<PAGE>

               UNITED STATES SECURITIES AND EXCHANGE COMMISSION
                             Washington, DC 20549

                                   FORM 10-K

(Mark One)

[X]  ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
     ACT OF 1934

                 For the fiscal year ended  December 31, 2000
                                            -----------------

                                      OR

[_]  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 0-1649
                                               -------

                              NEWPORT CORPORATION
   ------------------------------------------------------------------------
            (Exact name of registrant as specified in its charter)

                 Nevada                                    94-0849175
   ------------------------------------------------------------------------
     (State or other jurisdiction                         (IRS Employer
   of incorporation or organization)                   Identification No.)

        1791 Deere Avenue, Irvine, CA                          92606
   ------------------------------------------------------------------------
    (Address of principal executive offices)                 (Zip Code)

      Registrant's telephone number, including area code  (949) 863-3144
                                                          --------------

       Securities registered pursuant to Section 12(b) of the Act:  None
                                                                  ------

          Securities registered pursuant to Section 12(g) of the Act:

                 Common Stock, Stated Value $0.1167 per Share
                 --------------------------------------------
                               (Title of Class)

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

                                Yes  X  No ___
                                    ---

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K.

The aggregate market value of the voting stock held by non-affiliates of the
Registrant was $1,063,474,000 as of March 16, 2001.

The number of shares outstanding of the Registrant's sole class of common stock
as of March 16, 2001, was 36,298,040.

                      DOCUMENTS INCORPORATED BY REFERENCE

Portions of the Registrant's Proxy Statement for the Annual Meeting of
Stockholders to be held on May 30, 2001 are incorporated by reference into Part
III.

                              Page 1 of 46 Pages

                Exhibit Index on Sequentially Numbered Page 23
<PAGE>

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," "estimate," or "continue" or the negative or
other variations thereof or comparable terminology are intended to identify
forward-looking statements. These statements by their nature involve substantial
risks and uncertainties, certain of which are beyond our control, and actual
results may differ depending on a variety of important factors, including those
described below in "Risks Relating To Our Business."

                                   PART I

ITEM 1  Business

General Description of Business

Newport Corporation is a global supplier of high-precision test, measurement and
automation systems and subsystems that enable manufacturers of fiber optic
components, semiconductor capital equipment, industrial metrology, aerospace and
other high-precision products to automate manufacturing processes, enhance
product performance, and improve manufacturing efficiencies and yields.
Manufacturers of high-precision products increasingly require third party
expertise to develop, engineer and build automated systems and subsystems to
produce, assemble and test their products. Newport's products enhance the
productivity and capabilities of assembly, test and measurement functions by
leveraging our expertise in high-precision automated positioning and vibration
isolation technology and high resolution non-contact visual measurement and
inspection. By combining proven technology with advanced computer software and
imaging technology and our in-depth industry and process expertise, we are able
to offer comprehensive, integrated solutions to manufacturers of fiber optic
components. In the semiconductor capital equipment market we supply high-
performance value-added subsystems that enhance the performance of our
customers' products. We also provide sophisticated high-precision equipment to
commercial, academic and governmental research institutions worldwide that
engage in advanced research and development activities.

For nearly three decades we have serviced the needs of research laboratories for
precision equipment. In 1991, we acquired the micro-positioning business of
Micro-Controle S.A. and commenced our evolution from a provider of discrete
components for research applications to a company that manufactures both
components and integrated systems for research and commercial applications. The
acquisition also provided us with a significant manufacturing and distribution
base in Europe. In February 1995, we acquired RAM Optical Instrumentation, Inc.
("ROI") in order to increase participation in the semiconductor test and
measurement and computer peripherals markets. The acquisition of ROI also
increased our expertise in developing software and manufacturing integrated
systems. In March 1995, we acquired Light Control Instruments, Inc. ("LCI"), a
participant in the fiber optic test and measurement market. The acquisition of
LCI expanded the fiber optic product offering by adding laser diode test
equipment to the internally developed product line. In January 1996, we acquired
MikroPrecision Instruments, Inc. ("MPI") further increasing participation in the
semiconductor equipment and computer peripherals markets. In October 1998, we
acquired Environmental Optical Sensors, Inc ("EOSI"), further strengthening our
position as a leading provider of high-precision assembly and test equipment for
the fast growing fiber optic communications marketplace. In October 1999, we
acquired the west coast commercial optics operation of Corning OCA Corporation,
a subsidiary of Corning Incorporated (renamed Newport Precision Optics
Corporation or "NPOC"). This acquisition increased our product offerings and
expertise in the areas of specialized precision optical products and systems. In
August 2000, we acquired Unique Equipment Company ("Unique"), a systems
integrator specializing in the use of robotics for the fiber optics and
semiconductor industries, which increased our expertise in these areas. In
December 2000, we acquired the business of CE Johansson AB ("CEJ"), a Swedish
based global supplier of advanced metrology systems, which expanded our
industrial metrology product offerings and expertise by adding

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touch-probe metrology systems to our existing non-contact visual metrology
systems. In February 2001, we acquired Kensington Laboratories, Inc. ("KLI"), a
manufacturer of high-precision robotic and motion control equipment for the
semiconductor and fiber optic communication industries, which significantly
increased our product offerings and expertise in these areas. Also in February
2001, we acquired Design Technology Corporation ("DTC"), a systems integrator
specializing in the use of robotics and flexible automation solutions for
manufacturing processes, which further broadened our expertise in these areas.
As a result of our internal growth and strategic acquisitions, we are a leading
supplier of high-precision optics, instruments, micro-positioning and
measurement products and systems to manufacturers of fiber optic communications
equipment and semiconductor equipment worldwide. In addition, we continue to
focus on our core strengths in research test and measurement equipment to
provide ultra-precision motion and measurement technologies for research
applications. We seek to leverage our expertise in research laboratory equipment
to continue to expand product offerings for commercial applications.

Products and Services

We develop and sell a broad range of components, instruments, subsystems and
systems to markets where high-precision manufacturing, test and assembly are
critical. The products are used in mission-critical applications in industries
including fiber optic device manufacturing, semiconductor equipment
manufacturing and life and health sciences. We develop, manufacture and market
products within three distinct business segments, organized around customer and
manufacturing requirements. This structure enables us to quickly incorporate
customer feedback into new products and to respond rapidly to changing market
requirements.

Fiber Optics and Photonics

The Fiber Optics and Photonics division offers a broad line of automated
manufacturing systems. These products address a wide spectrum of applications in
the fiber optic component manufacturing process, from pre-test to assembly and
packaging to final device testing and burn-in. Our integrated systems enable
component manufacturers to significantly increase the productivity and capacity
of their manufacturing operations. In addition, we provide customers with value-
added product and process engineering services and device packaging services.

Pre-Test

The pre-test products automate the verification of devices used in fiber optic
components, such as laser diodes, to ensure their integrity prior to the start
of the assembly process. We offer a range of products that increase the
efficiency of the pre-test process, including:

<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------------------------
                       Product                                                   Application
-----------------------------------------------------------------------------------------------------------------------
<S>                                                    <C>
Broad Area Test Stations                               Automated testing and validation of devices on semiconductor
                                                       wafers
-----------------------------------------------------------------------------------------------------------------------
AutoBar Test and Characterization System               Automated test and characterization of unmounted laser diode
                                                       chips, laser bars, chip on carrier (COC) and other devices
-----------------------------------------------------------------------------------------------------------------------
AutoAlign(TM) Characterization Workstations            Automated alignment, test and characterization of laser diodes
                                                       and planar waveguides
-----------------------------------------------------------------------------------------------------------------------
Chameleon Nano Vision and Cognito Micromeasurement     Non-contact dimensional and defect analysis of V-grooves,
Systems                                                fibers and fiber arrays, MEMS devices, laser diodes and
                                                       waveguides
-----------------------------------------------------------------------------------------------------------------------
</TABLE>

Assembly and Packaging

The assembly and packaging of fiber optic devices require a high degree of
precision. Manufacturers have traditionally used manual assembly techniques for
fiber optic components, which are costly, result in low production yields and
produce inconsistent quality. We offer a line of integrated assembly and
packaging

                                    Page 3
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     systems which automate these processes and help reduce manufacturing times,
     increase yields and enhance quality. Assembly and packaging products
     include:

<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------------------------
                       Product                                                   Application
-----------------------------------------------------------------------------------------------------------------------
<S>                                                    <C>
AutoAlign and AMS(TM) Assembly Workstations            Automated assembly of waveguides, laser diodes, MEMS devices
                                                       and fiber arrays using soldering and adhesive techniques
-----------------------------------------------------------------------------------------------------------------------
LaserWeld and AMS(TM) Laserweld Automated Packaging    High-precision automated assembly of optoelectronic components
Workstations                                           using laser welding processes
-----------------------------------------------------------------------------------------------------------------------
ULTRAlign Optical Component Positioning System         Positioning systems for manual alignment of optical fibers and
                                                       devices
-----------------------------------------------------------------------------------------------------------------------
ORION Semi-automated Fiber Alignment System            High-precision fiber-to-fiber and fiber-to-device alignment
                                                       systems for low-volume applications
-----------------------------------------------------------------------------------------------------------------------
</TABLE>

     Final Device Testing and Burn-In

     Fiber optic devices must meet rigorous reliability and performance
     specifications, including a requirement for 20 to 30 year life cycles and
     the ability to perform in harsh weather conditions or even under water.
     These performance standards require manufacturers to perform extensive
     testing of the completed devices. We offer standardized systems which
     automate the burn-in and test process, including:

<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------------------------
                       Product                                                   Application
<S>                                                    <C>
-----------------------------------------------------------------------------------------------------------------------
Butterfly Module Test Station                          High-precision characterization of performance data of
                                                       butterfly modules during the manufacturing process and final
                                                       Quality Assurance checks
-----------------------------------------------------------------------------------------------------------------------
Chip-on-Carrier and Coaxial Burn-in and Test Systems   High-volume precision burn-in and testing of COC and coaxial
                                                       devices
-----------------------------------------------------------------------------------------------------------------------
Butterfly Module Burn-in and Testing Racks             High-volume precision control and monitoring of long- term
                                                       burn-in and life testing of butterfly modules
-----------------------------------------------------------------------------------------------------------------------
Model 8800 Photonics Test System                       Modular instrumentation platforms for testing and qualification
                                                       of optical fibers and passive fiber optic components
-----------------------------------------------------------------------------------------------------------------------
</TABLE>

     Instruments

     We offer several lines of instrumentation that are integral or
     complementary to the development of fiber optic components, including:

<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------------------------
                       Product                                                   Application
-----------------------------------------------------------------------------------------------------------------------
<S>                                                    <C>
Power Meters                                           Measure optical power for free space and fiber directed laser
                                                       light
-----------------------------------------------------------------------------------------------------------------------
Laser Diode Instruments                                Temperature and current controllers for maintaining stability
                                                       of laser diodes
-----------------------------------------------------------------------------------------------------------------------
Tunable Laser Sources                                  DWDM and Optical Spectrum Analyzer calibration, testing of
                                                       Erbium Doped Fiber Amplifiers
-----------------------------------------------------------------------------------------------------------------------
Optical Spectrum Analyzers                             Characterization of light emitted by laser diodes, ion lasers
                                                       and solid state lasers
-----------------------------------------------------------------------------------------------------------------------
</TABLE>

Engineering and Manufacturing Services

Due to our experience in fiber optic device assembly, packaging and testing
technology we have a deep knowledge base and expertise in the processes and
technologies necessary to build high-precision fiber optic components. In
addition, our recent acquisitions of Unique and DTC have expanded our knowledge
base and expertise in the use of robotics and flexible automation solutions for
the manufacture of fiber optic components. We apply this expertise to assist our
customers in designing device packaging,

                                    Page 4
<PAGE>

     developing manufacturing processes, developing and producing tooling and
     programming customized process automation software. These services help
     customers significantly reduce the development cycle for their products and
     improve the productivity, yields and quality of their manufacturing
     processes. In addition to helping customers become more productive, these
     services assist us in establishing a long-term relationship with our
     customers and allow us to identify additional opportunities for new
     products. We also offer device manufacturing and packaging services to
     enable customers to design and test new products.

     Industrial Metrology Systems

     The Industrial Metrology Systems division's products provide a broad range
     of non-contact video-based measurement and inspection products and touch
     probe measurement products for a number of industrial markets, including
     the transportation, automotive, computer peripherals, and life and health
     sciences markets. The systems and subsystems from this division incorporate
     years of experience and expertise in core technologies such as precision
     motion, vibration control and measurement. The Industrial Metrology
     Systems' product lines include:

<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------------------------------------
                  Product                             Application                           Markets
-------------------------------------------------------------------------------------------------------------------------
<S>                                           <C>                                 <C>
Polaris                                       Dimensional                         .  Computer Peripherals
                                                measurement of disk
                                                drive heads
-------------------------------------------------------------------------------------------------------------------------
DataStar/Galaxy Automated Measurement         High-precision                      .  Fiber Optic Components
 Systems                                        dimensional                       .  Industrial Manufacturing
                                                measurements to verify            .  Life and Health Sciences
                                                manufacturing                     .  Semiconductors
                                                tolerances                        .  Transportation
-------------------------------------------------------------------------------------------------------------------------
Sprint and Mini/AutoMap Manual Inspection     High-precision manual               .  Fiber Optic Components
 Systems                                        dimensional                       .  Industrial Manufacturing
                                                measurements to verify            .  Life and Health Sciences
                                                manufacturing                     .  Semiconductors
                                                tolerances                        .  Transportation
-------------------------------------------------------------------------------------------------------------------------
Video Direct Microscopes                      High magnification for              .  Fiber Optic Components
                                                visual/video inspection           .  Industrial Manufacturing
                                                and assembly of small             .  Life and Health Sciences
                                                parts                             .  Semiconductors
                                                                                  .  Transportation
                                                                                  .  Research
-------------------------------------------------------------------------------------------------------------------------
Automatic Stent Inspection System             Non-contact dimensional             .  Life and Health Sciences
                                                inspection and defect
                                                analysis of cardiac
                                                stents
-------------------------------------------------------------------------------------------------------------------------
JoWin/Ruby Automated Contact Measurement      High-precision dimensional          .  Automotive
 Systems                                        measurements to verify            .  Industrial manufacturing
                                                manufacturing tolerances          .  Aerospace
                                                                                  .  Transportation
                                                                                  .  Research
----------------------------------------------------------------------------------------------------------------------------
Contact Coordinate Measurement Machines       High accuracy contact               .  Automotive
                                                Dimensional inspection            .  Industrial manufacturing
                                                                                  .  Aerospace
                                                                                  .  Transportation
                                                                                  .  Research
-------------------------------------------------------------------------------------------------------------------------
</TABLE>

                                    Page 5
<PAGE>

Industrial and Scientific Technologies

The Industrial and Scientific Technologies division's products are used across a
wide range of industrial markets for applications that range from basic research
and development activities to high-precision manufacturing. In addition, we sell
systems and subsystems to third parties that integrate these products into
larger systems, particularly for semiconductor manufacturing. Our industrial and
scientific products address a wide range of markets, including fiber optic
communications, semiconductor equipment, life and health sciences, analytical
instruments, aerospace and research. These products and technologies also form
the foundation of our integrated, automated systems that we sell in our other
divisions. We believe that Industrial and Scientific Technologies customers
develop an appreciation for the quality of our products which makes them more
likely to buy integrated, automated systems from us as the need for production
and test systems grows.

