Irvine, CA. April 11, 2002 - Newport Corporation announced its intent to sell the majority of its Industrial Metrology Systems Division in two transactions with unrelated strategic buyers. In the first transaction, Newport signed an agreement to sell the contact measurement piece of its metrology business, primarily related to its CEJohansson subsidiary in Sweden, to Hexagon AB), based in Nacka Strand, Sweden. Hexagon is a multinational engineering company and parent of metrology company Brown and Sharpe, headquartered in North Kingstown, RI.
Separately, Newport also announced that it is in negotiations to sell its U.S.-based non-contact metrology business to a separate strategic buyer.
The total cash proceeds from both transactions are expected to be in the range of $10 to $12 million, and Newport expects to finalize both transactions in the second quarter of 2002. The transactions are expected to be immediately accretive to Newport's operating results, because the sales will eliminate continuing losses in its metrology business. In addition, the transactions will allow Newport to focus its resources on the strategic parts of its business.
Newport's combined metrology operations to be divested generated sales of approximately $24 million in 2001 and incurred operating losses of approximately $9 million. The business represented approximately $32 million of Newport's total assets of $544 million as of December 31, 2001. Newport will discuss the expected impact of the sale on its projected future financial results in connection with its first quarter earnings announcement on April 23, 2002.
Additionally, Newport announced that it has substantially completed its analysis of the impact of Financial Accounting Standards Board Statement 142, which prescribes new rules for assessing goodwill impairment. As a result of this review, Newport expects to record a one-time charge of approximately $14.5 million in the first quarter of 2002.
Pursuant to generally accepted accounting principles, the charge will be treated as a cumulative effect of accounting change and will be recorded after income from continuing operations. Accordingly, Newport will report income and earnings per share before and after this cumulative effect of accounting change. This non-cash charge will have no effect on Newport's operating income or ongoing results.
Commenting on the metrology divestiture, Robert G. Deuster, Newport's chairman and chief executive officer, said: "A key growth strategy of our company has been to expand Newport's product portfolio and services in order to become a leading single-source supplier of test, measurement and automation solutions to the fiber optic communications and semiconductor equipment markets. Divesting our metrology business, which primarily serves end markets outside of our strategic focus, will allow us to more aggressively deploy Newport's resources to those areas that hold the greatest growth potential for our company. The structure of these transactions, which will allow us to retain rights to certain visual inspection and metrology technology, as well as our recent acquisitions, which have enhanced our overall vision technology portfolio, enable us to divest this non-strategic business while keeping intact the expertise in visual inspection and metrology technology that is critical to our product development efforts for our strategic markets."
The divestiture will be accounted for as a discontinued operation pursuant to generally accepted accounting principles and, accordingly, the loss on the divestiture as well as the segment operating loss for the first quarter of 2002 will be shown as a charge after income from continuing operations. The effect on net income and earnings per share will be reported both including and excluding the charges.
Newport expects to record a pre-tax loss from the discontinued operation in the first quarter of 2002 in the range of $3.5 to $4.5 million. Between $2.2 million and $3.2 million of the loss is expected to be related to the sale transactions and the remainder is due to the operating losses from this segment during the first quarter of 2002. In addition, pursuant to generally accepted accounting principles, all prior periods will be adjusted to reflect the financial results of this segment as a discontinued operation. The adjustment to Newport's fiscal year 2001 results as a result of the discontinued operation is expected to decrease 2001 sales by $24 million and increase pro forma diluted earnings per share from continuing operations by $0.14.
Deuster continued: "This action culminates a busy beginning of the year for Newport, in which we have added a new general manager of our Fiber Optics and Photonics Division; finalized our acquisition of Micro Robotics Systems, Inc.; signed significant technology acquisition and marketing agreements with Flextronics Photonics, a business unit of Flextronics; and introduced seven new products at this spring's Optical Fiber Conference 2002. Newport's full attention for the balance of the 2002 year will be focused on continuing to extend our market leadership role in our strategic markets, while being mindful of the commitment we have to our stockholders to increase enterprise value in all market conditions," Deuster said.
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