IRVINE, Calif., July 23, 2002 (PRIMEZONE) -- Newport Corporation (Nasdaq:NEWP) today reported financial results for the second quarter and six months ended June 30, 2002, reflecting continued strength in orders and sales to its semiconductor capital equipment customers and other end markets, offset in part by ongoing weakness in its fiber optic communications business.
Three months ended Six months ended
------------------------- -----------------
June 30, March 31, June 30, June 30,
2002 2002 2001 2002 2001
------ ------ ----- ------ ------
Net sales
(in millions) $ 44.0 $ 43.9 $93.7 $ 87.9 $192.7
Earnings (loss)
per diluted share
- Continuing operations $(0.17) $(0.02) $0.37 $(0.19) $ 0.59
- Pro forma from
continuing $(0.03) $(0.02) $0.37 $(0.05) $ 0.79
operations
- Net income (loss),
including discontinued
operations and change
in accounting
principle $(0.19) $(0.50) $0.32 $(0.69) $ 0.50
Orders (in millions) $ 50.5 $ 39.5 $49.7 $ 90.0 $133.0
- Book-to-bill 1.15 .90 .53 1.02 .69
Note: Please see attached financial statements and pro forma
presentation for more information.
Sales from continuing operations for the 2002 second quarter totaled $44.0 million, compared with $43.9 million in the first quarter of 2002 and $93.7 million during the robust market environment of the second quarter of 2001. The company reported a loss from continuing operations for the current second quarter of $6.5 million, or $0.17 per diluted share, compared with income from continuing operations in the corresponding year-earlier period of $13.9 million, or $0.37 per diluted share. The 2002 second quarter results include a pre-tax charge of $6.5 million to write down the company's minority investments in two fiber optic component manufacturers. This charge is in line with the announcement made in April 2002 related to these investments. Excluding these write-downs, the loss from continuing operations totaled $1.0 million, or $0.03 per diluted share. The company's net loss for the 2002 second quarter, which includes the effect of such write-downs and the results of its Industrial Metrology Systems Division, which was discontinued in the first quarter of 2002, totaled $7.4 million, or $0.19 per diluted share, compared with net income of $12.1 million, or $0.32 per diluted share, a year ago.
For the six-month period ended June 30, 2002, Newport reported sales from continuing operations of $87.9 million versus record sales in the first half of 2001 of $192.7 million. The company reported a loss from continuing operations for the first half of 2002 of $7.2 million, or $0.19 per diluted share, compared with income from continuing operations in the corresponding year-earlier period of $22.6 million, or $0.59 per diluted share. Excluding the investment write-downs discussed previously, Newport's loss from continuing operations for the six-month period was $1.8 million, or $0.05 per diluted share, compared with pro forma income from continuing operations of $29.8 million, or $0.79 per diluted share in the first half of 2001. The pro forma income from continuing operations for the first half of 2001 excludes $10.7 million of acquisition and other non-recurring charges recorded during that period. The company's net loss for the first six months of 2002 totaled $26.0 million, or $0.69 per diluted share, versus net income of $19.1 million, or $0.50 per diluted share, for the first half of 2001. The net loss for the first half of 2002 includes the effect of the asset write-down of $6.5 million, the non-cash charge of $14.5 million recorded in the first quarter of 2002 resulting from a write-down of goodwill relating to past acquisitions required by the adoption of Financial Accounting Standard No. 142 and the results of the discontinued operations. Net income for the first half of 2001 includes the $10.7 million of acquisition and other non-recurring charges recorded during that period.
The results from continuing operations exclude Newport's Industrial Metrology Systems Division, which was discontinued in the first quarter of 2002. The division was sold in two separate transactions, both of which were finalized during the second quarter of 2002. Newport recorded a loss from discontinued operations of $4.3 million to reflect the year-to-date segment operating loss and the loss on the sale. The loss from discontinued operations for the comparable period of 2001 was $3.5 million.
