SECURITIES AND EXCHANGE COMMISSION
FORM 10-Q
| x | Quarterly report pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934 For the quarterly period ended September 30, 2002 or |
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| o | 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 | ||
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Simula, Inc.
| Arizona | 86-0320129 | |
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| (State or Other Jurisdiction of Incorporation or Organization) |
(I.R.S. Employer Identification No.) |
| 2625 S. Plaza Drive, Suite 100, Tempe, Arizona | 85282 | |||
| (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:
| Class | Outstanding at September 30, 2002 | |
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| Common Stock, $.01 par value |
12,954,372 |
SIMULA, INC.
TABLE OF CONTENTS
| Page | ||||
PART I — FINANCIAL INFORMATION |
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Item 1 - Interim (unaudited) Consolidated Financial Statements |
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Consolidated Balance Sheets as of
September 30, 2002 and December 31, 2001 |
2 | |||
Consolidated Statements of Operations for the Three and Nine Month
Periods Ended September 30, 2002 and 2001 |
3 | |||
Consolidated Statement of Shareholders’ Deficit for the
Nine Month Period Ended September 30, 2002 |
4 | |||
Consolidated Statements of Cash Flows for the
Nine Month Periods Ended September 30, 2002 and 2001 |
5 | |||
Notes to Interim Consolidated Financial Statements |
6-11 | |||
Item 2 - Management’s Discussion and Analysis of
Results of Operations and Financial Condition |
12-17 | |||
Item 3 - Quantitative and Qualitative Disclosure about Market Risk |
17 | |||
Item 4 -Controls and Procedures |
17 | |||
PART II — OTHER INFORMATION |
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Item 6 - Exhibits and Reports |
18 | |||
SIGNATURES |
20 | |||
SIMULA, INC. AND SUBSIDIARIES
Consolidated Balance Sheets
September 30, 2002 and December 31, 2001
| 2002 | 2001 | |||||||||
| (unaudited) | ||||||||||
ASSETS |
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CURRENT ASSETS |
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Cash and cash equivalents |
$ | 462,466 | $ | 362,319 | ||||||
Contract and trade receivables — Net |
25,672,997 | 26,441,295 | ||||||||
Inventories |
6,858,705 | 7,384,222 | ||||||||
Deferred income taxes |
1,818,000 | 2,596,000 | ||||||||
Prepaid expenses and other |
665,015 | 915,547 | ||||||||
Total current assets |
35,477,183 | 37,699,383 | ||||||||
PROPERTY,
EQUIPMENT, and LEASEHOLD IMPROVEMENTS — Net |
11,378,665 | 10,545,449 | ||||||||
DEFERRED INCOME TAXES |
35,685,519 | 34,985,000 | ||||||||
DEFERRED FINANCING COSTS |
2,762,067 | 4,059,630 | ||||||||
INTANGIBLES — Net |
3,504,761 | 3,333,896 | ||||||||
OTHER ASSETS |
1,976,959 | 2,029,933 | ||||||||
TOTAL |
$ | 90,785,154 | $ | 92,653,291 | ||||||
LIABILITIES AND SHAREHOLDERS’ DEFICIT |
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CURRENT LIABILITIES |
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Revolving line of credit |
$ | 8,985,373 | $ | 11,488,639 | ||||||
Trade accounts payable |
8,308,039 | 6,972,576 | ||||||||
Other accrued liabilities |
6,995,582 | 8,394,234 | ||||||||
Deferred revenue |
1,173,775 | 1,540,247 | ||||||||
Accrued restructuring costs |
1,470,764 | 1,313,931 | ||||||||
Liabilities
of discontinued operations |
640,529 | — | ||||||||
Advances on contracts |
2,723,425 | 2,049,645 | ||||||||
Current portion of long-term debt |
3,449,564 | 993,682 | ||||||||
Total current liabilities |
33,747,051 | 32,752,954 | ||||||||
DEFERRED REVENUE |
507,030 | 1,367,002 | ||||||||
DEFERRED LEASE COST |
709,158 | 400,914 | ||||||||
LONG-TERM DEBT — Less current portion |
58,520,256 | 60,772,414 | ||||||||
Total liabilities |
93,483,495 | 95,293,284 | ||||||||
SHAREHOLDERS’ DEFICIT |
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Preferred
stock, $.05 par value — authorized 50,000,000 shares;
none outstanding |
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Common
stock, $.01 par value — authorized 50,000,000 shares;
issued 12,954,372 in 2002 and 12,892,858 in 2001 |
129,543 | 128,929 | ||||||||
Additional paid-in-capital |
62,622,909 | 62,412,546 | ||||||||
Accumulated deficit |
(63,235,305 | ) | (63,377,118 | ) | ||||||
Accumulated other comprehensive loss |
(2,215,488 | ) | (1,804,350 | ) | ||||||
Total shareholders’ deficit |
(2,698,341 | ) | (2,639,993 | ) | ||||||
TOTAL |
$ | 90,785,154 | $ | 92,653,291 | ||||||
See notes to consolidated financial statements.
