IRVINE, Calif., Oct. 22, 2002 (PRIMEZONE) -- Newport Corporation (Nasdaq:NEWP) today reported financial results for the three and nine months ended September 30, 2002, reflecting weakness in all of its end markets. Sales from continuing operations for the 2002 third quarter totaled $45.5 million, compared with $57.2 million in the third quarter of 2001. The company reported a loss from continuing operations for the current year third quarter of $59.4 million, or $1.55 per share, compared with a loss from continuing operations of $21.2 million, or $0.58 per share, in the corresponding year-earlier period.
The 2002 third quarter results include a charge of $43.1 million, or $1.13 per share, related to increased inventory reserves and cost reduction initiatives announced in August 2002, as well as to expanded cost reduction measures finalized in September 2002 in response to the continuing market downturn. The results for the third quarter of 2002 also include a charge of $15.3 million, or $0.40 per share, required to establish a valuation reserve for previously recorded deferred tax assets. Results for the third quarter of 2001 included a pre-tax charge of $34.3 million for asset impairment and restructuring initiatives. Results for both periods account for the company's former metrology business and its Minnesota facility as discontinued operations reflecting the company's recently completed and planned divestitures.
Including the discontinued operations, the company incurred net losses of $68.6 million, or $1.79 per share, for the third quarter of 2002 and $25.5 million, or $0.70 per share, for the corresponding period of 2001.
Robert G. Deuster, president and chief executive officer, said, "Despite the turbulent market conditions, Newport remains strong. We have a healthy balance sheet, including almost $279 million in cash and cash equivalents, and we continue to be a recognized leader in every one of our key markets. Our leadership team is prepared to manage through these difficult times, and we are taking the tough actions necessary to streamline our cost structure to maximize our operating performance both during the current downturn and when industry conditions rebound."
Deuster added: "Due to the weak conditions we are experiencing in all of our end markets, we are in the process of reducing our cost structure beyond that which we announced in August. At that time, we indicated our intent to reduce headcount by 225 to 275 people. Based upon revisions to that plan, which were finalized in September 2002, we now anticipate the headcount reduction to be over 300. In addition, our plan originally called for downsizing our fiber optic operations in Santa Ana, California. We now intend to consolidate these operations into our main campus in Irvine, California. The actions are targeted for substantial completion in the fourth quarter of 2002 and will give us a much more efficient operating structure as we move into 2003. We estimate that these additional measures, combined with the actions identified in August 2002, will result in annualized savings of $13 million to $15 million."
For the nine-month period ended September 30, 2002, Newport reported sales from continuing operations of $131.6 million, compared with the record sales from continuing operations in the first three quarters of 2001 of $246.4 million. The company reported a loss from continuing operations for the first three quarters of 2002 of $66.6 million, or $1.76 per share, compared with income from continuing operations in the corresponding year-earlier period of $1.6 million, or $0.04 per share. Including the discontinued operations, for the nine months ended September 30, 2002, Newport reported a net loss of $94.6 million, or $2.50 per share, compared with a loss of $6.4 million, or $0.18 per share, in the same period of 2001.
New orders from continuing operations in the third quarter of 2002 totaled $38.4 million, a 14% increase compared with the $33.6 million recorded in the corresponding period of 2001. Sequentially, the order level reflects a 22% decrease versus the $49.3 million recorded in the second quarter of 2002. The company experienced order cancellations from continuing operations of $4.5 million in the current year third quarter, primarily from semiconductor customers. New orders received from continuing operations in the nine months ended September 30, 2002 totaled $125.9 million versus $164.6 million in the first nine months of 2001.
New orders from continuing operations from semiconductor capital equipment customers in the current year third quarter totaled $17.3 million, a 16% decrease compared with the $20.5 million reported in the second quarter of 2002, but a significant increase compared with the $6.5 million recorded in the third quarter of 2001. Order cancellations and the sequential reduction in semiconductor order intake levels reflect the apparent delay in the industry recovery, which began earlier in 2002. We now expect the recovery to be delayed until 2003. New orders from continuing operations from semiconductor customers in the first nine months of 2002 were $52.0 million, compared with $41.8 million in the first nine months of 2001.
