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Advanced Energy Announces 2006 Fourth Quarter and Record Year-End Financial Results
FORT COLLINS, Colo., Feb 07, 2007—Advanced Energy Industries, Inc. (Nasdaq: AEIS) today announced financial results for the fourth quarter and year ended December 31, 2006. Sales were $104.5 million for the fourth quarter of 2006, down 3% compared to $107.7 million in the third quarter of 2006, and up 30% compared to $80.4 million in the fourth quarter of 2005. Operating profit for the fourth quarter of 2006 was $16.6 million, or 16% of sales, compared to $18.3 million, or 17% of sales in the third quarter of 2006, and $6.2 million, or 8% of sales in the fourth quarter of 2005.
Fourth quarter 2006 income from continuing operations was $39.4 million, or $0.87 per diluted share, compared to $17.0 million, or $0.38 per diluted share in the third quarter of 2006, and $5.0 million, or $0.11 per diluted share in the fourth quarter of 2005. In the fourth quarter of 2006, the Company reversed its valuation allowance on its deferred tax assets and accrued taxes for the year at the full tax rate, which resulted in a net tax benefit of $23.5 million, or $0.52 per diluted share. Excluding the net tax benefit of $23.5 million related to income taxes, and using the same effective tax rate as the third quarter of 2006, income from continuing operations in the fourth quarter of 2006 would have been $15.9 million, or $0.35 per diluted share. Sales for 2006 were a record $410.7 million, a 26% increase over $325.5 million in 2005. Net income was $88.3 million, or $1.95 per diluted share, for 2006 including the income tax benefit mentioned above. Net income for 2005 was $12.8 million, or $0.34 per diluted share. Dr. Hans Betz, president and chief executive officer of Advanced Energy, said, "2006 was an outstanding year as the results of our initiatives improved our financial performance significantly. Our operating model complements the capability of our global infrastructure, and positions the company for future profitable growth. Our strategy, which focused on power conversion and flow control technologies, has enabled our growth throughout the year, particularly in sales to non-semiconductor markets. Sales to the solar industry tripled in 2006 over 2005, and sales to the architectural glass industry set a company record, more than doubling over 2005. We believe that we have built a global team and a platform that is scalable and capable of capturing future growth opportunities." First Quarter 2007 Guidance The Company anticipates first quarter 2007 guidance to be: * Sales of $102 million to $106 million. * Earnings per share of $0.26 to $0.29. Without the effect of reversing the valuation allowance related to the deferred tax assets, our guidance would be $0.35 to $0.40 per share based on a 12% tax rate. * Effective tax rate of 35%. The financial measures set forth above that present the financial results excluding certain charges and benefits, are not in accordance with GAAP. The Company believes that these non-GAAP financial measures provide further insight into the results of operations and enhance the consistency and comparability of those results to results in prior periods because they assist shareholder understanding of the effects of certain charges and benefits on the quarter's results. Fourth Quarter and Year-End 2006 Conference Call Management will host a conference call today, Wednesday, February 7, 2007 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 8117391. The replay will be available through February 14, 2007. 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 first quarter of 2007 as well as other matters discussed in this press 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, the timing of orders received from our customers, our ability to realize cost improvement benefits from the additional global operations 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 970-407-6732. 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 Years Ended
December 31, September 30, December 31,
2006 2005 2006 2006 2005
Sales $104,533 $80,387 $107,688 $410,742 $325,482
Cost of sales 59,639 50,196 60,674 235,524 208,401
Gross profit 44,894 30,191 47,014 175,218 117,081
Operating expenses:
Research and
development 12,240 9,635 11,345 44,848 39,720
Selling, general
and administrative 15,535 13,671 16,856 61,037 53,631
Amortization of
intangible assets 450 481 453 1,833 2,050
Restructuring
charges 20 166 31 111 2,706
Litigation
settlement -- -- -- -- 3,000
Total
operating
expenses 28,245 23,953 28,685 107,829 101,107