New orders from continuing operations in the second quarter of 2002 increased 28% sequentially to $50.5 million from the $39.5 million recorded in the first quarter of 2002, due primarily to increases in orders from semiconductor equipment customers, reflecting the growing momentum in that industry. In the second quarter of 2001, Newport recorded new orders from continuing operations of $49.7 million. For the second consecutive quarter, order cancellations were negligible. The book-to-bill ratio of 1.15 was greater than 1.00 for the first time in six quarters. New orders received in the six months ended June 30, 2002 totaled $90.0 million versus $133.0 million in the first half of 2001.
New orders from semiconductor capital equipment customers showed significant improvement in the second quarter of 2002, totaling $21.6 million, a 44% increase over the $15.0 million recorded in the first quarter of 2002 and a 30% increase over the $16.6 million recorded in the second quarter of 2001, reflecting increased investment in equipment for 300mm wafer sizes, narrower line widths and new materials. New orders from semiconductor customers in the first half of 2002 were $36.6 million, comparable with the $36.8 million recorded in the first half of 2001.
Robert G. Deuster, president and chief executive officer, said: "We are encouraged by the strength in our semiconductor capital equipment segment. Our strong semiconductor orders and broadening customer base reflect Newport's success in getting our products and subsystems designed into our customers' next-generation systems. The strength of Newport's product offerings for the semiconductor equipment market, currently being exhibited at SEMICON West, one of the largest trade shows for this industry, underscores our company's focus on gaining market share and expanding our business with our current semiconductor equipment customers."
New orders from fiber optic communications customers totaled $5.1 million in the second quarter of 2002, a 13% increase over the $4.5 million recorded in the first quarter of 2002, but well below the $11.9 million recorded in the second quarter of 2001, reflecting the continuing weakness in this market. New orders from fiber optic communications customers in the first half of 2002 were $9.5 million, compared with the $48.3 million recorded in the first half of 2001.
Deuster stated: "Although orders were up slightly on a sequential basis and we are maintaining our strong leadership position in the fiber optic communications market, we expect the weakness in this market to continue through 2003 due to continued low levels of investment by telecommunications carriers and existing overcapacity. Due to the longer than expected downturn, we are evaluating our investment and resource needs, as we have in the past, to ensure we cost-effectively serve this developing strategic market opportunity."
New orders from continuing operations from customers in Newport's other end markets - primarily research and aerospace - totaled $23.8 million in the second quarter of 2002, a 19% increase over the $20.0 million recorded in the first quarter of 2002, and a 12% increase over the $21.2 million recorded in the second quarter of 2001. The sequential increase in new orders over the first quarter of 2002 was due primarily to increased orders for automated assembly systems and normal seasonal order patterns. New orders from customers in these end markets in the first half of 2002 were $43.9 million, compared with the $47.9 million recorded in the first half of 2001. New orders from Newport's traditional research and aerospace customers were higher on a year-over-year basis, but this increase was offset by significantly lower orders from industrial customers supporting the telecommunications industry.
Second quarter 2002 sales from continuing operations to semiconductor capital equipment companies were $17.0 million compared with $16.8 million in the first quarter of 2002 and $28.1 million in the second quarter of 2001. Sales from continuing operations to this segment for the six months ended June 30, 2002 were $33.8 million versus $55.2 million in the corresponding period of 2001.
Sales to fiber optic customers in the second quarter of 2002 remained weak, reflecting the continued low levels of capital spending by these companies. Sales from continuing operations to fiber optic customers were $3.6 million in the second quarter of 2002, compared with $5.0 million in the first quarter of 2002. In the second quarter of 2001, before the dramatic industry contraction, Newport recorded sales from continuing operations to fiber optic customers of $36.2 million. For the six months ended June 30, 2002, sales from continuing operations to this segment were $8.5 million, compared with $80.6 million in the first half of 2001.
Second quarter 2002 sales from continuing operations to customers in Newport's other end-markets were $23.4 million, compared with $29.4 million in the second quarter of 2001. For the six months ended June 30, 2002, sales from continuing operations to this segment were $45.6 million, compared with $56.9 million in the first half of 2001. Sales to Newport's research and aerospace customers during the first half of 2002 were higher on a year-over-year basis, but this increase was offset by significantly lower sales to industrial customers supporting the telecommunications industry.
