Newport Corporation (NEWP)

October 04, 2011 4:00 pm ET


Charles F. Cargile - Chief Financial Officer, Senior Vice President and Treasurer

Robert J. Phillippy - Chief Executive Officer, President and Director


Mark S. Miller - Noble Financial Group, Inc., Research Division

Ajit Pai - Stifel, Nicolaus & Co., Inc., Research Division

Dave Kang - B. Riley & Co., LLC, Research Division

James Ricchiuti - Needham & Company, LLC, Research Division



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Good day, everyone, and welcome to the Newport Conference Call. Today's call is being recorded. At this time for opening remarks and introductions, I would like to turn the conference over to Chief Executive Officer, Mr. Robert Phillippy. Please go ahead, sir.

Robert J. Phillippy

Thanks. Good afternoon, and thank you for joining us on our call today. I'm here with Chuck Cargile, our Chief Financial Officer, and together we will provide updates on our acquisition of Ophir Optronics, our new debt financing and our expected orders and sales results for the third quarter.

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Before we get started, I'd like to remind you that during the course of this conference call, we will be making a number of forward-looking statements that are based on our current expectations and involve various risks and uncertainties that are disclosed in our periodic SEC filings. Although we believe that the assumptions underlying these statements are reasonable, any of them could prove inaccurate, and there can be no assurance that the results will be realized.

Earlier today, we issued a press release announcing the completion of Newport's acquisition of Ophir Optronics. As you may know, Ophir is a photonics technology company headquartered in Jerusalem, Israel. It was founded in 1976 and has industry-leading capabilities in 3 business segments: infrared optical systems, photonics instrumentation and 3D non-contact measurement.

In 2011, we expect Ophir to generate sales of approximately $122 million and operating income of approximately $14 million. The Ophir brand name is well known in the photonics industry for both innovation and quality. And their knowledgeable team of professionals is highly responsive to their customers. Today, we welcome the worldwide team of 650 Ophir employees to Newport, and in doing so, create an organization with unmatched capabilities in the photonics industry.

The complementary nature of Ophir's products and customer relationships will expand Newport's served market opportunities and provide a better balance in our end markets, which will help to further insulate us from the historical cyclicality of the microelectronics industry.

For example, Ophir has a strong presence in both the industrial and aerospace and defense markets. Their infrared optical systems technology is routinely deployed in drone aircraft, ground-based reconnaissance, night vision equipment and commercial security applications.

Their photonics instrumentation products are deployed wherever and whenever lasers are used for industrial materials processing to measure and characterize the performance of the laser system.

Ophir has a blue-chip customer base in both these areas, and their highly differentiated and, in many cases, trade secret technology and manufacturing processes position them well for new program wins and continued growth in both these areas.

In addition, Ophir has successfully deployed their patented conoscopic holography technology to penetrate the emerging field of digital dentistry, which is expected to grow robustly in coming years.

In total, Ophir's technologies and product lines will expand Newport's served markets by approximately $800 million per year, which means we now have direct access to total annual market opportunities approaching $5 billion.

Immediately following the signing of the Ophir acquisition agreement in early July, we established a number of integration teams of both Ophir and Newport leaders to identify opportunities for synergy and collaboration between the companies and to develop plans to capitalize on. These teams have been working diligently during the past 3 months, and while there are legal limits on what we have been allowed to do before closing, we are very pleased with the progress we've made so far.

We have already identified important opportunities for cross selling, channel integration, supply chain leverage and technology collaboration. With the transaction now closed, the pace of these activities will accelerate and we will quickly transition from planning to implementation.

In the coming months, we will provide more information and quantification of the synergies that we expect this transaction to provide. As mentioned previously, the key opportunities here are in the areas of sales growth, material cost reduction and product roadmap efficiency. We are not planning any major facility or business consolidation.

We remain confident that our shareholders will receive great benefits from this acquisition. The combination of Newport and Ophir will create a significantly larger, more profitable company, with very balanced and diverse end market participation.

The addition of Ophir will also give us a presence in new customer applications and markets, establish relationships with new Tier 1 customers and create some exciting new growth opportunities.

Before turning the call over to Chuck, I'd like to comment on conditions in our key end markets and our expectation for third quarter orders and sales.

As had been widely reported, semiconductor equipment companies, including our OEM customers, who account for the majority of our microelectronics market sales, are experiencing weaker demand for their products. This had a small impact on our sales during the quarter and a more significant impact on our order intake. We expect sales for the third quarter to be in the range of $124 million to $126 million, approximately equal to our sales of $125.2 million in the third quarter of 2010.

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