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Newport Corporation Reports First Quarter 2014 Results

Companies mentioned in this article: Newport Corporation

IRVINE, Calif., April 30, 2014 /PRNewswire/ -- Newport Corporation (NASDAQ: NEWP) today reported financial results for its first quarter ended March 29, 2014, and its outlook for the second quarter of 2014. The company noted the following regarding the first quarter results:

    --  Net sales of $146.9 million;
    --  New orders of $147.3 million;
    --  Net income attributable to Newport Corporation of $7.9 million, or $0.19
        per diluted share, when measured according to generally accepted
        accounting principles (GAAP);
    --  Non-GAAP net income of $11.6 million, or $0.29 per diluted share,
        excluding the amortization of intangible assets, stock-based
        compensation expense, acquisition-related, restructuring and severance
        costs, a gain on sale of assets and the tax impact of the excluded
        amounts; and
    --  Cash generated from operations of $9.4 million, and a reduction in debt
        of $12.5 million, resulting in a net debt position of $12.8 million at
        the end of the quarter.

Commenting on the results, Robert J. Phillippy, Newport's President and Chief Executive Officer, stated, "Newport's positive financial results in the first quarter of 2014 reflect the continued strength we are experiencing in our business. Our first quarter sales of $146.9 million increased 10.8% year-over-year, and we leveraged this increase into a 60.5% increase in non-GAAP operating income and an 81.3% increase in non-GAAP net income per diluted share."

Sales and Orders

Newport's sales and orders by end market were as follows:


    (In thousands, except percentages, unaudited)                     Three Months Ended                                   Percentage            Percentage
                                                                      ------------------

                                                                                                                                                  Change vs.          Change vs.

                                                      March 29,         December 28,                   March 30,                               Prior                Prior Year

                                                              2014                    2013                        2013 (1)                     Quarter                 Period
                                                              ----                    ----                         -------                     -------                 ------


    Sales by End Market
    -------------------


     Scientific research                                                           $31,881                         $33,077      $30,902                       -3.6%                3.2%

     Microelectronics                                                               33,953                          39,639       27,721                      -14.3%               22.5%

     Life and health sciences                                                       34,262                          32,902       31,220                        4.1%                9.7%

     Defense and security                                                           11,577                          13,875       15,403                      -16.6%              -24.8%

     Industrial manufacturing and other                                             35,217                          34,683       27,361                        1.5%               28.7%

                                                   Total  $146,890                $154,176                        $132,607               -4.7%                10.8%
                                                  =====                          ========                        ========


    Orders by End Market
    --------------------


     Scientific research                                                           $28,255                         $34,729      $31,650                      -18.6%              -10.7%

     Microelectronics                                                               42,579                          53,504       28,185                      -20.4%               51.1%

     Life and health sciences                                                       29,662                          29,951       29,884                       -1.0%               -0.7%

     Defense and security                                                           11,325                          14,111       14,927                      -19.7%              -24.1%

     Industrial manufacturing and other                                             35,463                          34,476       28,939                        2.9%               22.5%

                                                   Total  $147,284                $166,771                        $133,585              -11.7%                10.3%
                                                  =====                          ========                        ========


    Note:

    (1)                                            Certain prior period amounts have been reclassified to
                                                   conform to the current period presentation.

In the first quarter of 2014, the company's sales and orders both increased slightly more than 10% compared with the prior year period. The year-over-year increase in sales was driven by higher levels in all of the company's end markets, except for the defense and security end markets, which continued to be adversely impacted by government funding constraints, primarily in the United States. The year-over-year increase in orders was driven by very strong activity from customers in the company's microelectronics and industrial manufacturing and other end markets, offset by decreases in orders from customers in its scientific research and defense and security end markets.