The gross margin from continuing operations in the second quarter of 2002 improved to 35.7%, compared with 32.1% recorded in the first quarter of 2002, yet remained significantly below the 42.0% recorded in the second quarter of 2001. For the six months ended June 30, 2002, gross margin from continuing operations was 33.9% versus 43.6% for the comparable period of 2001. The margin improvement in the second quarter of 2002, compared with the first quarter of 2002, reflected an increase in production activity in the company's semiconductor operations, which resulted in an increase in the absorption of production related overhead. In accordance with generally accepted accounting principles, overhead is initially included in inventory and is charged to cost of sales in future periods as the related inventory is sold. Therefore, the second quarter margin is more favorable and the gross margin for the next several quarters will experience downward pressure. Gross margins for the second quarter and first half of 2001 reflected the positive leverage of the high sales volumes during those periods.
Selling, general and administrative (SG&A) expense from continuing operations for the second quarter of 2002 totaled $12.7 million, which was above the $11.4 million recorded in the first quarter of 2002 and well below the $15.1 million recorded during the corresponding period of 2001. The increase over the first quarter of 2002 was due primarily to the inclusion of the expenses for all of the second quarter from Micro Robotics Systems, Inc., which was acquired on February 15, 2002, versus only half of the first quarter. For the six months ended June 30, 2002, SG&A expense was $24.1 million, compared with $32.6 million in the first half of 2001. The decreases in SG&A expenses compared with the corresponding 2001 periods were due primarily to the benefits of cost reduction measures implemented during the second half of 2001.
Research and development (R&D) expense from continuing operations for the second quarter of 2002 of $6.6 million reflected a slight increase compared with the $6.4 million recorded in the first quarter of 2002 and a decrease from the $7.0 million recorded in the second quarter of 2001. For the six months ended June 30, 2002, R&D expense was $13.0 million, compared with $14.3 million in the first half of 2001. The decreases in R&D expenses compared with the corresponding 2001 periods were attributable primarily to the company's efforts to maximize the focus and efficiency of its R&D efforts.
Interest and other income, net of interest expense, consisting primarily of interest earned on marketable securities, totaled $2.2 million for the second quarter of 2002 compared with $2.5 million in the first quarter of 2002 and $3.5 million in the second quarter of 2001. The decrease on a year-over-year basis is due largely to reduced interest rate levels during the quarter. For the six months ended June 30, 2002, interest and other income, net of interest expense was $4.7 million, compared with $7.4 million in the first half of 2001.
Excluding the tax benefit associated with the $6.5 million asset write-down, the tax rate from continuing operations for the second quarter of 2002 was 31%, unchanged from the first quarter of 2002. The tax rate from continuing operations including the tax benefits of the $6.5 million asset write-down was 19%.
Deuster added: "Newport's balance sheet and cash position remain strong. During the second quarter we generated $15.0 million of cash and ended the quarter with a cash balance of $277.2 million. As we have demonstrated over the past year, we remain committed to streamlining the cost structure of our businesses and generating positive cash flow."
THIRD QUARTER 2002 BUSINESS OUTLOOK
The following statements are based on current expectations. These statements are forward-looking, and actual results may differ materially as a result of the factors more specifically referenced below.
-- The following guidance excludes the impact of the discontinued operations and focuses only on continuing operations.
-- The company currently expects net sales in the third quarter of 2002 to be in the range of $48 million to $51 million.
-- Gross margin for the third quarter of 2002 is expected to be in the range of 32% to 34%.
-- SG&A expenses in the third quarter of 2002 are expected to be slightly lower than the second quarter of 2002, as a result of additional cost reduction actions we anticipate taking.
-- R&D spending is expected to be between $6.2 million and $6.5 million in the third quarter of 2002.
-- The company expects interest and other income, net of interest expense, to be between $2.0 million and $2.3 million depending on interest rates, cash balances, foreign exchange markets, and potential business development activity.
-- The tax rate on continuing operations for the third quarter of 2002 is expected to be consistent with the 31% pro forma tax rate in the second quarter of 2002.
