Good morning, ladies and gentlemen. And welcome to Advanced Energy Second Quarter 2010 Conference Call. All lines have been placed on mute to prevent background noise. After the speakers’ remarks, there will be a question-and-answer session. (Operator Instructions) Thank you. I will now turn the call over to Annie Leschin. You may begin the conference.

Thank you, operator, and good morning, everyone. Thank you for joining us this morning on our second quarter 2010 earnings conference call. With me today is Hans Betz, Chief Executive Officer; and Larry Firestone, Executive Vice President and CFO, both of whom will present prepared remarks. By now you should have received a copy of the earnings press release that was issued last night, we also issued a press release announcing the divestiture of our core business last evening, for a copy of either release please visit our website at www.advanced-energy.com or contact us at 970-407-4670. Let me begin by saying during the quarter Advanced Energy will be participating in the Pacific Crest Growth Conference in Vail, Colorado on August 9th, the Deutsche Bank 2010 Technology Conference in San Francisco from September 14th to 16th and the ThinkEquity Growth Conference in New York from September 15th and 16th. We’ll make additional announcements as other events occur. I would like to remind everyone that except for historical financial information contained herein the matters discussed in this conference call contain certain forward-looking statements subject to known and unknown risks and uncertainties that could cause actual results to differ materially from those expressed or implied by such statements. Statements that include the terms believe, expect, plans, objectives, estimates, anticipates, intends, targets, or the like should be viewed as forward-looking and therefore uncertain. Such risks and uncertainties include, but are not limited to, the volatility and cyclicality of the industries we serve, the timing of orders received from our customers, and unanticipated changes in our estimates, reserves, or allowances. These and other risks are described in Form 10-K and 10-Q and other reports filed with the SEC. In addition, we assume no obligation to update the information that we provide you during this conference call, including the third quarter guidance provided during this call and in our press release dated today. Guidance will not be updated after today’s call until our next scheduled quarterly financial release. I now like to turn the call over to Hans Betz, CEO of Advanced Energy.

Good morning, everyone, and thank you for joining us. This is a very exciting time for at Advanced Energy. We are seeing the results of our strategic efforts as the acquisition, divestiture and product line expansion lie perfectly with the improvement in market conditions. We took two very significant strategic steps in the second quarter with the addition of PV Powered and we yesterday announced divestiture of our Aera Flow Controller business. First, laid out in 2005 our long-term vision of establishing AE as the premier supplier of power conversion devices has taken a giant leap forward this quarter. The combination of these transitions has set the stage for AE to drive significant growth in all of its existing markets as well as new markets and we are even more focused on power conversion. Advanced Energy is currently the market leader in power conversion for thin-film markets that we serve. Now in combination with PV Powered we host the number two market position in the fast growing U.S. inverter markets. Based on the momentum we are seeing in the inverter pipeline for the second half of 2010, the lead position is definitely within reach. Exceeding 2011, our goal is to become number one in the three phase U.S. inverter markets and to continue to increase our market decision in Europe and other geographies as we expand our footprint throughout the globe. We have taken the first step (inaudible) with our first acquisition in several years PV Powered. That acquisition was accretive in the first quarter of compliance operations. We’re also extending to take advantage of several regional opportunities in various markets. In the inverter markets we see Ontario, Canada as an area of opportunity with its healthy exceeding turf. We have already incorporated a Canadian subsidiary in Canada and will…

Thank you, Hans, and thank you all (inaudible) on our second quarter earnings call. I would like to cover several topics today. Along with the financial results for the second quarter, I’m going to discuss the reporting of our financial as it relates to the sale of our Aera Mass Flow Controller business. In conjunction with earnings press release today, we are pleased to announce the pending sale of Aera Mass Flow Controller business to Hitachi Metals Limited. While our financials tables in the press release, exclude the flow business, we have provided a reconciliation table in the press release, presenting the revenue, cost and expenses of the Aera Mass Flow Controller business for the first two quarters of 2010, with the exception of silicon financial metrics in which we call out our flow business, the results we discuss will exclude the adjustments for the divestiture. For clarification purposes, the financial information provided on the Aera Mass Flow Controller business is in accordance with discontinued operation accounting and only includes those costs related to specific items or resources that are discreet to the business and will be eliminate on closing. Even though the divestiture transaction has not yet been completed, now that the definitive agreement has been signed, the assets related to the flow business are held for sale and consequently any operations related to those assets will be considered discontinued and all the revenue costs and expenses will be reported on a net basis and discontinued operations below the net income from continuing operations line on the income statement. Now for the second quarter financial results, as Hans discussed, we had a sequence of many extremely positive events and strategies take hold this quarter. The same holds true in our financial results. We posted new records in several areas,…

(Operator Instructions) Our first question comes from the line of Bill Ong from Merriman. Your line is open. Bill Ong – Merriman: Yeah. Good morning. Congratulations on a very solid quarter.

