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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 Washington, DC 20549
 FORM 10-K
  þ
    
    ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the fiscal year ended January 3, 2009
 OR
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For
the transition period from  to
 Commission File Number: 000-01649
 
 NEWPORT CORPORATION
 (Exact name of registrant as specified in its charter)
 Nevada
    
    94-0849175(State or other jurisdiction of 
incorporation or organization)
    
    (IRS Employer Identification No.)
 1791 Deere Avenue, Irvine, California 92606  (Address of principal executive offices) (Zip Code)
 (949) 863-3144
 
  Title of Each Class
    
    Name of Each Exchange on Which RegisteredCommon Stock, Par Value $0.1167 per share
    
    The NASDAQ Stock Market LLC
 None
 o þ
 o þ
 þ o
 o
  Large accelerated filer oAccelerated filer þNon-accelerated filer o(Do not check if a smaller reporting company)Smaller reporting company o o þ
   DOCUMENTS INCORPORATED BY REFERENCE




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TABLE OF CONTENTS
 PART IItem 1.
    
    Business
    
    
    1Item 1A.
    
    Risk Factors
    
    
    17Item 1B.
    
    Unresolved Staff Comments
    
    
    29Item 2.
    
    Properties
    
    
    29Item 3.
    
    Legal Proceedings
    
    
    30Item 4.
    
    Submission of Matters to a Vote of Security Holders
    
    
    30PART IIItem 5.
    
    Market for the Registrants Common Equity, Related Stockholder
Matters and Issuer Purchases of Equity Securities
    
    
    30Item 6.
    
    Selected Financial Data
    
    
    33Item 7.
    
    Managements Discussion and Analysis of Financial Condition and
Results of Operations
    
    
    36Item 7A.
    
    Quantitative and Qualitative Disclosures About Market
Risk
    
    
    51Item 8.
    
    Financial Statements and Supplementary Data
    
    
    52Item 9.
    
    Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
    
    
    52Item 9A.
    
    Controls and Procedures
    
    
    52Item 9B.
    
    Other Information
    
    
    54PART IIIItem 10.
    
    Directors, Executive Officers and Corporate Governance
    
    
    55Item 11.
    
    Executive Compensation
    
    
    55Item 12.
    
    Security Ownership of Certain Beneficial Owners and Management
and Related Stockholder Matters
    
    
    55Item 13.
    
    Certain Relationships and Related Transactions, and Director
Independence
    
    
    55Item 14.
    
    Principal Accounting Fees and Services
    
    
    55PART IVItem 15.
    
    Exhibits, Financial Statement Schedules
    
    
    56SIGNATURES
    
    
    59INDEX TO FINANCIAL STATEMENTS AND SCHEDULE
    
    
    F-1EX-21.1EX-23.1EX-31.1EX-31.2EX-32.1EX-32.2
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This Annual Report on Form 10-K contains certain forward-looking statements within the meaning of
Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934,
and we intend that such forward-looking statements be subject to the safe harbors created thereby.
For this purpose, any statements contained in this Annual Report on Form 10-K except for historical
information may be deemed to be forward-looking statements. Without limiting the generality of the
foregoing, words such as may, will, expect, believe, anticipate, intend, could,
would, estimate, or continue or the negative or other variations thereof or comparable
terminology are intended to identify forward-looking statements. In addition, any statements that
refer to projections of our future financial performance, trends in our businesses, or other
characterizations of future events or circumstances are forward-looking statements.
 The forward-looking statements included herein are based on current expectations of our management
based on available information and involve a number of risks and uncertainties, all of which are
difficult or impossible to predict accurately and many of which are beyond our control. As such,
our actual results may differ significantly from those expressed in any forward-looking statements.
Factors that may cause or contribute to such differences include, but are not limited to, those
discussed in more detail 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 this Annual Report on Form 10-K. Readers should carefully review these risks, as well as the
additional risks described in other documents we file from time to time with the Securities and
Exchange Commission. In light of the significant risks and uncertainties inherent in the
forward-looking information included herein, the inclusion of such information should not be
regarded as a representation by us or any other person that such results will be achieved, and
readers are cautioned not to place undue reliance on such forward-looking information. We
undertake no obligation to revise the forward-looking statements contained herein to reflect events
or circumstances after the date hereof or to reflect the occurrence of unanticipated events.
 
 PART I
 
 Item 1. Business
 General Description of Business
    
    
    lasers and laser technology, including solid-state, gas and dye lasers, high-power diode
lasers, fiber lasers and amplifiers, and ultrafast laser systems;
    
    optical components and subassemblies, including precision optics and opto-mechanical
subassemblies, thin-film optical filters, ruled and holographic diffraction gratings and
crystals;
    
    photonics instruments and components, including optical meters, light sources,
monochromators and spectroscopy instrumentation;
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
    
    high-precision positioning and vibration isolation products and systems; and
    
    advanced automated manufacturing systems used in the manufacture of solar panels, disk
drive media and communications and electronics devices.
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Our Markets
  
    
    Scientific Research. We are one of the worlds leading suppliers of lasers and
photonics products to scientific researchers. For more than forty-five years, we have
worked closely with the research community to pioneer new applications and technologies.
Today, we continue to help researchers break new ground in a variety of scientific research
areas, including spectroscopy, ultrafast phenomena, multiphoton microscopy, terahertz
imaging, optical coherence tomography, laser-induced fluorescence, light detection and
ranging (LIDAR) and nonlinear optics.
    
    Microelectronics. Photonics technology addresses a number of vital applications in the
microelectronics market. It is a key enabler of the semiconductor industry roadmap driving
smaller chip feature sizes with the increased functionalities needed for next-generation
consumer technology products, including cellular phones, personal digital assistants and
digital cameras. It is also a key technology enabling the manufacture of solar panels with
higher efficiency at a lower cost per watt as that industry strives to make solar power
more cost competitive. Our products are used in several key applications in the
microelectronics market, including semiconductor wafer inspection and metrology, thin-film
solar panel scribing and edge deletion, solar cell testing and characterization, memory
yield enhancement, lithography, wafer dicing and scribing, wafer and component marking and
resistor trimming, as well as in disk drive, printed circuit board and flat panel display
manufacturing applications.
    
    Life and Health Sciences. Photonics is increasingly becoming an enabling technology in
the life and health sciences market. We provide products for use in diagnostic and
analytical instrumentation and cosmetic and therapeutic applications. Our products are
used in applications such as optical coherence tomography, multiphoton and confocal
microscopy, flow cytometry, matrix-assisted laser desorption/ionization time-of-flight mass
spectrometry, laser microdissection, DNA microarrays and blood analysis to enable
advancements in the fields of molecular biology, proteomics and drug discovery. In
addition, we supply high-power diode lasers to OEM customers for incorporation into laser
systems for hair removal and a variety of dermatological and dental procedures.
    
    Aerospace and Defense/Security. The drive for more technologically advanced weapons and
sensors is producing increased investment in light-based technologies that can remotely,
rapidly and non-invasively detect threats, improve intelligence gathering, provide secure
communications systems and improve the performance of weapons and countermeasures. In
addition, innovative optical sensors are augmenting human vision on the battlefield,
providing remote sensing, ranging and observation capabilities that offer high-resolution
imaging and night vision. Our high-precision products are used by aerospace and defense
engineers to develop, assemble, test and calibrate equipment for a wide range of
applications, including target recognition and acquisition, LIDAR, range finding, missile
guidance and advanced weapons development.
    
    Industrial Manufacturing. Our lasers and photonics products are used in a wide range of
precision industrial manufacturing applications, including rapid prototyping,
micromachining, heat-treating, welding and soldering, cutting, illumination, drilling and
high-precision marking and engraving. We also offer laser solutions for image recording
and graphics applications including pre-press (computer-to-plate), on-press, ultra-high
speed printing, photo finishing and holography.
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Our Operating Divisions
  Lasers Division
  Products
  Category
    
    Products
    
    Representative ApplicationsUltrafast Lasers and Systems
    
       Mai Tai® one-box femtosecond
Ti:sapphire lasers   Tsunami® ultrafast
Ti:sapphire lasers   Opal® femtosecond optical
parametric oscillators (OPOs)   Spitfire® Pro ultrafast
Ti:sapphire amplifiers   TOPAS automated ultrafast optical
parametric amplifiers (OPAs)   Solstice one-box ultrafast amplifiers
    

       Femtosecond spectroscopy   Materials processing   Multiphoton microscopy   Supercontinuum and high harmonic generation   Terahertz imaging   Time-resolved
photoluminescence
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Category
    
    Products
    
    Representative ApplicationsDiode-Pumped Solid State
Q-Switched Lasers
    
       BL series low power lasers   V-series high-repetition lasers   Tristar high repetition rate UV lasers   Navigator lasers   HIPPO high-power lasers   Pulseo high peak-power UV laser   Explorer low-power UV lasers   Empower green/UV lasers
    
       Diamond processing   Disk texturing   Laser microdissection   Matrix-assisted laser desorption/ionization   Memory yield enhancement
systems   Pump source for Ti:sapphire lasers   Rapid prototyping   Resistor trimming   Sapphire scribing   Silicon micromachining   Solar cell manufacturing   Stereolithography   Wafer markingDiode-Pumped Solid State
Continuous Wave (CW) and
Quasi-CW Lasers
    
       Millennia® Pro i/s CW lasers   MG series CW solid state green lasers   Excelsior low power CW lasers   Vanguard quasi-CW solid state UV lasers   3900S and Matisse® CW tunable
Ti:sapphire lasers   Cyan compact low power CW lasers
    
       Confocal microscopy   DNA sequencing   Flow cytometry   Image recording   Laser cooling   Materials processing   Optical trapping   Raman imaging   Semiconductor wafer
inspection and metrology   Solar cell manufacturing   Ti:Sapphire laser pumping
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Category
    
    Products
    
    Representative ApplicationsDiode Lasers
    
       Open heatsink diode laser bars   Multi-bar modules   Fiber-coupled diode laser bars   Fiber-coupled single emitter
diodes   Open heatsink single emitter
diodes   Integra industrial diode laser
systems
    
       Graphics and printing   Hair removal   Material heat treatment and
processing   Medical, therapeutic and cosmetic procedures   Pump source for solid state
and fiber lasers   Soldering
and weldingHigh Energy Pulsed Nd:YAG and Tunable Lasers
    
       Quanta-Ray® pulsed
Nd:YAG lasers   Scan Series and MOPO®
series High Energy optical
parametric oscillators (OPOs)   Tunable dye lasers
    
       Flat-panel display manufacturing   Laser ablation   Laser cleaning   LIDAR   Mass spectrometry   Particle imaging velocimetry
combustion diagnostics   Plastic and ceramic component
marking   Remote sensing   SpectroscopyGas Lasers
    
       Air-cooled argon ion lasers   Water-cooled ion laser systems
   Nitrogen
lasers
    
       Confocal microscopy   DNA sequencing   Flow cytometry   Fluorescence immunoassay   Holography   Laser doppler anemometry   Laser-doppler velocimetry   Lithography   Matrix-assisted laser
desorption/ionization   Raman spectroscopy   Semiconductor wafer inspection   Spectroscopy
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Category
    
    Products
    
    Representative ApplicationsFiber Lasers and Fiber
Amplified Lasers
    
       Alliant industrial fiber laser
   Pantera picosecond UV laser
    
       High-precision machining   Precision cutting   Spot and seam welding   Metal sintering   Reprographics and flexography   Laser direct imaging   High-speed laser processing   Scribing and ablation of thin layers for photovoltaics   Polyimide cutting for the electronics industry   Glass cutting for the flat panel and automotive industries   Silicon and wafer processing   Micro-material processing
 Photonics and Precision Technologies Division
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Products
  Category
    
    Products
    
    Representative ApplicationsPhotonics
Instruments and
Systems
    
       Optical power/energy meters   Laser diode controllers   Light sources   Solar simulators   Solar cell test instruments   Photonics test systems   Optical power/energy detectors   Spectrometers   Monochromators and spectrographs   Ultrafast laser pulse measurement
systems
    
       Characterization of cosmetic
and pharmaceutical products   Characterization of light
emitted by lasers, light emitting
diodes and broadband light
sources   Chemical composition analysis   Colorimetry   Optical power and energy
measurement for free space and
fiber-directed laser light   Solar cell characterization and
measurements   Spectroscopy   Testing and characterization of
optical fibers and passive fiber
optical componentsPrecision
Micro-Positioning
Devices, Systems
and Subsystems
    
       Precision air-bearing motion systems   Motorized linear and rotation stages   Motorized actuators and optical mounts   Piezo stack actuators   Custom multi-axis positioning systems   Motion controllers and drivers   Manual linear and rotation stages   Fiber alignment stages and accessories   Micrometers and adjustment screws   Nano-positioning and nano-focusing
stages   Fast steering mirrors
    
       Laser beam stabilization and
pointing   High-precision positioning and
motion control for manufacturing,
in-process inspection and final
test applications   High-precision positioning for
thin-film solar cell
manufacturing   Laser system alignment and beam
steering for inspection, laser
processing and communications   Precision positioning of
semiconductor wafers for
metrology and fabrication   Precision alignment in fiber
optic, telecommunication and
laser device assembly   Sample or sensor manipulation
for imaging and microscopy   Sample sorting and sequencing
for DNA research   Tracking and targeting test
systems for aerospace and
defense/security applications
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Category
    
    Products
    
    Representative ApplicationsVibration
Isolation Systems
and Subsystems
    
       Optical tables and support systems   Workstations   Active and passive isolation systems   Active vibration damping systems   Honeycomb, granite and rigid
structures   Elastomeric mounts
    
       Foundation platforms for laser
systems   Isolated platforms for
semiconductor lithography
equipment   Reduction of impact of external
vibration sources on
high-precision research,
manufacturing test and assembly
systems   Scanning electron microscope,
atomic force microscope, and
optical microscope base isolation   Workstation platforms for fiber
optic device fabrication   Workstation platforms for
microscopy and other advanced
imaging applicationsOptics and
Optical Hardware
    
       Lenses   Mirrors   Prisms and windows   Thin-film filters and coatings   Filters and attenuators   Collimators   Ultrafast laser optics   Beamsplitters and polarization optics   Ruled and holographic diffraction
gratings   Optical mounts   Bases and brackets   Posts and rod systems   Beam routing and enclosing systems   Laser-to-fiber couplers   Educational kits
    
       Analytical instrumentation for
life and health sciences
applications   Research in physical and
biological sciences   Product development activities   Semiconductor lithography,
wafer inspection and wafer
processing   Development and manufacture of
laser systems   Electro-optic sensors and
imaging systems for
defense/security applications   High-precision alignment of
optical instruments   Optical measurement and
communications systems   Spectroscopy   Ultrafast laser, terahertz
imaging and laser fusion research
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Category
    
    Products
    
    Representative ApplicationsCrystals
    
       Optical crystals   Scintillation crystals   Crystal imaging arrays   Electro optics
    
       Infrared spectroscopy (FT-IR)
for quality assurance   Optical and acoustic
applications including frequency
doubling, optical modulators and
Q switches   X-ray detection such as steel
thickness gauging   X-ray imaging for security,
industrial and medical
applicationsOpto-Mechanical
Subassemblies and
Subsystems
    
       Laser beam delivery and imaging
assemblies   Integrated electro-optic-mechanical
subsystems   Objective lens systems   Refractive beam shaper assemblies   Laser beam attenuators
    
       Analytical instrumentation for
life and health sciences
applications   High-speed cell sorting for
genomic research   Laser beam delivery systems for
solar panel manufacturing   Laser beam stabilization for
industrial metrology   Light detection and ranging   Optical coherence tomography
for non-invasive diagnostics   Optical data storage   Semiconductor mask patterning   Semiconductor wafer defect
inspection   Thin-film measurement of
semiconductor wafersAdvanced Manufacturing
Systems
    
       Automated, laser-based solar panel
scribing and edge deletion systems   Automated, laser-based disk texturing
systems   Automated manufacturing systems   Automated die bonding and dispensing
systems
    
       Thin-film solar panel
manufacturing   Automated manufacturing and
assembly of microelectronic and
optoelectronic devices   High-speed, high-accuracy
automated dispensing applications
for microwave modules, optical
modules, hybrid circuits,
multi-chip modules and
semiconductor packaging   High-speed, high-accuracy laser
texturing of disk drive media
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Sales and Marketing
   ®
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Research and Product Development
   Customers
  12




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Competition
  Product Category
    
    Primary CompetitorsLasers
    
    Bookham, Inc.
Coherent, Inc.
CVI Melles Griot
GSI Group/Excel Technology, Inc.
IPG Photonics, Inc.
    
