<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------
FORM 10-Q
(MARK ONE)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934.
For the quarterly period ended March 31, 1999.
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES 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 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 April 30, 1999, there were 26,927,185 shares of the Registrant's Common
Stock, par value $0.001 per share, outstanding.
<PAGE>
ADVANCED ENERGY INDUSTRIES, INC.
FORM 10-Q
INDEX
<TABLE>
<S> <C>
PART I FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
Consolidated Balance Sheets-
March 31, 1999 and December 31, 1998 3
Consolidated Statement of Operations-
Three months ended March 31, 1999 and 1998 4
Consolidated Statement of Cash Flows-
Three months ended March 31, 1999 and 1998 5
Notes to consolidated financial statements 6
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS 9
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT
MARKET RISK 16
PART II OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS 18
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS 18
ITEM 3. DEFAULTS UPON SENIOR SECURITIES 18
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS 18
ITEM 5. OTHER INFORMATION 18
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K 18
</TABLE>
2
<PAGE>
PART I FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS AND SUPPLEMENTAL DATA
ADVANCED ENERGY INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
1999 1998
(UNAUDITED)
----------- -------------
ASSETS
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents..................................... $ 11,755 $ 12,295
Marketable securities - trading............................... 15,006 15,839
Accounts receivable, net...................................... 21,749 15,604
Income tax receivable......................................... 2,732 3,576
Inventories................................................... 22,298 21,412
Other current assets.......................................... 1,318 797
Deferred income tax assets, net............................... 4,054 4,112
-------- --------
Total current assets...................................... 78,912 73,635
-------- --------
PROPERTY AND EQUIPMENT, net..................................... 15,291 15,320
OTHER ASSETS:
Deposits and other............................................ 791 1,007
Goodwill and intangibles, net................................. 8,241 8,586
Demonstration and customer service equipment, net............. 2,128 2,487
-------- --------
Total assets.............................................. $105,363 $101,035
-------- --------
-------- --------
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable trade........................................ $ 7,417 $ 5,675
Accrued payroll and employee benefits......................... 3,831 2,983
Other accrued expenses........................................ 2,152 2,074
Customer deposits............................................. 67 66
Accrued income taxes payable.................................. 576 567
Current portion of long-term debt............................. 537 211
-------- --------
Total current liabilities................................. 14,580 11,576
-------- --------
LONG-TERM LIABILITIES:
Long-term debt................................................ 290 326
-------- --------
Total liabilities......................................... 14,870 11,902
-------- --------
STOCKHOLDERS' EQUITY............................................ 90,493 89,133
-------- --------
Total liabilities and stockholders' equity................ $105,363 $101,035
-------- --------
-------- --------
</TABLE>
The accompanying notes to consolidated financial statements
are an integral part of these consolidated balance sheets.
3
<PAGE>
ADVANCED ENERGY INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
-----------------------------
1999 1998
(UNAUDITED) (UNAUDITED)
----------- -----------
<S> <C> <C>
SALES........................................................... $32,728 $43,869
COST OF SALES................................................... 19,630 30,263
------- -------
Gross profit................................................. 13,098 13,606
------- -------
OPERATING EXPENSES:
Research and development...................................... 5,852 5,835
Sales and marketing........................................... 3,305 3,564
General and administrative.................................... 2,870 2,859
------- -------
Total operating expenses..................................... 12,027 12,258
------- -------
INCOME FROM OPERATIONS.......................................... 1,071 1,348
OTHER (EXPENSE) INCOME.......................................... (39) 98
------- -------
Net income before income taxes............................... 1,032 1,446
PROVISION FOR INCOME TAXES...................................... 498 552
------- -------
NET INCOME...................................................... $ 534 $ 894
------- -------
------- -------
BASIC EARNINGS PER SHARE........................................ $ 0.02 $ 0.03
------- -------
------- -------
DILUTED EARNINGS PER SHARE...................................... $ 0.02 $ 0.03
------- -------
------- -------
BASIC WEIGHTED-AVERAGE COMMON SHARES
OUTSTANDING.................................................. 26,834 26,493
------- -------
------- -------
DILUTED WEIGHTED-AVERAGE COMMON SHARES
OUTSTANDING.................................................. 28,027 27,170
------- -------
------- -------
</TABLE>
The accompanying notes to consolidated financial statements
are an integral part of this consolidated statement.
4
<PAGE>
ADVANCED ENERGY INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
-----------------------------
1999 1998
(UNAUDITED) (UNAUDITED)
----------- -----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income............................................................. $ 534 $ 894
Adjustments to reconcile net income to net cash provided by operating
activities --
Depreciation and amortization....................................... 1,664 1,494
Provision for deferred income taxes................................. 58 75
Amortization of deferred compensation............................... -- 12
Earnings from marketable securities, net............................ (168) (147)
Writedown of stock investment....................................... 200 --
Changes in operating assets and liabilities --
Accounts receivable-trade, net.................................... (6,028) 3,288
Related parties and other receivables............................. (117) 802
Inventories....................................................... (886) 1,876
Other current assets.............................................. (521) 398
Deposits and other................................................ 16 113
Demonstration and customer service equipment...................... 221 (432)
Accounts payable, trade........................................... 1,742 (4,124)
Accrued payroll and employee benefits............................. 848 (434)
Customer deposits and other accrued expenses...................... 79 (358)
Income taxes payable/receivable................................... 853 (882)
-------- --------
Net cash (used in) provided by operating activities............ (1,505) 2,575
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Sale of marketable securities.......................................... 1,001 2,500
Purchase of property and equipment, net................................ (1,152) (2,894)
Purchase of stock investment........................................... -- (500)
-------- --------
Net cash used in investing activities.......................... (151) (894)
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from notes payable.......................................... 344 1,402
Repayment of notes payable and capital lease obligations............. (54) (2,822)
Proceeds from sale of common stock................................... 1,167 25
-------- --------
Net cash provided by (used in) financing activities.......... 1,457 (1,395)
-------- --------
EFFECT OF CURRENCY TRANSLATION ON CASH................................. (341) (300)
-------- --------
DECREASE IN CASH AND CASH EQUIVALENTS.................................. (540) (14)
CASH AND CASH EQUIVALENTS, beginning of period......................... 12,295 12,041
-------- --------
CASH AND CASH EQUIVALENTS, end of period............................... $ 11,755 $ 12,027
-------- --------
-------- --------
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid for interest............................................... $ 8 $ 42
-------- --------
-------- --------
Cash (received) paid for income taxes, net........................... $ (452) $ 1,378
-------- --------
-------- --------
</TABLE>
The accompanying notes to consolidated financial statements
are an integral part of this consolidated statement.
