Caution Regarding Forward-Looking Statements

Throughout this Report, and particularly in this Item 2-Management's Discussion and Analysis of Financial Condition and Results of Operations, there are forward-looking statements that are based upon our current expectations, estimates and projections and that reflect our beliefs and assumptions based upon information available to us at the date of this Report. In some cases, you can identify these statements by words such as "may," "might," "will," "should," "expects," "plans," "anticipates," "believes," "estimates," "predicts," "potential" or "continue," and other similar terms. These forward-looking statements include (but are not limited to) those relating to the timing and amount of anticipated restructuring and other related costs and related cost savings as well as anticipated capital expenditures in fiscal year 2009.

We caution investors that forward-looking statements are only our current expectations about future events. These forward-looking statements are not guarantees of future performance and are subject to risks, uncertainties, and assumptions that are difficult to predict. Our actual results, performance or achievements could differ materially from those expressed or implied by the forward-looking statements. Some of the important factors that could cause our results to differ are discussed in Item 1A-Risk Factors in our Annual Report on Form 10-K for the fiscal year ended October 3, 2008. We encourage you to read that section carefully.

Other risks and uncertainties that could cause actual results to differ materially from those in our forward-looking statements include, but are not limited to, the following: when and how quickly global economic conditions improve, and whether conditions worsen before they improve, whether we will succeed in new product development, release, commercialization, performance and acceptance; whether we can achieve continued growth in sales for life science, environmental, energy and/or applied research and other applications; whether we can achieve sales growth in Europe, North America, Asia Pacific and/or Latin America; risks arising from the timing of shipments, installations and the recognition of revenues on certain research products, including nuclear magnetic resonance ("NMR") spectroscopy systems, magnetic resonance ("MR") imaging systems and fourier transform mass spectrometry ("FTMS") systems and superconducting magnets; the impact of shifting product mix on profit margins; competitive products and pricing; economic conditions in our various product and geographic markets; whether we will see continued and timely delivery of key raw materials and components by suppliers; foreign currency fluctuations that could adversely impact revenue growth and/or earnings; whether we will see continued investment in capital equipment, in particular given the global liquidity and credit crisis; whether we will see reduced demand from customers that operate in cyclical industries; whether the global liquidity and credit crisis will impact the collectability of accounts receivable from our customers; the impact of any delay or reduction in government funding for research; our ability to successfully evaluate, negotiate and integrate acquisitions, in particular given the greater difficulty to borrow in the current credit environment; the actual costs, timing and benefits of restructuring activities (such as the employee reductions and other actions announced on January 16, 2009 and our Northern California operations consolidation) and other efficiency improvement activities (such as our global procurement, lower-cost manufacturing and outsourcing initiatives); variability in our effective income tax rate (due to factors including the timing and amount of discrete tax events and changes to unrecognized tax benefits); the timing and amount of share-based compensation; and other risks detailed from time to time in our filings with the U.S. Securities and Exchange Commission (the "SEC"). We undertake no special obligation to update any forward-looking statements, whether in response to new information, future events or otherwise.

Results of Operations

First Quarter of Fiscal Year 2009 Compared to First Quarter of Fiscal Year 2008

Segment Results

For financial reporting purposes, our operations are grouped into two reportable business segments: Scientific Instruments and Vacuum Technologies. The following table presents comparisons of our sales and operating earnings for each of those segments and in total for the first quarter of fiscal years 2009 and 2008:

                                            Fiscal Quarter Ended
                                      January 2,           December 28,            Increase
                                         2009                  2007               (Decrease)
                                               % of                  % of
                                      $        Sales        $        Sales        $          %
  (dollars in millions)
  Sales by Segment:
  Scientific Instruments           $ 171.8      82.5 %   $ 197.0      83.0 %   $ (25.2 )   (12.8 )%
  Vacuum Technologies                 36.4      17.5        40.4      17.0        (4.0 )    (9.9 )

  Total company                    $ 208.2     100.0 %   $ 237.4     100.0 %   $ (29.2 )   (12.3 )%


  Operating Earnings by Segment:
  Scientific Instruments           $  16.4       9.6 %   $  19.8      10.1 %   $  (3.4 )   (17.1 )%
  Vacuum Technologies                  7.1      19.3         7.7      19.1        (0.6 )    (9.0 )