    JDS Uniphase Corporation
Jenoptik Laser Optik Systeme GmbH
Rofin-Sinar Technologies, Inc.
Trumpf GroupPhotonics Instruments
    
    Agilent Technologies, Inc.
Coherent, Inc.
CVI Melles Griot 
ILX Lightwave Corporation
    
    Ocean Optics, Inc.
Ophir Optronics Ltd.
Thorlabs, Inc.Light Sources and
Spectroscopy
Instrumentation
    
    Andor Technology 
Acton Research Corporation
Horiba Jobin Yvon 
Ocean Optics, Inc. 
Photon Technology International
    
    Princeton Instruments
Sciencetech, Inc.
Spectral Products
Thorlabs, Inc.Precision
Micro-Positioning Devices,
Systems and Subsystems
    
    Aerotech Inc.
Bookham, Inc. (New Focus)
Danaher Corporation
Parker Hannifin Corporation
    
    Physik Instrumente
Rockwell Automation, Inc. (Anorad)
Sigma Koki Co., Ltd.
Thorlabs, Inc.Vibration Isolation Systems
and Subsystems
    
    Herzan, LLC 
Kinetic Systems, Inc.
    
    Technical Manufacturing Corp.
Thorlabs, Inc.Optics, Optical Hardware
and Opto-Mechanical
Subassemblies and
Subsystems
    
    Bookham, Inc. (New Focus)
CVI Melles Griot 
Corning Tropel Corporation
Jenoptik Laser Optik Systeme GmbH
    
    LINOS Photonics
Sigma Koki Co., Ltd. (OptoSigma)
Thorlabs, Inc.
Zygo CorporationOptical Filters
    
    Bookham, Inc.
Barr Associates, Inc.
Chroma Technology Corp.
Ferroperm EMC Filters ApS
    
    JDS Uniphase Corporation
Omega Optical, Inc.
Semrock, Inc.Diffraction Gratings
    
    Headwall Photonics, Inc.
Horiba Jobin Yvon
    
    Optometrics LLC
SpectrogonAutomated Manufacturing 
Systems
    
    Asymtek
Datacon Technology GmbH
EO Technics Co., Ltd.
    
    Jenoptik Laser Optik Systeme
GmbHManz Automation AGPalomar Technologies
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
    
    product features and performance;
    
    quality and reliability of products;
    
    pricing;
    
    customer service and support;
    
    breadth of product portfolio;
    
    customer relationships;
    
    ability to manufacture and deliver products on a timely basis;
    
    ability to customize products to customer specifications; and
    
    ability to offer complete integrated solutions to OEM customers.
   Intellectual Property and Proprietary Rights
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Manufacturing
    Backlog
  Employees
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Government Regulation
 Regulatory Compliance
  Environmental Regulation
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Availability of Reports
  Item 1A. Risk Factors
 The following is a summary of certain risks we face in our business. They are not the only
risks we face. Additional risks that we do not yet know of or that we currently believe are
immaterial may also impair our business operations. If any of the events or circumstances
described in the following risks actually occur, our business, financial condition or results of
operations could suffer, and the trading price of our common stock could decline. In assessing
these risks, investors should also refer to the other information contained or incorporated by
reference in our other filings with the Securities and Exchange Commission.
 Our operating results may be adversely affected by unfavorable economic and market conditions.
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Our financial results are difficult to predict, and if we fail to meet our financial guidance or
the expectations of investors, potential investors and/or securities analysts, the market price of
our common stock will likely decline significantly.
  
    
    fluctuations in our customers capital spending, industry cyclicality (particularly in
the semiconductor equipment industry), market seasonality (particularly in the scientific
research market), levels of government funding available to our customers and other
economic conditions within the markets we serve;
    
    demand for our products and the products sold by our customers;
    
    the level of orders within a given quarter and preceding quarters;
    
    the timing and level of cancellations and delays of orders for our products;
    
    the timing of product shipments within a given quarter;
    
    variations in the mix of products we sell;
    
    changes in our pricing practices or in the pricing practices of our competitors or
suppliers;
    
    our timing in introducing new products;
    
    market acceptance of any new or enhanced versions of our products;
    
    timing of new product introductions by our competitors;
    
    timing and level of scrap and warranty expenses;
    
    the availability, quality and cost of components and raw materials we use to
manufacture our products;
    
    our ability to manufacture a sufficient quantity of our products to meet customer
demand;
    
    changes in our effective tax rates;
    
    changes in interest income (expense) resulting from repurchases of convertible notes,
changes in our cash and marketable securities balances, and changes in interest rates;
    
    changes in bad debt expense based on the collectibility of our accounts receivable;
    
    fluctuations in foreign currency exchange rates; and
    
    our levels of expenses.
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We are dependent in part on the semiconductor capital equipment market, which is volatile and
unpredictable.
   A limited number of customers account for a significant portion of our sales to the
microelectronics market, and if we lose any of these customers or they significantly curtail their
purchases of our products, our results of operations would be harmed.
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Difficulties in executing our acquisitions could adversely impact our business.
  
    
    potentially incompatible cultural differences between the two companies;
    
    incorporating the acquired companys technology and products into our current and future
product lines, and successfully generating market demand for these expanded product lines;
    
    potential additional geographic dispersion of operations;
    
    the diversion of our managements attention from other business concerns;
    
    the difficulty in achieving anticipated synergies and efficiencies;
    
    the difficulty in integrating disparate operational and information systems;
    
    the difficulty in leveraging the acquired companys and our combined technologies and
capabilities across all product lines and customer bases; and
    
    our ability to retain key customers, suppliers and employees of an acquired company.
  Uncertainty in the development of the solar energy market could reduce the revenue we expect to
generate from product sales to this market.
  
    
    the cost-effectiveness of solar energy compared with conventional and other non-solar
renewable energy sources and products, including conventional energy sources such as coal
and natural gas;
    
    the performance and reliability of solar panels and thin-film technology compared with
conventional and other non-solar renewable energy sources and products;
    
    the availability and amount of government subsidies and incentives to support the
development of the solar energy industry;
    
    the success of other renewable energy generation technologies, such as hydroelectric,
tidal, wind, geothermal, solar thermal, concentrated photovoltaic, biomass and nuclear
fusion;
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
    
    fluctuations in economic and market conditions that affect the price of, and demand
for, conventional and non-solar renewable energy sources, such as increases or decreases in
the price of coal, oil, natural gas and other fossil fuels;
    
    fluctuations in capital expenditures by end-users of solar panels, which tend to
decrease when the economy slows and/or interest rates increase; and
    
    deregulation of the electric power industry and the broader energy industry to permit
widespread adoption of solar electricity.
  Many of the markets and industries that we serve are subject to rapid technological change, and if
we do not introduce new and innovative products or improve our existing products, our business and
results of operations will be negatively affected.
  We offer products for multiple industries and must face the challenges of supporting the distinct
needs of each of the markets we serve.
  Because the sales cycle for some of our products is long and difficult to predict, and certain of
our orders are subject to rescheduling or cancellation, we may experience fluctuations in our
operating results.
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If we are delayed in introducing our new products into the marketplace, our operating results will
suffer.
  We face significant risks from doing business in foreign countries.
  
    
    adverse changes or instability in the political or economic conditions in countries or
regions where we manufacture or sell our products;
    
    challenges of administering our business globally;
    
    the actions of U.S. and foreign regulatory authorities, including embargoes, export
restrictions, tariffs, trade restrictions and trade barriers, license requirements,
currency controls and other rules and regulations applicable to the importing and exporting
of our products, which are complicated and potentially conflicting and may impose strict
and severe penalties for noncompliance;
    
    longer accounts receivable collection periods;
    
    overlapping, differing or more burdensome tax structures;
    
    adverse currency fluctuations;
    
    differing protection of intellectual property;
    
    more complex and burdensome labor laws and practices in countries where we have
employees;
    
    difficulties in staffing and managing each of our individual foreign operations; and
    
    increased risk of exposure to terrorist activities.
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We face substantial competition, and if we fail to compete effectively, our operating results will
suffer.
  Our international sales and operations may be adversely impacted by export controls.
  If we fail to protect our intellectual property and proprietary technology, we may lose our
competitive advantage.
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We have experienced, and may in the future experience, intellectual property infringement claims,
which could be costly and time consuming to defend.
  If we are unable to attract new employees and retain and motivate existing employees, our business
and results of operations will suffer.
  Our reliance on sole source and limited source suppliers could result in delays in production and
distribution of our products.
  Our failure to successfully manage the transition of certain of our manufacturing operations to
international locations and to contract manufacturers could harm our business.
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Our products could contain defects, which would increase our costs and harm our business.
    
    
    loss of customers;
    
    increased costs of product returns and warranty expenses;
    
    increased costs required to analyze and mitigate the defects or problems;
    
    damage to our brand reputation;
    
    failure to attract new customers or achieve market acceptance;
    
    diversion of development and engineering resources; or
    
    legal action by our customers.
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Our convertible debt imposes significant financial obligations upon us, and certain provisions of
our convertible notes could discourage a change in control.
    Changes in accounting rules relating to convertible debt securities, such as our convertible
subordinated notes, will adversely affect our financial results.
 Accounting for Convertible Debt Instruments That May Be
Settled in Cash upon Conversion (Including Partial Cash Settlement) .
 Our products are subject to potential product liability claims which, if successful, could
adversely affect our results of operations.
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While we believe we currently have adequate internal control over financial reporting, we are
required to evaluate our internal control over financial reporting each year, and any adverse
results from such evaluation could result in a loss of investor confidence in our financial reports
and have an adverse effect on our stock price.
    Difficulties with our new global information technology system could harm our business.
  Compliance with environmental regulations and potential environmental liabilities could adversely
affect our financial results.
  27




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##### Table of Contents



28




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##### Table of Contents



Natural disasters or power outages could disrupt or shut down our operations, which would
negatively impact our operations.
  
 Item 1B. Unresolved Staff Comments
  
 Item 2. Properties
  Division
    
    Primary Facility Locations
    
    Approximate Facility SizeLasers
    
    Mountain View, California
    
    156,000 square feetTucson, Arizona
    
    81,000 square feetOttawa, Ontario
    
    19,000 square feetStahnsdorf, Germany
    
    12,000 square feetPhotonics and Precision
    
    Irvine, California
    
    273,000 square feetTechnologies
    
    Rochester, New York
    
    58,000 square feetFranklin, Massachusetts
    
    56,000 square feetNorth Billerica, Massachusetts
    
    41,000 square feetStratford, Connecticut
    
    32,000 square feetBeaune-la Rolande, France
    
    86,000 square feetBrigueuil, France
    
    44,000 square feetWuxi, China
    
    30,000 square feetMargate, United Kingdom
    
    16,500 square feet
  29




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##### Table of Contents



Item 3. Legal Proceedings
  
 Item 4. Submission of Matters to a Vote of Security Holders
  
 PART II
 
 Item 5.
    
    Market for the Registrants Common Equity, Related Stockholder Matters and
Issuer Purchases of Equity Securities
 Price Range of Common Stock
  Quarter Ended
    
    High
    
    LowJanuary 3, 2009
    
    $
    11.00
    
    
    $
    4.81September 27, 2008
    
    
    13.08
    
    
    
    9.24June 28, 2008
    
    
    13.94
    
    
    
    10.47March 29, 2008
    
    
    13.94
    
    
    
    9.34December 29, 2007
    
    
    15.68
    
    
    
    12.42September 29, 2007
    
    
    16.28
    
    
    
    11.85June 30, 2007
    
    
    16.84
    
    
    
    14.40March 31, 2007
    
    
    21.34
    
    
    
    15.96
 Dividends
  Purchases of Equity Securities
  30




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##### Table of Contents



Information Regarding Equity Compensation Plans
  Equity Compensation Plan Information
 Number ofSecuritiesNumber of
    
    
    
    
    
    Remaining AvailableSecurities to be
    
    
    
    
    
    for Future IssuanceIssued upon
    
    Weighted-Average
    
    under EquityExercise of
    
    Exercise Price of
    
    Compensation PlansOutstanding
    
    Outstanding
    
    (excludingOptions, Warrants
    
    Options, Warrants
    
    securitiesand Rights
    
    and Rights
    
    reflected in columnPlan Category
    
    (a)
    
    (b)
    
    (a)) (c)Equity Compensation
Plans Approved by
Security
Holders(1)
    
    
    4,544,639
    
    
    $
    17.69
    
    
    
    3,459,575Equity Compensation
Plans Not Approved by
Security
Holders(2)
    
    
    277,140
    
    
    $
    47.33
    
    
    
    Total
    
    
    4,821,779
    
    
    
    
    
    
    
    3,459,575
 
 (1)
    
    The number of shares reflected in column (a) for equity compensation plans
approved by security holders includes outstanding options to purchase 2,362,854 shares of
our common stock, which were issued under our 1992 Stock Incentive Plan and our 2001 Stock
Incentive Plan, and outstanding restricted stock units representing the right to receive
upon vesting an aggregate of 2,181,785 shares of our common stock, which were issued under
our 2006 Performance-Based Stock Incentive Plan. Substantially all of the outstanding
restricted stock units are subject to performance conditions and are not expected to vest.
Any restricted stock units that do not vest will become available for future grant. The
weighted-average exercise price reflected in column (b) for equity compensation plans
approved by security holders represents the weighted-average exercise price of the options
to purchase 2,362,854 shares of our common stock. The restricted stock units representing
the right to receive an aggregate of 2,181,785 shares of our common stock were awarded
without payment of any purchase price.(2)
    
    The number of shares reflected in column (a) for equity compensation plans not
approved by security holders consists of outstanding options to purchase shares of our
common stock issued under our 1999 Stock Incentive Plan (1999 Plan) having a
weighted-average exercise price of $47.33, and excludes outstanding options to purchase
68,380 shares of our common stock having a weighted-average exercise price of $2.37, which
were granted to employees and non-employees upon the assumption and conversion of former
options to purchase shares of common stock of MRSI in connection with our acquisition of
MRSI in February 2002. The options granted in connection with our acquisition of MRSI were
granted outside of a plan pursuant to individual nonqualified stock option agreements, and,
therefore, no additional securities are available for future grants. Equity Compensation Plans Not Approved by Security Holders
  31




