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Advanced Energy Industries, Inc.
Advanced Energy Reports Fourth Quarter and Year-End 2005 Results
FORT COLLINS, Colo., Feb. 16—Advanced Energy Industries, Inc. (Nasdaq: AEIS) today reported financial results for the fourth quarter and year ended December 31, 2005.
For the 2005 fourth quarter, sales were $80.4 million, up 2.1 percent compared to $78.8 million in the third quarter of 2005, and down 5.2 percent compared to $84.8 million in the fourth quarter of 2004. Gross profit was $30.2 million, or 37.6 percent of sales for the fourth quarter of 2005, compared to $28.9 million, or 36.7 percent of sales in the third quarter of 2005, and $13.3 million, or 15.7 percent of sales in the fourth quarter of 2004.
Income from continuing operations was $5.0 million, or $0.11 per diluted share, in the fourth quarter of 2005, compared to a loss from continuing operations of $4.2 million, or $0.11 per share, in the third quarter of 2005, and a loss from continuing operations of $23.3 million, or $0.71 per share, in the fourth quarter of 2004. Fourth quarter 2005 income from continuing operations reflects a tax rate of 21 percent, which is lower than the Company's anticipated tax rate of 40 percent due to the mix of foreign and domestic income in the respective taxing jurisdictions, allowing the utilization of the net operating loss carryforwards.
During the fourth quarter 2005, the Company sold its IKOR technology assets, resulting in income from discontinued operations of $5.0 million, or $0.11 per diluted share. Net income from discontinued operations in the third quarter of 2005 was $312,000, or $0.01 per diluted share, and $340,000, or $0.01 per diluted share in the fourth quarter of 2004.
Fourth quarter 2005 net income was $10.0 million, or $0.22 per diluted share, compared to a net loss of $3.9 million, or $0.10 per share in the third quarter of 2005, and a net loss of $23.0 million, or $0.70 per share in the fourth quarter of 2004.
The third quarter 2005 net loss included a $3.0 million litigation settlement, $2.1 million related to the early retirement of the convertible debt, and a non-cash charge of $1.1 million related to the write-off of deferred debt issuance costs. Included in the fourth quarter 2004 net loss were $19.8 million in pre-tax charges primarily attributable to increased excess and obsolete inventory reserves, a change in an accounting estimate related to demonstration equipment, employee severance and termination costs, and intangible asset impairments.
Dr. Hans Betz, president and chief executive officer of Advanced Energy, said, "We continue to improve our gross margin even on relatively flat sequential sales volumes," said Dr. Betz. "Incremental operating margin above our $66 million break even level was approximately 44 percent, and we expect additional improvements throughout the year as we continue to benefit from the increasing capability of our worldwide manufacturing operations."
Sales for the 2005 fiscal year were $325.5 million, a 14.5 percent decrease compared to net sales of $380.5 million in fiscal year 2004. Net income for the year was $12.8 million, or $0.34 per diluted share, compared to net loss of $12.7 million, or $0.39 per share in fiscal year 2004. Net income from continuing operations was $3.6 million, or $0.10 per diluted share, in fiscal year 2005, compared to a loss from continuing operations of $14.7 million, or $0.45 per share, in fiscal year 2004.
"We are currently experiencing increased demand for our innovative portfolio of solutions that enable advanced processing," said Dr. Betz. "During the fourth quarter, we made progress in further penetrating emerging opportunities in the solar market with both our DC and RF power platforms, and in flat panel display with our RF technology for a new etch application. We are well-positioned to apply our technology leadership and worldwide manufacturing excellence to a diverse set of high-growth, high-profitability opportunities."
Dr. Betz continued, "Based on improving order trends, we currently expect first quarter 2006 sales to be $88 million to $91 million. We anticipate earnings per share in the $0.17 to $0.19 range, including estimated stock-based compensation expense of $600,000, or $0.01 per diluted share after tax, due to our adoption of SFAS 123(R) in the first quarter of 2006."
Fourth Quarter and Year-End 2005 Conference Call
Management will host a conference call today, Thursday, February 16, 2006 at 5:00 pm Eastern time 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 4199312. The replay will be available through Thursday, February 23, 2006. There will also be a webcast available at www.advanced-energy.com, and on the investor relations page 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 National Market under the symbol AEIS. For more information, please visit our corporate website: www.advanced-energy.com.
