##### Table of Contents



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 Washington, DC 20549
 FORM 10-Q
  þ
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the quarterly period ended June 28, 2008
 OR
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the transition period from  to
 Commission File Number: 000-01649
 NEWPORT CORPORATION
 (Exact name of registrant as specified in its charter)
 Nevada
    
    94-0849175(State or other jurisdiction of
    
    (IRS Employer Identification No.)incorporation or organization)
 1791 Deere Avenue, Irvine, California 92606  (Address of principal executive offices) (Zip Code)
 (949) 863-3144  (Registrants telephone number, including area code)
 Not Applicable  (Former name, former address and former fiscal year, if changed since last report)
 
 þ o
  Large accelerated filer
o
    
    Accelerated filer
þ
    
    Non-accelerated filer   o
(Do not check if a smaller reporting company)

    Smaller reporting company
o
 o þ




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##### 



NEWPORT CORPORATION
 FORM 10-Q
 INDEX
 PageNumberPART I. FINANCIAL INFORMATIONItem 1. Financial Statements (unaudited):Consolidated Statements of Operations for the Three and Six Months Ended June 28, 2008 and June 30, 2007
    
    
    3Consolidated Balance Sheets as of June 28, 2008 and December 29, 2007
    
    
    4Consolidated Statements of Cash Flows for the Six Months Ended June 28, 2008 and June 30, 2007
    
    
    5Notes to Consolidated Financial Statements
    
    
    6Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    15Item 3. Quantitative and Qualitative Disclosures About Market Risk
    
    
    23Item 4. Controls and Procedures
    
    
    24PART II. OTHER INFORMATIONItem 1A. Risk Factors
    
    
    25Item 4. Submission of Matters to a Vote of Security Holders
    
    
    25Item 6. Exhibits
    
    
    26SIGNATURES
    
    
    27
  2




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PART I  FINANCIAL INFORMATION
 
 Item 1. Financial Statements
 NEWPORT CORPORATION
 
 Consolidated Statements of Operations
 (In thousands, except per share data)
 (Unaudited)
 Three Months Ended
    
    
    Six Months EndedJune 28,
    
    
    June 30,
    
    
    June 28,
    
    
    June 30,2008
    
    
    2007
    
    
    2008
    
    
    2007Net sales
    
    $
    117,664
    
    
    $
    110,904
    
    
    $
    232,907
    
    
    $
    218,168Cost of sales
    
    
    70,367
    
    
    
    61,843
    
    
    
    139,499
    
    
    
    122,476Gross profit
    
    
    47,297
    
    
    
    49,061
    
    
    
    93,408
    
    
    
    95,692Selling, general and administrative expenses
    
    
    30,092
    
    
    
    28,792
    
    
    
    59,883
    
    
    
    58,806Research and development expense
    
    
    12,341
    
    
    
    10,874
    
    
    
    23,785
    
    
    
    21,477Operating income
    
    
    4,864
    
    
    
    9,395
    
    
    
    9,740
    
    
    
    15,409Write-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
    )
    
    
    217Income (loss) before income taxes
    
    
    (2,402
    )
    
    
    9,411
    
    
    
    1,991
    
    
    
    15,626Income tax provision
    
    
    390
    
    
    
    1,448
    
    
    
    1,058
    
    
    
    2,412Net income (loss)
    
    $
    (2,792
    )
    
    $
    7,963
    
    
    $
    933
    
    
    $
    13,214Net income (loss) per share:Basic
    
    $
    (0.08
    )
    
    $
    0.20
    
    
    $
    0.03
    
    
    $
    0.33Diluted
    
    $
    (0.08
    )
    
    $
    0.20
    
    
    $
    0.03
    
    
    $
    0.33Shares used in per share calculations:Basic
    
    
    36,009
    
    
    
    38,955
    
    
    
    36,273
    
    
    
    39,629Diluted
    
    
    36,009
    
    
    
    39,554
    
    
    
    36,385
    
    
    
    40,491
  3




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NEWPORT CORPORATION
 
 Consolidated Balance Sheets
 (In thousands, except share and per share data)
 (Unaudited)
 June 28,
    
    
    December 29,2008
    
    
    2007ASSETSCurrent assets:Cash and cash equivalents
    
    $
    65,142
    
    
    $
    88,737Marketable securities
    
    
    75,982
    
    
    
