<PAGE>   1
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                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549
                                ----------------

                                    FORM 10-Q

(MARK ONE)

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

                  FOR THE QUARTERLY PERIOD ENDED JUNE 30, 1998

                                       OR

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

                             COMMISSION FILE NUMBER:
                                    000-23461
                                ----------------

                          SPECTRA-PHYSICS LASERS, INC.
             (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
                                ----------------

             DELAWARE                                           77-0264342
  (STATE OR OTHER JURISDICTION OF                            (I.R.S. EMPLOYER
   INCORPORATION OR ORGANIZATION)                            IDENTIFICATION NO.)

            1335 TERRA BELLA AVENUE, MOUNTAIN VIEW, CALIFORNIA, 94043
               (ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)

               REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE:
                                  650-961-2550

      (FORMER NAME, FORMER ADDRESS AND FORMER FISCAL YEAR IF CHANGED SINCE
                                  LAST REPORT)

    Indicate by check mark whether the Registrant: (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports) and (2) has been subject to such
filing requirements for the past 90 days. Yes [X] No [ ]

     The number of shares outstanding of the Registrant's common stock, par
value $0.01 per share, at July 31, 1998 was 16,168,043 shares.



================================================================================

<PAGE>   2

                          SPECTRA-PHYSICS LASERS, INC.

                  FORM 10-Q FOR THE QUARTER ENDED JUNE 30, 1998

                                      INDEX

<TABLE>
<CAPTION>
                                                                                                                         PAGE
                                                                                                                         ----
<S>                                                                                                                      <C>
Part I   Financial information......................................................................................       3

Item 1. Financial statements and supplementary data:
            (a) Consolidated Balance Sheet at June 30, 1998 and December 31, 1997...................................       3
            (b) Consolidated Statement of Operations for the three and six months ended  June 30, 1998 and 1997  ...       4
            (c) Consolidated Statement of Cash Flows for the six months ended June 30, 1998 and 1997................       5
            (d) Notes to Consolidated Financial Statements..........................................................       6

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations.......................       8

Part II  Other Information..........................................................................................      16

            Signatures..............................................................................................      19
</TABLE>



                                       2
<PAGE>   3

                         PART I -- FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

                          SPECTRA-PHYSICS LASERS, INC.

                           CONSOLIDATED BALANCE SHEET
                                 (IN THOUSANDS)

<TABLE>
<CAPTION>
                                                             JUNE 30,        DECEMBER 31,
                                                              1998              1997
                                                            ---------         ---------
                                                           (UNAUDITED)        (SEE NOTE)
<S>                                                        <C>               <C>      
ASSETS
Current assets:
  Cash and cash equivalents ........................        $  29,910         $  33,487
  Accounts receivable ..............................           34,529            39,511
  Inventories ......................................           28,471            25,857
  Deferred tax assets ..............................            8,200             8,200
  Prepaid expenses and other current assets ........            6,837             4,409
                                                            ---------         ---------
          Total current assets .....................          107,947           111,464
                                                            ---------         ---------

Property, plant and equipment, net .................           28,980            25,480
Intangible assets, net .............................            1,881             1,637
Other assets .......................................            1,797             1,943
                                                            ---------         ---------
          Total assets .............................        $ 140,605         $ 140,524
                                                            =========         =========

LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
  Accounts payable .................................        $   6,185         $  10,453
  Borrowings under credit facilities ...............            7,530             7,321
  Accrued and other current liabilities ............           21,945            24,749
                                                            ---------         ---------
          Total current liabilities ................           35,660            42,523

Long-term liabilities ..............................            1,641             1,677
Commitments and contingencies
Stockholders' equity:
  Common stock .....................................              162               158
  Additional paid-in capital .......................           97,236            93,991
  Retained earnings ................................            7,682             3,629
  Cumulative translation adjustments ...............           (1,776)           (1,454)
                                                            ---------         ---------
          Total stockholders' equity ...............          103,304            96,324
                                                            ---------         ---------
          Total liabilities and stockholders' equity        $ 140,605         $ 140,524
                                                            =========         =========
</TABLE>


    Note: The balance sheet at December 31, 1997 has been derived from the
audited consolidated financial statements at that date but does not include all
of the information and footnotes required by generally accepted accounting
principles for complete financial statements.

                 See Notes to Consolidated Financial Statements.



                                       3
<PAGE>   4

                          SPECTRA-PHYSICS LASERS, INC.

                      CONSOLIDATED STATEMENT OF OPERATIONS
                    (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

<TABLE>
<CAPTION>
                                                         THREE MONTHS ENDED                SIX MONTHS ENDED
                                                               JUNE 30,                        JUNE 30,
                                                      ------------------------         ------------------------
                                                        1998            1997             1998            1997
                                                      --------        --------         --------        --------
                                                             (UNAUDITED)                      (UNAUDITED)
<S>                                                   <C>             <C>              <C>             <C>     
Net sales ....................................        $ 40,227        $ 38,368         $ 83,833        $ 73,448
Cost of products sold ........................          24,488          23,750           51,508          46,285
                                                      --------        --------         --------        --------
          Gross margin .......................          15,739          14,618           32,325          27,163
Operating expenses:
  Research and development ...................           3,997           3,524            8,745           6,842
  Selling, general and administrative ........           8,913           7,514           17,715          14,788
  Other ......................................              --           4,833               --          11,323
                                                      --------        --------         --------        --------
          Total operating expenses ...........          12,910          15,871           26,460          32,953
                                                      --------        --------         --------        --------
          Operating income (loss) ............           2,829          (1,253)           5,865          (5,790)
Other income (expense):
  Interest income (expense) ..................             295          (1,343)             672          (2,766)
  Foreign currency gain (loss) ...............              --            (868)              --           1,255
  Legal settlement ...........................              --          17,010               --          17,010
                                                      --------        --------         --------        --------
          Total other income .................             295          14,799              672          15,499
                                                      --------        --------         --------        --------
          Income before income taxes .........           3,124          13,546            6,537           9,709
Income tax expense ...........................           1,187              76            2,484             202
                                                      --------        --------         --------        --------
          Net income .........................        $  1,937        $ 13,470         $  4,053        $  9,507
                                                      ========        ========         ========        ========

Net income per share:
  Basic ......................................        $   0.12        $   1.04         $   0.25        $   0.73
                                                      ========        ========         ========        ========
  Diluted ....................................        $   0.12        $   1.04         $   0.24            0.73
                                                      ========        ========         ========        ========
Shares used in computing net income per share:
  Basic ......................................          16,168          13,000           16,168          13,000
  Diluted ....................................          16,660          13,000           16,779          13,000
</TABLE>



                 See Notes to Consolidated Financial Statements.



                                       4
<PAGE>   5

                          SPECTRA-PHYSICS LASERS, INC.

