ADVANCED ENERGY INDUSTRIES INC (Form: 8-K, Received: 11/12/2019 07:36:01)

$310M +/- $15M

GAAP EPS from continuing operations

$0.31 +/- $0.12

Non-GAAP EPS

$0.68 +/- $0.12

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 8-K

CURRENT REPORT

Pursuant to Section 13 OR 15(d) of The Securities Exchange Act of 1934

Date of Report (Date of earliest event reported): November 12, 2019

Advanced Energy Industries, Inc.

(Exact name of registrant as specified in its charter)

Delaware		000-26966		84-0846841
(State or other jurisdiction of incorporation)		(Commission File Number)		(IRS Employer Identification No.)


1625 Sharp Point Drive, Fort Collins, Colorado		80525
(Address of principal executive offices)		(Zip Code)

(970) 221-4670

(Registrant’s telephone number, including area code)

Not applicable

(Former name or former address, if changed since last report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the

registrant under any of the following provisions (see General Instruction A.2. below):

☐	Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

☐	Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

☐	Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

☐	Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, $0.001 par value	AEIS	NASDAQ Global Select Market

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (17 CFR §230.405) or Rule 12b-2 of the Securities Exchange Act of 1934 (17 CFR §240.12b-2). Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Item 2.02 Results of Operations and Financial Condition.

The information in this Form 8-K is furnished under “Item 2.02 Results of Operations and Financial Condition” and Exhibit 99.1 attached hereto shall not be deemed “filed” for purposes of Section 18 of the Securities Act of 1934, nor shall they be deemed incorporated by reference in any filing under the Securities Act of 1933, except as shall be expressly set forth by specific reference in such filing.

On November 12, 2019, Advanced Energy Industries, Inc. issued a press release announcing its financial results for the quarter ended September 30, 2019. A copy of the press release is furnished with this Current Report on Form 8-K as Exhibit 99.1.

Item 9.01 Financial Statements and Exhibits.


(d)		Exhibits

99.1		Press release dated November 12, 2019 by Advanced Energy Industries, Inc., reporting its financial results for the quarter ended September 30, 2019.

104		The cover page from Advanced Energy Industries, Inc. Current Report on Form 8-K, formatted in Inline XBRL

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 hereunto duly authorized.




	/s/ Paul Oldham
Date: November 12, 2019	Paul Oldham
	Chief Financial Officer & Executive Vice President

Exhibit 99.1

IMAGE - IMAGE1.JPEG

Financial News Release

Advanced Energy Announces Third Quarter 2019 Results

Closed the acquisition of Artesyn Embedded Power on September 10

Q3 total revenue was $175.1 million; organic revenue was $134.2 million, above the guidance range of $123 to $133 million

Q3 GAAP EPS from continuing operations was $0.19

Q3 Non-GAAP EPS was $0.54; before acquisition, non-GAAP EPS was $0.47, also above the guidance range of $0.28 to $0.38

FORT COLLINS, Colo., November 12, 2019 - Advanced Energy Industries, Inc. (Nasdaq: AEIS), today announced financial results for the third quarter ended September 30, 2019.

“We delivered a strong third quarter, with both organic revenue and non-GAAP earnings above the high-end of our guidance ranges. Demand for our products in the semi equipment market is improving on increased foundry/logic investments and the beginning of investment in memory,” said Yuval Wasserman, president and CEO. “We closed the acquisition of Artesyn Embedded Power slightly ahead of schedule, adding incremental revenue and non-GAAP earnings to the third quarter. We have started the integration process and I am pleased with our progress.”

Third Quarter Results

Sales were $175.1 million in the third quarter of 2019 compared with $134.8 million in the second quarter of 2019 and $173.1 million in the third quarter of 2018.

GAAP net income from continuing operations was $7.3 million or $0.19 per diluted share, compared with $23.4 million or $0.61 per diluted share in the prior quarter, and $35.2 million or $0.90 per diluted share in the third quarter of 2018.

Non-GAAP net income was $20.9 million or $0.54 per diluted share in the third quarter of 2019. This compares with $17.2 million or $0.45 per diluted share in the second quarter of 2019, and $41.2 million or $1.05 per diluted share in the third quarter of 2018. Non-GAAP net income in the third quarter of 2019 included $2.9 million or $0.07 per diluted share earnings contribution, including financing cost, from the acquisition of Artesyn Embedded Power.

A reconciliation of non-GAAP measures is provided in the tables below.

The company generated $10.5 million of operating cash from continuing operations in the quarter.

