Southwall Announces Q3 2009 Results

http://www.businesswire.com/news/home/20091109005180/en

PALO ALTO, Calif.--(Business Wire)--
Southwall Technologies Inc. (OTCBB:SWTX) announced third quarter 2009 revenue of
$8.6 million, up 3% from second quarter 2009 revenues of $8.3 million and down
19% from third quarter 2008 revenues of $10.6 million. The year over year
decrease was primarily due to a decline in sales of automotive and window film
products primarily driven by lower market demand caused by the global economic
downturn.

Third quarter 2009 net income was $0.7 million, or $0.02 per diluted share, as
compared to net income of $1.5 million, or $0.04 per diluted share in second
quarter 2009, and $1.0 million, or $0.03 per diluted share in third quarter
2008. Net income in the second quarter 2009 included $0.5 million of other
income relating to the receipt of the final milestone payment under the
Technology Transfer and Services agreement with Sunfilm.

Third quarter 2009 gross profit was $3.7 million, or 43% of net revenues, as
compared to $3.7 million, or 44% of net revenues, in second quarter 2009 and
$4.2 million, or 40% of net revenues, in third quarter 2008. The Company posted
income from operations of $1.0 million in the third quarter 2009, as compared to
$0.9 million in the second quarter 2009 and $1.4 million in the third quarter
2008.

In addition, the Company reached an amicable settlement with Pilkington
Automotive GmbH on a patent allowed by the European Patent Office. The agreement
consists of an up-front license payment with no future royalties or other
licensing restrictions for Southwall or its customers.

"Despite the year over year sales decline, we are generating cash and continue
to invest in longer term growth opportunities," said Dennis Capovilla,
Southwall`s President and CEO. "As the economy begins to stabilize, we see
strong potential for growth across all markets relating to energy efficiency,
and we remain focused on realizing longer term growth."

About Southwall Technologies Inc.

Southwall Technologies Inc. is recognized as an innovator in the development and
manufacture of high performance, energy-saving films and glass products that
dramatically improve the energy efficiency of architectural and automotive
glass. Southwall is an ISO 9001:2000-certified manufacturer with customers in
over 25 countries around the world, including Audi, BMW, Guardian,
Peugeot-Citroen, 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
2009 or thereafter, that the Company will not be successful in improving
operating 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 any 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, 2008, filed on March 26, 2009.

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,
2009 2008 2009 2008

Net revenues $ 8,600 $ 10,632 $ 23,430 $ 34,887
Cost of revenues 4,867 6,383 13,554 20,063

Gross profit 3,733 4,249 9,876 14,824

Operating expenses:
Research & development 771 976 2,118 2,372
Selling, general and administrative 1,960 1,852 5,810 6,170

Total operating expenses 2,731 2,828 7,928 8,542

Income from operations 1,002 1,421 1,948 6,282

Interest expense, net (321 ) (170 ) (492 ) (433 )
Other income (expense), net 12 (238 ) 3,211 (123 )

Income before provision for income taxes 693 1,013 4,667 5,726

Provision for (benefit from) income taxes (17 ) 5 174 326

Net income 710 1,008 4,493 5,400

Deemed dividend on preferred stock 122 122 366 367

Net income attributable to common stockholders $ 588 $ 886 $ 4,127 $ 5,033

Net income per share:

Basic $ 0.02 $ 0.03 $ 0.14 $ 0.18
Diluted $ 0.02 $ 0.03 $ 0.13 $ 0.16

Weighted average shares used in computing net income per share :
Basic 28,728 28,409 28,715 28,099
Diluted 34,685 34,681 34,085 34,016

SOUTHWALL TECHNOLOGIES INC.
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)

September 30, December 31,
2009 2008

ASSETS
Current assets:
Cash and cash equivalents $ 12,845 $ 10,768
Restricted cash - 282
Accounts receivable, net 4,799 3,709
Inventories, net 4,677 5,965
Other current assets 1,302 745
Total current assets 23,623 21,469
Property, plant and equipment, net 14,233 15,012
Other assets 407 804
Total assets $ 38,263 $ 37,285

LIABILITIES, PREFERRED STOCK AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of long term debt and capital lease obligations $ 1,141 $ 1,767
Accounts payable 1,190 596
Accrued compensation 958 1,372
Other accrued liabilities 5,085 5,127
Total current liabilities 8,374 8,862

Term debt and capital lease obligations 3,639 4,501
Other long term liabilities 84 2,514
Total liabilities 12,097 15,877

Series A, convertible preferred stock 4,810 4,810

Stockholders' equity:
Common stock 29 29
Capital in excess of par value 78,292 78,323
Accumulated other comprehensive income 4,565 4,269
Accumulated deficit (61,530 ) (66,023 )
Total stockholders' equity 21,356 16,598

Total liabilities, preferred stock and stockholders' equity $ 38,263 $ 37,285

SOUTHWALL TECHNOLOGIES, INC.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
Nine months ended
September 30, September 30,
2009 2008
Cash flows from operating activities:
Net income $ 4,493 $ 5,400
Adjustments to reconcile net income to net cash provided by operating activities:
Gain on settlement of liability (2,359 ) -
Deferred income tax (77 ) (49 )
Gain on disposal of property, plant and equipment (24 ) -
Depreciation and amortization 1,911 2,054
Stock-based compensation 294 162
Changes in operating assets and liabilities:
Accounts receivable, net (1,072 ) (840 )
Inventories, net 1,336 (304 )
Other current and non-current assets (65 ) 827
Accounts payable and accrued liabilities (258 ) (870 )
Net cash provided by operating activities 4,179 6,380

Cash flows from investing activities:
Restricted cash 261 -
Proceeds from sale of property, plant and equipment 34 -
Expenditures for property, plant and equipment (975 ) (1,047 )
Net cash used in investing activities (680 ) (1,047 )

Cash flows from financing activities:
Proceeds from exercise of stock options 42 293
Borrowings from equipment financing 26 603
Investment credit in Germany 221 -
Repayments of term debt and capital lease obligations (1,719 ) (883 )
Net cash (used in) provided by financing activities (1,430 ) 13

Effect of foreign exchange rate changes on cash and cash equivalents 8 (165 )

Net increase in cash and cash equivalents 2,077 5,181
Cash and cash equivalents, beginning of period 10,768 6,492

Cash and cash equivalents, end of period $ 12,845 $ 11,673

Southwall Technologies Inc.
Mallorie Burak, 650-798-1200

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