Southwall Announces 49 Percent Sequential Increase in Fourth-Quarter Fiscal 2004 Earnings
PALO ALTO, Calif.--Feb. 24, 2005--Southwall Technologies Inc. (OTCBB:SWTX) released its financial results for the fourth quarter and fiscal 2004 following the close of market on February 24, 2005.Selected Fourth Quarter Financial Highlights
-- Fourth quarter revenues of $16.0 million increased 47% from $10.9 million in the fourth quarter of 2003 and improved 1% from $15.9 million in the third quarter of 2004.
-- Fourth quarter 2004 gross margin was 42%, a significant improvement from the fourth quarter 2003 of negative 2% and a 6 point improvement over third quarter gross margin of 36%.
-- Fourth quarter 2004 net income of $3.2 million improved $19.3 million over the fourth quarter of 2003 and improved $1.0 million, or 49% from the third quarter of 2004.
-- Fourth quarter 2004 net income of $3.2 million was $0.10 per fully diluted share, compared to a net loss of $1.29 per fully diluted share in the fourth quarter of 2003 and a net income of $2.1 million, or $0.07 per fully diluted share, for the third quarter of 2004.
Selected Fiscal 2004 Financial Highlights
-- Annual revenues increased 8% from $53.3 million in 2003 to $57.6 million in 2004.
-- Annual gross margins improved from 14% in 2003 to 36% in 2004.
-- Annual net loss improved $42.1 million from a $42.3 million loss in 2003 to a net loss of $0.2 million in 2004.
"I'm extremely pleased with Southwall's operational and financial performance during the fourth quarter of 2004," said Thomas G. Hood, Southwall's president and chief executive officer. "Our revenue growth and profitability in the fourth quarter represents a satisfying conclusion to our 2004 turnaround and a significant improvement over fiscal 2003. As we continue to demonstrate improved manufacturing and financial effectiveness, we can now increase our focus on Southwall's longer term growth plans."
During the fourth quarter of 2004, Southwall issued an aggregate of approximately 13,783,000 shares of its common stock upon exercise of warrants held by Needham & Company, Inc. and its affiliates and Dolphin Direct Equity Partners. In addition, on December 31, 2004, Needham and its affiliates and Dolphin converted convertible notes in the aggregate principal amount of $4.5 million held by them into approximately 4,892,500 shares of Southwall's Series A 10% cumulative preferred stock. These warrants and convertible notes were issued as part of the Company's financing activities that began in late 2003 and it is expected that these transactions conclude the accounting for the financing.
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 # 3992803, domestic U.S. callers can dial (877) 481-7179, while international callers can dial (706) 634-7186. The phone replay will be accessible at (800) 642-1687 or (706) 645-9291, access code # 3992803.
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, Philips, Pilkington, Renault, Saint-Gobain Sekurit, and Volvo.
This press release may contain forward-looking statements, 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 Company's expected future results will be materially worse than estimated, that the Company may not continue to be profitable in future quarters or may not be able to achieve future long-term growth, that there will be a decline in one or more portions of our business in 2005 or thereafter, that the Company will suffer a decline in manufacturing or financial effectiveness, and that the Company will not be able to secure additional financing if required, as well as risks associated with its failure to meet potential covenant requirements under future credit facilities. 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, as amended by Form 10-K/A filed on May 7, 2004, and the Quarterly Reports on Form 10-Q for the fiscal quarter ended March 28, 2004, filed on May 1, 20057, 2004, for the fiscal quarter ended June 27, 2004, filed on August 11, 2004, and for the fiscal quarter ended September 26, 2004, filed on November 8, 2004.
SOUTHWALL TECHNOLOGIES INC.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share data)
Three months Twelve months
ended ended
Dec. 31, Dec. 31, Dec. 31, Dec. 31,
2004 2003 2004 2003
-------- -------- -------- --------
Net revenues $16,026 $ 10,875 $57,573 $ 53,326
Cost of sales 9,233 11,088 36,787 45,914
------- -------- ------- -------
Gross profit 6,793 (213) 20,786 7,412
------- -------- ------- -------
Operating expenses:
Research and development 777 1,937 3,199 6,714
Selling, general and
administrative 2,326 3,576 10,217 12,348
Impairment charge
(recoveries) for long-
lived assets - 8,610 (1,513) 27,990
Restructuring - - - (65)
------- -------- ------- -------
Total operating expenses 3,103 14,123 11,903 46,987
------- -------- ------- -------
Income (loss) from operations 3,690 (14,336) 8,883 (39,575)
Interest expense, net (452) (756) (2,206) (1,590)
Cost of warrants issued - (865) (6,782) (865)
Other 163 211 534 419
------- -------- ------- -------
Income (loss) before provision
for income taxes 3,401 (15,746) 429 (41,611)
Provision for income taxes 214 393 614 681
------- -------- ------- -------
Net income (loss) $ 3,187 $(16,139) $ (185) $(42,292)
======= ======== ======= =======
Net income (loss) per share:
Basic $ 0.16 $ (1.29) $ (0.01) $ (3.37)
Diluted $ 0.10 $ (1.29) $ (0.01) $ (3.37)
Weighted average shares:
Weighted average shares used in
computing net income (loss)
per share
Basic 20,327 12,544 14,589 12,537
Diluted 32,697 12,544 14,589 12,537
SOUTHWALL TECHNOLOGIES INC.
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except per share data)
Dec. 31, Dec. 31,
2004 2003
-------- --------
ASSETS
Current assets:
Cash and cash equivalents $ 4,547 $ 1,152
Restricted cash 686 739
Accounts receivable, net 6,186 7,096
Inventories, net 8,355 6,830
Other current assets 1,757 2,617
------ ------
Total current assets 21,531 18,434
Property, plant & equipment, net 21,110 21,787
Restricted cash loans 1,149 1,066
Other assets 1,157 434
------ ------
Total assets $ 44,947 $ 41,721
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LIABILITIES, REDEEMABLE PREFERRED STOCK AND
STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of long term debt and capital
leases $ 1,463 $ 2,042
Short term obligations 2,975 6,844
Accounts payable 2,544 6,315
Accrued compensation 1,378 1,392
Other accrued liabilities 6,643 6,051
------ ------
Total current liabilities 15,003 22,644
Term debt and capital leases 11,644 13,658
Government grants advanced 505 614
Other long term liabilities 3,222 3,084
------ ------
Total liabilities 30,374 40,000
------ ------
Series A, Redeemable
Convertible Preferred Stock $0.001 par value,
5,000 shares authorized; 4,893 shares
outstanding 4,810 -
------ ------
Stockholders' equity:
Common stock, $0.001 par value; 50,000 shares
authorized, and 26,488 and 12,548 shares
outstanding at December 31, 2004 and 2003,
respectively 26 13
Capital in excess of par value 77,957 70,861
Accumulated other comprehensive income:
Translation gain on subsidiary 4,358 3,240
Accumulated deficit (72,578) (72,393)
------ ------
Total stockholders' equity 9,763 1,721
------ ------
Total liabilities, redeemable preferred and
stockholders' equity $ 44,947 $ 41,721
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