<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------
      Category                           Products                                       Applications
------------------------------------------------------------------------------------------------------------------------
<S>                    <C>                                           <C>
Motion Control         Linear and rotational stages                  .  High-precision positioning and motion control
  Devices,             Elevational devices                              apparatus for manufacturing and test
  Systems and          Actuators                                        applications
  Subsystems           Simple and programmable motion controllers    .  Precision alignment in fiber optic,
                       for linear stepping and DC motors                telecommunication and laser devices
                       Motion systems                                   assembly
                       Air bearing stages                            .  Precision positioning of semiconductor wafers
                                                                        for defect detection
                                                                     .  Sample sorting and sequencing for DNA
                                                                        research
------------------------------------------------------------------------------------------------------------------------
Vibration Isolation    Optical benches and support systems           .  Reduction of impact of external forces on
  Systems and          Workstations                                     high-precision research, manufacturing test
  Subsystems           Active and passive isolation systems             and assembly systems
                       Honeycomb, granite and rigid structures       .  Structures for optical fiber fabrication
                       Elastomeric mounts                            .  Scanning Electron Microscope/Atomic Force
                                                                        Microscope base isolation
                                                                     .  Wire bonding equipment base isolation
                                                                     .  Isolated floor for Wafer Stepper equipment
------------------------------------------------------------------------------------------------------------------------
Manual                 Optical mounts                                .  Manual, high-precision alignment of optical
  Positioning          Bases and brackets                               instruments
  Components           Posts and rod systems                         .  Manual assembly of fiber optic devices
                       Translation and rotation stages               .  Subsystems used for high-speed cell sorting
                       Micro interferometer                             for genomic research
                       Laser-to-fiber couplers                       .  Semiconductor reticule inspection equipment
                       Manual fiber optic positioners
                       Educational kits
------------------------------------------------------------------------------------------------------------------------
Optics                 Lenses                                        .  Components for research and product
                       Optical systems                                  development activities
                       Mirrors                                       .  Deep UV illumination optics for
                       Prisms and windows                               semiconductor lithography
                       Filters and attenuators                       .  Thin film measurement of semiconductor
                       Collimators                                      wafers for defect inspection
                       Ultrafast laser optics
                       Beamsplitters and polarization optics
------------------------------------------------------------------------------------------------------------------------
</TABLE>

We also offer subassemblies that are a value-added combination of standard and
custom products drawn from the components, optics, motion control and vibration
isolation product lines. We combine these items with additional engineering to
create more highly integrated products to meet customer needs. These products
are often subsystems of our OEM customer's products. This product line offers a
strategic

                                    Page 6
<PAGE>

competitive advantage allowing us to differentiate ourselves from competitors
that only offer a limited product selection.

Sales and Marketing

We market components and systems through an internal sales and marketing staff,
an internal field sales organization, an international network of distributors
and sales representatives, technical catalogs and our website. As of December
31, 2000, we had 25 company-employed field sales persons and 74 independent
representatives and distributors located in the United States. In international
markets, we have 54 field sales personnel based in France, Germany, the United
Kingdom, Switzerland, Sweden, Italy, the Netherlands, Canada and Taiwan,
together with 144 independent representatives and distributors located in
countries where we do not have a direct presence. Our customers often have
unique technical specifications and manufacturing processes, and may require
specific system, subsystem or component designs. This requires close cooperation
between the sales representatives and distributors and the engineering staff,
and results in long sales cycles for products.

We have written agreements with each of our representatives and distributors. In
some cases we have granted representatives and distributors exclusive
authorization to sell certain of our products to a specific geographic area.
These agreements generally have terms of one year and are renewable on an annual
basis. Either party can terminate the agreement without cause by providing 90
days written notice to the other party or immediately by providing written
notice to the other party, upon the occurrence of certain specified events.
These agreements are generally not assignable without prior approval. Most
agreements are structured to provide distributors with sales discounts off of
the domestic list price. Representatives are generally paid commissions for
sales of products. No single independent representative or distributor accounted
for more than 5% of revenues in 2000 and all independent representatives and
distributors combined accounted for less than 10% of revenues in 2000.

In addition to sales representatives and distributors, we also market our
standard products through our product catalogs and website. The principal
marketing tool for the scientific market is a comprehensive set of product
catalogs. These documents, numbering approximately 1,100 pages in total, provide
detailed product information as well as extensive technical and applications
data. These catalogs are published in English, French, German and Japanese and
mailed annually to more than 100,000 potential customers. Our website provides
customers with access to the latest products, a literature and information
request form, technical/tutorial and application related material, market
surveys, sales information (including catalogs), and the ability to purchase a
majority of our standard products.

Research and Product Development

We continually seek to improve our technological position through internal
research, product development and licensing, and acquisitions of complementary
technologies. As of December 31, 2000, we had 228 employees engaged in research
and development. We continually work to enhance existing products and to develop
and introduce innovative new products to satisfy the needs of customers. In
addition, we regularly investigate new ways to combine components manufactured
by various divisions to produce innovative technological solutions for the
markets we serve. Research and development expenses were $21.7 million, or 8.6%
of net sales, in 2000 and $13.3 million, or 9.2% of net sales, in 1999. We are
committed to continued product development and expect that R&D expenditures will
increase in absolute dollars in future periods.

Our research and development efforts may not be successful, our new products may
not be developed on a timely basis or achieve customer acceptance, and our
customers' products may not achieve market acceptance. Failure to develop, or
introduce on a timely basis, new products or product enhancements that achieve
market acceptance could have a materially adverse effect on our business,
operating results or financial condition.

                                    Page 7
<PAGE>

Competition

The markets for our products are intensely competitive and characterized by
rapidly changing technology. We believe that the primary competitive factors in
our markets are:

     .  product features and performance;
     .  quality and reliability;
     .  customer relationships;
     .  ability to manufacture and deliver products on a timely basis;
     .  pricing; and
     .  ability to customize products to customer specifications.

We believe that we currently compete effectively with respect to each of these
factors. However, we may not be able to compete successfully in the future
against existing or new competitors.

We compete in various markets against a number of companies, many of which have
longer operating histories, greater name recognition and significantly greater
technical, financial, manufacturing and marketing resources than we do. In
addition, some of these companies have long established relationships with our
customers and potential customers in our markets. In the fiber optic
communications market, the primary competition currently comes from certain of
our existing and potential customers, who have developed or may develop their
own manufacturing and test equipment. In the video metrology market, the primary
competitors are currently Optical Gauging Products, Mitutoyo, View Engineering
and Deltronic.

In addition to current competitors, we believe that new competitors, some of
whom may have substantially greater financial, technical and marketing resources
than us, will seek to provide products to one or more of our markets in the
future. Such future competition could harm our business.

Intellectual Property and Proprietary Rights

Our success and competitiveness depends to an extent on our technology and other
intellectual property such as trademarks. We protect our technology through the
use of patents, trademark registrations, exclusive marketing rights and
licenses. We have been granted a number of patents in the U.S. and foreign
jurisdictions. We also have trademarks registered in the U.S. and foreign
jurisdictions. We actively pursue applications for new patents and trademarks as
the need arises.

We generally control access to our proprietary information, and maintain
confidentiality agreements with our employees and consultants, as well as
licensing agreements with our corporate partners. It is possible that, despite
our efforts, other parties may use, obtain or try to copy our products and
technology. Policing unauthorized use of our products and technology is
difficult and time consuming. We cannot guarantee you that the steps we take to
protect our rights will prevent any misappropriation of our products or
technology. This is particularly the case in foreign jurisdictions, where the
intellectual property laws may not afford our intellectual property rights the
same protection as the laws of the United States. In addition, infringement,
invalidity, right to use or ownership claims by third parties may be asserted
against us in the future, which claims could materially harm our business,
operating results or financial condition, regardless of the outcome.

Manufacturing

We assemble, test and package components and systems at domestic manufacturing
facilities located in Chandler, Arizona; Garden Grove, California; Irvine,
California; Richmond, California; San Luis Obispo, California; Santa Ana,
California; Longmont, Colorado; Billerica, Massachusetts; and Plymouth,
Minnesota. International manufacturing facilities are located in France and
Sweden.

Our manufacturing processes are diverse and consist of: purchasing raw
materials, principally stainless

                                    Page 8
<PAGE>

steel, aluminum and glass; processing the raw materials into components,
subassemblies and finished products; purchasing components, assembling and
testing components and subassemblies; and, for our larger products, assembling
the subassemblies and components into integrated systems. We seek to primarily
design and manufacture components internally, although on a limited basis, we
purchase completed products from certain suppliers and resell those products
through our distribution system. Most of these completed products are produced
to specifications and carry our logo.

We currently procure various components from single-sources due to unique
component designs as well as certain quality and performance requirements. In
addition, we manufacture certain components internally, from which there are no
readily available suppliers. If single-sourced components were to become
unavailable or were to become unavailable on terms satisfactory to us, we would
be required to purchase comparable components from other sources. If for any
reason we could not obtain comparable replacement components from other sources
in a timely manner, our business, results of operations or financial condition
could be adversely affected.

Employees

As of February 28, 2001, we had 1,744 employees worldwide. None of our employees
are represented by a union. We believe that the relationship with our employees
is good.

Backlog

The consolidated backlog of products totaled $145.5 million and $34.1 at
December 31, 2000 and 1999, respectively. We manufacture a significant portion
of our products for inventory to provide the capability to make shipments upon
receipt of an order. As a result of these short response times and because
orders are generally cancelable with little or no penalty, we do not believe
that the backlog of orders at any particular date is a meaningful indicator of
sales for any succeeding period.

As a result of manufacturing products in advance of receiving orders, we may at
any given time have high levels of inventory. Such levels of inventories
increase our expenses and the amount of resources invested in working capital.
In addition, as the markets we serve are characterized by rapid technological
change, excess inventory levels increase the risk of product obsolescence.

Investments

In addition to the ownership of subsidiaries detailed in Exhibit 21 of this Form
10-K, we have minority ownership interests in several domestic companies
involved in manufacturing laser-related and other high technology products.

ITEM 2  Properties

Our corporate headquarters is located in Irvine, California. We lease this
facility under a fifteen-year lease expiring in March 2007. International
manufacturing operations are in owned facilities at Beaune and La Boulonnie,
France and in leased facilities at Eskilstuna, Sweden. Domestic manufacturing
operations are in leased facilities at Chandler, Arizona; Garden Grove,
California; Irvine, California; Richmond, California; San Luis Obispo,
California; Santa Ana, California; Longmont, Colorado; Billerica, Massachusetts;
and Plymouth, Minnesota. We lease office space in Santa Clara, California for
our Western Region sales, service and application center. We lease sales and
administration offices in Evry, France and Eskilstuna Sweden. We lease
additional sales and service offices in Germany, England, Switzerland, Italy,
the Netherlands, Canada and Taiwan, with leases expiring at various dates
through 2011. Our centralized European distribution center, formerly located at
leased facilities in the Netherlands, was relocated to the facility in Beaune,
France during the second quarter of 1999. We believe that these facilities are
adequate for our current needs and that suitable additional or substitute space
will be available in the future to accommodate expansion of the operations. In
1991, we acquired, in connection with the acquisition of

                                    Page 9
<PAGE>

Micro-Controle, a building in Evry, France. In 2000, we sold this property for
approximately $0.5 million.

ITEM 3  Legal Proceedings

In August 1999, Newport Electronics, a manufacturer of electronic devices, filed
suit against us in Federal District Court in Connecticut, claiming that our use
of the "Newport" trademark infringes their rights with respect to such mark. We
are vigorously defending our position in this litigation, however, we are unable
to predict the outcome of the case due to the complex nature of this litigation.
This case, if adversely determined, could have certain adverse effects on our
business, including potential monetary damages and being enjoined from using the
"Newport" mark in conjunction with certain classes of products.

Other than the foregoing, we are not a party to any material litigation.

ITEM 4  Submission of Matters to a Vote of Security Holders

No matters were submitted to a vote of security holders during the fourth
quarter of the year ended December 31, 2000.

                                    PART II

ITEM 5 Market For the Registrant's Common Equity and Related Security Holder
Matters

Price Range of Common Stock

Our common stock is traded on the NASDAQ National Market under NASDAQ symbol
NEWP. As of December 31, 2000, we had 1,221 common stockholders of record. Refer
to Note 16, Supplementary Quarterly Consolidated Financial Data (Unaudited), of
Notes to Consolidated Financial Statements on page 44 for quarterly share price
and dividend payments.

Recent Sales of Unregistered Securities

During the year ended December 31, 2000, we issued an aggregate of 285,847
shares of our common stock in connection with the purchase of the capital stock
of Unique Equipment Company and the business of CE Johansson AB. The shares were
issued pursuant to exemptions by reason of Section 4(2) of the Securities
Exchange Act of 1933, as amended (the "Securities Act"). These sales were made
without general solicitation or advertising. Each purchaser was an accredited
investor or a sophisticated investor with access to all relevant information
necessary. We have filed Registration Statements on Form S-3 covering the resale
of such securities.

                                    Page 10
<PAGE>

ITEM 6  Selected Financial Data

The table below presents selected financial data of the Company and its
subsidiaries as of and for the years ended December 31, 2000, 1999, 1998, 1997,
and 1996, restated to include financial information of Unique which was
accounted for as a pooling of interests.  This data does not include the pooling
effects of KLI, a subsequent event included in Note 17.

(In thousands, except percent, per share and worldwide employment)

<TABLE>
<CAPTION>
                                             2000       1999       1998       1997       1996
                                             ----       ----       ----       ----       ----
<S>                                        <C>        <C>        <C>        <C>        <C>
 FOR THE YEAR:
 Net sales                                 $252,853   $144,112   $142,825   $143,324   $128,472
 Cost of sales                              142,479     81,646     80,407     80,795     71,984
                                           --------   --------   --------   --------   --------
    Gross profit                            110,374     62,466     62,418     62,529     56,488
 Selling, general and administrative         54,786     36,760     34,402     37,703     38,463
 Research and development                    21,704     13,300     11,738      9,490      8,204
                                           --------   --------   --------   --------   --------
    Income from operations                   33,884     12,406     16,278     15,336      9,821
 Interest expense                             1,927      1,785      1,891      1,992      1,931
 Interest income                              8,428        144        510        278        151
 Other income (expense), net                   (421)        59       (336)      (559)       370
                                           --------   --------   --------   --------   --------
    Income before income taxes               39,964     10,824     14,561     13,063      8,411
 Income tax provision                        12,145      2,956      3,365      3,030      1,705
                                           --------   --------   --------   --------   --------
    Net income                             $ 27,819   $  7,868   $ 11,196   $ 10,033   $  6,706
                                           ========   ========   ========   ========   ========

 Percent of net sales:
    Gross profit                               43.7%      43.3%      43.7%      43.6%      44.0%
    Selling, general and administrative        21.7       25.5       24.1       26.3       30.0
    Research and development                    8.6        9.2        8.2        6.6        6.4
    Income from operations                     13.4        8.6       11.4       10.7        7.6
    Net income                                 11.0        5.5        7.8        7.0        5.2

 PER SHARE: (1) (2)
 Net income
  Basic                                    $   0.93   $   0.29   $   0.41   $   0.37   $   0.26
  Diluted                                      0.86       0.28       0.40       0.36       0.25
 Dividends paid                                0.02       0.01       0.01       0.01       0.01
 Equity (diluted)                             14.55       2.72       2.55       2.21       2.13

 AT YEAR END:
 Cash and marketable securities            $300,006   $  3,055   $  6,135   $  8,591   $  3,827
 Working capital                            414,044     46,522     49,409     44,478     40,654
 Total assets                               531,712    124,564    112,028    109,680    110,792
 Total debt                                  12,696     27,360     21,235     23,407     24,700
 Stockholders' equity                       470,235     77,778     72,112     61,104     57,731

 MISCELLANEOUS STATISTICS
 Common shares outstanding (2)               32,643     27,860     27,523     27,019     26,835
 Diluted shares outstanding (2)              32,309     28,549     28,316     27,703     27,116
 Annual average worldwide employment          1,128        859        836        808        767
 Sales per employee                        $    224   $    168   $    171   $    177   $    167
</TABLE>

(1)  Net income and equity per share (diluted) for 1996 has been restated as
     necessary to conform with the requirements of Statement of Financial
     Accounting Standards No. 128, Earnings Per Share (SFAS No.128).
(2)  Per share amounts have been restated as necessary to reflect the May 2000
     three-for-one stock split.