    55,127Accounts receivable, net of allowance for doubtful accounts of $1,705 and
$1,381 as of June 28, 2008 and December 29, 2007, respectively
    
    
    90,095
    
    
    
    87,606Notes receivable, net
    
    
    3,923
    
    
    
    3,821Inventories
    
    
    112,820
    
    
    
    113,969Deferred income taxes
    
    
    6,366
    
    
    
    6,248Prepaid expenses and other current assets
    
    
    14,227
    
    
    
    13,603Total current assets
    
    
    368,555
    
    
    
    369,111Property and equipment, net
    
    
    65,266
    
    
    
    61,872Goodwill
    
    
    174,197
    
    
    
    174,197Deferred income taxes
    
    
    16,975
    
    
    
    16,932Intangible assets, net
    
    
    44,131
    
    
    
    46,171Investments and other assets
    
    
    16,362
    
    
    
    21,664$
    685,486
    
    
    $
    689,947LIABILITIES AND STOCKHOLDERS EQUITYCurrent liabilities:Short-term obligations
    
    $
    15,192
    
    
    $
    12,402Accounts payable
    
    
    25,074
    
    
    
    33,319Accrued payroll and related expenses
    
    
    22,520
    
    
    
    23,096Accrued expenses and other current liabilities
    
    
    27,690
    
    
    
    24,598Total current liabilities
    
    
    90,476
    
    
    
    93,415Long-term debt
    
    
    175,000
    
    
    
    175,000Obligations under capital leases, less current portion
    
    
    1,432
    
    
    
    1,381Accrued pension liabilities
    
    
    11,510
    
    
    
    10,740Other liabilities
    
    
    4,908
    
    
    
    4,966Commitments and contingenciesStockholders equity:Common stock, par value $0.1167 per share, 200,000,000 shares authorized;
36,059,190 and 36,917,734 shares issued and outstanding as of
June 28, 2008 and December 29, 2007, respectively
    
    
    4,208
    
    
    
    4,308Capital in excess of par value
    
    
    380,775
    
    
    
    389,328Accumulated other comprehensive income
    
    
    15,678
    
    
    
    10,243Retained earnings
    
    
    1,499
    
    
    
    566Total stockholders equity
    
    
    402,160
    
    
    
    404,445$
    685,486
    
    
    $
    689,947
  4




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NEWPORT CORPORATION
 
 Consolidated Statements of Cash Flows
 (In thousands)
 (Unaudited)
 Six Months EndedJune 28,
    
    
    June 30,2008
    
    
    2007CASH FLOWS FROM OPERATING ACTIVITIES:Net income
    
    $
    933
    
    
    $
    13,214Adjustments to reconcile net income to net cash provided by operating activitiesDepreciation and amortization
    
    
    10,572
    
    
    
    10,283Stock-based compensation expense
    
    
    1,604
    
    
    
    3,492Write-down of note receivable and other amounts
related to previously discontinued operations
    
    
    7,060
    
    
    
    Provision for losses on inventories
    
    
    2,447
    
    
    
    679Provision for doubtful accounts, net
    
    
    104
    
    
    
    40Loss on disposal of property and equipment
    
    
    48
    
    
    
    69Deferred income taxes, net
    
    
    24
    
    
    
    Increase (decrease) in cash due to changes in:Accounts and notes receivable
    
    
    (742
    )
    
    
    6,937Inventories
    
    
    148
    
    
    
    (15,832
    )Prepaid expenses and other assets
    
    
    (1,880
    )
    
    
    1,621Accounts payable
    
    
    (8,794
    )
    
    
    (4,755
    )Accrued payroll and related expenses
    
    
    (1,032
    )
    
    
    (6,577
    )Accrued expenses and other liabilities
    
    
    2,408
    
    
    
    (412
    )Accrued restructuring costs and purchase accounting reserves
    
    
    (133
    )
    
    
    (470
    )Net cash provided by operating activities
    
    
    12,767
    
    
    
    8,289CASH FLOWS FROM INVESTING ACTIVITIES:Purchase of property and equipment
    
    
    (9,890
    )
    
    
    (7,760
    )Purchase of marketable securities
    
    
    (37,953
    )
    
    
    (33,369
    )Proceeds from the sale of marketable securities
    
    
    18,292
    
    
    
