Cautionary Note Regarding Forward-Looking Statements

Certain statements in this Quarterly Report on Form 10-Q constitute forward- looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 (the "Reform Act"). Forward-looking statements include all statements that do not relate solely to historical or current facts, and can be identified by the use of words such as "may", "believe", "will", "expect", "project", "anticipate", "estimate", "plan" or "continue" or other words or terms of similar meaning. These forward-looking statements are based on the current plans and expectations of our management and are subject to a number of uncertainties and risks that could significantly affect our current plans and expectations, as well as future results of operations and financial condition. In making these forward-looking statements, we claim the protection of the safe-harbor for forward-looking statements contained in the Reform Act. We do not assume any obligation to update these forward-looking statements to reflect actual results, changes in assumptions, or changes in other factors affecting such forward-looking statements.

Overview

Rofin-Sinar Technologies Inc. (herein also referred to as "Rofin-Sinar", or the "Company" or "we", "us" or "our") is a leader in the design, development, engineering, manufacture and marketing of laser-based products used for cutting, welding and marking a wide range of materials.

Through our global manufacturing, distribution and service network, we provide a comprehensive range of laser sources and laser-based system solutions to three principal target markets: the machine tool, automotive, and semiconductor/electronics industries. We sell principally to end-users and original equipment manufacturers ("OEMs") (principally in the machine tool industry) that integrate our laser sources with other system components. Many of our customers are among the largest global participants in their respective industries.

During the first quarter of fiscal years 2009, and 2008 respectively, we realized approximately 39% and 45% of revenues from the sale and servicing of laser products used for macro applications, approximately 51% and 47% from the sale and servicing of laser products for marking and micro applications, and approximately 10% and 8% from the sale of components.

Global economic conditions have adversely affected demand for laser sources and laser-based system solutions, and accordingly, our business and financial performance. First quarter sales were heavily impacted by postponed shipments in various industries. The North American and Asian markets experienced a significant slowdown in sales, while sales in the European markets remained relatively stable. However, order entry in all regions was slow. With very few exceptions, we experienced diminished demand across all industries, even in the photovoltaic industry, which is something we have never seen before. During the three months ended December 31, 2008, the Company has taken action to reduce its worldwide cost

At December 31, 2008, Rofin-Sinar had 1,773 employees compared to 1,641 employees at December 31, 2007.

Results of Operations

For the periods indicated, the following table sets forth the percentage of
net sales represented by the respective line items in the Company's
consolidated statements of operations.

                                       Three Months
                                     Ended December 31,
                                  ----------------------
                                     2008        2007
                                  ----------  ----------
Net sales                           100.0%        100.0%
Cost of goods sold                   60.8%         56.5%
Gross profit                         39.2%         43.5%
Selling, general and
  administrative expenses            21.5%         17.8%
Research and development expenses     7.9%          6.5%
Intangibles amortization              0.8%          0.7%
Income from operations                9.0%         18.5%
Income before income taxes
  and minority interest              10.4%         18.7%
Net income                            7.1%         12.5%

Net Sales - Net sales of $107.0 million represent a decrease of $27.7 million, or 21%, for the three months ended December 31, 2008, as compared to the corresponding period in fiscal 2008. The decrease resulted from a net sales decrease of $18.9 million, or 18%, in Europe/Asia and a decrease of $8.8 million, or 32%, in the United States, compared to the corresponding period in fiscal 2008. The U.S. dollar strengthened against foreign currencies, primarily against the Euro, which had an unfavorable effect on net sales of $7.8 million for the three-month period ended December 31, 2008.

Net sales of laser products for macro applications for the three-month period decreased by 32%, to $41.4 million, as compared to the corresponding period of fiscal 2008. The decrease can be mainly attributed to the lower demand for our lasers for macro applications in the machine tool industry.

