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Southwall Announces 2010 Third Quarter Results

PALO ALTO, Calif., Nov 12, 2010 (BUSINESS WIRE) -- Southwall Technologies Inc.

(OTCBB:SWTX) announced third quarter 2010 revenue of $ 12.2 million, an increase of 42% from third quarter 2009 revenues of $8.6 million, and up approximately 3.4% from second quarter 2010 revenues of $11.8 million. Revenues for the nine month period ended September 30, 2010 were $34.5 million, an increase of 47% compared to $23.4 million for the nine months ended September 30, 2009. The year over year increase primarily reflects increasing demand for higher energy efficiency products across our primary markets, as well as the consolidation of Southwall Insulating Glass, LLC and Crown Operations International, LLC.

Gross profit for the third quarter 2010 was $5.3 million, an increase of 43% from third quarter 2009 gross profit of $3.7 million. For the nine months ended September 30, 2010, gross profit increased 61% to $15.9 million compared to $9.9 million for the same period in 2009. The year over year increase is primarily due to higher sales volume and plant utilization resulting in more effective absorption of fixed manufacturing costs as a percentage of sales, which were partially offset by the increased cost of sales associated with SIG.

Third quarter 2010 net income attributable to Southwall was $1.1 million, or $0.03 per fully diluted share, as compared to the third quarter 2009 of $0.7 million, or $0.02 per fully diluted share. Net Income attributable to Southwall for the nine month period ended September 30, 2010 was $5.4 million, or $0.15 per fully diluted share, up 21% from the nine month period ended September 30, 2009.

During the third quarter, Southwall Technologies increased its ownership in Southwall Insulating Glass, LLC from 75% to 78%. In addition, Southwall acquired the operating assets of Crown Operations International, LLC, continuing the Company's focus on vertical integration to simplify material logistics and offer value-added products and services to its customers.

"Our growth strategy continues to gain momentum," said Dennis Capovilla, Chief Executive Officer. "We experienced increased demand for our energy efficient films and glass products, which delivered strong revenue and profitability. We remain committed to innovating and investing in our business and customer offerings, positioning us well for growth." About Southwall Technologies Inc.

Southwall Technologies is the leading innovator of energy-saving films and glass products that dramatically improve the energy efficiency of buildings, homes and cars. Southwall is an ISO 9001/2000/14001 certified manufacturer with customers in over 25 countries around the world.

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 2010 or thereafter, that the Company will not be successful in improving operations performance or controlling costs, that the Company will suffer a decline in manufacturing or financial effectiveness, that the Company's new product development will not be successful, that there may be decreasing demand in certain markets 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, 2009, filed on March 25, 2010.

