FSII FS Development Corporation II

FSI International, Inc. (Nasdaq: FSII), a manufacturer of capital equipment for the microelectronics industry, today reported financial results for its fiscal 2011 first quarter ended November 27, 2010.

First Quarter Financial Results

First quarter fiscal 2011 sales decreased 26 percent to $10.9 million, as compared to $14.6 million for the same period of fiscal 2010. The company’s net loss for the first quarter of fiscal 2011 was $2.5 million, or $0.06 per share, compared to a net loss of $55,000, or $0.00 per share for the first quarter last year. The company had previously provided first quarter revenue and earnings guidance of $10 to 12 million and a loss of $3.5 to 4.0 million. The first quarter financial results included $187,000 and $263,000 of stock-based compensation in fiscal 2011 and 2010, respectively.

Orders for the first quarter of fiscal 2011 increased 10 percent to $32.3 million, as compared to $29.3 million in the fourth quarter of fiscal 2010 and increased 73 percent from the $18.7 million first quarter fiscal 2010 level.

Balance Sheet

On November 27, 2010, the company maintained a strong balance sheet with approximately $104 million in assets, including $34 million in cash, restricted cash, cash equivalents and long-term marketable securities. At the end of the first quarter, the company had a current ratio of 3.7 to 1.0, no debt and a book value of $2.10 per share.

Company Outlook

Fiscal 2011 second quarter orders and sales are expected to exceed $30 million.* A portion of the expected revenue is subject to the receipt of purchase orders, and the shipment and recognition of revenue occurring in the quarter.*

Based upon the anticipated gross profit margin, the company expects to report between $3.5 and $4.5 million of net income for the second quarter of fiscal 2011.*

Conference Call Details

FSI investors have the opportunity to listen to management’s discussion of its financial results on a conference call at 3:30 p.m. CT today. The company invites all those interested to join the call by dialing 888-989-7562 and entering access code 4147904. For those who cannot listen to the live broadcast, a replay will be available shortly after the call by dialing 866-447-7326.

About FSI

FSI International, Inc. is a global supplier of surface conditioning equipment technology and support services for microelectronics manufacturing. Using the company’s broad portfolio of cleaning products, which include batch and single-wafer platforms for immersion, spray, vapor and cryogenic aerosol technologies, customers are able to achieve their process performance, flexibility and productivity goals. The company’s support services programs provide product and process enhancements to extend the life of installed FSI equipment, enabling worldwide customers to realize a higher return on their capital investment. FSI maintains a web site at http://www.fsi-intl.com.

“Safe Harbor” Statement Under the Private Securities Litigation Reform Act of 1995

This press release contains certain “forward-looking” statements (*), including, but not limited to expected orders, expected revenues and expected financial results for the second quarter of fiscal 2011. Except for the historical information contained herein, the matters discussed in this news release are forward-looking statements involving risks and uncertainties, both known and unknown, that could cause actual results to differ materially from those in such forward-looking statements. Such risks and uncertainties include, but are not limited to, changes in industry conditions; order delays or cancellations; general economic conditions; changes in customer capacity requirements and demand for microelectronics; the extent of demand for the company’s products and its ability to meet demand; global trade policies; worldwide economic and political stability; the company’s successful execution of internal performance plans; the cyclical nature of the company’s business; volatility of the market for certain products; performance issues with key suppliers and subcontractors; the level of new orders; the timing and success of current and future product and process development programs; the success of the company’s direct distribution organization; legal proceedings; the potential impairment of long-lived assets; and the potential adverse financial impacts resulting from declines in the fair value and liquidity of investments the company presently holds; as well as other factors listed herein or from time to time in the company’s SEC reports, including our latest 10-K annual report. The company assumes no duty to update the information in this press release.

          FSI INTERNATIONAL, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (in thousands, except per share data) (unaudited)   First Quarter Ended Nov. 27,           Nov. 28, 2010 2009 Sales $ 10,880 $ 14,617 Cost of goods sold   5,709     8,050   Gross margin 5,171 6,567   Selling, general and administrative expenses 4,671 3,795 Research and development expenses   3,000     2,756     Operating (loss) income (2,500 ) 16 Interest and other (expense) income, net   (8 )   (55 )   Loss before income taxes (2,508 ) (39 ) Income tax (benefit) expense   (6 )   16     Net loss $ (2,502 ) $ (55 )   Net loss per share – basic $ (0.06 ) $ (0.00 ) Net loss per share – diluted $ (0.06 ) $ (0.00 )   Weighted average common shares Basic 38,544 31,636 Diluted 38,544 31,636                       FSI INTERNATIONAL, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (in thousands) (unaudited)   Nov. 27, Aug. 28, 2010 2010 Assets   Current assets Cash, restricted cash and cash equivalents $ 30,803 $ 34,687 Receivables, net 14,370 18,935 Inventories 36,206 26,145 Other current assets   4,153   3,673 Total current assets 85,532 83,440   Property, plant and equipment, net 13,094 13,204   Marketable securities 3,612 3,612 Investment 460 460 Other assets   1,613   1,582 Total assets $ 104,311 $ 102,298     Liabilities and Stockholders’ Equity   Current liabilities Trade accounts payable $ 11,201 $ 8,396 Deferred profit* 4,281 2,669 Customer deposits 2,196 ─ Accrued expenses   5,366   8,020 Total current liabilities 23,044 19,085   Long-term accrued expenses 421 410   Total stockholders’ equity 80,846 82,803       Total liabilities and stockholders’ equity $ 104,311 $ 102,298  

*Deferred profit reflects deferred revenue less manufacturing and other related costs.

          FSI INTERNATIONAL, INC. AND SUBSIDIARIES MISCELLANEOUS FINANCIAL INFORMATION (in thousands, except percentages, per share and total employee data) (unaudited) First Quarter Ended Nov. 27,           Nov. 28, 2010 2009 Sales by Area   United States 23 % 46 % International 77 % 54 %   Cash Flow Statement   Capital expenditures $ 476 $ 353 Depreciation $ 585 $ 691   Miscellaneous Data   Total employees, including contract 304 270 Book value per share $ 2.10 $ 1.60 Shares outstanding 38,544 31,636