Net sales of lasers for marking and micro applications decreased by 14% to $54.6 million for the three months ended December 31, 2008 as compared to the corresponding period in fiscal 2008. The decrease can be mainly attributed to the lower demand for our lasers for micro and marking applications principally in the semiconductor, consumer electronics, and jewelry industries. Revenues for the components business increased by $0.9 million, or 9%, to $11.0 million for the three months ended December 31, 2008, mainly due to the recent acquisition of Nufern.

Gross Profit - Our gross profit of $42.0 million for the three months ended December 31, 2008, represents a decrease of $16.7 million (29%) from the corresponding period of fiscal year 2008. As a percentage of sales, compared to the corresponding three-month period of fiscal year 2008, gross profit decreased from 44% to 39%. The decrease in our gross margins was a result of the low level of business with the corresponding lower absorption of fixed costs, high volume orders with corresponding lower average prices in the micro business, a decrease of 26% in our service and spare part revenue, and a portion of one time costs related to employee benefits amounting to $0.6 million. Gross profit was unfavorably affected by $2.7 million for the three- month period ended December 31, 2008 due to the strengthening of the U.S. dollar against foreign currencies, primarily against the Euro.

Selling, General and Administrative Expenses - Selling, general and administrative ("SG&A") expenses of $23.0 million decreased by $1.0 million (4%) for the three-month period ended December 31, 2008, compared to the corresponding period of fiscal 2008. The decrease in SG&A expenses is mainly a result of lower commissions related to the lower level of revenues, lower advertisement expenses, partially offset by additional SG&A expenses from our acquired subsidiary Nufern, and a portion of the one time costs related to employee benefits of $1.0 million. Additionally, SG&A, a significant portion of which is incurred in foreign currencies, was favorably affected by $1.1 million for the three-month period ended December 31, 2008, due to the strengthening of the U.S. dollar against foreign currencies, primarily the Euro. As a percentage of net sales, SG&A expenses increased from 18% to 22% during the respective periods.

Research and Development - The Company's net expenses for research and development amounted to $8.5 million which represent a decrease of $0.3 million, or 4% for the three-month period ended December 31, 2008, compared to the corresponding period of fiscal 2008. Gross research and development expenses for the three-month periods ended December 31, 2008, and 2007, were $8.9 million and $9.3 million, respectively, and were reduced by $0.4 million and $0.5 million of government grants during each respective period. The decrease in R&D expenses is mainly a result of foreign currency translation which affected R&D expenses favorably by $0.7 million due to the strengthening of the U.S. dollar against foreign currencies, primarily the Euro. This was partially offset by a portion of one time costs related to employee benefits of $0.4 million.

Amortization Expense - Amortization expense for the three-month period ended December 31, 2008 and 2007 amounted to $0.8 million and $1.0 million, respectively.

Other Income/Expenses - Net other income of $1.5 million for the three-month period ended December 31, 2008, represents an increase of $1.2 million compared to net other income of $0.3 million in the corresponding period of the prior year. The increase in net other income is primarily attributable to net exchange gains of $1.3 million for the three-month period ended December 31, 2008, as compared to net exchange losses of $1.6 million for the three-month period ended December 31, 2007, which was partially offset by a decrease in interest income of $1.6 million.

Income Tax Expense - Income tax expense of $3.4 million for the three-month period ended December 31, 2008, represents an effective tax rate of 30% compared to 32% for the corresponding period of the prior year. The lower overall effective income tax rate is primarily the result of a refund of withholding taxes in Europe. Income tax expense, a significant portion of which is incurred in foreign currencies, was favorably affected by $0.5 million for the three-month period ended December 31, 2008, due to the strengthening of the U.S. dollar against foreign currencies, primarily the Euro.

Net Income - As a result of the foregoing factors, the Company realized consolidated net income of $7.6 million for the three-month period ended December 31, 2008, which represents a decrease of $9.3 million from the corresponding period in fiscal 2008. For the three-month period ended December 31, 2008, basic and diluted net income per common share equaled $0.26, respectively, based upon a weighted average of 28.9 million common shares outstanding, as compared to basic and diluted net income per common share of $0.55 and $0.53, respectively, for the three-month period ended December 31, 2007, based upon a weighted average of 30.7 million and 31.6 million common shares outstanding.