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##### Table of Contents



Stock Performance Graph
   COMPARES 5-YEAR CUMULATIVE RETURN AMONG
NEWPORT CORPORATION, NASDAQ MARKET INDEX AND PEER GROUP
 
 The material in this performance graph is not soliciting material and is not deemed filed with
the SEC and is not to be incorporated by reference in any filing of Newport under the Securities
Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, whether made before or
after the date hereof and irrespective of any general incorporation language in any such filing.
 32




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##### Table of Contents



Item 6. Selected Financial Data
   For the Year Ended (1)(13)January 3,
    
    December 29,
    
    December 30,
    
    December 31,
    
    January 1,(In thousands, except percentages)
    
    2009
    
    2007
    
    2006
    
    2005
    
    2005(2)CONSOLIDATED STATEMENTS OF OPERATIONS:Net sales
    
    $
    445,336
    
    
    $
    445,197
    
    
    $
    454,724
    
    
    $
    403,733
    
    
    $
    267,335Cost of sales (3)
    
    
    274,542
    
    
    
    259,636
    
    
    
    256,756
    
    
    
    234,480
    
    
    
    178,335Gross profit
    
    
    170,794
    
    
    
    185,561
    
    
    
    197,968
    
    
    
    169,253
    
    
    
    89,000Selling, general and administrative expenses
    
    
    118,518
    
    
    
    116,476
    
    
    
    114,533
    
    
    
    102,002
    
    
    
    71,354Research and development expense
    
    
    46,068
    
    
    
    42,570
    
    
    
    41,981
    
    
    
    35,949
    
    
    
    22,161Impairment charges (3)(4)
    
    
    119,944
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    14,877Operating income (loss)
    
    
    (113,736
    )
    
    
    26,515
    
    
    
    41,454
    
    
    
    31,302
    
    
    
    (19,392
    )Write-down of note receivable and other amounts related to
previously discontinued operations, net of recoveries (5)
    
    
    (7,040
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Write-down of minority interest investment (6)
    
    
    (2,890
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Gain on extinguishment of debt (7)
    
    
    10,659
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Gain on sale of building (8)
    
    
    2,504
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Interest and other income (expense), net (9)
    
    
    (1,891
    )
    
    
    137
    
    
    
    (759
    )
    
    
    (1,842
    )
    
    
    (2,000
    )Income (loss) from continuing operations before income taxes
    
    
    (112,394
    )
    
    
    26,652
    
    
    
    40,695
    
    
    
    29,460
    
    
    
    (21,392
    )Income tax provision (benefit) (10)
    
    
    28,545
    
    
    
    (17,229
    )
    
    
    2,193
    
    
    
    3,746
    
    
    
    (979
    )Income (loss) from continuing operations before
extraordinary gain
    
    
    (140,939
    )
    
    
    43,881
    
    
    
    38,502
    
    
    
    25,714
    
    
    
    (20,413
    )Loss from discontinued operations, net of income tax
benefits (3)(11)
    
    
    
    
    
    
    
    
    
    
    (1,075
    )
    
    
    (16,973
    )
    
    
    (61,023
    )Extraordinary gain on settlement of litigation (12)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,891
    
    
    
    Net income (loss)
    
    $
    (140,939
    )
    
    $
    43,881
    
    
    $
    37,427
    
    
    $
    11,632
    
    
    $
    (81,436
    )Percentage of net sales:Gross profit
    
    
    38.4
    %
    
    
    41.7
    %
    
    
    43.5
    %
    
    
    41.9
    %
    
    
    33.3
    %Selling, general and administrative expenses
    
    
    26.6
    %
    
    
    26.2
    %
    
    
    25.2
    %
    
    
    25.3
    %
    
    
    26.7
    %Research and development expense
    
    
    10.4
    %
    
    
    9.6
    %
    
    
    9.2
    %
    
    
    8.9
    %
    
    
    8.3
    %Impairment charges
    
    
    26.9
    %
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    5.6
    %Operating income (loss)
    
    
    (25.5
    )%
    
    
    6.0
    %
    
    
    9.1
    %
    
    
    7.8
    %
    
    
    (7.3
    )%Income (loss) from continuing operations before
extraordinary gain
    
    
    (31.6
    )%
    
    
    9.9
    %
    
    
    8.5
    %
    
    
    6.4
    %
    
    
    (7.6
    )%Net income (loss)
    
    
    (31.6
    )%
    
    
    9.9
    %
    
    
    8.2
    %
    
    
    2.9
    %
    
    
    (30.5
    )%
 33




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##### Table of Contents



As of or for the Year Ended(In thousands, except per share and worldwide
    
    January 3,
    
    December 29,
    
    December 30,
    
    December 31,
    
    January 1,employment figures)
    
    2009
    
    2007
    
    2006
    
    2005
    
    2005PER SHARE INFORMATION:Basic net income (loss) per share:Income (loss) from continuing operations before
extraordinary gain
    
    $
    (3.90
    )
    
    $
    1.14
    
    
    $
    0.95
    
    
    $
    0.62
    
    
    $
    (0.50
    )Loss from discontinued operations, net of income tax benefits
    
    
    
    
    
    
    
    
    
    
    (0.03
    )
    
    
    (0.41
    )
    
    
    (1.49
    )Extraordinary gain on settlement of litigation
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    0.07
    
    
    
    Net income (loss)
    
    $
    (3.90
    )
    
    $
    1.14
    
    
    $
    0.92
    
    
    $
    0.28
    
    
    $
    (1.99
    )Diluted net income (loss) per share:Income (loss) from continuing operations before
extraordinary gain
    
    $
    (3.90
    )
    
    $
    1.12
    
    
    $
    0.91
    
    
    $
    0.60
    
    
    $
    (0.50
    )Loss from discontinued operations, net of income tax benefits
    
    
    
    
    
    
    
    
    
    
    (0.02
    )
    
    
    (0.40
    )
    
    
    (1.49
    )Extraordinary gain on settlement of litigation
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    0.07
    
    
    
    Net income (loss)
    
    $
    (3.90
    )
    
    $
    1.12
    
    
    $
    0.89
    
    
    $
    0.27
    
    
    $
    (1.99
    )Shares used in computation of income (loss) per share:Basic
    
    
    36,155
    
    
    
    38,479
    
    
    
    40,698
    
    
    
    41,281
    
    
    
    40,838Diluted
    
    
    36,155
    
    
    
    39,058
    
    
    
    42,167
    
    
    
    42,716
    
    
    
    40,838Total stockholders equity per diluted share
    
    $
    6.93
    
    
    $
    10.35
    
    
    $
    10.32
    
    
    $
    8.82
    
    
    $
    10.17BALANCE SHEET INFORMATION:Cash and marketable securities
    
    $
    148,420
    
    
    $
    143,864
    
    
    $
    85,413
    
    
    $
    71,022
    
    
    $
    108,182Working capital
    
    $
    257,555
    
    
    $
    275,696
    
    
    $
    200,808
    
    
    $
    150,318
    
    
    $
    181,999Total assets
    
    $
    519,171
    
    
    $
    689,947
    
    
    $
    593,015
    
    
    $
    529,406
    
    
    $
    578,468Short-term obligations
    
    $
    14,089
    
    
    $
    12,402
    
    
    $
    9,481
    
    
    $
    12,559
    
    
    $
    17,186Long-term obligations (includes obligations under capital
leases)
    
    $
    151,636
    
    
    $
    176,487
    
    
    $
    52,125
    
    
    $
    51,372
    
    
    $
    48,453Stockholders equity
    
    $
    250,588
    
    
    $
    404,445
    
    
    $
    434,953
    
    
    $
    376,583
    
    
    $
    415,509MISCELLANEOUS STATISTICS:Common shares outstanding at year end
    
    
    36,049
    
    
    
    36,918
    
    
    
    41,458
    
    
    
    40,036
    
    
    
    43,023Average worldwide employment
    
    
    1,900
    
    
    
    1,943
    
    
    
    1,940
    
    
    
    1,978
    
    
    
    1,352Sales per employee
    
    $
    234
    
    
    $
    229
    
    
    $
    234
    
    
    $
    204
    
    
    $
    198
 
 (1)
    
    We use a conventional 52/53-week accounting fiscal year. Our fiscal year ends on the
Saturday closest to December 31, and our fiscal quarters end on the Saturday closest to the
end of each corresponding calendar quarter. Fiscal year 2008 (referred to herein as 2008)
ended on January 3, 2009, fiscal year 2007 (referred to herein as 2007) ended on December
29, 2007, fiscal year 2006 (referred to herein as 2006) ended on December 30, 2006, fiscal
year 2005 (referred to herein as 2005) ended on December 31, 2005 and fiscal year 2004
(referred to herein as 2004) ended on January 1, 2005.(2)
    
    In July 2004, we acquired Spectra-Physics and the transaction was accounted for using
the purchase method. Our results of operations for 2004 included the results of operations
of Spectra-Physics from July 16, 2004, the closing date of the acquisition.(3)
    
    In 2004, we determined that goodwill and other intangible assets of our former APAS
Division were impaired and recorded impairment charges of $56.6 million related to goodwill
and $2.7 million related to other acquired intangible assets, of which $1.8 million is
included in cost of sales,$13.4 million is included in impairment chargesand $44.1
million is included in loss from discontinued operations, net of income tax benefitsfor
2004.In addition, as a result of the acquisition of Spectra-Physics, we determined
that we had duplicate fixed assets that were not needed in our operations and an
intangible asset that was no longer strategic to our business. As a result, we recorded
impairment charges of $3.8 million, of which $1.5 million is included in cost of sales,
$1.1 million is included in impairment chargesand $1.2 million is included in loss from
discontinued operations, net of income tax benefitsfor 2004.(4)
    
    In 2008, we determined that goodwill and other intangible assets related to our Lasers
Division were impaired and recorded impairment charges of $104.6 million related to
goodwill and $15.4 million related to other acquired intangible assets. 34




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(5)
    
    In 2005, we sold our robotic systems operations to Kensington Laboratories LLC
(Kensington) for $0.5 million in cash and a note receivable of $5.7 million, after
adjustments provided for in the purchase agreement, and subleased the facility relating to
such operations to Kensington. In 2008, due to uncertainty regarding collectibility of
such note receivable and amounts owed under the sublease, we wrote off such note receivable
and other amounts owed in full, resulting in charges totaling $7.0 million, net of amounts
recovered relating to the sublease. See further discussion in Note 16 of the Notes to
Consolidated Financial Statements.(6)
    
    In 2008, we determined that a minority interest investment had an other-than-temporary
decline in value and wrote off $2.9 million, representing the full carrying value of such
investment.(7)
    
    In 2008, we extinguished $28.0 million of our convertible subordinated notes for $16.8
million. We recorded a gain of $10.7 million on extinguishment of the debt, net of
unamortized fees.(8)
    
    In 2008, we sold a building under a sale-leaseback agreement for $7.0 million, net of
$0.3 million in selling costs. We recorded a gain on the sale of the building of $2.5
million after considering the net book value of the building and the present value of the
leaseback agreement.(9)
    
    For 2004, such amounts included a $1.4 million write-down of a minority interest
investment made in prior years in a manufacturer of precision mechanical components due to
an other-than-temporary impairment in value. In addition, 2004 included a realized loss of
$1.7 million on sales of marketable securities prior to their maturity in order to fund the
cash portion of the purchase price for the Spectra-Physics acquisition.(10)
    
    We have previously established a valuation allowance against our deferred tax assets
due to uncertainty as to the timing and ultimate realization of those assets. In 2007, we
reduced the valuation allowance against our deferred tax assets by $19.8 million, and in
2008, we reestablished such valuation allowance and recorded an additional valuation
allowance of $4.6 million. See further discussion in Note 11 of the Notes to Consolidated
Financial Statements regarding our valuation allowance. In 2006, 2005 and 2004, we reduced
our tax contingency reserve by $2.2 million, $0.2 million and $3.0 million, respectively.(11)
    
    In 2005, our Board of Directors approved a plan to sell our robotic systems operations.
This divestiture has been accounted for as discontinued operations for all periods
presented.(12)
    
    In March 2005, we settled a dispute arising out of our acquisition of MRSI. As a
result of this settlement, we recorded an extraordinary gain of $2.9 million in the first
quarter of 2005.(13)
    
    Certain reclassifications have been made to prior year amounts to conform to the
current year presentation. 35




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Item 7. Managements Discussion and Analysis of Financial Condition and Results of Operations
 The following discussion and analysis of our financial condition and results of operations
should be read in conjunction with our consolidated financial statements and related notes included
in this Annual Report on Form 10-K . This discussion contains forward-looking statements that
involve risks and uncertainties. These statements are based on assumptions that we consider
reasonable. When used in this report, the words anticipates, believes, can, continue,
could, would, estimates, expects, intends, may, plans, potential, predicts,
should, will and similar expressions or the negative of such expressions are intended to
identify these forward-looking statements. In addition, any statements that refer to projections
of our future financial performance, trends in our businesses, or other characterizations of future
events or circumstances are forward-looking statements. Our actual results could differ materially
from those anticipated in these forward-looking statements as a result of certain factors
including, but not limited to, those discussed in Item 1A (Risk Factors) of Part I of this Annual
Report on Form 10-K .
 Overview
   Acquisitions
  Fiscal Year End
  Critical Accounting Policies and Estimates
  36




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Revenue Recognition
    Accounts and Notes Receivable
  notes receivable, net Accounting for Transfers and Servicing
of Financial Assets and
 37




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##### Table of Contents



Extinguishments of Liabilities (a replacement of FASB Statement No. 125) notes receivable, net short-term obligations notes receivable, net short-term obligations
 Pension Plans
  Inventories
  Warranty
  Impairment of Assets
  38




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Goodwill and Other Intangible Assets,
   39




---



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Income Taxes
 Accounting for Income Taxes
    Accounting for Uncertainty in Income Taxes 
An Interpretation of FASB Statement No. 109
 40




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##### Table of Contents



Stock-Based Compensation
 Share-Based Payment
   Year EndedJanuary 3,
    
    December 29,
    
    December 30,(In thousands)
    
    2009
    
    2007
    
    2006Cost of sales
    
    $
    52
    
    
    $
    425
    
    
    $
    516Selling, general and administrative expenses
    
    
    1,654
    
    
    
    3,005
    
    
    
    5,935Research and development expense
    
    
    97
    
    
    
    238
    
    
    
    464$
    1,803
    
    
    $
    3,668
    
    
    $
    6,915
 41




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##### Table of Contents



Results of Operations for the Years Ended January 3, 2009, December 29, 2007 and December 30, 2006
  Percentage of Net SalesFor the Year EndedJanuary 3,
    
    December 29,
    
    December 30,2009
    
    2007
    
    2006Net sales
    
    
    100.0
    %
    
    
    100.0
    %
    
    
    100.0
    %Cost of sales
    
    
    61.6
    
    
    
    58.3
    
    
    
    56.5Gross profit
    
    
    38.4
    
    
    
    41.7
    
    
    
    43.5Selling, general and administrative expenses
    
    
    26.6
    
    
    
    26.2
    
    
    
    25.2Research and development expense
    
    
    10.4
    
    
    
    9.6
    
    
    
    9.2Impairment charges
    
    
    26.9
    
    
    
    
    
    
    
    Operating income (loss)
    
    
    (25.5
    )
    
    
    5.9
    
    
    
    9.1Write-down of note receivable and other amounts related to
previously discontinued operations, net of recoveries
    
    
    (1.6
    )
    
    
    
    
    
    
    Write-down of minority interest investment
    
    
    (0.7
    )
    
    
    
    
    
