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Advanced Energy Announces 2006 Third Quarter Financial Results
Gross Margin Increases to 43.7%, Cash Increases $22.7 Million Sequentially
FORT COLLINS, Colo., Oct. 25—Advanced Energy Industries, Inc. (Nasdaq: AEIS) today announced financial results for the third quarter ended September 30, 2006. Sales were $107.7 million for the third quarter of 2006, up 3.0% compared to $104.6 million for the second quarter of 2006, and up 36.7% compared to $78.8 million for the third quarter of 2005. Gross profit was $47.0 million, or 43.7% of sales, compared to $44.8 million, or 42.8% of sales, in the second quarter of 2006, and $28.9 million, or 36.7% of sales in the third quarter of 2005.
Third quarter 2006 income from operations was $18.3 million or 17.0% of sales, compared to $19.2 million, or 18.4% of sales, in the second quarter of 2006. This compares to third quarter 2005 income from operations of $2.2 million, or 2.8% of sales. Third quarter 2005 income from operations includes a $3.0 million litigation settlement expense. Third quarter 2006 net income was $17.0 million, or $0.38 per diluted share, compared to $18.2 million, or $0.40 per diluted share, in the second quarter of 2006, and compared to a net loss of $3.9 million, or a net loss of $0.10 per share in the third quarter of 2005. Dr. Hans Betz, president and chief executive officer of Advanced Energy, said, "Sales continued at record levels in the third quarter, driven by continued strength in sales to semiconductor and advanced products customers. Within the advanced products category, sales to solar panel customers increased 42% sequentially as our strategy to grow our presence in this market continues to progress. Our operational focus drove additional efficiency gains, highlighted by a 90 basis point sequential improvement in gross margin. Cash increased by $22.7 million in the third quarter." Dr. Betz continued, "As you have seen from our guidance, following four quarters of increasing sales to the semiconductor industry, we expect semiconductor levels to decrease modestly in the fourth quarter as semiconductor manufacturers carefully manage inventory levels. We expect growing demand in our emerging markets, such as solar and architectural glass, as these markets continue their capital investment cycle to adopt leading edge technology. We will leverage the strength of our financial model, combined with technology innovation and optimized global operations, to pursue an expanding set of opportunities within core and emerging markets." Fourth Quarter 2006 Guidance The Company anticipates fourth quarter sales in the range of $101 million to $105 million, and earnings per share in the range of $0.33 to $0.36. Third Quarter 2006 Conference Call Management will host a conference call today, Wednesday, October 25, 2006 at 5:00 pm Eastern to discuss Advanced Energy's financial results. You may access this conference call by dialing 888-713-4717. International callers may access the call by dialing 706-679-7720. For a replay of this teleconference, please call 706-645-9291, and enter the pass code 7811538. The replay will be available through November 1, 2006. There will also be a webcast available on the Investor Relations webpage at http://ir.advanced-energy.com. About Advanced Energy Advanced Energy is a global leader in the development and support of technologies critical to high-technology, high-growth manufacturing processes used in the production of semiconductors, flat panel displays, data storage products, solar cells, architectural glass, and other advanced product applications. Leveraging a diverse product portfolio and technology leadership, Advanced Energy creates solutions that maximize process impact, improve productivity and lower the cost of ownership for its customers. This portfolio includes a comprehensive line of technology solutions in power, flow, thermal management, and plasma and ion beam sources for original equipment manufacturers (OEMs) and end-users around the world. Advanced Energy operates in regional centers in North America, Asia and Europe and offers global sales and support through direct offices, representatives and distributors. Founded in 1981, Advanced Energy is a publicly held company traded on the Nasdaq Global Market under the symbol AEIS. For more information, please visit our corporate website: www.advanced-energy.com. This press