<PAGE> 1
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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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 September 30, 2000.
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934.
For the transition period from to .
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Commission file number: 000-26966
ADVANCED ENERGY INDUSTRIES, INC.
--------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
DELAWARE 84-0846841
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(State or other jurisdiction of incorporation (I.R.S. Employer
or organization) Identification No.)
1625 SHARP POINT DRIVE, FORT COLLINS, CO 80525
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(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 October 24, 2000, there were 31,515,676 shares of the Registrant's Common
Stock, par value $0.001 per share, outstanding.
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ADVANCED ENERGY INDUSTRIES, INC.
FORM 10-Q
TABLE OF CONTENTS
<TABLE>
<S> <C> <C>
PART I FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
Consolidated Balance Sheets-
September 30, 2000 and December 31, 1999 3
Consolidated Statements of Operations -
Three months and nine months ended September 30, 2000 and 1999 4
Consolidated Statements of Cash Flows -
Nine months ended September 30, 2000 and 1999 5
Notes to consolidated financial statements 6
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS 11
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT
MARKET RISK 19
PART II OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS 21
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS 21
ITEM 3. DEFAULTS UPON SENIOR SECURITIES 21
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS 21
ITEM 5. OTHER INFORMATION 21
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K 21
</TABLE>
2
<PAGE> 3
PART I FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
ADVANCED ENERGY INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
2000 1999
(UNAUDITED)
------------- ------------
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents ............................................ $ 23,254 $ 21,043
Marketable securities - trading ...................................... 198,562 186,440
Accounts receivable, net ............................................. 78,045 46,471
Income tax receivable ................................................ 73 1,453
Inventories .......................................................... 39,732 28,410
Other current assets ................................................. 2,202 1,803
Deferred income tax assets, net ...................................... 5,773 3,753
------------- ------------
Total current assets ............................................. 347,641 289,373
------------- ------------
PROPERTY AND EQUIPMENT, net ............................................ 21,055 17,699
OTHER ASSETS:
Deposits and other ................................................... 532 559
Goodwill and intangibles, net ........................................ 10,490 11,040
Investments .......................................................... 4,571 --
Demonstration and customer service equipment, net .................... 2,821 2,352
Deferred debt issuance costs, net .................................... 3,929 4,410
------------- ------------
Total assets ..................................................... $ 391,039 $ 325,433
============= ============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable trade ............................................... $ 17,409 $ 15,702
Accrued payroll and employee benefits ................................ 11,973 7,606
Other accrued expenses ............................................... 4,616 3,040
Customer deposits .................................................... 507 804
Accrued income taxes payable ......................................... 7,777 1,266
Current portion of capital lease obligations and long-term debt ...... 2,902 2,585
Accrued interest payable on convertible subordinated notes ........... 2,658 886
------------- ------------
Total current liabilities ........................................ 47,842 31,889
------------- ------------
LONG-TERM LIABILITIES:
Capital lease obligations and notes payable, net of current
portion............................................................. 1,134 1,427
Convertible subordinated notes payable ............................... 135,000 135,000
------------- ------------
136,134 136,427
------------- ------------
Total liabilities ................................................ 183,976 168,316
------------- ------------
MINORITY INTEREST ...................................................... 42 128
------------- ------------
STOCKHOLDERS' EQUITY ................................................... 207,021 156,989
------------- ------------
Total liabilities and stockholders' equity ....................... $ 391,039 $ 325,433
============= ============
</TABLE>
The accompanying notes to consolidated financial statements
are an integral part of these consolidated balance sheets.
3
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ADVANCED ENERGY INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
THREE MONTHS ENDED SEPTEMBER 30,
--------------------------------
2000 1999
(UNAUDITED) (UNAUDITED)
----------- -----------
<S> <C> <C>
SALES ........................................................ $ 96,317 $ 55,626
COST OF SALES ................................................ 49,492 30,675
----------- -----------
Gross profit .............................................. 46,825 24,951
----------- -----------
OPERATING EXPENSES:
Research and development ................................... 9,711 7,211
Sales and marketing ........................................ 6,232 4,589
General and administrative ................................. 6,748 4,437
Merger costs ............................................... 2,250 --
Restructuring charge ....................................... 1,000 --
----------- -----------
Total operating expenses .................................. 25,941 16,237
----------- -----------
INCOME FROM OPERATIONS ....................................... 20,884 8,714
OTHER INCOME (EXPENSE) ....................................... 5,598 1,063
----------- -----------
Net income before income taxes and minority interest ...... 26,482 9,777
PROVISION FOR INCOME TAXES ................................... 10,195 3,687
MINORITY INTEREST IN NET LOSS ................................ (2) --
----------- -----------
NET INCOME ................................................... $ 16,289 $ 6,090
=========== ===========
BASIC EARNINGS PER SHARE ..................................... $ 0.52 $ 0.21
=========== ===========
DILUTED EARNINGS PER SHARE ................................... $ 0.50 $ 0.20
=========== ===========
BASIC WEIGHTED-AVERAGE COMMON SHARES OUTSTANDING ............. 31,339 29,662
=========== ===========
DILUTED WEIGHTED-AVERAGE COMMON SHARES OUTSTANDING ........... 32,417 30,932
=========== ===========
</TABLE>
<TABLE>
<CAPTION>
NINE MONTHS ENDED SEPTEMBER 30,
-------------------------------
2000 1999
(UNAUDITED) (UNAUDITED)
----------- -----------
<S> <C> <C>
SALES........................................................... $ 257,046 $ 137,408
COST OF SALES................................................... 131,191 76,955
----------- -----------
Gross profit................................................. 125,855 60,453
----------- -----------
OPERATING EXPENSES:
Research and development...................................... 26,328 20,223
Sales and marketing........................................... 17,472 12,208
General and administrative.................................... 18,197 11,692
Merger costs.................................................. 4,583 --
Restructuring charge.......................................... 1,000 --
----------- -----------
Total operating expenses..................................... 67,580 44,123
----------- -----------
INCOME FROM OPERATIONS.......................................... 58,275 16,330
OTHER INCOME (EXPENSE).......................................... 6,449 1,028
----------- -----------
Net income before income taxes and minority interest......... 64,724 17,358
PROVISION FOR INCOME TAXES...................................... 24,165 6,747
MINORITY INTEREST IN NET LOSS................................... (86) --
----------- -----------
NET INCOME...................................................... $ 40,645 $ 10,611
=========== ===========
BASIC EARNINGS PER SHARE........................................ $ 1.30 $ 0.36
=========== ===========
DILUTED EARNINGS PER SHARE...................................... $ 1.25 $ 0.35
=========== ===========
BASIC WEIGHTED-AVERAGE COMMON SHARES OUTSTANDING................ 31,276 29,435
=========== ===========
DILUTED WEIGHTED-AVERAGE COMMON SHARES OUTSTANDING.............. 32,473 30,666
=========== ===========
</TABLE>
The accompanying notes to consolidated financial statements
are an integral part of these consolidated statements.
