10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC  20549

FORM 10-Q

(Mark One)

þQUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 30, 2013

OR

oTRANSITION 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)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes ý  No ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

Yes ý  No ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company.  See definitions of “large accelerated filer”, “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer o	Accelerated filer ý
Non-accelerated filer   o	(Do not check if a smaller reporting company)    Smaller reporting company o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes ¨  No ý

As of April 26, 2013, 39,080,464 shares of the registrant’s sole class of common stock were outstanding.

NEWPORT CORPORATION

FORM 10-Q

INDEX

		PageNumber
PART I.	FINANCIAL INFORMATION
Item 1.	Financial Statements (unaudited):
	Consolidated Statements of Income and Comprehensive Income for the Three Months Ended March 30, 2013 and March 31, 2012	3
	Consolidated Balance Sheets as of March 30, 2013 and December 29, 2012	4
	Consolidated Statements of Cash Flows for the Three Months Ended March 30, 2013 and March 31, 2012	5
	Notes to Consolidated Financial Statements	6
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	18
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	24
Item 4.	Controls and Procedures	26
PART II.  OTHER INFORMATION
Item 1.	Legal Proceedings	27
Item 6.	Exhibits	27
SIGNATURES		28

2

PART I – FINANCIAL INFORMATION

ITEM 1.  FINANCIAL STATEMENTS

NEWPORT CORPORATION

Consolidated Statements of Income and Comprehensive Income

(In thousands, except per share data)

(Unaudited)

	Three Months Ended
	March 30,			March 31,
	2013			2012
Net sales	$	132,607		$	157,167
Cost of sales	77,475			89,098
Gross profit	55,132			68,069
Selling, general and administrative expenses	37,608			44,060
Research and development expense	13,101			13,799
Operating income	4,423			10,210
Interest and other expense, net	(2,137		)	(2,187		)
Income before income taxes	2,286			8,023
Income tax provision (benefit)	(448		)	1,435
Net income	2,734			6,588
Net loss attributable to non-controlling interests	(12		)	(4		)
Net income attributable to Newport Corporation	$	2,746		$	6,592
Net income	$	2,734		$	6,588
Other comprehensive income:
Foreign currency translation gains (losses)	(2,452		)	1,587
Unrecognized net pension gains (losses)	190			(16		)
Unrealized gains (losses) on marketable securities	(98		)	33
Comprehensive income	$	374		$	8,192
Comprehensive loss attributable to non-controlling interests	$	(61	)	$	(46	)
Comprehensive income attributable to Newport Corporation	435			8,238
Comprehensive income	$	374		$	8,192
Net income per share attributable to Newport Corporation:
Basic	$	0.07		$	0.17
Diluted	$	0.07		$	0.17
Shares used in per share calculations:
Basic	38,601			37,731
Diluted	39,260			38,931

See accompanying notes.

3

NEWPORT CORPORATION

Consolidated Balance Sheets

(In thousands, except share and per share data)

(Unaudited)

	March 30,			December 29,
	2013			2012
ASSETS
Current assets:
Cash and cash equivalents	$	83,846		$	88,767
Restricted cash	3,122			3,107
Marketable securities	9,205			8,498
Accounts receivable, net of allowance for doubtful accounts of $1,474 and $1,548 as of March 30, 2013 and December 29, 2012, respectively	89,722			89,445
Notes receivable	1,514			1,536
Inventories	108,262			108,728
Deferred income taxes	19,817			19,872
Prepaid expenses and other current assets	18,111			17,727
Total current assets	333,599			337,680
Property and equipment, net	81,962			82,843
Goodwill	79,388			79,586
Deferred income taxes	5,456			5,646
Intangible assets, net	74,651			77,446
Investments and other assets	35,322			37,760
	$	610,378		$	620,961
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Short-term borrowings, net	$	35,468		$	32,985
Accounts payable	30,372			31,061
Accrued payroll and related expenses	26,466			29,096
Accrued expenses and other current liabilities	34,945			34,696
Total current liabilities	127,251			127,838
Long-term debt, net	136,170			150,758
Accrued pension liabilities	26,561			27,764
Deferred income taxes and other liabilities	22,925			23,783
Commitments and contingencies
Stockholders’ equity:
Common stock, par value $0.1167 per share, 200,000,000 shares authorized; 38,810,704 and 38,402,291 shares issued and outstanding as of March 30, 2013 and December 29, 2012, respectively	4,529			4,481
Capital in excess of par value	447,305			441,074
Accumulated other comprehensive loss	(9,260		)	(6,949		)
Accumulated deficit	(146,428		)	(149,174		)
Total stockholders’ equity of Newport Corporation	296,146			289,432
Non-controlling interests	1,325			1,386
Total stockholders’ equity	297,471			290,818
	$	610,378		$	620,961

See accompanying notes.

4

NEWPORT CORPORATION

Consolidated Statements of Cash Flows

(In thousands)

(Unaudited)

	Three Months Ended
	March 30,			March 31,
	2013			2012
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income	$	2,734		$	6,588
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	7,965			10,818
Provision for losses on inventories	2,334			2,310
Stock-based compensation expense	2,269			2,214
Provision for doubtful accounts	15			35
Loss on disposal of property and equipment	61			58
Deferred income taxes	(8		)	(1,326		)
Increase (decrease) in cash, net of acquisition, due to changes in:
Accounts and notes receivable	(1,782		)	(1,415		)
Inventories	(2,363		)	(1,278		)
Prepaid expenses and other assets	(449		)	(1,270		)
Accounts payable	(330		)	1,053
Accrued payroll and related expenses	(2,379		)	(5,979		)
Accrued expenses and other liabilities	(289		)	1,112
Other long-term liabilities	(328		)	295
Net cash provided by operating activities	7,450			13,215
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment	(3,951		)	(3,732		)
Restricted cash	(53		)	11,460
Business acquisition, net of cash acquired	-			(8,939		)
Refundable amounts related to business acquisition	-			(317		)
Purchase of marketable securities	(2,346		)	(1,293		)
Proceeds from the sale of marketable securities	1,481			878
Net cash used in investing activities	(4,869		)	(1,943		)
CASH FLOWS FROM FINANCING ACTIVITIES:
Repayment of long-term debt and obligations under capital leases	(11,892		)	(9,376		)
Proceeds from short-term borrowings	1,599			3,280
Repayment of short-term borrowings	(876		)	(14,853		)
Proceeds from the issuance of common stock under employee plans	4,010			2,001
Tax withholding payments related to net share settlement of equity awards	-			(3,053		)
Net cash used in financing activities	(7,159		)	(22,001		)
Impact of foreign exchange rate changes on cash balances	(343		)	298
Net decrease in cash and cash equivalents	(4,921		)	(10,431		)
Cash and cash equivalents at beginning of period	88,767			55,701
Cash and cash equivalents at end of period	$	83,846		$	45,270
Supplemental disclosures of cash flow information:
Cash paid during the period for interest	$	1,927		$	1,873
Cash paid during the period for income taxes, net	$	799		$	1,299
Property and equipment accrued in accounts payable	$	178		$	20

See accompanying notes.

5

NEWPORT CORPORATION

Notes to Consolidated Financial Statements

March 30, 2013

NOTE 1BASIS OF PRESENTATION

The accompanying unaudited consolidated financial statements include the accounts of Newport Corporation and its wholly owned subsidiaries (collectively referred to as the Company) and have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial information and with the instructions of Form 10-Q and Rule 10-01 of Regulation S-X.  In the opinion of management, all adjustments (consisting of normal and recurring accruals) considered necessary for a fair presentation have been included.  All intercompany transactions and balances have been eliminated in consolidation.

The accompanying unaudited consolidated financial statements do not include certain footnotes and financial presentations normally required under generally accepted accounting principles (GAAP) and, therefore, should be read in conjunction with the consolidated financial statements and related notes contained in the Company’s Annual Report on Form 10-K for the year ended December 29, 2012.  The results for the interim periods are not necessarily indicative of the results the Company will have for the full year ending December 28, 2013.  The December 29, 2012 balances reported herein are derived from the audited consolidated financial statements included in the Company’s Annual Report on Form 10-K for the year ended December 29, 2012.

Subsequent to the filing of the Company’s Quarterly Report on Form 10-Q for the three months ended March 31, 2012, management determined that certain debt repayments and borrowings were both overstated by $1.0 million in the Company’s consolidated statement of cash flows for the three months ended March 31, 2012.  In the consolidated statement of cash flows included in the accompanying unaudited consolidated financial statements, the Company corrected the presentation of repayment of long-term debt and obligations under capital leases and proceeds from short-term borrowings to accurately report debt repayments and borrowings.  The Company believes that the effect of this adjustment is not material to the consolidated statement of cash flows for the three months ended March 31, 2012.

NOTE 2RECENT ACCOUNTING PRONOUNCEMENTS

In February 2013, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2013-02, Comprehensive Income: Reporting of Amounts Reclassified Out of Accumulated Other Comprehensive Income, which requires companies to disclose significant amounts that have been reclassified out of accumulated other comprehensive income.  Amounts that are required to be reclassified in their entirety to net income must be disclosed either on the face of the income statement or in the notes to the financial statements.  Amounts that are not required to be reclassified in their entirety to net income in the same reporting period must be disclosed by a cross reference to other disclosures that provide additional information regarding such amounts.  ASU No. 2013-02 is effective for fiscal years and interim periods beginning after December 15, 2012.  The adoption of ASU No. 2013-02 has not had a material impact on the Company’s financial position or results of operations.

In March 2013, the FASB issued ASU No. 2013-05, Foreign Currency Matters: Parent’s Accounting for the Cumulative Translation Adjustment upon Derecognition of Certain Subsidiaries or Groups of Assets within a Foreign Entity or of an Investment in a Foreign Entity, which clarifies the guidance in Topics 810 and 830.  Topic 810 requires companies to deconsolidate a subsidiary or derecognize a group of assets if the parent ceases to hold a controlling financial interest in that subsidiary or group of assets.  Upon the loss of a controlling financial interest, the parent would recognize the cumulative translation adjustment in net income.  The guidance in Topic 810 does not distinguish between a sale or transfer of an investment in a foreign entity and a sale or transfer of a subsidiary or group of assets within a foreign entity.  Topic 830 requires the release of the cumulative translation adjustment into net income if a sale or transfer represented a complete or substantially complete liquidation of an investment in a foreign entity.  ASU No. 2013-05 clarifies that companies that cease to have a controlling financial interest in a subsidiary or group of assets within a foreign subsidiary should release the cumulative translation adjustment into net income if the sale or transfer results in a complete or substantially complete liquidation of the foreign entity in which the subsidiary or group of assets had resided.  ASU No. 2013-05 will be effective for fiscal years beginning after December 15, 2013, and early adoption is permitted but has not been elected by the Company.  The adoption of ASU No. 2013-05 will not have a material impact on the Company’s financial position or results of operations.

6

NEWPORT CORPORATION

Notes to Consolidated Financial Statements

March 30, 2013

NOTE 3MARKETABLE SECURITIES

All marketable securities of the Company were classified as available for sale and were recorded at market value using the specific identification method, and unrealized gains and losses are reflected in accumulated other comprehensive loss in the accompanying consolidated balance sheets.  The aggregate fair value of available for sale securities and the aggregate amount of unrealized gains and losses in available for sale securities at March 30, 2013 were as follows:

(In thousands)	Aggregate		Aggregate Amount of Unrealized
	Fair Value		Gains		Losses
Money market funds	$	4,923	$	83	$	-
Certificates of deposit	4,282		-		-
	$	9,205	$	83	$	-

The aggregate fair value of available for sale securities and the aggregate amount of unrealized gains and losses in available for sale securities at December 29, 2012 were as follows:

(In thousands)	Aggregate		Aggregate Amount of Unrealized
	Fair Value		Gains		Losses
Money market funds	$	4,244	$	86	$	-
Certificates of deposit	4,254		-		-
	$	8,498	$	86	$	-

The contractual maturities of certificates of deposit were as follows:

(In thousands)	March 30,
	2013
0 – 1 Year	$	4,282
1 – 2 Years	-
2 – 3 Years	-
3 – 5 Years	-
5 – 10 Years	-
More than 10 years	-
	$	4,282

There were no realized gains or losses on the sale of available for sale securities for the three months ended March 30, 2013 or the three months ended March 31, 2012.

NOTE 4FAIR VALUE MEASUREMENTS

ASC 820-10, Fair Value Measurements and Disclosures, requires that for any assets and liabilities stated at fair value on a recurring basis in the Company’s financial statements, the fair value of such assets and liabilities be measured based on the price that would be received from selling an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.  Level 1 asset and liability values are derived from quoted prices in active markets for identical assets and liabilities and Level 2 asset and liability values are derived from quoted prices in inactive markets or based on other observable inputs.

7

NEWPORT CORPORATION

Notes to Consolidated Financial Statements

March 30, 2013

The Company’s assets and liabilities measured at fair value on a recurring basis are categorized in the table below based upon their level within the fair value hierarchy as of March 30, 2013.

(In thousands)			Fair Value Measurements at Reporting Date Using
Description	March 30, 2013		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Assets:
Restricted Cash	$	3,122	$	3,122	$	-	$	-
Marketable securities:
Money market funds	4,923		4,923		-		-
Certificates of deposit	4,282		-		4,282		-
	9,205		4,923		4,282		-
Derivative assets:
Forward contracts	8		-		8		-
Option contracts	701		-		701		-
	709		-		709		-
Funds in investments and other assets:
Israeli pension funds	10,344		-		10,344		-
Pension assets not owned by plan	6,541		-		6,541		-
	16,885		-		16,885		-
	$	29,921	$	8,045	$	21,876	$	-
Liabilities:
Derivative liabilities:
Option contracts	109		-		109		-

The Company’s assets and liabilities measured at fair value on a recurring basis are categorized in the table below based upon their level within the fair value hierarchy as of December 29, 2012.

