IRVINE, Calif., Oct. 17, 2001 (PRIMEZONE) -- Newport Corporation (Nasdaq:NEWP) today reported sales of $62.9 million and pro forma earnings per share of $0.02 for the third quarter of 2001, results that are slightly better than the company's previous guidance.
Pro forma results for the third quarter of 2001 exclude one-time charges of approximately $39.1 million, comprised of inventory revaluations of $24.4 million, facility closure costs of $8.2 million, employee severance of $3.4 million, and write-down of impaired assets of $3.1 million. The charges are related to the company's previously announced cost reduction programs, which are designed to improve the company's profitability both during and after the current period of weak demand, which the company expects to last at least through the first half of 2002.
Including the effects of these non-recurring charges, the company reported a net loss of $25.5 million, or $0.70 per share, for the third quarter of 2001. Including the effects of all non-recurring charges from both the first and third quarters of 2001, the company recorded a net loss of $6.4 million, or $0.18 per share, on net sales of $268.5 million for the nine months ended September 30, 2001.
Net sales for the quarter ended September 30, 2001 totaled $62.9 million, a decrease of 15 percent from $73.6 million in the prior-year period. Results in the third quarter reflect a 54 percent year-over-year decrease in sales to the fiber optic communications market to $14.6 million, compared with $31.5 million in the prior-year third quarter. This decrease was partially offset by a 33 percent increase in sales to the semiconductor capital equipment market to $22.5 million, compared with $16.9 million in the third quarter a year ago. Net sales to the company's other end markets totaled $25.8 million, an increase of 2 percent from $25.2 million a year ago. Net sales for the first nine months of 2001 increased 43 percent to $268.5 million, compared with $187.2 million for the corresponding period last year.
New orders received in the third quarter equaled $38.6 million, compared with $55.2 million in the second quarter of 2001. During the third quarter, the company recorded order cancellations of approximately $7.8 million, resulting in net orders of approximately $30.8 million. In addition to the cancellations, the company noted that the shippable backlog was further reduced by $4.9 million for orders that were rescheduled for delivery beyond the next 12 months.
Orders from customers in the fiber optic communications market were $6.2 million in the third quarter of 2001, compared with $11.9 million in the second quarter of 2001, and $48.7 million in the prior-year third quarter. Orders from customers in the semiconductor capital equipment market were $7.0 million in the third quarter of 2001, compared with $16.8 million in the second quarter of 2001 and $35.2 million in the prior-year third quarter. Orders from customers in Newport's other end markets were $25.4 million in the third quarter of 2001, compared with $26.5 million in the second quarter of 2001 and $29.6 million in the prior-year third quarter.
"Despite the sluggish environment in our key end markets, results for the third quarter were slightly better than we anticipated in early September," said Robert G. Deuster, chairman and chief executive officer. "As we have said for the last few quarters, orders from our fiber optic communications customers are slow due to excess manufacturing capacity and severely reduced demand from their own customers for components. At the same time, the current weakness in our semiconductor equipment business has been exacerbated by order push-outs by several of our large semiconductor equipment customers relating to products for optical and robotic applications, which we believe is due to delays in 300-millimeter tool deployments. We expect these conditions to continue into 2002. Accordingly, we have moved aggressively to bring Newport's cost structure in line with the difficult market environment and increase the efficiency of our operations."
The company's cost reduction measures, announced in July and September, are currently being implemented and include the following:
-- Adjustments of approximately $24.4 million to the carrying value of inventory to reflect current market conditions and resulting revisions to sales forecasts. -- Consolidation of manufacturing facilities in Garden Grove, California, San Luis Obispo, California and Longmont, Colorado, into Newport's expanded operations in Irvine, California, and consolidation of all metrology systems manufacturing into the company's CEJohansson operations in Eskilstuna, Sweden. The consolidations are expected to be completed by the second quarter of 2002. -- Workforce downsizing of approximately 400 employees or 20 percent of total headcount. Headcount has already been reduced by approximately 230 people. The remaining reductions will occur as the plant consolidations are completed.
"These actions are designed to maximize Newport's profitability during the current market downturn and then also once the current cycle reverses," Deuster added. "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 these actions will help us emerge from this down-cycle stronger and better positioned to serve our customers by offering them products to meet their current and next-generation needs."
