Simula Comments on Outlook for Fiscal 2000

28 December 2000

Simula Comments on Outlook for Fiscal 2000

    PHOENIX--Dec. 27, 2000--Simula Inc. (Amex:SMU) said today that for its current fiscal year ending December 31, 2000, it will -- for the first time since 1995 -- report both positive income from operations and positive net income.
    Earnings (net income available to common shareholders) will, however, be less than the $2.5 million projected earlier in the year, said Brad Forst, who in October succeeded Donald W. Townsend as the company's president and CEO.
    "Initiated in October, a review of year-to-date operations has exposed limitations in the economic model on which the earlier projection was based," explained Forst. "Costs, write-offs and losses in certain divisions, combined with needed strategic investments in other divisions, will result in lower-than-anticipated fourth-quarter results, and hence lower-than-projected results for the year.
    "During the quarter we made considerable progress in identifying operating issues of the past," said Forst. "Addressing those issues will be a top priority as we enter the new year. We remain committed to reducing the cost and level of debt as the fastest and best way to positively impact the bottom line, and it is imperative that we reduce overall operating costs within the company."
    Adjusted for extraordinary items related to the early retirement of debt and adjustments to restructuring reserves, and with interest expense of approximately $2.5 million, net income (before dividends on preferred stock) is expected to be essentially break-even in the fourth quarter.
    With a further adjustment of approximately $1 million pursuant to the payment of a preferred stock dividend in connection with the redemption of all the outstanding convertible preferred stock (completed in November 2000), the company expects to report a fourth-quarter net loss available to common shareholders in the range of $900,000 to $1.0 million, or $0.08 to $0.09 per diluted share.
    For the year, net income available to common shareholders -- which will reflect several extraordinary items mentioned in the company's third-quarter earnings report -- is expected to be in the range of $1.7 million to $1.8 million, or approximately $0.15 per diluted share. The company estimates that its fiscal 2000 revenues will be approximately $100 million.
    Income for the quarter was materially impacted by the poor performance of the airline soft goods business, despite a change in division management and other corrective actions that were instituted last summer; fourth-quarter results will include a write-off in excess of $1 million for inventory and accounts receivable in the division.
    Income was also impacted by several developments in the company's automotive safety division; these variances, which began in the third quarter and continued in the fourth, included platform production contracts that moved from 2000 to 2001, anticipated but unrealized cost savings, and increased investment in new business development and marketing efforts for the division.
    "We have work to do," said Forst. "We have made the decision to invest in the short term to ensure continued growth in the long term. From an operating point of view, we will focus on reducing costs across the board. Now is the time to make tough but positive choices for the company."