Advanced Energy Industries Inc. (Nasdaq:AEIS) is implementing several initiatives to further its long-term globalization strategy. The company is beginning with the alignment of its manufacturing and R&D resources.
September 28, 2011 – GLOBE NEWSWIRE — Advanced Energy Industries Inc. (Nasdaq:AEIS) is implementing several initiatives to further its long-term globalization strategy. In order to foster growth and enhance profitability, the company is beginning with the alignment of its manufacturing and R&D resources. The company expects the initial actions will be completed in the third quarter of 2011.
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Under the plan, Advanced Energy will align its engineering resources with the geographic footprint of its customer base. By localizing R&D within the major geographies it serves, the company will improve its time to market and distance to key customers, creating a more highly-focused and responsive development team. In addition, by leveraging its successful manufacturing operation in China, the company will transition the manufacture of certain solar inverter subcomponents to its Shenzhen factory. This will lower product costs for its solar energy business worldwide and enable regional fulfillment for complete products in the growing Asian market. The final assembly and testing of solar inverter products in the company’s other markets such as North America will remain in close proximity to each region’s customers.
Collectively, these steps will enable the company to more efficiently use its resources to bolster its financial results and better manage the cyclicality of its markets. The aim is to lower fixed costs for the company going forward.
“After two months at Advanced Energy, I continue to be impressed with the company’s strong leadership in the power conversion market,” said Garry Rogerson, chief executive officer. “The currently challenging environment in the end markets served by both the thin films and solar business units has prompted us to move forward on implementing our long-term strategic plan, which will be discussed at our upcoming analyst event. The initiatives announced today position us closer to our customers in high growth markets worldwide. We expect this will contribute to greater profitability and flexibility during the cyclical peaks and troughs of the thin films business. This will better position us to invest in strategic growth areas and remain at the forefront of the industry.”
The first step of this restructuring will be a reduction of the company’s workforce, primarily in the thin films business unit, resulting in annual savings of approximately $6 million. The affected employees have been notified and we anticipate a smooth transition. As a result, the company expects to take a charge in the third quarter related to the restructuring of approximately $2.5 to $3.5 million.
This charge was not anticipated at the time the company provided guidance on July 25, 2011. Although we have yet to close the quarter, at this point we expect to be at or slightly below the low end of our earnings guidance, and with the charge this quarter we expect to be below our earnings guidance.
Secondly, over the next 12 to 18 months, the company will continue to evaluate its cost structure as it closes facilities and relocates certain functions to different regions worldwide. As a result, the company anticipates further charges in the amount of $8 to $12 million, principally for space consolidation, and another $1 million in additional severance costs over this timeframe. Consequently, we expect total charges of $12 to $16 million for the initiatives announced today, approximately $9 to $13 million of which will be cash expenditures. The actions taken today as well as other cost savings initiatives and margin improvements are expected to deliver annual savings of approximately $16 to $20 million.
Advanced Energy will host an analyst event on Monday, November 21, 2011 in New York, NY from 10:30 a.m. ET to 1:30 p.m. ET to introduce CEO, Garry Rogerson and discuss the company’s long-term strategic plan for its Thin Films and Solar Energy business units. Garry Rogerson, CEO, Yuval Wasserman, President of Thin Films Business Unit, Gregg Patterson, President of Solar Energy Business Unit, and Danny Herron, CFO, will all present at the meeting. A live audio webcast of the presentations and a copy of the accompanying slides will be available on the investor relations section of the Advanced Energy website at www.advanced-energy.com. A replay will be available through the same link beginning Tuesday, November 22, at 12:30 p.m. ET, and ending Tuesday, December 20, at 8 p.m. ET.
Advanced Energy makes power and control technologies for high-growth, thin-films manufacturing and solar-power generation. For more information, go to www.advanced-energy.com.