Southwall Announces Continued Profitability in the Second Quarter
PALO ALTO, Calif.--Aug. 1, 2005--Southwall Technologies Inc. (OTCBB:SWTX) released its financial results for the second quarter of fiscal 2005 following the close of market on August 1, 2005.Selected Second Quarter Financial Highlights
-- Second quarter revenues of $15.2 million increased 4% from $14.5 million in the second quarter of 2004 and decreased 3% from $15.6 million in the first quarter of 2005.
-- Second quarter 2005 gross margin was 35%, a decrease of 4 points from the second quarter of 2004 and an improvement of 8 points over the first quarter gross margin of 28%.
-- Second quarter 2005 net income of $1.4 million increased by $0.2 million, or 18%, over the second quarter of 2004 and decreased $0.3 million, or 18%, from the first quarter of 2005.
-- Second quarter 2005 net income per fully diluted share of $0.04 was same as in the second quarter of 2004 and $0.01 lower than the $0.05 per fully diluted share for the first quarter of 2005.
"We were very pleased to post net income of 9.2% of sales for the quarter. Southwall recorded its 5th consecutive quarter of profitability, while continuing to improve our balance sheet as a result of good operating cash flow from our second quarter," commented Thomas G. Hood, President and CEO. "Our gross margin in the quarter of 35% was an improvement over our first quarter margin of 28%. Offsetting these improved margins and as expected, we had increased spending in research and development surrounding new product development as well as increased selling, general and administrative costs due to Sarbanes-Oxley compliance activities."
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 # 7828547, 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 # 7828547.
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, 2004, filed on March 30, 2005, and the Quarterly Report on Form 10-Q for the fiscal quarter ended April 3, 2005, filed on May 1, 20053, 2005.
SOUTHWALL TECHNOLOGIES INC.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share data)
Three months ended Six months ended
July 3, June 27, July 3, June 27,
2005 2004 2005 2004
------- ------- ------- -------
Net revenues $15,172 $14,548 $30,819 $25,615
Cost of revenues 9,788 8,936 21,058 17,402
------- ------- ------- -------
Gross profit 5,384 5,612 9,761 8,213
Operating expenses:
Research and development 1,017 771 1,713 1,581
Selling, general and
administrative 2,331 2,520 4,357 5,583
Recoveries for long-
lived assets - (1,428) (170) (1,428)
------- ------- ------- -------
Total operating expenses 3,348 1,863 5,900 5,736
------- ------- ------- -------
Income from operations 2,036 3,749 3,861 2,477
Interest expense, net (297) (635) (568) (1,240)
Cost of warrants issued - (1,473) - (6,291)
Other income (expense),
net (159) (112) 133 248
------- ------- ------- -------
Income (loss) before
provision for income taxes 1,580 1,529 3,426 (4,806)
Provision for income taxes 185 343 332 698
------- ------- ------- -------
Net income (loss) 1,395 1,186 3,094 (5,504)
Deemed dividend on redeemable
preferred stock 120 - 243 -
------- ------- ------- -------
Net income (loss)
attributable to common
stockholders $1,275 $1,186 $2,851 $(5,504)
Net income (loss) per share:
Basic $0.05 $0.09 $0.11 $(0.44)
Diluted $0.04 $0.04 $0.09 $(0.44)
Weighted average shares used
in computing net income
(loss) per share
Basic 26,782 12,548 26,697 12,548
Diluted 33,094 31,416 33,138 12,548
SOUTHWALL TECHNOLOGIES INC.
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)
July December
3, 31,
2005 2004
------- --------
ASSETS
Current assets:
Cash and cash equivalents $7,628 $4,547
Restricted cash 426 686
Accounts receivable, net 5,772 6,186
Inventories, net 7,081 8,355
Other current assets 1,337 1,757
------- --------
Total current assets 22,244 21,531
Property, plant and equipment, net 18,007 21,110
Restricted cash loans 1,020 1,149
Other assets 1,134 1,157
------- --------
Total assets $42,405 $44,947
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LIABILITIES, REDEEMABLE PREFERRED STOCK AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of long term debt and capital
leases $1,280 $1,463
Line of credit 2,996 2,975
Accounts payable 1,984 2,544
Accrued compensation 952 1,378
Other accrued liabilities 5,940 6,643
------- --------
Total current liabilities 13,152 15,003
Term debt and capital leases 9,637 11,644
Government grants advanced 426 505
Other long term liabilities 2,947 3,222
------- --------
Total liabilities 26,162 30,374
------- --------
Series A, redeemable convertible preferred stock 4,810 4,810
Stockholders' equity:
Common stock 27 26
Capital in excess of par value 78,072 77,957
Accumulated other comprehensive income:
Translation gain on subsidiary 2,818 4,358
Accumulated deficit (69,484) (72,578)
------- --------
Total stockholders' equity 11,433 9,763
------- --------
Total liabilities, redeemable preferred stock
and stockholders' equity $42,405 $44,947
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