Hi bigg e...
The absence of a credible investment banker doesn't help. The structure of the preferred issue was a disaster for common holders and will be affecting trading for a very long time.
The Coach and Car buyout is important to Simula, and it appears a certainty that the buyer knows that, too. I have no doubt that negotiations are difficult (despite the recent landing of the $80 million Long Island Railroad contract, which wasn't announced publicly because Coach and Car was already a discontinued business), because the buyer must realize that SMU has promised its shareholders the liquidation of the division. All of the negotiating strength is on the side of the buyer, as Simula's weak credibility to an extent depends on successful completion of the sale.
This isn't particularly insightful, by the way, as anyone with a working brain can see the difficulty that the Simula has placed itself in. This "sale" has been in the making for close to a full year already. I don't have to comment on it, as it speaks for itself.
The proceeds from the sale will undoubtedly go to reduce bank debt, with perhaps a few million utilized for the early retirement of some debentures. The $10 million reduction in debt will reduce pretax expenses by approximately $850,000, leaving the company an annualized after tax saving of approximately a nickel a share.
Having said all this, it appears that the sale will go through, but as someone commented on the Yahoo thread, the press release didn't indicate how much of a deposit Simula received, so shareholders are left wondering whether it was a significant sum (perhaps 7 figures), or something minuscule. I guess we will know at the end of this month assuming the deal is completed as promised.
Most people inside the company believe that San Diego will be at least breakeven for 1999. That appears to be the case for the first two quarters, but considering the reduction in expenses for seat certifications, I would be hard pressed to understand why the San Diego operation wouldn't come in with a "black" end of year number.
ITS has a very long sales cycle, and I have no doubt that the senior Simula people are disappointed that the number of announced platforms isn't higher than the 8 already indicated. My best guess is that they have at least a dozen high priority relationships still under discussion, and I have no doubt that there will be additional contract signings, perhaps to come in bunches if you are right in expecting a domestic auto manufacturer relationship.
ITTR is moving along quickly now, and most of the "street" clearly doesn't believe it is viable and will get into production in either the 2001 or 2002 model year cars. I think it will, and I think it has equal or greater potential than ITS. TRW is spending considerable time and effort in its relationship with Simula principally with this product in mind.
It has gigantic potential.
The stock has discounted much bad news, and seemingly sits at this level despite the probability that it will earn north of $.30 per share this year (my estimate is higher, as you know, but depends on San Diego doing better than breakeven). What can one say? It appears to be a credibility problem, and hopefully Simula's new PR relationship will help with it.
For what it is worth, however, I have found in my many moons on the "street" that PR is totally wasted if the numbers don't improve along with the "story".
That is job one at Simula. Enough red ink has been spilled the last few years, and increases in revenue are irrelevant if they can't be managed to yield bottom line improvements. From what I understand (not having been personally in attendance), that view was brought home aggressively to management by some of Phoenix's local Simula investors.
It is an important message, and one can only hope that it wasn't wasted or ignored because of the rancorous nature of the meeting.
The shareholders are exhausted, having watched a significant bull market without participation. Simula's senior people aren't giving shareholders credit for their collective intelligence when they divert attention from profits to brag about sales increases.
Shareholders know what is truly important.
Have a good day. |