                      CONSOLIDATED STATEMENT OF CASH FLOWS
                                 (IN THOUSANDS)

<TABLE>
<CAPTION>
                                                                             SIX MONTHS ENDED
                                                                                 JUNE 30,
                                                                         -------------------------
                                                                           1998             1997
                                                                         --------         --------
                                                                                (UNAUDITED)
<S>                                                                      <C>              <C>     
OPERATING ACTIVITIES
Net income ......................................................        $  4,053         $  9,507
Adjustments to reconcile net income to cash provided by (used in)
  operating activities:
  Depreciation and amortization .................................           2,744            2,321
  Changes in operating assets and liabilities:
     Accounts receivable ........................................           4,982            7,031
     Inventories ................................................          (2,614)          (2,964)
     Prepaid expenses and other current assets ..................          (2,428)             (11)
     Accounts payable ...........................................          (4,268)            (586)
     Accrued and other current liabilities ......................          (2,804)           5,786
                                                                         --------         --------
          Total cash provided by (used in) operating activities .            (335)          21,084
                                                                         --------         --------

INVESTING ACTIVITIES
Purchases of property, plant and equipment ......................          (6,244)          (4,242)
Other ...........................................................            (452)            (348)
                                                                         --------         --------
          Total cash provided by (used in) investing activities .          (6,696)          (4,590)
                                                                         --------         --------

FINANCING ACTIVITIES
Net transfers (to) from Spectra-Physics AB ......................              --          (15,442)
Net borrowings under credit facilities ..........................             209               --
Changes in loans and advances from Spectra-Physics AB ...........              --           (2,559)
Net proceeds from issuance of common stock ......................           3,245               --
                                                                         --------         --------
          Total cash provided by (used in) financing activities .           3,454          (18,001)
                                                                         --------         --------
          Increase (decrease) in cash and cash equivalents ......          (3,577)          (1,507)
Cash and cash equivalents at beginning of year ..................          33,487            2,531
                                                                         --------         --------
Cash and cash equivalents at end of period ......................        $ 29,910         $  1,024
                                                                         ========         ========
</TABLE>



                 See Notes to Consolidated Financial Statements.



                                       5
<PAGE>   6

                          SPECTRA-PHYSICS LASERS, INC.

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (UNAUDITED)

1. BASIS OF PRESENTATION

    Spectra-Physics Lasers, Inc. (the "Company") designs, develops, manufactures
and distributes lasers and laser systems for the industrial, original equipment
manufacturer ("OEM"), and research and development markets.

    The accompanying unaudited consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for interim
financial information and with the instructions to Form 10-Q and Article 10 of
Regulation S-X. Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments (consisting
of normal recurring adjustments) considered necessary for a fair presentation
have been included. Operating results for the six months ended June 30, 1998 are
not necessarily indicative of the results that may be expected for the year
ended December 31, 1998. For further information, refer to the consolidated
financial statements and footnotes thereto included in the Company's Annual
Report on Form 10-K for the year ended December 31, 1997.

    The Company's fiscal year ends on December 31. The Company's fiscal quarters
end on the Friday of the thirteenth week of the quarter. For presentation
purposes, the financial statements reflect the calendar month-end date.

2. INVENTORIES

    Inventories consisted of the following (in thousands):

<TABLE>
<CAPTION>
                                               JUNE 30,            DECEMBER 31,
                                                1998                  1997
                                               -------               -------
<S>                                            <C>                 <C>    
Raw material .......................           $14,419               $10,250
Work in process ....................             5,933                 8,077
Finished goods .....................             8,119                 7,530
                                               -------               -------
                                               $28,471               $25,857
                                               =======               =======
</TABLE>

3. STOCKHOLDERS' EQUITY

    In January 1998, the Company issued 360,000 shares of common stock at a
price of $10.00 per share in accordance with an overallotment option granted to
the underwriters of the Company's initial public offering. Net proceeds were
$3.2 million.

4. IMPACT OF RECENTLY ISSUED ACCOUNTING STANDARDS

    In February 1997, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards (SFAS) No. 128, "Earnings per
Share", and in March 1997, issued SFAS No. 129 "Disclosures of Information About
Capital Structure." These statements specify the computation, presentation and
disclosure requirements for earnings per share and the capital structure of a
company. SFAS No. 128 was adopted by the Company in 1997 and had no impact on
the Company's financial statements. The Company will adopt SFAS No. 129 in the
fourth quarter of 1998.

    In June 1997, the FASB issued SFAS No. 130, "Reporting Comprehensive Income"
and SFAS No. 131, "Disclosures About Segments of an Enterprise and Related
Information." SFAS No. 130 and SFAS No. 131 are effective for the Company in the
first quarter and fourth quarter of 1998, respectively. SFAS No. 130 establishes
the requirements for disclosure of comprehensive income. Comprehensive income
generally represents all changes in stockholders' equity except those resulting
from investments or contributions from stockholders. SFAS No. 131 requires
publicly held companies to report financial and other information about key
sales-producing segments of the entity for which such information is available
and utilized by the chief operating decision maker. Specific information to be
reported for individual segments includes profit and loss, certain sales and
expense items and total assets. A reconciliation of segment financial
information to amounts reported in the financial statements would be provided.



                                       6
<PAGE>   7

    The Company has adopted SFAS No. 130 in the first quarters of 1998.
Comprehensive net income (loss) for the six months ended June 30, 1998 and 1997
were $3,854,000 and $9,507,000, respectively. The principal difference between
comprehensive net income (loss) and net income (loss) is the treatment of
cumulative translation adjustments.

    The Company has determined that the impact of adopting SFAS No. 129 and SFAS
No. 131 will not be material to its financial position or results of operations.

    In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities." SFAS No. 133 requires all derivatives to be
recorded on the balance sheet at fair value and establishes "special accounting"
for the following three different types of hedges: hedges of changes in the fair
value of assets, liabilities or firm commitments (referred to as fair value
hedges); hedges of variable cash flows of forecasted transactions (cash flow
hedges); and hedges of foreign currency exposures of net investments in foreign
operations. All three types of hedges result in offsetting changes in fair
values or cash flows of both the hedge and the hedged item being recognized in
operations in the same period. Changes in fair value of derivatives that do not
meet the criteria of one of these three categories of hedges are included in
income.

    SFAS No. 133 is effective for years beginning after June 15, 1999, but
earlier adoption is allowed. The Company has not determined the impact of
adopting SFAS No. 133 on its financial position or results of operations.

5. EARNINGS PER SHARE

    SFAS No. 128 requires the presentation of basic and diluted net income per
share. Basic net income per share is computed by dividing net income by the
weighted average number of common shares outstanding during the period. Diluted
net income per share is computed giving effect to all diluted potential common
shares that were outstanding during the period. Dilutive potential common shares
consist of the incremental common shares issuable upon the exercise of stock
options. Stock options granted by subsidiaries of the Company were not included
in the calculation of net income per share as they were anti-dilutive.

    The following table presents the calculation of basic and diluted net income
per share as required under SFAS No. 128:

<TABLE>
<CAPTION>
                                                       THREE MONTHS ENDED              SIX MONTHS ENDED
                                                             JUNE 30,                      JUNE 30,
                                                      ----------------------        ----------------------
                                                       1998           1997           1998           1997
                                                      -------        -------        -------        -------
<S>                                                   <C>            <C>            <C>            <C>    
Numerator:
  Net income .................................        $ 1,937        $13,470        $ 4,053        $ 9,507
                                                      =======        =======        =======        =======
Denominator:
  Denominator for basic net income per share:
     Weighted average shares .................         16,168         13,000         16,168         13,000
  Effect of dilutive securities:
     Employee stock options ..................            492             --            611             --
                                                      -------        -------        -------        -------
  Denominator for diluted net income per share         16,660         13,000         16,779         13,000
                                                      =======        =======        =======        =======
Net income per share-- Basic .................        $  0.12        $  1.04        $  0.25        $  0.73
Net income per share-- Diluted ...............        $  0.12        $  1.04        $  0.24        $  0.73
</TABLE>

    Pro forma net income per share for 1997 gives effect to the Reorganization
as described in the Company's Annual Report on Form 10-K.