Thanks, Bill. Bill Ong – Merriman: Sure. In U.S. inverter market, what states will be driving your growth in the second half and what states, you expect to be the larger opportunity in 2011?

As far as the growth is concerned, the main driver for the inverter business is of course, U.S. But we are having strong orders out of Europe as well. Bill Ong – Merriman: Hans, [you return to] what particular states are driving from the near-term growth. I know that California is obviously one of the states, but perhaps you can give me more color within the individual states?

It’s hard to me to say at this point. I think what we see is of course, California which is well known for being the most aggressive. We see something in New Jersey now, in particular to PV Powered.

Yeah. I mean, Bill, we really don’t have that kind of granularity to give that kind of perspective outlook for you. Bill Ong – Merriman: Okay. That’s fair. And then I realize that revenue levels are still, are fairly small and the base numbers but what type of sustainable growth rates can be expect in inverter business, as well as in the solar and Solaron both going forward?

I mean on the inverter business, the CAGRs – The market CAGRs that we are looking at – I mean on the utility side and these are overall CAGRs are in the 85% range, so they are pretty huge in the commercial side, the CAGRs are in the 40 to 50% range. So we are seeing and actually, we are pretty fortunate, especially with the timing of the PV Powered Acquisition, is we are hitting market in the U.S. with complete suite of products, at a time when the US market is growing very fast. But as far as forecasting or giving you a number on sustainable growth rates, I will point you back to the CAGRs on the overall market expectation. Bill Ong – Merriman: Okay. Thank you very much. Nice job, gentlemen.

Thanks.

Your next question comes from the line of Colin Rusch from Thinkequity. Your line is open. Colin Rusch – Thinkequity: Thank so much for taking the question. Can you break out solar capital equipment sales for us, specific number and bookings for the quarter?

We don’t break out the bookings that way. I think we broke out the revenue numbers for you on the call. But you are talking about the solar panel revenues? Colin Rusch – Thinkequity: Just the capital equipment, I think it was lumped in with the some of the other thin-film numbers or is that, the number you quoted was all solar.

For glass and solar? Colin Rusch – Thinkequity: Yeah.

The glass part was $1.6 million and the solar part was $14 million. Colin Rusch – Thinkequity: Perfect. Thanks a lot. As you move more into the power management, are you expecting to integrate volt, voltage right through reactive power, any volt market built in your large scale inverters?

Yeah, yeah. It’s on our road map and I think that’s important for the next generation of inverter or things, because one of the key elements and one of the driving forces for the next generation is how to stabilize the grid and in order to do that you have to exactly do, what you have mentioned. Colin Rusch – Thinkequity: And when do you think those products might hit the market? Is that a 12-month kind of program or is it more of a 24 to 36 months type of program?

No, no, it’s a 12-month. Colin Rusch – Thinkequity: Excellent. And in the smaller orders, we are seeing a movement afoot to adjust you UL 1741 and IEEE 1547 Standards, are you guys involved in those efforts and what are you expecting in terms of seeing those adjustments?

At this point in time I cannot answer this question. Colin Rusch – Thinkequity: Okay. Great. And then one final one from me, in terms of the geographic breakdown in Europe, do you guys have a sense of where the inverters are ending up? You are already selling direct into the Czech Republic or any of the Eastern European countries or you’re looking mostly at Germany and Italy right now?

Now, to give you a color for that, not the exact number, I think, the bulks goes into Czech Republic and we have strong orders out of Germany as well. We have not yet in Italy. Colin Rusch – Thinkequity: Perfect. Thank a lot, guys. Congratulations.

Thanks.

