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`SECURITIES AND EXCHANGE COMMISSION
`WASHINGTON, D.C. 20549
`----------
`FORM 10-K
`
`(MARK ONE)
`[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
`OF 1934 (FEE REQUIRED).
`For the fiscal year ended December 31, 2000.
`[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
`ACT OF 1934 (NO FEE REQUIRED).
`For the transition period from __________ to __________.
`Commission file number: 000-26966
`ADVANCED ENERGY INDUSTRIES, INC.
`--------------------------------------------------------------------------------
`(Exact name of registrant as specified in its charter)
`
`DELAWARE
`(State or other jurisdiction of incorporation
`or organization)
`1625 SHARP POINT DRIVE, FORT COLLINS, CO
`(Address of principal executive offices)
`
`84-0846841
`(I.R.S. Employer Identification No.)
`
`80525
`(Zip Code)
`
`Registrant's telephone number, including area code: (970) 221-4670
`Securities registered pursuant to
`Section 12(b) of the Act:
`NONE
`Securities registered pursuant to
`section 12(g) of the Act:
`COMMON STOCK, $0.001 PAR VALUE
`(Title of Class)
`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 __.
`Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
`of Regulation S-K (Section 229.405 of this chapter) is not contained herein, and
`will not be contained, to the best of registrant's
`
`2
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`knowledge, in definitive proxy or information statements incorporated by
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`Page 1 of 102
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`INTEL EXHIBIT 1066
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`

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`reference in Part III of this Form 10-K or any amendment to this Form 10-K [ ].
`As of March 12, 2001, there were 31,555,604 shares of the Registrant's Common
`Stock outstanding and the aggregate market value of such stock held by
`non-affiliates of the Registrant was $409,060,275.
`
`DOCUMENTS INCORPORATED BY REFERENCE
`Portions of the Company's definitive proxy statement for the annual meeting of
`stockholders to be held on May 9, 2001 are incorporated by reference into Part
`III of this Form 10-K.
`
`2
`
`ADVANCED ENERGY INDUSTRIES, INC.
`FORM 10-K
`TABLE OF CONTENTS
`
`3
`
`PART I
`
`ITEM 1.
`
`BUSINESS
`EXECUTIVE OFFICERS OF THE REGISTRANT
`
`ITEM 2.
`
`PROPERTIES
`
`ITEM 3.
`
`LEGAL PROCEEDINGS
`
`ITEM 4.
`
`SUBMISSION OF MATTERS TO A VOTE OF SECURITY
`HOLDERS
`
`PART II
`
`ITEM 5.
`
`MARKET PRICE FOR REGISTRANT'S COMMON STOCK AND
`RELATED STOCKHOLDER MATTERS
`
`ITEM 6.
`
`SELECTED CONSOLIDATED FINANCIAL DATA
`
`ITEM 7.
`ITEM 7.A.
`
`MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
`CONDITION AND RESULTS OF OPERATIONS
`QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT
`MARKET RISK
`
`4
`30
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`31
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`31
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`32
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`33
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`34
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`35
`48
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`Page 2 of 102
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` ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA 50
`
` ITEM 9. DISAGREEMENTS ON ACCOUNTING AND FINANCIAL
` DISCLOSURES 73
`
`
`
`PART III
`
` ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT 74
`
` ITEM 11. EXECUTIVE COMPENSATION 74
`
` ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
` AND MANAGEMENT 74
`
` ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS 74
`
`
`
`PART IV
`
` ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS
` ON FORM 8-K 75
`
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`
`PART I
`ITEM 1. BUSINESS
` GENERAL
` We design, manufacture and support products and systems critical to
`plasma-based manufacturing processes. These systems are important components in
`industrial manufacturing equipment that modifies surfaces or deposits or etches
`thin film layers on computer chips, CDs, flat panel displays such as computer
`screens, DVDs, windows, eyeglasses, solar panels and other products. Our systems
`refine, modify and control the raw electrical power from a utility and convert
`it into power that is uniform and predictable. This allows manufacturing
`equipment to produce and deposit very thin films at an even thickness on a mass
`scale.
` We market and sell our systems primarily to large, original equipment
`manufacturers of semiconductor, flat panel display, data storage and other
`industrial thin film manufacturing equipment. We have sold our systems worldwide
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`to more than 100 OEMs and directly to more than 500 end-users. Our principal
`customers include Applied Materials, Axcelis, Lam Research, Novellus, Singulus,
`ULVAC and Unaxis.
