For more information, contact:

Mike El-Hillow
Advanced Energy Industries, Inc.
Cathy Kawakami,
Advanced Energy Industries, Inc.

Advanced Energy Reports Second Quarter 2004 Results

FORT COLLINS, Colo., July 21—Advanced Energy Industries, Inc. (Nasdaq: AEIS) today reported financial results for the second quarter ended June 30, 2004. Advanced Energy offers a comprehensive suite of process-centered solutions critical to the production of semiconductors, flat panel displays, data storage products, architectural glass and other advanced product applications.


For the 2004 second quarter, revenues were $108.9 million, up 73 percent from $62.9 million for the second quarter of 2003, and up 4 percent compared to revenues of $104.5 million for the first quarter of 2004.

Net income for the second quarter of 2004 was $4.5 million, or $0.13 per diluted share, compared to a net loss of $5.8 million, or $0.18 per share in the second quarter of 2003. This compares to first quarter 2004 net income of $6.9 million, or $0.21 per diluted share, which includes $1.0 million in pretax gains resulting from the sale of certain marketable securities and the sale of the Company's thermal control business.

Revenue for the six months ended June 30, 2004 was $213.4 million versus $119.1 million for the first six months of 2003. Net income for the 2004 six-month period was $11.4 million, or $0.34 per diluted share, compared to a net loss for the 2003 six-month period of $14.4 million, or $0.45 per share.

Doug Schatz, chairman and chief executive officer, said, "As we had anticipated, semiconductor order momentum leveled quarter-to-quarter, as end users entered an absorption phase following several months of robust 200mm-driven equipment shipments. While we had a modest increase in sales, we are disappointed by our operating results. The continuation of higher than expected China-related and Asian-based supplier transition costs, and product mix, negatively impacted gross margin. The decision to manufacture high volume products in China is the right strategic move long term. However, the continuation of dual manufacturing with our US-based facility on certain product lines is negatively impacting gross margin to a greater degree than we planned. We are committed to reducing these transition costs and expect gross margin improvement by the end of 2004.

"Looking ahead, we continue to experience the effect of semiconductor manufacturers' cautious capital equipment purchasing patterns, despite some positive longer-term indicators. We anticipate third quarter revenue to be down 2 to 5 percent relative to the second quarter, with earnings per share in the range of $0.08 to $0.12.

"Advanced Energy is well-positioned with innovative products that drive advanced technology in all of our target markets. We continue to increase our market share, particularly through key design wins on 300mm tools in high-growth semiconductor applications and new generation flat panel display equipment. Our focus on innovation enables technological and market leadership, and we continue to extend that lead as our customers adopt increasingly complex manufacturing processes, requiring increased precision and control," said Mr. Schatz.

Second Quarter Conference Call

Management will host a conference call today, Wednesday, July 21, 2004 at 5:00 pm Eastern time to discuss Advanced Energy's financial results. You may access this conference call by dialing 888-713-4717. International callers may access the call by dialing 706-679-7720. For a replay of this teleconference, please call 706-645-9291, and enter the pass code 6231797. The replay will be available through Wednesday, July 28, 2004. There will also be a webcast available at

About Advanced Energy

Advanced Energy is a global leader in the development and support of technologies critical to high-technology manufacturing processes used in the production of semiconductors, flat panel displays, data storage products, compact discs, digital video discs, architectural glass, and other advanced product applications.

Leveraging a diverse product portfolio and technology leadership, Advanced Energy creates solutions that maximize process impact, improve productivity and lower the cost of ownership for its customers. This portfolio includes a comprehensive line of technology solutions in power, flow, thermal management, and plasma and ion beam sources for original equipment manufacturers (OEMs) and end-users around the world.