SOUTHWALL TECHNOLOGIES INC. UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (in thousands, except per share data) Three months ended Nine months ended September 30, September 30, September 30, September 30, 2010 2009 2010 2009 -------------- -------------- -------------- -------------- Net revenues $ 12,198 $ 8,600 $ 34,469 $ 23,430 Cost of revenues 6,890 4,867 18,549 13,554 ------ ------ ------ ------ Gross profit 5,308 3,733 15,920 9,876 ------ ------ ------ ------ Operating expenses: Research & development 1,024 771 2,608 2,118 Selling, general and administrative 2,772 1,960 7,038 5,810 ------ ------ ------ ------ Total operating expenses 3,796 2,731 9,646 7,928 ------ ------ ------ ------ Income from operations 1,512 1,002 6,274 1,948 Interest expense, net (67 ) (321 ) (225 ) (492 ) Other income (expense), net 560 12 202 3,211 ------ ------ ------ ------ Income before provision for income taxes 2,005 693 6,251 4,667 Provision for /(Benefit from) income taxes 1,057 (17 ) 959 174 ------ ------ ---- ------ ------ Net income 948 710 5,292 4,493 Net loss attributable to noncontrolling interest (122 ) - (152 ) - ------ ---- ------ ------ ---- ------ Net income attributable to Southwall 1,070 710 5,444 4,493 Deemed dividend on preferred stock 122 122 366 366 ------ ------ ------ ------ Net income attributable to common stockholders $ 948 $ 588 $ 5,078 $ 4,127 ==== ====== ==== ====== ==== ====== ==== ====== Net income per share: Basic $ 0.03 $ 0.02 $ 0.18 $ 0.14 Diluted $ 0.03 $ 0.02 $ 0.15 $ 0.13 Weighted average shares used in computing net income per share: Basic 28,840 28,728 28,820 28,715 Diluted 36,334 34,685 36,105 34,085 SOUTHWALL TECHNOLOGIES INC. UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS (in thousands) September 30, December 31, 2010 2009 ------------- ------------- ASSETS ------------------------------------------------------------------- Current assets: Cash and cash equivalents $ 15,573 $ 12,454 Accounts receivable, net 7,367 5,907 Inventories, net 4,691 4,522 Other current assets 1,401 1,479 ------- ------- Total current assets 29,032 24,362 Property, plant and equipment, net 15,309 14,393 Goodwill 1,839 - Intangible assets 1,037 - Deferred tax and other assets 1,132 156 ------- ------- Total assets $ 48,349 $ 38,911 ===== ======= ===== ======= LIABILITIES, PREFERRED STOCK AND STOCKHOLDERS' EQUITY ------------------------------------------------------------------- Current liabilities: Current portion of long term debt and capital lease obligations $ 960 $ 808 Accounts payable 2,295 1,258 Accrued compensation 1,399 1,395 Income taxes payable 2,229 130 Other accrued liabilities 5,446 4,751 ------- ------- Total current liabilities 12,329 8,342 Term debt and capital lease obligations 3,708 3,358 Other long term liabilities - 58 ------- ------- Total liabilities 16,037 11,758 ------- ------- Series A, convertible preferred stock 4,810 4,810 ------- ------- Stockholders' equity: Common stock 29 29 Capital in excess of par value 78,403 78,291 Accumulated other comprehensive income: Translation gain on subsidiary 3,773 4,382 Accumulated deficit (54,915 ) (60,359 ) ------- - ------- - Southwall stockholders' equity 27,290 22,343 Noncontrolling interest 212 - ------- ------- Total equity 27,502 22,343 ------- ------- Total liabilities, preferred stock and equity $ 48,349 $ 38,911 ===== ======= ===== ======= SOUTHWALL TECHNOLOGIES, INC. UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands) Nine months ended September 30, September 30, 2010 2009 ------------- ------------- Cash flows from operating activities: Net income $ 5,292 $ 4,493 Adjustments to reconcile net income to net cash provided by operating activities: Gain on acquisition of controlling interest in SIG (706 ) - Gain on settlement of liability - (2,359 ) Deferred income tax (1,334 ) (77 ) Loss (Gain) on disposal of property, plant and equipment 10 (24 ) Depreciation and amortization 1,989 1,911 Stock-based compensation 433 294 Inventories reserves (201 ) 43 Non-cash effect of acquisition of controlling interest in SIG (232 ) - Changes in operating assets and liabilities: Accounts receivable, net (75 ) (1,072 ) Inventories 207 1,293 Other current and non-current assets (240 ) (65 ) Accounts payable and accrued liabilities 1,532 (258 ) ------ ------ - Net cash provided by operating activities 6,675 4,179 ------ ------ Cash flows from investing activities: (3,302 ) - Acquisition of assets of Crown Operations International Acquisition of controlling interest in SIG, net of cash acquired (195 ) - Restricted cash - 261 Proceeds from sale of property, plant and equipment - 34 Expenditures for property, plant and equipment (1,160 ) (975 ) ------ - ------ - Net cash used in investing activities (4,657 ) (680 ) ------ - ------ - Cash flows from financing activities: Proceeds from exercise of stock options 63 42 Borrowings from term loan 1,250 - Borrowings from equipment financing - 26 Investment credit in Germany 376 221 Repayments of term debt and capital lease obligations (599 ) (1,719 ) ------ - ------ - Net cash provided (used) in financing activities 1,090 (1,430 ) ------ ------ - Effect of foreign exchange rate changes on cash and cash equivalents 11 8 ------ ------ Net increase in cash and cash equivalents 3,119 2,077 Cash and cash equivalents, beginning of period 12,454 10,768 ------ ------ Cash and cash equivalents, end of period $ 15,573 $ 12,845 ====== ====== ====== ====== SOURCE: Southwall Technologies Inc.

CONTACT: Southwall Technologies Inc. Kathy Taylor, 650-798-1200 Copyright Business Wire 2010 -0- KEYWORD: United States

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