` We seek to expand our product offerings and customer base. In September
`1998 we acquired the assets of Fourth State Technology, Inc. This acquisition
`provided us with the capability to design and manufacture power-related process
`control systems used to monitor and analyze data in thin film processes.
` In October 1998 we acquired RF Power Products, Inc., which designs,
`manufactures and markets radio frequency (RF) power conversion and control
`systems consisting of generators and matching networks. This acquisition
`expanded our existing product line of RF generators and matching networks.
`Generators provide radio frequency power and matching networks provide the power
`flow control to our customers' equipment. We sell these products principally to
`semiconductor capital equipment manufacturers. We also sell similar systems to
`capital equipment manufacturers in the flat panel display and thin film disk
`media industries. We continue to explore applications for these products in
`other industries.
` In October 1999 we further expanded our range of product offerings when we
`acquired a majority ownership in LITMAS, in which we had previously held a
`minority interest. LITMAS is a manufacturer of plasma gas abatement systems and
`high-density plasma sources for the semiconductor capital equipment industry.
` In April 2000 we acquired Noah Holdings, Inc. ("Noah"), a privately held
`manufacturer of solid state temperature control systems used to control process
`temperatures during semiconductor manufacturing.
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` In August 2000 we acquired Sekidenko, Inc. ("Sekidenko"), a privately held
`manufacturer of optical fiber temperature measurement and control systems for
`the semiconductor and related industries.
` In January 2001 we acquired Engineering Measurements Company ("EMCO"), a
`publicly held manufacturer of flowmeters for use in semiconductor manufacturing
`and advanced product applications.
` Since inception we have sold over 200,000 power conversion and control
`systems. Sales to customers in the semiconductor capital equipment industry
`constituted 65% of our sales in 1999 and 70% in 2000. We sell our systems
`primarily through direct sales personnel to customers in the United States,
`Europe and Asia, and through distributors in Australia, China, France, India,
`Israel, Italy, Mexico, Singapore and Sweden. International sales represented 27%
`of our sales in 1999 and 28% in 2000.
`
`DEVELOPMENT OF COMPANY BUSINESS
` We incorporated in Colorado in 1981 and reincorporated in Delaware in 1995.
`In 1995 we effected the initial public offering of our Common Stock. As used in
`this Form 10-K, references to "Advanced Energy" refer to Advanced Energy
`Industries, Inc. and references to "we", "us", or "our" refer to Advanced Energy
`and its consolidated subsidiaries. Our principal executive offices are located
`at 1625 Sharp Point Drive, Fort Collins, Colorado 80525, and our telephone
`number is 970-221-4670.
`
`PRODUCTS
` Our switchmode power conversion and control systems have advanced features,
`which have enabled our customers to develop new plasma-based processing
`applications. In 1982 we introduced our first low-frequency switchmode power
`conversion and control system specifically designed for use in plasma processes.
`In 1983 we introduced our first direct current (DC) system designed for use in
`physical vapor deposition (PVD) applications. This DC system is a compact,
`cost-effective power solution, which greatly reduces stored energy, a major
`limitation in PVD systems. In 1989 we introduced tuners used to match the
`characteristics of the plasma with the RF generators. We carried the state of
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`the art further in 1995 when we introduced the Pinnacle series of DC systems,
`which we updated in 1997 with the Pinnacle-II. In 1990 we introduced the first
`switchmode RF power conversion and control systems for use in semiconductor etch
`applications. This product line achieved significant design wins because of its
`smaller size and its ability to provide more precise control. In 1998 we
`developed the APEX series of RF systems, which use new technology to further
`reduce size and extend the frequency and power range of our RF product line. We
`introduced a family of accessories for the DC product line in 1993. These pulsed
`DC products provided major improvements in arc prevention and suppression. We
`are currently extending the power
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`range of our systems to much higher power levels to enable them to supply
`products for advanced product applications. The products in these product
`families range in price from $3,100 to $175,000, with an average price of
`approximately $9,500.
` The acquisition of RF Power Products in 1998 expanded our product line of RF
`generators and matching networks. Solid-state generators are presently available
`for power requirements of up to 10 kW and are sold primarily to capital
`equipment manufacturers in the semiconductor equipment, flat panel display, thin
`film and analytical equipment markets. RF matching networks are systems composed
`primarily of variable inductors and capacitors with application-specific
`circuits that can be designed to a customer's specific power requirements. Our
`RF generators and matching networks have average selling prices similar to our
`DC products.
` In 1998 we acquired an ion source technology which can produce a beam of
`ions for surface modification and other ion beam processes. In that same year we
`also sold our first products having this technology. We also developed and
`introduced products using inductively coupled sources of both the solenoidal and
`toroidal forms.
