Simula, Inc.

1958–1981

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

for $4 million, gaining access to aircraft manufacturers.

1986–1997

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).

1994–2004

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.

1995–2000

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.