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Non-Tech : Simula (SMU) -- Ignore unavailable to you. Want to Upgrade?

To: Jacob Lewin who wrote (1501)	11/10/1998 7:33:00 PM
From: Noblesse Oblige	Read Replies (1) \| Respond to of 1671

Simula reported third quarter results yesterday, November 9th. The company had a loss for the quarter, and the loss was slightly larger than our expectations. The problems in San Diego at the 16G airline seat manufacturing facility continue to be the principal culprit, with higher than expected certification costs, lack of efficient manufacturing, and a couple of delayed shipsets being the primary cause. Management is taking radical steps to improve the situation, and it has opined that it expects to reach the necessary efficiencies to run the operation cleanly some time in 1999. There are no real surprises in this business, and the company is still on track to get to $60 million in sales during 1999. We continue to be disappointed in management's ability to turn the business around to profitability, but we are sure that the situation is a management issue more than one of fundamental nature to the business. As soon as the right people are in place, the business will begin to show sharply improved results. The balance of Simula's call discussed government business (profitable and steady), and the more important ITS (inflatable tubular structures) business, which continues to grow steadily and is already substantially profitable. The Auto Safety Division (ASD) has recently signed a development agreement with TRW which will allow for an exclusive relationship between the two parties that will spread out the financial risk of development of ITTR (inflatable tubular torso restraints, the Simula answer to current seat belt technology), and leave TRW promoting the Simula product as its first line inflatable seat belt solution. This product is ahead of ITS at the analogous point of development, and will lead to significant sales in a couple of years as automakers seek to differentiate their safety products from one another. In addition, Simula has announced that it is planning to repurchase at least $5 million of its common stock, almost certainly beginning this quarter once financing arrangements are closed, in order to take advantage of current market prices of the stock. It is possible that following the sale of the rail car business, this initial $5 million repurchase plan will be incremented, and it is almost a certainty that Simula will also reduce outstanding indebtedness (probably buying in the 8% debentures of 2004) in order to balance out the balance sheet ratios following the sale. We have seen the bottom in the stock, and the upside is significant from current levels. Aside from the share repurchases (which will reduce the outstanding float), it is obvious that the company's agreements with TRW augur well for our immediate future. As you probably know, TRW and Delphi (both now on Simula's Board of Directors) service over half the market for interior auto safety devices. Simula will get its fair share. This business is well on its way to being a major factor in auto safety. Now, if the company could straighten out the problems at Airline Interiors, we would really have a "hot" stock. Have a good day.