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SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-K

(Mark One)

For the fiscal year ended December 31, 2004 or

For the transition period from              to             

Commission File Number 001-16611

MYKROLIS CORPORATION

(Exact name of registrant as specified in its charter)

(978) 436-6500

(Registrant’s telephone number, including area code)

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

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

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

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

Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Act).  Yes  x    No  ¨

As of July 2, 2004, the aggregate market value of the registrant’s voting stock held by non-affiliates of the registrant was approximately $692,438,997 based on the closing price on that date on the New York Stock Exchange.

As of February 1, 2005 41,961,602 shares of the registrant’s Common Stock were outstanding.

Documents Incorporated by Reference

Part I

Item 1.    Business.

The Company

Mykrolis is a worldwide developer, manufacturer and supplier of liquid and gas delivery systems, components and consumables used to precisely measure, deliver, control and purify the process liquids, gases and chemicals that are used in the semiconductor manufacturing process. Our products are also used to manufacture a range of other products, such as flat panel displays, high purity chemicals, photoresists, solar cells, gas lasers, optical and magnetic storage devices and fiber optic cables. We sell our products worldwide through a direct sales force and through distributors in selected regions. Mykrolis Corporation was formed in 2000 in connection with the spin-off by Millipore Corporation of its microelectronics business unit. Our history is described in greater detail under “Our History” below.

We offer a diverse product line, grouped in 450 product categories, including both consumable products and equipment products.

During the third quarter of 2004 Mykrolis acquired the business and certain of the assets of Bentec Scientific, LLC, a privately held company that developed, manufactured and marketed polyvinyl alcohol roller brushes for use in post chemical mechanical planarization (“CMP”) process cleaning applications. The Bentec products supplement our consumable product offerings for semiconductor applications. Bentec’s results of operations are included in our consolidated financial statements since August 12, 2004, the date of purchase.

Unless the context otherwise requires, the terms “Mykrolis”, “we”, “our”, or the “Company” mean Mykrolis Corporation and its subsidiaries and the term “Millipore” means Millipore Corporation and its subsidiaries when referring to periods prior to March 31, 2001 and Millipore Corporation and its subsidiaries other than Mykrolis when referring to periods subsequent to March 31, 2001.

Background

The manufacture of semiconductors requires hundreds of process steps which take place in the controlled environment of process chambers within the semiconductor tool. We offer products for each of the primary processing steps in the manufacture of semiconductors which are listed below.

Deposition.    Deposition refers to placing layers of insulating or conductive materials on a wafer surface in thin films that make up the circuit elements of semiconductor devices. The two main deposition processes are physical vapor deposition, where a thin film is deposited on a wafer surface in a low-pressure gas environment, and chemical vapor deposition, where a thin film is deposited on a wafer surface using a gas medium and a chemical bonding process. In addition, electro-plating technology is utilized for the deposition of low resistance conductive materials such as copper. The control of uniformity and thickness of these films through filtration and purification of the fluids and materials used during the process is critical to the performance of the semiconductor circuit and, consequently, the manufacturing yield.

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Chemical Mechanical Planarization.    CMP flattens, or planarizes, the topography of the film surface to permit the patterning of small features on the resulting smooth surface by the photolithography process. Semiconductor manufacturers need filtration and purification systems to maintain acceptable manufacturing yields through the chemical mechanical planarization process by filtering the liquid slurries, which are solutions containing abrasive particles in a chemical mixture, to remove oversized particles and contaminants that can cause defects on a wafer’s surface while not affecting the functioning of the abrasive particles in the liquid slurries. In addition, manufacturers use consumable roller brushes to clean the wafer after completion of the CMP process to prepare the wafer for subsequent operations.

Photolithography.    Photolithography is the process step that defines the patterns of the circuits to be built on the chip. Before photolithography, a wafer is pre-coated with photoresist, a light sensitive film composed of ultra-high purity chemicals in liquid form. The photoresist is exposed to specific forms of radiation, such as ultraviolet light, electrons or x-rays, to form patterns which eventually become the circuitry on the chip. This process is repeated many times, using different patterns and interconnects between layers to form the complex, multi-layer circuitry on a semiconductor chip. As device geometries decrease and wafer sizes increase, it is even more critical that these photoresists are dispensed on to the chip with accurate thickness and uniformity, as well as with low levels of contamination, and that the process gases are free of micro-contamination so that manufacturers can achieve acceptable yields in the manufacturing process.

Etch and Resist Strip.    Etch is the process of selectively removing precise areas of thin films that have been deposited on the surface of a wafer. The hardened photoresist protects the remaining material that makes up the circuits. During etch, specific areas of the film not covered by photoresist are removed to leave a desired circuit pattern. Similarly, resist strip is a process of removing the photoresist material from the wafer after the desired pattern has been placed on the wafer. Emerging advanced etch and resist strip applications require precisely controlled gas chemistries and flow rates in order to achieve precise etch and resist strip characteristics.

Wet Cleaning.    Ultra-high purity chemicals and photoresists of precise composition are used to clean the wafers, to pattern circuit images and to remove photoresists after etch. Before processes such as photoresist coating, thin film deposition, ion implantation, diffusion and oxidation, and after processes, such as ion implantation and etch, the photoresists must be stripped off, and the wafer cleaned in multiple steps of chemical processes. To maintain manufacturing yields and avoid defective products, these chemicals must be maintained at very high purity levels without the presence of foreign material such as particles, ions or organic contaminants.

The increasing complexity of semiconductor devices has resulted in the need for more complex, higher-precision liquid and gas delivery, measurement, control and purification systems and subsystems. The ability of semiconductor device manufacturers to offer integrated circuits with smaller geometries, greater functionality and higher performance at a lower cost requires continuous improvements in semiconductor process equipment, process controls and liquid and gas delivery systems. The design and performance of those liquid and gas delivery systems, subsystems, components and consumables are critical to the semiconductor manufacturing process because they directly affect cost of ownership and manufacturing yields.

In addition, as equipment and process complexity in semiconductor manufacturing increases, semiconductor original equipment manufacturers and device manufacturers are seeking to improve time-to-market, reduce manufacturing costs, improve production quality and enhance product reliability and long-term service and support. To address these challenges, semiconductor equipment companies and device manufacturers are outsourcing the design and manufacture of liquid and gas delivery, measurement, control and purification systems, subsystems, components, and consumables to us and to other well-established subsystem and component companies that have worldwide presence and leading technologies.

Many of the processes used to manufacture semiconductors are also used to manufacture flat panel displays, magnetic and optical storage devices and fiber optic cables for telecommunications, resulting in the need for similar filtration, purification, control and measurement capabilities.

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Our Business Strategy

Our objective is to be a global leader providing innovative process solutions to the semiconductor and ancillary markets. We intend to build upon our position as a worldwide developer, manufacturer and supplier of liquid and gas delivery systems, components and consumables used by semiconductor and other electronic device manufacturers to grow our business in these and other high value-added manufacturing process markets. Our strategy includes the following key elements:

Comprehensive and Diverse Product Offerings.    The semiconductor manufacturing industry is driven by rapid technological changes and intense competition. We believe that semiconductor manufacturers are seeking process control suppliers who can provide a broad range of reliable, flexible and cost effective products, as well as the technological and application design expertise necessary to deliver effective solutions. Our comprehensive product offering enables us to meet a broad range of customer needs and provide a single source of flexible product offerings for semiconductor device and capital equipment manufacturers as they seek to consolidate their supplier relationships to a smaller select group. In addition, we believe manufacturers of semiconductor tools are looking to their suppliers for subsystems that provide more integrated functionality and that can seamlessly communicate with other equipment. We believe our offering of consumables and equipment, as well as our ability to integrate them, allows us to provide advanced subsystems.

Diversified Revenue Stream.    We target a diversified revenue stream by balancing our sales of component and subsystem equipment products with sales of our consumable products. Our consumable products provide a relatively more stable and recurring source of revenue in an otherwise cyclical industry. Our equipment products, which are generally driven by such factors as the construction and expansion of semiconductor manufacturing facilities and the retrofitting and renovation of existing semiconductor facilities, position us to benefit from increases in capital spending that typically occur during industry upturns.

Technology Leadership.    With the emergence of smaller and more powerful semiconductor devices, and the deployment of new materials and processes to produce them, we believe there is a need for greater contamination and process control within the semiconductor fabrication process. We seek to extend our technology by developing advanced products that address more stringent requirements for greater contamination control, fluid delivery and monitoring, and system integration. We have continuously improved our products as our customers’ needs have evolved. For example, we have expanded upon our proprietary two-stage dispense technology with integrated filtration for photoresist delivery, where the photoresist is filtered through one pump and precisely dispensed through a second pump at a different flow rate to reduce defects on wafers.

Strong Customer Base.    We have established ongoing relationships with many leading original equipment manufacturers and materials suppliers in our key markets. These industry relationships have provided us with the opportunity for significant collaboration with our customers at the product design stage which has facilitated our ability to introduce new products and applications that meet our customers’ needs. For example, we work with our key customers at the pre-design and design stage to identify and respond to their requests for current and future generations of products. We target opportunities to offer new technologies in emerging applications, such as copper plating, chemical mechanical planarization, wet- dry cleaning systems and photolithography. We believe that our large customer base will continue to be an important source of new product development ideas.

Global Presence.    We have established a global infrastructure of design, manufacturing, distribution, service and support facilities to meet the needs of our customers. In addition, we may expand our global infrastructure, either through acquisition or internal development, to accommodate increased demand or we may consolidate inefficient operations to optimize our manufacturing and other capabilities. For example, we have established sales and service offices in China in anticipation of a growing semiconductor manufacturing base in that region. As semiconductor and other electronic device manufacturers have become increasingly global, they have required that suppliers offer comprehensive local repair and customer support services. We maintain our customer relationships through a combination of direct sales and support personnel and selected independent sales representatives and distributors in Asia, Europe and the Middle East.

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Ancillary Markets.    We plan to leverage our accumulated expertise in the semiconductor industry by developing products for applications that employ similar production processes that utilize high purity fluids, integrated dispense systems and vacuum-based production technologies. Our products are used in manufacturing processes outside of the semiconductor industry, including the manufacturing of flat panel displays, high-purity chemicals, photoresists, solar cells, gas lasers, optical and magnetic storage devices and fiber optic cables. We plan to continue to identify and develop products that address advanced materials processing applications where fluid management plays a critical role. We believe that by utilizing our technology to provide manufacturing solutions across multiple industries we are able to increase the total available market for our products and reduce, to an extent, our exposure to the cyclicality of any particular market.

Strategic Acquisitions, Partnerships and Related Transactions.    We plan to pursue strategic acquisitions and business partnerships that enable us to address gaps in our product offerings, secure new customers, diversify into complementary product markets or broaden our technological capabilities and product offerings. During the third quarter of 2004 Mykrolis acquired the business and certain of the assets of Bentec Scientific, LLC, a privately held company that developed, manufactured and marketed polyvinyl alcohol roller brushes for use in post-CMP cleaning applications. During the fourth quarter of 2003, we acquired the business and certain of the assets and liabilities of Aeronex, Inc., a privately held company that developed, manufactured and marketed gas purification components and systems. In addition, we are continuously evaluating opportunities for strategic alliances and joint development efforts with key customers and other industry leaders. In addition, as the dynamics of the markets that we serve shift, we will re-evaluate the ability of our existing businesses to provide value added solutions to those markets in a manner that contributes to our achieving our objectives; in the event that we conclude that a business is not able to do this, we expect to restructure or replace that business.

Products

Our products include consumable products and equipment products that are used in the manufacture of semiconductors and other high precision electronic devices. Our consumable products include liquid filtration and purification products and gas filtration and purification products as well as other filtration components, PVA brush rollers and service programs. Our equipment products include precision liquid dispense systems, mass flow and pressure controllers, gas purification systems and vacuum gauges. These products are used by customers in manufacturing operations to remove contaminants in liquid and gas processes, to purify liquids and gases, to measure and control flow rates and to control and monitor pressure and vacuum levels during the manufacturing process. In addition, we integrate consumable and equipment components into subsystems that provide our customers with an integrated solution to a particular liquid and gas delivery problem. Consumable products, including service revenue, accounted for 69%, 71% and 65% of our net sales for the years ended December 31, 2004, 2003, and 2002, respectively, and equipment products accounted for 31%, 29% and 35%, respectively, of our net sales in these same periods. In each of these periods liquid filtration and purification products accounted for more than two-thirds of our net sales from consumable products. For the years ended December 31, 2004, 2003 and 2002, our gas delivery products accounted for approximately 56%, 55% and 54%, respectively, of our net sales from equipment products. Our two product classes include the following specific product types:

Consumable Products

Our consumable product class includes membrane based liquid filters and housings, metal based gas filters and resin based gas purifiers, which purify the process fluids used in the semiconductor manufacturing process as well as PVA roller brushes for use in post CMP cleaning applications. The key drivers of demand for our consumable products include the utilization rate of semiconductor fabrication facilities, the number of semiconductor wafers being manufactured and the timing of semiconductor plant preventative maintenance programs during which filters are usually replaced.

Liquid Filtration and Purification Products

Liquid processing occurs during multiple manufacturing steps including photolithography, deposition, planarization and surface etching and cleaning. The fluids that are used include various mixtures of acids, bases,

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solvents, slurries and photochemicals, which in turn are used over a broad range of operating conditions, including temperatures from 5 degrees Celsius up to 180 degrees Celsius. The design and performance of our liquid filtration and purification products are critical to the semiconductor manufacturing process because they directly affect the cost of ownership and manufacturing yield. Specially designed proprietary filters remove sub-micron sized particles and bubbles from the different fluid streams that are used in the manufacturing process. Some of our filters are constructed with ultra-high molecular weight polyethylene hollow fiber and flat sheet membranes that offer improved bubble clearance and gel removal, either of which can cause defects in the wafers if not removed. Our low hold-up volume disposable filters, with hollow fiber or flat sheet membranes, use our Connectology^™ technology to allow filter changes in less than a minute, significantly faster than conventional filters, to reduce the amount of expensive chemicals lost each time a filter is changed and to minimize operator exposure to hazardous solvents and vapors during changeout.

Gas Filtration and Purification Products

Our Wafergard^®, ChamberGard^™ and Waferpure^® particle and molecular filtration products purify the gas entering the process chamber in order to eliminate system and wafer problems due to particulate, atmospheric and chemical contaminants. These filters are able to retain all particles 0.003 microns and larger. Our metal filters, such as stainless steel and nickel filters, reduce outgassing and improve corrosion resistance. Our Waferpure^® and Aeronex Gatekeeper^® purifiers chemically react with and absorb volatile contaminants, such as oxygen and water, to prevent contamination and our ChamberGard^™ vent diffusers reduce particle contamination and processing cycle times.

PVA Roller Brush Products

Our PVA roller brush products, acquired from Bentec Scientific LLC during the third quarter of 2004, are used to clean the wafer following the chemical mechanical planarization process. This process uses abrasive liquid slurries to planarize the wafer after which a haze of slurry residue remains on the wafer and must be cleaned in preparation for subsequent operations. This cleaning process is integrated into advanced CMP tools and is effected by a cleaning solution being run through a PVA roller brush that rotates to remove the slurry residue from the surface of the wafer. Our unique Planacore^™ PVA roller brush is molded on the core to allow easy installation that reduces tool downtime and a dimensionally stable product that provides consistent wafer to wafer cleaning performance.