On a sequential basis, sales and orders declined 4.7% and 11.7%, respectively. The sequential decline in sales was due primarily to lower sales to customers in the company's microelectronics, scientific research and defense and security end markets, offset by slight increases in sales to customers in its life and health sciences and industrial manufacturing and other end markets. The sequential sales decline in the microelectronics end market resulted primarily from the company's divestiture of its MRSI business, which contributed approximately $3 million of sales to this market in the fourth quarter of 2013. The sequential decline in orders was due primarily to a $14 million order in the fourth quarter of 2013 from a microelectronics end market customer for a collaborative development program that did not repeat in the first quarter, and lower orders from customers in the scientific research and defense and security end markets. Activity levels in the scientific research and defense and security end markets continued to be adversely impacted by government funding constraints.

Operating Income and Net Income

Newport reported operating income for the first quarter of 2014 of $12.5 million, or 8.5% of net sales, when calculated in accordance with GAAP. On a non-GAAP basis, excluding the amortization of intangible assets, stock-based compensation expense, acquisition-related, restructuring and severance costs and a gain on sale of assets, the company's operating income for the first quarter of 2014 was $17.9 million, or 12.2% of net sales.

On a GAAP basis, the company reported net income attributable to Newport Corporation for the first quarter of 2014 of $7.9 million, or $0.19 per diluted share. On a non-GAAP basis, excluding the items referenced above and the tax impact of such excluded amounts, the company's net income for the first quarter of 2014 was $11.6 million, or $0.29 per diluted share.

The company has provided a reconciliation of its gross profit, operating income, net income and net income per diluted share calculated in accordance with GAAP and on a non-GAAP basis following the statements of income and comprehensive income included in this release. Management believes that the supplemental presentation of non-GAAP financial information provides insight into the company's core business results, as well as a useful resource for comparison of its financial results between periods.

Cash, Cash Equivalents and Marketable Securities

In the first quarter of 2014, Newport generated $9.4 million in cash from operations, and reduced its total indebtedness by $12.5 million. As of March 29, 2014, the company had $76.0 million in total indebtedness and $63.2 million in cash, restricted cash and marketable securities.

Financial Outlook

Commenting on Newport's outlook, Mr. Phillippy said, "We are off to a good start in 2014, and our first quarter results provide us with a strong foundation to build on. In the second quarter of 2014, we expect sales to be in the range of $147 million to $153 million, which would be 9.5% to 14.0% higher than the second quarter of 2013. As a result, we also expect significant year-over-year increases in our non-GAAP operating income and non-GAAP earnings per diluted share in the second quarter of 2014. We are successfully executing on our strategic initiatives to introduce innovative new products and capture design wins with our industry-leading customers to drive sales and profit growth. In addition, we expect this strong financial performance to generate increasing levels of cash that we will use to accelerate our growth and enhance shareholder value."

ABOUT NEWPORT CORPORATION

Newport Corporation is a leading global supplier of advanced-technology products and systems to customers in the scientific research, microelectronics, life and health sciences, industrial manufacturing and defense and security markets. Newport's innovative solutions leverage its expertise in advanced technologies, including lasers, photonics and precision motion equipment, and optical components and sub-systems, to enhance the capabilities and productivity of its customers' manufacturing, engineering and research applications. Newport is part of the Standard & Poor's SmallCap 600 Index and the Russell 2000 Index.

To download Newport's investor relations app, which offers access to its SEC filings, press releases, videos, audiocasts and more, please visit Apple's App Store for the iPhone and iPad or Google Play for Android mobile devices.

INVESTOR CONFERENCE CALL

Robert J. Phillippy, President and Chief Executive Officer, and Charles F. Cargile, Senior Vice President, Chief Financial Officer and Treasurer, will host an investor conference call today, April 30, 2014, at 5:00 p.m. Eastern time (2:00 p.m. Pacific time) to review the company's results for the first quarter of 2014 and its business outlook for the remainder of 2014. The call will be open to all interested investors through a live audio web broadcast via the Internet at www.newport.com/investors. The call also will be available to investors and analysts by dialing 877-375-4189 within the U.S. and Canada or 973-935-2046 from abroad.

