What changed in this filing

/stocks — the workspaceLOADING

Item 8. Financial Statements and Supplementary Data

2023-02-17 compared with 2022-03-16 · 359 added, 348 removed, 715 unchanged (50% of the section changed)

1 unchanged sentence

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

Report of Ernst & Young LLP, Independent Registered Public Accounting Firm (PCAOB ID No.

Report of Independent Registered Public Accounting Firm (PCAOB ID No.

Consolidated Balance Sheets

11 unchanged sentences

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.

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, 2022, 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 February 17, 2023 expressed an unqualified opinion thereon.

Basis for Opinion

10 unchanged sentences

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 critical audit matter communicated below is a matter arising from the current period audit of the 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 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

Inventory Valuation

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.

As more fully described in Notes 1 and 10 to the consolidated financial statements, the Company has inventories with a carrying value of $376.0 million as of December 31, 2022.

The Company adjusts its inventory carrying value for estimated excess or obsolescence equal to the difference between the cost of inventory and the estimated net realizable value based on projected end-user demand, which is determined by considering historical usage, customer orders and forecast, and qualitative considerations such as market and economic conditions.

Auditing management’s inventory valuation was complex and involved a high degree of judgment because a critical factor in determining excess and obsolete inventory requires management to determine projected end-user demand, which could be impacted by future market and economic conditions.

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.

We obtained an understanding, evaluated the design and tested the operating effectiveness of internal controls related to the Company’s process for evaluating inventory valuation inclusive of controls related to the development of and management’s review of the underlying data, including historical usage and the estimation of projected end-user demand.

We evaluated certain inventories for excess or obsolescence by testing key inputs, including historical usage and projected end-user demand, and by testing the completeness and accuracy of the underlying data supporting management’s inventory valuation assessment.

Specifically, we compared the Company’s projected end-user demand to historical sales and inventory usage.

We assessed historical trends of management’s estimates and performed analyses to evaluate management’s excess and obsolete inventory estimates and underlying assumptions.

We also performed a retrospective review of the prior year valuation assumptions, including inventory write-off history.

/s/ Ernst & Young LLP

1 unchanged sentence

Denver, Colorado

March 16, 2022

February 17, 2023

Report of Independent Registered Public Accounting Firm

To the Stockholders and the Board of Directors of Advanced Energy Industries, Inc.

Opinion on Internal Control Over Financial Reporting

We have audited Advanced Energy Industries, Inc.’s internal control over financial reporting as of December 31, 2022, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) (the COSO criteria).

In our opinion, Advanced Energy Industries, Inc.

(the Company) maintained, in all material respects, effective internal control over financial reporting as of December 31, 2022, based on the COSO criteria.

As indicated in the accompanying Management’s Annual Report on Internal Control over Financial Reporting, management’s assessment of and conclusion on the effectiveness of internal control over financial reporting did not include the internal controls of SL Power Electronics, which is included in the 2022 consolidated financial statements of the Company and constituted 2% and 3% of total and net assets, respectively, as of December 31, 2022 and 3% and 3% of revenues and net income, respectively, for the year then ended.

Our audit of internal control over financial reporting of the Company also did not include an evaluation of the internal control over financial reporting of SL Power Electronics.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheets of the Company as of December 31, 2022 and 2021, 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, 2022, and the related notes and our report dated February 17, 2023 expressed an unqualified opinion thereon.

Basis for Opinion

The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting included in the accompanying Management’s Annual Report on Internal Control over Financial Reporting.

Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit.

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 audit in accordance with the standards of the PCAOB.

Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects.

Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances.

We believe that our audit provides a reasonable basis for our opinion.

Definition and Limitations of Internal Control Over Financial Reporting

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles.

A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company;

(2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company;

and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements.

Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

/s/ Ernst & Young LLP

Denver, Colorado

February 17, 2023

ADVANCED ENERGY INDUSTRIES, INC.

3 unchanged sentences

Cash and cash equivalents

Marketable securities

Accounts and other receivable, net

Income taxes receivable

Other current assets

2 unchanged sentences

Operating lease right-of-use assets

Deposits and other assets

Intangible assets, net

Deferred income tax assets

LIABILITIES AND STOCKHOLDERS’ EQUITY

1 unchanged sentence

Accounts payable

Income taxes payable

Accrued payroll and employee benefits

7 unchanged sentences

Pension benefits

Deferred income tax liabilities

Uncertain tax positions

Long-term deferred revenue

Other long-term liabilities

4 unchanged sentences

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

37,429 and 37,589 issued and outstanding at December 31, 2022 and December 31, 2021, respectively

Additional paid-in capital

Accumulated other comprehensive loss

Accumulated other comprehensive income (loss)