6. ENVIRONMENTAL MATTERS

    See Part II., Item 1. Legal Proceedings



                                       7
<PAGE>   8

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS 
        OF OPERATIONS

STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT

    Certain information in this quarterly report on Form 10-Q, including but not
limited to the Management's Discussion and Analysis of Financial Condition and
Results of Operations, may constitute forward-looking statements as such term is
defined in Section 27A of the Securities Act of 1933 (the "Securities Act") and
Section 21E of the Securities Exchange Act of 1934. Certain forward-looking
statements can be identified by the use of forward-looking terminology such as,
"believes," "expects," "may," "will," "should," "seeks," "approximately,"
"intends," "plans," "estimates," or "anticipates" or the negative thereof or
other comparable terminology, or by discussions of strategy, plans or
intentions. Forward-looking statements involve risks and uncertainties,
including those described in the Risk Factors section of Item 1 of
Spectra-Physics Lasers, Inc's (the "Company's") Annual Report on Form 10-K,
which could cause actual results to be materially different than those in the
forward-looking statements. Readers are cautioned not to place undue reliance on
these forward-looking statements, which speak only as of the date hereof. The
Company assumes no obligation to update such information.

OVERVIEW

    The Company is a leader in the design, development, manufacture and
distribution of lasers and laser systems for a broad range of markets.
Spectra-Physics AB, a multinational corporation based in Sweden which is listed
for trading on the Stockholm Stock Exchange, indirectly owns 80.4% of the
Company's outstanding Common Stock. Prior to the Reorganization described below,
the Company, Opto Power Corporation and Spectra-Physics Laser Data Systems,
Inc., together with various foreign subsidiaries of Spectra-Physics AB that
conducted sales and technical support operations on their behalf, were operated
as a functional group called the Lasers and Optics Group. In preparation for the
Company's initial public offering, the Lasers and Optics Group was reorganized
(the "Reorganization") in October 1997 so that the assets and liabilities
(including contractual rights and obligations) of the Lasers and Optics Group
are now held directly or indirectly by the Company.

    In December 1997, the Company completed an initial public offering of
2,400,000 shares of Common Stock, at an offering price of $10.00 per share. An
additional 360,000 shares of common stock were sold in January 1998 in
accordance with an overallotment option granted to the underwriters. The net
proceeds from the sale of these shares was approximately $23.9 million.

    The consolidated financial statements as of and for the three and six month
periods ended June 30, 1997 reflect the financial position, results of
operations and cash flows of the Company as if it were a separate entity. The
Company's historical results have varied significantly from period to period due
to the inclusion of charges related to legal expenses associated with a lawsuit
and compensation expenses associated with certain stock options. The Company
also incurred interest expense on loans and advances from Spectra-Physics AB and
foreign currency gains and losses resulting from the Company's participation in
Spectra-Physics AB's foreign currency hedging program. These charges and credits
are not expected to be incurred in the future. However, there can be no
assurance that similar items might not occur.

     Net sales for products are recognized upon shipment. The Company derives
its revenue primarily from the sale of high power semiconductor-based and
conventional lasers and laser systems. High power semiconductor-based lasers and
laser systems are sold into the OEM/industrial market and research and
development market. The OEM/industrial market is characterized by unit sales,
with varying prices, in volumes of as much as several thousand units.
Conventional lasers are primarily sold into the research and development market.
This market is typically characterized by the sale of single units and systems
with prices that range from approximately $3,000 to $500,000. Sales in this
market have historically varied from quarter to quarter due to seasonal
fluctuations and governmental spending patterns. Over the last three years, a
growing proportion of the Company's total net sales and most of its sales growth
have been from high power semiconductor-based lasers.


    The Company has experienced a trend in its sales whereby its fiscal fourth
quarter net sales represent a disproportionate share of the Company's annual net
sales and whereby the Company's first quarter net sales decline significantly
compared to the fourth quarter of the prior fiscal year. The Company believes
these sales patterns result in part because of Spectra-Physics AB's emphasis on
annual (as opposed to quarterly) results and in part from the Company's
incentive compensation plan which compensates employees based on annual results.
The Company recognizes that the non-linear pattern of its shipments leads to
inefficiencies in asset and employee utilization. The Company is taking steps to
mitigate this sales trend, but this pattern is likely to continue in the near
term.



                                       8
<PAGE>   9

    The Company's gross margin is affected by a number of factors, including
product mix, product pricing, cost of components, the proportion of third party
products incorporated into the Company's systems, foreign currency exchange
rates and manufacturing costs. For example, since high power semiconductor-based
lasers and laser systems generally have higher gross margins than conventional
lasers, absent other factors, a shift in sales toward high power
semiconductor-based lasers and laser systems would lead to a gross margin
improvement for the Company. On the other hand, if market conditions in the
highly competitive conventional laser market forced the Company to lower unit
prices, the Company would suffer a decline in gross margin unless the Company
were able to timely offset the price reduction by a reduction in production
costs or by sales of other products with higher gross margins. Either of these
events could have a material effect on the Company's business, operating results
and financial condition.

    The Company spends a significant amount of resources on research and
development. In recent years, the Company has focused much of these resources on
high power semiconductor-based lasers and laser systems. The Company expects to
continue to spend substantial resources in developing high power
semiconductor-based lasers and laser systems while making focused research and
development expenditures to maintain its leadership position in conventional
lasers.

    A significant proportion of the Company's sales are to international
customers and are denominated in currencies other than the U.S. dollar. The
Company also has sales and support operations located in certain European
countries and in Japan which operate in local currencies. As a result, while the
Company attempts to hedge its economic risk of foreign currency fluctuations,
the Company is exposed to fluctuations in foreign currency exchange rates that
have had in the past, and may have in the future, a significant impact on the
Company's results of operations.

    The majority of the Company's sales in Japan are denominated in Japanese
Yen. The Company has responded to the recent devaluation of the Yen against the
U.S. dollar by raising the Yen denominated prices of its products in Japan.
Additionally, the Company is hopeful that the recently passed supplemental
government budget in Japan will result in increased unit sales there. However,
the devaluation of the Japanese Yen has negatively impacted the Company's
results of operations and there can be no assurance that further devaluation of
the Yen will not have a material adverse effect on the Company's results of
operations.

    Additionally, reduced orders and sales in the commercial printing and
graphics market due to an announced production slowdown by a major customer have
negatively impacted the Company's sales. 

    The Company also sells products to the semiconductor and disk media
manufacturing OEM markets. The widely reported challenging conditions of these
markets are of concern to the Company. The Company has experienced only a slight
softening of sales in these markets through the second quarter of 1998 compared
to the same period in 1997. If there is a prolonged softening of these markets,
it may have an adverse effect on the growth of the Company's sales and
profitability.