release contains certain forward-looking statements, including the company's expectations with respect to Advanced Energy's financial results for the fourth quarter of 2006 as well as other matters discussed in this news release that are not purely historical data. Forward-looking statements are subject to known and unknown risks and uncertainties that could cause actual results to differ materially from those expressed or implied by such statements. Such risks and uncertainties include, but are not limited to: the volatility and cyclicality of the industries we serve including the semiconductor capital equipment and flat panel display industries, the timing of orders received from our customers, our ability to realize cost improvement benefits from the manufacturing initiatives underway, and unanticipated changes to our estimates, reserves or allowances. These and other risks are described in Advanced Energy's Form 10-K, Forms 10-Q and other reports and statements filed with the Securities and Exchange Commission. These reports and statements are available on the SEC's website at www.sec.gov . Copies may also be obtained from Advanced Energy's website at www.advanced-energy.com or by contacting Advanced Energy's investor relations at 970-221-4670. Forward-looking statements are made and based on information available to us on the date of this press release. The company assumes no obligation to update the information in this press release.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
(in thousands, except per share data)
Three Months Ended Nine Months Ended
September 30, June 30, September 30,
2006 2005 2006 2006 2005
Sales $107,688 $78,757 $104,571 $306,209 $245,095
Cost of sales 60,674 49,835 59,811 175,885 158,205
Gross profit 47,014 28,922 44,760 130,324 86,890
Operating expenses:
Research and
development 11,345 9,610 10,804 32,608 30,085
Selling, general
and administrative 16,856 13,421 14,241 45,502 39,960
Amortization of
intangible assets 453 504 453 1,383 1,569
Restructuring
charges 31 210 31 91 2,540
Litigation
settlement -- 3,000 -- -- 3,000
Total operating
expenses 28,685 26,745 25,529 79,584 77,154
Income from operations 18,329 2,177 19,231 50,740 9,736
Other income (expense),
net 1,044 (4,796) 741 3,617 (7,602)
Income from continuing
operations before
income taxes 19,373 (2,619) 19,972 54,357 2,134
Provision for income
taxes (2,381) (1,584) (1,947) (6,580) (3,543)
Income from continuing
operations 16,992 (4,203) 18,025 47,777 (1,409)
Gain on sale of
discontinued assets -- -- 138 138 2,645
Results of discontinued
operations -- 312 -- -- 1,556
Income from discontinued
operations -- 312 138 138 4,201
Net income $16,992 $(3,891) $18,163 $47,915 $2,792
Net income per basic
share
Income from continuing
operations $0.38 $(0.11) $0.40 $1.07 $(0.04)
Income from discontinued
operations $-- $0.01 $-- $-- $0.12
Basic earnings per share $0.38 $(0.10) $0.41 $1.07 $0.08
Net income per diluted
share
Income from continuing
operations $0.38 $(0.11) $0.40 $1.06 $(0.04)
Income from discontinued
operations $-- $0.01 $-- $-- $0.12
Diluted earnings per share $0.38 $(0.10) $0.40 $1.06 $0.08
Basic weighted-average
common shares
outstanding 44,762 38,366 44,704 44,679 34,639
Diluted weighted-average
common shares
outstanding 45,166 38,366 45,108 45,168 34,932
CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)
(in thousands)
September 30, December 31,
2006 2005
ASSETS
Current assets:
Cash and cash equivalents $52,789 $52,874
Marketable securities 63,939 6,811
Accounts receivable, net 74,864 68,992
Inventories 58,079 56,199
Other current assets 5,463 6,773
Total current assets 255,134 191,649
Property and equipment, net 33,602 39,294
Deposits and other 1,829 3,808
Goodwill and intangibles, net 68,720 69,843
Customer service equipment, net 1,476 2,407
Deferred income tax assets, net 6,109 3,116
Total assets $366,870 $310,117
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Trade accounts payable $19,669 $22,028
Other accrued expenses 31,273 23,977
Current portion of capital
leases and senior borrowings 616 2,011
Total current liabilities 51,558 48,016
Long-term liabilities:
Capital leases and senior
borrowings 226 2,179
Other long-term liabilities 1,690 2,492
Total long-term liabilities 1,916 4,671
Total liabilities 53,474 52,687
Stockholders' equity 313,396 257,430
Total liabilities and stockholders'
equity $366,870 $310,117
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