-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, TlVLT/hDo3IW2G2vzzUYdwsF+91U2b3ASxRXVtqZymd3KtQvAC56ZkxPGzQB72ZZ GLrZMIowaKuFavX9g9TuBA== 0000898430-95-002367.txt : 19951119 0000898430-95-002367.hdr.sgml : 19951119 ACCESSION NUMBER: 0000898430-95-002367 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19951001 FILED AS OF DATE: 19951114 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: SOUTHWALL TECHNOLOGIES INC /DE/ CENTRAL INDEX KEY: 0000813619 STANDARD INDUSTRIAL CLASSIFICATION: UNSUPPORTED PLASTICS FILM & SHEET [3081] IRS NUMBER: 942551470 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-15930 FILM NUMBER: 95592132 BUSINESS ADDRESS: STREET 1: 1029 CORPORATION WAY CITY: PALO ALTO STATE: CA ZIP: 94303 BUSINESS PHONE: 4159629111 10-Q 1 FORM 10-Q SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q (MARK ONE) /X/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE - ACT OF 1934 [NO FEE REQUIRED] For the quarterly period ended October 1, 1995 /_/ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED] For the transition period from ______ to ________ Commission File Number: 0-15930 SOUTHWALL TECHNOLOGIES INC. ------------------------------------------------------ (Exact name of registrant as specified in its charter) DELAWARE 94-2551470 ------------------------------- --------------------- (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification Number) 1029 Corporation Way, Palo Alto, California 94303 ------------------------------------------- ---------- (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (415) 962-9111 -------------- Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No_________ --------- As of October 1, 1995 there were 5,913,581 shares of the Registrant's Common Stock outstanding. This report, including all attachments, contains 11 pages. SOUTHWALL TECHNOLOGIES INC. INDEX
Page Number ----------- PART 1 FINANCIAL INFORMATION Item 1 Financial Statements: (unaudited) Consolidated Balance Sheet - October 1, 1995 and December 31, 1994..........................................3 Consolidated Statement of Operations - three month and nine month periods ended October 1, 1995 and October 2, 1994 ...........................4 Consolidated Statement of Cash Flows - nine months ended October 1, 1995 and October 2, 1994............................................5 Consolidated Statement of Stockholders' Equity - nine months ended October 1,1995...............................6 Notes to Consolidated Financial Statements.....................7 Item 2 Management's Discussion and Analysis of Financial Condition and Results of Operations...............7 PART II OTHER INFORMATION Item 1 Legal Proceedings.............................................10 Item 2 Changes in Securities.........................................10 Item 3 Defaults Upon Senior Securities...............................10 Item 4 Submission of Matters to a Vote of Stockholders...............10 Item 5 Other Information.............................................10 Item 6 Exhibits and Reports on Form 8-K..............................10 Signatures....................................................11
2 PART 1 FINANCIAL INFORMATION Item 1 Financial Statements - ---------------------------- CONSOLIDATED BALANCE SHEET (in thousands, except per share data)
October 1, 1995 December 31, 1994 ---------------- ----------------- (Unaudited) ASSETS Current assets: Cash and cash equivalents $ 1,303 $ 1,144 Short-term investments 2,132 4,051 Accounts receivable, net of allowance for doubtful accounts of $528 and $528 6,133 3,720 Inventories 6,015 3,907 Other current assets 993 717 ------ ------ Total current assets 16,576 13,539 Property and equipment, net 15,447 15,994 Other assets 1,902 1,839 ------ ------ Total Assets $33,925 $31,372 ====== ====== LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable $3,643 $2,419 Accrued compensation 1,601 1,293 Other accrued liabilities 1,916 1,643 Current portion of long-term debt 100 82 ------ ------ Total current liabilities 7,260 5,437 Long-term debt 2,898 2,650 Deferred income taxes 297 297 ------ ------ Total liabilities 10,455 8,384 ------ ------ Stockholders' equity: Common stock, $.001 par value, 20,000 shares authorized: Issued and outstanding: 6,917 and 6,917 7 7 Capital in excess of par value 47,205 47,273 Accumulated deficit (19,692) (19,972) Less cost of treasury stock of 1,003 and 1,070 ( 4,050) ( 4,320) ------ ------ Total stockholders' equity 23,470 22,988 ------ ------ Total Liabilities and Stockholders' Equity $33,925 $31,372 ====== ======
See accompanying notes to financial statements. 3 SOUTHWALL TECHNOLOGIES INC. CONSOLIDATED STATEMENT OF OPERATIONS (in thousands, except per share data) (Unaudited)
