This bad news:
Southwall Expands On Financial Effect of Job Cuts and Near-term Business Expectations
PALO ALTO, Calif., Aug 9, 2002 (BUSINESS WIRE) -- Southwall Technologies Inc. (Nasdaq:SWTX), a global developer, manufacturer and marketer of thin-film coatings for the automotive glass, electronic display and architectural markets, expanded on the Company's decision to reduce its workforce at its California location, the anticipated financial effect on the Company's costs in the future, and the near-term outlook for third quarter of 2002 revenues.
Southwall Technologies was founded in Palo Alto, California in 1979 and, until 1997 it was the Company's only manufacturing location. Since 1997, Southwall has opened new manufacturing sites in Tempe, Arizona and Dresden, Germany. Due to the relatively high cost of labor, occupancy costs, and the inefficiencies of older production equipment, the California site has become less cost competitive relative to Southwall's Tempe and Dresden facilities. Consequently, the Company has initiated certain steps toward consolidating and restructuring its Palo Alto operations. In addition to the Company's recent reduction in force announced on August 7, the Company intends to reduce its occupancy costs, beginning in 2003, by consolidating office space into other existing Palo Alto buildings. Additionally, the Company intends to modify its manufacturing work schedules to reduce overtime and other related labor costs. The annual cost savings from these changes is expected to be approximately $1.7 million.
Since the latest guidance offered in its Form 8-K filed on June 24, 2002, the Company has seen a slow down in orders from certain parts of its business in the third quarter. As a result, preliminary estimates of the Company's financial results for the quarter ending September 30, 2002, indicate that revenues for the quarter will be between $16.5 million and $18.0 million. At this early point in the quarter, the Company is not able to predict its net income or loss for the quarter but believes that a net loss is possible if revenues fall in the estimated range. As a result of the Company's current estimates of third quarter revenues, it is likely that revenues for fiscal 2002, previously estimated as between $78.0 million and $82.0 million, and net income for fiscal 2002, previously estimated between $4.8 million and $5.2 million, will be lower than those estimates. These estimates are, of course, subject to certain assumptions, risks and uncertainties that could cause actual revenues or net income for the periods discussed to be different than the estimates presented.
"Although it's still somewhat early in the quarter, we are seeing a softening of orders in our U.S. architectural business," said Thomas G. Hood, President and Chief Executive Officer of Southwall Technologies. "Furthermore we are expecting to see a shortfall in orders for a couple of important display products that have, historically, shown strong sales in the first half of the year. We believe that these areas of current softness are not symptomatic of a reduced long-term demand for our products in these markets. We wish we had more visibility into some of these customers and markets, but that's not always possible," continued Hood.
"We are certain that the recent cost reductions in Palo Alto will greatly assist in the Company's competitiveness in future quarters," concluded Mr. Hood.
"As a result of our recently completed secondary offering, we believe that the Company's cash position and balance sheet have been significantly improved. Our balance sheet is stronger than in the recent past, with $13.8 million in cash and $44.3 million in equity at the end of July. The additional capital from the offering has enabled us to significantly reduce our outstanding debt obligations and given us increased financial wherewithal to support our business in the future. Furthermore, despite the anticipated slow down in orders, we expect to maintain the improvements in our operational efficiency which we've experienced in recent quarters," said Robert R. Freeman, Senior Vice-President and Chief Financial Officer. |