2
SIMULA, INC. AND SUBSIDIARIES
Unaudited Consolidated Statements of Operation
| Three Month Period Ended | Nine Month Period Ended | |||||||||||||||
| September 30, | September 30, | |||||||||||||||
| 2002 | 2001 | 2002 | 2001 | |||||||||||||
REVENUE |
$ | 27,582,979 | $ | 27,078,541 | $ | 86,866,759 | $ | 78,571,206 | ||||||||
COST OF REVENUE |
19,122,652 | 17,923,855 | 59,260,150 | 50,511,624 | ||||||||||||
GROSS MARGIN |
8,460,327 | 9,154,686 | 27,606,609 | 28,059,582 | ||||||||||||
ADMINISTRATIVE EXPENSES |
4,488,656 | 5,791,566 | 14,079,733 | 17,014,055 | ||||||||||||
RESEARCH AND DEVELOPMENT |
1,170,706 | — | 4,087,678 | — | ||||||||||||
WRITE-DOWN NET ASSETS HELD FOR SALE |
— | 50,000 | — | 650,000 | ||||||||||||
EMPLOYEE SEVERENCE EXPENSE |
— | 438,000 | — | 438,000 | ||||||||||||
RESTRUCTURING CHARGES |
762,459 | — | 762,459 | 479,000 | ||||||||||||
OPERATING INCOME |
2,038,506 | 2,875,120 | 8,676,739 | 9,478,527 | ||||||||||||
INTEREST EXPENSE |
(2,626,308 | ) | (2,640,180 | ) | (7,761,926 | ) | (7,808,701 | ) | ||||||||
(LOSS) INCOME BEFORE TAXES |
(587,802 | ) | 234,940 | 914,813 | 1,669,826 | |||||||||||
INCOME TAX BENEFIT (EXPENSE) |
194,000 | (86,000 | ) | (426,000 | ) | (621,000 | ) | |||||||||
(LOSS) INCOME BEFORE DISCONTINUED
OPERATIONS AND EXTRAORDINARY ITEM |
(393,802 | ) | 148,940 | 488,813 | 1,048,826 | |||||||||||
LOSS FROM DISCONTINUED OPERATIONS, NET
OF RELATED INCOME TAX BENEFIT
OF $303,000 |
(347,000 | ) | — | (347,000 | ) | — | ||||||||||
(LOSS) INCOME
BEFORE EXTRAORDINARY ITEM |
(740,802 | ) | 148,940 | 141,813 | 1,048,826 | |||||||||||
EXTRAORDINARY LOSS ON EARLY
EXTINGUISHMENT OF DEBT, NET OF
RELATED INCOME TAX BENEFIT OF $1,633,000 |
— | (2,182,900 | ) | — | (2,182,900 | ) | ||||||||||
NET (LOSS) INCOME |
$ | (740,802 | ) | $ | (2,033,960 | ) | $ | 141,813 | $ | (1,134,074 | ) | |||||
(LOSS) INCOME PER COMMON SHARE — Basic
(LOSS) INCOME BEFORE DISCONTINUED
OPERATIONS AND EXTRAORDINARY ITEM |
$ | (0.03 | ) | $ | 0.01 | $ | 0.04 | $ | 0.09 | |||||||
LOSS FROM DISCONTINUED OPERATIONS |
(0.03 | ) | — | (0.03 | ) | — | ||||||||||
EXTRAORDINARY LOSS ON EARLY
EXTINGUISHMENT OF DEBT |
— | (0.18 | ) | — | (0.18 | ) | ||||||||||
(LOSS) INCOME PER COMMON SHARE — Basic |
$ | (0.06 | ) | $ | (0.17 | ) | $ | 0.01 | $ | (0.09 | ) | |||||
(LOSS) INCOME PER COMMON SHARE -
Diluted
(LOSS) INCOME BEFORE DISCONTINUED
OPERATIONS AND EXTRAORDINARY ITEM |
$ | (0.03 | ) | $ | 0.01 | $ | 0.04 | $ | 0.09 | |||||||
LOSS FROM DISCONTINUED OPERATIONS |
(0.03 | ) | — | (0.03 | ) | — | ||||||||||
EXTRAORDINARY LOSS ON EARLY
EXTINGUISHMENT OF DEBT |
— | (0.18 | ) | — | (0.18 | ) | ||||||||||
(LOSS) INCOME PER COMMON SHARE -
Diluted |
$ | (0.06 | ) | $ | (0.17 | ) | $ | 0.01 | $ | (0.09 | ) | |||||
See notes to consolidated financial statements.