    29,048Net cash used in investing activities
    
    
    (29,551
    )
    
    
    (12,081
    )CASH FLOWS FROM FINANCING ACTIVITIES:Proceeds from the issuance of convertible debt
    
    
    
    
    
    
    175,000Debt issuance costs
    
    
    
    
    
    
    (5,559
    )Repayment of long-term debt and obligations under capital leases
    
    
    (83
    )
    
    
    (48,247
    )Short-term borrowings, net of repayments
    
    
    2,008
    
    
    
    1,018Proceeds from the issuance of common stock under employee plans
    
    
    1,193
    
    
    
    2,371Purchases of the Companys common stock and restricted stock units
    
    
    (11,450
    )
    
    
    (62,405
    )Net cash provided by (used in) financing activities
    
    
    (8,332
    )
    
    
    62,178Impact of foreign exchange rate changes on cash balances
    
    
    1,521
    
    
    
    358Net increase (decrease) in cash and cash equivalents
    
    
    (23,595
    )
    
    
    58,744Cash and cash equivalents at beginning of period
    
    
    88,737
    
    
    
    35,930Cash and cash equivalents at end of period
    
    $
    65,142
    
    
    $
    94,674Supplemental disclosures of cash flow information:Cash paid during the period for:Interest
    
    $
    2,446
    
    
    $
    1,020Income taxes, net
    
    $
    667
    
    
    $
    663
  5




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NEWPORT CORPORATION
 
 Notes to Consolidated Financial Statements
 June 28, 2008
 NOTE 1 BASIS OF PRESENTATION
    NOTE 2 RECENT ACCOUNTING PRONOUNCEMENTS
 Noncontrolling Interests in Consolidated Financial
Statementsan amendment of ARB No. 51
 Business Combinations
 Disclosures about Derivative Instruments and Hedging
Activities.
 Determination of the Useful
Life of Intangible Assets Goodwill and Other Intangible Assets
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NEWPORT CORPORATION
Notes to Consolidated Financial Statements
June 28, 2008
  The Hierarchy of Generally Accepted Accounting
Principles. The Meaning of Present Fairly in Conformity With Generally Accepted Accounting Principles
 Accounting for Convertible Debt Instruments That May Be
Settled in Cash upon Conversion (Including Partial Cash Settlement).
 NOTE 3 FAIR VALUE MEASUREMENTS
  (In thousands)
    
    Fair Value Measurements at Reporting Date UsingQuoted Prices inActive Markets for
    
    
    Significant Other
    
    
    SignificantIdentical Assets
    
    
    Observable Inputs
    
    
    Unobservable InputsDescription
    
    June 28, 2008
    
    
    (Level 1)
    
    
    (Level 2)
    
    
    (Level 3)Assets:Marketable securities
    
    $
    75,982
    
    
    $
    75,982
    
    
    $
    
    
    
    $
    Pension assets not owned by plan
    
    
    7,358
    
    
    
    7,358
    
    
    
    
    
    
    
    $
    83,340
    
    
    $
    83,340
    
    
    $
    
    
    
    $
    
 7




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NEWPORT CORPORATION
Notes to Consolidated Financial Statements
June 28, 2008
 NOTE 4 SUPPLEMENTAL BALANCE SHEET INFORMATION
 Inventories
  June 28,
    
    
    December 29,(In thousands)
    
    2008
    
    
    2007Raw materials and purchased parts
    
    $
    87,717
    
    
    $
    83,954Work in process
    
    
    14,829
    
    
    
    15,239Finished goods
    
    
    32,742
    
    
    
    37,920135,288
    
    
    
    137,113Allowance for excess and obsolete inventory
    
    
    (22,468
    )
    
    
    (23,144
    )$
    112,820
    
    
    $
    113,969
 Accrued Warranty Obligations
   Six Months EndedJune 28,
    
    
    June 30,(In thousands)
    
    2008
    
    
    2007Balance at beginning of year
    
    $
    5,847
    
    
    $
    5,159Additions charged to cost of sales
    
    
    3,732
    
    
    
    4,300Warranty claims
    
    
    (2,810
    )
    
    
    (4,413
    )Balance at end of period
    
    $
    6,769
    
    
    $
    5,046
 accrued expenses and other current liabilities
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NEWPORT CORPORATION
Notes to Consolidated Financial Statements
June 28, 2008
 Accrued Expenses and Other Current Liabilities
  June 28,
    