Discontinued Operations

The company’s financial statements for all periods presented reflect results for the continuing precision power business, with the discontinued inverter business included in discontinued

operations for all purposes. Further financial detail regarding the amounts related to the discontinued inverter business are available in the company’s 2018 Annual Report on Form 10‑K.

Fourth Quarter 2019 Guidance

Based on the company’s current view, beliefs and assumptions, guidance for the fourth quarter of 2019 is within the following ranges.

Conference Call

Management will host a conference call on Tuesday, November 12, 2019 at 6:30 a.m. Mountain Time/ 8:30 a.m. Eastern Time to discuss Advanced Energy’s financial results. Domestic callers may access this conference call by dialing 855‑232‑8958. International callers may access the call by dialing +1 315‑625‑6980. Participants will need to provide the operator with Conference ID Number 2569664, which has been reserved for this call. A webcast will also be available on the company’s Investor Relations web page at ir.advanced-energy.com.

About Advanced Energy

Advanced Energy (Nasdaq: AEIS) is a global leader in the design and manufacturing of highly engineered, precision power conversion, measurement and control solutions for mission-critical applications and processes. AE’s power solutions enable customer innovation in complex applications for a wide range of industries including semiconductor equipment, industrial, manufacturing, telecommunications, data center computing and healthcare. With engineering know-how and responsive service and support around the globe, the company builds collaborative partnerships to meet technology advances, propel growth for its customers and innovate the future of power. Advanced Energy has devoted more than three decades to perfecting power for its global customers and is headquartered in Fort Collins, Colorado, USA. For more information, visit www.advancedenergy.com.

Advanced Energy | Precision. Power. Performance.

For more information, contact:

Brian Smith

Advanced Energy

(970) 407‑6555

brian.smith@aei.com

Non-GAAP Measures

This release includes GAAP and non-GAAP income and per-share earnings data and other GAAP and non-GAAP financial information. Advanced Energy’s non-GAAP measures exclude the impact of non-cash related charges such as stock-based compensation and amortization of intangible assets, as well as discontinued operations, and non-recurring items such as acquisition-related costs and restructuring expenses. The non-GAAP measures included in this release are not in accordance with, or an alternative for, similar measures calculated under generally accepted accounting principles and may be different from non-GAAP measures used by other companies. In

addition, these non-GAAP measures are not based on any comprehensive set of accounting rules or principles. Advanced Energy believes that these non-GAAP measures provide useful information to management and investors to evaluate business performance without the impacts of certain non-cash charges and other cash charges which are not part of the company’s usual operations. The company uses these non-GAAP measures to assess performance against business objectives, make business decisions, develop budgets, forecast future periods, assess trends and evaluate financial impacts of various scenarios. In addition, management’s incentive plans include these non-GAAP measures as criteria for achievements. Additionally, the company believes that these non-GAAP measures, in combination with its financial results calculated in accordance with GAAP, provide investors with additional perspective. While some of the excluded items may be incurred and reflected in the company’s GAAP financial results in the foreseeable future, the company believes that the items excluded from certain non-GAAP measures do not accurately reflect the underlying performance of its continuing operations for the period in which they are incurred. The use of non-GAAP measures has limitations in that such measures do not reflect all of the amounts associated with the company’s results of operations as determined in accordance with GAAP, and these measures should only be used to evaluate the company’s results of operations in conjunction with the corresponding GAAP measures. Please refer to the Form 8‑K regarding this release furnished today to the Securities and Exchange Commission.

Forward-Looking Statements

The company’s guidance with respect to anticipated financial results for the fourth quarter ending December 31, 2019, potential future growth and profitability, our future business mix, expectations regarding future market trends and the company’s future performance within specific markets and other statements herein or made on the above-announced conference call that are not historical information are forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. 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: (a) the effects of global macroeconomic conditions upon demand for our products and services; (b) the volatility and cyclicality of the industries the company serves, particularly the semiconductor industry; (c) delays in capital spending by end-users in our served markets; (d) the risks and uncertainties related to the acquisition and integration of Artesyn Embedded Power; (e) the accuracy of the company’s estimates related to fulfilling solar inverter product warranty and post-warranty obligations; (f) the company’s ability to realize its plan to avoid additional costs after the solar inverter wind-down; (g) the accuracy of the company’s assumptions on which its financial statement projections are based; (h) the impact of product price changes, which may result from a variety of factors; (i) the timing of orders received from customers; (j) the company’s ability to realize benefits from cost improvement efforts including avoided costs, restructuring plans and inorganic growth; (k) the company’s ability to obtain in a timely manner the materials necessary to manufacture its products; (l) unanticipated changes to management’s estimates, reserves or allowances; (m) changes and adjustments to the tax expense and benefits related to the U.S. tax reform that was enacted in late 2017; and (n) the effects of U.S. government trade and export restrictions, Chinese retaliatory trade actions, and other governmental action related to tariffs upon the demand for our, and our customers’, products and services and the U.S. economy. 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 (the “SEC”). These reports and statements are available on the SEC’s website at www.sec.gov. Copies may also be obtained from Advanced Energy’s investor relations page at ir.advanced-energy.com or by contacting Advanced Energy’s investor relations at 970‑407‑6555. Forward-looking statements are made and based on information available to the company on the date of this press release. Aspirational goals and targets discussed on the conference call or in the presentation materials

should not be interpreted in any respect as guidance. The company assumes no obligation to update the information in this press release.

