SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
_______________
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934.
For the quarterly period ended September 30, 1996.
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
AND EXCHANGE ACT OF 1934.
For the transition period from __________ to __________.
Commission file number: 0-26966
ADVANCED ENERGY INDUSTRIES, INC.
- -------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
DELAWARE 84-0846841
- --------------------------------------- ------------------------------------
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
1625 SHARP POINT DRIVE, FORT COLLINS, CO 80525
- --------------------------------------- ------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (970) 221-4670
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities and Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No__.
As of September 30, 1996, there were 21,251,192 shares of the Registrant's
Common Stock, par value $0.001 per share, outstanding.
1
ADVANCED ENERGY INDUSTRIES, INC.
FORM 10-Q
INDEX
PART I FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
Consolidated Balance Sheets-
September 30, 1996 and December 31, 1995 3
Consolidated Statements of Operations-
Three months and nine months ended September 30, 1996 and 1995 4
Consolidated Statements of Cash Flows-
Nine months ended September 30, 1996 and 1995 5
Notes to consolidated financial statements 6
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS 8
PART II OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS 14
ITEM 2. CHANGES IN SECURITIES 14
ITEM 3. DEFAULTS UPON SENIOR SECURITIES 14
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS 14
ITEM 5. OTHER INFORMATION 14
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K 14
2
PART I FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS AND SUPPLEMENTAL DATA
ADVANCED ENERGY INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
SEPTEMBER 30, DECEMBER 31,
1996 1995
(UNAUDITED)
----------- -----------
ASSETS
Current Assets:
Cash and cash equivalents. . . . . . . . . . . . $ 8,544 $13,332
Accounts receivable. . . . . . . . . . . . . . . 15,813 15,172
Inventories. . . . . . . . . . . . . . . . . . . 15,297 16,104
Prepaid expenses and other current assets. . . . 998 663
Deferred income tax benefit. . . . . . . . . . . 1,031 1,031
------- -------
Total current assets . . . . . . . . . . . . . . . 41,683 46,302
------- -------
Property and Equipment, net. . . . . . . . . . . . 9,841 6,639
Other Assets . . . . . . . . . . . . . . . . . . . 2,596 2,378
------- -------
Total assets . . . . . . . . . . . . . . . . . . . $54,120 $55,319
------- -------
------- -------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable . . . . . . . . . . . . . . . . $ 2,607 $ 6,665
Accrued payroll and employee benefits. . . . . . 2,510 2,763
Other accrued expenses . . . . . . . . . . . . . 755 749
Customer deposits. . . . . . . . . . . . . . . . 125 113
Accrued income tax payable . . . . . . . . . . . 296 1,336
Current portion of long-term debt. . . . . . . . 1,004 927
------- -------
Total current liabilities. . . . . . . . . . . . . 7,297 12,553
------- -------
Long-term debt . . . . . . . . . . . . . . . . . . 978 1,557
Deferred income tax liability. . . . . . . . . . . 122 122
------- -------
Total liabilities. . . . . . . . . . . . . . . . . 8,397 14,232
------- -------
Stockholders' equity . . . . . . . . . . . . . . . 45,723 41,087
------- -------
Total liabilities and stockholders' equity . . . . $54,120 $55,319
------- -------
------- -------
The accompanying notes to consolidated financial statements
are an integral part of these consolidated balance sheets.