    
    Gain on extinguishment of debt
    
    
    2.4
    
    
    
    
    
    
    
    Gain on sale of building
    
    
    0.6
    
    
    
    
    
    
    
    Interest and other income (expense), net
    
    
    (0.4
    )
    
    
    0.1
    
    
    
    (0.2
    )Income (loss) from continuing operations before income
taxes
    
    
    (25.2
    )
    
    
    6.0
    
    
    
    8.9Income tax provision (benefit)
    
    
    6.4
    
    
    
    (3.9
    )
    
    
    0.4Income (loss) from continuing operations
    
    
    (31.6
    )
    
    
    9.9
    
    
    
    8.5Loss from discontinued operations, net of income tax
benefits
    
    
    
    
    
    
    
    
    
    
    (0.3
    )Net income (loss)
    
    
    (31.6
    )%
    
    
    9.9
    %
    
    
    8.2
    %
  Net Sales
   42




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##### Table of Contents



Year Ended
    
    
    
    
    
    PercentageJanuary 3,
    
    December 29,
    
    Increase /
    
    Increase /(In thousands, except percentages)
    
    2009
    
    2007
    
    (Decrease)
    
    (Decrease)United States
    
    $
    208,736
    
    
    $
    223,891
    
    
    $
    (15,155
    )
    
    
    (6.8
    )%Europe
    
    
    114,936
    
    
    
    112,695
    
    
    
    2,241
    
    
    
    2.0Pacific Rim
    
    
    100,676
    
    
    
    80,946
    
    
    
    19,730
    
    
    
    24.4Other
    
    
    20,988
    
    
    
    27,665
    
    
    
    (6,677
    )
    
    
    (24.1
    )Total sales
    
    $
    445,336
    
    
    $
    445,197
    
    
    $
    139
    
    
    
    0.0
    %
 Year Ended
    
    
    
    
    
    PercentageDecember 29,
    
    December 30,
    
    Increase /
    
    Increase /(In thousands, except percentages)
    
    2007
    
    2006
    
    (Decrease)
    
    (Decrease)United States
    
    $
    223,891
    
    
    $
    238,433
    
    
    $
    (14,542
    )
    
    
    (6.1
    )%Europe
    
    
    112,695
    
    
    
    99,968
    
    
    
    12,727
    
    
    
    12.7Pacific Rim
    
    
    80,946
    
    
    
    91,277
    
    
    
    (10,331
    )
    
    
    (11.3
    )Other
    
    
    27,665
    
    
    
    25,046
    
    
    
    2,619
    
    
    
    10.5Total sales
    
    $
    445,197
    
    
    $
    454,724
    
    
    $
    (9,527
    )
    
    
    (2.1
    )%
  43




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##### Table of Contents



Gross Margin
  Selling, General and Administrative (SG&A) Expenses
    Research and Development (R&D) Expense
   44




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##### Table of Contents



Impairment Charges
  Write-Down of Note Receivable and Other Amounts
  Write-Down of Minority Interest Investment
  Gain on Extinguishment of Debt
  Gain on Sale of Building
  Interest and Other Income (Expense), Net
  45




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##### Table of Contents



Income Taxes
     46




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##### Table of Contents



Liquidity and Capital Resources
       long-term debt
 47




---



##### Table of Contents



short-term
obligations short-term obligations .
      48




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##### Table of Contents



Contractual Obligations
   Capital
    
    Long-Term
    
    Operating
    
    Total(In thousands)
    
    Leases
    
    Debt
    
    Leases
    
    ObligationsPayments Due By Period:2009
    
    $
    190
    
    
    $
    3,675
    
    
    $
    9,459
    
    
    $
    13,3242010
    
    
    190
    
    
    
    3,675
    
    
    
    5,554
    
    
    
    9,4192011
    
    
    189
    
    
    
    3,675
    
    
    
    4,773
    
    
    
    8,6372012
    
    
    188
    
    
    
    148,838
    
    
    
    2,278
    
    
    
    151,3042013
    
    
    187
    
    
    
    
    
    
    
    1,781
    
    
    
    1,968Thereafter
    
    
    813
    
    
    
    
    
    
    
    2,202
    
    
    
    3,015Total minimum payments
    
    
    1,757
    
    
    
    159,863
    
    
    $
    26,047
    
    
    $
    187,667Less amount representing
interest
    
    
    (428
    )
    
    
    (12,863
    )Present value of obligation
    
    $
    1,329
    
    
    $
    147,000
  Operating(In thousands)
    
    LeasesPayments Due By Period:2009
    
    $
    1902010
    
    
    1842011
    
    
    1382012
    
    
    122013
    
    
    Total minimum sublease payments
    
    $
    524
  New Accounting Standards
 Noncontrolling Interests in Consolidated
Financial Statementsan amendment of ARB No. 51
 49




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##### Table of Contents



Business Combinations
 Disclosures about Derivative Instruments and
Hedging Activities.
 Determination of the Useful Life of Intangible
Assets Goodwill and Other Intangible Assets
 The Hierarchy of Generally Accepted Accounting
Principles. The Meaning of Present Fairly in Conformity With Generally Accepted Accounting Principles
 Accounting for Convertible Debt Instruments That
May Be Settled in Cash upon Conversion (Including Partial Cash Settlement).
 50




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##### Table of Contents



Employers Disclosures about
Postretirement Benefit Plan Assets
 
 Item 7A.
    
    Quantitative and Qualitative Disclosures About Market Risk
  Foreign Currency Risk
     Interest Rate Risk
  51




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##### Table of Contents



Item 8.
    
    Financial Statements and Supplementary Data
  
 Item 9.
    
    Changes in and Disagreements with Accountants on Accounting and Financial
Disclosure
  
 Item 9A.
    
    Controls and Procedures
 Evaluation of Disclosure Controls and Procedures
  Managements Annual Report on Internal Control over Financial Reporting
 Internal Control over Financial Reporting
   52




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##### Table of Contents



Managements Assessment of the Effectiveness of our Internal Control over Financial Reporting
 Internal Control  Integrated Framework
 Attestation Report
  Attestation Report of Independent Registered Public Accounting Firm
 Report of Independent Registered Public Accounting Firm
      53




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##### Table of Contents



/s/ Ernst & Young LLPOrange County, CaliforniaMarch 16, 2009 Changes in Internal Control Over Financial Reporting
  
 Item 9B.
    
    Other Information
  54




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##### Table of Contents



PART III
 
 Item 10.
    
    Directors, Executive Officers and Corporate Governance
  
 Item 11.
    
    Executive Compensation
  
 Item 12.
    
    Security Ownership of Certain Beneficial Owners and Management and Related
Stockholder Matters
  
 Item 13.
    
    Certain Relationships and Related Transactions, and Director Independence
  
 Item 14.
    
    Principal Accounting Fees and Services
  55




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##### Table of Contents



PART IV
 
 Item 15. Exhibits, Financial Statement Schedules
 (a)
    
    The following documents are filed as part of this Annual Report on Form 10-K:
 (1)
    
    Financial Statements.See Index to Financial Statements and Schedule on page F-1.(2)
    
    Financial Statement Schedules.See Index to Financial Statements and Schedule on page F-1. All other schedules are
omitted as the required information is not present or is not present in amounts
sufficient to require submission of the schedule, or because the information required is
included in the consolidated financial statements or notes thereto.(3)
    
    Exhibits.The following exhibits are filed (or incorporated by reference herein) as part of this
Annual Report on Form 10-K:
 ExhibitNumber
    
    Description of Exhibit2.1
    
    Stock Purchase Agreement dated May 28, 2004 by and among the Registrant,
Thermo Electron Corporation and other related parties (incorporated by
reference to Exhibit 2.1 to the Registrants Current Report on Form 8-K filed
on June 17, 2004).3.1
    
    Restated Articles of Incorporation of the Registrant, as amended to date
(incorporated by reference to Exhibit 3.1 of the Registrants Annual Report on
Form 10-K for the year ended December 30, 2006).3.2
    
    Restated Bylaws of the Registrant, as amended to date (incorporated by
reference to Exhibit 3.2 of the Registrants Annual Report on Form 10-K for
the year ended July 31, 1992).4.1
    
    Indenture, dated February 7, 2007, between the Registrant and Wells Fargo
Bank, N.A. (incorporated by reference to Exhibit 10.1 to the Registrants
Current Report on Form 8-K filed with the Securities and Exchange Commission
on February 7, 2007).4.2
    
    Registration Rights Agreement, dated February 7, 2007, between the Registrant
and Merrill, Lynch, Pierce, Fenner & Smith Incorporated (incorporated by
reference to Exhibit 10.2 to the Registrants Current Report on Form 8-K filed
with the Securities and Exchange Commission on February 7, 2007).4.3
    
    Form of 2.50% Convertible Subordinated Note due 2012 (incorporated by
reference to Exhibit 10.3 to the Registrants Current Report on Form 8-K filed
with the Securities and Exchange Commission on February 7, 2007).10.1
    
    Lease Agreement dated March 27, 1991, as amended, pertaining to premises
located in Irvine, California (incorporated by reference to Exhibit 10.1 of
the Registrants Annual Report on Form 10-K for the year ended July 31, 1992).10.2
    
    First Amendment to Lease dated January 31, 2002, between the Registrant and
IRP Muller Associates, LLC pertaining to premises located in Irvine,
California (incorporated by reference to Exhibit 10.2 of the Registrants
Annual Report on Form 10-K for the year ended December 31, 2001).
 56




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##### Table of Contents



ExhibitNumber
    
    Description of Exhibit10.3
    
    Second Amendment to Lease dated September 28, 2004, between the Registrant and
BCSD Properties, L.P. pertaining to premises located in Irvine, California
(incorporated by reference to Exhibit 10.5 of the Registrants Quarterly
Report on Form 10-Q for the quarter ended October 2, 2004).10.4*
    
    1992 Stock Incentive Plan (incorporated by reference to exhibit in the
Registrants 1992 Proxy Statement).10.5*
    
    1999 Stock Incentive Plan (incorporated by reference to Exhibit 10.11 of the
Registrants Annual Report on Form 10-K for the year ended December 31, 1999).10.6*
    
    Amendment to 1999 Stock Incentive Plan (incorporated by reference to Exhibit
10.4 to the Registrants Registration Statement on Form S-3, No. 333-40878,
filed with the Securities and Exchange Commission on July 6, 2000).10.7*
    
    2001 Stock Incentive Plan (incorporated by reference to Appendix B to the
Registrants Definitive Proxy Statement filed with the Securities and Exchange
Commission on April 27, 2001).10.8*
    
    Form of Nonqualified Stock Option Agreement under the Registrants 2001 Stock
Incentive Plan, as amended (incorporated by reference to Exhibit 10.9 of the
Registrants Annual Report on Form 10-K for the year ended December 31, 2002).10.9*
    
    Form of Incentive Stock Option Agreement under the Registrants 2001 Stock
Incentive Plan (incorporated by reference to Exhibit 10.10 of the Registrants
Annual Report on Form 10-K for the year ended December 31, 2002).10.10*
    
    Form of Restricted Stock Agreement under the Registrants 2001 Stock Incentive
Plan (incorporated by reference to Exhibit 10.3 of the Registrants Quarterly
Report on Form 10-Q for the quarter ended October 2, 2004).10.11*
    
    Form of Nonqualified Stock Option Agreement between the Registrant and each of
the former optionholders of Micro Robotics Systems, Inc. (incorporated by
reference to Exhibit 4.1 of the Registrants Registration Statement on Form
S-8, File No. 333-86268, filed with the Securities and Exchange Commission on
April 15, 2002).10.12*
    
    2006 Performance-Based Stock Incentive Plan (incorporated by reference to
Appendix B of the Registrants Definitive Proxy Statement filed with the
Securities and Exchange Commission on April 10, 2006).10.13*
    
    Form of Restricted Stock Unit Award Agreement to be used under the
Registrants 2006 Performance-Based Stock Incentive Plan (incorporated by
reference to Exhibit 10.2 to the Registrants Current Report on Form 8-K filed
with the Securities and Exchange Commission on May 23, 2006).10.14*
    
    Amended and Restated Employee Stock Purchase Plan, as amended (incorporated by
reference to Exhibit 10.15 to the Registrants Annual Report on Form 10-K for
the year ended December 31, 2005).10.15*
    
    Severance Compensation Agreement dated April 1, 2008 between the Registrant
and Robert J. Phillippy, President and Chief Executive Officer (incorporated
by reference to Exhibit 10.1 to the Registrants Current Report on Form 8-K
filed with the Securities and Exchange Commission on April 7, 2008).10.16*
    
    Severance Compensation Agreement dated April 1, 2008 between the Registrant
and Charles F. Cargile, Senior Vice President, Chief Financial Officer and
Treasurer (incorporated by reference to Exhibit 10.2 to the Registrants
Current Report on Form 8-K filed with the Securities and Exchange Commission
on April 7, 2008).
 57




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##### Table of Contents



ExhibitNumber
    
    Description of Exhibit10.17*
    
    Form of Severance Compensation Agreement between the Registrant and certain of
its executive and other officers (incorporated by reference to Exhibit 10.3 to
the Registrants Current Report on Form 8-K filed with the Securities and
Exchange Commission on April 7, 2008).10.18*
    
    Form of Indemnification Agreement between the Registrant and each of its
directors and executive officers (incorporated by reference to Exhibit 10.3 of
the Registrants Quarterly Report on Form 10-Q for the quarter ended June 30,
2002).10.19*
    
    Separation Agreement, dated September 18, 2007, by and between the Registrant
and Robert G. Deuster (incorporated by reference to Exhibit 10.1 to the
Current Report on Form 8-K filed with the Securities and Exchange Commission
on September 20, 2007).10.20
    
    Loan Agreement between the Registrant and Bank of America, N.A. dated January
2, 2008 (incorporated by reference to Exhibit 10.1 to the Registrants Current
Report on Form 8-K filed with the Securities and Exchange Commission on
January 7, 2008).10.21
    
    Amendment No. 1 to Loan Agreement between the Registrant and Bank of America,
N.A. dated December 1, 2008 (incorporated by reference to Exhibit 10.1 to the
Registrants Current Report on Form 8-K filed with the Securities and Exchange
Commission on December 4, 2008).10.22
    
    Security Agreement between the Registrant and Bank of America, N.A. dated
December 1, 2008 (incorporated by reference to Exhibit 10.2 to the
Registrants Current Report on Form 8-K filed with the Securities and Exchange
Commission on December 4, 2008).21.1
    
    Subsidiaries of the Registrant.23.1
    
    Consent of Independent Registered Public Accounting Firm.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.
 
