Newport plans closings, layoffs to integrate Spectra-Physics following acquisition

Irvine, CA— To save $10-12 million per year, Newport Corp. plans to shutter two manufacturing facilities, consolidate product lines, operations and administrative functions, and layoff 75-100 employees, following its recent acquisition of Spectera-Physics in mid-July. Newport will make these changes over the next nine months.

The plants that Newport will close include one it acquired in Oroville, CA, and an existing facility in Chandler, AZ. Manufacturing activity at these two plants will be relocated to other facilities in California and Arizona.

Meanwhile, duplicate product lines, administration and operations identified in the U.S. and Europe will be consolidated into other company locations. Newport adds that it’s downsizing mostly due to these consolidations, and that redundant positions will be eliminated in operations, information technology, accounting, marketing, communications and human resources. While some current staff will be relocated and some other new ones hired, Newport acknowledges its overall plan will reduce its total workforce by 4-5%.

“We noted previously that both Newport and Spectra-Physics already operated with relatively lean and efficient workforces, and have relatively minimal product and operational overlap. Therefore, the total reduction in headcount required to integrate the two businesses is lower than what might be expected from an integration of two companies of this size,” says Robert Deuster, Newport’s chairman and CEO. “Nevertheless, we have identified a number of restructuring actions that will allow us to operate the combined company even more efficiently.

“These are important steps in the process of completing the integration plan developed by the combined Newport and Spectra-Physics management team. While we regret the job reductions that must be made to maximize the operating efficiency of the combined company, every person impacted will be assisted in their transition to other employment. When completed, we believe that these integration actions will make Newport Corporation a more profitable and efficient company.”

Newport adds that integrating Spectra-Physics also will require it to pay charges in five categories in 2004’s third and fourth quarters (2Q04 and 3Q04). For example, direct costs of the integration plan will cost $7.8-8.8 million in 3Q04. This will consist mainly of $2.0-2.5 million in cash to pay severance, relocation, equipment transfer, lease abandonment and other costs, as well as “non-cash charges to cost of sales” of $4.5-5.0 million to write off inventory, and a “non-cash charge to selling” of $1.3 million to write off fixed assets at the facilities affected by the integration.

In addition, Newport will pay $4.3-4.8 million in cash in 3Q04 for items incremental to the costs either firm would have incurred if the acquisition hadn’t occurred. Other non-cash charges include amortization of intangibles and in-process research and development, which will be determined by a third party, and are expected to be about $8.5-9 million in 3Q04. Also, Newport will write off a minority investment in an unrelated company in 3Q04, and incur a $1.7-million loss on a sale of marketable securities July 2004, which occurred when it liquidated much if its fixed-income portfolio to pay Spectra-Physics’ $200 million price tag.

Finally, Newport will pay $7 million in professional fees and transaction costs related to buying Spectra-Physics, and $8-9 million for costs related to integrating Spectra-Physics’ locations.

Control Engineering Daily News DeskJim Montague, news editorjmontague@reedbusiness.com

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