<PAGE>   1

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


                                  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, 2001

                                       OR

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

                             COMMISSION FILE NUMBER:
                                    000-23461

                                ----------------

                              SPECTRA-PHYSICS, 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

                          SPECTRA-PHYSICS LASERS, INC.
                   (FORMER NAME, 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 June 30, 2001 was 16,711,241 shares.


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


<PAGE>   2

                              SPECTRA-PHYSICS, INC.

                  FORM 10-Q FOR THE QUARTER ENDED JUNE 30, 2001

                                      INDEX



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

Item 1.     Financial statements and supplementary data:

            (a)  Consolidated Balance Sheets at June 30, 2001 and December 31, 2000..................    3

            (b)  Consolidated Statements of Operations for the three and six months ended June 30,
                 2001 and 2000.......................................................................    4

            (c)  Consolidated Statements of Cash Flows for the six months  ended June 30, 2001 and
                 2000................................................................................    5

            (d)  Notes to Consolidated Financial Statements..........................................    6

Item 2.     Management's Discussion and Analysis of Financial Condition and Results of Operations....   10

Item 3.     Quantitative and Qualitative Disclosures About Market Risk...............................   17

Part II     Other Information........................................................................   18

            Signatures...............................................................................   20
</TABLE>





                                       2
<PAGE>   3

                         PART I -- FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA


                              SPECTRA-PHYSICS, INC.

                           CONSOLIDATED BALANCE SHEETS
                                 (IN THOUSANDS)


<TABLE>
<CAPTION>
                                                                  JUNE 30,      DECEMBER 31,
                                                                    2001            2000
                                                                 ---------      ------------
                                                                (UNAUDITED)      (SEE NOTE)
<S>                                                              <C>             <C>
                                     ASSETS

Current assets:
  Cash and cash equivalents ..................................   $   8,673       $  22,639
  Accounts receivable, less allowance for doubtful accounts
     of $1,241 and $842, respectively ........................      40,290          42,725
  Inventories ................................................      45,641          47,498
  Deferred tax assets ........................................       5,046           5,046
  Prepaid expenses and other current assets ..................       8,192           6,925
                                                                 ---------       ---------
          Total current assets ...............................     107,842         124,833
                                                                 ---------       ---------
Property, plant and equipment, net ...........................      66,881          57,746
Goodwill and other intangible assets, net of accumulated
 amortization of $3,423 and $2,989, respectively
                                                                     3,706           4,140
Other assets .................................................       5,221           4,112
                                                                 ---------       ---------
          Total assets .......................................   $ 183,650       $ 190,831
                                                                 =========       =========

                      LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:
  Accounts payable ...........................................   $  13,290       $  17,561
  Borrowings under credit facilities with banks ..............      24,549          22,311
  Borrowings under a credit facility with an affiliated
     company .................................................      12,000              --
  Accrued and other current liabilities, including $819 and
     $1,294, respectively due to affiliated companies ........      22,677          29,929
                                                                 ---------       ---------
          Total current liabilities ..........................      72,516          69,801
Long term debt ...............................................          --           7,500
Other long term liabilities ..................................         629             714
Commitments and contingencies
Stockholders' equity:
  Common stock ...............................................         167             167
  Additional paid-in capital .................................     104,156         102,976
  Retained earnings ..........................................       7,188          10,875
  Accumulated other comprehensive income (loss) ..............      (1,006)         (1,202)
                                                                 ---------       ---------
          Total stockholders' equity .........................     110,505         112,816
                                                                 ---------       ---------
          Total liabilities and stockholders' equity .........   $ 183,650       $ 190,831
                                                                 =========       =========
</TABLE>

   Note: The consolidated balance sheet at December 31, 2000 has been derived
from the Company's 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, INC.

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



<TABLE>
<CAPTION>
                                                                  THREE MONTHS ENDED           SIX MONTHS ENDED
                                                                       JUNE 30,                     JUNE 30,
                                                                ----------------------      -----------------------
                                                                  2001          2000          2001           2000
                                                                --------      --------      ---------      --------
<S>                                                             <C>           <C>           <C>            <C>
Net sales ....................................................  $ 54,514      $ 43,849      $ 109,068      $ 83,217
Cost of products sold ........................................    35,611        26,877         72,309        50,110
Cost of products sold--excess inventory charges ..............     5,400            --          5,400            --
                                                                --------      --------      ---------      --------
    Gross margin .............................................    13,503        16,972         31,359        33,107
                                                                --------      --------      ---------      --------
Operating expenses:
  Research and development ...................................     6,023         6,081         11,690        11,580
  Selling, general and administrative ........................    12,177         9,246         23,492        17,643
  Other ......................................................     1,075          (115)         1,662          (115)
                                                                --------      --------      ---------      --------
           Total operating expenses ..........................    19,275        15,212         36,844        29,108
                                                                --------      --------      ---------      --------
           Operating income (loss) ...........................    (5,772)        1,760         (5,485)        3,999
                                                                --------      --------      ---------      --------
Other income (expense):
  Interest income (expense) ..................................      (374)          244           (495)          482
  Foreign currency gain (loss) ...............................       (31)          189           (166)          344
                                                                --------      --------      ---------      --------
           Total other income (expense) ......................      (405)          433           (661)          826
                                                                --------      --------      ---------      --------
           Income (loss) before income taxes and cumulative
            effect of change in accounting method
                                                                  (6,177)        2,193         (6,146)        4,825
Provision for (benefit of) income taxes ......................    (2,471)          784         (2,459)        1,784
                                                                --------      --------      ---------      --------
           Income before cumulative effect of change in
            accounting method
                                                                  (3,706)        1,409         (3,687)        3,041
Cumulative  effect of change in accounting  method (net of
 income taxes of $1,778)
                                                                      --            --             --        (2,022)
                                                                --------      --------      ---------      --------
    Net income (loss) ........................................  $ (3,706)     $  1,409      $  (3,687)     $  1,019
                                                                ========      ========      =========      ========
Per share:
  Income before cumulative effect of change in accounting
     method:
     Basic ...................................................  $  (0.22)     $   0.08      $   (0.22)     $   0.18
     Diluted .................................................  $  (0.22)     $   0.08      $   (0.22)     $   0.18
  Cumulative effect of change in accounting method:
     Basic ...................................................  $    ---      $    ---      $     ---      $  (0.12)
     Diluted .................................................  $    ---      $    ---      $     ---      $  (0.12)
  Net Income (loss) per share:
     Basic ...................................................  $  (0.22)     $   0.08      $   (0.22)     $   0.06
     Diluted .................................................  $  (0.22)     $   0.08      $   (0.22)     $   0.06
Shares used in computing net income (loss) per share:
     Basic ...................................................    16,705        16,579         16,699        16,522
     Diluted .................................................    16,705        17,376         16,699        17,365
</TABLE>


                 See Notes to Consolidated Financial Statements.




