<PAGE>
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
-----------------------
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported) May 17, 1995
--------------------------
NEWPORT CORPORATION
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Nevada 0-1649 094-0849175
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(State or other jurisdiction (Commission (I.R.S. Employer
of incorporation or organization) File Number Identification No.)
1791 Deere Avenue, Irvine, CA 92714
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (714) 863-3144
-----------------------------
Not Applicable
- --------------------------------------------------------------------------------
(Former name or former address, if changed, since last report.)
Page 1 of 27 Pages
<PAGE>
Item 5. Other Events
------------
On February 28, 1995, the Company acquired RAM Optical
Instrumentation, Inc. (ROI) and on March 30, 1995, the Company
acquired Light Control Instruments, Inc. (LCI). These acquisitions
were accounted for as poolings of interests therefore the Company's
financial statements were restated to include the results of the
acquired companies for all periods presented. This Report on Form 8-K
presents the following restated, financial information originally
filed in the Company's Annual Report on Form 10-K:
Selected Financial Data restated to include results of
ROI and LCI for the periods presented Page 4
Management's Discussion and Analysis of Financial
Condition and Results of Operations restated to
include results of ROI and LCI for the periods
presented Page 5
Financial Statements and Schedule restated to include
results of ROI and LCI for the periods presented Pages 10-25
Item 7. Financial Statements and Exhibits
---------------------------------
Exhibit 23: Consent of Independent Auditors Page 26
Exhibit 27: Financial Data Schedule Page 27
2
<PAGE>
SIGNATURES
----------
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
NEWPORT CORPORATION
Date: May 17, 1995 By: /s/ ROBERT C. HEWITT
-----------------------------------
Robert C. Hewitt
Vice President and
Chief Financial Officer
3
<PAGE>
SELECTED FINANCIAL DATA
-----------------------
The following table presents selected financial data of the Company and
its subsidiaries as of and for the years ended December 31, 1994 and
1993, the five months ended December 31, 1992 and the years ended July
31, 1992, 1991 and 1990 (In thousands, except percent and per share
information) restated to include financial information of ROI and LCI
which were accounted for as poolings of interests:
<TABLE>
<CAPTION>
1994 1993 1992T* 1992 1991 1990
------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
FOR THE YEAR:
Net sales $94,201 $93,573 $39,398 $ 94,925 $65,109 $63,386
Cost of sales 51,811 51,747 21,887 53,378 35,882 35,504
Selling, general and administrative 32,240 31,735 14,161 34,699 20,814 18,215
Research and development 5,371 5,219 2,498 6,471 4,194 4,533
Restructuring expense and other special charges - 6,263 - 13,795 - -
------------------------------------------------------------------------------------------------------------------
Income (loss) from operations 4,779 (1,391) 852 (13,418) 4,219 5,134
Other income (expense) 57 (858) (635) (890) 861 2,916
------------------------------------------------------------------------------------------------------------------
Income (loss) before income taxes 4,836 (2,249) 217 (14,308) 5,080 8,050
Provision (benefit) for taxes 1,654 951 744 (333) 1,398 2,362
------------------------------------------------------------------------------------------------------------------
Net income (loss) $3,182 $(3,200) $ (527) $(13,975) $3,682 $5,688
------------------------------------------------------------------------------------------------------------------
Percent to sales:
Cost of sales 55.0 55.3 55.6 56.2 55.1 56.0
Selling, general and administrative 34.2 33.9 35.9 36.6 32.0 28.7
Research and development 5.7 5.6 6.3 6.8 6.4 7.2
Income (loss) from operations 5.1 (1.5) 2.2 (14.1) 6.5 8.1
Net income (loss) 3.4 (3.4) (1.3) (14.7) 5.7 9.0
------------------------------------------------------------------------------------------------------------------
PER SHARE:
Earnings (loss) per share $0.38 $(0.38) $(0.06) $(1.67) $0.44 $0.61
Dividends paid per share 0.03 0.04 0.03 0.14 0.13 0.12
Equity per share 5.53 5.20 5.66 5.78 7.79 7.54
------------------------------------------------------------------------------------------------------------------
AT YEAR END:
Cash and marketable securities $ 3,624 $ 4,311 $ 3,436 $ 6,593 $20,601 $28,697
Customer receivables 18,755 16,946 18,678 21,065 16,009 11,023
Inventories 21,432 21,655 24,531 27,452 20,322 15,845
Other current assets 4,512 4,941 5,939 7,603 6,122 4,948
------------------------------------------------------------------------------------------------------------------
Current assets 48,323 47,853 52,584 62,713 63,054 60,513
Investments and other assets 4,441 5,185 5,177 5,074 12,340 7,926
Assets held for sale - 372 - - - -
Property, plant and equipment 23,044 23,773 30,415 31,175 14,189 8,583
Goodwill, net 8,846 8,852 9,747 10,893 - -
------------------------------------------------------------------------------------------------------------------
Total assets $84,654 $86,035 $97,923 $109,855 $89,583 $77,022
------------------------------------------------------------------------------------------------------------------
Current liabilities 26,604 $24,085 $29,358 $ 34,893 $19,019 $10,088
Deferred taxes 282 2,302 2,083 2,054 1,531 1,547
Long-term debt 11,117 16,005 19,246 24,704 4,047 54
Stockholders' equity 46,651 43,643 47,236 48,204 64,986 65,333
------------------------------------------------------------------------------------------------------------------
Total liabilities and equity $84,654 $86,035 $97,923 $109,855 $89,583 $77,022
------------------------------------------------------------------------------------------------------------------
MISCELLANEOUS STATISTICS
Working capital $21,719 $23,768 $23,226 $ 27,820 $44,035 $50,425
Average equivalent shares 8,469 8,385 8,345 8,345 8,456 9,362
Common stock outstanding 8,441 8,400 8,345 8,345 8,345 8,670
------------------------------------------------------------------------------------------------------------------
</TABLE>
* Transition period of five months ended December 31, 1992 due to change in year
end.
4
<PAGE>
Management's Discussion and Analysis of Financial Condition and Results
of Operations
The following is management's discussion and analysis of certain
significant factors which have affected the earnings and financial
position of the Company during the periods included in the accompanying
financial statements. This discussion should be read in conjunction with
the financial statements and associated notes. This discussion includes
the impact of the acquisition of RAM Optical Instrumentation, Inc. and
Light Control Instruments, Inc., which were accounted for as poolings of
interests, described more fully in Note 3 to the financial statements on
page 16 of this Form 8-K.
RESTRUCTURING In response to the low level of sales experienced in
Europe, the Company recorded for the quarter ended December 31, 1993,
restructuring and other special charges totaling $6.3 million ($5.1
million after taxes) aimed primarily at its European operations. These
charges included $3.3 million to revalue surplus real estate in the U.S.
and Europe, $2.2 million for severance and related costs for
approximately 50 employees and $0.8 million for equipment relocation
costs, facility carrying costs and selling expenses associated with the
real estate. Non-cash items totaled $3.3 million for revaluing the real
estate. Cash items totaled $3.0 million of which $1.3 million has been
incurred during the twelve months ended December 31, 1994 primarily for
severance and other related payroll liabilities for 34 employees and
costs to close facilities. It is expected that the balance, $1.7
million, will be used primarily to close facilities and will be
substantially incurred by December 31, 1995.
The Company anticipates that the restructuring program will reduce costs
and expenses by approximately $2 million annually beginning in 1995 and
believes this restructuring program will align the Company's costs with
anticipated revenues. However, if sales in domestic or international
markets decline, further actions may be necessary. Long-term improvement
in profitability is dependent upon a strengthening of domestic and
international markets and the successful implementation of revenue growth
strategies.
