<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
ACT OF 1934
for the quarterly period ended FEBRUARY 28, 1998
-------------------------------------------------
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
--------------------- -------------------------
Commission File Number: 0-17276
---------------------------------------------------------
FSI INTERNATIONAL, INC.
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
MINNESOTA 41-1223238
- --------------------------------------------------------------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
322 LAKE HAZELTINE DRIVE, CHASKA, MINNESOTA 55318
- --------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
612-448-5440
- --------------------------------------------------------------------------------
(Registrant's telephone number, including area code)
N/A
- --------------------------------------------------------------------------------
(Former name, former address and former fiscal year,
if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
[X] YES [ ] NO
Indicate the number of shares outstanding of each of the issuer's classes of
common stock as of the latest practical date:
COMMON STOCK, NO PAR VALUE - 22,815,061 SHARES OUTSTANDING AS OF MARCH 27, 1998
1
<PAGE> 2
FSI INTERNATIONAL, INC. AND SUBSIDIARIES
QUARTERLY REPORT ON FORM 10-Q
<TABLE>
<CAPTION>
PART I. FINANCIAL INFORMATION PAGE NO.
--------------------- --------
<S> <C>
Item 1. Consolidated Condensed Financial Statements:
Consolidated Condensed Balance Sheets as of February 28, 1998
(Unaudited) and August 30, 1997 3
Consolidated Condensed Statements of Operations
(Unaudited) for the quarters ended February 28, 1998
and March 1, 1997 5
Consolidated Condensed Statements of Operations (Unaudited)
for the six months ended February 28, 1998 and March 1, 1997 6
Consolidated Condensed Statements of Cash Flows (Unaudited)
for the six months ended February 28, 1998 and March 1, 1997 7
Notes to the Consolidated Condensed Financial Statements (Unaudited) 8
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations 10
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 18
Item 4. Submission of Matters to a Vote of Security Holders 18
Item 5. Other Information 18
Item 6. Exhibits and Reports on Form 8-K 19
SIGNATURES 22
</TABLE>
2
<PAGE> 3
PART I. Item 1. FINANCIAL INFORMATION
FSI INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
FEBRUARY 28, 1998 AND AUGUST 30, 1997
ASSETS
<TABLE>
<CAPTION>
February 28, August 30,
1998 1997
(Unaudited) (Audited)
---------------- ---------------
Current assets:
<S> <C> <C>
Cash and cash equivalents $ 70,077,009 $ 79,186,746
Marketable securities 16,164,628 10,022,596
Trade accounts receivable, net of allowance for
doubtful accounts of $2,249,000 and $2,127,000,
respectively 45,109,677 54,161,499
Trade accounts receivable from affiliates 19,658,566 10,092,769
Inventories 69,816,496 61,990,473
Deferred income tax benefit 11,835,427 11,835,439
Prepaid expenses and other current assets 10,828,968 6,182,794
------------- -------------
Total current assets 243,490,771 233,472,316
------------- -------------
Property, plant and equipment, at cost 108,023,763 105,549,731
Less accumulated depreciation and amortization (36,420,937) (28,884,658)
------------- -------------
71,602,826 76,665,073
------------- -------------
Investment in affiliates 15,629,418 15,975,834
Deposits and other assets 3,357,795 3,937,844
Deferred income tax benefit 1,101,334 1,101,334
------------- -------------
$ 335,182,144 $ 331,152,401
============= =============
</TABLE>
See accompanying notes to consolidated condensed financial statements.
3
<PAGE> 4
FSI INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
FEBRUARY 28, 1998 AND AUGUST 30, 1997
(continued)
LIABILITIES AND STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
February 28, August 30,
1998 1997
(Unaudited) (Audited)
----------------- ---------------
Current liabilities:
<S> <C> <C>
Current maturities of long-term debt $ 85,666 $ 118,200
Trade accounts payable 22,926,268 24,349,713
Accrued expenses 25,046,422 26,398,976
Customer deposits 6,663,034 2,816,617
Deferred revenue 13,155,945 8,910,824
------------- -------------
Total current liabilities 67,877,335 62,594,330
------------- -------------
Long-term debt, less current maturities 42,093,586 42,137,894
Deferred income taxes 4,158 3,340
Minority interest 2,258,468 2,077,208
Stockholders' equity:
Preferred stock, no par value; 9,700,000 shares
authorized; none issued and outstanding -- --
Series A Junior Participating Preferred Stock, no par
value: 300,000 shares authorized; none issued and
outstanding -- --
Common stock, no par value; 50,000,000 shares
authorized; issued and outstanding,
22,814,061 and 22,583,174 shares at February 28, 1998
and August 30, 1997, respectively 161,763,273 159,706,639
Retained earnings 62,273,618 64,985,283
Cumulative translation adjustment (1,088,294) (352,293)
------------- -------------
Total stockholders' equity 222,948,597 224,339,629
------------- -------------
$ 335,182,144 $ 331,152,401
============= =============
</TABLE>
See accompanying notes to consolidated condensed financial statements.
4
<PAGE> 5
FSI INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
FOR THE QUARTERS ENDED FEBRUARY 28, 1998 AND MARCH 1, 1997
(Unaudited)
<TABLE>
<CAPTION>
February 28, March 1,
1998 1997
------------------ ----------------
<S> <C> <C>
Sales (including sales to affiliates of
$26,088,000 and $20,977,000, respectively) $ 59,431,392 $ 60,157,375
Cost of sales 38,759,409 38,865,173
------------ ------------
Gross profit 20,671,983 21,292,202
Selling, general and administrative expenses 17,374,954 12,247,047
Research and development expenses 11,228,302 8,917,409
------------ ------------
Operating income (loss) (7,931,273) 127,746
Interest expense (801,862) (195,125)
Interest income 1,190,871 1,227,478
Other income (expense), net (86,721) (180,692)
------------ ------------
Income (loss) before income taxes (7,628,985) 979,407
Income tax (benefit) (benefit) (3,042,384) (303,400)
------------ ------------
Income (loss) before minority interest
and equity in earnings (loss) of affiliates (4,586,601) 1,282,807
Minority interest 125,415 (149,344)
Equity in earnings (loss) of affiliates (135,816) 804,213
------------ ------------
Net income (loss) ($ 4,597,002) $ 1,937,676
============ ============
Net income (loss) per common share - Basic ($0.20) $0.09
Net income (loss) per common share - Diluted ($0.20) $0.08
Weighted average common shares 22,767,469 22,461,822
Weighted average common shares
and common share equivalents 22,767,469 23,201,862
</TABLE>
See accompanying notes to consolidated condensed financial statements.