4
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ADVANCED ENERGY INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
NINE MONTHS ENDED SEPTEMBER 30,
-------------------------------
2000 1999
(UNAUDITED) (UNAUDITED)
----------- -----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income ............................................................................. $ 40,645 $ 10,611
Adjustments to reconcile net income to net cash provided by operating activities --
Depreciation and amortization ....................................................... 7,436 5,964
Amortization of deferred debt issuance costs ........................................ 481 --
Minority interest ................................................................... (86) --
Stock issued for services rendered .................................................. 2,430 --
Provision for deferred income taxes ................................................. (2,020) (535)
Amortization of deferred compensation ............................................... 329 17
(Gain) loss on disposal of property and equipment ................................... (55) 1
Gain on sale of investment .......................................................... (4,841) --
Earnings from marketable securities, net ............................................ (7,122) (418)
Writedown of LITMAS investment ...................................................... -- 200
Changes in operating assets and liabilities --
Accounts receivable-trade, net .................................................... (27,204) (23,246)
Related parties and other receivables ............................................. (4,370) 235
Inventories ....................................................................... (11,322) (2,560)
Other current assets .............................................................. (399) (1,595)
Deposits and other ................................................................ (40) (311)
Demonstration and customer service equipment ...................................... (1,022) (574)
Accounts payable, trade ........................................................... 1,707 5,848
Accrued payroll and employee benefits ............................................. 4,367 2,982
Customer deposits and other accrued expenses ...................................... 3,051 (573)
Income taxes payable/receivable, net .............................................. 7,891 4,987
----------- -----------
Net cash provided by operating activities ...................................... 9,856 1,033
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Marketable securities transactions ..................................................... (5,000) (1,072)
Proceeds from sale of investment ....................................................... 4,464 --
Proceeds from sale of equipment ........................................................ 150 --
Purchase of property and equipment, net ................................................ (8,687) (4,483)
Purchase of technology ................................................................. (1,031) --
----------- -----------
Net cash used in investing activities .......................................... (10,104) (5,555)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net change from notes payable and capital lease obligations ............................ 24 1,528
Proceeds from common stock transactions ................................................ 4,013 3,045
----------- -----------
Net cash provided by financing activities ...................................... 4,037 4,573
----------- -----------
EFFECT OF CURRENCY TRANSLATION ON CASH FLOW .............................................. (1,578) (323)
----------- -----------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS ......................................... 2,211 (272)
CASH AND CASH EQUIVALENTS, beginning of period ........................................... 21,043 12,875
----------- -----------
CASH AND CASH EQUIVALENTS, end of period ................................................. $ 23,254 $ 12,603
=========== ===========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid for interest ................................................................. $ 3,830 $ 346
=========== ===========
Cash paid for income taxes ............................................................. $ 18,411 $ 3,267
=========== ===========
</TABLE>
The accompanying notes to consolidated financial statements
are an integral part of these consolidated statements.
5
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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,
2000 and December 31, 1999, and the results of the Company's operations for the
three- and nine-month periods ended September 30, 2000 and 1999, and cash flows
for the nine-month periods ended September 30, 2000 and 1999.
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 Annual
Report on Form 10-K for the year ended December 31, 1999, filed March 20, 2000,
and the Company's Current Report on Form 8-K/A, dated August 18, 2000, filed
September 19, 2000.
(2) ACQUISITIONS
SEKIDENKO, INC. - On August 18, 2000, Sekidenko, Inc. ("Sekidenko"), a
privately held, Vancouver, Washington-based supplier of optical fiber
thermometers to the semiconductor capital equipment industry, was merged with a
wholly owned subsidiary of the Company. The Company issued 2.1 million shares of
its common stock to the former shareholders of Sekidenko.
NOAH HOLDINGS, INC. - On April 6, 2000, Noah Holdings, Inc. ("Noah"), a
privately held, California-based manufacturer of solid state temperature control
systems used to control process temperatures during semiconductor manufacturing,
was merged with a wholly owned subsidiary of the Company. The Company issued
approximately 687,000 shares of its common stock in connection with the
acquisition. In addition, outstanding Noah stock options were converted into
options to purchase approximately 40,000 shares of the Company's common stock.
