ADVANCED ENERGY INDUSTRIES INC 10-K

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA INDEX TO CONSOLIDATED FINANCIAL STATEMENTS ​ ​ Report of Ernst & Young LLP, Independent Registered Public Accounting Firm (PCAOB ID No. 42 ) 48 Consolidated Balance Sheets 50 Consolidated Statements of Operations 51 Consolidated Statements of Comprehensive Income 52 Consolidated Statements of Stockholders’ Equity 53 Consolidated Statements of Cash Flows 54 Notes to Consolidated Financial Statements 55 ​ ​ ​ 47 Table of Contents Report of In dependent Registered Public Accounting Firm ​ ​ To the Stockholders and the Board of Directors of Advanced Energy Industries, Inc. ​ Opinion on the Financial Statements We have audited the accompanying consolidated balance sheets of Advanced Energy Industries, Inc. (the Company) as of December 31, 2021 and 2020, the related consolidated statements of operations, comprehensive income, stockholders’ equity and cash flows for each of the three years in the period ended December 31, 2021, and the related notes (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2021 and 2020, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2021, in conformity with U.S. generally accepted accounting principles. ​ We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company’s internal control over financial reporting as of December 31, 2021, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) and our report dated March 16, 2022 expressed an unqualified opinion thereon. ​ Basis for Opinion These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. ​ We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion. ​ 48 Table of Contents Critical Audit Matter The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective or complex judgments. The communication of the critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates. ​ ​ ​ ​ Accounting for income taxes Description of the Matter ​ For the year-ended December 31, 2021, the Company recognized a provision for income taxes of $14.0 million. As described in Notes 1 and 5 to the consolidated financial statements, the Company is subject to income taxes in the United States and various foreign jurisdictions, which affect the Company’s provision for income taxes. Management exercises judgment in interpretation and application of complex tax law when determining the Company’s provision for income taxes. Evaluating management’s application of current tax regulations in various tax jurisdictions and the impact of those regulations on the Company’s foreign and United States federal income tax provisions required complex auditor judgment and the use of tax subject matter professionals with specialized skills. How We Addressed the Matter in Our Audit ​ We obtained an understanding, evaluated the design and tested the operating effectiveness of the controls over the Company’s accounting for income taxes. For example, we tested controls over management’s review of the tax provision which includes their review of the underlying data used in the provision, foreign income inclusions reflected in the United States federal income tax provision and the basis by which the Company achieves certain tax holidays in foreign jurisdictions. To test the Company’s provision for income taxes, we performed audit procedures that included, among others, testing the calculation of the provision, including the completeness and accuracy of the underlying data. We tested the tax rates used by management in the computation of the provision including compliance with tax holiday requirements. We assessed the reasonableness of profit margin by tax jurisdiction related to intercompany transactions. We also tested calculations of foreign income inclusions included in the Company’s United States federal income tax provision. As part of these procedures, we engaged tax subject matter professionals with knowledge of and experience with international and local income tax laws to evaluate the application of these regulations to the Company’s tax positions. We have also evaluated the Company’s income tax disclosures included in Note 5 of the consolidated financial statements in relation to these matters. ​ /s/ Ernst & Young LLP ​ We have served as the Company’s auditor since 2019. ​ Denver, Colorado March 16, 2022 ​ ​ ​ 49 Table of Contents ADVANCED ENERGY INDUSTRIES, INC. Consolidated Balance Sheets (In thousands, except per share amounts) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, ​ December 31, ​ 2021 2020 ASSETS ​ ​ Current assets: ​ ​ Cash and cash equivalents ​ $ 544,372 ​ $ 480,368 Marketable securities ​ 2,296 ​ 2,654 Accounts and other receivable, net ​ 237,227 ​ 235,178 Inventories ​ 338,410 ​ 221,346 Income taxes receivable ​ 10,768 ​ 4,804 Other current assets ​ ​ 29,161 ​ ​ 35,899 Total current assets ​ 1,162,234 ​ 980,249 Property and equipment, net ​ 114,830 ​ 114,731 Operating lease right-of-use assets ​ ​ 101,769 ​ ​ 103,858 Deposits and other assets ​ 19,669 ​ 19,101 Goodwill ​ 212,190 ​ 209,983 Intangible assets, net ​ 159,406 ​ 168,939 Deferred income tax assets ​ ​ 47,242 ​ ​ 50,801 TOTAL ASSETS ​ $ 1,817,340 ​ $ 1,647,662 ​ ​ ​ ​ ​ ​ ​ LIABILITIES AND STOCKHOLDERS’ EQUITY ​ ​ ​ ​ Current liabilities: ​ ​ ​ ​ Accounts payable ​ $ 193,708 ​ $ 125,224 Income taxes payable ​ 9,226 ​ 11,850 Accrued payroll and employee benefits ​ 55,833 ​ 63,487 Other accrued expenses ​ 53,445 ​ 49,565 Customer deposits and other ​ 22,141 ​ 12,179 Current portion of long-term debt ​ ​ 20,000 ​ ​ 17,500 Current portion of operating lease liabilities ​ ​ 15,843 ​ ​ 16,592 Total current liabilities ​ 370,196 ​ 296,397 Long-term debt, net ​ ​ 372,733 ​ ​ 304,546 Operating lease liabilities ​ ​ 95,180 ​ ​ 95,993 Pension benefits ​ ​ 67,255 ​ ​ 80,447 Deferred income tax liabilities ​ 9,921 ​ 10,088 Uncertain tax positions ​ 5,940 ​ 12,839 Long-term deferred revenue ​ 6,200 ​ 7,352 Other long-term liabilities ​ ​ 18,419 ​ ​ 24,660 Total liabilities ​ 945,844 ​ 832,322 ​ ​ ​ ​ ​ ​ ​ Commitments and contingencies (Note 19) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Stockholders' equity: ​ ​ ​ ​ Preferred stock, $ 0.001 par value, 1,000 shares authorized, none issued and outstanding ​ — ​ — Common stock, $ 0.001 par value, 70,000 shares authorized; 37,589 and 38,293 issued and outstanding at December 31, 2021 and 2020, respectively ​ 38 ​ 38 Additional paid-in capital ​ 115,706 ​ 105,009 Accumulated other comprehensive loss ​ ( 1,216 ) ​ ( 2,605 ) Retained earnings ​ 756,323 ​ 712,297 Advanced Energy stockholders' equity ​ 870,851 ​ 814,739 Noncontrolling interest ​ 645 ​ 601 Total stockholders’ equity ​ 871,496 ​ 815,340 TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY ​ $ 1,817,340 ​ $ 1,647,662 ​ The accompanying notes are an integral part of these consolidated financial statements ​ 50 Table of Contents ADVANCED ENERGY INDUSTRIES, INC. Consolidated Statements of Operations (In thousands, except per share amounts) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Years Ended December 31, ​ 2021 2020 2019 Sales, net ​ $ 1,455,954 ​ $ 1,415,826 ​ $ 788,948 Cost of sales ​ 923,632 ​ 873,957 ​ 473,296 Gross profit ​ 532,322 ​ 541,869 ​ 315,652 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Operating expenses: ​ ​ ​ ​ ​ Research and development ​ 161,831 ​ 143,961 ​ 101,503 Selling, general, and administrative ​ 191,998 ​ 188,590 ​ 142,555 Amortization of intangible assets ​ 22,060 ​ 20,129 ​ 12,168 Restructuring expense ​ 4,752 ​ 13,166 ​ 5,038 Total operating expenses ​ 380,641 ​ 365,846 ​ 261,264 Operating income ​ 151,681 ​ 176,023 ​ 54,388 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Other income (expense), net ​ ( 2,970 ) ​ ( 17,876 ) ​ 12,806 Income from continuing operations, before income taxes ​ 148,711 ​ 158,147 ​ 67,194 Provision for income taxes ​ 14,004 ​ 22,996 ​ 10,699 Income from continuing operations ​ 134,707 ​ 135,151 ​ 56,495 Income (loss) from discontinued operations, net of income taxes ​ 73 ​ ( 421 ) ​ 8,480 Net income ​ $ 134,780 ​ $ 134,730 ​ $ 64,975 Income from continuing operations attributable to noncontrolling interest ​ 44 ​ 55 ​ 34 Net income attributable to Advanced Energy Industries, Inc. ​ $ 134,736 ​ $ 134,675 ​ $ 64,941 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Basic weighted-average common shares outstanding ​ 38,143 ​ 38,314 ​ 38,281 Diluted weighted-average common shares outstanding ​ 38,355 ​ 38,542 ​ 38,495 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Earnings per share: ​ ​ ​ ​ ​ Continuing operations: ​ ​ ​ ​ ​ Basic earnings per share ​ $ 3.53 ​ $ 3.53 ​ $ 1.47 Diluted earnings per share ​ $ 3.51 ​ $ 3.51 ​ $ 1.47 Discontinued operations: ​ ​ ​ ​ ​ Basic earnings (loss) per share ​ $ — ​ $ ( 0.01 ) ​ $ 0.22 Diluted earnings (loss) per share ​ $ — ​ $ ( 0.01 ) ​ $ 0.22 Net income: ​ ​ ​ ​ ​ Basic earnings per share ​ $ 3.53 ​ $ 3.52 ​ $ 1.70 Diluted earnings per share ​ $ 3.51 ​ $ 3.50 ​ $ 1.69 ​ The accompanying notes are an integral part of these consolidated financial statements. ​ 51 Table of Contents ADVANCED ENERGY INDUSTRIES, INC. Consolidated Statements of Comprehensive Income (In thousands) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Years Ended December 31, ​ 2021 2020 2019 Net income $ 134,780 ​ $ 134,730 ​ $ 64,975 Other comprehensive income (loss), net of income taxes ​ ​ Foreign currency translation ( 12,262 ) ​ 13,095 ​ ( 2,523 ) Change in fair value of cash flow hedges 4,246 ​ ( 2,139 ) ​ — Minimum benefit retirement liability 9,405 ​ ( 7,664 ) ​ 75 Comprehensive income ​ 136,169 ​ ​ 138,022 ​ ​ 62,527 Comprehensive income attributable to noncontrolling interest 44 ​ 55 ​ 34 Comprehensive income attributable to Advanced Energy Industries, Inc. $ 136,125 ​ $ 137,967 ​ $ 62,493 ​ The accompanying notes are an integral part of these consolidated financial statements. ​ 52 Table of Contents ADVANCED ENERGY INDUSTRIES, INC. Consolidated Statements of Stockholders’ Equity (In thousands) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Advanced Energy Industries, Inc. Stockholders' Equity ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Common Stock ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Accumulated ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Additional ​ Other ​ ​ ​ ​ Non- ​ Total ​ ​ ​ ​ ​ ​ ​ Paid-in ​ Comprehensive ​ Retained ​ controlling ​ Stockholders’ ​ ​ Shares ​ Amount ​ Capital ​ Income ​ Earnings ​ Interest ​ Equity Balances, December 31, 2018 38,164 $ 38 ​ $ 97,418 ​ $ ( 3,449 ) $ 512,783 ​ $ 512 $ 607,302 Stock issued from equity plans ​ 194 ​ ​ — ​ ​ 104 ​ ​ — ​ ​ — ​ ​ — ​ ​ 104 Stock-based compensation ​ — ​ ​ — ​ ​ 7,327 ​ ​ — ​ ​ — ​ ​ — ​ ​ 7,327 Other comprehensive income (loss) ​ — ​ ​ — ​ ​ — ​ ​ ( 2,448 ) ​ ​ — ​ ​ — ​ ​ ( 2,448 ) Net income ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ 64,941 ​ ​ 34 ​ ​ 64,975 Balances, December 31, 2019 ​ 38,358 ​ ​ 38 ​ ​ 104,849 ​ ​ ( 5,897 ) ​ ​ 577,724 ​ ​ 546 ​ ​ 677,260 Adoption of new accounting standards ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ ( 102 ) ​ ​ — ​ ​ ( 102 ) Stock issued from equity plans ​ 179 ​ — ​ ( 482 ) ​ — ​ — ​ — ​ ( 482 ) Stock-based compensation ​ — ​ — ​ 12,272 ​ — ​ — ​ — ​ 12,272 Share repurchase ​ ( 244 ) ​ ​ — ​ ​ ( 11,630 ) ​ ​ — ​ ​ — ​ ​ — ​ ​ ( 11,630 ) Other comprehensive income ​ — ​ — ​ — ​ 3,292 ​ — ​ — ​ 3,292 Net income ​ — ​ — ​ — ​ — ​ 134,675 ​ 55 ​ 134,730 Balances, December 31, 2020 ​ 38,293 ​ ​ 38 ​ ​ 105,009 ​ ​ ( 2,605 ) ​ ​ 712,297 ​ ​ 601 ​ ​ 815,340 Stock issued from equity plans ​ 197 ​ — ​ ( 1,931 ) ​ — ​ — ​ — ​ ( 1,931 ) Stock-based compensation ​ — ​ — ​ 15,428 ​ — ​ — ​ — ​ 15,428 Share repurchase ​ ( 901 ) ​ ​ — ​ ​ ( 2,800 ) ​ ​ — ​ ​ ( 75,325 ) ​ ​ — ​ ​ ( 78,125 ) Dividends declared ($ 0.10 per share) ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ ( 15,385 ) ​ ​ — ​ ​ ( 15,385 ) Other comprehensive income ​ — ​ — ​ — ​ 1,389 ​ — ​ — ​ 1,389 Net income ​ — ​ — ​ — ​ — ​ 134,736 ​ 44 ​ 134,780 Balances, December 31, 2021 ​ 37,589 ​ $ 38 ​ $ 115,706 ​ $ ( 1,216 ) ​ $ 756,323 ​ $ 645 ​ $ 871,496 ​ The accompanying notes are an integral part of these consolidated financial statements. ​ 53 Table of Contents ADVANCED ENERGY INDUSTRIES, INC. Consolidated Statements of Cash Flows (In thousands) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Years Ended December 31, ​ 2021 2020 2019 CASH FLOWS FROM OPERATING ACTIVITIES: ​ ​ ​ Net income ​ $ 134,780 ​ $ 134,730 ​ $ 64,975 Less: income (loss) from discontinued