Advanced Energy Industries (AEIS) 8-K Advanced Energy Reports Third Quarter 2003 Results

CONTACTS:
Mike El-Hillow	Cathy Kawakami
Executive Vice President, Chief Financial Officer	Director of Investor Relations
Advanced Energy Industries, Inc.	Advanced Energy Industries, Inc.
970-407-6570	970-407-6732
mike.el-hillow@aei.com	cathy.kawakami@aei.com

FOR IMMEDIATE RELEASE

ADVANCED ENERGY REPORTS THIRD QUARTER 2003 RESULTS

Fort Collins, Colorado (October 16, 2003)  Advanced Energy (Nasdaq: AEIS) today reported financial results for the third quarter ended September 30, 2003.

Revenue for the third quarter of 2003 decreased 3 percent to $68.6 million, compared to third quarter 2002 revenue of $70.7 million. Revenue for the third quarter of 2003 increased 9 percent compared to second quarter 2003 revenue of $62.9 million.

Net loss for the third quarter of 2003 was $27.4 million or $0.85 per share including pre-tax charges of $2.2 million related to restructuring charges and an intangible asset impairment, and a non-cash charge of $22.4 million related to the Company’s net deferred tax asset. The third quarter 2003 net loss compares to the third quarter 2002 net loss of $5.6 million or $0.17 per share, and the second quarter 2003 net loss of $5.8 million or $0.18 per share.

Sales for the nine months ended September 30, 2003 were $187.7 million compared to $181.5 million for the first nine months of 2002. Net loss for the 2003 nine-month period was $41.8 million, or $1.30 per share, compared to a net loss of $19.4 million, or $0.61 per share for the 2002 nine-month period.

Doug Schatz, chairman, president and chief executive officer, said, “The third quarter results met our expectations for moderate sequential improvement based on improving order trends and share gains in several end markets. Sales to the flat panel display, data storage and architectural glass markets all posted double-digit growth

sequentially. Our technology lead is being validated across our end markets through continued design wins and share gains in both our power and flow product lines.

“We are continuing to see modestly improving industry conditions. However, based on the fact that the fourth quarter will include industry-wide shutdowns, including three weeks at AE, we anticipate a fourth quarter sales level similar to that of the third quarter,” said Mr. Schatz.

Based on information currently available, the Company expects fourth quarter revenues to be relatively flat compared to the third quarter of 2003, and a loss per share range of $0.14 to $0.16, which assumes no tax benefit from the loss.

Third Quarter 2003 Conference Call
Management will host a conference call today, Thursday, October 16, 2003 at 5:00 pm Eastern time to discuss the 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, code 8360203. The replay will be available through Thursday, October 23, 2003. There will also be a webcast available at www.advanced-energy.com.

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, AE creates solutions that maximize process impact, improve productivity and lower cost of ownership for its customers. This portfolio includes a comprehensive line of technology solutions in power, flow, thermal management, plasma and ion beam sources, and integrated process monitoring and control for original equipment manufacturers (OEMs) and end-users around the world.

AE 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, AE is a publicly held company traded on the Nasdaq National Market under the symbol AEIS. For more information, please visit our corporate website: www.advanced-energy.com.

Safe Harbor Statement
This press release contains certain forward-looking statements 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, the timing of orders received from our customers, our ability to execute on the cost reduction initiatives currently underway, and other risks described in Advanced Energy’s Form 10-K, Forms 10-Q as well as other reports and statements, as 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 by contacting Advanced Energy’s investor relations at 970-407-6732. 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 September 30,						Nine Months Ended September 30,
			2003			2002			2003			2002
Sales			$	68,567		$	70,674		$	187,671		$	181,454
Cost of sales				45,474			44,074			126,355			117,168
Gross profit				23,093			26,600			61,316			64,286
Operating expenses:
	Research and development			12,979			12,185			38,897			36,020
	Sales and marketing			7,329			9,738			23,920			25,201
	General and administrative			6,340			7,245			17,487			21,073
	Restructuring charges			1,011			3,220			3,288			3,220
	Impairment of intangible assets			1,175			—			1,175			—
	Litigation damages			—			—			—			5,313
		Total operating expenses		28,834			32,388			84,767			90,827
Loss from operations				(5,741	)		(5,788	)		(23,451	)		(26,541	)
Other (expense) income, net				(2,261	)		(2,797	)		(7,351	)		(3,370	)
Loss before income taxes				(8,002	)		(8,585	)		(30,802	)		(29,911	)
(Provision) benefit for income taxes				(19,436	)		3,005			(11,000	)		10,469
Net loss			$	(27,438	)	$	(5,580	)	$	(41,802	)	$	(19,442	)
Basic and diluted net loss per share			$	(0.85	)	$	(0.17	)	$	(1.30	)	$	(0.61	)
Basic and diluted weighted-average common shares outstanding				32,286			32,073			32,217			31,994

CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)
(in thousands)

			September 30,		December 31,
			2003		2002
ASSETS
Current Assets:
		Cash and cash equivalents	$	33,004	$	70,188
		Marketable securities		103,376		102,159
		Accounts receivable		53,967		43,885
		Income tax receivable		14,089		14,720
		Inventories		58,579		57,306
		Other current assets		6,727		6,828
		Deferred income tax assets, net		—		17,510
Total current assets				269,742		312,596
Property and equipment, net				43,426		41,178
Deposits and other				5,451		5,181
Goodwill and intangibles, net				87,051		86,601
Deferred debt issuance costs				3,266		4,091
Demonstration and customer service equipment, net				4,250		6,086
Total assets			$	413,186	$	455,733
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current Liabilities:
		Trade accounts payable	$	21,023	$	16,055
		Other current liabilities		28,975		31,064
		Current portion of capital leases and senior borrowings		12,882		15,197
		Accrued interest payable on convertible subordinated notes		1,810		2,338
Total current liabilities				64,690		64,654
Long-term Liabilities:
	Capital leases and senior borrowings			7,506		10,665
	Other long-term liabilities			697		694
	Deferred income tax liability, net			3,777		8,663
	Convertible subordinated notes payable			187,718		187,718
Total long-term liabilities				199,698		207,740
Total liabilities				264,388		272,394
Stockholders’ equity				148,798		183,339
Total liabilities and stockholders’ equity			$	413,186	$	455,733

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
(in thousands)

	Nine Months Ended September 30,
	2003			2002
NET CASH USED IN OPERATING ACTIVITIES		(19,507	)		(20,173	)
NET CASH (USED IN) PROVIDED BY INVESTING ACTIVITIES		(13,904	)		28,677
NET CASH USED IN FINANCING ACTIVITIES		(4,905	)		(4,759	)
EFFECT OF CURRENCY TRANSLATION ON CASH		1,132			1,553
(DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS		(37,184	)		5,298
CASH AND EQUIVALENTS, beginning of period		70,188			81,955
CASH AND EQUIVALENTS, end of period	$	33,004		$	87,253