(In thousands)			Fair Value Measurements at Reporting Date Using
Description	December 29, 2012		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Assets:
Restricted Cash	$	3,107	$	3,107	$	-	$	-
Marketable securities:
Money market funds	4,244		4,244		-		-
Certificates of deposit	4,254		-		4,254		-
	8,498		4,244		4,254		-
Derivative assets:
Option contracts	755		-		755		-
Funds in investments and other assets:
Israeli pension funds	10,690		-		10,690
Pension assets not owned by plan	6,615		-		6,615		-
	17,305		-		17,305		-
	$	29,665	$	7,351	$	22,314	$	-
Liabilities:
Derivative liabilities:
Option contracts	202		-		202		-

8

NEWPORT CORPORATION

Notes to Consolidated Financial Statements

March 30, 2013

The Company’s other financial instruments include short-term borrowings and long-term debt.  The fair value of these financial instruments was estimated based on current rates for similar issues or on the current rates offered to the Company for debt of similar remaining maturities.  The estimated fair values of these financial instruments were as follows:

	March 30, 2013				December 29, 2012
(In thousands)	Carrying				Carrying
	Amount		Fair Value		Amount		Fair Value
Short-term borrowings	$	35,468	$	34,235	$	32,985	$	32,020
Long-term debt	$	136,170	$	130,271	$	150,758	$	145,404

NOTE 5SUPPLEMENTAL BALANCE SHEET INFORMATION

Inventories

Inventories that are expected to be sold within one year are classified as current inventories and are included in inventories in the accompanying consolidated balance sheets.  Such inventories were as follows:

(In thousands)	March 30,		December 29,
	2013		2012
Raw materials and purchased parts	$	64,261	$	65,766
Work in process	17,537		18,075
Finished goods	26,464		24,887
Short-term inventories	$	108,262	$	108,728

Inventories that are not expected to be sold within one year are classified as long-term inventories and are included in investments and other assets in the accompanying consolidated balance sheets.  Such inventories were as follows:

(In thousands)	March 30,		December 29,
	2013		2012
Raw materials and purchased parts	$	3,300	$	4,149
Finished goods	4,540		4,926
Long-term inventories	$	7,840	$	9,075

Accrued Warranty Obligations

Unless otherwise stated in the Company’s product literature or in its agreements with customers, products sold by the Company’s Photonics and Optics Groups generally carry a one-year warranty from the original invoice date on all product materials and workmanship, other than filters and gratings products, which generally carry a 90-day warranty and laser beam profilers and dental CAD/CAM scanners, which generally carry a two-year warranty.  Products of these groups sold to original equipment manufacturer (OEM) customers generally carry longer warranties, typically 15 to 19 months.  Products sold by the Company’s Lasers Group carry warranties that vary by product and product component, but generally range from 90 days to two years.  In certain cases, such warranties for Lasers Group products are limited by either a set time period or a maximum amount of hourly usage of the product, whichever occurs first.  Defective products will be either repaired or replaced, generally at the Company’s option, upon meeting certain criteria.  The Company accrues a provision for the estimated costs that may be incurred for warranties relating to a product (based on historical experience) as a component of cost of sales.  Short-term accrued warranty obligations, which expire within one year, are included in accrued expenses and other current liabilities and long-term warranty obligations are included in deferred income taxes and other liabilities in the accompanying consolidated balance sheets.  Short-term warranty obligations were $3.3 million and $3.4 million as of March 30, 2013 and December 29, 2012, respectively.  As of March 30, 2013 and December 29, 2012, the amounts accrued for long-term warranty obligations were not material.

9

NEWPORT CORPORATION

Notes to Consolidated Financial Statements

March 30, 2013

The activity in accrued warranty obligations was as follows:

	Three Months Ended
(In thousands)	March 30,		March 31,
	2013		2012
Balance at beginning of year	$	3,528	$	4,466
Additions charged to cost of sales	596		629
Additions from acquisitions	-		21
Warranty claims	(742)		(1,195)
Balance at end of period	$	3,382	$	3,921

Accrued Expenses and Other Current Liabilities

Accrued expenses and other current liabilities were as follows:

(In thousands)	March 30,		December 29,
	2013		2012
Deferred revenue	$	12,702	$	11,561
Deferred lease liability	5,464		5,445
Accrued and deferred taxes	3,714		3,866
Short-term accrued warranty obligations	3,251		3,421
Other	9,814		10,403
	$	34,945	$	34,696

Accumulated Other Comprehensive Loss

Accumulated other comprehensive loss consisted of the following:

(In thousands)	March 30,		December 29,
	2013		2012
Cumulative foreign currency translation losses	$	(6,972)	$	(4,569)
Unrecognized net pension losses	(3,058)		(3,248)
Unrealized gains on marketable securities	770		868
	$	(9,260)	$	(6,949)

10

NEWPORT CORPORATION

Notes to Consolidated Financial Statements

March 30, 2013

NOTE 6INTANGIBLE ASSETS

Intangible assets were as follows:

(In thousands)	March 30,		December 29,
	2013		2012
Intangible assets subject to amortization:
Developed technology, net of accumulated amortization of $11,638 and $10,885 as of March 30, 2013 and December 29, 2012, respectively	$	28,797	$	29,742
Customer relationships, net of accumulated amortization of $27,827 and $26,255 as of March 30, 2013 and December 29, 2012, respectively	18,487		20,100
In-process research and development, net of accumulated amortization of $280 and $158 as of March 30, 2013 and December 29, 2012, respectively	7,611		7,746
Other, net of accumulated amortization of $5,916 and $5,915 as of March 30, 2013 and December 29, 2012, respectively	1,451		1,553
	56,346		59,141
Intangible assets not subject to amortization:
Trademarks and trade names	18,305		18,305
Intangible assets, net	$	74,651	$	77,446

Developed technology is amortized on a straight line basis over 10 to 20 years, depending on the life of the product technology.  Intangible assets related to customer relationships are generally amortized over a period of up to 10 years on an accelerated basis.  In-process research and development is amortized on a straight line basis over the product’s estimated useful life upon completion of the technology.  Other intangible assets include acquired backlog, product trademarks and trade names, non-competition agreements and defensible assets.  With the exception of product trademarks and trade names, such assets are amortized on a straight line basis over a period of three months to 10 years, depending on the asset.  Trademarks and trade names associated with products are amortized on a straight line basis over the estimated remaining life of the product technology, which ranges from 10 to 20 years.  Trademarks and trade names associated with a business have indefinite lives and are not amortized.

Amortization expense related to intangible assets totaled $2.6 million for the three months ended March 30, 2013 and $5.2 million for the three months ended March 31, 2012.

11

NEWPORT CORPORATION

Notes to Consolidated Financial Statements

March 30, 2013

Estimated aggregate amortization expense for future fiscal years is as follows:

(In thousands)	Estimated Aggregate Amortization Expense
2013 (remaining)	$	7,751
2014	8,344
2015	6,712
2016	6,337
2017	5,371
Thereafter	19,863
	$	54,378

The Company has excluded $2.0 million of amortization expense related to certain in-process research and development projects from the table above, as it was uncertain as of March 30, 2013 when the technology will be completed and when the amortization will begin.

NOTE 7INTEREST AND OTHER EXPENSE, NET

Interest and other expense, net, was as follows:

	Three Months Ended
	March 30,		March 31,
(In thousands)	2013		2012
Interest expense	$	(1,789)	$	(2,201)
Interest and dividend income	49		61
Derivative gain	202		671
Bank and portfolio asset management fees	(192)		(164)
Other expense, net	(407)		(554)
	$	(2,137)	$	(2,187)

NOTE 8STOCK-BASED COMPENSATION

The total stock-based compensation expense included in the Company’s consolidated statements of income and comprehensive income was as follows:

	Three Months Ended
	March 30,		March 31,
(In thousands)	2013		2012
Cost of sales	$	209	$	117
Selling, general and administrative expenses	1,820		1,839
Research and development expense	240		258
	$	2,269	$	2,214

At March 30, 2013, the total compensation cost related to unvested stock-based awards granted to employees, officers and directors under the Company’s stock-based benefit plans that had not yet been recognized was $7.6 million (net of estimated forfeitures of $1.5 million).  This future compensation expense will be amortized over a weighted-average period of 1.4 years using the straight-line attribution method.  The actual compensation expense that the Company will recognize in the future related to unvested stock-based awards outstanding at March 30, 2013 will be adjusted for actual forfeitures.

12

NEWPORT CORPORATION

Notes to Consolidated Financial Statements

March 30, 2013

At March 30, 2013, 0.7 million stock options with a weighted-average exercise price of $14.58 per share, intrinsic value of $1.5 million and remaining contractual term of 1.4 years were outstanding and were exercisable.  At March 30, 2013, 1.4 million stock-settled stock appreciation rights with a weighted-average base value of $11.47 per share, intrinsic value of $8.0 million and remaining contractual term of 4.4 years were outstanding, and 0.8 million stock-settled stock appreciation rights with a weighted-average base value of $7.23 per share, intrinsic value of $7.5 million and remaining contractual term of 3.4 years were exercisable.

NOTE 9DEBT AND LINES OF CREDIT

Total short-term debt was as follows:

(In thousands)	March 30,		December 29,
	2013		2012
Japanese revolving lines of credit	$	5,307	$	5,231
Japanese receivables financing facilities	551		415
Total short-term borrowings	$	5,858	$	5,646

Total long-term debt was as follows:

(In thousands)	March 30,		December 29,
	2013		2012
U.S. term loan due October 2016	$	159,563	$	171,125
Israeli loans due through October 2015	3,230		3,591
Japanese private placement bonds due June 2014	2,122		2,325
Japanese loans due through November 2016	865		1,056
Total long-term debt	165,780		178,097
Current portion of long-term debt	29,610		27,339
Total long-term debt, less current portion	$	136,170	$	150,758

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NEWPORT CORPORATION

Notes to Consolidated Financial Statements

March 30, 2013

NOTE 10NET INCOME PER SHARE

The following table sets forth the computation of basic and diluted net income per share:

	Three Months Ended
	March 30,		March 31,
(In thousands, except per share data)	2013		2012
Net income attributable to Newport Corporation	$	2,746	$	6,592
Shares:
Weighted average shares outstanding - basic	38,601		37,731
Dilutive potential common shares, using treasury stock method	659		1,200
Weighted average shares outstanding - diluted	39,260		38,931
Net income per share attributable to Newport Corporation:
Basic	$	0.07	$	0.17
Diluted	$	0.07	$	0.17

For the three months ended March 30, 2013, an aggregate of 0.9 million stock options and stock appreciation rights were excluded from the computations of diluted net income per share, as their exercise prices (or base values) exceeded the average market price of the Company’s common stock during such periods, and their inclusion would have been antidilutive.  For the three months ended March 30, 2013, 0.4 million restricted stock units were excluded from the computations of diluted net income per share, as the amount of unrecognized future compensation expense associated with these restricted stock units would have resulted in assumed proceeds in excess of the amount required to repurchase the underlying shares under the treasury stock method and, therefore, their inclusion would have been antidilutive.

NOTE 11INCOME TAXES

Under ASC 740-270, Income Taxes – Interim Reporting, the Company is required to evaluate and make any necessary adjustments to its effective tax rate each quarter as new information is obtained that may affect the assumptions used to estimate its annual effective tax rate.  The Company’s assumptions relate to factors such as the projected level and mix of pre-tax earnings in the various tax jurisdictions in which it operates, valuation allowances against deferred tax assets, the recognition or derecognition of tax benefits related to uncertain tax positions, expected utilization of tax credits and changes in or the interpretation of tax laws in jurisdictions in which the Company conducts business.  In addition, jurisdictions for which the Company has projected losses for the year, or a year-to-date loss, where no tax benefit can be recognized, are excluded from the calculation of the estimated annual effective tax rate.  Changes in the assumptions and the inclusion or exclusion of certain jurisdictions could result in a higher or lower effective tax rate during a particular quarter.

Deferred income taxes are recognized for the future tax consequences of temporary differences using enacted statutory tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled.  Temporary differences include the difference between the financial statement carrying amounts and the tax bases of existing assets and liabilities and operating loss and tax credit carryforwards.  The effect of a change in tax rates on deferred taxes is recognized in income in the period that includes the enactment date.  In accordance with the provisions of ASC 740, a valuation allowance for deferred tax assets is recorded to the extent the Company cannot determine that the ultimate realization of the net deferred tax assets is more likely than not.  Realization of deferred tax assets is principally dependent upon the achievement of future taxable income, the estimation of which requires significant management judgment.  As of March 30, 2013, the Company could not determine that it is more likely than not that deferred tax assets related to certain domestic and foreign net operating loss carryforwards and certain other miscellaneous domestic and foreign deferred tax assets would be realized.  Therefore, the Company has maintained a valuation allowance of $3.3 million against its domestic and certain foreign subsidiaries’ deferred tax assets.

14

NEWPORT CORPORATION

Notes to Consolidated Financial Statements

March 30, 2013

The Company utilizes ASC 740-10-25, Income Taxes – Recognition, which requires income tax positions to meet a more-likely-than-not recognition threshold to be recognized in the financial statements.  Under ASC 740-10-25, tax positions that previously failed to meet the more-likely-than-not threshold should be recognized in the first subsequent financial reporting period in which that threshold is met.  Previously recognized tax positions that no longer meet the more-likely-than-not threshold should be derecognized in the first subsequent financial reporting period in which that threshold is no longer met.  As a multi-national corporation, the Company is subject to taxation in many jurisdictions, and the calculation of its tax liabilities involves dealing with uncertainties in the application of complex tax laws and regulations in various taxing jurisdictions.  If the Company ultimately determines that the payment of these liabilities will be unnecessary, it reverses the liability and recognizes a tax benefit during the period in which it determines the liability no longer applies.  Conversely, the Company records additional tax charges in a period in which it determines that a recorded tax liability is less than it expects the ultimate assessment to be.  As a result of these adjustments, the Company’s effective tax rate in a given financial statement period could be materially affected.  During the three months ended March 30, 2013, the Company reversed $0.7 million of unrecognized tax benefits related to a Japanese subsidiary, due to the expiration of the applicable audit statute of limitations.  As of March 30, 2013, the Company had $14.5 million of gross unrecognized tax benefits and a total of $11.7 million of net unrecognized tax benefits, which, if recognized, would affect the effective tax rate.  Interest and penalties related to unrecognized tax benefits were not significant for the three months ended March 30, 2013.

NOTE 12STOCKHOLDERS’ EQUITY TRANSACTIONS

In May 2008, the Board of Directors of the Company approved a share repurchase program, authorizing the purchase of up to 4.0 million shares of the Company’s common stock.  No purchases were made under this program during the three months ended March 30, 2013.  As of March 30, 2013, 3.9 million shares remained available for purchase under the program.  However, the terms of the Company’s senior secured credit facility entered into in October 2011 restrict the Company’s ability to purchase additional shares under this program during the term of such facility.

NOTE 13DEFINED BENEFIT PENSION PLANS

The Company has defined benefit pension plans covering substantially all full-time employees in France, Germany, Israel and Japan. In addition, the Company has certain pension liabilities relating to former employees of the Company in the United Kingdom.  The German plan is unfunded, as permitted under the plan and applicable laws.  For financial reporting purposes, the calculation of net periodic pension costs is based upon a number of actuarial assumptions, including a discount rate for plan obligations, an assumed rate of return on pension plan assets and an assumed rate of compensation increase for employees covered by the plan.  All of these assumptions are based upon management’s judgment, considering all known trends and uncertainties.  Actual results that differ from these assumptions would impact future expense recognition and the cash funding requirements of the Company’s pension plans.

Net periodic benefit costs for the plans in aggregate included the following components:

	Three Months Ended
	March 30,		March 31,
(In thousands)	2013		2012
Service cost	$	721	$	589
Interest cost on benefit obligations	165		185
Expected return on plan assets	(52)		(57)
Amortization of net loss	63		27
	$	897	$	744

15

NEWPORT CORPORATION

Notes to Consolidated Financial Statements

March 30, 2013

NOTE 14      BUSINESS SEGMENT INFORMATION

The operating segments reported below are the segments of the Company for which separate financial information is available and for which operating results are evaluated regularly by the Chief Executive Officer, who is the chief operating decision maker, in deciding how to allocate resources and in assessing performance.  Prior to 2013, the Company developed, manufactured and marketed its products within three distinct business segments: its Lasers Division, its Photonics and Precision Technologies Division and its Ophir Division.  In January 2013, the Company reorganized its operations to create three new operating segments: its Photonics Group, its Lasers Group and its Optics Group.  As a result, the Company has revised its reportable segments to correspond with its new operating segments, reflecting the manner in which it now assesses performance and allocates resources.  The results of operations of the Company’s reportable segments for the three months ended March 31, 2012 reported below have been restated to conform to the new reportable segments.

The Company measured income reported for each business segment, which included only those costs that were directly attributable to the operations of that segment, and excluded certain unallocated operating expenses, such as corporate overhead and intangible asset amortization, interest and other expense, net, and income taxes.