5
<PAGE>
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 March 31,
1999, and the results of their operations and cash flows for the three-month
periods ended March 31, 1999 and March 31, 1998.
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, 1998.
(2) ACQUISITIONS
RF POWER PRODUCTS-- On October 8, 1998, RF Power Products, Inc.
("RFPP"), a New Jersey-based designer and manufacturer of radio frequency
power systems, matching networks and peripheral products primarily for
original equipment providers in the semiconductor capital equipment,
commercial coating, flat panel display and analytical instrumentation
markets, was merged with a wholly owned subsidiary of the Company. The
Company issued approximately 4 million shares of its common stock to the
former shareholders of RFPP. Each share of RFPP common stock was exchanged
for 0.32857 of one share of the Company's common stock. In addition,
outstanding RFPP stock options were converted at the same exchange factor
into options to purchase approximately 148,000 shares of the Company's common
stock.
The merger constituted a tax-free reorganization and has been accounted
for as a pooling of interests under Accounting Principles Board Opinion No.
16. Accordingly, all prior period consolidated financial statements presented
have been restated to include the combined balance sheet, statements of
operations and cash flows of RFPP as though it had always been part of the
Company. RFPP's year-end was November 30, and therefore, the combined
statements of operations and cash flows for the first quarter of 1998 include
RFPP's results for the three-month period ended February 28, 1998.
In connection with the merger, the Company recorded in the fourth
quarter of 1998 a charge to operating expenses of $2,742,000 for direct
merger-related costs. There were no transactions between the Company and RFPP
prior to the combination, and immaterial adjustments were recorded to conform
RFPP's accounting policies. Certain reclassifications were made to conform
the RFPP prior period financial statements to the Company's presentations. On
April 5, 1999, the name of RF Power Products, Inc. was changed to Advanced
Energy Voorhees, Inc.
FST-- Effective September 3, 1998, the Company acquired substantially
all of the assets of Fourth State Technology, Inc. ("FST"), a privately held,
Texas-based designer and manufacturer of process controls used to monitor and
analyze data in the RF process. The purchase price consisted of $2.5 million
in cash, assumption of a $113,000 liability, and an earn-out provision which
is based on profits over the next three-year period. Approximately $2.6
million of the purchase price was allocated to intangible assets. The
6
<PAGE>
results of operations of FST are included within the accompanying
consolidated financial statements from the date of acquisition.
TOWER-- Effective August 15, 1997, the Company acquired all of the
outstanding stock of Tower Electronics, Inc. ("Tower"), a Minnesota-based
designer and manufacturer of custom, high-performance switchmode power
supplies used principally in the telecommunications, medical and non-impact
printing industries. The purchase price consisted of $14.5 million in cash
and a $1.5 million non-interest-bearing promissory note to the seller (the
"Note"), which was paid in full during August 1998. Total consideration,
including the effect of imputing interest on the Note, equaled $15,889,000.
The acquisition was accounted for using the purchase method of accounting and
resulted in a one-time charge of $3,080,000 for in-process research and
development costs acquired as a result of the transaction. Acquisition costs
totaled approximately $209,000. The purchase agreement included a contingent
purchase price based on Tower exceeding a certain sales level in 1998. No
additional purchase price was recorded during 1998 as the sales level was not
achieved.
(3) ACCOUNTS RECEIVABLE
ACCOUNTS RECEIVABLE consisted of the following:
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
1999 1998
(UNAUDITED)
----------- -------------
(IN THOUSANDS)
<S> <C> <C>
Domestic..................................... $ 13,090 $ 8,295
Foreign...................................... 8,335 7,128
Allowance for doubtful accounts.............. (556) (582)
-------- --------
Trade accounts receivable.................... $ 20,869 $ 14,841
Related parties.............................. 201 221
Other........................................ 679 542
-------- --------
Total accounts receivable.................... $ 21,749 $ 15,604
-------- --------
-------- --------
</TABLE>
(4) INVENTORIES
INVENTORIES consisted of the following:
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
1999 1998
(UNAUDITED)
----------- -------------
(IN THOUSANDS)
<S> <C> <C>
Parts and raw materials..................... $ 14,087 $ 13,212
Work in process............................. 2,878 1,934
Finished goods.............................. 5,333 6,266
-------- --------
Total inventories........................... $ 22,298 $ 21,412
-------- --------
-------- --------
</TABLE>
(5) STOCKHOLDERS' EQUITY
STOCKHOLDERS' EQUITY consisted of the following:
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
1999 1998
(UNAUDITED)
----------- -------------
(IN THOUSANDS, EXCEPT PAR VALUE)
<S> <C> <C>
Common stock, $0.001 par value, 30,000 shares
authorized; 26,910 and 26,725 shares
issued and outstanding at March 31, 1999
and December 31, 1998, respectively............. $ 27 $ 27
Additional paid-in capital........................ 61,548 60,381
Retained earnings................................. 29,673 29,139
Accumulated other comprehensive loss.............. (755) (414)
-------- --------
Total stockholders' equity........................ $ 90,493 $ 89,133
-------- --------
-------- --------
</TABLE>
7
<PAGE>
(6) ACCOUNTING STANDARDS
COMPREHENSIVE INCOME (LOSS) -- In June 1997, the FASB issued SFAS No.
130, "Reporting Comprehensive Income," which establishes rules for the
reporting of comprehensive income (loss) and its components. Comprehensive
income (loss) for the Company consists of net income (loss) and foreign
currency translation adjustments as presented below. The adoption of SFAS No.
130 in fiscal 1998 had no impact on total stockholders' equity. Prior year
financial statements have been reclassified to conform to the SFAS No. 130
requirements.