For the quarter ended April 30, 1992, the Company recorded restructuring
charges which resulted in a $13.8 million pre-tax charge to operations
and $7.1 million accounted for as an increase of the goodwill associated
with the acquisition of Micro-Controle. Cash items totaled $12.0 million
and non-cash items accounted for $8.9 million. During the twelve months
ended December 31, 1994, cash charges amounted to $0.5 million for
severance and other payroll related liabilities, $0.3 million
representing lease payments and $1.1 million for costs to close
facilities. For the twenty months ended December 31, 1993, the Company
charged against this reserve $4.7 million representing severance and
other payroll related liabilities, $1.7 million representing lease
payments on abandoned facilities and $3.0 million representing costs to
close facilities. It is expected that the $0.7 million balance,
principally for severance and costs to close facilities, will be spent
during the first half of 1995.
NET SALES For the years ended December 31, 1994 and 1993, the
Company's net sales totaled $94.2 million and $93.6 million,
respectively. The increase of $0.6 million (0.7%) represented increases
in both domestic and international markets. Sales for the five-month
transition period ended December 31, 1992 and the 1992 fiscal year
totaled $39.4 million and $94.9 million, respectively. Because the
Company switched to a calendar fiscal year effective January 1, 1993,
these prior year periods are not strictly comparable. However, average
monthly sales for the two periods totaled $7.9 million, respectively.
Domestic sales totaled $49.9 million, $49.5 million, $21.0 million and
$51.3 million for years ended December 31, 1994 and 1993, the five months
ended December 31, 1992 and the year ended July 31, 1992, respectively.
Sales for the twelve months ended December 31, 1994 increased $0.4
million (0.8 %) compared with the sales for the twelve months ended
December 31, 1993. The increase is attributable principally to the
strengthening of sales of core precision micropositioning systems and
continued improvement in newer growth markets. Average monthly domestic
sales for the year ended December 31, 1993, the five-month transition
period ended December 31, 1992 and the year ended July 31, 1992 were $4.1
million, $4.2 million and $4.3 million per month, respectively.
5
<PAGE>
International sales totaled $44.3 million, $44.1 million, $18.4 million
and $43.6 million for the years ended December 31, 1994 and 1993, the
five-month transition period ended December 31, 1992 and the year ended
July 31, 1992. International sales for the twelve months ended December
31, 1994 increased $0.2 million compared with the twelve months ended
December 31, 1993. The increase is attributable principally to the
growth in sales of RAM products offset in part by weak market conditions
in certain European countries for core Newport products. Average monthly
international sales for the year ended December 31, 1993, the five-month
transition period ended December 31, 1992 and the year ended July 31,
1992 were $3.7 million, $3.7 million and $3.6 million per month,
respectively.
The order rate in the U.S. showed signs of moderate strength in the
latter part of 1994 and early 1995 in response to the increasing sales
and marketing emphasis on newer growth markets; however, the order rate
for Japan has weakened somewhat toward the end of 1995's first quarter.
Overall, management anticipates modest sales growth through the end of
calendar year 1995 from an improving US economy and increased sales of
ultrahigh precision positioning products.
OPERATING INCOME Total costs and expenses for the years ended December
31, 1994 and 1993, the five-month transition period ended December 31,
1992 and the year ended July 31, 1992 were $91.0 million, $96.8 million,
$39.9 million and $108.9 million respectively. Excluding the
restructuring and other special charges mentioned previously, these costs
and expenses totaled $91.0 million, $90.5 million, $39.9 million and
$95.1 million for the respective periods.
Cost of sales when stated as a percentage of sales were 55.0%, 55.3%,
55.6% and 56.2% for the years ended December 31, 1994 and 1993, the five-
month transition period ended December 31, 1992 and the year ended July
31, 1992, respectively. The decrease in 1994 from the year ended
December 31, 1993, is attributable primarily to lower costs resulting
from the restructuring activities mentioned previously. Management
anticipates that these expenses as a percent of sales will be reduced
further in 1995 as a result of increased sales volume and continued
productivity improvements which are anticipated to offset recent material
price increases.
Selling, general and administrative (SG&A) expenses totaled $32.2
million, $31.7 million, $14.2 million and $34.7 million for the years
ended December 31, 1994 and 1993, the five-month transition period ended
December 31, 1992 and the year ended July 31, 1992, respectively. SG&A
expenses represented 34.2%, 33.9%, 35.9% and 36.6% of net sales in 1994,
1993, the transition period and 1992, respectively. The increase in 1994
was attributable to the costs associated with strengthening the operating
management of the Company. The decrease in 1993 and the transition
period from fiscal year 1992 was attributable primarily to lower costs
resulting from the 1992 restructuring program. Management anticipates
SG&A expenses in total will increase in 1995 but as a percent of sales
will be reduced further as a result of increased sales volume. In
addition, management anticipates that certain bonus and insurance
expenses incurred historically by ROI will not continue. These expenses
totaled $0.6 million, $0.7 million, $0.3 million and $0.6 million for the
years ended December 31, 1994 and 1993, the five-month transition period
ended July 31, 1992 and the year ended December 31, 1992, respectively.
Research and development (R&D) expenses totaled $5.4 million, $5.2
million, $2.5 million and $6.5 million for the years ended December 31,
1994 and 1993, the five-month transition period ended December 31, 1992
and the year ended July 31, 1992, respectively. R&D expenses represented
5.7%, 5.6%, 6.3% and 6.8% of net sales in 1994, 1993, the transition
period and 1992, respectively. The change in R&D expenses in 1994
compared with 1993 was attributable primarily to lower costs resulting
from the restructuring programs offset by increases in R&D spending at
RAM and LCI. Management believes that increases in the level of R&D
expenditures are required for the development of new products and product
improvements principally related to AutoAlign(TM) and related ultrahigh
precision positioning products and intends to increase annual R&D
expenditures in 1995 by approximately one million dollars over amounts
expended in 1994.
6
<PAGE>
Excluding the restructuring and other special charges mentioned
previously, operating income (loss) totaled $4.8 million, $4.9 million,
$0.9 million and $0.4 million for the years ended December 31, 1994 and
1993, the five-month transition period ended December 31, 1992 and the
year ended July 31, 1992, respectively. Operating income (loss)
excluding restructuring and other special charges represented 5.1%, 5.2%,
2.2% and 0.4% of net sales in 1994, 1993, the transition period and 1992,
respectively. Management anticipates that operating income will improve
further as the restructuring programs mentioned previously are completed
and because certain bonus and insurance expenses incurred historically by
ROI will not continue.
INTEREST EXPENSE Interest expense totaled $1.8 million, $2.3 million,
$1.5 million and $2.9 million for the years ended December 31, 1994 and
1993, the five-month transition period ended December 31, 1992 and the
year ended July 31, 1992, respectively. The decrease in interest expense
for the year ended December 31, 1994, compared with the year ended
December 31, 1993 is attributable to a reduction in the average debt
outstanding. The Company anticipates that recent increases in the
interest rates will result in higher interest expense in 1995. The
Company is actively seeking alternate sources of financing which if
successful could reduce the net after tax financing cost for the Company.
There is no assurance, however, that the Company will be successful in
obtaining alternate financing.
OTHER INCOME (EXPENSE) Interest and dividend income totaled $0.1
million, $0.2 million, $0.3 million and $0.8 million for the twelve
months ended December 31, 1994 and 1993, the five-month transition period
ended December 31, 1992 and the twelve months ended July 31, 1992,
respectively.
Realized exchange gains (losses) totaled $0.2 million, $(0.2 million),
$(0.2 million) and $0.6 million for the twelve months ended December 31,
1994 and 1993, the five-months ended December 31, 1992 and the twelve
months ended July 31, 1992, respectively. The gains in 1994 and the
losses in 1993 and the 1992 transition period were attributable primarily
to the strengthening, in 1994, and weakening, in 1993 and the transition
period, of the European currencies compared with the U.S. dollar on
current receivables denominated in European currencies.
The Company recorded investment gains totaling $1.4 million, $1.3
million, $0.2 million, and $0.9 million in the years ended December 31,
1994 and 1993, the five-month transition period ended December 31, 1992
and the year ended July 31, 1992. The gains were attributable primarily
to the sale of marketable and non-marketable investments.