5
<PAGE> 6
FSI INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
FOR THE SIX-MONTHS ENDED FEBRUARY 28, 1998 AND MARCH 1, 1997
(Unaudited)
<TABLE>
<CAPTION>
February 28, March 1,
1998 1997
-------------------- -------------------
<S> <C> <C>
Sales (including sales to affiliates of
$44,990,000 and $42,817,000, respectively) $ 124,346,286 $ 127,148,370
Cost of sales 77,490,431 79,091,343
------------- -------------
Gross profit 46,855,855 48,057,027
Selling, general and administrative expenses 31,763,518 25,465,886
Research and development expenses 21,879,138 18,595,322
------------- -------------
Operating income (loss) (6,786,801) 3,995,819
Interest expense (1,599,698) (230,933)
Interest income 2,438,229 1,958,631
Other income (expense), net (62,811) (204,885)
------------- -------------
Income (loss) before income taxes (6,011,081) 5,518,632
Income tax expense (benefit) (2,524,654) 1,103,726
------------- -------------
Income (loss) before minority interest
and equity in earnings of affiliates (3,486,427) 4,414,906
Minority interest 352,126 (264,107)
Equity in earnings of affiliates 422,636 1,827,801
------------- -------------
Net income (loss) ($ 2,711,665) $ 5,978,600
============= =============
Net income (loss) per common share - Basic ($0.12) $0.27
Net income (loss) per common share - Diluted ($0.12) $0.26
Weighted average common shares 22,691,001 22,412,576
Weighted average common shares
and common share equivalents 22,691,001 23,119,302
</TABLE>
See accompanying notes to consolidated condensed financial statements.
6
<PAGE> 7
FSI INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED FEBRUARY 28, 1998 AND MARCH 1, 1997
(Unaudited)
<TABLE>
<CAPTION>
February 28, March 1,
1998 1997
------------------ --------------
OPERATING ACTIVITIES:
<S> <C> <C>
Net income (loss) ($ 2,711,665) $ 5,978,600
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Minority interest (352,126) 264,107
Provision for deferred income taxes 818 2,958
Depreciation and amortization 7,840,392 4,800,062
Equity in earnings of affiliates (422,636) (1,827,801)
Loss on sale of equipment -- 11,901
Changes in operating assets and liabilities:
Trade accounts receivable (513,975) 19,618,203
Inventories (7,826,023) 5,723,634
Prepaid and other current assets (4,646,174) 28,088
Trade accounts payable (1,423,445) (13,587,813)
Accrued expenses (1,147,392) (4,611,639)
Customer deposits 3,846,417 (183,916)
Deferred revenue 4,245,121 (310,690)
Other 66,114 270,121
------------ ------------
Net cash provided by (provided by (used in)) operating activities (3,044,574) 16,175,815
------------ ------------
INVESTING ACTIVITIES:
Acquisition of property, plant and equipment (2,474,032) (21,586,568)
Purchase of marketable securities (11,142,280) (15,065,983)
Maturities of marketable securities 5,000,248 2,705,300
Decrease (Increase) in deposits and other assets 275,936 455,311
------------ ------------
Net cash used in investing activities (8,340,128) (33,491,940)
------------ ------------
FINANCING ACTIVITIES:
Debt financing costs -- (338,872)
Minority interest's investment in FME 500,335 --
Principal payments on long-term debt (76,842) (115,684)
Increase in long-term debt -- 42,000,000
Net proceeds from issuance of common stock 1,851,472 1,315,740
------------ ------------
Net cash provided by financing activities 2,274,965 42,861,184
------------ ------------
Increase (decrease) in cash and cash equivalents (9,109,737) 25,545,059
Cash and cash equivalents at beginning of period 79,186,746 48,804,158
------------ ------------
Cash and cash equivalents at end of period $ 70,077,009 $ 74,349,217
============ ============
</TABLE>
See accompanying notes to consolidated condensed financial statements.
7
<PAGE> 8
FSI INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(Unaudited)
(1) CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
The accompanying consolidated condensed financial statements have been
prepared by the Company without audit and reflect all adjustments
(consisting only of normal and recurring adjustments) which are, in the
opinion of management, necessary to present a fair statement of the
results for the interim periods presented. The statements have been
prepared in accordance with the regulations of the Securities and
Exchange Commission but omit certain information and footnote
disclosures necessary to present the statements in accordance with
generally accepted accounting principles. The results of operations for
the interim periods presented are not necessarily indicative of the
results to be expected for the full fiscal year. These consolidated
condensed financial statements should be read in conjunction with the
Consolidated Financial Statements and footnotes thereto included in the
Company's Annual 10-K Report on Form 10-K for the fiscal year ended
August 30, 1997 previously filed with the Securities and Exchange
Commission.
(2) INVENTORIES
Inventories are summarized as follows:
<TABLE>
<CAPTION>
February 28, August 30,
1998 1997
(Unaudited) (Audited)
-------------- -------------
<S> <C> <C>
Finished productsproducts $ 5,951,145 $ 7,539,031
Work-in-process 21,712,128 18,341,911
Subassemblies 8,515,712 9,545,857
Raw materials and purchased parts 33,637,511 26,563,674
----------- -----------
$69,816,496 $61,990,473
----------- -----------
</TABLE>
(3) SUPPLEMENTARY CASH FLOW INFORMATION
<TABLE>
<CAPTION>
Six Months Ended
-----------------------------------
February March 1,
1998 1997
(Unaudited) (Unaudited)
---------------- --------------
Schedule of interest and income taxes paid:
<S> <C> <C>
Interest $1,579,297 $ 85,533
Income taxes $1,313,819 $3,816,630
</TABLE>
The Company realized ina tax benefit from disqualifying stock options
and purchasesthe exercise of stock options of $205,162 and $70,280 in
the first half of fiscal 1998 and 1997, respectively.
(4) RECONCILIATION OF EARNINGS AND SHARE AMOUNTS USED IN EPS CALCULATION
Effective December 31, 1997, the Company adopted SFAS No. 128,
"Earnings per Share." Basic earnings per common share were computed by
dividing net income by the weighted average number of shares of common
stock outstanding during the year. Diluted earnings per common share
for the quarter and six months ended February 28, 1998 and March 1,
1997 were calculated using the treasury stock method to compute the
weighted average common stock outstanding assuming the conversion of
dilutive common stock equivalents. As a result, the Company's reported
earnings per share for prior periods were restated. There was no
material impact on reported earnings per share (EPS) data when compared
to basic and diluted earnings per share calculated under the provisions
of SFAS No. 128 for the quarter and six months ended March 1, 1997.