ADVANCED ENERGY INDUSTRIES, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)

(in thousands, except per share data)


	Three Months Ended									Nine Months Ended
	September 30,						June 30,			September 30,
	2019			2018			2019			2019			2018
Sales:
Product	$	148,138		$	144,843		$	106,193		$	366,443		$	485,287
Service		26,989			28,239			28,617			84,237			79,444
Total sales		175,127			173,082			134,810			450,680			564,731
Cost of sales:
Product		87,536			73,019			56,113			204,450			233,778
Service		14,100			14,524			14,571			42,873			40,534
Total cost of sales		101,636			87,543			70,684			247,323			274,312
Gross profit		73,491			85,539			64,126			203,357			290,419
		42.0	%		49.4	%		47.6	%		45.1	%		51.4	%
Operating expenses:
Research and development		24,546			18,451			21,840			67,675			55,283
Selling, general and administrative		36,401			25,386			27,612			93,027			78,792
Amortization of intangible assets		3,002			1,437			1,874			6,849			3,958
Restructuring expense		152			403			1,795			3,620			403
Total operating expenses		64,101			45,677			53,121			171,171			138,436
Operating income		9,390			39,862			11,005			32,186			151,983
Other income (expense), net		1,361			401			15,545			17,649			(58)
Income from continuing operations before income taxes		10,751			40,263			26,550			49,835			151,925
Provision (benefit) for income taxes		3,495			5,106			3,177			3,819			23,998
Income from continuing operations, net of income taxes		7,256			35,157			23,373			46,016			127,927
Income (loss) from discontinued operations, net of income taxes		375			(371)			8,324			8,690			(226)
Net income		7,631			34,786			31,697			54,706			127,701
Income from continuing operations attributable to non-controlling interest		10			7			11			29			82
Net income attributable to Advanced Energy Industries, Inc.	$	7,621		$	34,779		$	31,686		$	54,677		$	127,619

Basic weighted-average common shares outstanding		38,313			38,970			38,274			38,258			39,309
Diluted weighted-average common shares outstanding		38,489			39,195			38,462			38,457			39,594

Earnings per share attributable to Advanced Energy Industries, Inc:

Continuing operations:
Basic earnings per share	$	0.19		$	0.90		$	0.61		$	1.20		$	3.25
Diluted earnings per share	$	0.19		$	0.90		$	0.61		$	1.20		$	3.23

Discontinued operations:
Basic earnings per share	$	0.01		$	(0.01)		$	0.22		$	0.23		$	(0.01)
Diluted earnings per share	$	0.01		$	(0.01)		$	0.22		$	0.23		$	(0.01)

Net income:
Basic earnings per share	$	0.20		$	0.89		$	0.83		$	1.43		$	3.25
Diluted earnings per share	$	0.20		$	0.89		$	0.82		$	1.42		$	3.23

ADVANCED ENERGY INDUSTRIES, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands)


	September 30,		December 31,
	2019		2018
	Unaudited
ASSETS
Current assets:
Cash and cash equivalents	$	340,402	$	349,301
Marketable securities		747		2,470
Accounts and other receivable, net		250,151		100,442
Inventories, net		240,699		97,987
Income taxes receivable		2,124		2,220
Other current assets		45,757		10,173
Current assets of discontinued operations		84		5,855
Total current assets		879,964		568,448

Property and equipment, net		104,568		31,269
Operating lease right-of-use assets		111,193		—

Deposits and other assets		20,650		6,874
Goodwill and intangibles, net		421,801		156,810
Deferred income tax assets		56,488		47,099
Non-current assets of discontinued operations		755		5,984
Total assets	$	1,595,419	$	816,484

LIABILITIES AND STOCKHOLDERS’ EQUITY

Current liabilities:
Accounts payable	$	210,647	$	39,646
Other accrued expenses		109,192		65,377
Current portion of debt		17,500		—
Current portion of operating lease liability		17,648		—
Current liabilities of discontinued operations		910		5,286
Total current liabilities		355,897		110,309

Long-term debt		325,769		—
Non-current liabilities of continuing operations		252,540		88,158
Non-current liabilities of discontinued operations		1,045		10,715
Long-term liabilities		579,354		98,873

Total liabilities		935,251		209,182

Advanced Energy stockholders’ equity		659,627		606,790
Noncontrolling interest		541		512
Stockholders’ equity		660,168		607,302
Total liabilities and stockholders’ equity	$	1,595,419	$	816,484

December 31, 2018 amounts are derived from the December 31, 2018 audited Consolidated Financial Statements.

