For more information, contact:

Danny Herron
Advanced Energy Industries, Inc.
970.407.6570
danny.herron@aei.com
Annie Leschin/Vanessa Lehr
Advanced Energy Industries, Inc.
970.407.6555
ir@aei.com

Advanced Energy Announces Record Revenues and Inverter Sales for the Third Quarter 2010
FORT COLLINS, Colo., October 31, 2010 —Advanced Energy Industries, Inc. (Nasdaq GM:AEIS) today announced financial results for the third quarter ended September 30, 2010. Total sales for the third quarter were $141.0 million, another record for the company, with earnings of $0.40 per diluted share from continuing operations. The financials highlighted in this release exclude results from the Aera® mass flow controller business, which was sold to Hitachi Metals, Ltd. on October 15, 2010. Results for the quarter include a full quarter of operations from PV Powered, Inc.

"We had another exceptional quarter with all key areas of our business growing significantly. This record performance was highlighted by the sixth straight quarter of growth in semiconductor revenues, significant acceleration of our inverter business, now 27% of sales, and strong operating leverage," said Dr. Hans Betz, chief executive officer. "The aggressive capacity additions and investment in our inverter business have proven very successful, as Advanced Energy was recently ranked #1 in the 3-phase North America solar PV inverter market, according to IMS Research. With the diversification of Advanced Energy into high growth power conversion markets, particularly inverters, we are well positioned to capitalize on future opportunities and expand our business.

"Semiconductor sales rose 12.5% sequentially to $49.4 million, representing 35.0% of total sales for the quarter. Sales to the non-semiconductor thin film markets increased 49.8% sequentially to $41.1 million, representing 29.2% of total sales for the quarter. Inverter sales grew substantially to $37.4 million, or 26.5% of total sales compared to $14.4 million in the second quarter. Service revenue also exhibited healthy growth, increasing to $13.2 million, or 9.3% of total sales, compared to $10.7 million last quarter.

Bookings for the third quarter reached a record $160.3 million, increasing 17.2% compared to $136.7 million in the second quarter of 2010. This resulted in a book-to-bill ratio of 1.14:1 for the third quarter. Ending backlog for the third quarter increased 17.7% sequentially to $128.5 million, compared to $109.2 million at the end of the second quarter of 2010.

Gross margin for the third quarter was 43.1%, compared with 44.5% in the second quarter of 2010 and 31.9% in the same period last year. The strong growth in inverter revenues this quarter drove inverters to a larger percentage of total sales, pushing margins down in the short-term.

Operating expenses for the third quarter increased to $38.4 million compared to $31.5 million in the second quarter in order to support higher sales volumes, and as a result of an additional full quarter of PV Powered expenses compared to just two months in the second quarter. As a percent of sales, operating costs were 27.2% compared to 31.4% of sales in the prior quarter. Operating costs during the quarter also included $1.2 million in amortization of acquired intangible assets related to the acquisition of PV Powered. Third quarter net income from continuing operations was $17.6 million or $0.40 per diluted share, compared to net income from continuing operations of $11.5 million or $0.26 per diluted share in the second quarter of 2010. In the same period a year ago, net loss from continuing operations was $8.4 million or a loss of $0.20 per share.

Cash and investments were $112.4 million at the end of the third quarter, compared to $128.9 million in the second quarter due to investment in capital equipment as well as inventory purchases to support our growing backlog of inverter sales.

Fourth Quarter 2010 Guidance

The Company anticipates fourth quarter 2010 results from continuing operations, to be within the following ranges:

  • Sales of $140 million to $150 million
  • Gross profit of 41% to 43%
  • Earnings per share of $0.36 to $0.42
Third Quarter 2010 Conference Call

Management will host a conference call tomorrow, Monday, November 1, 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) 771-4371. International callers may access the call by dialing (847) 585-4405. Participants will need to provide a conference pass code 28184917. For a replay of this teleconference, please call (888) 843-7419 or (630) 652-3042, and enter the pass code 28184917. The replay will be available for two weeks following the conference call. 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 http://www.advanced-energy.com.

