareholders."
The Company confirmed that its working capital line of credit is unaffected, and moreover Company sees no liquidity issues. "Business continues as usual," Mr. Forst said.
The Company's refinancing negotiations continue a corporate overhaul that, since October 2000, has included the following steps:
| -- | Appointment of new senior management, including the appointment of Mr. Forst as CEO, and J. Michael Miller as COO. |
| -- | Completion of the Company's new business model focused on core competencies and eliminating non-profitable business units. |
| -- | Consolidation of the Company's operating units and sale of its non-core businesses. |
| -- | Reduction and rationalization of research and development expenditures. |
| -- | Downsizing the workforce, to reflect the Company's new business focus and to eliminate redundancies across six divisions. |
Additionally, Mr. Forst disclosed that the company anticipates a one-time charge of approximately $500,000 for the 1st quarter of 2001 for previously announced severance and restructuring activities. Simula expects annualized net savings of $2.5 million to $3 million as a result of these activities. Moreover, net of this charge, the Company continues to expect that first-quarter income from operations will be positive.
As previously disclosed, net of the restructuring and severance charges, the Company's revamped business model calls for net income in 2003 expected to be three to four times 2001 levels and for annualized growth in revenues and EBITDA of approximately 30% and 25%, respectively, through fiscal 2003.
Simula designs and makes systems and devices that save human lives. Its core markets are aerospace and defense systems, and automotive safety systems. Simula's core technologies include inflatable restraints, energy absorbing seating systems, advanced polymer materials, transparent and opaque armor products, personnel protective equipment and parachutes, and crash sensors. More information is available at http://www.simula.com.
Safe Harbor statement under the Private Securities Litigation Reform Act of 1995: This news release contains forward-looking statements that involve risks and uncertainties that may cause the Company's actual experience to differ materially from that which is anticipated. These forward-looking statements include statements about expected revenues, cost reductions, net income and operating income in 2001; the ability to find a replacement lender and the likelihood of a material reduction in the Company's level and cost of debt. Other factors pertinent to the Company's ability to meet its current financial projections include its leveraged status and the level and cost of debt and the nature of debt covenants; the reduction of fixed expenses; the ability to maintain margins or grow volumes in its automotive segment; the likelihood of success in building strategic alliances with large prime contractors and first tier suppliers to OEMs; the competition and competitive pressures on pricing including from first tier supplier partners; and the amount of resources committed to independent research and development from time to time. Actual results may differ materially from those projected. Additional risks include those described herein and in the Company's registration statements and periodic reports filed with the U.S. Securities and Exchange Commission.
NOTE TO EDITORS
Mr. Forst is available for media interviews on this subject.