TAXES BASED ON INCOME The tax provisions for the 1994 and 1993 fiscal
years and the 1992 transition period of $1.7 million, $1.0 million and
$0.7 million, respectively, were recorded on profits earned in the US.
Prior to 1994, net losses, principally in Europe, did not have a tax
benefit recorded; in 1994 approximately $0.4 million foreign income tax
benefit was recorded due to the utilization of net loss carryforwards.
The tax benefit for the 1992 fiscal year, $0.3 million, was attributable
principally to restructuring charges that were carried back to offset
taxable income of prior years.
STOCKHOLDERS' EQUITY The Company paid dividends totaling $299,000,
$304,000, $279,000 and $1,140,000 during the twelve months ended December
31, 1994 and 1993, the five-month transition period ended December 31,
1992 and the twelve months ended July 31, 1992, respectively. This
represents 3, 4, 3 and 14 cents per share during the respective periods
as the Company reduced its payout from the 1992 fiscal year period to
conserve cash in light of the restructuring activities.
Stockholders' equity decreased from $47.2 million ($5.66 per share), at
December 31, 1992 to $43.6 million ($5.20 per share) as of December 31,
1993 and increased to $46.7 million ($5.53 per share) as of December 31,
1994. The decrease is attributable primarily to restructuring and other
special charges, unrealized exchange losses as a result of the
strengthening of the dollar and payment of dividends. The increase in
1994 was attributable to the current year earnings and unrealized
exchange gains, offset in part by dividend payments.
7
<PAGE>
WORKING CAPITAL AND LIQUIDITY Cash paid to reduce debt totaled $2.9
million, $3.5 million and $3.1 million during the years 1994, 1993 and
the five-month transition period ended December 31, 1992. The debt
reduction in 1994 was offset by translation losses of $1.7 million as
result of the weakening of the US dollar versus the French franc. The
Company believes its current working capital position together with
estimated cash flows from operations, its existing financing
availability, anticipated refinancing and proceeds from asset sales are
adequate for operations in the ordinary course of business, anticipated
capital expenditures as well as restructuring and debt payment
requirements.
The Company has a credit agreement with a U.S. bank which provides for a
line of credit of up to $15 million, expiring in June 1996, secured by
eligible accounts receivable, inventory and fixed assets, with interest
at prime plus one percent. At December 31, 1994, amounts outstanding
under the line of credit aggregated $7.6 million. Additional amounts
available for borrowing under the line at that date were $1.2 million.
The Company has a credit agreement with a US financial institution which
provides for a line of credit of up to $1 million, expiring in August
1995, secured by eligible accounts receivable and inventory, with
interest at prime plus one percent. At December 31, 1994, amounts
outstanding under the line of credit aggregated $0.2 million and amounts
available for borrowing under this line totaled $0.8 million.
The Company has a line of credit with a consortium of foreign banks
which, at December 31, 1993, provided for advances up to a limit of 60
million French francs (approximately $11.2 million) with interest at 1%
above PIBOR (Paris Interbank Offered Rate), collateralized by eligible
receivables. During the third quarter of 1994 the Company renewed this
line of credit with a reduced advance limit of 25 million French francs
($4.7 million) for a period of seven months to March 31, 1995, all other
terms and conditions remaining the same. On March 31, 1995 the Company
renewed this line for one year under essentially the same terms and
conditions. Borrowings outstanding under this agreement were 13.0
million French francs (approximately $2.4 million) at December 31, 1994.
Additional amounts available for borrowing under the line at that date
were 12.0 million French francs (approximately $2.3 million).
The Company has term notes with the same consortium of foreign banks
which, at December 31, 1994 totaled 37.5 million French francs
(approximately $7.0 million) with interest at 1.6% above PIBOR, secured
generally by assets of the Company's wholly-owned subsidiary, Micro-
Controle. Payments are in three annual installments commencing in
October 1995. During 1994, the Company repaid the consortium 22.5
million French francs (approximately $4.2 million).
Capitalized lease obligations, payable in varying installments to 1999,
of 16.1 million French francs (approximately $3.0 million) at December
31, 1994 relate to real estate and equipment.
CAPITAL EXPENDITURES Net capital expenditures for plant improvements
and new equipment, excluding funds used to acquire Micro-Controle and its
former subsidiaries, aggregated $1.7 million, $1.7 million, $2.4 million
and $4.6 million for the years ended December 31, 1994 and 1993, the
five-month transition period ended December 31, 1992 and the year ended
July 31, 1992, respectively. The Company does not anticipate significant
increases in net capital expenditures in 1995 compared to 1994.
8
<PAGE>
INDEX
Financial Statements and Schedule restated to include results of ROI and
LCI
<TABLE>
<S> <C>
Report of Independent Auditors 10
FINANCIAL STATEMENTS:
Consolidated statement of operations for the years ended
December 31, 1994 and 1993, the five months ended
December 31, 1992 and the year ended July 31, 1992 11
Consolidated balance sheet at December 31, 1994 and 1993 12
Consolidated statement of cash flows for the years ended
December 31, 1994 and 1993, the five months ended
December 31, 1992 and the year ended July 31, 1992 13
Consolidated statement of stockholders' equity for the years ended
December 31, 1994 and 1993, the five months ended
December 31, 1992 and the year ended July 31, 1992 14
Notes to consolidated financial statements 15-24
FINANCIAL STATEMENT SCHEDULE:
II - Consolidated valuation accounts 25
</TABLE>
9
<PAGE>
Report of Independent Auditors
The Board of Directors and Stockholders
Newport Corporation
We have audited the accompanying consolidated balance sheets of Newport
Corporation as of December 31, 1994 and 1993, and the related
consolidated statements of operations, stockholders' equity, and cash
flows for the years ended December 31, 1994 and 1993, the five months
ended December 31, 1992 and the year ended July 31, 1992. Our audits
also included the financial statement schedule listed in the Index on
page 9 of this Form 8-K. These financial statements and schedule are the
responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements and schedule based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are
free of material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles
used and significant estimates made by management, as well as evaluating
the overall financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial
position of Newport Corporation at December 31, 1994 and 1993, and the
consolidated results of its operations and its cash flows for the years
ended December 31, 1994 and 1993, the five months ended December 31, 1992
and the year ended July 31, 1992, in conformity with generally accepted
accounting principles. Also, in our opinion, the related financial
statement schedule, when considered in relation to the basic financial
statements taken as a whole, presents fairly in all material respects the
information set forth therein.
ERNST & YOUNG LLP
Orange County, California
May 17, 1995
10
<PAGE>
NEWPORT CORPORATION
Consolidated Statement of Operations
<TABLE>
<CAPTION>
(In thousands except Years Ended Five Months Year
per share amounts) December 31, Ended Ended
------------ December 31, July 31,
1994 1993 1992 1992
-------- ------- -------- --------
<S> <C> <C> <C> <C>
Net sales $94,201 $93,573 $39,398 $ 94,925
Cost of sales 51,811 51,747 21,887 53,378
-------- ------- -------- --------
Gross profit 42,390 41,826 17,511 41,547
Selling, general and administrative expense 32,240 31,735 14,161 34,699
Research and development expense 5,371 5,219 2,498 6,471
Restructuring and other special charges - 6,263 - 13,795
-------- ------- -------- --------
Income (loss) from operations 4,779 (1,391) 852 (13,418)
Interest expense (1,782) (2,321) (1,540) (2,911)
Other income, net 1,839 1,463 905 2,021
-------- ------- -------- --------
Income (loss) before income taxes 4,836 (2,249) 217 (14,308)
Income tax provision (benefit) 1,654 951 744 (333)
-------- ------- -------- --------
Net income (loss) $ 3,182 $(3,200) $ (527) $(13,975)
======= ======= ======= ========
Net income (loss) per share $ 0.38 $ (0.38) $ (0.06) $ (1.67)
======= ======= ======= ========
Number of shares used to calculate
net income (loss) per share 8,469 8,385 8,345 8,345
======= ======= ======= ========
</TABLE>
See accompanying notes.