<TABLE>
<CAPTION>
THREE MONTHS THREE MONTHS
ENDED ENDED
MARCH 31, 1999 MARCH 31, 1998
(UNAUDITED) (UNAUDITED)
-------------- --------------
(IN THOUSANDS)
<S> <C> <C>
Net income, as reported.......................................... $ 534 $ 894
Adjustment to arrive at comprehensive net income:
Cumulative translation adjustment.............................. (341) (300)
----- -----
Comprehensive net income......................................... $ 193 $ 594
----- -----
----- -----
</TABLE>
EARNINGS PER SHARE -- In February 1997, the Financial Accounting
Standards Board ("FASB") issued SFAS No. 128, "Earnings Per Share," which
requires companies to present basic earnings (loss) per share ("EPS") and
diluted EPS, instead of primary and fully-diluted EPS that was previously
required. This standard was effective for the Company in fiscal 1997 and
prior periods have been retroactively adjusted. Basic EPS is computed by
dividing income available to common stockholders by the weighted-average
number of common shares outstanding during the period. The computation of
diluted EPS is similar to the computation of basic EPS except that the
denominator is increased to include the number of additional common shares
that would have been outstanding if dilutive potential common shares had been
issued.
SEGMENT REPORTING -- In June 1997, the FASB issued SFAS No. 131,
"Disclosure about Segments of an Enterprise and Related Information," which
requires a public business enterprise to report financial and descriptive
information about its reportable operating segments. Operating segments are
components of an enterprise about which separate financial information is
available that is evaluated regularly by the chief operating decision-maker
in deciding how to allocate resources and in assessing performance. SFAS No.
131 is effective for the Company in fiscal 1998. Management operates and
manages its business of supplying power conversion and control systems as one
operating segment, as their products have similar economic characteristics
and production processes.
NEW ACCOUNTING STANDARD -- In June 1998, the FASB issued SFAS No. 133,
"Accounting for Derivative Instruments and Hedging Activities," which
establishes accounting and reporting standards for derivative instruments and
for hedging activity. SFAS No. 133 is effective for all periods in fiscal
years beginning after June 15, 1999. SFAS No. 133 requires all derivatives to
be recorded on the balance sheet as either an asset or liability and measured
at their fair value. Changes in the derivative's fair value will be
recognized currently in earnings unless specific hedging accounting criteria
are met. SFAS No. 133 also establishes uniform hedge accounting criteria for
all derivatives. The Company has not yet evaluated the impact that the
adoption of SFAS No. 133 will have on the financial statements.
8
<PAGE>
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, within the meaning of Section 27A of the
Securities Act of 1933, as amended, and Section 21E of the Securities
Exchange Act of 1934, as amended. For example, statements relating to the
Company's beliefs, expectations and plans are forward-looking statements, as
are statements that certain actions, conditions or circumstances will
continue. Forward-looking statements involve risks and uncertainties. As a
result, the Company's actual results may differ materially from the results
discussed in the forward-looking statements. Factors that could cause or
contribute to such differences or prove any forward-looking statements, by
hindsight, to be overly optimistic or unachievable, include, but are not
limited to the following: the significant fluctuations in the Company's
quarterly operating results, the volatility of the semiconductor and
semiconductor capital equipment industries, timing and success of integration
of recent and potential future acquisitions, supply constraints and
technological changes. For a discussion of these and other factors that may
impact the Company's realization of its forward-looking statements, see the
Company's Annual Report on Form 10-K for the year ended December 31, 1998,
Part I "Cautionary Statements - Risk Factors."
RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDED MARCH 31, 1999 AND 1998
SALES
Sales for the first quarter of 1999 were $32.7 million, a decrease of 25%
from first quarter of 1998 sales of $43.9 million. The decrease in sales
between such periods resulted from decreased unit sales of the Company's
systems. The decrease was attributable mostly to semiconductor capital
equipment customers in the United States, including the Company's largest
customer in that industry. The first quarter of 1999 continued to reflect the
impact of the severe downturn in the semiconductor capital equipment market
that began near the end of 1997 and was reflected in a decreasing sales trend
throughout 1998. Sales in the first quarter of 1999 were significantly higher
than sales in the third and fourth quarters of 1998, and represented a
significant recovery in the semiconductor capital equipment market which is
anticipated to continue throughout 1999. Many of the customers to whom the
Company's OEM customers sell are located in Asia and Japan, and were
negatively impacted by the Asian financial crisis.
Sales to the data storage equipment market decreased moderately on a
worldwide basis, though sales to the Company's largest customer in that
industry, located in Europe, decreased significantly. Sales to the flat panel
display industry, predominately in Japan, were half the level of the comparable
period last year. Sales to industrial markets were
9
<PAGE>
down significantly, partially due to decreased sales by Tower Electronics,
Inc., a wholly owned subsidiary. The Company sells primarily to the
semiconductor capital equipment, data storage and industrial markets in the
United States, to the flat panel display and data storage markets in Japan,
and to the data storage and industrial markets in Europe. The Company also
sells spare parts and repair services worldwide through its global support
organization.
Sales for the first quarter of 1999 were up 45% from fourth quarter of
1998 sales of $22.6 million. This increase was due to higher demand from
semiconductor capital equipment manufacturers in the United States, increased
sales to the entertainment segment of the data storage market, and increased
sales to flat panel customers in Japan, partially offset by decreased sales
to industrial customers in the United States.
The following tables summarize net sales and percentages of net sales by
customer type for the Company for the three-month periods ended March 31,
1999 and March 31, 1998, respectively:
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31,
----------------------------
1999 1998
--------- -----------
(IN THOUSANDS)
<S> <C> <C>
Semiconductor capital equipment.................................. $18,266 $23,903
Data storage..................................................... 4,603 4,926
Flat panel display............................................... 1,217 2,412
Industrial....................................................... 7,041 10,862
Customer service technical support............................... 1,601 1,766
------- -------
$32,728 $43,869
------- -------
------- -------
</TABLE>
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31,
----------------------------
1999 1998
--------- -----------
<S> <C> <C>
Semiconductor capital equipment.................................. 55.8% 54.5%
Data storage..................................................... 14.1 11.2
Flat panel display............................................... 3.7 5.5
Industrial....................................................... 21.5 24.8
Customer service technical support............................... 4.9 4.0
------ ------
100.0% 100.0%
------ ------
------ ------
</TABLE>
The following tables summarize net sales and percentages of net sales by
geographic region for the Company for the three-month periods ended March 31,
1999 and March 31, 1998, respectively:
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31,
----------------------------
1999 1998
--------- -----------
(IN THOUSANDS)
<S> <C> <C>
United States and Canada......................................... $22,949 $33,658
Europe........................................................... 5,672 6,416
Asia Pacific..................................................... 3,789 3,645
Rest of world.................................................... 318 150
------- -------
$32,728 $43,869
------- -------
------- -------
</TABLE>
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31,
----------------------------
1999 1998
--------- -----------
<S> <C> <C>
United States and Canada......................................... 70.1% 76.7%
Europe........................................................... 17.3 14.7
Asia Pacific..................................................... 11.6 8.3
Rest of world.................................................... 1.0 0.3
------ ------
100.0% 100.0%
------ ------
------ ------
</TABLE>
10
<PAGE>
GROSS MARGIN
The Company's gross margin for the first quarter of 1999 was 40.0%, up
from 31.0% in the first quarter 1998 and up from 29.3% in the fourth quarter
of 1998. The improvements in gross margin from both the first quarter of 1998
and the fourth quarter of 1998 to the first quarter of 1999 were primarily a
result of the Company's efforts to reduce material costs and, to a lesser
extent, a more favorable absorption of manufacturing overhead.
