IRVINE, Calif., July 30 /EMWNews/ -- Newport Corporation

(Nasdaq: NEWP) today reported financial results for its second quarter

ended June 28, 2008, and provided guidance regarding its outlook in the

third quarter of 2008.



    Sales in the second quarter of 2008 totaled $117.7 million, an increase

of 6.1% compared with the $110.9 million recorded in the second quarter of

2007. Sales in the first half of 2008 totaled $232.9 million, an increase

of 6.8% compared with the $218.2 million recorded in the first half of

2007. New orders received in the second quarter of 2008 totaled $110.1

million, a decrease of approximately 1.6% compared with the $111.9 million

recorded in the second quarter of 2007. New orders received in the first

half of 2008 totaled $235.1 million, an increase of 5.8% compared with the

$222.2 million recorded in the first half of 2007.



    Robert J. Phillippy, president and chief executive officer, commented,

"Despite weak overall macroeconomic conditions, we achieved our sales

objectives in the second quarter. In particular, we experienced strong

year-over-year increases in shipments of products to customers for

industrial manufacturing and photovoltaic applications. The strength in

these areas was offset in part by lower sales to research customers and

semiconductor equipment manufacturers."



    Commenting on orders, Mr. Phillippy stated, "Our order level for the

second quarter of 2008 was slightly below the comparable quarter of 2007

and was below our expectations, due primarily to lower orders received from

customers in the life and health sciences (LHS) market. This decrease in

LHS market orders was offset in part by higher orders from photovoltaic

customers. Following two consecutive quarters of all-time record orders

from LHS customers, we believe that our lower orders from this market in

the second quarter primarily reflect the timing of our customers' needs.

However, a few of our original equipment manufacturer (OEM) customers in

this market have reported a modest slowdown in demand for their medical

laser systems for cosmetic procedures. On the other hand, we continue to be

pleased by the traction we are gaining in the photovoltaic market. Our new

orders from photovoltaic customers in the second quarter exceeded $6.5

million, the second highest quarterly level ever recorded by Newport from

this market after the all-time record level in the first quarter of this

year. In the first half of 2008, we have received new orders totaling

approximately $22 million from customers in the photovoltaic industry."



    Based on generally accepted accounting principles (GAAP), Newport

reported a net loss in the second quarter of 2008 of $2.8 million, or $0.08

per diluted share, compared with net income of $8.0 million, or $0.20 per

diluted share, in the second quarter of 2007. Included in the net loss is a

non-cash, pre-tax charge of $7.1 million to write-off a note receivable and

other amounts relating to a business that had been classified as a

discontinued operation and subsequently sold in 2005. The buyer of that

business has failed to make certain principal, interest and rent payments

due under its agreements with Newport. The company has a secured interest

in the assets of the business and has begun legal proceedings to recover

the amounts owed. Pursuant to GAAP, the note receivable and other amounts

have been fully written off in the second quarter, and in future periods,

any cash received by the company in satisfaction of these items will be

recorded as other income in the company's financial statements. Excluding

this charge, the company would have reported net income of $4.0 million, or

$0.11 per diluted share, in the second quarter of 2008. For the first half

of 2008, Newport reported net income of $0.9 million, or $0.03 per diluted

share, compared with $13.2 million, or $0.33 per diluted share, in the

first half of 2007. Excluding the write-off charge, Newport's net income

for the first half of 2008 would have been $7.7 million, or $0.21 per

diluted share. A table reconciling the company's net income (loss) and net

income (loss) per diluted share for the second quarter and first half of

2008 in accordance with GAAP and on a non-GAAP basis excluding the

write-off is included for reference herein.



    The company's gross profit for the second quarter of 2008 was $47.3

million, or 40.2% of net sales, compared with $49.1 million, or 44.2% of

net sales, for the second quarter of 2007. The company's gross profit for

the first half of 2008 was $93.4 million, or 40.1% of net sales, compared

with $95.7 million, or 43.9% of net sales, for the first half of 2007. The

decrease in gross profit in both periods of 2008 was due primarily to lower

gross margins in the company's Lasers Division, which incurred higher

manufacturing costs and experienced greater market pricing pressure

compared with the corresponding periods of 2007.



    Selling, general and administrative (SG&A) expenses for the second

quarter of 2008 were $30.1 million, or 25.6% of net sales, compared with

$28.8 million, or 26.0% of net sales, in the second quarter of 2007. SG&A

expenses for the first half of 2008 totaled $59.9 million, or 25.7% of net

sales, compared with $58.8 million, or 27.0% of net sales, in the first

half of 2007.



