Simula Inc. Reports 1998 Financial Results; Company Anticipates Return to Profitability in First Quarter of 1999
31 March 1999
Simula Inc. Reports 1998 Financial Results; Company Anticipates Return to Profitability in First Quarter of 1999
PHOENIX--March 30, 1999--Simula Inc. Tuesday announced financial results for the fourth quarter and year ended Dec. 31, 1998.Revenues for the three months ended Dec. 31, 1998, were $28.7 million, compared with $24.6 million for the comparable period in 1997. The net loss for the quarter was $21.0 million, or $2.12 per share, compared with a net loss of approximately $607,000, or 6 cents per share, in the three months ended Dec. 31, 1997.
Excluding a loss from discontinued operations of $163,000, or 2 cents per share, net of tax benefit, and an estimated loss on disposal of the rail and mass-transit subsidiary of $13.9 million, or $1.40 per share, net of tax benefit, the fourth-quarter 1998 loss from continuing operations was $7.0 million, or 70 cents per share.
Results for the quarter and year ended Dec. 31, 1997, reflected a gain of $1.3 million -- approximately $790,000, or 9 cents per share, net of income-tax effect -- from real estate transactions.
Revenues for the year ended Dec. 31, 1998, were $100.7 million, compared with $67.4 million in the prior year. The net loss for the year was $27.7 million, or $2.80 per share, compared with a loss of $3.5 million, or 38 cents per share, in 1997.
Excluding a loss from discontinued operations of $2.3 million, or 23 cents per share, net of tax benefit, and an estimated loss on disposal of the company's rail and mass-transit subsidiary of $18.6 million, or $1.88 per share, net of tax benefit, the loss from continuing operations for the year was $6.8 million, or 69 cents per share.
In the second quarter of 1998, pursuant to its decision to sell the rail and mass-transit operations, the company recorded a net loss from discontinued operations of $6.6 million, or 67 cents per share, an amount that included a write-down of $4.7 million, or 47 cents per share, based at the time upon an independent evaluation of the net realizable value of the remaining assets of the two businesses.
The company has signed a letter of intent with a prospective purchaser of the business. Based on its efforts to sell the business in late 1998 and early 1999, the company determined that the purchase price will be less than the earlier evaluation and accordingly has taken an additional write-off for this estimate of loss on disposal in the fourth quarter.
The company anticipates that it will complete the sale of the rail business in the second quarter and will use the sales proceeds to repay indebtedness.
Commenting on the fourth-quarter results, Donald W. Townsend, president and chief executive officer of Simula, noted that the company's automobile-safety business did exceptionally well in the fourth quarter, in part because of higher production of the company's Inflatable Tubular Structure (ITS) product.
"Our agreements with TRW, Delphi and IMMI continue to provide us with new opportunities," said Townsend, "and the future of the ITS product looks extremely bright.
"Interest among automotive manufacturers in our Inflatable Tubular Torso Restraint (ITTR) technology is significantly higher at this point in the marketing cycle than was the case with the ITS product, and we expect ITTR to play a significant role in the company's participation in the growing automotive-safety market.
"Our business in government defense contracts also remains strong," added Townsend. "Near-term, significant growth is expected to come from two new product lines.
"One is the cockpit airbag system (CABS), where we are in the final stages of qualification with initial production expected to begin in the fourth quarter of 1999. The other is our proprietary sealed parachute for the military.
"Initial production commenced in the fourth quarter of 1998, and, with higher volumes expected to begin in the second quarter, we anticipate that parachutes will start making a contribution to this segment of our business in 1999.
"The one area that had a significant negative impact on continuing operations in the fourth quarter," continued Townsend, "was the commercial-airliner seating business.
"The difficulties we have encountered in Airline Interiors, which we have discussed in some detail in the past, have stemmed in large part from internal systems and controls that, despite improvements, during the fourth quarter were not yet fully up to the volume of business received.
"Moreover, challenges inherent in the design of any new seat program, exacerbated by evolving and ever-more-stringent certification standards for 16g seats, further contributed to lower production, slower certifications, lower revenue and lower margins as reflected in fourth-quarter and year-end results.