                                    Page 11

<PAGE>

ITEM 7    Management's Discussion and Analysis of Financial Condition and
          Results of Operations

This Item contains forward-looking statements that involve risks and
uncertainties and actual results could differ materially from those anticipated
in such statements, as a result of various factors including those described
below in "Risks Relating To Our Business."

OVERVIEW

The following is a discussion and analysis of certain significant factors that
have affected the results of operations and financial condition during the
period included in the accompanying financial statements.  This discussion
should be read in conjunction with the financial statements and associated
notes.

In October 1998, we acquired Environmental Optical Sensors, Inc. ("EOSI"), a
provider of high-precision assembly and test equipment for the fiber optic
communications market.  In October 1999, we acquired the west coast commercial
optics operation of Corning OCA Corporation, a subsidiary of Corning
Incorporated (renamed Newport Precision Optics Corporation or "NPOC"), which
manufactures specialized precision optical products and systems.  In August
2000, we acquired Unique Equipment Co. ("Unique"), a systems integrator
specializing in the use of robotics for the fiber optics and semiconductor
industries.  In December 2000, we acquired the business of CE Johansson AB
("CEJ"), a Swedish based global supplier of advanced metrology systems.  The
EOSI, NPOC and CEJ acquisitions were accounted for using the purchase method.
The Unique acquisition was accounted for as a pooling of interests.  This
discussion includes the effects of the acquisition of Unique for all years
presented and the effect of the acquisitions of EOSI, NPOC and CEJ from the
start of their respective acquisition.

Amounts in 1999 include net sales of $2.5 million representing one extra month
of sales from the European operations.  The additional net sales stem from a
reporting change in the second quarter of 1999 that eliminated a one-month lag
in the reporting of European results.  Without the change, 1999 net sales would
have been $141.6 million, while net income would not have been materially
different.  Earnings per share were not impacted by the change.

RESULTS OF OPERATIONS

Financial Analysis  The following table sets forth, for the periods indicated,
certain income and expense items expressed as a percent of net sales and as
period-to-period percent increases or decreases:

<TABLE>
<CAPTION>
                                                                     Period-to-Period
                                        Percent of Net Sales        Increase (Decrease)
                                   -----------------------------    -------------------
<S>                                <C>        <C>         <C>         <C>        <C>
                                    2000        1999        1998       2000       1999
                                    ----        ----        ----       ----       ----
Net sales                          100.0%      100.0%      100.0%      75.5%       0.9%
Cost of sales                       56.3        56.7        56.3       74.5        1.5
                                   -----       -----       -----

     Gross profit                   43.7        43.3        43.7       76.7        0.1
Selling, general and
  administrative expense            21.7        25.5        24.1       49.0        6.9
Research and
  development expense                8.6         9.2         8.2       63.2       13.3
                                   -----       -----       -----

     Income from operations         13.4         8.6        11.4      173.1      (23.8)
Interest expense                     0.8         1.2         1.3        8.0       (5.6)
Interest income                      3.3         0.1         0.4         NM      (71.8)
Other income (expense), net         (0.1)        0.0        (0.3)        NM      117.6
                                   -----       -----       -----
     Income before income taxes     15.8         7.5        10.2      269.2      (25.7)
Income tax provision                 4.8         2.0         2.4      310.9      (12.2)
                                   -----       -----       -----

     Net income                     11.0         5.5         7.8      253.6      (29.7)
                                   =====       =====       =====
</TABLE>

NM = not meaningful

                                    Page 12
<PAGE>

Net Sales For 2000, 1999 and 1998, our net sales totaled $252.9 million, $144.1
million and $142.8 million, respectively. Net sales for 2000 increased $108.8
million, or 75.5%, as compared with 1999, due primarily to sales increases in
the fiber optic communications and semiconductor equipment markets. Net sales
for 1999 increased $1.3 million, or 0.9%, as compared with 1998, due primarily
to sales increases in the fiber optic communications and general metrology
markets, offset in part by sales declines in the computer peripherals and
aerospace and research markets.

Sales to the fiber optic communications market in 2000 were $110.0 million, an
increase of $75.7 million, or 220.7%, as compared with 1999.  Sales to the
semiconductor equipment market in 2000 were $42.1 million, an increase of $27.9
million, or 197.0%, as compared with 1999.  2000 sales to the other market
segments, which include the general metrology, aerospace and research, and
computer peripherals markets, were $100.8 million, an increase of $5.2 million,
or 5.3%, as compared with the prior year.  In 1999, sales to the fiber optic
communications market were $34.3 million, an increase of $13.3 million, or
63.0%, over 1998.  1999 sales to the semiconductor equipment market were $14.2
million, a decrease of $0.2 million, or 1.4%, as compared with 1998.  1999 sales
to the other market segments were $95.6 million, a decrease of $11.8 million, or
11.0%, versus 1998.

For 2000, 1999 and 1998, domestic sales were $170.1 million, $91.9 million and
$95.7 million, respectively.  Domestic sales in 2000 increased $78.2 million, or
85.1%, versus 1999, due primarily to sales increases in the fiber optic
communications and semiconductor equipment markets of $49.1 million, or 221.6%,
and $25.4 million, or 224.0%, respectively.  All other market segments combined,
including computer peripherals, aerospace and research and general metrology,
increased $3.7 million, or 6.3%, over 1999.  Domestic sales in 1999 decreased
$3.8 million, or 4.0%, as compared with 1998.  The sales increase in 1999 of
$10.5 million, or 89.6%, to the fiber optic communications market was offset by
sales declines of $0.5 million, or 3.9% to the semiconductor equipment market,
$9.2 million, or 50.8% to the computer peripherals market and $4.0 million, or
14.7% to the aerospace and research markets.

International sales totaled $82.8 million, $52.2 million and $47.1 million for
2000, 1999 and 1998, respectively.  For 2000, international sales increased
$30.6 million, or 58.6%, versus 1999.  International sales in 1999 included net
sales of $2.5 million representing one extra month of sales from our European
operations, due to a reporting change in the second quarter of 1999 that
eliminated a one-month lag in the reporting of European results.  Without such
change, 1999 international sales would have been $49.7 million.  The increase in
international sales in 2000 as compared with 1999 was due primarily to an
increase of $26.6 million, or 218.9%, in sales to international fiber optic
communications customers, an increase of $2.5 million, or 89.1%, in sales to the
semiconductor equipment market, and an increase in international sales to all
other market segments combined of $1.5 million, or 3.8%.  Geographically, the
increase in 2000 sales were driven primarily from European, Canadian and Pacific
Rim customers with increases of $8.3 million, or 25.4%, $13.0 million, or
113.2%, and $9.1 million, or 144.9%, respectively, over 1999. International
sales in 1999 increased $5.1 million, or 10.9% versus 1998.  The increase in
international sales in 1999 as compared with 1998 was due primarily to an
increase of $2.8 million, or 32.5%, in sales to international fiber optic
communications customers, an increase of $0.2 million, or 9.6%, in sales to
international semiconductor equipment customers and an increase of $4.4 million,
or 32.6%, in sales to international general metrology customers, partially
offset by a decrease of $2.3 million, or 11.5%, in sales to international
aerospace and research customers.  Geographically, European, Canadian and
Pacific Rim sales in 1999 increased $2.2 million, or 7.1%, $2.5 million, or
65.3%, and $1.7 million, or 17.2%, respectively, over 1998, while sales to Latin
American customers decreased $1.2 million, or 53.1%

Gross Margin  Gross margin was 43.7%, 43.3% and 43.7% for 2000, 1999 and 1998,
respectively.  The gross margin increase from 1999 to 2000 was attributable to a
mix shift towards higher margin product and system sales to the fiber optic
communications market.  Sales of these higher margin product and systems sales
were offset partially by higher growth rates in sales to semiconductor OEM
customers, which generally have lower margins.

                                    Page 13
<PAGE>

Selling, General and Administrative (SG&A) Expense  SG&A expenses totaled $54.8
million, or 21.7% of net sales, $36.8 million, or 25.5% of net sales, and $34.4
million, or 24.1% of net sales for 2000, 1999 and 1998, respectively.  SG&A
expenses, which increased $18.0 million, or 49.0%, versus 1999, were leveraged
against the net sales increase of 75.5% and primarily resulted from increases in
expenses tied to the sales and profit growth.  SG&A expense in 1999 increased
$2.4 million, or 6.9%, versus 1998, due in part to the inclusion of an
additional month of expenses from the change in European reporting, which added
$0.9 million of expenses to 1999, and to the inclusion of additional costs from
companies acquired.

Research and Development (R&D) Expense  R&D expenses totaled $21.7 million,
$13.3 million and $11.7 million for 2000, 1999 and 1998, respectively.  R&D
expenses represented 8.6%, 9.2% and 8.2% of net sales in 2000, 1999 and 1998,
respectively.  R&D expenses increased $8.4 million, or 63.2%, in 2000, and $1.6
million, or 13.3%, in 1999 as compared with 1998.  The increases in both years
were attributable primarily to increased personnel costs related to the
development of a number of new products and product enhancements including
extending the range of our automated packaging and test equipment product lines
for the fiber optic communications market, technology enhancements to the
LaserWeld and AutoAlign packaging workstations, and the development of laser
diode burn-in and characterization systems.  We are committed to continued
product development and intend to maintain R&D expenditures at a level between
8% and 9% of net sales for the development of new products and product
improvements.

Interest Expense and Interest Income  Interest expense totaled $1.9 million,
$1.8 million and $1.9 million for 2000, 1999 and 1998, respectively.  Although a
majority of the debt is at fixed interest rates, we anticipate that interest
expense for 2001 will decrease slightly from 2000 because the long term debt
will be reduced by principal payments of $2.5 million in the second quarter and
$2.5 million in the fourth quarter.

In July 2000, we completed a secondary public offering of which net proceeds of
$329.9 million (after underwriting discounts and commissions) were received in
August 2000.  Interest income totaled $8.4 million, $0.1 million and $0.5
million for 2000, 1999 and 1998, respectively.  The increase in the interest
income is attributable to the investment of the proceeds from the secondary
public offering.

Taxes Based On Income  The effective tax rates for 2000, 1999 and 1998 were
30.4%, 27.3% and 23.1%, respectively.  Due to substantially higher pretax income
in 2000, tax benefits primarily associated with the Company's foreign sales
corporation and various tax credits did not have as great an impact on the
effective tax rate as in the prior year, which resulted in a higher effective
tax rate versus 1999.  The increase in the effective tax rate for 1999 compared
with 1998 was primarily the result of earnings attributable to the Unique
pooling combination for which a tax provision was not presented due to Unique's
S-Corp income tax status.

LIQUIDITY AND CAPITAL RESOURCES

Net cash used in our operating activities in 2000 of $23.6 million resulted from
the significant growth of the Company in 2000.  The usage was primarily
attributable to the increase in primary working capital (defined as customer
receivables and inventories less accounts payable) and deferred income taxes,
partially offset by net income, plus non-cash charges for depreciation and
amortization.  Customer receivables increased by $31.5 million, or 96.4%, in
2000, while the days sales outstanding ratio improved to 70 days in 2000 from 74
days in 1999.  Inventories increased 96.6% in 2000 over 1999 levels, due
primarily to production planning associated with our goal of maintaining
competitive manufacturing lead times, and to the inclusion of inventory from CEJ
in 2000 for which there was no comparable inventory in 1999.  Inventory turns
improved to 2.5 times in 2000 from 2.2 times in 1999.  Accounts payable
increased $16.7 million, or 240.1%, in 2000 compared with 1999, primarily as a
result of higher inventory levels.

Net cash used in investing activities in 2000 of $305.5 million was attributable
principally to the purchases and sales of marketable securities and property,
plant and equipment, net of disposals.

                                    Page 14
<PAGE>

Net cash provided by financing activities in 2000 of $336.2 million was
attributable principally to the proceeds from the secondary offering and the
issuance of common stock in connection with stock option and purchase plans.
This increase was offset in part by a decrease in our line of credit and long-
term borrowings.

At December 31, 2000, the Company had in place a $20.0 million unsecured line of
credit expiring May 30, 2003 and a $20.0 million unsecured line of credit
expiring May 30, 2001.  Both lines bear interest at either the prevailing prime
rate, or the prevailing London Interbank Offered Rate plus 1.0%, at the
Company's option, plus an unused line fee of 0.2% per year.  At December 31,
2000, there was no outstanding balance under either line of credit, with $39.4
million available under the combined lines, after considering outstanding
letters of credit.  In March 2001, we amended these lines of credit to be $10.0
million each.

We believe our current working capital position together with estimated cash
flows from operations and existing credit availability are adequate to fund
operations in the ordinary course of business, anticipated capital expenditures
and debt payment requirements, and for at least the next twelve months.
However, this belief is based upon many assumptions and is subject to numerous
risks (see "Risks Relating To Our Business," below), and there can be no
assurance that we will not require additional funding in the future.

Although we have no present agreements or commitments with respect to any
material acquisitions of other businesses, products, product rights or
technologies, we continue to evaluate acquisitions of products, technologies or
companies that complement our business and may make such acquisitions in the
future.  Accordingly, there can be no assurance that we will not need to obtain
additional sources of capital to finance any such acquisitions.

European Economic and Monetary Union (EMU) - New European Currency

On January 1, 1999, member countries of the European Economic and Monetary Union
established fixed conversion rates between their existing national currencies
and one common currency - the euro.  The euro trades on currency exchanges and,
during a three-year dual-currency transition period, either the euro or the
national currencies may be used in business transactions.  Beginning in January
2002, new euro-denominated bills and coins will be issued, and the national
currencies will be withdrawn from circulation.  Our operating subsidiaries
affected by the euro conversion have implemented and are implementing plans to
address the systems and business issues raised by the euro currency conversion.
These issues include, among others, (1) the need to adapt computer and other
business systems and equipment to accommodate euro-denominated transactions; and
(2) the competitive impact of cross-border price transparency, which may make it
more difficult for businesses to charge different prices for the same products
on a country-by-country basis, particularly once the euro currency is issued in
2002.  While we anticipate that the euro conversion will not have a material
adverse impact on our financial condition or results of operations, there can be
no assurance that key vendors, customers and distributors will not be affected
by such euro currency issues, which could have an adverse effect on our
business, operating results and financial condition.  Further, there can be no
assurance that the currency market volatility will not increase, which could
have an adverse effect on our euro exposures.

Recent Accounting Pronouncements

In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 133, Accounting for Derivative Instruments
and Hedging Activities (SFAS No. 133).  SFAS No. 133 establishes a new model for
accounting for derivatives and hedging activities and supercedes and amends a
number of existing accounting standards.  SFAS No. 133 requires that all
derivatives be recognized in the balance sheet at their fair market value and
the corresponding derivative gains or losses be either reported in the statement
of operations or as a deferred item depending on the type of hedge relationship
that exists with respect of such derivatives.  In July 1999, the Financial
Accounting Standards Board issued Statement of Financial Accounting Standards
No. 137, Accounting for Derivative Instruments

                                    Page 15
<PAGE>

and Hedging Activities-Deferral of the Effective Date of SFAS No. 133 (SFAS No.
137). SFAS No. 137 deferred the effective date until the year beginning after
June 30, 2000. In June 2000, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 138, Accounting for Derivative
Instruments and Hedging Activities-An Amendment of SFAS Statement No. 133 (SFAS
No. 138). SFAS No. 138 amends the accounting and reporting standards for certain
derivatives and hedging activities such as net settlement contracts, foreign
currency transactions and intercompany derivatives. We will adopt SFAS No. 133
in our quarter ending March 31, 2001. We do not anticipate that the adoption of
SFAS No. 133 will have a significant impact on our results of operations,
financial position or cash flow.

In December 1999, the Securities and Exchange Commission ("SEC") issued Staff
Accounting Bulletin No. 101, Revenue Recognition in Financial Statements (SAB
No. 101), which provides guidance on the recognition, presentation and
disclosure of revenue in financial statements filed with the SEC.  SAB No. 101
outlines the basic criteria that must be met to recognize revenue and provides
guidance for disclosures related to revenue recognition policies.  We review our
sales contracts on an ongoing basis to ensure our compliance with SAB No. 101.
Adoption of SAB No. 101 had no material effect on our results of operations,
financial position or cash flow for the current or any prior period.

