For more information, contact:

Lawrence D. Firestone
Advanced Energy Industries, Inc.
970.407.6570
lawrence.firestone@aei.com 
 

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.