-- The company expects the number of diluted common shares outstanding to be approximately 40 million shares.
-- For the third quarter of 2002, the company expects earnings per share in the range of $0.00 to $0.02.
ABOUT NEWPORT CORPORATION
Newport Corporation is a leading global supplier of advanced technology products and systems to the semiconductor, communications, electronics and research markets. The company provides components and integrated subsystems to manufacturers of semiconductor processing equipment, advanced automated assembly and test systems to manufacturers of communications and electronics devices, and a broad array of high-precision components and instruments to commercial, academic and government customers worldwide. Newport's innovative solutions leverage its expertise in precision robotics and automation, sub-micron positioning systems, vibration isolation and optical subsystems to enhance the capabilities and productivity of its customers' manufacturing, engineering and research applications. Newport is part of the Standard & Poor's Midcap 400 Index and the Russell 2000 Index.
INVESTOR CONFERENCE CALL
Robert G. Deuster, chairman and chief executive officer, and Charles F. Cargile, vice president and chief financial officer, will host an investor conference call today, July 23, 2002 at 5:00 p.m., Eastern time, to review the company's second quarter and six months results. The call will be open to all interested investors through a live audio Web broadcast via the Internet at www.newport.com/Investors and www.companyboardroom.com. Rebroadcast over the Internet will be available through 8:00 p.m., Eastern time, Tuesday, August 6, on both Web sites. A telephonic playback of the conference call will also be available through 8:00 p.m., Eastern time, Tuesday, July 30, 2002. Listeners should call (800) 642-1687 (domestic) or (706) 645-9291 (international) and use Reservation No. 4840668.
FORWARD-LOOKING STATEMENTS
This news release contains forward-looking statements, including without limitation the statements under the heading "Third Quarter 2002 Business 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, 2001 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, risks associated with terrorist activity and resulting economic uncertainty, 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.
Newport Corporation
Consolidated Income Statement
(In thousands, except per share amounts and percentages)
(Unaudited)
Three Months Ended Six Months Ended
June 30, June 30,
2002 2001 % Chg 2002 2001 % Chg
---- ---- ----- ---- ---- -----
Net sales $43,975 $93,679 (53) $87,892 $192,748 (54)
Cost of sales 28,297 54,296 58,125 108,692
------- ------- ------- --------
Gross profit 15,678 39,383 (60) 29,767 84,056 (65)
Selling, general
and administrative
expense 12,699 15,055 24,077 32,551
Acquisition and other
non-recurring charges -- -- -- 10,683
Research and development
expense 6,581 7,049 12,960 14,273
------- ------- ------- --------
Income (loss) from
operations (3,602) 17,279 nm (7,270) 26,549 nm
Income (loss) from
operations % (8.2) 18.4 (8.3) 13.8
Interest and other
income, net 2,164 3,457 4,688 7,391
Asset write-down (6,490) -- (6,490) --
------- ------- ------- --------
Income (loss) from
continuing operations
before income taxes (7,928) 20,736 nm (9,072) 33,940 nm
Income tax provision
(benefit) (1,474) 6,801 (1,829) 11,389
------- ------- ------- --------
Income (loss) from
continuing
operations (6,454) 13,935 nm (7,243) 22,551 nm
Loss from discontinued
operations, net of tax
of $292 and $802 for the
three and six months
ended June 30, 2002,
respectively, and
$820 and $1,989 for the
three and six months
ended June 30, 2001,
respectively (897) (1,793) (4,275) (3,467)
Cumulative effect of a
change in accounting
principle -- -- (14,500) --
------- ------- ------- --------
Net income (loss) $(7,351) $12,142 nm $(26,018) $19,084 nm
Number of shares used
to calculate earnings
(loss) per share:
Basic 37,969 36,354 37,588 36,260
Diluted 37,969 37,849 37,588 37,918
Earnings (loss) per
share, basic:
Income (loss) from
continuing
operations $(0.17) $0.38 nm $(0.19) $ 0.62 nm
Loss from
discontinued
operations, net
of tax $(0.02) $(0.05) nm $(0.11) $(0.09) nm
Cumulative effect
of a change in
accounting
principle -- -- nm $(0.39) -- nm
Net income (loss) $(0.19) $0.33 nm $(0.69) $ 0.53 nm
Earnings (loss) per
share, diluted:
Income (loss) from
continuing
operations $(0.17) $0.37 nm $(0.19) $0.59 nm
Loss from
discontinued
operations, net
of tax $(0.02) $(0.05) nm $(0.11) $(0.09) nm
Cumulative effect
of a change in
accounting
principle -- -- nm $(0.39) -- nm
Net income (loss) $(0.19) $0.32 nm $(0.69) $0.50 nm
nm = not meaningful
Note: Refer to the attached Pro Forma Consolidated Income
Statement for the pro forma presentation.
