Southwall Announces Financial Results for Fourth Quarter and Year 2000

    PALO ALTO, Calif.--April 9, 2001--Southwall Technologies Inc. reported a net loss of ($1,302,000) or ($0.17) per dilutive share for the fourth quarter ended December 31, 2000, which included a net loss from the Company's German subsidiary of ($1,004,000) or ($0.13) per dilutive share. This compares with a net loss of ($1,292,000) or ($0.17) per dilutive share for the same period a year ago. Revenues increased by 38.4% to $20,950,000 in the current quarter from $15,139,000 for the same period a year ago. Previously, the Company had reported a net loss for the third quarter of 2000 of ($1,548,000) or ($0.20) per dilutive share on $26,361,000 of revenue.
    Net revenues increased $30,750,000 or 56.3% from $54,598,000 in 1999 to $85,348,000 in 2000. For the year 2000, Southwall had a net loss of ($6,180,000) or ($0.81) per dilutive share. This compares to a net loss of ($1,865,000) or ($0.25) per dilutive share in 1999.
    The loss experienced in 2000 can be partially attributed to non-recurring legal, accounting and temporary labor costs of $1,766,000 related to the preparation of restated financial statements for 1999 and the first quarter of 2000, and a withdrawn S-1 registration filing. The Company's German subsidiary incurred an operating loss of ($2,749,000). The Company's 2000 operating income, without the Germany subsidiary and adjusted for the non-recurring costs, would have been $921,000. This compares to an operating loss in 1999, excluding the German subsidiary, of ($220,000).
    Thomas G. Hood, President and Chief Executive Officer, said, "Although we experienced strong growth in our sales revenue, several significant factors negatively impacted the Company's profitability in 2000. These included start-up costs with the new German plant, start-up of new production equipment in the Tempe plant, dramatically higher lease costs for the Palo Alto plant, and the costs associated with the cancelled follow-on public offering and the legal and accounting fees resulting from our financial restatement."
    "The fourth quarter revenue performance declined 20.5% from the prior quarter as a result of the slowing economy that began to surface around the year end. We continue to see this softness reflected in our anti-reflective film sales in the first quarter 2001. Southwall reduced its U.S. work force by 20% in the first quarter in anticipation of this economic retraction, and we continue to monitor and control our expenses accordingly. The anti-reflective business for computer displays is the area most impacted by the slowdown, while the automotive business in Europe remains quite robust. While the growth in 2000 can be primarily attributed to the computer display business, the Company experienced a 14% increase in the automotive business. The automotive sales are expected to increase significantly in 2001 as a result of the German plant's production ramping up," added Hood.

                      Conference Call Information

                       When: Tuesday, April 10th

                  Time: 11:00am Pacific Daylight Time

               Dial-In Number: 1-877/481-7179 (Domestic)

                    1-706/634-4399 (International)

                        Name of call: Southwall

                           Leader: Tom Hood

  Playback Number: 1-800/642-1687 (2 Hours after Completion of Call)

                           ID Number: 649724

                  Playback Dates: April 10 - 17, 2001

    About Southwall Technologies Inc.

    Southwall Technologies (www.southwall.com) designs and produces technologically advanced thin film coatings that selectively absorb, reflect or transmit electromagnetic radiation. Southwall products are used in a number of architectural, automotive and electronic products to enhance optical and thermal performance characteristics, improve user comfort and reduce energy costs. Southwall exports advanced thin film coatings to over 25 countries around the world for use in products manufactured by such companies as Audi, BMW, DaimlerChrysler, Renault, Peugeot-Citroen, Volvo, Saint-Gobain Sekurit, Pilkington, Mitsubishi Electric, and Samsung.

    This press release may contain forward-looking statements (as that term is defined in the Private Securities Litigation Reform Act of 1995), including, without limitation, statements regarding the Company's expectations, beliefs, intentions or strategies regarding the future. All forward-looking statements in this press release are based on information available to the Company on the date hereof, and the Company assumes no obligation to update any such forward-looking statements. These statements are subject to certain risks and uncertainties that could cause actual results to differ materially from those presented. These risks include the possibility that shipments to customers will be materially less than anticipated, that the schedule for the commencement of production on new machines will be materially longer than described above, that yields and throughputs will not be improved and production targets may not be met, or that the customers discussed above will continue to purchase product from the Company, as well as risks associated with its failure to meet covenants under credit facilities and strains on the Company's liquidity. Further risks are detailed in the Company's filing with the Securities and Exchange Commission, including those set forth in the Company's most recent Form 10K.