Retained earnings

Advanced Energy stockholders' equity

Advanced Energy Industries, Inc.

stockholders' equity

Noncontrolling interest

11 unchanged sentences

Amortization of intangible assets

Restructuring expense

Restructuring

Total operating expenses

26 unchanged sentences

Change in fair value of cash flow hedges

Minimum benefit retirement liability

Minimum pension benefit retirement liability

Comprehensive income

9 unchanged sentences

Stockholders'

Income (Loss)

Balances, December 31, 2019

Adoption of new accounting standards

Stock issued from equity plans

Stock-based compensation

Other comprehensive income (loss)

Share repurchases

Other comprehensive income

Balances, December 31, 2020

Adoption of new accounting standards

Stock issued from equity plans

Stock-based compensation

Share repurchase

Share repurchases

Dividends declared ($ 0.10 per share)

Other comprehensive income

2 unchanged sentences

Stock-based compensation

Share repurchase

Share repurchases

Dividends declared ($ 0.10 per share)

Other comprehensive income

Acquisition of non-controlling interest

Balances, December 31, 2022

12 unchanged sentences

(Gain) loss from discount on notes receivable

Gain on sale of central inverter service business

Loss on disposal of assets

(Gain) loss on disposal and sale of assets

Changes in operating assets and liabilities, net of assets acquired

6 unchanged sentences

CASH FLOWS FROM INVESTING ACTIVITIES:

Net proceeds from sale of marketable securities

Receipt (issuance) of notes receivable

Proceeds from sale of assets

Purchases of property and equipment

16 unchanged sentences

Cash paid for income taxes

Cash received for refunds of income taxes

The accompanying notes are an integral part of these consolidated financial statements.

2 unchanged sentences

(in thousands, except per share amounts)

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.

SUMMARY OF OPERATIONS AND SIGNIFICANT ACCOUNTING POLICIES AND ESTIMATES

Advanced Energy Industries, Inc., a Delaware corporation, and its consolidated 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 plasma power solutions enable innovation in complex semiconductor and thin film plasma processes such as dry etch and deposition.

Our broad portfolio of high and low voltage power products are used in a wide range of applications, such as semiconductor equipment, industrial production, medical and life science equipment, data centers computing, networking, and telecommunications.

We also supply related sensing, controls, and instrumentation products primarily for advanced measurement and calibration of power and temperature for multiple industrial markets.

Our network of global service support centers provides repair services, calibration, conversions, upgrades, refurbishments, and used equipment to companies using our products.

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.

Disposed and Discontinued Operations for more information.

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.

Principles of Consolidation — Our consolidated financial statements include the Company and its 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.

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.

We reclassified certain prior period amounts to conform to the current year presentation.

Use of Estimates in the Preparation of the Consolidated Financial Statements — The preparation of our consolidated financial statements in conformity with U.S.

4 unchanged sentences

acquisitions and asset valuations, and

taxes and other provisions.

income taxes and other provisions.

Segment Information — Our Chief Executive Officer is the chief operating decision maker who reviews financial information on a consolidated basis for purposes of allocating resources and evaluating financial performance.

Accordingly, we determined we operate in a single reporting segment.

Foreign Currency Translation — The functional currency of certain of our foreign subsidiaries is the local currency.

4 unchanged sentences

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.

Subsequent changes in exchange rates for foreign

ADVANCED ENERGY INDUSTRIES, INC.

1 unchanged sentence

(in thousands, except per share amounts)

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.

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.

For derivatives designated as cash flow hedges, changes in fair value are recorded to accumulated other comprehensive income (loss) on the Consolidated Balance Sheets and are reclassified into earnings when the underlying forecasted transaction affects earnings.

We reassess the probability of the underlying forecasted transactions occurring on a quarterly basis.

8 unchanged sentences

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.

We have various assets and liabilities measured at fair value on a recurring basis, including:

Foreign currency forward contracts

We estimate the fair value based on the movement in the forward rates of foreign currency cash flows in which the hedging instrument is denominated.

Interest rate swaps

We determine the fair value by estimating the net present value of the expected cash flows based on market rates and the associated yield curves, adjusted for non-performance credit risk, as applicable.

Contingent consideration associated with business combinations

We determine the fair value by estimating the net present value of the expected cash flows based on the probability of expected payment.

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.

ADVANCED ENERGY INDUSTRIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (continued)

(in thousands, except per share amounts)

Our non-financial assets, which primarily consist of property and equipment, operating lease right-of-use assets, 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.

6 unchanged sentences

Cash and cash equivalents consist primarily of short-term money market instruments and demand deposits with insignificant interest rate risk.

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.