Your next question comes from the line of Edwin Mok from Needham & Company. Your line is now open. Edwin Mok – Needham & Company: Question on you divestitures, just curious, well, two things, one is logistically do you expect to get the deal done within this quarter, the third quarter of 2010 and second thing is how do you come to the $44 million price?

Yeah. We will close the deal in this quarter. And because of the fact, there’s no problem on the HSR sides, so we expect that there are no major hiccups in order to close in this quarter. The $44 million price tag, I mean it is, obviously, negotiation settlement.

We did it. We actually, we worked with – We mentioned in the press release, we worked with Savvian, GCA Savvian and we worked up the valuation on the business and arrived at that, Hitachi Metals. Edwin Mok – Needham & Company: Okay. That’s fair. And then besides the MSC product, you guys also have some thermal instrumentation and some other pressure products that you sell to, within the market and your focus seem more on power conversion right now, any thought about those product lines? Would that be on the market? How do we think about that?

Of course, I think we have determined instrumentation. We don’t have any kind of pressure sensors. So this is a small very self standing independent business, which serves the semiconductor key customers and at this point in time, we have no intention and no plans to sell it off. Edwin Mok – Needham & Company: I see. Great. And then Larry, just a quick question on optics. If I take your guidance, it sounds like optics are increased to may be around $37million in that range, I wonder how much of that is amortization and intangibles and is that the cover on rate, we should expect going beyond the September quarter?

Yeah. The amortization of intangibles is about $900,000 and that’s the level that we should expect going forward. Edwin Mok – Needham & Company: And then what about just the overall mix level?

Yeah. The overall OpEx, the growth will be in the $37 million range and that will be a sustainable level for us as well, since we’ve combined PV Powered into the overall mix. Edwin Mok – Needham & Company: Great. And then just one last question on your guidance of $130 million to $140, for your, very strong guidance and congratulations on that. If I take your comment on the inverter which you said, over $30 million of revenue in the third quarter, you still have probably an increment of $15 to $20 million from other business line. I was wondering if you can kind of give us some color, in terms of where do you think is driving that growth. Is it semi, is it – I know the solar equipment grew a lot sequentially last quarter or any color will be helpful? Thank you.

Yeah. That’s really – in the thin-film market. That’s really across the board. We see it in semi-flat panel, mix of renewables which is glass and silver and also on the industrial side. Edwin Mok – Needham & Company: Great. That’s all I have. Thank you.

All right.

Your next question comes from the line of Jim Covello from Goldman Sachs. Your line is open. Kate Kotlarsky – Goldman Sachs: Good morning. This is Kate Kotlarsky for Jim Covello. Quick question on your lead time, I was wondering if you’ve seen any meaningful changes in your lead times, particularly in the end part, Hans had mentioned some capacity constraints that you are now facing, so we hope you could gives us a little bit of color on that.

The Solaron lead times are still probably in the 10 to 12 week kind of range. PV Powered lead times are in the 4 to 6 lead time range. So it hasn’t been a big shift in that.

As far as the capacity constraints are concerned, I think we have enough measures put in place in order to cope with that. And this is going to happen in Q3 and Q4 but reaction to that is in place. Kate Kotlarsky – Goldman Sachs: And I know you had mentioned, your plan on expanding capacity in Fort Collins, can you help us quantify how much capacity is going to expand there?

Yeah. We are actually doubling the capacity in Fort Collins from 130 Solarons per quarter, approximately up to 260 as we see shipping beyond 130 in Q3. Kate Kotlarsky – Goldman Sachs: Okay. That’s very helpful and maybe the last question. Larry, do you have an update on the target model kind of given, along the moving parts with PV Powered, now, the divestiture of the mass flow controller business?

Yeah. The target model stay in the same and we think, we’re heading to achieve it right now. We got – As you mentioned, we have some moving parts, so we are going to let the business settle down and then we’ll take a look at it going forward. Kate Kotlarsky – Goldman Sachs: Okay. Thank you.

Your next question comes from the line Krish Sankar from Bank of America, Merrill Lynch. Your line is open. Paul Thomas– Bank of America/Merrill Lynch: Good morning. This is Paul Thomas for Krish Sankar. I want to confirm just on the semi-side that you said that it sounds like the tailwind we’ve been getting from inventory restocking, you guys considered that to be pretty much over and now we should expect the semi-business to move pretty much along the shipment growth that we see from the OEMs.

