The year over year decrease in net revenues was primarily due to a sharp decline in sales of automotive products and the impact of generally lower demand across all markets due to the global economic downturn.
Net income in the first quarter of 2009, incorporated about $2.4 million of other income relating to the reversal of an accrued, long term reserve resulting from final payment of the company’s obligation under a settlement agreement.
First quarter 2009 gross profit was $2.4 million, or 38% of net revenues, as compared $2.7 million, or 39% of net revenues, in fourth quarter 2008 and $4.9 million, or 46% of net revenues, in first quarter 2008. The company posted income from operations of $0.1 million in the first quarter of 2009, as compared to $0.1 million in the fourth quarter 2008 and $2.1 million in the first quarter of 2008. Fixed production costs in the first quarter of 2009 did not decline at the same rate as sales volume, resulting in lower gross margins year over year.
Over the last six quarters, the company generated cash through increased sales of higher margin products, eliminated unprofitable product lines, and aggressively managed working capital and operating expenses. This enabled Southwall Technologies to retire certain existing debt, thus improving the company’s debt ratios and strengthening the balance sheet. From the third quarter of 2007 through the first quarter of 2009, Southwall Technologies has reduced debt by $7.6 million, reducing the debt to asset ratio from 33% in the third quarter of 2007 to 14% at the end of the first quarter of 2009.
Despite the sales decline over the last two quarters, Southwall Technologies continues to focus on a broad portfolio of high performance energy products to meet the growing global need for improved energy efficiency in green building and automotive design.
“While the global economy is having a visible impact on our core markets, we have minimized our debt and remain focused on disciplined financial management to carry us through this period of financial uncertainty,” stated Dennis Capovilla, Southwall Technologies’ president and chief executive officer. “Though we expect lower sales and profit in the near term as the economy continues to struggle, we remain focused on our key growth initiatives to produce innovative, high performance, energy-efficient products.”