3
ADVANCED ENERGY INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
QUARTER ENDED SEPTEMBER 30,
--------------------------
1996 1995
(UNAUDITED) (UNAUDITED)
---------- ----------
Net Sales. . . . . . . . . . . . . . . . . . . . . $21,639 $25,554
Cost of Sales. . . . . . . . . . . . . . . . . . . 15,047 12,734
------- -------
Gross profit . . . . . . . . . . . . . . . . . . . 6,592 12,820
------- -------
Operating Expenses:
Research and development . . . . . . . . . . . . 3,349 2,711
Sales and marketing. . . . . . . . . . . . . . . 2,201 1,571
General and administrative . . . . . . . . . . . 933 1,801
------- -------
Operating Income . . . . . . . . . . . . . . . . . 109 6,737
------- -------
Other (expense) income, net. . . . . . . . . . . . 97 (562)
------- -------
Net income before income taxes . . . . . . . . . . 206 6,175
Provision for income taxes . . . . . . . . . . . . 83 2,116
------- -------
Net Income . . . . . . . . . . . . . . . . . . . . $ 123 $ 4,059
------- -------
------- -------
Net Income per share . . . . . . . . . . . . . . . $ 0.01 $ 0.21
------- -------
------- -------
Weighted average shares outstanding. . . . . . . . 21,622 19,170
------- -------
------- -------
NINE MONTHS ENDED SEPTEMBER 30,
-------------------------------
1996 1995
(UNAUDITED)
---------- ----------
Net Sales. . . . . . . . . . . . . . . . . . . . . $78,636 $68,538
Cost of Sales. . . . . . . . . . . . . . . . . . . 49,286 34,473
------- -------
Gross profit . . . . . . . . . . . . . . . . . . . 29,350 34,065
------- -------
Operating Expenses:
Research and development . . . . . . . . . . . . 10,491 7,105
Sales and marketing. . . . . . . . . . . . . . . 6,532 4,293
General and administrative . . . . . . . . . . . 4,989 5,415
------- -------
Operating Income . . . . . . . . . . . . . . . . . 7,338 17,252
------- -------
Other (expense) income, net. . . . . . . . . . . . (139) (466)
------- -------
Net income before income taxes . . . . . . . . . . 7,199 16,786
Provision for income taxes . . . . . . . . . . . . 2,741 6,221
------- -------
Net Income . . . . . . . . . . . . . . . . . . . . $ 4,458 $ 10,565
------- -------
------- -------
Net Income per share . . . . . . . . . . . . . . . $ 0.21 $ 0.56
------- -------
------- -------
Weighted average shares outstanding. . . . . . . . 21,645 18,887
------- -------
------- -------
The accompanying notes to consolidated financial statements
are an integral part of these consolidated statements.
4
ADVANCED ENERGY INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
NINE MONTHS ENDED SEPTEMBER 30,
-------------------------------
1996
(UNAUDITED) 1995
------------- ----------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 4,458 $10,565
Adjustments to reconcile net income to net cash provided by
operating activities --
Depreciation and amortization . . . . . . . . . . . . . . . . 1,914 1,170
Deferred income tax benefit . . . . . . . . . . . . . . . . . -- (252)
Amortization of deferred compensation . . . . . . . . . . . . 36 --
Loss on disposal of property and equipment. . . . . . . . . . 41 --
Changes in operating assets and liabilities --
Accounts receivable, trade. . . . . . . . . . . . . . . . . (520) (6,859)
Related parties and other receivables . . . . . . . . . . . (120) (983)
Inventories . . . . . . . . . . . . . . . . . . . . . . . . 806 (7,527)
Income taxes. . . . . . . . . . . . . . . . . . . . . . . . (1,040) 2,390
Other current assets. . . . . . . . . . . . . . . . . . . . (335) (310)
Deposits and other. . . . . . . . . . . . . . . . . . . . . 43 (96)
Demonstration and customer service equipment. . . . . . . . (536) (705)
Accounts payable. . . . . . . . . . . . . . . . . . . . . . (4,058) 4,628
Accrued payroll and employee benefits . . . . . . . . . . . (253) 619
Customer deposits and other accrued expenses. . . . . . . . 18 (108)
-------- -------
Net cash provided by operating activities. . . . . . . . 454 2,532
-------- -------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment, net. . . . . . . . . . . . . (4,878) (2,385)
-------- -------
Net cash used in investing activities. . . . . . . . . . (4,878) (2,385)
-------- -------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from notes payable. . . . . . . . . . . . . . . . . . . -- 25,163
Repayment of notes payable and capital lease
obligations . . . . . . . . . . . . . . . . . . . . . . . . . . (502) (24,638)
Proceeds from sale of common stock . . . . . . . . . . . . . . . 129 84
-------- -------
Net cash (used in) provided by financing activities . . . . . (373) 609
-------- -------
EFFECT OF CUMULATIVE TRANSLATION ADJUSTMENT. . . . . . . . . . . . 9 (399)
-------- -------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS . . . . . . . . . (4,788) 357
CASH AND CASH EQUIVALENTS, beginning of period . . . . . . . . . . 13,332 368
-------- -------
CASH AND CASH EQUIVALENTS, end of period . . . . . . . . . . . . . $ 8,544 $ 725
-------- -------
-------- -------
SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING AND
FINANCING ACTIVITIES:
Deferred compensation on stock options issued. . . . . . . . . . $ 0 $ 142
-------- -------
-------- -------
Exercise of stock options in exchange for stockholders'
note receivable . . . . . . . . . . . . . . . . . . . . . . . . $ 0 $ 1,083
-------- -------
-------- -------
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid for interest . . . . . . . . . . . . . . . . . . . . . $ 143 $ 469
-------- -------
-------- -------
Cash paid for income taxes . . . . . . . . . . . . . . . . . . . $ 3,657 $ 4,083
-------- -------
-------- -------
The accompanying notes to consolidated financial statements
are an integral part of these consolidated statements.