RESEARCH AND DEVELOPMENT
The Company's research and development expenses are incurred researching
new technologies, developing new products and improving existing product
designs. Research and development expenses for the first quarter of 1999 were
$5.9 million, essentially unchanged from $5.8 million in the comparable
period in 1998. As a percentage of sales, research and development expenses
increased to 17.9% in the first quarter of 1999 from 13.3% in the first
quarter of 1998, reflecting the lower sales base in 1999.
The Company believes continued research and development investment for
development of new products is critical to the Company's ability to serve new
and existing markets. Since inception, most research and development costs
have been internally funded and all have been expensed as incurred.
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 first
quarter of 1999 were $3.3 million, down from $3.6 million in the first
quarter of 1998, representing a decrease of 7%. The decrease was attributable
to lower depreciation and reduced spending for purchased services. As a
percentage of sales, sales and marketing expenses increased to 10.1% in the
first quarter of 1999 from 8.1% in the first quarter of 1998, reflecting the
lower sales base in 1999.
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 first quarter of 1999
were $2.9 million, unchanged from the first quarter of 1998. As a percentage
of sales, general and administrative expenses increased to 8.7% in the first
quarter of 1999 from 6.5% in the first quarter of 1998, reflecting the lower
sales base in 1999.
11
<PAGE>
The Company continues to implement its management system software,
including the replacement of existing systems in its domestic and foreign
locations. The Company expects that charges related to training and
implementation of the software will continue through 2000.
OTHER (EXPENSE) INCOME
Other (expense) income consists primarily of interest income and expense,
foreign exchange gains and losses, and other non-operating expenses. Other
expense for the first quarter of 1999 was $39,000, attributable primarily to
$252,000 of net interest income offset by $200,000 for a writedown of a stock
investment. In the comparable period in 1998, other income was $98,000.
The Company has experienced fluctuations in foreign currency exchange
rates, particularly against the Japanese yen. As a hedge against currency
fluctuations in the yen, the Company entered into various forward foreign
exchange contracts to mitigate the effect of potential depreciation in that
currency from 1997 to the present. The Company will continue to evaluate
various methods to minimize the effects of currency fluctuations.
PROVISION FOR INCOME TAXES
The income tax provision of $498,000 for the first quarter of 1999
represented an estimated effective rate of 48.3%, compared to an effective
income tax rate of 38.2% for the first quarter of 1998. The higher effective
consolidated tax rate for the first quarter of 1999 was attributed to the
effect of higher nondeductible goodwill expense and a shift in mix of the
Company's taxable income toward a greater share from countries with higher
effective tax rates. The Company adjusts its provision for income taxes
periodically, based upon the anticipated tax status of all of its foreign and
domestic entities.
LIQUIDITY AND CAPITAL RESOURCES
Since its inception, the Company has 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, cash flow from operations and proceeds from underwritten public
offerings.
Operating activities used cash of $1.5 million in the first three months
of 1999, primarily a result of increases in accounts receivable and
inventories, partially offset by net income, depreciation, amortization,
increases in accounts payable and increased accruals for payroll, employee
benefits and income taxes. In the comparable period in 1998, operating
activities provided cash of $2.6 million, primarily as a result of net
income, depreciation, amortization, and decreases in accounts receivable and
inventories, offset by decreases in accounts payable and decreased accruals
for payroll, employee
12
<PAGE>
benefits, income taxes and other accruals. The Company expects future
receivable and inventory balances to fluctuate with net sales. The Company
provides "just-in-time" deliveries to certain of its customers and may be
required to maintain higher levels of inventory to satisfy its customers'
delivery requirements.
Investing activities used cash of $0.2 million in the first three months
of 1999, and included the purchase of property and equipment for $1.2 million
offset by the sale of marketable securities of $1.0 million. In the
comparable period in 1998, investing activities used cash of $0.9 million and
included the purchase of property and equipment for $2.9 million and the
purchase of preferred stock of LITMAS for $0.5 million, offset by the sale of
marketable securities of $2.5 million.
Financing activities in the first three months of 1999 provided cash of
$1.5 million and consisted primarily of proceeds from the sale of common
stock of $1.2 million. Financing activities in the comparable period in 1998
used cash of $1.4 million and consisted primarily of repayment of notes
payable and capital lease obligations of $2.8 million, partially offset by
proceeds from notes payable of $1.4 million.
The Company plans to spend approximately $3.5 million through the
remainder of 1999 for the acquisition of manufacturing and test equipment and
furnishings.
As of March 31, 1999, the Company had working capital of $64.3 million.
The Company's principal sources of liquidity consisted of $11.8 million of
cash and cash equivalents, $15.0 million of marketable securities, and a
credit facility consisting of a $30.0 million revolving line of credit, with
options to convert up to $10.0 million to a three-year term loan. Advances
under the revolving line of credit bear interest at either the prime rate
(7.75% at April 30, 1999) minus 1.25% or the LIBOR 360-day rate (5.23% at
April 30, 1999) plus 150 basis points, at the Company's option. All advances
under the revolving line of credit will be due and payable in December 2000;
however, there were no advances outstanding as of March 31, 1999.
The Company believes that its cash and cash equivalents, marketable
securities, cash flow from operations and available borrowings, will be
sufficient to meet the Company's working capital needs through the end of
1999. After that time, the Company may require additional equity or debt
financing to address its working capital, capital equipment, or expansion
needs. In addition, any significant acquisitions by the Company may require
additional equity or debt financings to fund the purchase price, if paid in
cash. 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
<PAGE>
YEAR 2000 PROGRAM
The Year 2000 problem is the result of computer programs that rely on
two-digit date codes, instead of four-digit date codes, to indicate the year.
Such computer programs, which are unable to interpret the date code "00" as
the year 2000, may not be able to perform computations and decision-making
functions and could cause computer systems to malfunction.