                                       4
<PAGE>   5

                             SPECTRA-PHYSICS, INC.

                     CONSOLIDATED STATEMENTS OF CASH FLOWS
                                 (IN THOUSANDS)
                                  (UNAUDITED)



<TABLE>
<CAPTION>
                                                              SIX MONTHS ENDED
                                                                   JUNE 30,
                                                           -----------------------
                                                             2001           2000
                                                           --------       --------
<S>                                                        <C>            <C>
OPERATING ACTIVITIES
Net income (loss) ......................................   $ (3,687)      $  1,019
Adjustments  to reconcile  net income  (loss) to cash
  provided by (used in) operating activities:
  Depreciation and amortization ........................      5,563          3,644
  Excess inventory charges .............................      5,400             --
Changes in operating assets and liabilities:
     Accounts receivable ...............................      2,435          6,191
     Inventories .......................................     (3,543)       (11,415)
     Prepaid expenses and other current assets .........     (1,267)        (1,473)
     Accounts payable ..................................     (4,271)          (653)
     Accrued and other current liabilities .............     (6,051)        (1,164)
                                                           --------       --------
      Total cash used in operating activities ..........     (5,421)        (3,851)
                                                           --------       --------
INVESTING ACTIVITIES
Payments for intangible assets .........................         --           (600)
Purchases of property, plant and equipment .............    (15,510)        (7,122)
Investment .............................................       (935)            --
Other ..................................................        987            (17)
                                                           --------       --------
      Total cash used in investing activities ..........    (15,458)        (7,739)
                                                           --------       --------
FINANCING ACTIVITIES
Net borrowings under credit facilities .................      6,738            476
Net proceeds from issuance of common stock .............      1,183          4,183
                                                           --------       --------
      Total cash provided by financing activities ......      7,921          4,659
                                                           --------       --------
Effect of changes in foreign currency exchange rates ...     (1,008)          (555)
                                                           --------       --------
          Decrease in cash and cash equivalents ........    (13,966)        (7,486)
Cash and cash equivalents at beginning of year .........     22,639         23,278
                                                           --------       --------
Cash and cash equivalents at end of period .............   $  8,673       $ 15,792
                                                           ========       ========
</TABLE>


                 See Notes to Consolidated Financial Statements.




                                       5
<PAGE>   6

                              SPECTRA-PHYSICS, INC.

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (UNAUDITED)


1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

   Spectra-Physics, Inc. ("the Company", formerly Spectra-Physics Lasers, Inc.)
designs, develops, manufactures and distributes lasers, laser systems and optics
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, 2001 are
not necessarily indicative of the results that may be expected for the year
ended December 31, 2001. 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, 2000.

   The Company's fiscal year ends on December 31. The Company's fiscal quarters
end on the Friday of the thirteenth week of each 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,
                                                                 2001         2000
                                                               -------    ------------
          <S>                                                  <C>        <C>
          Raw material .....................................   $22,240      $19,519
          Work in process ..................................     7,269        9,533
          Finished goods (including  $4,000 and $5,600 at
            customer locations, respectively) ..............    16,132       18,446
                                                               -------      -------
                                                               $45,641      $47,498
                                                               =======      =======
</TABLE>

3. NET INCOME (LOSS) PER SHARE

   Basic net income (loss) per share is computed by dividing net income (loss)
by the weighted average number of common shares outstanding during the period.
Diluted net income (loss) 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.




                                       6
<PAGE>   7

   The following table presents the calculation of basic and diluted net income
(loss) per share as required under SFAS No. 128 (in thousands, except per share
data):


<TABLE>
<CAPTION>
                                                           THREE MONTHS ENDED          SIX MONTHS ENDED
                                                                 JUNE 30,                   JUNE 30,
                                                         ----------------------      ----------------------
                                                           2001          2000          2001          2000
                                                         --------      --------      --------      --------
<S>                                                      <C>           <C>           <C>           <C>
Numerator:
  Net income (loss) ...................................  $ (3,706)     $  1,409      $ (3,687)     $  1,019
                                                         ========      ========      ========      ========
Denominator:
  Denominator for basic net income (loss) per share:
     Weighted average shares ..........................    16,705        16,579        16,699        16,522
  Effect of dilutive securities:
     Employee stock options ...........................        --           797            --           843
                                                         --------      --------      --------      --------
  Denominator for diluted net
     income (loss) per share ..........................    16,705        17,376        16,699        17,365
                                                         ========      ========      ========      ========
Net income (loss) per share -- Basic ..................  $  (0.22)     $   0.08      $  (0.22)     $   0.06
Net income (loss) per share -- Diluted ................  $  (0.22)     $   0.08      $  (0.22)     $   0.06
</TABLE>

4. COMPREHENSIVE INCOME (LOSS)

        Comprehensive income (loss) was as follows (in thousands):

<TABLE>
<CAPTION>
                                                           THREE MONTHS ENDED          SIX MONTHS ENDED
                                                                 JUNE 30,                   JUNE 30,
                                                         ----------------------      ----------------------
                                                           2001          2000          2001          2000
                                                         --------      --------      --------      --------
<S>                                                      <C>           <C>           <C>           <C>
Net income (loss) .....................................  $ (3,706)     $  1,409      $ (3,687)     $  1,019
Foreign currency translation adjustments ..............      (263)         (125)       (1,006)         (555)
Unrealized gain on forward foreign currency
  contracts, net of income taxes ......................      (286)          647         1,202         1,504
          Total comprehensive income (loss) ...........  $ (4,255)     $  1,931      $ (3,491)     $  1,968
                                                         ========      ========      ========      ========
</TABLE>


   Accumulated other comprehensive income (loss) presented in the accompanying
consolidated balance sheets consist of the cumulative foreign currency
translation adjustments and net unrealized gains (losses) on certain forward
foreign currency contracts.

5. LEGAL AND ENVIRONMENTAL MATTERS

   See Part II., Item 1.

6. SEGMENT REPORTING

DESCRIPTION OF THE TYPES OF PRODUCTS AND SERVICES FROM WHICH EACH OF THE
REPORTABLE SEGMENT DERIVES ITS REVENUES

   In 2000, the Company realigned its business units to support growth in
telecommunications and other strategic markets. The Company's current structure
includes four operating groups, the Passive Telecommunications Group, the Active
Telecommunications Group, the Laser Group, and Spectra-Physics Distribution.