Liquidity and Capital Resources

The Company's primary sources of liquidity at December 31, 2008, were cash and cash equivalents of $86.8 million, short-term investments of $3.7 million, an annually renewable $25.0 million line of credit with Deutsche Bank AG, a long-term loan with Deutsche-Bank AG of $7.0 million and several other lines of credit to support foreign subsidiaries in their local currencies in an aggregate amount of $112.9 million (translated at the applicable exchange rate at December 31, 2008). As of December 31, 2008, $1.7 million, which is due in the short term, was outstanding under the $25.0 million Deutsche Bank line of credit, $7.0 million was outstanding under the long-term loan with Deutsche-Bank and $36.3 million (of which $31.6 million is due in the short term) under other lines of credit. Approximately $99.9 million was unused and available under the Company's bank facility and lines of credit at December 31, 2008. The Company is subject to financial covenants, which could restrict the Company from drawing money under these lines of credit. At December 31, 2008, the Company was in compliance with these covenants.

Cash and cash equivalents decreased by $27.7 million during the three months ended December 31, 2008. Approximately $9.9 million in cash and cash equivalents were provided by operating activities, primarily as the result of a decrease in accounts receivables partially offset by a decrease in accounts payable and accrued liabilities. Operating cash flow was negatively affected mainly by a decrease in accounts payable and accrued liabilities.

Net cash used in investing activities totaled $12.6 million for the three- month period ended December 31, 2008, and primarily related to the acquisition of businesses ($5.2 million), prepayments on future acquisitions ($4.2 million), various additions to property and equipment (2.9 million), purchases of short-term investments ($1.7 million), offset by the sale of long-term investments ($1.3 million).

Net cash used in financing activities totaled $21.3 million and was primarily related to current period net repayments on short term loans with banks.

Management believes that the Company's cash flow from operations, along with existing cash and cash equivalents and availability under the credit facilities and lines of credit, will provide adequate resources to meet both our capital requirements and operational needs on both a short-term and long- term basis.

The Company has listed all its material contractual obligations in the Annual Report on Form 10-K, for the fiscal year ended September 30, 2008, and has not entered into any further material contractual obligations since that date.

Off-Balance Sheet Arrangements

The Company has no off-balance sheet arrangements or financing arrangements involving variable interest entities.

Currency Exchange Rate Fluctuations

Although we report our Consolidated Financial Statements in U.S. dollars, approximately 71% of our sales have been denominated in other currencies, primarily the Euro, British pound, Swiss Francs, Swedish krona, Singapore dollar, Taiwanese dollar, Korean won, Canadian dollar, Chinese RMB, and Japanese yen. Net sales, costs and related assets and liabilities of our operations are generally denominated in the functional currencies of the relevant operating units, thereby serving to reduce the Company's exposure to exchange gains and losses.

Exchange differences upon translation from each operating unit's functional currency to U.S. dollars are accumulated as a separate component of equity. The currency translation adjustment component of stockholders' equity had the effect of increasing total equity by $26.3 million at December 31, 2008, as compared to $50.9 million at December 31, 2007.

The fluctuation of the Euro and the other relevant functional currencies against the U.S. dollar has had the effect of increasing or decreasing (as applicable) reported net sales, cost of goods sold, gross margin and selling, general and administrative expenses, denominated in such foreign currencies when translated into U.S. dollars as compared to prior periods.

Critical Accounting Policies

Our significant accounting policies are more fully described in Note 1 of our consolidated financial statements in our Annual Report on 10-K for the fiscal year ended September 30, 2008. Certain of the accounting policies require the application of significant judgment by management in selecting appropriate assumptions for calculating financial estimates. By their nature, these judgments are subject to an inherent degree of uncertainty.

The Company records allowances for uncollectible customer accounts receivable based on historical experience. Additionally, an allowance is made based on an assessment of specific customers' financial condition and liquidity. If the financial condition of the Company's customers were to deteriorate, additional allowances may be required. No individual customer represents more than 10% of total accounts receivable. Any increase in allowance will impact operating income during a given period.

