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Southwall reports second-quarter loss and restates first-quarter 1999 results

US-based Southwall Technologies Inc. reported a second quarter loss and said it completed the previously announced restatement of its 1999 and first quarter 2000 results, recasting results from both p…

US-based Southwall Technologies Inc. reported a second quarter loss and said it completed the previously announced restatement of its 1999 and first quarter 2000 results, recasting results from both periods as losses rather than profits. “We are clearly disappointed with the need to restate our financial statements for 1999 and first quarter 2000, and with the results of these restatements,” president and chief executive Thomas Hood said in a statement. “We are also disappointed that the second quarter results were not profitable.” For the quarter ended July 2, Southwall posted a net loss of US$ 1.65 million, or 22 cents per share, compared with net income of US$ 452,000, or 6 cents per share, for the same period a year ago. Net revenues increased by 55% to US$ 20.9 million for the second quarter of 2000, from US$ 13.5 million in the year earlier period. On August 1, Southwall, which makes thin film coatings for glass computer screens and car windows, said it anticipated stronger revenues in the second quarter than in the year ago period. Hood said the poor second quarter results stemmed, in part, from lower than expected gross margins, higher than expected start up costs and one-time charges, such as offering expenses and legal settlements. Southwall said the restated 1999 results show a US$ 2.4 million reduction in net income from the previously reported net income of US$ 510,000, or 7 cents per share, to a net loss of US$ 1.87 million or 25 cents per share. The company said about US$ 1.1 million of the adjustments arose from under-recognition of expenses, US$ 733,000 came from deferral of revenue recognition and US$ 500,000 stemmed from the March settlement of a lawsuit. Southwall also reclassified the portion of cash that is restricted to payments for its facility in Germany to restricted cash. The restatement of the financial results for the quarter ended April 2 resulted in an almost US$ 2.6 million drop in net income from the previously reported net income of US$ 894,000, or 11 cents per share, to a net loss of US$ 1.7 million, or 22 cents per share. That restatement stemmed from the following adjustments: understatement of cost of goods sold, US$ 2.5 million; an increase in reserve for sales returns and allowances, US$ 531,000; and over recognition of expenses, US$ 420,000. For the first six months of 2000, Southwall posted a net loss of US$ 3.3 million, or 44 cents per share, on net revenues of US$ 38 million, compared to a net loss of US$ 1 million, or 15 cents per share, on net revenues of US$ 24.3 million for the same period last year. The company also said it reclassified long-term debt to current liabilities because it did not get waivers of a potential breach of a covenant regarding material changes in its business. The reclassification for December 31, 1999 was US$ 12 million; for the quarter ended April 2 was US$ 13.7 million; and for the quarter ended July 2 was US$ 13.8 million. Nasdaq suspended trading of shares of Southwall“s common stock in August after the company announced it would be restating prior periods“ results. The company attended a delisting hearing before Nasdaq on September 22 and discussed its financial results and plans for the future. Nasdaq“s decision is expected within about 30 days from that date, the company said. Southwall said it expects to release results for the third quarter in November, and to file its third quarter 10Q with the Securities and Exchange Commission “in a timely manner.” Southwall said it has filed a revised 10K for 1999, a revised 10Q for the first quarter of 2000, and a 10Q for the second quarter of 2000.

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