The above mergers constituted tax-free reorganizations and have been
accounted for as poolings 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 Noah and Sekidenko as though each had always
been part of the Company. There were no transactions between the Company, Noah
and Sekidenko prior to the combinations, and immaterial adjustments were
recorded at Noah and Sekidenko to conform their accounting policies. Certain
reclassifications were made to conform the Noah and Sekidenko financial
statements to the Company's presentations. The results of operations for the
separate companies and combined amounts presented in the consolidated financial
statements follow:
6
<PAGE> 7
<TABLE>
<CAPTION>
NINE MONTHS ENDED SEPTEMBER 30,
-------------------------------
2000 1999
---------- ----------
(IN THOUSANDS)
<S> <C> <C>
Sales:
Pre-Noah and Sekidenko mergers
Advanced Energy ................................ $ 67,171 $ 125,385
Noah ........................................... 3,080 4,734
Sekidenko ...................................... 4,777 7,289
Post-Noah merger
Advanced Energy merged with Noah ............... 123,190 --
Sekidenko ...................................... 7,034 --
Post-Noah and Sekidenko mergers .................. 51,794 --
---------- ----------
Consolidated .................................. $ 257,046 $ 137,408
========== ==========
Net income:
Pre-Noah and Sekidenko mergers
Advanced Energy ................................ $ 9,996 $ 8,839
Noah ........................................... 43 50
Sekidenko ...................................... 1,198 1,722
Post-Noah merger
Advanced Energy merged with Noah ............... 20,809 --
Sekidenko ...................................... 1,367 --
Noah merger costs ................................ (2,333) --
Post-Noah and Sekidenko mergers .................. 11,815 --
Sekidenko merger costs ........................... (2,250) --
---------- ----------
Consolidated .................................. $ 40,645 $ 10,611
========== ==========
</TABLE>
LITMAS -- During 1998 the Company acquired a 29% ownership interest in
LITMAS, a privately held, North Carolina-based start-up company that designs and
manufactures plasma gas abatement systems and high-density plasma sources. The
purchase price consisted of $1 million in cash. On October 1, 1999, the Company
acquired an additional 27.5% interest in LITMAS for an additional $560,000. The
purchase price consisted of $385,000 in the Company's common stock and $175,000
in cash. The acquisition was accounted for using the purchase method of
accounting and resulted in $523,000 allocated to intangible assets as goodwill.
The results of operations of LITMAS have been consolidated in the accompanying
consolidated financial statements from the date the controlling interest of
56.5% was acquired.
AEV -- On October 8, 1998, RF Power Products, Inc., since renamed Advanced
Energy Voorhees, Inc. ("AEV"), 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 AEV. In addition, outstanding AEV stock options were converted
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 were
restated to include the combined balance sheet, statements of operations and
cash flows of AEV as though it had always been part of the Company.
FST -- On 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 a twelve-quarter period beginning October 1, 1998. During the
fourth quarter of 1999 and the first nine months of 2000, the Company accrued
$240,000 and $36,000, respectively, to intangible assets as a result of the
earn-out provision being met during those periods. Approximately $2.6 million of
the initial purchase price was allocated to intangible assets. The results of
operations of FST are included within the accompanying consolidated financial
statements from the date of acquisition.
7
<PAGE> 8
(3) MARKETABLE SECURITIES - TRADING
MARKETABLE SECURITIES - TRADING consisted of the following:
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
2000 1999
(UNAUDITED)
------------- ------------
(IN THOUSANDS)
<S> <C> <C>
Commercial paper ............................ $ 156,775 $ 118,894
Municipal bonds and notes ................... 41,674 67,453
Money market mutual funds ................... 113 93
------------- ------------
Total marketable securities ................. $ 198,562 $ 186,440
============= ============
</TABLE>
(4) ACCOUNTS RECEIVABLE - TRADE
ACCOUNTS RECEIVABLE - TRADE consisted of the following:
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
2000 1999
(UNAUDITED)
------------- ------------
(IN THOUSANDS)
<S> <C> <C>
Domestic ................................... $ 40,433 $ 21,877
Foreign .................................... 32,066 23,414
Allowance for doubtful accounts ............ (643) (639)
------------- ------------
Trade accounts receivable .................. 71,856 44,652
Related parties ............................ 718 32
Other ...................................... 5,471 1,787
------------- ------------
Total accounts receivable .................. $ 78,045 $ 46,471
============= ============
</TABLE>
(5) INVENTORIES
INVENTORIES consisted of the following:
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
2000 1999
(UNAUDITED)
------------- ------------
(IN THOUSANDS)
<S> <C> <C>
Parts and raw materials................ $ 30,655 $ 19,381
Work in process........................ 3,692 2,526
Finished goods......................... 5,385 6,503
------------- ------------
Total inventories...................... $ 39,732 $ 28,410
============= ============
</TABLE>
(6) INVESTMENTS
In the third quarter of 2000 the Company exercised warrants of a supplier in
a cashless transaction and received 458,000 shares of the supplier's common
stock, which is publicly traded. Concurrent with the exercise, the Company sold
320,000 shares of the supplier's common stock and recognized a gain of
approximately $4.8 million. The remaining 138,000 shares have been classified as
available-for-sale securities and are reflected as an asset of approximately
$4.6 million in the accompanying balance sheet.
8
<PAGE> 9
(7) STOCKHOLDERS' EQUITY
STOCKHOLDERS' EQUITY consisted of the following:
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
2000 1999
(UNAUDITED)
------------- ------------
(IN THOUSANDS, EXCEPT PAR VALUE)
<S> <C> <C>
Common stock, $0.001 par value, 40,000 shares authorized;
31,474 and 30,981 shares issued and outstanding at September
30, 2000 and December 31, 1999, respectively................. $ 31 $ 31
Additional paid-in capital....................................... 117,434 108,997
Retained earnings................................................ 89,582 48,937
Deferred compensation............................................ (1,752) (86)
Accumulated other comprehensive income (loss).................... 1,726 (890)
------------- ------------
Total stockholders' equity....................................... $ 207,021 $ 156,989
============= ============
</TABLE>
(8) ACCOUNTING STANDARDS
COMPREHENSIVE INCOME -- In June 1997 the Financial Accounting Standards
Board ("FASB") issued SFAS No. 130, "Reporting Comprehensive Income," which
establishes rules for the reporting of comprehensive income and its components.
