CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
(in thousands, except per share data)
Three Months Ended Year Ended
December 31, September 30, December 31,
2004 2003 2004 2004 2003
Sales $88,399 $74,731 $93,550 $395,305 $262,402
Cost of sales 73,836 48,100 63,810 275,626 174,455
Gross profit 14,563 26,631 29,740 119,679 87,947
Operating expenses:
Research and
development 12,746 12,750 12,576 51,541 51,647
Selling, general
and administrative 12,494 11,345 14,382 54,767 49,339
Amortization of
intangible assets 538 1,199 1,092 3,925 4,612
Restructuring charges 3,670 1,018 (165) 3,912 4,306
Demonstration
equipment charge 3,752 -- -- 3,752 --
Impairment of
intangible assets 3,326 -- -- 3,326 1,175
Total operating
expenses 36,526 26,312 27,885 121,223 111,079
(Loss) income from
operations (21,963) 319 1,855 (1,544) (23,132)
Other expense, net (1,690) (1,957) (1,994) (7,256) (9,308)
Loss before income
taxes (23,653) (1,638) (139) (8,800) (32,440)
Benefit (provision)
for income taxes 648 (801) (997) (3,947) (11,801)
Net loss $(23,005) $(2,439) $(1,136) $(12,747) $(44,241)
Basic and diluted
loss per share $(0.70) $(0.08) $(0.03) $(0.39) $(1.37)
Basic and diluted
weighted-average
common shares
outstanding 32,698 32,433 32,674 32,649 32,271
The following condensed consolidated statements of operations excluding
certain (charges) benefits are presented to aid in understanding the
operating results of Advanced Energy Industries, Inc. These condensed
consolidated statements of operations are not in accordance with
generally accepted accounting principals (GAAP) in the United States of
America and may be different from similar measures used by other
companies. The statement below presents adjusted net income that is
GAAP net income, adjusted to exclude certain charges and benefits, and
adjusted gross profit that is GAAP gross profit, adjusted to exclude
inventory write-downs for excess and obsolete inventory. Reconciliations
from these non-GAAP financial measures to the most directly comparable
measures reported under GAAP are included at the bottom of this
statement. The inclusion of the charges and benefits herein does not
necessarily indicate that such events will not recur in the future.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
EXCLUDING CERTAIN (CHARGES) BENEFITS
(in thousands, except per share data)
Three Months Ended
December 31, September 30,
2004 2004
Sales $88,399 $93,550
Cost of sales 64,797 63,810
Gross profit (Non-GAAP) 23,602 29,740
Operating expenses:
Research and development 12,746 12,576
Selling, general and administrative 12,494 14,382
Amortization of intangible assets 538 1,092
Restructuring charges -- --
Demonstration equipment charge -- --
Impairment of intangible assets -- --
Total operating expenses 25,778 28,050
(Loss) income from operations
(Non-GAAP) (2,176) 1,690
Other expense, net (1,690) (1,994)
Loss before income taxes (3,866) (304)
Provision for income taxes (Non-GAAP) (654) (997)
Net loss excluding certain
(charges) benefits (Non-GAAP) $(4,520) $(1,301)
Basic and diluted loss per share
(Non-GAAP) $(0.14) $(0.04)
A reconciliation of our gross profit and net loss excluding certain
(charges) benefits to the most directly comparable measures under
generally accepted accounting principals in the United States of America
is presented below:
Gross profit excluding certain
(charges) benefits (Non-GAAP) $23,602 $29,740
Inventory write-down (1) (9,039) --
Gross profit (GAAP) $14,563 $29,740
Net loss excluding certain
(charges) benefits (Non-GAAP) $(4,520) $(1,301)
Inventory write-down (1) (9,039)
Employee severance and
termination costs (2) (3,670) 165
Change in estimated life of
demonstration and evaluation
equipment (3) (3,752)
Impairment of intangible
assets (4) (3,326)
Total (charges) benefits (19,787) 165
Adjustment to provision for
income taxes 1,302
Net loss (GAAP) $(23,005) $(1,136)
Basic and diluted loss per
share (GAAP) $(0.70) $(0.03)
Basic and diluted weighted-average
common shares outstanding 32,698 32,674
(1) The inventory write-down is primarily due to the product lifecycle
management program, discontinuance of certain products in select
markets, the product mix shift from 200mm wafers to 300mm wafers,
and the expected continued slowdown in the semiconductor industry.
(2) The employee severance and termination costs consist of costs
associated with the involuntary severance of approximately
225 employees at the Fort Collins facility. The need to reduce
headcount in Fort Collins resulted primarily from the transfer of a
substantial portion of manufacturing operations to Shenzhen, China.
Additional charges are expected in the first half of 2005, primarily
related to employees in the Hajiochi, Japan facility.
(3) As a result of the continuing process of obtaining and analyzing
historical data and the Company's fiscal year 2005 operating plan
for use of current and future demonstration equipment, the Company
has made a change in the estimated useful life of the demonstration
equipment from two years to zero years. The Company's policy going-
forward is to record sales and marketing expense for the
demonstration equipment as it is placed into service at our
customers' or potential customers' location.
(4) The intangible asset impairment charge relates to assets acquired in
conjunction with the acquisitions of Aera and Dressler and were
considered for impairment in conjunction with the Company's
restructuring activities and 2005 operating plan.
CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)
(in thousands)
December 31, December 31,
2004 2003
ASSETS
Current Assets:
Cash and cash equivalents $38,404 $41,522
Marketable securities, available
for sale 69,578 93,370
Accounts receivable, net 72,053 61,927
Inventories, net 73,224 65,703
Other current assets 6,140 5,637
Total current assets 259,399 268,159
Property and equipment, net 44,746 44,725
Deposits and other 6,468 5,951
Goodwill and intangibles, net 80,308 88,943
Demonstration and customer service
equipment, net 2,968 3,934
Deferred debt issuance costs, net 2,086 3,019
Total assets $395,975 $414,731
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Trade accounts payable $17,683 $23,066
Other accrued expenses 28,615 28,216
Current portion of capital leases
and senior borrowings 3,726 8,582
Accrued interest payable on
convertible subordinated notes 2,460 2,460
Total current liabilities 52,484 62,324
Long-term Liabilities:
Capital leases and senior borrowings 4,679 6,168
Deferred income tax liabilities, net 3,709 4,672
Convertible subordinated notes
payable 187,718 187,718
Other long-term liabilities 2,407 2,015
Total long-term liabilities 198,513 200,573
Total liabilities 250,997 262,897
Stockholders' equity 144,978 151,834
Total liabilities and
stockholders' equity $395,975 $414,731
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
(in thousands)
Year Ended December 31,
2004 2003
NET CASH USED IN OPERATING ACTIVITIES $(11,378) $(12,986)
NET CASH PROVIDED BY (USED IN)
INVESTING ACTIVITIES 12,329 (8,590)
NET CASH USED IN FINANCING ACTIVITIES (5,191) (8,608)
EFFECT OF CURRENCY TRANSLATION ON CASH 1,122 1,518
DECREASE IN CASH AND CASH EQUIVALENTS (3,118) (28,666)
CASH AND EQUIVALENTS, beginning of period 41,522 70,188
CASH AND EQUIVALENTS, end of period $38,404 $41,522