   The Passive Telecommunications Group (PTG) primarily produces passive
components for sale to telecommunication customers and for use by the Laser
Group in the Company's laser products. The Laser Group (LG) primarily produces
high power solid state and conventional lasers for sale in all of the Company's
principal markets. The Active Telecom Group (ATG) primarily produces
semiconductor lasers for sale to telecommunication, medical, industrial
manufacturing and image recording customers and for use by the Laser Group in
the Company's solid state laser products. The Spectra-Physics Distribution (SPD)
business unit is primarily responsible for selling and servicing products
directly in the United States, Japan, and Europe, and through approximately 30
independent distributors throughout the remainder of the world. Certain 2000
segment information has been reclassified to conform to the 2001 presentation.

MEASUREMENT OF SEGMENT PROFIT OR LOSS AND SEGMENT ASSETS




                                       7
<PAGE>   8

   The Company evaluates performance and allocates resources based on Earnings
Before Interest and Taxes (EBIT), before restructuring and other charges. The
accounting policies of the reportable segments are the same as those described
in the summary of significant accounting policies in the consolidated financial
statements included in the Company's Annual Report on Form 10-K for the year
ended December 31, 2000.

   Intersegment sales and transfers are recorded at intercompany transfer prices
which approximate sales as if conducted on an arm's length basis.

FACTORS MANAGEMENT USED TO IDENTIFY THE COMPANY'S REPORTABLE SEGMENTS

   The Company's reportable segments are identified by Group. The reportable
segments are each managed separately because they manufacture and distribute
distinct products with different production methods.

   Information about segments (in thousands):


<TABLE>
<CAPTION>
                                                                                                    ALL
                                               ATG           PTG           LG          SPD         OTHERS        TOTAL
                                            --------      --------      -------     ---------      -------      --------
      <S>                                    <C>           <C>           <C>         <C>            <C>          <C>
      Three months ended June 30, 2001
        Net sales to external customers ..  $  1,022      $     --      $   383     $  51,506      $ 1,603      $ 54,514
        Intersegment net sales ...........     8,555         4,813       40,190            --           --        53,558
        Segment EBIT .....................      (748)         (749)       6,648        (3,026)       1,603         3,728
        Segment assets ...................    45,992        29,763       62,317        83,769           --       221,841
</TABLE>

<TABLE>
<CAPTION>
                                                                                                    ALL
                                               ATG           PTG           LG          SPD         OTHERS        TOTAL
                                            --------      --------      -------     ---------      -------      --------
      <S>                                    <C>           <C>           <C>         <C>            <C>          <C>
      Three months ended June 30, 2000
        Net sales to external customers ..  $    732      $      2      $    93     $  43,363      $  (341)     $ 43,849
        Intersegment net sales ...........     7,243         3,780       32,208            --           --        43,231
        Segment EBIT .....................      (401)       (1,499)       7,111        (3,349)        (341)        1,521
        Segment assets ...................    35,847        14,055       47,296        68,811           --       166,009
</TABLE>

<TABLE>
<CAPTION>
                                                                                                    ALL
                                               ATG           PTG           LG          SPD         OTHERS        TOTAL
                                            --------      --------      -------     ---------      -------      --------
      <S>                                    <C>           <C>           <C>         <C>            <C>          <C>
      Six months ended June 30, 2001
        Net sales to external customers ..  $  1,704      $     13      $   670     $ 103,972      $ 2,709      $109,068
        Intersegment net sales ...........    18,504        12,004       78,648            --           --       109,156
        Segment EBIT .....................    (1,071)       (2,051)      13,843        (6,533)       2,709         6,897
</TABLE>

<TABLE>
<CAPTION>
                                                                                                    ALL
                                               ATG           PTG           LG          SPD         OTHERS        TOTAL
                                            --------      --------      -------     ---------      -------      --------
      <S>                                    <C>           <C>           <C>         <C>            <C>          <C>
      Six months ended June 30, 2000
        Net sales to external customers ..  $  1,847      $      8      $   181     $  81,496      $  (315)     $ 83,217
        Intersegment net sales ...........    13,123         7,028       62,527            --           --        82,678
        Segment EBIT .....................      (928)       (2,376)      14,404        (4,941)        (315)        5,844
</TABLE>




                                       8
<PAGE>   9

   Reconciliation of segment information to financial statements (in thousands):

<TABLE>
<CAPTION>
                                                              THREE MONTHS ENDED           SIX MONTHS ENDED
                                                                    JUNE 30,                    JUNE 30,
                                                            ----------------------      -----------------------
                                                              2001          2000          2001           2000
                                                            --------      --------      ---------      --------
<S>                                                         <C>           <C>           <C>            <C>
Net Sales:
Total external sales for reportable segments .............  $ 52,911      $ 44,190      $ 105,359      $ 83,532
Intersegment sales for reportable segments ...............    53,558        43,231        109,156        82,678
Other sales ..............................................     1,603          (341)         3,709          (315)
Elimination of intersegment sales ........................   (53,558)      (43,231)      (109,156)      (82,678)
                                                            --------      --------      ---------      --------
   Total consolidated net sales ..........................  $ 54,514      $ 43,849      $ 109,068      $ 83,217
                                                            ========      ========      =========      ========
Income (loss) before income taxes and cumulative
  effect of change in accounting method:
Total EBIT for reportable segments .......................  $  2,125      $  1,862      $   4,188      $  6,159
Other EBIT ...............................................     1,603          (341)         2,709          (315)
Corporate expenses .......................................    (1,989)       (1,362)        (3,859)       (2,379)
Other expenses not allocated to segments .................    (1,036)        1,486         (1,461)          419
Excess inventory charges .................................    (5,400)           --         (5,400)           --
Restructuring ............................................      (812)          115           (812)          115
Litigation expenses ......................................      (263)           --           (429)           --
Financing expenses .......................................        --            --           (421)           --
Interest income (expense) ................................      (374)          244           (495)          482
Foreign currency gain (loss) .............................       (31)          189           (166)          344
                                                            --------      --------      ---------      --------
         Total consolidated income (loss) before income
           taxes and cumulative effect of change in
           accounting method .............................  $ (6,177)     $  2,193      $  (6,146)     $  4,825
                                                            ========      ========      =========      ========
</TABLE>

7. RESTRUCTURING CHARGE

   In April 2001, the Company announced measures to reduce its workforce in the
Passive Telecommunications Group in Oroville, California and centralize all of
its European distribution operations in one location in Darmstadt, Germany, near
Frankfurt. As a result the Company recognized a one-time charge to earnings
principally for severance payments of approximately $0.8 million covering 145
employees, all of whom were terminated by June 30, 2001. At June 30, 2001, $0.5
million was paid and $0.3 million was expected to be paid through December 31,
2001. During the three and six months ended June 30, 2000, the Company reversed
$0.1 million of unused excess restructuring reserves from its 1999 restructuring
activities.