5
ADVANCED ENERGY INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(1) BASIS OF PRESENTATION AND MANAGEMENT OPINION
In the opinion of management, the accompanying unaudited consolidated
balance sheets and statements of operations and cash flows contain all
adjustments, consisting only of normal recurring items, necessary to present
fairly the financial position of Advanced Energy Industries, Inc., a Delaware
corporation, and its wholly owned subsidiaries (the "Company") at September
30, 1996, its results of operations and cash flows for the three and nine
month periods ended September 30, 1996 and September 30, 1995.
The unaudited financial statements presented herein have been prepared
in accordance with the instructions to Form 10-Q and do not include all the
information and note disclosures required by generally accepted accounting
principles. The financial statements should be read in conjunction with the
audited financial statements and notes thereto contained in the Company's latest
annual report on Form 10-K for the year ended December 31, 1995.
(2) INITIAL PUBLIC OFFERING
In November 1995, the Company closed on the initial public offering of its
common stock. In connection with the offering, 2,400,000 shares of previously
unissued common shares were sold at a price of $10 per share, providing gross
proceeds of $24,000,000, less $2,790,000 in offering costs.
(3) ACCOUNTS RECEIVABLE
Accounts receivable consisted of the following:
SEPTEMBER 30, DECEMBER 31,
1996 1995
(UNAUDITED)
------------- ------------
(IN THOUSANDS)
Domestic . . . . . . . . . . . . . . . . . . . . $ 9,350 $ 8,825
Foreign. . . . . . . . . . . . . . . . . . . . . 4,916 4,925
Allowance for doubtful accounts. . . . . . . . . (206) (210)
------- -------
Trade accounts receivable. . . . . . . . . . . . $14,060 $13,540
Related parties. . . . . . . . . . . . . . . . . 909 979
Other. . . . . . . . . . . . . . . . . . . . . . 844 653
------- -------
Total accounts receivable. . . . . . . . . . . . $15,813 $15,172
------- -------
------- -------
(4) INVENTORIES
Inventories consisted of the following:
SEPTEMBER 30, DECEMBER 31,
1996 1995
(UNAUDITED)
------------- ------------
(IN THOUSANDS)
Parts and raw materials. . . . . . . . . . . . . $11,060 $11,104
Work in process. . . . . . . . . . . . . . . . . 1,672 1,936
Finished goods . . . . . . . . . . . . . . . . . 2,565 3,064
------- -------
$15,297 $16,104
------- -------
------- -------
6
(5) NET INCOME PER COMMON SHARE
Net income per share is computed based on results of operations
attributable to common stock and weighted average number of common and common
equivalent shares outstanding during each of the periods. Earnings per share
are calculated by dividing the net earnings by the weighted average of common
and common equivalent shares outstanding during each of the periods.