8
<PAGE> 9
<TABLE>
<CAPTION>
FSI INTERNATIONAL, INC. AND SUBSIDIARIES
- ------------------------------------------------------------------------------------------------------------------------------------
FEBRUARY 28, 1998 MARCH 1, 1997
(UNAUDITED) (UNAUDITED)
------------------------------------------------- ---------------------------------------------
Per Share Per Share
FOR THE QUARTERS ENDED Income Shares Amount Income Shares Amount
----------- ---------- ------------ ------------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Net Income (loss) ($4,597,002) $1,937,676
BASIC EARNINGS PER SHARE:
Income (loss) available to
common stockholders ($4,597,002) 22,767,469 ($0.20) $1,937,676 22,461,822 $0.09
Effect of Dilutive Securities:
Stock options - - * - - 740,040 ($0.01)
DILUTIVE EARNINGS PER SHARE:
Income (loss) available to
common stockholders ($4,597,002) 22,767,469 ($0.20) $1,937,676 23,201,862 $0.08
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
FEBRUARY 28, 1998 MARCH 1, 1997
(UNAUDITED) (UNAUDITED)
----------------------------------------------- ------------------------------------------
Per Per
Share Share
FOR THE SIX MONTHS ENDED Income Shares Amount Income Shares Amount
------------ ---------- --------- ----------- ----------- ----------
<S> <C> <C> <C> <C> <C> <C>
Net Income (loss) ($2,711,665) $5,978,600
BASIC EARNINGS PER SHARE:
Income (loss) available to
common stockholders ($2,711,665) 22,691,001 ($0.12) $5,978,600 22,412,576 $0.27
Effect of Dilutive Securities:
Stock options - - * - - 706,726 ($0.01)
DILUTIVE EARNINGS PER SHARE:
Income (loss) available to
common stockholders ($2,711,665) 22,691,001 ($0.12) $5,978,600 23,119,302 $0.26
</TABLE>
* The effect of stock options were not included in the calculation of dilutive
earnings per share for the quarter and six months ended February 28, 1998
because their inclusion would have been anti-dilutive.
9
<PAGE> 10
ITEM 2.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
SECOND QUARTER AND FIRST SIX MONTHS OF FISCAL 1998 COMPARED WITH THE SECOND
QUARTER AND FIRST SIX MONTHS OF FISCAL 1997
The information in this discussion, except for the historical information
contained herein, contains forward-looking statements within the meaning of
Section 21E of the Securities Exchange Act of 1934, as amended, and is subject
to the safe harbor created by that statute. Such statements are subject to
various risks and uncertainties. Actual results may be materially different from
these foward-looking statements. Factors that could cause actual results to
differ include general economic conditions including the current economic and
financial conditions in Asia, particularly Korea and Japan; the demand and price
for semiconductors; the level of new orders and order delays or cancellations;
competitive pricing pressures; the timing and success of current and future
product and process development programs; the success of the company's
affiliated distributors; and the timing and extent of an industry
up-or down-turn. In addition, readers are also directed to the Risk Factors
discussion found below under "Risk Factors" and in the Company's Report on Form
10-K for the year ended August 30, 1997 and the Company's Report on Form 10-Q
for the quarter ended November 29, 1997. Readers also are cautioned not to
place undue reliance on these forward-looking statements as actual results
could differ materially. The Company assumes no obligation to publicly release
any revisions or updates to these forward-looking statements to reflect future
events or unanticipated occurrences. Such forward-looking statements are marked
with an asterisk (*).
Due to current industry conditions, the Company implemented cost-control
measures including asking all employees to take ten furlough days during the
remainder of the fiscal year. In addition, capital spending plans have been
reduced for fiscal 1998, from previously anticipated $10 to $15 million to less
than $10 million.*
SALES:
<TABLE>
<CAPTION>
Second Quarters Ended Six Months Ended
-------------------------------------------------- ----------------------------------------------------
February 28, March 1, February 28, March 1,
1998 Change 1997 1998 Change 1997
---------------- --------------- ----------------- ----------------- -------------- -------------------
<S> <C> <C> <C> <C> <C> <C>
Sales $59,431,392 (1.2%) $60,157,375 124,346,286 (2.2%) $127,148,370
</TABLE>
Sales decreased to $59.4 million for the second quarter ended February 28, 1998
as compared to $60.2 million for the second quarter of fiscal 1997. Sales for
the six months ended February 28, 1998 decreased $2.8 million to $124.3 million
as compared to $127.1 million for the first six months of fiscal 1997. Sales for
the second quarter of fiscal 1998 were lower than anticipated due to the
softness in the microelectronics market. The Company experienced an order delay
from a major Korean semiconductor manufacturer, which had been expected to ship
during the quarter. In addition, a U.S. disk drive manufacturer requested a
delay in the shipment of two POLARIS(R) Microlithography Clusters.
International sales were $26.5 million, and $25.5 million for the second quarter
of fiscal 1998 and 1997, respectively, and represented approximately 44.6% and
42.3% of sales during these periods. International sales were $48.1 million and
$48.2 million for the first half of fiscal 1998 and 1997, respectively, and
represented 38.7% and 37.9% of sales during these periods. International sales
were approximately 36% of total sales for fiscal 1997. The increase in
international sales in second quarter and first half of fiscal 1998 as a
percentage of sales as compared to second quarter and first half of fiscal 1997
occurred in Europe.
10
<PAGE> 11
The continued weakness in DRAM prices, driven by excess capacity, combined with
the financing difficulties and economic turbulence in Asia are causing the
Company's customers to be cautious about capital spending. In addition, some
customers are contracting out device manufacturing instead of adding capacity to
their own operations. Given the uncertainty in the industry, the Company could
see delays or cancellations of orders in the future.* The Company believes, with
the current softness in the industry and the overall uncertainty in the market
place, fiscal 1998 sales could be at or below 1997 sales of $252 million.*
Therefore, sales for the next few quarters are currently forecasted to be
relatively flat compared to the second quarter.*
GROSS PROFIT:
<TABLE>
<CAPTION>
Second Quarter Six Months Ended
----------------------------------------------- --------------------------------------------------
February 28, March 1, February 28, March 1,
1998 Change 1997 1998 Change 1997
--------------- -------------- ---------------- ----------------- --------------- ----------------
<S> <C> <C> <C> <C> <C> <C>
Gross Profit $20,671,983 (2.9%) $21,292,202 $46,855,855 (2.5%) $48,057,027
As a % of sales 34.8% 35.4% 37.7% 37.8%
</TABLE>
Gross profit as a percentage of sales for second quarter of fiscal 1998 was
34.8% as compared to approximately 35.4% for second quarter of fiscal 1997.
