Southwall Announces Fourth-Quarter and Fiscal 2003 Results
PALO ALTO, Calif.--April 15, 2004--Southwall Technologies Inc. released its financial results for the fourth quarter and Fiscal 2003 following the close of market on April 15th.Selected Fourth Quarter 2003 Financial Highlights
-- Revenue of $10.9 million; Loss of $1.29 per share
-- Needham led financing completed
-- Major reorganization implemented
Net revenues for the fourth quarter 2003 were $10.9 million, compared with $13.5 million for the same quarter in 2002 and with $11.9 million for the third quarter of 2003. The year-to-year revenue decline of $2.6 million was mainly in the Display products segment while the sequential revenue decline of $1.0 million was seen across the automotive and electronic display segments of the business.
Southwall's fourth-quarter 2003 net loss was $16.1 million, or a loss of $1.29 per share, compared with net loss of $6.9 million, or $0.55 per share, for the same quarter a year ago and with a net loss of $22.8 million, or a loss of $1.82 per share, for the third quarter of 2003. During the fourth quarter 2003 Southwall incurred a non cash Asset Impairment charge of $8.6 million associated with the closing of manufacturing facilities and a non cash charge of $0.8 million associated with the warrants issued in conjunction with the Needham financing deal. 12.54 million shares outstanding were used to calculate fourth-quarter 2003 per share data.
Net revenues for the fiscal year ended December 2003 were $53.3 million, compared with $68.8 million for 2002. The year-to-year revenue decline of $15.5 million was due to decreased revenues in the electronic display and architectural segments of the business. Gross margin for 2003 of $7.4 million was 14% of revenue compared with $19.1 million or 28% of revenue for 2002. The year-to-year gross margin percentage decline was mainly due to the impact of amortizing fixed manufacturing costs over lower production volumes.
Net Losses for fiscal 2003 were $42.3 million, compared with a Net Loss of $4.2 million for 2002 reflecting the lower gross margins in 2003 coupled with the non cash Asset Impairment and Warrant expenses of $28 million and $0.8 million respectively incurred during the third and fourth quarter 2003. The Net Loss per share for fiscal 2003 was $3.37 per share, compared with $0.40 per share for 2002.
Southwall's balance sheet at December 31, 2003 included cash and cash equivalents of $1.2 million, compared with $2.0 million on December 31, 2002 and with $0.6 million on September 28, 2003.
"As a result of disappointing revenue and earnings results and negative cash flows during last year the Southwall Board of Directors and Management took certain measures during the fourth quarter 2003. At that time the company was in dire need of additional working capital. We restructured our operations to focus on our newest manufacturing facility in Germany, implemented broad cost reductions and refinanced Southwall with the assistance of the Needham-led group," said Thomas G. Hood, Southwall's president and chief executive officer. "It has been a difficult six months for our employees, customers and creditors, and I'd personally like to thank all of them for their contributions. I believe that with our newly streamlined operations, focused management and new financial partnering that we will return to profitability, perhaps as early as the second half of fiscal 2004," added Hood.
The company will hold a teleconference at 2:00 p.m. PT / 5:00 p.m. ET today to discuss the results in more detail.
This call will be open to all investors via a webcast accessible at www.southwall.com and by phone. Both phone and webcast replays will be available for approximately one week after the teleconference, beginning approximately two hours after the call ends.
How to Access the Webcast
Go to the Investor Relations page of the Southwall website at www.southwall.com and click on the CCBN webcast icon. From here, you can listen to the teleconference, assuming that your computer system is configured properly.
How to Access the Call
Using access code #6682837, domestic U.S. callers can dial (877) 481-7179, while international callers can dial (706) 634-0663. The phone replay will be accessible at (800) 642-1687 or (706) 645-9291, access code #6682837.
About Southwall Technologies Inc.
Southwall Technologies Inc., designs and produces thin film coatings that selectively absorb, reflect or transmit light. Southwall products are used in a number of automotive, electronic display and architectural glass products to enhance optical and thermal performance characteristics, improve user comfort and reduce energy costs. Southwall is an ISO 9001:2000-certified manufacturer and sells advanced thin film coatings to over 25 countries around the world. Southwall's customers include Audi, BMW, DaimlerChrysler, Hewlett-Packard, Mitsubishi Electric, Mitsui Chemicals, Peugeot-Citroen, Pilkington, Renault, Saint-Gobain Sekurit, and Volvo.