The Company has developed a multi-phase program for Year 2000 information
systems compliance that consists of the following:
- ASSESSMENT of the corporate systems and operations of the Company that
could be affected by the Year 2000 problem;
- REMEDIATION of non-compliant systems and components; and
- TESTING of systems and components following remediation.
The Company has focused its Year 2000 review on three areas:
- information technology (IT) system applications;
- non-IT systems, including engineering and manufacturing applications;
and
- relationships with third parties.
The Company has completed assessment of its IT and non-IT systems at all
of its facilities, except for Tower's manufacturing facility in Fridley,
Minnesota. Assessment of the IT and non-IT systems at Tower's facility is
underway and is expected to be complete during June 1999. The Company
believes that its enterprise-wide software system, which is installed at the
Fort Collins facility and certain other facilities, is Year 2000 compliant.
Such belief is based significantly on discussions with and representations by
the vendor of such software. The Company has been, and will continue to be,
in contact with such vendor in order to obtain any additional revisions or
upgrades issued by the vendor to ensure that such enterprise-wide software
remains Year 2000 compliant. The Company also has conducted its own tests on
the enterprise-wide software to verify the vendor's representations. The
Company has not determined whether to install its enterprise-wide software
system at the Fridley facility prior to the year 2000.
Following completion of the assessment phase, the Year 2000 team
identified those non-compliant systems that it considers to be "mission
critical." Remediation and testing of the mission critical IT systems, except
at the Fridley facility, have been completed. Remediation and testing of
mission critical non-IT systems are underway and are expected to be completed
during the third quarter of 1999, except at the Fridley facility. Remediation
and testing of non-compliant systems that are not mission critical are
expected to be completed during the third quarter of 1999. Once the Year 2000
team has
14
<PAGE>
completed assessment of the IT and non-IT systems at the Fridley facility, it
will identify the non-compliant systems that are mission critical. Until such
time, the Company cannot determine the date by when remediation and testing
will be completed at the Fridley facility. Based on the assessment results to
date, the Company expects to complete remediation and testing of mission
critical IT systems at the Fridley facility during the third quarter of 1999.
The Company is examining its relationship with third parties whose Year
2000 compliance could have a material effect on the Company. The Company
considers third party suppliers and customers to pose the greatest Year 2000
risk to the Company, because the failure of such persons to become Year 2000
compliant in a timely manner, if at all, could result in the Company's
inability to obtain components in a timely manner, reductions in the quality
of components obtained, reductions, delays or cancellations of customer
orders or delay in payments by customers for products shipped. In addition,
conversions by third parties to become Year 2000 compliant might not be
compatible with the Company's systems. Any or all of these events could have
a material adverse effect on the Company's business, financial condition and
results of operations.
The Company has circulated questionnaires to and has actively solicited
feedback from its significant vendors and customers with respect to such
persons' Year 2000 compliance programs and status, except that the Company
has not yet contacted all of Advanced Energy Voorhees' significant vendors;
the Company expects such contact to be made and feedback to be received by
June 1999. Based on the results of such efforts, the Company believes that
its principal customers and all of its sole source suppliers are either Year
2000 compliant or are implementing plans to become Year 2000 compliant in a
timely manner. Certain suppliers have advised the Company that they are
implementing Year 2000 programs, but have not indicated by when they expect
to be Year 2000 compliant or have indicated that they don't expect to be Year
2000 compliant until the fourth quarter of 1999. The Company continues to
pursue additional information about such suppliers' Year 2000 readiness in
order to assess the risks involved in relying on such suppliers.
In what the Company believes to be the most reasonably likely worst case
Year 2000 scenario, the Company would be unable to obtain electronic
components from its suppliers because of such third parties' failure to
become Year 2000 compliant, and the Company would be unable to manufacture
such components internally or to redesign its systems to accommodate
different components because of the failure of the Company's engineering and
manufacturing systems to be Year 2000 compliant. The Company is in the
process of reviewing the capabilities of its current and other component
suppliers to ensure that the components most critical to production of the
Company's systems are not sole-sourced. See the Company's Annual Report on
Form 10-K for the year ended December 31, 1998, Part I "Cautionary Statements
- - Risk Factors--Supply Constraints and Dependence on Sole and Limited Source
Suppliers."
15
<PAGE>
Although the Company is continuing to assess Year 2000 costs, it does not
expect the costs associated with such projects to have a material effect on
the Company's financial results. The Company expects to spend less than five
percent of its total annual IT budget on Year 2000 costs. The Company has not
identified any IT projects that have been deferred due to its Year 2000
efforts. The Company's current estimates of the impact of the Year 2000
problem on its operations and financial results do not include costs and time
that may be incurred as a result of any vendors' or customers' failures to
become Year 2000 compliant on a timely basis.
The Company believes that its systems are Year 2000 ready, except that
certain products acquired from Fourth State Technology have not been fully
assessed. The Company intends to complete assessment of the Fourth State
Technology products during June 1999.
The foregoing beliefs and expectations are forward-looking statements
within the meaning of Section 27A of the Securities Act and Section 21E of
the Exchange Act, and are based in large part on certain statements and
representations made by persons outside the Company, any of which statements
or representations ultimately could prove to be inaccurate.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT
MARKET RISK
INTEREST RATE RISK
The Company's exposure to market risk for changes in interest rates
relates primarily to the Company's investment portfolio and long-term debt
obligations. The Company does not use derivative financial instruments in its
investment portfolio. The Company places its investments with high credit
quality issuers and by policy is averse to principal loss and ensures the
safety and preservation of its invested funds by limiting default risk,
market risk and reinvestment risk. As of March 31, 1999, the Company's
investments consisted of equities, municipal bonds and notes and mutual funds.
The Company's interest expense is sensitive to changes in the general
level of U.S. interest rates. The Company's debt is fixed rate in nature and
mitigates the impact of fluctuations in interest rates. The fair value of the
Company's debt approximates the carrying amount at March 31, 1999. Management
believes the potential effects of near-term changes in interest rates on the
Company's fixed rate debt is not material.
16
<PAGE>
FOREIGN CURRENCY EXCHANGE RATE RISK
The Company transacts business in various foreign countries. Its primary
foreign currency cash flows are in countries in Asia and Europe. The
Company's subsidiary in Japan enters into foreign currency forward contracts
to buy U.S. dollars to hedge its payable position arising from trade
purchases and intercompany transactions with its parent. Foreign currency
forward contracts reduce the Company's exposure to the risk that the eventual
net cash outflows resulting from the purchase of products denominated in
other currencies will be adversely affected by changes in exchange rates.