    
    December 29,(In thousands)
    
    2008
    
    
    2007Deferred revenue
    
    $
    9,634
    
    
    $
    7,396Accrued warranty obligations
    
    
    6,769
    
    
    
    5,847Accrued sales tax
    
    
    305
    
    
    
    2,031Other
    
    
    10,982
    
    
    
    9,324$
    27,690
    
    
    $
    24,598
 Accumulated Other Comprehensive Income
  June 28,
    
    
    December 29,(In thousands)
    
    2008
    
    
    2007Cumulative foreign currency translation gains
    
    $
    15,688
    
    
    $
    10,135Unrecognized net pension gains
    
    
    75
    
    
    
    52Unrealized gains (losses) on marketable securities
    
    
    (85
    )
    
    
    56$
    15,678
    
    
    $
    10,243
 NOTE 5 INTEREST AND OTHER INCOME (EXPENSE), NET
  Three Months Ended
    
    
    Six Months EndedJune 28,
    
    
    June 30,
    
    
    June 28,
    
    
    June 30,(In thousands)
    
    2008
    
    
    2007
    
    
    2008
    
    
    2007Interest and dividend income
    
    $
    983
    
    
    $
    1,907
    
    
    $
    2,064
    
    
    $
    3,482Interest expense
    
    
    (1,493
    )
    
    
    (1,470
    )
    
    
    (2,980
    )
    
    
    (2,504
    )Bank and portfolio asset management fees
    
    
    (150
    )
    
    
    (205
    )
    
    
    (291
    )
    
    
    (365
    )Other, net
    
    
    454
    
    
    
    (216
    )
    
    
    518
    
    
    
    (396
    )$
    (206
    )
    
    $
    16
    
    
    $
    (689
    )
    
    $
    217
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NEWPORT CORPORATION
Notes to Consolidated Financial Statements
June 28, 2008
 NOTE 6 STOCK-BASED COMPENSATION
   Three Months Ended
    
    
    Six Months EndedJune 28,
    
    
    June 30,
    
    
    June 28,
    
    
    June 30,(In thousands)
    
    2008
    
    
    2007
    
    
    2008
    
    
    2007Cost of sales
    
    $
    117
    
    
    $
    12
    
    
    $
    162
    
    
    $
    244Selling, general and administrative expenses
    
    
    588
    
    
    
    628
    
    
    
    1,238
    
    
    
    2,925Research and development expense
    
    
    142
    
    
    
    10
    
    
    
    204
    
    
    
    323$
    847
    
    
    $
    650
    
    
    $
    1,604
    
    
    $
    3,492
  NOTE 7 DEBT AND LINES OF CREDIT
 long-term debt investments and other assets
   short-term obligations short-term obligations Accounting
for Transfers and Servicing of Financial Assets and Extinguishments of Liabilitiesa replacement of
FASB Statement No. 125
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NEWPORT CORPORATION
Notes to Consolidated Financial Statements
June 28, 2008
  NOTE 8 NET INCOME (LOSS) PER SHARE
  Three Months Ended
    
    
    Six Months EndedJune 28,
    
    
    June 30,
    
    
    June 28,
    
    
    June 30,(In thousands)
    
    2008
    
    
    2007
    
    
    2008
    
    
    2007Net income (loss)
    
    $
    (2,792
    )
    
    $
    7,963
    
    
    $
    933
    
    
    $
    13,214Shares:Weighted average shares outstanding  basic
    
    
    36,009
    
    
    
    38,955
    
    
    
    36,273
    
    
    
    39,629Dilutive potential common shares, using treasury
stock method
    
    
    
    
    
    
    599
    
    
    
    112
    
    
    
    862Weighted average shares outstanding  diluted
    
    
    36,009
    
    
    
    39,554
    
    
    
    36,385
    
    
    
    40,491Net income (loss) per share:Basic
    
    $
    (0.08
    )
    
    $
    0.20
    
    
    $
    0.03
    
    
    $
    0.33Diluted
    
    $
    (0.08
    )
    