  Total segments                      23.5      11.3        27.5      11.6        (4.0 )   (14.8 )
  General corporate                   (3.6 )    (1.7 )      (3.4 )    (1.4 )      (0.2 )    (5.2 )

  Total company                    $  19.9       9.6 %   $  24.1      10.2 %   $  (4.2 )   (17.6 )%

Scientific Instruments. The decrease in Scientific Instruments sales was primarily attributable to lower sales volume of our research products (in particular, NMR and imaging systems), products for traditional energy and raw material applications, and the negative impact of the stronger U.S. dollar on reported revenues. The timing of research products sales is often impacted by factors such as laboratory readiness and access to customer sites, duration of installations and availability of key components and installation personnel. The lower volume of research product sales in the first quarter of fiscal year 2009 was primarily due to delays due to some of these factors, compounded by the shorter working month and customer shutdowns in December 2008. Sales from businesses acquired in fiscal year 2008 positively impacted reported sales by approximately 2%.

Scientific Instruments operating earnings for the first quarter of fiscal year 2009 included acquisition-related intangible amortization of $2.1 million and restructuring and other related costs of $1.6 million. In comparison, Scientific Instruments operating earnings for the first quarter of fiscal year 2008 included acquisition-related intangible amortization of $1.8 million, amortization of $0.5 million related to inventory written up to fair value primarily in connection with the acquisition of IonSpec Corporation ("IonSpec") and restructuring and other related costs of $2.0 million. Excluding the impact of these items, operating earnings decreased as a percentage of sales due to the negative impact of lower sales volume, partially offset by the positive impact of efficiency improvements implemented in recent years and the stronger U.S. dollar (which was unfavorable to reported sales but favorable to reported operating margins).

Vacuum Technologies. The decrease in Vacuum Technologies sales was driven by lower sales volume of products for industrial applications and by the negative impact of the stronger U.S. dollar on reported revenues.

Vacuum Technologies operating earnings for the first quarter of fiscal year 2009 included the impact of restructuring and other related costs of $0.1 million. Excluding the impact of this item, the increase in Vacuum

Technologies operating earnings as a percentage of sales was primarily due to the positive impact of efficiency improvements implemented in recent years and the stronger U.S. dollar, partially offset by the negative impact of lower sales volume.

Consolidated Results



The following table presents comparisons of our sales and other selected
consolidated financial results for the first quarter of fiscal years 2009 and
2008:



                                                Fiscal Quarter Ended
                                         January 2,             December 28,              Increase
                                            2009                    2007                 (Decrease)
                                                  % of                    % of
                                        $         Sales         $         Sales         $           %
(dollars in millions, except per
share data)
Sales:                               $ 208.2      100.0 %    $ 237.4      100.0 %    $ (29.2 )    (12.3 )%

Gross profit                            95.3       45.8        107.3       45.2        (12.0 )    (11.2 )

Operating expenses:
Selling, general and
administrative                          60.9       29.2         66.0       27.8 %       (5.1 )     (7.7 )
Research and development                14.5        7.0         17.2        7.2         (2.7 )    (15.5 )

Total operating expenses                75.4       36.2         83.2       35.0         (7.8 )     (9.3 )

Operating earnings                      19.9        9.6         24.1       10.2         (4.2 )    (17.6 )
Interest income                          0.5        0.3          1.9        0.8         (1.4 )    (69.7 )
Interest expense                        (0.3 )     (0.2 )       (0.4 )     (0.2 )        0.1       28.5
Income tax expense                      (7.1 )     (3.4 )       (8.0 )     (3.4 )        0.9       11.6

Net earnings                         $  13.0        6.3 %    $  17.6        7.4 %    $  (4.6 )    (25.8 )%

Net earnings per diluted share       $  0.45                 $  0.57                 $ (0.12 )

Sales. As discussed under the heading Segment Results above, sales by our Scientific Instruments and Vacuum Technologies segments in the first quarter of fiscal year 2009 decreased by 12.8% and 9.9%, respectively, compared to the prior-year quarter. On a consolidated basis, sales declined 12.3% in the first quarter of fiscal year 2009. This decrease was primarily due to lower sales of research products, but also reflects a decline in the sales volume of certain vacuum and analytical products. Reported sales were also negatively impacted by the stronger U.S. dollar, which strengthened approximately 5% on a weighted-average basis compared to currencies in which we sell products and services. Sales from businesses acquired in fiscal year 2008 positively impacted reported sales by approximately 2%.