(6) STOCKHOLDERS' EQUITY
Stockholders' equity consisted of the following:
SEPTEMBER 30, DECEMBER 31,
1996 1995
(UNAUDITED)
------------- ------------
(IN THOUSANDS,
EXCEPT PAR VALUE)
Common stock, $0.001 par value, 30,000 shares
authorized; 21,251 and 21,069 shares issued
and outstanding. . . . . . . . . . . . . . . . $ 21 $ 21
Additional paid-in capital . . . . . . . . . . . 23,057 22,925
Retained earnings. . . . . . . . . . . . . . . . 24,380 19,921
Stockholders' notes receivable . . . . . . . . . (1,083) (1,083)
Deferred compensation. . . . . . . . . . . . . . (94) (130)
Cumulative translation adjustment. . . . . . . . (558) (567)
------- -------
Total stockholders' equity . . . . . . . . . . . $45,723 $41,087
------- -------
------- -------
7
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
The following discussion contains, in addition to historical
information, forward-looking statements. The Company's actual results may
differ significantly from the results discussed in the forward-looking
statements. Factors that could cause or contribute to such differences
include, but are not limited to, those discussed below and in the Company's
1995 annual report on Form 10-K.
In particular, the Company believes that the following factors could
impact forward-looking statements made herein or in future written or oral
releases and by hindsight, prove such statements to be overly optimistic and
unachievable: volatility of the semiconductor and semiconductor equipment
industries, customer concentration, dependence on design wins, rapid
technological change and dependence on new system introduction, competition,
and management of growth.
RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDED SEPTEMBER 30, 1996 AND 1995
SALES
Sales for the third quarter of 1996 were $21.6 million, a decrease of
16% from third quarter of 1995 sales of $25.6 million. The Company's sales
decline in the third quarter of 1996 resulted from the decreased unit sales
of the Company's systems and a change in product mix, which also reduced the
average selling price for the period. A significant part of this unit sales
decrease is attributable to decreased demand by domestic semiconductor
equipment customers, primarily the Company's two largest customers.
The Company continues to be cautious about the outlook for future sales
to the semiconductor equipment industry. During the most recent quarter, 52%
of the Company's revenue came from this industry, down from 57% in the same
quarter a year ago.
GROSS MARGIN
The Company's gross margin for the third quarter of 1996 was 30.5% of
revenue, down from 50.2% of revenue in the comparable period in 1995, and
down from 42.3% in the second quarter of 1996. The decline in gross margin in
the third quarter of 1996 was primarily the result of underabsorbed fixed
manufacturing costs. Revenues in the current quarter were $3.9 million lower
than in the third quarter of 1995 and $8.2 million lower than in the second
quarter of 1996, while fixed overhead expenses were increased during 1995 and
early 1996 to provide higher capacity. The Company expects underabsorption of
manufacturing overhead will continue to adversely impact gross margin until
sales
8
levels improve. Additionally, gross margin was negatively impacted by a shift
in product mix toward products on which material costs increased as a
percentage of sales and by increased customer service costs, which increased
as a percentage of sales, as a result of the lower sales base.
During the third quarter, the Company announced cost containment
measures in response to recent declines in orders to the semiconductor
capital equipment market. As part of these measures, the Company reduced
headcount by 7 percent, reduced leased facilities by 7 percent, initiated a
10% decrease in senior management salaries and reevaluated inventories for
excess and obsolete parts. These efforts resulted in additional charges of
$350K related to severance pay, charges associated with subleasing facilities
and an increased provision for excess inventories.
RESEARCH AND DEVELOPMENT
The Company's research and development costs are associated with
researching new technologies, developing new products and improving existing
product designs. Research and development expenses for the third quarter of
1996 were $3.3 million, compared to expenses of $2.7 million in the third
quarter of 1995, representing an increase of 22%. As a percentage of sales,
research and development expenses increased to 15.5% in the third quarter of
1996 from 10.6% in the third quarter of 1995. The increase is primarily
associated with costs incurred to support new product development.
The Company believes that continued research and development investment
is essential to ongoing development of new products. Since inception, all
research and development costs have been internally funded and expensed.
