Simula, Inc. History
Phoenix, Arizona 85004
Telephone: (602) 631-4005
Fax: (602) 631-9005
Sales: $97.3 million (2000)
Stock Exchanges: American
Ticker Symbol: SMU
NAIC: 54171 Research and Development in the Physical, Engineering, and Life Sciences; 33636 Motor Vehicle Seating and Interior Trim Manufacturing; 336399 All Other Motor Vehicle Parts Manufacturing; 336413 Other Aircraft Parts and Auxiliary Equipment Manufacturing; 551112 Offices of Other Holding Companies
Simula makes a life saving difference every day. For over 25 years we have developed and supplied equipment and systems designed to safeguard human lives. Our technologies and products are sold around the world for a wide range of applications in various markets and industries. Key Dates:
- Simula, Inc. is founded to produce crashworthy helicopter seating.
- US Government commissions Simula to study airliner crashes.
- Simula goes public.
- The company begins five years of losses, even as revenues grow.
- BMW Inc. begins offering Simula's side airbags in certain automobile models.
- New officers, new strategies attempt to satisfy shareholders.
Simula, Inc. makes high-tech products designed to protect people in vehicles. As a research firm, Simula helps draft safety requirements for civil and military air transports; as a manufacturing firm, the company designs products to meet the new requirements. The company's business is split evenly between the military and commercial sectors. About half the seats in new US military helicopters are made by Simula. Headquartered in Phoenix, Arizona, Simula operates eight divisions and subsidiaries located throughout the United States and the United Kingdom, with more than 700 employees worldwide.
Company Origins: 1970s-80s
Simula, Inc. was founded by Stanley Desjardins in 1975 to bring crash safety research results into production. Years before, Desjardins was born in a farm town in northern Minnesota, and his family followed his father to an Army base in Idaho during World War II. Desjardins later joined the National Guard himself, and served active duty in the Korean War. There, he may have seen the need for better protective equipment in military helicopters.
The GI Bill put Desjardins into college, and he studied mechanical engineering at the University of Idaho. There, he developed an interest in solid-propellant rocketry. As a result, in 1958 he took a job at Thiokol Chemical Corp. in Utah, working on nozzle design for the Minuteman program--the first solid-propellant intercontinental ballistic missiles (ICBMs). After ten years at Thiokol, Desjardins accepted a job offer from a friend at a tiny Arizona company (later part of Ultrasystems Inc.) studying crash safety. Soon thereafter, in 1975 Desjardins founded Simula, Inc. to bring this research--and the results gathered from it--into production.
Simula had no shop facilities of its own, and its first big break was supplying seats for Sikorsky Aircraft Corporation's bid for a military utility helicopter contract. Desjardins developed the energy-absorbing, "crashworthy" seats himself--seats which helped Sikorsky's design beat out a Boeing offering for the contract. Desjardins later told The Business Journal (Phoenix) that the design work for those seats started on a drawing board that a friend kept in his bedroom.
In 1981, federal regulators contracted Simula to study jet airliner crashes. One of the firm's recommendations was stronger seats, which would later become a key line of business for the company. Within a decade, the company soon grew to employ 185 people by the 1990s.
Growth and Expansion Into the 1990s
The company earned a net income of $1.7 million on revenues of $15.1 million in 1991, up from earnings of $94,000 on 1990's $12.3 million in revenues. Thus, Simula decided to launch its initial public offering in April 1992 at $5 a share. The company was hoping to raise money to enter the commercial aircraft market, which would be a vital strategic move, given post-perestroika defense cutbacks.
In August 1993, Simula bought San Diego-based Airline Interiors Inc. for $4 million, gaining access to aircraft manufacturers. Simula's sales rose by a third for the year to $24.8 million, though earnings declined 11 percent to $1.1 million.
In July 1994, Simula bought Coach and Car Equipment Corp., a $12 million a year company based in Elk Grove, Illinois, that produced railway seating systems. Simula also began developing side airbags for automobiles. Airbags were also being designed for use inside the Army's UH-60 Blackhawk helicopter. About half of Simula's business at the time involved defense contractors.
Bulkhead airbag systems for commercial aircraft was another potential new market. Simula also had an offering for the relatively small armored car market: a cheap, portable $10,000 kit that included armored panels and a secondary bulletproof windshield.
By the end of 1994, Simula's share price had exceeded $25, and the company was being touted as the darling of Arizona's high tech sector. The company then landed a deal to put Inflatable Tubular Structure (ITS) side-airbags in BMWs beginning in 1997. Informally dubbed weisswurst, ("white sausage"), these were to be produced in Scotland in collaboration with Autoliv AB, a Swedish airbag manufacturer. Simula chose to work with Autoliv because it felt it needed a partner acquainted with the mass volumes required by the automotive industry, where production was measured in millions--not hundreds--of units.