"When last year we suggested that income from continuing operations in 1999 might be in the range of 60 cents to 65 cents per share, based on anticipated revenues of approximately $130 million," continued Townsend, "we did not fully appreciate the economic impact facing us in the airline seating business.
"Quite simply, the impact of new management and the implementation of new purchasing, inventory and production procedures at Airline Interiors has taken longer than expected.
"Yet given the strength of our other businesses, and with three- quarters of total 1999 anticipated production volume in aircraft seating already designed and certified, we remain comfortable with our top-line projection for the year.
"Moreover, we are clearly making progress in addressing the challenges (not all of which are unique to Simula) associated with the production and certification of 16g seats. Based upon the results of January and February 1999, we anticipate this portion of our business will approximate break-even in the first quarter.
"We expect to see the benefits of better systems and controls as the year progresses, and -- with many design, testing and certification issues behind us -- the outlook for Airline Interiors remains extremely positive. With these results at Airline Interiors, we believe that the company will report a profit for the first quarter 1999.
"Nonetheless," concluded Townsend, "the environment is sufficiently fluid that, our inherent optimism notwithstanding, we are at this point reluctant to forecast any specific range for 1999. If one assumes that Airline Interiors makes no contribution to earnings, our earlier projection regarding income from continuing operations in 1999 would now be viewed as probably too high by a factor of approximately two."
Simula is a leader in developing and commercializing protective systems and energy-absorption technologies that safeguard human lives. Products include advanced occupant seating and restraint systems for commercial-airline, military and automotive applications. Additional information may be found at www.simula.com.
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 anticipated. These forward-looking statements include projections of revenue and net income; issues that may affect revenue and net income; plans for the future; and assumptions relating to the foregoing. Estimates are based on reliable information and past experience. However, operating results are affected by a wide variety of factors, many of which are beyond the control of the company. Factors include but are not limited to the levels of orders that are received and can be shipped in the quarter; whether and when order options are exercised; customer order patterns and seasonality; contract mix among the company's two business segments; shifting production and delivery schedules; manufacturing capacity and yield; costs of labor, raw materials, supplies and equipment; reliability of vendor base; amount of resources committed to research and development from time to time; technological changes; competition and competitive pressures on pricing; and economic conditions in the United States and worldwide. Additionally, factors and risks affecting operating results include those described in the company's registration statements and periodic reports filed with the U.S. Securities and Exchange Commission.
SIMULA INC.
Consolidated Statements of Operations
Three months ended 12 months ended
Dec. 31, Dec. 31,
1998 1997 1998 1997
Revenue $ 28,691,952 $24,604,363 $100,653,953 $67,362,456
Cost of revenue 31,852,506 19,471,494 85,733,121 51,781,020
Gross margin (3,160,554) 5,132,869 14,920,832 15,581,436
Administrative
expenses 6,194,931 5,718,875 20,420,763 18,697,971
Operating loss (9,355,485) (586,006) (5,499,931) (3,116,535)
Interest expense (1,546,584) (1,111,299) (5,276,942) (4,486,391)
Interest income 14,439 37,616 177,748 313,118
Other income 1,298,026 1,298,026
(Loss) before taxes
and discontinued
operations (10,887,630) (361,663) (10,599,125) (5,991,782)
Income-tax benefit 3,902,000 137,049 3,786,000 2,390,049
Loss from continuing
operations (6,985,630) (224,614) (6,813,125) (3,601,733)
Discontinued
operations:
(Loss) earnings
from discontinued
operations, net
of tax (163,000) (382,066) (2,319,388) 62,207
Estimated loss on
disposal, net of
tax (13,896,000) (18,576,000)
Net loss $(21,044,630) $ (606,680)$(27,708,513) $(3,539,526)
Loss per common
share -- basic and
assuming dilution:
Loss from continuing
operations $ (0.70) $ (0.02)$ (0.69) $ (0.39)
Discontinued
operations:
(Loss) earnings
from discontinued
operations, net
of tax (0.02) (0.04) (0.23) 0.01
Estimated loss on
disposal, net of
tax (1.40) (1.88)
Net loss $ (2.12) $ (0.06)$ (2.80) $ (0.38)
Weighted average
shares 9,915,391 9,849,956 9,880,283 9,288,416