Gross profit as a percentage of sales for the first six months of fiscal 1998
was 37.7% as compared to approximately 37.8% for the first six months of fiscal
1997. Gross profit margins for the second quarter and the first six months of
fiscal 1998 were impacted by low manufacturing capacity utilization, reflecting
lower than expected revenues and the addition of the new Microlithography
facility in Allen, Texas in the second half of fiscal 1997. Also, an increase in
inventory obsolescence reserves, OEM systems content and increased pricing
pressure impacted gross margins.
The Company's gross profit margin fluctuates as a result of a number of
factors, including the mix of products sold, the proportion of international
sales, OEM systems content, competitive pricing pressures and the utilization of
manufacturing capacity. The Company expects gross margins as a percentage of
sales to slightly increase during the remainder of fiscal 1998 due to the
expected mix of products to be sold.*
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES:
<TABLE>
<CAPTION>
Second Quarter Six Months Ended
------------------------------------------------ -------------------------------------------------
February 28, March 1, February 28, March 1,
1998 Change 1997 1998 Change 1997
---------------- -------------- ---------------- ------------------ ------------ -----------------
<S> <C> <C> <C> <C> <C> <C>
SG&A Expenses $17,374,954 41.9% $12,247,047 $31,763,518 24.7% $25,465,886
As a % of sales 29.2% 20.4% 25.5% 20.0%
</TABLE>
Selling, general and administrative expenses were $17.4 million and $12.2
million or 29.2% and 20.4% of sales during the second quarter of fiscal 1998 and
1997, respectively. For the first six months of fiscal 1998, and 1997, SG&A
expenses were $31.8 million and $25.5 million or 25.5% and 20.0% of sales,
respectively. SG&A expenses were higher in the second quarter and first half of
fiscal 1998 as compared to the second quarter and first half of fiscal 1997
primarily due to one-time charges of approximately $2 million related to
organizational changes announced in December 1997 and the settlement of a patent
infringement lawsuit.
In addition, the increase in the amount of SG&A expenses in the second quarter
and first half of fiscal 1998 was also due to increased costs associated with
the new business system, year 2000 programs and overall infrastructure costs.
11
<PAGE> 12
The Company recently settled a patent infringement lawsuit relating to its
EXCALIBUR(R) Systems which had been brought by Purusar Corporation in October
1995. In exchange for a one-time lump-sum payment, Purusar has dismissed the
lawsuit and released FSI and its customers from any past or future claims of
infringement relating to the patent at issue. FSI did not and will not be paying
any royalties to Purusar. (See Item 3, Legal Proceedings).
RESEARCH AND DEVELOPMENT EXPENSES:
<TABLE>
<CAPTION>
Second Quarter Six Months Ended
----------------------------------------------- -------------------------------------------------
February 28, March 1, February 28, March 1,
1998 Change 1997 1998 Change 1997
---------------- ------------- ---------------- ----------------- ------------- -----------------
<S> <C> <C> <C> <C> <C> <C>
R&D Expenses $11,228,302 25.9% $8,917,409 $21,879,138 17.7% $18,595,322
As a % of sales 18.9% 14.8% 17.6% 14.6%
</TABLE>
Research and development expenses for the second quarter of fiscal 1998 were
$11.2 million, or 18.9% of sales, as compared to $8.9 million, or 14.8% of
sales, for the second quarter of fiscal 1997. For the first six months of fiscal
1998, research and development expenses were $21.9 million or 17.6% of sales as
compared to $18.6 million or 14.6% of sales for the first half of fiscal 1997.
The increase in the amount of R&D expenses resulted from continued product and
process development efforts on new and existing products, including 300-mm
development programs for the EXCALIBUR(R), ARIES(TM) CryoKinetic(TM) cleaning
systems, the ZETA(TM) automated surface conditioning system, the new POLARIS(R)
cluster models and certain new chemical management products. The Company is also
investing in 0.25 and 0.18 micron process development programs. The successful
introduction of new products is important to the long-term growth of the
Company.* Overall, the Company's goal is to invest approximately 13% to 15% of
sales in research and development and process development programs.* The Company
expects to invest a higher percentage of sales in research and development
programs in fiscal 1998.*
OTHER INCOME (EXPENSE), NET:
<TABLE>
<CAPTION>
Second Quarter Six Months Ended
---------------------------------------------- ------------------------------------------------
February 28, March 1, February 28, March 1,
1998 Change 1997 1998 Change 1997
---------------- ------------- --------------- ---------------- -------------- ----------------
<S> <C> <C> <C> <C> <C> <C>
Other income, (expense), net $302,288 (64.5%) $851,661 $775,720 (49.1%) $1,522,813
As a % of sales 0.5% 1.4% 0.6% 1.2%
</TABLE>
Other income, (expense) was approximately $302,000 and $776,000 respectively, of
income for the second quarter and first six months of fiscal 1998 as compared to
$852,000 and $1.5 million, respectively, of income for the second quarter and
first half of fiscal 1997.
INCOME TAX (BENEFIT) EXPENSE:
Income tax (benefit), expense for the second quarter and first six months of
fiscal 1998 was approximately ($3.0) million tax (benefit) and ($2.5) million
tax (benefit), respectively, compared to approximately ($303,000) tax benefit
and $1.1 million of tax expense, respectively for the second quarter and first
six months of fiscal 1997.
12
<PAGE> 13
EQUITY IN EARNINGS OF AFFILIATES:
<TABLE>
<CAPTION>
Second Quarter Six Months Ended
------------------------------------------------ ------------------------------------------------
February 28, March 1, February 28, March 1,
1998 Change 1997 1998 Change 1997
------------------ --------------- ------------- ------------------- ------------ ---------------
<S> <C> <C> <C> <C> <C> <C>
Equity in
Earnings (Loss)
of Affiliates ($135,816) (116.9%) $804,213 $422,636 (76.9%) $1,827,801
As a % of sales (0.2%) 1.3% 0.3% 1.4%
</TABLE>
The equity in loss of affiliates was ($136,000) for the second quarter of fiscal
1998, compared to earnings of $804,000 for the second quarter of fiscal 1997.