(In thousands)	Photonics		Lasers		Optics		Total
Three months ended March 30, 2013:
Sales to external customers	$	58,367	$	38,885	$	35,355	$	132,607
Segment income	$	12,566	$	3,133	$	700	$	16,399
Three months ended March 31, 2012:
Sales to external customers	$	60,132	$	49,227	$	47,808	$	157,167
Segment income	$	12,280	$	6,683	$	6,189	$	25,152

The following table reconciles segment income to consolidated income before income taxes:

	Three Months Ended
	March 30,		March 31,
(In thousands)	2013		2012
Segment income	$	16,399	$	25,152
Unallocated operating expenses	(11,976)		(14,942)
Interest and other expense, net	(2,137)		(2,187)
	$	2,286	$	8,023

16

NEWPORT CORPORATION

Notes to Consolidated Financial Statements

March 30, 2013

NOTE 15      LEGAL PROCEEDINGS

In November 2010, two former employees of Spectra-Physics, Linda Pope and Yvette Flores, together with their children, Tia Pope Hudson and Mark Flores, filed a complaint against Spectra-Physics and the Company in the Superior Court for Santa Clara County, California.  In the action, the plaintiffs allege that between 1975 and 1985 they and their unborn children were exposed to toxic chemicals during their work at Spectra-Physics, and that Spectra-Physics failed to warn them about dangers associated with the chemicals and failed to implement adequate safeguards to protect them from the chemicals, resulting in injuries to them and their unborn children.

In November 2012, the Company reached an agreement with Linda Pope and Tia Pope Hudson to settle all claims related to their portion of the suit. The amount of such settlement was immaterial.  In December 2012, the court denied the Company’s motions for summary judgment of Yvette and Mark Flores’ claims based on the statute of limitations applicable to such claims.  The Company subsequently filed motions for summary judgment or summary adjudication of the plaintiffs’ remaining claims based on additional grounds, and the plaintiffs have filed a motion for summary adjudication of certain of the Company’s affirmative defenses to the plaintiffs’ claims, which motions are scheduled to be heard in June 2013.  Trial is currently set to commence in July 2013.

Yvette and Mark Flores are seeking an aggregate of $20.5 million in general and special damages, as well as punitive damages for each of them to be established by the trier of fact.  The Company disputes that the plaintiffs are entitled to any damages, and it continues to believe that the plaintiffs’ claims are without merit and intends to continue to vigorously defend its position.  Further, discovery in the action is ongoing, and the motions for summary judgment or adjudication filed by the Company and the plaintiffs are pending.  Therefore, at this stage of the litigation, the Company is unable to provide an estimate of the potential exposure or the likelihood of a favorable or unfavorable outcome in this action.

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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, 2012 previously filed with the SEC.  This discussion contains descriptions of our expectations regarding future trends affecting our business.  Words such as “anticipate,” “believe,” “can,” “continue,” “could,” “estimate,” “expect,” “intend,” “may,” “plan,” “potential,” “predict,” “should,” “will,” “would,” 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 or condition, trends in our business, or other characterizations of future events or circumstances are forward-looking statements.  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.  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 elsewhere in this Quarterly Report on Form 10-Q and 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, 2012.  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.  Except as required by law, we undertake no obligation to update or revise these forward-looking statements, whether as a result of new information, future events or otherwise.

Overview

We are a global supplier of advanced-technology products and systems, including lasers, photonics instrumentation, precision positioning and vibration isolation products and systems, optical components, subassemblies and subsystems, three-dimensional non-contact measurement equipment and advanced automated manufacturing systems.  Our products are used worldwide in a variety of industries including scientific research, defense and security, microelectronics, life and health sciences and industrial markets.  Prior to 2013, we operated within three distinct business segments: our Lasers Division, our Photonics and Precision Technologies Division and our Ophir Division.  In January 2013, we reorganized our operations to create three new operating groups: our Photonics Group, our Lasers Group and our Optics Group.  All of these groups offer a broad array of advanced technology products and services to original equipment manufacturer (OEM) and end-user customers across a wide range of applications in all of our targeted end markets.

The following is a discussion and analysis of certain factors that have affected our results of operations and financial condition during the periods included in the accompanying consolidated financial statements.

Critical Accounting Policies and Estimates

The preparation of our financial statements requires that we make estimates and assumptions that affect the reported amounts of assets and liabilities and related disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods.  We evaluate these estimates and assumptions on an ongoing basis.  We base our estimates on our historical experience and on various other factors which we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities and the amounts of certain expenses that are not readily apparent from other sources.  The accounting policies that involve the most significant judgments, assumptions and estimates used in the preparation of our financial statements are those related to revenue recognition, allowances for doubtful accounts, pension liabilities, inventory reserves, warranty obligations, asset impairment, income taxes and stock-based compensation.  The judgments, assumptions and estimates used in these areas by their nature involve risks and uncertainties, and in the event that any of them prove to be inaccurate in any material respect, it could have a material effect on our reported amounts of assets and liabilities at the date of the financial statements and on the reported amounts of revenues and expenses during the reporting periods.  A summary of these critical accounting policies is included in 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 fiscal year ended December 29, 2012.  There have been no material changes to the critical accounting policies disclosed in our Annual Report on Form 10-K.

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Stock-Based Compensation

The total stock-based compensation expense included in our consolidated statements of income and comprehensive income was as follows:

	Three Months Ended
	March 30,		March 31,
(In thousands)	2013		2012
Cost of sales	$	209	$	117
Selling, general and administrative expenses	1,820		1,839
Research and development expense	240		258
	$	2,269	$	2,214

Results of Operations for the Three Months Ended March 30, 2013 and March 31, 2012

The following table presents our results of operations for the periods indicated as a percentage of net sales:

	Percentage of Net Sales
	For the Three Months Ended
	March 30,		March 31,
	2013		2012
Net sales	100.0	%	100.0	%
Cost of sales	58.4		56.7
Gross profit	41.6		43.3
Selling, general and administrative expenses	28.4		28.0
Research and development expense	9.9		8.8
Operating income	3.3		6.5
Interest and other expense, net	(1.6)		(1.4)
Income before income taxes	1.7		5.1
Income tax provision (benefit)	(0.3)		0.9
Net income	2.0		4.2
Net loss attributable to non-controlling interests	(0.0)		(0.0)
Net income attributable to Newport Corporation	2.0	%	4.2	%

In the following discussion regarding our results of operations, certain prior period amounts have been restated to conform to our current operating groups.  In addition, in the following discussion regarding our net sales, due to changes in our market classifications for certain of our customers and product applications, certain prior period amounts have been reclassified among our end markets to conform to the current period presentation.

Net Sales

Net sales for the three months ended March 30, 2013 decreased by $24.6 million, or 15.6%, compared with the corresponding period in 2012.  For the three months ended March 30, 2013, net sales by our Photonics Group decreased $1.8 million, or 2.9%; net sales by our Lasers Group decreased $10.3 million, or 21.0%; and net sales by our Optics Group decreased $12.5 million, or 26.0%, compared with the corresponding prior year period.  For the three months ended March 30, 2013, we experienced decreases in net sales to all of our end markets compared with the corresponding period in 2012.

19

Net sales to the scientific research market for the three months ended March 30, 2013 decreased $5.1 million, or 14.2%, compared with the same period in 2012, due primarily to decreased sales of laser products.  Net sales to the defense and security markets for the three months ended March 30, 2013 decreased by $2.0 million, or 11.3%, compared with the same period in 2012, due primarily to decreased sales of optics products.  Net sales to these markets were impacted by adverse macroeconomic conditions as a result of budget constraints and uncertainty in future global research and defense spending levels.  Generally, our net sales to these markets by each of our operating groups may fluctuate from period to period due to changes in overall research and defense spending levels and the timing of large sales relating to major research and defense programs and, in some cases, these fluctuations may be offsetting between our operating groups or between such periods.

Net sales to the microelectronics market for the three months ended March 30, 2013 decreased $8.4 million, or 23.3%, compared with the same period in 2012.  The decrease in sales to this market was due primarily to decreased sales of optics and precision motion products resulting from the continued cyclical downturn in the semiconductor equipment industry.

Net sales to the life and health sciences market for the three months ended March 30, 2013 decreased $5.9 million, or 16.0%, compared with the same period in 2012.  The decrease in sales to this market was due primarily to lower sales of lasers for bioimaging and surgical applications, and lower sales of optics products for analytical instrumentation applications.

Net sales to our industrial manufacturing and other end markets for the three months ended March 30, 2013 decreased $3.1 million, or 10.2%, compared with the same period in 2012.  The decrease in sales to these markets was due primarily to lower sales of products used for graphics, automotive safety and fiber optic communications applications due to weak macroeconomic conditions.

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The table below reflects our net sales by geographic region.  Sales are attributed to each location based on the customer address to which the product is shipped.

	Three Months Ended
	March 30,		March 31,				Percentage
(In thousands)	2013		2012		Decrease		Decrease
United States	$	50,069	$	61,195	$	(11,126)	(18.2)	%
Germany	16,421		20,546		(4,125)		(20.1)
Other European countries	19,373		20,647		(1,274)		(6.2)
Japan	14,095		18,043		(3,948)		(21.9)
Other Pacific Rim countries	22,572		24,500		(1,928)		(7.9)
Rest of world	10,077		12,236		(2,159)		(17.6)
	$	132,607	$	157,167	$	(24,560)	(15.6)	%

The decreases in sales to customers in the United States and Germany for the three months ended March 30, 2013 compared with the corresponding period in 2012 were attributable primarily to lower sales to our life and health sciences and our microelectronics end markets.  To a lesser extent, sales in the United States decreased due to lower sales to our defense and security end markets, offset in part by increased sales to our scientific research end market.

The decreases in sales to customers in other parts of Europe and in Japan for the three months ended March 30, 2013 compared with the corresponding prior year period were due to lower sales to our scientific research end market and our industrial manufacturing and other end markets.  In other parts of Europe, such decreases were offset in part by increased sales to our life and health sciences end market.

The decreases in sales to customers in other parts of the Pacific Rim and to customers in the rest of the world for the three months ended March 30, 2013 compared with the corresponding prior year period were attributable primarily to lower sales to our scientific research and microelectronics end markets, offset in part by increased sales to customers in our life and health sciences end market.

Gross Margin

Gross margin was 41.6% and 43.3% for the three months ended March 30, 2013 and March 31, 2012, respectively.  Gross margin decreased in all of our operating groups, which was due to decreased absorption of manufacturing overhead resulting from our lower overall sales and production levels, and a lower proportion of sales of higher margin products.  In addition, gross margin for the three months ended March 31, 2012 was positively impacted by higher sales of lasers inventory that had previously been written down.

In general, we expect that our gross margin will vary in any given period depending upon factors such as our mix of sales, product pricing variations, manufacturing absorption levels, and changes in levels of inventory and warranty reserves.

Selling, General and Administrative (SG&A) Expenses

SG&A expenses totaled $37.6 million, or 28.4% of net sales, and $44.1 million, or 28.0% of net sales, for the three months ended March 30, 2013 and March 31, 2012, respectively.  The decrease in SG&A expenses in absolute dollars in the current year period compared with the prior year period was due primarily to a $3.3 million reduction in amortization expense resulting from the write off of certain intangible assets of our Ophir subsidiaries during the fourth quarter of 2012 and a $3.2 million decrease in personnel costs resulting primarily from lower incentive compensation accruals and headcount reductions as part of our 2012 cost reduction initiative.

In general, we expect that SG&A expenses will vary as a percentage of net sales in the future based on our sales level in any given period.  Because the majority of our SG&A expenses is fixed in the short term, changes in SG&A expenses will likely not be in proportion to changes in net sales.  In addition, any acquisitions would increase our SG&A expenses, and such increases may not be in proportion to the changes in net sales.

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Research and Development (R&D) Expense

R&D expense totaled $13.1 million, or 9.9% of net sales, and $13.8 million, or 8.8% of net sales, for the three months ended March 30, 2013 and March 31, 2012, respectively.  The decrease in R&D expense in absolute dollars in the current year period compared with the prior year period was due to headcount reductions as part of our 2012 cost reduction initiative and delayed spending on new projects and materials.

We believe that the continued development and advancement of our products and technologies is critical to our success, and we intend to continue to invest in R&D initiatives, while working to ensure that our efforts are focused and the resources are deployed efficiently.  In general, we expect that R&D expense as a percentage of net sales will vary in the future based on our sales level in any given period.  Because of our commitment to continued product development, and because the majority of our R&D expense is fixed in the short term, changes in R&D expense will likely not be in proportion to changes in net sales.  In addition, any acquisitions would increase our R&D expenses, and such increases may not be in proportion to the changes in net sales.

Interest and Other Expense, Net

Interest and other expense, net totaled $2.1 million and $2.2 million for the three months ended March 30, 2013 and March 31, 2012, respectively.  The decrease in interest and other expense, net for the three months ended March 30, 2013 compared with the same period in 2012 was due primarily to lower interest expense as a result of the repayment of our convertible notes in February 2012 and lower interest expense on our term loan, resulting from the lower loan balance in the current year period.  This decrease was offset in part by lower gains on derivative instruments in the 2013 period compared with the 2012 period.

Income Taxes

Our effective tax rate reflects a tax benefit on income of 19.6% and a tax expense of 17.9% for the three months ended March 30, 2013 and March 31, 2012, respectively.  Our effective tax rate for the three months ended March 30, 2013 was favorably impacted by the retroactive extension of the federal research credit for 2012, which was signed into law on January 2, 2013 and the reversal of an uncertain foreign tax position related to a Japanese subsidiary, due to the expiration of the applicable audit statute of limitations.

Liquidity and Capital Resources

Our cash and cash equivalents, restricted cash and marketable securities balances decreased to a total of $96.2 million as of March 30, 2013 from $100.4 million as of December 29, 2012.  This decrease was attributable primarily to cash used for net repayments of debt, purchases of property and equipment and annual incentive compensation payouts, offset in part by cash provided by other operating activities and proceeds from the issuance of common stock under employee stock plans.

Net cash provided by our operating activities of $7.5 million for the three months ended March 30, 2013 was attributable primarily to cash provided by our results of operations, offset in part by a decrease in accrued payroll and related expenses of $2.4 million due primarily to annual incentive compensation payouts, an increase in gross inventory of $2.4 million and a decrease in accounts receivable of $1.8 million due to lower sales and the timing of collections.

Net cash used in investing activities of $4.9 million for the three months ended March 30, 2013 was attributable to purchases of property and equipment of $4.0 million and net purchases of marketable securities of $0.9 million.

Net cash used in financing activities of $7.2 million for the three months ended March 30, 2013 was attributable to net repayments of borrowings of $11.2 million, which consisted primarily of principal payments on the term loan under our secured credit facility, offset in part by proceeds of $4.0 million from the sale of stock under employee plans.

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In October 2011, we entered into a credit agreement with certain lenders (Credit Agreement).  The Credit Agreement and the related security agreement provide for a senior secured credit facility consisting of a $185 million term loan and a $65 million revolving line of credit, each with a term of five years.  The credit facility is secured by substantially all of our domestic assets as well as a pledge of certain shares of our subsidiaries.  At March 30, 2013, we had a remaining balance of $159.6 million outstanding on the term loan, with an effective interest rate of 2.95%.  At March 30, 2013, there was no balance outstanding under the revolving line of credit, with $63.6 million available for borrowing after considering outstanding letters of credit totaling $1.4 million.  Our ability to borrow funds under the revolving line of credit is subject to certain conditions, including compliance with certain covenants and making certain representations and warranties.