3 unchanged sentences

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.

Concentrations of Credit Risk — Financial instruments with potential 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.

2 unchanged sentences

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.

We maintain a credit approval process and we make 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.

1 unchanged sentence

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.

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.

1 unchanged sentence

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.

Inventories — Inventories are valued at the lower of cost (using the first-in, first-out method) or net realizable value.

General market conditions, as well as our design activities, can cause certain products to become obsolete and we adjust our inventory carrying value for estimated excess and obsolescence equal to the difference between the cost of inventory and the estimated net realizable value based on projected end-user demand, which is determined by considering historical usage, customer orders and forecast, and qualitative considerations such as market and economic conditions.

The determination of projected end-user demand requires the use of estimates and assumptions related to

ADVANCED ENERGY INDUSTRIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (continued)

(in thousands, except per share amounts)

projected unit sales for each product.

Demand for our products can fluctuate significantly.

4 unchanged sentences

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.

Business Combinations — 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.

1 unchanged sentence

Transaction related costs associated with business combinations are expensed as incurred.

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.

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.

19 unchanged sentences

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.

ADVANCED ENERGY INDUSTRIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (continued)

(in thousands, except per share amounts)

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.

3 unchanged sentences

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.

Deferred debt issuance costs associated with the revolving credit facility are recorded within 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.

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.

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.

Revenue Recognition — Net sales consist of revenue from the sale of products and support services.

We recognize substantially all revenue at a point in time when we satisfy our performance obligations.

Typically, this occurs on shipment of goods because, at that point, we transfer control to our customer.

The transaction price is based upon the standalone selling price.

3 unchanged sentences

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.

We expense the 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.

Repairs covered under our standard warranty do not generate revenue.

We recognize substantially all non-warranty revenue upon completion of service because that is the point in time when we satisfy our performance obligation.

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 that would allow us to project the estimated service usage pattern at this time.

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.

3 unchanged sentences

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.

Disposed and Discontinued Operations for more information.

The warranty expense accrued

ADVANCED ENERGY INDUSTRIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (continued)

(in thousands, except per share amounts)

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.

Discontinued Operations for more information.

Warranties for more information on our warranties from continuing operations.

2 unchanged sentences

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.

We utilize the Black-Scholes Merton option pricing model to estimate the fair value of stock options and Employee Stock Purchase Plan (“ESPP”) purchase rights.

This model requires various estimates and assumptions, including:

Fair value of the common stock

We use the market closing price of our common stock, as reported on the NASDAQ Exchange.

Expected term

The expected term is based on historical experience and represents the period we expect the stock option or ESPP purchase right to be outstanding.

Expected volatility

We derive the expected volatility from the historical volatility of our common stock over a period equivalent to the expected term.

Risk -free interest rate

We obtain the risk-free interest rate from the U.S.

Treasury yield curve in effect at the time of grant for zero coupon U.S.

Treasury notes with maturities approximately equal to the expected term of the stock-based award.

Expected dividend

The expected dividend is based on the assumption that future dividend payments will follow recent historical practice.

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.

We record stock-based compensation expense for awards with time-based vesting conditions on a straight-line basis over the requisite service period.

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.

2 unchanged sentences

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

Because the probability of achievement is a factor in the 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.

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.

ADVANCED ENERGY INDUSTRIES, INC.

1 unchanged sentence

(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.

12 unchanged sentences

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.

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.

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 that the tax is incurred as a period expense only.

We have elected to account for GILTI in the year that 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.

5 unchanged sentences

Resolution of these uncertainties in a manner inconsistent with our expectations could have a significant impact on our results of operations and financial condition.

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.

ADVANCED ENERGY INDUSTRIES, INC.

1 unchanged sentence

(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").

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.

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 address diversity and inconsistency related to the recognition and measurement of contract assets and contract liabilities acquired in a business combination.

ASU 2021-08 requires an acquirer to recognize and measure contract assets and contract liabilities acquired in a business combination in accordance with ASC 606, Revenue from Contracts with Customers.

We adopted ASU 2021-08 on a prospective basis effective January 1, 2022.

The adoption will impact business combinations subsequent to that date and require recognition and measurement of acquired contract assets and liabilities in accordance with ASC 606.

Specifically, we will account for the related revenue contracts of the acquiree as if we originated the contracts.

Adoption of ASU 2021-08 did not impact acquired contract assets or liabilities from prior business combinations.

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):

("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.

The FASB issued the following ASUs:

Issuance Date

Reference Rate Reform (Topic 848):

Facilitation of the Effects of Reference Rate Reform on Financial Reporting

Reference Rate Reform (Topic 848):

December 2022

Reference Rate Reform (Topic 848):

Deferral of the Sunset Date of Topic 848

This collective guidance provides optional expedients and exceptions for applying U.S.