RISKS RELATING TO OUR BUSINESS

Our quarterly operating results are difficult to predict, and if we fail to meet
the expectations of investors and/or securities analysts, the market price of
our common stock would likely decline significantly.

Our operating results in any given quarter have fluctuated and will likely
continue to fluctuate. These fluctuations are typically unpredictable and can
result from numerous factors including:

     .  the timing of customer orders and shipments within a given quarter;

     .  fluctuations in the economic conditions of the markets for our products;

     .  demand for our products and the products sold by our customers;

     .  our ability to manufacture a sufficient quantity of our products;

     .  variations in the mix of products we sell in each of the markets in
        which we do business;

     .  our timing in introducing new products;

     .  changes in our pricing policies or in the pricing policies of our
        competitors or suppliers;

     .  market acceptance of any new or enhanced versions of our products;

     .  the availability and cost of key components we use to manufacture our
        products;

     .  fluctuations in foreign currency exchange rates;

     .  timing of our competitors in introducing new products; and

     .  our levels of expenses.

We may in the future choose to reduce prices, increase spending, or add or
eliminate products in response to actions by competitors or as an effort to
pursue new market opportunities. These actions may also adversely affect our
business and operating results and may cause our quarterly results to be lower
than the

                                    Page 16
<PAGE>

results of previous quarters. We believe that quarter-to-quarter comparisons of
results from operations, or any other similar period-to-period comparisons, are
not meaningful and should not be construed as reliable indicators of our future
performance. In any period, our results may be below the expectations of market
analysts and investors, which would likely cause the trading price of our common
stock to drop.

We are highly dependent on the growth of the fiber optic communications industry
and on our customers who serve this industry.

A substantial portion of our current and future business comes from sales to
companies that manufacture components for fiber optic communications systems.
The fiber optics communications market is characterized by rapid technological
change, frequent product introductions, changing customer requirements and
evolving industry standards. Because our customers face uncertainties with
regard to the growth and requirements of this market, their products and
components may not achieve, or continue to achieve, anticipated levels of market
acceptance. If our customers are unable to deliver products that gain market
acceptance with fiber optic systems vendors, it is likely that these customers
will not purchase our products or will purchase smaller quantities of our
products. We often invest substantial resources in helping our customers develop
products and manufacturing processes in advance of significant sales of our
products to such customers. A failure on the part of our customers' products to
gain market acceptance, or a failure of the fiber optic communications market as
a whole to grow would have a significant negative effect on our business and
results of operations.

If we are unable to continue to meet the demand for our products in the fiber
optic communications market, we may not be able to sustain our growth rate.

The fiber optic communications market has experienced significant growth over
the past few years, and demand for the products we sell to companies that
manufacture components for fiber optic communications systems has increased
accordingly. If we cannot significantly increase our manufacturing capacity, we
may not be able to meet the demand for our products in the future and our growth
rate may decline.

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.

Our markets are characterized by rapid technological advances, evolving industry
standards, shifting customer needs and new product introductions and
enhancements. Products in our markets often become outdated quickly and without
warning. We depend to a significant extent upon our ability to enhance our
existing products, to address the demands of the marketplace for new and
improved technology and to be price competitive. We may not be successful in
developing, manufacturing or marketing new products on a timely or cost-
effective basis. If we fail to adequately introduce new, competitive products on
a timely basis, our business and results of operations would be harmed.

We offer products for multiple industries and must face the challenges of
supporting the distinct needs of each of our markets.

We market products for the fiber optic component, semiconductor capital
equipment, industrial metrology, aerospace and research markets. Because we
operate in multiple markets, we must work constantly to understand the needs,
standards and technical requirements of several different industries and must
devote significant resources to developing different products for these
industries. Product development is costly and time consuming. Many of our
products are used by our customers to develop, manufacture and test their own
products. As a result, we must anticipate trends in our customers' industries
and develop products before our customers' products are commercialized. If we do
not accurately predict our customers' needs and future activities, we may invest
substantial resources in developing products that do not achieve broad market
acceptance. Our decision to continue to offer products to a given market or to

                                    Page 17
<PAGE>

penetrate new markets is based in part on our judgment of the size, growth rate
and other factors that contribute to the attractiveness of a particular market.
If our product offerings in any particular market are not competitive or our
analyses of a market are incorrect, our business and results of operations would
be harmed.

Because our sales cycle is long and difficult to predict, we may experience
fluctuations in our operating results.

Many of our products are complex, and customers for these products require
substantial time to make purchase decisions. These customers often perform, or
require us to perform, elaborate testing and evaluation of our products before
committing to purchasing them. The sales cycle for our products typically
varies, is difficult to predict and can last as long as one year. Orders
expected to be shipped in any one quarter may be delayed to subsequent quarters,
which could cause our operating results to fluctuate from period to period.
These fluctuations could harm our results of operations and cause our stock
price to drop.

If we are unable to attract, retain and motivate our employees, our business and
results of operations will suffer.

Our ability to maintain and grow our business is directly related to the service
of our employees in each area of our operations. Our future performance will be
directly tied to our ability to hire, train, motivate and retain qualified
personnel. Competition for personnel in the technology marketplace is intense,
particularly for employees with expertise in fiber optics. If we are unable to
hire sufficient numbers of employees with the experience and skills we need or
to retain our employees, our business and results of operations would be harmed.

We face significant risks from doing business in foreign countries.

Our business is subject to risks inherent in conducting business
internationally. In 2000, 1999 and 1998, our international revenues accounted
for approximately 32.7%, 36.3% and 33.0%, respectively, of total net sales, with
a substantial portion of sales originating in Europe. We expect that
international revenues will continue to account for a significant percentage of
total net sales for the foreseeable future. As a result of our international
operations, we face various risks, which include:

     .  adverse changes in the political or economic conditions in countries or
        regions where we manufacture or sell our products;

     .  challenges of administering our business globally;

     .  compliance with multiple and potentially conflicting regulatory
        requirements including export requirements, tariffs and other trade
        barriers;

     .  longer accounts receivable cycles;

     .  overlapping or differing tax structures;

     .  adverse currency fluctuations;

     .  differing protection of intellectual property;

     .  difficulties in staffing and managing each of our individual foreign
        operations; and

     .  trade restrictions and licensing requirements.

                                    Page 18
<PAGE>

As a result of our international operations, fluctuations in foreign exchange
rates could affect the sales price in local currencies of our products in
foreign markets, potentially making our products less competitive. In addition,
exchange rate fluctuations could increase the costs and expenses of our foreign
operations or require us to modify our current business practices. If we
experience any of the risks associated with international business, our business
and results of operations could be significantly harmed.

We face substantial competition, and if we fail to compete effectively, our
operating results will suffer.

The markets for our products are intensely competitive, and we believe that
competition from both new and existing competitors will increase in the future.
We compete in several specialized market segments, against a limited number of
companies. We also face competition in some of our markets from our existing and
potential customers who have developed or may develop products that are
competitive to ours. Many of our existing and potential competitors are more
established, enjoy better name recognition and possess greater financial,
technological and marketing resources than we do. Other competitors are small,
and highly specialized firms that are able to focus on only one aspect of a
market. We compete on the basis of product features, quality, reliability and
price and on our ability to manufacture and deliver our products on a timely
basis. We may not be able to compete successfully in the future against existing
or new competitors. In addition, competitive pressures may force us to reduce
our prices, which could negatively affect our operating results. If we do not
respond adequately to competitive challenges, our business and results of
operations would be harmed.

Acquisitions of additional business, products or technologies we may make could
negatively affect our business.

We have historically achieved growth through a combination of internally
developed new products and acquisitions.  Since August 2000 we have acquired
four companies, and as part of our strategy to sustain growth, we expect to
continue to pursue acquisitions of other companies, technologies and
complementary product lines in the future.  Each of our recent acquisitions
involves, and any future acquisition would involve risks, including:

     .  our ability to integrate the acquired business' operations, products and
        personnel;

     .  our ability to retain key personnel of the acquired businesses;

     .  our ability to manufacture and sell the products of the acquired
        businesses;

     .  a decline in demand by our customers for the acquired business'
        products;

     .  our ability to expand our financial and management controls and
        reporting systems and procedures to incorporate the acquired businesses;

     .  diversion of management's time and attention;

     .  customer dissatisfaction or performance problems with the products or
        services of an acquired firm;

     .  assumption of unknown liabilities, or other unanticipated events or
        circumstances; and

     .  the need to record significant one-time charges or amortize intangible
        assets, which could lower our reported earnings.

We cannot assure you that any business that we may acquire will achieve
anticipated revenues and operating results, which could decrease the value of
the acquisition to us. Any of these risks could materially harm our business,
financial condition and results of operations.

                                    Page 19
<PAGE>

If we are delayed in introducing our new products into the marketplace, or if
our new products contain defects, our operating results will suffer.

Because our products are sophisticated and complex, we may experience delays in
introducing new products or enhancements to our existing products. If we do not
introduce our new products or enhancements into the marketplace in a timely
fashion, our customers may choose to use competitors' products. Our inability to
introduce new or enhanced products in a timely manner could cause our business
and results of operations to suffer. Our products may also contain defects or
undetected errors. As a result, we could incur substantial expenses in fixing
any defects or undetected errors, which could result in damage to our
competitive position and harm our business and results of operations.

We rely on several sole-source and limited source suppliers.

We obtain some of the materials used to build our systems and subsystems, such
as the sheet steel used in some of our vibration isolation tables, from single
or limited sources due to unique component designs as well as specialized
quality and performance requirements needed to manufacture our products. If our
components or raw materials are unavailable in adequate amounts or are
unavailable on satisfactory terms, we may be required to purchase them from
alternative sources, if available, which could increase our costs and cause
delays in the production and distribution of our products. If we do not obtain
comparable replacement components from other sources in a timely manner, our
business and results of operations will be harmed. Many of our suppliers require
long lead-times to deliver the quantities of components that we need. If we fail
to accurately forecast our needs, or if we fail to obtain sufficient quantities
of components that we use to manufacture our products, then delays or reductions
in production and shipment could occur, which would harm our business and
results of operations.

Natural disasters or power outages could disrupt or shut down our operations.

Our operations are susceptible to damages from earthquakes, floods, fire, loss
of power or water supplies, or other similar contingencies.  We have significant
facilities in areas with above average seismic activity.  If any of our
facilities were to experience a catastrophic loss, it could disrupt our
operations, delay production, shipments and revenue, and result in large
expenses to repair or replace the facility, any of which would harm our
business.  In addition, a significant portion of our manufacturing operations
are located in California, which has recently experienced ongoing power
shortages, which have resulted in "rolling blackouts."  These blackouts, which
are expected to continue at least through 2001, could cause disruptions to our
operations and the operations of certain of our suppliers, distributors and
customers. We are predominantly uninsured for losses and interruptions caused by
earthquakes and power outages.

ITEM 7A  Quantitative and Qualitative Disclosures About Market Risk

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

Foreign Currency Risk

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

International operations constituted approximately 28% of our 2000 consolidated
operating profit.  As

                                    Page 20
<PAGE>

currency exchange rates change, translation of the income statements of
international operations into U.S. dollars affects year-over-year comparability
of operating results. We do not generally hedge translation risks because cash
flows from international operations are generally reinvested locally. We do not
enter into hedges to minimize volatility of reported earnings because we do not
believe it is justified by the exposure or the cost.

Changes in currency exchange rates that would have the largest impact on
translating future international operating profit include the euro, British
pound, Canadian dollar, Swedish krona and Swiss franc.  We estimate that a 10%
change in foreign exchange rates would have affected reported operating profit
by approximately $1.2 million for the year ended December 31, 2000.  We believe
that this quantitative measure has inherent limitations because, as discussed in
the first paragraph of this section, it does not take into account any
governmental actions or changes in either customer purchasing patterns or
financing and operating strategies.

Transaction gains and losses arise from monetary assets and liabilities
denominated in currencies other than a subsidiary's functional currency.  Net
foreign exchange gains and losses were not material to our earnings for the last
three years.  The impact of unrealized foreign exchange translation gains and
losses is disclosed in the Consolidated Statement of Comprehensive Income on
page 28.

Interest Rate Risk

Our exposure to interest rate risk is limited to our unsecured lines of credit
and our investments in marketable securities.  Our lines of credit bear interest
at either the prevailing prime rate, or the prevailing London Interbank Offered
Rate plus 1.0%, at our option.  No amounts were outstanding under these lines of
credit as of December 31, 2000.  Our long term debt instruments carry fixed
interest rates.  Our investments in marketable securities, which total $289.8
million at December 31, 2000, are sensitive to changes in the general level of
U.S. interest rates.  We estimate that a 10% decline in the interest earned on
our investment portfolio would have resulted in an after tax decline in our net
income of $1.3 million for the year ended December 31, 2000.

The sensitivity analyses presented in the interest rate and foreign exchange
discussions above disregard the possibility that rates can move in opposite
directions and that gains from one category may or may not be offset by losses
from another category and vice versa.

ITEM 8  Financial Statements and Supplementary Data

Consolidated financial statements of the Company as of December 31, 2000 and
1999 and for each of the three years in the period ended December 31, 2000, the
report of independent auditors thereon and the Company's unaudited quarterly
financial data for 2000 and 1999 are referenced in Item 14 herein.

ITEM 9  Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure

Not applicable.

                                    Page 21
<PAGE>

                                   PART III

ITEM 10  Directors and Executive Officers of the Registrant

The information required hereunder is incorporated by reference to the Company's
Proxy Statement to be filed within 120 days of December 31, 2000 in connection
with its May 30, 2001 Annual Meeting of Stockholders.

ITEM 11  Executive Compensation

The information required hereunder is incorporated by reference to the Company's
Proxy Statement to be filed within 120 days of December 31, 2000 in connection
with its May 30, 2001 Annual Meeting of Stockholders.

ITEM 12  Security Ownership of Certain Beneficial Owners and Management

The information required hereunder is incorporated by reference to the Company's
Proxy Statement to be filed within 120 days of December 31, 2000 in connection
with its May 30, 2001 Annual Meeting of Stockholders.

ITEM 13  Certain Relationships and Related Transactions

The information required hereunder is incorporated by reference to the Company's
Proxy Statement to be filed within 120 days of December 31, 2000 in connection
with its May 30, 2001 Annual Meeting of Stockholders.

                                    Page 22
<PAGE>

                                    PART IV

ITEM 14  Exhibits, Financial Statement Schedules and Reports on Form 10-K

 (a)  1. Financial Statements and Financial Statement Schedules

<TABLE>
<S>                                                                                  <C>
     Report of Independent Auditors                                                    27

     FINANCIAL STATEMENTS:
     Consolidated income statement
         for the years ended December 31, 2000, 1999 and 1998                          28

     Consolidated statement of comprehensive income
         for the years ended December 31, 2000, 1999 and 1998                          28

     Consolidated balance sheet
         at December 31, 2000 and 1999                                                 29

     Consolidated statement of cash flows
         for the years ended December 31, 2000, 1999 and 1998                          30

     Consolidated statement of stockholders' equity
         for the years ended December 31, 2000, 1999 and 1998                          31

     Notes to consolidated financial statements                                     32-45

     FINANCIAL STATEMENT SCHEDULES:

     II - Consolidated valuation accounts                                              46
</TABLE>

     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.

 2. Exhibits

     The exhibits set forth below are filed as part of this Annual Report:

     Exhibit 3.1  Restated Articles of Incorporation of Newport Corporation, a
                  Nevada Corporation, as amended to date (incorporated by
                  reference to exhibit in the Company's 1987 Proxy Statement).

     Exhibit 3.2  Certificate of Amendment to Articles of Incorporation, as
                  filed May 30, 2000 (incorporated by reference to Exhibit 3.2
                  to the Company's Registration Statement on Form S-3, No. 333-
                  40878 (the "Form S-3")).