operations, net of income taxes ​ 73 ​ ( 421 ) ​ 8,480 Income from continuing operations, net of income taxes ​ 134,707 ​ 135,151 ​ 56,495 Adjustments to reconcile net income to net cash from operating activities: ​ ​ ​ Depreciation and amortization ​ 52,893 ​ 47,770 ​ 26,147 Stock-based compensation expense ​ 15,739 ​ 12,272 ​ 7,327 Provision for deferred income taxes ​ 1,326 ​ ( 622 ) ​ 1,015 (Gain) loss from discount on notes receivable ​ ​ ( 638 ) ​ ​ 721 ​ ​ 1,100 Gain on sale of central inverter service business ​ ​ — ​ ​ — ​ ​ ( 14,795 ) Loss on disposal of assets ​ 1,496 ​ 1,296 ​ 700 Changes in operating assets and liabilities, net of assets acquired: ​ ​ ​ ​ Accounts and other receivable, net ​ 5,271 ​ 15,412 ​ ( 18,879 ) Inventories ​ ( 115,737 ) ​ 11,658 ​ 3,687 Other assets ​ ( 2,910 ) ​ 1,750 ​ 23,544 Accounts payable ​ 67,111 ​ ( 48,163 ) ​ ( 16,094 ) Other liabilities and accrued expenses ​ ( 4,414 ) ​ 24,520 ​ ( 12,486 ) Income taxes ​ ( 13,930 ) ​ 394 ​ ( 9,862 ) Net cash from operating activities from continuing operations ​ 140,914 ​ 202,159 ​ 47,899 Net cash from operating activities from discontinued operations ​ ( 669 ) ​ ( 923 ) ​ 493 Net cash from operating activities ​ 140,245 ​ 201,236 ​ 48,392 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ CASH FLOWS FROM INVESTING ACTIVITIES: ​ ​ ​ Net proceeds from sale of marketable securities ​ ​ — ​ ​ 3 ​ ​ 1,742 Receipt (issuance) of notes receivable ​ ​ 3,050 ​ ​ ( 1,000 ) ​ ​ ( 4,300 ) Proceeds from sale of assets ​ ​ 3,060 ​ ​ 116 ​ ​ — Purchases of property and equipment ​ ( 31,877 ) ​ ( 36,483 ) ​ ( 25,188 ) Acquisitions, net of cash acquired ​ ​ ( 21,535 ) ​ ​ ( 5,476 ) ​ ​ ( 366,101 ) Net cash from investing activities ​ ( 47,302 ) ​ ( 42,840 ) ​ ( 393,847 ) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ CASH FLOWS FROM FINANCING ACTIVITIES: ​ ​ ​ Proceeds from long-term borrowings ​ ​ 85,000 ​ ​ — ​ ​ 347,486 Payment of debt-issuance costs ​ ​ ( 1,350 ) ​ ​ — ​ ​ — Payments on long-term borrowings ​ ​ ( 13,750 ) ​ ​ ( 17,500 ) ​ ​ ( 8,750 ) Dividend payments ​ ​ ( 15,385 ) ​ ​ — ​ ​ — Purchase and retirement of common stock ​ ​ ( 78,125 ) ​ ​ ( 11,630 ) ​ ​ — Net payments related to stock-based awards ​ ( 1,762 ) ​ ( 482 ) ​ 104 Net cash from financing activities ​ ( 25,372 ) ​ ( 29,612 ) ​ 338,840 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ EFFECT OF CURRENCY TRANSLATION ON CASH AND CASH EQUIVALENTS ​ ( 3,567 ) ​ 5,143 ​ ( 1,496 ) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ NET CHANGE IN CASH AND CASH EQUIVALENTS ​ 64,004 ​ 133,927 ​ ( 8,111 ) CASH AND CASH EQUIVALENTS, beginning of period ​ 480,368 ​ 346,441 ​ 354,552 CASH AND CASH EQUIVALENTS, end of period ​ $ 544,372 ​ $ 480,368 ​ $ 346,441 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: ​ ​ ​ Cash paid for interest ​ $ 4,040 ​ $ 5,278 ​ $ 3,479 Cash paid for income taxes ​ 32,543 ​ 21,032 ​ 18,594 Cash received for refunds of income taxes ​ 12,506 ​ 1,569 ​ 1,762 ​ The accompanying notes are an integral part of these consolidated financial statements. ​ ​ ​ 54 Table of Contents ADVANCED ENERGY INDUSTRIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (in thousands, except per share amounts) NOTE 1. OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND ESTIMATES Advanced Energy Industries, Inc., a Delaware corporation, and its wholly-owned subsidiaries ("we," "us," "our," "Advanced Energy," or the "Company") design, manufacture, sell, and support precision power products that transform, refine, and modify the raw electrical power coming from either the utility or the building facility and convert it into various types of highly controllable, usable power that is predictable, repeatable, and customizable to meet the necessary requirements for powering a wide range of complex equipment. Our power solutions enable innovation in complex semiconductor and thin film plasma processes such as dry etch, strip and deposition, high and low voltage applications such as semiconductor process control, data center computing, networking, telecommunication, medical equipment, life science applications, industrial technology and production, scientific instruments, clean technology production, advanced material production and temperature-critical thermal applications. We also supply related sensing, controls, and instrumentation products for advanced measurement and calibration of radio frequency (“RF”) power and temperature, and electrostatic instrumentation products for test and measurement applications. Our network of global service support centers provides a recurring revenue opportunity as we offer repair services, conversions, upgrades, refurbishments, and used equipment to companies using our products. In September 2019, we acquired the Artesyn Embedded Power business ("Artesyn") , which added new power products and technologies used in networking and computing, data center, including hyperscale, and industrial and medical applications. As of December 31, 2015, we discontinued our engineering, production, and sales of our inverter product line. As such, all inverter product revenues, costs, assets, and liabilities are reported in Discontinued Operations for all periods presented herein. See Note 4. Disposed and Discontinued Operations for more information. Ongoing inverter repair and service operations are reported as part of our continuing operations. Principles of Consolidation — Our consolidated financial statements include our accounts and the accounts of our wholly-owned subsidiaries. All intercompany accounts and transactions have been eliminated. Our consolidated financial statements are stated in United States ("U.S.") Dollars and have been prepared in accordance with accounting principles generally accepted in the United States ("U.S. GAAP"). Use of Estimates in the Preparation of the Consolidated Financial Statements — The preparation of our consolidated financial statements in conformity with U.S. GAAP requires us to make estimates, assumptions, and judgments that affect the reported amounts of assets and liabilities, the disclosure of contingent liabilities at the date of the financial statements, and the reported amounts of revenue and expenses during the reporting period. The significant estimates, assumptions, and judgments include, but are not limited to: ● excess and obsolete inventory; ● pension obligations; ● acquisitions and asset valuations, and ● taxes and other provisions. ​ Foreign Currency Translation — The functional currency of certain of our foreign subsidiaries is the local currency. Assets and liabilities of these foreign subsidiaries are translated to the United States Dollar at prevailing exchange rates on the balance sheet date. Revenues and expenses are translated at the average exchange rates in effect for each period. Translation adjustments resulting from this process are reported as a separate component of Other Comprehensive Income. For certain other subsidiaries, the functional currency is the U.S. Dollar. Foreign currency transactions are recorded based on exchange rates at the time such transactions arise. Subsequent changes in exchange rates for foreign currency denominated monetary assets and liabilities result in foreign currency transaction gains and losses, which are reflected as unrealized (based on period end remeasurement) or realized (upon settlement of the transactions) in Other income (expense), net in our Consolidated Statements of Operations. 55 Table of Contents ADVANCED ENERGY INDUSTRIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (continued) (in thousands, except per share amounts) Derivatives — We use derivative financial instruments to manage risks associated with foreign currency and interest rate fluctuations. Unless we meet specific hedge accounting criteria, changes in the fair value of derivative financial instruments are recognized in the Consolidated Statements of Operations within Other income (expense), net. For derivatives designated as cash flow hedges, changes in fair value are recorded to Accumulated other comprehensive loss on the Consolidated Balance Sheets and are reclassified to earnings when the underlying forecasted transaction affects earnings. We reassess the probability of the underlying forecasted transactions occurring on a quarterly basis. Fair Value — We value our financial assets and liabilities using fair value measurements. U.S. GAAP for fair value establishes a hierarchy that prioritizes fair value measurements based on the types of inputs used for the various valuation techniques (market approach, income approach, and cost approach). Our financial assets and liabilities are measured using inputs from the three levels of the fair value hierarchy. The three levels of the hierarchy and the related inputs are as follows: ● Level 1 — Quoted prices (unadjusted) in active markets for identical assets or liabilities that the entity can access on the measurement date. ● Level 2 — Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly. ● Level 3 — Unobservable inputs for the asset or liability. We categorize fair value measurements within the fair value hierarchy based upon the lowest level of the most significant inputs used to determine fair value. Our assessment of the significance of a particular input to the fair value measurement requires judgment and may affect the valuation of the fair value of assets and liabilities and their placement within the fair value hierarchy levels. The carrying amounts of our cash and cash equivalents, accounts receivable, accounts payable and other current assets and liabilities approximate fair value as recorded due to the short-term nature of these instruments. Our non-financial assets, which primarily consist of property and equipment, goodwill, and other intangible assets, are not required to be carried at fair value on a recurring basis and are reported at carrying value. However, on a periodic basis or whenever events or changes in circumstances indicate that their carrying value may not be fully recoverable (and at least annually for goodwill), non-financial instruments are assessed for impairment and, if applicable, written down to and recorded at fair value. See Note 12. Goodwill and Note 13. Intangible Assets for further discussion and presentation of these amounts. The fair value of borrowings approximates the recorded borrowing value based upon market interest rates for similar facilities. See Note 21. Credit Facility for additional information. The fair value of contingent consideration and other acquired assets and liabilities associated with our acquisitions are based on Level 3 inputs. Cash, Cash Equivalents, and Marketable Securities — We consider all amounts on deposit with financial institutions and highly liquid investments with an original maturity of three months or less at the time of purchase to be cash equivalents. Cash and cash equivalents consist primarily of short-term money market instruments and demand deposits with insignificant interest rate risk. 56 Table of Contents ADVANCED ENERGY INDUSTRIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (continued) (in thousands, except per share amounts) In some instances, we invest excess cash in money market funds not insured by the Federal Deposit Insurance Corporation. We believe the investments in money market funds are on deposit with credit-worthy financial institutions and the funds are highly liquid. These investments are reported at fair value and included in Cash and cash equivalents. We record interest income within Other income (expense), net in our Consolidated Statement of Operations. We classify investments with stated maturities of greater than three months at time of purchase as marketable securities. Concentrations of Credit Risk — Financial instruments which potentially subject us to credit risk include cash and cash equivalents, marketable securities, and trade accounts receivable. To preserve capital and maintain liquidity, we invest with financial institutions we deem to be of high quality and sound financial condition. Our investments are in low-risk instruments, and we limit our credit exposure in any one institution or type of investment instrument based upon criteria including creditworthiness. We establish a reserve for credit losses based upon factors surrounding the credit risk of specific customers, historical trends, and other information. Accounts Receivable and Reserve for Credit Losses — Accounts receivable are recorded