IRVINE, Calif., Sept. 10, 2001 (PRIMEZONE) -- Citing continued weakness in its fiber optic communications and semiconductor equipment markets, Newport Corporation (Nasdaq:NEWP) today revised its outlook for the second half of fiscal 2001 and announced an expanded cost reduction program geared toward improving profitability during a period of weak demand that it expects to last at least through the first half of 2002. In total, the cost cutting measures are expected to result in one-time charges in the third quarter of 2001 of approximately $38.5 million, of which approximately $32.5 million will be non-cash in nature. This charge is higher than the $6 million to $10 million level previously announced in July, due to increases in inventory reserves dictated by the lower sales outlook in the fiber optic communications and semiconductor equipment markets and to additional charges associated with manufacturing consolidation and headcount reductions not planned in July. Newport expects these actions to result in annualized savings of between $16 million and $18 million.
Robert G. Deuster, president and chief executive officer, said, "In the two months since our last update, many of our customers in the fiber optic communications and semiconductor equipment markets in the U.S. and Europe have implemented additional restructuring programs and suspended a significant portion of their capital spending plans. We have continued to experience cancellations and push-outs of existing orders and a deterioration of new order flow in our fiber optic communications business as our customers deal with excess manufacturing capacity and severely reduced demand from their customers for components. Additionally, the current weakness in our semiconductor market has been exacerbated by a recent string of order push-outs by several large semiconductor equipment customers relating to products for optical and robotic applications, due to apparent delays in 300 millimeter production tool deployments."
Deuster continued: "Due to the continued decline in our primary markets and the ongoing lack of visibility from our customers, we are taking more aggressive actions to resize our business, consolidate facilities and reduce costs. Our goal is to maximize Newport's profitability by bringing the company's cost structure in line with the difficult market environment and by increasing the efficiency of our operations. At the same time, we continue to invest in research and development of next generation products to further strengthen Newport's leadership position as a provider of powerful manufacturing and automation solutions to the fiber optic communications, semiconductor equipment and general metrology markets. Notwithstanding the current downturn, we remain confident that there will be a continuing need for fiber optic and semiconductor manufacturers to improve their process efficiencies and yields through automation. We believe that the planned actions will help us to emerge from this down-cycle stronger, more profitable and better positioned to serve our customers by offering them products to meet their current and next generation needs."
Workforce and Facilities Reductions
Newport stated that the cost reduction program will include a workforce downsizing of between 350 and 375 employees, including the 180 to 200 layoffs announced and effected in July, which in total constitutes approximately 20 percent of the company's workforce. The increase is due to the fact that the company is now moving more aggressively to reduce its total cost structure to maximize its profitability during and after this market downturn. The workforce reductions primarily involve manufacturing and support personnel within Newport's Fiber Optics and Photonics Division.
In addition, the company said that it plans to streamline its operations by consolidating its Garden Grove, California, San Luis Obispo, California and Longmont, Colorado manufacturing facilities into expanded operations in Irvine, California, and by consolidating all metrology systems manufacturing into the company's CE Johansson operations in Eskilstuna, Sweden. The company expects this consolidation to increase the efficiency of its manufacturing operations, while retaining ample capacity for future growth. Newport plans to complete these consolidations by the second quarter of 2002.
Deuster said, "The recent opening of our dedicated Fiber Optics facility and the pending expansion of our other facilities in Irvine make these planned manufacturing consolidations possible. We have added a number of locations in recent years through acquisitions, and as we look forward, we believe that consolidating these widely separated facilities into much more tightly integrated organizations will enable us to operate them more efficiently and profitably, especially during soft market conditions."
Newport said that the charge includes approximately $23.5 million of adjustments to the carrying value of its inventory to reflect current market conditions and the resulting revisions to its sales forecasts. The estimated total charges associated with the expanded cost reduction program are summarized as follows:
(in millions) Cash Non-Cash Total
------ -------- -------
Severance $ 3.4 $ 0.4 $ 3.8
Facility consolidation costs 2.6 5.6 8.2
Inventory valuation reserves -- 23.5 23.5
Other charges -- 3.0 3.0
Total charges $ 6.0 $ 32.5 $ 38.5
Newport reported that it currently has cash and marketable securities of approximately $265 million and that it expects to generate additional cash from operations over the remainder of the year. Deuster said, "We will focus on effectively utilizing our cash in the coming months and recognize the advantages such a cash reserve affords us." In keeping with its desire to maximize its cash reserves, the company announced that it is canceling its semi-annual $0.01 per share dividend. Deuster continued, "The cash dividend that we have historically paid is quite small, and we believe that we can more effectively use the $0.8 million we are currently paying on an annual basis."