Tough Financial Times in the Mid- and Late 1990s
Donald W. Townsend, the company's chief financial officer since 1986, received the titles of president and chief operating officer of Simula in November 1994. The founder and former president, Desjardins, remained as the company's chairman and CEO (though Townsend would later become CEO as well).
The company's profits doubled to $2.1 million in 1994 on sales of $41.2 million. An additional public offering in March 1995, however, failed to garner the desired response. Simula had hoped to net $25 million from the sale, which was earmarked towards reducing debt and expanding manufacturing facilities. But the company ended up with only $22 million from the sale. It was thought that the high share price in relation to earnings (36 times 1994 earnings) and a relatively high debt level ($20 million) may have discouraged investors. Desjardins personally owned 45 percent after the offering; he had planned to sell some of his shares, but changed his mind.
Simula's earnings grew at a 90 percent clip throughout 1995, but its share price fell more than 20 percent one week in November. It was then that enraged analysts learned the company's third quarter profits were derived largely from a tax benefit related to a previous acquisition.
On a positive note, Simula picked up new armoring business early in 1996 due to the United States military's peacekeeping deployment in Bosnia. The company then announced plans to relocate from Tempe to downtown Phoenix in May 1996. By that time, Simula had 730 full-time employees working in several plants around the country.
In 1996, Simula formed a UK subsidiary to supply BMW's side airbags from a plant in Newcastle, after beginning the production in Phoenix. At the same time elsewhere in northern England, the Manchester-based Airtours tour operator ordered seats for its Airbus A320 aircraft from Simula's San Diego-based Airline Interiors unit.
After 12 consecutive quarters of income growth, Simula finally announced a loss for the third quarter of 1996. The loss was attributed to more conservative accounting practices. In fact, Simula would post a loss for the year, and that was just the beginning of the bad news. Production problems in 1997 kept its airliner seat business unprofitable, as inexperienced workers had trouble meeting demand.
A joint venture with leading automotive airbag supplier TRW Vehicle Safety Systems Inc. was announced in June 1998, and helped to reassure investors. The losses continued, however, even though sales rose 33 percent in 1998 to $100.7 million. The company's share price fell to $5 by mid-1999. Complaints of low stock ownership among board members prompted one director, Tom Emerson, to pledge to invest $50,000 in the company; but it was a promise that had not yet been kept by May 2000.
The company's Coach and Car Equipment division was sold at a $4 million loss in November 1999, in an attempt to pay off debt that amounted to 70 percent of capitalization. Simula received $10 million in the controversial sale to a group of investors, but the deal was written so that Simula would receive only interest payments until 2004. Simula shareholders and Coach & Car employees doubted the buyers' ability to pay, and in April 2000 Simula wrote off the $10 million note, though it still expected to eventually be paid "something" from the money-losing enterprise.
In January 2000, Simula also announced the sale of its Airline Interiors Inc. unit to Weber Aircraft Inc., a Texas-based subsidiary of Zodiac SA of France. The sale went through for $11.4 million in cash and $9.4 million in assumed liabilities.
Meanwhile, Simula had supplied seating and parachutes, free, for the Team Re/Max attempt to circumnavigate the world in a hot-air balloon in 1998-99. Its share price did not prove as buoyant as the balloon, however, falling to an all-time low in May 2000 of about $2. This dip in price came alongside news of a first-quarter loss resulting largely from divestments in the previous year.
New Direction in 2000 and Beyond
Bradley P. Forst, a Phoenix lawyer, was named CEO on October 1, 2000 after Donald Townsend resigned. Simula's heavily depressed share price rose 40 percent on the news, once again reaching $2. Soon after taking office, Forst announced plans to add more outsiders to the board of directors, as well as review the sales-based executive bonuses that had irked minority shareholders for so long. Strategically, the company would focus on making air bags as well as body armor and armor for military vehicles.
De-listed from the Big Board, Simula began trading on the American (AMEX) Stock Exchange in November 2000. After losing money every year since 1995, Simula lost $6 million in 2000, mostly due to write-offs and restructuring charges. Auditors warned of Simula's ability to remain a going concern after one of its lenders, a Beverly Hills investment bank, refused to grant waivers for non-monetary violations of a loan agreement. Simula officials stated this investment bank had asked $2 million for such waivers. Forst was optimistic of buying back the $20 million note with help from another financier, though.
Principal Subsidiaries: Airline Interiors, Inc.; Artcraft Industries Corp.; International Center for Safety Education, Inc.; Simula Automotive Safety Devices, Inc.; Simula Automotive Safety Devices, Ltd. (UK); Simula Composites Corporation; Simula Polymer Systems, Inc.; Simula Protective Systems, Limited (UK); Simula Safety Systems, Inc.; Simula Technologies, Inc.; Simula Transportation Equipment Corporation.