                                       9

<PAGE>   10

RESULTS OF OPERATIONS

    The following tables set forth, for the periods indicated, the Company's
results of operations in dollar terms and as a percentage of net sales and the
percent change from 1997 to 1998:

<TABLE>
<CAPTION>
                                                                               PERCENT OF NET
                                                                                   SALES
                                                THREE MONTHS                    THREE MONTHS
                                                    ENDED                          ENDED                 PERCENT
                                                   JUNE 30,                       JUNE 30,               CHANGE
                                           -----------------------        -----------------------        1997 TO
                                             1998           1997            1998           1997           1998
                                           --------       --------        --------       --------       --------
<S>                                        <C>            <C>                <C>            <C>         <C> 
Net sales ...........................      $ 40,227       $ 38,368           100.0%         100.0%          4.8%
Cost of products sold ...............        24,488         23,750            60.9           61.9           3.1%
                                           --------       --------        --------       --------
  Gross margin ......................        15,739         14,618            39.1           38.1           7.7%
Operating expenses:
  Research and development ..........         3,997          3,524             9.9            9.2          13.4%
  Selling, general and administrative         8,913          7,514            22.2           19.6          18.6%
  Other .............................            --          4,833             0.0           12.6        (100.0%)
                                           --------       --------        --------       --------
     Total operating expenses .......        12,910         15,871            32.1           41.4         (18.7%)
                                           --------       --------        --------       --------
     Operating income (loss) ........         2,829         (1,253)            7.0           (3.3)          NM
Other income (expense):
  Interest income (expense) .........           295         (1,343)            0.7           (3.5)          NM
  Foreign currency gain (loss) ......            --           (868)            0.0           (2.3)       (100.0%)
                                                                                                                
  Legal settlement ..................            --         17,010             0.0           44.3        (100.0%)
                                           --------       --------        --------       --------
     Total other income .............           295         14,799             0.7           38.5         (98.0%)
                                           --------       --------        --------       --------
     Income before income taxes .....         3,124         13,546             7.7           35.2         (76.9%)
Income tax expense ..................         1,187             76             3.0            0.2       1,461.8%
                                           --------       --------        --------       --------
  Net income ........................      $  1,937       $ 13,470             4.8%          35.0%        (85.6%)
                                           ========       ========        ========       ========
Operating income before infrequent or
unusual items(a) ....................      $  2,829       $  3,580             7.0%           9.3%        (21.0%)
</TABLE>


<TABLE>
<CAPTION>
                                                                               PERCENT OF NET
                                                                                    SALES
                                                   SIX MONTHS                    SIX MONTHS
                                                      ENDED                         ENDED                 PERCENT
                                                     JUNE 30,                      JUNE 30,               CHANGE
                                              ----------------------       -----------------------        1997 TO
                                                1998          1997           1998           1997           1998
                                              --------      --------       --------       --------       --------
<S>                                           <C>           <C>               <C>            <C>         <C>  
Net sales ..............................      $ 83,833      $ 73,448          100.0%         100.0%         14.1%
Cost of products sold ..................        51,508        46,285           61.4           63.0          11.3%
                                              --------      --------       --------       --------
  Gross margin .........................        32,325        27,163           38.6           37.0          19.0%
Operating expenses:
  Research and development .............         8,745         6,842           10.4            9.3          27.8%
  Selling, general and administrative ..        17,715        14,788           21.1           20.1          19.8%
  Other ................................            --        11,323            0.0           15.4        (100.0%)
                                              --------      --------       --------       --------
     Total operating expenses ..........        26,460        32,953           31.5           44.8         (19.7%)
                                              --------      --------       --------       --------
     Operating income (loss) ...........         5,865        (5,790)           7.1           (7.8)         NM
Other income (expense):
  Interest income (expense) ............           672        (2,766)           0.8           (3.8)         NM
  Foreign currency gain ................            --         1,255            0.0            1.7        (100.0%)
  Legal settlement .....................            --        17,010            0.0           23.2        (100.0%)
                                              --------      --------       --------       --------
     Total other income ................           672        15,499            0.8           21.1         (95.7%)
                                              --------      --------       --------       --------
     Income before income taxes ........         6,537         9,709            7.8           13.2         (32.7%)
Income tax expense .....................         2,484           202            3.0            0.3       1,129.7%
                                              --------      --------       --------       --------
  Net income ...........................      $  4,053      $  9,507            4.8%          12.9%        (57.4%)
                                              ========      ========       ========       ======== 
Operating  income  before  infrequent or
unusual  items(a) ......................      $  5,865      $  5,533            7.0%           7.5%          6.0%
</TABLE>



                                       10
<PAGE>   11

(a) Operating income before infrequent or unusual items is presented as
    supplemental information and should not be construed as a substitute for, or
    better, indicator of, results of operations than operating income (loss) or
    net income determined in accordance with generally accepted accounting
    principles. This information represents actual 1997 operating loss adjusted
    for compensation expense associated with stock options of $4.8 million for
    the three months ended June 30, 1997, and legal expense associated with a
    lawsuit of $1.7 million and compensation expense associated with stock
    options of $9.6 million for the six months ended June 30, 1997. No such
    amounts were incurred in 1998. While such items are not expected to be
    incurred in the future, there can be no assurances that similar items might
    not occur.

NM -- not meaningful


THREE AND SIX MONTHS ENDED JUNE 30, 1998 AND 1997

Net sales

    Net sales were $40.2 million and $38.4 million in the three months ended
June 30, 1998 and 1997, respectively, representing an increase of 4.8%. Net
sales for the three months ended June 30, 1998, calculated using foreign
currency exchange rates for the same period in 1997, increased 7.9%. The growth
in sales was principally due to increased volumes of high power
semiconductor-based lasers and laser systems as the market for these products
expanded due to customers' acceptance of these products.

    Net sales in the following geographic markets were:

<TABLE>
<CAPTION>
                                                         THREE MONTHS ENDED
                                                              JUNE 30,
                                                    ----------------------------
                                                     1998                  1997
                                                    -------              -------
                                                           (IN THOUSANDS)
<S>                                                 <C>                  <C>
North America.........................               21,523               22,315  
Japan ................................                7,915                7,000
Europe ...............................                8,286                7,338
Other Asia ...........................                1,383                  735
Rest of the World ....................                1,120                  980
                                                    -------              -------
                                                    $40,227              $38,368
                                                    =======              =======
</TABLE>

    Net sales for the three months ended June 30, 1998 at actual currency
exchange rates decreased 3.5%, for North America, and increased 13.1% for Japan,
12.9% for Europe, 88.2% for Other Asia, and 14.3% for Rest of the World. Net
sales for the three months ended June 30, 1998, calculated using foreign
currency exchange rates for the same period in 1997, increased 25.0% for Japan
and 19.9% for Europe. Since substantially all sales in North America, Other Asia
and Rest of the World are denominated in U.S. dollars, year to year constant
currency changes in these markets are as described above. Europe in the above
table includes sales from the Company's European sales subsidiaries. Export
sales to countries not located in Asia are included in Rest of the World.

    Net sales were $83.8 million and $73.4 million for the six months ended June
30, 1998 and 1997, respectively, representing an increase of 14.1%. Net sales
for the six months ended June 30, 1998, calculated using foreign currency
exchange rates for the same period in 1997, increased 17.9%.