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.

The above accounting standards will be in effect through December 31, 2024.

Our Credit Facility (refer to Note 21.

3 unchanged sentences

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.

We are currently assessing the potential timing of transitioning to a replacement interest rate benchmark for our Credit Facility (refer to Note 21.

Credit Facility ) and do not expect the above guidance to materially impact our consolidated financial statements.

SL Power Electronics Corporation

On April 25, 2022, we acquired 100 % of the issued and outstanding shares of capital stock of SL Power Electronics Corporation (“SL Power”), which is based in Calabasas, California.

We accounted for this transaction as a business combination.

This acquisition added complementary products to Advanced Energy’s medical power offerings and extends our presence in several advanced industrial markets.

ADVANCED ENERGY INDUSTRIES, INC.

1 unchanged sentence

(in thousands, except per share amounts)

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 .

Intangible Assets for additional details.

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

Total fair value of consideration transferred

Less cash acquired

Total purchase price

The following table summarizes the preliminary values of the assets acquired and liabilities assumed:

Total fair value of purchase consideration

We allocated the purchase consideration to the assets acquired and liabilities assumed based on their estimated fair values as of the acquisition date, with the excess allocated to goodwill.

Current assets and liabilities, net

1 unchanged sentence

Operating lease right-of-use assets

Deferred taxes and other liabilities

Intangible assets

Goodwill (deductible for tax purposes)

Other non-current assets

Total assets acquired

Other non-current liabilities

Operating lease liability

Total liabilities assumed

Total fair value of net assets acquired

A summary of the intangible assets acquired, amortization method, and estimated useful lives follows:

Straight-line

The following table summarizes the intangible assets acquired:

Customer relationships

1 unchanged sentence

Straight-line

To estimate the fair value of intangible assets, we used a multi-period excess earnings approach for the customer relationships and a relief from royalty approach for developed technology.

Goodwill represents SL Power’s assembled workforce and the expected operating synergies from combining operations.

We expect approximately 85 % of goodwill to be deductible for tax purposes.

We are still evaluating the fair value for the assets acquired and liabilities assumed.

Accordingly, the purchase price allocation presented above is preliminary.

We included SL Power’s results of operations in our consolidated financial statements from the date of acquisition.

The following table summarizes SL Power’s contribution to sales in our Consolidated Statements of Operations.

Year Ended December 31,

ADVANCED ENERGY INDUSTRIES, INC.

1 unchanged sentence

(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.

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.

We accounted for this transaction as a business combination.

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

Total fair value of consideration transferred

Cash paid at closing

Cash paid for indemnity holdback released in June 2022

Less cash acquired

Total purchase price

The following table summarizes the final values of the assets acquired and liabilities assumed:

Total fair value of purchase consideration

We allocated the purchase consideration to the assets acquired and liabilities assumed based on their estimated fair values as of the acquisition date, with the excess allocated to goodwill.

Current assets and liabilities, net

3 unchanged sentences

Goodwill (deductible for tax purposes)

Total assets acquired

Other non-current liabilities

Operating lease liability

Total liabilities assumed

Total fair value of net assets acquired

A summary of the intangible assets acquired, amortization method, and estimated useful lives follows:

Amortization Method

Straight-line

1 unchanged sentence

Straight-line

ADVANCED ENERGY INDUSTRIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (continued)

(in thousands, except per share amounts)

Nature of goods and services

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 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.

Deferred revenue

Straight-line

Goodwill represents TEGAM’s assembled workforce and the expected operating synergies from combining operations.

We included TEGAM’s results of operations in our consolidated financial statements from the date of acquisition.

Intangible Assets Acquired

In January 2021, we acquired certain intangible assets related to the manufacturing of fiber optic sensing equipment for a total purchase price of $ 6.5 million in cash.

These intangible assets have an estimated useful life of five years .

Intangible Assets for additional details.

ADVANCED ENERGY INDUSTRIES, INC.

2 unchanged sentences

Disaggregation of Revenue

The following tables present additional information regarding our revenue:

The following tables presents additional information regarding our revenue:

Revenue by Market

Years Ended December 31,

3 unchanged sentences

Telecom and Networking

Revenue by Region

Years Ended December 31,

North America

Revenue by Significant Countries

Years Ended December 31,

United States

North America (excluding U.S.)

We attribute sales to individual countries and regions based on the customer’s ship to location.

Apart from the United States, no revenue attributable to any individual country exceeded 10% of our total consolidated revenues in 2022.

Revenue by Category

Years Ended December 31,

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.

