Newport to outsource laser manufacturing processes

Newport Corporation announced actions it is taking to reduce its operating costs and improve its financial performance. These actions, which the company expects to improve Newport's operating profit by $11 million to $14 million in 2009, include the following:

-- Transferring or outsourcing certain manufacturing processes, particularly in the company's Lasers Division, to lower-cost sources in Asia, including the company's new manufacturing facility in Wuxi, China;

-- Reduction of approximately 8% to 10% of the company's total worldwide workforce, of which approximately half of the eliminations will result from the outsourcing of certain manufacturing processes; and

-- Streamlining administrative processes and reducing costs across its facilities by leveraging the completion of the company's three-year initiative to implement a common SAP software platform worldwide.

The company reconfirmed that it expects its revenue for the third quarter of 2008 to be in the range of $106 million to $112 million. Further, the company highlighted that it expects higher revenue in the fourth quarter of 2008, despite the uncertain conditions in the semiconductor equipment market, due primarily to its strong backlog of orders from photovoltaic customers and the strength it normally experiences in its research market in the fourth quarter of the year. Specifically, the company anticipates revenue in the fourth quarter of 2008 to be in the range of $115 million to $125 million.

The company noted that its earnings, as reported in accordance with generally accepted accounting principles (GAAP), will be negatively impacted by charges related to these profit improvement initiatives, including severance benefits for terminated employees, transition costs related to the transfer of manufacturing operations and other expenses. The company expects these costs to total $8.0 million to $12.0 million, of which it expects to record approximately $1.5 million to $3.0 million in the third quarter of 2008, $4.0 to $6.0 million in the fourth quarter of 2008 and the remainder in 2009.

In the fourth quarter of 2008, including these charges, the company anticipates reporting GAAP earnings per diluted share in the range of $0.06 to $0.11. Excluding these charges, the company anticipates generating earnings per diluted share in the fourth quarter of 2008 in the range of $0.15 to $0.25. A reconciliation of the company's expected earnings per diluted share for the third and fourth quarters of 2008 in accordance with GAAP and on a non-GAAP basis excluding the charges is included in this press release for reference.

The company also noted that, in the third and fourth quarters of 2008, it expects to generate cash and non-operating income from the planned sale of a building owned by the company, as well as from the satisfaction of certain amounts owed to the company relating to a previously divested business. The timing of these events has not been finalized, and as such these anticipated amounts are not included in the company's earnings guidance.

Robert J. Phillippy, president and chief executive officer, commented, "We believe that these cost reduction actions will drive sustainable near- and long-term profit improvement for Newport. Our new manufacturing facility in Wuxi, China provides us increasing opportunities to produce selected products in a lower-cost environment, while simultaneously enhancing our presence in the rapidly growing Chinese market. We are also developing stronger outsourcing partnerships in Asia for some of our manufacturing processes, which will further enable us to reduce our cost structure. In addition, by the end of this year, all of our worldwide locations will utilize SAP as our common information technology platform. We expect that this platform will provide us with operational efficiencies and will allow us to reduce our information technology support costs."

The company also confirmed that it is on track to achieve in excess of $35 million of new orders from customers for photovoltaic applications for the full year of 2008 and that it does not expect any of the cost reduction steps to negatively impact the increasing traction being gained in this emerging area of its business.

Mr. Phillippy concluded, "We believe that the opportunities we are capitalizing on in photovoltaic applications will drive significant revenue growth in the future and that this growth combined with the lower cost structure resulting from our profit improvement actions will position us well to significantly improve our profitability in 2009 and beyond."


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