at net realizable value. We maintain a credit approval process and we make significant judgments in connection with assessing our customers’ ability to pay. Despite this assessment, from time to time, our customers are unable to meet their payment obligations. We continuously monitor our customers’ credit worthiness and use our judgment in establishing a provision for estimated credit losses. We do not require collateral from customers. Our principal customers are original equipment manufacturers ("OEM") and end user customers, which operate globally through wholly owned subsidiaries that purchase our products under substantially the same credit terms, with similar historical credit risks. As a result, we assess credit risks as a single group. We evaluate collection risk and establish expected credit loss primarily through a combination of the following: an assessment of customer credit risk ratings utilizing third party credit risk data, analysis of historical aging and credit loss experience, and customer specific information. Inventories — Inventories are valued at the lower of cost (first-in, first-out method) or net realizable value and are presented net of reserves for excess and obsolete inventory. General market conditions, as well as our design activities, can cause certain products to become obsolete. We regularly review inventory quantity and write down excess and obsolete inventories based upon a regular analysis of inventory on hand compared to historical and projected end-user demands. The determination of projected end-user demand requires the use of estimates and assumptions related to projected unit sales for each product. Demand for our products can fluctuate significantly. A significant decrease in demand could result in an increase in the charges for excess inventory quantities on hand. Property and Equipment — Property and equipment are stated at cost or estimated fair value if acquired in a business combination. Depreciation is computed over the estimated useful lives using the straight-line method. Additions and improvements are capitalized, while maintenance and repairs are expensed as incurred. When depreciable assets are retired, or otherwise disposed of, the cost and related accumulated depreciation are removed from the accounts, and any related gains or losses are included in Other income (expense), net, in our Consolidated Statements of Operations. Purchase accounting — Business combinations are accounted for using the purchase method of accounting. Under the purchase method, assets and liabilities, including intangible assets, are recorded at their fair values as of the acquisition date. Acquisition costs in excess of amounts assigned to assets acquired and liabilities assumed are recorded as goodwill. Transaction related costs associated with business combinations are expensed as incurred. 57 Table of Contents ADVANCED ENERGY INDUSTRIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (continued) (in thousands, except per share amounts) Leases — We lease manufacturing and office space under non-cancelable operating leases. Some of these leases contain provisions for landlord funded leasehold improvements, which we record as a reduction to right-of-use ("ROU") assets and the related operating lease liabilities. Our lease agreements generally contain lease and non-lease components, and we combine fixed payments for non-lease components with lease payments and account for them together as a single lease component. Certain lease agreements may contain variable payments, which are expensed as incurred and not included in the right-of-use lease assets and operating lease liabilities. When renewal options are reasonably certain of exercise, we include the renewal period in the lease term. In many cases, we have leases with a term of less than one year. We elected the practical expedient to exclude these short-term leases from our ROU assets and operating lease liabilities. On an ongoing basis, we negotiate and execute new leases to meet business objectives. Right-of-use assets and operating lease liabilities are recognized at the present value of the future lease payments on the lease commencement date. The interest rate used to determine the present value of the future lease payments is our incremental borrowing rate because the interest rate implicit in our leases is not readily determinable. Our incremental borrowing rate is estimated to approximate the interest rate on a collateralized basis with similar terms and payments. We have a centrally managed treasury function; therefore, we apply a portfolio approach for determining the incremental borrowing rate applicable to the lease term. Operating lease expense is recognized on a straight-line basis over the lease term. Intangible Assets, Goodwill, and Other Long-Lived Assets — As a result of our acquisitions, we identified and recorded intangible assets and goodwill. Intangible assets are valued based on estimates of future cash flows and amortized over their estimated useful lives. Goodwill is subject to annual impairment testing, as well as testing upon the occurrence of any event that indicates a potential impairment. Intangible assets and other long-lived assets are subject to an impairment test if there is an indicator of impairment. The carrying value and ultimate realization of these assets is dependent upon our estimates of future earnings and benefits that we expect to generate from their use. If our expectations of future results and cash flows are significantly diminished, intangible assets and goodwill may be impaired and the resulting charge to operations may be material. When we determine that the carrying value of intangibles or other long-lived assets may not be recoverable based upon the existence of one or more indicators of impairment, we use the projected undiscounted cash flow method to determine whether an impairment exists, and then measure the impairment using discounted cash flows. The estimation of useful lives and expected cash flows requires us to make judgments regarding future periods that are subject to some factors outside of our control. Changes in these estimates can result in revisions to our carrying value of these assets and may result in material charges to our results of operations. We conduct an annual goodwill impairment analysis using an assessment of qualitative factors in determining if it is more likely than not that goodwill is impaired. If this assessment indicates that it is more likely than not that goodwill is impaired, the next step of impairment testing compares the fair value of a reporting unit to its carrying value. Goodwill would be impaired if the resulting implied fair value of goodwill was less than the recorded carrying value of the goodwill. Debt Issuance Costs — We incurred debt issuance costs in connection with our debt facilities. Amounts paid directly to lenders are classified as issuance costs. Commitment fees and other costs directly associated with obtaining credit facilities are classified as deferred financing costs, which are recorded in the Consolidated Balance Sheets and amortized over the term of the facility. We allocated deferred debt issuance costs incurred for the current credit facility between the revolver and term loan based on their relative borrowing capacity. Deferred debt issuance costs associated with the revolving credit facility are recorded within Deposits and other assets and those associated with the term loan are recorded as a reduction of the carrying value of the debt on the Consolidated Balance Sheets. We amortize the majority of deferred debt issuance costs to interest expense using the effective interest rate method. Deferred debt issuance costs on the Line of Credit are amortized on the straight line basis over the life of the debt agreement. 58 Table of Contents ADVANCED ENERGY INDUSTRIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (continued) (in thousands, except per share amounts) Amortization of debt issuance costs is reflected in Other income (expense), net on the Consolidated Statements of Operations. See Note 21. Credit Facility for additional details. Revenue Recognition — We recognize substantially all revenue at a point in time when we satisfy our performance obligations. Typically, this occurs on shipment of goods or completion of service because, at that point, we transfer control to our customer. The transaction price is based upon the standalone selling price. In most transactions, we have no obligations to our customers after the date products are shipped, other than pursuant to warranty obligations. Revenue is recognized net of any taxes collected from customers, which are subsequently remitted to governmental authorities. Surcharges, cost recoveries, and shipping and handling fees billed to customers, if any, are recognized as revenue. The related cost for shipping and handling fees is recognized in cost of sales. We expense incremental costs of obtaining contracts when the amortization period of the costs is less than one year. These costs are included in Selling, general, and administrative expenses in our Consolidated Statements of Operations. Payment terms for customers extended credit are typically net 30 days. We maintain a worldwide support organization in ten countries, including the U.S., the People's Republic of China ("PRC"), Japan, Korea, Taiwan, Germany, Ireland, Singapore, Israel, and Great Britain. Support services include warranty and non-warranty repair services, upgrades, and refurbishments on the products we sell. Repairs that are covered under our standard warranty do not generate revenue. Research and Development Expenses — Costs incurred to advance, test, or otherwise modify our proprietary technology or develop new technologies are considered research and development costs and are expensed when incurred. These costs are primarily comprised of costs associated with the operation of our laboratories and research facilities, including internal labor, materials, and overhead. Warranty Costs — We provide for the estimated costs to fulfill customer warranty obligations upon the recognition of the related revenue. We offer warranty coverage for a majority of our precision power products for periods typically ranging from 12 to 24 months after shipment. We warranted our inverter products for five to ten years and provided the option to purchase additional warranty coverage for up to 20 years . The warranty expense accrued related to our standard inverter product warranties is now considered part of our discontinued operations and is recorded as such on our Consolidated Balance Sheets. See Note 4. Disposed and Discontinued Operations for more information. See Note 15. Warranties for more information on our warranties from continuing operations. We estimate the anticipated costs of repairing our products under such warranties based on the historical costs of the repairs. The assumptions we use to estimate warranty accruals are reevaluated periodically, considering actual experience, and when appropriate, the accruals are adjusted. Should product failure rates differ from our estimates, actual costs could vary significantly from our expectations. Stock-Based Compensation — Accounting for stock-based compensation requires the measurement and recognition of compensation expense for all stock-based awards made to employees and directors based on estimated fair values. We estimate the fair value of restricted stock units ("RSUs") on the grant date. For RSUs that contain a time-based and/or performance-based vesting condition, we estimate fair value using the closing share price on the grant date. We record stock-based compensation expense for awards with time-based vesting conditions over the term of the award. For awards with a performance-based vesting condition, we record stock-based compensation expense (based on management's assessment of the probability of meeting the performance conditions) over the estimated period to achieve the performance conditions. Upon forfeiture or expiration of these awards, we reverse the stock-based compensation expense. Certain RSUs vest based on a market condition. We estimate the fair value and probability of achievement for each tranche of these awards using a Monte Carlo simulation. Because the probability of achievement is a factor in the 59 Table of Contents ADVANCED ENERGY INDUSTRIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (continued) (in thousands, except