Inventories are stated at the lower of cost or market, after provisions for excess and obsolete inventory salable at prices below cost. Provisions for slow moving and obsolete inventories are provided based on current assessments about historical experience and future product demand and production requirements for the next twelve months. These factors are impacted by market conditions, technology changes, and changes in strategic direction, and require estimates and management judgment that may include elements that are uncertain. The Company evaluates the adequacy of these provisions quarterly. Although the Company strives to achieve a balance between market demands and risk of inventory excess or obsolescence, it is possible that, should conditions change, additional provisions may be needed. Any changes in the provisions will impact operating income during a given period.

The Company provides reserves for the estimated costs of product warranties when revenue is recognized. The Company relies upon historical experience, expectation of future conditions, and its service data to estimate its warranty reserve. The Company continuously monitors this data to ensure that the reserve is sufficient. Warranty expense has historically been within our expectations. To the extent we experience increased warranty claim activity or increased costs associated with servicing those claims (such costs may include material, labor and travel costs), revisions to the estimated warranty liability would be required. Increases in reserves will impact operating income during the period.

The determination of the Company's obligation and expense for pension is dependent on the selection of certain assumptions used by actuaries in calculating those amounts. Assumptions are made about interest rates, expected investment return on plan assets, total turnover rates, and rates of future compensation increases. In addition, the Company's actuarial consultants use subjective factors such as withdrawal rates and mortality rates to develop their calculations of these amounts. The Company generally reviews these assumptions at the beginning of each fiscal year. The Company is required to consider current market conditions, including changes in interest rates, in making these assumptions. The actuarial assumptions that the Company may use may differ materially from actual results due to changing market and economic conditions, higher or lower withdrawal rates or longer or shorter life spans of participants. These differences may result in a significant impact on the amount of pension benefits expense the Company has recorded or may record.

The discount rate enables the Company to state expected future cash flows at a present value on the measurement date. The Company has little latitude in selecting this rate, and it must represent the market rate of high-quality fixed income investments. A lower discount rate increases the present value of benefit obligations and increases pension expense.

To determine the expected long-term rate of return on plan assets, the Company considers the current and expected assets allocations, as well as historical and expected returns on various categories of plan assets.

Stock-based compensation cost is measured at grant date, based on the fair value of the award, and is recognized as expense over the employee requisite vesting period. We make judgments about the fair value of the awards, including the expected term of the award, volatility of the underlying stock and estimated forfeitures, which impact the amount of compensation expense recognized in the financial statements. Such amounts may change as a result of additional grants, forfeitures, modifications in assumptions and other factors. SFAS No. 123R provides that income tax effects of share-based payments are recognized in the financial statements for those awards which will normally result in tax deductions under existing tax law. Under current U.S. federal tax laws, we receive a compensation expense deduction related to stock options only when those options are exercised and vested shares are received. Accordingly, the financial statement recognition of compensation cost for stock options creates a deductible temporary difference which results in a deferred tax asset and a corresponding deferred tax benefit in the income statement for all U.S.-based employees. Compensation expense related to all other employees is treated as a permanent difference for income tax purposes.

Ownership of Common Stock By Directors

The following table sets forth information as of December 31, 2008, with
respect to beneficial ownership of the Company's common stock and exercisable
options by each director.

                       Number of             Total            Number of
                       Shares of          Number of          Exercisable
                      Common Stock       Stock Options      Stock Options
                      Beneficially         Owned at           Owned at
Name                    Owned          December 31, 2008  December 31, 2008
----------------     --------------    -----------------   -----------------
Peter Wirth             12,600             302,000             173,000
Gunther Braun            6,000             570,000             310,000
Carl F. Baasel         128,000              24,000                  --
Ralph E. Reins (1)      18,000                  --                  --
Gary K. Willis (1)      33,000                  --                  --
Daniel Smoke (1)        23,000                  --                  --
Stephan Fantone (1)     10,700                  --                  --

(1) Outside, non-executive directors