Foreign currency forward contracts are entered into with a major commercial
Japanese bank that has a high credit rating and the Company does not expect
the counterparty to fail to meet its obligations under outstanding contracts.
The Company generally enters into foreign currency forward contracts with
maturities ranging from 7 to 10 months, with contracts outstanding at March
31, 1999, maturing through June 1999. At March 31, 1999, the Company held
foreign forward exchange contracts with notional amounts of $1,500,000 and
market settlement amounts of $1,659,000 for an unrealized loss position of
$159,000. The impact of exchange rate changes on the forward exchange
contracts will be substantially offset by the impact of such changes on the
underlying transactions.
Several European countries have adopted, and others are expected to
adopt, a Single European Currency (the "euro") as of January 1, 1999 with a
transition period continuing through January 1, 2002. As of January 1, 1999,
eleven of the fifteen member countries of the European Union (the
"participating countries") established fixed conversion rates between their
existing sovereign currencies and the euro. For three years after the
introduction of the euro, the participating countries can perform financial
transactions in either the euro or their original local currencies. This will
result in a fixed exchange rate among the participating countries, whereas
the euro (and the participating countries' currencies in tandem) will
continue to float freely against the U.S. dollar and other currencies of
non-participating countries. While the Company does not expect the
introduction of the euro currency to have a significant impact on the
Company's revenues or results of operations, the Company is unable to
determine what effects, if any, the currency change in Europe will have on
competition and competitive pricing in the affected regions.
17
<PAGE>
PART II OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
The Company is not aware of any material legal proceedings that are
expected to have a material effect on its business, assets or property.
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
Not applicable.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
Not applicable.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not applicable.
ITEM 5. OTHER INFORMATION
None.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits:
2.1 Agreement and Plan of Reorganization, dated as of June 1, 1998, by
and among the Company, Warpspeed, Inc., a wholly owned subsidiary
of the Company, and RF Power Products, Inc.(1)
3.1 The Company's Restated Certificate of Incorporation(2)
3.2 The Company's By-laws(2)
4.1 Form of Specimen Certificate for the Company's Common Stock(2)
4.2 The Company hereby agrees to furnish to the SEC, upon request, a
copy of the instruments which define the rights of holders of
long-term debt of the Company. None of such instruments not
included as exhibits herein represents long-term debt in excess of
10% of the consolidated total assets of the Company.
18
<PAGE>
10.1 Comprehensive Supplier Agreement, dated May 18, 1998, between
Applied Materials Inc. and the Company(1)+
10.2 Purchase Order and Sales Agreement, dated July 1, 1993, amended
September 16, 1995 between Lam Research Corporation and the
Company(2)+
10.3 Purchase Agreement, dated November 1, 1995, between Eaton
Corporation and the Company(3)+
10.4 Loan and Security Agreement, dated August 15, 1997, among Silicon
Valley Bank, Bank of Hawaii and the Company(4)
10.5 Loan Agreement dated December 8, 1997, by and among Silicon Valley
Bank, as Servicing Agent and a Bank, and Bank of Hawaii, as a
Bank, and the Company, as borrower(5)
10.6 Lease, dated June 12, 1984, amended June 11, 1992, between
Prospect Park East Partnership and the Company for property in
Fort Collins, Colorado(2)
10.7 Lease, dated March 14, 1994, as amended, between Sharp Point
Properties, L.L.C., and the Company for property in Fort Collins,
Colorado(2)
10.8 Lease, dated May 19, 1995, between Sharp Point Properties, L.L.C.
and the Company for a building in Fort Collins, Colorado(2)
10.9 Lease, dated April 15, 1998, between Cross Park Investors, Ltd.,
and the Company for property in Austin, Texas(1)
10.10 Lease, dated April 15, 1998, between Cameron Technology Investors,
Ltd., and the Company for property in Austin, Texas(1)
10.11 Sublease Agreement, dated November 1, 1992, between RF Power
Products, Inc., and Test Technology, Inc. for property in
Voorhees, New Jersey(6)
10.12 Lease Agreement, dated March 18, 1996, and amendments dated June
21, 1996 and August 30, 1996, between RF Power Products, Inc., and
Laurel Oak Road, L.L.C. for property in Voorhees, New Jersey(7)
10.13 Form of Indemnification Agreement(2)
10.14 Employment Agreement, dated June 1, 1998, between RF Power
Products, Inc., and Joseph Stach(12)
10.15 1995 Stock Option Plan, as amended and restated(12)*
10.16 1995 Non-Employee Directors' Stock Option Plan(12)*
10.17 License Agreement, dated May 13, 1992 between RF Power Products
and Plasma-Therm, Inc.(8)
10.18 Distribution Agreement dated August 10, 1993 between RF Power
Products, Inc. and Astech Corporation(9)
10.19 Master Purchase Order and Sales Agreement dated May 1994 between
RF Power Products, Inc. and Applied Materials, Inc. and Master
Purchase Order and Sales Agreement Revision I dated November 9,
1994 between RF Power Products, Inc. and Applied Materials,
Inc.(10)
10.20 Purchase Agreement dated October 14, 1994 between RF Power
Products, Inc. and Plasma Therm Incorporated(10)
10.21 Purchase Agreement dated October 28, 1994 between RF Power
Products, Inc. and Plasma Etch, Inc.(10)
10.22 Purchase Agreement dated November 9, 1995 between RF Power
Products, Inc. and Plasma and Material Technology, Inc.(11)
19
<PAGE>
10.23 Purchase Agreement dated October 16, 1995 between RF Power
Products, Inc. and Plasma Therm, Incorporated(11)
10.24 Purchase Agreement dated June 5, 1995 between RF Power Products,
Inc. and Mattson Technology(11)
10.25 Lease Agreement dated March 18, 1996 and amendments dated June 21,
1996 and August 30, 1996 between RF Power Products, Inc. and
Laurel Oak Road, L.L.C. for office, manufacturing and warehouse
space at 1007 Laurel Oak Road, Voorhees, New Jersey(7)
10.26 Direct Loan Agreement dated December 20, 1996 between RF Power
Products, Inc. and the New Jersey Economic Development Authority
(7)
27.1 Financial Data Schedule for the three-month period ended March 31,
1999.