During 2011, we issued 200 million yen ($2.1 million at March 30, 2013) in private placement bonds through a Japanese bank.  These bonds bear interest at a rate of 0.62% per year, payable in cash semiannually in arrears on June 30 and December 31 of each year, and mature on June 30, 2014.  The bonds are included in long-term debt in the accompanying consolidated balance sheets.

At March 30, 2013, we had (i) four revolving lines of credit with Japanese banks; (ii) two agreements with Japanese banks under which we sell trade notes receivable with recourse; (iii) six loans with Japanese banks; and (iv) three loans with Israeli banks, as follows:

	Principal Amount Outstanding		Amount Available for Borrowing
Description	(in millions)		(in millions)		Interest Rate(s)	Expiration Date(s)
Japanese lines of credit	$	5.3	$	5.8	1.18% to 2.475%	Various dates through July 2013
Japanese agreements for sale of receivables	$	0.6	$	5.3	1.48%	No expiration dates
Japanese loans	$	0.9	$	-	1.25% to 1.45%	Various dates through November 2016
Israeli loans	$	3.2	$	-	2.97% to 3.75%	Various dates through October 2015

In May 2008, our Board of Directors approved a share repurchase program, authorizing the purchase of up to 4.0 million shares of our common stock.  No purchases were made under this program during the three months ended March 30, 2013.  As of March 30, 2013, 3.9 million shares remained available for purchase under the program.  However, the terms of the Credit Agreement restrict our ability to purchase additional shares under this program during the term of the Credit Agreement.

During the remainder of 2013, we expect to use $10 million to $12 million of cash for capital expenditures.

We believe that our current working capital position, together with our expected future cash flows from operations and the borrowing availability under our lines of credit, will be adequate to fund our operations in the ordinary course of business, our anticipated capital expenditures, our debt payment requirements and other contractual obligations for at least the next twelve months.  However, this belief is based upon many assumptions and is subject to numerous risks, including those discussed in Item 1A (Risk Factors) of Part I of our Annual Report on Form 10-K for the year ended December 29, 2012.

Except for the aforementioned capital expenditures, we have no present agreements or commitments with respect to any material acquisitions of businesses, products, product rights or technologies or any other material capital expenditures.  We will continue to evaluate acquisitions of and/or investments in products, technologies, capital equipment or improvements or companies that complement our business and may make such acquisitions and/or investments in the future.  However, the Credit Agreement only permits us to make investments and acquisitions under certain circumstances, and restricts our ability to incur additional indebtedness, which limits our ability to make such acquisitions and investments.

23

Recent Accounting Pronouncements

In February 2013, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2013-02, Comprehensive Income: Reporting of Amounts Reclassified Out of Accumulated Other Comprehensive Income, which requires companies to disclose significant amounts that have been reclassified out of accumulated other comprehensive income.  Amounts that are required to be reclassified in their entirety to net income must be disclosed either on the face of the income statement or in the notes to the financial statements.  Amounts that are not required to be reclassified in their entirety to net income in the same reporting period must be disclosed by a cross reference to other disclosures that provide additional information regarding such amounts.  ASU No. 2013-02 is effective for fiscal years and interim periods beginning after December 15, 2012.  The adoption of ASU No. 2013-02 has not had a material impact on our financial position or results of operations.

In March 2013, the FASB issued ASU No. 2013-05, Foreign Currency Matters: Parent’s Accounting for the Cumulative Translation Adjustment upon Derecognition of Certain Subsidiaries or Groups of Assets within a Foreign Entity or of an Investment in a Foreign Entity, which clarifies the guidance in Topics 810 and 830.  Topic 810 requires companies to deconsolidate a subsidiary or derecognize a group of assets if the parent ceases to hold a controlling financial interest in that subsidiary or group of assets.  Upon the loss of a controlling financial interest, the parent would release the cumulative translation adjustment into net income.  The guidance in Topic 810 does not distinguish between a sale or transfer of an investment in a foreign entity and a sale or transfer of a subsidiary or group of assets within a foreign entity.  Topic 830 requires the release of the cumulative translation adjustment into net income if a sale or transfer represented a complete or substantially complete liquidation of an investment in a foreign entity.  ASU No. 2013-05 clarifies that companies that cease to have a controlling financial interest in a subsidiary or group of assets within a foreign subsidiary should release the cumulative translation adjustment into net income if the sale or transfer results in a complete or substantially complete liquidation of the foreign entity in which the subsidiary or group of assets had resided.  ASU No. 2013-05 will be effective for fiscal years beginning after December 15, 2013, and early adoption is permitted but has not been elected.  The adoption of ASU No. 2013-05 will not have a material impact on our financial position or results of operations.

ITEM 3.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The principal market risks (i.e., the risk of loss arising from adverse changes in market rates and prices) to which we are exposed are changes in foreign exchange rates, which may generate translation and transaction gains and losses, and changes in interest rates.

Foreign Currency Risk

Operating in international markets sometimes involves exposure to volatile movements in currency exchange rates.  The economic impact of currency exchange rate movements on our operating results is complex because such changes are often linked to variability in real growth, inflation, interest rates, governmental actions and other factors.  These changes, if material, may cause us to adjust our financing and operating strategies.  Consequently, isolating the effect of changes in currency does not incorporate these other important economic factors.

We use foreign currency option and forward exchange contracts to mitigate the risks associated with certain foreign currency transactions entered into in the ordinary course of business, primarily foreign currency denominated receivables, payables and other expenses.  These derivative instruments are used as an economic hedge.  However, we have not elected hedge accounting treatment and therefore, all changes in value of these derivative instruments are reflected in interest and other expense, net in our consolidated statements of income.  We do not engage in currency speculation.  All of our foreign currency option and forward exchange contracts are entered into to reduce the volatility of earnings, primarily related to Israeli shekel-based expenses.  If the counterparties to these contracts (typically highly rated banks) do not fulfill their obligations to deliver the contracted currencies, we could be at risk for any currency related fluctuations.

As currency exchange rates change, translation of the statements of income of international operations into U.S. dollars affects the year-over-year comparability of operating results.  We do not generally hedge translation risks because cash flows from international operations are generally reinvested locally.  Changes in currency exchange rates that would have the largest impact on translating our future international operating income include changes to the exchange rates of the U.S. dollar to the euro and Japanese yen.

24

The following table provides information about our foreign currency derivative financial instruments outstanding as of March 30, 2013.  The information is presented in U.S. dollars, as presented in our consolidated financial statements:

	March 30, 2013
	Notional		Average
(In thousands)	Amount		Strike Price
Foreign currency forward contracts
(Pay U.S. dollar/receive foreign currency)
Israeli Shekel	$	197	3.81
Fair value	$	8
Foreign currency options
Israeli Shekel - call options	$	16,079	3.99
Israeli Shekel - put options	(17,409)		3.80
	$	(1,330)
Fair value	$	592

Interest Rate Risk

Our investments in cash, cash equivalents, restricted cash and marketable securities, which totaled $96.2 million at March 30, 2013, are sensitive to changes in the general level of interest rates.  In addition, certain assets related to our pension plans are sensitive to interest rates and economic conditions in Europe.

We have a term loan, which had an outstanding principal balance of $159.6 million at March 30, 2013, and a $65 million revolving line of credit in the United States, as well as various lines of credit, private placement bonds and other loans throughout the world, primarily in Israel and Japan.  Our term loan and revolving line of credit in the United States, and many of our other borrowings, carry variable interest rates and therefore are subject to interest rate risk.

The table below presents information about our debt obligations as of March 30, 2013:

	Expected Maturity Date
(US$ equivalent in thousands)	2013		2014		2015		2016		2017		Thereafter		Total		Fair Value
Debt obligations:
Variable rate (US$)	$	13,874	$	27,748	$	27,748	$	90,193	$	-	$	-	$	159,563	$	152,451
Weighted average interest rate	2.95%		2.95%		2.95%		2.95%		0.00%		0.00%		2.95%
Fixed rate (non-US$)	$	1,200	$	3,723	$	612	$	-	$	-	$	-	$	5,535	$	5,459
Weighted average interest rate	3.16%		1.71%		2.97%		0.00%		0.00%		0.00%		2.16%
Variable rate (non-US$)	$	6,037	$	232	$	173	$	98	$	-	$	-	$	6,540	$	6,596
Weighted average interest rate	1.92%		1.65%		1.30%		1.25%		0.00%		0.00%		1.88%
Total debt obligations	$	21,111	$	31,703	$	28,533	$	90,291	$	-	$	-	$	171,638	$	164,506
Weighted average interest rate	2.67%		2.80%		2.94%		2.95%		0.00%		0.00%		2.89%

25

ITEM 4.  CONTROLS AND PROCEDURES

(a)Evaluation of Disclosure Controls and Procedures

Our Chief Executive Officer and our Chief Financial Officer, after evaluating our “disclosure controls and procedures” (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934 (the “Exchange Act”)) 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 were 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 Reporting

There 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.

26

PART II – OTHER INFORMATION

ITEM 1.LEGAL PROCEEDINGS

Hudson et al. v. Spectra-Physics, Inc. et al.

In November 2010, two former employees of Spectra-Physics, Linda Pope and Yvette Flores, together with their children, Tia Pope Hudson and Mark Flores, filed a complaint against Spectra-Physics and us in the Superior Court for Santa Clara County, California.  In the action, the plaintiffs allege that between 1975 and 1985 they and their unborn children were exposed to toxic chemicals during their work at Spectra-Physics, and that Spectra-Physics failed to warn them about dangers associated with the chemicals and failed to implement adequate safeguards to protect them from the chemicals, resulting in injuries to them and their unborn children.

In November 2012, we reached an agreement with Linda Pope and Tia Pope Hudson to settle all claims related to their portion of the suit. The amount of such settlement was immaterial.  In December 2012, the court denied our motions for summary judgment of Yvette and Mark Flores’ claims based on the statute of limitations applicable to such claims.  We subsequently filed motions for summary judgment or summary adjudication of the plaintiffs’ remaining claims based on additional grounds, and the plaintiffs have filed a motion for summary adjudication of certain of our affirmative defenses to the plaintiffs’ claims, which motions are scheduled to be heard in June 2013.  Trial is currently set to commence in July 2013.

Yvette and Mark Flores are seeking an aggregate of $20.5 million in general and special damages, as well as punitive damages for each of them to be established by the trier of fact.  We dispute that the plaintiffs are entitled to any damages, and it continues to believe that the plaintiffs’ claims are without merit and intends to continue to vigorously defend its position.  Further, discovery in the action is ongoing, and the motions for summary judgment or adjudication filed by us and the plaintiffs are pending.  Therefore, at this stage of the litigation, we are unable to provide an estimate of the potential exposure or the likelihood of a favorable or unfavorable outcome in this action.

ITEM 6.EXHIBITS

Exhibit Number	Description of Exhibit
31.1	Certification pursuant to Rule 13a-14(a) or Rule 15d-14(a) of the Securities Exchange Act of 1934 (the “Exchange Act”).
31.2	Certification pursuant to Rule 13a-14(a) or Rule 15d-14(a) of the Exchange Act.
32.1	Certification 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 pursuant to Rule 13a-14(b) or Rule 15d-14(b) of the Exchange Act and 18 U.S.C. Section 1350.
101.INS	XBRL Instance Document.
101.SCH	XBRL Taxonomy Extension Schema Document.
101.CAL	XBRL Taxonomy Extension Calculation Linkbase Document.
101.DEF	XBRL Taxonomy Extension Definition Linkbase Document.
101.LAB	XBRL Taxonomy Extension Label Linkbase Document.
101.PRE	XBRL Taxonomy Extension Presentation Linkbase Document.

27

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.

Dated: May 9, 2013	NEWPORT CORPORATION
	By:	/s/ Charles F. Cargile
		Charles F. Cargile,
		Senior Vice President and Chief Financial Officer (Principal Financial Officer and Duly Authorized Officer)

28

EXHIBIT INDEX

Exhibit Number	Description of Exhibit
31.1	Certification pursuant to Rule 13a-14(a) or Rule 15d-14(a) of the Securities Exchange Act of 1934 (the “Exchange Act”).
31.2	Certification pursuant to Rule 13a-14(a) or Rule 15d-14(a) of the Exchange Act.
32.1	Certification 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 pursuant to Rule 13a-14(b) or Rule 15d-14(b) of the Exchange Act and 18 U.S.C. Section 1350.
101.INS	XBRL Instance Document.
101.SCH	XBRL Taxonomy Extension Schema Document.
101.CAL	XBRL Taxonomy Extension Calculation Linkbase Document.
101.DEF	XBRL Taxonomy Extension Definition Linkbase Document.
101.LAB	XBRL Taxonomy Extension Label Linkbase Document.
101.PRE	XBRL Taxonomy Extension Presentation Linkbase Document.

29

EX-31.1

Exhibit 31.1

CERTIFICATION PURSUANT TO

RULE 13a-14(a) OR RULE 15d-14(a) OF THE

SECURITIES EXCHANGE ACT OF 1934

I, Robert J. Phillippy, certify that:

1.    I have reviewed this Quarterly Report on Form 10-Q of Newport Corporation;

2.    Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.    Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.    The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a)   Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b)   Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c)   Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d)   Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.    The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a)   All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b)   Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date:  May 9, 2013

/s/ Robert J. Phillippy

Robert J. Phillippy

President and Chief Executive Officer

(Principal Executive Officer)

EX-31.2

Exhibit 31.2

CERTIFICATION PURSUANT TO

RULE 13a-14(a) OR RULE 15d-14(a) OF THE

SECURITIES EXCHANGE ACT OF 1934

I, Charles F. Cargile, certify that:

1.    I have reviewed this Quarterly Report on Form 10-Q of Newport Corporation;

2.    Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.    Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.    The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a)   Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b)   Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c)   Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d)   Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.    The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a)   All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b)   Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date:  May 9, 2013

/s/ Charles F. Cargile

Charles F. Cargile

Senior Vice President and Chief Financial Officer

(Principal Financial Officer)

EX-32.1

Exhibit 32.1

CERTIFICATION PURSUANT TO

RULE 13a-14(b) OR RULE 15d-14(b) OF THE

SECURITIES EXCHANGE ACT OF 1934

AND 18 U.S.C. SECTION 1350

I, Robert J. Phillippy, certify, pursuant to Rule 13a-14(b) or Rule 15d-14(b) of the Securities Exchange Act of 1934 and 18 U.S.C. Section 1350, that (i) the Quarterly Report on Form 10-Q of Newport Corporation for the quarterly period ended March 30, 2013 fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, and (ii) the information contained in such Quarterly Report on Form 10-Q fairly presents in all material respects the financial condition and results of operations of Newport Corporation.

Date: May 9, 2013	/s/ Robert J. Phillippy
	Robert J. Phillippy
	President and Chief Executive Officer
	(Principal Executive Officer)

A signed original of this written statement required by 18 U.S.C. Section 1350 has been provided to Newport Corporation and will be retained by Newport Corporation and furnished to the Securities and Exchange Commission or its staff upon request.  This certification will not be deemed filed by Newport Corporation for purposes of Section 18 of the Securities Exchange Act of 1934, or otherwise subject to the liability of that Section.  This certification will not be deemed to be incorporated by reference into any filing under the Securities Act of 1933 or the Securities Exchange Act of 1934, except to the extent that Newport Corporation specifically incorporates it by reference.

EX-32.2

Exhibit 32.2

CERTIFICATION PURSUANT TO

RULE 13a-14(b) OR RULE 15d-14(b) OF THE

SECURITIES EXCHANGE ACT OF 1934

AND 18 U.S.C. SECTION 1350

I, Charles F. Cargile, certify, pursuant to Rule 13a-14(b) or Rule 15d-14(b) of the Securities Exchange Act of 1934 and 18 U.S.C. Section 1350, that (i) the Quarterly Report on Form 10-Q of Newport Corporation for the quarterly period ended March 30, 2013 fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, and (ii) the information contained in such Quarterly Report on Form 10-Q fairly presents in all material respects the financial condition and results of operations of Newport Corporation.