    Research and development (R&D) expenses for the second quarter of 2008

were $12.3 million, or 10.5% of net sales, compared with $10.9 million, or

9.8% of net sales, in the second quarter of 2007. R&D expenses for the

first half of 2008 totaled $23.8 million, or 10.2% of net sales, compared

with $21.5 million, or 9.8% of net sales, in the corresponding period of

2007. The increase in R&D expenses in the 2008 periods was due primarily to

higher expenses related to the development of products targeted at the

photovoltaic industry.



    The company's cash, cash equivalents and marketable securities at the

end of the second quarter of 2008 totaled $141.1 million, an increase of

$6.7 million during the quarter.



    Mr. Phillippy continued, "While our operational performance in the

second quarter exceeded our expectations slightly, the low order intake

levels during the quarter, the generally weak conditions in our primary end

markets and the slower than anticipated rebound in our Lasers Division's

financial performance cause us to be cautious about our outlook for the

third quarter and second half of 2008. We currently expect our consolidated

net sales in the third quarter to be approximately 5% to 10% lower than the

second quarter of 2008. We also expect this reduction in revenue to

negatively impact our expected profitability in the third quarter,

particularly in our Lasers Division. As a result of this weaker financial

outlook, we are in the process of analyzing and quantifying actions to

improve our financial performance in the second half of this year and in

2009. Once this analysis is completed, we will quantify the expected

financial impact in the third and fourth quarters of this year. In

addition, as we work through the legal process to recover the amounts owed

relating to the discontinued operation, we anticipate recovering some, if

not all, of the amounts that were written off. As these actions are

finalized and the legal proceedings progress and their financial impacts

are quantified, we will provide updated guidance."



    ABOUT NEWPORT CORPORATION



    Newport Corporation is a leading global supplier of advanced-technology

products and systems to customers in the scientific research,

microelectronics, aerospace and defense/security, life and health sciences

and precision industrial manufacturing markets. Newport's innovative

solutions leverage its expertise in high-power semiconductor, solid-state

and ultrafast lasers, photonics instrumentation, sub-micron positioning

systems, vibration isolation, optical components and subsystems and

precision automation 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.



    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, July 30, 2008, at 5:00 p.m.

Eastern time (2:00 p.m. Pacific time) to review the company's results for

the second quarter of 2008 and its business outlook. The call will be open

to all interested investors through a live audio web broadcast via the

Internet at http://www.newport.com/investors and http://www.earnings.com. The call also

will be available to investors and analysts by dialing (888) 684-1262

within the U.S. and Canada or (913) 312-1495 from abroad.



    The webcast will be archived on both websites and can be reached

through the same links. A telephonic playback of the conference call also

will be available by calling (888) 203-1112 within the U.S. and Canada or

(719) 457-0820 from abroad. Playback will be available beginning at 8:00

p.m. Eastern time (5:00 p.m. Pacific time) on Wednesday, July 30, 2008, and

continue through 8:00 p.m. on Wednesday, August 6, 2008. The replay

confirmation code is 6469557.



    SAFE HARBOR STATEMENT



    This news release contains forward-looking statements, including

without limitation statements regarding Newport's expected sales and

profitability in the third quarter of 2008 and the actions being considered

to improve its financial results for the second half of 2008 and for 2009,

and Newport's anticipated recovery of amounts owed relating to the sale of

its previously discontinued operation. 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 29, 2007,

assumptions relating to the foregoing involve judgments and risks with

respect to, among other things, the outcome of legal proceedings relating

to the recovery of amounts due to Newport; the timing of acquisition and

divestiture activities and the amounts of charges associated with those

activities; the strength of business conditions in the industries Newport

serves, particularly the semiconductor industry; Newport's ability to

successfully penetrate and increase sales to its targeted end markets,

particularly to photovoltaic customers and the life and health sciences

market; Newport's ability to successfully integrate businesses acquired;

the levels of private and governmental research funding worldwide;

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 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. 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)



                                       Three Months Ended   Six Months Ended

                                       June 28,  June 30,  June 28,  June 30,

    (In thousands)                       2008      2007      2008      2007



    Net sales                          $117,664  $110,904  $232,907  $218,168

    Cost of sales                        70,367    61,843   139,499   122,476

    Gross profit                         47,297    49,061    93,408    95,692



    Selling, general and

     administrative expenses             30,092    28,792    59,883    58,806

    Research and development expense     12,341    10,874    23,785    21,477

    Operating income                      4,864     9,395     9,740    15,409



    Write-down of note receivable and

     other amounts related to

     previously discontinued operations  (7,060)      -      (7,060)      -

    Interest and other income

     (expense), net                        (206)       16      (689)      217

    Income before income taxes           (2,402)    9,411     1,991    15,626



    Income tax provision, net               390     1,448     1,058     2,412

    Net income (loss)                   $(2,792)   $7,963      $933   $13,214





    Net income (loss) per share:

      Basic                              $(0.08)    $0.20     $0.03     $0.33

      Diluted                            $(0.08)    $0.20     $0.03     $0.33



    Shares used in the computation of

     net income (loss) per share:

      Basic                              36,009    38,955    36,273    39,629

      Diluted                            36,009    39,554    36,385    40,491



    Other operating data:

    New orders received during the

     period                            $110,076  $111,920  $235,051  $222,234

    Backlog at the end of period

     scheduled to ship within 12

     months                                                $122,165  $111,913







                              Newport Corporation

                 Reconciliation of Non-GAAP Financial Measures

                                  (Unaudited)



    (In thousands)                        Three Months Ended Six Months Ended

                                          June 28, June 30,  June 28, June 30,

                                            2008     2007     2008     2007

    Net income (loss):

    Net income (loss) -- GAAP            $(2,792)  $7,963      $933   $13,214

    Write-down of note receivable and

     other amounts related to previously

     discontinued operations, net of tax

     impact                                 6,759     -       6,759      -

    Non-GAAP net income                    $3,967  $7,963    $7,692   $13,214





    Net income (loss) per diluted share:

    Net income (loss) -- GAAP              $(0.08)  $0.20     $0.03     $0.33

    Write-down of note receivable and

     other amounts related to previously

     discontinued operations, net of tax

     impact                                  0.19     -        0.18       -

    Non-GAAP net income per diluted share   $0.11   $0.20     $0.21     $0.33







                               Newport Corporation

                           Consolidated Balance Sheets

                                   (Unaudited)



                                                  June 28,        December 29,

    (In thousands)                                  2008              2007



    ASSETS

    Current assets:

     Cash and cash equivalents                     $65,142           $88,737

     Marketable securities                          75,982            55,127

     Accounts receivable, net                       90,095            87,606

     Notes receivable, net                           3,923             3,821

     Inventories                                   112,820           113,969

     Deferred income taxes                           6,366             6,248

     Prepaid expenses and other current assets      14,227            13,603

        Total current assets                       368,555           369,111



    Property and equipment, net                     65,266            61,872

    Goodwill                                       174,197           174,197

    Deferred income taxes                           16,975            16,932

    Intangible assets, net                          44,131            46,171

    Investments and other assets                    16,362            21,664

                                                  $685,486          $689,947



    LIABILITIES AND STOCKHOLDERS' EQUITY

    Current liabilities:

     Short-term obligations                        $15,192           $12,402

     Accounts payable                               25,074            33,319

     Accrued payroll and related expenses           22,520            23,096

     Accrued expenses and other current

      liabilities                                   27,690            24,598

        Total current liabilities                   90,476            93,415



    Long-term debt                                 175,000           175,000

    Obligations under capital leases,

     less current portion                            1,432             1,381

    Accrued pension liabilities                     11,510            10,740

    Other liabilities                                4,908             4,966



    Stockholders' equity                           402,160           404,445

                                                  $685,486          $689,947







                               Newport Corporation

                          Sales & Orders by End Market

                                   (Unaudited)



    (In thousands, except percentages)

                                     Three Months Ended   Six Months Ended

                                      6/28/08   6/30/07   6/28/08   6/30/07



    Sales by End Market



     Scientific research, aerospace

      and defense/security             $38,015   $39,887   $76,452   $74,659

     Microelectronics                   36,594    32,963    72,894    64,733

     Life and health sciences           20,941    20,124    41,708    40,850

     Industrial manufacturing and

      other                             22,114    17,930    41,853    37,926

                 Total                $117,664  $110,904  $232,907  $218,168



     As a percentage of net sales:

     Scientific research, aerospace

      and defense/security                32.3      36.0      32.8      34.2

     Microelectronics                     31.1      29.7      31.3      29.7

     Life and health sciences             17.8      18.1      17.9      18.7

     Industrial manufacturing and

      other                               18.8      16.2      18.0      17.4

                 Total                   100.0     100.0     100.0     100.0



    Orders by End Market



     Scientific research, aerospace

      and defense/security             $38,383   $40,601   $74,065   $76,314

     Microelectronics                   34,699    31,153    75,781    61,941

     Life and health sciences           16,763    22,395    43,284    44,517

     Industrial manufacturing and

      other                             20,231    17,771    41,921    39,462

                 Total                $110,076  $111,920  $235,051  $222,234



     As a percentage of total orders:

     Scientific research, aerospace

      and defense/security                34.9      36.3      31.5      34.3

     Microelectronics                     31.5      27.8      32.3      27.9

     Life and health sciences             15.2      20.0      18.4      20.0

     Industrial manufacturing and

      other                               18.4      15.9      17.8      17.8

                 Total                   100.0     100.0     100.0     100.0





    Note: Sales and orders from semiconductor equipment manufacturers and

photovoltaic customers are included in the company's Microelectronics end

market.