THREE MONTHS ENDED NINE MONTHS ENDED ------------------ ----------------- OCT. 1, OCT. 2, OCT. 1, OCT.2, 1995 1994 1995 1994 ---- ---- ---- ---- Net product sales $9,315 $6,151 $24,160 $15,657 License revenues 96 78 223 356 ----- ----- ------ ------ Net Revenues 9,411 6,229 24,383 16,013 Cost and expenses: Cost of product sales 6,848 4,768 17,043 11,716 Research and development 476 634 1,637 1,660 Selling, general and administrative 1,720 1,473 5,332 3,958 ----- ----- ----- ------ Total costs and expenses 9,044 6,875 24,012 17,334 ----- ----- ------ ------ Income (loss) from operations 367 (646) 371 (1,321) Interest income (expense), net (22) 36 (91) 156 ------ ---- ------ ------- Income (loss) before income taxes 345 ( 610) 280 (1,165) Provision for income taxes - - - 1 ------ ----- ----- ----- Net income (loss) $ 345 $( 610) $ 280 $ (1,166) ===== ===== ====== ====== Net income (loss) per share $ .05 $( .11) $ .04 $ ( .20) ===== ===== ====== ====== Weighted average shares of common stock and common stock equivalents 6,341 5,785 6,279 5,794 ===== ===== ===== =====
See accompanying notes to financial statements. 4 SOUTHWALL TECHNOLOGIES INC. CONSOLIDATED STATEMENT OF CASH FLOWS (in thousands) (Unaudited)
Nine Months Ended ----------------- October 1, 1995 October 2, 1994 --------------- --------------- Cash flows from operating activities: Net income (loss) 280 $(1,166) Adjustments to reconcile net income to net cash provided by (used in) operating activities: Depreciation and amortization 1,597 1,548 Decrease (increase) in accounts receivable (2,413) (1,599) Decrease (increase) in inventories (2,108) (173) Decrease (increase) in other current assets (276) (25) (Decrease) increase in accounts payable and accrued liabilities 1,915 1,017 ----- ----- Cash provided by (used in) operating activities (1,005) ( 398) ----- ----- Cash flows from investing activities: Decrease (increase) in short-term investments 1,919 1,530 Expenditures for property and equipment and other assets (1,113) ( 800) ----- ----- Net cash provided by (used in) investing activities 806 730 ----- ----- Cash flows from financing activities: Increase (decrease) in long-term debt 266 ( 128) Proceeds from issuance of treasury stock 92 - Purchase of treasury stock, net - ( 74) ------- ---- Net cash provided by (used in) financing activities 358 ( 202) ------- ---- Net increase (decrease) in cash and cash equivalents 159 130 Cash and cash equivalents, end of period 1,144 1,340 ------- ----- Cash and cash equivalents, end of period $ 1,303 $1,470 ======= ===== Supplemental non-cash financing activities: Payment of interest with treasury stock $ 110 $ - ======= =====
See accompanying notes to financial statements. 5 CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY Nine Months Ended October 1, 1995 (in thousands) (Unaudited)
Capital in Total ---------- ----- Common Stock excess of Accumulated Treasury Stockholders' ------------ --------- ----------- -------- ------------- Shares Amount par value Deficit Stock Equity ------ ------ --------- ------- ----- ------ Balance: December 31, 1994 6,917 $7 $47,273 $(19,972) $(4,320) $22,988 Exercise of option (37) 108 71 Employee Stock Purchase Plan (16) 37 21 Monsanto Interest (15) 125 110 Net Income 280 280 --------- -------- --------- ------- -------- ------ Balance: October 1, 1995 6,917 $ 7 $47,205 $(19,692) $(4,050) $23,470 ===== === ====== ======= ====== ======
See accompanying notes to financial statements. 6 SOUTHWALL TECHNOLOGIES INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (in thousands) (Unaudited) Note 1 - Interim Period Reporting: - --------------------------------- While the information presented in the accompanying condensed financial statements is unaudited, it includes all adjustments (consisting only of normal recurring adjustments) which, in the opinion of management, are necessary to present fairly the Company's financial position and results of operations, and changes in financial position as of the dates and for the periods indicated. Certain information and footnote disclosures normally contained in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted. It is suggested that these condensed financial statements be read in conjunction with the financial statements contained in the Company's Form 10-K for the year ended December 31, 1994. The results of operations for the interim periods presented are not necessarily indicative of the operating results of the full year. Note 2 - Inventories: - -------------------- Inventories are stated at the lower of cost (determined by the first-in, first- out method) or market. Inventories at October 1, 1995 and December 31, 1994, consisted of the following:
October 1, 1995 December 31, 1994 --------------- ----------------- Raw materials 2,540 $1,299 Work-in-process 998 440 Finished goods 2,477 2,168 ----- ----- TOTAL $6,015 $3,907 ===== =====