    $
    0.20
    
    
    $
    0.03
    
    
    $
    0.33
   11




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NEWPORT CORPORATION
Notes to Consolidated Financial Statements
June 28, 2008
 NOTE 9 INCOME TAXES
 Accounting for Income Taxes,
  NOTE 10 COMPREHENSIVE INCOME (LOSS)
  Three Months Ended
    
    
    Six Months EndedJune 28,
    
    
    June 30,
    
    
    June 28,
    
    
    June 30,(In thousands)
    
    2008
    
    
    2007
    
    
    2008
    
    
    2007Net income (loss)
    
    $
    (2,792
    )
    
    $
    7,963
    
    
    $
    933
    
    
    $
    13,214Foreign currency translation gains (losses)
    
    
    (1,263
    )
    
    
    1,012
    
    
    
    5,553
    
    
    
    1,900Unrecognized net pension gains (losses)
    
    
    (4
    )
    
    
    (23
    )
    
    
    23
    
    
    
    (29
    )Unrealized gains (losses) on marketable
securities
    
    
    360
    
    
    
    (59
    )
    
    
    (141
    )
    
    
    4$
    (3,699
    )
    
    $
    8,893
    
    
    $
    6,368
    
    
    $
    15,089
 NOTE 11 STOCKHOLDERS EQUITY TRANSACTIONS
   NOTE 12 DEFINED BENEFIT PENSION PLANS
  12




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NEWPORT CORPORATION
Notes to Consolidated Financial Statements
June 28, 2008
  Three Months Ended
    
    
    Six Months EndedJune 28,
    
    
    June 30,
    
    
    June 28,
    
    
    June 30,(In thousands)
    
    2008
    
    
    2007
    
    
    2008
    
    
    2007Service cost
    
    $
    149
    
    
    $
    159
    
    
    $
    295
    
    
    $
    316Interest cost on benefit obligation
    
    
    178
    
    
    
    162
    
    
    
    351
    
    
    
    321Expected return on plan assets
    
    
    (41
    )
    
    
    (46
    )
    
    
    (83
    )
    
    
    (92
    )Net gain
    
    
    
    
    
    
    2
    
    
    
    
    
    
    
    4$
    286
    
    
    $
    277
    
    
    $
    563
    
    
    $
    549
 NOTE 13 BUSINESS SEGMENT INFORMATION
   Photonics andPrecision(In thousands)
    
    Lasers
    
    Technologies
    
    TotalThree months ended June 28, 2008:Sales to external customers
    
    $
    49,582
    
    
    $
    68,082
    
    
    $
    117,664Segment income (loss)
    
    $
    (658
    )
    
    $
    12,057
    
    
    $
    11,399Three months ended June 30, 2007:Sales to external customers
    
    $
    46,426
    
    
    $
    64,478
    
    
    $
    110,904Segment income
    
    $
    1,720
    
    
    $
    14,409
    
    
    $
    16,129Six months ended June 28, 2008:Sales to external customers
    
    $
    97,365
    
    
    $
    135,542
    
    
    $
    232,907Segment income (loss)
    
    $
    (1,925
    )
    
    $
    24,432
    
    
    $
    22,507Six months ended June 30, 2007:Sales to external customers
    
    $
    88,755
    
    
    $
    129,413
    
    
    $
    218,168Segment income
    
    $
    1,288
    
    
    $
    28,363
    
    
    $
    29,651
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NEWPORT CORPORATION
Notes to Consolidated Financial Statements
June 28, 2008
  Three Months Ended
    
    
    Six Months EndedJune 28,
    
    
    June 30,
    
    
    June 28,
    
    
    June 30,(In thousands)
    
    2008
    
    
    2007
    
    
    2008
    
    
    2007Segment income
    
    $
    11,399
    
    
    $
    16,129
    
    
    $
    22,507
    
    
    $
    29,651Unallocated operating expenses
    
    
    (6,535
    )
    
    
    (6,734
    )
    
    
    (12,767
    )
    
    
    (14,242
    )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$
    (2,402
    )
    