Equipment

Our equipment product class includes precision liquid dispense systems, mass flow and pressure controllers, gas purification systems and vacuum gauges as well as other equipment components. The key drivers of demand for our equipment products include the expansion and construction of semiconductor fabrication facilities, retrofitting and renovation of existing semiconductor production equipment and the installation of new processes in semiconductor fabrication facilities.

Liquid Delivery Systems

Our proprietary photochemical filtration and dispense systems integrate our patented two-stage, filter device and valve control technologies. We believe that we offer the microelectronics industry the only dispense systems with integrated filtration capability and that our proprietary patented two-stage technology has a significant advantage over conventional single-stage technology. Our two-stage technology permits the filtering and dispense functions to operate independently so that filtering and dispensing of photochemicals can occur at different rates, reducing the differential pressure across the filter, conserving expensive photochemicals and resulting in reduced defects in wafers. As described above, we offer a line of proprietary filters specifically designed to efficiently connect with these systems. Our patented digital valve control technology improves chemical uniformity on wafers and improves ease of optimized system operation. In addition, our integrated high precision liquid dispense systems enable uniform application of photoresists for the spin-coating process where uniformity is measured in units of Angstroms, a tiny fraction of the thickness of a human hair.

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Gas Delivery Products and Purification Systems

We offer a wide variety of gas delivery and purification products to meet the stringent requirements of semiconductor processing, including mass flow controllers, transducers, vacuum gauges, valves and controllers and gas purification systems.

Our mass flow controllers automatically and precisely measure and control the flow rates of multiple liquids and gases into the semiconductor tool process chamber in order to maintain circuit quality, reduce maintenance requirements and prolong the life of the equipment used in the manufacturing process. We have also developed pressure-based mass flow controllers, which measure and control the liquids and gases by controlling the pressure applied to these fluids. Our IntelliFlow^™ product platform combines our gas measurement and control products with the DeviceNet^™ communications protocol to provide a digital solution to achieve advanced process control and network communications to provide real time feedback as to gas measurement and control performance, thereby minimizing costly unscheduled down time. We believe that our newly introduced Intelliflow(R)3XP^™ mass flow controller, a pressure insensitive mass flow controller, demonstrates improved performance, embedded diagnostics and user programmability for gases and flow ranges, is the technological leader in the market.

Our Aeronex Gas Purification Systems contain dual resin beds providing a continuous supply of purified gas without process interruption. These gas purification systems are capable of handling higher flow rates and longer duty cycles than cartridge purifiers.

We also offer other equipment components including: transducers to measure the pressure in the process gas feed line and of the process fluids during semiconductor manufacturing; vacuum gauges to directly measure the level of pressure in the process chamber and between the process chamber and a pump and. vacuum controllers to receive signals from the vacuum gauges and provide the necessary control signals to the vacuum valves in order to maintain precise processing parameters.

We believe that our customers will increasingly demand more integrated products and systems that combine the functionality of many of our gas delivery products which were previously purchased as discrete components.

Worldwide Applications Development and Field Support Capabilities

We provide strong technical support to our customers through local service groups and engineers consisting of field applications engineers, technical service groups, applications development groups and training capabilities. Our field applications engineers, located in the United States and in eight other countries, work directly with our customers on product qualification and process improvement in their facilities. In addition, in response to customer needs for local technical service and fast turn-around time, we maintain regional applications laboratories. Our applications laboratories maintain process equipment that simulate customers’ applications and industry test standards and provide product evaluation, technical support and complaint resolution for our customers. Our service centers are responsible for calibration, repairs and servicing of our products. These service centers also support industry collaborations and provide additional technical expertise to our customers. We have service centers located in California, Texas, Japan, Korea, China, Taiwan, Singapore, Germany and France.

Customers and Markets

Our major customer groups include integrated circuit device manufacturers, original equipment manufacturers that provide equipment to integrated circuit device manufacturers, gas and chemical manufacturing companies and manufacturers of high precision electronics.

Our most significant customers based on sales in 2004 include industry leaders, such as Applied Materials, Inc., Dainippon Screen Manufacturing Co., Ltd., Samsung Electronics Co., Ltd., Taiwan Semiconductor

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Manufacturing Co. Ltd., Tokyo Electron Limited and UMC Group. We also sell our products to flat panel display original equipment manufacturers, materials suppliers and end-users. The major manufacturers for flat panel displays and flat panel display equipment are concentrated in Japan, Korea and other parts of Asia.

In 2004, 2003 and 2002, net sales to our top ten customers accounted for approximately 38%, 34% and 35%, respectively, of our net sales. During those same periods, our largest single customer accounted for approximately 14%, 11% and 13%, respectively, of our net sales and international net sales represented approximately 74%, 73% and 69%, respectively, of our net sales. Over 2,700 customers purchased products from us during 2004.

We may enter into supply agreements with our customers to govern the conduct of business between us and our customers, including the manufacture of our products. These agreements generally have a term of one to three years but these agreements do not contain any long-term purchase orders or commitments. Instead, we work closely with our customers to develop non-binding forecasts of the future volume of orders. However, customers may cancel their orders, change production quantities from forecasted volumes or delay production for a number of reasons beyond our control.

Sales and Marketing

We sell our products worldwide primarily through our own direct sales force located in twelve offices in all major semiconductor markets, as well as through independent distributors elsewhere. As of December 31, 2004, our sales and marketing force consisted of approximately 207 employees worldwide. Our direct sales force is supplemented by independent sales representatives and agents.

Our marketing efforts focus on our “push/pull” marketing strategy in order to maximize our selling opportunities. We work with original equipment manufacturers to persuade them to design tools that require our products and we create end user “pull” demand by persuading semiconductor manufacturers to specify our products. Our industry relationships have provided us with the opportunity for significant collaboration with our customers at the product design stage that has facilitated our ability to introduce new products and applications that meet our customers’ needs. In addition, we are constantly identifying for our customers the variety of analytical, purification and process control challenges which may be addressed by our products. Further, we adapt our products and technologies to resolve process control issues identified by our customers. Our sales representatives provide our customers with worldwide support and information about our products.

We believe that our technical support services are important to our marketing efforts. These services include assisting in defining a customer’s needs, evaluating alternative products, designing a specific system to perform the desired separation, training users and assisting customers in compliance with relevant government regulations. In addition, we maintain a network of service centers located in the United States and in key international markets to support our products.

Competition

The market for our products is highly competitive. While price is an important factor, we compete primarily on the basis of the following factors:

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We believe that we compete favorably with respect to all of the factors listed above, but we cannot assure you that we will continue to do so. We believe that our key competitive strengths include our broad product line, the low total cost of ownership of our products, our ability to provide our customers with quick order fulfillment and our technical expertise. However, our competitive position varies depending on the market segment and specific product areas within these segments. For example, in the market for photochemical dispense systems, we believe that our patented technology, our longstanding relationship with the leading original equipment manufacturer in this market niche and our ability to support our customers’ needs on a global basis have allowed us to compete favorably. In contrast, other companies have more established positions in the markets related to gas delivery systems and components, such as gas flow measurement and control products, pressure measurement and control products and vacuum gauges, valves and controllers. While we have longstanding relationships with a number of semiconductor and other electronic device manufacturers, we also face significant competition from companies that have longstanding relationships with other semiconductor and electronic device manufacturers and, as a result, have been able to have their products specified by those customers for use in manufacturers’ fabrication facilities. In addition, some of our competitors have cost advantages over us in the markets for gas delivery systems and components due to their larger market share and the related economies of scale. In the markets for our consumable products, we believe that our differentiated membrane technology, strong supply chain capabilities, which allow us to provide our customers with quick order fulfillment, and technical expertise, which enables us to develop membranes to meet specific customer needs and assist our customers in improving the functionality of our membranes for particular applications, allow us to compete favorably. In these markets our competitors compete against us on the basis of price, as well as alternative membrane technology having different functionality, manufacturing capabilities and breadth of geographic presence.

The market for our products is highly fragmented, and we compete with a number of different companies, including Advanced Energy Industries Inc., Celerity Group, Inc., Iwaki Co., Ltd., MKS Instruments, Inc., Mott Metallurgical Corporation and Pall Corporation. Some of our competitors are larger and have greater resources than we do. In some cases, our competitors are smaller than us, but well-established in specific product niches. However, we believe that none of our competitors competes with us across all of our product offerings and that, within the markets that we serve, we offer a broader line of products, make use of a wider range of process control technologies and address a broader range of applications than any single competitor. Nonetheless, competitors with greater financial resources may be able to offer lower prices, additional products or services or other incentives that we cannot match or offer. These competitors may be in a stronger position to respond quickly to new technological trends, devote more resources to capitalize on those new technological trends and may be able to undertake more extensive marketing campaigns. They also may adopt more aggressive pricing policies and make more attractive offers to potential customers, employees and strategic partners.

Semiconductor and other electronic device manufacturers may direct semiconductor capital equipment manufacturers to use a specified supplier’s product in their equipment. Accordingly, our success depends in part on our ability to have semiconductor and other electronic device manufacturers specify that our products be used at their fabrication facilities. Some of our competitors may have more developed relationships with semiconductor and other electronic device manufacturers, which enable them to have their products specified for use in manufacturers’ fabrication facilities.

Research and Development

Our aggregate research and development expenses in 2004, 2003 and 2002 were $25.7 million, $19.1 million and $19.7 million, respectively. As of December 31, 2004, we had approximately 106 employees in engineering, research and development. In addition, we have followed a practice of supplementing our internal research and development efforts by licensing technology from unaffiliated third parties and/or acquiring distribution rights with respect thereto when we believe it is in our long-term interests to do so.

To meet the global needs of our customers, we have research and development capabilities in the United States and Japan. Our research and development efforts are directed toward developing and improving our

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technology platforms for semiconductor and advanced processing applications and identifying and developing products for new applications for which fluid management plays a critical role. Key elements of our 2004, 2003 and 2002 research and development expenses were related to the development of the new product platforms to meet the manufacturing needs for 90 and 65 nanometer semiconductor devices. Driven by the proliferation of new materials and chemicals in the manufacturing processes and increased needs for tighter process control for 300mm wafers, investments were made for new contamination control products in the area of copper interconnects, deep ultra-violet (DUV) photolithography; and chemical and gas management technologies for advanced wafer cleans, deposition and etch equipment. Additional investments were made in the area of advanced process control, monitoring and diagnostics capabilities for future generations of semiconductor manufacturing processes. We have undertaken an initiative to involve our marketing, engineering, manufacturing and sales personnel in the development of new products in order to reduce the time to market for new products. Our employees also work closely with our customers’ development personnel. These relationships help us identify and define future technical needs on which to focus our research and development efforts. In addition, we participate in Semiconductor Equipment and Materials International (SEMI), a consortium of semiconductor equipment suppliers. We also support research at academic and other institutions targeted at advances in materials science and semiconductor process development. Finally we continue to maintain a membrane research agreement with Millipore that was entered into at the time of our separation from Millipore and continues in effect through March 31, 2006.

Patents and Other Intellectual Property Rights

We rely on a combination of patent, copyright, trademark and trade secret laws and license agreements to establish and protect our proprietary rights. We maintain 142 U.S. issued and enforceable patents, 232 issued and enforceable foreign patents, including counterparts to U.S. filings, 105 pending U.S. patent applications, 24 pending filings under the Patent Cooperation Treaty not yet nationalized and 320 pending foreign patent applications. While we believe that patents may be important for aspects of our business, such as our patents related to photoresist dispense pumps, polymeric membranes and surface chemistries, gas filters and purifiers, gas and liquid contactors, fluid control processes, mass flow controllers and our Connectology^™ products, which U.S. patents expire between 2005 and 2024, we believe that our success also depends more upon close customer contact, innovation, technological expertise, responsiveness and worldwide distribution. Additionally, while our patented technology may delay or deter a competitor in offering a competing product, we do not believe that our patent portfolio functions as a barrier to entry for any of our competitors. In addition, while we license and will continue to license technology used in the manufacture and distribution of products from third parties, except as described in the “Risks Related to our Separation from Millipore” section of Management’s Discussion and Analysis of Financial Condition and Results of Operations in Item 7 below, which information is hereby incorporated by reference, these licenses are not currently related to any of our core product technology.

We require each of our employees, including our executive officers, to enter into standard agreements pursuant to which the employee agrees to keep confidential all of our proprietary information and to assign to us all inventions made while employed by us.

A number of our patented products were specifically developed in response to the transition from 200 millimeter wafers to 300 millimeter wafers, and many of our new products are specifically targeted to meet the more stringent requirements for the advanced technologies dominating 300 millimeter wafer manufacturing processes. Examples include our Solaris^® chemical mechanical planarization filters for copper slurries, IntelliGen^® photoresist dispense with digital valves targeted for photolithography applications and our Intelliflow^® mass flow controllers for 300 millimeter tool automation.

In connection with our separation from Millipore, we were assigned patents and trademarks which relate exclusively to our business. Patented technology that was used by both Millipore and Mykrolis was generally retained by Millipore and licensed to us with exclusive rights in our fields of use that are generally defined by the operating scope of our business at the time of our separation from Millipore. In some cases, the technology was transferred to us, and we granted Millipore an exclusive license in its fields of use in the biopharmaceutical and

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related industries. These licenses are assignable by the licensee only in connection with a sale of its business, do not require the payment of any license fees or royalties by either Millipore or us and will continue in effect for the life of the patents. In addition, in order to assure future access to patented technology not licensed as part of the separation, the separation agreements provide each of us with a technology license option. The option grants each party a five-year option to acquire a royalty bearing license to patented technology existing as of the separation date that is owned by the other party and is not currently used by the optionee but may be useful for future products, with exclusive rights in its fields of use. The license term would extend for the life of the subject patents.

Governmental Regulation

Our operations are subject to federal, state and local regulatory requirements relating to environmental, waste management and health and safety matters, including measures relating to the release, use, storage, treatment, transportation, discharge, disposal and remediation of contaminants, hazardous substances and wastes, as well as practices and procedures applicable to the construction and operation of our plants. There can be no assurance that we will not incur material costs and liabilities or that our past or future operations will not result in exposure to injury or claims of injury by employees or the public. Although some risk of costs and liabilities related to these matters is inherent in our business, as with many similar businesses, we believe that our business is operated in substantial compliance with applicable regulations. However, new, modified or more stringent requirements or enforcement policies could be adopted, which could adversely affect us. While we expect that capital expenditures will be necessary to assure that any new manufacturing facility is in compliance with environmental and health and safety laws, we do not expect these expenditures to be material. Otherwise, we are not presently aware of any facts or circumstances that would cause us to incur significant liabilities in the future related to environmental, health and safety law compliance.

Employees

As of February 1, 2005, we had approximately 1,077 full-time employees, including approximately 106 in engineering, research and development and approximately 270 in sales and marketing as well as 179 temporary employees. Given the variability of business cycles in the semiconductor industry and the quick response time required by our customers, it is critical that we be able to quickly adjust the size of our production staff to maximize efficiency. Therefore, we use skilled temporary labor as required.

None of our employees are represented by a labor union or covered by a collective bargaining agreement other than statutorily mandated programs in European countries.

