AEIS Advanced Energy Industries Inc

Advanced Energy Industries, Inc. (Nasdaq GM: AEIS) today announced financial results for the second quarter ended June 30, 2010. Total sales for the second quarter were $115.2 million, representing an all-time high for the company in a single quarter and producing earnings of $0.31 per diluted share. The results highlighted in this release include our Aera® mass flow controller business that is currently being divested, as well as the inclusion of two months of operating results from PV Powered.

“We had an outstanding second quarter, with $154 million in bookings and $115 million in revenue, including PV Powered and the flow business. As our semiconductor revenues continued to grow, the semiconductor industry demonstrated its momentum again this quarter,” said Dr. Hans Betz, chief executive officer.

"Our recent acquisition of PV Powered contributed significantly to our higher inverter revenues and backlog, which we anticipate will provide momentum for the second half of 2010. PV Powered also contributed to our bottom line, delivering a profitable second quarter ahead of expectations and making the acquisition immediately accretive. The addition of this excellent team and product line to our Solaron inverter business positions us to forge ahead and take the leading position in the US market for inverters and expand worldwide.”

"Additionally, today we announced that we are divesting our flow business. We see this move as a crucial part of our corporate strategy to focus the company on becoming the market leader in power conversion and capitalize on future growth opportunities.”

Semiconductor sales rose 9.9% sequentially to $53.5 million, representing 46.4% of total sales for the quarter. Sales to the non-semiconductor thin film markets increased 87.2% sequentially to $35.9 million, representing 31.2% of total sales for the quarter. Inverter sales grew substantially with the addition of PV Powered to $14.4 million to 12.5% of total sales compared to $2.3 million in the first quarter. Service revenue was flat sequentially at $11.4 million, representing 9.9% of total sales for the quarter.

Bookings for the second quarter, including $15.3 million for the mass flow controller business, hit a record of $154.3 million, or a 60.0% increase, compared to $96.7 million in the first quarter of 2010, resulting in a book-to-bill ratio of 1.34:1 for the second quarter. Ending backlog for the second quarter increased 52.0% sequentially to $123.6 million, including $14.4 million for the flow business, compared to $81.3 million at the end of the first quarter of 2010.

Advanced Energy also announced that it has entered into an agreement to sell its flow business, related product lines and all related assets including the real property in Japan to Hitachi Metals, Ltd. for $44 million in cash, subject to an adjustment based on inventory balance at closing. The company anticipates this transaction will close in the third quarter of 2010 subject to satisfaction of customary closing conditions.

As a result of this transaction, the financial results for our flow business will be recorded in discontinued operations on a net basis beginning with the second quarter 2010. These amounts are revenue of $15.1 million, gross profit of $5.3 million, operating expenses of $1.7 million and net income of $2.2 million, or $0.05 per diluted share in the quarter ended June 30, 2010. Comparable results for the flow business for the second quarter of 2009 were revenues of $3.7 million, gross profit of $0.6 million, operating expenses of $1.3 million and a net loss of $0.4 million, or $0.01 per diluted share. For comparative purposes, the financial results discussed below assume the adjustments for the divestiture have been made.

Excluding the flow business, sales for the second quarter of 2010 increased 43.6% to $100.1 million from $69.7 million in the first quarter of 2010, and up substantially from $31.9 million in the second quarter of 2009.

Gross margin for the second quarter was 44.5%, compared with 41.9% in the first quarter of 2010, as a result of higher revenues and leverage from overhead absorption. This compares to gross margin of 22.8% in the same period last year.

Operating expenses for the second quarter increased to $31.5 million. This increase was significantly driven by the addition of approximately two months of operating costs associated with the acquisition of PV Powered, including an additional $767,000 of amortization of acquired intangible assets.

Second quarter net income from continuing operations was $11.5 million or $0.26 per diluted share, compared to net income from continuing operations of $4.9 million or $0.11 per diluted share in the first quarter of 2010. In the same period a year ago, net loss from continuing operations was $16.0 million or a loss of $0.38 per share.