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 the Over the Counter Bulletin Board will fail to approve the listing of the Company and there will be no market for the Company's stock, that the Needham-led financing and related activities will not be sufficient to permit Southwall to continue as a going concern, that the Company will not return to profitability in the second half of 2004 or at all, that the Company's expected future results will be materially worse than estimated, that the Company will not receive stockholder approval of an amendment of its charter (which would result in acceleration of $4.5 million of convertible notes and result in the Company having insufficient shares available to cover all of its obligations to issue equity), that the Company's restructuring efforts will not be sufficient to allow the Company to return to profitability or continue as a going concern, that there will not be growth in the electronic display portion (or any other portions) of our business in 2004, and that the Company will not be able to secure additional financing (including upon expiration in May 20, 200404 of its existing senior credit facility), as well as risks associated with its failure to meet covenants under the Needham investment agreement or credit facilities, and strains on the Company's liquidity. Further risks are detailed in the Company's filings with the Securities and Exchange Commission, including those set forth in the Company's most recent Annual Report on Form 10-K for the year ended December 31, 2003, filed on April 14, 2004.
SOUTHWALL TECHNOLOGIES INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per-share data)
Twelve Months Ended
Dec 31, Dec 31,
2002 2003
-------- ---------
Net revenues $68,759 $53,326
Cost of sales 49,614 45,914
-------- ---------
Gross profit 19,145 7,412
-------- ---------
Operating expenses
Research and development 7,685 6,714
Selling, general and administrative 12,450 12,348
Restructuring expenses 2,624 (65)
Impairment Charges -- 27,990
-------- ---------
Total operating expenses 22,759 46,987
-------- ---------
Income (loss) from operations (3,614) (39,575)
Interest expense, net (1,734) (1,590)
Warrant Expense -- (865)
Other income, net 1,070 419
-------- ---------
Income (loss) before provision for income taxes (4,278) (41,611)
Provision for income taxes (87) 681
-------- ---------
Net income (loss) ($4,191) ($42,292)
======== =========
Net income (loss) per share:
Basic ($0.40) ($3.37)
Diluted ($0.40) ($3.37)
Weighted average shares of common stock
and dilutive potential common stock:
Basic 10,418 12,537
Diluted 10,418 12,537
SOUTHWALL TECHNOLOGIES INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except per-share data)
Dec 31 Dec 31
2002 2003
-------- --------
ASSETS
Current assets
Cash and cash equivalents $1,998 $1,152
Restricted cash 631 739
Accounts receivable, net of allowance for bad
debts of $552 and $778 In 2002 and 2003
respectively 8,995 7,396
Inventories, net 8,537 6,830
Other current assets 4,310 2,617
-------- --------
Total current assets 24,471 18,434
Property, plant and equipment, net 50,251 21,787
Restricted loan proceeds 885 1,066
Other assets 975 434
-------- --------
Total assets $76,582 $41,721
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion term debt $7,499 $2,042
Line of credit -- 6,844
Accounts payable 9,244 6,315
Accrued compensation 1,254 1,392
Other accrued liabilities 5,886 6,051
-------- --------
Total current liabilities 23,883 22,644
Term debt & capital leases 9,253 13,658
Government grants advanced 604 614
Other 2,368 3,084
-------- --------
Total liabilities 36,108 40,000
-------- --------
Stockholders' equity:
Common stock, $0.001 par value; 20,000 shares
authorized, 12,527 and 12,548 shares
outstanding at 2002 and 2003, respectively 12 13
Capital in excess of par value 69,657 70,861
Notes receivable and accrued interest (126) --
Other comprehensive income
Translation gain on subsidiary 1,032 3,240
Accumulated deficit (30,101) (72,393)
-------- --------
Total stockholders' equity 40,474 1,721
-------- --------
Total liabilities and stockholders' equity $76,582 $41,721
======== ========
SOUTHWALL TECHNOLOGIES INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
Three Months Ended
12/31
2002 2003
-------- ---------
Cash flows provided by operating activities:
Net income (loss) $(6,891) $(16,139)
Adjustments to reconcile net income (loss)
to net cash provided by operating
activities:
Impairment charge for long-lived assets -- 8,610
Depreciation and amortization 1,696 1,148
Stock-based compensation non- employee 42 84
Amortization of debt issuance costs -- 28
Warrants issued to investors and creditors -- 1,038
Interest on notes receivable (2) --
Change in assets and liabilities:
Accounts receivable, net 1,282 445
Inventories, net (1,571) (420)
Other current and non-current assets (962) 620
Accounts payable, and accrued liabilities 3,934 2,682
-------- ---------
Cash provided by operating activities (2,472) (1,904)
-------- ---------
Cash flows used in investing activities:
Restricted cash 365 --
Cash expenditures (446) (261)
-------- ---------
Cash from investing (81) (261)
-------- ---------
Long-term liabilities, net (3,963) (810)
-------- ---------
Government grants advanced (252) --
-------- ---------
Bank credit line -- 3,725
Proceeds from exercise of stock options 59 4
-------- ---------
Net cash from financing activities (4,156) 2,919
-------- ---------
Effect of foreign exchange rate changes on cash (954) (192)
-------- ---------
Net change in cash and cash equivalents (7,663) 563
Cash and cash equivalents, beginning of period 9,661 590
-------- ---------
Cash and cash equivalents, end of period $1,998 $1,152
======== =========