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Advanced Energy Industries Inc. Reports Operating Results (10-Q)

August 05, 2010 | About:
10qk

10qk

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Advanced Energy Industries Inc. (AEIS) filed Quarterly Report for the period ended 2010-06-30.

Advanced Energy Industries Inc. has a market cap of $784 million; its shares were traded at around $18.16 with a P/E ratio of 67.3 and P/S ratio of 4.2. AEIS is in the portfolios of RS Investment Management, Chuck Royce of Royce& Associates, Jim Simons of Renaissance Technologies LLC.

Highlight of Business Operations:

We had net income for the three months ended June 30, 2010 of $13.6 million compared to a $16.0 million net loss for the three months ended June 30, 2009. We had net income for the six months ended June 30, 2010 of $19.8 million compared to a $95.8 million net loss for the six months ended June 30, 2009, which included a $63.3 million non-cash impairment of goodwill and $4.1 million of restructuring charges.

Shareholders of PV Powered received approximately $36.7 million of cash less certain closing date indebtedness plus approximately 1.0 million shares of our common stock issued in exchange for all PV Powered common stock, options and warrants outstanding as of May 3, 2010. Fractional shares generated by the conversion were settled for cash. Additional cash consideration in an amount of up to $40.0 million is payable to the shareholders of PV Powered if certain financial targets are met during the year ended December 31, 2010. The fair value of the $40.0 million contingent consideration arrangement was estimated to be $39.0 million as of May 3, 2010 based on a projected cash payout of $39.4 million in January 2011.

After removing $15.1 million of sales during the three months ended June 30, 2010 and $4.0 million of sales during the three months ended June 30, 2009 for the gas flow control business and recording those revenues in discontinued operations, sales for the three months ended June 30, 2010 increased 217.3% to $100.1 million from $31.6 million for the three months ended June 30, 2009. Sales for the six months ended June 30, 2010 increased 181.5% to $169.8 million from $60.3 million for the six months ended June 30, 2009. The increase in sales for the period was driven primarily by a recovery in all of the end markets that we serve, most notably in the semiconductor capital equipment market and the addition of $10.4 million generated by PV Powered during the period May 3, 2010 to June 30, 2010. This recovery began to occur in the second half of 2009 and continued into the first half of 2010.

Global support revenue grew 39.2% to $11.8 million, or 11.8% of total sales, for the three months ended June 30, 2010, compared to $8.5 million, representing 26.8% of sales, for the three months ended June 30, 2009. In the six months ended June 30, 2010, global support sales rose 43.3% to $22.7 million, or 13.4% of sales, from $15.8 million, or 26.4% of sales in the six months ended June 30, 2009. The increase in global support sales was due to an increase in factory utilization by our customers, which drove demand for repairs, replacement parts and inventory restocking. The outlook for our service business in the second half of 2010 continues to be strong, and we expect it will grow as we expand our product offerings to include maintenance contracts in the growing solar array market.

Sales to the solar inverter market rose to $14.4 million, or 14.4% of total sales, for the three months ended June 30, 2010 as compared to $0.0 million, or 0.0% of total sales, for the three months ended June 30, 2009. The primary driver of the increase was our acquisition of PV Powered, which accounted for approximately $10.3 million of additional inverter sales during the period May 3, 2010 to June 30, 2010. Sales of our Solaron inverter product also increased in the three months ended June 30, 2010 as compared to the three months ended March 30, 2010 as orders from the U.S. and European markets continued to increase as we penetrate new accounts and secure repeat business from existing customers. The market for inverters picked up from the seasonal low in the U.S. in the first quarter and remained very strong. The backlog for our inverter product line grew from $4.0 million at March 31, 2010 to approximately $34.2 million at June 30, 2010 with bookings from both the U.S. and European markets. As a result, we expect inverter sales to grow in the third and fourth quarter of 2010.

The increase in SG&A expenses of $7.8 million and $11.5 million in the three months and six months ended June 30, 2010 as compared to the same periods in 2009, respectively, was primarily driven by increases in sales personnel, commissions and travel expenses to meet the expectations and demands of our global customers, increased personnel costs related to the reversal of the temporary cost control efforts described earlier in this section, and the accrual of incentive compensation totaling $2.4 million and $4.1 million during the three and six months ended June 30, 2010 as compared to no bonus expense in 2009. We also incurred $0.2 million and $0.8 million of transaction costs related to the acquisition of PV Powered during the three and six months ended June 30, 2010 as well as the employees absorbed through the acquisition. Although we are aware of the growing needs of our customers during this period of revenue growth and will continue to closely scrutinize and monitor increases to these expenses throughout the year, we do anticipate that selling, general and administrative expenses will continue to increase in the second half of 2010 in terms of absolute dollars but remain within their current range as a percentage of sales.

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