For more information, contact:

Mike El-Hillow
Advanced Energy Industries, Inc.
Cathy Kawakami,
Advanced Energy Industries, Inc.
Advanced Energy Reports Second Quarter 2004 Results
FORT COLLINS, Colo., July 21—Advanced Energy Industries, Inc. (Nasdaq: AEIS) today reported financial results for the second quarter ended June 30, 2004. Advanced Energy offers a comprehensive suite of process-centered solutions critical to the production of semiconductors, flat panel displays, data storage products, architectural glass and other advanced product applications.


For the 2004 second quarter, revenues were $108.9 million, up 73 percent from $62.9 million for the second quarter of 2003, and up 4 percent compared to revenues of $104.5 million for the first quarter of 2004.

Net income for the second quarter of 2004 was $4.5 million, or $0.13 per diluted share, compared to a net loss of $5.8 million, or $0.18 per share in the second quarter of 2003. This compares to first quarter 2004 net income of $6.9 million, or $0.21 per diluted share, which includes $1.0 million in pretax gains resulting from the sale of certain marketable securities and the sale of the Company's thermal control business.

Revenue for the six months ended June 30, 2004 was $213.4 million versus $119.1 million for the first six months of 2003. Net income for the 2004 six-month period was $11.4 million, or $0.34 per diluted share, compared to a net loss for the 2003 six-month period of $14.4 million, or $0.45 per share.

Doug Schatz, chairman and chief executive officer, said, "As we had anticipated, semiconductor order momentum leveled quarter-to-quarter, as end users entered an absorption phase following several months of robust 200mm-driven equipment shipments. While we had a modest increase in sales, we are disappointed by our operating results. The continuation of higher than expected China-related and Asian-based supplier transition costs, and product mix, negatively impacted gross margin. The decision to manufacture high volume products in China is the right strategic move long term. However, the continuation of dual manufacturing with our US-based facility on certain product lines is negatively impacting gross margin to a greater degree than we planned. We are committed to reducing these transition costs and expect gross margin improvement by the end of 2004.

"Looking ahead, we continue to experience the effect of semiconductor manufacturers' cautious capital equipment purchasing patterns, despite some positive longer-term indicators. We anticipate third quarter revenue to be down 2 to 5 percent relative to the second quarter, with earnings per share in the range of $0.08 to $0.12.

"Advanced Energy is well-positioned with innovative products that drive advanced technology in all of our target markets. We continue to increase our market share, particularly through key design wins on 300mm tools in high-growth semiconductor applications and new generation flat panel display equipment. Our focus on innovation enables technological and market leadership, and we continue to extend that lead as our customers adopt increasingly complex manufacturing processes, requiring increased precision and control," said Mr. Schatz.

Second Quarter Conference Call

Management will host a conference call today, Wednesday, July 21, 2004 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 6231797. The replay will be available through Wednesday, July 28, 2004. There will also be a webcast available at

About Advanced Energy

Advanced Energy is a global leader in the development and support of technologies critical to high-technology manufacturing processes used in the production of semiconductors, flat panel displays, data storage products, compact discs, digital video discs, 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:

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 third quarter of 2004. 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 and semiconductor capital equipment industries, Advanced Energy's ongoing ability to develop new products in a highly competitive industry characterized by increasingly rapid technological changes, Advanced Energy's ability to successfully integrate acquired companies' operations, 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 Copies may also be obtained from Advanced Energy's website at 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.


    (in thousands, except per share data)

                                        Three Months Ended   Six Months Ended
                                             June 30,            June 30,
                                          2004     2003      2004      2003

    Sales                               $108,869  $62,946  $213,356  $119,104
    Cost of sales                         71,907   42,673   137,980    80,881
    Gross profit                          36,962   20,273    75,376    38,223

    Operating expenses:
         Research and development         12,809   12,551    26,219    25,918
         Sales and marketing               8,012    8,261    16,049    16,591
         General and administrative        6,075    4,347    11,842     8,876
         Amortization of intangible
          assets                           1,125    1,171     2,295     2,271
         Restructuring charges               187      768       407     2,277
              Total operating expenses    28,208   27,098    56,812    55,933

    Income (loss) from operations          8,754   (6,825)   18,564   (17,710)

    Other expense, net                    (2,417)  (2,340)   (3,572)   (5,090)
    Income (loss) before income taxes      6,337   (9,165)   14,992   (22,800)

    (Provision) Benefit for income
     taxes                                (1,867)   3,391    (3,598)    8,436

    Net income (loss)                     $4,470  $(5,774)  $11,394  $(14,364)

    Basic earnings (loss) per share        $0.14   $(0.18)    $0.35    $(0.45)

    Diluted earnings (loss) per share       0.13    (0.18)     0.34     (0.45)

    Basic weighted-average common
     shares outstanding                   32,644   32,206    32,612    32,183
    Diluted weighted-average common
     shares outstanding                   33,188   32,206    33,435    32,183

    (in thousands)

                                                   June 30,       December 31,
                                                     2004             2003


    Current Assets:
         Cash and cash equivalents                 $40,508           $41,522
         Marketable securities                      83,880            93,370
         Accounts receivable, net                   79,025            61,927
         Inventories                                83,720            65,703
         Other current assets                        4,665             5,637
    Total current assets                           291,798           268,159

    Property and equipment, net                     44,782            44,725

    Deposits and other                               7,527             5,951
    Goodwill and intangibles, net                   82,077            88,943
    Demonstration and customer service
     equipment, net                                  4,845             3,934
    Deferred debt issuance costs                     2,596             3,019
    Total assets                                  $433,625          $414,731


    Current Liabilities:
         Trade accounts payable                    $39,530           $23,066
         Other current liabilities                  26,404            28,216
         Current portion of capital
          leases and senior borrowings               4,596             8,582
         Accrued interest payable on
          convertible subordinated notes             2,460             2,460
    Total current liabilities                       72,990            62,324

    Long-term Liabilities:
        Capital leases and senior
         borrowings                                  4,077             6,168
        Deferred income tax liability,
         net                                         3,312             4,672
        Convertible subordinated notes
         payable                                   187,718           187,718
        Other long-term liabilities                  2,045             2,015
    Total long-term liabilities                    197,152           200,573

    Total liabilities                              270,142           262,897

    Stockholders' equity                           163,483           151,834
    Total liabilities and stockholders'
     equity                                       $433,625          $414,731

    (in thousands)

                                                     Six Months Ended June 30,
                                                      2004              2003

    NET CASH USED IN OPERATING ACTIVITIES            $(271)          $(10,785)

     IN) INVESTING ACTIVITIES                         4,117            (9,672)

    NET CASH USED IN FINANCING ACTIVITIES           (4,814)            (3,692)

     CASH                                              (46)               344
    DECREASE IN CASH AND CASH EQUIVALENTS           (1,014)           (23,805)
    CASH AND EQUIVALENTS, beginning of
     period                                         41,522             70,188
    CASH AND EQUIVALENTS, end of period            $40,508            $46,383