Comprehensive income for the Company consists of net income, foreign currency
translation adjustments and an unrealized holding gain 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>
NINE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, 2000 SEPTEMBER 30, 1999
(UNAUDITED) (UNAUDITED)
------------------ ------------------
(IN THOUSANDS)
<S> <C> <C>
Net income, as reported.......................................... $ 40,645 $ 10,611
Adjustment to arrive at comprehensive net income:
Unrealized holding gain........................................ 4,194 --
Cumulative translation adjustment.............................. (1,578) (323)
-------- --------
Comprehensive net income......................................... $ 43,261 $ 10,288
======== ========
</TABLE>
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 was effective for
the Company beginning 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.
DERIVATIVE HEDGING ACTIVITIES -- 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, as amended by SFAS No. 137 in June 1999, is
effective for the Company for all periods in fiscal year 2001. 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.
9
<PAGE> 10
REVENUE RECOGNITION -- In December 1999 the staff of the Securities and
Exchange Commission issued its Staff Accounting Bulletin ("SAB") No. 101,
"Revenue Recognition." SAB No. 101 provides guidance on the measurement and
timing of revenue recognition in financial statements of public companies.
Changes in accounting policies to apply the guidance of SAB No. 101 must be
adopted by recording the cumulative effect of the change in the fiscal quarter
ending December 31, 2000. Management does not believe that the adoption of SAB
No. 101 will have a material effect on the Company's financial position or
results of operations.
(9) CONVERTIBLE SUBORDINATED NOTES PAYABLE
In November 1999 the Company issued $135 million of convertible subordinated
notes payable at 5.25%. These notes mature November 15, 2006, with interest
payable on May 15th and November 15th each year beginning May 15, 2000. Net
proceeds to the Company were approximately $130.5 million, after deducting $4.5
million of offering costs and underwriters' discounts and commissions, which
have been capitalized and are being amortized over a period of 7 years. Holders
of the notes may convert the notes at any time into shares of the Company's
common stock, at $49.53 per share. The Company may convert the notes on or after
November 19, 2002 at a redemption price of 103.00% times the principal amount,
and may convert at successively lesser amounts thereafter until November 15,
2006, at which time the Company may convert at a redemption price equal to the
principal amount. At September 30, 2000, $2.7 million of interest expense was
accrued as a current liability, and there had been no conversion of notes into
the Company's common stock.
Between October 16, 2000 and October 28, 2000, the Company purchased an
aggregate of approximately $31.7 million principal amount of notes in the open
market, for a cost of approximately $23.6 million. The note purchases were
funded from the Company's available cash. The Company may purchase additional
notes in the open market from time to time, if market conditions and the
Company's financial position are deemed favorable for such purchases.
(10) SUBSEQUENT EVENTS
On July 6, 2000, the Company entered into a definitive agreement to acquire
Engineering Measurements Company ("EMCO"), a Longmont, Colorado-based company
which manufactures electronic and electromechanical precision instruments for
measuring and controlling the flow of liquids, steam and gases, for 900,000
shares of the Company's common stock. The Company and EMCO renegotiated the
agreement as of October 20, 2000 to change the consideration from stock to cash.
Completion of the merger is subject to approval by EMCO's shareholders and
certain other conditions. If the merger is completed, the Company will pay the
EMCO shareholders cash in an aggregate amount equal to $30 million plus the
exercise prices paid in cash by EMCO option holders on exercise of any EMCO
stock options after October 20, 2000 and before the completion of the merger.
The Company will assume options that are not exercised before the completion of
the merger and convert them into options to acquire the Company's common stock.
The acquisition will be accounted for using the purchase method of accounting.
The Company will operate EMCO as a wholly owned subsidiary.
10
<PAGE> 11
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
SPECIAL NOTE ON FORWARD LOOKING STATEMENTS
This Form 10-Q, including the following discussion, contains 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.
Statements that are other than historical information are forward looking
statements. For example, statements relating to our beliefs, expectations and
plans are forward looking statements, as are statements that certain actions,
conditions or circumstances will occur or continue. Forward looking statements
involve risks and uncertainties. As a result, 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:
o changes or slowdowns in economic conditions in the
semiconductor and semiconductor capital equipment industries
or other industries in which our customers operate;
o changes in customers' inventory management practices;
o timing and challenges of integrating recent and potential
future acquisitions;
o component shortages or allocations or other factors that
change our levels of inventory or substantially increase our
spending on inventory;
o introduction of new products by our competitors; and
o our ability to attract and retain key personnel.
For a discussion of these and other factors that may impact our realization of
our forward looking statements, see our Annual Report on Form 10-K for the year
ended December 31, 1999, Part I "Cautionary Statements - Risk Factors."
RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2000 AND 1999
SALES
We sell power conversion and control systems and plasma gas abatement
systems primarily to the semiconductor capital equipment, data storage and
emerging markets in the United States, to the flat panel display and data
storage markets in Japan, and to data storage and emerging markets in Europe. We
also sell spare parts and repair services worldwide through our customer service
and technical support organization.