Information About Our Operating Segment

The Company operates in one reportable business segment that develops, manufactures and sells consumables and capital equipment products to semiconductor manufacturing companies and other companies using similar manufacturing processes, as well as Original Equipment Manufacturer (“OEM”) suppliers to those companies. In 2004, 2003 and 2002 approximately 74%, 73% and 69%, respectively, of our net sales were made to customers outside North America. Industry and geographic segment information is discussed in Note 14 to the Mykrolis Corporation Consolidated Financial Statements (the “Financial Statements”) included in Item 8 below, which Note is hereby incorporated herein by reference.

Other Information

In March of 2001, the Board of Directors of Mykrolis adopted a shareholder rights plan (the “Rights Plan”) pursuant to which Mykrolis declared a dividend on November 29, 2001 to its shareholders of record on December 31, 2001 of the right to purchase (a “Right”) one additional share of Mykrolis Common Stock for each share of Mykrolis Common Stock owned, at a price of $130.00 for each share. The Rights Plan is designed to protect Mykrolis’ shareholders from attempts by others to acquire Mykrolis on terms or by using tactics that

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could deny all shareholders the opportunity to realize the full value of their investment. The Rights are attached to the shares of our common stock until certain triggering events occur. The Rights authorize the holders to purchase shares of our common stock at a 50% discount from market value upon the occurrence of specified triggering events, including, unless approved by our board of directors, an acquisition by a person or group of specified levels of beneficial ownership of our common stock or a tender offer for our common stock. The common stock purchase rights are redeemable by us for $0.01 and will expire in March of 2011. One of the events which will trigger the common stock purchase rights is the acquisition, or commencement of a tender offer, by a person (an Acquiring Person, as defined in the shareholder rights plan), other than Mykrolis or any of our subsidiaries or employee benefit plans, of 15% or more of the outstanding shares of our common stock. An Acquiring Person may not exercise a common stock purchase right.

Mykrolis’ products are made from a wide variety of raw materials which are generally available in quantity from alternate sources of supply. Accordingly, as a general matter, Mykrolis is not substantially dependent upon any single supplier.

Our History

Mykrolis Corporation is a Delaware corporation organized on October 16, 2000 under the name Millipore MicroElectronics, Inc. in connection with the spin-off by Millipore Corporation of its microelectronics business unit. On March 27, 2001, we changed our name to Mykrolis Corporation. On March 31, 2001, Millipore effected the separation of our business from Millipore’s business by transferring to us substantially all of the assets and liabilities associated with its microelectronics business. On August 9, 2001 we completed an initial public offering of approximately 18% of the total shares of the Company’s common stock outstanding. On February 27, 2002, Millipore completed the spin-off of Mykrolis by distributing to its stockholders the 82% of our common stock that it held following our initial public offering. In the early 1980’s, Millipore internally developed products with applications in semiconductor manufacturing, which became the Millipore microelectronics business unit. Subsequently, through internal development and acquisitions, Millipore expanded that business unit into the business that was spun off as Mykrolis Corporation.

Executive Officers of Mykrolis

The following is a list, as of February 1, 2005, of the Executive Officers of Mykrolis. All of the officers of Mykrolis Corporation listed below were elected to serve until the first Directors Meeting following the 2005 Annual Stockholders Meeting.

Gideon Argov has been our Chief Executive Officer and a director since November 2004. Prior to joining Mykrolis, Mr. Argov was a Special Limited Partner at Parthenon Capital, a Boston-based private equity

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partnership, since 2001. He served as Chairman, Chief Executive Officer and President of Kollmorgen Corporation from 1991 to 2000. From 1988 to 1991 he served as Chief Executive Officer of High Voltage Engineering Corporation. Prior to 1988, he led consulting engagement teams at Bain and Company. He is a director of Helix Technology, Inc. and Fundtech Corporation.

Jean-Marc Pandraud has been our President and Chief Operating Officer since January 2001. Prior to that he served as Vice President and General Manager of the Microelectronics Divisions of Millipore, a position he had held since July 1999. From 1994 until 1999, Mr. Pandraud served as the Vice President and General Manager of Millipore’s Laboratory Water Division and was also Regional Manager of Millipore’s Latin American operations from 1997 until 1999. Mr. Pandraud also served as the Managing Director of Millipore’s French subsidiary and as European General Manager for the Millipore Analytical Division from 1988 until 1994.

Bertrand Loy has been our Vice President and Chief Financial Officer since January 2001. Prior to that, Mr. Loy served as the Chief Information Officer of Millipore from April 1999 until December 2000. From 1995 until 1999, he served as the Division Controller for Millipore’s Laboratory Water Division. From 1989 until 1995, Mr. Loy served Sandoz Pharmaceuticals (now Novartis) in a variety of financial, audit and controller positions located in Europe, Central America and Japan.

Peter W. Walcott has been our Vice President, Secretary and General Counsel since October 2000. Mr. Walcott served as the Assistant General Counsel of Millipore from 1981 until March 2001.

Peter S. Kirlin has been our Vice President—Business Development since June of 2004. Prior to joining us he served Dupont Photomasks, Inc. as Chairman of the Board and Chief Executive Officer from May 2000 until July 2003. From 1988 until May 2000, Mr. Kirlin held various positions with ATMI, Inc., a supplier of materials, equipment and services used in the manufacture of semiconductors, most recently as Group Vice President, Technologies and Services. From 1986 to 1988, he worked at American Cyanamid Corporation as a project leader and conducted post-graduate research projects at the University of Munich’s Institute of Physical Chemistry. Mr. Kirlin also serves as a director of Akrion, Inc. a supplier of single wafer and batch immersion cleaning tools for the semiconductor industry.

Fred E. Faulkner, Jr. has been our Vice President—Worldwide Manufacturing since April 2001. Prior to joining Mykrolis, Mr. Faulkner served as Millipore’s Director of Manufacturing Operations from May 2000 until April 2001. Prior to that, Mr. Faulkner was President and Chief Operating Officer of Boston Acoustics, Inc., a designer and manufacturer of high-performance audio systems, from April 1997 until April 2000. Before joining Boston Acoustics, Mr. Faulkner served as Vice President of Technical Operations for Millipore’s Microelectronics Division from June 1994 until April 1997.

Takashi Mizuno has been our Vice President since April 2001 and has been President of our Japanese subsidiary, Nihon Mykrolis KK since April 2001. Mr. Mizuno was a Director of Global Accounts for Tokyo Electron Limited from February 2000 until April 2001. Prior to that, Mr. Mizuno served as Millipore’s Director of Laboratory Research from September 1995 until February 2000 and as Division Manager of Millipore’s Laboratory Water Division from January 1995 until September 1995.

Gerry Mackay has been our Vice President—Worldwide Sales & Marketing since February 2002. Prior to joining Mykrolis, Mr. Mackay served Millipore in various sales and marketing capacities since August of 1987, first with Millipore’s UK subsidiary and subsequently as the General Manager for Millipore’s Asia operations and finally as Worldwide Director of Marketing—Biotechnology. Mr. Mackay was designated as an Executive Officer by our Board of Directors in April 2002, and was elected an officer of the corporation in April 2003.

Jieh Hwa Shyu has been our Vice President of Research and Development since April of 2001, was designated as an Executive Officer by our Board of Directors in April 2002 and was elected an officer of the corporation in April 2003. In January 2004 Mr. Shyu was named Chief Technology Officer of Mykrolis. Prior to

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our separation from Millipore, Mr. Shyu served the Microelectronic Division of Millipore as a Director of R & D from 1997 until March 2001. Prior to joining Millipore, Mr. Shyu served Digital Equipment Corporation as a Principal Engineer and Supervisor.

Sharon Pinto has been our Vice President-Human Resources since June of 2003 and was designated as an Executive Officer by our Board of Directors in October 2003. Prior to joining us Ms. Pinto had served as the Director of Human Resources at Maxtor Corporation since April 2002. From January 2001 until April 2002, Ms. Pinto was the Director of Human Resources at Tilion Inc and from January 1999 until December of 2000 she served as the Global Human Resource Director of Lionbridge Technologies Inc. Prior to that Ms. Pinto was a Senior Human Resources Manager at Polaroid Corporation.

Available Information

Our Annual Report on Form 10-K, our quarterly reports on Form 10-Q and any current reports on Form 8-K that we may file or furnish to the S.E.C. pursuant to Sections 13(a) or 15(d) of the Securities Exchange Act of 1934 as well as any amendments to any of those reports are available free of charge on or through our website as soon as reasonably practicable after we file them with or furnish them to the S.E.C. electronically. Our website is located at http://www.Mykrolis.com; these reports can be found under “Investor Relations—SEC Filings”. In addition, the SEC maintains a website containing these reports that can be located at http://www.SEC.gov. These reports may also be read and copied at the SEC’s Public Reference Room at 450 Fifth Street, N.W., Washington, D.C. 20549. Information on the operation of the Public Reference Room may be obtained by calling the SEC at 1-800-SEC-0330.

The Board of Directors adopted an amended code of business ethics, The Mykrolis Code of Conduct, applicable to all of our executives, directors and employees on June 27, 2002 as well as a set of corporate governance guidelines on December 19, 2002. The Mykrolis Code of Conduct, the Governance Guidelines and the charters for our Audit & Finance Committee and of our Management Development & Compensation Committee all appear on our website at http://www.Mykrolis.com under “Investor Relations—Governance”. The Governance Guidelines and committee charters are also available in print to any shareholder that requests a copy. Copies may be obtained by contacting Peter W. Walcott, our Vice President & General Counsel at our corporate headquarters.

Item 2.    Properties.

Our principal executive offices are located in Billerica, Massachusetts. We also have manufacturing and design facilities in the United States and Japan. Information about these facilities is set forth below:

In addition, we lease a 144,000 square foot building in Bedford, Massachusetts of which 70,000 square feet is subleased by us to a third party under a sublease expiring in November 2005. We have an option to purchase this leased facility at fair market value between June 2005 and November 2005, the expiration date on our lease, and our landlord has an option to sell us this facility at 90% of its fair market value prior to November 30, 2005. If our landlord exercises the option to sell, we will have one year to complete the purchase of the facility, during which time interest on the purchase price will accrue. Since this facility was deemed to be inappropriate for our business needs, we closed this facility during the third quarter of 2001. We are currently attempting to sublease the unused portion of this facility.

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We lease approximately 4,200 square feet of manufacturing space in Millipore’s facility located at 80 Ashby Road, Bedford, MA under a transitional services agreement that expires March 31, 2006. We also lease approximately 21,000 square feet of research and development and manufacturing space in two buildings located in San Diego, California which we assumed pursuant to our acquisition of Aeronex, Inc. described above. The leases for this space expire in December 2006.

We maintain a worldwide network of sales and service centers, including two in the United States, three in Europe (two in Germany and one in France), two in Japan and four in other parts of Asia (Taiwan, Singapore, China (Shanghai) and Korea). Leases for our facilities expire between February 2005 and March 2014. We currently expect to be able to extend the terms of expiring leases or to find suitable replacement facilities on reasonable terms.

We believe that our facilities are well-maintained and, except as described above, suitable for their respective operations. Except for approximately 25,000 square feet in our Billerica facility, 27,000 square feet in our Yonezawa plant, our Swindon U.K. site and the above described closed facility, all of our facilities are fully utilized.

In addition to the above facilities that we use or have used in our operations, we continue to be a named lessee on two leases relating to facilities located in California which were formerly used by Tylan General Corporation prior to its acquisition by Millipore in 1997. These leases expire in 2005 and 2006. These lease obligations were assumed by us pursuant to our separation from Millipore. While both of these facilities have been subleased for the remainder of their terms, under the provisions of the sublease arrangements we were not released from the lease obligations by the landlord.

Item 3.    Legal Proceedings.

On March 3, 2003 we filed a lawsuit against Pall Corporation in the United States District Court for the District of Massachusetts alleging infringement of two of the Company’s U.S. patents by a fluid separation device known as the Pall Photo Kleen EZD-2 filter assembly manufactured and sold by the defendant. Our lawsuit also sought a preliminary injunction preventing the defendant from the manufacture, use, sale, offer for sale or importation into the U.S. of the infringing product. On March 24, 2003 defendant filed an answer denying that its fluid separation device infringed our patents; defendant also filed a counterclaim seeking a dismissal of the Company’s lawsuit, a decree that our patents are invalid and/or not infringed and costs incurred in conducting the litigation. On April 30, 2004, the court issued a preliminary injunction against Pall Corporation and ordered Pall to immediately stop making, using, selling, or offering to sell within the U.S., or importing into the U.S., its PhotoKleen EZD-2 Filter Assembly products or “any colorable imitation” of those products. On June 21, 2004, the Company filed a motion with the court to hold Pall Corporation in contempt of court for failing to comply with the terms of the preliminary injunction. Subsequently, Pall filed a motion to dissolve the preliminary injunction based on two Japanese publications that it alleged raised questions as to the validity of the Company’s patents. On January 18, 2005, the United States District Court of Massachusetts issued an order holding Pall Corporation in contempt of court for the violation of the preliminary injunction and ordering Pall to disgorge all profits earned from the sale of its PhotoKleen EZD-2 Filter Assembly products and colorable imitations thereof from the date the preliminary injunction was issued through January 12, 2005. In addition, Pall was also ordered to reimburse Mykrolis for certain of its attorney’s fees associated with the contempt and related proceedings. The Court’s order also dissolved the preliminary injunction, effective January 12, 2005. On February 17, 2005, the Company filed a notice of appeal to the U.S. Circuit Court of Appeals for the Federal Circuit appealing the portion of the Court’s order that dissolved the preliminary injunction and Pall filed a notice of appeal to that court with respect to the finding of contempt.

We are also party to lawsuits arising in the ordinary course of business. We do not believe that these proceedings individually or in the aggregate will have a material adverse effect on our financial condition, results of operations or cash flows.

Item 4.    Submission of Matters to a Vote of Security Holders.

This item is not applicable.

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PART II

Item 5.    Market for Mykrolis’ Common Stock, and Related Stockholder Matters.

Mykrolis’ Common Stock, $0.01 par value, has traded on the New York Stock Exchange under the symbol “MYK” since August 10, 2001. The following table sets forth, for the indicated fiscal periods, the high and low sales prices of Mykrolis’ Common Stock (as reported on the New York Stock Exchange Composite Tape). As of February 1, 2005 there were approximately 2,181 shareholders of record.

The Company has never declared or paid any cash dividends on its capital stock. The Company currently intends to retain all available earnings for use in its business and does not anticipate paying any cash dividends in the foreseeable future. On November 29, 2001 the Mykrolis Board of Directors declared a dividend of one common stock purchase right for each share of Mykrolis Common Stock outstanding to shareholders of record on December 31, 2001, payable on January 4, 2002. For a description of the Common Stock Rights Plan see “Other Information” in Item 1 above. Each right entitles the holder to purchase one share of Mykrolis Corporation Common Stock at a price of $130.

Item 6.    Selected Financial Data.