Safe Harbor Statement
This press release contains certain forward-looking statements, including the company's expectations with respect to Advanced Energy's financial results for the first quarter of 2006. 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 semiconductor, semiconductor capital equipment and flat panel display industries, Advanced Energy's ongoing ability to develop new products in a highly competitive industry characterized by increasingly rapid technological changes, and other risks described in Advanced Energy's Form 10-K, Forms 10-Q and other reports and statements, as 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. 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 Years Ended
December 31, September 30, December 31,
2005 2004 2005 2005 2004
Sales $80,387 $84,811 $78,756 $325,482 $380,537
Cost of sales 50,196 71,536 49,834 208,401 265,911
Gross profit 30,191 13,275 28,922 117,081 114,626
development 9,635 11,987 9,610 39,720 49,004
administrative 13,671 12,305 13,421 53,631 54,174
assets 481 538 504 2,050 3,925
charges 166 3,670 210 2,706 3,912
settlement -- -- 3,000 3,000 --
charge -- 3,752 -- -- 3,752
assets -- 3,326 -- -- 3,326
expenses 23,953 35,578 26,745 101,107 118,093
from operations 6,238 (22,303) 2,177 15,974 (3,467)
(expense), net 123 (1,690) (4,796) (7,479) (7,256)
income taxes 6,361 (23,993) (2,619) 8,495 (10,723)
income taxes (1,330) 648 (1,584) (4,873) (3,947)
operations 5,031 (23,345) (4,203) 3,622 (14,670)
Gain on sale of
assets 5,210 -- -- 7,855 --
operations (216) 340 312 1,340 1,923
income taxes -- -- -- -- --
operations 4,994 340 312 9,195 1,923
Net income (loss) $10,025 $(23,005) $(3,891) $12,817 $(12,747)
Net income (loss)
per basic share
operations $0.11 $(0.71) $(0.11) $0.10 $(0.45)
operations $0.11 $0.01 $0.01 $0.25 $0.06
(loss) per share $0.23 $(0.70) $(0.10) $0.35 $(0.39)
Net income (loss)
per diluted share
operations $0.11 $(0.71) $(0.11) $0.10 $(0.45)
operations $0.11 $0.01 $0.01 $0.25 $0.06
(loss) per share $0.22 $(0.70) $(0.10) $0.34 $(0.39)
outstanding 44,416 32,698 38,366 37,084 32,649
outstanding 44,902 32,698 38,366 37,434 32,649
CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)
December 31, December 31,
Cash and cash equivalents $52,874 $38,404
Marketable securities 6,811 69,578
Accounts receivable, net 68,992 72,053
Inventories, net 56,199 73,224
Other current assets 6,773 6,140
Total current assets 191,649 259,399
Property and equipment, net 39,294 44,746
Deposits and other 3,808 6,468
Goodwill and intangibles, net 69,843 80,308
Customer service equipment, net 2,407 2,968
Deferred debt issuance costs, net -- 2,086
Deferred income tax assets, net 3,116 --
Total assets $310,117 $395,975
LIABILITIES AND STOCKHOLDERS' EQUITY
Trade accounts payable $22,028 $17,683
Other accrued expenses 23,977 28,615
Current portion of capital leases and
senior borrowings 1,216 3,726
Accrued interest payable on
convertible subordinated notes -- 2,460
Total current liabilities 47,221 52,484
Capital leases and senior borrowings 2,974 4,679
Deferred income tax liabilities, net -- 3,709
Convertible subordinated notes payable -- 187,718
Other long-term liabilities 2,492 2,407
Total long-term liabilities 5,466 198,513
Total liabilities 52,687 250,997
Stockholders' equity 257,430 144,978
Total liabilities and stockholders' equity $310,117 $395,975
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
Years Ended December 31,
NET CASH PROVIDED BY (USED IN)
OPERATING ACTIVITIES $36,051 $(11,378)
NET CASH PROVIDED BY INVESTING ACTIVITIES 67,032 12,329
NET CASH USED IN FINANCING ACTIVITIES (85,972) (5,191)
EFFECT OF CURRENCY TRANSLATION ON CASH (2,641) 1,122
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 14,470 (3,118)
CASH AND EQUIVALENTS, beginning of period 38,404 41,522
CASH AND EQUIVALENTS, end of period $52,874 $38,404