For more information, contact:

Lawrence D. Firestone
Advanced Energy Industries, Inc.
970.407.6570
lawrence.firestone@aei.com
Annie Leschin/Brooke Deterline
Advanced Energy Industries, Inc.
970.407.6555
ir@aei.com


ADVANCED ENERGY ANNOUNCES 2007 THIRD QUARTER FINANCIAL RESULTS


Fort Collins, Colo., October 24, 2007
—Advanced Energy Industries, Inc. (Nasdaq GM: AEIS) today announced financial results for the third quarter ended September 30, 2007. Sales were $90.5 million for the third quarter of 2007, consistent with the Company’s revised guidance given on August 30, 2007. This represented a decrease of 16.0% from $107.7 million in the third quarter of 2006, and a sequential decline of 12.1% compared to $103.0 million in the second quarter of 2007.


Gross margin for the third quarter was 40.6%, down from 43.7% in the third quarter of 2006, and down from 43.6% in the second quarter of 2007. This was primarily due to lower revenues, an additional charge of $2.2 million to cost of goods sold, and costs related to the transition of manufacturing from Stolberg, Germany to China. The additional charges were related to a change in the estimate of warranty expense for two products, which resulted in a 2.4% reduction in gross margin. The company also incurred a net charge of $1.4 million related to a foreign exchange loss during the quarter, as the Yen and Euro strengthened relative to the US dollar. Net income for the third quarter of 2007 was $5.9 million, or $0.13 per diluted share, compared to $17.0 million, or $0.38 per diluted share in the third quarter of 2006, and $11.7 million or $0.25 in the second quarter of 2007.


“Our revenue was in line with our pre announcement due to the weakness in the semiconductor equipment market. The gross margin did not meet our objective due to the increased warranty expense. In the near term we expect to see continued softness in the semiconductor equipment and flat panel display markets with modest growth in our other markets,” said Dr. Hans Betz, president and chief executive officer of Advanced Energy. “We made additional progress in the strategic diversification of our business notably with the successful introduction of our Solaron™ inverter product line."


Fourth Quarter 2007 Guidance


The Company anticipates fourth quarter 2007 results to be within the following ranges:


• Sales of $86 million to $90 million.

• Earnings per share of $0.12 to $0.14

 


Third Quarter 2007 Conference Call


Management will host a conference call today, Wednesday, October 24, 2007 at 5:00 pm eastern daylight 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)-634-7937. Participants will need to provide a conference passcode 20284265. For a replay of this teleconference, please call (800)-642-1687 or (706) 645-9291, and enter the passcode 20284265. The replay will be available through October 27, 2007. A webcast will also be available on the Investor Relations webpage at http://ir.advanced-energy.com.

 

 

About Advanced Energy®

Advanced Energy® develops innovative power and control technologies that drive high-growth, plasma thin-film manufacturing processes worldwide, including semiconductors, flat panel displays, data storage products, solar cells, architectural glass, and other advanced product applications. Advanced Energy also develops grid connect inverters for the solar energy market.

The Company’s expectations with respect to financial results for the fourth quarter of 2007 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 volatility and cyclicality of the industries the company serves, the timing of orders received from customers, the company's ability to realize cost improvement benefits from the global operations initiatives underway, the company’s dependence on sole and limited source suppliers, fluctuating currency rates, 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.advanced-energy.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 Nine Months Ended
September 30, June 30, September 30,
2007 2006 2007 2007 2006

Sales $90,492 $107,688 $103,049 $300,863 $306,209
Cost of sales 53,765 60,674 58,094 170,873 175,885
Gross profit 36,727 47,014 44,955 129,990 130,324

Operating expenses:
Research and development 12,937 11,345 12,911 37,883 32,608
Selling, general and
administrative 15,537 16,856 15,414 46,169 45,502
Amortization of
intangible assets 201 453 202 727 1,383
Restructuring charges 556 31 158 3,505 91
Total operating
expenses 29,231 28,685 28,685 88,284 79,584

Income from operations 7,496 18,329 16,270 41,706 50,740

Other income, net 308 1,044 1,505 3,367 3,617
Income from continuing
operations before income
taxes 7,804 19,373 17,775 45,073 54,357
Provision for income taxes (1,948) (2,381) (6,108) (14,879) (6,580)
Income from continuing
operations 5,856 16,992 11,667 30,194 47,777

Gain on sale of
discontinued assets - - - - 138

Income from discontinued
operations - - - - 138

Net income $5,856 $16,992 $11,667 $30,194 $47,915

Net income per basic share
Income from continuing
operations $0.13 $0.38 $0.26 $0.67 $1.07
Income from discontinued
operations $- $- $- $- $0.00
Basic earnings per share $0.13 $0.38 $0.26 $0.67 $1.07

Net income per diluted
share
Income from continuing
operations $0.13 $0.38 $0.25 $0.66 $1.06
Income from discontinued
operations $- $- $- $- $0.00
Diluted earnings per
share $0.13 $0.38 $0.25 $0.66 $1.06

Basic weighted-average
common shares
outstanding 45,248 44,762 45,161 45,117 44,679

Diluted weighted-average
common shares
outstanding 45,761 45,166 45,992 45,696 45,168



CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)
(in thousands)

September 30, December 31,
2007 2006

ASSETS

Current assets:
Cash and cash equivalents $76,878 $58,240
Marketable securities 108,154 85,978
Accounts receivable, net 69,704 74,794
Inventories, net 57,388 52,778
Deferred income taxes 21,740 24,434
Assets held for sale 1,345 -
Other current assets 5,877 4,503
Total current assets 341,086 300,727

Property and equipment, net 30,677 33,571

Deposits and other 8,296 2,640
Goodwill and intangibles, net 67,013 65,584
Customer service equipment, net 939 832
Deferred income tax assets, net 4,222 8,549

Total assets $452,233 $411,903


LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:
Trade accounts payable $15,578 $16,310
Other accrued expenses 28,488 36,619
Total current liabilities 44,066 52,929

Long-term liabilities 9,851 3,184

Total liabilities 53,917 56,113

Stockholders' equity 398,316 355,790
Total liabilities and stockholders'
equity $452,233 $411,903

SOURCE Advanced Energy Industries, Inc. - 10/24/2007

CONTACT:
Lawrence D. Firestone,
+1-970-407-6570, lawrence.firestone@aei.com, or
Annie Leschin or Brooke Deterline,
+1-970-407-6555, ir@aei.com, all of Advanced Energy Industries, Inc.
Web site: http://www.advanced-energy.com