    Net sales in the following geographic markets were:

<TABLE>
<CAPTION>
                                                         SIX MONTHS ENDED
                                                              JUNE 30,
                                                    ----------------------------
                                                     1998                  1997
                                                    -------              -------
                                                           (IN THOUSANDS)
<S>                                                 <C>                  <C>    
North America ........................              $45,755              $40,428
Japan ................................               16,853               16,418
Europe ...............................               15,676               13,338
Other Asia ...........................                3,073                1,385
Rest of the World ....................                2,476                1,879
                                                    -------              -------
                                                    $83,833              $73,448
                                                    =======              =======
</TABLE>



                                       11
<PAGE>   12

    Net sales for the six months ended June 30, 1998 at actual currency exchange
rates increased 13.2% for North America, 2.6% for Japan, 17.5% for Europe,
121.9% for Other Asia, and 31.8% for Rest of the World. Net sales for the six
months ended June 30, 1998, calculated using foreign currency exchange rates for
the same period in 1997, increased 13.5% for Japan and 24.7% for Europe.

Cost of products sold and gross margin

    Cost of products sold includes all manufacturing materials and labor and a
proportionate share of overhead costs, as well as costs of shipping, tooling,
royalties, third party products incorporated in the Company's products and
provisions for excess and obsolete inventories and warranty. Cost of products
sold varies by product mix, product pricing, cost of components, the proportion
of third party products incorporated in systems manufactured by the Company, and
manufacturing costs.

    Gross margin was $15.7 million and $14.6 million for the three months ended
June 30, 1998 and 1997, respectively, representing an increase of 7.7%. As a
percentage of net sales, gross margin was 39.1% and 38.1% in the three months
ended June 30, 1998 and 1997, respectively. The principal reason for the
improvement in gross margin as a percentage of net sales was the higher
proportion of sales of high power semiconductor-based lasers and laser systems
which generally have higher gross margins than conventional products. Gross
margin as a percentage of net sales also increased in 1998 compared to 1997 due
to improved manufacturing yields for high power semiconductor-based lasers and
laser systems.

    Gross margin was $32.3 million and $27.2 million for the six months ended
June 30, 1998 and 1997, respectively, representing an increase of 19.0 %. As a
percentage of net sales, gross margin was 38.6% and 37.0% in the six months
ended June 30, 1998 and 1997, respectively. The principal reasons for the
improvement in gross margin as a percentage of net sales were the higher
proportion of sales of high power semiconductor-based lasers and laser systems
which generally have higher gross margins than conventional products and the
increase in sales that allowed the absorption of fixed manufacturing overhead
expenses over a larger unit base.

Operating expenses

    Operating expenses totaled $12.9 million and $15.9 million in the three
months ended June 30, 1998 and 1997, respectively, representing a decrease of
18.7%. As a percentage of net sales, operating expenses were 32.1% and 41.4% in
the three months ended June 30, 1998 and 1997, respectively. Included in other
operating expenses in the three months ended June 30, 1997 was compensation
expense associated with certain stock options of a subsidiary of $4.8 million.
The stock options were cancelled in the fourth quarter of 1997 for a combination
of cash and common stock of the Company. Accordingly, the Company does not
expect to incur additional compensation expense relating to these stock options
in the future. Excluding such compensation expense, operating expenses increased
17.0% from the three months ended June 30,1997 to the same period in 1998 and
were 28.8% of net sales for the three months ended June 30, 1997.

    Operating expenses totaled $26.5 million and $33.0 million for the six
months ended June 30, 1998 and 1997, respectively, representing a decrease of
19.7%. As a percentage of net sales, operating expenses were 31.5% and 44.8% in
the six months ended June 30, 1998 and 1997, respectively. Included in other
operating expenses in 1997 were legal expense of $1.7 million associated with a
lawsuit which was settled in the second quarter of 1997 and compensation expense
associated with certain stock options of a subsidiary of $9.6 million. The stock
options were cancelled in the fourth quarter of 1997 for a combination of cash
and common stock of the Company. Accordingly, the Company does not expect to
incur additional compensation expense relating to these stock options in the
future. Excluding such legal and compensation expenses, operating expenses
increased 22.3% from the six months ended June 30, 1997 to the same period in
1998 and were 29.4% of net sales for the six months ended June 30, 1997.

    Research and development expenses represent expenses associated with Company
funded research and new product development, and efforts designed to improve the
performance of existing products and manufacturing processes. Customer funded
product development engineering for certain OEM customers and the U.S.
government, which to date has been minimal, is recorded as a reduction of
research and development expenses. Research and development expenses are charged
to operations as incurred.

    Research and development expenses totaled $4.0 million and $3.5 million for
the three months ended June 30, 1998 and 1997, respectively, representing an
increase of 13.4%. As a percentage of net sales, research and development
expenses were 9.9% and 9.2% in the three months ended June 30, 1998 and 1997,
respectively.

    Research and development expenses totaled $8.7 million and $6.8 million for
the six months ended June 30, 1998 and 1997, respectively, representing an
increase of 27.8%. As a percentage of net sales, research and development
expenses were 10.4% and 



                                       12
<PAGE>   13

9.3% in the six months ended June 30, 1998 and 1997, respectively. The increase
in research and development spending for the three and six month periods was
principally focused on high power semiconductor-based lasers and laser systems.

    Selling, general and administrative expenses include the expenses of the
Company's sales and support subsidiaries in the United Kingdom, France, Germany,
the Netherlands and Japan as well as the Company's North American sales and
support organization, and other administrative expenses such as legal and
accounting.

    Selling, general and administrative expenses totaled $8.9 million and $7.5
million for the three months ended June 30, 1998 and 1997, respectively,
representing an increase of 18.6%. As a percentage of net sales, selling,
general and administrative expenses were 22.2% and 19.6% in the three months
ended June 30, 1998 and 1997, respectively.

    Selling, general and administrative expenses totaled $17.7 million and $14.8
million for the six months ended June 30, 1998 and 1997, respectively,
representing an increase of 19.8%. As a percentage of net sales, selling,
general and administrative expenses were 21.1% and 20.1% in the six months ended
June 30, 1998 and 1997, respectively. The principal reasons for the increase in
selling, general and administrative expenses in dollar terms for the three and
six month periods were increased expenses associated with penetrating the
industrial/OEM markets and costs of being a public company.

Interest income (expense)

    Interest income totaled $0.3 million in the three months ended June 30, 1998
compared to interest expense of $1.3 million in the three months ended June 30,
1997. Interest income totaled $0.7 million in the six months ended June 30, 1998
compared to interest expense of $2.8 million in the six months ended June 30,
1997. Interest income for 1998 was earned on the Company's invested cash and
cash equivalents. Interest expense for 1997 was incurred on loans and advances
from Spectra-Physics AB and affiliates. Interest expense was also imputed on the
certain non-interest bearing advances from Spectra-Physics AB and affiliates. In
connection with the Reorganization, Spectra-Physics AB and affiliates converted
all loans and advances to the Company to equity.

Foreign currency gain (loss)

    All of the Company's manufacturing is performed in the United States.
However, the Company has significant sales outside the United States denominated
in currencies other than the U.S. dollar. Also, the Company's sales and support
subsidiaries pay local operating expenses in local currencies. As a result, the
Company's operations are exposed to fluctuations in foreign currency exchange
rates and these fluctuations have been, and may continue to be, material.

