Advanced Energy Announces Strong Non-GAAP Results

August 03, 2015 by Jeff Shepard

Advanced Energy Industries, Inc. announced financial results for the second quarter ended June 30, 2015. The company reported second quarter sales of $136.8 million compared with $141.1 million in the first quarter of 2015 and $146.3 million in the second quarter of 2014. On a GAAP basis, net income was $(232.5) million or $(5.68) per diluted share due to one-time, primarily non-cash, charges related to the winding down of the inverter business. Non-GAAP adjusted net income was $17.7 million or $0.43 per diluted share. A reconciliation of non-GAAP net income and earnings per share is provided in the tables below. The company ended the quarter with $183.2 million in cash and marketable securities, a sequential increase of $27.3 million.

"Midway through 2015, the semiconductor market remains robust and the expansion of our industry-leading products into other precision power markets is contributing to our strong non-GAAP results," said Yuval Wasserman, President and CEO of Advanced Energy. "With the decision to wind down the inverter business, the true power of our business model to generate strong profitability and cash flow becomes evident as we drive towards strengthening our leadership position in precision power."

Excluding the inverter business, sales were $104.6 million in the second quarter of 2015, slightly below the first quarter's sales of $105.8 million and up 27.9% from $81.8 million in the second quarter of 2014. In line with the company's served market, sales to semiconductor declined slightly in the quarter from near-record highs, while improvements in some industrial applications also contributed. Non-GAAP operating income for the business excluding inverters was $28.6 million, or 27.3% of sales.

Closing out the second quarter 2015, inverter sales were $32.2 million, slightly down from $35.3 million in the first quarter 2015, and down 50.0% from $64.5 million in the second quarter of 2014. Non-GAAP operating income for Inverters was $(213.2) million due to the charges related to the wind down.

During the quarter, the company incurred $201.1 million in charges related to the wind down of the inverter business that was announced on June 29, 2015. These include: Restructuring charges of $168.4 million consisting of $154.6 million for impairment of goodwill and intangibles, $12.3 million to write down fixed assets and $1.5 million for contract settlement costs. An inventory write-down of $15.0 million that is included in cost of sales, and a reserve for accounts receivable of $17.7 million that is included in selling, general and administrative expense.

Income taxes include a non-cash tax accrual of $48 million which is expected to reverse in the second half of 2015. The tax amount relates to applying the annual tax rate to quarterly taxable income which is heavily impacted by the restructuring charges. The total year 2015 GAAP tax expense is currently anticipated to range from zero to a slight tax benefit.

The remainder of the restructuring plan is expected to be substantially complete by year end. Total year restructuring, tax and other charges related to the wind down are anticipated to be $260 million to $290 million, consistent with the range included in the June 29th press release. Cash costs for the wind down are expected to be $20 million to $30 million in 2015.