11
<PAGE>
NEWPORT CORPORATION
Consolidated Balance Sheet
<TABLE>
<CAPTION>
(Dollars in thousands, except stated value per share) December 31,
------------------
1994 1993
------- -------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 3,014 $ 2,537
Marketable securities 610 1,774
Customer receivables, net 18,755 16,946
Other receivables 1,912 1,141
Inventories 21,432 21,655
Other current assets 2,600 3,800
------- -------
Total current assets 48,323 47,853
Assets held for sale -- 372
Investments, notes receivable and other assets 4,441 5,185
Property, plant and equipment, at cost, net 23,044 23,773
Goodwill, net 8,846 8,852
------- -------
$84,654 $86,035
======= =======
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 5,393 $ 3,952
Accrued payroll and related expenses 4,679 3,621
Taxes based on income 1,308 64
Accrued restructuring liabilities, net 2,364 5,561
Current portion of long-term debt 10,316 6,681
Other accrued liabilities 2,544 4,206
------- -------
Total current liabilities 26,604 24,085
Deferred taxes 282 2,302
Notes payable to banks-long term 11,117 16,005
Commitments (Note 11)
Stockholders' equity:
Common stock, $.35 stated value, 20 million shares authorized;
8,441,000 shares issued and outstanding at December 31, 1994;
8,400,000 shares at December 31, 1993 2,954 2,939
Capital in excess of stated value 5,771 5,554
Unamortized deferred compensation (251) (174)
Unrealized gain on marketable securities 343 979
Unrealized translation loss (2,778) (3,384)
Retained earnings 40,612 37,729
------- -------
Total stockholders' equity 46,651 43,643
------- -------
$84,654 $86,035
======= =======
</TABLE>
See accompanying notes.
12
<PAGE>
NEWPORT CORPORATION
Consolidated Statement of Cash Flows
<TABLE>
<CAPTION>
(In thousands) Years Ended Five Months Year
December 31, Ended Ended
----------------------- December 31, July 31,
1994 1993 1992 1992
------- ------- ------------ --------
<S> <C> <C> <C> <C>
Operating activities:
Net income (loss) $ 3,182 $(3,200) $ (527) $(13,975)
Adjustments to reconcile net income (loss)
to net cash provided by (used in)
operating activities:
Depreciation and amortization 4,622 5,638 2,380 6,566
Net gains from sales of investments (1,685) (1,260) (217) (926)
Increase in provision for losses on
receivables, inventories and investments 1,129 1,366 1,137 125
Decrease in deferred income taxes (1,126) (2) -- 5
Realized foreign currency (gains) losses, net (175) 158 245 (647)
Restructuring and other special charges -- 6,263 -- 13,795
Other non cash (income) loss 79 -- (53) (132)
Changes in operating assets and liabilities:
(Increase) decrease in receivables (1,799) 1,471 4,599 (1,498)
(Increase) decrease in inventories 234 1,660 1,904 (1,589)
(Increase) decrease in other current assets (517) 171 (909) 453
Decrease in accounts payable and
other accrued expenses (3,358) (6,807) (5,593) (8,639)
Increase (decrease) in taxes based on income 2,203 (19) 244 (990)
Other, net 203 (2,196) (481) (1,315)
------- ------- ------- --------
Net cash provided by (used in) operating activities 2,992 3,243 2,729 (8,767)
------- ------- ------- --------
Investing activities:
Proceeds from sales of investments
and marketable securities 2,205 1,386 3,456 8,327
Purchases of property, plant and equipment (2,142) (2,139) (3,217) (4,565)
Disposition of property, plant and equipment 434 454 784 --
Investment in Micro-Controle S.A. -- -- -- (8,629)
Other, net 164 20 -- (23)
------- ------- ------- --------
Net cash provided by (used in) investing activities 661 (279) 1,023 (4,890)
------- ------- ------- --------
Financing activities:
Proceeds from short-term borrowings, net 2,450 (76) 5 7,424
Repayment of long-term borrowings, net (5,394) (3,455) (3,091) (1,026)
Cash dividends paid (299) (304) (279) (1,140)
Proceeds from common stock under
employee agreements for cash 99 91 -- 3
------- ------- ------- --------
Net cash provided by (used in) financing activities (3,144) (3,744) (3,365) 5,261
------- ------- ------- --------
Effect of foreign exchange rate changes on cash (32) (119) (305) 381
------- ------- ------- --------
Increase (decrease) in cash and cash equivalents 477 (899) 82 (8,015)
Cash and cash equivalents at beginning of period 2,537 3,436 3,354 11,369
------- ------- ------- --------
Cash and cash equivalents at end of period $ 3,014 $ 2,537 $ 3,436 $ 3,354
======= ======= ======= ========
</TABLE>
See accompanying notes.
13
<PAGE>
NEWPORT CORPORATION
Consolidated Statement of Stockholders' Equity
<TABLE>
<CAPTION>
(Amounts in thousands, except Unrealized
share and per share amounts) Capital in Unamortized gain on Unrealized
Common excess of deferred marketable translation Retained
stock stated value compensation securities loss earnings Total
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at July 31, 1991, as previously
- ---------------------------------------
reported $2,438 $5,584 $ 0 $ 0 $ (359) $ 56,163 $ 63,826
Adjustments for ROI and LCI poolings
of interest 482 (322) - - - 991 1,151
- -----------------------------------------------------------------------------------------------------------------------------------
Balance at July 31, 1991, as restated 2,920 5,262 0 0 (359) 57,154 64,977
- -------------------------------------
Cash dividends
($0.16 per share) - - - - - (1,113) (1,113)
Cash dividends to ROI shareholders - - - - - (27) (27)
Issuance of common stock
under employee agreements
for cash (407 shares) - 3 - - - - 3
Net loss - - - - - (13,975) (13,975)
Unrealized translation loss - - - - (1,661) - (1,661)
- -----------------------------------------------------------------------------------------------------------------------------------
Balance at July 31, 1992 2,920 5,265 0 0 (2,020) 42,039 48,204
- ------------------------
Cash dividends
($0.04 per share) - - - - - (279) (279)
Net loss - - - - - (527) (527)
Unrealized translation loss - - - - (161) - (161)
- -----------------------------------------------------------------------------------------------------------------------------------
Balance at December 31, 1992 2,920 5,265 0 0 (2,181) 41,233 47,237
- ----------------------------
Cash dividends
($0.04 per share) - - - - - (280) (280)
Cash dividends to ROI shareholders - - - - - (24) (24)
Issuance of common stock
under employee agreements
for cash (13,750 shares) 6 85 - - - - 91
Grants of restricted
stock (37,000 shares) 13 204 (217) - - - 0
Amortization of deferred
compensation - - 43 - - - 43
Unrealized gain on marketable
equity securities, net of
income taxes - - - 979 - - 979
Net loss - - - - - (3,200) (3,200)
Unrealized translation loss - - - - (1,203) - (1,203)
- -----------------------------------------------------------------------------------------------------------------------------------
Balance at December 31, 1993 2,939 5,554 (174) 979 (3,384) 37,729 43,643
- ----------------------------
Cash dividends
($0.04 per share) - - - - - (281) (281)
Cash dividends to ROI shareholders - - - - - (18) (18)
Issuance of common stock
under employee agreements
for cash (16,750 shares) 7 92 - - - - 99
Grants of restricted
stock (32,000 shares) 11 169 (180) - - - 0
Forfeiture of restricted
stock grants (8,000 shares) (3) (44) 47 - - - 0
Amortization of deferred
compensation - - 56 - - - 56
Reduction in unrealized gain on
marketable equity securities,
net of income taxes - - - (636) - - (636)
Net income - - - - - 3,182 3,182
Unrealized translation gain - - - - 606 - 606
- -----------------------------------------------------------------------------------------------------------------------------------
Balance at December 31, 1994 $2,954 $5,771 $(251) $ 343 $(2,778) $ 40,612 $ 46,651
===================================================================================================================================
</TABLE>
See accompanying notes.