    From late 1995 to September 1997, the Company had a hedging program with
Spectra-Physics AB whereby it hedged a portion of its anticipated non-U.S.
dollar denominated cash flows on a twelve-month rolling basis. Accordingly, at
the end of each period, there was approximately twelve months of foreign
exchange contracts open to deliver a specified amount of foreign currency at a
specified rate. As allowed under generally accepted accounting principles
("GAAP") in Sweden, the Company had deferred the unrealized gain or loss
resulting from the impact of currency exchange rate movements on open contracts
until the underlying transaction was completed. However, since these contracts
were not, as required under U.S. GAAP, designated as hedges of firm,
identifiable foreign currency commitments, the proper U.S. accounting treatment
for these contracts was to recognize unrealized gain or loss resulting from the
impact of currency exchange rate movements on open contracts in each period
reported. Accordingly in the accompanying financial statements such gains and
losses were recorded as other income or expense. Also included in other income
and expense were realized gains and losses on the settlement of foreign exchange
contracts and realized and unrealized gains and losses on transactions
denominated in currencies other than the U.S. dollar for U.S. based operations.

    In October 1997, the Company changed the way it hedges its foreign currency
exposures. The Company now enters into transactions with independent financial
institutions. The Company's policy is to not hold or issue financial instruments
for trading purposes nor will it hold or issue leveraged derivative financial
instruments. The objective of the Company's foreign exchange risk management
policy is to preserve the U.S. dollar value of its non-U.S. dollar cash flows.
These cash flows arise primarily from the sale of the Company's products in
currencies other than U.S. dollar, most of which are made through the Company's
subsidiaries in Japan and Europe. The Company will use forward exchange
contracts and simple purchased foreign currency option contracts to hedge,
respectively, firm commitments and probable anticipated transactions that expose
the Company to enterprise risk. Gains and losses on forward exchange contracts
that are designated as hedges of a firm order from a customer outside the United
States will be deferred and included in the measurement of the underlying
transaction. Gains on purchased foreign currency options with little or no
intrinsic value designated as hedges of probable anticipated foreign sales
transactions expected to occur within the next three to six



                                       13
<PAGE>   14

months whose significant characteristics and terms are known will also be
deferred and recognized at the time of the closing of the anticipated
transactions.

    In all time periods, the Company had no foreign currency options. There were
no foreign currency gains or losses in either the three or six month periods
ended June 30, 1998. Foreign currency losses of $0.9 million were recognized in
the three months ended June 30, 1997. Foreign currency gains of $1.3 million
were recognized in the six months ended June 30, 1997.

Legal settlement

    The Company recognized other income of $17.0 million in the three months
ended June 30, 1997 relating to the settlement of a lawsuit.

Income tax expense

    Income taxes have been provided in the financial statements as if the
Company were a separate taxable entity. For periods prior to the three months
ended September 30, 1997, income tax expense reflected foreign taxes only due to
the expectation by the Company at that time of continuing losses in the U.S.
Deferred tax assets were established relating to differences between the
financial statements and tax basis of assets and liabilities based on enacted
tax laws and rates applicable to the period in which the differences are
expected to affect taxable income. These deferred tax assets were offset in
total by a valuation allowance due to the expectation of continued losses in the
U.S. During the three months ended September 30, 1997, the Company decreased the
tax valuation allowance based on management's expectations regarding future
taxable income for the Company. Management's expectations included the
consideration of the conversion of loans and advances from Spectra-Physics AB
and affiliates to equity in October 1997 which eliminated related interest
charges in the future.

    For income tax return purposes, the Company and affiliates of
Spectra-Physics AB have entered into a tax sharing arrangement that generally
requires the Company to determine its U.S. tax liability as a separate
consolidated group.

    Income tax expense was $1.2 million and $0.1 million in the three months
ended June 30, 1998 and 1997, and $2.5 million and $0.2 million in the six
months ended June 30, 1998 and 1997, respectively.


LIQUIDITY AND CAPITAL RESOURCES

    Through the third quarter of 1997, the Company had satisfied its liquidity
requirements through cash provided by Spectra-Physics AB and affiliates in the
form of loans and advances. As of October 1, 1997, all outstanding loans and
advances from Spectra-Physics AB and affiliates were converted to equity. At
June 30, 1998, the Company had working capital of $72.3 million, including cash
and cash equivalents of $29.9 million, compared to working capital at December
31, 1997 of $68.9 million, including cash and cash equivalents of $33.5 million.

    Cash used in operating activities was $0.3 million in the six months ended
June 30, 1998. Cash provided by operating activities was $21.1 million in the
six months ended June 30, 1997. Included in cash provided by operating
activities in the six months ended June 30, 1997 was the receipt of $17.0
million relating to the settlement of a lawsuit. Cash used in investing
activities, mostly purchases of property, plant and equipment, was $6.7 million
and $4.6 million in the six months ended June 30, 1998 and 1997, respectively.
Cash provided by financing activities was $3.5 million in the six months ended
June 30, 1998. Cash used in financing activities was $18.0 million in the six
months ended June 30, 1997. During the six months ended June 30, 1998, financing
activities included the sale of 360,000 shares of common stock in accordance
with an overallotment option granted to the underwriters of the Company's
initial public offering of $3.2 million and increases in net borrowings under
the Company's credit facilities in Japan of $0.2 million. All of the cash used
in financing activities in the six months ended June 30, 1997 represented
payments on loans and advances or transfers to Spectra-Physics AB and
affiliates.

    The above activities resulted in a decrease in cash and cash equivalents of
$3.6 million and $1.5 million in the six months ended June 30, 1998 and 1997,
respectively.



                                       14
<PAGE>   15

    As part of the Reorganization, the Company assumed two short-term credit
facilities in Japan. The credit facilities are with two different banks and are
unsecured. The two facilities allow aggregate borrowings of 1.2 billion Yen
($9.1 million) and bear interest at 1.625% per annum. At June 30, 1998 and
December 31, 1997 there were $7.5 million and $7.3 million, respectively, of
borrowings outstanding under these facilities. The Company also has available a
$10.0 million committed, unsecured credit facility and a $10.0 million
uncommitted, unsecured credit facility with a bank. The committed facility is
through June 2000. At June 30, 1998 and December 31, 1997, there were no
borrowings under either facility.

    The Company has reviewed its short- and long-term liquidity needs. The
Company has determined that funding from Spectra-Physics AB will not be
necessary in the future. The Company's liquidity needs for at least the next
eighteen months will be met by cash flows from operations, existing cash
balances and borrowings available under its credit facilities.

YEAR 2000 COMPLIANCE

    An issue exists for all companies that rely on computers as the year 2000
approaches. Known as the "Millennium Bug" or the "Year 2000 (Y2K) Problem" the
problem stems from the way that some computer systems and other chip containing
equipment were programmed to process date information. To conserve memory,
dates were stored as two digit, rather than as four digit, numbers with all the
dates assumed to be between 1900 and 1999. Thus the year 2000 would be stored
as "00" and be assumed to be 1900, and year 2001 as "01", and be assumed to be
1901, etc. This practice will result in incorrect results when computers so
programmed perform arithmetic operations, comparisons or data field sorting
with dates later than 1999.

    The Board of Directors of Spectra-Physics, and all levels of management,
are well aware of the Y2K problem, and plans have been made to address the
issue. Spectra-Physics' Y2K compliance plans are supervised by the Vice
President of Finance, and progress is under ongoing review by the Board. The
Company's Year 2000 Project Team has completed an initial review of
Spectra-Physics' (a) Information Technology (IT) and non IT systems, (b)
products, (c) vendors and (d) customers and is acting to correct identified
problems.