` In 1998 we also developed sophisticated pulsing power supply specifically
`for electroplating processes on semiconductor wafers, which led to the
`introduction of the E'Wave product in 1999.
` The acquisition of Fourth State Technology in 1998 enhanced our capability
`to design and manufacture RF power-related process control systems used to
`monitor and analyze data in thin film processes. This technology also is
`enabling us to develop power conversion and control systems that incorporate
`advanced measurement and control systems.
` The acquisition of a majority interest in LITMAS in 1999 expanded our
`product line to include plasma abatement systems and high-density plasma
`sources. We market these products to semiconductor capital equipment
`manufacturers.
` The acquisition of Noah in 2000 expanded our product offerings to include
`solid state temperature control systems for use in controlling temperatures
`during semiconductor manufacturing.
` The acquisition of Sekidenko in 2000 expanded our product offerings to
`include optical fiber temperature measurement and control systems. We market
`these products to semiconductor capital equipment manufacturers.
` The acquisition of EMCO in 2001 expanded our product offerings to include
`electronic and electromechanical precision instruments for measuring and
`controlling the flow of liquids, steam and gases.
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` The following chart sets forth our principal product lines and related basic
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`information:
`
`------------------------------------------------------------------------------------------------------------------------------------
` PRODUCT POWER/CURRENT MAJOR PROCESS
` PLATFORM DESCRIPTION LEVEL APPLICATIONS
`------------------------------------------------------------------------------------------------------------------------------------
`
` MDX Power control and 500W-80kW PVD
` DIRECT conversion system o Metal sputtering
` o Reactive sputtering
` ---------------- ------------------------ ------------------ ----------------------------
` CURRENT MDX II Power control and 15kW-120kW PVD
` conversion system o Metal sputtering
` PRODUCTS o Reactive sputtering
`
` ---------------- ------------------------ ------------------ ----------------------------
` Pinnacle(TM) Power control and 6kW-120kW PVD
` Pinnacle(TM)- II conversion system o Metal sputtering
` o Reactive sputtering
`
`
` ---------------- ------------------------ ------------------ ----------------------------
` Pinnacle(TM)Plus Pulsed power control and 5kW - 10kW PVD
` conversion system o Metal sputtering
` o Reactive sputtering
`
` ---------------- ------------------------ ------------------ ----------------------------
` Sparc-le(R) Arc management 1kW-60kW For use with MDX
` accessory systems - permits precise
` control of reactive
` sputtering of insulating
` films
`
` ---------------- ------------------------ ------------------ ----------------------------
` E-Chuck Electrostatic chuck <100W General wafer handling in
` power system semiconductor PVD, CVD,
` and etch applications
`
`------------------------------------------------------------------------------------------------------------------------------------
` Astral(TM) Pulsed DC power system 20kW, 120kW, 200kW PVD
` HIGH-POWER o Reactive sputtering
`
` ---------------- ------------------------ ------------------ ----------------------------
` Crystal(TM) Mid-frequency power 180kW PVD
` PRODUCTS control and conversion CVD
` system Reactive sputtering
` Dual magnetron sputtering
`
`------------------------------------------------------------------------------------------------------------------------------------
` PE and PE-II Low frequency 1.25kW-30kW CVD
` LOW AND MID- power control and PVD
` conversion system o Reactive sputtering
` FREQUENCY Surface modification
` ---------------- ------------------------ ------------------ ----------------------------
` PRODUCTS PD Mid-frequency 1.25kW-8kW CVD
` power control and PVD
` conversion system o Reactive sputtering
` Surface modification
`
` ---------------- ------------------------ ------------------ ----------------------------
` LF Low frequency 500W-1kW Etch
` power control and PVD
` conversion system
`
`------------------------------------------------------------------------------------------------------------------------------------
` HFV Power control and 3kW-8kW PVD
` conversion system Etch
`
` ---------------- ------------------------ ------------------ ----------------------------
` RADIO RFX Power control and 600W General R&D
` conversion system
`
` ---------------- ------------------------ ------------------ ----------------------------
` FREQUENCY RFG Power control and 600W-5.5kW Etch
` conversion system CVD
`
` ---------------- ------------------------ ------------------ ----------------------------
` PRODUCTS RFXII Power control and 600W-5.5kW Etch
` conversion system CVD
`
` ---------------- ------------------------ ------------------ ----------------------------
` APEX(TM) Power control and 1kW-10kW Etch
` conversion system CVD
`