14
<PAGE>
NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Consolidation The accompanying financial statements consolidate the
accounts of the Company and its wholly owned subsidiaries and have been
restated for all periods presented to reflect the acquistions of ROI and
LCI (Note 3) which have been accounted for using the pooling of interests
method. Effective August 1, 1991 the accounts of the Company's
subsidiaries in Europe and Japan have been consolidated using a one-month
lag. This accounting change for the European and Japanese sales
subsidiaries resulted in a one-time sales reduction aggregating $1.5
million for the year ended July 31, 1992. The impact on 1992's loss
before taxes and net loss was not material. The Company changed, by
resolution of its board of directors, its fiscal year from July 31 to
December 31, effective December 31, 1992. Management has determined that
it is not practical or cost effective to recast prior year results to the
new fiscal year because required information cannot reasonably be
reconstructed. The results of operations of the former non-French
subsidiaries of Micro-Controle S.A. (Micro-Controle) have been included
effective July 1, 1991, whereas the results of operations of Micro-
Controle have been included effective October 1, 1991 (Note 3). All
significant intercompany transactions and balances have been eliminated.
Certain reclassifications have been made to prior year amounts to conform
to current year presentation. The $2 million carrying value of the
Company's facility in Garden City, New York that was held for sale at
December 31, 1993, has been reclassified to property, plant and equipment
since the Company no longer intends to sell it. In March 1995, the
Company entered into a long-term agreement to lease this facility.
Sales A sale is recorded when title passes to customers.
Income taxes The Company recognizes the amount of current and deferred
taxes payable or refundable at the date of the financial statements as a
result of all events that have been recognized in the financial
statements and as measured by the provisions of enacted laws.
Depreciation and amortization The cost of buildings, machinery and
equipment and leasehold improvements is depreciated generally using an
accelerated method based on a declining balance formula over estimated
useful lives ranging from three to thirty one and one-half years.
Leasehold improvements are generally amortized over the term of the
lease.
Net income (loss) per share Net income (loss) per share is based on the
weighted average number of shares of common stock, and for periods with
income, the dilutive effects of common stock equivalents (stock options),
determined using the treasury stock method, outstanding during the
periods.
Goodwill Goodwill is amortized on a straight line basis over its
estimated useful life of twenty years. At December 31, 1994, accumulated
amortization aggregated $1.7 million. Annually the Company compares the
undiscounted estimated future cash flows from Micro-Controle over a ten-
year period to the unamortized balance of goodwill to determine whether
any impairment exists.
Investments In May 1993 the Financial Accounting Standards Board issued
Statement of Financial Accounting Standard (SFAS 115), "Accounting for
Certain Investments in Debt and Equity Securities" (Note 9). As
permitted under this statement, the Company elected to adopt the
provisions of the new standard as of December 31, 1993. In accordance
with SFAS 115, prior period financial statements have not been restated
to reflect the change in accounting principle. The cumulative effect as
of December 31, 1993, of adopting SFAS 115 increased shareholders' equity
and working capital by $1.0 million (net of $0.6 million in deferred
income taxes) to reflect the net unrealized gain on securities classified
as available-for-sale previously carried at the lower of cost or market.
Foreign currency Balance sheet accounts denominated in foreign currency
are translated at exchange rates as of the date of the balance sheet and
income statement accounts are translated at average exchange rates for
the period. Translation gains and losses are accumulated as a separate
component of Stockholders' Equity.
15
<PAGE>
The Company has adopted local currencies as the functional currencies for
its subsidiaries because their principal economic activities are most
closely tied to the respective local currencies.
The Company may enter into foreign exchange contracts as a hedge against
foreign currency denominated receivables. It does not engage in currency
speculation. Market value gains and losses on contracts are recognized
currently, offsetting gains or losses on the associated receivables.
Foreign currency transaction gains and losses are included in current
earnings. Foreign exchange contracts totaled $0.1 million at December 31,
1994.
NOTE 2 RESTRUCTURING
In response to the continued low level of sales experienced in Europe,
the Company recorded for the quarter ended December 31, 1993,
restructuring and other special charges totaling $6.3 million ($5.1
million after taxes) aimed primarily at its European operations. These
charges included $3.3 million to revalue surplus real estate in the US
and Europe, $2.2 million for severance and related costs for
approximately 50 employees to be terminated and $0.8 million for
equipment relocation costs, facility carrying costs and selling expenses
associated with the real estate. Non-cash items totaled $3.3 million for
revaluing the real estate. Cash items totaled $3.0 million of which $1.3
million has been incurred during the twelve months ended December 31,
1994 primarily for severance and other related payroll liabilities for 34
employees and costs to close facilities. It is expected that the
balance, $1.7 million, will be used primarily to close facilities and
will be substantially incurred by December 31, 1995.
The Company anticipates that the restructuring program will reduce costs
and expenses by approximately $2 million annually beginning in 1995 and
believes this restructuring program will align the Company's costs with
anticipated revenues. However, if sales in domestic or international
markets decline, further actions may be necessary. Long-term improvement
in profitability is dependent upon a strengthening of domestic and
international markets and the successful implementation of revenue growth
strategies.
For the quarter ended April 30, 1992, the Company recorded restructuring
charges which resulted in a $13.8 million pre-tax charge to operations
and $7.1 million accounted for as an increase of the goodwill associated
with the acquisition of Micro-Controle. Cash items totaled $12.0 million
and non-cash items accounted for $8.9 million. During the twelve months
ended December 31, 1994, cash charges amounted to $0.5 million for
severance and other payroll related liabilities, $0.3 million
representing lease payments and $1.1 million for costs to close
facilities. For the twenty months ended December 31, 1993, the Company
charged against this reserve $4.7 million representing severance and
other payroll related liabilities, $1.7 million representing lease
payments on abandoned facilities and $3.0 million representing costs to
close facilities. It is expected that the $0.7 million balance,
principally for severance and costs to close facilities, will be spent
during the first half of 1995.
NOTE 3 ACQUISITIONS
On March 30, 1995, the Company acquired all the outstanding stock of
Light Control Instruments, Inc. (LCI) in exchange for 128,000 shares of
its common stock. LCI, a manufacturer of laser-diode instruments became a
wholly owned subsidiary of the Company. The transaction has been
accounted for as a pooling of interests.
On February 28, 1995, the Company acquired all the outstanding capital
stock of Ram Optical Instrumentation, Inc. (ROI) in exchange for
1,251,000 shares of its common stock. Additionally, an option to
purchase 3,500 ROI common shares at $50 per share was exchanged for an
option to purchase 72,975 Newport common shares at $2.398 per share.
ROI, a manufacturer of video inspection systems, became a wholly-owned
subsidiary of Newport. The fiscal year of ROI will be changed from March
31 to December 31 to conform to the Company's fiscal year-end. The
transaction has been accounted for as a pooling of interests.
16
<PAGE>
Net sales and net income (loss) of Newport, ROI and LCI for the periods
preceding the acquisitions were:
(In thousands)
<TABLE>
<CAPTION>
Newport ROI LCI Combined
------- ------ ----- --------
<S> <C> <C> <C> <C>
Fiscal year ended December 31, 1994:
Net sales $85,637 $8,039 $525 $94,201
Net income (loss) 3,339 (145) (12) 3,182
Fiscal year ended December 31, 1993:
Net sales 84,147 9,069 357 93,573
Net income (loss) (3,746) 566 (20) (3,200)
Five months ended December 31, 1992:
Net sales 36,070 3,125 203 39,398
Net income (loss) (648) 83 38 (527)
Fiscal year ended July 31, 1992:
Net sales 87,801 6,746 378 94,925
Net income (loss) (14,240) 236 29 (13,975)
</TABLE>
In June 1991, the Company acquired the stock of several non-French
subsidiaries of Micro-Controle, a privately-held company with
headquarters in Evry, France, in the first step of a two-step acquisition
of Micro-Controle's micro-positioning business. The Company completed
the acquisition of the micro-positioning business of Micro-Controle in
September 1991, for $43.0 million cash, financed through $23.9 million in
debt and $19.1 million cash, and assumption of $16.0 million of existing
liabilities. The acquisition has been accounted for as a purchase. The
purchase price allocation for the acquisition resulted in costs in excess
of net assets acquired (goodwill) of $11.3 million including the impact
of the 1992 restructuring.
