Advanced Energy
Advanced Energy
A global leader in innovative power and control technologies that drive high-growth, plasma thin-film and nontech manufacturing processes.
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For more information, contact:

Richard Beck
Advanced Energy Industries, Inc.
970.407.6208
dick.beck@aei.com
Cathy Kawakami
Advanced Energy Industries, Inc.
970.407.6732
cathy.kawakami@aei.com


Advanced Energy Reports Third Quarter Results

Fort Collins, Colorado (October 12, 2000)—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 www.advanced-energy.com.

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.

    CONSOLIDATED INCOME STATEMENT
(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

ADDITIONAL INFORMATION -
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

ADDITIONAL INFORMATION - EBITDA:
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


CONSOLIDATED BALANCE SHEET
(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

LIABILITIES AND STOCKHOLDERS' EQUITY

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


CONSOLIDATED STATEMENT OF CASH FLOWS
(in thousands)

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

CASH FLOWS FROM OPERATING ACTIVITIES:
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

CASH FLOWS FROM INVESTING ACTIVITIES:
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)

CASH FLOWS FROM FINANCING ACTIVITIES:
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

EFFECT OF CURRENCY TRANSLATION
ON CASH FLOW (1,578) (323)
INCREASE (DECREASE) IN CASH
AND CASH EQUIVALENTS 2,211 (272)
CASH AND EQUIVALENTS,
beginning of period 21,043 12,875
CASH AND EQUIVALENTS,
end of period $23,254 $12,603