Cash, cash equivalents and investments were $128.9 million at the end of the second quarter, versus $163.4 million in the first quarter reflecting the $35 million payment for the PV Powered acquisition.

Third Quarter 2010 Guidance

The Company anticipates third quarter 2010 results from continuing operations, without revenues from the flow business, to be within the following ranges:

• Sales of $130.0 million to $140.0 million
• Earnings per share of $0.36 to $0.44

Announcement of Agreement to Sell Aera Flow Controller and Related Product Lines to Hitachi Metals, Ltd.

This earnings release should be read in conjunction with our press release regarding the sale of the Aera flow business transaction dated July 21, 2010.

Second Quarter 2010 Conference Call

Management will host a conference call tomorrow, Thursday July 22, 2010, at 8:30 a.m. Eastern Daylight Time to discuss Advanced Energy's financial results. Domestic callers may access this conference call by dialing (888) 713-4717. International callers may access the call by dialing (816) 650-2836. Participants will need to provide a conference pass code 86106130. For a replay of this teleconference, please call (800) 642-1687 or (706) 645-9291, and enter the pass code 86106130. The replay will be available through 12:00 a.m. Eastern Daylight Time, July 24, 2010. A webcast will also be available on the Investor Relations Web page at http://ir.advanced-energy.com.

About Advanced Energy

Advanced Energy (NASDAQ: AEIS) is a global leader in innovative power and control technologies for high-growth, thin-film manufacturing and solar-power generation. Advanced Energy is headquartered in Fort Collins, Colorado, with dedicated support and service locations around the world. For more information, go to www.advanced-energy.com.

Forward-Looking Language

The Company’s expectations with respect to guidance to financial results for the third quarter ending September 30, 2010 are forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. 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 effects of global macroeconomic conditions upon demand for our products, the volatility and cyclicality of the industries the company serves, particularly the semiconductor industry, the timing of orders received from customers, the company's ability to realize cost improvement benefits, and unanticipated changes to management's 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.advancedenergy.com or by contacting Advanced Energy's investor relations at 970-407-6555. Forward-looking statements are made and based on information available to the company 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 Six Months Ended June 30, March 31, June 30, 2010 2009 2010 2010 2009   Sales $ 100,107 $ 31,898 $ 69,687 $ 169,794 $ 60,996 Cost of sales   55,548     24,616    