     Exhibit 3.3  Restated Bylaws of Newport Corporation, a Nevada Corporation,
                  as amended to date (incorporated by reference to Exhibit 3.2
                  of the Company's Annual Report on Form 10-K for the year ended
                  July 31, 1992).

     Exhibit 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 Company's Annual Report on
                  Form 10-K for the year ended July 31, 1992).

                                    Page 23
<PAGE>

     ITEM 14        Exhibits, Financial Statement Schedules and Reports on Form
                    10-K (Cont'd)

     Exhibit 10.2   Lease Agreement dated November 1, 2000, between Newport
                    Corporation and Arden Realty Limited Partnership.

     Exhibit 10.3   1992 Incentive Stock Plan (incorporated by reference to
                    exhibit in the Company's 1992 Proxy Statement).*

     Exhibit 10.4   1999 Stock Incentive Plan* (incorporated by reference to
                    Exhibit 10.11 of the Company's Annual Report on Form 10-K
                    for the year ended December 31, 1999).

     Exhibit 10.5   Amendment to 1999 Stock Incentive Plan (incorporated by
                    reference to Exhibit 10.4 to the Company's Form S-3).*

     Exhibit 10.6   Employee Stock Purchase Plan, as amended (incorporated by
                    reference to Exhibit 10.4 of the Company's Annual Report on
                    Form 10-K for the year ended December 31, 1997).*

     Exhibit 10.7   Form of Severance Compensation Agreement between Newport
                    Corporation and certain Executive Officers (incorporated by
                    reference to Exhibit 10.7 of the Company's Annual Report on
                    Form 10-K for the year ended December 31, 1993).*

     Exhibit 10.8   Severance Compensation Agreement dated as of April 8, 1996,
                    between Newport Corporation, a Nevada Corporation, and
                    Robert J. Phillippy, Vice President and General Manager
                    (incorporated by reference to Exhibit 10.2 of the Company's
                    Form 10-Q for the quarter ended September 30, 1996).*

     Exhibit 10.9   Severance Compensation Agreement dated as of May 1, 1996,
                    between Newport Corporation, a Nevada Corporation, and
                    Robert G. Deuster, President and Chief Executive Officer
                    (incorporated by reference to Exhibit 10.3 of the Company's
                    Form 10-Q for the quarter ended September 30, 1996).*

     Exhibit 10.10  Consulting Agreement dated November 7, 1997 between Newport
                    Corporation, a Nevada Corporation, and Richard E. Schmidt, a
                    director of the Company (incorporated by reference to
                    Exhibit 10.14 of the Company's Annual Report on Form 10-K
                    for the year ended December 31, 1997).

     Exhibit 10.11  364-Day $10,000,000 Credit Agreement dated as of October 29,
                    1999 between Newport Corporation and ABN AMRO Bank, N.V.
                    (incorporated by reference to Exhibit 10.9 of the Company's
                    Annual Report on Form 10-K for the year ended December 31,
                    1999).

     Exhibit 10.12  3-Year $15,000,000 Credit Agreement dated as of October 29,
                    1999 between Newport Corporation and ABN AMRO Bank, N.V.
                    (incorporated by reference to Exhibit 10.10 of the Company's
                    Annual Report on Form 10-K for the year ended December 31,
                    1999).

     Exhibit 10.13  Amendment to 364-Day $10,000,000 Revolving Credit Agreement,
                    dated as of May 31, 2000, between Newport Corporation and
                    ABN AMRO Bank, N.V. (incorporated by reference to Exhibit
                    10.10 to the Company's Form S-3).

                                    Page 24
<PAGE>

     ITEM 14        Exhibits, Financial Statement Schedules and Reports on Form
                    10-K (Cont'd)

     Exhibit 10.14  Amendment to 3-Year $15,000,000 Revolving Credit Agreement,
                    dated as of May 31, 2000, between Newport Corporation and
                    ABN AMRO Bank, N.V. (incorporated by reference to Exhibit
                    10.12 to the Company's Form S-3).

     Exhibit 10.15  Amendment to 364 Day $10,000,000 Revolving Credit Agreement,
                    dated as of March 9, 2001, between Newport Corporation and
                    ABN AMRO Bank, N.V.

     Exhibit 10.16  Amendment to 3 Year $15,000,000 Revolving Credit Agreement,
                    dated as of March 9, 2001, between Newport Corporation and
                    ABN AMRO Bank, N.V.

     Exhibit 10.17  Note Agreement dated as of May 2, 1996 between Newport
                    Corporation and The Prudential Insurance Company of America
                    (incorporated by reference to Exhibit 10.8 of the Company's
                    Form 10-Q for the quarter ended March 31, 1996).

     Exhibit 21     Subsidiaries of Registrant

     Exhibit 23     Consent of Independent Auditors


_____________
* Management contract or compensatory plan or arrangement required to be filed
  pursuant to Item 14(a) (3) of Form 10-K

(b) Reports on Form 8-K
The Company filed no Reports on Form 8-K during the quarter ended December 31,
2000.

                                    Page 25
<PAGE>

                                   SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the Registrant has duly caused this amendment to be signed on its
behalf by the undersigned, thereunto duly authorized.

                              NEWPORT CORPORATION


/s/ ROBERT G. DEUSTER                                             March 27, 2001
--------------------------------------------------------------------------------
Robert G. Deuster, President and Chief Executive Officer                Date
  (Principal Executive Officer)

/s/ CHARLES F. CARGILE                                            March 27, 2001
--------------------------------------------------------------------------------
Charles F. Cargile, Vice President and Chief Financial Officer          Date
  (Principal Financial Officer)

/s/ WILLIAM R. ABBOTT                                             March 27, 2001
--------------------------------------------------------------------------------
William R. Abbott, Vice President and Corporate Controller              Date
  (Principal Accounting Officer)


                               POWER OF ATTORNEY

The undersigned directors and officers of Newport Corporation constitutes and
appoints Robert G. Deuster and Charles F. Cargile, or either of them, as their
true and lawful attorney and agent with power of substitution, to do any and all
acts and things in our name and behalf in our capacities as directors and
officers and to execute any and all instruments for us and in our names in the
capacities indicated below, which said attorney and agent may deem necessary or
advisable to enable said corporation to comply with the Securities Exchange Act
of 1934, as amended, and any rules, regulations and requirements of the
Securities and Exchange Commission, in connection with this Annual Report on
Form 10-K, including specifically but without limitation, power and authority to
sign for us or any of us in our names in the capacities indicated below, any and
all amendments (including post-effective amendments) hereto; and we do hereby
ratify and confirm all that said attorney and agent shall do or cause to be done
by virtue hereof.  Pursuant to the requirements of the Securities Exchange Act
of 1934, this report has been signed below by the following persons on behalf of
the Registrant and in the capacities and on the dates indicated.


/s/ R. JACK APLIN                                     March 27, 2001
-----------------------------------------------------------------------
R. Jack Aplin, Member of the Board                         Date

/s/ ROBERT L. GUYETT                                  March 27, 2001
-----------------------------------------------------------------------
Robert L. Guyett, Member of the Board                      Date

/s/ C. KUMAR N. PATEL                                 March 27, 2001
-----------------------------------------------------------------------
C. Kumar N. Patel, Member of the Board                     Date

/s/ KENNETH F. POTASHNER                              March 27, 2001
-----------------------------------------------------------------------
Kenneth F. Potashner, Member of the Board                  Date

/s/ RICHARD E. SCHMIDT                                March 27, 2001
-----------------------------------------------------------------------
Richard E. Schmidt, Member of the Board                    Date

/s/ JOHN T. SUBAK                                     March 27, 2001
-----------------------------------------------------------------------
John T. Subak, Member of the Board                         Date

                                    Page 26
<PAGE>

                        Report of Independent Auditors



The Board of Directors and Stockholders
Newport Corporation

We have audited the accompanying consolidated balance sheet of Newport
Corporation as of December 31, 2000 and 1999, and the related consolidated
statements of income, comprehensive income, stockholders' equity and cash flows
for each of the three years in the period ended December 31, 2000.  Our audits
also included the financial statement schedule listed in the Index at Item
14(a).  These financial statements and schedule are the responsibility of the
Company's management.  Our responsibility is to express an opinion on these
financial statements and schedule based on our audits.

We conducted our audits in accordance with auditing standards generally accepted
in the United States.  Those standards require that we plan and perform the
audit to obtain reasonable assurance about whether the financial statements are
free of material misstatement.  An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements.  An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation.  We believe that our audits provide a reasonable basis
for our opinion.

In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of Newport
Corporation at December 31, 2000 and 1999, and the consolidated results of its
operations and its cash flows for each of the three years in the period ended
December 31, 2000, in conformity with accounting principles generally accepted
in the United States.  Also, in our opinion, the related financial statement
schedule, when considered in relation to the basic financial statements taken as
a whole, presents fairly in all material respects the information set forth
therein.

                                             /S/ ERNST & YOUNG LLP

Orange County, California
January 23, 2001
except for Note 17, as to which the date is
February 2, 2001

                                    Page 27
<PAGE>

                              NEWPORT CORPORATION
                         Consolidated Income Statement
<TABLE>
<CAPTION>
(In thousands, except per share amounts)                                     Years Ended December 31,
                                                                        -----------------------------------
                                                                            2000          1999         1998
                                                                            ----          ----         ----
<S>                                                                     <C>        <C>          <C>
Net sales                                                               $252,853      $144,112     $142,825
Cost of sales                                                            142,479        81,646       80,407
                                                                        --------      --------     --------

Gross profit                                                             110,374        62,466       62,418
Selling, general and administrative expense                               54,786        36,760       34,402
Research and development expense                                          21,704        13,300       11,738
                                                                        --------      --------     --------

Income from operations                                                    33,884        12,406       16,278
Interest expense                                                           1,927         1,785        1,891
Interest income                                                            8,428           144          510
Other income (expense), net                                                 (421)           59         (336)
                                                                        --------      --------     --------

Income before income taxes                                                39,964        10,824       14,561
Income tax provision                                                      12,145         2,956        3,365
                                                                        --------      --------     --------

Net income                                                              $ 27,819      $  7,868     $ 11,196
                                                                        ========      ========     ========

Earnings per share
  Basic                                                                 $   0.93      $   0.29     $   0.41
  Diluted                                                               $   0.86      $   0.28     $   0.40

Number of shares used to calculate earnings per share
  Basic                                                                   29,938        27,413       27,132
  Diluted                                                                 32,309        28,549       28,316

Dividends per share                                                     $   0.02      $   0.01     $   0.01
</TABLE>

                Consolidated Statement of Comprehensive Income

<TABLE>
<CAPTION>
(In thousands)                                                             Years Ended December 31,
                                                                         ---------------------------
                                                                            2000      1999      1998
                                                                            ----      ----      ----
<S>                                                                      <C>       <C>       <C>
Net income                                                               $27,819   $ 7,868   $11,196
Foreign currency translation gains (losses)                               (1,501)   (2,719)    1,120
Unrealized gain on marketable securities                                     901         -         -
                                                                         -------   -------   -------
Comprehensive income                                                     $27,219   $ 5,149   $12,316
                                                                         =======   =======   =======
</TABLE>
                            See accompanying notes.

                                    Page 28
<PAGE>

                              NEWPORT CORPORATION
                           Consolidated Balance Sheet
<TABLE>
<CAPTION>
(In thousands, except share data)                                         December 31,
                                                                      --------------------
                                                                          2000       1999
                                                                          ----       ----
<S>                                                                   <C>        <C>
ASSETS
Current assets:
 Cash and cash equivalents                                            $ 10,225   $  3,055
 Marketable securities                                                 289,781          -
 Customer receivables, net                                              64,101     32,639
 Other receivables                                                       3,383        686
 Income tax receivable                                                   4,110          -
 Inventories                                                            74,107     37,696
 Deferred tax assets                                                    17,720      2,626
 Other current assets                                                    4,246      2,484
                                                                      --------   --------
  Total current assets                                                 467,673     79,186

Investments and other assets                                             9,773      8,461
Property, plant and equipment, at cost, net                             35,461     26,003
Goodwill, net                                                           18,805     10,914
                                                                      --------   --------
                                                                      $531,712   $124,564
                                                                      ========   ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
 Accounts payable                                                     $ 23,705   $  6,971
 Accrued payroll and related expenses                                   12,699      5,549
 Line of credit                                                              -     10,000
 Current portion of long-term debt                                       5,523      4,645
 Deferred revenue                                                        1,148      1,512
 Other current liabilities                                              10,554      3,987
                                                                      --------   --------
  Total current liabilities                                             53,629     32,664

Long-term debt                                                           7,173     12,715
Deferred tax liabilities                                                   675      1,407

Commitments and contingencies

Stockholders' equity:
 Common stock, $0.1167 stated value, 75,000,000 shares authorized;
  32,643,000 shares issued and outstanding at December 31, 2000;
  27,860,000 shares at December 31, 1999                                 3,808      3,250
 Capital in excess of stated value                                     375,371      9,385
 Unamortized deferred compensation                                        (996)      (417)
 Accumulated other comprehensive loss                                   (7,235)    (6,635)
 Retained earnings                                                      99,287     72,195
                                                                      --------   --------
  Total stockholders' equity                                           470,235     77,778
                                                                      --------   --------
                                                                      $531,712   $124,564
                                                                      ========   ========
</TABLE>

                            See accompanying notes

                                    Page 29
<PAGE>

                              NEWPORT CORPORATION
                      Consolidated Statement of Cash Flows

<TABLE>
<CAPTION>
(In thousands)                                                  Years Ended December 31,
                                                             -------------------------------
                                                                  2000       1999      1998
                                                             ---------   --------   -------
<S>                                                          <C>         <C>        <C>
Operating activities:
 Net income                                                  $  27,819   $  7,868   $11,196
 Adjustments to reconcile net income to
  net cash provided by operating activities:
   Depreciation and amortization                                10,805      7,098     6,148
   Increase in provision for losses on
     receivables, inventories and investments                    3,914      1,260     1,073
   Deferred income taxes                                       (13,726)       251       704
   Other non-cash items, net                                       (78)      (484)     (481)
   Changes in operating assets and liabilities:
     Receivables                                               (29,442)    (6,201)     (796)
     Income tax receivable                                      (4,108)         -         -
     Inventories                                               (36,248)    (6,023)     (880)
     Other current assets                                       (3,885)    (1,531)     (196)
     Other assets                                                 (820)       327       280
     Accounts payable and other accrued expenses                22,524       (339)   (4,620)
     Deferred revenue                                             (364)     1,218    (4,178)
     Other, net                                                      -          -        (1)
                                                             ---------   --------   -------
Net cash provided by (used in) operating activities            (23,609)     3,444     8,249
                                                             ---------   --------   -------

Investing activities:
 Purchases of property, plant and equipment                    (15,850)    (4,924)   (5,400)
 Disposition of property, plant and equipment                      503        201     2,323
 Acquisition of business, net of cash acquired                     (50)    (6,559)   (3,561)
 Purchases of marketable securities                           (314,451)         -         -
 Sales of marketable securities                                 25,571          -         -
 Payments for equity investment                                 (1,510)    (1,074)        -
 Proceeds from sale of equity investments                        1,430      1,054       720
 Acquisition of other assets                                    (1,157)    (2,261)     (779)
                                                             ---------   --------   -------
Net cash used in investing activities                         (305,514)   (13,563)   (6,697)
                                                             ---------   --------   -------

Financing activities:
 Increase (decrease) in credit line                            (10,000)    10,000         -
 Decrease in long-term borrowings                               (7,777)    (3,632)   (2,360)
 Cash dividends paid                                              (555)      (478)   (1,886)
 Repurchase of common stock                                          -     (1,589)   (2,879)
 Proceeds from secondary offering                              329,851          -         -
 Issuance of common stock under employee
     plans including associated tax benefit                     24,664      2,453     3,218
                                                             ---------   --------   -------
Net cash provided by (used in) financing activities            336,183      6,754    (3,907)
                                                             ---------   --------   -------