Date: May 9, 2013	/s/ Charles F. Cargile
	Charles F. Cargile
	Senior Vice President and Chief Financial Officer
	(Principal Financial Officer)

A signed original of this written statement required by 18 U.S.C. Section 1350 has been provided to Newport Corporation and will be retained by Newport Corporation and furnished to the Securities and Exchange Commission or its staff upon request.  This certification will not be deemed filed by Newport Corporation for purposes of Section 18 of the Securities Exchange Act of 1934, or otherwise subject to the liability of that Section.  This certification will not be deemed to be incorporated by reference into any filing under the Securities Act of 1933 or the Securities Exchange Act of 1934, except to the extent that Newport Corporation specifically incorporates it by reference.

XML

INTANGIBLE ASSETS (Details) (USD $) In Thousands, unless otherwise specified					3 Months Ended				3 Months Ended					3 Months Ended
	Mar. 30, 2013	Dec. 29, 2012	Mar. 30, 2013 Developed technology	Dec. 29, 2012 Developed technology	Mar. 30, 2013 Developed technology Minimum	Mar. 30, 2013 Developed technology Maximum	Mar. 30, 2013 Customer relationships	Dec. 29, 2012 Customer relationships	Mar. 30, 2013 Customer relationships Maximum	Mar. 30, 2013 In-process research and development	Dec. 29, 2012 In-process research and development	Mar. 30, 2013 Other intangible assets	Dec. 29, 2012 Other intangible assets	Mar. 30, 2013 Other intangible assets except product trademarks and trade names Minimum	Mar. 30, 2013 Other intangible assets except product trademarks and trade names Maximum	Mar. 30, 2013 Trademarks and trade names associated with products Minimum	Mar. 30, 2013 Trademarks and trade names associated with products Maximum
Intangible assets subject to amortization:
Intangible assets	$ 56,346	$ 59,141	$ 28,797	$ 29,742			$ 18,487	$ 20,100		$ 7,611	$ 7,746	$ 1,451	$ 1,553
Accumulated amortization			11,638	10,885			27,827	26,255		280	158	5,916	5,915
Intangible asset amortized period					10 years	20 years			10 years					3 months	10 years	10 years	20 years
Intangible assets not subject to amortization:
Trademarks and trade names	18,305	18,305
Intangible assets, net	$ 74,651	$ 77,446

XML

INCOME TAXES (Details) (USD $) In Millions, unless otherwise specified	3 Months Ended
	Mar. 30, 2013
Unrecognized tax benefits
Reversal of unrecognized tax benefits	$ 0.7
Gross unrecognized tax benefits	14.5
Net unrecognized tax benefits	11.7
Domestic and foreign subsidiaries
Valuation allowance
Valuation allowance	$ 3.3

XML

NET INCOME PER SHARE (Details) (USD $) In Thousands, except Per Share data, unless otherwise specified	3 Months Ended
	Mar. 30, 2013	Mar. 31, 2012
NET INCOME PER SHARE
Net income attributable to Newport Corporation	$ 2,746	$ 6,592
Shares:
Weighted average shares outstanding - basic	38,601	37,731
Dilutive potential common shares, using treasury stock method	659	1,200
Weighted average shares outstanding - diluted	39,260	38,931
Net income per share attributable to Newport Corporation:
Basic (in dollars per share)	$ 0.07	$ 0.17
Diluted (in dollars per share)	$ 0.07	$ 0.17

XML

MARKETABLE SECURITIES (Details 2) (USD $) In Thousands, unless otherwise specified	Mar. 30, 2013	Dec. 29, 2012
Contractual maturities of certificates of deposit
Total contractual maturities	$ 9,205	$ 8,498
Certificates of deposit
Contractual maturities of certificates of deposit
0 - 1 Year	4,282
Total contractual maturities	$ 4,282	$ 4,254

XML

INTEREST AND OTHER EXPENSE, NET (Tables)

3 Months Ended

Mar. 30, 2013

INTEREST AND OTHER EXPENSE, NET

Interest and other expense, net

	Three Months Ended
	March 30,		March 31,
(In thousands)	2013		2012
Interest expense	$	(1,789)	$	(2,201)
Interest and dividend income	49		61
Derivative gain	202		671
Bank and portfolio asset management fees	(192)		(164)
Other expense, net	(407)		(554)
	$	(2,137)	$	(2,187)

XML

DEFINED BENEFIT PENSION PLANS (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended
	Mar. 30, 2013	Mar. 31, 2012
Net periodic benefit costs
Service cost	$ 721	$ 589
Interest cost on benefit obligations	165	185
Expected return on plan assets	(52)	(57)
Amortization of net loss	63	27
Total	$ 897	$ 744

XML

STOCK-BASED COMPENSATION (Details) (USD $)	3 Months Ended
	Mar. 30, 2013	Mar. 31, 2012
Total stock-based compensation expense included in the Company's consolidated statements of operations
Stock-based compensation expense	$ 2,269,000	$ 2,214,000
Unrecognized total compensation cost
Unrecognized stock-based compensation expense related to non-vested stock-based awards	7,600,000
Estimated forfeitures	1,500,000
Weighted-average period over which unrecognized stock-based compensation cost is expected to be recognized	1 year 4 months 24 days
Cost of sales
Total stock-based compensation expense included in the Company's consolidated statements of operations
Stock-based compensation expense	209,000	117,000
Selling, general and administrative expenses
Total stock-based compensation expense included in the Company's consolidated statements of operations
Stock-based compensation expense	1,820,000	1,839,000
Research and development expense
Total stock-based compensation expense included in the Company's consolidated statements of operations
Stock-based compensation expense	$ 240,000	$ 258,000

XML

SUPPLEMENTAL BALANCE SHEET INFORMATION (Details) (USD $) In Thousands, unless otherwise specified	Mar. 30, 2013	Dec. 29, 2012
Short-term Inventories
Raw materials and purchased parts	$ 64,261	$ 65,766
Work in process	17,537	18,075
Finished goods	26,464	24,887
Short-term inventories	108,262	108,728
Long-term Inventories
Raw materials and purchased parts	3,300	4,149
Finished goods	4,540	4,926
Long-term inventories	$ 7,840	$ 9,075

XML

BUSINESS SEGMENT INFORMATION (Details 2) (USD $) In Thousands, unless otherwise specified	3 Months Ended
	Mar. 30, 2013	Mar. 31, 2012
Reconciliation of segment income to consolidated income before income taxes
Segment income	$ 16,399	$ 25,152
Unallocated operating expenses	(11,976)	(14,942)
Interest and other expense, net	(2,137)	(2,187)
Income before income taxes	$ 2,286	$ 8,023

XML

NET INCOME PER SHARE (Details 2) In Millions, unless otherwise specified	3 Months Ended
	Mar. 30, 2013
Stock options and stock-settled stock appreciation rights
Stock-Based Benefit Plans
Antidilutive securities excluded from computation of earnings per share, amount	0.9
Restricted stock units
Stock-Based Benefit Plans
Antidilutive securities excluded from computation of earnings per share, amount	0.4

XML

FAIR VALUE MEASUREMENTS

3 Months Ended

Mar. 30, 2013

FAIR VALUE MEASUREMENTS

FAIR VALUE MEASUREMENTS

NOTE 4 FAIR VALUE MEASUREMENTS

ASC 820-10, Fair Value Measurements and Disclosures, requires that for any assets and liabilities stated at fair value on a recurring basis in the Company’s financial statements, the fair value of such assets and liabilities be measured based on the price that would be received from selling an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.  Level 1 asset and liability values are derived from quoted prices in active markets for identical assets and liabilities and Level 2 asset and liability values are derived from quoted prices in inactive markets or based on other observable inputs.

The Company’s assets and liabilities measured at fair value on a recurring basis are categorized in the table below based upon their level within the fair value hierarchy as of March 30, 2013.

(In thousands)			Fair Value Measurements at Reporting Date Using
Description	March 30, 2013		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Assets:
Restricted Cash	$	3,122	$	3,122	$	-	$	-
Marketable securities:
Money market funds	4,923		4,923		-		-
Certificates of deposit	4,282		-		4,282		-
	9,205		4,923		4,282		-
Derivative assets:
Forward contracts	8		-		8		-
Option contracts	701		-		701		-
	709		-		709		-
Funds in investments and other assets:
Israeli pension funds	10,344		-		10,344		-
Pension assets not owned by plan	6,541		-		6,541		-
	16,885		-		16,885		-
	$	29,921	$	8,045	$	21,876	$	-
Liabilities:
Derivative liabilities:
Option contracts	109		-		109		-

The Company’s assets and liabilities measured at fair value on a recurring basis are categorized in the table below based upon their level within the fair value hierarchy as of December 29, 2012.

(In thousands)			Fair Value Measurements at Reporting Date Using
Description	December 29, 2012		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Assets:
Restricted Cash	$	3,107	$	3,107	$	-	$	-
Marketable securities:
Money market funds	4,244		4,244		-		-
Certificates of deposit	4,254		-		4,254		-
	8,498		4,244		4,254		-
Derivative assets:
Option contracts	755		-		755		-
Funds in investments and other assets:
Israeli pension funds	10,690		-		10,690
Pension assets not owned by plan	6,615		-		6,615		-
	17,305		-		17,305		-
	$	29,665	$	7,351	$	22,314	$	-
Liabilities:
Derivative liabilities:
Option contracts	202		-		202		-

The Company’s other financial instruments include short-term borrowings and long-term debt.  The fair value of these financial instruments was estimated based on current rates for similar issues or on the current rates offered to the Company for debt of similar remaining maturities.  The estimated fair values of these financial instruments were as follows:

	March 30, 2013				December 29, 2012
(In thousands)	Carrying				Carrying
	Amount		Fair Value		Amount		Fair Value
Short-term borrowings	$	35,468	$	34,235	$	32,985	$	32,020
Long-term debt	$	136,170	$	130,271	$	150,758	$	145,404

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STOCK-BASED COMPENSATION (Details 2) (USD $) In Millions, except Per Share data, unless otherwise specified	3 Months Ended
	Mar. 30, 2013
Stock Options
Stock-based compensation
Stock options exercisable and outstanding (in shares)	0.7
Stock options exercisable and outstanding, weighted average exercise price (in dollars per share)	$ 14.58
Stock options exercisable and outstanding, intrinsic value	$ 1.5
Stock options exercisable and outstanding, remaining contractual term	1 year 4 months 24 days
Stock-settled stock appreciation rights
Stock-based compensation
Stock appreciation rights outstanding (in shares)	1.4
Stock appreciation rights outstanding, weighted average base value (in dollars per share)	$ 11.47
Stock appreciation rights outstanding, intrinsic value	8.0
Stock appreciation rights outstanding, remaining contractual term	4 years 4 months 24 days
Stock appreciation rights exercisable (in shares)	0.8
Stock appreciation rights exercisable, weighted-average exercise price (in dollars per share)	$ 7.23
Stock appreciation rights exercisable, intrinsic value	$ 7.5
Stock appreciation rights exercisable, remaining contractual term	3 years 4 months 24 days

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DEFINED BENEFIT PENSION PLANS (Tables)

3 Months Ended

Mar. 30, 2013

DEFINED BENEFIT PENSION PLANS

Schedule of net periodic benefit costs

	Three Months Ended
	March 30,		March 31,
(In thousands)	2013		2012
Service cost	$	721	$	589
Interest cost on benefit obligations	165		185
Expected return on plan assets	(52)		(57)
Amortization of net loss	63		27
	$	897	$	744

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NET INCOME PER SHARE (Tables)

3 Months Ended

Mar. 30, 2013

NET INCOME PER SHARE

Schedule of basic and diluted net income per share

	Three Months Ended
	March 30,		March 31,
(In thousands, except per share data)	2013		2012
Net income attributable to Newport Corporation	$	2,746	$	6,592
Shares:
Weighted average shares outstanding - basic	38,601		37,731
Dilutive potential common shares, using treasury stock method	659		1,200
Weighted average shares outstanding - diluted	39,260		38,931
Net income per share attributable to Newport Corporation:
Basic	$	0.07	$	0.17
Diluted	$	0.07	$	0.17

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DEBT AND LINES OF CREDIT (Details) (USD $) In Thousands, unless otherwise specified	Mar. 30, 2013	Dec. 29, 2012
Debts and Lines of credit
Total short-term borrowings	$ 5,858	$ 5,646
Japanese revolving lines of credit
Debts and Lines of credit
Total short-term borrowings	5,307	5,231
Japanese receivables financing facilities
Debts and Lines of credit
Total short-term borrowings	$ 551	$ 415

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BUSINESS SEGMENT INFORMATION (Tables)

3 Months Ended

Mar. 30, 2013

BUSINESS SEGMENT INFORMATION

Schedule of selected segment financial information

(In thousands)	Photonics		Lasers		Optics		Total
Three months ended March 30, 2013:
Sales to external customers	$	58,367	$	38,885	$	35,355	$	132,607
Segment income	$	12,566	$	3,133	$	700	$	16,399
Three months ended March 31, 2012:
Sales to external customers	$	60,132	$	49,227	$	47,808	$	157,167
Segment income	$	12,280	$	6,683	$	6,189	$	25,152

Schedule of reconciliation of segment income to consolidated income before income taxes

	Three Months Ended
	March 30,		March 31,
(In thousands)	2013		2012
Segment income	$	16,399	$	25,152
Unallocated operating expenses	(11,976)		(14,942)
Interest and other expense, net	(2,137)		(2,187)
	$	2,286	$	8,023

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BASIS OF PRESENTATION (Details) (USD $) In Millions, unless otherwise specified	3 Months Ended
	Mar. 31, 2012
BASIS OF PRESENTATION
Debt repayment and borrowing reclassifications	$ 1.0

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MARKETABLE SECURITIES

3 Months Ended

Mar. 30, 2013

MARKETABLE SECURITIES

MARKETABLE SECURITIES

NOTE 3 MARKETABLE SECURITIES

All marketable securities of the Company were classified as available for sale and were recorded at market value using the specific identification method, and unrealized gains and losses are reflected in accumulated other comprehensive loss in the accompanying consolidated balance sheets.  The aggregate fair value of available for sale securities and the aggregate amount of unrealized gains and losses in available for sale securities at March 30, 2013 were as follows:

(In thousands)	Aggregate		Aggregate Amount of Unrealized
	Fair Value		Gains		Losses
Money market funds	$	4,923	$	83	$	-
Certificates of deposit	4,282		-		-
	$	9,205	$	83	$	-

The aggregate fair value of available for sale securities and the aggregate amount of unrealized gains and losses in available for sale securities at December 29, 2012 were as follows:

(In thousands)	Aggregate		Aggregate Amount of Unrealized
	Fair Value		Gains		Losses
Money market funds	$	4,244	$	86	$	-
Certificates of deposit	4,254		-		-
	$	8,498	$	86	$	-

The contractual maturities of certificates of deposit were as follows:

(In thousands)	March 30,
	2013
0 – 1 Year	$	4,282
1 – 2 Years	-
2 – 3 Years	-
3 – 5 Years	-
5 – 10 Years	-
More than 10 years	-
	$	4,282

There were no realized gains or losses on the sale of available for sale securities for the three months ended March 30, 2013 or the three months ended March 31, 2012.