Information Technology (IT) and non-IT systems.

    Spectra-Physics has completed a review of its Information Technology (IT)
and non-IT systems at all of its sites. The Company has identified a few items
that are not Y2K compliant and has created a plan to bring them into compliance
by the end of the second quarter of 1999. The Company feels that it will be able
to accomplish this goal by (a) using its internal programming staff, (b) using
outside computer consultants in a few limited cases, and (c) buying replacements
for some specific systems. Costs in connection with these solutions are not
expected to be material. However, if such modifications or replacements are not
completed in a timely manner, the Y2K problem may have a material adverse effect
on the operations of the Company.

Products

    The Company has completed a thorough review of its products. This review has
uncovered no material Y2K issues with Spectra-Physics products. The cost of this
review was not material.

Vendors and Suppliers

    The Company has performed a careful review of its suppliers and vendors and
has identified a subset of them as being "critical" vendors. Spectra-Physics has
sent letters to each of these critical vendors asking them about their Y2K
readiness. The Company expects to get responses to such requests in the second
half of 1998. The Company will then assess their responses and, for those who
are not Y2K compliant, will either work with them to bring them into compliance
or identify alternative vendors. The cost of this process was not and is not
expected to be material. If a critical vendor is not Y2K compliant, and such
vendor cannot remedy its noncompliance and Spectra-Physics cannot identify an
alternative vendor, there may be a material adverse effect on the operations of
the Company.

Customers

    The Company is currently drafting a Y2K compliance letter to be sent to its
customers. Since no one customer of the Company makes up more than 5% of the
Company's total sales, the Company is not subject to as much risk as companies
with more concentrated sales. The Company expects to complete the survey of its
customers during the second half of 1998. The Company will assess their Y2K
readiness in the first half of 1999 and will work with those who are not
compliant to identify alternative methods for them to order from
Spectra-Physics. The cost of this process has not been, and is not expected to
be, material.

    The business communities' understanding of the Y2K Problem is continually
evolving, and all plans may need to be reviewed as the year 2000 approaches.
Further third party Y2K problems (suppliers to Spectra-Physics' vendors, for
example) which are outside the control of Spectra-Physics may have an effect on
Spectra-Physics' ability to serve its customers. This, in turn, may have a
material adverse effect on the Company's operations. The Company is working to
be ready for the year 2000 and will continue to modify plans and efforts as
necessary.


                                       15
<PAGE>   16

                          PART II -- OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

    The Company's facilities and operations are subject to a wide variety of
Environmental Laws and Employee Safety Laws. Further, compliance with
Environmental Laws also may require the acquisition of permits or other
authorizations for certain activities and compliance with various standards or
procedural requirements. Although the Company believes that its operations are
in compliance in all material respects with current requirements under
Environmental Laws and Employee Safety Laws, the nature of the Company's
operations exposes it to the risk of liabilities or claims with respect to such
matters.

     Certain of these Environmental Laws, including Superfund Laws, hold owners
or operators of land or businesses liable for their own and for previous owners'
or operators' releases of Hazardous Substances. Such Superfund Laws also provide
for responses to and liability for releases of certain Hazardous Substances into
the environment. The nature of the Company's operations and the long history of
industrial uses at some of its current or former facilities expose the Company
to risk of liabilities or claims under Superfund Laws. The Company has received
two notifications from state or federal environmental regulatory agencies
stating that the Company may be potentially responsible under Superfund Laws for
the release of Hazardous Substances generated by its former operations at these
two locations. The Company responded to the inquiries by asserting that it was
not responsible for response activities at these sites. Since the Company
provided its responses, the environmental regulatory agencies have not pursued
the Company as a potentially responsible party.

    Since 1984, the Company's facilities in Mountain View, California ("Mountain
View Site") have been undergoing investigation and remediation in response to
past releases of industrial solvents to the soil and groundwater. In addition,
the impacted groundwater has migrated to what is referred to as the North
Bayshore Area. As a result of these past releases, the Mountain View Site and
other neighboring sites are listed on the NPL or the Superfund List under
CERCLA. The Company is subject to Orders that require the Company to perform
remediation on- and off-site and investigate other potentially responsible
parties. Pursuant to the Orders and other orders issued to other responsible
parties, the Company and other responsible parties are jointly performing and
funding remediation which includes soil treatment and on-site and off-site
groundwater extraction, treatment and monitoring. All of the required soil and
groundwater remediation and monitoring systems currently required by the Order
are in place, and consequently the initial capital expenses for such systems
have been incurred. In October 1997, the Company was served with a complaint
that had been filed in the Superior Court of the State of California seeking an
unspecified amount of damages for personal injuries and property damage incurred
by residents of a single location alleged to have resulted from the Company's
and others' negligent and/or intentional handling of toxic chemicals (Rosario
Balcita et al. v. Teledyne Semiconductor, Spectra-Physics Lasers, et al.). While
the Company believes it has meritorious defenses to the claims asserted in this
lawsuit and intends to vigorously defend itself in this case, the amount of
loss, if any, that may result upon resolution of this complaint is not currently
estimable nor have any amounts been accrued in the financial statements.
Accordingly, there can be no assurance that the complaint will be resolved
without adverse impact to the Company's financial position or results of
operations. There can be no assurances that other parties will not come forward
and claim personal injury or property damage.

    Based on the Company's experience to date, the Company believes that the
future cost of compliance with existing Environmental Laws (or liability for
known environmental liabilities or claims) and Employee Safety Laws should not
have a material adverse effect on the Company's business, operating results and
financial condition. However, future events, such as changes in existing laws
and regulations or their interpretation, or the discovery of heretofore unknown
contamination, may give rise to additional compliance costs or liabilities that
could have a material adverse effect on the Company's business, operating
results and financial condition. Compliance with more stringent laws or
regulations, as well as more vigorous enforcement policies of regulatory
agencies or stricter or different interpretations of existing laws, may require
additional expenditures by the Company that may be material.

ITEM 2. CHANGES IN SECURITIES

    Not applicable.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

    Not applicable.



                                       16
<PAGE>   17

ITEM 4. SUBMISSION OF MATTERS TO A VOTE BY SECURITY HOLDERS

    At Spectra-Physics Lasers, Inc.'s Annual Meeting of Stockholders held on May
20, 1998, the following proposal was adopted by margins indicated:

    1.  To elect five directors to the board of directors to hold office until
        the next annual meeting of stockholders and until their successors have
        been elected and qualified.


<TABLE>
<CAPTION>
                                                    For               Withheld
                                                 -------------------------------
<S>                                              <C>                  <C>  
Patrick L. Edsell ....................           15,625,633            2,345
Lawrence C. Karlson ..................           15,626,278            1,700
Lennart F. Rappe .....................           15,625,778            2,200
Lars Spongberg .......................           15,626,178            1,800
Thomas T. van Overbeek ...............           15,624,678            3,300
</TABLE>


ITEM 5. OTHER INFORMATION

    None.