Principal Divisions: Automotive Safety Systems; Aerospace & Defense Systems; Advanced Polymer Materials; Technology Development & Testing.
Principal Operating Units: Commercial Products; Aerospace and Defense.
Principal Competitors: Autoliv AB; Israeli Aircraft Industries Ltd.; Martin-Baker Aircraft Co. Ltd.; Mexican Industries in Michigan Inc. Safety Components International, Inc.; TRW Vehicle Safety Systems Inc.
- "Auditors Question Viability of Troubled Simula," Associated Press State & Local Wire, April 19, 2001.
- Davis, Riccardo A., "Simula Bows to Its Critics," Arizona Republic, October 17, 2000, p. D10.
- ------, "Simula Stock Falls Hard," Arizona Republic, May 12, 2000, p. D1.
- Fehr-Snyder, Kerry, "Phoenix-Based Simula Sees Stock Rise on News of Air Bag Deal," Arizona Republic, June 10, 1998.
- Foster, Ed, "Simula, Inc. Loss Attributed to Accounting Change," Arizona Republic, November 15, 1996.
- ------, "Tempe Firm's `Sausage' Could Save You; Auto Safety Device Shields Head in Crash," Arizona Republic, August 4, 1995, p. C1.
- Gilbertson, Dawn, "Ford's News Gives Simula Another Boost," Arizona Republic, April 12, 1998, p. D1.
- ------, "Shareholders Underwhelmed by Simula Vows," Arizona Republic, June 20, 1999, p. D1.
- ------, "Simula Director Yet to Keep Promise," Arizona Republic, May 12, 2000, p. D1.
- ------, "Simula Shares Crash in Rough Week," Arizona Republic, November 19, 1995, p. D2.
- ------, "Simula Stock Jumps 39 Percent as CEO Retires," Arizona Republic, October 3, 2000, p. D1.
- ------, "Simula Writes Off Note for $10 Million," Arizona Republic, April 18, 2000, p. D1.
- Gilbertson, Dawn and Russ Wiles, "Phoenix Firm to Divest Train-Seat Unit in Hopes of Paying Off Debt," Arizona Republic, November 8, 1999.
- Golfen, Bob, "Endurance Testers; Simula Pushes Gear's Limits to Improve Safety," Arizona Republic, December 21, 2000, p. D1.
- Hart, Dan, "Simula Loss Wider Than Expected," Arizona Republic, March 31, 1999, p. E3.
- Luebke, Cathy, "Stan Desjardins: Simula Founder Is Well-Versed in Every Aspect of His Business," Business Journal (Phoenix), October 12, 1992, p. 12.
- Maio, Patrick J., "Sit Tight," Investor's Business Daily, July 18, 1995, p. A4.
- Mencke, Claire, "Rebound," Investor's Business Daily, September 27, 1994, p. A6.
- Reagor, Catherine, "Simula Stock Jumps as It Crashes Into New Markets," The Business Journal (Phoenix), October 7, 1994, p. 24.
- ------, "Simula to Expand, Files $35 Million Offering," Business Journal (Phoenix), February 10, 1995, p. 1.
- Rolwing, Rebecca, "Tempe, Ariz. Firm Built Equipment for US-Australian Balloon Quest," Arizona Republic, January 4, 1999.
- ------, "Valley Firms Rush to Fill Bosnian Orders," Business Journal (Phoenix), February 9, 1996, pp. 1F.
- Rundle, Rhonda L., "Do You Envy Clinton His Limo? This Kit Could Be for You," Wall Street Journal, September 25, 1995, p. B1.
- Schneider, Paul, "Longtime CFO Wins Key Post at Surging Firm," Arizona Business Gazette, November 17, 1994, p. 9.
- ------, "Rise in Stock Price Follows Simula Growth," Arizona Business Gazette, June 9, 1994, p. 9.
- ------, "Simula, Founder to Sell Shares of Growing Business," Arizona Business Gazette, March 23, 1995, p. 6.
- Waxler, Caroline, "Injury-Proof," Forbes, June 16, 1997, p. 270.
- Weinstein, Randi, "Reinventing a Firm," Business Journal (Phoenix), April 27, 2001, p. 20B.
- Wiles, Russ, "Simula Doubled Take in '94," Arizona Republic, March 3, 1995, p. D1.
- ------, "Simula Offering Falls Short; $22 Million Net Below Firm's Goal," Arizona Republic, March 31, 1995, p. E1.
Source: International Directory of Company Histories, Vol. 41. St. James Press, 2001.comments powered by Disqus