Remaining Performance Obligations

Our remaining performance obligations primarily relate to customer purchase orders for products we have not yet shipped.

We expect to fulfill the majority of these performance obligations within one year.

ADVANCED ENERGY INDUSTRIES, INC.

1 unchanged sentence

(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.

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.

We defer revenue associated with sales of extended inverter warranties and include them within customer deposits and other 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.

2 unchanged sentences

Years Ended December 31,

Income from continuing operations, before income taxes

The provision for income taxes from continuing operations is summarized as follows:

3 unchanged sentences

Total provision for income taxes

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.

Our effective tax rate increased in 2022 compared to 2021, primarily driven by a change in tax law from the 2017 Tax Cuts and Jobs Act related to the capitalization of R&D expenses, as it impacts the net U.S.

tax on foreign operations, that went into effect in January 2022, offset by the benefit of earnings in foreign jurisdictions which are subject to lower tax rates.

Our effective tax rate decreased in 2021 compared to 2020, primarily driven by one-time tax benefits due to reductions in uncertain tax positions and increased tax credits.

ADVANCED ENERGY INDUSTRIES, INC.

18 unchanged sentences

Significant deferred tax assets and liabilities consist of the following:

Years Ended December 31,

Deferred tax assets

Stock-based compensation

Net operating loss and tax credit carryforwards

1 unchanged sentence

Pension obligation

Excess and obsolete inventory

Accrued restructuring

Deferred revenue

Employee bonuses and commissions

Depreciation and amortization

Operating lease liabilities

8 unchanged sentences

Net deferred tax assets

Of the $ 38.7 million and $ 37.3 million net deferred tax asset on December 31, 2022 and 2021, respectively, $ 48.1 million and $ 47.2 million, respectively, are included as a net non-current deferred tax asset within other assets on the Consolidated Balance Sheets.

$ 9.4 million and $ 9.9 million, respectively, are included as a net non-current deferred tax liability within other long-term liabilities on the Consolidated Balance Sheets.

ADVANCED ENERGY INDUSTRIES, INC.

1 unchanged sentence

(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, 2022, we have recorded a valuation allowance on $ 2.9 million of our U.S.

10 unchanged sentences

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.

Much of the foreign loss carryforwards, 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.

3 unchanged sentences

The benefit of the tax holiday on earnings per diluted share was $ 0.52 and $ 0.35 for 2022 and 2021, 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.

As of December 31, 2022, we have undistributed earnings in certain foreign subsidiaries of approximately $ 33.3 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:

We account for uncertain tax positions by applying a minimum recognition threshold to tax positions before recognizing these positions in the consolidated financial statements.

The following table provides a reconciliation of our total gross unrecognized tax benefits, which we include within other long-term liabilities on the Consolidated Balance Sheets:

Years Ended December 31,

7 unchanged sentences

Balance at end of period

The unrecognized tax benefits of $ 7.5 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 $ 0.6 million and $ 0.4 million of accrued interest and penalties on December 31, 2022

ADVANCED ENERGY INDUSTRIES, INC.

1 unchanged sentence

(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.

and 2021, respectively.

With few exceptions, we are no longer subject to federal, state, or foreign income tax examinations by tax authorities for years before 2019.

The Inflation Reduction Act (“IRA”) and CHIPS and Science Act (“CHIPS Act”) were both enacted in August 2022.

The IRA introduced new provisions including a 15% corporate alternative minimum tax for certain large corporations that have at least an average of $1 billion adjusted financial statement income over a consecutive three-tax-year period and a 1% excise tax surcharge on stock repurchases.

The CHIPS Act provides a variety of incentives associated with investments in domestic semiconductor manufacturing and related activities.

The IRA and the CHIPS Act are applicable for tax years beginning after December 31, 2022 and had no benefit to our consolidated financial statements for any of the periods presented, and we do not expect them to have a direct material impact on our future results of operations, financial condition, or cash flows.

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.

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:

The following table summarizes our earnings per share:

Years Ended December 31,

8 unchanged sentences

Diluted earnings per share

Share Repurchase

Share Repurchases

To execute the repurchase of shares of our common stock, we periodically enter into stock repurchase agreements.

2 unchanged sentences

(in thousands, except per share amounts)

Amount paid to repurchase shares

Amount paid or accrued to repurchase shares

Number of shares repurchased

Average repurchase price per share

Remaining authorized by Board of Directors for future repurchases as of period end

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.

ADVANCED ENERGY INDUSTRIES, INC.

1 unchanged sentence

(in thousands, except per share amounts)

There were no shares repurchased from related parties.

Repurchased shares were retired and assumed the status of authorized and unissued shares.