Forward-Looking Language

The Company's expectations with respect to guidance to financial results for the fourth quarter ending December 31, 2010 and statements that are not historical information 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, the ability to source materials and manufacture products, 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,
    2010   2009   2010   2010   2009
                     
Sales   $ 140,966     $ 43,452     $ 100,107     $ 310,760     $ 103,766  
Cost of sales     80,276       29,597       55,548       176,304       77,244  
Gross profit     60,690       13,855       44,559       134,456       26,522  
      43.1 %     31.9 %     44.5 %     43.3 %     25.6 %
Operating expenses:                    
Research and development     16,672       9,448       13,515       41,329       30,413  
Selling, general and administrative     20,545       9,801       17,183       49,956       27,723  
Impairment of goodwill     -       -       -       -       63,260  
Amortization of intangible assets     1,177       -       767       1,944       102  
Restructuring charges     -       235       -       -       4,370  
Total operating expenses     38,394       19,484       31,465       93,229       125,868  
                     
Income (loss) from operations     22,296       (5,629 )     13,094       41,227       (99,346 )
                     
Other income, net     1,224       506       220       1,828       1,415  
Income (loss) from operations before income taxes     23,520       (5,123 )     13,314       43,055       (97,931 )
Provision for income taxes     5,964       3,229       1,857       9,192       5,557  
Net income (loss) from continuing operations     17,556       (8,352 )     11,457       33,863       (103,488 )
                     
Basic earnings (loss) per share from continuing operations   $ 0.41     $ (0.20 )   $ 0.27     $ 0.79     $ (2.47 )
Diluted earnings (loss) per share from continuing operations   $ 0.40     $ (0.20 )   $ 0.26     $ 0.78     $ (2.47 )
                     
Gain (loss) from discontinued operations, net of income taxes     2,392       (79 )     2,162       5,921       (740 )
                     
Basic earnings (loss) per share from discontinuing operations   $ 0.06     $ (0.00 )   $ 0.05     $ 0.14     $ (0.02 )
Diluted earnings (loss) per share from discontinuing operations   $ 0.05     $ (0.00 )   $ 0.05     $ 0.14     $ (0.02 )
                     
Net Income (loss)   $ 19,948     $ (8,431 )   $ 13,619     $ 39,784     $ (104,228 )
                     
Basic earnings (loss) per share   $ 0.46     $ (0.20 )   $ 0.32     $ 0.93     $ (2.48 )
Diluted earnings (loss) per share   $ 0.45     $ (0.20 )   $ 0.31     $ 0.92     $ (2.48 )
                     
Basic weighted-average common shares outstanding     43,254       42,004       42,806       42,711       41,944  
Diluted weighted-average common shares outstanding     43,849       42,004       43,327       43,293       41,944  
 
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)
         
    September 30,   December 31,
    2010   2009
         
ASSETS        
         
Current assets:        
Cash and cash equivalents   $ 101,566   $ 133,106
Marketable securities     10,834     44,401
Accounts receivable, net     112,457     50,267
Inventories, net     66,691     28,567
Deferred income taxes     9,669     9,222
Income taxes receivable     4,325     -
Assets held for sale     30,315     26,460
Other current assets     8,857     5,641
Total current assets     344,714     297,664
         
Property and equipment, net     24,732     18,687
         
Deposits and other     8,829     9,295
Goodwill and intangibles, net     97,068     -
Deferred income tax assets, net     20,549     19,479
Total assets   $ 495,892   $ 345,125
         
         
LIABILITIES AND STOCKHOLDERS' EQUITY        
         
Current liabilities:        
Accounts payable   $ 36,153   $ 23,802
Other accrued expenses     37,816     24,055
Acquisition related contingent liability     38,967     -
Liabilities of business held for sale     1,992     1,477
Total current liabilities     114,928     49,334
         
Long-term liabilities     43,224     17,457
         
Total liabilities     158,152     66,791
         
Stockholders' equity     337,740     278,334
Total liabilities and stockholders' equity   $ 495,892   $ 345,125

SOURCE: Advanced Energy Industries, Inc.