Newport Corporation Reports Third Quarter 2013 Results

PR Newswire

IRVINE, Calif., Oct. 30, 2013 /PRNewswire/ -- Newport Corporation (NEWP) today reported financial results for its third quarter and nine months ended September 28, 2013, and its outlook for the fourth quarter of 2013.  The company noted the following regarding its third quarter results:

  • Net sales of $139.0 million;
  • New orders received of $144.4 million;
  • Net income attributable to Newport Corporation of $12.4 million, or $0.31 per diluted share, when measured on a non-GAAP basis, excluding $7.9 million of previously announced charges related to a loss on extinguishment of debt and a loss on the sale of a business, as well as restructuring and severance costs, the amortization of intangible assets and stock-based compensation expense, and the tax impact of such excluded amounts;
  • Net income attributable to Newport Corporation of $0.4 million, or $0.01 per diluted share, when measured according to GAAP, including the charges and expenses referenced above; and
  • Cash generated from operations of $10.8 million.   

Commenting on the results, Robert J. Phillippy, Newport's President and Chief Executive Officer, stated, "Our profit leverage exceeded our expectations in the third quarter, with non-GAAP operating income and net income both increasing sharply on a sequential basis.  In addition, our book-to-bill ratio of 1.04 exceeded 1.0 for the third consecutive quarter, driven primarily by new program wins and improved activity levels in our microelectronics end market."  

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.



September 28,

June 29,

September 29,


Prior 

Prior Year



2013

2013 ¹

2012 ¹


Quarter

Period









Sales by End Market
















 Scientific research  


$           29,148

$           29,846

$           31,143


-2.3%

-6.4%

 Microelectronics 


34,699

29,017

32,798


19.6%

5.8%

 Life and health sciences 


29,220

31,308

29,390


-6.7%

-0.6%

 Defense and security 


15,578

13,764

18,691


13.2%

-16.7%

 Industrial manufacturing and other  


30,392

30,299

30,859


0.3%

-1.5%


 Total 


$         139,037

$         134,234

$         142,881


3.6%

-2.7%









Orders by End Market
















 Scientific research  


$           29,713

$           30,425

$           32,321


-2.3%

-8.1%

 Microelectronics 


36,915

35,622

32,595


3.6%

13.3%

 Life and health sciences 


30,665

31,719

33,118


-3.3%

-7.4%

 Defense and security 


15,172

14,344

19,323


5.8%

-21.5%

 Industrial manufacturing and other  


31,926

35,532

26,416


-10.1%

20.9%


 Total 


$         144,391

$         147,642

$         143,773


-2.2%

0.4%


Notes:

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

In the third quarter of 2013, sales increased sequentially by $4.8 million, or 3.6%, but declined 2.7% compared with the prior year period.  The sequential increase was driven primarily by higher sales to customers in Newport's microelectronics end market, which increased approximately 20% to $34.7 million.  The year-over-year decrease was due primarily to lower sales to customers in the scientific research and defense end markets resulting from government funding reductions, particularly in the United States and Europe.  

New orders increased slightly compared with the third quarter of 2012, but declined by $3.3 million, or 2.2%, on a sequential basis.

Mr. Phillippy commented, "Our sales and orders have increased significantly from the low levels we recorded at the beginning of this year.  These increases have been driven primarily by the success of our new products and recent design wins for new programs, rather than by improvement in market conditions.  These market share gains, coupled with our increasing backlog and the improving outlook of our customers, give us confidence that we will achieve strong sales and profit growth in 2014."

Operating Income and Net Income
Newport reported operating income for the third quarter of 2013 of $6.4 million, or 4.6% of net sales, when calculated in accordance with GAAP.  On a non-GAAP basis, excluding restructuring and severance costs, the amortization of intangible assets, stock-based compensation expense and the previously announced $4.5 million loss attributable to the sale of the MRSI business, the company's operating income for the third quarter of 2013 was $18.3 million, or 13.2% of net sales.

The company reported net income attributable to Newport Corporation for the third quarter of 2013 of $0.4 million, or $0.01 per diluted share, when calculated in accordance with GAAP.  On a non-GAAP basis, excluding the items referenced above, as well as the previously announced $3.4 million loss on extinguishment of debt relating to the refinancing of the company's credit facility and the tax impact of such excluded amounts, net income attributable to Newport Corporation for the third quarter of 2013 was $12.4 million, or $0.31 per diluted share. 