NOTE 4 CASH AND CASH EQUIVALENTS
Cash and cash equivalents consist of cash-on-hand, short-term
certificates of deposit and other securities readily convertible to cash.
NOTE 5 CUSTOMER RECEIVABLES
Customer receivables consist of the following:
<TABLE>
<CAPTION>
(In thousands) December 31,
----------------------
1994 1993
-------- ---------
<S> <C> <C>
Customer receivables $19,215 $17,663
Less allowance for doubtful accounts 460 717
------- -------
$18,755 $16,946
======= =======
</TABLE>
The Company maintains adequate reserves for potential credit losses. Such
losses have been minimal and within management's estimates. Receivables
from customers are generally unsecured.
17
<PAGE>
NOTE 6 INVENTORIES
Inventories are stated at cost, determined on either a first-in, first-
out (FIFO) or average cost basis and do not exceed net realizable value.
Inventories consist of the following:
<TABLE>
<CAPTION>
(In thousands) December 31,
------------------------
1994 1993
--------- ----------
<S> <C> <C>
Raw materials and purchased parts $ 7,350 $ 6,751
Work in process 3,541 3,089
Finished goods 10,541 11,815
------- -------
$21,432 $21,655
======= =======
</TABLE>
NOTE 7 INCOME TAXES
The provision (benefit) for taxes based on income (loss) consists of
the following:
<TABLE>
<CAPTION>
Years Ended Five Months Year
(In thousands) December 31, Ended Ended
------------------ December 31, July 31,
1994 1993 1992 1992
-------- -------- ------------- ---------
<S> <C> <C> <C> <C>
Current:
Federal $ 2,615 $ 877 $ 77 $ 74
State (35) 90 25 103
Foreign 200 (7) (20) (59)
Net deferred:
Federal (1,114) (364) 469 (322)
State (12) 355 193 (129)
------- ----- ---- -----
$ 1,654 $ 951 $744 $(333)
======= ===== ==== =====
</TABLE>
The provision (benefit) for taxes based on income (loss) differs from
the amount obtained by applying the statutory tax rate as follows:
<TABLE>
<CAPTION>
Years Ended Five Months Year
(In thousands) December 31, Ended Ended
------------------ December 31, July 31,
1994 1993 1992 1992
-------- -------- ------------- ---------
<S> <C> <C> <C> <C>
Income tax provision (benefit)
at statutory rate $1,644 $ (797) $ 74 $(4,864)
Increase (decrease) in taxes
resulting from:
Foreign losses not currently
benefited (359) 1,508 600 4,604
Non deductible goodwill
amortization 182 174 74 101
State income taxes, net of federal
income tax benefit (22) 236 135 (43)
Foreign Sales Corporation income (79) (14) (49) (24)
Other, net 288 (156) (90) (107)
------ ------ ----- -----
$1,654 $ 951 $ 744 $(333)
====== ====== ===== =====
</TABLE>
Deferred tax assets and liabilities reflect the impact of temporary
differences between amounts of assets and liabilities for tax and
financial reporting purposes; such amounts are measured by tax laws and
the expected future tax consequences of net operating loss carryforwards.
Temporary differences and net operating loss carryforwards which give
rise to deferred tax assets and liabilities recognized in the balance
sheet are as follows:
18
<PAGE>
<TABLE>
<CAPTION>
(In thousands) December 31,
-----------------------
1994 1993
---------- ----------
<S> <C> <C>
Deferred tax assets:
Foreign net operating loss carryforwards $ 6,261 $ 8,211
Accrued restructuring liabilities 1,871 2,001
Accruals not currently deductible for tax purposes 846 751
Other 142 331
Valuation allowance (7,046) (9,479)
------- -------
Total deferred tax asset 2,074 1,815
Deferred tax liabilities:
Accelerated depreciation methods used for tax purposes 1,033 1,286
Unrealized gain on marketable securities 228 652
Other 402 1,016
------- -------
Total deferred tax liability 1,663 2,954
------- -------
Net deferred tax asset (liability) $ 411 $(1,139)
======= =======
</TABLE>
The Company has foreign net operating loss carryforwards totaling
approximately $18.3 million at December 31, 1994, of which approximately
$0.3 million expires at various dates through 1996, $11.6 million expires
in 1997, and the balance expires thereafter. Approximately $3.2 million
of the valuation allowance will be allocated to reduce goodwill when
realized.
Income taxes paid, net of refunds, for the twelve months ended December
31, 1994, December 31, 1993, five months ended December 31, 1992, and
twelve months ended July 31, 1992, totaled $0.3 million, $1.1 million,
$0.5 million, and $1.3 million, respectively.
NOTE 8 PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment, at cost, including capitalized lease
assets, consist of the following:
<TABLE>
<CAPTION>
(In thousands) December 31,
-----------------------
1994 1993
---------- ----------
<S> <C> <C>
Land $ 2,115 $ 1,956
Buildings 12,671 11,370
Leasehold improvements 7,176 6,674
Machinery and equipment 19,119 18,162
Office equipment 7,596 7,213
-------- -------
48,677 45,375
Less accumulated depreciation 25,633 21,602
-------- -------
$23,044 $23,773
======== =======
</TABLE>
NOTE 9 INVESTMENTS, NOTES RECEIVABLE AND OTHER ASSETS
Investments, notes receivable and other assets consist of the following:
<TABLE>
<CAPTION>
(In thousands) December 31,
-----------------------
1994 1993
---------- ----------
<S> <C> <C>
Marketable investments available-for-sale $ 610 $ 1,774
Nonmarketable investments 3,840 4,468
Notes receivable 97 184
Other assets 504 533
------ -------
5,051 6,959
Less current portion 610 1,774
------ -------
$4,441 $ 5,185
====== =======
</TABLE>
19
<PAGE>
Marketable investments available-for-sale at December 31, 1994 and 1993
consist of shares of common stocks of publicly traded companies. They
are stated at fair market value at December 31, 1994 and 1993, which
resulted in gross unrealized gains of $0.5 million and $1.6 million,
respectively. The excess of fair market value over cost (net of deferred
income taxes of $0.2 million and $0.6 million at December 31, 1994 and
1993, respectively) is included as a separate component of Stockholders'
Equity. Gross proceeds resulting from the sale of these securities were
$1.2 million and $1.4 million for the twelve months ended December 31,
1994 and 1993, respectively. Realized gains and losses on sale of these
securities are based on the difference between the selling price and
historical cost. Realized gains of $1.1 million and $1.3 million are
reflected as other income for the twelve months ended December 31, 1994
and 1993, respectively.
Nonmarketable investments consist primarily of investments in private
companies, including a 25% interest in a US supplier and a 29% interest
in a company active in laser and electro-optical technology, stated at
cost, adjusted for the Company's proportionate share of undistributed
earnings or losses. The Company made purchases of approximately $3.8
million, $4.2 million, $1.3 million and $3.4 million from that supplier
during the twelve months ended December 31, 1994 and 1993, five months
ended December 31, 1992 and twelve months ended July 31, 1992. Notes
receivable are carried at lower of amortized cost or net realizable
value. Other assets consist primarily of patents and license agreements.