ADVANCED ENERGY INDUSTRIES, INC.

CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS

(in thousands)


	Nine Months Ended September 30,
	2019		2018
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income	$	54,706	$	127,701
Income from discontinued operations, net of income taxes		8,690		(226)
Income from continuing operations, net of income taxes		46,016		127,927

Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		15,301		9,488
Stock-based compensation expense		5,053		7,461
Provision for deferred income taxes		2,825		—
Gain on sale of central inverter service business		(14,804)		—
Net loss on disposal of assets		104		167
Changes in operating assets and liabilities, net of assets acquired		(25,637)		(26,560)
Net cash provided by operating activities from continuing operations		28,858		118,483
Net cash provided by operating activities from discontinued operations		317		(4,550)
Net cash provided by operating activities		29,175		113,933
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of marketable securities		—		(93)
Proceeds from sale of marketable securities		1,742		6
Acquisitions, net of cash acquired		(365,798)		(93,801)
Issuance of notes receivable		(2,800)		—
Purchases of property and equipment		(15,681)		(16,586)
Net cash used in investing activities from continuing operations		(382,537)		(110,474)
Net cash used in investing activities from discontinued operations		—		—
Net cash used in investing activities		(382,537)		(110,474)
CASH FLOWS FROM FINANCING ACTIVITIES:
Net Proceeds from long-term borrowings		347,486		—
Payments on long-term borrowings		(4,375)		—
Purchase and retirement of common stock		—		(69,021)
Net payments related to stock-based award activities		(714)		(2,636)
Net cash provided by financing activities from continuing operations		342,397		(71,657)
Net cash provided by financing activities from discontinued operations		—		—
Net cash provided by financing activities		342,397		(71,657)
EFFECT OF CURRENCY TRANSLATION ON CASH		(3,185)		(722)
DECREASE IN CASH AND CASH EQUIVALENTS		(14,150)		(68,920)
CASH AND CASH EQUIVALENTS, beginning of period		354,552		415,037
CASH AND CASH EQUIVALENTS, end of period		340,402		346,117
Less cash and cash equivalents from discontinued operations		—		7,444
CASH AND CASH EQUIVALENTS FROM CONTINUING OPERATIONS, end of period	$	340,402	$	338,673

ADVANCED ENERGY INDUSTRIES, INC.

SUPPLEMENTAL INFORMATION (UNAUDITED)

(in thousands)


Net Sales by Product Line	Three Months Ended						Nine Months Ended
	September 30,				June 30,		September 30,
	2019		2018		2019		2019		2018
Semiconductor Equipment	$	96,426	$	119,969	$	90,058	$	277,911	$	426,380
Telecom & Networking		10,016		—		—		10,016		—
Data Center Computing		13,498		—		—		13,498		—
Industrial & Medical		55,187		53,113		44,752		149,255		138,351
Total	$	175,127	$	173,082	$	134,810	$	450,680	$	564,731


Net Sales by Geographic Region	Three Months Ended						Nine Months Ended
	September 30,				June 30,		September 30,
	2019		2018		2019		2019		2018
North America	$	83,632	$	85,728	$	61,393	$	203,531	$	295,567
Asia		66,157		61,691		50,962		175,554		198,020
Europe		25,008		25,538		22,092		70,526		70,802
Other Countries		330		125		363		1,069		342
Total	$	175,127	$	173,082	$	134,810	$	450,680	$	564,731

ADVANCED ENERGY INDUSTRIES, INC.