 *
    
    This exhibit is identified as a management contract or compensatory
plan or arrangement pursuant to Item 15(a)(3) of Form 10-K. 58




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##### Table of Contents



SIGNATURES
  NEWPORT CORPORATIONBy:
    /s/ Robert J. PhillippyRobert J. PhillippyPresident and Chief Executive Officer   SIGNATURE
    
    TITLE
    
    DATE/s/ Robert J. Phillippy
    
    President and Chief Executive Officer
    
    March 17, 2009Robert J. Phillippy
    
    (Principal Executive Officer)/s/ Charles F. Cargile
    
    Senior Vice President, Chief Financial
    
    March 17, 2009Charles F. Cargile
    
    Officer and Treasurer (Principal Financial Officer)/s/ Mark J. Nelson
    
    Vice President and Corporate Controller
    
    March 17, 2009Mark J. Nelson/s/ Robert L. Guyett
    
    Director
    
    March 17, 2009Robert L. Guyett/s/ Michael T. ONeill
    
    Director
    
    March 17, 2009Michael T. ONeill/s/ C. Kumar N. Patel
    
    Director
    
    March 17, 2009C. Kumar N. Patel/s/ Kenneth F. Potashner
    
    Director
    
    March 17, 2009Kenneth F. Potashner/s/ Peter J. Simone
    
    Director
    
    March 17, 2009Peter J. Simone/s/ Markos I. Tambakeras
    
    Director
    
    March 17, 2009Markos I. Tambakeras
 59




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##### Table of Contents



INDEX TO FINANCIAL STATEMENTS AND SCHEDULE
 PageReport of Independent Registered Public Accounting Firm
    
    F-2Consolidated statements of operations for the years ended
January 3, 2009, December 29, 2007 and December 30, 2006
    
    F-3Consolidated balance sheets as of January 3, 2009 and December 29, 2007
    
    F-4Consolidated statements of cash flows for the years ended
January 3, 2009, December 29, 2007 and December 30, 2006
    
    F-5Consolidated statements of comprehensive income (loss) and stockholders equity
for the years ended January 3, 2009, December 29, 2007 and December 30, 2006
    
    F-6Notes to consolidated financial statements
    
    F-7Financial Statement Schedule  Schedule II  Consolidated valuation accounts
    
    F-39
 F-1




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Report of Independent Registered Public Accounting Firm
     Accounting for Uncertainty in Income Taxes  an interpretation of
FASB Statement No. 109
 Internal Control- Integrated Framework
 /s/ Ernst & Young LLP 
 F-2




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##### Table of Contents



NEWPORT CORPORATION
Consolidated Statements of Operations
(In thousands, except per share data)
 Year EndedJanuary 3,
    
    December 29,
    
    December 30,2009
    
    2007
    
    2006Net sales
    
    $
    445,336
    
    
    $
    445,197
    
    
    $
    454,724Cost of sales
    
    
    274,542
    
    
    
    259,636
    
    
    
    256,756Gross profit
    
    
    170,794
    
    
    
    185,561
    
    
    
    197,968Selling, general and administrative expenses
    
    
    118,518
    
    
    
    116,476
    
    
    
    114,533Research and development expense
    
    
    46,068
    
    
    
    42,570
    
    
    
    41,981Impairment charges
    
    
    119,944
    
    
    
    
    
    
    
    Operating income (loss)
    
    
    (113,736
    )
    
    
    26,515
    
    
    
    41,454Write-down of note receivable and other amounts related to
previously discontinued operations, net of recoveries
    
    
    (7,040
    )
    
    
    
    
    
    
    Write-down of minority interest investment
    
    
    (2,890
    )
    
    
    
    
    
    
    Gain on extinguishment of debt
    
    
    10,659
    
    
    
    
    
    
    
    Gain on sale of building
    
    
    2,504
    
    
    
    
    
    
    
    Interest and other income (expense), net
    
    
    (1,891
    )
    
    
    137
    
    
    
    (759
    )Income (loss) from continuing operations before income
taxes
    
    
    (112,394
    )
    
    
    26,652
    
    
    
    40,695Income tax provision (benefit)
    
    
    28,545
    
    
    
    (17,229
    )
    
    
    2,193Income (loss) from continuing operations
    
    
    (140,939
    )
    
    
    43,881
    
    
    
    38,502Loss from discontinued operations, net of income tax
benefits
of $31 for the year ended December 30, 2006
    
    
    
    
    
    
    
    
    
    
    (1,075
    )Net income (loss)
    
    $
    (140,939
    )
    
    $
    43,881
    
    
    $
    37,427Basic income (loss) per share:Income (loss) from continuing operations
    
    $
    (3.90
    )
    
    $
    1.14
    
    
    $
    0.95Loss from discontinued operations, net of income tax benefits
    
    
    
    
    
    
    
    
    
    
    (0.03
    )Net income (loss)
    
    $
    (3.90
    )
    
    $
    1.14
    
    
    $
    0.92Diluted income (loss) per share:Income (loss) from continuing operations
    
    $
    (3.90
    )
    
    $
    1.12
    
    
    $
    0.91Loss from discontinued operations, net of income tax benefits
    
    
    
    
    
    
    
    
    
    
    (0.02
    )Net income (loss)
    
    $
    (3.90
    )
    
    $
    1.12
    
    
    $
    0.89Shares used in the computation of income (loss) per share:Basic
    
    
    36,155
    
    
    
    38,479
    
    
    
    40,698Diluted
    
    
    36,155
    
    
    
    39,058
    
    
    
    42,167
  F-3




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##### Table of Contents



NEWPORT CORPORATION
Consolidated Balance Sheets
(In thousands, except share and per share data)
 January 3,
    
    December 29,2009
    
    2007ASSETSCurrent assets:Cash and cash equivalents
    
    $
    74,874
    
    
    $
    88,737Marketable securities
    
    
    73,546
    
    
    
    55,127Accounts receivable, net of allowance for doubtful accounts of $1,642
and $1,381, as of January 3, 2009 and December 29, 2007, respectively
    
    
    75,258
    
    
    
    87,606Notes receivable, net
    
    
    6,610
    
    
    
    3,821Inventories
    
    
    98,833
    
    
    
    113,969Deferred income taxes
    
    
    7,504
    
    
    
    6,248Prepaid expenses and other current assets
    
    
    10,740
    
    
    
    13,603Total current assets
    
    
    347,365
    
    
    
    369,111Property and equipment, net
    
    
    60,245
    
    
    
    61,872Goodwill
    
    
    68,540
    
    
    
    174,197Deferred income taxes
    
    
    2,555
    
    
    
    16,932Intangible assets, net
    
    
    26,696
    
    
    
    46,171Investments and other assets
    
    
    13,770
    
    
    
    21,664$
    519,171
    
    
    $
    689,947LIABILITIES AND STOCKHOLDERS EQUITYCurrent liabilities:Short-term obligations
    
    $
    14,089
    
    
    $
    12,402Accounts payable
    
    
    24,636
    
    
    
    33,319Accrued payroll and related expenses
    
    
    21,827
    
    
    
    23,096Accrued expenses and other current liabilities
    
    
    29,258
    
    
    
    24,598Total current liabilities
    
    
    89,810
    
    
    
    93,415Long-term debt
    
    
    150,307
    
    
    
    175,000Obligations under capital leases, less current portion
    
    
    1,220
    
    
    
    1,381Accrued pension liabilities
    
    
    10,652
    
    
    
    10,740Accrued restructuring costs and other liabilities
    
    
    16,594
    
    
    
    4,966Commitments and contingenciesStockholders equity:Common stock, par value $0.1167 per share, 200,000,000 shares authorized;
36,048,634 and 36,917,734 shares issued and outstanding as of
January 3, 2009 and December 29, 2007, respectively
    
    
    4,207
    
    
    
    4,308Capital in excess of par value
    
    
    380,463
    
    
    
    389,328Accumulated other comprehensive income
    
    
    6,291
    
    
    
    10,243Retained earnings (accumulated deficit)
    
    
    (140,373
    )
    
    
    566Total stockholders equity
    
    
    250,588
    
    
    
    404,445$
    519,171
    
    
    $
    689,947
  F-4




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##### Table of Contents



NEWPORT CORPORATION
Consolidated Statements of Cash Flows
(In thousands)
 Year EndedJanuary 3,
    
    
    December 29,
    
    
    December 30,2009
    
    
    2007
    
    
    2006CASH FLOWS FROM OPERATING ACTIVITIES:Net income (loss)
    
    $
    (140,939
    )
    
    $
    43,881
    
    
    $
    37,427Adjustments to reconcile net income (loss) to net cash provided by operating activities:Impairment of goodwill and intangible assets
    
    
    119,944
    
    
    
    
    
    
    
    Depreciation and amortization
    
    
    22,204
    
    
    
    21,260
    
    
    
    19,494Deferred income taxes, net
    
    
    15,186
    
    
    
    (19,679
    )
    
    
    704Provision for losses on inventories
    
    
    7,989
    
    
    
    4,501
    
    
    
    2,411Write-down of note receivable and other amounts
related to previously discontinued operations
    
    
    7,061
    
    
    
    
    
    
    
    Write-down of minority interest investment
    
    
    2,890
    
    
    
    
    
    
    
    Stock-based compensation expense
    
    
    1,803
    
    
    
    3,668
    
    
    
    6,915Provision for doubtful accounts, net
    
    
    574
    
    
    
    190
    
    
    
    697(Gain) loss on disposal of property and equipment
    
    
    (2,818
    )
    
    
    198
    
    
    
    45Gain on extinguishment of debt
    
    
    (10,659
    )
    
    
    
    
    
    
    Loss on disposal of business
    
    
    
    
    
    
    
    
    
    
    958Gain on sale of patents
    
    
    
    
    
    
    
    
    
    
    (1,425
    )Realized foreign exchange translation gain
    
    
    
    
    
    
    
    
    
    
    (915
    )Increase (decrease) in cash, net of acquisitions and divestitures, due to changes in:Accounts and notes receivable
    
    
    9,435
    
    
    
    9,862
    
    
    
    (17,972
    )Inventories
    
    
    5,537
    
    
    
    (22,712
    )
    
    
    (19,804
    )Prepaid expenses and other assets
    
    
    (64
    )
    
    
    (2,193
    )
    
    
    (3,028
    )Accounts payable
    
    
    (8,538
    )
    
    
    1,147
    
    
    
    4,483Accrued payroll and related expenses
    
    
    (1,101
    )
    
    
    (5,032
    )
    
    
    4,373Accrued expenses and other liabilities
    
    
    16,191
    
    
    
    996
    
    
    
    (4,991
    )Accrued restructuring costs and purchase accounting reserves
    
    
    32
    
    
    
    (712
    )
    
    
    (1,019
    )Net cash provided by operating activities
    
    
    44,727
    
    
    
    35,375
    
    
    
    28,353CASH FLOWS FROM INVESTING ACTIVITIES:Purchase of property and equipment
    
    
    (18,575
    )
    
    
    (18,705
    )
    
    
    (18,894
    )Proceeds from the sale of property and equipment, net of selling costs
    
    
    6,983
    
    
    
    
    
    
    
    237Purchase of marketable securities
    
    
    (71,789
    )
    
    
    (58,061
    )
    
    
    (46,034
    )Proceeds from the sale of marketable securities
    
    
    51,759
    
    
    
    54,013
    
    
    
    38,691Business acquisitions, net of cash acquired
    
    
    
    
    
    
    
    
    
    
    (7,118
    )Proceeds from the sale of patents
    
    
    
    
    
    
    
    
    
    
    1,425Net cash used in investing activities
    
    
    (31,622
    )
    
    
    (22,753
    )
    
    
    (31,693
    )CASH FLOWS FROM FINANCING ACTIVITIES:Proceeds from the issuance long-term debt
    
    
    3,307
    
    
    
    175,000
    
    
    
    Debt issuance costs
    
    
    
    
    
    
    (5,563
    )
    
    
    Repayment of long-term debt
    
    
    (16,850
    )
    
    
    (48,403
    )
    
    
    (87
    )Short term borrowings (repayments), net
    
    
    (1,520
    )
    
    
    14
    
    
    
    (2,576
    )Proceeds from the issuance of common stock under employee plans
    
    
    2,053
    
    
    
    5,064
    
    
    
    11,931Purchases of the Companys common stock
    
    
    (12,822
    )
    
    
    (86,998
    )
    
    
    (1,387
    )Net cash provided by (used in) financing activities
    
    
    (25,832
    )
    
    
    39,114
    
    
    
    7,881Impact of foreign exchange rate changes on cash balances
    
    
    (1,136
    )
    
    
    1,071
    
    
    
    1,277Net increase (decrease) in cash and cash equivalents
    
    
    (13,863
    )
    
    
    52,807
    
    
    
    5,818Cash and cash equivalents at beginning of year
    
    
    88,737
    
    
    
    35,930
    
    
    
    30,112Cash and cash equivalents at end of period
    
    $
    74,874
    
    
    $
    88,737
    
    
    $
    35,930Supplemental disclosures of cash flow information:Cash paid during the year for:Interest
    
    $
    5,146
    
    
    $
    3,793
    
    
    $
    3,124Income taxes, net
    
    $
    26
    
    
    $
    3,488
    
    
    $
    5,291
  F-5




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##### Table of Contents



NEWPORT CORPORATION
Consolidated Statements of Comprehensive Income (Loss) and Stockholders Equity
(In thousands)
 RetainedDeferred
    
    Accumulated other
    
    earnings/
    
    TotalCommon Stock
    
    Capital in excess
    
    stock
    
    comprehensive
    
    (accumulated
    
    stockholdersShares
    
    Amount
    
    of par value
    
    compensation
    
    income
    
    deficit)
    
    equityDecember 31, 2005
    
    
    40,036
    
    
    $
    4,672
    
    
    $
    449,921
    
    
    $
    (316
    )
    
    $
    1,263
    
    
    $
    (78,957
    )
    
    $
    376,583Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    37,427
    
    
    
    37,427Foreign currency translation gain, net of
reclassification adjustment
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,466
    
    
    
    
    
    
    
    2,466Minimum pension liability adjustment, net
of income tax of $224
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,220
    
    
    
    
    
    
    
    1,220Unrealized gain on marketable securities, net of reclassification adjustment
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    192
    
    
    
    
    
    
    
    192Comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    41,305Adjustment to initially apply SFAS No.
158,
net of income tax benefit of $364
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (731
    )
    
    
    
    
    
    
    (731
    )Issuance of common stock under employee
plans
    
    
    1,504
    
    
    
    175
    
    
    
    11,756
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    11,931Stock-based compensation expense
    
    
    
    
    
    
    
    
    
    
    6,948
    
    
    
    304
    
    
    
    
    
    
    
    
    
    
    
    7,252Repurchases of common stock
    
    
    (81
    )
    
    
    (9
    )
    
    
    (1,378
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,387
    )Cancellation of restricted stock
    
    
    (1
    )
    
    
    
    
    
    
    (12
    )
    
    
    12
    
    
    
    
    
    
    
    
    
    
    
    December 30, 2006
    
    
    41,458
    
    
    
    4,838
    
    
    
    467,235
    
    
    
    
    
    
    
    4,410
    
    
    
    (41,530
    )
    
    
    434,953Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    43,881
    
    
    
    43,881Foreign currency translation gain
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4,868
    
    
    
    
    
    
    
    4,868Unrecognized net pension gain, net of
income tax of $457
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    783
    
    
    
    
    
    
    
    783Unrealized gain on marketable securities
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    182
    
    
    
    
    
    
    
    182Comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    49,714Cumulative effect to prior year
accumulated
deficit related to the adoption of FASB
Interpretation No. 48 (FIN 48) (Note 11)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,785
    )
    
    
    (1,785
    )Issuance of common stock under employee
plans
    
    
    842
    
    
    
    98
    
    
    
    4,966
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    5,064Stock-based compensation expense
    
    
    
    
    
    
    
    
    
    
    3,497
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,497Repurchases of common stock
    
    
    (5,382
    )
    
    
    (628
    )
    
    
    (86,370
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (86,998
    )December 29, 2007
    
    
    36,918
    
    
    
    4,308
    
    
    
    389,328
    
    
    
    
    
    
    
    10,243
    
    
    
    566
    
    
    
    404,445Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (140,939
    )
    
    
    (140,939
    )Foreign currency translation loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (3,251
    )
    
    
    