The following table sets forth selected historical financial information derived from our audited consolidated and combined balance sheets and statements of operations as of and for the years ended December 31, 2004, 2003, 2002, 2001 and 2000. Our combined financial statements for periods prior to March 31, 2001 include amounts that have been derived from the consolidated financial statements and accounting records of Millipore using the historical results of operations and historical basis of assets and liabilities of our business. The selected historical financial information for the years ended December 31, 2001 and 2000 includes allocations of Millipore corporate expenses related to our business, including centralized research and development, legal, accounting, employee benefits, officers’ salaries, real estate, insurance, information technology services, distribution, treasury and other Millipore corporate and infrastructure costs. These expense allocations were determined on a basis that Millipore and we considered to be a reasonable reflection of the utilization of services provided or the benefit received by us. However, the consolidated and combined financial information included herein may not necessarily reflect our operating results, financial position and cash flows in the future or what they would have been had we been a separate, stand-alone entity during all periods presented.

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You should also read our “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our consolidated and combined financial statements and related notes included elsewhere in this document for a further explanation of the financial data summarized here.

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Item 7.    Management’s Discussion and Analysis of Financial Condition and Results of Operations.

(In thousands except share and per share data)

You should read the following discussion and analysis of our financial condition and results of operations with the consolidated financial statements and the accompanying notes to the consolidated financial statements included elsewhere in this document. This discussion contains forward-looking statements and involves numerous risks and uncertainties, including, but not limited to, those described in the “Risk Factors” section of this Item 7. Our actual results may differ materially from those contained in any forward-looking statements.

Overview

This overview is not a complete discussion of our financial condition, changes in financial condition and results of operations; it is intended merely to facilitate an understanding of the most salient aspects of our financial condition and operating performance and to provide a context for the discussion that follows. The detailed discussion and analysis that follows must be read in its entirety in order to fully understand our financial condition and results of operations.

We are a worldwide developer, manufacturer and supplier of liquid and gas delivery systems, components and consumables used to precisely measure, deliver, control and purify the process liquids, gases and chemicals that are used in the semiconductor manufacturing process. Prior to March 2001, our business was operated as a fully integrated business unit of Millipore Corporation (“Millipore”). We became an independent company through a spin-off by Millipore, which was completed in February of 2002.

The principal market we serve is the global semiconductor industry, a highly cyclical business which experienced a significant downturn that resulted in deterioration in our net sales and results of operations during the period from 2001 to 2003. This downturn had the greatest impact on our sales of liquid and gas equipment products, as new semiconductor plant construction and upgrades declined. Net sales of our consumable products, which tend to be driven by capacity utilization also declined during this period, although less drastically, and benefited from the recovery of the volume of semiconductor wafers being built in 2003. Commencing during the fourth quarter of 2003 and continuing through the fourth quarter of 2004, we experienced improved business conditions, which had a positive impact on our sales growth and profitability. During the third quarter of 2004 this recovery began to soften, as key OEM customers announced order delays and reduced booking rates and there was a pause in the growth of wafer starts. The outlook for 2005 is currently unclear; however, should business conditions signal a downturn, we intend to take appropriate actions to maintain profitability at reduced sales levels.

As the depth of the semiconductor downturn continued from 2001 into 2002, product demand deteriorated causing lower overhead absorption due to the reduced production volumes and a resulting decrease in gross profit margins from 36.1% to 33.4%. As business activity started to recover and we started to benefit from our manufacturing consolidation and restructuring programs during 2003, gross profit margins increased to 43.4%. In 2004, gross profit margin increased further to 47.7% primarily driven by spending efficiency and increased leverage of our manufacturing overhead due to higher demand. We maintained our research and development expenditures during the period at $19,685 in 2002 and $19,110 in 2003 increasing to $25,739 in 2004 as we continued to make investments in a number of new product initiatives, including new chemical filtration products, dispense systems and advanced gas delivery equipment. Cost savings from our restructuring programs in 2001 and 2002 and reductions in discretionary spending throughout the period caused our selling, general and administrative expenses to decline from $67,809 in 2002 to $64,795 in 2003 selling, general and administrative spending increased to $75,737 in 2004 primarily due to increases in incentive compensation related to higher revenue and profitability.

Our operations generated positive cash flows of $7,481 in 2002, $14,927 in 2003 and $44,093 in 2004 as a result of increasing levels of profitability and efforts to effectively manage working capital. Capital expenditures

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for property, plant and equipment were $17,949 in 2002, $3,755 in 2003 and $4,154 in 2004. Capital expenditures during this period were primarily used for the purchase of production and research and development equipment and the transfer of manufacturing operations from Millipore facilities. Most of our separation-related programs have now been completed. During 2003 and 2004, we also used cash of approximately $7,875 and $7,439, respectively, to acquire certain assets of two privately held businesses, Aeronex, Inc and Bentec Scientific LLC. During 2005, we expect to invest in the range of $10 to $12 million on capital expenditures primarily related to the purchase of manufacturing and R&D equipment. We believe that our cash, investments and expected future cash flows from operations will be sufficient to meet our working capital, capital expenditure, and research and development investment requirements for the next 12 months. However, in order to take advantage of growth opportunities, we may elect to raise capital through equity or debt financing. To that end, we filed a shelf registration statement with the Securities and Exchange Commission, which became effective on November 26, 2003.

Our Separation from Millipore Corporation

In connection with our separation from Millipore, we entered into agreements with Millipore under which Millipore agreed to provide services to us during a transition period after the separation date. The agreements related to facilities services, information technology services, distribution, accounting, finance and other services and arrangements. Under these agreements, we reimbursed Millipore for the cost of these services. The duration of the different transition service agreements varied depending on the anticipated time it would take for us to replace the service, generally for a one-year period. As these transition service agreements expired without renewal, we were able to provide these services ourselves or negotiate new agreements with various third parties at costs at least as favorable as those paid to Millipore for these services.

Upon separation, we also entered into agreements with Millipore for membrane manufacturing and supply, research and development, product distribution and contract manufacturing, generally for a five-year period. The foregoing transition agreements may not necessarily reflect the costs of obtaining the services from unrelated third parties or of our providing the applicable services ourselves. However, we believe that purchasing these products and services from Millipore provides us with an efficient means of obtaining these products and services during the transition period.

Products and services purchased from Millipore included in the accompanying consolidated statements of operations are as follows:

In addition, we have agreed to provide transition services to Millipore, for which we have been reimbursed at our cost. These amounts totaled $806, $1,296, and $1,750 in 2004, 2003 and 2002 respectively, related to manufacturing, distribution, research and development services that have been recorded as reductions to our cost of sales, and to our research and development expenses. During 2001, we entered into a royalty agreement with Nihon Millipore, which provides Nihon Millipore the right to use certain intellectual property that was developed by Mykrolis in connection with the bioscience business. As a result of this agreement, $358, $553 and $536 in royalty income from Millipore was recognized and recorded in other income (expense), net for the years ended December 31, 2004, 2003 and 2002, respectively. Millipore discontinued usage of our distribution and research and development services in Japan and vacated our Japanese manufacturing site in late 2004, therefore, intellectual property royalty income ceased in the fourth quarter of 2004. We anticipate to partially offset this loss by additional cost reductions in Japan.

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In 2004, 2003 and 2002 we purchased products from Millipore for inclusion in our products sold to third parties totaling $3,986, $3,016 and $2,717, respectively. For 2004, 2003 and 2002, products sold to Millipore by us totaled $1,308, $1,587 and $2,010, respectively.

Critical Accounting Policies and Significant Judgments and Accounting Estimates

The discussion and analysis of our financial condition and results of operations are based upon our consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. On an on-going basis, we evaluate our critical accounting policies and significant judgments and estimates, including those related to net sales, accounts receivable, inventories, long-lived assets and goodwill, deferred tax assets, income tax contingencies, warranty obligations, restructuring charges, pension obligations, and litigation contingencies. We base our estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.

We believe the following critical accounting policies affect our more significant judgments and estimates used in the preparation of the consolidated financial statements. We have reviewed these policies with the Audit and Finance Committee of our Board of Directors.

Net Sales

Our net sales consist of revenue from sales of products net of trade discounts and allowances. We recognize revenue upon shipment, primarily FOB shipping point, when evidence of an arrangement exists, contractual obligations have been satisfied, title and risk of loss have been transferred to the customer and collection of the resulting receivable is reasonably assured through historical collection results and regular credit evaluations. In most transactions, we have no obligations to our customers after the date products are shipped other than pursuant to warranty obligations. In the event that significant post-shipment obligations or uncertainties exist such as customer acceptance, revenue recognition is deferred as appropriate until we fulfill such obligations or the uncertainties are resolved.

Accounts Receivable

We maintain allowances for doubtful accounts for estimated losses resulting from the inability of our customers to make required payments based upon specific identification, by customer. If the financial condition of our customers were to deteriorate, resulting in an impairment of their ability to make payments, additional allowances may be required.

Inventories

We adjust the cost basis of our inventory to reflect its net realizable value, if lower than cost. We provide reserves for estimated excess and obsolete inventory equal to the difference between the cost of inventory and the estimated net realizable value based upon assumptions about future demand and market conditions. We fully reserve for inventories deemed obsolete. We perform quarterly reviews of all inventory items to identify excess and obsolete inventories on-hand by comparing on-hand balances to recent historical usage as well as anticipated or forecasted demand, based upon input from sales, R&D and marketing functions. If estimates of future demand or actual market conditions are less favorable than those previously projected, additional inventory write-downs may be required.

Long-Lived Assets and Goodwill

We periodically evaluate the recoverability of long-lived assets whenever events and changes in circumstances indicate that the carrying value of an asset or class of assets may not be fully recoverable and

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exceeds its fair value. For long-lived assets we intend to hold and use, if the carrying amount of the asset exceeds the sum of undiscounted cash flows expected to result from the use of the asset over its useful life, an impairment loss will be recorded. The amount of the impairment loss is measured as the amount by which the carrying amount of the long-lived asset exceeds its fair value. Assets held for sale are valued at fair value less costs to sell the asset.

For goodwill, we assess fair value by measuring discounted cash flows and comparable company analysis for the applicable underlying reporting unit and test for impairment as the difference between the resulting implied fair value of goodwill compared to its recorded carrying value. Goodwill impairment is tested annually or whenever events and changes in circumstances occur. We adopted the provisions of Statement of Financial Accounting Standards (“SFAS”) No. 142 on January 1, 2002; accordingly, goodwill amortization ceased on that date.

The estimates of useful lives and expected cash flows require us to make significant judgments regarding future periods that are subject to some factors outside our control. Changes in these estimates can result in significant revisions to the carrying value of these assets and may result in material charges to the results of operations.

Property, plant and equipment are recorded at cost. Expenditures for maintenance and repairs are charged to expense while the costs of significant improvements, which extend the life of the underlying asset, are capitalized. Assets are depreciated primarily using straight-line methods over estimated useful lives. Upon retirement or sale, the cost of assets disposed and the related accumulated depreciation are eliminated and related gains or losses are reflected in income.

Deferred Tax Assets

Our valuation allowance against the U.S. deferred tax assets are based on an assessment of historical pre-tax income (loss) and projected pre-tax income (loss) for early future periods. In addition, there is a valuation allowance against the deferred tax assets in certain foreign subsidiaries based on our assessment of historical pre-tax income and projected pre-tax income for early future periods. We currently expect there will be sufficient pre-tax income during 2005 to realize deferred tax assets in these foreign subsidiaries. We currently forecast pre-tax income in the U.S. and in addition, we have undertaken tax-planning initiatives designed to generate future U.S. taxable income however due to the early future period uncertainty a full valuation remains on the U.S. deferred tax assets at December 31, 2004. As we continue to generate taxable income in the U.S. against which these tax assets may be applied, some portion or all of the valuation allowance would be reversed and an increase in net income would consequently be reported in future years.

Income Tax Contingencies

Tax contingencies are recorded for probable exposures involving tax positions taken that could be challenged by taxing authorities. These probable exposures result from the varying application of statutes, rules, regulations and interpretations. Our estimate of the value of our tax contingencies contains assumptions based on past experiences and judgments about potential actions by taxing jurisdictions. It is reasonably likely that the ultimate resolution of these matters may be greater or less than the amount that we have accrued.

Warranty Obligations

At the time revenue is recognized, we provide for the estimated cost of product warranties as provided for under our contractual arrangements. Our warranty obligation is affected by product failure rates and service delivery costs incurred in correcting a product failure. Should such failure rates or costs differ from these estimates, accrued warranty costs would be adjusted in the period that such events or costs become known.

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Restructuring Charges

During 2003, 2002 and 2001, we recorded significant charges to operations in connection with our restructuring programs. The related reserves reflect estimates, including those pertaining to severance costs, facility exit costs and asset impairments. We reassess the reserve requirements to complete each restructuring program at the end of each reporting period and record adjustments to reflect changes in prior estimates. Actual experience may be different from these estimates.

Pension Obligations

We have pension costs and credits, which are developed from actuarial valuations. Inherent in these valuations are key assumptions, including discount rates, compensation increases and expected return on plan assets, which are usually updated annually at the beginning of each fiscal year. We consider current market conditions in making these key assumptions. Changes in the related pension costs or credits may occur in the future due to changes in assumptions.

Litigation contingencies

In March of 2003 we filed a lawsuit against Pall Corporation in the United States District Court for the District of Massachusetts alleging infringement of two of the Company’s U.S. Patents by a fluid separation device known as the Pall Photo Kleen EZD-2 filter assembly manufactured and sold by the defendant. Current developments in this litigation are described in Part I, Item 3, of this report.

We are subject to proceedings, lawsuits and other claims, including proceedings under laws and government regulations related to securities, environmental, labor, product and other matters. We are required to assess the likelihood of any adverse judgments or outcomes to these matters, as well as potential ranges of probable losses. A determination of the amount of reserves required, if any, for these contingencies is based on a careful analysis of each individual issue with the assistance of outside legal counsel. The required reserves may change in the future due to new developments in each matter or changes in approach such as a change in settlement strategy in dealing with these matters.

Results of Operations

Operating trends and recent developments

We operate in one reportable business segment that develops, manufactures and sells consumables and capital equipment products to semiconductor fabrication companies and other companies using similar manufacturing processes, as well as OEM suppliers to those companies. The principal market we serve is the global semiconductor industry, a highly cyclical business. From early 2001 until 2003, this industry faced a severe downturn, and as a result, we have experienced significant variations in net sales and results of operations in the periods presented.

Our liquid and gas equipment products were impacted the most by the industry downturn and we have experienced weak demand for these products during 2001, 2002 and a portion of 2003 as new semiconductor fabrication plant constructions and upgrades declined. The semiconductor and related industry capacity utilization started to improve in late 2002 and this trend has continued through 2004, which primarily benefited our consumable products.

Beginning in the fourth quarter of 2003 semiconductor fabrication companies’ increased capacity utilization rates and capacity additions, which significantly improved our business conditions and positively impacted our revenue and profitability levels in 2004. During the third quarter of 2004 our business conditions began to soften as key OEM customers announced order delays and reduced booking rates and key semiconductor manufacturers reported lower wafer starts. The outlook for 2005 is currently unclear; however, should business conditions signal a downturn, we intend to take appropriate actions to maintain profitability at reduced sales levels.

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During the third quarter of 2004, we completed the acquisition of Bentec Scientific LLC, a privately held manufacturer of polyvinyl alcohol (“PVA”) roller brushes used in post chemical mechanical planarization (“CMP”) cleaning applications. This acquisition is a key addition to our technology portfolio and expands our consumable product line. In addition, in the fourth quarter of 2003, we acquired the business and certain assets and liabilities of Aeronex, Inc., a privately held company that developed, manufactured and marketed gas purification components and systems. The Aeronex products complement our line of gas purifiers. As part of our business strategy, we expect to continue to address gaps in our product offerings, diversify into complementary markets or pursue additional technology and customers through acquisitions, joint ventures or other types of collaborations. Our results of operations include Bentec and Aeronex results since the date of purchase.