SELECTED OTHER DATA (UNAUDITED)

(in thousands)


Reconciliation of Non-GAAP measure - operating expenses and operating income, excluding certain items	Three Months Ended						Nine Months Ended
	September 30,				June 30,		September 30,
	2019		2018		2019		2019		2018
Gross profit from continuing operations, as reported	$	73,491	$	85,539	$	64,126	$	203,357	$	290,419
Adjustments to gross profit:
Stock-based compensation		77		76		55		365		576
Facility expansion and relocation costs		1,342		725		150		1,662		974
Acquisition-related costs		1,506		158		—		1,506		158
Non-GAAP gross profit		76,416		86,498		64,331		206,890		292,127

Operating expenses from continuing operations, as reported		64,101		45,677		53,121		171,171		138,436
Adjustments:
Amortization of intangible assets		(3,002)		(1,437)		(1,874)		(6,849)		(3,958)
Stock-based compensation		(840)		(948)		(883)		(4,688)		(6,885)
Acquisition-related costs		(6,398)		(705)		(1,531)		(9,440)		(1,310)
Facility expansion and relocation costs		(223)		(29)		—		(297)		(518)
Restructuring charges		(152)		(403)		(1,795)		(3,620)		(403)
Non-GAAP operating expenses		53,486		42,155		47,038		146,277		125,362
Non-GAAP operating income	$	22,930	$	44,343	$	17,293	$	60,613	$	166,765


Reconciliation of Non-GAAP measure - operating expenses and operating income, excluding certain items	Three Months Ended									Nine Months Ended
	September 30,						June 30,			September 30,
	2019			2018			2019			2019			2018
Gross profit from continuing operations, as reported		42.0	%		49.4	%		47.6	%		45.1	%		51.4	%
Adjustments to gross profit:
Stock-based compensation		—			—			—			0.1			0.1
Facility expansion and relocation costs		0.8			0.5			0.1			0.4			0.2
Acquisition-related costs		0.8			0.1			—			0.3			—
Non-GAAP gross profit		43.6			50.0			47.7			45.9			51.7

Operating expenses from continuing operations, as reported		36.6			26.4			39.4			38.0			24.5
Adjustments:
Amortization of intangible assets		(1.7)			(0.8)			(1.4)			(1.5)			(0.7)
Stock-based compensation		(0.5)			(0.6)			(0.7)			(1.0)			(1.2)
Acquisition-related costs		(3.7)			(0.4)			(1.1)			(2.1)			(0.2)
Facility expansion and relocation costs		(0.1)			—			—			(0.1)			(0.1)
Restructuring charges		(0.1)			(0.2)			(1.3)			(0.8)			(0.1)
Non-GAAP operating expenses		30.5			24.4			34.9			32.5			22.2
Non-GAAP operating income		13.1	%		25.6	%		12.8	%		13.4	%		29.5	%


Reconciliation of Non-GAAP measure - income excluding certain items	Three Months Ended						Nine Months Ended
	September 30,				June 30,		September 30,
	2019		2018		2019		2019		2018
Income from continuing operations, less noncontrolling interest, net of income taxes	$	7,246	$	35,150	$	23,362	$	45,987	$	127,845
Adjustments:
Amortization of intangible assets		3,002		1,437		1,874		6,849		3,958
Acquisition-related costs		7,904		863		1,531		10,946		1,468
Facility expansion and relocation costs		1,565		754		150		1,959		1,492
Restructuring charges		152		403		1,795		3,620		403
Tax Cuts and Jobs Act Impact		—		2,398		—		—		4,251
Central inverter services business sale		—		—		(14,804)		(14,804)		—
Acquisition transition services		(29)		—		—		(29)		—
Tax effect of Non-GAAP adjustments		326		(598)		2,536		2,011		(1,145)
Non-GAAP income, net of income taxes, excluding stock-based compensation		20,166		40,407		16,444		56,539		138,272
Stock-based compensation, net of taxes		702		779		722		3,887		5,716
Non-GAAP income, net of income taxes	$	20,868	$	41,186	$	17,166	$	60,426	$	143,988


Reconciliation of Non-GAAP measure - per share earnings excluding certain items	Three Months Ended						Nine Months Ended
	September 30,				June 30,		September 30,
	2019		2018		2019		2019		2018
Diluted earnings per share from continuing operations, as reported	$	0.19	$	0.90	$	0.61	$	1.20	$	3.23
Add back (subtract):
per share impact of Non-GAAP adjustments, net of tax		0.35		0.15		(0.16)		0.37		0.41
Non-GAAP per share earnings	$	0.54	$	1.05	$	0.45	$	1.57	$	3.64


Reconciliation of Q4 2019 Guidance
	Low End		High End

Revenue	$295 million		$325 million

Reconciliation of Non-GAAP earnings per share
GAAP earnings per share	$	0.19	$	0.43
Stock-based compensation		0.06		0.05
Amortization of intangible assets		0.14		0.14
Amortization of Acquisition Fair Value Adjustment in Inventory		0.10		0.13
Restructuring and other		0.11		0.08
Tax effects of excluded items		(0.04)		(0.03)
Non-GAAP earnings per share	$	0.56	$	0.80