Newport Corporation
Condensed Consolidated Balance Sheet
(In thousands)
(Unaudited)
June 30, December 31,
2002 2001
----------- -----------
ASSETS
Cash and cash equivalents $ 8,319 $ 7,107
Marketable securities 268,868 274,494
Customer receivables, net 33,054 35,833
Inventories 93,888 96,424
Deferred tax assets 9,941 11,091
Other current assets 15,192 15,172
----------- -----------
Total current assets 429,262 440,121
Long-term deferred tax assets 20,759 22,240
Investments and other assets 9,603 9,000
Property, plant and equipment,
at cost 44,097 45,460
Goodwill, net 55,395 27,056
------ ------
$ 559,116 $ 543,877
=========== ===========
(Unaudited)
June 30, December 31,
2002 2001
----------- -----------
LIABILITIES AND EQUITY
Accounts payable $ 10,509 $ 12,939
Accrued payroll expenses 10,376 12,813
Current portion of long-term debt 2,000 6,189
Deferred revenue 4,608 823
Other current liabilities 12,068 18,039
----------- -----------
Total current liabilities 39,561 50,803
Long-term debt 2,583 3,409
Other liabilities 261 658
Stockholders' equity 516,711 489,007
----------- -----------
$ 559,116 $ 543,877
=========== ===========
Newport Corporation
Pro Forma Consolidated Income Statement
(In thousands, except per share amounts and percentages)
(Unaudited)
Three Months Ended Six Months Ended
June 30, June 30,
2002 2001 % Chg 2002 2001 % Chg
---- ---- ----- ---- ---- -----
Net sales $43,975 $93,679 (53) $87,892 $192,748 (54)
Cost of sales 28,297 54,296 58,125 108,692
------- ------- ------- --------
Gross profit 15,678 39,383 (60) 29,767 84,056 (65)
Selling, general
and administrative
expense 12,699 15,055 24,077 32,551
Research and
development
expense 6,581 7,049 12,960 14,273
------- ------- ------- --------
Income (loss)
from operations (3,602) 17,279 nm (7,270) 37,232 nm
Income (loss)
from operations % (8.2) 18.4 (8.3) 19.3
Interest and other
income, net 2,164 3,457 4,688 7,439
------- ------- ------- --------
Income (loss) from
continuing
operations
before income taxes (1,438) 20,736 nm (2,582) 44,671 nm
Income tax provision
(benefit) (451) 6,801 (806) 14,841
------- ------- ------- --------
Pro forma income
(loss) from
continuing
operations (987) 13,935 nm (1,776) 29,830 nm
Number of shares
used to calculate
pro forma earnings
(loss) per share: 37,969 37,849 37,588 37,918
Pro forma earnings
(loss) per share $(0.03) $0.37 nm $(0.05) $0.79 nm
nm = not meaningful
Note: The above pro forma presentation excludes the impact of (a)
Newport's Industrial Metrology Systems Division, which was
discontinued in the first quarter of 2002, (b) $6.5 million in
non-recurring charges for the three and six months ended June 30,
2002 associated with the write-down of company's minority
ownership investment in two fiber optic component manufacturers,
and (c) $10.7 million in acquisition and other non-recurring
charges recorded in the first quarter of 2001.