    $
    9,411
    
    
    $
    1,991
    
    
    $
    15,626
 NOTE 14 WRITE-DOWN OF NOTE RECEIVABLE AND OTHER AMOUNTS
  14




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Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
 This Managements Discussion and Analysis of Financial Condition and Results of Operations should
be read in conjunction with our unaudited consolidated financial statements and related notes
included elsewhere in this Quarterly Report on Form 10-Q and in conjunction with our Annual Report
on Form 10-K for the year ended December 29, 2007. This discussion contains descriptions of our
expectations regarding future trends affecting our business. These forward-looking statements and
other forward-looking statements made elsewhere in this report are made in reliance upon safe
harbor provisions in Section 27A of the Securities Act of 1933 and Section 21E of the Securities
Exchange Act of 1934. 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 projections of our future financial performance, trends in our business, or other
characterizations of future events or circumstances, including statements regarding our expected
net sales, gross margin, selling, general and administrative expenses, research and development
expense, interest and other income (expense), net, income taxes, cash balances, working capital
position, and future cash flows are forward-looking statements. Our actual results could differ
materially from those anticipated in these forward-looking statements as a result of several
factors, including, but not limited to those factors set forth and discussed in Item 1 (Business)
and Item 1A (Risk Factors) of Part I, and Item 7 (Managements Discussion and Analysis of Financial
Condition and Results of Operations) of Part II, of our Annual Report on Form 10-K for the year
ended December 29, 2007. In light of the significant uncertainties inherent in the forward-looking
information included in this report, the inclusion of this information should not be regarded as a
representation by us or any other person that our objectives or plans will be achieved and readers
are cautioned not to place undue reliance on such forward-looking information. We undertake no
obligation to update or revise these forward-looking statements, whether as a result of new
information, future events or otherwise.
 Overview
   Critical Accounting Policies and Estimates
  15




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##### Table of Contents



Stock-Based Compensation
   Three Months Ended
    
    
    Six Months EndedJune 28,
    
    
    June 30,
    
    
    June 28,
    
    
    June 30,(In thousands)
    
    2008
    
    
    2007
    
    
    2008
    
    
    2007Cost of sales
    
    $
    117
    
    
    $
    12
    
    
    $
    162
    
    
    $
    244Selling, general and administrative expenses
    
    
    588
    
    
    
    628
    
    
    
    1,238
    
    
    
    2,925Research and development expense
    
    
    142
    
    
    
    10
    
    
    
    204
    
    
    
    323$
    847
    
    
    $
    650
    
    
    $
    1,604
    
    
    $
    3,492
  Results of Operations for the Three and Six Months Ended June 28, 2008 and June 30, 2007
  Percentage of Net SalesThree Months Ended
    
    
    Six Months EndedJune 28,
    
    
    June 30,
    
    
    June 28,
    
    
    June 30,2008
    
    
    2007
    
    
    2008
    
    
    2007Net sales
    
    
    100.0
    %
    
    
    100.0
    %
    
    
    100.0
    %
    
    
    100.0
    %Cost of sales
    
    
    59.8
    
    
    
    55.8
    
    
    
    59.9
    
    
    
    56.1Gross profit
    
    
    40.2
    
    
    
    44.2
    
    
    
    40.1
    
    
    
    43.9Selling, general and administrative expenses
    
    
    25.6
    
    
    
    26.0
    
    
    
    25.7
    
    
    
    27.0Research and development expense
    
    
    10.5
    
    
    
    9.7
    
    
    
    10.2
    
    
    
    9.8Operating income
    
    
    4.1
    
    
    
    8.5
    
    
    
    4.2
    
    
    
    7.1Write-down of note receivable and other
amounts
related to previously discontinued
operations
    
    
    (6.0
    )
    
    
    
    
    
    
    (3.0
    )
    
    
    Interest and other income (expense), net
    
    
    (0.1
    )
    
    
    0.0
    
    
    
    (0.3
    )
    
    
    0.1Income (loss) before income taxes
    
    
    (2.0
    )
    
    
    8.5
    
    
    
    0.9
    
    
    
    7.2Income tax provision
    
    
    0.4
    
    
    
    1.3
    
    
    
    0.5
    
    
    
    1.1Net income (loss)
    
    
    (2.4
    )%
    
    
    7.2
    %
    
    
    0.4
    %
    
    
    6.1
    %
  Net Sales
  16




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##### Table of Contents



Three Months Ended
    
    
    
    
    
    
    PercentageJune 28,
    
    
    June 30,
    
    
    Increase
    
    
    Increase(In thousands)
    
    2008
    
    
    2007
    
    
    (Decrease)
    
    
    (Decrease)United States
    
    $
    53,911
    
    
    $
    58,336
    
    
    $
    (4,425
    )
    