8. REVENUE RECOGNITION

   Effective January 1, 2000, the Company adopted Staff Accounting Bulletin No.
101, "Revenue Recognition in Financial Statements", as amended ("SAB 101"),
issued by the Securities and Exchange Commission in December 1999. The adoption
of SAB 101 resulted in a change in method of accounting for revenue related to
certain product shipments. The cumulative effect of this accounting change was
$2.0 million (net of taxes). The accounting change did not have a material
effect on revenue and quarterly earnings during 2000. The Company restated its
results for the first three quarters of the year ended December 31, 2000, as
reflected in footnote 10 of the Notes to the Company's Consolidated Financial
Statements included in the Annual Report on Form 10-K for the year ended
December 31, 2000

9. CREDIT FACILITIES

   At June 30, 2001, the Company had outstanding a $11.3 million term loan with
a bank which had an original balance of $15.0 million. The term loan is
repayable in eight equal quarterly installments through December 2002. The loan
bears interest at LIBOR (3.5% at June 30, 2001) plus 1.75%. At June 30, 2001 the
Company was not in compliance with certain financial covenants of this loan and
did not obtain a waiver of this non-compliance from the bank. Accordingly, the
balance of the loan at June 30, 2001 of $11.3 million is included in current
liabilities.




                                       9
<PAGE>   10

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 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," "anticipates," or "hopeful," 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, Inc's (the "Company's") Annual Report on Form 10-K for the year
ended December 31, 2000, 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

   We design, develop, manufacture and distribute semiconductor-based lasers and
laser optics for a variety of end-markets. Our forty years of laser and optic
experience has enabled us to offer passive and active optical component products
to the telecommunications industry. We began shipping optical components for the
telecommunications industry in 1999 and have been shipping lasers for commercial
applications since the early 1960s. Thermo Electron Corporation, a company whose
common stock is traded on the New York Stock Exchange, indirectly owns
approximately 79.8% of our outstanding common stock at June 30, 2001. Prior to
its acquisition by Thermo Electron Corporation in February 1999, Spectra-Physics
AB, a Swedish company, beneficially owned approximately 80% of our outstanding
common stock.

   We derive our revenue primarily from the sale of high power
semiconductor-based and conventional lasers. High power semiconductor-based
lasers are sold primarily into the telecommunications, computer and
microelectronics manufacturing, industrial manufacturing, medical, image
recording and research and development markets. Conventional lasers are
primarily sold into the medical and research and development markets.

   Over the last several years, a growing proportion of our total net sales and
most of our sales growth have been from high power semiconductor-based lasers
used primarily in commercial applications. We have also begun to sell passive
and active optical components to telecommunications customers. We have developed
our passive telecommunications products based on our experience and capabilities
in optical fabrication and thin film coating. Although these products currently
represent a small percentage of our total revenues, we are focusing significant
efforts on increasing revenues to telecommunications customers.

   We recognize revenue when persuasive evidence of an arrangement exists,
delivery has occurred, the sales price is fixed or determinable and
collectibility is probable. Generally, these criteria are met at the time
product is shipped. Provision is made at the time the related revenue is
recognized for estimated product returns. We provide for the estimated cost of
product warranties upon shipment. We warrant our products for 12 to 24 months
depending on the product line. When other significant obligations remain after
products are delivered, revenue is recognized only after such obligations are
fulfilled. Revenue earned from services is recognized ratably over the
contractual period or as the services are performed. Shipping and handling costs
are included in cost of goods sold.

   Effective January 1, 2000, we adopted Staff Accounting Bulletin No. 101,
"Revenue Recognition in Financial Statements", as amended ("SAB 101"), issued by
the Securities and Exchange Commission in December 1999. Our adoption of SAB 101
resulted in a change in method of accounting for revenue related to certain
product shipments. The cumulative effect of this accounting change was $2.0
million (net of taxes). The accounting change did not have a material effect on
revenue and quarterly earnings during 2000. We restated our results for the
first three quarters of the year ended December 31, 2000, as reflected in
footnote 10 of the Notes to our Consolidated Financial Statements included in
the Annual Report on Form 10-K for the year ended December 31, 2000.

   Our sales have shown a pattern in the last several years whereby the fiscal
fourth quarter net sales represent a large share of our annual net sales and
whereby our first quarter net sales decline significantly compared to the fourth
quarter of the prior fiscal year. We believe these sales patterns result in part
because of seasonal sales patterns related to customers' fiscal years and in
part from our incentive compensation plan, which compensates employees based on
annual results. We anticipate that this pattern is likely to continue.




                                       10
<PAGE>   11

   Our gross margin is affected by a number of factors, including product mix,
product pricing, cost of materials, the proportion of third party products
incorporated into our systems, foreign currency exchange rates and manufacturing
costs. For example, since high power semiconductor-based lasers generally have
higher gross margins than conventional lasers, absent other factors, a shift in
sales toward high power semiconductor-based lasers would lead to a gross margin
improvement for us. On the other hand, if market conditions in the highly
competitive conventional laser market forced us to lower unit prices, we would
suffer a decline in gross margin unless we 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 our
business, operating results and financial condition.

   We spend a significant amount of resources on research and development for
products for all six of our principal markets. For example, in 2001 and 2000, we
expended a significant amount of research and development effort on ultra-violet
semiconductor-based lasers and telecommunications products. We expect to
continue to spend substantial resources in developing high power
semiconductor-based lasers and optical components products for our six principal
markets.

   A significant proportion of our sales are to international customers and are
denominated in currencies other than the U.S. dollar. We also have sales and
support operations located in certain European countries and in Japan which
operate in local currencies. As a result, while we attempt to hedge our economic
risk of foreign currency fluctuations, we are exposed to fluctuations in foreign
currency exchange rates. These fluctuations have had in the past, and may have
in the future, a significant impact on our results of operations.

   In 2000, we realigned our business units to support growth in
telecommunications and other strategic markets. Our current structure includes
four operating groups, the Passive Telecommunications Group, the Active
Telecommunications Group, the Laser Group, and Spectra-Physics Distribution.
Reference is made to the footnotes of our consolidated financial statements
included in our annual report on Form 10-K for the year ended December 31, 2000,
incorporated by reference herein for disclosures of certain financial
information related to the reportable segments.