27.2 Financial Data Schedule as restated for the three-month period
ended March 31, 1998; the six-month period ended June 30, 1998;
and the nine-month period ended December 31, 1998, respectively.
(b) No reports on Form 8-K were required to be filed by the Company
during the quarter ended March 31, 1999.
- ---------------
(1) Incorporated by reference to the Company's quarterly Report on Form
10-Q for the quarter ended June 30, 1998 (File No. 0-26966), filed
August 7, 1998.
(2) Incorporated by reference to the Company's Registration Statement on
Form S-1 (File No. 33-97188), filed September 20, 1995, as amended.
(3) Incorporated by reference to the Company's Annual Report on Form 10-K
for the year ended December 31, 1995 (File No. 0-26966), filed March
28, 1996, as amended.
(4) Incorporated by reference to the Company's Registration Statement on
Form S-3 (File No. 333-34039), filed August 21, 1997, as amended.
(5) Incorporated by reference to the Company's Annual Report on Form 10-K
for the year ended December 31, 1997 (File No. 0-26966), filed March
24, 1998.
(6) Incorporated by reference to RF Power Products' Annual Report on Form
10-K for the fiscal year ended November 30, 1992 (File No. 0-20229),
filed February 26, 1993.
(7) Incorporated by reference to RF Power Products' Annual Report on Form
10-K for the fiscal year ended November 30, 1996 (File No. 0-20229),
filed February 25, 1997.
(8) Incorporated by reference to RF Power Products' Registration Statement
on Form 10 (File No. 0-020229), filed May 19, 1992 as amended.
(9) Incorporated by reference to RF Power Products' Annual Report on Form
10-K for the fiscal year ended November 30, 1993 (File No. 0-20229),
filed February 28, 1994.
(10) Incorporated by reference to RF Power Products' Annual Report on Form
10-K for the fiscal year ended November 30, 1994 (File No. 0-20229),
filed February 24, 1995.
(11) Incorporated by reference to RF Power Products' Annual Report on Form
10-K for the fiscal year ended November 30, 1995 (File No. 0-20229),
filed February 28, 1996.
20
<PAGE>
(12) Incorporated by reference to the Company's Annual Report on Form 10-K
for the year ended December 31, 1998 (File No. 0-26966), filed March
24, 1999.
* Compensation Plan
+ Confidential treatment has been granted for portions of this
agreement.
21
<PAGE>
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.
/s/ Richard P. Beck
-------------------------
Senior Vice President, Chief Financial May 13, 1999
Officer, Assistant Secretary and
Director (Principal Financial Officer
and Principal Accounting Officer)
22
<PAGE>
EXHIBIT INDEX
<TABLE>
<S> <C>
2.1 Agreement and Plan of Reorganization, dated as of June 1, 1998, by and
among the Company, Warpspeed, Inc., a wholly owned subsidiary of the
Company, and RF Power Products, Inc.(1)
3.1 The Company's Restated Certificate of Incorporation(2)
3.2 The Company's By-laws(2)
4.1 Form of Specimen Certificate for the Company's Common Stock(2)
4.2 The Company hereby agrees to furnish to the SEC, upon request, a copy
of the instruments which define the rights of holders of long-term
debt of the Company. None of such instruments not included as exhibits
herein represents long-term debt in excess of 10% of the consolidated
total assets of the Company.
10.1 Comprehensive Supplier Agreement, dated May 18, 1998, between Applied
Materials Inc. and the Company(1)+
10.2 Purchase Order and Sales Agreement, dated July 1, 1993, amended
September 16, 1995 between Lam Research Corporation and the
Company(2)+
10.3 Purchase Agreement, dated November 1, 1995, between Eaton Corporation
and the Company(3)+
10.4 Loan and Security Agreement, dated August 15, 1997, among Silicon
Valley Bank, Bank of Hawaii and the Company(4)
10.5 Loan Agreement dated December 8, 1997, by and among Silicon Valley
Bank, as Servicing Agent and a Bank, and Bank of Hawaii, as a Bank,
and the Company, as borrower(5)
10.6 Lease, dated June 12, 1984, amended June 11, 1992, between Prospect
Park East Partnership and the Company for property in Fort Collins,
Colorado(2)
10.7 Lease, dated March 14, 1994, as amended, between Sharp Point
Properties, L.L.C., and the Company for property in Fort Collins,
Colorado(2)
10.8 Lease, dated May 19, 1995, between Sharp Point Properties, L.L.C. and
the Company for a building in Fort Collins, Colorado(2)
10.9 Lease, dated April 15, 1998, between Cross Park Investors, Ltd., and
the Company for property in Austin, Texas(1)
10.10 Lease, dated April 15, 1998, between Cameron Technology Investors,
Ltd., and the Company for property in Austin, Texas(1)
10.11 Sublease Agreement, dated November 1, 1992, between RF Power
Products, Inc., and Test Technology, Inc. for property in Voorhees,
New Jersey(6)
10.12 Lease Agreement, dated March 18, 1996, and amendments dated June 21,
1996 and August 30, 1996, between RF Power Products, Inc., and Laurel
Oak Road, L.L.C. for property in Voorhees, New Jersey(7)
10.13 Form of Indemnification Agreement(2)
10.14 Employment Agreement, dated June 1, 1998, between RF Power Products,
Inc., and Joseph Stach(12)
10.15 1995 Stock Option Plan, as amended and restated(12)*
</TABLE>
23
<PAGE>
<TABLE>
<S> <C>
10.16 1995 Non-Employee Directors' Stock Option Plan(12)*
10.17 License Agreement, dated May 13, 1992 between RF Power Products and
Plasma-Therm, Inc.(8)
10.18 Distribution Agreement dated August 10, 1993 between RF Power
Products, Inc. and Astech Corporation(9)
10.19 Master Purchase Order and Sales Agreement dated May 1994 between RF
Power Products, Inc. and Applied Materials, Inc. and Master Purchase
Order and Sales Agreement Revision I dated November 9, 1994 between RF
Power Products, Inc. and Applied Materials, Inc.(10)
10.20 Purchase Agreement dated October 14, 1994 between RF Power Products,
Inc. and Plasma Therm Incorporated(10)
10.21 Purchase Agreement dated October 28, 1994 between RF Power Products,
Inc. and Plasma Etch, Inc.(10)
10.22 Purchase Agreement dated November 9, 1995 between RF Power Products,
Inc. and Plasma and Material Technology, Inc.(11)
10.23 Purchase Agreement dated October 16, 1995 between RF Power Products,
Inc. and Plasma Therm, Incorporated(11)
10.24 Purchase Agreement dated June 5, 1995 between RF Power Products, Inc.
and Mattson Technology(11)
10.25 Lease Agreement dated March 18, 1996 and amendments dated June 21,
1996 and August 30, 1996 between RF Power Products, Inc. and Laurel
Oak Road, L.L.C. for office, manufacturing and warehouse space at 1007
Laurel Oak Road, Voorhees, New Jersey(7)
10.26 Direct Loan Agreement dated December 20, 1996 between RF Power
Products, Inc. and the New Jersey Economic Development Authority(7)
27.1 Financial Data Schedule for the three-month period ended March 31,
1999.