40,480

    96,028     47,644   Gross profit 44,559 7,282 29,207 73,766 13,352 44.5 % 22.8 % 41.9 % 43.4 % 21.9 % Operating expenses: Research and development 13,515 10,308 11,143 24,658 20,965 Selling, general and administrative 17,183 9,359 12,228 29,411 17,923 Impairment of goodwill - - - - 63,260 Amortization of intangible assets 767 - - 767 102 Restructuring charges   -     739     -     -     4,135   Total operating expenses   31,465     20,406     23,371     54,836     106,384     Income (loss) from operations 13,094 (13,124 ) 5,836 18,930 (93,032 ) Other income, net   220     627     386     606     909   Income (loss) from operations before income taxes 13,314 (12,497 ) 6,222 19,536 (92,123 ) Provision (benefit) for income taxes   1,857     3,110     1,371     3,228     2,602   Net income (loss) from continuing operations $ 11,457   $ (15,607 ) $ 4,851   $ 16,308   $ (94,725 )   Basic earnings (loss) per share $ 0.27 $ (0.37 ) $ 0.12 $ 0.38 $ (2.26 ) Diluted earnings (loss) per share $ 0.26 $ (0.37 ) $ 0.11 $ 0.38 $ (2.26 )   Basic weighted-average common shares outstanding 42,806 41,948 42,074 42,440 41,915 Diluted weighted-average common shares outstanding 43,327 41,948 42,680 43,004 41,915           GAIN (LOSS) FROM DISCONTINUED OPERATIONS, NET OF INCOME TAXES $ 2,162   $ (427 ) $ 1,366   $ 3,529   $ (1,072 )   BASIC EARNINGS (LOSS) PER SHARE $ 0.05 $ (0.01 ) $ 0.03 $ 0.08 $ (0.03 ) DILUTED EARNINGS (LOSS) PER SHARE $ 0.05 $ (0.01 ) $ 0.03 $ 0.08 $ (0.03 )           NET INCOME (LOSS) $ 13,619   $ (16,034 ) $ 6,217   $ 19,836   $ (95,797 )   BASIC EARNINGS (LOSS) PER SHARE $ 0.32 $ (0.38 ) $ 0.15 $ 0.47 $ (2.29 ) DILUTED EARNINGS (LOSS) PER SHARE $ 0.31 $ (0.38 ) $ 0.15 $ 0.46 $ (2.29 )   BASIC WEIGHTED—AVERAGE COMMON SHARES OUTSTANDING 42,806 41,948 42,074 42,440 41,915 DILUTED WEIGHTED—AVERAGE COMMON SHARES OUTSTANDING 43,327 41,948 42,680 43,004 41,915   CONDENSED CONSOLIDATED BALANCE SHEETS (in thousands)     June 30, December 31, 2010 2009   ASSETS   Current assets: Cash and cash equivalents $ 116,795 $ 133,106 Marketable securities 12,066 44,401 Accounts receivable, net 75,175 50,267 Inventories, net 54,515 28,567 Deferred income taxes 9,183 9,223 Income taxes receivable 3,245 - Assets held for sale 32,276 26,460 Other current assets   7,532   5,641 Total current assets 310,787 297,665   Property and equipment, net 22,244 18,687   Deposits and other 8,814 9,295 Goodwill and intangibles, net 98,139 - Deferred income tax assets, net   20,268   19,479 Total assets $ 460,252 $ 345,126     LIABILITIES AND STOCKHOLDERS' EQUITY   Current liabilities: Accounts payable $ 35,549 $ 23,802 Other accrued expenses 30,750 24,055 PVP Contingent liability 38,967 - Liabilities of business held for sale   1,493   1,477 Total current liabilities 106,759 49,335   Long-term liabilities   42,860   17,457   Total liabilities 149,619 66,791   Stockholders' equity   310,633   278,335 Total liabilities and stockholders' equity $ 460,252 $ 345,126   RECONCILIATION OF CONSOLIDATED STATEMENTS OF OPERATIONS (LOSS) FOR DISCONTINUED OPERATIONS (in thousands)     March 31, 2010   June 30, 2010 Consolidated  

DiscontinuedOperations

 

Adjusted Q12010

Consolidated  

DiscontinuedOperations

 

Adjusted Q22010

Total sales $ 81,552 $ 11,865 $ 69,687 $ 115,191 $ 15,084 $ 100,107 Cost of sales 48,444 7,964 40,480 65,302 9,754 55,548 Gross profit 33,108 3,901 29,207 49,889 5,330 44,559 OPERATING EXPENSES: R&D 11,590 447 11,143 13,959 444 13,515 Selling, general and administrative 13,283 1,054 12,228 18,342 1,159 17,183 Intangible amortization 122 122 - 891 124 767 Total Operating Expenses 24,995 1,623 23,371 33,192 1,727 31,465 Operating Income 8,113 2,278 5,836 16,697 3,603 13,094 Other Income (Expense) 386 - 386 220 - 220 Pre-tax income 8,499 2,278 6,222 16,917 3,603 13,314 Provision for income taxes 2,282 911 1,371 3,299 1,442 1,857 Net Income $ 6,217 $ 1,367 $ 4,851 $ 13,618 $ 2,161 $ 11,457 Diluted Earnings per Share $ 0.15 $ 0.03 $ 0.11 $ 0.31 $ 0.05 $ 0.26