For the first six months of fiscal 1998, equity in earnings of affiliates was
$423,00 compared to $1.8 million for the first half of fiscal 1997. The
decrease is due to lower earnings at both affiliates (Metron Technology B.V. and
m-FSI Ltd.) due to the downturn in industry conditions.
LIQUIDITY AND CAPITAL RESOURCES
The Company's cash and cash equivalents and marketable securities approximated
$86.2 million as of February 28, 1998, a decrease of $3.0 million from the end
of fiscal year 1997. The decrease in cash, cash equivalents and marketable
securities is a result of cash flow used in operations of approximately $3.0
million.
The Company's accounts receivable increased 0.8%, or approximately $514,000 to
$64.8 million at February 28, 1998 as compared to $64.3 million at the end of
fiscal 1997. The increase in accounts receivable is due to an increase in
foreign sales from 30% in the fourth quarter of fiscal 1997 to 45% in the second
quarter of fiscal 1998. Generally, foreign receivables tend to have extended
payment terms or take longer to collect. The Company does not believe it has any
significant collection exposure from South East Asia.*
The Company's inventory increased approximately $7.8 million to $69.8 million at
February 28, 1998 compared to $62.0 million at the end of fiscal 1997. This was
mainly due to increased levels of raw materials and purchased parts. The Company
had anticipated higher order levels in the first half of fiscal 1998 than what
was achieved which resulted in higher inventory levels. As of February 28, 1998,
the Company's current ratio of current assets to current liabilities was 3.59 to
1.0 and working capital was $175.6 million.
The Company had acquisitions of property, plant and equipment of approximately
$2.5 million and $21.6 million for the first half of fiscal 1998 and fiscal
1997, respectively. It is anticipated the Company will invest less than $10.0
million in fiscal 1998.*
The Company believes that with existing cash and cash equivalents, marketable
securities and internally generated funds, there will be sufficient funds to
meet the Company's current projected working capital and other cash requirements
through at least fiscal 1999.*
The Company believes that success in its industry requires substantial capital
to maintain the flexibility to take advantage of opportunities as they may
arise. The Company may, from time to time, as market and business conditions
warrant, invest in or acquire complementary businesses, products or
technologies.* The Company may fund such activities with additional equity or
debt financings.* The sale of additional equity or debt securities could result
in additional dilution to the Company's shareholders.*
NEW ACCOUNTING PRONOUNCEMENTS
In February 1997, the FASB issued Statement of Financial Accounting Standards
(SFAS) No. 128, Earnings Per Share, which simplifies the standards for computing
earnings per share previously found in Accounting Principles
13
<PAGE> 14
Board Opinion (APB) No. 15. SFAS No. 128 replaces the presentation of primary
earnings per share with a presentation of basic earnings per share, which
excludes dilution. SFAS No. 128 also requires dual presentation of basic and
diluted earnings per share on the face of the income statement for all entities
with complex capital structures, and requires a reconciliation. Diluted earnings
per share is computed similarly to fully diluted earnings per share pursuant to
APB No. 15. SFAS No. 128 must be adopted for financial statements issued for
periods ending after December 15, 1997, including interim periods; earlier
application is not permitted. SFAS No. 128 requires restatement of all
prior-period earnings-per-share data presented. The Company implemented SFAS No.
128 during the second quarter of fiscal 1998. This implementation of SFAS No.
128 did not have a material impact on the Company's financial statement
disclosures.
In February 1997, the FASB issued SFAS No. 129, Disclosure of Information about
Capital Structures, which was implemented by the Company in the first quarter of
fiscal 1998. SFAS No. 129 requires companies to disclose certain information
about their capital structure. The disclosure requirements of SFAS No. 129 did
not have an impact on the Company's financial statement disclosures.
In June 1997, the FASB issued SFAS No. 130, Reporting Comprehensive Income,
which establishes standards for reporting and display of comprehensive income
and its components (revenue, expenses, gains, and losses) in a full set of
general-purpose financial statements. The Company will adopt SFAS No. 130 in
fiscal year 1999.
In June 1997, the FASB issued SFAS No. 131, Disclosure about Segments of an
Enterprise and Related Information, which changes the way public companies
report information about operating segments. SFAS No. 131, which is based on the
management approach to segment reporting, establishes requirements to report
selected segment information quarterly and to report entity-wide disclosures
about products and services, major customers, and the material countries in
which the entity holds assets and reports revenue. Management has not yet
evaluated the effects of this change on its reporting of segment information.
The Company will adopt SFAS No. 131 in fiscal 1999.
RISK FACTORS
Due to the nature of business and the industry in which the Company operates,
the following risk factors should be considered in addition to others described
above.
CYCLICALITY AND VOLATILITY IN THE MICROELECTRONICS INDUSTRY:
The Company's business depends upon the capital equipment expenditures of
microelectronics manufacturers, which in turn depend on the current and
anticipated market demand for semiconductor devices and products utilizing
semi-conductor devices. The microelectronics industry has been cyclical in
nature and has experienced periodic downturns. Certain semiconductor device
manufactures have experienced slowdowns in terms of product demand and
volatility in terms of product pricing. Industry slowdowns and volatility have
caused the semiconductor device manufacturers to reduce their demand for
semiconductor processing equipment and in some instances, to delay capital
equipment decisions. In some cases this has resulted in order delays and may
result in order cancellations or delays of delivery dates for the Company's
products. No assurance can be given that the Company's sales and operating
results will not be adversely affected during a slowdown in the semiconductor
industry.
In addition, the need for continued investments in research and development,
substantial capital equipment requirements and extensive ongoing worldwide
customer service and support capability will limit the Company's ability to
reduce expenses. Accordingly, there is no assurance that the Company will be
able to remain profitable in the future.