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MARKETABLE SECURITIES (Details) (USD $) In Thousands, unless otherwise specified	Mar. 30, 2013	Dec. 29, 2012
Marketable Securities
Aggregate Fair Value	$ 9,205	$ 8,498
Aggregate amount of unrealized gains and losses
Aggregate amount of unrealized gains	83	86
Money market funds
Marketable Securities
Aggregate Fair Value	4,923	4,244
Aggregate amount of unrealized gains and losses
Aggregate amount of unrealized gains	83	86
Certificates of deposit
Marketable Securities
Aggregate Fair Value	$ 4,282	$ 4,254

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INTANGIBLE ASSETS (Details 2) (USD $)	3 Months Ended
	Mar. 30, 2013	Mar. 31, 2012
Intangible assets, excluding goodwill
Amortization expense related to intangible assets	$ 2,600,000	$ 5,200,000
Estimated aggregate amortization expense
2013 (remaining)	7,751,000
2014	8,344,000
2015	6,712,000
2016	6,337,000
2017	5,371,000
Thereafter	19,863,000
Total estimated future amortization expense	54,378,000
Future IPR&D expense excluded from estimated future expense	$ 2,000,000

XML

LEGAL PROCEEDINGS (Details) (Former employees of Spectra-Physics versus Spectra-Physics and Newport, USD $) In Millions, unless otherwise specified	1 Months Ended	3 Months Ended
	Nov. 30, 2010 item	Mar. 30, 2013 General and special damages sought by plaintiffs in legal proceeding
Loss Contingencies
Number of former employees who filed a suit	2
Aggregate damages sought by plaintiffs in legal proceeding		$ 20.5

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Consolidated Statements of Income and Comprehensive Income (USD $) In Thousands, except Per Share data, unless otherwise specified	3 Months Ended
	Mar. 30, 2013	Mar. 31, 2012
Consolidated Statements of Income and Comprehensive Income
Net sales	$ 132,607	$ 157,167
Cost of sales	77,475	89,098
Gross profit	55,132	68,069
Selling, general and administrative expenses	37,608	44,060
Research and development expense	13,101	13,799
Operating income	4,423	10,210
Interest and other expense, net	(2,137)	(2,187)
Income before income taxes	2,286	8,023
Income tax provision (benefit)	(448)	1,435
Net income	2,734	6,588
Net loss attributable to non-controlling interests	(12)	(4)
Net income attributable to Newport Corporation	2,746	6,592
Net income	2,734	6,588
Other comprehensive income:
Foreign currency translation gains (losses)	(2,452)	1,587
Unrecognized net pension gains (losses)	190	(16)
Unrealized gains (losses) on marketable securities	(98)	33
Comprehensive income	374	8,192
Comprehensive loss attributable to non-controlling interests	(61)	(46)
Comprehensive income attributable to Newport Corporation	435	8,238
Comprehensive income	$ 374	$ 8,192
Net income per share attributable to Newport Corporation:
Basic (in dollars per share)	$ 0.07	$ 0.17
Diluted (in dollars per share)	$ 0.07	$ 0.17
Shares used in per share calculations:
Basic (in shares)	38,601	37,731
Diluted (in shares)	39,260	38,931

XML

DEBT AND LINES OF CREDIT (Details 2) (USD $) In Thousands, unless otherwise specified	Mar. 30, 2013	Dec. 29, 2012
Debt and Lines of credit
Total long-term debt	$ 165,780	$ 178,097
Current portion of long-term debt	29,610	27,339
Total long-term debt, less current portion	136,170	150,758
U.S. term loan, maturing October 2016
Debt and Lines of credit
Total long-term debt	159,563	171,125
Israeli loans, maturing through October 2015
Debt and Lines of credit
Total long-term debt	3,230	3,591
Japanese private placement bonds due June 2014
Debt and Lines of credit
Total long-term debt	2,122	2,325
Japanese loans due through November 2016
Debt and Lines of credit
Total long-term debt	$ 865	$ 1,056

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BASIS OF PRESENTATION

3 Months Ended

Mar. 30, 2013

BASIS OF PRESENTATION

BASIS OF PRESENTATION

NOTE 1 BASIS OF PRESENTATION

The accompanying unaudited consolidated financial statements include the accounts of Newport Corporation and its wholly owned subsidiaries (collectively referred to as the Company) and have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial information and with the instructions of Form 10-Q and Rule 10-01 of Regulation S-X.  In the opinion of management, all adjustments (consisting of normal and recurring accruals) considered necessary for a fair presentation have been included.  All intercompany transactions and balances have been eliminated in consolidation.

The accompanying unaudited consolidated financial statements do not include certain footnotes and financial presentations normally required under generally accepted accounting principles (GAAP) and, therefore, should be read in conjunction with the consolidated financial statements and related notes contained in the Company’s Annual Report on Form 10-K for the year ended December 29, 2012.  The results for the interim periods are not necessarily indicative of the results the Company will have for the full year ending December 28, 2013.  The December 29, 2012 balances reported herein are derived from the audited consolidated financial statements included in the Company’s Annual Report on Form 10-K for the year ended December 29, 2012.

Subsequent to the filing of the Company’s Quarterly Report on Form 10-Q for the three months ended March 31, 2012, management determined that certain debt repayments and borrowings were both overstated by $1.0 million in the Company’s consolidated statement of cash flows for the three months ended March 31, 2012.  In the consolidated statement of cash flows included in the accompanying unaudited consolidated financial statements, the Company corrected the presentation of repayment of long-term debt and obligations under capital leases and proceeds from short-term borrowings to accurately report debt repayments and borrowings.  The Company believes that the effect of this adjustment is not material to the consolidated statement of cash flows for the three months ended March 31, 2012.

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FAIR VALUE MEASUREMENTS (Details) (USD $) In Thousands, unless otherwise specified	Mar. 30, 2013	Dec. 29, 2012
Assets:
Restricted Cash	$ 3,122	$ 3,107
Marketable securities:	9,205	8,498
Derivative Assets	709
Funds in investments and other assets	16,885	17,305
Total assets	29,921	29,665
Money market funds
Assets:
Marketable securities:	4,923	4,244
Certificates of deposit
Assets:
Marketable securities:	4,282	4,254
Forward contracts
Assets:
Derivative Assets	8
Option contracts
Assets:
Derivative Assets	701	755
Liabilities:
Derivative liabilities	109	202
Israeli pension funds
Assets:
Funds in investments and other assets	10,344	10,690
Pension assets not owned by plan
Assets:
Funds in investments and other assets	6,541	6,615
Quoted Prices in Active Markets for Identical Assets (Level 1) | Fair Value Measurements, Recurring basis
Assets:
Restricted Cash	3,122	3,107
Marketable securities:	4,923	4,244
Total assets	8,045	7,351
Quoted Prices in Active Markets for Identical Assets (Level 1) | Money market funds | Fair Value Measurements, Recurring basis
Assets:
Marketable securities:	4,923	4,244
Significant Other Observable Inputs (Level 2)
Assets:
Funds in investments and other assets	16,885	17,305
Significant Other Observable Inputs (Level 2) | Fair Value Measurements, Recurring basis
Assets:
Marketable securities:	4,282	4,254
Derivative Assets	709
Total assets	21,876	22,314
Significant Other Observable Inputs (Level 2) | Certificates of deposit | Fair Value Measurements, Recurring basis
Assets:
Marketable securities:	4,282	4,254
Significant Other Observable Inputs (Level 2) | Forward contracts | Fair Value Measurements, Recurring basis
Assets:
Derivative Assets	8
Significant Other Observable Inputs (Level 2) | Option contracts | Fair Value Measurements, Recurring basis
Assets:
Derivative Assets	701	755
Liabilities:
Derivative liabilities	109	202
Significant Other Observable Inputs (Level 2) | Israeli pension funds
Assets:
Funds in investments and other assets	10,344	10,690
Significant Other Observable Inputs (Level 2) | Pension assets not owned by plan
Assets:
Funds in investments and other assets	$ 6,541	$ 6,615

XML

FAIR VALUE MEASUREMENTS (Tables)

3 Months Ended

Mar. 30, 2013

FAIR VALUE MEASUREMENTS

Summary of the Company's assets and liabilities measured at fair value on a recurring basis

(In thousands)			Fair Value Measurements at Reporting Date Using
Description	March 30, 2013		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Assets:
Restricted Cash	$	3,122	$	3,122	$	-	$	-
Marketable securities:
Money market funds	4,923		4,923		-		-
Certificates of deposit	4,282		-		4,282		-
	9,205		4,923		4,282		-
Derivative assets:
Forward contracts	8		-		8		-
Option contracts	701		-		701		-
	709		-		709		-
Funds in investments and other assets:
Israeli pension funds	10,344		-		10,344		-
Pension assets not owned by plan	6,541		-		6,541		-
	16,885		-		16,885		-
	$	29,921	$	8,045	$	21,876	$	-
Liabilities:
Derivative liabilities:
Option contracts	109		-		109		-

(In thousands)			Fair Value Measurements at Reporting Date Using
Description	December 29, 2012		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Assets:
Restricted Cash	$	3,107	$	3,107	$	-	$	-
Marketable securities:
Money market funds	4,244		4,244		-		-
Certificates of deposit	4,254		-		4,254		-
	8,498		4,244		4,254		-
Derivative assets:
Option contracts	755		-		755		-
Funds in investments and other assets:
Israeli pension funds	10,690		-		10,690
Pension assets not owned by plan	6,615		-		6,615		-
	17,305		-		17,305		-
	$	29,665	$	7,351	$	22,314	$	-
Liabilities:
Derivative liabilities:
Option contracts	202		-		202		-

Summary of carrying amount and estimated fair values of financial instruments

	March 30, 2013				December 29, 2012
(In thousands)	Carrying				Carrying
	Amount		Fair Value		Amount		Fair Value
Short-term borrowings	$	35,468	$	34,235	$	32,985	$	32,020
Long-term debt	$	136,170	$	130,271	$	150,758	$	145,404

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FAIR VALUE MEASUREMENTS (Details 2) (USD $) In Thousands, unless otherwise specified	Mar. 30, 2013	Dec. 29, 2012
Carrying Amount
Carrying amount and estimated fair values of financial instruments
Short-term borrowings	$ 35,468	$ 32,985
Long-term debt	136,170	150,758
Fair Value
Carrying amount and estimated fair values of financial instruments
Short-term borrowings	34,235	32,020
Long-term debt	$ 130,271	$ 145,404

XML

INTANGIBLE ASSETS (Tables)

3 Months Ended

Mar. 30, 2013

INTANGIBLE ASSETS

Schedule of intangible assets, excluding goodwill

(In thousands)	March 30,		December 29,
	2013		2012
Intangible assets subject to amortization:
Developed technology, net of accumulated amortization of $11,638 and $10,885 as of March 30, 2013 and December 29, 2012, respectively	$	28,797	$	29,742
Customer relationships, net of accumulated amortization of $27,827 and $26,255 as of March 30, 2013 and December 29, 2012, respectively	18,487		20,100
In-process research and development, net of accumulated amortization of $280 and $158 as of March 30, 2013 and December 29, 2012, respectively	7,611		7,746
Other, net of accumulated amortization of $5,916 and $5,915 as of March 30, 2013 and December 29, 2012, respectively	1,451		1,553
	56,346		59,141
Intangible assets not subject to amortization:
Trademarks and trade names	18,305		18,305
Intangible assets, net	$	74,651	$	77,446

Schedule of estimated aggregate amortization expense for future fiscal years

(In thousands)	Estimated Aggregate Amortization Expense
2013 (remaining)	$	7,751
2014	8,344
2015	6,712
2016	6,337
2017	5,371
Thereafter	19,863
	$	54,378

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RECENT ACCOUNTING PRONOUNCEMENTS

3 Months Ended

Mar. 30, 2013

RECENT ACCOUNTING PRONOUNCEMENTS

RECENT ACCOUNTING PRONOUNCEMENTS

NOTE 2 RECENT ACCOUNTING PRONOUNCEMENTS

In February 2013, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2013-02, Comprehensive Income: Reporting of Amounts Reclassified Out of Accumulated Other Comprehensive Income, which requires companies to disclose significant amounts that have been reclassified out of accumulated other comprehensive income.  Amounts that are required to be reclassified in their entirety to net income must be disclosed either on the face of the income statement or in the notes to the financial statements.  Amounts that are not required to be reclassified in their entirety to net income in the same reporting period must be disclosed by a cross reference to other disclosures that provide additional information regarding such amounts.  ASU No. 2013-02 is effective for fiscal years and interim periods beginning after December 15, 2012.  The adoption of ASU No. 2013-02 has not had a material impact on the Company’s financial position or results of operations.

In March 2013, the FASB issued ASU No. 2013-05, Foreign Currency Matters: Parent’s Accounting for the Cumulative Translation Adjustment upon Derecognition of Certain Subsidiaries or Groups of Assets within a Foreign Entity or of an Investment in a Foreign Entity, which clarifies the guidance in Topics 810 and 830.  Topic 810 requires companies to deconsolidate a subsidiary or derecognize a group of assets if the parent ceases to hold a controlling financial interest in that subsidiary or group of assets.  Upon the loss of a controlling financial interest, the parent would recognize the cumulative translation adjustment in net income.  The guidance in Topic 810 does not distinguish between a sale or transfer of an investment in a foreign entity and a sale or transfer of a subsidiary or group of assets within a foreign entity.  Topic 830 requires the release of the cumulative translation adjustment into net income if a sale or transfer represented a complete or substantially complete liquidation of an investment in a foreign entity.  ASU No. 2013-05 clarifies that companies that cease to have a controlling financial interest in a subsidiary or group of assets within a foreign subsidiary should release the cumulative translation adjustment into net income if the sale or transfer results in a complete or substantially complete liquidation of the foreign entity in which the subsidiary or group of assets had resided.  ASU No. 2013-05 will be effective for fiscal years beginning after December 15, 2013, and early adoption is permitted but has not been elected by the Company.  The adoption of ASU No. 2013-05 will not have a material impact on the Company’s financial position or results of operations.

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Consolidated Balance Sheets (USD $) In Thousands, unless otherwise specified	Mar. 30, 2013	Dec. 29, 2012
Current assets:
Cash and cash equivalents	$ 83,846	$ 88,767
Restricted cash	3,122	3,107
Marketable securities	9,205	8,498
Accounts receivable, net of allowance for doubtful accounts of $1,474 and $1,548 as of March 30, 2013 and December 29, 2012, respectively	89,722	89,445
Notes receivable	1,514	1,536
Inventories	108,262	108,728
Deferred income taxes	19,817	19,872
Prepaid expenses and other current assets	18,111	17,727
Total current assets	333,599	337,680
Property and equipment, net	81,962	82,843
Goodwill	79,388	79,586
Deferred income taxes	5,456	5,646
Intangible assets, net	74,651	77,446
Investments and other assets	35,322	37,760
Total assets	610,378	620,961
Current liabilities:
Short-term borrowings, net	35,468	32,985
Accounts payable	30,372	31,061
Accrued payroll and related expenses	26,466	29,096
Accrued expenses and other current liabilities	34,945	34,696
Total current liabilities	127,251	127,838
Long-term debt, net	136,170	150,758
Accrued pension liabilities	26,561	27,764
Deferred income taxes and other liabilities	22,925	23,783
Commitments and contingencies
Stockholders' equity:
Common stock, par value $0.1167 per share, 200,000,000 shares authorized; 38,810,704 and 38,402,291 shares issued and outstanding as of March 30, 2013 and December 29, 2012, respectively	4,529	4,481
Capital in excess of par value	447,305	441,074
Accumulated other comprehensive loss	(9,260)	(6,949)
Accumulated deficit	(146,428)	(149,174)
Total stockholders' equity of Newport Corporation	296,146	289,432
Non-controlling interests	1,325	1,386
Total stockholders' equity	297,471	290,818
Total Liabilities and Stockholders' equity	$ 610,378	$ 620,961

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STOCKHOLDERS' EQUITY TRANSACTIONS

3 Months Ended

Mar. 30, 2013

STOCKHOLDERS' EQUITY TRANSACTIONS

STOCKHOLDERS' EQUITY TRANSACTIONS

NOTE 12 STOCKHOLDERS’ EQUITY TRANSACTIONS

In May 2008, the Board of Directors of the Company approved a share repurchase program, authorizing the purchase of up to 4.0 million shares of the Company’s common stock.  No purchases were made under this program during the three months ended March 30, 2013.  As of March 30, 2013, 3.9 million shares remained available for purchase under the program.  However, the terms of the Company’s senior secured credit facility entered into in October 2011 restrict the Company’s ability to purchase additional shares under this program during the term of such facility.