    
    
    
    (3,251
    )Unrecognized net pension gain, net of
income tax of $48
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    6
    
    
    
    
    
    
    
    6Unrealized loss on marketable securities
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (707
    )
    
    
    
    
    
    
    (707
    )Comprehensive loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (144,891
    )Issuance of common stock under employee
plans
    
    
    320
    
    
    
    38
    
    
    
    2,015
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,053Stock-based compensation expense
    
    
    
    
    
    
    
    
    
    
    1,803
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,803Repurchases of common stock
    
    
    (1,189
    )
    
    
    (139
    )
    
    
    (12,683
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (12,822
    )January 3, 2009
    
    
    36,049
    
    
    $
    4,207
    
    
    $
    380,463
    
    
    $
    
    
    
    $
    6,291
    
    
    $
    (140,373
    )
    
    $
    250,588
  F-6




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##### Table of Contents



NEWPORT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 NOTE 1 ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
 anization
  Basis of Presentation
   Foreign Currency Translation
  Derivative Instruments
 interest and other income (expense), net
  F-7




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##### Table of Contents



Cash and Cash Equivalents and Marketable Securities
 accumulated
other comprehensive income
 Accounts and Notes Receivable
  notes receivable, net Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities (a
replacement of FASB Statement No. 125) notes receivable, net short-term obligations notes receivable, net short-term obligations
 Concentrations of Credit Risk
   F-8




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##### Table of Contents



Pension Plans
  Inventories
  Property and Equipment
  Buildings and improvements
    
    
    3 to 40 yearsMachinery and equipment
    
    
    2 to 20 yearsOffice equipment
    
    
    3 to 10 years
  Intangible Assets, including Goodwill
  Developed technology
    
    10 yearsCustomer relationships
    
    10 yearsOther
    
    3 years
  Goodwill and Other Intangible Assets,
 F-9




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##### Table of Contents



Investments
  Long-Lived Assets
  Warranty
  F-10




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##### Table of Contents



Environmental Reserves
  Revenue Recognition
   Advertising
  Shipping and Handling Costs
 selling, general and administrative
expenses
 F-11




---



##### Table of Contents



Research and Development
  Income Taxes
 Accounting for Income Taxes
 Accounting for Uncertainty in Income Taxes  An
Interpretation of FASB Statement No. 109
 Accounting for Contingencies
 Income (loss) per Share
  Stock-Based Compensation
 Share-Based Payment
 Use of Estimates
  F-12




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##### Table of Contents



Reclassifications
  Recent Accounting Pronouncements
 Noncontrolling Interests in Consolidated Financial
Statements  an amendment of ARB No. 51
 Business Combinations
 Disclosures about Derivative Instruments and Hedging
Activities.
 Determination of the Useful
Life of Intangible Assets Goodwill and Other Intangible Assets
 The Hierarchy of Generally Accepted Accounting
Principles.
 F-13




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##### Table of Contents



The Meaning of Present Fairly in Conformity With Generally Accepted Accounting Principles
 Accounting for Convertible
Debt Instruments That May Be Settled in Cash upon Conversion (Including Partial Cash Settlement) .
 Employers Disclosures about Postretirement
Benefit Plan Assets
 NOTE 2 ACQUISITIONS AND INVESTMENTS
 Acquisition of Laser Product Business from Picarro
    F-14




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##### Table of Contents



(In thousands)Assets acquired and liabilities assumed:Current assets
    
    $
    1,613Goodwill
    
    
    1,584Purchased intangible assets
    
    
    3,300Other assets
    
    
    803Current liabilities
    
    
    (600
    )$
    6,700
  Investments
 investments and other assets
 NOTE 3 MARKETABLE SECURITIES
  (In thousands)
    
    January 3,
    
    December 29,2009
    
    2007U.S. government and agency debt securities
    
    $
    21,516
    
    
    $
    13,063Corporate debt securities
    
    
    18,819
    
    
    
    13,970Equity securities
    
    
    22,054
    
    
    
    16,478Asset-backed securities
    
    
    10,504
    
    
    
    10,674Certificates of deposit
    
    
    653
    
    
    
    942$
    73,546
    
    
    $
    55,127
 accumulated other comprehensive income
 Aggregate Amount of(In thousands)
    
    Aggregate
    
    UnrealizedFair Value
    
    Gains
    
    LossesU.S. government and agency debt securities
    
    $
    21,516
    
    
    $
    419
    
    
    $
    (4
    )Corporate debt securities
    
    
    18,819
    
    
    
    26
    
    
    
    (588
    )Equity securities
    
    
    22,054
    
    
    
    154
    
    
    
    Asset-backed securities
    
    
    10,504
    
    
    
    
    
    
    
    (938
    )Certificates of deposit
    
    
    653
    
    
    
    1
    
    
    
    $
    73,546
    
    
    $
    600
    
    
    $
    (1,530
    )
 F-15




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##### Table of Contents



Marketable Securities In CumulativeUnrealized Loss PositionsLess Than 12 Months
    
    More Than 12 Months(In thousands)
    
    Aggregate
    
    Unrealized
    
    Aggregate
    
    UnrealizedFair Value
    
    Loss
    
    Fair Value
    
    LossU.S. government and agency debt securities
    
    $
    1,090
    
    
    $
    (1
    )
    
    $
    172
    
    
    $
    (3
    )Corporate debt securities
    
    
    5,962
    
    
    
    (249
    )
    
    
    8,187
    
    
    
    (340
    )Asset-backed securities
    
    
    7,361
    
    
    
    (498
    )
    
    
    3,144
    
    
    
    (439
    )$
    14,413
    
    
    $
    (748
    )
    
    $
    11,503
    
    
    $
    (782
    )
  Aggregate Amount of(In thousands)
    
    Aggregate
    
    UnrealizedFair Value
    
    Gains
    
    LossesU.S. government and agency debt securities
    
    $
    13,063
    
    
    $
    102
    
    
    $
    (1
    )Corporate debt securities
    
    
    13,970
    
    
    
    11
    
    
    
    (98
    )Equity securities
    
    
    16,478
    
    
    
    
    
    
    
    Asset-backed securities
    
    
    10,674
    
    
    
    49
    
    
    
    (7
    )Certificates of deposit
    
    
    942
    
    
    
    
    
    
    
    $
    55,127
    
    
    $
    162
    
    
    $
    (106
    )
 Marketable Securities In CumulativeUnrealized Loss PositionsLess Than 12 Months
    
    More Than 12 Months(In thousands)
    
    Aggregate
    
    Unrealized
    
    Aggregate
    
    UnrealizedFair Value
    
    Loss
    
    Fair Value
    
    LossU.S. government and agency debt securities
    
    $
    826
    
    
    $
    
    
    
    $
    269
    
    
    $
    (1
    )Corporate debt securities
    
    
    8,047
    
    
    
    (84
    )
    
    
    4,409
    
    
    
    (14
    )Asset-backed securities
    
    
    873
    
    
    
    (2
    )
    
    
    208
    
    
    
    (5
    )Certificates of deposit
    
    
    942
    
    
    
    
    
    
    
    
    
    
    
    $
    10,688
    
    
    $
    (86
    )
    
    $
    4,886
    
    
    $
    (20
    )
  (In thousands)
    
    January 3,
    
    December 29,2009
    
    20070 - 1 Year
    
    $
    38,903
    
    
    $
    24,2771 - 2 Years
    
    
    14,975
    
    
    
    11,8202 - 3 Years
    
    
    4,153
    
    
    
    8,0943 - 5 Years
    
    
    7,773
    
    
    
    4,5765 - 10 Years
    
    
    1,514
    
    
    
    1,598More than 10 years
    
    
    6,228
    
    
    
    4,762$
    73,546
    
    
    $
    55,127
 F-16




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##### Table of Contents



Year EndedJanuary 3,
    
    December 29,
    
    December 30,(In thousands)
    
    2009
    
    2007
    
    2006Gross realized gains
    
    $
    123
    
    
    $
    17
    
    
    $
    64Gross realized losses
    
    
    (3
    )
    
    
    (24
    )
    
    
    (26
    )$
    120
    
    
    $
    (7
    )
    
    $
    38
 NOTE 4 SUPPLEMENTAL BALANCE SHEET INFORMATION
 Inventories
  January 3,
    
    December 29,(In thousands)
    
    2009
    
    2007Raw materials and purchased parts
    
    $
    84,472
    
    
    $
    83,954Work in process
    
    
    7,624
    
    
    
    15,239Finished goods
    
    
    33,422
    
    
    
    37,920125,518
    
    
    
    137,113Allowance for excess and obsolete inventory
    
    
    (26,685
    )
    
    
    (23,144
    )$
    98,833
    
    
    $
    113,969
 Property and Equipment, net
  January 3,
    
    December 29,(In thousands)
    
    2009
    
    2007Land
    
    $
    387
    
    
    $
    3,004Buildings
    
    
    2,172
    
    
    
    2,796Leasehold improvements
    
    
    30,787
    
    
    
    30,820Machinery and equipment
    
    
    50,488
    
    
    
    44,628Office equipment
    
    
    50,166
    
    
    
    42,666134,000
    
    
    
    123,914Less accumulated depreciation
    
    
    (73,755
    )
    
    
    (62,042
    )$
    60,245
    
    
    $
    61,872
  F-17




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##### Table of Contents



Accrued Warranty Obligations
  Year EndedJanuary 3,
    
    December 29,(In thousands)
    
    2009
    
    2007Balance at beginning of year
    
    $
    5,847
    
    
    $
    5,159Additions charged to cost of sales
    
    
    6,604
    
    
    
    8,693Warranty claims
    
    
    (6,473
    )
    
    
    (8,005
    )Balance at end of year
    
    $
    5,978
    
    
    $
    5,847
 accrued expenses and other current liabilities
 Accrued Expenses and Other Current Liabilities
  January 3,
    
    December 29,(In thousands)
    
    2009
    
    2007Deferred revenue
    
    $
    11,813
    
    
    $
    7,396Accrued warranty obligations
    
    
    5,978
    
    
    
    5,847Accrued sales tax
    
    
    343
    
    
    
    2,031Other
    
    
    11,124
    
    
    
    9,324$
    29,258
    
    
    $
    24,598
 Accumulated Other Comprehensive Income
  January 3,
    
    December 29,(In thousands)
    
    2009
    
    2007Cumulative foreign currency translation gains
    
    $
    6,884
    
    
    $
    10,135Unrecognized net pension gains, net of taxes
    
    
    58
    
    
    
    52Unrealized gains (losses) on marketable securities
    
    
    (651
    )
    
    
    56$
    6,291
    
    
    $
    10,243
 F-18




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##### Table of Contents



NOTE 5 GOODWILL AND INTANGIBLE ASSETS
  January 3,
    
    December 29,(In thousands)
    
    2009
    
    2007Lasers
    
    $
    
    
    
    $
    104,562Photonics and Precision Technologies
    
    
    68,540
    
    
    
    69,635$
    68,540
    
    
    $
    174,197
    January 3,
    
    December 29,(In thousands)
    
    2009
    
    2007Intangible assets subject to amortization:Developed technology, net of accumulated amortization of $3,210 and
$6,443 as of January 3, 2009 and December 29, 2007, respectively
    
    $
    3,990
    
    
    $
    21,357Customer relationships, net of accumulated amortization of $8,694 and
$6,744 as of January 3, 2009 and December 29, 2007, respectively
    
    
    10,806
    
    
    
    12,756Other, net of accumulated amortization of $388 and $230 as of
January 3,
2009 and December 29,2007, respectively
    
    
    
    
    
    
    15814,796
    
    
    
    34,271Intangible assets not subject to amortization:Trademarks and trade names
    
    
    11,900
    
    
    
    11,900Intangible assets, net
    
    $
    26,696
    
    
    $
    46,171
   F-19




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##### Table of Contents



EstimatedAggregateAmortization(In thousands)
    
    Expense2009
    
    $
    2,6702010
    
    
    2,6702011
    
    
    2,6702012
    
    
    2,6702013
    
    
    2,670Thereafter
    
    
    1,446$
    14,796
 NOTE 6 INTEREST AND OTHER INCOME (EXPENSE), NET
  Year EndedJanuary 3,
    
    December 29,
    
    December 30,(In thousands)
    
    2009
    
    2007
    
    2006Interest and dividend income
    
    $
    4,208
    
    
    $
    6,717
    
    
    $
    3,247Interest expense
    
    
    (6,000
    )
    
    
    (5,579
    )
    
    
    (3,847
    )Bank and portfolio asset management fees
    
    
    (612
    )
    
    
    (642
    )
    
    
    (549
    )Other, net
    
    
    513
    
    
    
    (359
    )
    
    
    390$
    (1,891
    )
    
    $
    137
    
    
    $
    (759
    )
 NOTE 7 STOCK INCENTIVE PLANS AND STOCK-BASED COMPENSATION
 Stock-Based Benefit Plans
    F-20




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##### Table of Contents



Stock-Based Compensation Expense
  Year EndedDecember 30,2006Fair value
    
    $
    5.79Expected annual volatility
    
    
    35.90
    %Risk-free interest rate
    
    
    4.40
    %Expected term (years)
    
    
    5.4Annualized expected dividend yield
    
    
    
   Year EndedJanuary 3,
    
    December 29,
    
    December 30,(In thousands)
    
    2009
    
    2007
    
    2006Cost of sales
    
    $
    52
    
    
    $
    425
    
    
    $
    516Selling, general and administrative expenses
    
    
    1,654
    
    
    
    3,005
    
    
    
    5,935Research and development expense
    
    
    97
    
    
    
    238
    
    
    
    464$
    1,803
    
    
    $
    3,668
    
    
    $
    6,915
   F-21




---



##### Table of Contents



Stock Options and Awards Activity
  WeightedWeighted
    
    Average
    
    AggregateNumber of
    
    Average
    
    Remaining
    
    IntrinsicOptions
    
    Exercise
    
    Contractual
    
    Value(In thousands)
    
    Price
    
    Life (Years)
    
    (In thousands)Outstanding at December 29, 2007
    
    
    3,390
    
    
    $
    19.97Granted
    
    
    
    
    
    $
    Exercised
    
    
    (150
    )
    
    $
    6.23Forfeited (cancelled pre-vesting)
    
    
    (8
    )
    
    $
    13.45Expired (cancelled post-vesting)
    
    
    (524
    )
    
    $
    22.26Outstanding at January 3, 2009
    
    
    2,708
    
    
    $
    20.31
    
    
    
    3.7
    
    
    $
    370Vested and expected to vest at
January 3, 2009
    
    
    2,695
    
    
    $
    20.34
    
    
    
    3.7
    
    
    $
    370Options exercisable at January 3, 2009
    
    
    2,623
    
    
    $
    20.53
    
    
    
    3.7
    
    
    $
    370
    WeightedNumber of
    
    AverageShares
    
    Grant Date(In thousands)
    
    Fair ValueOutstanding at December 29, 2007
    
    
    1,142
    
    
    $
    15.43Granted
    
    
    1,432
    
    
    $
    9.88Vested
    
    
    (54
    )
    
    $
    15.45Forfeited
    
    
    (338
    )
    
    $
    14.15Outstanding at January 3, 2009
    
    
    2,182
    
    
    $
    11.99
  F-22




---



##### Table of Contents



NOTE 8 DEBT AND LINES OF CREDIT
 Long-term convertible notes
     long-term debt investments and
other assets
 F-23




---



##### Table of Contents



Long-term debt
 long-term debt
 Lines of credit
   short-term obligations
 short-term obligations
   January 3,
    