Advanced Energy operates in regional centers in North America, Asia and Europe and offers global sales and support through direct offices, representatives and distributors. Founded in 1981, Advanced Energy is a publicly held company traded on the Nasdaq National Market under the symbol AEIS. For more information, please visit our corporate website:

Safe Harbor Statement

This press release contains certain forward-looking statements, including the company's expectations with respect to Advanced Energy's financial results for the third quarter of 2004. Forward-looking statements are subject to known and unknown risks and uncertainties that could cause actual results to differ materially from those expressed or implied by such statements. Such risks and uncertainties include, but are not limited to: the volatility and cyclicality of the semiconductor and semiconductor capital equipment industries, Advanced Energy's ongoing ability to develop new products in a highly competitive industry characterized by increasingly rapid technological changes, Advanced Energy's ability to successfully integrate acquired companies' operations, and other risks described in Advanced Energy's Form 10-K, Forms 10-Q and other reports and statements, as filed with the Securities and Exchange Commission. These reports and statements are available on the SEC's website at Copies may also be obtained from Advanced Energy's website at or by contacting Advanced Energy's investor relations at 970-221-4670. The company assumes no obligation to update the information in this press release.

(in thousands, except per share data)

Three Months Ended Six Months Ended
June 30, June 30,
2004 2003 2004 2003

Sales $108,869 $62,946 $213,356 $119,104
Cost of sales 71,907 42,673 137,980 80,881
Gross profit 36,962 20,273 75,376 38,223

Operating expenses:
Research and development 12,809 12,551 26,219 25,918
Sales and marketing 8,012 8,261 16,049 16,591
General and administrative 6,075 4,347 11,842 8,876
Amortization of intangible
assets 1,125 1,171 2,295 2,271
Restructuring charges 187 768 407 2,277
Total operating expenses 28,208 27,098 56,812 55,933

Income (loss) from operations 8,754 (6,825) 18,564 (17,710)

Other expense, net (2,417) (2,340) (3,572) (5,090)
Income (loss) before income taxes 6,337 (9,165) 14,992 (22,800)

(Provision) Benefit for income
taxes (1,867) 3,391 (3,598) 8,436

Net income (loss) $4,470 $(5,774) $11,394 $(14,364)

Basic earnings (loss) per share $0.14 $(0.18) $0.35 $(0.45)

Diluted earnings (loss) per share 0.13 (0.18) 0.34 (0.45)

Basic weighted-average common
shares outstanding 32,644 32,206 32,612 32,183
Diluted weighted-average common
shares outstanding 33,188 32,206 33,435 32,183

(in thousands)

June 30, December 31,
2004 2003


Current Assets:
Cash and cash equivalents $40,508 $41,522
Marketable securities 83,880 93,370
Accounts receivable, net 79,025 61,927
Inventories 83,720 65,703
Other current assets 4,665 5,637
Total current assets 291,798 268,159

Property and equipment, net 44,782 44,725

Deposits and other 7,527 5,951
Goodwill and intangibles, net 82,077 88,943
Demonstration and customer service
equipment, net 4,845 3,934
Deferred debt issuance costs 2,596 3,019
Total assets $433,625 $414,731


Current Liabilities:
Trade accounts payable $39,530 $23,066
Other current liabilities 26,404 28,216
Current portion of capital
leases and senior borrowings 4,596 8,582
Accrued interest payable on
convertible subordinated notes 2,460 2,460
Total current liabilities 72,990 62,324

Long-term Liabilities:
Capital leases and senior
borrowings 4,077 6,168
Deferred income tax liability,
net 3,312 4,672
Convertible subordinated notes
payable 187,718 187,718
Other long-term liabilities 2,045 2,015
Total long-term liabilities 197,152 200,573

Total liabilities 270,142 262,897

Stockholders' equity 163,483 151,834
Total liabilities and stockholders'
equity $433,625 $414,731

(in thousands)

Six Months Ended June 30,
2004 2003




CASH (46) 344
period 41,522 70,188
CASH AND EQUIVALENTS, end of period $40,508 $46,383