Our results of operations for the years ended December 31, 2004, 2003 and 2002 in dollars and as a percentage of total net sales were as follows:

Year Ended December 31, 2004 Compared to Years Ended December 31, 2003 and 2002

Net Sales.    Net sales were $289,230 in 2004, which represented a 55.6%, or $103,332, increase from 2003. The increase was primarily attributable to increases in sales of both our consumable and equipment product lines, as our customers’ capacity utilization and capacity expansion increased. The favorable impact of stronger Japanese Yen, Asian and Euro foreign exchange rates increased net sales by $12,411 in 2004 compared to 2003.

Net sales were $185,898 in 2003, which represented a 4.2% or $7,449, increase from 2002. The increase was primarily attributable to the favorable impact of stronger Japanese Yen, Asian and Euro foreign exchange

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rates which increased net sales by $8,760. The strong recovery in net sales in Asia, driven primarily by increased consumable sales, was offset by a sharp decline in our North American equipment business.

Net sales and percent change in net sales in comparison to the prior year from 2004—2002 years, by geography, are summarized in the table below.

The primary currencies impacting the difference between U.S. dollar results and local currency results, during 2004, compared with 2003, were the Japanese Yen, the Euro and the South Korean Won. During 2004 average exchange rates for the Japanese Yen strengthened by approximately 7.4%, the Euro by 10.2% and the South Korean Won by 3.9%. This positively impacted U.S. Dollar sales growth in 2004. During 2003 compared to 2002, average exchange rates for the Japanese Yen strengthened by approximately 7.9%, the Euro by 19.7% and the South Korean Won by 5.0%. This also positively impacted U.S. Dollar sales growth in 2003.

Gross Profit Margins.    Gross profit margins were 47.7% in 2004, 43.4% in 2003 and 33.4% in 2002. During 2004, the improvement in our gross profit margin was primarily driven by spending efficiency, increased leverage of our manufacturing overhead due to higher demand, sales of products that were previously deemed excess or obsolete and the favorable impact of foreign exchange. The favorable impact of stronger foreign exchange rates in Japan, Asia and Europe in relation to the U.S. resulted in a favorable foreign exchange impact of approximately $4 million in the 2004 period compared to the 2003 period.

During 2003, the improvement in gross margin was primarily attributed to $9,424 of excess and obsolete inventory reserves that were recorded in the fourth quarter of 2002 and to a lesser extent the $4.0 million favorable impact of foreign exchange. In addition, we realized spending efficiency from cost reductions resulting for the consolation and reorganization of manufacturing operations and reductions in warranty expense during 2003. Finally, gross profit margins in 2002 included $1,735 of redundant facility costs and labor expenses associated with the transfer of manufacturing operations from Millipore to our Billerica facility and $971 of impairment charges associated with surplus manufacturing machinery.

During the fourth quarter of 2002, we recorded $9,424 of inventory reserves and write-offs in light of the prolonged downturn in the semiconductor industry. We decided to rationalize our product portfolio and discontinue older generations of pressure transducers, vacuum products, filter housings, liquid dispense pumps and mass flow controllers. These “end-of-life” decisions resulted in a $6,992 charge to operations. In addition, the Company recorded additional charges for other products considered in excess of supply requirements needed to meet lower projections of product demand in the semiconductor industry over the ensuing three-year period and in excess of net realizable value.

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Operating Expenses

Research and Development Expenses.    Research and development expenses consist primarily of salaries and related expense for personnel engaged in research and development, fees paid to consultants, material cost for test units and other expense related to the design, development, testing and enhancement of our products. We expense all our research and development costs as they are incurred.

Research and development expenses increased 34.7% to $25,739 in 2004 compared to 2003. Key elements of our research and development expenses were related to the development of the new product platforms to meet the manufacturing needs for 90 and 65 nanometer semiconductor devices. In order to respond to the proliferation of new materials and chemicals in the manufacturing processes, and increased needs for tighter process control for 300mm wafers, investments were made for new contamination control products in the area of copper interconnects, deep ultra-violet (DUV) photolithography; and chemical and gas management technologies for advanced wafer cleans, deposition and etch equipments. Additional investments were made in area of advanced process control, monitoring and diagnostics capabilities for future generations of semiconductor manufacturing processes. During 2003 compared to 2002, research and development expenses decreased 2.9% from $19,685 in 2002 to $19,110 in 2003 mostly due to the timing of spending on key research and development project materials and the delay in staffing open positions.

Selling, General and Administrative Expenses.    Selling, general and administrative expenses consist primarily of compensation for personnel engaged in sales and marketing, finance and accounting, information technology, facilities and human resources; costs associated with marketing programs which include costs associated with trade shows, public relations, product marketing costs, and product evaluation costs and travel, professional services, which include legal, accounting audit and tax fees and directors and officers insurance, administrative expenses associated with operating as a public company and bad debt expenses.

Selling, general and administrative expenses increased 16.9% to $75,737 during 2004 versus 2003. This increase was primarily attributable to increases in incentive compensation relating to improvement in revenue and profitability, increases in travel and professional fees related to our compliance with Section 404 of the Sarbanes-Oxley Act of 2002 as well as the unfavorable impact of stronger foreign currency translation rates. This increase was slightly offset by a non-recurring benefit of $1,976 related to the termination of post retirement benefits recorded in the third quarter of 2004. Selling, general and administrative expenses decreased 4.4% from $67,809 in 2002 to $64,795 in 2003. This decrease was primarily attributable to cost savings resulting from the 2001 and 2002 restructuring programs as well as additional actions to reduce discretionary spending.

The impact of stronger foreign exchange rates in Japan, Asia and Europe in relation to the U.S. resulted in increased operating expenses of approximately $2 million in both 2004 compared to the 2003 and 2003 compared to 2002.

Restructuring and Other Charges.    We took several restructuring actions in 2003, 2002 and 2001 to better align our cost structure with prevailing market conditions due to the prolonged industry downturn. These actions, which were necessary as a result of reduced business volume, primarily focused on reducing our workforce and consolidating global facilities.

During 2004, we recorded $146 of accretion to selling, general and administration expenses during 2004 as a non-cash increase in the restructuring reserve as a result of originally recording the liability at present value. In addition, during 2004, we recorded changes to prior estimates resulting in the reversal of $88 in employee severance costs and $125 in facility exit costs. These changes in estimate were primarily due to lower than expected severance benefits paid and a reduction in estimated leasing costs for the Swindon, England and Bedford, MA vacant facilities.

Our operating results in 2003 included a total of $2,111 of restructuring and other charges. We recorded charges of $1,189 related to employee severance costs, $352 related to facility exit costs at the Swindon service

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facility and $570 related to changes in estimates for prior-year restructuring programs associated with the closing of manufacturing and service facilities in the United States and England.

During 2002, restructuring and other charges totaled $5,182. We recorded facilities exit costs of $81 and asset impairment charges of $1,683 related to the closure of the San Clemente, CA manufacturing site. Severance costs of $1,708 were recorded for reduction in force of employees in Europe, Asia and the United States. We recorded changes in estimate of $1,710 associated with facility exit costs for the Bedford, MA and Swindon, England sites. Also during 2002, the Company reclassified $1,638 of accrued restructuring costs from the workforce category to the leasehold/other category. This reclassification was primarily to increase the accrued restructuring costs for the Bedford, MA facility and reduce the accrued restructuring costs for 2001 reduction in force programs in Japan, Asia, Europe and the United States.

As of December 31, 2004, our accrued restructuring costs amounted to $1,482. Of this amount, the majority of the $69 in severance costs for terminated employees will be paid by the first quarter of 2005. The facilities-related costs of $1,413 will be substantially paid by the fourth quarter of 2005.

These combined restructuring initiatives were expected to generate annual savings of approximately $22 million through reduced payroll costs, facility-related costs and depreciation expense. The savings have been reflected in costs of sales, selling, general and administrative expenses and research and development expenses. For further details, see Note 18 of the accompanying notes to the consolidated financial statements included elsewhere in this document.

Other Income (Expense), Net.    During 2004, other income (expense), net included foreign currency transaction exchange gains of $561, interest income of $768, royalty income from Millipore of $358 and $602 of income on investments in entities accounted for under the equity method. During 2003, other income (expense), net included foreign currency transaction exchange gains of $567, interest income of $570, royalty income from Millipore of $536 and $587 of income on investments in entities accounted for under the equity method. In 2002, other income (expense), net included foreign currency transaction exchange gains of $1,632 primarily related to intercompany loans denominated in foreign currencies, interest income of $1,220, royalty income from Millipore of $553 and $38 loss on investments accounted for under the equity method.

Income Tax Expense.    In 2004, we recorded income tax expense of $9,338 on pre-tax income of $38,935. The income tax expense is primarily related to our foreign operations and results from our overall geographic mix of income and includes tax benefits relating to U.S. net operating losses for which no tax benefit had been previously taken.

In 2003, we recorded income tax expense of $4,977 on a pre-tax loss of $3,127. The income tax expense is related to our foreign operations and results from our overall geographic mix of income and includes no tax benefit for net operating losses in the United States.

In 2002, we recorded income tax expense of $2,118 on a pre-tax loss of $29,643. The income tax expense included settlements from foreign tax audits for which we are responsible under our tax sharing agreement with Millipore and other income tax expense in our foreign operations.

Prior to the completion of the spin-off by Millipore, our operating results were included in Millipore’s consolidated U.S. and state income tax returns and in tax returns of certain Millipore foreign subsidiaries. Accordingly, income taxes were calculated on a separate return basis as if we filed tax returns separately from Millipore. At December 31, 2001, we had a $9.0 million income tax receivable related to net operating loss carrybacks determined on a separate return basis. During 2002, in accordance with the tax sharing agreement, Millipore decided not to allow us to carry back these net operating losses. As a result, the receivable was transferred to Millipore and is reflected in the consolidated financial statements as a reduction to additional paid-in capital included in shareholders’ equity. Millipore managed its consolidated tax position for the benefit of its entire portfolio of businesses, and its tax strategies were not necessarily reflective of the tax strategies that we

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would have followed as a stand-alone company. We continuously evaluate our tax position and our effective tax rate depending on changes in the geographic mix of our earnings and the continued development of our tax strategies.

During 2004, Millipore notified us that certain of the Company’s U.S. tax attributes were utilized in connection with Millipore’s consolidated tax return filings for periods between the Separation and the Distribution Date. Under the terms of the tax sharing agreement with Millipore in connection with the Separation, we are entitled to be paid for tax attributes utilized by Millipore. In the first quarter of 2004, we received a payment with respect to these tax attributes of $1,255 from Millipore. As a result, this payment was recorded as an increase in additional paid-in capital included in stockholder’s equity. No receivable has been established for any remaining portion of these expunged attributes since the Company continues to review this matter with its former parent. Upon any cash settlement in the future, the Company will record a similar adjustment to reflect the contribution to capital by Millipore.

Liquidity and Capital Resources

Cash provided by operating activities was $44,093 during the year ended December 31, 2004 compared to $14,927 during the year ended December 31, 2003 and $7,481 during 2002. The increase in net cash from operations during 2004 and 2003 is primarily attributable to net income in 2004 and a reduced net loss in 2003. In 2002, cash provided by operating activities resulted primarily from inventory reductions of $20,981.

Cash flow used in investing activities consisted of a net of $28,447 and $14,477 during 2004 and 2003, respectively, for the purchase of marketable securities to invest in longer-term high-grade instruments. During 2004 we used $7,439 to acquire Bentec Scientific, a privately held manufacturer of polyvinyl alcohol (“PVA”) roller brushes used in post-CMP cleaning applications. During 2003, we also used $4,530 to acquire certain net assets of privately held Aeronex Inc., a manufacturer of gas purification products and $3,002 as a refundable deposit for the potential acquisition of certain assets of Bentec Scientific. Capital expenditures for property, plant and equipment totaled $4,154, $3,755 and $17,949 in the years ended December 31, 2004, 2003 and 2002, respectively. Over the past three years, capital expenditures were primarily for the construction and purchase of production and research and development equipment, and the transfer of manufacturing operations from Millipore facilities pursuant to our separation agreements. Most of our separation-related programs have now been completed. During 2005, we expect to spend $10 to $12 million on capital expenditures primarily related to the purchase of manufacturing and research and development equipment.

In 2004, 2003 and 2002, cash flows provided by financing activities primarily consisted of $10,668, $5,540 and $1,860, respectively, from the issuance of common stock under our employee stock purchase and stock option plans. Cash flows provided by financing activities for the year ended December 31, 2004 also included $1,255 of proceeds from our tax sharing agreement with Millipore. For the year ended December 31, 2002 also included net transfers of $1,457 from Millipore in accordance with the transition service agreements entered into in conjunction with our separation from Millipore, offset by $1,608 in cash collateratization related to a security deposit under the lease for our corporate headquarters, research and development and manufacturing facility and other security deposits. At December 31, 2004, this cash collateral was invested in certificates of deposit and money market funds.

We believe that our cash, cash equivalents, marketable securities and expected future cash flows from operations will be sufficient to meet our working capital, capital expenditure, and research and development investment requirements for the next 12 months. However, in order to take advantage of growth opportunities, including potential acquisitions, facility expansion, joint ventures, alliances or other business arrangements, we may seek to raise capital through equity or debt financing. To that effect, during 2003 we filed a shelf registration statement with the Securities and Exchange Commission with respect to $200 million of securities, which was declared effective on November 26, 2003. The timing, size and terms of any offering will depend on a number of factors, including market conditions.

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Contractual Obligations

The following table summarizes the payments due for specific contractual obligations. These amounts are as of December 31, 2004.

We do not have any relationships with unconsolidated entities or financial partnerships, such as entities often referred to as structured finance or special purpose entities, which would have been established for the purpose of facilitating off-balance sheet arrangements or other contractually narrow or limited purposes. As such, we are not exposed to any financing, liquidity, market or credit risk that could arise if we had engaged in such relationships.

Pursuant to the terms of the lease for our vacated Bedford, Massachusetts facility, the landlord has an option to sell the facility to us at any time prior to November 30 2005, the end of the lease term, at 90% of the then current market value, excluding the value of the lease. The landlord has informed us that it is currently assessing the alternatives available under this lease. Should the landlord decide to exercise the option to sell the facility to us, the lease provides that the sale to us of this facility is to be completed within twelve months following the date of exercise during which time interest on the purchase price will accrue, offset by rent paid under the lease. We estimate that the current fair market value of the facility is between $7,200 and $8,700. The landlord has informed us that it believes that the fair market value of the facility is substantially in excess of this range.

Qualitative and Quantitative Disclosure Relating to Market Risks

Our exposure to foreign currency exchange rate risk is managed on an enterprise-wide basis. We do not currently hold any derivative financial instruments and continue to evaluate our future hedging strategy. We sell our products in many countries and a substantial portion of our net sales and a portion of our costs and expenses are denominated in foreign currencies. Approximately 74% of our net sales in the year ended December 31, 2004 were derived from customers located outside of the U.S., principally in Asia including Japan, where we also manufacture some of our products. This exposes us to risks associated with changes in foreign currencies that can adversely impact revenues, net income and cash flow. In addition, we are potentially subject to concentrations of credit risk, principally in accounts receivable, as historically we have relied on a limited number of customers for a substantial portion of our net sales. We perform ongoing credit evaluations of our customers and we generally do not require collateral. Our major customers are large, well-established microelectronics companies that have historically paid their accounts receivable balances with us.