RISK OF DELAYS IN INTRODUCING NEW PRODUCTS AND THE MARKET'S ACCEPTANCE OF SUCH
PRODUCTS:
Microelectronics manufacturing equipment and processes are subject to rapid
technological change and new product introductions, as well as evolving industry
standards. The Company believes microelectronics manufacturers are increasingly
relying on equipment manufacturers to design and develop more efficient
equipment, to design and
14
<PAGE> 15
implement improved processes for the benefit of microelectronics manufacturers
and to integrate their equipment with that of other equipment manufacturers. The
Company must continue to develop, manufacture and market new products that
conform to evolving industry standards and that require a significant commitment
of resources and capital. The success of the Company in developing, introducing
and selling new and enhanced equipment depends upon a variety of factors
including product selection, timely and efficient completion of product design
and development, timely and efficient implementation of manufacturing and
assembly processes, product performance in the field, and effective sales and
marketing. The Company must also manage product transitions successfully, as
introductions of new products could adversely affect the sales of existing
products. The Company's failure to develop and successfully introduce new
products or enhancements to its existing products and processes or achieve
market acceptance of the new products or enhancements could adversely affect the
Company's business and results of operations.
NEW FACILITIES AND RELATED INFASTRUCTURE COSTS:
The Company added manufacturing capacity with new facilities during fiscal 1997.
This additional manufacturing capacity will have a negative impact on gross
profit margins if the Company's anticipated revenue levels are not met. These
additional facilities and related infrastructure costs will also increase the
overall operating expenses of the Company. The potential impact of idle
manufacturing capacity on gross margins and related infrastructure costs could
also have an adverse impact on the Company's future financial results.
VOLATILITY OF STOCK PRICE:
The Company's common stock has experienced in the past, and could experience in
the future, substantial price volatility as a result of a number of factors,
including quarter-to-quarter variations in the actual or anticipated financial
results of the Company, announcements by the Company, its competitors or
customers, government regulations and developments in the industry. In addition,
the stock market has experienced extreme price and volume fluctuations, which
have affected the market price of many technology companies in particular and
which have at times been unrelated to the operating performance of the specific
companies whose stock is traded. Broad market fluctuations, as well as economic
conditions generally and, in the microelectronics industry specifically, may
adversely affect the market price of the Company's common stock.
FLUCTUATIONS IN QUARTERLY OPERATING RESULTS:
The Company's operating results have in the past been, and may continue to be,
subject to quarterly fluctuations due to a number of factors. FSI may
experience significant fluctuations in its quarterly sales, gross profits,
operating results, and net income. Factors which may influence FSI's operating
results in a given quarter include specific economic conditions in the
microelectronics industry, the financial results of FSI's affiliates, the
timing of the receipt of orders from major customers, the mix of products sold
by FSI, competitive pricing pressures, the proportion of international
sales, product modifications requested by customers, utilization of
manufacturing capacity, and production ability. During a specific quarter, a
significant portion of the Company's revenue may be derived from the sale of a
relatively small number of systems. Accordingly, a small change in the numbers
of such systems sold in a quarter may cause significant changes in operating
results. Moreover, customers may cancel or reschedule shipments, and parts
availability could delay shipments. These factors also could significantly
affect annual results of operations.
SUCCESS OF COMPANY'S AFFILIATED DISTRIBUTORS:
The majority of the Company's international sales are made through its
affiliated distributors, Metron Technology B.V. and m-FSI Ltd. These affiliated
distributors also provide service and support to many of the Company's
international customers. The affiliated distributors also sell other principals'
products. A reduction in the sales efforts or financial viability of such
distributors or a loss of a significant principal by a distributor could affect
the Company's results of operations.
15
<PAGE> 16
LITIGATION:
The Company recently settled a patent infringement lawsuit. The Company could
become involved in additional litigation in the future. There can be no
assurance about the outcome of any future litigation or patent infringement
inquiries and whether it will adversely impact the Company's business or results
of operations.
HIGHLY COMPETITIVE INDUSTRY:
The microelectronics processing equipment industry is highly competitive. The
Company faces substantial competition throughout the world. The Company believes
that to remain competitive, it will require significant financial resources to
offer a broad range of products, to maintain customer service and support
centers worldwide, and to invest in product and process research and
development. There can be no assurance that financial resources with favorable
terms would be available when required. The Company believes that the
microelectronics industry is becoming increasingly dominated by large
manufacturers that have the resources to support customers on a worldwide basis.
Certain of the Company's competitors have substantially greater financial,
marketing, and customer service and support capabilities than the Company. There
is the possibility of large equipment companies entering the market areas in
which the Company competes. In addition, there are smaller emerging
microelectronics equipment companies that provide innovative technology. The
Company expects its competitors to continue to improve the design and
performance of their current products and processes and to introduce new
products and processes with improved price and performance characteristics. No
assurance can be given that the Company will continue to compete successfully in
the United States or elsewhere.
DEPENDENCE ON KEY PERSONNEL:
The Company's success depends to a significant extent upon management and
technical personnel. The loss of the services of several or more of these key
persons could have an adverse effect on the Company's operations. Competition
for such personnel in the Company's industry in all geographic locations is
high. There can be no assurance that the Company will continue to be successful
in attracting and retaining the personnel it requires to continue to grow and
operate profitably.
INDUSTRY CONSOLIDATION:
There has been a trend toward industry consolidation for several years, During
fiscal 1997, the Company saw this trend continue with the completion of two
large industry mergers. The Company expects this trend toward industry
consolidation to continue as companies attempt to strengthen or hold their
market positions in a rapidly changing industry. The Company believes that the
industry consolidation may result in competitors that are better able to
compete. This could have a material adverse affect on the Company's business
operating results and financial condition.
VOLATILITY OF GLOBAL MARKETS:
The Company and its affiliates operate in a global market. Global operations are
subject to risks, including political and economic instability, general economic
conditions, imposition of government controls, fluctuations of exchange rates,
the need to comply with a wide variety of foreign and United States export laws,
trade restrictions and the greater difficulty of administering business
overseas. Although substantially all the Company's direct international sales
are denominated in United States dollars, both direct sales by the Company and
sales through its affiliated international distributors may be affected by these
factors and thus may adversely affect the operations and financial results of
the Company.
Recently the South East Asian currency crisis and the impact the crisis has had
upon the capital markets has resulted in lowered expectations for the
semiconductor capital industry. Due to the uncertainty in the South East Asia
region, the Company has seen a recent slow down in the industry. Anticipated
sales levels are at risk if industry conditions continue to deteriorate and
confidence in the Asian markets is not restored.
16
<PAGE> 17
YEAR 2000:
The Company is addressing the issues associated with the programming code in
existing computer systems as the millennium (year 2000) approaches. The "year
2000" problem is pervasive and complex as virtually every computer operation
will be affected in some way. The Company is aware of the computing difficulties
that the Millennium issue presents for the year 2000.
