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Advanced Energy Reports Third Quarter Results

FORT COLLINS, Colo., Oct. 12 /PRNewswire/ -- Advanced Energy (Nasdaq: AEIS) today reported financial results for the third quarter and nine-month period ended September 30, 2000. Advanced Energy is an industry-leading provider of critical technology solutions for the manufacture of semiconductors, data storage products, and flat panel displays.

For the third quarter, revenues were $96.3 million, up 73 percent from $55.6 million for the third quarter of 1999, and up 12 percent from $85.7 million for the second quarter of 2000. The company's prior quarter and 1999 results have been restated to reflect the April 6, 2000 acquisition of Noah Holdings and the August 18, 2000 acquisition of Sekidenko, Inc., using the pooling of interests method of accounting.

"Despite posting our fourth consecutive quarter of record revenues and record net income, the third quarter results were lower than our expectations," said Doug Schatz, Chairman and Chief Executive Officer. "Late in the quarter we learned that one of our major OEM customers had pulled inventory in the second quarter in anticipation of changing to a contract manufacturer for sub assemblies. As a result, the new contract manufacturer did not have to purchase all of its product requirements from us in the third quarter. This was a one-time occurrence that has now been resolved, although it resulted in lower revenues in the third quarter than we anticipated. One result of this change in the method of procurement is that it will decrease the percentage of our revenue derived from Just-in-Time (JIT) shipments."

"We believe the semiconductor industry cycle is far from over, and we expect strong, continued industry growth in 2001," Mr. Schatz continued. "The third quarter revenue shortfall was customer specific and does not reflect the tone of the overall semiconductor equipment industry or of our OEM customers."

Net income for the 2000 third quarter was $16.3 million, or $0.50 per diluted share, which includes a $2.3 million non-recurring charge associated with the acquisition of Sekidenko, Inc., a $1.0 million non-recurring charge related to the relocation of the Tower Electronics business unit to Voorhees, NJ, and a $4.8 million one-time gain on investment. This compares to net income of $6.1 million or $0.20 per diluted share for the third quarter of 1999, and net income of $13.1 million, or $0.40 per diluted share, for the second quarter of 2000 which also included a one-time charge of $2.3 million for costs related to the Noah Holdings acquisition.

Pro forma net income from operations for the third quarter of 2000, excluding the non-recurring charges and the one-time gain was $16.5 million, or $0.51 per diluted share and is lower than the company's previous expectations. This compares to pro forma net income of $15.5 million, or $0.47 per diluted share for the second quarter of 2000 excluding one-time charges related to the Noah Holdings acquisition. The lower-than-anticipated net income is directly attributable to the shortfall in revenue as gross margin and operating expenses were in line with the company's expectations.

For the 2000 nine-month period, revenues were $257.0 million compared with $137.4 million for the first nine months of 1999. Gross profit for the 2000 nine-month period was $125.9 million, or 49.0 percent, an improvement compared with $60.5 million or 44.0 percent for the same 1999 period.

Net income for the 2000 nine-month period was $40.6 million, or $1.25 per diluted share, compared with $10.6 million, or $0.35 per diluted share, for the nine-month period ended September 30, 1999. Pro forma net income for the 2000 nine-month period was $42.8 million, or $1.32 per diluted share, and does not include non-recurring charges or the one-time gain on investment.

"We are pleased with the progress we've made in integrating our recent acquisitions of Sekidenko, Inc. and Noah Holdings," said Mr. Schatz. "We are continuing to pursue our strategy of integrating more components around a semiconductor processing tool, and our recent acquisitions add critical technologies toward that goal."

Third Quarter Conference Call

Management will host a conference call on Thursday, October 12, 2000 at 5:00 pm Eastern time to discuss the third quarter financial results. You may access this conference call by dialing 800-982-3661. For a replay of this teleconference, please call 703-925-2533, passcode 4571131. The replay will be available through Thursday, October 19, 2000. There will also be a webcast available at

About Advanced Energy

Advanced Energy (AE) is a global leader in the development, marketing, and support of technology solutions that are critical in the manufacture of semiconductors, data storage products, and flat panel displays. Original equipment manufacturers (OEMs) and end-users around the world depend on AE products when plasma-based technology plays a vital role in their manufacturing process. AE offers a comprehensive suite of key subsystems for vacuum process systems including power conversion and control solutions, process monitoring and machine control tools, ion-beam sources, dynamic temperature control products, and plasma abatement technologies. AE technology solutions are sold and supported globally by direct offices, representatives and distributors. Founded in 1981, AE is a publicly held company quoted on the Nasdaq national market under the symbol AEIS.

Safe Harbor Statement

Except for historical information contained herein, the matters discussed in this news release are forward-looking statements that involve risks and uncertainties that could cause actual results to differ materially from those projected in the forward-looking statements, including risk relating to the acquisition and integration of other businesses and companies, the management of our rapid growth and the change from JIT shipments to orders and backlog. These and other risks and cautionary statements are detailed in Advanced Energy's Securities and Exchange Commission reports, including the Company's Form 10-K and Forms 10-Q. The Company continues to be susceptible to fluctuations in quarterly and annual revenues and operating results and the volatility and cyclicality of the semiconductor and semiconductor capital equipment industries. The Company assumes no obligation to update the information in this release.