Recently Issued Accounting Pronouncements

In December 2004, the FASB issued SFAS No. 123 (revised 2004), “Share-Based Payment” (“SFAS 123(R)”). SFAS 123 (R) replaces SFAS 123, “Accounting for Stock-Based Compensation”, and supersedes APB Opinion No. 25, “Accounting for Stock Issued to Employees”. SFAS 123(R) requires that the compensation cost

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relating to share-based payment transactions be recognized in financial statements. That cost will be measured based on the fair value of the equity or liability instruments issued. The provisions of this Statement are effective for the first interim or annual reporting period that begins after June 15, 2005. We are currently evaluating the method of adoption and the impact of SFAS 123(R) on our financial position and results of operations. We are required to adopt SFAS 123 (R) in the third quarter of 2005. The pro forma disclosures previously permitted under SFAS 123 will no longer be an alternative to financial statement recognition. See Note 3 in our Notes to Consolidated Financial Statements for the pro forma net income and net income per share amounts for the years 2002 through 2004, as if we had used a fair value based method under SFAS 123, which is similar to the methods required under SFAS 123(R) to measure compensation expense for employee stock incentive awards.

In November 2004, the FASB issued SFAS No. 151, “Inventory Costs—an Amendment of ARB No. 43, Chapter 4” (“SFAS 151”). SFAS 151 amends ARB 43, Chapter 4, to clarify that abnormal amounts of idle facility expense, freight, handling costs, and wasted materials (spoilage) should be recognized as current-period charges. In addition, this Statement requires that allocation of fixed production overheads to the costs of conversion be based on the normal capacity of the production facilities. The provisions of this Statement are effective for inventory costs incurred during fiscal years beginning after June 15, 2005. The adoption of the provisions of SFAS 151 is not expected to have a material impact on our financial position or results of operations.

In March 2004, the FASB approved the consensus reached on the Emerging Issues Task Force (“EITF”) Issue No. 03-01, “The Meaning of Other-Than-Temporary Impairment and Its Application to Certain Investments.” EITF 03-01 provides guidance on determining when an investment is considered impaired, whether that impairment is other than temporary, and the measurement of an impairment loss. EITF 03-01 also provides new disclosure requirements for other-than-temporary impairments on debt and equity investments. In September 2004, the FASB delayed until further notice the effective date of the measurement and recognition guidance contained in EITF 03-01. The disclosure requirements of EITF 03-01 are effective for annual financial statements for fiscal years ending after December 15, 2003. The adoption of EITF 03-01 is not expected to have a material impact on our financial position or results of operations.

In December 2004, the FASB issued two FASB Staff Positions (FSP) that provide accounting guidance on how companies should account for the effects of the American Jobs Creation Act of 2004 that was signed into law on October 22, 2004. FSP FAS 109-1, “Application of FASB Statement No. 109, “Accounting for Income Taxes,” to the Tax Deduction on Qualified Production Activities Provided by the American Jobs Creation Act of 2004,” states that the manufacturers’ deduction provided for under this legislation should be accounted for as a special deduction instead of a tax rate change. FSP FAS 109-2, “Accounting and Disclosure Guidance for the Foreign Earnings Repatriation Provision within the American Jobs Creation Act of 2004,” allows a company additional time to evaluate the effects of the legislation on any plan for reinvestment or repatriation of foreign earnings for purposes of applying SFAS No. 109, “Accounting for Income Taxes.” These FSP’s may affect how a company accounts for deferred income taxes. These FSP’s are effective December 21, 2004. We are currently evaluating the impact from these FSP’s on our results of operations and financial position.

Factors and Uncertainties that may Affect Future Results

The matters discussed in this Annual Report on Form 10-K, include forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements include but are not limited to statements about:

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Discussions containing these forward-looking statements may be found, among other places, in “Business” and in “Management’s Discussion and Analysis of Financial Condition and Results of Operations”, as well as any amendments thereto reflected in subsequent filings with the SEC. These statements are based on current management expectations and are subject to substantial risks and uncertainties which could cause actual results to differ materially from the results expressed in, or implied by, these forward-looking statements. When used herein or in such statements, the words “anticipate”, “believe”, “estimate”, “expect”, “may”, “will”, “should” or the negative thereof and similar expressions as they relate to Mykrolis or its management are intended to identify such forward-looking statements. We undertake no obligation to publicly release any revisions to the forward-looking statements or reflect events or circumstances after the date of this Annual Report on Form 10-K except as required by law. Potential risks and uncertainties that could affect our future operating results include the risk factors described elsewhere in this Annual Report on Form 10-K as well as the following:

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RISKS RELATING TO OUR BUSINESS AND INDUSTRY

Our business depends substantially on semiconductor industry capital spending and production levels, which are characterized by periodic fluctuations that may cause a reduction in demand for our products.

Our business depends substantially upon the capital expenditures of semiconductor device manufacturers, which in turn depend upon the demand for semiconductors and other products utilizing semiconductors. We estimate that approximately 90% of our sales during 2004, 2003 and 2002 were to semiconductor capital equipment manufacturers, semiconductor device manufacturers and semiconductor material manufacturers and we expect that sales to such customers will continue to account for a substantial majority of our sales. Reductions in demand for the products manufactured by semiconductor capital equipment manufacturers and semiconductor device manufacturers will restrict our ability to grow our business and cause our sales and profitability to decline. Historically, the semiconductor market has been highly cyclical and has experienced periods of over capacity, resulting in significantly reduced demand for capital equipment used to make semiconductors. During fiscal 2003, 2002 and 2001 the semiconductor industry experienced a significant decline, which has caused a number of our customers to reduce their orders. The cyclicality of our sales is illustrated by the following: our net sales for 2004 were $289,230, an increase of $103,332 over 2003; our net sales for 2003 were $185,898 slightly up from 2002 sales of $178,449, but representing a decline of $36,825, or 13.6% from our net sales in 2001. Our net sales for 2001 were $215,274, representing a $140,226, or 39.4%, decline from our net sales in 2000. We also experienced downturns in 1996 and 1998. During the 1998 downturn, our annual net sales declined approximately $82,865, or 31% from the prior year. There is typically up to a three month lag between a change in capital expenditures within the semiconductor industry and the related impact on the demand for our products. Any future downturn could inhibit our growth and could cause our profitability to decline.

The semiconductor industry is subject to rapid demand shifts which are difficult to predict. As a result, our inability to meet demand in response to these rapid shifts may cause a reduction in our market share.

Our ability to increase sales of our products, particularly our capital equipment products, depends in part upon our ability to ramp up the use of our manufacturing capacity for such products in a timely manner and to mobilize our supply chain. In order to meet the demands of our customers, we may be required to ramp up our manufacturing capacity in as little as a few months. If we are unable to expand our manufacturing capacity on a timely basis or manage such expansion effectively, our customers could seek such products from other suppliers, and our market share could be reduced. Because demand shifts in the semiconductor industry are rapid and difficult to foresee, we may not be able to increase capacity quickly enough to respond to such an increase in demand.

Our annual and quarterly operating results are subject to fluctuations as a result of rapid demand shifts and our insignificant level of backlog and if we fail to meet the expectations of securities analysts or investors, the market price of our securities may decrease significantly.

Our sales and profitability can vary significantly from quarter to quarter and year to year. Because our expense levels are relatively fixed in the short-term, an unanticipated decline in revenue in a particular quarter could disproportionately affect our net income in that quarter. In addition, we make a substantial portion of our shipments shortly after we receive the order, and therefore we operate with an insignificant level of backlog. As a consequence of the just-in-time nature of shipments and the low level of backlog, our results of operations may decline quickly and significantly in response to changes in order patterns or rapid decreases in demand for our products. We anticipate that fluctuations in operating results will continue in the future. Such fluctuations in our results could cause us to fail to meet the expectations of securities analysts or investors, which could cause the market price of our securities to decline substantially. We believe that period-to-period comparisons of our results of operations may not be meaningful, and you should not rely upon them as indicators of our future performance.

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We may not be able to accurately forecast demand for our products.

As noted above, we typically operate our business on a just-in-time shipment basis with a low level of backlog and we order supplies and plan production based on internal forecasts of demand. Due to these factors, we have, in the past, and may again in the future, fail to accurately forecast demand for our products, in terms of both volume and specific products for which there will be demand. This has lead to, and may in the future lead to, delays in product shipments, disappointment of customer expectations, or, alternatively, an increased risk of excess inventory and of inventory obsolescence. If we fail to accurately forecast demand for our products, our business, financial condition and operating results could be materially and adversely affected.

As the semiconductor industry rebounds, it may not rebound to historic levels but instead may reflect a lower rate of long-term growth, similar to the electronics industry.

Notwithstanding the recent severe and prolonged downturn in the semiconductor industry and the related reduction in manufacturing operations, there may still be excess manufacturing capacity. In addition, there is no new application to drive growth in the semiconductor industry, as was the case in 1998 with telecommunications and internet applications. Accordingly, some analysts have predicted that the semiconductor industry may experience lower growth rates during a recovery cycle than has historically been the case and that its longer-term performance may reflect this lower growth rate, which would be similar to the growth rate of the electronics industry.

If we are unable to maintain our technological expertise in design and manufacturing processes, we will not be able to successfully compete.

We believe that our future success will depend upon our ability to develop and provide products that meet the changing needs of our customers, including the transition from the use of 200 millimeter wafers to 300 millimeter wafers, the shrinking of integrated circuit line-widths and the use of new classes of materials, such as copper, titanium nitride and organic and inorganic dielectric materials, which are materials that have either a low or high resistance to the flow of electricity. This requires that we successfully anticipate and respond to technological changes in manufacturing processes in a cost-effective and timely manner. Any inability to develop the technical specifications for any of our new products or enhancements to our existing products or to manufacture and ship these products or enhancements in volume in a timely manner could harm our business prospects and significantly reduce our sales. In addition, if new products have reliability or quality problems, we may experience reduced orders, higher manufacturing costs, delays in acceptance and payment, additional service and warranty expense and damage to our reputation.

Our competitive position will be weakened if semiconductor device manufacturers do not require semiconductor capital equipment manufacturers to design our products into new generations of their equipment.

New products designed by semiconductor capital equipment manufacturers typically have a lifespan of five to ten years. Our competitive success depends on our products being designed into new generations of equipment for the semiconductor industry. In some cases, semiconductor device manufacturers may direct semiconductor capital equipment manufacturers to use a specified supplier’s product in their equipment. Accordingly, our success will depend in part on our ability to have semiconductor device manufacturers specify that our products be used at their semiconductor fabrication facilities. If our products are not specified by semiconductor equipment manufacturers, our net sales may be reduced during the lifespan of our customers’ products.

Because our sales are concentrated on a small number of key customers, our revenue and profitability may materially decline if one or more of our key customers do not continue to purchase our existing and new products in significant quantities.

We depend and expect to continue to depend on a limited number of customers for a large portion of our business, and changes in several customers’ orders could have had a significant impact on our operating results. In 2004, 2003 and 2002, our top customer accounted for approximately 14%, 11% and 13%, respectively, of our

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net sales. In those same periods, net sales to our ten largest customers accounted for approximately 38%, 34% and 35%, respectively, of our net sales. In addition, we sell products to systems integrators who then sell components, which include our products, to some of our major customers. If any one of our key customers decides to purchase significantly less from us or to terminate its relationship with us, our revenue and profitability may decline significantly. We could also lose our key customers or significant sales to our key customers because of factors beyond our control, such as a significant disruption in our customers’ businesses generally or in a specific product line. These customers may stop incorporating our products into their products with limited notice to us and suffer little or no penalty for doing so. In addition, if any of our customers merge, we may experience lower overall sales from the merged companies. Because one of our strategies has been to develop long-term relationships with a few key customers in the product areas in which we focus and because we have a long product design and development cycle for most of our products and prospective customers typically require lengthy product qualification periods prior to placing volume orders, we may be unable to replace these customers quickly or at all.

Because we are subject to order and shipment uncertainties and many of our costs are fixed, any significant changes, cancellations or deferrals of orders or shipments could cause our revenue and profitability to decline or fluctuate.

As is typical in the microelectronics industry, we do not usually obtain long-term purchase orders or commitments from our customers. Instead, we work closely with our customers to develop non-binding forecasts of the future volume of orders. Customers may cancel their orders, change production quantities from forecasted volumes or delay production for reasons beyond our control. Order cancellations or deferrals could cause us to hold inventory for longer than anticipated, which could reduce our profitability, restrict our ability to fund our operations and cause us to incur unanticipated reductions or delays in our revenue. Our customers often change their orders multiple times between initial order and delivery. Such changes usually relate to quantities or delivery dates, but sometimes relate to the specifications of the products we are supplying. If a customer does not timely pay for these products, we could incur significant charges against our income. In addition, our profitability may be affected by the generally fixed nature of our costs. Because a substantial portion of our costs are fixed, we may experience deterioration in gross margins when volumes decline. From time to time, we make capital investments in anticipation of future business opportunities. If we are unable to obtain the anticipated business, our revenue and profitability may decline.

Competition from existing or new companies in the microelectronics industry could cause us to experience downward pressure on prices, fewer customer orders, reduced margins, the inability to take advantage of new business opportunities and the loss of market share.

We operate in a highly competitive industry. We compete against many domestic and foreign companies that have substantially greater manufacturing, financial, research and development and marketing resources than we do. In addition, some of our competitors may have more developed relationships with our existing customers than we do, which may enable them to have their products specified for use more frequently by these customers. We also face competition from the manufacturing operations of our current and potential customers, who continually evaluate the benefits of internal manufacturing versus outsourcing. As more original equipment manufacturers dispose of their manufacturing operations and increase the outsourcing of their products to liquid and gas delivery system and other component companies, we may face increasing competitive pressures to grow our business in order to maintain our market share. If we are unable to maintain our competitive position, we could experience downward pressure on prices, fewer customer orders, reduced margins, the inability to take advantage of new business opportunities and a loss of market share.

If we are unable to successfully adjust our business strategy for some of our product lines to reflect the increasing price sensitivity on the part of our customers, our business and financial condition could be harmed.

Our business strategy for many of our product lines has been focused on product performance, technological innovations that provide enhanced efficiencies, and customer service, rather than simply price. As a result of

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current economic conditions and changes in various markets that we serve, our customers have experienced significant cost pressures and, as a result, we have observed increased price sensitivity on the part of our customers. If competition for any of our product lines should come to focus solely on price rather than on product performance, technological innovations and customer service, we will need to adjust our business strategy and/or product offerings accordingly and, if we are unable to do so, our business, financial condition and operating results could be materially and adversely affected.

We conduct a significant amount of our sales activity and manufacturing efforts outside the United States, which subjects us to additional business risks and may cause our profitability to decline due to increased costs.