Effect of foreign exchange rate changes on cash                    110        285      (101)
                                                             ---------   --------   -------
Increase (decrease) in cash and cash equivalents                 7,170     (3,080)   (2,456)
Cash and cash equivalents at beginning of year                   3,055      6,135     8,591
                                                             ---------   --------   -------
Cash and cash equivalents at end of year                     $  10,225   $  3,055   $ 6,135
                                                             =========   ========   =======
</TABLE>

                            See accompanying notes.
                                    Page 30
<PAGE>

                              NEWPORT CORPORATION
                 Consolidated Statement of Stockholders' Equity

<TABLE>
<CAPTION>
(In thousands)                                                      Years Ended December 31
                                                                 -----------------------------
                                                                     2000      1999      1998
                                                                 --------   -------   -------
<S>                                                              <C>        <C>       <C>
Common shares:
 Shares outstanding at beginning of year                           27,860    27,523    27,019
 Issuance of common shares through secondary offering               3,100         -         -
 Issuance of common shares through employee plans                   1,503       670       960
 Grants of restricted stock, net                                       60         -        60
 Repurchase of common shares                                            -      (333)     (516)
 Other                                                                120         -         -
                                                                 --------   -------   -------
 Shares outstanding at end of year                                 32,643    27,860    27,523
                                                                 ========   =======   =======

Common stock:
 Balance at beginning of year                                    $  3,250   $ 3,211   $ 3,151
 Issuance of common shares through secondary offering                 362         -         -
 Issuance of common shares through employee plans                     175        75       113
 Grants of restricted stock, net                                        7         -         7
 Repurchase of common stock                                             -       (36)      (60)
 Other                                                                 14         -         -
                                                                 --------   -------   -------
 Balance at end of year                                             3,808     3,250     3,211
                                                                 ========   =======   =======

Capital in excess of stated value:
 Balance at beginning of year                                       9,385     8,560     8,013
 Issuance of common shares through secondary offering             329,489         -         -
 Issuance of common shares through employee plans                  24,111     2,378     3,105
 Grants of restricted stock, net                                    2,400         -       261
 Repurchase of common stock                                             -    (1,553)   (2,819)
 Other                                                              9,986         -         -
                                                                 --------   -------   -------
 Balance at end of year                                           375,371     9,385     8,560
                                                                 ========   =======   =======

Unamortized deferred compensation:
 Balance at beginning of year                                        (417)     (548)     (519)
 Grants of restricted stock, net                                   (2,407)        -      (268)
 Amortization of deferred compensation                              1,828       131       239
                                                                 --------   -------   -------
 Balance at end of year                                              (996)     (417)     (548)
                                                                 ========   =======   =======

Accumulated other comprehensive loss:
 Balance at beginning of year                                      (6,635)   (3,916)   (5,036)
 Foreign currency translation gain (loss)                          (1,501)   (2,719)    1,120
 Unrealized gain on marketable securities                             901         -         -
                                                                 --------   -------   -------
 Balance at end of year                                            (7,235)   (6,635)   (3,916)
                                                                 ========   =======   =======

Retained earnings:
 Balance at beginning of year                                      72,195    64,805    55,495
 Dividends                                                           (609)     (366)     (364)
 Distribution of S-Corp earnings                                     (118)     (112)   (1,522)
 Net income                                                        27,819     7,868    11,196
                                                                 --------   -------   -------
 Balance at end of year                                            99,287    72,195    64,805
                                                                 ========   =======   =======

Total stockholders' equity                                       $470,235   $77,778   $72,112
                                                                 ========   =======   =======
</TABLE>

                            See accompanying notes.
                                    Page 31
<PAGE>

NOTE 1  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Organization  Newport Corporation is a global leader in the design, manufacture
and marketing of high-precision components, instruments and integrated systems
to the fiber optic communications, semiconductor equipment, aerospace and
scientific research markets.  The company's innovative products are designed to
enhance productivity and capabilities of test and measurement and automated
assembly for precision manufacturing, engineering and research applications.
Customers include Fortune 500 corporations, technology companies and research
laboratories in commercial, academic and government sectors worldwide.

Consolidation  The accompanying financial statements consolidate the accounts of
the Company and its wholly owned subsidiaries and have been restated to reflect
the acquisition of Unique Equipment Co. (Note 2) which has been accounted for as
a pooling of interests.  All significant intercompany transactions and balances
have been eliminated.  Certain reclassifications have been made to prior year
amounts to conform to current year presentation.  Amounts in 1999 include net
sales of $2.5 million representing one extra month of sales from Newport's
European operations.  The additional net sales stem from a reporting change in
the second quarter of 1999 that eliminated a one-month lag in the reporting of
European results.  Without the change, 1999 net sales would have been $141.6
million, while net income would not have been materially different.  Earnings
per share were not impacted by the change.

Use of Estimates  The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the amounts reported in the financial statements and
accompanying notes.  Actual results could differ from those estimates.
Significant estimates made in preparing the consolidated financial statements
include the allowance for doubtful accounts, inventory obsolescence reserves,
income tax valuation and warranty reserves.

Sales  A sale is recorded upon customer acceptance after all significant
obligations have been met, collectibility is probable and title has passed to
the customer.  Customers generally have 30 days from the original invoice date
(generally 60 days for international customers) to return a catalog product
purchase for exchange or credit.  The catalog product must be returned in its
original condition and meet certain other criteria.  Product returns of catalog
items have historically been immaterial.  Custom configured and certain other
products as defined in the Company's Customer Satisfaction and Product Guarantee
Policy cannot be returned.  Unless otherwise stated in its product literature,
the Company provides a one-year warranty from the original invoice date on all
product material and workmanship.  Defective products will be either repaired or
replaced, at the Company's option, upon meeting certain criteria.

In December 1999, the Securities and Exchange Commission ("SEC") issued Staff
Accounting Bulletin No. 101, Revenue Recognition in Financial Statements (SAB
No. 101), which provides guidance on the recognition, presentation and
disclosure of revenue in financial statements filed with the SEC.  SAB No. 101
outlines the basic criteria that must be met to recognize revenue and provides
guidance for disclosures related to revenue recognition policies.  We review our
sales contracts on an ongoing basis to ensure our compliance with SAB No. 101.
Adoption of SAB No. 101 had no material effect on our results of operations,
financial position or cash flow for the years ended December 31, 2000, 1999 or
1998.

Income Taxes  The Company recognizes the amount of current and deferred taxes
payable or refundable at the date of the financial statements as a result of all
events that have been recognized in the financial statements and as measured by
the provisions of enacted laws.

Depreciation and Amortization  Property, plant and equipment is depreciated on a
straight line basis over estimated useful lives of the assets ranging from three
to twenty years.  Leasehold improvements are generally amortized over the term
of the lease.

                                    Page 32
<PAGE>

Advertising  The Company expenses the costs of advertising as incurred, except
for direct-response advertising, which is capitalized and amortized over its
expected period of future benefits.  Direct-response advertising consists
primarily of product catalogs.  The Company uses these product catalogs as its
principal marketing tools for the scientific market.  Sales to this market
approximate 16% of the Company's annual revenues.  The catalogs provide detailed
product information as well as extensive technical and applications data.  The
catalogs are published in English, French, German and Japanese languages and are
mailed worldwide to more than 100,000 potential customers.

The Company believes that after a period of generally 12 to 18 months, no future
benefit can be realized from these catalogs due to price changes, technological
enhancements to existing products and new product releases.  As such, the
Company has established benefit periods for its various catalogs ranging from 12
to 18 months and amortizes catalog costs over this timeframe.  Advertising
materials of $0.3 million and $0.8 million were reported as assets at December
31, 2000 and 1999, respectively.  Advertising expense was $1.6 million, $1.5
million and $1.4 million for 2000, 1999 and 1998, respectively.

Earnings per Share  Basic earnings per share is computed using the weighted
average number of shares of common stock outstanding during the periods,
excluding restricted stock.  Diluted earnings per share is computed using the
weighted average number of shares of common stock outstanding during the
periods, including restricted stock, and the dilutive effects of common stock
equivalents (stock options), determined using the treasury stock method,
outstanding during the periods (see Note 13).

In May 2000, the Company effected a three-for-one stock split of its shares of
common stock.  Share and per share information for all periods presented have
been restated to reflect the stock split.

Cash and Cash Equivalents  Cash and cash equivalents consist of cash-on-hand and
interest bearing investments with original maturities of three months or less at
the date of purchase.

Cash and cash equivalents consist of the following:


(In thousands)                                                   December 31,
                                                               ---------------
                                                                  2000    1999
                                                               -------  ------

Cash                                                           $10,163  $2,938
Money market                                                        62     117
                                                               -------  ------
                                                               $10,225  $3,055
                                                               =======  ======

Fair Values of Financial Instruments  Fair values of cash and cash equivalents,
short-term borrowings and the current portion of long-term debt approximate the
carrying value because of the short period of time to maturity.  The fair value
of long-term debt approximates its carrying value because their rates of
interest approximate current market rates.  The carrying amounts of the foreign
exchange contracts, if any, equal fair value and are adjusted each balance sheet
date for changes in exchange rates.

Marketable Securities  The Company considers all liquid interest-earning
investments with a maturity of more than three months at the date of purchase to
be marketable securities.  Marketable securities generally mature between three
months and three years from the purchase date.  All marketable securities are
classified as available for sale and are recorded at market using the specific
identification method; unrealized gains and losses are reflected in other
comprehensive income.  Cost approximates market for all classifications of cash
and short-term investments; realized and unrealized gains and losses are not
material.

                                    Page 33
<PAGE>

Marketable securities consist of the following:

(In thousands)                                               December 31,
                                                            -----------------
                                                            2000         1999
                                                            ----         ----

Commercial paper                                            $ 84,731  $     -
U.S. government and agency securities                         20,208        -
Corporate notes and bonds                                     74,435        -
Asset backed securities                                       32,015        -
Municipal notes and bonds                                     63,578        -
Certificates of deposit                                       14,814        -
                                                            --------  -------
                                                            $289,781  $     -
                                                            ========  =======

Goodwill  Goodwill, representing the excess of the purchase price over the fair
value of the net assets of acquired entities, is amortized on a straight-line
basis over its estimated useful life of fourteen to twenty years.  Accumulated
amortization totaled $6.1 million and $5.2 million at December 31, 2000 and
1999, respectively.

The Company examines the carrying value of goodwill for impairment when
indicators of impairment are present.  If such circumstances are present and
undiscounted future cash flows are not expected to be sufficient to recover the
assets' carrying amount, the asset would be written down to its fair value.  No
events have been identified to indicate an impairment of the carrying value of
material intangible assets.

Foreign Currency  Balance sheet accounts denominated in foreign currency are
translated at exchange rates as of the date of the balance sheet and income
statement accounts are translated at average exchange rates for the period.
Translation gains and losses are accumulated as a separate component of
Comprehensive Income.  The Company has adopted local currencies as the
functional currencies for its subsidiaries because their principal economic
activities are most closely tied to the respective local currencies.

The Company may enter into foreign exchange contracts as a hedge against foreign
currency denominated receivables.  It does not engage in currency speculation.
Market value gains and losses on contracts are recognized currently, offsetting
gains or losses on the associated receivables.  Foreign currency transaction
gains and losses are included in current earnings (see Note 12).  Foreign
exchange contracts totaled $4.6 million and $4.3 million at December 31, 2000
and 1999, respectively.

Stock-Based Compensation  The Company accounts for stock-based employee
compensation arrangements in accordance with Accounting Principles Board Opinion
No. 25, Accounting for Stock-Issued to Employees (APB No. 25), and complies with
the disclosures provisions of Statement of Financial Accounting Standards No.
123, Accounting for Stock-Based Compensation.  Under APB No. 25, compensation
cost is recognized based on the difference, if any, on the date of the grant
between the fair value of the Company's stock and the amount the employee must
pay to acquire the stock.

Comprehensive Income  The Company adopted the provisions of Statement of
Financial Accounting Standards No. 130, Reporting Comprehensive Income.  This
statement requires companies to classify items of other comprehensive income by
their nature in the financial statements and display the accumulated balance of
other comprehensive income separately in the equity section of the balance
sheet.

                                    Page 34
<PAGE>

The accumulated other comprehensive loss presented in the balance sheet consists
of the following:

(In thousands)                                                December 31,
                                                           ------------------
                                                           2000          1999
                                                           ----          ----

Cumulative foreign currency translation losses          $(8,136)      $(6,635)
Unrealized gains on marketable securities                   901             -
                                                         ------        ------
                                                        $(7,235)      $(6,635)
                                                         ======        ======

Adoption of Statement of Financial Accounting Standards No. 133 In June 1998,
the Financial Accounting Standards Board issued Statement of Financial
Accounting Standards No. 133, Accounting for Derivative Instruments and Hedging
Activities (SFAS No. 133).  SFAS No. 133 establishes a new model for accounting
for derivatives and hedging activities and supercedes and amends a number of
existing accounting standards.  SFAS No. 133 requires that all derivatives be
recognized in the balance sheet at their fair market value and the corresponding
derivative gains or losses be either reported in the statement of operations or
as a deferred item depending on the type of hedge relationship that exists with
respect of such derivatives.  In July 1999, the Financial Accounting Standards
Board issued Statement of Financial Accounting Standards No. 137, Accounting for
Derivative Instruments and Hedging Activities-Deferral of the Effective Date of
SFAS No. 133 (SFAS No. 137).  SFAS No. 137 deferred the effective date until the
year beginning after June 30, 2000.  In June 2000, the Financial Accounting
Standards Board issued Statement of Financial Accounting Standards No. 138,
Accounting for Derivative Instruments and Hedging Activities-An Amendment of
SFAS Statement No. 133 (SFAS No. 138).  SFAS No. 138 amends the accounting and
reporting standards for certain derivatives and hedging activities such as net
settlement contracts, foreign currency transactions and intercompany
derivatives.  We will adopt SFAS No. 133 in our quarter ending March 31, 2001.
We do not anticipate that the adoption of SFAS No. 133 will have a significant
impact on our results of operations, financial position or cash flow.

NOTE 2  ACQUISITIONS

In October 1998, the Company acquired all the outstanding capital stock of
Environmental Optical Sensors, Inc. ("EOSI"), a manufacturer of tunable external
cavity diode laser systems and other components.  The company is located in
Longmont, Colorado.  The acquisition was accounted for as a purchase. EOSI's
results from the date of acquisition are included in the Fiber Optics and
Photonics reportable segment in Note 14.

In October 1999, the Company entered into a stock purchase agreement providing
for the acquisition of the west coast commercial optics subsidiary of Corning
OCA Corporation, a subsidiary of Corning Incorporated.  The transaction was
accounted for as a purchase and the commercial optics subsidiary (renamed
Newport Precision Optics Corporation, "NPOC"), a manufacturer of specialized
precision optical products and systems, became a wholly owned subsidiary of
Newport.  NPOC's results from the date of acquisition are included in the
Industrial and Scientific Technologies reportable segment in Note 14.

In August 2000, the Company acquired Unique Equipment Co. ("Unique"), based in
Chandler, Arizona.  Unique is a privately held systems integrator specializing
in the use of robotics for the fiber optics and semiconductor industries.  The
transaction was accounted for as a pooling of interests, and accordingly, the
accompanying consolidated financial statements have been restated to incorporate
the results of operations, financial position and cash flows of Unique, the
effects of which are immaterial to all periods presented.  Unique's results are
included in the Fiber Optics and Photonics reportable segment in Note 14.

In December 2000, the Company acquired the business of CE Johansson AB ("CEJ"),
a privately held, Swedish based, global supplier of advanced metrology systems.
The acquisition was accounted for as a purchase.  The December 2000 results of
operations for CEJ have been included in the Company's consolidated financial
statements.  CEJ's results from the date of acquisition are included in the
Industrial Metrology Systems reportable segment in Note 14.

                                    Page 35
<PAGE>

Pro forma information for these acquisitions is not presented as they are not
material to the Company's consolidated sales or net income.