    
    (7.6
    )%Europe
    
    
    31,727
    
    
    
    27,718
    
    
    
    4,009
    
    
    
    14.5Pacific Rim
    
    
    26,962
    
    
    
    17,963
    
    
    
    8,999
    
    
    
    50.1Other
    
    
    5,064
    
    
    
    6,887
    
    
    
    (1,823
    )
    
    
    (26.5
    )$
    117,664
    
    
    $
    110,904
    
    
    $
    6,760
    
    
    
    6.1
    %
 Six Months Ended
    
    
    
    
    
    
    PercentageJune 28,
    
    
    June 30,
    
    
    Increase
    
    
    Increase(In thousands)
    
    2008
    
    
    2007
    
    
    (Decrease)
    
    
    (Decrease)United States
    
    $
    106,380
    
    
    $
    114,552
    
    
    $
    (8,172
    )
    
    
    (7.1
    )%Europe
    
    
    59,817
    
    
    
    53,380
    
    
    
    6,437
    
    
    
    12.1Pacific Rim
    
    
    56,335
    
    
    
    37,176
    
    
    
    19,159
    
    
    
    51.5Other
    
    
    10,375
    
    
    
    13,060
    
    
    
    (2,685
    )
    
    
    (20.6
    )$
    232,907
    
    
    $
    218,168
    
    
    $
    14,739
    
    
    
    6.8
    %
  17




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##### Table of Contents



Gross Margin
  Selling, General and Administrative (SG&A) Expenses
   18




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##### Table of Contents



Research and Development (R&D) Expense
   Write-Down of Note Receivable and Other Amounts
  Interest and Other Income (Expense), Net
    Income Taxes
  19




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Accounting for Income Taxes
  Liquidity and Capital Resources
      20




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##### Table of Contents



short-term obligations short-term obligations .
       21




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##### Table of Contents



Recent Accounting Pronouncements
 Noncontrolling Interests in Consolidated Financial Statementsan amendment of ARB No. 51
 Business Combinations
 Disclosures about Derivative Instruments and Hedging
Activities.
 Determination of the Useful
Life of Intangible Assets Goodwill and Other Intangible Assets
 The Hierarchy of Generally Accepted Accounting
Principles. The Meaning of Present Fairly in Conformity With Generally Accepted Accounting Principles
 22




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##### Table of Contents



Accounting for Convertible Debt Instruments That May Be
Settled in Cash upon Conversion (Including Partial Cash Settlement).
 
 Item 3. Quantitative and Qualitative Disclosures About Market Risk
  Foreign Currency Risk
     Interest Rate Risk
  23




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##### Table of Contents



Item 4. Controls and Procedures
 (a)
    
    Evaluation of Disclosure Controls and ProceduresOur chief executive officer and our chief financial officer, after evaluating our
disclosure controls and procedures (as defined in Securities Exchange Act of 1934 (the
Exchange Act) Rules 13a-15(e) and 15d-15(e)) as of the end of the period covered by this
Quarterly Report on Form 10-Q (the Evaluation Date), have concluded that as of the
Evaluation Date, our disclosure controls and procedures are effective to ensure that
information we are required to disclose in reports that we file or submit under the Exchange
Act is recorded, processed, summarized and reported within the time periods specified in
Securities and Exchange Commission rules and forms, and to ensure that information required
to be disclosed by us in such reports is accumulated and communicated to our management,
including our chief executive officer and chief financial officer where appropriate, to
allow timely decisions regarding required disclosure.(b)
    
    Changes in Internal Control Over Financial ReportingThere was no change in our internal control over financial reporting that occurred during
the period covered by this Quarterly Report on Form 10-Q that has materially affected, or is
reasonably likely to materially affect, our internal control over financial reporting. We
continue to enhance our internal control over financial reporting, primarily by evaluating
and enhancing our process and control documentation, in connection with our ongoing efforts
to meet the requirements of Section 404 of the Sarbanes-Oxley Act of 2002. We discuss with
and disclose these matters to the Audit Committee of our Board of Directors and our
independent registered public accounting firm.
 24




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##### Table of Contents



PART II  OTHER INFORMATION
 
 Item 1A. Risk Factors
  
 Item 4. Submission of Matters to a Vote of Security Holders
  Proposal 1
  Nominee
    