per share amounts) Monte Carlo simulation, we recognize stock-based compensation expense over each tranche’s estimated achievement period even if some or all of the shares never vest. We estimate the fair value of the purchase rights in our employee stock purchase plan using a Black-Scholes Merton option pricing model and recognize compensation expense over the term of the purchase right. For all stock awards, we estimate forfeitures at the grant date and revise those estimates in subsequent periods if actual forfeitures differ from our estimates. Income Taxes — We follow the liability method of accounting for income taxes under which deferred tax assets and liabilities are recognized for future tax consequences. A deferred tax asset or liability is computed for both the expected future impact of differences between the financial statement and tax basis of assets and liabilities and for the expected future tax benefit to be derived from tax loss and tax credit carryforwards. Tax rate changes are reflected in the period such changes are enacted. We assess the recoverability of our net deferred tax assets and the need for a valuation allowance on a quarterly basis. Our assessment includes several factors including historical results and taxable income projections for each jurisdiction. The ultimate realization of deferred income tax assets is dependent on the generation of taxable income in appropriate jurisdictions during the periods in which those temporary differences are deductible. We consider the scheduled reversal of deferred income tax liabilities, projected future taxable income, and tax planning strategies in determining the amount of the valuation allowance. Based on the level of historical taxable income and projections for future taxable income over the periods in which the deferred income tax assets are deductible, we determine if we will realize the benefits of these deductible differences. Accounting for income taxes requires a two-step approach to recognize and measure uncertain tax positions. In general, we are subject to regular examination of our income tax returns by the Internal Revenue Service and other tax authorities. The first step is to evaluate the tax position for recognition by determining, if based on the technical merits, it is more likely than not that the position will be sustained upon audit, including resolutions of related appeals or litigation processes, if any. The second step is to measure the tax benefit as the largest amount that is more than 50% likely of being realized upon ultimate settlement. We regularly assess the likelihood of favorable or unfavorable outcomes resulting from these examinations to determine the adequacy of our provision for income taxes. This evaluation is based on factors including, but not limited to, changes in facts or circumstances, changes in tax law, effectively settled issues under audit, and new audit activity. Under U.S. GAAP, an accounting policy election can be made to either recognize deferred taxes for temporary basis differences expected to reverse as global intangible low-tax income ("GILTI") in future years, or to provide for the tax expense related to GILTI in the year the tax is incurred as a period expense only. We have elected to account for GILTI in the year the tax is incurred. Commitments and Contingencies — From time to time we are involved in disputes and legal actions arising in the normal course of our business. While we currently believe that the amount of any ultimate loss would not be material to our financial position, the outcome of these actions is inherently difficult to predict. In the event of an adverse outcome, the ultimate loss could have a material adverse effect on our financial position or reported results of operations in a particular period. An unfavorable decision, particularly in patent litigation, could require material changes in production processes and products or result in our inability to ship products or components found to have violated third-party patent rights. We accrue loss contingencies when it is probable that a loss has occurred or will occur, and the amount of the loss can be reasonably estimated. Our estimates of probability of losses are subjective, involve significant judgment and uncertainties, and are based on the best information we have at any given point in time. Resolution of these uncertainties in a manner inconsistent with our expectations could have a significant impact on our results of operations and financial condition. 60 Table of Contents ADVANCED ENERGY INDUSTRIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (continued) (in thousands, except per share amounts) NEW ACCOUNTING STANDARDS New Accounting Standards From time to time, the Financial Accounting Standards Board ("FASB") or other standards setting bodies issue new accounting pronouncements. Updates to the FASB Accounting Standards Codification ("ASC") are communicated through issuance of an Accounting Standards Update ("ASU"). Unless otherwise discussed, we believe that the impact of recently issued guidance, whether adopted or to be adopted in the future, will not have a material impact on the consolidated financial statements upon adoption. New Accounting Standards Adopted In August 2018, the FASB issued ASU 2018-14, "Compensation—Retirement Benefits—Defined Benefit Plans—General (Subtopic 715-20)" ("ASU 2018-14"). ASU 2018-14 eliminates requirements for certain disclosures and requires additional disclosures under defined benefit pension plans and other post-retirement plans. ASU 2018-14 was effective for us on January 1, 2021. The impact of adoption was not material to our consolidated financial statements. New Accounting Standards Issued But Not Yet Adopted In March 2020, the FASB issued ASU 2020-04, "Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting" ("ASU 2020-04"). In January 2021, the FASB issued ASU 2021-01, "Reference Rate Reform (Topic 848): Scope" ("ASU 2021-01"). This collective guidance provides optional expedients and exceptions for applying GAAP to contract modifications and hedging relationships, subject to meeting certain criteria, that reference LIBOR or another reference rate that is expected to be discontinued. ASU 2020-04 and ASU 2021-01 will be in effect through December 31, 2022. ​ Our Credit Facility (refer to Note 21. Credit Facility ) and interest rate swap agreements (refer to Note 8. Derivative Financial Instruments ) reference the one-month USD LIBOR rate. Both agreements contain provisions for transition to a new reference rate upon discontinuance of LIBOR. We expect the one-month USD LIBOR rate to be available through June 2023. We are currently assessing the potential timing of transitioning to a replacement interest rate benchmark for our Credit Facility (See Note 21. Credit Facility ) and do not expect ASU 2020-04 and ASU 2020-01 to materially impact our consolidated financial statements. In October 2021, the FASB issued ASU 2021-08, " Business Combinations (Topic 806) Accounting for Contract Assets and Contract Liabilities from Contracts with Customers." The amendments in ASU 2021-08 will improve the accounting for acquired revenue contracts with customers in a business combination. This pronouncement will be effective for us on January 1, 2023. We are still evaluating the impact, if any, that the adoption of ASU 2021-08 may have on our consolidated financial statements. ​ 61 Table of Contents ADVANCED ENERGY INDUSTRIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (continued) (in thousands, except per share amounts) NOTE 2. ACQUISITIONS Intangible Assets Acquired In January 2021, we acquired certain intangible assets related to the manufacturing of fiber optic sensing equipment. As of December 31, 2021, we paid $ 6.1 million in cash and expect to pay an additional $ 0.4 million within one year of the closing. These intangible assets have an estimated useful life of five years . See Note 13. Intangible Assets for additional details. TEGAM, Inc. On June 1, 2021, we acquired 100 % of the issued and outstanding shares of capital stock of TEGAM, Inc., which is based in Geneva, Ohio. This acquisition added metrology and calibration instrumentation to Advanced Energy’s RF process power solutions in our Semiconductor and Industrial and Medical markets. The components of the fair value of the total consideration transferred were as follows: ​ ​ ​ ​ ​ Cash paid for acquisition $ 15,430 Holdback ​ ​ 1,800 Total fair value of consideration transferred ​ ​ 17,230 Less cash acquired ​ ​ ( 177 ) Total purchase price ​ $ 17,053 ​ The following table summarizes the preliminary values of the assets acquired and liabilities assumed: ​ ​ ​ ​ ​ ​ Preliminary Fair Value Current assets and liabilities, net ​ $ 3,536 Property and equipment ​ ​ 734 Operating lease right-of-use assets ​ ​ 425 Intangible assets ​ ​ 6,900 Goodwill (deductible for tax purposes) ​ ​ 5,877 Other non-current assets ​ ​ 31 Total assets acquired ​ ​ 17,503 Other non-current liabilities ​ ​ 25 Operating lease liability ​ ​ 425 Total liabilities assumed ​ ​ 450 Total fair value of net assets acquired ​ $ 17,053 ​ A summary of the intangible assets acquired, amortization method, and estimated useful lives follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Amortization ​ ​ ​ ​ Method Useful Life Technology ​ $ 1,100 Straight-line 5 Customer relationships ​ 5,500 Straight-line 15 Tradename ​ 300 Straight-line 5 Total ​ $ 6,900 ​ 62 Table of Contents ADVANCED ENERGY INDUSTRIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (continued) (in thousands, except per share amounts) Versatile Power, Inc On December 31, 2020, we acquired 100 % of the issued and outstanding shares of Versatile Power, Inc., which is based in Campbell, California. This acquisition added radio frequency ("RF") and programmable power supplies for medical and industrial applications to our product portfolio and further expands our presence in the medical market by adding proven technologies, deep customer relationships, expertise in medical design, and a medical-certified manufacturing center. The components of the fair value of the total consideration transferred were as follows: ​ ​ ​ ​ ​ Cash paid for acquisition $ 4,654 Holdback ​ ​ 950 Total fair value of consideration transferred ​ ​ 5,604 Less cash acquired ​ ​ ( 245 ) Total purchase price ​ $ 5,359 ​ The following table summarizes the final values of the assets acquired and liabilities assumed: ​ ​ ​ ​ ​ ​ Fair Value Current assets and liabilities, net ​ $ 1,021 Property and equipment ​ ​ 35 Operating lease right-of-use assets ​ ​ 463 Intangible assets ​ ​ 4,000 Goodwill (deductible for tax purposes) ​ ​ 323 Total assets acquired ​ ​ 5,842 Other non-current liabilities ​ ​ 20 Operating lease liability ​ ​ 463 Total liabilities assumed ​ ​ 483 Total fair value of net assets acquired ​ $ 5,359 ​ A summary of the intangible assets acquired, amortization method, and estimated useful lives follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Amortization ​ ​ ​ ​ ​ ​ Method ​ Useful Life Technology ​ $ 400 Straight-line 5 Customer relationships ​ 3,600 Straight-line 15 Total ​ $ 4,000 ​ ​ 63 Table of Contents ADVANCED ENERGY INDUSTRIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (continued) (in thousands, except per share amounts) NOTE 3. REVENUE Nature of goods and services Products Advanced Energy provides highly engineered, mission-critical, precision power conversion, measurement, and control solutions to our global customers. We design, manufacture, sell, and support precision power products that transform, refine, and modify the raw electrical power coming from either the utility or the building facility and convert it into various types of highly controllable, usable power that is predictable, repeatable, and customizable to meet the necessary requirements for powering a wide range of complex equipment. Our power solutions enable innovation in complex semiconductor and thin film plasma processes such as dry etch, strip and deposition, high and low voltage applications such as process control, data center computing, networking, telecommunication, medical equipment, life science applications, industrial technology and production, scientific instruments, clean technology production, advanced material production and temperature-critical thermal applications such as material and chemical processing. We also supply related sensing, controls, and instrumentation products for advanced measurement and calibration of radio RF power and temperature, electrostatic instrumentation products for test and measurement applications, and gas sensing and monitoring solutions for multiple industrial markets. Our network of global service support centers provides a recurring revenue opportunity as we offer repair services, conversions, upgrades, refurbishments, and used equipment to companies using our products. Services Our services group offers warranty and after-market repair services in the regions in which we operate, providing us with preventive maintenance opportunities. Our customers continue to pursue low cost of ownership of their capital equipment and are increasingly sensitive to the costs of system downtime. They expect that suppliers offer comprehensive local repair service and customer support. To meet these market requirements, we maintain a worldwide support organization in the U.S., the PRC, Japan, Korea, Taiwan, Germany, Ireland, Singapore, Israel, and Great Britain. Support services include warranty and non-warranty repair services, upgrades, and refurbishments on the products we sell. As part of our ongoing service business, we satisfy our service obligations under preventative maintenance contracts and extended warranties which had previously been offered on our discontinued inverter products. Any up-front fees received for extended warranties or maintenance plans are deferred. Revenue under these arrangements is recognized ratably over the underlying terms as we do not have historical information which would allow us to project the estimated service usage pattern at this time. The following table summarizes deferred revenue, which relates to extended warranties and service contracts. We expect to recognize this revenue ratably through the year 2031. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, ​ December 31, ​ 2021 2020 Deferred revenue ​ $ 7,067 ​ $ 8,671 ​ 64 Table of Contents ADVANCED ENERGY INDUSTRIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (continued) (in thousands, except per share amounts) Disaggregation of Revenue The following tables present additional information regarding our revenue: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Years Ended December 31, ​ ​ ​ 2021 2020 2019 Semiconductor Equipment ​ ​ $ 710,174 ​ $ 611,864 ​ $ 403,018 Industrial and Medical ​ ​ 341,176 ​ 313,646 ​ 245,992 Data Center Computing ​ ​ ​ 270,924 ​ ​ 322,539 ​ ​ 91,438 Telecom and Networking ​ ​ ​ 133,680 ​ ​ 167,777 ​ ​ 48,500 Total ​ ​ $ 1,455,954 ​ $ 1,415,826 ​ $ 788,948 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Years Ended December 31, ​ 2021 2020 2019 United States ​ ​ $ 561,312 ​ 38.5 % $ 530,965 ​ 37.5 % $ 321,869 ​ 40.8 % North America (excluding U.S.) ​ ​ ​ 104,167 7.2 ​ ​ 156,856 11.1 ​ ​ 51,765 6.6 ​ Asia ​ ​ 597,830 41.1 ​ 606,893 42.9 ​ 295,155 37.4 ​ Europe ​ ​ 179,056 12.3 ​ 117,989 8.3 ​ 119,427 15.1 ​ Other ​ ​ 13,589 0.9 ​ 3,123 0.2 ​ 732 0.1 ​ Total ​ ​ $ 1,455,954 100.0 % $ 1,415,826 100.0 % $ 788,948 100.0 % ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Years Ended December 31, ​ 2021 2020 2019 Product ​ $ 1,318,213 ​ $ 1,296,867 ​ $ 678,061 Services ​ ​ 137,741 ​ 118,959 ​ 110,887 Total ​ $ 1,455,954 $ 1,415,826 $ 788,948 ​ ​ NOTE 4. DISPOSED AND DISCONTINUED OPERATIONS Disposed Operations In May 2019, we sold our grid-tied central solar inverter services business to Bold Renewables Holdings, LLC ("Bold") for $ 1.00 dollar and Bold's assumption of certain product warranty obligations. In connection with this transaction, we entered into a Loan and Security Agreement whereby we loaned Bold an aggregate $ 5.3 million between May 2019 and the first quarter of 2020. During the year ended December 31, 2021, Bold repaid the amount borrowed at a discounted amount in accordance with the terms of the agreement. The loan is now fully repaid, and the Loan and Security Agreement has been cancelled. As a result of the transaction, during the year ended December 31, 2019, we reduced our discontinued operations liabilities by approximately $ 10.9 million that were related to initial product warranty and reduced our other liabilities by approximately $ 22.0 million that were related to extended warranty service obligations as well as reduced other assets and liabilities associated with the continuing grid-tied central solar inverter service and repair business. Accordingly, we recognized a $ 14.8 million non-cash gain in Other income (expense) from continuing operations and an $ 8.6 million non-cash gain, net of tax expense of $ 2.4 million, in Income (loss) from discontinued operations. Discontinued Operations In December 2015, we completed the wind down of engineering, manufacturing, and sales of our solar inverter product line. Accordingly, the results of our inverter business are reflected as Income (loss) from discontinued operations, net of income taxes on our Consolidated Statements of Operations. 65 Table of Contents ADVANCED ENERGY INDUSTRIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (continued) (in thousands, except per share amounts) The effect of our sales of extended inverter warranties to our customers continues to be reflected in deferred revenue in our Consolidated Balance Sheets. Deferred revenue for extended inverter warranties and the associated costs of warranty service will be reflected in Sales and Cost of goods sold, respectively, from continuing operations in future periods in our Consolidated Statement of Operations as the deferred revenue is earned and the associated services are rendered. We no longer offer extended warranties related to the inverter product line. ​ ​ NOTE 5. INCOME TAXES The geographic distribution of pretax income from continuing operations was as follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Years Ended December 31, ​ 2021 2020 2019 Domestic ​ $ 24,541 ​ $ 17,526 ​ $ ( 20,597 ) Foreign ​ 124,170 ​ 140,621 ​ 87,791 ​ ​ $ 148,711 ​ $ 158,147 ​ $ 67,194 ​ The provision for income taxes from continuing operations is summarized as follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Years Ended December 31, ​ 2021 2020 2019 Current: ​ ​ ​ Federal ​ $ ( 2,468 ) ​ $ 5,475 ​ $ ( 9,627 ) State ​ 929 ​ 1,927 ​ 882 Foreign ​ 14,217 ​ 16,216 ​ 18,429 Total current provision ​ ​ 12,678 ​ ​ 23,618 ​ ​ 9,684 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Deferred: ​ ​ ​ Federal ​ ​ 762 ​ ​ ( 312 ) ​ ​ 3,822 State ​ ( 200 ) ​ 1,270 ​ ( 178 ) Foreign ​ 764 ​ ( 1,580 ) ​ ( 2,629 ) Total deferred provision (benefit) ​ 1,326 ​ ( 622 ) ​ 1,015 Total provision for income taxes ​ $ 14,004 ​ $ 22,996 ​ $ 10,699 ​ Our effective tax rates differ from the U.S. federal statutory rate of 21 % for the years ended December 31, 2021, 2020, and 2019 primarily due to the benefit of earnings in foreign jurisdictions which are subject to lower tax rates as well as reductions in uncertain tax positions and tax credits, offset by net U.S. tax on foreign operations, withholding taxes, and audit settlements. ​ 66 Table of Contents ADVANCED ENERGY INDUSTRIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (continued) (in thousands, except per share amounts) The principal causes of the difference between the federal statutory rate and the effective income tax rate for each of the years below are as follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Years Ended December 31, ​ 2021 2020 2019 Income taxes per federal statutory rate ​ $ 31,229 ​ $ 33,211 ​ $ 14,111 State income taxes, net of federal deduction ​ ​ 534 ​ ​ 2,793 ​ ​ 10 U.S. tax on foreign operations ​ ​ 5,786 ​ ​ 9,666 ​ ​ 5,805 Foreign derived intangible income deduction ​ ​ ( 3,927 ) ​ ​ ( 4,070 ) ​ ​ — Tax effect of foreign operations ​ ​ ( 11,520 ) ​ ​ ( 20,527 ) ​ ​ ( 13,086 ) Uncertain tax positions ​ ​ ( 6,899 ) ​ ​ ( 3,215 ) ​ ​ ( 4,487 ) Audit settlements ​ ​ 7,764 ​ ​ — ​ ​ — Unremitted earnings ​ ​ 261 ​ ​ ( 567 ) ​ ​ 1,624 Tax credits ​ ​ ( 6,149 ) ​ ​ ( 2,292 ) ​ ​ ( 2,088 ) Change in valuation allowance ​ ​ ( 73 ) ​ ​ ( 1,175 ) ​ ​ 7,222 Withholding taxes ​ ​ 756 ​ ​ 4,265 ​ ​ 6,500 Executive compensation limitation ​ ​ 1,926 ​ ​ 1,070 ​ ​ 356 Other permanent items, net ​ ​ ( 5,684 ) ​ ​ 3,837 ​ ​ ( 5,268 ) Total provision for income taxes ​ $ 14,004 ​ $ 22,996 ​ $ 10,699 ​ Deferred tax assets and liabilities are recognized for the future tax consequences of differences between the carrying amounts of assets and liabilities and their respective tax bases using enacted tax rates in effect for the year in which the differences are expected to be reversed. Significant deferred tax assets and liabilities consist of the following: ​ ​ ​ ​ ​ ​ ​ ​ ​ Years Ended December 31, ​ 2021 2020 Deferred tax assets ​ ​ Stock-based compensation ​ $ 2,528 ​ $ 2,130 Net operating loss and tax credit carryforwards ​ 54,210 ​ 57,590 Interest expense limitation ​ ​ 7,344 ​ ​ 7,344 Pension obligation ​ 10,778 ​ 14,297 Excess and obsolete inventory ​ 3,325 ​ 3,722 Accrued restructuring ​ ​ 2,223 ​ ​ 2,468 Deferred revenue ​ 4,195 ​ 3,048 Employee bonuses and commissions ​ 3,861 ​ 5,388 Amortization ​ 26,358 ​ 28,786 Operating lease liabilities ​ ​ 19,405 ​ ​ 20,267 Other ​ 8,017 ​ 8,925 Deferred tax assets ​ 142,244 ​ 153,965 Less: Valuation allowance ​ ( 42,051 ) ​ ( 46,702 ) Net deferred tax assets ​ 100,193 ​ 107,263 ​ ​ ​ ​ ​ ​ ​ Deferred tax liabilities ​ ​ ​ Depreciation and amortization ​ 37,515 ​ 40,266 Unremitted earnings ​ 4,435 ​ 4,173 Operating lease right-of-use assets ​ ​ 17,558 ​ ​ 18,731 Other ​ 3,364 ​ 3,380 Deferred tax liabilities ​ 62,872 ​ 66,550 Net deferred tax assets ​ $ 37,321 ​ $ 40,713 ​ 67 Table of Contents ADVANCED ENERGY INDUSTRIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (continued) (in thousands, except per share amounts) Of the $ 37.3 million and $ 40.7 million net deferred tax asset on December 31, 2021 and 2020, respectively, $ 47.2 million and $ 50.8 million is reflected as a net non-current deferred tax asset and $ 9.9 million and $ 10.1 million is reflected as a long-term liability on December 31, 2021 and 2020, respectively. As of December 31, 2021, we have recorded a valuation allowance on $ 4.0 million of our U.S. domestic deferred tax assets, largely attributable to state carryforward attributes that are expected to expire before sufficient income can be realized in those jurisdictions. The remaining valuation allowance on deferred tax assets approximates $ 38.0 million and is associated primarily with operations in Germany, Hong Kong, and Switzerland. As of December 31, 2021, there is not sufficient positive evidence to conclude that such deferred tax assets, presently reduced by a valuation allowance, will be recognized. The December 31, 2021 valuation allowance balance reflects a decrease of $ 4.7 million during the year. The change in the valuation allowance is primarily due to decreases from foreign exchange movements and current year activity. As of December 31, 2021, we had U.S., foreign and state tax loss carryforwards of $ 56.9 million, $ 129.0 million, and $ 117.1 million, respectively. Additionally, we had $ 0.8 million and $ 30.5 million of capital loss and interest expense limitation carryforwards, respectively. Finally, we had U.S. and state tax credit carryforwards of $ 1.5 million and $ 1.7 million, respectively. The U.S. and state net operating losses, tax credits, and interest expense limitation are subject to various utilization limitations under Section 382 of the Internal Revenue Code and applicable state laws. These Section 382 limited attributes have various expiration periods through 2036 or, in the case of the interest expense limitation amount, no expiration period. Much of the foreign jurisdiction, and $ 8.0 million of the federal net operating loss carry forwards, have no expiration period. We operate under a tax holiday in Singapore and China. These tax holidays are in effect through June 30, 2027 and December 31, 2022, respectively. The tax holiday is conditional upon our meeting certain employment and investment thresholds. The impact of the tax holidays decreased foreign taxes by $ 13.3 million and $ 13.0 million for 2021 and 2020, respectively. The benefit of the tax holiday on earnings per diluted share was $ 0.35 and $ 0.34 for 2021 and 2020, respectively. As of December 31, 2021, we have undistributed earnings of certain foreign subsidiaries of approximately $ 32.4 million that we have indefinitely invested, and on which we have not recognized deferred