Demand for Energy Conservation Products Drives Improved Operating Margin in First Quarter

Southwall Technologies Inc. (OTCBB:SWTX) on May 15, 2008 announced first quarter 2008 revenue of $10.6 million, up 21% from the fourth quarter of 2007 and up approximately 1% from the first quarter of 2007. The increase year over year was primarily due to higher sales of Automotive products, which more than offset the decline in revenue relating to Plasma Display product sales resulting from the Company's decision to exit that business and focus on its core energy conservation products.

Net income increased to $2.0 million, or $.06 per fully diluted share, compared to net income of $0.2 million, or earnings of $0.00 per fully diluted share, in the first quarter of 2007. First quarter 2008 gross margins increased to 46% of sales from 42% in the first quarter of 2007 on a shift in product mix to higher margin energy conversation products and improved operating efficiencies. Operating margins increased to 20% of sales from 5% due to cost reduction efforts begun last year to more closely align the Company's operating expenses with its strategic objectives. Overall, operating expenses decreased $1.1 million, or 29%, year over year.

Dennis Capovilla, Southwall's President said of the Q1 results, "We believe that we are well positioned for growth in our core energy markets, where our products enable a new level of energy efficiency for green building and automotive designs. The recent increase in sales for our energy conservation products follows a growing global trend, highlighting consumer awareness that energy conservation is an efficient, effective and readily-available renewable technology choice that can have an immediate impact on saving energy and reducing carbon emissions."

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