    For
    
    WithheldRobert L. Guyett
    
    
    
    33,276,886
    
    
    
    271,001Robert J. Phillippy
    
    
    
    33,282,426
    
    
    
    265,461
 Proposal 2
  For
    
    Against
    
    Abstain
    
    Broker Non-Vote32,883,536
    
    
    
    70,089
    
    
    
    594,262
    
    
    
    0
 Proposal 3
  For
    
    Against
    
    Abstain
    
    Broker Non-Vote13,567,411
    
    
    
    12,212,917
    
    
    
    65,314
    
    
    
    7,702,245
 25




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##### Table of Contents



Item 6. Exhibits
 ExhibitNumber
    
    Description of Exhibit10.1
    
    Severance Compensation Agreement dated April 1, 2008
between the Registrant and Robert J. Phillippy, President
and Chief Executive Officer (incorporated by reference to
Exhibit 10.1 to the Registrants Current Report on Form 8-K
filed with the Securities and Exchange Commission on April
7, 2008).10.2
    
    Severance Compensation Agreement dated April 1, 2008
between the Registrant and Charles F. Cargile, Senior Vice
President, Chief Financial Officer and Treasurer
(incorporated by reference to Exhibit 10.2 to the
Registrants Current Report on Form 8-K filed with the
Securities and Exchange Commission on April 7, 2008).10.3
    
    Form of Severance Compensation Agreement between the
Registrant and certain of its executive and other officers
(incorporated by reference to Exhibit 10.3 to the
Registrants Current Report on Form 8-K filed with the
Securities and Exchange Commission on April 7, 2008).31.1
    
    Certification of Chief Executive Officer pursuant to Rule
13a-14(a) or Rule 15d-14(a) of the Securities Exchange Act
of 1934 (the Exchange Act).31.2
    
    Certification of Chief Financial Officer pursuant to Rule
13a-14(a) or Rule 15d-14(a) of the Exchange Act.32.1
    
    Certification of Chief Executive Officer pursuant to Rule
13a-14(b) or Rule 15d-14(b) of the Exchange Act and 18
U.S.C. Section 1350.32.2
    
    Certification of Chief Financial Officer pursuant to Rule
13a-14(b) or Rule 15d-14(b) of the Exchange Act and 18
U.S.C. Section 1350.
 26




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##### Table of Contents



SIGNATURES
  Dated:  August 7, 2008
    NEWPORT CORPORATIONBy:
    /s/ Charles F. CargileCharles F. Cargile,Senior Vice President, Chief Financial
Officer and Treasurer (Principal
Financial Officer and Duly Authorized
Officer) 27




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##### Table of Contents



EXHIBIT INDEX
 ExhibitNumber
    
    Description of Exhibit10.1
    
    Severance Compensation Agreement dated April 1, 2008
between the Registrant and Robert J. Phillippy, President
and Chief Executive Officer (incorporated by reference to
Exhibit 10.1 to the Registrants Current Report on Form 8-K
filed with the Securities and Exchange Commission on April
7, 2008).10.2
    
    Severance Compensation Agreement dated April 1, 2008
between the Registrant and Charles F. Cargile, Senior Vice
President, Chief Financial Officer and Treasurer
(incorporated by reference to Exhibit 10.2 to the
Registrants Current Report on Form 8-K filed with the
Securities and Exchange Commission on April 7, 2008).10.3
    
    Form of Severance Compensation Agreement between the
Registrant and certain of its executive and other officers
(incorporated by reference to Exhibit 10.3 to the
Registrants Current Report on Form 8-K filed with the
Securities and Exchange Commission on April 7, 2008).31.1
    
    Certification of Chief Executive Officer pursuant to Rule
13a-14(a) or Rule 15d-14(a) of the Securities Exchange Act
of 1934 (the Exchange Act).31.2
    
    Certification of Chief Financial Officer pursuant to Rule
13a-14(a) or Rule 15d-14(a) of the Exchange Act.32.1
    
    Certification of Chief Executive Officer pursuant to Rule
13a-14(b) or Rule 15d-14(b) of the Exchange Act and 18
U.S.C. Section 1350.32.2
    
    Certification of Chief Financial Officer pursuant to Rule
13a-14(b) or Rule 15d-14(b) of the Exchange Act and 18
U.S.C. Section 1350.
 28