The webcast will be archived on the Newport website and can be reached through the same link. An archived webcast will also be available on Newport's investor relations app. A telephonic playback of the conference call will be available by calling 855-859-2056 within the U.S. and Canada and 404?537-3406 from abroad. Playback will be available beginning at 8:00 p.m. Eastern time on Wednesday, April 30, 2014, and continue through 11:30 p.m. Eastern time on Wednesday, May 7, 2014. The replay passcode is 30735412.

SAFE HARBOR STATEMENT

This news release contains forward-looking statements, including without limitation statements regarding the company's expectation of continued momentum in its business; the company's expected sales level in the second quarter of 2014 and its expectation of significant year-over-year increases in non-GAAP operating income and non-GAAP earnings per diluted share in the second quarter of 2014; the company's expectation that it will drive future sales and profit growth by successfully introducing new products and capturing new design wins with industry-leading customers; and the company's expectation of generating increasing levels of cash flow to accelerate its growth and enhance shareholder value. 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. Assumptions relating to the foregoing involve judgments and risks with respect to, among other things, the strength of business conditions in the industries Newport serves, particularly the semiconductor and defense and security industries; Newport's ability to successfully penetrate and increase sales to its targeted end markets; the levels of private and governmental research funding worldwide; potential order cancellations and push-outs; future economic, competitive and market conditions, including those in Europe and Asia and those related to its strategic markets; whether its products will continue to achieve customer acceptance; and future business decisions, all of which are difficult or impossible to predict accurately and many of which are beyond the control of Newport. Certain of these judgments and risks are discussed in more detail in Newport's periodic reports filed with the Securities and Exchange Commission. 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 Income and Comprehensive Income

                                  (Unaudited)



                                       Three Months
                                          Ended
                                      -------------

                                        March 29,            March 30,

    (In thousands, except per
     share amounts)                             2014                 2013
                                                ----                 ----


    Net sales                               $146,890             $132,607

    Cost of sales                             81,431               77,475
                                              ------               ------

    Gross profit                              65,459               55,132


    Selling, general and
     administrative expenses                  39,206               37,608

    Research and development
     expense                                  14,138               13,101

    Gain on sale of assets                      (411)                   -
                                                ----                  ---

    Operating income                          12,526                4,423


    Interest and other expense,
     net                                        (976)              (2,137)
                                                ----               ------

    Income before income taxes                11,550                2,286


    Income tax provision (benefit)             3,609                 (448)
                                               -----                 ----

    Net income                                 7,941                2,734

    Net income (loss) attributable
     to non-controlling interests                 55                  (12)

    Net income attributable to
     Newport Corporation                      $7,886               $2,746
                                              ======               ======



    Net income                                $7,941               $2,734

    Other comprehensive income:

    Foreign currency translation
     gains (losses)                              461               (2,452)

    Unrecognized net pension gains                43                  190

    Unrealized gains (losses) on
     marketable securities                        20                  (98)
                                                 ---                  ---

    Comprehensive income                      $8,465                 $374
                                              ======                 ====


    Comprehensive income (loss)
     attributable to non-
     controlling interests                       $69                 $(61)

    Comprehensive income
     attributable to Newport
     Corporation                               8,396                  435

    Comprehensive income                      $8,465                 $374
                                              ======                 ====


    Net income per share attributable to Newport
     Corporation:

    Basic                                      $0.20                $0.07

    Diluted                                    $0.19                $0.07


    Shares used in the computation of net income
     per share:

    Basic                                     39,525               38,601

    Diluted                                   40,499               39,260


    Other operating data:

    New orders received during the
     period                                 $147,284             $133,585

    Backlog at the end of period
     scheduled to ship within 12
     months                                 $192,122             $149,716



                              Newport Corporation

                        Supplemental Non-GAAP Measures

                                  (Unaudited)




                            Three Months Ended
                            ------------------

    (In thousands,
     except per share
     amounts)                   March 29,              March 30,

                                                2014                 2013
                                                ----                 ----