` ---------------- ------------------------ ------------------ ----------------------------
` AZX, VZX, Tuner 100W-5kW Impedance matching
` SwitchMatch(TM) network
`
` ---------------- ------------------------ ------------------ ----------------------------
` RF Power control and 500W-5kW Etch
` conversion system CVD
`
` ---------------- ------------------------ ------------------ ----------------------------
` Atlas(TM) Power control and 1.5kW-5kW Etch
` conversion system
`
` ---------------- ------------------------ ------------------ ----------------------------
` Mercury(TM) Tuner 500W-10kW Impedance matching network
`
` ---------------- ------------------------ ------------------ ----------------------------
` FTMS(TM) Tuner 2kW-5kW Impedance matching network
`
`------------------------------------------------------------------------------------------------------------------------------------
` 12cm multi-cell Round ion beam source 1.5kW-2.0kW Magnetic media
` ION BEAM SOURCES ion beam source DLC deposition
` Optical ion assist
`
` ---------------- ------------------------ ------------------ ----------------------------
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` PRODUCTS Linear ion beam 38cm, 65cm, 94cm 1.0kW-3.0kW Architectural glass
` sources Flat panel displays -
` pre-cleaning
` Ion assist deposition
`
` ---------------- ------------------------ ------------------ ----------------------------
` Inductively 3kW linear ICP 3kW Enhanced reactive
` coupled plasma deposition
` source (ICP - 3) Low energy CVD
` Low energy cleaning
`
` ---------------- ------------------------ ------------------ ----------------------------
` RAPID-F Toroidal fluorine ion 8 kW Chamber cleaning
` RAPID-O source 8 kW Reactive gas sputtering
` Torodal oxygen ion source
`------------------------------------------------------------------------------------------------------------------------------------
`
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`
`------------------------------------------------------------------------------------------------------------------------------------
` PRODUCT POWER/CURRENT MAJOR PROCESS
` PLATFORM DESCRIPTION LEVEL APPLICATIONS
`------------------------------------------------------------------------------------------------------------------------------------
`
` Gen-Cal(TM) RF power measurement 50W-3kW Generator diagnostic tool
`
` ---------------- ------------------------ ------------------ ----------------------------
` OTHER RF-EP RF probe 50W-5kW End-point detection system
`
` ---------------- ------------------------ ------------------ ----------------------------
` Z-Scan(TM) RF probe 50W-5kW Impedance measurement tool
`
` ---------------- ------------------------ ------------------ ----------------------------
` PRODUCTS RF-MS RF metrology system 5W-5kW Plasma diagnostic tool
`
` ---------------- ------------------------ ------------------ ----------------------------
` ID Ion-beam conversion 500W-5kW Ion-beam deposition
` and control system Ion implantation
` Ion-beam etching/milling
`
` ---------------- ------------------------ ------------------ ----------------------------
` E'Wave(TM) Bipolar electroplating 400W-8kW Electroplating copper onto
` a wafer
`
` ---------------- ------------------------ ------------------ ----------------------------
` Virtual Front Power system control N/A Computer control of power
` Panel systems
`
` ---------------- ------------------------ ------------------ ----------------------------
` NPSA Products Low voltage, high <1 kW Powering of next
` current power regulators generation microprocessors
` and ASICs
`------------------------------------------------------------------------------------------------------------------------------------
`
`DIRECT CURRENT PRODUCTS
` The MDX Series. We introduced our MDX series of products in 1983. These
`products are most commonly used as DC power supplies for PVD sputtering where
`precise control, superior arc prevention and suppression and low stored energy
`characteristics are required. They are also used as bias supplies for RF
`sputtering, tool coating and some etching systems. The MDX series consists of
`six different product lines that provide a range of power levels from 500W to
`120kW. Our second generation product, the MDX II, was introduced in 1991 to
`support higher power levels, to provide wider output range, and to meet strict
`European regulatory requirements. A model in the MDX series, the MDX-L, was
`designed for especially high reliability and was introduced in 1992.
` The Pinnacle(TM) Platform. The Pinnacle platform, which we introduced in
`1995, including its updated version, the Pinnacle(TM) -II, which we introduced
`in 1997, is the most recent general purpose platform in the DC product line. We
`developed the Pinnacle primarily for use in DC PVD sputtering processes, and it
`provides substantial improvements in arc prevention, arc suppression capability,
`reduced size, higher precision and expanded control capability. The low stored
`energy of Pinnacle, a basic feature of our DC power conversion equipment, is the
`lowest ever achieved in a switchmode power supply, and is due to the patented
`basi