11
<PAGE> 12
Sales were $55.6 million in the third quarter of 1999 and $96.3 million in
the third quarter of 2000, representing an increase of 73%. The third quarter of
2000 achieved another record quarterly level of sales for us and was the seventh
consecutive quarter of sales growth. Our sales levels in the third quarter of
2000 were primarily attributable to capacity expansion and increased investment
in advanced technology by the semiconductor industry, which resulted in
increased demand for our systems from manufacturers of semiconductor capital
equipment, including our largest customer. Our experience has shown that our
sales to semiconductor capital equipment customers is dependent on the
volatility of that industry, which results from sudden changes in semiconductor
supply and demand, and rapid technological advances in both semiconductor
devices and wafer fabrication processes.
Our sales in the third quarter of 2000 when compared to the third quarter of
1999 were also higher because of increased sales to all five industries to which
we sell. Sales to the flat panel display industry were 166% higher due to
increased demand by that industry in Japan. Additionally, increased demand by
the entertainment customer group of the data storage industry led to
significantly higher sales to that industry.
By geographic region, our sales were higher in the third quarter of 2000
when compared to the third quarter of 1999 in all our major geographic markets
including the United States, Asia Pacific and Europe while our sales in the rest
of the world decreased.
The following tables summarize net sales and percentages of net sales by
customer type for us for the three-month periods ended September 30, 2000 and
1999:
<TABLE>
<CAPTION>
THREE MONTHS ENDED SEPTEMBER 30,
--------------------------------
2000 1999
---------- ----------
(IN THOUSANDS)
<S> <C> <C>
Semiconductor capital equipment................. $ 67,142 $ 36,867
Data storage.................................... 8,034 5,733
Flat panel display.............................. 7,733 2,904
Emerging markets................................ 9,641 7,241
Customer service technical support.............. 3,767 2,881
---------- ----------
$ 96,317 $ 55,626
========== ==========
</TABLE>
<TABLE>
<CAPTION>
THREE MONTHS ENDED SEPTEMBER 30,
--------------------------------
2000 1999
---------- ----------
<S> <C> <C>
Semiconductor capital equipment................. 70% 66%
Data storage.................................... 8 11
Flat panel display.............................. 8 5
Emerging markets................................ 10 13
Customer service technical support.............. 4 5
---------- ----------
100% 100%
========== ==========
</TABLE>
The following tables summarize net sales and percentages of net sales by
geographic region for us for the three-month periods ended September 30, 2000
and 1999:
12
<PAGE> 13
<TABLE>
<CAPTION>
THREE MONTHS ENDED SEPTEMBER 30,
--------------------------------
2000 1999
---------- ----------
(IN THOUSANDS)
<S> <C> <C>
United States and Canada........................ $ 69,251 $ 41,429
Europe.......................................... 14,480 8,256
Asia Pacific.................................... 12,561 5,863
Rest of world................................... 25 78
---------- ----------
$ 96,317 $ 55,626
========== ==========
</TABLE>
<TABLE>
<CAPTION>
THREE MONTHS ENDED SEPTEMBER 30,
--------------------------------
2000 1999
---------- ----------
<S> <C> <C>
United States and Canada........................ 72% 74%
Europe.......................................... 15 15
Asia Pacific.................................... 13 11
Rest of world................................... -- --
---------- ----------
100% 100%
========== ==========
</TABLE>
GROSS MARGIN
Our gross margin was 48.6% in the third quarter of 2000 compared to 44.9% in
the third quarter of 1999. The improvement was due to more favorable absorption
of manufacturing overhead from the higher sales base, and lower costs of
customer service and technical support. We will add new facilities in Fort
Collins, Colorado in the first quarter of 2001 to increase our manufacturing
capacity, which will involve substantial fixed costs. This could adversely
impact absorption of overhead if the increased capacity is not fully utilized.
RESEARCH AND DEVELOPMENT EXPENSES
We invest in research and development to investigate new technologies,
develop new products, and improve existing product designs. Our research and
development expenses were $7.2 million in the third quarter of 1999 and $9.7
million in the third quarter of 2000, representing an increase of 35%. The
increase is primarily due to increases in payroll, materials, supplies and
higher infrastructure costs for new product development. As a percentage of
sales, research and development expenses decreased from 13.0% in the third
quarter of 1999 to 10.0% in the third quarter of 2000 because of the higher
sales base.
We believe continued research and development investment for development of
new systems is critical to our ability to serve new and existing markets. Since
our inception, the majority of our research and development costs have been
internally funded and all have been expensed as incurred.
SALES AND MARKETING EXPENSES
Our 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 were $4.6 million in
the third quarter of 1999 and $6.2 million in the third quarter of 2000,
representing a 36% increase. The
13
<PAGE> 14
increase is primarily due to higher payroll, promotion and distribution costs
incurred as we continue to increase our sales management and product management
capabilities. As a percentage of sales, sales and marketing expenses decreased
from 8.2% in the third quarter of 1999 to 6.5% in the third quarter of 2000
because of the higher sales base.
GENERAL AND ADMINISTRATIVE EXPENSES
Our general and administrative expenses support our worldwide financial,
administrative, information systems and human resources functions. General and
administrative expenses were $4.4 million in the third quarter of 1999 and $6.7
million in the third quarter of 2000, representing a 52% increase. The increase
is primarily due to higher spending for payroll and purchased services. As a
percentage of sales, general and administrative expenses decreased from 8.0% in
the third quarter of 1999 to 7.0% in the third quarter of 2000 because of the
higher sales base.
We continue to implement our management system software, including the
replacement of existing systems in our domestic and foreign locations. We expect
that charges related to training and implementation of the new software will
continue into 2001.
RESTRUCTURING AND MERGER COSTS
On July 17, 2000, we announced the consolidation of our Tower Electronics
facility in Fridley, Minnesota into our existing facility in Voorhees, New
Jersey. We recorded a restructuring charge of $1.0 million in the third quarter
of 2000 related to the consolidation, which we expect to complete during the
fourth quarter of 2000.