NOTE 10 NOTES PAYABLE TO BANKS
Outstanding notes payable to banks consists of the following:
<TABLE>
<CAPTION>
(Dollar amounts in thousands) December 31,
------------------------
1994 1993
--------- ----------
<S> <C> <C>
Credit agreements:
PIBOR + 1%, maturing March 31, 1995, payable in French francs $ 2,434 $ 884
Prime + 1%, maturing August 1995 249 --
Prime + 1%, maturing June 1996 6,378 3,193
Term notes:
PIBOR + 1.6%, maturing in annual installments
beginning October 1994, payable in French francs 7,024 10,154
Prime + 1%, maturing June 1996 1,185 1,783
Mortgages payable:
LIBOR + 2.0%, repaid July 1994 -- 2,000
Various (9.2% to 12.75%), maturing from 1995 to 1999,
payable in French francs 1,148 1,698
Capitalized lease obligations, payable in varying installments to 1999,
in French francs 3,015 2,974
------- -------
21,433 22,686
Less current portion 10,316 6,681
------- -------
$11,117 $16,005
======= =======
</TABLE>
The Company has a credit agreement with a US bank which provides for a
line of credit of up to $15 million, expiring in June 1996, secured by
eligible accounts receivable, inventory and fixed assets, with interest
at prime plus one percent. The line has an annual facility fee of 0.5
percent and an unused line fee of 0.25 percent of the first $5 million of
unused credit and 0.5 percent of any unused credit in excess of $5
million. At December 31, 1994, amounts outstanding under the line of
credit aggregated $7.6 million and amounts available for borrowing under
the line totaled $1.2 million. The prime rate was 8.5% at December 31,
1994. The weighted average interest rate for the years ended December
31, 1994 and 1993 was 10.2% and 9.7%, respectively.
The Company has a credit agreement with a US financial institution which
provides for a line of credit of up to $1 million, expiring in August
1995, secured by eligible accounts receivable and inventory, with
interest at prime plus one percent. At December 31, 1994, amounts
outstanding under the line of credit aggregated $0.2 million and amounts
available for borrowing under the line totaled $0.8 million.
20
<PAGE>
The Company has a line of credit with a consortium of foreign banks
which, at December 31, 1993, provided for advances up to a limit of 60
million French francs (approximately $11.2 million) with interest at 1%
above PIBOR (Paris Interbank Offered Rate), collateralized by eligible
receivables. During the third quarter of 1994 the Company renewed this
line of credit with a reduced advance limit of 25 million French francs
($4.7 million) for a period of seven months to March 31, 1995, all other
terms and conditions remaining the same. At March 31, 1995, the Company
renewed this line for one year under essentially the same terms and
conditions. Borrowings outstanding under this agreement were 13.0
million French francs (approximately $2.4 million) at December 31, 1994.
Additional amounts available for borrowing under the line at that date
were 12.0 million French francs (approximately $2.3 million). The six-
month PIBOR was 6.3% at December 31, 1994. The weighted average interest
rate for the years ended December 31, 1994 and 1993, respectively, was
7.6% and 9.2%.
The Company has term notes with the same consortium of foreign banks
which, at December 31, 1994, totaled 37.5 million French francs
(approximately $7.0 million) with interest at 1.6% above PIBOR, secured
generally by assets of Micro-Controle. Repayment is in three remaining
annual installments commencing in October 1995.
Capitalized lease obligations of 16.1 million French francs
(approximately $3.0 million) relate to real estate and equipment.
Anticipated annual payments are as follows:
<TABLE>
<CAPTION>
(In thousands) Capitalized Borrowings,
Lease Mortgages and
Obligations Term Notes
------------- -------------
<S> <C> <C>
For years ending December 31,
1995 $ 499 $6,049
1996 477 9,663
1997 480 2,459
1998 484 129
1999 488 118
Thereafter 1,860 -
------ -------
4,288 $18,418
=======
Less interest 1,273
------
$3,015
======
</TABLE>
The Company believes its current working capital position together with
estimated cash flows from operations, its existing financing availability
and anticipated refinancing and proceeds from asset sales are adequate
for operations in the ordinary course of business, anticipated capital
expenditures as well as restructuring and debt payment requirements.
Interest paid during the twelve months ended December 31, 1994 and 1993,
five months ended December 31, 1992, and twelve months ended July 31,
1992, totaled $1.5 million, $2.4 million, $1.6 million, and $2.6 million,
respectively.
NOTE 11 COMMITMENTS
The Company leases certain of its manufacturing and office facilities and
equipment under non cancelable operating leases. Minimum rental
commitments under terms of these leases are as follows:
<TABLE>
<S> <C>
For years ending December 31, (In thousands)
1995 $ 2,463
1996 2,297
1997 2,180
1998 1,866
1999 1,739
Thereafter 11,902
</TABLE>
21
<PAGE>
The principal lease expires in 2007. Future sublease income is estimated
at $0.4 million. Rental expense under all leases totaled $2.6 million,
$2.4 million, $.9 million, and $1.9 million, for the twelve months ended
December 31, 1994 and 1993, five months ended December 31, 1992, and
twelve months ended July 31, 1992, respectively.
NOTE 12 STOCK OPTION PLANS
The Company adopted a stock option/restricted stock plan in 1992 to
replace the Company's then existing option plans. The stockholders
approved this plan at the annual meeting held on December 1, 1992. The
number of shares available for issuance as either stock options or
restricted stock increases on the last day of each fiscal year by an
amount equal to 2% of the then outstanding shares. Options have been
granted to directors, officers and key employees at a price not less than
fair market value at the dates of grants. Accordingly, no charges have
been made to income in accounting for these options. The tax benefits, if
any, resulting from the exercise of options are credited to capital in
excess of stated value. The fair market value of restricted stock at date
of grant is amortized to income over the vesting period of six years.
The following table summarizes option plan and restricted stock activity
for the years ended December 31, 1994 and 1993:
<TABLE>
<CAPTION>
Restricted
Stock Options Total
---------- --------- ----------
<S> <C> <C> <C>
Amounts outstanding at December 31, 1992 -- 1,048,375 1,048,375
Granted 37,000 45,000 82,000
Exercised -- (13,750) (13,750)
Canceled -- (108,725) (108,725)
------- --------- ---------
Amounts outstanding at December 31, 1993 37,000 970,900 1,007,900
Granted 32,000 181,470 213,470
Exercised (10,250) (16,750) (27,000)
Canceled (8,000) (132,864) (140,864)
------- --------- ---------
Amounts outstanding at December 31, 1994 50,750 1,002,756 1,053,506
======= ========= =========
At December 31, 1994:
Exercise prices of outstanding options $5.000 to $9.625
Shares available for future grants 568,973
Options exercisable 658,418
</TABLE>
As a result of the acquisition of ROI, an option to purchase 3,500 shares
of ROI stock at $50 per share was exchanged for an option to purchase
72,975 shares of the Company's stock at $2.398 per share. The above
table does not reflect this stock option.
Subject to approval by the Company's stockholders, the Company's Employee
Stock Purchase Plan (the "Purchase Plan"), was adopted by the Board of
Directors on November 15, 1994 to be effective for ten years starting
January 1, 1995. The Purchase Plan authorizes the Company to issue and
reserve for the Purchase Plan, or purchase up to an aggregate of 250,000
shares of common stock in open market transactions for the benefit of
participating employees during the term of the Purchase Plan. The
primary purpose of the Purchase Plan is to provide employees of the
Company and selected subsidiaries with an opportunity to purchase common
stock through payroll deductions and to increase their proprietary
interest in the Company. Shares of common stock covered by the Purchase
Plan will either be issued by the Company pursuant to the Purchase Plan
or purchased in open market transactions.