SALES AND MARKETING
Sales and marketing expenses support domestic and international sales
and marketing activities which include personnel, trade shows, advertising,
and other marketing activities. Sales and marketing expenses for the third
quarter of 1996 were $2.2 million, compared to expenses of $1.6 million in
the third quarter of 1995, representing an increase of 38%. As a percentage
of sales, sales and marketing expenses increased to 10.2% in the third
quarter of 1996 from 6.1% in the third quarter of 1995. The dollar increase
is attributable to costs associated with expansion of the sales and marketing
infrastructure to support the sales volume increase realized in the second
quarter of 1996. As a percentage of sales, the major increase is a result of
the lower sales base.
The Company is reorganizing its sales and marketing team to better
address the specific needs of its customers. As a result, sales and marketing
expenses are expected to increase as a percentage of sales in future periods.
9
GENERAL AND ADMINISTRATIVE
General and administrative expenses support the worldwide financial,
administrative, information systems and human resources functions of the
Company. General and administrative expenses for the third quarter of 1996
were $0.9 million, compared to expenses of $1.8 million in the third quarter
of 1995, representing a decrease of 42%. As a percentage of sales, these
expenses decreased to 4.3% in the third quarter of 1996 from 7.0% in the
third quarter of 1995. The decrease during the third quarter was primarily
attributed to reductions made to previously accrued bonuses and other
employee benefits.
The Company is currently implementing information management system
software which will replace existing systems to support its growth. The
Company expects that significant charges related to training and
implementation of the new software will occur during 1996 and 1997. The
expenses incurred to date have been recognized in the appropriate functional
area.
OTHER INCOME (EXPENSE)
Other income and expense consists primarily of foreign exchange gains
and losses, interest expense and other miscellaneous income and expense
items. Other income was $0.1 million for the third quarter of 1996, compared
to other expenses of $0.6 million in the third quarter of 1995.
The Company has experienced fluctuations in foreign currency exchange
rates during the past few months. As a hedge against significant currency
fluctuations in the Japanese yen, the Company has entered into various
forward foreign exchange contracts to lessen exposures to foreign exchange
losses.
PROVISION FOR INCOME TAXES
The income tax provision of $0.1 million for the third quarter of 1996
represented an estimated effective rate of 40.3%. The income tax provision in
the comparable period in 1995 was $2.1 million, representing an estimated
rate of 34.3%. The Company adjusts its income taxes periodically based upon
the anticipated tax status of all foreign and domestic entities.
RESULTS OF OPERATIONS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1996 AND 1995
SALES
Sales for the first nine months of 1996 were $78.6 million, an increase
of 15% from sales of $68.5 million in the comparable period in 1995. The
Company's sales growth during the periods presented has resulted from the
increased unit sales of the Company's
10
systems, primarily in the first half of 1996. A significant part of this
growth is attributable to higher sales to domestic customers, primarily the
Company's two largest customers.
GROSS MARGIN
The Company's gross margin for the first nine months of 1996 was 37.3%
of revenue, down from 49.7% of revenue in the comparable period in 1995. The
decline in gross margin in the first nine months of 1996 was primarily
affected by higher material costs associated with outsourcing assemblies,
changes in product mix, including some shift toward lower margin CE products,
and underabsorbed overhead costs. Average selling prices for the two
comparative nine month periods remained relatively constant.
RESEARCH AND DEVELOPMENT
Research and development expenses for the first nine months of 1996 were
$10.5 million, compared to expenses of $7.1 million in the comparable period
in 1995, representing an increase of 48%. As a percentage of sales, research
and development expenses increased to 13.3% in the first nine months of 1996
from 10.4% in the first nine months of 1995. The increase is primarily
associated with costs incurred to support new product development.
SALES AND MARKETING
Sales and marketing expenses for the first nine months of 1996 were $6.5
million, compared to expenses of $4.3 million in the comparable period in
1995, representing an increase of 51%. As a percentage of sales, these
expenses increased to 8.3% in the first nine months of 1996 from 6.3% in the
first nine months of 1995. The increase is attributable to costs associated
with expansion to support the increase in sales volume, and to provide
additional support to customers.