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

    (a) EXHIBITS:

<TABLE>
<CAPTION>
   EXHIBIT
    NUMBER                                                          DESCRIPTION
    ------                                                          -----------
<S>             <C>
     2.1        Plan of Reorganization of the Company (Incorporated by reference to exhibit 2.1 of the Company's Registration
                Statement on Form S-1 (No. 333-38329))

     3.1        Certificate of Incorporation of the Company, as amended (Incorporated by reference to exhibit 3.1 of the Company's
                Registration Statement on Form S-1 (No. 333-38329))

     3.2        Bylaws of the Company (Incorporated by reference to exhibit 3.2 of the Company's Registration Statement on Form S-1
                (No. 333-38329))

     4.1        Specimen of Common Stock Certificate (Incorporated by reference to exhibit 4.1 of Amendment No. 1 of the Company's
                Registration Statement on Form S-1 (No. 333-38329))

    10.1        Agreement by and between Spectra-Physics USA and the Company, dated as of August 29, 1997 (Incorporated by reference
                to exhibit 10.1 of the Company's Registration Statement on Form S-1 (No. 333-38329))

    10.2        Registration Rights Agreement between Spectra-Physics USA and the Company (Incorporated by reference to exhibit 10.2
                of Amendment No. 2 of the Company's Registration Statement on Form S-1 (No. 333-38329))

    10.3        Form of Executive Employment Agreement with certain officers of the Company (Incorporated by reference to exhibit
                10.3 of Amendment No. 2 of the Company's Registration Statement on Form S-1 (No. 333-38329))

    10.4        Employment Agreement dated May 19, 1995 between the Company and Mark S. Sobey (Incorporated by reference to exhibit
                10.4 of Amendment No. 1 of the Company's Registration Statement on Form S-1 (No. 333-38329))

    10.5        Form of Executive Incentive Plan (Incorporated by reference to exhibit 10.5 of Amendment No. 1 of the Company's
                Registration Statement on Form S-1 (No. 333-38329))

    10.6        1997 Spectra-Physics Lasers, Inc. Stock Option Plan (Incorporated by reference to exhibit 10.6 of Amendment No. 1 of
                the Company's Registration Statement on Form S-1 (No. 333-38329))

    10.7        Patent License Agreement dated as of October 4, 1997 by and between the Company, as licensor, and Spectra Precision,
                Inc., as licensee (Incorporated by reference to exhibit 10.7 of Amendment No. 1 of the Company's Registration
                Statement on Form S-1 (No. 333-38329))

    10.8        Patent License Agreement dated as of October 4, 1997 by and between Spectra Precision, Inc., as licensor, and the
</TABLE>



                                                                 17
<PAGE>   18

<TABLE>
<CAPTION>
   EXHIBIT
    NUMBER                                                          DESCRIPTION
    ------                                                          -----------
<S>             <C>
                Company, as licensee (Incorporated by reference to exhibit 10.8 of Amendment No. 1 of the Company's Registration
                Statement on Form S-1 (No. 333-38329))

    10.9        Tradename and Trademark License Agreement dated as of August 29, 1997 by and between the Company, Spectra-Physics AB
                and certain Spectra-Physics AB subsidiaries (Incorporated by reference to exhibit 10.9 of Amendment No. 1 of the
                Company's Registration Statement on Form S-1 (No. 333-38329))

    10.10       Form of Restricted Stock Plan Agreement among the Company, Opto Power and certain Opto Power employees (Incorporated
                by reference to exhibit 10.10 of Amendment No. 1 of the Company's Registration Statement on Form S-1 (No.
                333-38329))

    27          Financial Data Schedule
</TABLE>

    (b) REPORTS ON FORM 8-K:

        None



                                       18
<PAGE>   19

                                   SIGNATURES

    Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this Report to be signed on its behalf by the
undersigned thereunto duly authorized.

                                             Spectra-Physics Lasers, Inc.

Date: August 13, 1998                             /s/ PATRICK L. EDSELL
                                             -----------------------------------
                                                  Patrick L. Edsell
                                             Chairman, President and Chief 
                                                  Executive Officer

Date: August 13, 1998                             /s/ THOMAS J. SCANNELL
                                             -----------------------------------
                                                   Thomas J. Scannell
                                                 Vice President, Finance
                                               (Principal Financial Officer)



                                       19
<PAGE>   20
                               INDEX TO EXHIBITS
 
<TABLE>
<CAPTION>
   EXHIBIT
    NUMBER                                                          DESCRIPTION
    ------                                                          -----------
<S>             <C>
     2.1        Plan of Reorganization of the Company (Incorporated by reference to exhibit 2.1 of the Company's Registration
                Statement on Form S-1 (No. 333-38329))

     3.1        Certificate of Incorporation of the Company, as amended (Incorporated by reference to exhibit 3.1 of the Company's
                Registration Statement on Form S-1 (No. 333-38329))

     3.2        Bylaws of the Company (Incorporated by reference to exhibit 3.2 of the Company's Registration Statement on Form S-1
                (No. 333-38329))

     4.1        Specimen of Common Stock Certificate (Incorporated by reference to exhibit 4.1 of Amendment No. 1 of the Company's
                Registration Statement on Form S-1 (No. 333-38329))

    10.1        Agreement by and between Spectra-Physics USA and the Company, dated as of August 29, 1997 (Incorporated by reference
                to exhibit 10.1 of the Company's Registration Statement on Form S-1 (No. 333-38329))

    10.2        Registration Rights Agreement between Spectra-Physics USA and the Company (Incorporated by reference to exhibit 10.2
                of Amendment No. 2 of the Company's Registration Statement on Form S-1 (No. 333-38329))

    10.3        Form of Executive Employment Agreement with certain officers of the Company (Incorporated by reference to exhibit
                10.3 of Amendment No. 2 of the Company's Registration Statement on Form S-1 (No. 333-38329))

    10.4        Employment Agreement dated May 19, 1995 between the Company and Mark S. Sobey (Incorporated by reference to exhibit
                10.4 of Amendment No. 1 of the Company's Registration Statement on Form S-1 (No. 333-38329))

    10.5        Form of Executive Incentive Plan (Incorporated by reference to exhibit 10.5 of Amendment No. 1 of the Company's
                Registration Statement on Form S-1 (No. 333-38329))

    10.6        1997 Spectra-Physics Lasers, Inc. Stock Option Plan (Incorporated by reference to exhibit 10.6 of Amendment No. 1 of
                the Company's Registration Statement on Form S-1 (No. 333-38329))

    10.7        Patent License Agreement dated as of October 4, 1997 by and between the Company, as licensor, and Spectra Precision,
                Inc., as licensee (Incorporated by reference to exhibit 10.7 of Amendment No. 1 of the Company's Registration
                Statement on Form S-1 (No. 333-38329))

    10.8        Patent License Agreement dated as of October 4, 1997 by and between Spectra Precision, Inc., as licensor, and the
                Company, as licensee (Incorporated by reference to exhibit 10.8 of Amendment No. 1 of the Company's Registration
                Statement on Form S-1 (No. 333-38329))

    10.9        Tradename and Trademark License Agreement dated as of August 29, 1997 by and between the Company, Spectra-Physics AB
                and certain Spectra-Physics AB subsidiaries (Incorporated by reference to exhibit 10.9 of Amendment No. 1 of the
                Company's Registration Statement on Form S-1 (No. 333-38329))

    10.10       Form of Restricted Stock Plan Agreement among the Company, Opto Power and certain Opto Power employees (Incorporated
                by reference to exhibit 10.10 of Amendment No. 1 of the Company's Registration Statement on Form S-1 (No.
                333-38329))

    27          Financial Data Schedule
</TABLE>