For geographic reporting purposes, we use four regions-North America (excluding Mexico), Europe (including the Middle East and Africa), Asia Pacific (including India) and Latin America (including Mexico). Sales by geographic region in the first quarters of fiscal years 2009 and 2008 were as follows:

                                      Fiscal Quarter Ended
                                 January 2,         December 28,           Increase
                                    2009                2007              (Decrease)
                                         % of                % of
                                  $      Sales        $      Sales        $          %
       (dollars in millions)
       Geographic Region
       North America           $  65.2    31.3 %   $  80.6    34.0 %   $ (15.4 )   (19.2 )%
       Europe                     83.9    40.3        96.2    40.5       (12.3 )   (12.8 )
       Asia Pacific               47.1    22.6        47.8    20.1        (0.7 )    (1.4 )
       Latin America              12.0     5.8        12.8     5.4        (0.8 )    (6.1 )

       Total company           $ 208.2   100.0 %   $ 237.4   100.0 %   $ (29.2 )   (12.3 )%

The decrease in sales in North America was primarily attributable to lower Scientific Instruments sales (in particular, sales of research products) and, to a lesser extent, lower Vacuum Technologies sales. Reported sales outside North America were unfavorably impacted by the strengthening of the U.S. dollar compared to the first quarter of fiscal year 2008. The decrease in sales in Europe was also attributable to lower sales volume of both Scientific Instruments and Vacuum Technologies products. Sales volume in Asia Pacific decreased slightly due to lower Vacuum Technologies sales, while sales volume in Latin America decreased slightly due to lower Scientific Instruments sales.

The sales decrease in North America was more pronounced compared to the prior-year quarter due to the timing of sales of certain low-volume, high-selling price research products. We do not consider this to be indicative of any particular trend for magnet-based products as a whole, but rather to be reflective of the variability in results that these low-volume, high-selling price magnet-based products can create.

Gross Profit. Gross profit for the first quarter of fiscal year 2009 reflects the impact of $1.6 million in amortization expense relating to acquisition-related intangible assets and $0.9 million in restructuring and other related costs. In comparison, gross profit for the first quarter of fiscal year 2008 reflects the impact of $1.4 million in amortization expense relating to acquisition-related intangible assets, amortization of $0.5 million related to inventory written up to fair value primarily in connection with the IonSpec acquisition and $0.5 million in restructuring and other related costs. Excluding the impact of these items, the increase in gross profit as a percentage of sales was primarily the result of the stronger U.S. dollar (which was favorable to reported gross profit margins but unfavorable to reported sales) and the positive impact of efficiency improvements (such as those resulting from lower-cost manufacturing and outsourcing initiatives, global procurement initiatives, and facility relocations/closures) implemented in recent years.

Selling, General and Administrative.Selling, general and administrative expenses for the first quarter of fiscal year 2009 included $0.5 million in amortization expense relating to acquisition-related intangible assets and $0.6 million in restructuring and other related costs. In comparison, selling, general and administrative expenses for the first quarter of fiscal year 2008 included $0.4 million in amortization expense relating to acquisition-related intangible assets and $1.2 million in restructuring and other related costs. Excluding the impact of these items, the increase in selling, general and administrative expenses as a percentage of sales was primarily due to the negative impact of lower sales volume, partially offset by the favorable impact of the stronger U.S. dollar and the cost savings achieved from restructuring activities implemented in recent years.

Research and Development. Research and development expenses for the first quarter of fiscal year 2009 reflect the impact of restructuring and other related costs of $0.2 million. In comparison, research and development expenses for the first quarter of fiscal year 2008 reflect the impact of restructuring and other related costs of $0.3 million. Excluding the impact of these items, the decrease in research and development expenses as a percentage of sales was primarily due to the stronger U.S. dollar and lower costs associated with new product introductions compared to the first quarter of fiscal year 2008.

