Advanced Energy Announces Fourth Quarter Results

January 30, 2012 by Jeff Shepard

Advanced Energy Industries, Inc. announced financial results for the fourth quarter ended December 31, 2011. The company posted fourth quarter sales of $112.5 million compared to $148.7 million in the fourth quarter of 2010 and $128.5 million in the third quarter of 2011. Loss from continuing operations was $2.6 million or $0.06 per diluted share. On a non-GAAP basis, income generated from operations was 1.0% of sales, and earnings from our continuing operations on a per share basis was $0.01. The non-GAAP measures exclude the impact of the $4.2 million restructuring charge recorded in the fourth quarter. The company also generated $6.3 million in cash during the quarter before the share repurchase of $18 million.

"During the fourth quarter we made great strides executing on our strategic plan by consolidating facilities, redesigning incentive plans and repurchasing stock and we are well on our way to achieving our initial goals and exceeding our cost savings targets," said Garry Rogerson, chief executive officer. "While market conditions remain uncertain in the near-term, our focus is centered on accomplishing the objectives we laid out at our analyst day to realign our cost structure, accelerate revenue growth and effectively utilize our cash. Once implemented, these actions should improve our profitability and deliver exceptional value to our shareholders."

Thin Films sales declined 29.1% to $54.4 million in the fourth quarter of 2011 from $76.8 million in the third quarter of 2011, primarily due to continued weak market conditions in solar panel and flat panel displays. In general, capital spending across all of our thin films end markets weakened this quarter. Year-over-year, Thin Films sales declined from $97.0 million in the fourth quarter of 2010.

Solar Energy sales were $58.1 million in the quarter, an increase of 12.3% from $51.7 million in both the third quarter of 2011 and the fourth quarter of 2010. The strongest area of growth continues to be in the utility-scale market where our Solaron inverters have been selected on some of the largest projects in North America.

Loss from continuing operations for the fourth quarter was $2.6 million or $0.06 per diluted share, compared to income from continuing operations of $19.7 million or $0.45 per diluted share in the same period last year and income from continuing operations of $7.2 million or $0.16 in the third quarter of 2011. On a non-GAAP basis, excluding the impact of the restructuring charge, continuing operations generated income for the fourth quarter of 2011 of $0.5 million or per share earnings of $0.01.

During the fourth quarter, the company incurred $4.2 million in charges related to the restructuring plan that was announced on September 28, 2011. Under the first phase of the plan, the company consolidated certain facilities and began aligning its engineering resources with the geographic footprint of its customer base by localizing R&D within the major geographies it serves. During the quarter, the company also started the transfer of manufacturing of certain solar inverter subcomponents to its Shenzhen, China factory. These and other efforts have resulted in savings from the first phase of the restructuring of approximately $12 million annually.

The second phase is expected to be implemented over the next 9 to 15 months as the company further reduces its cost structure, closes facilities, and relocates other functions to different regions worldwide. As a result, the company anticipates further charges in the amount of $4 to $8 million, principally for space consolidation, and another $1 million in additional severance costs over this timeframe. Once complete, the two phases of the restructuring plan, along with other cost savings initiatives and margin improvements, are expected to deliver annual savings higher than the originally anticipated $16 to $20 million.