Item 2 - Management's Discussion and Analysis of Financial Condition and - ------------------------------------------------------------------------- Results of Operations (in thousands) - --------------------- Nine Months Ended October 1, 1995 and October 1, 1994 - ------------------------------------------------------ Effective September 1, 1994, the Company commenced leasing all the assets formerly owned by Safety Glass, Inc., dba Armour Worldwide Glass, located in Southern California, under a five year operating lease for $40 per month. A wholly-owned subsidiary, Southwall Worldwide Glass Inc. ("SWGI"), was created to operate the facility and to manufacture the Company's proprietary California Series (TM) solar control laminated glass, as well as bullet resistant, security, custom and standard laminated glass products. Effective October 31, 1994, the Company acquired Sunflex L.P. ("Sunflex") for $500, which will only be paid from Sunflex's operating income, if any, over the next four years. Sunflex assembles and markets aftermarket mesh, glass and film anti-reflective filters primarily for personal computer monitors. The consolidated financial statements for 1995 include the results of operations of SWGI and Sunflex. The Company's net product sales were $24.2 million for the first nine months of 1995 compared to $15.7 million for the similar period of 1994. Of this increase, which was primarily volume related, approximately $2.2 million was from the new operations discussed above. In addition, net product sales of energy conservation products increased by approximately $4.9 million, and net 7 product sales of electronics products, including sales of the Company's new anti-reflective film product for computer monitors, increased by approximately $1.8 million, offsetting a decrease of approximately $.4 million in aerospace and other product sales. Cost of product sales for the first nine months of 1995 was 71% of product sales compared to 75% for the same period of 1994. The percentage decrease was primarily due to increased sales volume and the related improvement in manufacturing efficiencies. Research and development expenses, as a percent of product sales, were 7% for the nine months of 1995, compared to 11% for the same period in 1994. The decrease is primarily attributable to an increased volume of product sales. Selling, general and administrative expenses, as a percent of net product sales, decreased to 22% in the first nine months of 1995, from 25% for the similar period in 1994 due to increased sales volume. The increase from $4.0 million in 1994 to $5.3 million in 1995, is attributable to the new operations discussed above, and increased sales and marketing expenses associated with the introduction of new products and expansion into the Pacific Rim. Interest income, net decreased in 1995 compared to 1994 due primarily to a decrease in monies invested. As a result of the factors discussed above, the Company reported a pre-tax income of $.3 million for the first nine months of 1995, compared to a pre-tax loss of $(1.2) for the similar period in 1994. The Company believes that it must continue to increase revenues to achieve sustained profitability. Although the Company is seeking to expand existing applications, to develop new applications and to expand international marketing and sales efforts, there can be no assurance that the Company will be able to remain profitable. Three Months Ended October 1,1995 and October 2, 1994 - ----------------------------------------------------- The Company's net product sales were $9.3 million for the third quarter of 1995 compared to $6.2 million of net product sales for the same period of 1994. Of this increase, which was primarily volume related, approximately $.7 million was from the new operations discussed above. In addition, net product sales of energy conservation products increased by approximately $1.7 million, and net product sales of electronics products, including sales of the Company's new anti-reflective film product for computer monitors, increased by approximately $1.1 million, offsetting a decrease of approximately $.3 million in aerospace and other product sales. Cost of product sales for the third quarter of 1995 was 74% of product sales compared to 78% for the same period of 1994. The percentage decrease was primarily due to increased sales volume. However, the Company's new anti- reflective film product for use on CRTs for computer applications is early in its commercial cycle and start-up costs have adversely affected cost of sales and profitability. Research and development expenses, as a percent of product sales, were 5% for the third quarter of 1995, compared to 10% for the same period in 1994. The percentage decrease was primarily attributable to the higher product sales. 