The Company is utilizing both internal and external resources to identify,
correct or reprogram, and test its systems for year 2000 compliance. It is
anticipated that all reprogramming efforts will be complete by December 31,
1998, allowing adequate time for testing. To date, confirmations have been
received from some of the Company's vendors that plans are being developed to
address processing of transactions in the year 2000. It is anticipated the
Company will incur at least $850,000 to address the year 2000 problem during
fiscal 1998 and $800,000 in fiscal 1999. The year 2000 problem creates
risk for the Company from unforeseen problems in its own computer systems and
from the Company's vendors. The failures of the Company's or its vendor's
computer systems could have a material impact on the Company's operations.
17
<PAGE> 18
FSI INTERNATIONAL, INC. AND SUBSIDIARIES
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
The Company recently settled a patent infringement lawsuit relating to
its EXCALIBUR(R) Systems which had been brought by Purusar Corporation
in October 1995. In exchange for a one-time lump-sum payment, Purusar
has dismissed the lawsuit and released the Company and its customers
from any past or future claims of infringement relating to the patent
at issue. The Company did not and will not be paying any royalties to
Purusar.
ITEM 2. CHANGE IN SECURITIES
None
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
At the Company's Annual Meeting of Shareholders held on January 27,
1998, the shareholders approved the following:
(1) Election of three Class II Directors to serve a three-year term.
Each nominated director was elected as follows:
<TABLE>
<CAPTION>
DIRECTOR-NOMINEE VOTES FOR VOTES ABSTENTIONS
---------------- --------- -----------------
<S> <C> <C>
Neil R. Bonke 19,462,258 77,178
Joel A. Elftmann 19,466,693 72,743
Thomas D. George 19,468,173 71,263
</TABLE>
James A. Bernards and Joanna T. Lau, as Class I Directors, and
Terrence W. Glarner and Charles R. Wofford, as Class III Directors,
continue to serve as directors of the Company.
(2) Proposal to ratify the appointment of KPMG Peat Marwick LLP as
independent auditors of the Company for the fiscal year ending August
29, 1998. The proposal received 19,456,987 votes for and 50,588 votes
against. There were 31,861 abstentions.
(3) Proposal to increase the number of shares authorized under the FSI
International, Inc. Employee Stock Purchase Plan by 350,000 shares.
The proposal received 18,262,627 votes for and 1,204,928 votes
against. There were 71,881 abstentions.
(4) Proposal to increase the number of shares authorized under FSI
International, Inc's 1997 Omnibus Stock Plan by 750,000 shares. The
proposal received 13,507,635 votes for and 5,805,744 votes against.
There were 226,057 abstentions.
ITEM 5. OTHER INFORMATION
None
18
<PAGE> 19
FSI INTERNATIONAL, INC. AND SUBSIDIARIES
ITEM 6 EXHIBITS AND REPORTS ON FORM 8-K
a)(3) Exhibits
* An asterisk next to a listed Exhibit indicates it is an executive
compensation plan or arrangement.
2.1 Agreement and Plan of Reorganization dated December 23, 1994 by and
among the Company, ACS Acquisition Corp., Applied Chemical
Solutions, and certain significant shareholders of Applied Chemical
Solutions.(1)
2.2 Share Purchase Agreement dated December 14, 1994 by and among the
Company, Metron Semiconductors Europa B.V., Christopher
Springall, Anthony Springall, Roger Springall, David Springall
and Michael Springall. (2)
2.3 Agreement and Plan of Reorganization by and Among FSI
International, Inc., Spectre Acquisition Corp., and Semiconductor
Systems, Inc. (12)
3.1 Restated Articles of Incorporation of the Company. (3)
3.2 Restated By-Laws. (4)
3.3 Amendment to Restated By-Laws. (5)
4.1 Note Purchase Agreement between FSI International, Inc. and
Metropolitan Life Insurance Company and other certain purchasers.
(Schedule A omitted) (14)
4.2 Form of Rights Agreement dated as of May 22, 1997 between FSI
International, Inc. and Harris Trust and Savings Bank, National
Association, as Rights Agent (15)
*10.1 FSI International, Inc. 1997 Omnibus Stock Plan (14)
*10.2 Split Dollar Insurance Agreement and Collateral Assignment
Agreement dated December 28, 1989, between the Company and Joel
A. Elftmann. (Similar agreements between the Company and each of
Robert E. Cavins, Benjamin J. Sloan, Dale A. Courtney, Peter A.
Pope, Benno G. Sand and J. Wayne Stewart have
been omitted, but will be filed upon the request of the
Commission).(6)
10.3 Lease dated June 27, 1985, between the Company and Lake Hazeltine
Properties. (4)
10.4 Lease dated September 1, 1985, between the Company and Elftmann,
Wyers, Blackwood Partnership. (4)
10.5 Lease dated September 1, 1985, between the Company and Elftmann,
Wyers Partnership. (4)
*10.6 1989 Stock Option Plan. (5)
*10.7 Amended and Restated Employees Stock Purchase Plan. (3)
10.8 Shareholders Agreement among FSI International, Inc. and Mitsui
& Co., Ltd. and Chlorine Engineers Corp. Ltd. dated as of August
14, 1991. (6)
10.9 FSI Exclusive Distributorship Agreement dated as of August 14,
1991 between FSI International, Inc. and moFSI, Ltd. (6)
10.10 FSI Licensing Agreement dated as of August 14, 1991, between FSI
International, Inc. and moFSI, Ltd. (6)
10.11 License Agreement, dated October 15, 1991, between the Company
and Texas Instruments Incorporated. (7)
10.12 Amendment No. 1, dated April 10, 1992, to the License Agreement,
dated October 15, 1991, between the Company and Texas Instruments
Incorporated. (7)
10.13 Amendment effective October 1, 1993 to the License Agreement, dated
October 15, 1991 between the Company and Texas Instruments
Incorporated (8)
*10.14 Amended and Restated Directors' Nonstatutory Stock Option Plan. (9)
*10.15 Management Agreement between FSI International, Inc. and Robert E.
Cavins, effective as of March 28, 1994. (9)
19
<PAGE> 20
*10.16 Management Agreement between FSI International, Inc. and Dale A.
Courtney, effective as of March 28, 1994. (9)
*10.17 Management Agreement between FSI International, Inc. and Joel A.
Elftmann, effective as of March 28, 1994 (9)
*10.19 Management Agreement between FSI International, Inc. and Peter A.