RESULTS OF OPERATIONS

   The following table sets forth, for the periods indicated, the Company's
results of operations as a percentage of net sales:


<TABLE>
<CAPTION>
                                                             THREE MONTHS ENDED        SIX MONTHS ENDED
                                                                   JUNE 30,                 JUNE 30,
                                                            -------------------       -------------------
                                                             2001         2000         2001         2000
                                                            ------       ------       ------       ------
<S>                                                         <C>          <C>          <C>          <C>
Net sales .............................................     100.0%       100.0%       100.0%       100.0%
                                                            -----        -----        -----        -----
Gross margin ..........................................      24.8         38.7         28.8         39.8
Operating expenses:
  Research and development ............................      11.0         13.9         10.7         13.9
  Selling, general and administrative .................      22.3         21.1         21.5         21.2
  Other ...............................................       2.0         (0.3)         1.5         (0.1)
                                                            -----        -----        -----        -----
          Total operating expenses ....................      35.3         34.7         33.7         35.0
                                                            -----        -----        -----        -----
    Operating income (loss) ...........................     (10.5)         4.0         (4.9)         4.8
                                                            -----        -----        -----        -----
Other income (expense):
  Interest income (expense) ...........................      (0.7)         0.6         (0.5)         0.6
  Foreign currency gain (loss) ........................      (0.1)         0.4         (0.1)         0.4
                                                            -----        -----        -----        -----
           Total other income (expense) ...............      (0.8)         1.0         (0.6)         1.0
                                                            -----        -----        -----        -----
    Income (loss) before income taxes and cumulative
     effect of change in accounting method
                                                            (11.3)         5.0         (5.5)         5.8
Provision for (benefit of) income taxes ...............      (4.5)         1.8         (2.2)         2.1
                                                            -----        -----        -----        -----
Income (loss) before cumulative effect of change
     in accounting method .............................      (6.8)%        3.2%        (3.4)%        3.7%
                                                            =====        =====        =====        =====
</TABLE>




                                       11
<PAGE>   12

THREE AND SIX MONTHS ENDED JUNE 30, 2001 AND 2000

Net sales

   Net sales were $54.5 million and $43.8 million in the three months ended June
30, 2001 and 2000, respectively, representing an increase of 24.3%. Net sales
for the three months ended June 30, 2001, calculated using foreign currency
exchange rates for the same period in 2000, increased 26.5%.

   Net sales in the following end user markets were:

<TABLE>
<CAPTION>
                                                          THREE MONTHS ENDED
                                                                JUNE 30,
                                                         --------------------
                                                           2001         2000
                                                         -------      -------
                                                            (IN THOUSANDS)
        <S>                                              <C>          <C>
        Telecommunications ...........................   $ 2,154      $   694
        Computer and microelectronics manufacturing ..     7,369        8,099
        Industrial manufacturing .....................     6,394        5,280
        Medical ......................................    10,799        7,171
        Image recording ..............................     3,503        3,190
        Research and development .....................    23,128       17,902
        Other ........................................     1,167        1,513
                                                         -------      -------
                                                         $54,514      $43,849
                                                         =======      =======
</TABLE>


   Sales of telecommunications, semiconductor-based lasers and conventional
products were 4.0%, 66.5% and 29.5% of total net sales in the three months ended
June 30, 2001, compared to 1.6%, 63.3% and 35.1% in the three months ended June
30, 2000.

   Net sales in the following geographic markets were:

<TABLE>
<CAPTION>
                                                          THREE MONTHS ENDED
                                                                JUNE 30,
                                                         --------------------
                                                           2001         2000
                                                         -------      -------
                                                            (IN THOUSANDS)
        <S>                                              <C>          <C>
        North America ................................   $25,840      $21,047
        Japan ........................................    11,933       10,552
        Europe .......................................    11,083        8,112
        Other Asia ...................................     2,699        2,258
        Rest of the World ............................     2,959        1,880
                                                         -------      -------
                                                         $54,514      $43,849
                                                         =======      =======
</TABLE>

   Net sales are attributed in the above table based on the location of our
customer. Substantially all sales in North America, Other Asia and Rest of the
World are denominated in U.S. dollars. Europe and Japan in the above table
include sales from Spectra-Physics' European and Japan sales subsidiaries,
respectively. Export sales to countries not located in Asia are included in Rest
of the World.

   Net sales at actual currency exchange rates percentage increase/(decrease)
were as follows:

<TABLE>
<CAPTION>
                                                               2000 TO
                                                                 2001
                                                               -------
        <S>                                                    <C>
        North America .....................................     22.8%
        Japan .............................................     13.1%
        Europe ............................................     36.6%
        Other Asia ........................................     19.5%
        Rest of World .....................................     57.4%
        Worldwide .........................................     24.3%
</TABLE>




                                       12
<PAGE>   13

   Net sales at constant currency exchange rates percentage increase/(decrease)
were as follows:

<TABLE>
<CAPTION>
                                                               2000 TO
                                                                 2001
                                                               -------
        <S>                                                    <C>
        North America .....................................     22.8%
        Japan .............................................     17.2%
        Europe ............................................     42.4%
        Other Asia ........................................     19.5%
        Rest of World .....................................     57.4%
        Worldwide .........................................     26.5%
</TABLE>


   Net sales were $109.1 million and $83.2 million in the six months ended June
30, 2001 and 2000, respectively, representing an increase of 31.1%. Net sales
for the six months ended June 30, 2001, calculated using foreign currency
exchange rates for the same period in 2000, increased 33.5%.

   Net sales in the following end user markets were:

<TABLE>
<CAPTION>
                                                           SIX MONTHS ENDED
                                                                JUNE 30,
                                                         ---------------------
                                                           2001          2000
                                                         --------      -------
                                                            (IN THOUSANDS)
        <S>                                              <C>           <C>
        Telecommunications ...........................   $  6,065      $ 1,073
        Computer and microelectronics manufacturing ..     15,146       16,536
        Industrial manufacturing .....................     14,553        9,675
        Medical ......................................     20,300       13,134
        Image recording ..............................      6,939        5,097
        Research and development .....................     43,797       35,078
        Other ........................................      2,268        2,624
                                                         --------      -------
                                                         $109,068      $83,217
                                                         ========      =======
</TABLE>

   Sales of telecommunications, semiconductor-based lasers and conventional
products were 5.6%, 64.0% and 30.4% of total net sales in the six months ended
June 30, 2001, compared to 1.3%, 59.9% and 38.8% in the six months ended June
30, 2000.

   Net sales in the following geographic markets were:

<TABLE>
<CAPTION>
                                                           SIX MONTHS ENDED
                                                                JUNE 30,
                                                         ---------------------
                                                           2001          2000
                                                         --------      -------
                                                            (IN THOUSANDS)
        <S>                                              <C>           <C>
        North America ................................   $ 51,551      $39,274
        Japan ........................................     28,261       22,640
        Europe .......................................     19,452       14,355
        Other Asia ...................................      4,723        3,833
        Rest of the World ............................      5,081        3,115
                                                         --------      -------
                                                         $109,068      $83,217
</TABLE>

   Net sales are attributed in the above tables based on the location of the
Company's customer. Substantially all sales in North America, Other Asia and
Rest of the World are denominated in U.S. dollars. Europe and Japan in the above
table include sales from the Company's European and Japanese sales subsidiaries,
respectively. Export sales to countries not located in Asia are included in Rest
of the World.