Yeah. That’s true. But what we see so far, the inventory has not been replenished totally. Because what we see though is that they are starting to replenish the inventory. On the other side because of the situation in the semiconductor market, which is mainly driven by the fact that being announced cannot be build at this point in time, because of shortage of lithography, we see and we expect that the semiconductor growth, by bringing new [path online] next year is continuing to grow through 2011. Paul Thomas – Bank of America/Merrill Lynch: Okay. So may be not completely done, but a little less of the tailwind than it’s been in the past.

Correct. Paul Thomas – Bank of America/Merrill Lynch: And then on the PV Powered side, I guess you said a little more than $10 million in the quarter or so, I guess just doing the straight math, you get to kind of low end in the $40-$50 million range that you guys had talked about in the past. You are comfortably saying that you are, you think you’ll be higher than that low end for the year or be still in the range?

I think we see some similar pattern as we see in our Solaron business. The second half is dramatically stronger. So from that vantage point, I think we expect at least that they fulfill their business plan. It may even come to the point that they exceed that. Paul Thomas – Bank of America/Merrill Lynch: Okay. All right. That’s all I got. Thank you.

Thank you.

Your next question comes from the line of Timothy Arcuri from Citi. Your line is open. Timothy Arcuri – Citi: Hi, hi. Couple of things, as I look at the semiconductor revenue, it’s a little bit light relative to the last peak. And if you look at some of the, the customer shipments, they are all shipping close to the prior peak and you’re still 30% below. I’m still wondering whether there’s something going on in the semi-business, may be for the entire component supply chain or if there is some customer specifics going on there.

Yeah. Our prior peak was $60 million in the quarter. So we are running about 10% off peak right now for Q2. So, I’m expecting that to grow. Of course, the numbers will get adjusted in Q3 as we remove the flow business. We are running close to peak in semi right now. Timothy Arcuri – Citi: I guess based on your former disclosure, I had something more in the mid70s but we can talk about that. What was the flow business at last peak?

I don’t have that number off, the top of my head. I’d have to dig that one out for you. Timothy Arcuri – Citi: Got it. And then, clearly, sounds like the inverter business as you move into December probably osrt of moderates a little bit because you have a big slug coming in Q3. So I’m sort of wondering, I know you don’t want to give guidance that far out. But, how do we think about the moderation of the inverter business as we head into December. So, what sort of portion of the September revenues maybe is the result of push-out from June because folks couldn’t get product?

Yeah. We actually see strong growth through the end of the year in the inverter business. So I don’t think we’re seeing really much moderation at all in the second half of this year. Timothy Arcuri – Citi: All right. So you think December revenues in the inverter business will be up, actually?

Yeah. Timothy Arcuri – Citi: Great. Thanks.

Your next question comes from the line of CJ Muse from Barclays Capital. Your line is open. CJ Muse – Barclays Capital: Hello.

Yeah. Go ahead. CJ Muse – Barclays Capital: Yeah, sir. Good morning. I guess, first question, how do you expect your percentage of semi product revenues and portfolio to change overtime given your outlook for an inverter business. And then given this outlook, how should we think about on your gross margin?

Well, as I stated in my written script, I think what we see in terms of growth in the inverter business we could assume that within the next two years we have a business of the inverter side, which is equally or even bigger than the semiconductor has been. So therefore I think what we expect is a very clear balance between semi and non-semi business. CJ Muse – Barclays Capital: And what the gross margin looks like in that change of mix?

The gross margins in the inverter business right now are similar to semi but growing. So we’ve, as the business grows, we’ll see the additional inverter revenues being accretive to gross margin.

And as we discussed earlier, I think, they are becoming more and more functionality into the inverter and therefore, we expect that there is a higher growth margin with these new functionalities. CJ Muse – Barclays Capital: That’s helpful. And then, trying to baseline your core semi-business XMSC, what was MSC in 2009 to try to get through growth here in 2010?

I don’t have that. I’ll have to get back to you with that -- on that one, CJ. CJ Muse – Barclays Capital: Okay. And I guess, lastly, can you just highlight the timing of your decision to sell MSC today, what drove your thinking there?

