CAE USA Inc.

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CAE USA Inc.

4908 Tampa West Boulevard
Tampa, Florida 33634-2411
P.O. Box 15000
Tampa, Florida 33684-5000
U.S.A.
Telephone: (813) 885-7481
Fax: (813) 887-1419
Web site: http://www.cae.com

Wholly Owned Subsidiary of CAE Inc.
Incorporated: 1935
Employees: 800
Sales: $80 million (2000)
NAIC: 334511 Search, Detection, Navigation, Guidance, Aeronautical, and Nautical System and Instrument Manufacturing

CAE USA Inc., formerly known as Reflectone, is one of the few remaining producers of full-fledged flight simulators for military and civil planes. This subsidiary of CAE Inc. was created when the Canadian defense giant acquired the Tampa-based flight simulator business known as Reflectone from BABE Systems.

Inventive Origins

Luther G. Simjian, a Turk of Armenian descent, arrived in the United States in 1921 at the age of 16. Simjian went on to study in the Middle East and France before finishing his secondary education in New Haven, Connecticut. A stint at the Yale University Medical School’s photo lab steered him away from a planned career as a doctor; instead he became director of the school’s new photography department in 1928.

Simjian then started on the 200 inventions he would patent during his lifetime. The first was the self-focusing camera, in 1932; a color X-ray machine followed two years later. The deaths of friends in World War II led him to create a simulator for training pilots and gunners known as the Optical Range Estimation Trainer.

Simjian learned early, as he wrote in a privately published autobiography, that “I can’t stick with just one idea for too long.” Subsequent inventions included a remote-controlled postage meter, an ultrasonic device for medical exploration, a computerized indoor golf practice range, and the foundations of the automated teller machine (ATM). Most of his patents, though, dealt with electronics or optics.

Inventor Luther Simjian founded Reflectone in 1935 in Stamford, Connecticut. An early product, called “Reflect One,” was a boudoir chair equipped with mirrors that allowed the view of one’s hair from four different angles. Mirrors figured in a few of the company’s early offerings.

During World War II Reflectone developed technologies to train Allied military personnel. In the 1950s, Reflectone took a leading role in electronic countermeasures simulation for the B-52 bomber.

Reflectone merged with the Universal Match Company in the early 1960s. The use of flight simulators increased dramatically during the decade. Reflectone built the first helicopter simulator in 1971, for the U.S. Coast Guard.

A Move to Florida in 1979

Needing more space to complete contracts related to the U.S. Air Force’s A-10 antitank aircraft, Reflectone relocated its facilities from Stamford, Connecticut to Tampa, Florida in 1979. It employed a technical staff of 135 at the time. That figure would more than quadruple in the next seven years.

Tallahassee investor John Mowell took over the company in 1981, becoming its chairman and CEO. He would hire a succession of four presidents to handle day-to-day management of the company in the next eight years.

Reflectone In-Flight Systems, Inc. was formed in 1984 to enter the market for in-flight entertainment (IFE) systems on commercial airliners. This unit found a shortage of airlines willing to invest in new IFE systems, and it was dissolved in May 1986.

Reflectone continued to focus on military training systems, even after losing one of its biggest awards in 1986. The company had been awarded a contract to build 24 simulators for the Fairchild Republic T-46A trainer before this program was canceled by Congress. The company had simulators for several other types of military aircraft in development or in production. In fact, military training made up 95 percent of Reflectone’s business, according to one executive. The company was looking to expand its negligible overseas business and had a few civil projects under way. Reflectone International Training Academies, Inc. trained civil airline pilots on three simulators in Tampa. The Reflectone Media Systems subsidiary produced interactive video disks for vocational training and other uses.

As the U.S. military continued to encourage high levels of competition in its procurement contracts, major aircraft manufacturers were vying for a piece of the growing military training market, altogether worth between $8 and $10 billion in the mid-1980s. Unfortunately, Reflectone had a chronic problem of falling behind schedule on its military work, such as producing trainers for the Navy’s EA-6 communications aircraft and the Air Force’s C-141 tankers. Ultimately, this produced losses of $11 million between 1987 and 1989. The company’s new president Charles J. Cunningham, Jr., a retired Air Force three-star general, believed that Reflectone had taken on contracts that carried too much risk. It sought $1 million in reimbursement from the Department of Defense over problems with the design database and government-furnished equipment that hindered one Marine Corps training program.