                                       13
<PAGE>   14

   Net sales at actual currency exchange rates percentage increase/(decrease)
were as follows:

<TABLE>
<CAPTION>
                                                              2000 TO
                                                                2001
                                                              -------
        <S>                                                   <C>
        North America ....................................     31.3%
        Japan ............................................     24.8%
        Europe ...........................................     35.5%
        Other Asia .......................................     23.2%
        Rest of World ....................................     63.1%
        Worldwide ........................................     31.1%
</TABLE>

   Net sales at constant currency exchange rates percentage increase/(decrease)
were as follows:

<TABLE>
<CAPTION>
                                                              2000 TO
                                                                2001
                                                              -------
        <S>                                                   <C>
        North America ....................................     31.3%
        Japan ............................................     29.9%
        Europe ...........................................     41.6%
        Other Asia .......................................     23.2%
        Rest of World ....................................     63.1%
        Worldwide ........................................     33.5%
</TABLE>

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 $13.5 million and $17.0 million for the three months ended
June 30, 2001 and 2000, respectively, representing a decrease of 20.4%. As a
percentage of net sales, gross margin was 24.8% and 38.7% in the three months
ended June 30, 2001 and 2000, respectively. Included in cost of sales for the
three months ended June 30, 2001 was $5.4 million of excess inventory charges.
This excess inventory charge related principally to inventories for optical
components and other inventories of telecommunications products and were
reflective of current telecommunications market conditions. The charge reduced
the carrying value of inventories to net realizable value following a decrease
in demand from telecommunication customers. Excluding the $5.4 million inventory
charge, gross margin for the three months ended June 30, 2001 was 34.7% of sales
and increased 11.4% over the three months ended June 30, 2000. Gross margin was
$31.4 million and $33.1 million for the six months ended June 30, 2001 and 2000,
respectively, representing a decrease of 5.3%. As a percentage of net sales,
gross margin was 28.8% and 39.8% in the six months ended June 30, 2001 and 2000,
respectively. Excluding the $5.4 million inventory charge discussed above, gross
margin for the six months ended June 30, 2001 was 33.7% of sales and increased
11.0% over the six months ended June 30, 2000.

   The principal reasons for the decrease in gross margin, excluding the
inventory charges, as a percentage of net sales in the three and six month
period ended June 30 2001 compared to June 30, 2000, was under absorption of
fixed costs and infrastructure investments for passive and active
telecommunication components and the effects of foreign currency exchange rates
and to a lesser extent, product mix.

Operating expenses

   Operating expenses totaled $19.3 million and $15.2 million in the three
months ended June 30, 2001 and 2000, respectively, representing an increase of
26.7%. As a percentage of net sales, operating expenses were 35.4% and 34.7% in
the three months ended June 30, 2001 and 2000, respectively. Included in
operating expenses for the three months ended June 30, 2001 were $0.8 million of
restructuring expenses and $0.3 million of certain legal expenses related to a
patent litigation described in Part II, Item 1. Included in operating expenses
for the three months ended June 30, 2000 was a reversal of excess restructuring
reserves of $0.1 million.




                                       14
<PAGE>   15

   Operating expenses totaled $36.8 million and $29.1 million in the six months
ended June 30, 2001 and 2000, respectively, representing an increase of 26.6%.
As a percentage of net sales, operating expenses were 33.8% and 35.0% in the six
months ended June 30, 2001 and 2000, respectively. Included in operating
expenses for the six months ended June 30, 2001 were $1.7 million of
restructuring expenses and certain legal and accounting expenses related to a
litigation described in Part II, Item 1 and to a potential financing. Included
in operating expenses for the six months ended June 30, 2000 was a reversal of
excess restructuring reserves of $0.1.

   Research and development expenses represent expenses associated with our
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 $6.0 million and $6.1 million for
the three months ended June 30, 2001 and 2000, respectively, representing a
decrease of 1.0%. As a percentage of net sales, research and development
expenses were 11.0% and 13.9% in the three months ended June 30, 2001 and 2000,
respectively. Research and development expenses totaled $11.7 million and $11.6
million for the six months ended June 30, 2001 and 2000, respectively,
representing an increase of 1.0%. As a percentage of net sales, research and
development expenses were 10.7% and 13.9% in the six months ended June 30, 2001
and 2000, respectively.

   Selling, general and administrative expenses include the expenses of our
sales and support subsidiaries in Europe, Japan and North America, and other
marketing and administrative expenses.

   Selling, general and administrative expenses totaled $12.2 million and $9.2
million for the three months ended June 30, 2001 and 2000, respectively,
representing an increase of 31.7%. As a percentage of net sales, selling,
general and administrative expenses were 22.3% and 21.1% in the three months
ended June 30, 2001 and 2000, respectively. Selling, general and administrative
expenses totaled $23.5 million and $17.6 million for the six months ended June
30, 2001 and 2000, respectively, representing an increase of 33.2%. As a
percentage of net sales, selling, general and administrative expenses were 21.5%
and 21.2% in the six months ended June 30, 2001 and 2000, respectively. The
principal reason for the increase in selling, general and administrative
expenses is the continued expansion of OEM/industrial sales efforts.

Interest income (expense)

   Net interest expense totaled $0.4 million in the three months ended June 30,
2001, and net interest income totaled $0.2 million in the three months ended
June 30, 2000. Net interest expense totaled $0.5 million in the six months ended
June 30, 2001, and net interest income totaled $0.5 million in the six months
ended June 30, 2000. We incurred interest expense under our credit facilities
and earned interest income on our invested cash and cash equivalents. Most of
the increases in net interest expense for the three and six month periods ended
June 30, 2001 compared to June 30, 2000 resulted from increased borrowings under
our credit facilities during the period.

Foreign currency gain (loss)

   At June 30, 2001, we had contracts for the sale of foreign currencies and the
purchase of U.S. dollars totaling $56.3 million. At June 30, 2001, we had
deferred gains relating to our foreign currency contracts of approximately $2.5
million (net of income taxes), substantially all of which is expected to be
recognized in income over the next twelve months.

   The following table provides information about our foreign currency
derivative financial instruments outstanding as of June 30, 2001. The
information is provided in U.S. dollar amounts, as presented in our consolidated
financial statements. The table presents the notional amount (at contract
exchange rates) and the weighted average contractual foreign currency exchange
rates. All contracts mature within twelve months.




                                       15
<PAGE>   16

   Foreign currency spot/forward contracts (in thousands, except average
contract rates):

<TABLE>
<CAPTION>
                                                                   AVERAGE
                                               NOTIONAL            CONTRACT
                                                AMOUNT               RATE
                                               --------            --------
        <S>                                    <C>                 <C>
        Japanese Yen ........................   $32,120            111.2004
        British Pound Sterling ..............     3,572              0.6950
        Australian Dollar ...................        64              1.8957
        Euro ................................    20,552              1.1209
                                                -------
                                                $56,308
                                                =======
        Estimated fair value ................   $ 2,523
                                                =======
</TABLE>

   The estimated fair value is based on the estimated amount at which the
contracts could be settled based on forward exchange rates.