Yeah. We looked -- we engaged an investment banker early this year and looked at marketing the business and just seeing what was out there. But, and then we found the right partner, we found a great partner, one that’s going to take care of the business and grow it and also take care of the customers. So, we’ve certainly got momentum around that once we’ve got engaged. CJ Muse – Barclays Capital: Okay. Thank you.

All right.

Your next question comes from the line of Neal Waggoner from Stephens. Your line is open. Neal Waggoner – Stephens: Hi, guys. This is Neal. Thanks for taking my questions. Larry, sounds like gross margins for PV Powered little better than you’re expecting in the second quarter, what drove that outperformance? And then secondly, what’s the timeline for getting PV Powered gross margin up to the corporate inverter gross margin average and what is in the leverage you think you guys can pull to get there?

Yeah. Neal, they did really well with the concentration of commercial versus residential. 70% of what they delivered was commercial, so that drove -- that mix drove higher gross margin for us in the quarter, so outstanding performance from the team. On the -- from the standpoint of gross margin leverage, where we’re going to go combined company, right now we’re running PV Powered as an independent subsidiary while they get to the earn-out period. But there is really nice, I’d say significant opportunities in the material costs, in the building material as we combine and integrate PV Powered that we get into 2011, opportunity, for many certain points those opportunity for other components to really drive their costs down. So, I would say, the gross margin increased in a meaningful way is more than a 2011 story than it is immediate. Neal Waggoner – Stephens: Okay. And what were gross margins in the quarter for PV Powered? Can you tell us that?

Yeah. We didn’t break that out for you guys. Neal Waggoner – Stephens: Okay. And then, Hans, just one last question. You mentioned some delays in shipments in the second quarter in the inverter business due to lack of panel availability. What was the impact in the quarter and do you expect that trend to continue in the second half of the year?

I think, it has a good side of the coin and the bad side. The good side is that, it drives, of course, a business into the panel and the equipment for building those panel primarily in China and I think capacity will catch up until the end of the year, so we do not expect any major delays going forward. Neal Waggoner – Stephens: Okay. Thanks, guys.

Yeah.

Your next question comes from line of Weston Twigg from Pacific Crest Securities. Your line is open. Weston Twigg – Pacific Crest Securities: Hi. Just a couple of quick questions. The inverters that you have letters of intent for $84 million, I think, is that all shippable by the end of the year?

It’s $8 million. Weston Twigg – Pacific Crest Securities: Oh! $8 million.

$8 million. Weston Twigg – Pacific Crest Securities: A difference.

Yeah. And then the letters of intent, Wes, are -- they need to close into purchase orders before they can head out the door, so we’re building the order right now. We are just characterizing that in our order pipeline. They’ll need to turn in the hard orders before we can move on. Weston Twigg – Pacific Crest Securities: Okay. The 1 megawatt inverter, Solaron product you have new timing on that?

Yeah. It’s a story which goes probably in the second half of 2011. and I think, the reason why it’s being delayed as, it’s two fold. First, we have seen other opportunities in order to get into the European business, which we put a higher priority on. And on the second point is, we don’t see at this point in time not that much immediate need for 1 megawatt and 1 megawatt will be much more important, if we see that the installation goes into the 10-megawatt plus or 20-megawatt plus, which is not fix. Weston Twigg – Pacific Crest Securities: Okay. That’s helpful. And then, just one more question on Canadian inverter operations. Do you have any projection about how much revenue that might contribute beginning next year?

It’s hard, what we can see is that there is round about 1.5 gigawatt which is a last one, Ontario. But because there are some incumbents there already, so this is combined with the growth in the Ontario market in general, but at the same time market share gain is always hard to make a prediction when we gain the market share and therefore, when we have a certain revenue stream out of that. Weston Twigg – Pacific Crest Securities: Okay. Thank you.

Thank you. Weston Twigg – Pacific Crest Securities: Yeah.

(Operator Instructions) Your next question comes from line of Edwin Mok from Needham & Company. Your line is open. Edwin Mok – Needham & Company: Yeah. Thanks. Just a follow-up. But just a few things, one, Larry, you have previously said that, your tax rate next year is expected to be 12% to 15% assuming your revenue would be at about $500 million. With the sell of MSC product, does that outlook changed?