Restructuring Activities. We have committed to several restructuring plans in order to adjust our organizational structure, improve operational efficiencies, eliminate redundant or excess costs resulting from acquisitions or dispositions during those periods, and to otherwise reduce our costs. From the respective inception dates of these plans through January 2, 2009, we have incurred a total of $7.1 million in restructuring expense and a total of $6.9 million in other costs related directly to those plans (comprised primarily of employee retention and relocation costs and accelerated depreciation of assets disposed upon the closure of facilities). During the first quarter of fiscal year 2009, there was no significant activity under these plans except for the fiscal year 2007 plan and the fiscal year 2009 first quarter plan as described below.

Fiscal Year 2007 Plan. During the third quarter of fiscal year 2007, we committed to a plan to combine and optimize the development and assembly of most of our nuclear magnetic resonance ("NMR") and mass spectrometry products, to further centralize related administration and other functions and to reallocate certain

resources toward more rapidly growing product lines and geographies. As part of the plan, we are creating an information rich detection ("IRD") center in Walnut Creek, California, where NMR operations are being integrated with mass spectrometry operations already located in Walnut Creek. Merging our IRD talent base into this single location will capitalize on our strength in NMR and mass spectrometry and enhance our ability to develop innovative IRD solutions that are more powerful, complementary, routine and user-friendly. Underscoring our commitment to IRD and the benefits that a combined location and organization will provide, we are investing in a new 45,000 square foot building and a substantial remodel of an existing building there to house the IRD center.

As a result of the plan, a number of employee positions have been or will be relocated or eliminated and certain facilities have been, or will be, consolidated. These actions primarily impact the Scientific Instruments segment and involve the elimination of between approximately 40 and 60 positions. We expect these activities to be completed during fiscal year 2009.

Restructuring and other related costs associated with this plan include one-time employee termination benefits, employee retention payments, costs to relocate facilities (including decommissioning costs, moving costs and temporary facility/storage costs), accelerated depreciation of fixed assets to be disposed as a result of facilities actions and lease termination costs.

The following table sets forth changes in our restructuring liability relating to the foregoing plan during the first quarter of fiscal year 2009 as well as total restructuring expense and other restructuring-related costs recorded since the inception of the plan:

                                                      Employee-          Facilities-
                                                       Related             Related            Total
(in thousands)
Balance at October 3, 2008                           $     1,840        $         551        $ 2,391
Reversals of expense, net                                   (387 )                  -           (387 )
Cash payments                                                  -                  (38 )          (38 )
Foreign currency impacts and other adjustments                (2 )                 17             15

Balance at January 2, 2009                           $     1,451        $         530        $ 1,981


Total expense since inception of plan
(in millions)
Restructuring expense                                                                        $   4.0

Other restructuring-related costs                                                            $   6.2

The reversals of restructuring expense of $0.4 million recorded during the first quarter of fiscal year 2009 related to changes in estimates relating to certain employee termination benefits. We also incurred $0.8 million in other restructuring-related costs during the quarter, which were comprised of $0.6 million in employee retention costs and $0.2 million in facilities-related costs including decommissioning costs and a non-cash charge for accelerated depreciation of assets to be disposed upon the closure of facilities.

Fiscal Year 2009 First Quarter Plan.During the first quarter of fiscal year 2009, we committed to a plan to reduce our employee headcount in order to reduce operating costs and increase margins. The plan involves the termination of approximately 35 employees, mostly located in Europe. The restructuring costs related to this plan primarily consist of one-time termination benefits which are expected to be settled by the end of fiscal year 2011. This restructuring plan did not involve any non-cash components. Costs relating to restructuring activities recorded under this plan have been included in cost of sales, selling, general and administrative expenses and research and development expenses.