New orders from continuing operations from fiber optic communications customers totaled $2.7 million in the third quarter of 2002 versus $6.2 million in the corresponding period of 2001. New orders from continuing operations from fiber optic communications customers in the first nine months of 2002 were $12.3 million, compared with the $54.5 million recorded in the first nine months of 2001. The current order activity level reflects the continued downturn in the overall telecommunications market. The company does not anticipate any meaningful recovery in this market until at least 2004.
New orders from continuing operations from customers in Newport's other end markets, primarily research and aerospace, totaled $18.4 million in the third quarter of 2002 compared with $20.9 million in the third quarter of 2001. New orders from continuing operations from customers in these end markets in the first nine months of 2002 were $61.6 million, compared with the $68.3 million recorded in the first nine months of 2001.
Deuster explained, "The order levels for the quarter are reflective of weakness across-the-board in our end-markets. The recovery in the semiconductor market appears to have stalled, and the fiber optic communications market continues to be depressed. In addition, overall macro-economic conditions continue to be uncertain at best. We do not anticipate any recovery in any of these markets in the fourth quarter of this year and have expanded our cost reduction initiatives accordingly."
Third quarter 2002 sales from continuing operations to semiconductor capital equipment companies were $17.3 million compared with $22.0 million in the third quarter of 2001. Sales from continuing operations to this segment for the nine months ended September 30, 2002 were $49.7 million versus $74.3 million in the corresponding period of 2001.
Sales from continuing operations to fiber optic customers in the third quarter of 2002 were $6.9 million versus $14.6 million in the third quarter of 2001, reflecting the continued low levels of capital spending by customers in this market. For the nine months ended September 30, 2002, sales from continuing operations to this segment were $15.4 million, compared with $95.2 million in the first nine months of 2001.
Third quarter 2002 sales from continuing operations to customers in Newport's other end-markets were $21.3 million, compared with $20.6 million in the third quarter of 2001. For the nine months ended September 30, 2002, sales from continuing operations to this segment were $66.5 million, compared with $76.9 million in the first nine months of 2001. Sales from continuing operations to Newport's research and aerospace customers during the nine months 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.
Gross margin from continuing operations in the third quarter of 2002 was a negative 28.8%, compared with a negative 3.9% in the third quarter of 2001. The cost of sales from continuing operations in the third quarter of 2002 included a charge of $28.7 million for excess and slow moving inventory related primarily to the continued weakness in the telecommunications industry. A similar charge of $22.7 million was recorded in the corresponding period of 2001. Excluding these charges, gross margin from continuing operations would have been 34.3% in the third quarter of 2002 versus 35.8% in the third quarter of 2001. For the nine months ended September 30, 2002, again excluding these inventory charges, gross margin from continuing operations would have been 34.0% versus 42.2% for the comparable period of 2001. Gross margin in the third quarter of 2002 was negatively impacted by increased cost of goods sold. Products sold in the current quarter were produced in prior periods when production volumes were low, resulting in an increased amount of overhead allocated to inventory. In accordance with generally accepted accounting principles, these variances were capitalized when the inventory was produced and are expensed when the related products are sold. The company expects this negative impact to its gross margin to continue for the next several quarters. In the current quarter, this negative impact was partially offset by an order cancellation fee of $0.5 million that was recorded as revenue with no corresponding cost, in accordance with generally accepted accounting principles. The gross margins for the 2001 periods reflected the positive leverage of the higher sales volumes during those periods.
Selling, general and administrative (SG&A) expense from continuing operations for the third quarter of 2002 was $15.3 million, compared with $14.0 million in the third quarter of 2001. SG&A expense from continuing operations in the 2002 third quarter included expenses of $2.5 million for non-recurring costs incurred in connection with the cost reduction and related initiatives discussed previously. Excluding these charges, SG&A expense from continuing operations for the quarter ended September 30, 2002 would have been $12.8 million, or 28.0% of sales, compared with $14.0 million, or 24.4% of sales, in the corresponding period of 2001. Excluding such charges, SG&A expense from continuing operations for the nine months ended September 30, 2002 would have been $36.5 million, or 27.8% of sales, compared with $46.1 million, or 18.7% of sales, in the first nine months of 2001. The decreases in SG&A expenses from continuing operations compared with the corresponding 2001 periods were due primarily to the benefits of the company's cost reduction measures.
