EX-99.1 2 ex99_1.htm EXHIBIT 99.1 Exhibit 99.1
 
Exhibit 99.1 Contact:
Roween Nacionales
Southwall Technologies
Phone: (650) 798-1200


Southwall Announces Earnings for Q3 2006

Palo Alto, California - October 30, 2006 - Southwall Technologies Inc. (OTC BB: SWTX.OB) released its financial results for the third quarter of fiscal 2006 following the close of market on October 30, 2006.

Selected Third Quarter Financial Highlights
 
·
Third quarter revenues of $9.6 million decreased 20% from $12.0 million in the third quarter 2005 and decreased 15% from $11.3 million in the second quarter 2006. The decrease in revenues was the result of supplier quality problems and yield issues with one electronic display product.
·
Third quarter 2006 gross margin was 41%, an increase of 7% from the third quarter 2005 margin of 34% and an increase of 5% over second quarter 2006 gross margin of 36%.
·
Third quarter 2006 net loss of $2.7 million included charges of $1.9 million relating to an accrual of leasehold obligations and other expenses as a result of closing down the Palo Alto manufacturing facility, $0.3 million relating to a severance package and $0.1 million accrual for settlement of an employee lawsuit. Third quarter 2005 net income was $15,000. Second quarter 2006 net loss of $1.4 million included charges of $0.2 million relating to net impairment charge for long-lived assets and $0.3 million of restructuring charges.
·
Third quarter 2006 net loss per fully diluted share was $0.11, compared to third quarter 2005 net income per fully diluted share of $0.00 and compared to second quarter 2006 net loss per fully diluted share of $0.06.
 
“Our third quarter 2006 gross margin is a company record high at 41% as we now produce all of our products in our manufacturing facility in Dresden, Germany. We continue to have good demand for our products but are now faced with the challenge of improving our product yields as we transition our Palo Alto products to Germany,” commented George Boyadjieff, Chairman and Interim CEO. “We will continue to reduce operating costs and are committed to returning back to profitability.”
 
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 Southwall website at www.southwall.com and access the CCBN webcast icon by selecting “News & Events => Press Releases” from the main menu bar. From here, you can listen to the teleconference, assuming that your computer system is configured properly.

How to Access the Call
 
Using access code # 8354340, 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 # 8354340.


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, DuPont, Mitsui Chemicals, Peugeot-Citroën, 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 or that margins may decline, that there will be a decline in one or more portions of our business, 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, 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, 2005, filed on March 29, 2006, and the Quarterly Report on Form 10-Q for the fiscal quarter ended September 30, 2006, is expected to be filed by November 14, 2006.

###

 
SOUTHWALL TECHNOLOGIES INC.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share data)

   
Three months ended
  
Nine months ended
  
   
September 30,
2006
  
October 2,
2005
  
September 30,
2006
  
October 2,
2005
  
                   
Net revenues
  
$
9,597
  
$
12,025
  
$
30,968
  
$
42,844
  
Cost of revenues
    
5,667
    
7,921
    
19,301
    
28,979
  
                           
Gross profit
    
3,930
    
4,104
    
11,667
    
13,865
  
                           
Operating expenses:
                          
Research and development
    
1,659
    
1,334
    
5,376
    
3,047
  
Selling, general and administrative
    
4,674
    
2,104
    
9,761
    
6,461
  
Impairment charge (recoveries) for long-lived assets
    
(325
)
  
-
    
(117
)
  
(170
)
Restructuring charges
    
263
    
-
    
974
    
-
  
                           
Total operating expenses
    
6,271
    
3,438
    
15,994
    
9,338
  
                           
Income (loss) from operations
    
(2,341
)
  
666
    
(4,327
)
  
4,527
  
                           
Interest expense, net
    
(169
)
  
(210
)
  
(550
)
  
(778
)
Other income (expenses), net
    
(18
)
  
9
    
161
    
142
  
                           
Income (loss) before provision for income taxes
    
(2,528
)
  
465
    
(4,716
)
  
3,891
  
                           
Provision for income taxes
    
193
    
450
    
719
    
782
  
                           
Net income (loss)
    
(2,721
)
  
15
    
(5,435
)
  
3,109
  
                           
Deemed dividend on preferred stock
   
123
    
120
    
367
    
363
  
 
                          
Net income (loss) attributable to common stockholders 
  
$
(2,844
)
$
(105
)
$
(5,802
)
$
2,746
  
                           
Net income (loss) per share:
                          
                           
Basic
  
$
( 0.11
)
$
0.00
  
$
(0.22
)
$
0.10
  
Diluted
  
$
(0.11
)
$
0.00
  
$
(0.22
)
$
0.09
  
                           
Shares used in computing net income (loss) per share:
                          
Basic
    
26,957
    
26,788
    
26,907
    
26,727
  
Diluted
    
26,957
    
32,720
    
26,907
    
32,999
  

 
SOUTHWALL TECHNOLOGIES INC.
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)
 
   
September 30,
2006
  
December 31,
2005
  
ASSETS
          
Current assets:
          
Cash and cash equivalents
  
$
5,032
  
$
6,600
  
Restricted cash
    
206
    
402
  
Accounts receivable, net
    
4,804
    
6,780
  
Inventories, net
    
5,241
    
5,879
  
Other current assets
    
1,492
    
982
  
Total current assets
    
16,775
    
20,643
  
               
Property, plant and equipment, net
    
16,689
    
16,857
  
Restricted cash loans
    
1,063
    
995
  
Other assets
    
1,161
    
1,146
  
Total assets
  
$
35,688
  
$
39,641
  
               
               
LIABILITIES, PREFERRED STOCK AND STOCKHOLDERS’ EQUITY
              
Current liabilities:
              
Current portion of long term debt
 
$
1,030
  
$
1,317
  
Line of credit
    
2,996
    
2,996
  
Accounts payable
    
1,543
    
1,402
  
Accrued compensation
    
1,109
    
1,161
  
Other accrued liabilities
    
6,300
    
5,076
  
Total current liabilities
    
12,978
    
11,952
  
               
Term debt
   
8,544
    
8,790
  
Government grants advanced
    
206
    
396
  
Other long term liabilities
    
2,531
    
2,564
  
Total liabilities
    
24,259
    
23,702
  
               
Series A, convertible preferred stock
    
4,810
    
4,810
  
               
Stockholders’ equity:
              
Common stock
    
27
    
27
  
Capital in excess of par value
    
78,050
    
77,828
  
Accumulated other comprehensive income:
              
Translation gain on subsidiary
    
3,236
    
2,532
  
Accumulated deficit
    
(74,694
)
  
(69,258
)
Total stockholders’ equity
    
6,619
    
11,129
  
               
Total liabilities, preferred stock and stockholders’ equity
  
$
35,688
  
$
39,641