NOTE 3  CUSTOMER RECEIVABLES

The Company maintains adequate reserves for potential credit losses.  Such
losses have been minimal and within management's estimates.  Receivables from
customers are generally unsecured.

Customer receivables consist of the following:

(In thousands)                                                 December 31,
                                                             ----------------
                                                             2000        1999
                                                             ----        ----
Customer receivables                                      $64,568     $33,050
Less allowance for doubtful accounts                          467         411
                                                          -------     -------
                                                          $64,101     $32,639
                                                          =======     =======

NOTE 4  INVENTORIES

Inventories are stated at cost, determined on either a first-in, first-out
(FIFO) or average cost basis and do not exceed net realizable value.

Inventories consist of the following:

(In thousands)                                                December 31,
                                                           ------------------
                                                           2000          1999
                                                           ----          ----
Raw materials and purchased parts                       $24,538       $12,128
Work in process                                          15,059         8,701
Finished goods                                           34,510        16,867
                                                        -------       -------
                                                        $74,107       $37,696
                                                        =======       =======

NOTE 5  INCOME TAXES

The provision for taxes based on income consists of the following:

(In thousands)                                      Years Ended December 31,
                                                 ----------------------------
                                                     2000      1999      1998
                                                     ----      ----      ----
Current:
  Federal                                        $ 20,620   $ 2,038   $ 1,999
  State                                             3,859       340       225
  Foreign                                           1,392       327       437
Deferred:
  Federal                                         (13,605)      262       674
  State                                            (4,062)      (16)       35
  Foreign                                           3,941         5        (5)
                                                 --------   -------   -------
                                                 $ 12,145   $ 2,956   $ 3,365
                                                 ========   =======   =======

                                    Page 36
<PAGE>

The provision for taxes based on income differs from the amount obtained by
applying the statutory tax rate as follows:

<TABLE>
<CAPTION>

(In thousands)                                                Years Ended December 31,
                                                            ---------------------------
                                                               2000      1999      1998
                                                            -------   -------   -------
<S>                                                        <C>        <C>      <C>
Income tax provision at statutory rate                      $14,057    $3,834    $4,220
Increase (decrease) in taxes resulting from:
  Non deductible goodwill amortization                          267       250       142
  State income taxes, net of federal income tax benefit        (131)      214       171
  Foreign rate variance                                         211      (314)      (21)
  Foreign sales corporation benefit                            (607)     (370)     (516)
  Reduction valuation allowance                              (3,569)     (607)     (237)
  Other, net                                                  1,917       (51)     (394)
                                                            -------    ------    ------
                                                            $12,145    $2,956    $3,365
                                                            =======    ======    ======
</TABLE>

Deferred tax assets and liabilities determined in accordance with Statement of
Financial Accounting Standards No. 109, Accounting for Income Taxes, reflect the
impact of temporary differences between amounts of assets and liabilities for
tax and financial reporting purposes.  Such amounts are measured by tax laws and
the expected future tax consequences of net operating loss carryforwards.

In 2000, the Company reduced the valuation allowance primarily applicable to
foreign net operating loss carryforwards by approximately $5,669,000, of which
$2,100,000 was allocated to goodwill, primarily because of improvements in
earnings of certain of its European subsidiaries.

Temporary differences and net operating loss carryforwards, which give rise to
deferred tax assets and liabilities recognized in the balance sheet, are as
follows:

<TABLE>
<CAPTION>

(In thousands)                                                         December 31,
                                                                    ------------------
                                                                       2000       1999
                                                                       ----       ----
<S>                                                                 <C>        <C>
Deferred tax assets:
  Net operating loss carryforwards                                  $11,164    $ 8,449
  Accruals not currently deductible for tax purposes and other        3,090      1,609
  Tax credit carryforwards                                            7,454          -
  Valuation allowance                                                (1,763)    (7,432)
                                                                    -------    -------
    Total deferred tax asset                                         19,945      2,626
                                                                    -------    -------
Deferred tax liabilities:
  Accelerated depreciation methods used for tax purposes                849        977
  Other                                                               2,051        430
                                                                    -------    -------
    Total deferred tax liability                                      2,900      1,407
                                                                    -------    -------
Net deferred tax asset                                              $17,045    $ 1,219
                                                                    =======    =======
</TABLE>

The Company has foreign net operating loss carryforwards totaling approximately
$3.1 million at December 31, 2000, principally expiring in the years 2007
through 2012 if not sooner utilized.  For financial reporting purposes, a
valuation allowance was recorded primarily to offset the deferred tax assets
related to net operating loss and tax credit carryforwards.  Approximately $5.7
million of the $7.4 million valuation allowance existing at January 1, 2000 was
released due to improved earnings of certain European subsidiaries.
Approximately $2.1 million and $0.4 million of the valuation allowance realized
was allocated to goodwill for 2000 and 1999, respectively.  As the Company's net
operating loss carryforwards and valuation allowance are largely denominated in
foreign currencies, they are subject to foreign currency translation adjustments
as described in Note 1 above and to the risks associated therewith.  The
exchange loss related to gross net operating loss carryforwards is partly offset
by a corresponding exchange fluctuation in the valuation allowance.
Accordingly, the net effect of currency fluctuations on the net operating loss
carryforwards, net of valuation allowance, is not material.

                                    Page 37
<PAGE>

The Company has income tax credit carryforwards of approximately $7.5 million
that begin to expire for federal and state tax purposes in years 2005 through
2020.

The Company has federal and state net operating loss carryforwards totaling
approximately $26.3 million and $15.6 million, respectively.  These losses
relate primarily to employee stock option exercises, the benefit for which has
been allocated directly to capital in excess of stated value.  Federal net
operating loss carryforwards begin to expire in 2020, while state net operating
loss carryforwards begin to expire in 2005.

Net income taxes paid for 2000, 1999 and 1998 totaled $3.5 million, $2.8 million
and  $4.3 million, respectively.

Undistributed earnings of the Company's foreign subsidiaries amounted to
approximately $20.0 million and $10.0 million at December 31, 2000 and December
31, 1999, respectively.  Those earnings are considered to be indefinitely
reinvested and, accordingly, no provision for U.S. federal and state taxes has
been provided thereon.

United States and foreign earnings before taxes are as follows:

(In thousands)                                 Years Ended December 31,
                                             ----------------------------
                                                2000       1999      1998
                                                ----       ----      ----
United States                                $27,879    $ 6,758   $12,658
Foreign                                       12,085      4,066     1,903
                                             -------    -------  --------
                                             $39,964    $10,824   $14,561
                                             =======    =======  ========

NOTE 6  PROPERTY, PLANT AND EQUIPMENT

Property, plant and equipment, at cost, including capitalized lease assets,
consists of the following:

(In thousands)                           December 31,
                                     --------------------
                                        2000        1999
                                        ----        ----
Land                                 $   920     $ 1,106
Buildings                              5,304       6,202
Leasehold improvements                12,677       8,457
Machinery and equipment               35,727      29,727
Office equipment                      20,492      13,840
                                     -------    --------
                                      75,120      59,332
Less accumulated depreciation         39,659      33,329
                                     -------    --------
                                     $35,461     $26,003
                                     =======    ========

Depreciation expense, including the amortization of capital lease assets,
totaled $6.2 million, $5.0 million and $4.3 million for 2000, 1999 and 1998,
respectively.

NOTE 7  INVESTMENTS AND OTHER ASSETS

Investments and other assets consist of the following:


(In thousands)                            December 31,
                                     --------------------
                                       2000          1999
                                       ----          ----
Nonmarketable investments            $4,088        $4,015
Other assets                          5,685         4,446
                                     ------        ------
                                     $9,773        $8,461
                                     ======        ======

Nonmarketable investments consist primarily of investments in private companies,
including a $1.4 million investment in a U.S. supplier and a $2.6 million
investment in a photonics manufacturer.  The Company

                                    Page 38
<PAGE>

made purchases of approximately $4.8 million, $3.8 million and $4.3 million from
the U.S. supplier during 2000, 1999 and 1998, respectively.

Other assets consist primarily of capitalized software, patents and license
agreements.

NOTE 8   LONG-TERM DEBT

Long-term debt consists of the following:

<TABLE>
<CAPTION>
(In thousands)                                                                    December 31,
                                                                             ----------------------
                                                                                2000         1999
                                                                                ----         ----
<S>                                                                          <C>          <C>
Revolving credit agreements:
 $20.0 million, expiring May 2003                                            $     -      $10,000
 $20.0 million, expiring May 2001                                                  -            -
Term notes:
 8.25% senior notes, maturing May 2004                                        11,500       15,500
Capitalized lease obligations, payable in installments to 2005,
 in French francs                                                                888        1,224
Equipment loans and other                                                        308          636
                                                                             -------      -------
                                                                              12,696       27,360
Less current portion                                                           5,523       14,645
                                                                             -------      -------
                                                                             $ 7,173      $12,715
                                                                             =======      =======
</TABLE>

During May 1996, the Company obtained $20.0 million of long-term financing from
an insurance company.  These senior notes, sold at par, are unsecured, carry an
8.25% annual coupon and mature in May 2004.  Interest is payable semiannually
and semiannual principal payments commenced during November 1998.

To support its worldwide operations, at December 31, 2000, the Company had in
place a $20.0 million unsecured line of credit expiring May 30, 2003 and a $20.0
million unsecured line of credit expiring May 30, 2001.  Both lines bear
interest at either the prevailing prime rate, or the prevailing London Interbank
Offered Rate plus 1.0%, at the Company's option, plus an unused line fee of 0.2%
per year.  At December 31, 2000, there was no outstanding balance under either
line of credit, with $39.4 million available under the combined lines, after
considering outstanding letters of credit.  In March 2001, we amended these
lines of credit to be $10.0 million each.

Capitalized lease obligations of 6.2 million French francs (approximately $0.9
million) relate to real estate and equipment located in France.  The original
cost of assets under capital leases at December 31, 2000 and 1999, was 19.1
million French francs (approximately $2.7 million at December 31, 2000).
Accumulated amortization totaled 11.8 million French francs (approximately $1.7
million) and 11.1 million French francs (approximately $1.6 million) at December
31, 2000 and 1999, respectively.  Required annual payments are as follows:

<TABLE>
<CAPTION>

(In thousands)                                             Capitalized
                                                              Lease     Borrowings and
For years ending December 31,                              Obligations    Term Notes
                                                           -----------  --------------
<S>                                                        <C>          <C>
2001                                                            $  280         $ 5,308
2002                                                               285           3,500
2003                                                               252           2,000
2004                                                               181           1,000
2005                                                                78               -
                                                                ------         -------
                                                                 1,076          11,808
Less interest                                                      188               -
                                                                ------         -------
                                                                $  888         $11,808
                                                                ======         =======
</TABLE>

                                    Page 39
<PAGE>

Interest paid totaled $2.1 million, $1.9 million and $1.9 million for 2000, 1999
and 1998, respectively.

NOTE 9   COMMITMENTS

The Company leases certain of its manufacturing and office facilities and
equipment under non-cancelable operating leases.  Minimum rental commitments
under terms of these leases are as follows for years ending December 31:

(In thousands)

2001                                                                     $5,539
2002                                                                      4,427
2003                                                                      4,116
2004                                                                      3,640
2005                                                                      3,444
Thereafter                                                                4,777

The principal lease expires in 2007.  Rental expense under all leases totaled
$4.5 million, $2.8 million and $2.6 million for 2000, 1999 and 1998,
respectively.

NOTE 10  CONTINGENCIES

In August 1999, Newport Electronics, a manufacturer of electronic devices, filed
suit against us in Federal District Court in Connecticut, claiming that our use
of the "Newport" trademark infringes their rights with respect to such mark.  We
are vigorously defending our position in this litigation, however we are unable
to predict the outcome of the case due to the complex nature of this litigation.
This case, if adversely determined, could have certain adverse effects on our
business, including potential monetary damages and being enjoined from using the
"Newport" mark in conjunction with certain classes of products.

NOTE 11  STOCK OPTION PLANS

The Company's 1992 stock option plan provides that the number of shares
available for issuance as either stock options or restricted stock increases on
the last day of each fiscal year by an amount equal to 2% of the then
outstanding shares.  Options have been granted to directors, officers and key
employees at a price not less than fair market value at the dates of grants for
terms of not more than ten years.  Accordingly, no charges have been made to
income in accounting for these options.  The tax benefits, if any, resulting
from the exercise of options are credited to capital in excess of stated value.
The fair market value of restricted stock at date of grant is amortized to
expense over the vesting period of one to five years.

Effective November 18, 1999, the Company's Board of Directors adopted the
Newport Corporation 1999 Stock Incentive Plan to enhance the Company's ability
to attract and retain qualified managers (excluding Board members, officers and
key employees) and to align their interests with stockholders.  The Plan
authorizes the granting of non-incentive stock options and restricted stock up
to an aggregate of 1,800,000 shares, of which 853,500 shares were granted in
2000.  The term of the Plan is 10 years.

                                    Page 40
<PAGE>

The following table summarizes option plan and restricted stock activity for the
years ended December 31, 2000, 1999, and 1998:

<TABLE>
<CAPTION>
                                                           Under Plan                Weighted Average
                              Available for   -------------------------------------   Exercise Price
                               Option Grant   Restricted                             of Option Shares
                                 or Award        Stock       Options       Total        Under Plan
                                 --------        -----       -------       -----        ----------
<S>                           <C>             <C>          <C>          <C>          <C>
Balance, December 31, 1997        1,494,795      303,750    3,186,177    3,489,927          $ 2.56
Authorized                          547,164            -            -            -               -
Granted                          (1,468,800)      60,000    1,408,800    1,468,800            4.50
Exercised                                 -      (73,875)    (688,200)    (762,075)           2.19
Forfeited                            95,700            -      (95,700)     (95,700)           3.50
                                 ----------      -------   ----------   ----------
Balance, December 31, 1998          668,859      289,875    3,811,077    4,100,952            3.32
Authorized                        1,453,893            -            -            -               -
Granted                            (725,100)           -      725,100      725,100            7.10
Exercised                                 -      (89,250)    (401,025)    (490,275)           3.12
Forfeited                           173,928            -     (173,928)    (173,928)           4.57
                                 ----------      -------   ----------   ----------
Balance, December 31, 1999        1,571,580      200,625    3,961,224    4,161,849            3.99
Authorized                        1,552,800            -            -            -               -
Granted                          (1,626,039)      69,039    1,557,000    1,626,039           34.39
Exercised                                 -      (86,625)  (1,563,099)  (1,649,724)           3.04
Forfeited                            97,308      (22,500)     (97,308)    (119,808)          12.05
                                 ----------      -------   ----------   ----------
Balance, December 31, 2000        1,595,649      160,539    3,857,817    4,018,356          $16.44
                                 ==========      =======   ==========   ==========
</TABLE>

The weighted average per share fair value of restricted stock granted during
2000 and 1998 was $36.32 and $4.46, respectively.  There were no grants of
restricted stock in 1999.