Newport also announced that Dan Petrescu, formerly vice president and general manager of the company's Fiber Optics and Photonics Division, has been reassigned to the newly created position of vice president of photonics business development. Deuster said, "This move was prompted by the changing nature of our fiber optic equipment business and the need for increased capital equipment company management expertise." Robert Deuster will serve as acting general manager of the division while the company seeks a new division general manager.
2001 Third Quarter and Second Half Outlook
Newport said that it now expects revenues for the third quarter to be in the range of $58 million to $62 million, which is $10 million to $14 million below the guidance previously provided. Approximately half of the expected sales reduction stems from recent semiconductor equipment order push-outs, and the remainder is due to lower than expected order conversions in the fiber optic communications market. With this reduction in sales, the company expects third quarter pro forma diluted earnings per share, excluding integration expenses for previously completed acquisitions and charges related to the cost reduction initiatives, to be slightly better than break-even. Including the effects of these non-recurring charges, the company expects to report a third quarter loss of approximately $0.70 per share.
Newport anticipates that sales in the fourth quarter of 2001 will be approximately the same level as the third quarter, and that its fourth quarter pro forma diluted earnings per share, excluding integration expenses for previously completed acquisitions and charges related to the cost reduction initiatives, will be slightly higher than the third quarter as the benefits of the cost reduction actions begin to be realized. Based on its current estimates, Newport expects revenues for the full year 2001 to be between $325 million and $330 million.
Investor Conference Call
Newport will host an investor conference call related to its cost reduction initiatives and outlook today, September 10, 2001, at 5:00 p.m. Eastern Daylight Time. The call will be open to all interested investors through a live audio Web broadcast via the Internet at www.newport.com and www.streetevents.com. Rebroadcast over the Internet will be available through 8:00 p.m., Eastern Daylight Time, Monday, September 24, 2001 on both Web sites. A telephonic playback of the conference call will also be available through 8:00 p.m., Eastern Daylight Time, Monday, September 17, 2001. Listeners should call (800) 633-8284 (domestic) or (858) 812-6440 (international) and use Reservation No. 19692003.
Newport Corporation is a global leader in the design, manufacture and marketing of high precision components, instruments and integrated systems to the fiber optic communications, semiconductor equipment, aerospace and research and industrial metrology markets. The company's innovative products are designed to enhance productivity and capabilities in test and measurement and automated assembly for precision manufacturing, engineering and research applications. Customers include Fortune 500 corporations, technology companies and research laboratories in commercial, academic and government sectors worldwide.
This news release contains forward-looking statements, including without limitation the statements under the heading "2001 Third Quarter and Second Half Outlook" and the statements made by Robert G. Deuster, that are based on current expectations and involve risks and uncertainties. Without limiting the generality of the foregoing, words such as "may," "will," "expect," "believe," "anticipate," "intend," "could," "estimate" or "continue" or the negative or other variations thereof or comparable terminology are intended to identify forward-looking statements. In addition, any statements that refer to expectations, projections or other characterizations of future events or circumstances are forward-looking statements. As discussed in Newport's Annual Report on Form 10-K for the year ended December 31, 2000 and its subsequent SEC reports, assumptions relating to the foregoing involve judgments and risks with respect to, among other things, potential order cancellations and push-outs, potential product returns, future economic, competitive and market conditions, including those in Europe and Asia and those related to its strategic markets, whether its products, particularly those targeting the company's strategic markets, will continue to achieve customer acceptance, the ability of Newport to successfully integrate its acquired and to-be-acquired companies and the contributions of those companies to Newport's operating results, the risks of power interruptions and electricity rate increases and future business decisions, all of which are difficult or impossible to predict accurately and many of which are beyond the control of Newport. Although Newport believes that the assumptions underlying the forward-looking statements are reasonable, any of the assumptions could prove inaccurate and, therefore, there can be no assurance that the results contemplated in forward-looking statements will be realized. In light of the significant uncertainties inherent in the forward-looking information included herein, the inclusion of such information should not be regarded as a representation by Newport or any other person that Newport's objectives or plans will be achieved. Newport undertakes no obligation to revise the forward-looking statements contained herein to reflect events or circumstances after the date hereof or to reflect the occurrence of unanticipated events.