22
<PAGE>
NOTE 13 OTHER INCOME
Other income consisted of the following:
<TABLE>
<CAPTION>
Years Ended Five Months Year
(In thousands) December 31, Ended Ended
-------------------- December 31, July 31,
1994 1993 1992 1992
-------- --------- ------------ -----------
<S> <C> <C> <C> <C>
Interest and dividend income $ 143 $ 229 $ 258 $ 808
Realized foreign currency gains (losses), net 175 (158) (245) 647
Gains on sale of investments 1,404 1,260 217 926
Sale of technology -- -- 501 --
Other 117 132 174 (360)
------ ------ ----- ------
$1,839 $1,463 $ 905 $2,021
====== ====== ===== ======
</TABLE>
NOTE 14 BUSINESS SEGMENT INFORMATION
The Company operates in one business segment. It designs, manufactures
and markets on a worldwide basis precision equipment for scientists and
engineers who develop and apply technology involving lasers, optics and
integrated motion control. The Company designs and manufactures a broad
line of vibration isolation systems, electronic and optical instruments
and precision mechanical, electronic and optical components and systems.
These products are used predominately in research laboratories and test
and measurement applications for industrial, government and university
customers, domestically and internationally.
Information concerning the Company's operations by geographic segment is
as follows :
<TABLE>
<CAPTION>
Years Ended Five Months Year
(In thousands) December 31, Ended Ended
-------------------- December 31, July 31,
1994 1993 1992 1992
-------- --------- ------------ -----------
<S> <C> <C> <C> <C>
Sales to unaffiliated customers:
United States $ 59,211 $ 55,469 $ 23,273 $ 57,664
Europe 30,926 32,595 14,538 33,734
Other areas 4,064 5,509 1,587 3,527
-------- -------- -------- --------
$ 94,201 $ 93,573 $ 39,398 $ 94,925
======== ======== ======== ========
Sales between geographic areas
(based on invoiced prices):
United States $ 7,784 $ 8,951 $ 3,211 $ 8,751
Europe 9,095 8,251 3,103 4,294
Intercompany eliminations (16,879) (17,202) (6,314) (13,045)
-------- -------- -------- --------
$ -- $ -- $ -- $ --
======== ======== ======== ========
Income (loss) before taxes:
United States $ 4,132 $ 2,501 $ 2,358 $ (253)
Europe (80) (5,229) (1,803) (13,845)
Other areas 493 282 (180) (19)
Intercompany eliminations 291 197 (158) (191)
-------- -------- -------- --------
$4,836 $ (2,249) $ 217 $(14,308)
======== ======== ======== ========
Assets:
United States $ 91,129 $ 86,950
Europe 48,516 50,577
Other areas 720 2,145
Intercompany eliminations (55,711) (53,637)
-------- --------
$ 84,654 $ 86,035
======== ========
</TABLE>
23
<PAGE>
The Company's manufacturing facilities are located in the United States
and France. United States revenues include exports to unaffiliated
customers totaling $9.2 million, $5.9 million, $2.3 million, and $6.3
million, for the years ended December 31, 1994 and 1993, the five months
ended December 31, 1992, and the year ended July 31, 1992, respectively.
NOTE 15 DEFINED CONTRIBUTION PLANS
The Company sponsors a defined contribution plan. Generally, all US
employees are eligible to participate and contribute in this plan.
Contributions to the plan are determined based on a percentage of
contributing employees' compensation. During September 1992 the plan was
amended to provide for an increase in the Company's contribution rate.
ROI has a discretionary defined contribution plan. All ROI employees are
eligible to participate in this non-contributory plan.
Expense recognized for these plans totaled $0.9 million, $0.9 million,
$0.4 million, and $0.7 million for the years ended December 31, 1994 and
1993, the five months ended December 31, 1992, and the year ended July
31, 1992, respectively.
24
<PAGE>
NEWPORT CORPORATION
SCHEDULE II
CONSOLIDATED VALUATION ACCOUNTS
(In thousands)
<TABLE>
<CAPTION>
Balance at Additions
Beginning Charged to Costs Other Changes Balance at End
Description of Period and Expenses Write Offs (1) Add (Deduct) (2) of Period
----------- ---------- ---------------- -------------- ---------------- ---------------
<S> <C> <C> <C> <C> <C>
Year ended December 31, 1994:
Deducted from asset accounts:
Allowance for doubtful accounts $ 717 $ 90 $ (203) $ (144) $ 460
Reserve for inventory obsolescence 2,786 715 (313) 192 3,380
------ ------ ------- ------ ------
Total $3,503 $ 805 $ (516) $ 48 $3,840
====== ====== ======= ====== ======
Year ended December 31, 1993:
Deducted from asset accounts:
Allowance for doubtful accounts $1,439 $ 150 $ (786) $ (86) $ 717
Reserve for inventory obsolescence 2,298 1,216 (625) (103) 2,786
------ ------ ------- ------ ------
Total $3,737 $1,366 $(1,411) $ (189) $3,503
====== ====== ======= ====== ======
Five months ended December 31, 1992:
Deducted from asset accounts:
Allowance for doubtful accounts $1,297 $ 120 $ 39 $ (17) $1,439
Reserve for inventory obsolescence 1,484 1,017 -- (203) 2,298
------ ------ ------- ------ ------
Total $2,781 $1,137 $ 39 $ (220) $3,737
====== ====== ======= ====== ======
Year ended July 31, 1992: (3)
Deducted from asset accounts:
Allowance for doubtful accounts $ 692 $ 113 $ 412 $ 80 $1,297
Reserve for inventory obsolescence 672 452 -- 360 1,484
------ ------ ------- ------ ------
Total $1,364 $ 565 $ 412 $ 440 $2,781
====== ====== ======= ====== ======
</TABLE>
(1) Amounts are net of recoveries and acquisitions.
(2) Amounts reflect the effect of change rate changes on translating valuation
accounts of foreign subsidiaries in accordance with FASB Statement No. 52,
"Foreign Currency Translation" and certain reclassifications between balance
sheet accounts.
(3) 1992 includes the effect of the acquisition of Micro-Controle effective
September 18, 1991.
25
<PAGE>
EXHIBIT 23
Consent of Independent Auditors
We consent to the incorporation by reference in the Registration
Statements pertaining to the 1992 Stock Incentive Plan (Form S-8 No.
33-58564) and Employee Stock Purchase Plan (Form S-8 No. 33-87062), of
Newport Corporation of our report dated May 17, 1995, with respect to the
consolidated financial statements and schedule of Newport Corporation
included in Form 8-K dated May 17, 1995.
ERNST & YOUNG LLP
Orange County, California
May 17, 1995
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
COMPANY'S CONSOLIDATED STATEMENTS OF INCOME, CONSOLIDATED BALANCE SHEETS AND
CONSOLIDATED STATEMENTS OF CASH FLOWS RESTATED TO INCLUDE THE RESULTS OF THE
ACQUIRED COMPANIES FOR ALL PERIODS PRESENTED AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS CONTAINED WITHIN THE COMPANY'S FORM 8-K
FOR THE YEAR ENDED DECEMBER 31, 1994.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-END> DEC-31-1994
<CASH> 3,014
<SECURITIES> 610
<RECEIVABLES> 19,215
<ALLOWANCES> 460
<INVENTORY> 21,432
<CURRENT-ASSETS> 48,323
<PP&E> 48,677
<DEPRECIATION> 25,633
<TOTAL-ASSETS> 84,654
<CURRENT-LIABILITIES> 26,604
<BONDS> 11,117
<COMMON> 0
0
2,954
<OTHER-SE> 43,697
<TOTAL-LIABILITY-AND-EQUITY> 84,654
<SALES> 94,201
<TOTAL-REVENUES> 94,201
<CGS> 51,811
<TOTAL-COSTS> 32,150
<OTHER-EXPENSES> 5,371
<LOSS-PROVISION> 90
<INTEREST-EXPENSE> 1,782
<INCOME-PRETAX> 4,836
<INCOME-TAX> 1,654
<INCOME-CONTINUING> 3,182
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,182
<EPS-PRIMARY> $0.38
<EPS-DILUTED> $0.38
</TABLE>
