Southwall: Financial results for second quarter, 2001

Revenues for the second quarter of 2001 were $21.9 million, up 4.8 percent over the $20.9 million recorded in the second quarter of 2000, and up sequentially $4.2 million, or 23.7 percent, from the $17.7 million achieved in the first quarter of 2001.Automotive products nearly doubled from the previous year to $9.9 million from $5.0 million for the second quarter of 2000. Conversely Display product sales were down 31% from the same quarter last year. Display product sales have been impacted by the worldwide decline of sales in the computer industry, beginning late in 2000. Architectural products were up 10.6% from the second quarter of 2000.

Net income for the second quarter of 2001 was $1.2 million, or $0.15 per diluted share, an increase of $2.8 million, or 175%, compared to a net loss of $1.6 million, or ($0.22) per diluted share in the comparable period last year. Net income increased sequentially $2.3 million, or 205%, from a net loss of $1.1 million in the first quarter.

Gross margin for the second quarter of 2001 was 25.5% compared to 19.1% for the second quarter of 2000 and 16.2% for the first quarter of 2001. The increase in gross margin from the previous year was related primarily to better than expected margins from the company's German facility, offset by lower fixed cost absorption as a result of lower production in the Tempe facility.

Operating expenses were down 16.6% from the same period in 2000, and up 3.9% sequentially from the first quarter of 2001. Second quarter operating expenses, as a percent of sales, were 19.3% compared to 24.3% for the same period in 2000 and 23.0% for the first quarter of 2001.

"Southwall's return to profitability is extremely gratifying to the company and its employees", commented Mr. Thomas G. Hood, Chief Executive Officer. "It demonstrates that the company's decisions, to broaden product lines and expand production facilities, may finally be realizing their promise. More immediately, the company's quick reaction to control expenses, in response to the downturn in computer sales late last year, are also reflected in the second quarter results."

Mr. Robert R. Freeman, Chief Financial Officer noted "the company continues to improve its liquidity by focusing on receivable and inventory control. This has allowed the company to reduce its vendor payables and debt by $8.4 million since the beginning of 2001."