   During the three months ended June 30, 2001 and 2000, we recorded a foreign
currency loss of $31,000 and a foreign currency gain of $0.2 million,
respectively. During the six months ended June 30, 2001 and 2000, we recorded a
foreign currency loss of $0.2 million and a foreign currency gain of $0.3
million, respectively. These losses and gains related principally to foreign
exchange rate movements on unhedged accounts receivable.

Income tax expense (benefit)

   Prior to February 2000, we filed consolidated tax returns with certain
members of Thermo Electron Corporation's (or predecessor company's) consolidated
tax group. Income tax expense was provided in the financial statements as if we
were a separate taxable entity. Effective February 2000, we are no longer a
member of such consolidated tax group for federal income tax purposes. As a
result of our no longer filing consolidated tax returns with the Thermo Electron
Corporation consolidated group, in the third quarter of 2000 we received
approximately $5.5 million from Thermo Electron Corporation in settlement of the
use by Thermo Electron Corporation in its consolidated tax return of certain of
our net operating loss carryforwards. These net operating loss carryforwards are
no longer available to us to reduce future taxable income.

   We recorded an income tax benefit of $2.5 million for the three months ended
June 30, 2001 and income tax expense of $0.8 million for the three months ended
June 30, 2000. We recorded an income tax benefit of $2.5 million for the six
months ended June 30, 2001 and income tax expense of $1.8 million for the six
months ended June 30, 2000. For the six months ended June 30, 2001, our
effective tax rate was 40.0%.

LIQUIDITY AND CAPITAL RESOURCES

   At June 30, 2001, we had working capital of $35.3 million, including cash and
cash equivalents of $8.7 million, compared to working capital at December 31,
2000 of $55.0 million, including cash and cash equivalents of $22.6 million.

   Cash used by operating activities was $5.4 million and $3.9 million in the
six months ended June 30, 2001 and 2000, respectively. Substantially all the net
cash used by operating activities in the six months ended June 30, 2001
represented the net loss for the period ($3.7 million) adjusted for the non-cash
impact of depreciation and amortization ($5.6 million) and excess inventory
charges ($5.4 million), offset by the use of cash for operating assets and
liabilities ($12.7 million). Substantially all the net cash used by operating
activities in the six months ended June 30, 2000 represented the net income for
the period ($1.0 million) adjusted for the non-cash impact of depreciation and
amortization ($3.6 million), offset by the use of cash for operating assets and
liabilities ($8.5 million).

   Cash used in investing activities, primarily purchases of property, plant and
equipment, was $15.5 million and $7.7 million in the six months ended June 30,
2001 and 2000, respectively.

   Cash provided by financing activities was $7.9 million and $4.7 million in
the six months ended June 30, 2001 and 2000, respectively. During the six months
ended June 30, 2001, financing activities were primarily net borrowings under
credit facilities of $6.7 million and exercises of employee stock options and
purchases of common stock under our Employee Stock Purchase Plan of $1.2
million. During the six months ended June 30, 2000, financing activities were
primarily net borrowings on credit facilities of $0.5 million and exercises of
employee stock options of $4.2 million.




                                       16
<PAGE>   17

   The effect of foreign currency exchange rate changes on cash were losses of
$1.0 million and $0.6 million in the six months ended June 30, 2001 and 2000,
respectively.

   These activities resulted in decreases in cash and cash equivalents of $14.0
million and $7.5 million in the six months ended June 30, 2001 and 2000,
respectively.

   We have a short-term credit facility in Japan. The credit facility is with
several banks, is unsecured, allows aggregate borrowings of 2.7 billion Yen
($21.3 million), bears interest at 1.75% per annum and expires at various times
through December 2001. At June 30, 2001, there were approximately $12.5 million
of borrowings outstanding under this facility. Our foreign subsidiaries in
Europe have credit facilities aggregating $3.5 million, of which $0.6 million
was outstanding as of June 30, 2001. From time to time, the amount available
under credit facilities will be reduced by the amount of performance bonds
outstanding guaranteed by the applicable bank to our customers, foreign currency
contracts outstanding with the applicable bank and similar arrangements.

   At June 30, 2001, we had outstanding a $11.3 million term loan with a bank
which had an original balance of $15.0 million. The term loan is repayable in
eight equal quarterly installments through December 2002. The loan bears
interest at LIBOR (3.5% at June 30, 2001) plus 1.75%. At June 30, 2001 we were
not in compliance with certain financial covenants of this loan and did not
obtain a waiver of this non-compliance from the bank. Accordingly, the balance
of the loan at June 30, 2001 of $11.3 million is included in current
liabilities.

   We have a short-term credit facility with Thermo Electron Corporation. The
agreement provides for a one year, $20.0 million revolving credit facility
through March 2002. At June 30, 2001, there were approximately $12.0 million of
borrowings outstanding under this facility. The facility bears interest at 2.75%
above the prevailing LIBOR rate.

   We have reviewed our short and long term liquidity needs including the
previously mentioned $11.3 million bank loan. We expect our liquidity needs for
at least the next 12 months will be satisfied by existing cash balances, cash
available from operations, and borrowings currently available under our credit
facilities. We are currently evaluating alternatives with respect to our $11.3
million bank loan and expect to restructure this loan or to refinance it from
existing or other resources. However, there can be no assurance that we will not
require additional financing within this time frame or that such additional
funding if needed will be available at terms acceptable to us.

IMPACT OF RECENTLY ADOPTED ACCOUNTING PRONOUNCEMENTS

   On June 29, 2001, the Financial Accounting Standards Board (FASB) approved
for issuance Statement of Financial Accounting Standards (SFAS) No. 141,
Business Combinations, and SFAS No. 142, Goodwill and Intangible Assets. The
adoption of these statements in January 2002 will not have a material impact on
the Company's financial statements.

EUROPEAN MONETARY UNION (EMU)

   The euro is the new currency introduced by certain European countries
collectively known as the European Monetary Union, or EMU. The euro was
introduced on January 1, 1999 and the eleven participating EMU members
established fixed conversion rates between their existing currencies, or legacy
currencies, and the euro. The legacy currencies have no value of their own but
are subsets of the euro. The legacy currencies and the euro will both be used
through June 30, 2002 when the legacy currencies will be withdrawn.

   The introduction of the euro could have an adverse impact on our information
systems, our markets and the economies in which we operate.