3
SIMULA, INC. AND SUBSIDIARIES
Unaudited Consolidated Statements of Shareholders’ Deficit
Nine Month Period Ended September 30, 2002
| Accumulated | ||||||||||||||||||||||||||||
| Common Stock | Additional | Other | Total | |||||||||||||||||||||||||
| Paid-in | Accumulated | Comprehensive | Shareholders' | Comprehensive | ||||||||||||||||||||||||
| Shares | Amount | Capital | Deficit | Loss | Deficit | Loss | ||||||||||||||||||||||
BALANCE, JANUARY 1, 2002 |
12,892,858 | $ | 128,929 | $ | 62,412,546 | $ | (63,377,118 | ) | $ | (1,804,350 | ) | $ | (2,639,993 | ) | ||||||||||||||
Net Income |
141,813 | 141,813 | $ | 141,813 | ||||||||||||||||||||||||
Issuance of stock |
61,514 | 614 | 210,363 | 210,977 | ||||||||||||||||||||||||
Gain on cash flow hedge |
231 | 231 | 231 | |||||||||||||||||||||||||
Foreign currency
translation adjustment |
(411,369 | ) | (411,369 | ) | (411,369 | ) | ||||||||||||||||||||||
BALANCE,SEPTEMBER 30, 2002 |
12,954,372 | $ | 129,543 | $ | 62,622,909 | $ | (63,235,305 | ) | $ | (2,215,488 | ) | $ | (2,698,341 | ) | $ | (269,325 | ) | |||||||||||
See notes to consolidated financial statements.
4
SIMULA, INC. AND SUBSIDIARIES
Unaudited Consolidated Statements of Cash Flows
Nine Month Periods Ended September 30, 2002 and 2001
| 2002 | 2001 | |||||||||||
CASH FLOWS FROM OPERATING ACTIVITIES: |
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Net income (loss) |
$ | 141,813 | $ | (1,134,074 | ) | |||||||
Adjustment
to reconcile net income (loss) to net cash provided by
operating activities: |
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Depreciation and amortization |
3,182,575 | 3,370,986 | ||||||||||
Deferred income taxes |
77,481 | (1,060,000 | ) | |||||||||
Capitalized interest |
1,139,531 | 348,808 | ||||||||||
Non-cash equity compensation |
109,971 | 74,000 | ||||||||||
Loss from discontinued operations |
640,529 | — | ||||||||||
Loss on extinguishment of debt |
— | 3,815,900 | ||||||||||
Loss on disposal of assets |
97,261 | — | ||||||||||
Restructuring charge |
762,459 | 479,000 | ||||||||||
Write down net assets held for sale |
— | 650,000 | ||||||||||
Currency translation adjustment |
(411,369 | ) | 21,569 | |||||||||
Bad debt expense |
236,067 | — | ||||||||||
Changes in net assets and liabilities: |
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Contract and trade receivables — net of advances |
1,206,012 | 1,684,240 | ||||||||||
Inventories |
525,517 | (562,178 | ) | |||||||||
Prepaid expenses and other |
250,762 | 60,119 | ||||||||||
Other assets |
52,974 | (992,511 | ) | |||||||||
Trade accounts payable |
1,335,463 | 777,198 | ||||||||||
Deferred revenue |
(1,226,444 | ) | (2,002,938 | ) | ||||||||
Deferred lease costs |
308,244 | 152,790 | ||||||||||
Restructuring reserve |
(557,360 | ) | ||||||||||