    (in thousands except per share data)

                                   Quarter Ended           Nine Months Ended
                                   September 30,             September 30,
                                2000         1999         2000        1999
                            (unaudited)   (unaudited) (unaudited)(unaudited)

    Sales                     $96,317      $55,626      $257,046   $137,408
    Cost of sales              49,492       30,675       131,191     76,955
    Gross profit               46,825       24,951       125,855     60,453

    Operating expenses:
      Research and
       development              9,711        7,211        26,328     20,223
      Sales and marketing       6,232        4,589        17,472     12,208
      General and
       administrative           6,748        4,437        18,197     11,692
      Merger costs              2,250           --         4,583         --
      Restructuring charge      1,000           --         1,000         --

    Income from operations     20,884        8,714        58,275     16,330

    Other income (expense)      5,598        1,063         6,449      1,028

    Net income before income
     taxes and minority
     interest                  26,482        9,777        64,724     17,358

    Provision for
     income taxes              10,195        3,687        24,165      6,747
    Minority interest
     in net loss                   (2)          --           (86)        --

    Net income                $16,289       $6,090       $40,645    $10,611

    Basic earnings
     per share                  $0.52        $0.21         $1.30      $0.36
    Diluted earnings
     per share                  $0.50        $0.20         $1.25      $0.35

    Basic weighted-average
     common shares
     outstanding               31,399       29,662        31,276     29,435

    Diluted weighted-average
     common shares
     outstanding               32,417       30,932        32,473     30,666

     Pro forma without
     one-time items:
      Pro forma net income
       without one-time
       items                  $16,455       $6,090       $42,821    $10,611
      Pro forma basic
       earnings per share       $0.52        $0.21         $1.37      $0.36
      Pro forma fully diluted
       earnings per share       $0.51        $0.20         $1.32      $0.35

      Earnings before interest,
       taxes, depreciation
       and amortization       $28,492      $11,711       $70,732    $22,799

    Pretax cash diluted
     EPS*                       $0.81        $0.38         $2.01      $0.74
    After tax cash diluted
     EPS*                        0.50         0.24          1.26      $0.45

    * Assumes dilution from conversion of subordinated notes in 2000

    (in thousands)

                                        September 30,       December 31,
                                            2000                1999
    ASSETS                               (unaudited)          (audited)

    Current Assets:
      Cash and cash equivalents            $23,254             $21,043
      Marketable securities - trading      198,562             186,440
      Accounts receivable                   78,045              46,471
      Income tax receivable                     73               1,453
      Inventories                           39,732              28,410
      Other current assets                   2,202               1,803
      Deferred income tax assets, net        5,773               3,753
    Total current assets                   347,641             289,373

    Long-term investments                    4,571                  --

    Property and equipment, net             21,055              17,699
    Goodwill and intangibles, net           10,490              11,040
    Deferred debt issuance costs             3,929               4,410
    Other assets                             3,353               2,911
    Total assets                          $391,039            $325,433


    Current Liabilities:
      Accounts payable, trade              $17,409             $15,702
      Other current liabilities             17,096              11,450
      Accrued income taxes payable           7,777               1,266
      Current portion of long-term debt      2,902               2,585
      Accrued interest payable on
       convertible subordinated notes        2,658                 886
    Total current liabilities               47,842              31,889

    Long-term Liabilities:
      Capital leases and notes payable       1,134               1,427
      Convertible subordinated
       notes payable                       135,000             135,000
    Total long-term liabilities            136,134             136,427

    Total liabilities                      183,976             168,316

    Minority interest                           42                 128

    Stockholders' equity                   207,021             156,989
    Total liabilities and
     stockholders' equity                 $391,039            $325,433

    (in thousands)

                                          Nine Months Ended September 30,
                                            2000                1999
                                         (unaudited)         (unaudited)

      Net income                           $40,645             $10,611
      Depreciation and amortization          7,917               5,964
      Accounts receivable                  (31,574)            (23,011)
      Inventories                          (11,322)             (2,560)
      Accounts payable, trade                1,726               5,848
      Income taxes                           7,891               4,987
      Other                                 (1,942)               (806)
        Net cash provided by
         operating activities               13,341               1,033

      Proceeds from sale of equipment          150                  --
      Marketable securities                 (5,000)             (1,072)
      Purchase of property and
       equipment, net                       (8,687)             (4,483)
      Net cash used in
       investing activities                (13,537)             (5,555)

      Net change from notes payable
       and capital lease obligations           (28)              1,528
      Proceeds from common
       stock transactions                    4,013               3,045
      Net cash provided by
       financing activities                  3,985               4,573

     ON CASH FLOW                           (1,578)               (323)
     AND CASH EQUIVALENTS                    2,211                (272)
     beginning of period                    21,043              12,875
     end of period                         $23,254             $12,603

SOURCE Advanced Energy Industries, Inc.
Web site: http: //
CONTACT: Richard Beck, 970-407-6204,, or Cathy Kawakami, 970-407-6732,, both of Advanced Energy Industries, Inc.