Sales by our international subsidiaries to customers outside the United States accounted for approximately 74% of our net sales in 2004, 73% of our net sales in 2003, and 69% of our net sales in 2002. We anticipate that international sales will continue to account for a majority of our net sales. In addition, a number of our key domestic customers derive a significant portion of their revenues from sales in international markets. We also manufacture a significant portion of our products outside the United States and are dependent on international suppliers for many of our parts. We intend to continue to pursue opportunities in both sales and manufacturing internationally. Our international operations are subject to a number of risks and potential costs that could adversely affect our revenue and profitability, including:

In the past, we have incurred costs or experienced disruptions due to the factors described above and expect to do so in the future. For example, our operations in Asia, and particularly Korea, Taiwan and Japan, have been negatively impacted in the past as a result of regional economic instability, most recently in 1998. In addition, Taiwan and Korea account for a growing portion of the world’s semiconductor manufacturing. There are currently strained relations between China and Taiwan and there are growing tensions between North Korea and South Korea and the United States. Any adverse developments in those relations could significantly disrupt the worldwide production of semiconductors, which would lead to reduced sales of our products.

Fluctuations in the value of the U.S. dollar in relation to other currencies may lead to lower net income or may cause us to raise prices, which could result in reduced net sales.

Foreign currency exchange rate fluctuations could have an adverse effect on our net sales and results of operations. Approximately 74% of our net sales in 2004, 73% of our net sales in 2003 and 69% of our net sales in 2002 were denominated in foreign currencies. Unfavorable foreign currency fluctuations against the U.S. dollar could require us to increase prices to foreign customers, which could result in lower net sales by us to such customers. Alternatively, if we do not adjust the prices for our products in response to unfavorable foreign currency fluctuations, our profitability could decline. In addition, sales made by our foreign subsidiaries are denominated in the currency of the country in which these products are sold, and the currency we receive in payment for such sales could be less valuable at the time of receipt versus the time of sale as a result of foreign currency exchange rate fluctuations.

We incur significant cash outlays over long-term periods in order to research, develop, manufacture and market new products, which may never reach market or may have limited market acceptance.

We make significant cash expenditures to research, develop and market new products. For example, we incurred $25,739 of research and development expense in 2004, $19,110 in 2003, and $19,685 in 2002. The

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development period for a product can be as long as five years. Following development, it may take an additional two to three years for the market size of that product to reach a substantial level. We cannot be certain of the success of a new product. A product concept may never progress beyond the development stage or may only achieve limited acceptance in the marketplace. If this occurs, we do not receive a direct return on our expenditures and may not even realize any indirect benefits. Additionally, capacity expansion may be necessary in order to manufacture a new product. If sales levels do not increase to offset the additional fixed operating expenses associated with any such expansion, our revenue and profitability could decline and our prospects could be harmed.

We depend on our suppliers for our raw materials and components, and our production would be substantially curtailed if these suppliers are not able to meet our demands and alternative sources are not available.

We purchase raw materials and components from third parties to complete our customers’ orders, and some of these raw materials and components may, in the future, need to be ordered from sole-source suppliers. Although we work with our customers and suppliers to minimize the impact of defects or shortages in raw materials and components, we sometimes experience short-term adverse effects due to price fluctuations, delayed shipments and out of specification materials or components. In the past, there have been industry-wide shortages of electronic components, particularly memory and logic devices. If a significant shortage of raw materials or components were to occur or if our suppliers provide us with out of specification materials or components, we may have to delay shipment. Supply shortages of or defects in particular components will likely substantially curtail production of products using these components. If defects in materials or components from our suppliers are undetected by us and incorporated into our products, the quality of our products will deteriorate and may injure our reputation with our customers or cause us to incur remedial expense to resolve the problem. In addition, while many of our significant customer contracts permit periodic reviews of pricing based on decreases and increases in the prices of raw materials and components, we are not always able to pass on price increases to our customers and significant price increases from our suppliers could cause our profitability to decline. The loss of any of these or other significant suppliers, delays in shipments, the inability of a supplier to meet performance and quality specifications or delivery schedules or our inability to pass along price increases could cause our revenue and profitability to decline significantly.

We may acquire other businesses, form joint ventures or divest businesses that could negatively affect our profitability, increase our debt and dilute your ownership of our company.

As part of our business strategy, we have, and we expect to continue to address gaps in our product offerings, diversify into complementary product markets or pursue additional technology and customers through acquisitions, joint ventures or other types of collaborations. We also expect to adjust our portfolio of businesses to meet our ongoing strategic objectives. As a result, we may enter markets in which we have no or limited prior experience and may encounter difficulties in divesting businesses that no longer meet our objectives. Competition for acquiring attractive businesses in our industry is substantial. In executing this part of our business strategy, we may experience difficulty in identifying suitable acquisition candidates or in completing selected transactions at appropriate valuations. Alternatively, we may be required to undertake multiple transactions at the same time in order to take advantage of acquisition opportunities that do arise; this could strain our ability to effectively execute and integrate these transactions. We intend to pay for these acquisitions with cash and/or our common stock which could impair our liquidity and dilute your ownership of our company. Further, we may not be able to successfully integrate any acquisitions that we do make into our existing business operations and we could assume unknown or contingent liabilities or experience negative effects on our reported results of operations from dilutive results from operations and/or from future potential impairment of acquired assets including goodwill related to future acquisitions. We may experience difficulties in operating in foreign countries or over significant geographical distances and in retaining key employees or customers of an acquired business, and our management’s attention could be diverted from other business issues. We may not identify or complete these transactions in a timely manner, on a cost effective basis or at all, and we may not realize the benefits of any acquisition or joint venture.

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We may not be able to obtain financing to fund our future capital requirements, including strategic acquisitions, on favorable terms or at all, and the amount of equity that we can issue may likewise be limited. This could prevent us from addressing gaps in our product offerings, improving our technology or increasing our manufacturing capacity.

If our cash flows from operations are less than we expect, we may need to issue additional equity or incur debt. There can be no assurance that we will be able to obtain necessary short-term or other financing on favorable terms or at all. If we are unable to obtain necessary financing, we may not have sufficient cash to operate our business. In particular, we expect to fund future acquisitions in whole or in part by issuing additional equity. Any equity issued would be dilutive to existing stockholders. If the price of our equity is low or volatile, we may not be able to issue equity to acquire other companies and our acquisition strategy could require us to incur substantial amounts of indebtedness. While we currently have no debt outstanding, potential future levels of indebtedness could have adverse consequences for our business, including:

Furthermore, if we raise funds through the issuance of debt, the debt securities issued will likely have rights, preferences and privileges senior to those of holders of our common stock in the event of a liquidation or otherwise, and the terms of the debt securities may impose restrictions on our operations. We cannot assure you that financing for acquisitions will be available on terms acceptable to us, or at all.

Loss of any of our key personnel could hurt our business because of their experience in the microelectronics industry and their technological expertise. Similarly, our inability to attract and retain new qualified personnel could inhibit our ability to operate and grow our business successfully.

We depend on the services of our key senior executives and other technological experts because of their experience in the microelectronics industry and their technical expertise. The loss of the services of one or several of our key employees or an inability to attract, train and retain qualified and skilled employees, specifically research and development and engineering personnel, could result in the loss of customers or otherwise inhibit our ability to operate and grow our business successfully. During the recent extended downturn in the semiconductor industry we had to impose salary reductions on our senior employees and freeze merit increases in an effort to maintain our financial position. Similarly, changes in accounting rules requiring fair value accounting for stock options will make it more expensive to provide our employees with equity incentives, which may require us to reduce the level of equity compensation. These actions may have an adverse effect on employee loyalty and may make it more difficult for us to attract and retain key personnel. In addition, our ability to successfully integrate acquired facilities or businesses depends, in part, on our ability to retain and motivate key management and employees hired by us in connection with the acquisition.

If we are unable to protect our intellectual property rights, our business and prospects could be harmed.

Our future success and competitive position depend in part upon our ability to obtain and maintain proprietary technology used in our principal product families. We rely, in part, on patent, trade secret and trademark law to protect that technology. We routinely enter into confidentiality agreements with our employees. However, there can be no assurance that these agreements will not be breached, that we will have adequate remedies for any breach or that our confidential and proprietary information and technology will not be independently developed by or become otherwise known to third parties. We have obtained a number of patents relating to our products and have filed applications for additional patents. We cannot assure you that any of our pending patent applications will be approved, that we will develop additional proprietary technology that is

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patentable, that any patents owned by or issued to us will provide us with competitive advantages or that these patents will not be challenged by third parties. Patent filings by third parties, whether made before or after the date of our filings, could render our intellectual property less valuable. Competitors may misappropriate our intellectual property, and disputes as to ownership of intellectual property may arise. In addition, if we do not obtain sufficient international protection for our intellectual property, our competitiveness in international markets could be significantly impaired, which would limit our growth and future revenue. Furthermore, there can be no assurance that third parties will not design around our patents.

Protection of our intellectual property rights has and may continue to result in costly litigation.

We may from time to time be required to institute litigation in order to enforce our patents, copyrights or other intellectual property rights, to protect our trade secrets, to determine the validity and scope of the proprietary rights of others or to defend against claims of infringement. Such litigation could result in substantial costs and diversion of resources and could negatively affect our sales, profitability and prospects regardless of whether we are able to successfully enforce our rights. For example, in 1998, we settled a patent lawsuit in which each party claimed infringement of a patent by the other. In connection with the settlement, we incurred a charge of approximately $3.7 million and agreed to a cross-license of the two patents at issue. More recently, on March 3, 2003 we filed a lawsuit against Pall Corporation in the United States District Court for the District of Massachusetts alleging infringement of two of our U.S. patents. Our lawsuit also seeks a preliminary injunction preventing Pall Corporation from manufacturing, using, selling, offering for sale or importing into the United States the infringing product. As of the date of filing this Annual Report on Form 10-K, the court has dissolved a preliminary injunction against Pall and questioned the validity of the patents in suit. See, “Item 3. Legal Proceedings” above. We have appealed this ruling and expect that this litigation will continue for an extended period and that we will incur substantial costs in pursuing this litigation.

Our ability to manufacture and sell our products and develop new products in response to competitive pressures could be restricted or delayed, and we could incur significant expenses, if we are unable to obtain necessary licenses to the proprietary technology of others.

We license and will continue to license technology used in the manufacture and distribution of our products from third parties. Our inability to acquire any third-party licenses, or integrate the related third-party technologies into our products, could result in delays in our product developments and enhancements until equivalent technologies can be identified, licensed or integrated. We may also require new licenses in the future as our business grows and technology evolves. We cannot assure you that these licenses will be available to us on commercially reasonable terms, if at all.

If we infringe on the proprietary technology of others, our business and prospects could be harmed.

Our commercial success will depend, in part, on our ability to avoid infringing or misappropriating any patents or other proprietary rights owned by third parties. If we are found to infringe or misappropriate a third party’s patent or other proprietary rights, we could be required to pay damages to such third party, alter our products or processes, obtain a license from the third party or cease activities utilizing such proprietary rights, including making or selling products utilizing such proprietary rights. If we are required to obtain a license from a third party, there can be no assurance that we will be able to do so on commercially favorable terms, if at all.

We are subject to a variety of environmental laws which could cause us to incur significant expenses.

In addition to other regulatory requirements affecting our business, we are subject to a variety of federal, state, local and foreign regulatory requirements relating to the use, disposal, clean-up of, and human exposure to, hazardous chemicals. We generate and handle materials that are considered hazardous waste under applicable law. If we fail to comply with any present or future regulations, we could be subject to future liabilities or the suspension of production. In addition, compliance with these or future laws could restrict our ability to expand our facilities or build new facilities or require us to acquire costly equipment, incur other significant expenses or modify our manufacturing processes.

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We are currently relocating certain manufacturing operations from our Yonezawa, Japan facility and from the company from which we acquired our roller brush business into our Billerica, Massachusetts headquarters, research and development and manufacturing facility and relocating certain manufacturing operations from our Allen, Texas plant to our Billerica and Yonezawa facilities. If we are unable to successfully manage there transfers, our ability to deliver product to our customers could be disrupted and our business, financial condition and results of operations could be adversely affected.

In order to enhance the efficiency and cost effectiveness of our manufacturing operations we are moving several product lines from our Yonezawa, Japan plant to our Billerica facility, from the Sacremento, CA plant of Bentec Scientific LLC to our Billerica facility and from our Allen, Texas facility to our Billerica and Yonezawa facilities. These product lines involve technically complex manufacturing processes that require considerable expertise to operate. If we are unable to complete these transfers in a systematic manner within established schedules or if we are unable to successfully operate these relocated manufacturing processes in the destination plant, production may be disrupted and we may not be able to deliver these products to meet customer orders in a timely manner, which could harm our business.

Terrorist attacks, such as the attacks that occurred in New York and Washington, D.C. on September 11, 2001, and other acts of violence or war may affect the markets in which we operate and hurt our profitability.

Terrorist attacks may negatively affect our operations and your investment. There can be no assurance that there will not be further terrorist attacks against the United States or United States businesses. These attacks or armed conflicts may directly impact our physical facilities or those of our suppliers or customers. Our primary facilities include headquarters, research and development and manufacturing facilities in the United States, sales, research and development and manufacturing facilities in Japan and sales and service facilities in Europe and Asia. Also, these attacks have disrupted the global insurance and reinsurance industries with the result that we may not be able to obtain insurance at historical terms and levels for our facilities. Furthermore, these attacks may make travel and the transportation of our supplies and products more difficult and more expensive and may ultimately affect the sales of our products in the United States and overseas. As a result of terrorism the United States may enter into an armed conflict, which could have a further impact on our domestic and international sales, our supply chain, our production capacity and our ability to deliver products to our customers. The consequences of these armed conflicts and instability are unpredictable and we may not be able to foresee events that could have an adverse effect on our business and your investment.

RISKS RELATED TO THE SECURITIES MARKETS AND OWNERSHIP OF OUR SECURITIES

Our securities have had only a limited market history, and we cannot assure you that our stock price will not decline.

There has been only a limited public market for our common stock, and an active public market for our common stock may not be sustained. The market price of our common stock has been and may continue to be subject to significant fluctuations. Among the factors that could affect our stock price are:

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The stock markets in general, and the markets for high technology stocks in particular, have experienced extreme volatility that has often been unrelated to the operating performance of particular companies. These broad market fluctuations may cause the trading price of our common stock to decrease.

Recently enacted changes in the securities laws and regulations are likely to increase our costs.

The Sarbanes-Oxley Act of 2002 that became law in July 2002 has required changes in some of our corporate governance, securities disclosure and compliance practices. In response to the requirements of that Act, the Securities and Exchange Commission and the New York Stock Exchange have promulgated new rules and listing standards covering a variety of subjects. Compliance with these new rules and listing standards has increased our legal and financial and accounting costs, and we expect these increased costs to continue indefinitely. We also expect these developments to make it more difficult and more expensive for us to obtain director and officer liability insurance, and we may be forced to accept reduced coverage or incur substantially higher costs to obtain coverage. Likewise, these developments may make it more difficult for us to attract and retain qualified members of our board of directors, particularly independent directors, or qualified executive officers.

Changes to financial accounting standards may affect our reported results of operations and could result in a decrease in the value of your shares.