    Net sales                               $146,890             $132,607


    Cost of sales:

    Cost of sales -
     GAAP                                    $81,431              $77,475

    Amortization of
     intangible assets                           962                  895

    Stock-based
     compensation
     expense                                     212                  209

    Acquisition-
     related,
     restructuring and
     severance costs                               -                  403
                                                 ---                  ---

    Non-GAAP cost of
     sales                                    80,257               75,968

    Non-GAAP gross
     profit                                  $66,633              $56,639
                                             =======              =======


    Non-GAAP gross
     profit as a
     percentage of net
     sales                                      45.4%                42.7%


    Operating income:

    Operating income -
     GAAP                                    $12,526               $4,423

    Amortization of
     intangible assets                         2,479                2,586

    Stock-based
     compensation
     expense                                   2,337                2,269

    Acquisition-
     related,
     restructuring and
     severance costs                             968                1,874

    Gain on sale of
     assets                                     (411)                   -

    Non-GAAP operating
     income                                  $17,899              $11,152
                                             =======              =======


    Non-GAAP operating
     income as a
     percentage of net
     sales                                      12.2%                 8.4%


    Net income
     attributable to
     Newport
     Corporation:

    Net income - GAAP                         $7,886               $2,746

    Amortization of
     intangible assets                         2,479                2,586

    Stock-based
     compensation
     expense                                   2,337                2,269

    Acquisition-
     related,
     restructuring and
     severance costs                             968                1,874

    Gain on sale of
     assets                                     (411)                   -

    Income tax
     provision on non-
     GAAP adjustments                         (1,691)              (3,315)

    Non-GAAP net income                      $11,568               $6,160
                                             =======               ======



    Net income per
     diluted share
     attributable to
     Newport
     Corporation:

    Net income - GAAP                          $0.19                $0.07

    Total non-GAAP
     adjustments                                0.10                 0.09

    Non-GAAP net
     income per diluted
     share                                     $0.29                $0.16
                                               =====                =====


                                     Newport Corporation

                                 Consolidated Balance Sheets

                                         (Unaudited)



                                               March 29,     December 28,

    (In thousands)                                     2014                2013
                                                       ----                ----


    ASSETS

    Current assets:

    Cash and cash equivalents                       $52,602             $53,710

    Restricted cash                                   2,397               2,305

    Marketable securities                             8,191               8,219

    Accounts receivable, net                         96,629              96,388

    Inventories, net                                105,284             103,383

    Deferred income taxes                            22,521              22,437

    Prepaid expenses and other
     current assets                                  18,152              14,769
                                                     ------              ------

    Total current assets                            305,776             301,211


    Property and equipment, net                      81,237              80,516

    Goodwill                                         78,806              78,801

    Deferred income taxes                             4,481               4,474

    Intangible assets, net                           64,897              67,342

    Investments and other assets                     32,494              32,885

                                                   $567,691            $565,229
                                                   ========            ========


    LIABILITIES AND STOCKHOLDERS' EQUITY

    Current liabilities:

    Short-term borrowings, net                       $4,991              $4,861

    Accounts payable                                 32,264              31,714

    Accrued payroll and related
     expenses                                        30,938              31,015

    Accrued expenses and other
     current liabilities                             37,522              35,341
                                                     ------              ------

    Total current liabilities                       105,715             102,931


    Long-term debt, net                              70,988              83,646

    Pension liabilities                              27,191              27,093

    Other liabilities                                22,760              23,182


    Total stockholders' equity of
     Newport                                        340,009             326,968

    Non-controlling interests                         1,028               1,409
                                                      -----               -----

    Total stockholders' equity                      341,037             328,377

                                                   $567,691            $565,229
                                                   ========            ========

Contact:
Charles F. Cargile, 949/863-3144
Newport Corporation, Irvine, CA
investor@newport.com
or
Rob Fink, 212/896-1206
KCSA Strategic Communications
newport@kcsa.com

SOURCE Newport Corporation