Pope, effective as of March 28, 1994. (9)
*10.20 Management Agreement between FSI International, Inc. and Benno G.
Sand, effective as of March 31, 1994. (9)
*10.21 Management Agreement between FSI International, Inc. and Benjamin
J. Sloan, effective as of March 28, 1994. (9)
*10.22 Management Agreement between FSI International, Inc. and J. Wayne
Stewart, effective as of March 28, 1994. (9)
*10.23 Management Agreement between FSI International, Inc. and Charles
Wofford effective as of February 5, 1996. (13)
*10.24 FSI International, Inc. 1994 Omnibus Stock Plan. (10)
*10.25 FSI International, Inc. 1997 Incentive Plan.
10.26 First Amendment to Lease made and entered into October 31, 1995 by
and between Lake Hazeltine Properties and FSI International, Inc.
(11)
10.27 Distribution Agreement made and entered into as of July 6, 1995 by
and between FSI International, Inc. and Metron Semiconductors
Europa B.V. (Exhibits to Agreement omitted) (11)
10.28 Lease dated August 9, 1995 between Skyline Builders, Inc. and FSI
International, Inc. (11)
10.29 Lease Rider dated August 9, 1995 between Skyline Builders, Inc. and
FSI International, Inc. (11)
10.30 Lease Amendment dated November, 1995 between Roland A. Stinski and
FSI International, Inc. (Exhibits to Amendment omitted) (11)
27.0 Financial Data Schedules
(1) Filed as an Exhibit to the Company's Report on Form 8-K dated January 5,
1995, as amended, File No. 0-17276, and incorporated by reference.
(2) Filed as an Exhibit to the Company's Registration Statement on Form S-3
dated January 5, 1995, SEC File No. 33-88250 and incorporated by
reference.
(3) Filed as an Exhibit to the Company's Report on Form 10-Q for the quarter
ended February 24, 1990, SEC File No. 0-17276, and incorporated by
reference.
(4) Filed as an Exhibit to the Company's Registration Statement on Form
S-1, SEC File No. 33-25035, and incorporated by reference.
(5) Filed as an Exhibit to the Company's Report on Form 10-K for the fiscal
year ended August 26, 1989, SEC File No. 0-17276, and incorporated by
reference.
(6) Filed as an Exhibit to the Company's Report on Form 10-K for the fiscal
year ended August 31, 1991, as amended by Form 8 dated January 7, 1992,
SEC File No. 0-17276, and incorporated by reference.
(7) Filed as an Exhibit to the Company's Report on Form 10-K for the fiscal
year ended August 29, 1992, File No. 0-17276, and incorporated by
reference.
(8) Filed as an Exhibit to the Company's Report on Form 10-K for the fiscal
year ended August 28, 1993, SEC File No. 0-17276, and incorporated by
reference.
(9) Filed as an Exhibit to the Company's Report on Form 10-Q for the fiscal
quarter ended May 28, 1994, SEC File No. 0-17276, and incorporated by
reference.
(10)Filed as an Exhibit to the Company's Report on Form 10-K for the fiscal
year ended August 27, 1994, SEC File No. 0-17276, and incorporated by
reference.
(11)Filed as an Exhibit to the Company's Report on Form 10-K for the fiscal
year ended August 26, 1995, SEC File No. 0-17276 and incorporated by
reference.
(12)Filed as an Exhibit to the Company's Registration Statement on Form
S-4 (as amended) dated March 21, 1996, SEC File No. 333-1509 and
incorporated by reference.
(13)Filed as an Exhibit to the Company's Report on Form 10-K for the fiscal
year ended August 31, 1996, SEC File No. 0-17276 and incorporated by
reference.
(14)Filed as an Exhibit to the Company's Report on Form 10-Q for the fiscal
quarter ended March 1, 1997, SEC File No. 0-17276, and incorporated by
reference.
(15)Filed as an Exhibit to the Company's Report on Form 8-K, filed by the
Company on June 5, 1997, SEC File No. 0-17276, and incorporated by
reference.
- ---------------------------
20
<PAGE> 21
(b) Reports on Form 8-K
No reports on Form 8-K were filed during the second quarter ended
February 28, 1998.
21
<PAGE> 22
FSI INTERNATIONAL, INC. AND SUBSIDIARIES
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
FSI INTERNATIONAL, INC.
. . . . . . . . . . . . .
[Registrant]
DATE: April 13, 1998
By: /s/Patricia M. Hollister
---------------------------------
Patricia M. Hollister
Chief Financial Officer and
Corporate Controller
on behalf of the
Registrant and as
Principal Financial Officer
22
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0
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<S> <C>
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<DEPRECIATION> 27,264,983
<TOTAL-ASSETS> 325,305,165
<CURRENT-LIABILITIES> 55,849,951
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0
0
<COMMON> 159,117,848
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<EPS-DILUTED> .08
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<NET-INCOME> (2,711,665)
<EPS-PRIMARY> (0.12)
<EPS-DILUTED> (0.12)
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
LEARNINGS PER SHARE HAVE BEEN RESTATED TO REFLECT THE IMPLEMENTATION OF
THE FASB STATEMENT OF FINANCIAL ACCOUNTING STANDARDS (SFAS) NO. 128, EARNINGS
PER SHARE.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> AUG-30-1997
<PERIOD-START> SEP-01-1996
<PERIOD-END> MAR-01-1997
<CASH> 74,349,217
<SECURITIES> 35,477,167
<RECEIVABLES> 63,076,171
<ALLOWANCES> 1,933,000
<INVENTORY> 58,351,660
<CURRENT-ASSETS> 243,868,939
<PP&E> 89,780,066
<DEPRECIATION> 27,264,983
<TOTAL-ASSETS> 325,305,165
<CURRENT-LIABILITIES> 55,849,951
<BONDS> 42,000,000
0
0
<COMMON> 159,117,848
<OTHER-SE> 66,509,199
<TOTAL-LIABILITY-AND-EQUITY> 325,305,165
<SALES> 127,148,370
<TOTAL-REVENUES> 127,148,370
<CGS> 79,091,343
<TOTAL-COSTS> 79,091,343
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 90,000
<INTEREST-EXPENSE> 230,933
<INCOME-PRETAX> 5,518,632
<INCOME-TAX> 1,103,726
<INCOME-CONTINUING> 5,978,600
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 5,978,600
<EPS-PRIMARY> .27
<EPS-DILUTED> .26
</TABLE>