Income from operations 16,649 6,238 18,329 67,389 15,974
Other income (expense),
net 1,060 123 1,044 4,677 (7,479)
Income from continuing
operations before
income taxes 17,709 6,361 19,373 72,066 8,495
Benefit (provision) for
income taxes 21,697 (1,330) (2,381) 15,118 (4,873)
Income from continuing
operations 39,406 5,031 16,992 87,184 3,622
Gain on sale of
discontinued assets 1,000 5,210 -- 1,138 7,855
Results of discontinued
operations -- (216) -- -- 1,340
Income from
discontinued
operations 1,000 4,994 -- 1,138 9,195
Net income $40,406 $10,025 $16,992 $88,322 $12,817
Net income per basic
share
Income from
continuing
operations $0.88 $0.11 $0.38 $1.95 $0.10
Income from
discontinued
operations $0.02 $0.11 $-- $0.03 $0.25
Basic earnings
per share $0.90 $0.23 $0.38 $1.98 $0.35
Net income per diluted
share
Income from
continuing
operations $0.87 $0.11 $0.38 $1.93 $0.10
Income from
discontinued
operations $0.02 $0.11 $-- $0.03 $0.25
Diluted earnings
per share $0.89 $0.22 $0.38 $1.95 $0.34
Basic weighted-average
common shares
outstanding 44,826 44,416 44,762 44,721 37,084
Diluted weighted-average
common shares
outstanding 45,345 44,902 45,166 45,265 37,434
CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)
(in thousands)
December 31, December 31,
2006 2005
ASSETS
Current assets:
Cash and cash equivalents $58,240 $52,874
Marketable securities 85,978 6,811
Accounts receivable, net 71,956 64,900
Inventories, net 52,778 56,199
Deferred income taxes 24,434 --
Other current assets 7,341 10,865
Total current assets 300,727 191,649
Property and equipment, net 33,571 39,294
Deposits and other 2,640 3,808
Goodwill and intangibles, net 65,584 69,843
Customer service equipment, net 832 2,407
Deferred income tax assets, net 8,549 3,116
Total assets $411,903 $310,117
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Trade accounts payable $16,310 $22,028
Other accrued expenses 36,488 23,977
Current portion of capital leases
and senior borrowings 131 2,011
Total current liabilities 52,929 48,016
Long-term liabilities:
Capital leases and senior borrowings 198 2,179
Other long-term liabilities 2,986 2,492
Total long-term liabilities 3,184 4,671
Total liabilities 56,113 52,687
Stockholders' equity 355,790 257,430
Total liabilities and
stockholders' equity $411,903 $310,117
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
RECONCILIATION OF GAAP EARNINGS TO "ADJUSTED" EARNINGS
(in thousands, except per share data)
Three Months Ended Twelve Months Ended
December 31, 2006 December 31, 2006
GAAP Adjustment "Adjusted" GAAP Adjustment "Adjusted"
Sales $104,533 $-- $104,533 $410,742 $-- $410,742
Cost of sales 59,639 -- 59,639 235,524 -- 235,524
Gross profit 44,894 -- 44,894 175,218 -- 175,218
Operating
expenses 28,245 -- 28,245 107,829 -- 107,829
Income from
operations 16,649 -- 16,649 67,389 -- 67,389
Other income
(expense), net 1,060 -- 1,060 4,677 -- 4,677
Income from
continuing
operations
before income
taxes 17,709 -- 17,709 72,066 -- 72,066
Benefit
(provision)
for income
taxes 21,697 (23,492)(1) (1,795) 15,118 (23,492)(1) (8,374)
Income from
continuing
operations 39,406 (23,492) 15,914 87,184 (23,492) 63,692
Gain on sale
of discontinued
assets 1,000 -- 1,000 1,138 -- 1,138
Income from
discontinued
operations 1,000 -- 1,000 1,138 -- 1,138
Net income $40,406 $(23,492) $16,914 $88,322 $(23,492) $64,830
Net income per
basic share
Income from
continuing
operations $0.88 $(0.52) $0.36 $1.95 $(0.53) $1.43
Income from
discontinued
operations $0.02 $-- $0.02 $0.03 $-- $0.03
Basic earnings
per share $0.90 $(0.52) $0.38 $1.98 $(0.53) $1.45
Net income per
diluted share
Income from
continuing
operations $0.87 $(0.52) $0.35 $1.93 $(0.52) $1.41
Income from
discontinued
operations $0.02 $-- $0.02 $0.03 $-- $0.03
Diluted
earnings per
share $0.89 $(0.52) $0.37 $1.95 $(0.52) $1.43
Basic weighted-
average common
shares
outstanding 44,826 44,721
Diluted weighted-
average common
shares
outstanding 45,345 45,265
(1) To eliminate the effect of the reversal of the valuation allowance on
net deferred tax assets at December 31, 2006. We assess the
recoverability of our net deferred tax assets on a quarterly basis,
in accordance with SFAS No. 109, to determine if it is more likely
than not that our net deferred tax assets will be realized. Based
on our 2006 operating results, our management concluded that it was
more likely than not that the majority of net deferred tax assets
would be realized and recorded a reduction in the valuation allowance
of approximately $23.5 million in the fourth quarter of 2006.
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