The company has provided a reconciliation of its gross profit, operating income, net income attributable to Newport Corporation 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 helps to provide insight into the company's core business results, as well as a more meaningful comparison of its financial results between periods. 

Cash and Debt
In the third quarter of 2013, Newport established a new $275 million revolving credit facility.  As part of this refinancing, the company repaid all of the outstanding obligations remaining on its prior credit facility, and the fees relating to the new facility, by using $34.2 million in cash and borrowing $120.0 million on its new revolving credit line.  The new credit facility provides the company with greater flexibility from a borrowing capacity, cash flow and covenant perspective, with lower ongoing financing costs.  During the quarter, the company reduced its outstanding borrowings under the new facility by an additional $19 million, to $101 million.  At the end of the third quarter of 2013, Newport had $56.1 million of cash, cash equivalents, restricted cash and marketable securities.  The company generated $10.8 million of operating cash flow in the third quarter.  In the first nine months of 2013, Newport has generated $40.1 million of cash from operations and reduced its net debt position by $31.8 million, to $52.4 million. 

Financial Outlook
The company expects its sales in the fourth quarter of 2013 to be in the range of $139 million to $145 million.  However, the company expects its fourth quarter non-GAAP operating and net income per diluted share to be slightly lower than the third quarter level, due primarily to a modest sequential increase in operating expenses.   

Mr. Phillippy concluded, "We are pleased with our results in the third quarter, and particularly the strong profit leverage.  We continue to win new business in our key end markets during this prolonged period of tepid macro-economic conditions.  In addition, we expect our orders to outpace sales again in the current quarter, marking the fourth consecutive quarter that our book-to-bill ratio exceeds 1.0.  We remain confident in our ability to execute our strategy, and believe we are building the foundation for a strong 2014 in terms of sales growth, profit leverage and increasing cash generation."

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 photonics, optics, and laser technologies, to enhance the performance 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
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, October 30, 2013, at 5:00 p.m. Eastern time (2:00 p.m. Pacific time) to review the company's results for the third quarter of 2013 and its outlook for the fourth quarter of 2013.  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.  A telephonic playback of the conference call also will be available by calling 855-859-2056 within the U.S. and Canada and 404-537-3406 from abroad.  The playback will be available beginning at 6:00 p.m. Eastern time today and continue through 11:59 p.m. Eastern time on Wednesday, November 6, 2013.  The replay passcode is 87562451.

SAFE HARBOR STATEMENT
This news release contains forward-looking statements, including without limitation statements regarding Newport's expectation of strong sales and profit growth in 2014, its expected lower ongoing financing costs under its new credit facility, its anticipated levels of sales and non-GAAP operating and net income per diluted share in the fourth quarter of 2013, its expected book-to-bill ratio in the fourth quarter of 2013, and its expectation of strong profit leverage and increasing cash generation in 2014.  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/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


Nine Months Ended

(In thousands, except

September 28,


September 29,


September 28,


September 29,

per share amounts)

2013


2012


2013


2012









Net sales

$         139,037


$         142,881


$         405,878


$         453,703

Cost of sales

79,306


80,073


233,778


255,943

Gross profit

59,731


62,808


172,100


197,760









Selling, general and administrative expenses

35,649


37,320


111,324


123,267

Research and development expense

13,129


12,869


39,807


40,319

Loss on sale of assets

4,517


-


4,517


-

Operating income 

6,436


12,619


16,452


34,174









Gain on sale of investment

-


950


-


6,248

Loss on extinguishment of debt

(3,355)


-


(3,355)


-

Interest and other expense, net

(1,293)


(2,082)


(5,472)


(7,097)

Income before income taxes

1,788


11,487


7,625


33,325









Income tax provision 

1,199


3,955


1,697


10,144

Net income 

589


7,532


5,928


23,181

Net income (loss) attributable to non-controlling interests

152


(104)


83


(201)

Net income attributable to Newport Corporation

$                437


$             7,636


$             5,845


$           23,382

















Net income 

$                589


$             7,532


$             5,928


$           23,181

Other comprehensive income:








Foreign currency translation gains (losses)

2,995


1,399


1,320


(499)

Unrecognized net pension gains (losses)

(67)


10


161


96

Unrealized gains (losses) on marketable securities

22


(13)


(126)


(120)

Comprehensive income 

$             3,539


$             8,928


$             7,283


$           22,658









Comprehensive income (loss) attributable to non-controlling interests

$                154


$                 (94)


$                    8


$               (209)

Comprehensive income attributable to Newport Corporation

3,385


9,022


7,275


22,867

Comprehensive income   

$             3,539


$             8,928


$             7,283


$           22,658









Net income per share attributable to Newport Corporation:








Basic

$               0.01


$               0.20


$               0.15


$               0.61

Diluted

$               0.01


$               0.20


$               0.15


$               0.60









Shares used in the computation of net income per share:








Basic

39,121


38,264


38,935


38,072

Diluted

39,657


38,645


39,426


38,825









Other operating data:








New orders received during the period

$         144,391


$         143,773


$         425,617


$         478,163

Backlog at the end of period scheduled to ship within 12 months





$         170,611


$         154,972

 

Newport Corporation

Supplemental Non-GAAP Measures

(Unaudited)






























Three Months Ended


Nine Months Ended

(In thousands, except
per share amounts)


September 28,
2013


September 29,
2012


September 28,
2013


September 29,
2012










Net sales


$          139,037


$         142,881


$          405,878


$         453,703










Cost of sales:









Cost of sales - GAAP


$            79,306


$           80,073


$          233,778


$         255,943

Amortization of intangible assets


922


1,071


2,737


1,431

Stock-based compensation expense


233


189


656


490

Integration-related, restructuring and severance costs 


521


-


924


808

Non-GAAP cost of sales


77,630


78,813


229,461


253,214

Non-GAAP gross profit


$            61,407


$           64,068


$          176,417


$         200,489










Non-GAAP gross profit as a percentage of net sales


44.2%


44.8%


43.5%


44.2%










Operating income:









Operating income - GAAP


$              6,436


$           12,619


$            16,452


$           34,174

Amortization of intangible assets


2,550


4,615


7,751


14,823

Stock-based compensation expense


2,445


2,173


6,590


6,265

Integration-related, restructuring and severance costs 


2,365


1,756


6,926


6,188

Loss (gain) on sale of assets


4,517


-


4,517


(166)

Non-GAAP operating income


$            18,313


$           21,163


$            42,236


$           61,284










Non-GAAP operating income as a percentage of net sales


13.2%


14.8%


10.4%


13.5%










Net income attributable to Newport Corporation:









Net income - GAAP


$                 437


$             7,636


$              5,845


$           23,382

Amortization of intangible assets


2,550


4,615


7,751


14,823

Stock-based compensation expense


2,445


2,173


6,590


6,265

Integration-related, restructuring and severance costs 


2,365


1,756


6,926


6,188

Loss (gain) on sale of assets


4,517


(950)


4,517


(6,414)

Loss on extinguishment of debt


3,355


-


3,355


-

Release of valuation allowance against certain deferred tax assets


-


(424)


-


(1,815)

Income tax provision on non-GAAP adjustments


(3,227)


(1,129)


(8,624)


(4,994)

Non-GAAP net income 


$            12,442


$           13,677


$            26,360


$           37,435



















Net income per diluted share attributable to Newport Corporation:









Net income - GAAP


$                0.01


$               0.20


$                0.15


$               0.60

Total non-GAAP adjustments


0.30


0.15


0.52


0.36

Non-GAAP net income per diluted share


$                0.31


$               0.35


$                0.67


$               0.96










 

Newport Corporation

Consolidated Balance Sheets

(Unaudited)










September 28,


December 29,

(In thousands)

2013


2012





ASSETS




Current assets:




Cash and cash equivalents

$             47,328


$             88,767

Restricted cash

3,405


3,107

Marketable securities

5,318


8,498

Accounts receivable, net 

94,737


90,981

Inventories, net

105,841


108,728

Deferred income taxes

19,811


19,872

Prepaid expenses and other current assets

22,591


17,727

Total current assets

299,031


337,680





Property and equipment, net

79,190


82,843

Goodwill

78,698


79,586

Deferred income taxes

5,502


5,646

Intangible assets, net

69,857


77,446

Investments and other assets

34,455


37,760


$           566,733


$           620,961





LIABILITIES AND STOCKHOLDERS' EQUITY




Current liabilities:




Short-term borrowings, net

$               5,614


$             32,985

Accounts payable

31,657


31,061

Accrued payroll and related expenses

28,596


29,096

Accrued expenses and other current liabilities

41,054


34,696

Total current liabilities

106,921


127,838





Long-term debt, net 

102,069


150,758

Accrued pension liabilities

28,316


27,764

Other liabilities

22,809


23,783





Total stockholders' equity of Newport 

305,224


289,432

Non-controlling interests

1,394


1,386

Total stockholders' equity 

306,618


290,818


$           566,733


$           620,961





 

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

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