taxes. Estimating the amount of potential tax is not practicable because of the complexity and variety of assumptions necessary to compute the tax. We account for uncertain tax positions by applying a minimum recognition threshold to tax positions before recognizing these positions in the financial statements. The reconciliation of our total gross unrecognized tax benefits is as follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Years Ended December 31, ​ 2021 2020 2019 Balance at beginning of period ​ $ 9,673 ​ $ 13,009 ​ $ 13,162 Additions based on tax positions taken during a prior period ​ 963 ​ 219 ​ 484 Additions based on tax positions taken during a prior period - acquisitions ​ — ​ — ​ 4,479 Additions based on tax positions taken during the current period ​ 566 ​ — ​ — Reductions based on tax positions taken during a prior period ​ — ​ — ​ ( 4,295 ) Reductions related to a lapse of applicable statute of limitations ​ ( 4,575 ) ​ ( 3,555 ) ​ ( 821 ) Reductions related to a settlement with taxing authorities ​ ( 1,114 ) ​ — ​ — Balance at end of period ​ $ 5,513 ​ $ 9,673 ​ $ 13,009 ​ 68 Table of Contents ADVANCED ENERGY INDUSTRIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (continued) (in thousands, except per share amounts) The unrecognized tax benefits of $ 5.5 million, if recognized, will impact our effective tax rate. In accordance with our accounting policy, we recognize accrued interest and penalties related to unrecognized tax benefits as a component of tax expense. We had $ 0.4 million and $ 3.2 million of accrued interest and penalties on December 31, 2021 and 2020, respectively. With few exceptions, we are no longer subject to federal, state, or foreign income tax examinations by tax authorities for years before 2018. ​ NOTE 6. EARNINGS PER SHARE We compute basic earnings per share ("EPS") by dividing income available to common stockholders by the weighted-average number of common shares outstanding during the period. The diluted EPS computation is similar to basic EPS except we increase the denominator to include the number of additional common shares that would have been outstanding (using the if-converted and treasury stock methods) if our outstanding stock options and restricted stock units had been converted to common shares (when such conversion is dilutive). The following is a reconciliation of the weighted-average shares outstanding used in the calculation of basic and diluted earnings per share: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Years Ended December 31, ​ 2021 2020 2019 Income from continuing operations $ 134,707 ​ $ 135,151 ​ $ 56,495 Less: income from continuing operations attributable to noncontrolling interest 44 ​ 55 ​ 34 Income from continuing operations attributable to Advanced Energy Industries, Inc. $ 134,663 ​ $ 135,096 ​ $ 56,461 ​ ​ ​ ​ ​ ​ ​ ​ ​ Basic weighted-average common shares outstanding 38,143 ​ 38,314 ​ 38,281 Assumed exercise of dilutive stock options and restricted stock units 212 ​ 228 ​ 214 Diluted weighted-average common shares outstanding 38,355 ​ 38,542 ​ 38,495 ​ ​ ​ ​ ​ ​ ​ ​ ​ Continuing operations: ​ ​ Basic earnings per share $ 3.53 ​ $ 3.53 ​ $ 1.47 Diluted earnings per share $ 3.51 ​ $ 3.51 ​ $ 1.47 ​ Share Repurchase To execute the repurchase of shares of our common stock, we periodically enter into stock repurchase agreements. The following table summarizes these repurchases: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Years Ended December 31, (in thousands, except per share amounts) 2021 2020 Amount paid to repurchase shares ​ $ 78,125 ​ $ 11,630 Number of shares repurchased ​ 901 ​ 244 Average repurchase price per share ​ $ 86.76 ​ $ 47.75 Remaining authorized by Board of Directors for future repurchases as of period end ​ $ 128,377 ​ $ 38,369 ​ There were no shares repurchased from related parties. Repurchased shares were retired and assumed the status of authorized and unissued shares. On July 29, 2021, the Board of Directors approved an increase to the share repurchase program, which authorized the Company to repurchase up to $ 200 million in shares of our common stock with no time limitation. 69 Table of Contents ADVANCED ENERGY INDUSTRIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (continued) (in thousands, except per share amounts) NOTE 7. FAIR VALUE MEASUREMENTS The following tables present information about our assets and liabilities measured at fair value on a recurring basis. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, 2021 Description ​ Balance Sheet Classification ​ Level 1 ​ Level 2 ​ Level 3 ​ Total Fair Value Assets: ​ ​ ​ ​ ​ ​ ​ ​ ​ Certificates of deposit ​ Marketable securities ​ $ — ​ ​ 2,296 ​ ​ — ​ $ 2,296 Interest rate swaps ​ Deposits and other assets ​ ​ — ​ ​ 2,739 ​ ​ — ​ ​ 2,739 Total assets measured at fair value on a recurring basis ​ ​ ​ $ — ​ $ 5,035 ​ $ — ​ $ 5,035 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Liabilities: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Contingent consideration ​ Other current liabilities ​ $ — ​ ​ — ​ ​ 1,738 ​ $ 1,738 Total liabilities measured at fair value on a recurring basis ​ ​ ​ $ — ​ $ — ​ $ 1,738 ​ $ 1,738 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, 2020 Description ​ Balance Sheet Classification ​ Level 1 Level 2 Level 3 Total Fair Value Assets: ​ ​ ​ ​ ​ ​ ​ ​ ​ Certificates of deposit ​ Marketable securities ​ $ — ​ $ 2,654 ​ $ — ​ $ 2,654 Total assets measured at fair value on a recurring basis ​ ​ ​ $ — ​ $ 2,654 ​ $ — ​ $ 2,654 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Liabilities: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Contingent consideration ​ Other current liabilities ​ $ — ​ $ — ​ $ 2,009 ​ $ 2,009 Contingent consideration ​ Other long-term liabilities ​ ​ — ​ ​ — ​ ​ 2,940 ​ ​ 2,940 Interest rate swaps ​ Other long-term liabilities ​ ​ — ​ ​ 2,811 ​ ​ — ​ ​ 2,811 Total liabilities measured at fair value on a recurring basis ​ ​ ​ $ — ​ $ 2,811 ​ $ 4,949 ​ $ 7,760 ​ The fair value of foreign currency forward contracts is based on the movement in the forward rates of foreign currency cash flows in which the hedging instrument is denominated. We determine the fair value of interest rate swaps by estimating the net present value of the expected cash flows based on market rates and associated yield curves, adjusted for non-performance credit risk, as applicable. See Note 8. Derivative Financial Instruments for additional information. The fair value of contingent consideration is determined by estimating the net present value of the expected cash flows based on the probability of expected payment. For all periods presented, there were no transfers into or out of Level 3. ​ 70 Table of Contents ADVANCED ENERGY INDUSTRIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (continued) (in thousands, except per share amounts) NOTE 8. DERIVATIVE FINANCIAL INSTRUMENTS Changes in foreign currency exchange rates impact us. We may manage these risks through the use of derivative financial instruments, primarily forward contracts with banks. These forward contracts manage the exchange rate risk associated with assets and liabilities denominated in nonfunctional currencies. These derivative instruments are typically executed for one-month periods and not designated as hedges; however, they do economically offset the fluctuations of our assets and liabilities due to foreign exchange rate changes. Gains and losses related to foreign currency exchange contracts were offset by corresponding gains and losses on the revaluation of the underlying assets and liabilities. Both are included as a component of Other income (expense), net in our Consolidated Statements of Operations. As of December 31, 2021 and 2020, there were no foreign currency forward contracts outstanding. In April 2020, we executed interest rate swap contracts with independent financial institutions to partially reduce the variability of cash flows in LIBOR indexed debt interest payments on our Term Loan Facility (under our existing Credit Agreement dated September 10, 2019, as amended). These transactions are accounted for as cash flow hedging instruments. The interest rate swap contracts fixed a portion of the outstanding principal balance on our term loan to a total interest rate of 1.271 %. This is comprised of 0.521 % average fixed rate per annum in exchange for a variable interest rate based on one-month USD-LIBOR-BBA plus the credit spread in our existing Credit Agreement, which is 75 basis points at current leverage ratios. The following table summarizes the notional amount of our qualified hedging instruments: ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, ​ December 31, ​ 2021 2020 Interest rate swap contracts ​ $ 255,719 ​ $ 273,219 ​ The following table summarizes the amounts recorded in Accumulated other comprehensive loss on the Consolidated Balance Sheets for qualifying hedges. ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, ​ December 31, ​ 2021 2020 Interest rate swap contracts - gains (losses) ​ $ 2,107 ​ $ ( 2,139 ) ​ See Note 7. Fair Value Measurements for information regarding fair value of derivative instruments. As a result of using derivative financial instruments, we are exposed to the risk that counterparties to contracts could fail to meet their contractual obligations. We manage this risk by reviewing counterparty creditworthiness on a regular basis and limiting exposure to any single counterparty. ​ 71 Table of Contents ADVANCED ENERGY INDUSTRIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (continued) (in thousands, except per share amounts) NOTE 9. ACCOUNTS AND OTHER RECEIVABLE, NET We record accounts and other receivable at net realizable value. Components of accounts and other receivable, net of reserves, were as follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, ​ December 31, ​ 2021 2020 Amounts billed, net ​ $ 217,549 ​ $ 213,560 Unbilled receivables ​ ​ 19,678 ​ 21,618 Total receivables, net ​ $ 237,227 ​ $ 235,178 ​ "Amounts billed, net" represents amounts invoiced to customers in accordance with our terms and conditions and reflects an allowance for expected credit losses. These receivables are short term in nature and do not include any financing components. "Unbilled receivables" consist of amounts where we satisfied our contractual obligations associated with customer inventory stocking agreements. Such amounts typically become billable upon the customer's consumption of the inventory. We anticipate invoicing and collecting substantially all unbilled receivables within the next twelve months. The following table summarizes the changes in expected credit losses: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, ​ December 31, ​ 2021 2020 Balance at beginning of period $ 7,602 ​ $ 7,745 Additions ​ 135 ​ 368 Deductions - write-offs, net of recoveries ​ ( 687 ) ​ ( 511 ) Foreign currency translation ​ ​ ( 18 ) ​ ​ — Other ​ ​ ( 1,248 ) ​ ​ — Balance at end of period ​ $ 5,784 ​ $ 7,602 ​ ​ NOTE 10. INVENTORIES We value inventories at the lower of cost or net realizable value and computed on a first-in, first-out basis. Components of inventories were as follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, ​ December 31, ​ 2021 2020 Parts and raw materials ​ $ 261,365 ​ $ 141,337 Work in process ​ 24,222 ​ 13,702 Finished goods ​ 52,823 ​ 66,307 Total ​ $ 338,410 ​ $ 221,346 ​ ​ 72 Table of Contents ADVANCED ENERGY INDUSTRIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (continued) (in thousands, except per share amounts) NOTE 11. PROPERTY AND EQUIPMENT, NET Property and equipment, net is comprised of the following: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Estimated Useful ​ December 31, ​ December 31, ​ Life (in years) 2021 2020 Buildings ​ 25 ​ $ 1,625 ​ $ 1,776 Machinery and equipment ​ 5 to 8 ​ 133,010 ​ 115,404 Computer equipment, furniture, fixtures, and vehicles ​ 3 to 5 ​ 33,490 ​ 31,237 Leasehold improvements ​ 2 to 10 ​ 48,370 ​ 42,984 Construction in process ​ ​ ​ 5,914 ​ 3,693 ​ ​ ​ ​ 222,409 ​ 195,094 Less: Accumulated depreciation ​ ​ ​ ( 107,579 ) ​ ( 80,363 ) Property and equipment, net ​ ​ ​ $ 114,830 ​ $ 114,731 ​ The following table summarizes depreciation expense. All depreciation expense is recorded in income from continuing operations. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Years Ended December 31, ​ 2021 2020 2019 Depreciation expense $ 30,833 ​ $ 27,641 ​ $ 13,979 ​ ​ NOTE 12. GOODWILL The following table summarizes the changes in goodwill: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, ​ December 31, ​ 2021 2020 Balance at beginning of period ​ $ 209,983 ​ $ 202,932 Measurement period adjustments to purchase price allocations ​ ​ ( 1,426 ) ​ ​ 1,957 Additions from acquisition ​ ​ 5,877 ​ ​ 1,749 Foreign currency translation ​ ​ ( 2,244 ) ​ ​ 3,345 Balance at end of period $ 212,190 ​ $ 209,983 ​ Additions and adjustments are the result of business combinations. Refer to Note 2. Acquisitions. ​ 73 Table of Contents ADVANCED ENERGY INDUSTRIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (continued) (in thousands, except per share amounts) NOTE 13. INTANGIBLE ASSETS Intangible assets consisted of the following: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, 2021 ​ Gross Carrying Accumulated Net Carrying ​ ​ Amount ​ Amortization ​ Amount Technology ​ $ 91,461 ​ $ ( 35,854 ) ​ $ 55,607 Customer relationships ​ 118,706 ​ ​ ( 34,187 ) ​ 84,519 Trademarks and other ​ 27,244 ​ ​ ( 7,964 ) ​ 19,280 Total ​ $ 237,411 ​ $ ( 78,005 ) ​ $ 159,406 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, 2020 ​ Gross Carrying Accumulated Net Carrying ​ ​ Amount ​ Amortization ​ Amount Technology ​ $ 85,075 ​ $ ( 24,999 ) ​ $ 60,076 Customer relationships ​ 114,171 ​ ( 26,880 ) ​ 87,291 Trademarks and other ​ 27,021 ​ ( 5,449 ) ​ 21,572 Total ​ $ 226,267 ​ $ ( 57,328 ) ​ $ 168,939 ​ At December 31, 2021, the weighted average remaining useful life of intangibles subject to amortization was approximately 9.8 years. Amortization expense related to intangible assets was as follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Years Ended December 31, ​ 2021 2020 2019 Amortization expense ​ $ 22,060 ​ $ 20,129 ​ $ 12,168 ​ Estimated amortization expense related to intangibles is as follows: ​ ​ ​ ​ ​ Year Ending December 31, ​ ​ 2022 ​ 22,025 2023 ​ 22,007 2024 ​ 19,148 2025 ​ 14,653 2026 ​ ​ 12,937 Thereafter ​ 68,636 Total ​ $ 159,406 ​ ​ ​ 74 Table of Contents ADVANCED ENERGY INDUSTRIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (continued) (in thousands, except per share amounts) NOTE 14. RESTRUCTURING COSTS During 2018, we committed to a restructuring plan to optimize our manufacturing footprint and to improve our operating efficiencies and synergies related to our recent acquisitions. For the periods presented, we incurred severance costs primarily related to the transition and exit of our facility in Shenzhen, PRC and actions associated with synergies related to the Artesyn acquisition. The table below summarizes restructuring charges: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Years Ended December 31, ​ ​ 2021 2020 2019 Severance and related charges $ 3,467 ​ $ 9,632 ​ $ 3,042 Facility relocation and closure charges ​ 1,285 ​ 3,534 ​ 1,996 Total restructuring charges ​ $ 4,752 ​ $ 13,166 ​ $ 5,038 ​ ​ ​ ​ ​ ​ ​ Cumulative Cost ​ ​ Through ​ ​ December 31, ​ ​ 2021 Severance and related charges $ 20,380 Facility relocation and closure charges ​ ​ 6,815 Total restructuring charges ​ $ 27,195 ​ Our restructuring liabilities are included in other accrued expenses in our Consolidated Balance Sheets and related primarily to severance and associated costs. Changes in restructuring liabilities were as follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, ​ December 31, ​ ​ 2021 2020 Balance at beginning of period $ 10,641 ​ $ 2,172 Costs incurred and charged to expense ​ ​ 4,752 ​ ​ 13,166 Costs paid or otherwise settled ​ ​ ( 6,127 ) ​ ​ ( 4,714 ) Effects of changes in exchange rate ​ ​ ( 3 ) ​ ​ 17 Balance at end of period ​ $ 9,263 ​ $ 10,641 ​ ​ NOTE 15. WARRANTIES Our sales agreements include customary product warranty provisions, which range from 12 to 24 months after shipment. We record the estimated warranty obligations cost when we recognize revenue. This estimate is based on historical experience by product and configuration. Our estimated warranty obligation is included in other accrued expenses in our Consolidated Balance Sheets. Changes in our product warranty obligation were as follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Years Ended December 31, ​ 2021 2020 Balance at beginning of period ​ $ 4,780 ​ $ 6,413 Warranty acquired in business combinations ​ ​ — ​ ​ 15 Increases to accruals ​ 3,165 ​ 2,996 Warranty expenditures ​ ( 4,587 ) ​ ( 4,688 ) Effect of changes in exchange rates ​ ( 8 ) ​ 44 Balance at end of period ​ $ 3,350 ​ $ 4,780 ​ ​ 75 Table of Contents ADVANCED ENERGY INDUSTRIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (continued) (in thousands, except per share amounts) NOTE 16. LEASES Components of operating lease cost were as follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Years Ended December 31, ​ 2021 2020 ​ 2019 Operating lease cost ​ $ 23,443 ​ $ 22,920 ​ $ 11,052 Short-term and variable lease cost ​ ​ 2,555 ​ ​ 1,895 ​ ​ 4,726 Total operating lease cost ​ $ 25,998 ​ $ 24,815 ​ $ 15,778 ​ Maturities of our operating lease liabilities are as follows: ​ ​ ​ ​ ​ Year Ending December 31, ​ ​ 2022 ​ $ 20,416 2023 ​ 17,230 2024 ​ 14,812 2025 ​ ​ 12,426 2026 ​ ​ 11,079 Thereafter ​ ​ 65,785 Total lease payments ​ ​ 141,748 Less: Interest ​ ​ ( 30,725 ) Present value of lease liabilities ​ $ 111,023 ​ We have lease agreements that commence in the future between 2022 and 2023 with total payments of $ 4.3 million through 2029. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended December 31, ​ ​ ​ 2021 2020 ​ Weighted average remaining lease term (in years) ​ ​ 9.81 ​ ​ 10.65 ​ Weighted average discount rate ​ ​ 4.51 % ​ 4.63 % ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended December 31, ​ 2021 2020 ​ 2019 Cash paid for operating leases ​ $ 23,668 ​ $ 21,877 ​ $ 12,101 Right-of-use assets obtained in exchange for operating lease liabilities ​ $ 16,399 ​ $ 33,741 ​ $ 84,551 ​ ​ NOTE 17. EMPLOYEE RETIREMENT PLANS AND POSTRETIREMENT BENEFITS Defined Contribution Plans We have a 401(k) profit-sharing and retirement savings plan covering substantially all full-time U.S. employees. Participants may defer up to the maximum amount allowed permitted by law. Effective January 1, 2022, participants are immediately vested in both their own contributions and profit-sharing contributions. Profit-sharing contributions, which are discretionary, are approved by the Board of Directors. For the years ended December 31, 2021, 2020, and 2019 we based our profit-sharing contribution on matching 50 % of employee contributions up to 6 % of the employee’s compensation. During the years ended December 31, 2021, 2020, and 2019 we recognized total defined contribution plan costs of $ 3.1 million, $ 2.6 million, and $ 1.6 million, respectively. 76 Table of Contents ADVANCED ENERGY INDUSTRIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (continued) (in thousands, except per share amounts) Defined Benefit Plan We maintain defined benefit pension plans for certain of our non-U.S. employees in the U.K., Germany, and Philippines. Each plan is managed locally and in accordance with respective local laws and regulations. To measure the expense and related benefit obligation, we make various assumptions, including discount rates used to value the obligation, expected return on plan assets used to fund these expenses, and estimated future inflation rates. We base these assumptions on historical experience as well as facts and circumstances. We use an actuarial analysis to measure the expense and liability associated with pension benefits. The information provided below includes one pension plan which is part of discontinued operations. As such, for all periods presented, all related expenses are reported in discontinued operations in the Consolidated Statements of Operations. Our projected benefit obligation and plan assets for defined benefit pension plans and the related assumptions used to determine the related liabilities are as follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Years Ended December 31, ​ 2021 2020 Projected benefit obligation, beginning of year ​ $ 97,740 ​ $ 83,262 Service cost ​ 1,282 ​ 1,068 Interest cost ​ 1,452 ​ 1,716 Actuarial (gain) loss ​ ( 8,682 ) ​ 7,591 Benefits paid ​ ( 2,010 ) ​ ( 1,199 ) Translation adjustment ​ ( 4,006 ) ​ 5,302 Projected benefit obligation, end of year ​ $ 85,776 ​ $ 97,740 ​ ​ ​ ​ ​ ​ ​ Fair value of plan assets, beginning of year ​ $ 17,293 ​ $ 14,903 Actual return on plan assets ​ 641 ​ 682 Contributions ​ 1,775 ​ 1,827 Benefits paid ​ ( 1,112 ) ​ ( 993 ) Actuarial gain ​ 71 ​ 180 Translation adjustment ​ ( 147 ) ​ 694 Fair value of plan assets, end of year ​ $ 18,521 ​ $ 17,293 Funded status of plan ​ $ ( 67,255 ) ​ $ ( 80,447 ) ​ The components of net periodic pension benefit cost recognized in our Consolidated Statements of Operations for the periods presented are as follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Years Ended December 31, ​ 2021 2020 2019 Service cost ​ $ 1,282 ​ $ 1,068 ​ $ 272 Interest cost ​ ​ 1,452 ​ ​ 1,716 ​ ​ 1,211 Expected return on plan assets ​ ( 642 ) ​ ( 683 ) ​ ( 615 ) Amortization of actuarial gains and losses ​ 820 ​ 459 ​ 411 Net periodic pension cost ​ $ 2,912 ​ $ 2,560 ​ $ 1,279 ​ 77 Table of Contents ADVANCED ENERGY INDUSTRIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (continued) (in thousands, except per share amounts) Assumptions used in the determination of the net periodic pension cost are: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Years Ended December 31, ​ 2021 2020 2019 Discount rate 1.6 % 1.8 % 2.7 % Expected long-term return on plan assets 3.2 % 3.7 % 4.6 % ​ The fair value of our qualified pension plan assets by category was as follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, 2021 ​ Level 1 Level 2 Level 3 Total Diversified Growth Fund ​ $ — ​ $ 12,249 ​ $ — ​ $ 12,249 Corporate Bonds ​ — ​ ​ 4,640 ​ ​ — ​ ​ 4,640 Insurance Contracts ​ ​ — ​ ​ — ​ ​ 984 ​ ​ 984 Cash ​ 648 ​ ​ — ​ ​ — ​ ​ 648 Total ​ $ 648 ​ $ 16,889 ​ $ 984 ​ $ 18,521 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, 2020 ​ Level 1 Level 2 Level 3 Total Multi-Asset Fund ​ $ — ​ $ 5,149 ​ $ — ​ $ 5,149 Diversified Growth Fund ​ — ​ 5,134 ​ — ​ 5,134 Corporate Bonds ​ — ​ 4,906 ​ — ​ 4,906 Insurance Contracts ​ ​ — ​ — ​ 1,109 ​ 1,109 Cash ​ 995 ​ — ​ — ​ 995 Total ​ $ 995 ​ $ 15,189 ​ $ 1,109 ​ $ 17,293 ​ On December 31, 2021, our plan’s assets of $ 18.5 million were invested in cash plus three separate funds including, a diversified growth fund ( 66.1 %), corporate bonds ( 25.1 %), and insurance contracts ( 5.3 %). The growth fund aims to generate an "equity-like" return over an economic cycle with significantly reduced volatility relative to equity markets and has the scope to use a diverse range of asset classes, including equities, bonds, cash, and alternatives (e.g., property, infrastructure, high yield bonds, floating rate debt, private, equity, hedge funds and currency). These investments are intended to provide a degree of protection against changes in the value of our plan’s liabilities related to changes in long-term expectations for interest rates and inflation expectations. Expected future payments during the next ten years for our defined benefit pension plans are as follows: ​ ​ ​ ​ ​ Year Ending December 31, ​ ​ 2022 ​ $ 1,778 2023 ​ ​ 2,068 2024 ​ ​ 2,847 2025 ​ ​ 2,299 2026 ​ ​ 5,395 2027 to 2031 ​ ​ 18,739 ​ ​ 78 Table of Contents ADVANCED ENERGY INDUSTRIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (continued) (in thousands, except per share amounts) NOTE 18. STOCK-BASED COMPENSATION As of December 31, 2021, we had two active stock-based incentive compensation plan: the 2017 Omnibus Incentive Plan ("the 2017 Plan") and the Employee Stock Purchase Plan ("ESPP"). We issue all new equity compensation grants under these two plans; however, outstanding awards previously issued under inactive plans will continue to vest and remain exercisable in accordance with the terms of the respective plans. Our stock plans are administered by the Board of Directors Compensation Committee. On December 31, 2021, there were 3.3 million shares reserved and 2.6 million shares available for future grant under our stock-based incentive plans. On May 4, 2017, the stockholders approved the 2017 Plan, and all shares that were then available for issuance under the 2008 Omnibus Incentive Plan ("the 2008 Plan") are now available for issuance under the 2017 Plan. The 2017 Plan and 2008 Plan provide for the grant of stock options, stock