Advanced Energy Industries (AEIS) 8-K Advanced Energy Announces 2006 Third Quarter Financial Results

CONTACTS:

Larry Firestone
Executive Vice President, CFO
lawrence.firestone@aei.com
970-407-6570 Cathy Kawakami
Director, Investor Relations
cathy.kawakami@aei.com
970-407-6732

FOR IMMEDIATE RELEASE

ADVANCED ENERGY ANNOUNCES 2006 THIRD QUARTER FINANCIAL RESULTS

Gross margin increases to 43.7%, cash increases $22.7 million sequentially

Fort Collins, Colo., October 25, 2006— Advanced Energy Industries, Inc. (Nasdaq: AEIS) today announced financial results for the third quarter ended September 30, 2006.

Sales were $107.7 million for the third quarter of 2006, up 3.0% compared to $104.6 million for the second quarter of 2006, and up 36.7% compared to $78.8 million for the third quarter of 2005. Gross profit was $47.0 million, or 43.7% of sales, compared to $44.8 million, or 42.8% of sales, in the second quarter of 2006, and $28.9 million, or 36.7% of sales in the third quarter of 2005.

Third quarter 2006 income from operations was $18.3 million or 17.0% of sales, compared to $19.2 million, or 18.4% of sales, in the second quarter of 2006. This compares to third quarter 2005 income from operations of $2.2 million, or 2.8% of sales. Third quarter 2005 income from operations includes a $3.0 million litigation settlement expense.

Third quarter 2006 net income was $17.0 million, or $0.38 per diluted share, compared to $18.2 million, or $0.40 per diluted share, in the second quarter of 2006, and compared to a net loss of $3.9 million, or a net loss of $0.10 per share in the third quarter of 2005.

Dr. Hans Betz, president and chief executive officer of Advanced Energy, said, “Sales continued at record levels in the third quarter, driven by continued strength in sales to semiconductor and advanced products customers. Within the advanced products category, sales to solar panel customers increased 42% sequentially as our strategy to grow our presence in this market continues to progress. Our operational focus drove additional efficiency gains, highlighted by a 90 basis point sequential improvement in gross margin. Cash increased by $22.7 million in the third quarter.”

Dr. Betz continued, “As you have seen from our guidance, following four quarters of increasing sales to the semiconductor industry, we expect semiconductor levels to decrease modestly in the fourth quarter as semiconductor manufacturers carefully manage inventory levels. We expect growing demand in our emerging

Advanced Energy Reports Third Quarter 2006 Results — Page 2
October 25, 2006

markets, such as solar and architectural glass, as these markets continue their capital investment cycle to adopt leading edge technology. We will leverage the strength of our financial model, combined with technology innovation and optimized global operations, to pursue an expanding set of opportunities within core and emerging markets.”

Fourth Quarter 2006 Guidance

The Company anticipates fourth quarter sales in the range of $101 million to $105 million, and earnings per share in the range of $0.33 to $0.36.

Third Quarter 2006 Conference Call

Management will host a conference call today, Wednesday, October 25, 2006 at 5:00 pm Eastern 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 7811538. The replay will be available through November 1, 2006. There will also be a webcast available on the Investor Relations webpage at http://ir.advanced-energy.com.

About Advanced Energy

Advanced Energy is a global leader in the development and support of technologies critical to high-technology, high-growth manufacturing processes used in the production of semiconductors, flat panel displays, data storage products, solar cells, 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 Global Market under the symbol AEIS. For more information, please visit our corporate website: www.advanced-energy.com.

Advanced Energy Reports Third Quarter 2006 Results — Page 3
October 25, 2006

This press release contains certain forward-looking statements, including the company’s expectations with respect to Advanced Energy’s financial results for the fourth quarter of 2006 as well as other matters discussed in this news release that are not purely historical data. 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 industries we serve including the semiconductor capital equipment and flat panel display industries, the timing of orders received from our customers, our ability to realize cost improvement benefits from the manufacturing initiatives underway, and unanticipated changes to our 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 970-221-4670. Forward-looking statements are made and based on information available to us on the date of this press release. The company assumes no obligation to update the information in this press release.

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CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
(in thousands, except per share data)

	Three Months Ended									Nine Months Ended
	September 30,						June 30,			September 30,
	2006			2005			2006			2006			2005
Sales	$	107,688		$	78,757		$	104,571		$	306,209		$	245,095
Cost of sales		60,674			49,835			59,811			175,885			158,205
Gross profit		47,014			28,922			44,760			130,324			86,890
Operating expenses:
Research and development		11,345			9,610			10,804			32,608			30,085
Selling, general and administrative		16,856			13,421			14,241			45,502			39,960
Amortization of intangible assets		453			504			453			1,383			1,569
Restructuring charges		31			210			31			91			2,540
Litigation settlement		—			3,000			—			—			3,000
Total operating expenses		28,685			26,745			25,529			79,584			77,154
Income from operations		18,329			2,177			19,231			50,740			9,736
Other income (expense), net		1,044			(4,796	)		741			3,617			(7,602	)
Income from continuing operations before income taxes		19,373			(2,619	)		19,972			54,357			2,134
Provision for income taxes		(2,381	)		(1,584	)		(1,947	)		(6,580	)		(3,543	)
Income from continuing operations		16,992			(4,203	)		18,025			47,777			(1,409	)
Gain on sale of discontinued assets		—			—			138			138			2,645
Results of discontinued operations		—			312			—			—			1,556
Income from discontinued operations		—			312			138			138			4,201
Net income	$	16,992		$	(3,891	)	$	18,163		$	47,915		$	2,792
Net income per basic share
Income from continuing operations	$	0.38		$	(0.11	)	$	0.40		$	1.07		$	(0.04	)
Income from discontinued operations	$	—		$	0.01		$	—		$	—		$	0.12
Basic earnings per share	$	0.38		$	(0.10	)	$	0.41		$	1.07		$	0.08
Net income per diluted share
Income from continuing operations	$	0.38		$	(0.11	)	$	0.40		$	1.06		$	(0.04	)
Income from discontinued operations	$	—		$	0.01		$	—		$	—		$	0.12
Diluted earnings per share	$	0.38		$	(0.10	)	$	0.40		$	1.06		$	0.08
Basic weighted-average common shares outstanding		44,762			38,366			44,704			44,679			34,639
Diluted weighted-average common shares outstanding		45,166			38,366			45,108			45,168			34,932

CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)
(in thousands)

	September 30,		December 31,
	2006		2005
ASSETS
Current assets:
Cash and cash equivalents	$	52,789	$	52,874
Marketable securities		63,939		6,811
Accounts receivable, net		74,864		68,992
Inventories		58,079		56,199
Other current assets		5,463		6,773
Total current assets		255,134		191,649
Property and equipment, net		33,602		39,294
Deposits and other		1,829		3,808
Goodwill and intangibles, net		68,720		69,843
Customer service equipment, net		1,476		2,407
Deferred income tax assets, net		6,109		3,116
Total assets	$	366,870	$	310,117
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Trade accounts payable	$	19,669	$	22,028
Other accrued expenses		31,273		23,977
Current portion of capital leases and senior borrowings		616		2,011
Total current liabilities		51,558		48,016
Long-term liabilities:
Capital leases and senior borrowings		226		2,179
Other long-term liabilities		1,690		2,492
Total long-term liabilities		1,916		4,671
Total liabilities		53,474		52,687
Stockholders’ equity		313,396		257,430
Total liabilities and stockholders’ equity	$	366,870	$	310,117