The following table sets forth changes in our restructuring liability relating to the foregoing plan during the first quarter of fiscal year 2009:

                                                  Employee-       Facilities-
                                                   Related          Related       Total
(in thousands)
Balance at October 3, 2008                       $         -     $           -   $     -
Charges to expense, net                                1,312                 -     1,312
Cash payments                                           (601 )               -      (601 )
Foreign currency impacts and other adjustments            49                 -        49

Balance at January 2, 2009                       $       760     $           -   $   760


Total expense since inception of plan
(in millions)
Restructuring expense                                                            $   1.3

Fiscal Year 2009 Second Quarter Plan (Subsequent Event). During the second quarter of fiscal year 2009, we committed to a separate plan to reduce our cost structure, primarily through headcount reductions, due to continuing uncertainties in the global economic environment. The plan primarily involves the elimination of approximately 240 regular employees (primarily in North America and Europe and to a lesser extent Asia Pacific and Latin America) and 80 temporary positions in both the Scientific Instruments and Vacuum Technologies segments. In addition, the plan includes the closure of one small R&D/manufacturing facility in North America (Lake Forest, California) and two sales offices in Europe (Sweden and Switzerland).

Restructuring and other related costs expected to be incurred in connection with this plan are currently estimated to be between $8.5 million and $10.5 million, of which between $8.0 million and $9.5 million is expected to impact the Scientific Instruments segment and between $0.5 million and $1.0 million is expected to impact the Vacuum Technologies segment. The restructuring costs are expected to include one-time termination benefits for employees whose positions are being eliminated of between $7.5 million and $9.0 million and lease termination costs of between $0.1 million and $0.2 million (including future lease payments on vacated facilities). Other restructuring-related costs are expected to include employee retention and relocation costs of between $0.3 million and $1.0 million and facility-related relocation costs and accelerated depreciation of fixed assets to be disposed upon the closure of facilities of between $0.1 million and $0.3 million. These costs will be recorded and included in cost of sales, selling, general and administrative expenses and research and development expenses.

Most of these costs are expected to be recorded and settled during fiscal year 2009, although certain one-time termination benefits are expected to be settled in fiscal year 2010. Non-cash costs are not expected to be material under the plan.

Restructuring Cost Savings. The following table sets forth the estimated annual cost savings for each plan, when they were initiated, as well as where those cost savings were expected to be realized:

Restructuring Plan                                       Estimated Annual Cost Savings
Fiscal Year 2007 Plan (Scientific Instruments - to
combine and optimize the development and assembly on
certain products and to centralize functions and
reallocate resources to rapidly growing product lines)      $3 million - $5 million
Fiscal Year 2009 First Quarter Plan (Scientific
Instruments - to reduce headcount and operating costs
and increase operating margins)                             $2 million - $3 million
Fiscal Year 2009 Second Quarter Plan (Scientific
Instruments and Vacuum Technologies - to reduce its
cost structure, primarily through headcount reduction)     $20 million - $24 million

These estimated cost savings are expected to impact cost of sales, selling, general and administrative expenses and research and development expenses. Some of these cost savings have been and will continue to be reinvested in other parts of our business, for example, as part of our continued emphasis on IRD and consumable products. In addition, unrelated cost increases in other areas of our operations have and could in the future offset some or all of these cost savings. Although it is difficult to quantify with any precision our actual cost savings to date from these activities, many of which are still ongoing, we currently believe that the ultimate savings realized will not differ materially from these estimates.

Interest Income. The decrease in interest income was primarily due to lower average invested cash balances and lower rates of interest on those balances during the first quarter of fiscal year 2009 compared to the first quarter of fiscal year 2008.

Income Tax Expense. The effective income tax rate was 35.3% for the first quarter of fiscal year 2009, compared to 31.4% for the first quarter of fiscal year 2008. The lower effective income tax rate in the first quarter of fiscal year 2008 was primarily due to the release of $1.5 million in tax reserves resulting from the positive outcome of tax uncertainties during that period.

Net Earnings. Net earnings for the first quarter of fiscal year 2009 reflect the after-tax impacts of $2.1 million in pre-tax acquisition-related intangible amortization and $1.7 million in pre-tax restructuring and other related costs. Net earnings for the first quarter of fiscal year 2008 reflect the after-tax impacts of $1.8 million in acquisition-related intangible amortization, $0.5 million in amortization related to inventory written up to fair value in connection with the acquisition of IonSpec and $2.0 million in restructuring and other related costs. Excluding the after-tax impact of these items, the decrease in net earnings in the first quarter of fiscal year 2009 was primarily attributable to the negative impact of lower sales volume.

Outlook

. . .