In July 2022, the Board of Directors approved an increase to the share repurchase plan that increased the remaining amount authorized for future repurchases to a maximum of $ 200.0 million with no time limitation.

At December 31, 2022, the remaining amount authorized by the Board of Directors for future share repurchases was $ 199.3 million .

FAIR VALUE MEASUREMENTS

3 unchanged sentences

Certificates of deposit

Marketable securities

Other current assets

Interest rate swaps

Deposits and other assets

Total assets measured at fair value on a recurring basis

Contingent consideration

Other current liabilities

Total liabilities measured at fair value on a recurring basis

December 31, 2021

1 unchanged sentence

Certificates of deposit

Marketable securities

Other current assets

Interest rate swaps

Total assets measured at fair value on a recurring basis

1 unchanged sentence

Other current liabilities

Contingent consideration

Other long-term liabilities

Interest rate swaps

Other long-term liabilities

Total liabilities measured at fair value on a recurring basis

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.

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.

ADVANCED ENERGY INDUSTRIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (continued)

(in thousands, except per share amounts)

DERIVATIVE FINANCIAL INSTRUMENTS

2 unchanged sentences

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.

Typically, we execute these derivative instruments for one-month periods and do not designate them as hedges;

however, they do partially offset the economic fluctuations of certain 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.

Both are included as a component of other income (expense),

ADVANCED ENERGY INDUSTRIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (continued)

(in thousands, except per share amounts)

net in our Consolidated Statements of Operations.

As of December 31, 2022 and 2021, there were no foreign currency forward contracts outstanding.

2 unchanged sentences

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.

This is comprised of an 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 (see Note 21.

Credit Facility ), which is 75 basis points at current leverage ratios.

The following table summarizes the notional amount of our qualified hedging instruments:

Interest rate swap contracts

The following table summarizes the amounts recorded in Accumulated other comprehensive loss on the Consolidated Balance Sheets for qualifying hedges.

Interest rate swap contracts - gains (losses)

Fair Value Measurements for information regarding fair value of derivative instruments.

The following table summarizes the amounts recorded in accumulated other comprehensive income (loss) on the Consolidated Balance Sheets for qualifying hedges.

Interest rate swap contract gains

Fair Value Measurements for information regarding the 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.

ADVANCED ENERGY INDUSTRIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (continued)

(in thousands, except per share amounts)

We manage this credit risk by reviewing counterparty creditworthiness on a regular basis and limiting exposure to any single counterparty.

ACCOUNTS AND OTHER RECEIVABLE, NET

4 unchanged sentences

Total receivables, net

"Amounts billed, net"

represents amounts invoiced to customers in accordance with our terms and conditions and reflects an allowance for expected credit losses.

“Amounts billed, net” represents amounts invoiced to customers in accordance with our terms and conditions.

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.

“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:

We anticipate invoicing and collecting substantially all unbilled receivables within the next 12 months.

ADVANCED ENERGY INDUSTRIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (continued)

(in thousands, except per share amounts)

The following table summarizes the changes in expected credit losses related to receivables:

Balance at beginning of period

7 unchanged sentences

Finished goods

ADVANCED ENERGY INDUSTRIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (continued)

(in thousands, except per share amounts)

PROPERTY AND EQUIPMENT, NET

2 unchanged sentences

Life (in years)

Machinery and equipment

Buildings, machinery, and equipment

Computer equipment, furniture, fixtures, and vehicles

3 unchanged sentences

Property and equipment, net

ADVANCED ENERGY INDUSTRIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (continued)

(in thousands, except per share amounts)

The following table summarizes property and equipment by geographic area:

United States

Europe and other

The following table summarizes depreciation expense.

4 unchanged sentences

Balance at beginning of period

Measurement period adjustments to purchase price allocations

Measurement period adjustments

Additions from acquisition

17 unchanged sentences

Trademarks and other

At December 31, 2021, the weighted average remaining useful life of intangibles subject to amortization was approximately 9.8 years.

At December 31, 2022, the weighted average remaining useful life of intangibles subject to amortization was 9.1 years.

Amortization expense related to intangible assets was as follows:

7 unchanged sentences

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:

In the fourth quarter of 2022, management approved a restructuring plan (the “2022 Plan”), which is expected to further improve our operating efficiencies and drive the realization of synergies from business combinations by consolidating our operations, optimizing our factory footprint including moving certain production into our higher volume factories, and reducing redundancies.

We anticipate the 2022 Plan will be substantially completed, and associated expenses will be incurred by 2024.

In 2018, we committed to a restructuring plan (the “2018 Plan”) to optimize our manufacturing footprint and to improve our operating efficiencies and synergies related to business combinations.