    December 29,(In thousands)
    
    2009
    
    2007Japanese private placement bonds due June 2011, interest at 1.55%
semi-annually
    
    $
    3,307
    
    
    $
    Convertible notes due February 2012, interest at 2.5% semi-annually
    
    
    147,000
    
    
    
    175,000Total long-term debt
    
    $
    150,307
    
    
    $
    175,000
 F-24




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##### Table of Contents



NOTE 9 NET INCOME (LOSS) PER SHARE
  Year EndedJanuary 3,
    
    December 29,
    
    December 30,(In thousands, except per share data)
    
    2009
    
    2007
    
    2006Income (loss) from continuing operations
    
    $
    (140,939
    )
    
    $
    43,881
    
    
    $
    38,502Shares:Weighted average shares outstanding  basic
    
    
    36,155
    
    
    
    38,479
    
    
    
    40,698Dilutive potential common shares, using treasury
stock method
    
    
    
    
    
    
    579
    
    
    
    1,469Weighted average shares outstanding  diluted
    
    
    36,155
    
    
    
    39,058
    
    
    
    42,167Income (loss) from continuing operations per share:Basic
    
    $
    (3.90
    )
    
    $
    1.14
    
    
    $
    0.95Diluted
    
    $
    (3.90
    )
    
    $
    1.12
    
    
    $
    0.91
  NOTE 10 COMMITMENTS AND CONTINGENCIES
 Facility Leases
  F-25




---



##### Table of Contents



Capital
    
    Operating
    
    Total(In thousands)
    
    Leases
    
    Leases
    
    ObligationsPayments Due By Period:2009
    
    $
    190
    
    
    $
    9,459
    
    
    $
    9,6492010
    
    
    190
    
    
    
    5,554
    
    
    
    5,7442011
    
    
    189
    
    
    
    4,773
    
    
    
    4,9622012
    
    
    188
    
    
    
    2,278
    
    
    
    2,4662013
    
    
    187
    
    
    
    1,781
    
    
    
    1,968Thereafter
    
    
    813
    
    
    
    2,202
    
    
    
    3,015Total minimum payments
    
    
    1,757
    
    
    $
    26,047
    
    
    $
    27,804Less amount representing
interest
    
    
    (428
    )Present value of obligation
    
    $
    1,329
 Sale-Leaseback
  Subleases
  Operating(In thousands)
    
    LeasesPayments Due By Period:2009
    
    $
    1902010
    
    
    1842011
    
    
    1382012
    
    
    12Total minimum sublease payments
    
    $
    524
  Environmental Reserves
  F-26




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##### Table of Contents



Other Contingencies
  NOTE 11 INCOME TAXES
  Year EndedJanuary 3,
    
    December 29,
    
    December 30,(In thousands)
    
    2009
    
    2007
    
    2006United States
    
    $
    (115,142
    )
    
    $
    20,540
    
    
    $
    32,583Foreign
    
    
    2,748
    
    
    
    6,112
    
    
    
    8,112$
    (112,394
    )
    
    $
    26,652
    
    
    $
    40,695
  Year EndedJanuary 3,
    
    December 29,
    
    December 30,(In thousands)
    
    2009
    
    2007
    
    2006Current:Federal
    
    $
    (17
    )
    
    $
    (116
    )
    
    $
    (1,782
    )State
    
    
    933
    
    
    
    637
    
    
    
    234Foreign
    
    
    3,105
    
    
    
    2,725
    
    
    
    3,0374,021
    
    
    
    3,246
    
    
    
    1,489Deferred:Federal
    
    
    21,125
    
    
    
    (17,005
    )
    
    
    State
    
    
    3,567
    
    
    
    (2,843
    )
    
    
    Foreign
    
    
    (168
    )
    
    
    (627
    )
    
    
    70424,524
    
    
    
    (20,475
    )
    
    
    704$
    28,545
    
    
    $
    (17,229
    )
    
    $
    2,193
 F-27




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##### Table of Contents



Year EndedJanuary 3,
    
    December 29,
    
    December 30,(In thousands)
    
    2009
    
    2007
    
    2006Income tax provision at statutory rate
    
    $
    (39,338
    )
    
    $
    9,328
    
    
    $
    14,243Increase (decrease) in taxes resulting from:Impairment of goodwill
    
    
    36,576
    
    
    
    
    
    
    
    Non-deductible expenses
    
    
    182
    
    
    
    382
    
    
    
    117State tax (net of federal benefit)
    
    
    2,864
    
    
    
    (1,473
    )
    
    
    55Foreign rate variance
    
    
    (1,090
    )
    
    
    (150
    )
    
    
    850Income tax credits
    
    
    (178
    )
    
    
    (763
    )
    
    
    Valuation allowance
    
    
    24,342
    
    
    
    (25,154
    )
    
    
    (10,792
    )Increase (reduction) of tax contingency
    
    
    3,160
    
    
    
    402
    
    
    
    (2,160
    )Other, net
    
    
    2,027
    
    
    
    199
    
    
    
    (120
    )$
    28,545
    
    
    $
    (17,229
    )
    
    $
    2,193
  January 3,
    
    December 29,(In thousands)
    
    2009
    
    2007Deferred tax assets:Net operating loss carryforwards
    
    $
    23,336
    
    
    $
    32,799Accruals and reserves not
currently deductible
    
    
    19,400
    
    
    
    17,553Tax credit carryforwards
    
    
    15,638
    
    
    
    15,554Capital loss carryforwards
    
    
    630
    
    
    
    627Foreign deferred tax assets
    
    
    9,774
    
    
    
    4,092Other basis differences
    
    
    6,279
    
    
    
    Total gross deferred tax assets
    
    
    75,057
    
    
    
    70,625Valuation allowance
    
    
    (58,423
    )
    
    
    (25,952
    )16,634
    
    
    
    44,673Deferred tax liabilities:Intangible assets
    
    
    8,854
    
    
    
    16,029Property and equipment
    
    
    4,968
    
    
    
    4,461Other basis differences
    
    
    1,983
    
    
    
    1,003Total deferred tax liabilities
    
    
    15,805
    
    
    
    21,493Net deferred tax assets
    
    $
    829
    
    
    $
    23,180
  F-28




---



##### Table of Contents



F-29




---



##### Table of Contents



Year EndedJanuary 3,
    
    December 29,(In thousands)
    
    2009
    
    2007Unrecognized tax benefits at beginning of year
    
    $
    6,896
    
    
    $
    8,399Gross increases for tax positions of prior years
    
    
    
    
    
    
    262Gross decreases for tax positions of prior years
    
    
    (1,196
    )
    
    
    (2,683
    )Gross increases for tax positions of current year
    
    
    3,047
    
    
    
    1,578Settlements
    
    
    (139
    )
    
    
    (660
    )Lapse of statute of limitations
    
    
    
    
    
    
    Unrecognized tax benefits at end of year
    
    $
    8,608
    
    
    $
    6,896
      U.S. Federal
    
    2005 through current periodsCalifornia
    
    2004 through current periodsFrance
    
    2006 through current periodsGermany
    
    2005 through current periodsJapan
    
    2002 through current periods
  NOTE 12 STOCKHOLDERS EQUITY TRANSACTIONS
  F-30




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##### Table of Contents



NOTE 13 FAIR VALUE MEASUREMENTS
   January 3, 2009
    
    December 29, 2007Carrying
    
    
    
    
    
    Carrying(In thousands)
    
    Amount
    
    Fair Value
    
    Amount
    
    Fair ValueCash and cash equivalents
    
    $
    74,874
    
    
    $
    74,874
    
    
    $
    88,737
    
    
    $
    88,737Marketable securities
    
    $
    73,546
    
    
    $
    73,546
    
    
    $
    55,127
    
    
    $
    55,127Investments
    
    $
    
    
    
    $
    
    
    
    $
    2,890
    
    
    $
    3,633Pension assets not owned
by plan
    
    $
    6,614
    
    
    $
    6,614
    
    
    $
    6,598
    
    
    $
    6,598Note receivable related
to sale of
business
    
    $
    
    
    
    $
    
    
    
    $
    5,701
    
    
    $
    5,701Short-term obligations
    
    $
    14,089
    
    
    $
    14,089
    
    
    $
    12,402
    
    
    $
    12,402Long-term debt
    
    $
    150,307
    
    
    $
    117,967
    
    
    $
    175,000
    
    
    $
    175,000
  F-31




---



##### Table of Contents



(In thousands)
    
    
    
    
    
    Fair Value Measurements at Reporting Date UsingQuoted Pricesin ActiveMarkets for
    
    
    
    
    
    
    SignificantIdentical
    
    
    Significant Other
    
    
    UnobservableAssets
    
    
    Observable Inputs
    
    
    InputsDescription
    
    January 3, 2009
    
    
    (Level 1)
    
    
    (Level 2)
    
    
    (Level 3)Assets:Marketable securities
    
    $
    73,546
    
    
    $
    73,546
    
    
    $
    
    
    
    $
    Pension assets not owned by plan
    
    
    6,614
    
    
    
    6,614
    
    
    
    
    
    
    
    $
    80,160
    
    
    $
    80,160
    
    
    $
    
    
    
    $
    
  (In thousands)
    
    
    
    
    
    Fair Value Measurements at Reporting Date UsingQuoted Prices inActive Markets for
    
    
    Significant Other
    
    
    Significant
    
    
    TotalIdentical Assets
    
    
    Observable Inputs
    
    
    Unobservable Inputs
    
    
    Gains /Description
    
    January 3, 2009
    
    
    (Level 1)
    
    
    (Level 2)
    
    
    (Level 3)
    
    
    (Losses)Assets:Goodwill
    
    $
    68,540
    
    
    $
    
    
    
    $
    68,540
    
    
    $
    
    
    
    $
    (104,562
    )$
    68,540
    
    
    $
    
    
    
    $
    68,540
    
    
    $
    
    
    
    $
    (104,562
    )
 NOTE 14 EMPLOYEE BENEFIT PLANS
 Defined Contribution Plan
  Defined Benefit Pension Plans
  F-32




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##### Table of Contents



Year Ended(In thousands)
    
    January 3,
    
    December 29,
    
    December 30,2009
    
    2007
    
    2006Service cost
    
    $
    587
    
    
    $
    638
    
    
    $
    641Interest cost on projected benefit obligation
    
    
    676
    
    
    
    654
    
    
    
    599Expected return on plan assets
    
    
    (159
    )
    
    
    (183
    )
    
    
    (162
    )Recognized net actuarial loss
    
    
    
    
    
    
    
    
    
    
    50$
    1,104
    
    
    $
    1,109
    
    
    $
    1,128
  (In thousands)
    
    January 3,
    
    December 29,2009
    
    2007Change in projected benefit obligation:Projected benefit obligation, beginning of
year
    
    $
    15,747
    
    
    $
    17,078Service cost
    
    
    518
    
    
    
    566Interest cost
    
    
    676
    
    
    
    654Contributions by plan participants
    
    
    11
    
    
    
    18Actuarial loss (gain)
    
    
    59
    
    
    
    (1,589
    )Benefits paid
    
    
    (1,576
    )
    
    
    (1,942
    )Currency translation adjustments
    
    
    (149
    )
    
    
    962Projected benefit obligation, end of year
    
    
    15,286
    
    
    
    15,747Change in plan assets:Fair value of plan assets, beginning of year
    
    
    4,769
    
    
    
    5,428Company contributions
    
    
    1,126
    
    
    
    1,138Contributions by plan participants
    
    
    11
    
    
    
    18Gain (loss) on plan assets
    
    
    19
    
    
    
    (157
    )Benefits paid
    
    
    (1,400
    )
    
    
    (1,790
    )Currency translation adjustments
    
    
    (123
    )
    
    
    132Fair value of plan assets, end of year
    
    
    4,402
    
    
    
    4,769Funded status
    
    $
    (10,884
    )
    
    $
    (10,978
    )Amounts recognized in the balance sheet:Current portion of pension liabilities
    
    $
    (232
    )
    
    $
    (238
    )Accrued pension liabilities
    
    
    (10,652
    )
    
    
    (10,740
    )Total accrued pension liabilities
    
    $
    (10,884
    )
    
    $
    (10,978
    )Accumulated other comprehensive income
    
    $
    (58
    )
    
    $
    (52
    )Deferred taxes
    
    $
    (45
    )
    
    $
    (93
    )
  F-33




---



##### Table of Contents



EstimatedBenefit(In thousands)
    
    Payments2009
    
    $
    1,0912010
    
    
    3972011
    
    
    1,2372012
    
    
    8012013
    
    
    7272014-2017
    
    
    5,890$
    10,143
   January 3,
    
    December 29,
    
    December 30,2009
    
    2007
    
    2006Discount rate
    
    
    4.60
    %
    
    
    4.40
    %
    
    
    3.80
    %Rate of increase in salary levels
    
    
    3.00
    %
    
    
    2.90
    %
    
    
    2.90
    %Expected long-term rate of return on assets
    
    
    3.60
    %
    
    
    3.50
    %
    
    
    3.40
    %
  January 3,
    
    December 29,2009
    
    2007Discount rate
    
    
    4.10
    %
    
    
    4.50
    %Rate of increase in salary levels
    
    
    2.80
    %
    
    
    3.00
    %Expected long-term rate of return on assets
    
    
    3.60
    %
    
    
    3.50
    %
   January 3,
    
    December 29,2009
    
    2007Cash
    
    
    22
    %
    
    
    32
    %Bonds
    
    
    19
    
    
    
    24Pooled funds of insurance companies
    
    
    59
    
    
    
    44100
    %
    
    
    100
    %
  F-34




---



##### Table of Contents



Other Pension-Related Assets
 investments and other assets
 NOTE 15 BUSINESS SEGMENT INFORMATION
      F-35




---



##### Table of Contents



(In thousands)
    
    Lasers
    
    PPTDivision
    
    Division
    
    TotalYear ended January 3, 2009Sales to external customers
    
    $
    187,536
    
    
    $
    257,800
    
    
    $
    445,336Depreciation and amortization
    
    $
    7,270
    
    
    $
    6,290
    
    
    $
    13,560Impairment charges
    
    $
    119,944
    
    
    $
    
    
    
    $
    119,944Segment income (loss)
    
    $
    (126,313
    )
    
    $
    39,665
    
    
    $
    (86,648
    )Segment assets
    
    $
    135,618
    
    
    $
    187,920
    
    
    $
    323,538Expenditures for long-lived assets
    
    $
    3,892
    
    
    $
    7,216
    
    
    $
    11,108Year ended December 29, 2007Sales to external customers
    
    $
    185,186
    
    
    $
    260,011
    
    
    $
    445,197Depreciation and amortization
    
    $
    7,012
    
    
    $
    6,127
    
    
    $
    13,139Segment income
    
    $
    1,445
    
    
    $
    54,397
    
    
    $
    55,842Segment assets
    
    $
    271,504
    
    
    $
    201,531
    
    
    $
    473,035Expenditures for long-lived assets
    
    $
    2,548
    
    
    $
    5,000
    
    
    $
    7,548Year ended December 30, 2006Sales to external customers
    
    $
    190,842
    
    
    $
    262,132
    
    
    $
    452,974Depreciation and amortization
    
    $
    7,480
    
    
    $
    5,570
    
    
    $
    13,050Segment income
    
    $
    8,042
    
    
    $
    56,542
    
    
    $
    64,584Segment assets
    
    $
    265,617
    
    
    $
    234,036
    
    
    $
    499,653Expenditures for long-lived assets
    
    $
    3,711
    
    
    $
    5,400
    
    
    $
    9,111
  Year Ended(In thousands)
    