On August 18, 2000, Advanced Energy acquired Sekidenko, Inc. ("Sekidenko")
in a merger that was accounted for as a pooling of interests. This merger
involved the exchange of 2.1 million shares of Advanced Energy common stock for
the privately held common stock of Sekidenko. As part of the business
combination, we took a charge of $2.3 million in the third quarter of 2000 for
merger costs, which cannot be capitalized and which in certain cases are
nondeductible for income tax purposes. We expect to incur additional operating
expenses during 2000 related to consolidating and integrating operations of this
and other business combinations made in 2000.
OTHER INCOME (EXPENSE)
Other income consists primarily of interest income and expense, foreign
exchange gains and other gains and losses. Other income was $5.6 million in the
third quarter of 2000, primarily due to a $4.8 million gain on a sale of an
investment, compared to other income of $1.1 million in the third quarter of
1999, which was primarily due to a $1.0 million foreign currency gain.
14
<PAGE> 15
PROVISION FOR INCOME TAXES
The income tax provision for the third quarter of 1999 was $3.7 million and
represented an effective tax rate of 38%. The income tax provision for the third
quarter of 2000 was $10.2 million, which also represented an effective tax rate
of 38%. We have implemented several strategic tax reduction initiatives to
reduce our overall effective rate, and we adjust our income taxes periodically
based upon the anticipated tax status of all foreign and domestic entities. In
the third quarter of 2000 we incurred certain merger costs which are
nondeductible, and which adversely impacted the effective rate.
RESULTS OF OPERATIONS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2000 AND 1999
SALES
Sales were $137.4 million for the first nine months of 1999 and $257.0
million for the first nine months of 2000. The increase was attributable to
increased sales to all the industries to which we sell, and also included
increases to all of our major geographic regions.
The following tables summarize net sales and percentages of net sales by
customer type for us for the nine-month periods ended September 30, 2000 and
1999:
<TABLE>
<CAPTION>
NINE MONTHS ENDED SEPTEMBER 30,
-------------------------------
2000 1999
---------- ----------
(IN THOUSANDS)
<S> <C> <C>
Semiconductor capital equipment.............. $ 179,227 $ 88,260
Data storage................................. 19,404 14,371
Flat panel display........................... 21,363 6,865
Emerging markets............................. 25,784 20,986
Customer service technical support........... 11,268 6,926
---------- ----------
$ 257,046 $ 137,408
========== ==========
</TABLE>
<TABLE>
<CAPTION>
NINE MONTHS ENDED SEPTEMBER 30,
-------------------------------
2000 1999
---------- ----------
<S> <C> <C>
Semiconductor capital equipment.............. 70% 64%
Data storage................................. 8 11
Flat panel display........................... 8 5
Emerging markets............................. 10 15
Customer service technical support........... 4 5
---------- ----------
100% 100%
========== ==========
</TABLE>
The following tables summarize net sales and percentages of net sales by
geographic region for us for the nine-month periods ended September 30, 2000 and
1999:
<TABLE>
<CAPTION>
NINE MONTHS ENDED SEPTEMBER 30,
-------------------------------
2000 1999
---------- ----------
(IN THOUSANDS)
<S> <C> <C>
United States and Canada..................... $ 185,470 $ 102,150
Europe....................................... 38,117 20,449
Asia Pacific................................. 33,147 14,369
Rest of world................................ 312 440
---------- ----------
$ 257,046 $ 137,408
========== ==========
</TABLE>
15
<PAGE> 16
<TABLE>
<CAPTION>
NINE MONTHS ENDED SEPTEMBER 30,
-------------------------------
2000 1999
---------- ----------
<S> <C> <C>
United States and Canada..................... 72% 74%
Europe....................................... 15 15
Asia Pacific................................. 13 11
Rest of world................................ -- --
---------- ----------
100% 100%
========== ==========
</TABLE>
GROSS MARGIN
Our gross margin was 44.0% in the first nine months of 1999 and 49.0% in the
first nine months of 2000. The improvement was due to more favorable absorption
of manufacturing overhead from the higher sales base and lower costs of customer
service and technical support.
RESEARCH AND DEVELOPMENT EXPENSES
Research and development expenses were $20.2 million in the first nine
months of 1999 and $26.3 million in the first nine months of 2000, representing
an increase of 30%. The increase is primarily due to increases in payroll,
materials and supplies, depreciation and higher infrastructure costs for new
product development. As a percentage of sales, research and development expenses
decreased from 14.7% in the first nine months of 1999 to 10.2% in the first nine
months of 2000 because of the higher sales base.
SALES AND MARKETING EXPENSES
Sales and marketing expenses were $12.2 million in the first nine months of
1999 and $17.5 million in the first nine months of 2000, representing a 43%
increase. The increase is primarily due to higher payroll, promotion,
distribution and travel costs. As a percentage of sales, sales and marketing
expenses decreased from 8.9% in the first nine months of 1999 to 6.8% in the
first nine months of 2000 because of the higher sales base.
GENERAL AND ADMINISTRATIVE EXPENSES
General and administrative expenses were $11.7 million in the first nine
months of 1999 and $18.2 million in the first nine months of 2000, representing
a 56% increase. The increase is primarily due to higher spending for payroll and
purchased services. As a percentage of sales, general and administrative
expenses decreased from 8.5% in the first nine months of 1999 to 7.1% in the
first nine months of 2000 because of the higher sales base.