We incurred severance costs primarily related to the transition and exit of our facility in Shenzhen, China and actions associated with synergies related to the acquisition of Artesyn Embedded Technologies, Inc.’s embedded power business (“Artesyn”).

This plan is substantially complete with the final closure of our Shenzhen facility expected in early 2023.

The table below summarizes the charges related to our restructuring plans:

Years Ended December 31,

6 unchanged sentences

Total restructuring charges

Our restructuring liabilities are included in other accrued expenses in our Consolidated Balance Sheets and related primarily to severance and associated costs.

Our restructuring liabilities are included in other accrued expenses in our Consolidated Balance Sheets.

Changes in restructuring liabilities were as follows:

Balance at beginning of period

December 31, 2020

Costs incurred and charged to expense

Costs paid or otherwise settled

Effects of changes in exchange rate

Balance at end of period

Our sales agreements include customary product warranty provisions, which range from 12 to 24 months after shipment.

Foreign currency translation

December 31, 2021

Costs incurred and charged to expense

Costs paid or otherwise settled

Foreign currency translation

December 31, 2022

ADVANCED ENERGY INDUSTRIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (continued)

(in thousands, except per share amounts)

Our sales agreements include customary product warranty provisions, which generally range from 12 to 24 months after shipment.

We record the estimated warranty obligations cost when we recognize revenue.

4 unchanged sentences

Balance at beginning of period

Warranty acquired in business combinations

Additions from acquisitions

Increases to accruals

2 unchanged sentences

Balance at end of period

ADVANCED ENERGY INDUSTRIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (continued)

(in thousands, except per share amounts)

Components of operating lease cost were as follows:

7 unchanged sentences

Present value of lease liabilities

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,

The following tables present additional information about our lease agreements:

Weighted average remaining lease term (in years)

Weighted average discount rate

ADVANCED ENERGY INDUSTRIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (continued)

(in thousands, except per share amounts)

Year Ended December 31,

5 unchanged sentences

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.

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 year ended December 31, 2022 we based our profit-sharing contribution on matching 100 % of employee contributions up to 3 % of compensation plus an additional match of 50 % on the next 2 % of compensation.

For the years ended December 31, 2021 and 2020 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, 2022, 2021, and 2020 we recognized total defined contribution plan costs of $ 4.5 million, $ 3.1 million, and $ 2.6 million, respectively.

ADVANCED ENERGY INDUSTRIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (continued)

(in thousands, except per share amounts)

Defined Benefit Plan

Defined Benefit Plans

We maintain defined benefit pension plans for certain of our non-U.S.

employees in the U.K., Germany, and Philippines.

employees in the United Kingdom, 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 base these assumptions on historical experience as well as current facts and circumstances.

We use an actuarial analysis to measure the expense and liability associated with pension benefits.

1 unchanged sentence

As such, for all periods presented, all related expenses are reported in discontinued operations in the Consolidated Statements of Operations.

ADVANCED ENERGY INDUSTRIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (continued)

(in thousands, except per share amounts)

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:

2 unchanged sentences

Interest cost

Actuarial (gain) loss

Actuarial gain

Benefits paid

2 unchanged sentences

Fair value of plan assets, beginning of year

Actual return on plan assets

Expected return

Contributions

Benefits paid

Actuarial gain

Actuarial gain (loss)

Translation adjustment

7 unchanged sentences

Net periodic pension cost

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:

7 unchanged sentences

Insurance Contracts

ADVANCED ENERGY INDUSTRIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (continued)

(in thousands, except per share amounts)

December 31, 2021

Multi-Asset Fund

Diversified Growth Fund

1 unchanged sentence

Insurance Contracts

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.

The diversified 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).

Expected future payments during the next ten years for our defined benefit pension plans are as follows:

Year Ending December 31,

ADVANCED ENERGY INDUSTRIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (continued)

(in thousands, except per share amounts)

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").

The Board of Directors Compensation Committee administers our stock plans.

As of December 31, 2022, we had two active stock-based incentive compensation plans:

the 2017 Omnibus Incentive Plan (“the 2017 Plan”) and the 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.

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.

The following table summarizes information related to our stock-based incentive compensation plans:

December 31, 2022

Shares available for future issuance under the 2017 Omnibus Incentive Plan

Shares available for future issuance under the Employee Stock Purchase Plan

ADVANCED ENERGY INDUSTRIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (continued)

(in thousands, except per share amounts)

Stock-based Compensation Expense

2 unchanged sentences

Years Ended December 31,

Equity classified awards

Liability classified awards

Stock-based compensation expense

3 unchanged sentences

Certain RSUs contain performance-based or market-based vesting conditions in addition to the time-based vesting requirements.

RSUs are generally granted with a grant date fair value based on the market price of our stock on the date of grant.