XML

Document and Entity Information	3 Months Ended
	Mar. 30, 2013	Apr. 26, 2013
Document and Entity Information
Entity Registrant Name	NEWPORT CORP
Entity Central Index Key	0000225263
Document Type	10-Q
Document Period End Date	Mar. 30, 2013
Amendment Flag	false
Current Fiscal Year End Date	--12-28
Entity Current Reporting Status	Yes
Entity Filer Category	Accelerated Filer
Entity Common Stock, Shares Outstanding		39,080,464
Document Fiscal Year Focus	2013
Document Fiscal Period Focus	Q1

XML

DEFINED BENEFIT PENSION PLANS

3 Months Ended

Mar. 30, 2013

DEFINED BENEFIT PENSION PLANS

DEFINED BENEFIT PENSION PLANS

NOTE 13 DEFINED BENEFIT PENSION PLANS

The Company has defined benefit pension plans covering substantially all full-time employees in France, Germany, Israel and Japan. In addition, the Company has certain pension liabilities relating to former employees of the Company in the United Kingdom.  The German plan is unfunded, as permitted under the plan and applicable laws.  For financial reporting purposes, the calculation of net periodic pension costs is based upon a number of actuarial assumptions, including a discount rate for plan obligations, an assumed rate of return on pension plan assets and an assumed rate of compensation increase for employees covered by the plan.  All of these assumptions are based upon management’s judgment, considering all known trends and uncertainties.  Actual results that differ from these assumptions would impact future expense recognition and the cash funding requirements of the Company’s pension plans.

Net periodic benefit costs for the plans in aggregate included the following components:

	Three Months Ended
	March 30,		March 31,
(In thousands)	2013		2012
Service cost	$	721	$	589
Interest cost on benefit obligations	165		185
Expected return on plan assets	(52)		(57)
Amortization of net loss	63		27
	$	897	$	744

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Consolidated Balance Sheets (Parenthetical) (USD $) In Thousands, except Share data, unless otherwise specified	Mar. 30, 2013	Dec. 29, 2012
Consolidated Balance Sheets
Accounts receivable, allowance for doubtful accounts	$ 1,474	$ 1,548
Common stock, par value (in dollars per share)	$ 0.1167	$ 0.1167
Common stock, shares authorized	200,000,000	200,000,000
Common stock, shares issued	38,810,704	38,402,291
Common stock, shares outstanding	38,810,704	38,402,291

XML

INTEREST AND OTHER EXPENSE, NET

3 Months Ended

Mar. 30, 2013

INTEREST AND OTHER EXPENSE, NET

INTEREST AND OTHER EXPENSE, NET

NOTE 7 INTEREST AND OTHER EXPENSE, NET

Interest and other expense, net, was as follows:

	Three Months Ended
	March 30,		March 31,
(In thousands)	2013		2012
Interest expense	$	(1,789)	$	(2,201)
Interest and dividend income	49		61
Derivative gain	202		671
Bank and portfolio asset management fees	(192)		(164)
Other expense, net	(407)		(554)
	$	(2,137)	$	(2,187)

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INTANGIBLE ASSETS

3 Months Ended

Mar. 30, 2013

INTANGIBLE ASSETS

INTANGIBLE ASSETS

NOTE 6 INTANGIBLE ASSETS

Intangible assets were as follows:

(In thousands)	March 30,		December 29,
	2013		2012
Intangible assets subject to amortization:
Developed technology, net of accumulated amortization of $11,638 and $10,885 as of March 30, 2013 and December 29, 2012, respectively	$	28,797	$	29,742
Customer relationships, net of accumulated amortization of $27,827 and $26,255 as of March 30, 2013 and December 29, 2012, respectively	18,487		20,100
In-process research and development, net of accumulated amortization of $280 and $158 as of March 30, 2013 and December 29, 2012, respectively	7,611		7,746
Other, net of accumulated amortization of $5,916 and $5,915 as of March 30, 2013 and December 29, 2012, respectively	1,451		1,553
	56,346		59,141
Intangible assets not subject to amortization:
Trademarks and trade names	18,305		18,305
Intangible assets, net	$	74,651	$	77,446

Developed technology is amortized on a straight line basis over 10 to 20 years, depending on the life of the product technology.  Intangible assets related to customer relationships are generally amortized over a period of up to 10 years on an accelerated basis.  In-process research and development is amortized on a straight line basis over the product’s estimated useful life upon completion of the technology.  Other intangible assets include acquired backlog, product trademarks and trade names, non-competition agreements and defensible assets.  With the exception of product trademarks and trade names, such assets are amortized on a straight line basis over a period of three months to 10 years, depending on the asset.  Trademarks and trade names associated with products are amortized on a straight line basis over the estimated remaining life of the product technology, which ranges from 10 to 20 years.  Trademarks and trade names associated with a business have indefinite lives and are not amortized.

Amortization expense related to intangible assets totaled $2.6 million for the three months ended March 30, 2013 and $5.2 million for the three months ended March 31, 2012.

Estimated aggregate amortization expense for future fiscal years is as follows:

(In thousands)	Estimated Aggregate Amortization Expense
2013 (remaining)	$	7,751
2014	8,344
2015	6,712
2016	6,337
2017	5,371
Thereafter	19,863
	$	54,378

The Company has excluded $2.0 million of amortization expense related to certain in-process research and development projects from the table above, as it was uncertain as of March 30, 2013 when the technology will be completed and when the amortization will begin.

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SUPPLEMENTAL BALANCE SHEET INFORMATION (Tables)

3 Months Ended

Mar. 30, 2013

SUPPLEMENTAL BALANCE SHEET INFORMATION

Schedule of inventories

(In thousands)	March 30,		December 29,
	2013		2012
Raw materials and purchased parts	$	64,261	$	65,766
Work in process	17,537		18,075
Finished goods	26,464		24,887
Short-term inventories	$	108,262	$	108,728

Schedule of long-term inventories

(In thousands)	March 30,		December 29,
	2013		2012
Raw materials and purchased parts	$	3,300	$	4,149
Finished goods	4,540		4,926
Long-term inventories	$	7,840	$	9,075

Schedule of activity in accrued warranty obligations

	Three Months Ended
(In thousands)	March 30,		March 31,
	2013		2012
Balance at beginning of year	$	3,528	$	4,466
Additions charged to cost of sales	596		629
Additions from acquisitions	-		21
Warranty claims	(742)		(1,195)
Balance at end of period	$	3,382	$	3,921

Schedule of accrued expenses and other current liabilities

(In thousands)	March 30,		December 29,
	2013		2012
Deferred revenue	$	12,702	$	11,561
Deferred lease liability	5,464		5,445
Accrued and deferred taxes	3,714		3,866
Short-term accrued warranty obligations	3,251		3,421
Other	9,814		10,403
	$	34,945	$	34,696

Schedule of accumulated other comprehensive loss

(In thousands)	March 30,		December 29,
	2013		2012
Cumulative foreign currency translation losses	$	(6,972)	$	(4,569)
Unrecognized net pension losses	(3,058)		(3,248)
Unrealized gains on marketable securities	770		868
	$	(9,260)	$	(6,949)

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BUSINESS SEGMENT INFORMATION

3 Months Ended

Mar. 30, 2013

BUSINESS SEGMENT INFORMATION

BUSINESS SEGMENT INFORMATION

NOTE 14      BUSINESS SEGMENT INFORMATION

The operating segments reported below are the segments of the Company for which separate financial information is available and for which operating results are evaluated regularly by the Chief Executive Officer, who is the chief operating decision maker, in deciding how to allocate resources and in assessing performance.  Prior to 2013, the Company developed, manufactured and marketed its products within three distinct business segments: its Lasers Division, its Photonics and Precision Technologies Division and its Ophir Division.  In January 2013, the Company reorganized its operations to create three new operating segments: its Photonics Group, its Lasers Group and its Optics Group.  As a result, the Company has revised its reportable segments to correspond with its new operating segments, reflecting the manner in which it now assesses performance and allocates resources.  The results of operations of the Company’s reportable segments for the three months ended March 31, 2012 reported below have been restated to conform to the new reportable segments.

The Company measured income reported for each business segment, which included only those costs that were directly attributable to the operations of that segment, and excluded certain unallocated operating expenses, such as corporate overhead and intangible asset amortization, interest and other expense, net, and income taxes.

(In thousands)	Photonics		Lasers		Optics		Total
Three months ended March 30, 2013:
Sales to external customers	$	58,367	$	38,885	$	35,355	$	132,607
Segment income	$	12,566	$	3,133	$	700	$	16,399
Three months ended March 31, 2012:
Sales to external customers	$	60,132	$	49,227	$	47,808	$	157,167
Segment income	$	12,280	$	6,683	$	6,189	$	25,152

The following table reconciles segment income to consolidated income before income taxes:

	Three Months Ended
	March 30,		March 31,
(In thousands)	2013		2012
Segment income	$	16,399	$	25,152
Unallocated operating expenses	(11,976)		(14,942)
Interest and other expense, net	(2,137)		(2,187)
	$	2,286	$	8,023

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NET INCOME PER SHARE

3 Months Ended

Mar. 30, 2013

NET INCOME PER SHARE

NET INCOME PER SHARE

NOTE 10 NET INCOME PER SHARE

The following table sets forth the computation of basic and diluted net income per share:

	Three Months Ended
	March 30,		March 31,
(In thousands, except per share data)	2013		2012
Net income attributable to Newport Corporation	$	2,746	$	6,592
Shares:
Weighted average shares outstanding - basic	38,601		37,731
Dilutive potential common shares, using treasury stock method	659		1,200
Weighted average shares outstanding - diluted	39,260		38,931
Net income per share attributable to Newport Corporation:
Basic	$	0.07	$	0.17
Diluted	$	0.07	$	0.17

For the three months ended March 30, 2013, an aggregate of 0.9 million stock options and stock appreciation rights were excluded from the computations of diluted net income per share, as their exercise prices (or base values) exceeded the average market price of the Company’s common stock during such periods, and their inclusion would have been antidilutive.  For the three months ended March 30, 2013, 0.4 million restricted stock units were excluded from the computations of diluted net income per share, as the amount of unrecognized future compensation expense associated with these restricted stock units would have resulted in assumed proceeds in excess of the amount required to repurchase the underlying shares under the treasury stock method and, therefore, their inclusion would have been antidilutive.

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STOCK-BASED COMPENSATION

3 Months Ended

Mar. 30, 2013

STOCK-BASED COMPENSATION

STOCK-BASED COMPENSATION

NOTE 8 STOCK-BASED COMPENSATION

The total stock-based compensation expense included in the Company’s consolidated statements of income and comprehensive income was as follows:

	Three Months Ended
	March 30,		March 31,
(In thousands)	2013		2012
Cost of sales	$	209	$	117
Selling, general and administrative expenses	1,820		1,839
Research and development expense	240		258
	$	2,269	$	2,214

At March 30, 2013, the total compensation cost related to unvested stock-based awards granted to employees, officers and directors under the Company’s stock-based benefit plans that had not yet been recognized was $7.6 million (net of estimated forfeitures of $1.5 million).  This future compensation expense will be amortized over a weighted-average period of 1.4 years using the straight-line attribution method.  The actual compensation expense that the Company will recognize in the future related to unvested stock-based awards outstanding at March 30, 2013 will be adjusted for actual forfeitures.

At March 30, 2013, 0.7 million stock options with a weighted-average exercise price of $14.58 per share, intrinsic value of $1.5 million and remaining contractual term of 1.4 years were outstanding and were exercisable.  At March 30, 2013, 1.4 million stock-settled stock appreciation rights with a weighted-average base value of $11.47 per share, intrinsic value of $8.0 million and remaining contractual term of 4.4 years were outstanding, and 0.8 million stock-settled stock appreciation rights with a weighted-average base value of $7.23 per share, intrinsic value of $7.5 million and remaining contractual term of 3.4 years were exercisable.

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DEBT AND LINES OF CREDIT

3 Months Ended

Mar. 30, 2013

DEBT AND LINES OF CREDIT

DEBT AND LINES OF CREDIT

NOTE 9 DEBT AND LINES OF CREDIT

Total short-term debt was as follows:

(In thousands)	March 30,		December 29,
	2013		2012
Japanese revolving lines of credit	$	5,307	$	5,231
Japanese receivables financing facilities	551		415
Total short-term borrowings	$	5,858	$	5,646

Total long-term debt was as follows:

(In thousands)	March 30,		December 29,
	2013		2012
U.S. term loan due October 2016	$	159,563	$	171,125
Israeli loans due through October 2015	3,230		3,591
Japanese private placement bonds due June 2014	2,122		2,325
Japanese loans due through November 2016	865		1,056
Total long-term debt	165,780		178,097
Current portion of long-term debt	29,610		27,339
Total long-term debt, less current portion	$	136,170	$	150,758

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INCOME TAXES

3 Months Ended

Mar. 30, 2013

INCOME TAXES

INCOME TAXES

NOTE 11 INCOME TAXES

Under ASC 740-270, Income Taxes – Interim Reporting, the Company is required to evaluate and make any necessary adjustments to its effective tax rate each quarter as new information is obtained that may affect the assumptions used to estimate its annual effective tax rate.  The Company’s assumptions relate to factors such as the projected level and mix of pre-tax earnings in the various tax jurisdictions in which it operates, valuation allowances against deferred tax assets, the recognition or derecognition of tax benefits related to uncertain tax positions, expected utilization of tax credits and changes in or the interpretation of tax laws in jurisdictions in which the Company conducts business.  In addition, jurisdictions for which the Company has projected losses for the year, or a year-to-date loss, where no tax benefit can be recognized, are excluded from the calculation of the estimated annual effective tax rate.  Changes in the assumptions and the inclusion or exclusion of certain jurisdictions could result in a higher or lower effective tax rate during a particular quarter.

Deferred income taxes are recognized for the future tax consequences of temporary differences using enacted statutory tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled.  Temporary differences include the difference between the financial statement carrying amounts and the tax bases of existing assets and liabilities and operating loss and tax credit carryforwards.  The effect of a change in tax rates on deferred taxes is recognized in income in the period that includes the enactment date.  In accordance with the provisions of ASC 740, a valuation allowance for deferred tax assets is recorded to the extent the Company cannot determine that the ultimate realization of the net deferred tax assets is more likely than not.  Realization of deferred tax assets is principally dependent upon the achievement of future taxable income, the estimation of which requires significant management judgment.  As of March 30, 2013, the Company could not determine that it is more likely than not that deferred tax assets related to certain domestic and foreign net operating loss carryforwards and certain other miscellaneous domestic and foreign deferred tax assets would be realized.  Therefore, the Company has maintained a valuation allowance of $3.3 million against its domestic and certain foreign subsidiaries’ deferred tax assets.