27.2 Financial Data Schedule as restated for the three-month period ended
March 31, 1998; the six-month period ended June 30, 1998; and the
nine-month period ended December 31, 1998, respectively.
</TABLE>
- ---------------
(1) Incorporated by reference to the Company's quarterly Report on Form
10-Q for the quarter ended June 30, 1998 (File No. 0-26966), filed
August 7, 1998.
(2) Incorporated by reference to the Company's Registration Statement on
Form S-1 (File No. 33-97188), filed September 20, 1995, as amended.
(3) Incorporated by reference to the Company's Annual Report on Form 10-K
for the year ended December 31, 1995 (File No. 0-26966), filed March
28, 1996, as amended.
(4) Incorporated by reference to the Company's Registration Statement on
Form S-3 (File No. 333-34039), filed August 21, 1997, as amended.
(5) Incorporated by reference to the Company's Annual Report on Form 10-K
for the year ended December 31, 1997 (File No. 0-26966), filed March
24, 1998.
(6) Incorporated by reference to RF Power Products' Annual Report on Form
10-K for the fiscal year ended November 30, 1992 (File No. 0-20229),
filed February 26, 1993.
24
<PAGE>
(7) Incorporated by reference to RF Power Products' Annual Report on Form
10-K for the fiscal year ended November 30, 1996 (File No. 0-20229),
filed February 25, 1997.
(8) Incorporated by reference to RF Power Products' Registration Statement
on Form 10 (File No. 0-020229), filed May 19, 1992 as amended.
(9) Incorporated by reference to RF Power Products' Annual Report on Form
10-K for the fiscal year ended November 30, 1993 (File No. 0-20229),
filed February 28, 1994.
(10) Incorporated by reference to RF Power Products' Annual Report on Form
10-K for the fiscal year ended November 30, 1994 (File No. 0-20229),
filed February 24, 1995.
(11) Incorporated by reference to RF Power Products' Annual Report on Form
10-K for the fiscal year ended November 30, 1995 (File No. 0-20229),
filed February 28, 1996.
(12) Incorporated by reference to the Company's Annual Report on Form 10-K
for the year ended December 31, 1998 (File No. 0-26966), filed March
24, 1999.
* Compensation Plan
+ Confidential treatment has been granted for portions of this
agreement.
25
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> MAR-31-1999
<CASH> 11,755
<SECURITIES> 15,006
<RECEIVABLES> 22,305
<ALLOWANCES> (556)
<INVENTORY> 22,298
<CURRENT-ASSETS> 78,912
<PP&E> 30,773
<DEPRECIATION> (15,482)
<TOTAL-ASSETS> 105,363
<CURRENT-LIABILITIES> 14,580
<BONDS> 0
0
0
<COMMON> 27
<OTHER-SE> 90,466
<TOTAL-LIABILITY-AND-EQUITY> 105,363
<SALES> 32,728
<TOTAL-REVENUES> 32,728
<CGS> 19,630
<TOTAL-COSTS> 19,630
<OTHER-EXPENSES> 12,027
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 8
<INCOME-PRETAX> 1,032
<INCOME-TAX> 498
<INCOME-CONTINUING> 534
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 534
<EPS-PRIMARY> 0.02
<EPS-DILUTED> 0.02
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM BALANCE
SHEET AND INCOME STATEMENT INFORMATION THAT WAS RESTATED AS A RESULT OF THE
BUSINESS COMBINATION OF ADVANCED ENERGY INDUSTRIES, INC. AND RF POWER PRODUCTS,
INC. THAT WAS ACCOUNTED FOR AS A POOLING OF INTERESTS AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<RESTATED>
<MULTIPLIER> 1,000
<S> <C> <C> <C>
<PERIOD-TYPE> 3-MOS 6-MOS 9-MOS
<FISCAL-YEAR-END> DEC-31-1998 DEC-31-1998 DEC-31-1998
<PERIOD-START> JAN-01-1998 JAN-01-1998 JAN-01-1998
<PERIOD-END> MAR-31-1998 JUN-30-1998 SEP-30-1998
<CASH> 12,027 11,864 10,808
<SECURITIES> 17,821 19,047 19,218
<RECEIVABLES> 32,551 25,806 19,822
<ALLOWANCES> (586) (605) (670)
<INVENTORY> 29,331 25,272 22,981
<CURRENT-ASSETS> 96,552 86,345 77,941
<PP&E> 27,409 28,435 29,246
<DEPRECIATION> (10,632) (11,805) (13,098)
<TOTAL-ASSETS> 123,477 112,878 106,465
<CURRENT-LIABILITIES> 23,984 16,162 13,179
<BONDS> 0 0 0
0 0 0
0 0 0
<COMMON> 27 27 27
<OTHER-SE> 98,131 95,537 92,148
<TOTAL-LIABILITY-AND-EQUITY> 123,477 112,878 106,465
<SALES> 43,869 75,850 102,142
<TOTAL-REVENUES> 43,869 75,850 102,142
<CGS> 30,263 53,729 72,046
<TOTAL-COSTS> 30,263 53,729 72,046
<OTHER-EXPENSES> 12,258 24,932 37,262
<LOSS-PROVISION> 0 0 0
<INTEREST-EXPENSE> 49 104 253
<INCOME-PRETAX> 1,446 (2,584) (7,153)
<INCOME-TAX> 552 (333) (1,422)
<INCOME-CONTINUING> 894 (2,251) (5,731)
<DISCONTINUED> 0 0 0
<EXTRAORDINARY> 0 0 0
<CHANGES> 0 0 0
<NET-INCOME> 894 (2,251) (5,731)
<EPS-PRIMARY> 0.03 (0.08) (0.22)
<EPS-DILUTED> 0.03 (0.08) (0.22)
</TABLE>
