Newport (NEWP)

Acquisition

In July 2004, we acquired all of the issued and outstanding capital stock of Spectra-Physics, Inc. and certain related entities (collectively, Spectra-Physics). Spectra-Physics manufactures high-power solid-state, gas and dye lasers, high-power laser diodes and ultrafast laser systems, as well as other photonic components and devices used in a wide range of applications, including scientific research, industrial and microelectronic manufacturing and analytical instrumentation for life and health sciences. The combination created a leading photonics company with an integrated technology mix. The transaction was accounted for using the purchase method. Our results of operations for 2004 included the results of operations of Spectra-Physics from the date of acquisition on July 16, 2004.

Discontinued Operations

Following the acquisition of Spectra-Physics, we conducted a strategic review of all of our businesses and concluded that the Company’s robotic systems operations in Richmond, California were no longer core to our strategy. Consequently, in the first quarter of 2005, our Board of Directors approved a plan to sell these operations, which serve the front-end semiconductor equipment industry with product lines including wafer-handling robots, load ports and equipment front-end modules. At that time, we classified our robotic systems operations as discontinued operations. In October 2005, we announced that we had entered into a definitive agreement to sell our robotic

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systems operations, and we expect to complete the sale in the fourth quarter of 2005. The robotic systems operations were included in our former Advanced Packaging and Automation Systems (APAS) Division.

In the third quarter of 2005, we determined that we would have ongoing cash flows with an identifiable component of this operation. Accordingly, the results of operations for this component for all periods presented have been reclassified into continuing operations. The remaining robotic systems operations have been accounted for as discontinued operations for all periods presented. The amounts of this component that were included in continuing operations are as follows:

The net sales and loss before income taxes from the discontinued operations consisted of the following:

In the third quarter of 2005, we recorded a $9.2 million adjustment to reduce the carrying amount of the assets disposed to reflect the expected consideration for the sale, less estimated selling costs.

Unless otherwise indicated, Management’s Discussion and Analysis of Financial Condition and Results of Operations excludes discontinued operations and relates only to continuing operations.

Acquisition

In July 2004, we acquired all of the issued and outstanding capital stock of Spectra-Physics, Inc. and certain related entities (collectively, Spectra-Physics). Spectra-Physics manufactures high-power solid-state, gas and dye lasers, high-power laser diodes and ultrafast laser systems, as well as other photonic components and devices used in a wide range of applications, including scientific research, industrial and microelectronic manufacturing and analytical instrumentation for life and health sciences. The transaction was accounted for using the purchase method. Our results of operations for 2004 included the results of operations of Spectra-Physics from the date of acquisition on July 16, 2004. Accordingly, our results of operations for the three and six months ended July 3, 2004 do not include the results of operations of Spectra-Physics. As a result, comparisons of financial results with corresponding amounts in subsequent or prior periods may not be meaningful. See further discussion in Note 6 of the Notes to Consolidated Financial Statements included elsewhere in this Quarterly Report on Form 10-Q.

Discontinued Operations

In the first quarter of 2005, our Board of Directors approved a plan to sell our robotic systems operations, which serve the front-end semiconductor equipment industry with product lines including wafer-handling robots, load ports and equipment front-end modules. Following the acquisition of Spectra-Physics, we conducted a strategic review of all of our businesses and concluded that these operations were no longer core to our strategy. We have hired an investment banking firm to assist us in selling the assets of the operations and expect to complete the divestiture by the end of 2005. The robotic systems operations were included in our former Advanced Packaging and Automation

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Systems (APAS) Division. The robotic systems operations have been accounted for as discontinued operations for all periods presented. Unless otherwise indicated, Management’s Discussion and Analysis of Financial Condition and Results of Operations excludes discontinued operations and relates only to continuing operations.

Acquisition

In July 2004, we acquired all of the issued and outstanding capital stock of Spectra-Physics, Inc. and certain related entities (collectively, Spectra-Physics). Spectra-Physics manufactures high-power solid-state, gas and dye lasers, high-power laser diodes and ultrafast laser systems, as well as other photonic components and devices used in a wide range of applications, including scientific research, industrial and microelectronic manufacturing and analytical instrumentation for life and health sciences. The transaction was accounted for using the purchase method. Our results of operations for 2004 included the results of operations of Spectra-Physics from the date of acquisition on July 16, 2004. Accordingly, our results of operations for the first quarter of 2004 do not include the results of operations of Spectra-Physics. As a result, comparisons of financial results with corresponding amounts in prior periods may not be meaningful. See further discussion in Note 7 of the Notes to Consolidated Financial Statements included elsewhere in this Quarterly Report on Form 10-Q.

Discontinued Operations

In the first quarter of 2005, our Board of Directors approved a plan to sell our robotic systems operations, which serve the front-end semiconductor equipment industry with product lines including wafer-handling robots, load ports and equipment front-end modules. Following the acquisition of Spectra-Physics, we conducted a strategic review of all of our businesses and concluded that these operations were no longer core to our strategy. We have hired an investment banking firm to assist us in selling the assets of the operations and expect to complete the divestiture by the end of 2005. The robotic systems operations were included in our former Advanced Packaging and Automation

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Systems (APAS) Division. These operations have been accounted for as discontinued operations for all periods presented. Unless otherwise indicated, Management’s Discussion and Analysis of Financial Condition and Results of Operations excludes these operations and relates only to continuing operations.