8 Selling, general and administrative expense, as a percent of net product sales decreased to 18% in the third quarter of 1995, from 24% for the similar period in 1994 due to increased sales volume. The increase from $1.5 million to $1.7 million in 1995, is attributable to the new operations discussed above, and increased sales and marketing expenses associated with the introduction of new products and expansion into the Pacific Rim. Interest income, net decreased in 1995 compared to 1994 due primarily to a decrease in monies invested. As a result of the factors discussed above, the Company reported net income of $.3 million for the third quarter of 1995, compared to a net loss of $.6 million for the similar period in 1994. The Company believes that it must continue to increase revenues to achieve sustained profitability. Although the Company is seeking to expand existing applications, to develop new applications and to expand international marketing and sales efforts, there can be no assurance that the Company will be able to increase revenues and sustain profitability. Liquidity and Capital Resources - ------------------------------- At October 1, 1995, the Company's net working capital was $9.3 million compared to $8.1 million at December 31, 1994. For the past 4 years the Company has financed its operations through a combination of equity and debt instruments and cash flow from operations. From December 31, 1994, to October 1, 1995, cash and short-term investments decreased by $1.8 million, while accounts receivable increased by $2.4 million and inventories increased by $2.1 million. The increase in accounts receivable is primarily attributable to the increase in net revenues from $5.9 million in the fourth quarter of 1994 to $9.4 million in the third quarter of 1995, most of which occurred during the later portion of the quarter. The increase in inventories is primarily due to the fact that inventories at December 31, 1994, were at relatively low levels as a result of a shut down of the Company's production equipment during part of the fourth quarter of 1994 and a planned increase in production during 1995. Further, additions to property and equipment were approximately $1.1 million during the first nine months of 1995. The Company anticipates total capital expenditures of approximately $1.5 million during 1995. At October 1, 1995, the Company has $3.4 million of cash and short-term investments and a $5 million line of credit, which is subject to certain financial covenants. As of October 1, 1995, there were no borrowings under this line of credit. Existing working capital and cash generated from operations are expected to be adequate to satisfy the Company's capital and operating requirements at least through 1995. Failure to generate sufficient cash flow from operations or external sources would have a material adverse effect on the Company. 9 PART II OTHER INFORMATION Item 1 Legal Proceedings In January 1992, the Company filed a patent infringement suit against Cardinal IG Company, and one of its customers, in the U.S. Federal District Court of San Francisco, California. The suit alleges that Cardinal's LoE glass product violates the Company's U.S. Patent #4,799,745, which covers the structure of particular optical coatings for glass products, including the Company's Heat Mirror XIR solar reflecting film. In April 1993, Cardinal filed a motion for summary judgment alleging that the LoE coatings do not infringe the Company's patent and that the patent is invalid. On March 2, 1994, the District Court judge entered an order denying Cardinal's motion that the Company's patent was invalid, but granting its motion with respect to noninfringement. The Company filed an appeal to the noninfringement decision with the Court of Appeals for the Federal Circuit. In May 1995, the Court of Appeals for the Federal Circuit affirmed the Federal District Court decision. The Company's subsequent petition for a rehearing was denied. The Company has filed an appeal to the Supreme Court of the United States. The Company is not a party to any other material litigation. Item 2 Changes in Securities Not applicable Item 3 Defaults upon Senior Securities Not applicable Item 4 Submission to Matters to a Vote of Security Holders No matters were submitted to a vote of security holders during the quarter ended October 1, 1995. Item 5 Other Information Not applicable Item 6 Exhibits and Reports on Form 8-K (a) Exhibits - None (b) Reports on Form 8-K -October 31, 1994, filed August 15, 1995 10 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. Dated: November 13, 1995 By:/s/Martin M. Schwartz --------------------- Martin M. Schwartz President and Chief Executive Officer By:/s/Alfred V. Larrenaga ---------------------- Alfred V. Larrenaga Senior Vice President and Chief Financial Officer 11 EX-27 2 FINANCIAL DATA SCHEDULE
5 3-MOS DEC-31-1995 OCT-01-1995 1,303 2,132 6,661 528 6,015 16,576 34,280 (18,833) 33,925 7,290 0 43,162 0 0 (19,692) 33,925 9,315 9,411 6,848 9,044 0 0 22 345 0 345 0 0 0 345 .05 .05
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