Reflectone signed about $50 million in new contracts in fiscal 1989, half of it commercial business for British Aerospace, which acquired a 38 percent shareholding in Reflectone’s voting stock. In July of that year, Cunningham resigned, after little more than a year as president. (He went on to teach business ethics at the University of Tampa.) At the time, the commercial contracts had brought in little cash, and the Navy was behind on $4 million in payments. Reflectone lost about $13.6 million in fiscal 1989; it was late filing its annual reports and in violation of loan covenants.

According to the St. Petersburg Times, a petty dispute between two government agencies was the final straw for Reflectone’s shaky independence. While the Navy and the Federal Aviation Administration argued over who should inspect safety manuals for modified Boeing 707s, Reflectone missed a critical deadline and lost the $48 million contract. It was out-of-pocket $7 million.

BABE-Controlled in the 1990s

British Aerospace (BABE) agreed to buy a controlling (52 percent) interest in the summer of 1989, increasing its capital by $3.6 million. BABE also loaned Reflectone $4.1 million to keep going.

Richard G. Snyder, formerly president of Toronto-based CAE Industries Ltd.’s Link Tactical Simulation Division, was named Reflectone president and CEO in January 1990. Employment at Reflectone would fall to 400 in the next two years. A new chairwoman, Tampa lawyer Stella Ferguson Thayer, was elected in June 1992.

Under BABE control, Reflectone sought more commercial work. BABE’s own British Aerospace Simulation Ltd. subsidiary was able to direct more business to Reflectone, which soon landed new contracts with Ansett Airlines of Australia and a handful of U.S.-based regional airlines. Reflectone also began installing amusement park rides, including three at Sea World in Orlando.

The company narrowed its losses to just $3.3 million in fiscal 1990 as sales grew 20 percent to $49.7 million. Reflectone was finally able to post a profit, $122,000, in the final quarter of an abbreviated fiscal year ending December 31, 1990, although it lost $1.3 million for the year. It did post net income of $1.4 million in 1991. Revenues reached $54 million in 1992.

Reflectone bought the assets of a once-leading commercial flight simulator manufacturer for $4 million in January 1994. AAI-Microflite Simulation International Corp. had once been a division of The Singer Co. and lead the simulator market between 1975 and 1985. By the end of 1994, consolidation in the shrinking industry had reduced the number of large jet airliner simulators to four: CAE Electronics, Thomson Training & Simulation, FlightSafety International, and Reflectone. Less than 10 percent of Reflectone’s 1993 revenues of $63 million were for civil airliner simulators, however.

The company lost $3.8 million in 1994, although things would soon be looking up. Reflectone received the largest contract in its history in July 1995, a $77 million order to build flight simulators for Lockheed Martin Aeronautical Systems. The company posted a profit of $4.5 million for the year on record sales of $170.5 million.

British Aerospace Holdings Inc. bought Reflectone’s remaining shares for $39 million in early 1997. BABE then installed John Pitts, a West Point graduate, as CEO. At the time, Reflectone had 950 employees in the United States, half of them in Tampa, and another 80 at a subsidiary in England. Pitts installed a new top management team. This changing of the guard was accompanied by the passing of company founder Luther Simjian, who died at his Fort Lauderdale home on October 23, 1997.

Key Dates:

1935:: Inventor Simjian starts Reflectone in Stamford, Connecticut.
1971:: Reflectone builds the first helicopter simulator.
1979:: Company relocates to Tampa, Florida.
1989:: British Aerospace acquires a controlling interest.
1997:: BABE Systems buys remainder of shares; renames company.
2001:: Simulator giant CAE Inc. buys Reflectone business from BABE Systems.

Pitts sought to make the company more proactive in customer dealings—anticipating needs rather than putting out fires. According to the Tampa Tribune, he also urged managers to see themselves as part of a larger organization. Indeed, its parent was about to become larger still: BABE merged with Marconi Electronics Systems in November 1999, creating BABE Systems, the world’s second largest defense contractor, a $20 billion enterprise. Reflectone was renamed BABE Systems Flight Simulation and Training, Inc. (BABE Systems FS&T) after the merger.

A New Owner in 2001

In February 2001, BABE Systems sold off the simulation and training business formerly known as Reflectone. CAE Inc. of Canada won a bidding war with rival L-3 Communications and paid $80 million for the unit, which became the company’s U.S. subsidiary, known as CAE USA Inc. The purchase brought the Canadian firm more into the U.S. military market.

John Lenyo was named president of CAE USA in June 2001, replacing John Pitts. Lenyo had a long history of working in the simulator industry and had joined BABE Systems FS&T in January 1999 as vice-president of Marketing and Business Development.