At December 31, 2000, options on 1,301,173 shares were exercisable with a
weighted average exercise price of $4.45 per share.  The following table
summarizes information concerning options outstanding and exercisable at
December 31, 2000 (Contractual life in years):
<TABLE>
<CAPTION>
                                       Options Outstanding             Options Exercisable
                         -------------------------------------------  ---------------------
                                        Weighted Average    Weighted               Weighted
                                            Remaining       Average                Average
        Range of            Number         Contractual      Exercise    Number     Exercise
    Exercise Prices       Outstanding         Life           Price    Exercisable   Price
    ---------------       -----------         ----           -----    -----------   -----
    <S>                   <C>          <C>                  <C>       <C>          <C>
        $2.00 - 6.00        2,115,567         6.4             $ 4.07    1,184,398    $ 3.56
        6.50 - 15.50        1,318,600         9.0              13.66      116,275     13.17
        22.00 - 180.00        458,450         9.6              85.85          500     95.88
                            ---------                                   ---------
                            3,892,617                                   1,301,173
                            =========                                   =========
</TABLE>

The Company applies Accounting Principles Board Opinion No. 25, Accounting for
Stock Issued to Employees, and related interpretations in accounting for its
plans.  Accordingly, no compensation expense has been recognized for its stock-
based compensation plans other than for restricted stock awards.  Had
compensation cost for the Company's stock option and employee stock purchase
plans been determined based upon the fair value at the grant date for awards
under these plans consistent with the methodology prescribed under Statement of
Financial Accounting Standards No. 123, Accounting for Stock-Based Compensation
(SFAS No. 123), the Company's net income and earnings per share would have been
reduced to the pro forma amounts indicated below:

<TABLE>
<CAPTION>
 (In thousands)                              2000    1999     1998
                                             ----    ----     ----
<S>                                       <C>      <C>     <C>
Net income - reported                     $27,819  $7,868  $11,196
Net income - pro forma                    $25,159  $7,358  $11,079
Diluted earnings per share - reported     $  0.86  $ 0.28  $  0.40
Diluted earnings per share - pro forma    $  0.78  $ 0.26  $  0.39
</TABLE>

                                    Page 41
<PAGE>

The fair value of each option grant in 2000 was estimated on the date of the
grant using the Black-Scholes option-pricing model with the following weighted-
average assumptions: dividend yield of 0.02%; expected annual volatility of 76%;
risk-free interest rate of 6.33%; expected lives of 5 years; and expected
turnover rate of 12.90%.  The fair value of each option grant in 1999 and 1998
was estimated on the date of the grant using the following weighted-average
assumptions: dividend yield of 0.23% and 0.33% respectively; expected annual
volatility of 50.50% and 41.01%, respectively, risk-free interest rates of 4.93%
and 5.44%, respectively, expected lives of 5 years and expected turnover rate of
12.90%.  The weighted average per share fair value of options granted in 2000,
1999 and 1998 was $34.43, $2.89 and $1.94, respectively.  The pro forma amounts
shown for the impact of SFAS No. 123 are not necessarily indicative of future
results because of the phase in rules and differences in number of grants, stock
price and assumptions for future years.

Effective January 1, 1995 the Company adopted an Employee Stock Purchase Plan
(the "Purchase Plan") to provide employees of the Company with an opportunity to
purchase common stock through payroll deductions.  The purchase price is the
lower of 85% of the fair market value of the stock on the first or last day of
each quarter.  The Purchase Plan expires on December 31, 2005.  An aggregate of
1,950,000 shares of common stock is available for purchase under the Purchase
Plan.  There were 68,180, 297,408, and 246,603 shares issued under the Purchase
Plan during 2000, 1999, and 1998, respectively.  The amounts included in the pro
forma net income disclosures related to the impact of the Purchase Plan totaled
$0.5 million, $0.2 million, and $0.2 million for the years 2000, 1999, and 1998,
respectively.

NOTE 12  OTHER INCOME (EXPENSE), NET

Other income (expense), net, consisted of the following:
<TABLE>
<CAPTION>

(In thousands)                                              Years Ended December 31,
                                                         ----------------------------
                                                            2000       1999      1998
                                                            ----       ----      ----
<S>                                                      <C>        <C>        <C>
Exchange losses, net                                     $   (59)   $  (226)  $  (261)
Gains (losses) on sale of investments, net                    (8)       275       134
Other                                                       (354)        10      (209)
                                                            ----       ----      ----
                                                         $  (421)   $    59   $  (336)
                                                            ====       ====      ====
</TABLE>

NOTE 13   EARNINGS PER SHARE

The following table sets forth the computation of basic and diluted earnings per
share under SFAS No. 128:

<TABLE>
<CAPTION>
(In thousands, except per share amounts)                     Years Ended December 31,
                                                          -----------------------------
                                                            2000       1999      1998
                                                            ----       ----      ----
<S>                                                      <C>        <C>       <C>
Numerator:
 Net income                                              $27,819    $ 7,868   $11,196

Denominator:
 Denominator for basic earnings per
  share - weighted-average shares                         29,938     27,413    27,132
 Effect of dilutive securities:
  Employee stock options                                   2,273      1,016     1,010
  Restricted stock                                            98        120       174
                                                              --        ---       ---
 Dilutive potential common shares                          2,371      1,136     1,184
  Denominator for diluted earnings per
   share - adjusted weighted-average
   shares and assumed conversions                         32,309     28,549    28,316
                                                         =======    =======   =======

Basic earnings per share                                 $  0.93    $  0.29   $  0.41
Diluted earnings per share                               $  0.86    $  0.28   $  0.40
</TABLE>

                                    Page 42
<PAGE>

NOTE 14  BUSINESS SEGMENT INFORMATION

The Company operates in three reportable segments, Industrial and Scientific
Technologies, Fiber Optics and Photonics and Industrial Metrology Systems.  The
accounting policies of the reportable segments are the same as those described
in the summary of significant accounting policies except that certain non-
operating income and expenses, such as interest, are not allocated to the
segments.  In addition, certain assets, including cash and cash equivalents,
deferred taxes and certain long-lived and intangible assets are not allocated to
the segments.

The Industrial and Scientific Technologies segment consists primarily of Motion
Control Devices and Systems, Vibration Isolation Products, Optics, Mechanical
Components, Instruments and Subassemblies.  The Fiber Optics and Photonics
segment consists primarily of Device Testing and Characterization Systems and
Process Automation Workstations for Fiber Optics and Photonics manufacturing.
The Industrial Metrology Systems segment (formerly Video Metrology segment)
consists primarily of Measurement and Inspection Systems.

Selected financial information for the Company's reportable segments for the
years ended December 31, 2000, 1999 and 1998 follows:

<TABLE>
<CAPTION>
(In thousands)                            Industrial                 Industrial
                                      and Scientific   Fiber Optics   Metrology
                                        Technologies  and Photonics     Systems    Total
                                        ------------  -------------     -------    -----
<S>                                   <C>             <C>            <C>          <C>
Year Ended December 31, 2000:
-----------------------------
Sales to external customers                 $152,856        $91,036     $ 8,961   $252,853
Depreciation and amortization                  4,722          1,148       1,223      7,093
Segment income (loss)                         29,941         11,058      (7,115)    33,884
Segment assets                               121,473         70,226      21,810    213,509
Expenditures for long-lived assets             5,044          3,210         227      8,481

Year Ended December 31, 1999:
-----------------------------
Sales to external customers                 $ 96,578        $37,617     $ 9,917   $144,112
Depreciation and amortization                  4,011            914         484      5,409
Segment income (loss)                         12,418          3,353      (3,365)    12,406
Segment assets                                77,110         25,503      10,897    113,510
Expenditures for long-lived assets             2,558            754         304      3,616

Year Ended December 31, 1998:
-----------------------------
Sales to external customers                 $ 97,792        $32,545     $12,488   $142,825
Depreciation and amortization                  4,034            456         258      4,748
Segment income (loss)                         14,667          3,804      (2,193)    16,278
Segment assets                                68,143         17,110       9,445     94,698
Expenditures for long-lived assets             3,231            479         615      4,325
</TABLE>

The following reconciles segment income to consolidated income before income
taxes and segment assets and depreciation and amortization to consolidated
assets and consolidated depreciation and amortization.

<TABLE>
<CAPTION>
(In thousands)                                                  2000        1999      1998
                                                                ----        ----      ----
<S>                                                         <C>        <C>        <C>
Income:
Segment income                                              $ 33,884    $ 12,406  $ 16,278
Unallocated amounts:
Interest expense                                               1,927       1,785     1,891
Interest income                                                8,428         144       510
Other income (expense)                                          (421)         59      (336)
                                                              ------      ------    ------
Income before income taxes                                  $ 39,964    $ 10,824  $ 14,561
                                                              ======      ======    ======
</TABLE>

                                    Page 43
<PAGE>

<TABLE>
<CAPTION>
(In thousands)                                                               2000        1999      1998
                                                                             ----        ----      ----
<S>                                                                      <C>         <C>       <C>
Assets:
Assets for reportable segments                                           $213,509    $113,510  $ 94,698
Assets held at corporate                                                  318,203      11,054    17,330
                                                                         --------    --------  --------
Total assets                                                             $531,712    $124,564  $112,028
                                                                         ========    ========  ========

Expenditures for long-lived assets for reportable segments               $  8,481    $  3,616  $  4,325
Expenditures for long-lived assets held at corporate                        7,369       1,308     1,075
                                                                         --------    --------  --------
Total expenditures for long-lived assets                                 $ 15,850    $  4,924  $  5,400
                                                                         ========    ========  ========

Depreciation and amortization:
Depreciation and amortization for reportable segments                    $  7,093    $  5,409  $  4,748
Depreciation and amortization for assets held at corporate                  3,712       1,689     1,400
                                                                         --------    --------  --------
Total depreciation and amortization                                      $ 10,805    $  7,098  $  6,148
                                                                         ========    ========  ========
</TABLE>

Selected financial information for the Company's operations by geographic
segment is as follows:

<TABLE>
<CAPTION>
                                                                             2000        1999      1998
                                                                             ----        ----      ----
<S>                                                                      <C>         <C>       <C>
Geographic area revenue:
United States                                                            $170,093    $ 91,853  $ 95,708
Europe                                                                     40,769      32,516    30,358
Pacific Rim                                                                24,459      11,474     9,787
Other                                                                      17,532       8,269     6,972
                                                                         --------    --------  --------
                                                                         $252,853    $144,112  $142,825
                                                                         ========    ========  ========

Geographic area long-lived assets:
United States                                                            $ 29,169    $ 19,287  $ 14,325
Europe                                                                      6,226       6,634     8,508
Other                                                                          66          82        94
                                                                         --------    --------  --------
                                                                         $ 35,461    $ 26,003  $ 22,927
                                                                         ========    ========  ========
</TABLE>

NOTE 15  DEFINED CONTRIBUTION PLAN

The Company sponsors a defined contribution plan.  Generally, all U.S. employees
are eligible to participate in and contribute to this plan.  Company
contributions to the plan are determined based on a percentage of contributing
employees' compensation.  Expense recognized for the plan totaled $1.9 million,
$1.3 million and $1.3 million for 2000, 1999 and 1998, respectively.

NOTE 16  SUPPLEMENTARY QUARTERLY CONSOLIDATED FINANCIAL DATA (Unaudited)

<TABLE>
<CAPTION>
(In thousands, except per share amounts)
                                                              Diluted      Dividends    High      Low
                               Net       Gross      Net     Earnings Per      Per       Share    Share
Three months ended            Sales     Profit    Income       Share         Share      Price    Price
------------------            -----     ------    ------       -----         -----      -----    -----
<S>                          <C>        <C>       <C>       <C>            <C>         <C>       <C>
December 31, 2000            $86,723    $38,024   $12,302      $0.36        $0.0100    $176.25   $57.00
September 30, 2000            66,594     28,660     8,179       0.25              -     189.25    82.44
June 30, 2000                 52,769     23,237     4,080       0.13         0.0100     110.00    29.33
March 31, 2000                46,767     20,453     3,258       0.11              -      59.50    14.31

December 31, 1999            $42,329    $17,798   $ 2,952      $0.10        $0.0067    $ 15.25   $ 5.42
September 30, 1999            35,530     15,484     2,014       0.07              -       6.88     4.58
June 30, 1999                 36,538     16,268     2,137       0.08         0.0067       5.25     3.98
March 31, 1999                29,715     12,916       765       0.03              -       4.13     6.50
</TABLE>

                                    Page 44
<PAGE>

NOTE 17  SUBSEQUENT EVENTS

In February 2001, the Company acquired Kensington Laboratories, Inc. ("KLI"), a
manufacturer of high-precision robotic and motion control equipment for the
semiconductor and fiber optic communications industries.  The Company issued
3,526,000 shares in the transaction, which is being accounted for as a pooling
of interests.

Net sales and net income information assuming the acquisition had occurred on
January 1, 1998, is as follows:

<TABLE>
<CAPTION>
                                                               Years Ended December 31, 2000
                                                             --------------------------------
                                                                  2000       1999       1998
                                                                  ----       ----       ----
<S>                                                           <C>        <C>        <C>
Net sales:
Newport                                                       $252,853   $144,112   $142,825
KLI                                                             38,828     18,853     23,964
Less: Intercompany sales                                        (7,676)    (3,440)    (2,938)
                                                              --------   --------   --------
Combined                                                      $284,005   $159,525   $163,851
                                                              ========   ========   ========

Net income:
Newport                                                       $ 27,819   $  7,868   $ 11,196
KLI                                                              8,492      2,053      5,079
                                                              --------   --------   --------
Combined                                                      $ 36,311   $  9,921   $ 16,275
                                                              ========   ========   ========

Net earnings per share:
Basic
  Newport                                                     $   0.83   $   0.25   $   0.36
  KLI                                                             0.26       0.07       0.17
                                                              --------   --------   --------
  Combined                                                    $   1.09   $   0.32   $   0.53
                                                              ========   ========   ========

Diluted
  Newport                                                     $   0.77   $   0.25   $   0.35
  KLI                                                             0.24       0.06       0.16
                                                              --------   --------   --------
  Combined                                                    $   1.01   $   0.31   $   0.51
                                                              ========   ========   ========

Number of shares used to calculate net earnings per share:
Basic                                                           33,464     30,939     30,658
Diluted                                                         35,835     32,075     31,842
</TABLE>

Also in February 2001, the Company acquired Design Technology Corporation
("DTC"), a systems integrator specializing in the use of robotics and flexible
automation solutions for manufacturing processes.  The acquisition was accounted
for using the purchase method.  Results of the operations will be included with
the filing of our Quarterly Report on Form 10-Q for the quarter ended March 31,
2001.

                                    Page 45
<PAGE>

                              NEWPORT CORPORATION
                                  Schedule II
                        Consolidated Valuation Accounts

<TABLE>
<CAPTION>
(In thousands)
                                      Balance at     Additions                                             Balance
                                      Beginning   Charged to Costs                    Other Charges        at End
         Description                  of Period     and Expenses      Write-Offs (1)  Add (Deduct) (2)    of Period
         -----------                  ---------     ------------      --------------  ----------------    ---------
<S>                                   <C>         <C>                  <C>            <C>                 <C>
Year ended December 31, 2000:
Deducted from asset accounts:
Allowance for doubtful accounts           $  411            $  232         $  (164)            $ (12)        $  467
Reserve for inventory obsolescence         3,768             3,682          (2,394)              810          5,866
Warranty reserve                             403             1,965          (1,901)                -            467

Year ended December 31, 1999:
Deducted from asset accounts:
Allowance for doubtful accounts           $  279            $  278         $  (116)            $ (30)        $  411
Reserve for inventory obsolescence         4,304               982          (1,330)             (188)         3,768
Warranty reserve                             336             1,575          (1,508)                -            403

Year ended December 31, 1998:
Deducted from asset accounts:
Allowance for doubtful accounts           $  485            $  (97)        $  (120)            $  11         $  279
Reserve for inventory obsolescence         4,119             1,170          (1,460)              475          4,304
Warranty reserve                             426               966          (1,056)                -            336
</TABLE>

(1) Amounts are net of recoveries.

(2) 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 Translation, the acquisition
    of CE Johansson, and certain reclassifications between balance sheet
    accounts.

                                    Page 46
<PAGE>

                              NEWPORT CORPORATION
                                   FORM 10-K
                                 Exhibit Index



Exhibit 10.2   Lease Agreement dated November 1, 2000, between Newport
               Corporation and Arden Realty Limited Partnership.

Exhibit 10.15  Amendment to 364 Day $10,000,000 Revolving Credit Agreement,
               dated as of March 9, 2001, between Newport Corporation and ABN
               AMRO Bank, N.V.

Exhibit 10.16  Amendment to 3 Year $15,000,000 Revolving Credit Agreement, dated
               as of March 9, 2001, between Newport Corporation and ABN AMRO
               Bank, N.V.

Exhibit 21     Subsidiaries of Registrant

Exhibit 23     Consent of Independent Auditors