Research and development (R&D) expense from continuing operations for the third quarter of 2002 declined to $6.4 million from $6.7 million in the third quarter of 2001. For the nine months ended September 30, 2002, R&D expense from continuing operations was $18.9 million, compared with $20.4 million in the first nine months 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.
Restructuring and impairment charges related to the cost reduction and related initiatives discussed previously totaled $11.9 million for the third quarter of 2002. A similar charge of $11.6 million was recorded in the corresponding period of 2001 for cost reduction initiatives undertaken at that time.
Interest and other income, net of interest expense, consisting primarily of interest earned on marketable securities, totaled $2.5 million for the third quarter of 2002 compared with $3.0 million in the third quarter of 2001. For the nine months ended September 30, 2002, interest and other income, net of interest expense, excluding the $6.5 million asset write-down recorded in the second quarter, was $7.2 million, compared with $10.4 million in the first nine months of 2001. The decreases in both periods on a year-over-year basis were due primarily to reduced interest rate levels during the current year period and a slightly lower average cash balance.
Despite the losses, the company recorded a tax expense of $15.3 million for the third quarter of 2002. The expense resulted from a valuation reserve that was recorded against the company's deferred tax assets pursuant to Statement of Financial Accounting Standards No. 109 (FAS 109), due to the uncertainty as to the timing and ultimate realization of those assets. As such, the company did not recognize any tax benefit on the losses recorded in the current period and recorded a valuation allowance against deferred tax assets previously recorded. For the foreseeable future, the tax provision related to earnings will be substantially offset by a reduction in the valuation reserve. Any pretax losses will not be offset by a tax benefit due to uncertainty of the timing of recovery of the deferred tax asset.
Fourth 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.
-- Due to the relatively low recent order intake levels, the impact of recent order cancellations and the apparent delay in the semiconductor industry recovery, the company currently expects net sales in the fourth quarter of 2002 to be in the range of $32.0 million to $36.0 million.
-- Lower sales volume is expected to offset most of the cost of sales savings leading to gross margin for the fourth quarter of 2002 in the range of 31% to 32%.
-- SG&A expenses in the fourth quarter of 2002 are expected to be in the range of $11.8 million to $12.3 million, reflecting the implementation of the additional cost reduction initiatives in the third and fourth quarters of 2002.
-- R&D spending is expected to be between $5.7 million and $6.0 million in the fourth quarter of 2002.
-- The company expects interest and other income, net of interest expense, to be approximately $2.3 million depending on interest rates, gains or losses on marketable securities, cash balances, foreign exchange markets, and potential business development activity.
-- Based on the factors noted herein, the company expects to incur a net loss in the range of $4.0 million to $5.0 million. As discussed previously, this loss will not be offset by a tax benefit for federal tax purposes, but includes an estimated tax provision for state and foreign taxes of approximately $0.5 million, resulting in a loss per share in the range of $0.10 to $0.13.
-- The company expects the number of diluted common shares outstanding to be approximately 38 to 39 million shares.
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, October 22, 2002 at 5:00 p.m., eastern time, to review the company's third quarter and nine 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, November 5, 2002, on both Web sites. A telephonic playback of the conference call will also be available through 8:00 p.m., eastern time, Tuesday, October 29, 2002. Listeners should call (800) 642-1687 (domestic) or (706) 645-9291 (international) and use Reservation No. 6094540.