Changes in our unvested RSUs were as follows:

3 unchanged sentences

RSUs outstanding at end of period

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.

The total intrinsic value of RSUs converted to shares for the years ended December 31, 2022, 2021 and 2020 was $ 13.6 million, $ 19.2 million, and $ 9.2 million, respectively.

As of December 31, 2022, there was $ 35.3 million of total unrecognized compensation cost, net of expected forfeitures, related to non-vested RSUs, that we expect to recognize through December 2025, with a weighted-average remaining vesting period of 1.3 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 .

ADVANCED ENERGY INDUSTRIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (continued)

(in thousands, except per share amounts)

Changes in our stock options were as follows:

1 unchanged sentence

Exercise Price

Contractual Life

Options outstanding at beginning of period

Options granted

Options exercised

Options outstanding at end of period

Options vested at end of period

The total intrinsic value of options exercised for the years ended December 31, 2022, 2021 and 2020 was $ 2.6 million, $ 2.6 million, and $ 1.9 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

Weighted-Average

Range of Exercise Prices

Contractual Life

Exercise Price

$ 18.77 to $ 26.32

Options outstanding on December 31, 2022 have aggregate intrinsic value of $ 4.6 million.

As of December 31, 2022, there was $ 1.8 million of total unrecognized compensation cost, net of expected forfeitures, related to the unvested options that we expect to recognize over a remaining period of 2.2 years.

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.

The ESPP, a stockholder-approved plan, provides for the issuance of rights to purchase up to 1.5 million shares of common stock.

Most employees are eligible to participate in the ESPP if employed 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.

1 unchanged sentence

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.

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, 2022, there was $ 0.5 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,

Stock-based compensation expense related to the ESPP

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:

Estimating Fair Value

We estimated the fair value of each stock option and ESPP purchase right on the grant date using the Black-Scholes-Merton option pricing model with the following assumptions:

Year Ended December 31,

Stock Options

Risk-free interest rate

Expected dividend yield rate

Expected term

Expected volatility

Weighted average grant date fair value of options granted

Years Ended December 31,

3 unchanged sentences

0.10 % - 0.18 %

Expected dividend yield rates

Expected dividend yield rate

Expected term

Expected volatility

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.

ADVANCED ENERGY INDUSTRIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (continued)

(in thousands, except per share amounts)

COMMITMENTS AND CONTINGENCIES

2 unchanged sentences

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.

An unfavorable decision in intellectual property 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 intellectual property 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.

ADVANCED ENERGY INDUSTRIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (continued)

(in thousands, except per share amounts)

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,

Applied Materials, Inc.

Lam Research Corporation

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:

Applied Materials, Inc.

Nidec Motor Corporation

* 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.

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:

United States

Long-lived assets include property and equipment, operating lease right-of-use assets , goodwill, and intangible assets.

SIGNIFICANT CUSTOMER INFORMATION

During the year ended December 31, 2022, Applied Materials, Inc.

and Lam Research Corporation accounted for 20 % and 14 %, respectively, of our total revenue compared to 20 % and 10 %, respectively, of our total revenue during the year ended December 31, 2021 and 18 % and 10 %, respectively, of our total revenue during the year ended December 31, 2020.

As of December 31, 2022 and 2021, the account receivable balance from Applied Materials, Inc.

accounted for 18 % of our total accounts receivable.

No other customer’s account receivable exceeded 10% of our total accounts receivable in the periods presented.

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 2019, in connection with the acquisition of Artesyn, 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.

1 unchanged sentence

Both the Term Loan Facility and Revolving Facility mature on September 9, 2026.

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.

2 unchanged sentences

Unused Line Fee

Term Loan Facility subject to a fixed interest rate

Term Loan Facility subject to a fixed interest rate due to interest rate swap

Term Loan Facility subject to a variable interest rate

1 unchanged sentence

Total borrowings under the Credit Agreement

ADVANCED ENERGY INDUSTRIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (continued)

(in thousands, except per share amounts)

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.

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 following table summarizes our availability to withdraw on the Revolving Facility.

Available capacity on Revolving Facility

In addition to the available capacity on the Revolving Facility, prior to the maturity date of our Credit Agreement, we may also request an increase to the financing commitments in either the Term Loan Facility or Revolving Facility by an aggregate amount not to exceed $ 250.0 million at identical terms to our existing Credit Facility.

The fair value of the Term Loan Facility approximates the outstanding balance of $ 375.0 million as of December 31, 202 2.

1 unchanged sentence

Term Loan Facility

debt issuance costs

debt discount

Less current portion of long-term debt

11 unchanged sentences

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 8. Financial Statements and Supplementary Data