There has been an ongoing public debate as to whether employee stock option and employee stock purchase plan shares should be treated as a compensation expense and, if so, how to properly value such charges. When we are required to record an expense for our stock-based compensation plans using the fair value method, we will incur significant compensation charges. Although we are currently not required to record any compensation expense using the fair value method in connection with option grants that have an exercise price at or above fair market value of our common stock and for shares issued under our employee stock purchase plan, regulations will require us to treat all stock-based compensation as a compensation expense using the fair value method during 2005 and our results of operations could be adversely affected.

Provisions in our charter documents, Delaware law and our shareholder rights plan may delay or prevent an acquisition of us, which could decrease the value of your shares.

Our certificate of incorporation and By-Laws, Delaware law and our shareholder rights plan contain provisions that could make it harder for a third party to acquire us without the consent of our board of directors. These provisions include a classified board of directors and limitations on actions by our stockholders by written consent. In addition, subject to applicable New York Stock Exchange listing standards, our board of directors has the right to issue preferred stock without stockholder approval, which could be used to dilute the stock ownership of a potential hostile acquirer. Our shareholder rights plan will permit our stockholders to purchase shares of our common stock at a 50% discount upon the occurrence of specified events, including the acquisition by anyone of 15% or more of our common stock, unless such event is approved by our board of directors. Delaware law also imposes restrictions on mergers and other business combinations between us and any holder of 15% or more of our outstanding common stock. Although we believe these provisions provide for an opportunity to receive a higher bid by requiring potential acquirers to negotiate with our board of directors, these provisions apply even if the offer may be considered beneficial by stockholders. If a change of control or change in management is delayed or prevented, the market price of our common stock could suffer.

Your percentage ownership in us may be diluted by future issuances of capital stock, which could reduce your influence over matters on which stockholders vote.

Subject to applicable New York Stock Exchange listing standards, our board of directors has the authority, without action or vote of our stockholders, to issue all or any part of our authorized but unissued shares. Issuances of common stock or the exercise of employee and director stock options would dilute your percentage ownership interest, which will have the effect of reducing your influence over matters on which our stockholders vote. In addition, if the issuances are made at prices that reflect a discount from the then current trading price of our common stock, your interest in the book value of our common stock might be diluted.

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RISKS RELATED TO OUR SEPARATION FROM MILLIPORE

Our pre-separation historical financial information may not be representative of our results as a stand-alone company and, therefore, may not be reliable as an indicator of our historical or future results.

We have only a limited operating history as an independent company. Prior to our separation from Millipore, Millipore did not account for us, and we were not operated, as a stand-alone entity. The historical combined financial information incorporated into this report were derived in part from Millipore’s consolidated financial statements and may not be indicative of our financial position, results of operations or cash flows in the future nor is it necessarily indicative of what our financial position, results of operations or cash flows would have been had we been a stand-alone entity for all of the periods presented. This is primarily a result of the following factors:

Following our separation from Millipore, we have incurred incremental non-recurring operating costs and expenses associated with increased marketing expenses related to establishing a new brand identity, legal fees, retention bonuses, increased depreciation due to decreases in the estimated useful lives of fixed assets and leasehold improvements and other separation related costs.

We currently use Millipore’s membrane manufacturing infrastructure, and our ability to meet our customer’s demands will suffer if we do not successfully extend these arrangements or transition our membrane manufacturing requirements to other facilities.

We have entered into transition agreements with Millipore relating to the manufacture and distribution of specified products for limited periods of time. The manufacture of our membrane products is highly complex and requires sophisticated and costly equipment. While we are entitled to continue to manufacture membrane in Millipore’s plant until March of 2006, we might not be able to extend these arrangements or successfully transition the membrane production to a different facility after that date. As a result, any prolonged disruption in the operations of any of our manufacturing facilities or any unforeseen delays in shifting membrane manufacturing operations to a new facility, whether due to technical or labor difficulties, destruction or damage to the facility or other reasons, could result in increased costs and reduced revenues and profitability and could harm our prospects.

Following our separation from Millipore, we do not have access to the membrane research and development resources that were previously available to us, which could limit our research and development activities, thereby inhibiting our ability to develop new membrane products in response to competitive pressures and harming our business and prospects.

Prior to our separation from Millipore, many research and development projects were conducted through the centralized Millipore research group. Following our separation from Millipore, while our research and development personnel have been transferred to us in accordance with the terms of the separation agreements, we do not have access to any other resources or personnel in Millipore’s research group other than in specific limited circumstances outlined in our research agreement with Millipore. As a result, we will not have access to all of the research and development facilities and resources, including membrane research resources, that were previously available to us, and we may not be able to manage projects as successfully as we had in the past. If we are unable

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to continue to successfully develop new membrane products and technology through internal research and development activities, we may not be able to maintain our market position or successfully grow our business and our business and prospects may be harmed.

Our agreements with Millipore limit our ability to use Millipore’s technology to fields of use in the microelectronics industry and may prevent us from expanding our business beyond the microelectronics industry.

Our use of Millipore’s technology is governed by the agreements governing our separation from Millipore, such as the master patent license agreement and the master trade secret and know-how agreement. The licenses granted by these agreements prohibit our use of Millipore’s technology in fields of use outside of the microelectronics industry. In general, where technology is used both by Millipore in the manufacture of its products and by us in the manufacture of our products, Millipore retained ownership of the technology and granted us a license to use the technology limited to fields of use in the microelectronics industry. In some cases, Millipore transferred ownership of the technology to us and retained an exclusive license to the technology in its fields of use in the biopharmaceutical and related industries. Under the master patent license agreement and the master trade secret and know-how agreement, we may sell products using Millipore’s technology only to customers in the microelectronics industry, as defined in the agreements, and we may not transfer the technology except in limited circumstances. These restrictions could limit our ability to expand our business into markets outside the microelectronics industry, which could limit our growth.

We may have potential business conflicts of interest with Millipore with respect to our past and ongoing relationships.

Conflicts of interest may arise between Millipore and us in a number of areas relating to our past and ongoing relationships, including:

We may not be able to resolve any potential conflicts, and even if we do, the resolution may be less favorable because of our prior affiliation with Millipore and our continuing reliance on Millipore to provide transitional manufacturing services.

In addition, Millipore may terminate transitional arrangements that currently generate income for us.

We may be responsible for certain income tax liabilities arising out of the tax sharing agreement entered into with Millipore in connection with our separation from Millipore.

Millipore received a tax ruling from the Internal Revenue Service to the effect that the distribution of our shares in the 2002 spin-out qualified as a tax-free distribution for U.S. federal income tax purposes. The tax ruling is binding on the IRS, and can be relied upon by Millipore provided that the factual representations and assumptions made in Millipore’s request are true. We are not aware of any facts or circumstances that would

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cause such representations and assumptions to be untrue. Our tax sharing agreement with Millipore provides that we will be responsible for certain taxes imposed on Millipore, us or our respective subsidiaries if we or one or more of our shareholders are responsible for the distribution’s failure to qualify for tax-free treatment. In addition, under the tax sharing agreement that we entered into with Millipore, we are responsible for tax liabilities and adjustments to tax liabilities with respect to those Millipore foreign subsidiaries which we acquired pursuant to our separation from Millipore for periods prior to that separation.

Further, under the tax sharing agreement Millipore is entitled to use net operating losses generated by our business during periods prior to the spin-off; if it should elect to use any of these losses, the Company would be indemnified for loss of these tax attributes.

Item 7A.    Quantitative and Qualitative Disclosures About Market Risk.

The information called for by this item is set forth under the heading “Market Risk” in Management’s Discussion and Analysis contained in Item 7 above which information is hereby incorporated by reference.

Item 8.    Financial Statements and Supplementary Data.

The information called for by this item is set forth in the Consolidated Financial Statements and Schedule Covered by the Report of Independent Registered Public Accounting Firm at the end of this report commencing at the pages indicated below:

All of the foregoing Consolidated Financial Statements and Schedule are hereby incorporated in this Item 8 by reference.

Item 9.    Changes in and Disagreements With Accountants on Accounting and Financial Disclosure.

This item is not applicable.

Item 9A.    Controls and Procedures.

EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES

The Company has carried out an evaluation under the supervision and with the participation of management, including the Chief Executive Officer and the Vice President and Chief Financial Officer, of the effectiveness of the design and operation of the Company’s disclosure controls and procedures, as such term is defined under Rule 13a-15(e) promulgated under the Securities Exchange Act of 1934, as amended (“Exchange Act”). Based upon the Company’s evaluation, the Chief Executive Officer and the Vice President and Chief Financial Officer have concluded that, as of December 31, 2004, the disclosure controls and procedures were effective to provide reasonable assurance that information required to be disclosed in the reports that the Company files and submits under the Exchange Act is recorded, processed, summarized and reported as and when required.

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It must be borne in mind that there are inherent limitations to the effectiveness of any system of disclosure controls and procedures, including the possibility of human error and the circumvention or overriding of the controls and procedures. Accordingly, even effective disclosure controls and procedures can only provide reasonable assurance of achieving their control objectives.

MANAGEMENT’S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING

The management of the Company is responsible for establishing and maintaining an adequate system of internal control over financial reporting, as such term is defined in Exchange Act Rule 13a-15(f). Management has assessed the effectiveness of the Company’s internal control over financial reporting as of December 31, 2004. In making its assessment, management has utilized the criteria set forth by the Committee of Sponsoring Organizations (COSO) of the Treadway Commission in Internal Control—Integrated Framework. Management concluded that based on its assessment, the Company’s internal control over financial reporting was effective as of December 31, 2004. Management’s assessment of the effectiveness of the Company’s internal control over financial reporting as of December 31, 2004 has been audited by PricewaterhouseCoopers LLP, an independent registered public accounting firm, as stated in their report which appears on page F-29 of this Form 10-K Annual Report.

Internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external reporting purposes in accordance with generally accepted accounting principles. All internal control systems, no matter how well designed, have inherent limitations. Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation.

CHANGES IN INTERNAL CONTROL OVER FINANCIAL REPORTING

There has been no change in the Company’s internal control over financial reporting during the Company’s quarter ended December 31, 2004 that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.

Item 9B.    Other Information.

No information was required to be disclosed in a report on Form 8-K in the fourth quarter that was not so disclosed.

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PART III

Item 10.    Directors and Executive Officers of Mykrolis.

The information called for by this item with respect to registrant’s directors, including information relating to the independence of certain directors, identification of the audit committee and the audit committee financial expert is set forth under the caption “Election of Directors” in Mykrolis’ definitive Proxy Statement for Mykrolis’ Annual Meeting of Stockholders to be held on April 26, 2005, and to be filed with the Securities and Exchange Commission on or about March 25, 2005, which information is hereby incorporated herein by reference.

The information called for by this item with respect to registrant’s compliance with Section 16(a) of the Securities Exchange Act of 1934, as amended, is set forth under the caption “Ownership of Mykrolis Stock” in Mykrolis’ definitive Proxy Statement for Mykrolis’ Annual Meeting of Stockholders to be held on April 26, 2005, and to be filed with the Securities and Exchange Commission on or about March 25, 2005, which information is hereby incorporated herein by reference.

Information called for by this item with respect to registrant’s executive officers is set forth under “Executive Officers of Mykrolis” in Item 1 of this report.

The Company has adopted a code of ethics, the Mykrolis Code of Conduct, that applies to all employees of the registrant including the registrant’s chief executive officer, chief financial officer and controller. A copy of the Mykrolis Code of Conduct is posted on our website at http://www.Mykrolis.com, under “Investor Relations—Governance”. The Mykrolis Code of Conduct is available in print to any stockholder that requests a copy. A copy of the Mykrolis Code of Conduct may be obtained by contacting Peter W. Walcott, the Company’s Vice President & General Counsel at the Company’s headquarters. The Company intends to comply with the requirements of Item 10 of Form 8-K with respect to any waiver of the provisions of the Mykrolis Code of Conduct applicable to the registrant’s Chief Executive Officer, Chief Financial Officer or Controller by posting notice of any such waiver at the same location on our website.

Item 11.    Executive Compensation.

The information called for by this item is set forth under the caption “Management and Election of Directors—Executive Compensation” in Mykrolis’ definitive Proxy Statement for Mykrolis’ Annual Meeting of Stockholders to be held on April 26, 2005, and to be filed with the Securities and Exchange Commission on or about March 25, 2005, which information is hereby incorporated herein by reference.

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Item 12.    Security Ownership of Certain Beneficial Owners and Management.

The following information is provided as of December 31, 2004, with respect to our compensation plans under which equity securities are authorized for issuance. The only equity securities currently authorized for issuance under our compensation plans are common stock forwards or options to acquire our common stock.

The securities issued and available for issue pursuant to equity compensation plans not approved by security holders listed in the table above refers to the Mykrolis Corporation 2003 Employment Inducement and Acquisition Stock Option Plan which was adopted by the Company’s Board of Directors effective as of July 1, 2003. This stock option plan provides for the grant of stock options covering an aggregate of 350,000 shares of the Common stock, $0.01 par value, of the Company to newly hired (or rehired) employees and to employees of companies acquired by Mykrolis. The plan has a term of ten years and provides that all stock options granted under the plan carry an exercise price of fair market value on the date of grant. This plan also contains an “evergreen” provision that annually increases the number of shares available for award or to support option grants by 0.25% of the number of shares of common stock outstanding on the date of the Annual Meeting of Stockholders during the term of the plan.

The information called for by Item 403 of Regulation S-K is set forth under the caption “Ownership of Mykrolis Common Stock” in Mykrolis’ definitive Proxy Statement for Mykrolis’ Annual Meeting of Stockholders to be held on April 26, 2005, and to be filed with the Securities and Exchange Commission on or about March 25, 2005, which information is hereby incorporated herein by reference.

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Item 13.    Certain Relationships and Related Transactions.

The information called for by this item with respect to registrant’s directors relationships and related transactions is set forth under the caption “Management and Election of Directors-Nominees for Election as Directors” in Mykrolis’ definitive Proxy Statement for Mykrolis’ Annual Meeting of Stockholders to be held on April 26, 2005, and to be filed with the Securities and Exchange Commission on or about March 25, 2005, which information is hereby incorporated herein by reference.

Item 14.    Principal Accountant Fees and Services.

The information called for by this item with respect to the fees paid to and the services performed by registrant’s principal accountant is set forth under the caption “Accountants” in Mykrolis’ definitive Proxy Statement for Mykrolis’ Annual Meeting of Stockholders to be held on April 26, 2005, and to be filed with the Securities and Exchange Commission on or about March 25, 2005, which information is hereby incorporated herein by reference.

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PART IV

Item 15.    Exhibits, Financial Statement Schedules, and Reports on Form 8-K.

(a) The following documents are filed as a part of this report:

1. Financial Statements.

The Consolidated Financial Statements listed under Item 8 of this report and in the Index to Consolidated Financial Statements on page F-1 of this report which is incorporated by reference.

2. Financial Statement Schedules.

The Financial Statement Schedule listed under Item 8 of this report and in the Index to Consolidated Financial Statements on page F-1 of this report which is incorporated by reference.

3. Exhibits.

A. The following exhibits are incorporated by reference:

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B.    The Company hereby files as exhibits to this Annual Report on Form 10-K the following documents:

(b)    Reports on Form 8-K.

None.

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SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) 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.

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.

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MYKROLIS CORPORATION

INDEX TO FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

F-1

MYKROLIS CORPORATION

CONSOLIDATED STATEMENTS OF OPERATIONS