The estimated total charges associated with the cost reduction actions are summarized as follows:
(in millions) Cash Non-Cash Total Inventory valuation reserves $ -- $24.4 $24.4 Facility consolidation costs 2.5 5.7 8.2 Severance 3.1 0.3 3.4 Other charges -- 3.1 3.1 Total charges $5.6 $33.5 $39.1
Excluding the effects of these one-time charges, gross margin in the third quarter of 2001 was 35.0 percent compared with 44.4 percent in the prior-year third quarter, reflecting significantly lower absorption of fixed overhead due to the sharp decline in net sales.
Selling, general and administrative (SG&A) expense for the third quarter of 2001, including the $14.1 million in one-time charges, totaled $30.3 million. On a pro forma basis excluding the one-time charges, SG&A expense was $16.2 million, or 25.9 percent of sales, versus $14.2 million, or 19.3 percent of sales, in the third quarter of 2000. Sequentially, pro forma SG&A expense decreased $2.0 million from the second quarter of 2001 primarily due to the lower sales as well as the effects of the cost reduction actions identified and implemented in July.
Research and development (R&D) expense for the third quarter of 2001 increased 19 percent year-over-year to $7.7 million, or 12.2 percent of sales, compared $6.4 million, or 8.8 percent of sales in the third quarter of 2000. Sequentially, R&D expense decreased $0.5 million, or 7 percent, from the second quarter of 2001.
Interest and other income, net of interest expense, consisting primarily of interest earned on marketable securities, totaled $3.1 million for the third quarter of 2001, unchanged from the third quarter of 2000. The tax rate for the third quarter was 33 percent versus a pro forma tax rate of 34 percent in the third quarter last year. The pro forma tax rate for the 2000 period reflects the additional tax provision on the earnings attributable to Kensington Laboratories, Inc. for which a tax provision was not recorded due to Kensington's S-Corp income tax status.
Deuster added: "Newport's balance sheet and cash position remain very strong. The company now has $268.4 million in cash and marketable securities, which allow us to continue to invest, internally and through acquisitions, in important automation and productivity technology to meet our customers' ever-increasing needs for greater throughput and lower cost."
EXPANDED 2001 FOURTH QUARTER AND FULL-YEAR 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 company anticipates that revenues for the fourth quarter of 2001 will be in the range of $55 million to $58 million. For the full year 2001, revenues are expected to be in the range of $324 million to $327 million.
-- Gross margin for the fourth quarter of 2001 is expected to be approximately 33 to 34 percent.
-- SG&A expenses, excluding one-time charges, are expected to be down slightly from the $16.2 million recorded in third quarter of 2001. The company expects one-time charges of approximately $0.5 million to $1.0 million related to certain cost reduction initiatives and final acquisition integration costs not accruable at September 30, 2001. For the full year, SG&A expenses, excluding one-time charges, are expected to be approximately 22 percent of sales.
-- R&D spending is expected to be between $7.0 million and $7.5 million. in the fourth quarter of 2001. For the full year, R&D spending is expected to be approximately 10 percent of sales.
-- The company expects interest and other income, net of interest expense, to be between $3.2 million and $3.6 million in the fourth quarter of 2001, depending on interest rates, cash balances, foreign exchange markets, and potential business development activity.
-- The tax rate for the fourth quarter of 2001 and the full year is expected to be approximately 33 percent.
-- The company expects the number of diluted common shares outstanding to remain essentially flat at approximately 37.6 million for the fourth quarter. Actual diluted shares may vary depending on share price trends and option grant and exercise activity.
-- For the fourth quarter, diluted earnings per share, excluding non-recurring charges, are expected to be approximately at the break-even level despite the sequentially lower sales output due to savings generated from the cost reduction initiatives.
ABOUT NEWPORT CORPORATION
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 general 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.
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, October 17, 2001 at 5:00 p.m., Eastern Time, to review the company's third quarter results. 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 Time, Wednesday, October 31, 2001, on both Web sites. A telephonic playback of the conference call will also be available through 8:00 p.m., Eastern Time, Wednesday, October 24, 2001. Listeners should call (800) 633-8284 (domestic) or (858) 812-6440 (international) and use Reservation No. 19822812.