    January 3,
    
    
    December 29,
    
    
    December 30,2009
    
    
    2007
    
    
    2006Segment income (loss)
    
    $
    (86,648
    )
    
    $
    55,842
    
    
    $
    64,584Unallocated net sales (1)
    
    
    
    
    
    
    
    
    
    
    1,750Unallocated operating expenses
    
    
    (27,088
    )
    
    
    (29,327
    )
    
    
    (24,880
    )Write-down of note receivable and other amounts related
to previously discontinued operations, net of
recoveries
    
    
    (7,040
    )
    
    
    
    
    
    
    Write-down of minority interest investment
    
    
    (2,890
    )
    
    
    
    
    
    
    Gain on extinguishment of debt
    
    
    10,659
    
    
    
    
    
    
    
    Gain on sale of building
    
    
    2,504
    
    
    
    
    
    
    
    Interest and other income (expense), net
    
    
    (1,891
    )
    
    
    137
    
    
    
    (759
    )Consolidated income (loss) from continuing operations
before income taxes
    
    $
    (112,394
    )
    
    $
    26,652
    
    
    $
    40,695
 
 (1)
    
    2006 includes revenue associated with licensing of certain intellectual property, which
was not allocated to the business segments. F-36




---



##### Table of Contents



As of or for the Year EndedJanuary 3,
    
    December 29,
    
    December 30,(In thousands)
    
    2009
    
    2007
    
    2006Depreciation and amortization for reportable segments
    
    $
    13,560
    
    
    $
    13,139
    
    
    $
    13,050Depreciation and amortization for assets held at
corporate
    
    
    8,644
    
    
    
    8,121
    
    
    
    6,444Total depreciation and amortization
    
    $
    22,204
    
    
    $
    21,260
    
    
    $
    19,494Assets of reportable segments
    
    $
    323,538
    
    
    $
    473,035
    
    
    $
    499,653Assets held at corporate, primarily cash and cash
equivalents and marketable securities
    
    
    195,633
    
    
    
    216,912
    
    
    
    93,362Total assets
    
    $
    519,171
    
    
    $
    689,947
    
    
    $
    593,015Expenditures for long-lived assets for reportable
segments
    
    $
    11,108
    
    
    $
    7,548
    
    
    $
    9,111Expenditures for assets held at corporate
    
    
    7,467
    
    
    
    11,157
    
    
    
    9,783Total expenditures for long-lived assets
    
    $
    18,575
    
    
    $
    18,705
    
    
    $
    18,894
  As of or for the Year EndedJanuary 3,
    
    December 29,
    
    December 30,(In thousands)
    
    2009
    
    2007
    
    2006Geographic area net sales:United States
    
    $
    208,736
    
    
    $
    223,891
    
    
    $
    238,433Europe
    
    
    114,936
    
    
    
    112,695
    
    
    
    99,968Pacific Rim
    
    
    100,676
    
    
    
    80,946
    
    
    
    91,277Other
    
    
    20,988
    
    
    
    27,665
    
    
    
    25,046$
    445,336
    
    
    $
    445,197
    
    
    $
    454,724Geographic area long-lived assets:United States
    
    $
    45,736
    
    
    $
    51,489
    
    
    $
    46,981Europe
    
    
    11,328
    
    
    
    8,895
    
    
    
    9,140Other
    
    
    3,181
    
    
    
    1,488
    
    
    
    1,279$
    60,245
    
    
    $
    61,872
    
    
    $
    57,400
 F-37




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##### Table of Contents



NOTE 16 WRITE DOWN OF NOTE RECEIVABLE AND OTHER AMOUNTS
  NOTE 17 SUPPLEMENTARY QUARTERLY CONSOLIDATED FINANCIAL DATA (Unaudited)
 First
    
    Second
    
    Third
    
    Fourth(In thousands except per share data)
    
    Quarter
    
    Quarter
    
    Quarter
    
    QuarterYear Ended January 3, 2009:Net sales
    
    $
    115,243
    
    
    $
    117,664
    
    
    $
    105,026
    
    
    $
    107,403Gross profit
    
    $
    46,111
    
    
    $
    47,297
    
    
    $
    39,602
    
    
    $
    37,784Net income (loss) (1)
    
    $
    3,725
    
    
    $
    (2,792
    )
    
    $
    (1,135
    )
    
    $
    (140,737
    )Basic income (loss) per share (2)
    
    $
    0.10
    
    
    $
    (0.08
    )
    
    $
    (0.03
    )
    
    $
    (3.91
    )Diluted income (loss) per share (2)
    
    $
    0.10
    
    
    $
    (0.08
    )
    
    $
    (0.03
    )
    
    $
    (3.91
    )
 First
    
    Second
    
    Third
    
    Fourth(In thousands except per share data)
    
    Quarter
    
    Quarter
    
    Quarter
    
    QuarterYear Ended December 29, 2007:Net sales
    
    $
    107,264
    
    
    $
    110,904
    
    
    $
    109,001
    
    
    $
    118,028Gross profit
    
    $
    46,631
    
    
    $
    49,061
    
    
    $
    43,592
    
    
    $
    46,277Net income
    
    $
    5,251
    
    
    $
    7,963
    
    
    $
    5,542
    
    
    $
    25,125Basic income per share (2)
    
    $
    0.13
    
    
    $
    0.20
    
    
    $
    0.15
    
    
    $
    0.68Diluted income per share (2)
    
    $
    0.13
    
    
    $
    0.20
    
    
    $
    0.15
    
    
    $
    0.67
 
 (1)
    
    During the fourth quarter of 2008, the Company recorded impairment charges of $119.9
million (Note 5), a gain on the extinguishment of convertible subordinated notes of $10.7
million (Note 8) and a gain on the sale of a building under a sale-leaseback agreement of
$2.5 million (Note 10).(2)
    
    Per share data was computed independently for each of the quarters presented.
Therefore, the sum of the quarterly per share information may not equal the annual income
per share. F-38




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##### Table of Contents



NEWPORT CORPORATION
Schedule II
Consolidated Valuation Accounts
 Additions
    
    AdditionsBalance at
    
    Charged
    
    Charged
    
    
    
    
    
    Other
    
    Balance atBeginning
    
    to Costs and
    
    to Other
    
    
    
    
    
    Charges
    
    End of(In thousands)
    
    of Period
    
    Expenses
    
    Accounts
    
    Write-Offs
    
    Add/Deduct (1)
    
    PeriodYear Ended January 3, 2009:Deducted from asset accounts:Allowance for doubtful accounts
    
    $
    1,381
    
    
    $
    573
    
    
    $
    
    
    
    $
    (252
    )
    
    $
    (60
    )
    
    $
    1,642Reserve for inventory obsolescence
    
    $
    23,144
    
    
    $
    7,989
    
    
    $
    
    
    
    $
    (4,825
    )
    
    $
    377
    
    
    $
    26,685Year Ended December 29, 2007:Deducted from asset accounts:Allowance for doubtful accounts
    
    $
    1,503
    
    
    $
    190
    
    
    $
    
    
    
    $
    (397
    )
    
    $
    85
    
    
    $
    1,381Reserve for inventory obsolescence
    
    $
    23,370
    
    
    $
    4,501
    
    
    $
    
    
    
    $
    (5,251
    )
    
    $
    524
    
    
    $
    23,144Year Ended December 30, 2006:Deducted from asset accounts:Allowance for doubtful accounts
    
    $
    1,402
    
    
    $
    697
    
    
    $
    
    
    
    $
    (629
    )
    
    $
    33
    
    
    $
    1,503Reserve for inventory obsolescence
    
    $
    26,275
    
    
    $
    3,508
    
    
    $
    154
    
    
    $
    (7,059
    )
    
    $
    492
    
    
    $
    23,370
 
 (1)
    
    Amounts reflect the effect of exchange rate changes on translating valuation accounts of
foreign subsidiaries in accordance with Statement of Financial Accounting Standards No. 52,
Foreign Currency Translationand certain reclassifications between balance sheet accounts. F-39




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##### Table of Contents



EXHIBIT INDEX
 ExhibitNumber
    
    Description of Exhibit2.1
    
    Stock Purchase Agreement dated May 28, 2004 by and among the Registrant,
Thermo Electron Corporation and other related parties (incorporated by
reference to Exhibit 2.1 to the Registrants Current Report on Form 8-K filed
on June 17, 2004).3.1
    
    Restated Articles of Incorporation of the Registrant, as amended to date
(incorporated by reference to Exhibit 3.1 of the Registrants Annual Report on
Form 10-K for the year ended December 30, 2006).3.2
    
    Restated Bylaws of the Registrant, as amended to date (incorporated by
reference to Exhibit 3.2 of the Registrants Annual Report on Form 10-K for
the year ended July 31, 1992).4.1
    
    Indenture, dated February 7, 2007, between the Registrant and Wells Fargo
Bank, N.A. (incorporated by reference to Exhibit 10.1 to the Registrants
Current Report on Form 8-K filed with the Securities and Exchange Commission
on February 7, 2007).4.2
    
    Registration Rights Agreement, dated February 7, 2007, between the Registrant
and Merrill, Lynch, Pierce, Fenner & Smith Incorporated (incorporated by
reference to Exhibit 10.2 to the Registrants Current Report on Form 8-K filed
with the Securities and Exchange Commission on February 7, 2007).4.3
    
    Form of 2.50% Convertible Subordinated Note due 2012 (incorporated by
reference to Exhibit 10.3 to the Registrants Current Report on Form 8-K filed
with the Securities and Exchange Commission on February 7, 2007).10.1
    
    Lease Agreement dated March 27, 1991, as amended, pertaining to premises
located in Irvine, California (incorporated by reference to Exhibit 10.1 of
the Registrants Annual Report on Form 10-K for the year ended July 31, 1992).10.2
    
    First Amendment to Lease dated January 31, 2002, between the Registrant and
IRP Muller Associates, LLC pertaining to premises located in Irvine,
California (incorporated by reference to Exhibit 10.2 of the Registrants
Annual Report on Form 10-K for the year ended December 31, 2001).10.3
    
    Second Amendment to Lease dated September 28, 2004, between the Registrant and
BCSD Properties, L.P. pertaining to premises located in Irvine, California
(incorporated by reference to Exhibit 10.5 of the Registrants Quarterly
Report on Form 10-Q for the quarter ended October 2, 2004).10.4*
    
    1992 Stock Incentive Plan (incorporated by reference to exhibit in the
Registrants 1992 Proxy Statement).10.5*
    
    1999 Stock Incentive Plan (incorporated by reference to Exhibit 10.11 of the
Registrants Annual Report on Form 10-K for the year ended December 31, 1999).10.6*
    
    Amendment to 1999 Stock Incentive Plan (incorporated by reference to Exhibit
10.4 to the Registrants Registration Statement on Form S-3, No. 333-40878,
filed with the Securities and Exchange Commission on July 6, 2000).10.7*
    
    2001 Stock Incentive Plan (incorporated by reference to Appendix B to the
Registrants Definitive Proxy Statement filed with the Securities and Exchange
Commission on April 27, 2001).10.8*
    
    Form of Nonqualified Stock Option Agreement under the Registrants 2001 Stock
Incentive Plan, as amended (incorporated by reference to Exhibit 10.9 of the
Registrants Annual Report on Form 10-K for the year ended December 31, 2002).




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##### Table of Contents



ExhibitNumber
    
    Description of Exhibit10.9*
    
    Form of Incentive Stock Option Agreement under the Registrants 2001 Stock
Incentive Plan (incorporated by reference to Exhibit 10.10 of the Registrants
Annual Report on Form 10-K for the year ended December 31, 2002).10.10*
    
    Form of Restricted Stock Agreement under the Registrants 2001 Stock Incentive
Plan (incorporated by reference to Exhibit 10.3 of the Registrants Quarterly
Report on Form 10-Q for the quarter ended October 2, 2004).10.11*
    
    Form of Nonqualified Stock Option Agreement between the Registrant and each of
the former optionholders of Micro Robotics Systems, Inc. (incorporated by
reference to Exhibit 4.1 of the Registrants Registration Statement on Form
S-8, File No. 333-86268, filed with the Securities and Exchange Commission on
April 15, 2002).10.12*
    
    2006 Performance-Based Stock Incentive Plan (incorporated by reference to
Appendix B of the Registrants Definitive Proxy Statement filed with the
Securities and Exchange Commission on April 10, 2006).10.13*
    
    Form of Restricted Stock Unit Award Agreement to be used under the
Registrants 2006 Performance-Based Stock Incentive Plan (incorporated by
reference to Exhibit 10.2 to the Registrants Current Report on Form 8-K filed
with the Securities and Exchange Commission on May 23, 2006).10.14*
    
    Amended and Restated Employee Stock Purchase Plan, as amended (incorporated by
reference to Exhibit 10.15 to the Registrants Annual Report on Form 10-K for
the year ended December 31, 2005).10.15*
    
    Severance Compensation Agreement dated April 1, 2008 between the Registrant
and Robert J. Phillippy, President and Chief Executive Officer (incorporated
by reference to Exhibit 10.1 to the Registrants Current Report on Form 8-K
filed with the Securities and Exchange Commission on April 7, 2008).10.16*
    
    Severance Compensation Agreement dated April 1, 2008 between the Registrant
and Charles F. Cargile, Senior Vice President, Chief Financial Officer and
Treasurer (incorporated by reference to Exhibit 10.2 to the Registrants
Current Report on Form 8-K filed with the Securities and Exchange Commission
on April 7, 2008).10.17*
    
    Form of Severance Compensation Agreement between the Registrant and certain of
its executive and other officers (incorporated by reference to Exhibit 10.3 to
the Registrants Current Report on Form 8-K filed with the Securities and
Exchange Commission on April 7, 2008).10.18*
    
    Form of Indemnification Agreement between the Registrant and each of its
directors and executive officers (incorporated by reference to Exhibit 10.3 of
the Registrants Quarterly Report on Form 10-Q for the quarter ended June 30, 2002).10.19*
    
    Separation Agreement, dated September 18, 2007, by and between the Registrant
and Robert G. Deuster (incorporated by reference to Exhibit 10.1 to the
Current Report on Form 8-K filed with the Securities and Exchange Commission
on September 20, 2007).10.20
    
    Loan Agreement between the Registrant and Bank of America, N.A. dated January 2,
2008 (incorporated by reference to Exhibit 10.1 to the Registrants Current
Report on Form 8-K filed with the Securities and Exchange Commission on
January 7, 2008).10.21
    
    Amendment No. 1 to Loan Agreement between the Registrant and Bank of America,
N.A. dated December 1, 2008 (incorporated by reference to Exhibit 10.1 to the
Registrants Current Report on Form 8-K filed with the Securities and Exchange
Commission on December 4, 2008).




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##### Table of Contents



ExhibitNumber
    
    Description of Exhibit10.22
    
    Security Agreement between the Registrant and Bank of America, N.A. dated
December 1, 2008 (incorporated by reference to Exhibit 10.2 to the
Registrants Current Report on Form 8-K filed with the Securities and Exchange
Commission on December 4, 2008).21.1
    
    Subsidiaries of the Registrant.23.1
    
    Consent of Independent Registered Public Accounting Firm.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.
 
 *
    
    This exhibit is identified as a management contract or compensatory plan or
arrangement pursuant to Item 15(a)(3) of Form 10-K.