Forward-Looking Statements
This news release contains forward-looking statements, including without limitation the statements under the heading "Fourth 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; and 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 Statements of Operations
(Unaudited)
(In thousands, except per share amounts)
Three Months Ended Nine Months Ended
September 30, September 30,
2002 2001 2002 2001
-------- -------- -------- --------
Net sales $ 45,521 $ 57,232 $131,560 $246,439
Cost of sales 29,924 36,743 86,868 142,546
Restructuring related
inventory reserves 28,686 22,717 28,686 22,717
-------- -------- -------- --------
Gross profit (loss) (13,089) (2,228) 16,006 81,176
Selling, general and
administrative expenses 15,274 13,956 39,048 46,067
Research and development
expense 6,449 6,694 18,891 20,350
Restructuring and
impairment charges 11,883 11,584 11,883 11,584
Acquisition and other
non-recurring charges -- -- -- 10,683
-------- -------- -------- --------
Loss from operations (46,695) (34,462) (53,816) (7,508)
Interest and other
income, net 2,547 3,035 7,235 10,426
Asset write-down -- -- (6,490) --
-------- -------- -------- --------
Income (loss) from
continuing operations
before income taxes (44,148) (31,427) (53,071) 2,918
Income tax provision
(benefit) 15,301 (10,246) 13,531 1,306
-------- -------- -------- --------
Income (loss) from
continuing operations (59,449) (21,181) (66,602) 1,612
Loss from discontinued
operations, net of tax
expense of $861 and
$0 for the three and
nine months ended
September 30, 2002,
respectively, and net
of tax benefit of
$2,294 and $4,446 for
the three and nine months
ended September 30, 2001,
respectively (9,112) (4,278) (13,477) (7,987)
Cumulative effect of
change in accounting
principle -- -- (14,500) --
-------- -------- -------- --------
Net loss $(68,561) $(25,459) $(94,579) $ (6,375)
======== ======== ======== ========
Number of shares used
to calculate earnings
(loss) per share:
Basic 38,228 36,487 37,804 36,335
Diluted 38,228 36,487 37,804 37,836
Earnings (loss) per
share, basic:
Income (loss) from
continuing operations $ (1.55) $ (0.58) $ (1.76) $ 0.04
Loss from discontinued
operations, net of tax $ (0.24) $ (0.12) $ (0.36) $ (0.22)
Cumulative effect of
change in accounting
principle -- -- $ (0.38) --
Net loss $ (1.79) $ (0.70) $ (2.50) $ (0.18)
Earnings (loss) per share,
diluted:
Income (loss) from
continuing operations $ (1.55) $ (0.58) $ (1.76) $ 0.04
Loss from discontinued
operations, net of tax $ (0.24) $ (0.12) $ (0.36) $ (0.21)
Cumulative effect of
change in accounting
principle -- -- $ (0.38) --
Net loss $ (1.79) $ (0.70) $ (2.50) $ (0.17)
Newport Corporation
Condensed Consolidated Balance Sheets
(In thousands)
(Unaudited)
September 30, December 31,
2002 2001
-------- --------
Assets
Current assets:
Cash and cash equivalents $ 7,950 $ 7,107
Marketable securities 270,751 274,494
Customer receivables, net 28,045 35,833
Inventories, net 55,283 96,424
Deferred tax assets -- 11,091
Assets of operations held for sale 4,382 --
Other current assets 9,930 15,172
-------- --------
Total current assets 376,341 440,121
Investments and other assets 8,066 9,000
Property, plant and equipment, net 39,756 45,460
Long-term deferred tax assets 15,570 22,240
Goodwill, net 57,360 27,056
-------- --------
$497,093 $543,877
======== ========
Liabilities and stockholders' equity
Current liabilities:
Accounts payable $ 7,763 $ 12,939
Accrued payroll and related expenses 8,923 12,813
Current portion of long-term debt 2,224 6,189
Accrued restructuring costs 12,177 5,460
Deferred revenue 2,793 823
Liabilities of operations held for sale 410 --
Other current liabilities 10,293 12,579
-------- --------
Total current liabilities 44,583 50,803
Long-term debt 2,253 3,409
Other liabilities 261 658
Stockholders' equity 449,996 489,007
-------- --------
$497,093 $543,877
======== ========