This news release contains forward-looking statements, including without limitation the statements under the heading "Expanded 2001 Fourth Quarter and Full-Year 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, 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, 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 Nine Months Ended September 30, September 30, 2001 2000 % Chg 2001 2000 % Chg ---- ---- ----- ---- ---- ----- Net sales $ 62,903 $ 73,629 (15) $268,543 $187,175 43 Cost of sales, including asset writedown related to acquisition integration, inventory valuations and other costs 66,003 40,959 185,029 101,291 -------- -------- -------- -------- Gross profit (3,100) 32,670 (109) 83,514 85,884 (3) Selling, general and administra- tive expense 16,880 14,201 55,344 37,492 Restructuring, acquisition, and other one-time charges 13,438 0 24,121 0 Research and development expense 7,689 6,449 24,133 17,227 -------- -------- -------- -------- Income (loss) from operations (41,107) 12,020 (442) (20,084) 31,165 (164) Income (loss) from operations % (65.3) 16.3 (7.5) 16.7 Interest and other income, net 3,108 3,135 10,569 1,893 -------- -------- -------- -------- Income (loss) before income taxes (37,999) 15,155 (351) (9,515) 33,058 (129) Income tax provision (benefit) (12,540) 3,941 (3,140) 6,745 -------- -------- -------- -------- Net income (loss) $(25,459) $ 11,214 (327) $(6,375) $ 26,313 (124) Earnings (loss) per share Basic $ (0.70) $ 0.32 (319) $ (0.18) $ 0.81 (122) Diluted $ (0.70) $ 0.30 (333) $ (0.18) $ 0.75 (124) Number of shares used to calculate earnings per share Basic 36,487 34,514 36,335 32,679 Diluted 36,487 36,827 36,335 35,126 NOTE: Refer to the attached Consolidated Income Statement for the pro forma presentation. Condensed Consolidated Balance Sheet (In thousands) September 30, December 31, 2001 2000 ASSETS (Unaudited) Cash and cash equivalents $ 4,477 $ 16,861 Marketable securities 263,921 289,781 Customer receivables, net 58,298 70,241 Inventories, net 94,421 80,585 Deferred tax assets 27,423 17,720 Other current assets 9,218 11,946 -------- -------- Total current assets 457,758 487,134 Investments and other assets 8,890 9,773 Property, plant and equipment, net 47,567 41,308 Goodwill, net 27,433 18,805 -------- -------- $541,648 $557,020 ======== ======== September 30, December 31, 2001 2000 LIABILITIES AND EQUITY (Unaudited) Accounts payable $ 14,259 $ 24,797 Accrued payroll expenses 13,013 13,313 Taxes based on income 0 1,139 Current portion of long-term debt 7,958 7,590 Deferred revenue 673 2,696 Other current liabilities 13,910 11,305 -------- -------- Total current liabilities 49,813 60,840 Long-term debt 4,479 9,540 Other liabilities 1,294 675 Stockholders' equity 486,062 485,965 -------- -------- $541,648 $557,020 ======== ======== Newport Corporation Pro Forma Consolidated Income Statement (In thousands, except per share amounts and percentages) (Unaudited) Three Months Ended Nine Months Ended September 30, September 30, 2001 2000 % Chg 2001 2000 % Chg ------- ------- --- -------- -------- --- Net sales $62,903 $73,629 (15) $268,543 $187,175 43 Cost of sales 40,900 40,959 158,138 101,291 ------- ------- -------- -------- Gross profit 22,003 32,670 (33) 110,405 85,884 29 Selling, general and administra- tive expense 16,249 14,201 54,713 37,492 Research and development expense 7,689 6,449 24,133 17,227 ------- ------- -------- -------- Income (loss) from operations (1,935) 12,020 (116) 31,559 31,165 1 Income (loss) from operations % (3.1) 16.3 11.8 16.7 Interest and other income, net 3,108 3,135 10,617 1,893 ------- ------- -------- -------- Income before income taxes 1,173 15,155 (92) 42,176 33,058 28 Income tax provision 387 5,155 13,918 11,064 ------- ------- -------- -------- Net income $ 786 $10,000 (92) $ 28,258 $ 21,994 28 Earnings per share Basic $0.02 $0.29 (93) $0.78 $0.67 16 Diluted $0.02 $0.27 (93) $0.75 $0.63 19 Number of shares used to calculate earnings per share Basic 36,487 34,514 36,335 32,679 Diluted 37,676 36,827 37,836 35,126 Note: Adjusted to (a) exclude the impacts of the $51.6 million of non-recurring charges in the first and third quarters of 2001 and (b) reflect pro forma tax provisions of $1.2 million and $4.3 million in the 2000 three- and nine-month periods, respectively, on the operations of Kensington Laboratories, Inc., with whom Newport merged via a transaction accounted for as a pooling of interests in February 2001.