appreciation rights, restricted stock, stock units (including deferred stock units), unrestricted stock, and dividend equivalent rights. Any of the awards issued may be issued as performance-based awards to align stock compensation awards to the attainment of annual or long-term performance goals. As of December 31, 2021, there were 1.9 million shares available for grant under the 2017 Plan. Stock-based Compensation Expense We recognize stock-based compensation expense based on the fair value of the awards issued and the functional area of the employee receiving the award. Stock-based compensation was as follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Years Ended December 31, ​ 2021 2020 2019 Equity classified awards ​ $ 15,428 ​ $ 12,272 ​ $ 7,327 Liability classified awards ​ ​ 311 ​ ​ — ​ ​ — Stock-based compensation expense ​ $ 15,739 ​ $ 12,272 ​ $ 7,327 ​ Estimated forfeiture rates for our stock-based compensation expense applicable to stock options and RSUs were approximately 8 %, 5 % and 10 % for the years ended December 31, 2021, 2020 and 2019, respectively. Restricted Stock Units Generally, we grant RSUs with a three-year time-based vesting schedule. Certain RSUs contain performance-based or market-based vesting conditions in addition to the time-based vesting requirements. ​ Changes in our unvested RSUs were as follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended December 31, 2021 ​ ​ Weighted- ​ ​ ​ ​ Average ​ ​ Number of ​ Grant Date ​ ​ RSUs ​ Fair Value RSUs outstanding at beginning of period 608 ​ $ 58.15 RSUs granted 406 ​ $ 94.60 RSUs vested ( 178 ) ​ $ 62.82 RSUs forfeited ( 209 ) ​ $ 70.34 RSUs outstanding at end of period 627 ​ $ 76.37 ​ 79 Table of Contents ADVANCED ENERGY INDUSTRIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (continued) (in thousands, except per share amounts) The total intrinsic value of RSUs converted to shares for the years ended December 31, 2021, 2020 and 2019 were $ 19.2 million, $ 9.2 million, and $ 8.3 million, respectively. As of December 31, 2021, there was $ 21.4 million of total unrecognized compensation cost, net of expected forfeitures related to non-vested RSUs granted, which is expected to be recognized through December 2024, with a weighted-average remaining vesting period of 1.1 years. Stock Options Generally, we grant stock option awards with an exercise price equal to the market price of our stock at the date of grant and with either a three or four-year vesting schedule or performance-based vesting; however, no stock options were granted in 2021. Stock option awards generally have a term of ten years . Changes in our stock options were as follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended December 31, 2021 ​ ​ Weighted- ​ ​ ​ ​ Average ​ ​ Number of ​ Exercise Price ​ ​ Options ​ per Share Options outstanding at beginning of period 147 ​ $ 23.63 Options exercised ( 35 ) ​ $ 21.10 Options outstanding at end of period 112 ​ $ 24.41 ​ The total intrinsic value of options exercised for the years ended December 31, 2021, 2020 and 2019 was $ 2.6 million, $ 1.9 million, and $ 1.6 million, respectively. All options outstanding on December 31, 2021 are vested and have aggregate intrinsic value of $ 7.5 million and weighted-average remaining contractual life of 3.0 years. The following table summarizes information about the stock options outstanding on December 31, 2021: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Options Outstanding and Exercisable ​ ​ Number ​ Weighted-Average ​ Weighted- ​ ​ Outstanding ​ Remaining ​ Average Range of Exercise Prices (In 000's) Contractual Life Exercise Price $ 18.77 28 2.75 years ​ $ 18.77 $ 26.32 84 3.10 years ​ $ 26.32 $ 18.77 to $ 26.32 112 3.01 years ​ $ 24.41 ​ Employee Stock Purchase Plan The ESPP, a stockholder-approved plan, provides for the issuance of rights to purchase up to 1,000,000 shares of common stock. In May 2010, stockholders approved an increase from 500,000 to 1,000,000 shares authorized for sale under our ESPP. Employees below the Vice President level are eligible to participate in the ESPP if employed by us for at least 20 hours per week during at least five months per calendar year. Participating employees may contribute up to the lesser of 15 % of their eligible earnings or $ 5,000 during each plan period. Currently, the plan period is six months. The purchase price of common stock purchased under the ESPP is currently equal to the lower of 1) 85 % of the fair market value of our common stock on the commencement date of each plan period or 2) 85 % of the fair market value of our common shares on each plan period purchase date. On December 31, 2021, 0.7 million shares remained available for future issuance under the ESPP. 80 Table of Contents ADVANCED ENERGY INDUSTRIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (continued) (in thousands, except per share amounts) Purchase rights granted under the ESPP are valued using the Black-Scholes-Merton model. As of December 31, 2021, there was $ 0.6 million of total unrecognized compensation cost related to the ESPP that we expect to recognize over a remaining period of five months . The following table summarizes compensation expense related to the ESPP. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Years Ended December 31, ​ 2021 2020 2019 Stock-based compensation expense related to the ESPP ​ $ 1,114 ​ $ 856 ​ $ 475 ​ The fair value of each purchase right granted under the ESPP was estimated on the date of grant using the Black-Scholes-Merton option pricing model with the following assumptions: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Years Ended December 31, ​ ​ 2021 2020 2019 Risk-free interest rates 0.04 % - 0.10 % 0.10 % - 0.18 % % 1.62 % - 2.31 % Expected dividend yield rates — % — % — % Expected term 0.5 years 0.5 years 0.5 years ​ Expected volatility 42.7 % 70.1 % 41.3 % ​ The risk-free interest rate is based on the six-month U.S. Treasury Bill at the time of the grant. Our term is 0.5 years as purchases are made biannually. We utilize our historical experience in determining the volatility of our common stock over the expected term. ​ NOTE 19. COMMITMENTS AND CONTINGENCIES We are involved in disputes and legal actions arising in the normal course of our business. While we currently believe that the amount of any ultimate loss would not be material to our financial position, the outcome of these actions is inherently difficult to predict. In the event of an adverse outcome, the ultimate loss could have a material adverse effect on our financial position or reported results of operations. An unfavorable decision in patent litigation also could require material changes in production processes and products or result in our inability to ship products or components found to have violated third-party patent rights. We accrue loss contingencies in connection with our commitments and contingencies, including litigation, when it is probable that a loss has occurred, and the amount of the loss can be reasonably estimated. We are not currently a party to any legal action that we believe would reasonably have a material adverse impact on our business, financial condition, results of operations or cash flows. ​ 81 Table of Contents ADVANCED ENERGY INDUSTRIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (continued) (in thousands, except per share amounts) NOTE 20. GEOGRAPHIC AND SIGNIFICANT CUSTOMER INFORMATION The following table summarizes sales and percentages of total sales from customers who individually accounted for 10% or more of our sales: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Years Ended December 31, ​ ​ 2021 ​ 2020 ​ 2019 ​ Applied Materials, Inc. ​ $ 296,369 20.4 % ​ $ 248,350 17.5 % ​ $ 164,724 20.9 % Lam Research Corporation ​ 147,385 10.1 % ​ 141,778 10.0 % ​ 88,251 11.2 % ​ The following table summarizes the accounts receivable balances and percentages of the total accounts receivable from customers who individually accounted for 10% or more of accounts receivable: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, ​ December 31, ​ ​ ​ 2021 ​ ​ 2020 ​ Applied Materials, Inc. ​ $ 42,425 17.9 % $ 33,402 14.2 % Nidec Motor Corporation ​ ​ * ​ * % $ 24,344 ​ 10.4 % * Customer’s balance was less than 10% of total Our sales to Applied Materials, Inc. and Lam Research Corporation are reflected in the Semiconductor Equipment and Industrial and Medical market. Our sales to Nidec Motor Corporation are reflected in the Industrial and Medical market. For more information on our markets, see Note 3. Revenue . No other customer accounted for 10% or more of our sales or accounts receivable balances during these periods. The following table summarizes long-lived assets by geographic area: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, ​ 2021 2020 United States ​ $ 255,791 ​ $ 253,115 Asia ​ 275,260 ​ 283,549 Europe ​ 57,144 ​ 60,847 Total ​ $ 588,195 ​ $ 597,511 ​ Long-lived assets include property and equipment, operating lease right-of-use assets , goodwill, and intangible assets. ​ NOTE 21. CREDIT FACILITY In September 2019, in connection with the Artesyn Acquisition Agreement, we entered into a credit agreement ("Credit Agreement") that provided aggregate financing of $ 500.0 million, consisting of a $ 350.0 million senior unsecured term loan facility (the "Term Loan Facility") and a $ 150.0 million senior unsecured revolving facility (the "Revolving Facility" and together with the Term Loan Facility, the “Credit Facility”). In September 2021, we amended the Credit Agreement whereby we borrowed an additional $ 85.0 million, which increased the aggregate amount outstanding under the Term Loan Facility to $ 400.0 million. In addition, we increased the Revolving Facility capacity by $ 50.0 million to $ 200.0 million. Both the Term Loan Facility and Revolving Facility mature on September 9, 2026. 82 Table of Contents ADVANCED ENERGY INDUSTRIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (continued) (in thousands, except per share amounts) The following table summarizes borrowings under our Credit Facility and the associated interest rate. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, 2021 ​ ​ Balance Interest Rate Unused Line Fee Term Loan Facility subject to a fixed interest rate ​ $ 255,719 ​ 1.271 % ​ — Term Loan Facility subject to a variable interest rate ​ ​ 139,281 ​ 0.890 % ​ — Revolving Facility subject to a variable interest rate ​ ​ — ​ 0.890 % ​ 0.10 % Total borrowings under the Credit Agreement ​ $ 395,000 ​ ​ ​ ​ ​ For more information on the interest rate swap that fixes the interest rate for a portion of our Term Loan Facility, see Note 8. Derivative Financial Instruments . The Term Loan Facility and Revolving Facility bear interest, at our option, at a rate based on a reserve adjusted "Eurodollar Rate" or "Base Rate," as defined in the Credit Agreement, plus an applicable margin. For all periods presented, we were in compliance with the Credit Agreement covenants. As of December 31, 2021 and December 31, 2020, we had $ 200.0 million and $ 150.0 million, respectively, available to withdraw on the Revolving Facility. The fair value of the Term Loan Facility approximates the outstanding balance of $ 395.0 million as of December 31, 2021 . The debt obligation on our Consolidated Balance Sheets consists of the following: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, ​ December 31, ​ 2021 2020 Term Loan Facility ​ $ 395,000 ​ $ 323,750 Less: debt issuance costs ​ ​ ( 2,267 ) ​ ​ ( 1,704 ) Total debt ​ ​ 392,733 ​ ​ 322,046 Less current portion of long-term debt ​ ​ ( 20,000 ) ​ ​ ( 17,500 ) Total long-term debt ​ $ 372,733 ​ $ 304,546 ​ Contractual maturities of our debt obligations, excluding amortization of debt issuance costs, are as follows: ​ ​ ​ ​ ​ Year Ending December 31, ​ 2022 ​ $ 20,000 2023 ​ ​ 20,000 2024 ​ ​ 20,000 2025 ​ ​ 20,000 2026 ​ ​ 315,000 Total ​ $ 395,000 ​ Interest expense and unused line of credit fees were recorded in Other income (expense), net in our Consolidated Statements of Operations as follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Years Ended December 31, ​ 2021 2020 2019 Interest expense ​ $ 3,969 ​ $ 5,080 ​ $ 2,994 Amortization of debt issuance costs ​ ​ 822 ​ ​ 519 ​ ​ 186 Unused line of credit fees and other ​ ​ 168 ​ ​ 153 ​ ​ 236 Total interest expense ​ $ 4,959 ​ $ 5,752 ​ $ 3,416 ​ ​ 83 Table of Contents ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE Not applicable. ​