The Company utilizes ASC 740-10-25, Income Taxes – Recognition, which requires income tax positions to meet a more-likely-than-not recognition threshold to be recognized in the financial statements.  Under ASC 740-10-25, tax positions that previously failed to meet the more-likely-than-not threshold should be recognized in the first subsequent financial reporting period in which that threshold is met.  Previously recognized tax positions that no longer meet the more-likely-than-not threshold should be derecognized in the first subsequent financial reporting period in which that threshold is no longer met.  As a multi-national corporation, the Company is subject to taxation in many jurisdictions, and the calculation of its tax liabilities involves dealing with uncertainties in the application of complex tax laws and regulations in various taxing jurisdictions.  If the Company ultimately determines that the payment of these liabilities will be unnecessary, it reverses the liability and recognizes a tax benefit during the period in which it determines the liability no longer applies.  Conversely, the Company records additional tax charges in a period in which it determines that a recorded tax liability is less than it expects the ultimate assessment to be.  As a result of these adjustments, the Company’s effective tax rate in a given financial statement period could be materially affected.  During the three months ended March 30, 2013, the Company reversed $0.7 million of unrecognized tax benefits related to a Japanese subsidiary, due to the expiration of the applicable audit statute of limitations.  As of March 30, 2013, the Company had $14.5 million of gross unrecognized tax benefits and a total of $11.7 million of net unrecognized tax benefits, which, if recognized, would affect the effective tax rate.  Interest and penalties related to unrecognized tax benefits were not significant for the three months ended March 30, 2013.

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MARKETABLE SECURITIES (Details 3) (USD $) In Thousands, unless otherwise specified	3 Months Ended
	Mar. 30, 2013	Mar. 31, 2012
Gross realized gains and losses on sales of available for sale securities
Realized gains and losses on sales of available for sale securities	$ 0	$ 0

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BUSINESS SEGMENT INFORMATION (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended
	Mar. 30, 2013 item	Mar. 31, 2012
BUSINESS SEGMENT INFORMATION
Number of operating segments	3
Segment Reporting Information, by Segment
Sales to external customers	$ 132,607	$ 157,167
Segment income	16,399	25,152
Photonics
Segment Reporting Information, by Segment
Sales to external customers	58,367	60,132
Segment income	12,566	12,280
Lasers
Segment Reporting Information, by Segment
Sales to external customers	38,885	49,227
Segment income	3,133	6,683
Optics
Segment Reporting Information, by Segment
Sales to external customers	35,355	47,808
Segment income	$ 700	$ 6,189

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MARKETABLE SECURITIES (Tables)

3 Months Ended

Mar. 30, 2013

MARKETABLE SECURITIES

Schedule of aggregate fair value of available for sale securities and aggregate amount of unrealized gains and losses

The aggregate fair value of available for sale securities and the aggregate amount of unrealized gains and losses in available for sale securities at March 30, 2013 were as follows:

(In thousands)	Aggregate		Aggregate Amount of Unrealized
	Fair Value		Gains		Losses
Money market funds	$	4,923	$	83	$	-
Certificates of deposit	4,282		-		-
	$	9,205	$	83	$	-

The aggregate fair value of available for sale securities and the aggregate amount of unrealized gains and losses in available for sale securities at December 29, 2012 were as follows:

(In thousands)	Aggregate		Aggregate Amount of Unrealized
	Fair Value		Gains		Losses
Money market funds	$	4,244	$	86	$	-
Certificates of deposit	4,254		-		-
	$	8,498	$	86	$	-

Schedule of contractual maturities of certificates of deposit

(In thousands)	March 30,
	2013
0 – 1 Year	$	4,282
1 – 2 Years	-
2 – 3 Years	-
3 – 5 Years	-
5 – 10 Years	-
More than 10 years	-
	$	4,282

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STOCK-BASED COMPENSATION (Tables)

3 Months Ended

Mar. 30, 2013

STOCK-BASED COMPENSATION

Schedule of total stock-based compensation expense included in the Company's consolidated statements of income and comprehensive income

	Three Months Ended
	March 30,		March 31,
(In thousands)	2013		2012
Cost of sales	$	209	$	117
Selling, general and administrative expenses	1,820		1,839
Research and development expense	240		258
	$	2,269	$	2,214

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STOCKHOLDERS' EQUITY TRANSACTIONS (Details)	3 Months Ended
	Mar. 30, 2013	May 31, 2008
STOCKHOLDERS' EQUITY TRANSACTIONS
Shares of common stock authorized to be repurchased		4,000,000
Purchases made under the program	0
Remaining shares to be repurchased	3,900,000

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INTEREST AND OTHER EXPENSE, NET (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended
	Mar. 30, 2013	Mar. 31, 2012
INTEREST AND OTHER EXPENSE, NET
Interest expense	$ (1,789)	$ (2,201)
Interest and dividend income	49	61
Derivative gain	202	671
Bank and portfolio asset management fees	(192)	(164)
Other expense, net	(407)	(554)
Total	$ (2,137)	$ (2,187)

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Consolidated Statements of Cash Flows (USD $) In Thousands, unless otherwise specified	3 Months Ended
	Mar. 30, 2013	Mar. 31, 2012
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income	$ 2,734	$ 6,588
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	7,965	10,818
Provision for losses on inventories	2,334	2,310
Stock-based compensation expense	2,269	2,214
Provision for doubtful accounts	15	35
Loss on disposal of property and equipment	61	58
Deferred income taxes	(8)	(1,326)
Increase (decrease) in cash, net of acquisition, due to changes in:
Accounts and notes receivable	(1,782)	(1,415)
Inventories	(2,363)	(1,278)
Prepaid expenses and other assets	(449)	(1,270)
Accounts payable	(330)	1,053
Accrued payroll and related expenses	(2,379)	(5,979)
Accrued expenses and other liabilities	(289)	1,112
Other long-term liabilities	(328)	295
Net cash provided by operating activities	7,450	13,215
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment	(3,951)	(3,732)
Restricted cash	(53)	11,460
Business acquisition, net of cash acquired		(8,939)
Refundable amounts related to business acquisition		(317)
Purchase of marketable securities	(2,346)	(1,293)
Proceeds from the sale of marketable securities	1,481	878
Net cash used in investing activities	(4,869)	(1,943)
CASH FLOWS FROM FINANCING ACTIVITIES:
Repayment of long-term debt and obligations under capital leases	(11,892)	(9,376)
Proceeds from short-term borrowings	1,599	3,280
Repayment of short-term borrowings	(876)	(14,853)
Proceeds from the issuance of common stock under employee plans	4,010	2,001
Tax withholding payments related to net share settlement of equity awards		(3,053)
Net cash used in financing activities	(7,159)	(22,001)
Impact of foreign exchange rate changes on cash balances	(343)	298
Net decrease in cash and cash equivalents	(4,921)	(10,431)
Cash and cash equivalents at beginning of period	88,767	55,701
Cash and cash equivalents at end of period	83,846	45,270
Supplemental disclosures of cash flow information:
Cash paid during the period for interest	1,927	1,873
Cash paid during the period for income taxes, net	799	1,299
Property and equipment accrued in accounts payable	$ 178	$ 20

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SUPPLEMENTAL BALANCE SHEET INFORMATION

3 Months Ended

Mar. 30, 2013

SUPPLEMENTAL BALANCE SHEET INFORMATION

SUPPLEMENTAL BALANCE SHEET INFORMATION

NOTE 5 SUPPLEMENTAL BALANCE SHEET INFORMATION

Inventories

Inventories that are expected to be sold within one year are classified as current inventories and are included in inventories in the accompanying consolidated balance sheets.  Such inventories were as follows:

(In thousands)	March 30,		December 29,
	2013		2012
Raw materials and purchased parts	$	64,261	$	65,766
Work in process	17,537		18,075
Finished goods	26,464		24,887
Short-term inventories	$	108,262	$	108,728

Inventories that are not expected to be sold within one year are classified as long-term inventories and are included in investments and other assets in the accompanying consolidated balance sheets.  Such inventories were as follows:

(In thousands)	March 30,		December 29,
	2013		2012
Raw materials and purchased parts	$	3,300	$	4,149
Finished goods	4,540		4,926
Long-term inventories	$	7,840	$	9,075

Accrued Warranty Obligations

Unless otherwise stated in the Company’s product literature or in its agreements with customers, products sold by the Company’s Photonics and Optics Groups generally carry a one-year warranty from the original invoice date on all product materials and workmanship, other than filters and gratings products, which generally carry a 90-day warranty and laser beam profilers and dental CAD/CAM scanners, which generally carry a two-year warranty.  Products of these groups sold to original equipment manufacturer (OEM) customers generally carry longer warranties, typically 15 to 19 months.  Products sold by the Company’s Lasers Group carry warranties that vary by product and product component, but generally range from 90 days to two years.  In certain cases, such warranties for Lasers Group products are limited by either a set time period or a maximum amount of hourly usage of the product, whichever occurs first.  Defective products will be either repaired or replaced, generally at the Company’s option, upon meeting certain criteria.  The Company accrues a provision for the estimated costs that may be incurred for warranties relating to a product (based on historical experience) as a component of cost of sales.  Short-term accrued warranty obligations, which expire within one year, are included in accrued expenses and other current liabilities and long-term warranty obligations are included in deferred income taxes and other liabilities in the accompanying consolidated balance sheets.  Short-term warranty obligations were $3.3 million and $3.4 million as of March 30, 2013 and December 29, 2012, respectively.  As of March 30, 2013 and December 29, 2012, the amounts accrued for long-term warranty obligations were not material.

The activity in accrued warranty obligations was as follows:

	Three Months Ended
(In thousands)	March 30,		March 31,
	2013		2012
Balance at beginning of year	$	3,528	$	4,466
Additions charged to cost of sales	596		629
Additions from acquisitions	-		21
Warranty claims	(742)		(1,195)
Balance at end of period	$	3,382	$	3,921

Accrued Expenses and Other Current Liabilities

Accrued expenses and other current liabilities were as follows:

(In thousands)	March 30,		December 29,
	2013		2012
Deferred revenue	$	12,702	$	11,561
Deferred lease liability	5,464		5,445
Accrued and deferred taxes	3,714		3,866
Short-term accrued warranty obligations	3,251		3,421
Other	9,814		10,403
	$	34,945	$	34,696

Accumulated Other Comprehensive Loss

Accumulated other comprehensive loss consisted of the following:

(In thousands)	March 30,		December 29,
	2013		2012
Cumulative foreign currency translation losses	$	(6,972)	$	(4,569)
Unrecognized net pension losses	(3,058)		(3,248)
Unrealized gains on marketable securities	770		868
	$	(9,260)	$	(6,949)

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DEBT AND LINES OF CREDIT (Tables)

3 Months Ended

Mar. 30, 2013

DEBT AND LINES OF CREDIT

Schedule of short-term debt

(In thousands)	March 30,		December 29,
	2013		2012
Japanese revolving lines of credit	$	5,307	$	5,231
Japanese receivables financing facilities	551		415
Total short-term borrowings	$	5,858	$	5,646

Schedule of long-term debt

(In thousands)	March 30,		December 29,
	2013		2012
U.S. term loan due October 2016	$	159,563	$	171,125
Israeli loans due through October 2015	3,230		3,591
Japanese private placement bonds due June 2014	2,122		2,325
Japanese loans due through November 2016	865		1,056
Total long-term debt	165,780		178,097
Current portion of long-term debt	29,610		27,339
Total long-term debt, less current portion	$	136,170	$	150,758

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SUPPLEMENTAL BALANCE SHEET INFORMATION (Details 2) (USD $) In Thousands, unless otherwise specified	3 Months Ended
	Mar. 30, 2013	Mar. 31, 2012	Dec. 29, 2012
Warranty
Short-term accrued warranty obligations	$ 3,251		$ 3,421
Accrued Warranty Obligations
Balance at beginning of year	3,528	4,466
Additions charged to cost of sales	596	629
Additions from acquisitions		21
Warranty claims	(742)	(1,195)
Balance at end of period	3,382	3,921
Accrued Expenses and Other Current Liabilities
Deferred revenue	12,702		11,561
Deferred lease liability	5,464		5,445
Accrued and deferred taxes	3,714		3,866
Short-term accrued warranty obligations	3,251		3,421
Other	9,814		10,403
Accrued expenses and other current liabilities, total	34,945		34,696
Accumulated Other Comprehensive Loss
Cumulative foreign currency translation losses	(6,972)		(4,569)
Unrecognized net pension losses	(3,058)		(3,248)
Unrealized gains on marketable securities	770		868
Accumulated other comprehensive loss	$ (9,260)		$ (6,949)
Photonics and Optics | All products other than filters, gratings, laser beam profilers and dental CAD/CAM scanners
Warranty
Product warranty period	1 year
Photonics and Optics | Original equipment manufacturer | Minimum
Warranty
Product warranty period	15 months
Photonics and Optics | Original equipment manufacturer | Maximum
Warranty
Product warranty period	19 months
Optics | Filters and gratings products
Warranty
Product warranty period	90 days
Photonics | Laser beam profilers and dental CAD/CAM scanners
Warranty
Product warranty period	2 years
Lasers Division | Minimum
Warranty
Product warranty period	90 days
Lasers Division | Maximum
Warranty
Product warranty period	2 years

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LEGAL PROCEEDINGS

3 Months Ended

Mar. 30, 2013

LEGAL PROCEEDINGS

LEGAL PROCEEDINGS

NOTE 15      LEGAL PROCEEDINGS

In November 2010, two former employees of Spectra-Physics, Linda Pope and Yvette Flores, together with their children, Tia Pope Hudson and Mark Flores, filed a complaint against Spectra-Physics and the Company in the Superior Court for Santa Clara County, California.  In the action, the plaintiffs allege that between 1975 and 1985 they and their unborn children were exposed to toxic chemicals during their work at Spectra-Physics, and that Spectra-Physics failed to warn them about dangers associated with the chemicals and failed to implement adequate safeguards to protect them from the chemicals, resulting in injuries to them and their unborn children.

In November 2012, the Company reached an agreement with Linda Pope and Tia Pope Hudson to settle all claims related to their portion of the suit. The amount of such settlement was immaterial.  In December 2012, the court denied the Company’s motions for summary judgment of Yvette and Mark Flores’ claims based on the statute of limitations applicable to such claims.  The Company subsequently filed motions for summary judgment or summary adjudication of the plaintiffs’ remaining claims based on additional grounds, and the plaintiffs have filed a motion for summary adjudication of certain of the Company’s affirmative defenses to the plaintiffs’ claims, which motions are scheduled to be heard in June 2013.  Trial is currently set to commence in July 2013.

Yvette and Mark Flores are seeking an aggregate of $20.5 million in general and special damages, as well as punitive damages for each of them to be established by the trier of fact.  The Company disputes that the plaintiffs are entitled to any damages, and it continues to believe that the plaintiffs’ claims are without merit and intends to continue to vigorously defend its position.  Further, discovery in the action is ongoing, and the motions for summary judgment or adjudication filed by the Company and the plaintiffs are pending.  Therefore, at this stage of the litigation, the Company is unable to provide an estimate of the potential exposure or the likelihood of a favorable or unfavorable outcome in this action.