   With regard to information systems, the euro had no material impact on our
information systems through June 30, 2001. We believe the euro will have no
material impact on our systems in 2001. Furthermore, our review indicates that
our information systems can operate when the legacy currencies are withdrawn in
2002. As that date gets closer, we expect to conduct another survey concerning
the euro's impact on our information systems.

   With regard to our markets, we have reviewed our customer list and current
selling practices and expect no material adverse impact from the introduction of
the euro.

   We are currently unable to determine the ultimate long term financial impact
of the exclusive use of the euro on our markets and on the economies of the
countries in which we operate. This impact will be dependent upon the evolving
competitive situations and macro-economic impact of the introduction of the
euro.




                                       17
<PAGE>   18

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

   There has been no material change in our exposure to market risk since
December 31, 2000. See Spectra-Physics, Inc.'s Annual Report on Form 10-K dated
December 31, 2000.






                                       18
<PAGE>   19

                          PART II -- OTHER INFORMATION


ITEM 1. LEGAL PROCEEDINGS

   Our facilities and operations are subject to various 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 we believe that our operations are in compliance in all material
respects with current requirements under environmental laws and employee safety
laws, the nature of our operations exposes us to the risk of liabilities or
claims with respect to such matters.

   Some environmental laws hold owners or operators of land or businesses liable
for their own and for previous owners' or operators' releases of certain
hazardous substances. These laws also provide for responses to and liability for
releases of certain hazardous substances into the environment. The nature of our
operations and the long history of industrial uses at some of our current or
former facilities expose us to risk of liabilities or claims under these laws.
In 1988, we were named on the General Notification List of the Environmental
Protection Agency stating that we may be a potentially responsible party under
the laws for hazardous substances which may have been generated by our former
operations at a former site. Since that time, we have not been named in the
Environmental Protection Agency's first or second tier lists, and have not been
pursued as a potentially responsible party by the Environmental Protection
Agency or any of the other potentially responsible parties. In 1991, we were
named by the California Regional Water Quality Control Board as a discharger of
solvents to soil and groundwater from our Mountain View facility.

   Since 1984, our facilities in Mountain View 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 Superfund List under federal environmental laws. We are subject to orders
that require us to perform remediation on-site and off-site and investigate
other potentially responsible parties. Pursuant to these orders and other orders
issued to other responsible parties, we and other responsible parties are
jointly performing and funding 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 these systems have been incurred.

   Based on our experience to date, we believe 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 our 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 our 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 us that may be material.

   On June 19, 2000, Rockwell Technologies LLC filed a complaint against both
Spectra Physics and our Opto Power subsidiary in the United States District
Court for the District of Delaware. The complaint alleges that both we and Opto
Power have infringed U.S. Patent No. 4,368,098 entitled "Epitaxial Composite and
Method of Making." Rockwell avers that Opto Power has infringed the patent by
performing the patented process and by using wafers manufactured by the patented
process and that we have infringed the patent by using and/or selling products
made by the patented process. Rockwell seeks damages, including increased
damages due to defendants' alleged willful infringement, plus costs and attorney
fees. Rockwell has not sought injunctive relief as the patent has already
expired. On January 9, 2001, the Court entered a Scheduling Order setting the
trial date for February 5, 2002. We believe that Rockwell's allegations are
without merit and we intend to vigorously defend this action.

   The resolution of this dispute is uncertain, in part because the issues
underlying the case depend upon discovery of many facts, some of which concern
inventions and related circumstances dating back many years, and in part because
the action has been recently filed and our analysis of the case is ongoing. We
cannot assure that Rockwell will not ultimately prevail in this dispute. If
Rockwell were to prevail, it is possible that Rockwell could recover substantial
monetary damages, based on past sales of our products for a number of years. Our
efforts to defend Rockwell's claim against us may involve significant expense to
us and could divert the attention of our technical and management personnel. An
adverse outcome in this case could materially harm our business or results of
operations.




                                       19
<PAGE>   20

   We are subject to various claims which arise in the normal course of
business. We believe the ultimate resolution of these claims will not have a
material adverse effect on our financial position or results of operations.

ITEM 2. CHANGES IN SECURITIES

   Not applicable.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

   At June 30, 2001, the Company had outstanding a $11.3 million term loan with
a bank which had an original balance of $15.0 million. The term loan is
repayable in eight equal quarterly installments through December 2002. The loan
bears interest at LIBOR (3.5% at June 30, 2001) plus 1.75%. At June 30, 2001 the
Company was not in compliance with certain financial covenants of this loan and
did not obtain a waiver of this non-compliance from the bank. Accordingly, the
balance of the loan at June 30, 2001 of $11.3 million is included in current
liabilities.

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

        At Spectra-Physics, Inc.'s Annual Meeting of Stockholders held on May
16, 2001, the following proposals were adopted by margins indicated:

        1.  To elect six 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       ABSTAIN
                                                       ----------    -------
                 <S>                                   <C>           <C>
                 Patrick L. Edsell                     15,627,128    723,529
                 Marijn E. Dekkers                     15,554,960    795,697
                 Denis A. Helm                         15,564,900    785,757
                 Lawrence C. Karlson                   16,340,973      9,684
                 Earl R. Lewis                         16,341,033      9,624
                 Polyvios C. Vintiadis                 16,340,773      9,884
</TABLE>

        2.  To amend the Certificate of Incorporation to change the name of the
            company from Spectra-Physics Lasers, Inc. to Spectra-Physics, Inc.:

<TABLE>
<CAPTION>
               FOR             AGAINST    ABSTAIN
               ---             -------    -------
               <S>            <C>         <C>
               16,344,474       1,479      4,704
</TABLE>

   No abstentions or broker nonvotes were recorded.

ITEM 5. OTHER INFORMATION

   None.

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

   (a)EXHIBITS:

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

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

     3.2          Bylaws of Spectra-Physics (Incorporated by reference to
                  exhibit 3.2 of Spectra-Physics' 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
                  Spectra-Physics' Registration Statement on Form S-1 (No.
                  333-38329))
</TABLE>

   (b) REPORTS ON FORM 8-K:

   None.




                                       20
<PAGE>   21

                                   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, Inc.



Date: August 10, 2001                         /s/ PATRICK L. EDSELL
                                 -----------------------------------------------
                                                Patrick L. Edsell
                                 Chairman, President and Chief Executive Officer



Date: August 10, 2001                           /s/ SETH S. HALIO
                                 -----------------------------------------------
                                                  Seth S. Halio
                                     Vice President, Finance, and Treasurer
                                          (Principal Financial Officer)




                                       21
<PAGE>   22

                                  EXHIBIT INDEX



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

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

     3.2          Bylaws of Spectra-Physics (Incorporated by reference to
                  exhibit 3.2 of Spectra-Physics' 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
                  Spectra-Physics' Registration Statement on Form S-1 (No.
                  333-38329))
</TABLE>




                                       22