GENERAL AND ADMINISTRATIVE
General and administrative expenses for the first nine months of 1996
were $5.0 million, compared to expenses of $5.4 million in the comparable
period in 1995, representing a decrease of 7%. As a percentage of sales,
these expenses decreased to 6.3% in the first nine months of 1996 from 7.9%
in the first nine months of 1995. The decrease in general and administrative
expenses as a percentage of sales was primarily attributed to reductions made
to previously accrued bonuses and other employee benefits.
OTHER INCOME (EXPENSE)
Other expenses were $0.1 million for the first nine months of 1996,
compared to $0.5 million in the comparable period in 1995.
11
PROVISION FOR INCOME TAXES
The income tax provision of $2.7 million for the first nine months of
1996 represented an estimated effective rate of 38.1%. The income tax
provision in the comparable period in 1995 was $6.2 million, representing an
estimated rate of 37.1%. The Company periodically adjusts its income tax
provision based upon the anticipated tax status of all foreign and domestic
entities.
LIQUIDITY AND CAPITAL RESOURCES
Until the initial public offering of the Company's common stock in
November 1995, the Company financed its operations, acquired equipment and
met its working capital requirements through borrowings under its revolving
line of credit, long-term loans secured by property and equipment and cash
flow from operations.
Cash provided by operations totaled $0.5 million for the first nine
months in 1996 compared to $2.5 million for the same period in 1995. Cash
provided in the first nine months of 1996 was primarily a result of net
income offset by decreases in accounts payable. Cash provided in the
comparable period in 1995 was primarily a result of net income and increases
in accounts payable and income taxes payable offset by increases in accounts
receivable and inventories.
Investing activities, consisting primarily of equipment acquisitions and
leasehold improvements, used cash of $4.9 million in the first nine months of
1996, versus $2.4 million in the comparable period in 1995. Financing
activities in the first nine months of 1996 consisted primarily of note and
loan repayments and used cash of $0.4 million. In the comparable period in
1995, financing activities consisted primarily of proceeds from and
repayments to the Company's revolving line of credit, proceeds from notes
payable, and repayment of notes payable and capital lease obligations and
generated cash of $0.6 million.
The Company plans to spend approximately $0.4 million through the
remainder of 1996 for the acquisition of equipment and integrated information
management system software, leasehold improvements and furnishings.
As of September 30, 1996, the Company had working capital of $34.4
million. The Company's principal sources of liquidity consisted of $8.5
million of cash and cash equivalents and $8.0 million available under an $8.0
million revolving line of credit that bears interest at the prime rate (8.25%
at October 15, 1996). The Company has the option to convert up to $3.0
million of its revolving line of credit to a 36-month term loan that would
bear interest at prime rate plus 0.50%.
The Company also has a term loan for equipment financing for its US
operations. At September 30, 1996, $1.2 million was outstanding under the
term loan, which bears
12
interest at prime plus 0.75% and is due July 31, 1999. During the third
quarter, the Company entered into an agreement for a term loan of $0.2
million to provide working capital for its Japan operations. The Company also
entered into an agreement in November 1995, that provides the Company with a
$1.5 million line of credit to purchase equipment. At September 30, 1996,
there were no amounts outstanding under this line of credit.
The Company believes that its cash and cash equivalents, cash flow from
operations and available borrowings, will be sufficient to meet the Company's
working capital needs through at least the first half of 1997. After that
time, the Company may require additional equity or debt financing to address
its working capital, capital equipment, or expansion needs. There can be no
assurance that additional funding will be available when required or that it
will be available on terms acceptable to the Company.
13
PART II OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
None.
ITEM 2. CHANGES IN SECURITIES
None.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
ITEM 5. OTHER INFORMATION
None.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
None.
14
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
ADVANCED ENERGY INDUSTRIES, INC.
November 12, 1996
/s/ RICHARD P. BECK
-----------------------------------------
(Registrant)
Vice President, Chief Financial
Officer, Assistant Secretary and
Director (Principal Financial Officer
and Principal Accounting Officer)
15