RESTRUCTURING AND MERGER COSTS
On April 6, 2000, Advanced Energy acquired Noah Holdings, Inc. ("Noah") in
a pooling of interests that involved the exchange of 687,000 shares of Advanced
Energy common stock for the privately held common stock of Noah. As part of the
business
16
<PAGE> 17
combination, we took a one-time charge of $2.3 million in the second quarter of
2000 for merger costs, which cannot be capitalized and which in certain cases
are nondeductible for income tax purposes. We expect to incur additional
operating expenses during 2000 related to consolidating and integrating
operations of this business combination.
On July 17, 2000, we announced the consolidation of our Tower Electronics
facility in Fridley Minnesota, into our existing facility in Voorhees, New
Jersey. We recorded a restructuring charge of $1.0 million in the third quarter
of 2000 related to the consolidation, which we expect to complete during the
fourth quarter of 2000.
On August 18, 2000, Advanced Energy acquired Sekidenko, Inc. ("Sekidenko")
in a merger that was accounted for as a pooling of interests. This merger
involved the exchange of 2.1 million shares of Advanced Energy common stock for
the privately held common stock of Sekidenko. As part of the business
combination, we took a charge of $2.3 million in the third quarter of 2000 for
merger costs, which cannot be capitalized and which in certain cases are
nondeductible for income tax purposes. We expect to incur additional operating
expenses during 2000 related to consolidating and integrating operations of this
business combination.
OTHER INCOME (EXPENSE)
Other income was $1.0 million in the first nine months of 1999, primarily
due to $900,000 of foreign currency gain. Other income was $6.4 million in the
first nine months of 2000, primarily due to a $4.8 million gain on a sale of an
investment and net interest income from marketable securities we hold.
PROVISION FOR INCOME TAXES
The income tax provision for the first nine months of 1999 was $6.7 million
and represented an effective tax rate of 39%. The income tax provision for the
first nine months of 2000 was $24.2 million and represented an effective tax
rate of 37%. We have implemented several strategic tax reduction initiatives to
reduce our overall effective rate, and we adjust our income taxes periodically
based upon the anticipated tax status of all foreign and domestic entities.
LIQUIDITY AND CAPITAL RESOURCES
Since our inception, we have financed our operations, acquired equipment and
met our working capital requirements through borrowings under our revolving line
of credit, long-term loans secured by property and equipment, cash flow from
operations and proceeds from underwritten public offerings of our common stock
and convertible subordinated debt.
17
<PAGE> 18
Operating activities provided cash of $1.0 million in the first nine months
of 1999, primarily as a result of net income, depreciation and amortization,
increases in accounts payable and increased accruals for payroll, employee
benefits and income taxes, partially offset by increases in accounts receivable
and inventories. Operating activities provided cash of $9.9 million in the first
nine months of 2000, primarily as a result of net income, depreciation and
amortization, increased accruals for payroll, employee benefits and income
taxes, partially offset by increases in accounts receivable and inventories,
earnings from marketable securities and a gain from a sale of an investment. We
expect future receivable and inventory balances to fluctuate with net sales. We
provide just-in-time deliveries to certain of our customers and may be required
to maintain higher levels of inventory to satisfy our customers' delivery
requirements. Any increase in our inventory levels will require the use of cash
to purchase the inventory.
Investing activities used cash of $5.6 million in the first nine months of
1999, and included the purchase of property and equipment for $4.5 million and
an increase of marketable securities of $1.1 million. Investing activities used
cash of $10.1 million in the first nine months of 2000, and included the net
purchase of marketable securities of $5.0 million, the purchase of property and
equipment for $8.7 million, and the purchase of technology for $1.0 million,
partially offset by proceeds from the sale of an investment of $4.5 million and
proceeds from the sale of equipment of $150,000.
Financing activities provided cash of $4.6 million in the first nine months
of 1999, and consisted of $3.0 million from the exercise of employee stock
options and sale of common stock through our employee stock purchase plan
("ESPP") and $1.5 million of net changes in notes payable and capital lease
obligations. Financing activities provided cash of $4.0 million in the first
nine months of 2000, and consisted primarily of $4.0 million from the exercise
of employee stock options and sale of common stock through our ESPP.
Between October 16, 2000 and October 28, 2000, we purchased an aggregate of
approximately $31.7 million principal amount of our convertible subordinated
notes in the open market, for a cost of approximately $23.6 million. The note
purchases were funded from our available cash. We may purchase additional notes
in the open market from time to time, if market conditions and our financial
position are deemed favorable for such purchases.
We plan to spend approximately $8 million through the remainder of 2000 for
the acquisition of equipment, leasehold improvements and furnishings, with
depreciation expense projected to be approximately $2 million.
As of September 30, 2000, we had working capital of $299.8 million. Our
principal sources of liquidity consisted of $23.3 million of cash and cash
equivalents, $198.6 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
18
<PAGE> 19
(9.5% at October 24, 2000) minus 1.25% or the LIBOR 360-day rate (6.68% at
October 24, 2000) plus 150 basis points, at our option. All advances under the
revolving line of credit will be due and payable in December 2000. We intend to
renew and extend the terms of this line of credit. As of September 30, 2000
there was an advance outstanding of $2.3 million on this line of credit by our
Japanese subsidiary, Advanced Energy Japan K.K. We also have a line of credit of
$1.5 million of which $100,000 was outstanding at September 30, 2000.
We believe that our cash and cash equivalents, marketable securities, cash
flow from operations and available borrowings, will be sufficient to meet our
working capital needs through at least the end of 2001. After that time, we may
require additional equity or debt financing to address our working capital,
capital equipment or expansion needs. In addition, any significant acquisitions
we make may require additional equity or debt financing 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
us.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT
MARKET RISK
INTEREST RATE RISK
Our exposure to market risk for changes in interest rates relates primarily
to our investment portfolio and long-term debt obligations. We generally place
our investments with high credit quality issuers and by policy are averse to
principal loss and seek to protect and preserve our invested funds by limiting
default risk, market risk and reinvestment risk. As of September 30, 2000, our
investments consisted of equity securities, commercial paper, municipal bonds
and notes and money market mutual funds.