It may change a little bit as PV Powered is going to be a domestic tax payer. So we’ll give further guidance on that, as we go forward. But it would, probably, won’t change materially but it may change a little bit. Edwin Mok – Needham & Company: I see. That’s fair. And then just quickly on the MSC business, if I look at that business, $50 million this quarter and also wondering, how do we think about that business in the first quarter, do you expect to have similar growth rate as your semi-business or ex-inverter business or is that slower growing business?

I’m not sure I understand the question, Ed. Are you talking about the flow business? Edwin Mok – Needham & Company: Yeah. I’m talking about the flow business, yeah.

The flow business generically is always coupled with the semi-business.

Yeah.

But 100% at one correlation but like it’s…

And that’s the lion’s share of our revenues.

Right.

But we gave, if you’re, is the question around adjusting your Q1 up to 2010 numbers? Edwin Mok – Needham & Company: No. I guess, what I’m trying to get to is, if you didn’t sell MSC business, you’d have slower sequential growth in the first quarter versus what you have guided, right, is that what you’re seeing?

In the third quarter? Edwin Mok – Needham & Company: In the third quarter, I call it?

Oh! Sorry, I thought you said first quarter. Edwin Mok – Needham & Company: I’m not. Sorry about that, yeah.

As if we didn’t sell it, but we have -- it would, yeah, if you wanted to do the math, it probably would run in the third quarter similar to what it was running, probably a little bit north of what it was running in the second quarter. Edwin Mok – Needham & Company: Great. And then, lastly on PV Powered, you guys have previously guide $40 to $50 million, and you talked about it being dramatically stronger than second half. Is that also and then you made, ultimately compensate that you expect sequential growth in the fourth quarter. It’s PV Powered growth costs that part of the business also have this consumer cost profile or do you expect Solaron to be bigger drive because obviously Solaron is really big in the third quarter. Do you expect PV Powered to have also sequential growth and come into fourth quarter as well?

Yeah. Let me just clarify, the $40 to $50 million range that we gave was a post-closing range, so that would have been eight-month perspective. So we have the first two months under our belt. And as far as growth rates go, I mean, PV have been growth profile gross and PV Powered is in the same kind of position that AE is with Solaron. Second half of the year, I mean, both addressing the U.S. market, the U.S. commercial market and 3-phase is unfolding and getting a lot of momentum right now. So they’re going to have the same growth profile, it’s going to be second half of the year strong as well and so combined for AE, it’s a really strong second half for inventors. Edwin Mok – Needham & Company: Great. Sorry, just to squeeze one more in. So on one of your competitor yesterday have guided for the semi-business to be more like flat in the third quarter sequentially from the second quarter. Sounds like you guys believe your business can grow. Is it more function of the power business having better growth profile or why would you think there would be a difference there?

I think, if you look at the situation of the power business, it has a different profile, that’s one point. And the other point is, it depends always on the mix of the equipment being shipped by our OEM customers. Because nobody is on all of these systems, so depending on the mix when it’s being shipped it may shift back and forth a bit. Edwin Mok – Needham & Company: Great. That’s all I have. Thank you.

Okay. Thank you.

Your next question comes from the line of Timothy Arcuri from Citi. Your line is open. Timothy Arcuri – Citi: Larry, just last question for me. If I try to sort of fit the guidance and if I normalize for the inclusion of Aera in June but the exclusion in the guidance, you have to come up with something like $35 to $40 million worth of incremental revenue quarter-over-quarter, and you sort of indicated that maybe $20 of that comes from PV Powered or from the inverted business. So I’m wondering of the other $15 to $20 million, is that more on the semi-side or where is that going to come from?

Yeah. What we said is, we think that, the inverter business is actually going to be, at least $30 million in Q3. So, that’s certainly going to be a strong contributor. And then the rest of it is really spread. I think, we talked about semi being a growth component flat panel display, glass and solar and then also the industrial products. They are all really targeted for some pretty good growth in Q3. Timothy Arcuri – Citi: All right. So there’s not any one slug that’s going to up, that $20, it sort of is sprinkled throughout the other businesses?

Yeah. Timothy Arcuri – Citi: Got it.

There are no further questions at this time. I turn the call back over to Mr. Larry Firestone for any closing remarks.

Thank you, operator, and thank you everyone for joining. This was certainly an exciting quarter and we are looking forward to see you at all of our future events. Thank you.

This concludes today’s conference call. You may now disconnect.