Advanced Energy: weak economy hit all markets in 2008

Advanced Energy Industries, Inc. on 23 February 2009 announced financial results for the 4Q and year ended 31 December 2008. Sales for the 4Q of 2008 were USD 67.5 million, down 19.5% from USD 83.8 mi…

Advanced Energy Industries, Inc. on 23 February 2009 announced financial results for the 4Q and year ended 31 December 2008. Sales for the 4Q of 2008 were USD 67.5 million, down 19.5% from USD 83.8 million in the same quarter a year ago and down 20.1% from USD 84.5 million in the 3Q 2008. The weak economy affected all of the firm“s markets, led by semiconductor equipment, which experienced a revenue decrease of 20.2% sequentially. Sales to non-semiconductor markets represented 48.3% of total sales for the quarter, driven by continued strength from the solar market, which represented 23.6% of total sales. Service revenues were 18.4% of total sales, down 20.5% sequentially, primarily due to softness in the semiconductor market. Gross margin for the 4Q was 27.2%, down from 39.1% in the 4Q 2007, and 41.7% in the 3Q 2008. Margins were lower due to a USD 5.1 million charge to cost of goods sold for excess and obsolete inventory, which impacted gross margin by 7.6%, as well as lower revenues and the resulting lower absorption of manufacturing overhead. Operating expenses were reduced by 15.7% sequentially in the quarter, as additional cost reduction measures were implemented including discretionary spending controls, global shutdown weeks during the holiday season and workforce reductions. During the 4Q 2008, a non-cash charge of USD 18.0 million was also recorded for income taxes related to a valuation allowance against deferred tax assets. This resulted in a net loss for the 4Q 2008 of USD 19.0 million compared to net income of USD 4.2 million in the 4Q of 2007. Net income also decreased sequentially from USD 5.4 million in the 3Q 2008. For the full year 2008, sales were USD 328.9 million, a 14.5% decrease from USD 384.7 million in 2007. The primary driver of the reduction in sales was a 39.0% drop in revenues to the semiconductor equipment market, partially offset by a 118.7% increase in revenues to the solar market. Net loss from continuing operations for 2008 was USD 1.8 million compared to net income of USD 34.4 million in 2007. During 2008, the company generated USD 24.7 million in cash from operations to end the year with USD 180.1 million in cash, cash equivalents and investments, including auction rate securities of USD 30.4 million. “In 2008, non-semiconductor revenue grew faster and became a larger part of total revenue. In an otherwise difficult environment during the year, our strategy of targeting a diverse group of markets for our leading power conversion technology proved to be effective”, said Hans Betz, president and CEO. “Though overall revenues declined year-over-year, we doubled our solar revenue, grew our services business and introduced successful new products such as the Solaron(R) 500KW inverter, while maintaining a healthy balance sheet with a strong cash position. As the year ended with extremely challenging economic conditions across all industries and very limited visibility, we took quick, decisive action to implement major cost reductions”. “Going forward, we continue to see a weak economic outlook that may persist for some time. We will take additional cost reduction measures in the future as needed to drive our breakeven point even lower and address further deterioration in our markets. We remain focused on our core market and technology initiatives to ensure Advanced Energy is well positioned to take market share during the downturn and is poised for tremendous leverage when our markets recover”. The company anticipates 1Q 2009 sales of USD 30.0 million to USD 36.0 million and a loss per share of USD 0.46 to USD 0.53. Advanced Energy develops power and control technologies that enable high-growth, plasma thin-film manufacturing processes worldwide, including semiconductors, flat panel displays, data storage products, solar cells, architectural glass, and other advanced product applications.