Our interest expense is sensitive to changes in the general level of U.S.
interest rates with respect to our bank facilities of which $2.3 million was
outstanding as of September 30, 2000. Our other debt, including our convertible
subordinated notes, is fixed rate in nature and mitigates the impact of
fluctuations in interest rates. The fair value of our debt approximates the
carrying amount at September 30, 2000. We believe the potential effects of
near-term changes in interest rates on our debt is not material.
FOREIGN CURRENCY EXCHANGE RATE RISK
We transact business in various foreign countries. Our primary foreign
currency cash flows are generated in countries in Asia and Europe. We have
entered into various forward foreign exchange contracts as a hedge against
currency fluctuations in the Japanese yen. We will continue to evaluate various
methods to minimize the effects of currency fluctuations.
19
<PAGE> 20
Eleven European countries adopted 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, these 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. A twelfth European country is schedule to adopt the
euro January 1, 2001. Although we do not expect the introduction of the euro
currency to have a significant impact on our revenues or results of operations,
we are unable to determine what effects, if any, the currency change in Europe
will have on competition and competitive pricing in the affected regions.
OTHER RISK
We have invested in start-up companies and may in the future make additional
investments in start-up companies that develop products which we believe may
provide future benefits. The current and any future start-up investments will be
subject to all of the risks inherent in investing in companies that are not
established.
20
<PAGE> 21
PART II OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
We are not aware of any legal proceedings that are expected to have a
material effect on our 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
None.
ITEM 5. OTHER INFORMATION
None.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits:
3.1 The Company's Restated Certificate of Incorporation, as amended(1)
3.2 The Company's By-laws(2)
10.21 Agreement and Plan of Reorganization, dated July 21, 2000, by and
among the Company, Mercury Merger Corporation, a wholly owned
subsidiary of the Company, Sekidenko, Inc., and Dr. Ray R. Dils(3)
10.22 Agreement and Plan of Reorganization, dated July 6, 2000, amended
and restated as of October 20, 2000, by and among the Company,
Flow Acquisition Corporation, a wholly owned subsidiary of the
Company, and Engineering Measurements Company
27.1 Financial Data Schedule for the nine-month period ended September
30, 2000
21
<PAGE> 22
----------
(1) Incorporated by reference to the Company's quarterly Report on
Form 10-Q for the quarter ended June 30, 1999 (File No.
000-26966), filed July 28, 1999.
(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 quarterly Report on
Form 10-Q for the quarter ended June 30, 2000 (File No.
000-26966), filed August 4, 2000.
(b) The Company filed a report on Form 8-K on August 14, 2000. The report
contained a restatement of the Company's financial statements originally
reported in its Form 10-K, filed March 20, 2000, which included the
consolidated balance sheets as of December 31, 1999 and 1998, and the
related consolidated statements of operations, stockholders' equity and
cash flows for each of the three years in the period ended December 31,
1999. The report on Form 8-K was filed to reflect the merger of Noah
Holdings, Inc. ("Noah") with Advanced Energy that occurred on April 6,
2000, which was accounted for as a pooling of interests under Accounting
Principles Board Opinion No. 16. All prior period consolidated financial
statements referred to above, were restated to include the comparable
statements of Noah as though it had always been part of the Company.
The Company filed a report on Form 8-K on September 15, 2000, and a related
amended report on Form 8-K/A on September 19, 2000. The reports contained a
restatement of the Company's financial statements originally reported in
its Form 10-K, filed March 20, 2000, which included the consolidated
balance sheets as of December 31, 1999 and 1998, and the related
consolidated statements of operations, stockholders' equity and cash flows
for each of the three years in the period ended December 31, 1999. The
reports on Form 8-K and Form 8-K/A were filed to reflect the merger of Noah
with Advanced Energy that occurred on April 6, 2000 and the merger of
Sekidenko, Inc. ("Sekidenko") with Advanced Energy that occurred on August
18, 2000. These mergers were accounted for as poolings of interests under
Accounting Principles Board Opinion No. 16. All prior period consolidated
financial statements referred to above, were restated to include the
comparable statements of Noah and Sekidenko as though each had always been
part of the Company.
22
<PAGE> 23
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
-------------------
Richard P. Beck
Senior Vice President, October 30, 2000
Chief Financial Officer,
Assistant Secretary and
Director (Principal Financial
Officer and Principal
Accounting Officer)
<PAGE> 24
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<S> <C>
3.1 The Company's Restated Certificate of Incorporation, as amended(1)
3.2 The Company's By-laws(2)
10.21 Agreement and Plan of Reorganization, dated July 21, 2000, by and
among the Company, Mercury Merger Corporation, a wholly owned
subsidiary of the Company, Sekidenko, Inc., and Dr. Ray R. Dils(3)
10.22 Agreement and Plan of Reorganization, dated July 6, 2000, amended
and restated as of October 20, 2000, by and among the Company,
Flow Acquisition Corporation, a wholly owned subsidiary of the
Company, and Engineering Measurements Company
27.1 Financial Data Schedule for the nine-month period ended September
30, 2000
</TABLE>
----------
(1) Incorporated by reference to the Company's quarterly Report on
Form 10-Q for the quarter ended June 30, 1999 (File No.
000-26966), filed July 28, 1999.
(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 quarterly Report on
Form 10-Q for the quarter ended June 30, 2000 (File No.
000-26966), filed August 4, 2000.
