FSII FS Development Corporation II

FSI International, Inc. (Nasdaq: FSII), a manufacturer of capital equipment for the microelectronics industry, today reported financial results for the third quarter of fiscal 2011 and for the first nine months ended May 28, 2011.

Fiscal 2011 Third Quarter and First Nine MonthsSales for the third quarter of fiscal 2011 were $25.6 million, compared to $28.7 million for the same period in fiscal 2010. The company’s net income for the third quarter of fiscal 2011 was $4.1 million, or $0.10 per share (diluted), compared to net income of $5.9 million, or $0.18 per share, for the third quarter of fiscal 2010. Third quarter fiscal 2011 financial results included $274,000 of non-cash stock-based compensation charges, compared to $144,000 in the prior year comparable period.

Sales for the first nine months of fiscal 2011 were $67.2 million, compared to $62.2 million for the same period of fiscal 2010. The company’s net income for the first nine months of fiscal 2011 was $6.5 million, or $0.17 per share, as compared to net income of $6.4 million, or $0.20 per share for the first nine months of fiscal 2010. The financial results for the first nine months of fiscal 2011 included $0.7 million of non-cash stock-based compensation charges, compared to $1.3 million in the prior year comparable period.

Balance SheetAs of the end of the fiscal 2011 third quarter, the company had approximately $113.2 million in assets, including $29.5 million in cash, restricted cash, cash equivalents and long-term marketable securities. The company had a current ratio of 4.4 to 1.0 and a book value of $2.35 per share at the end of the fiscal 2011 third quarter.

OutlookBased on the backlog and deferred revenue levels at the end of the third quarter and expected additional fourth quarter orders, the company expects fourth quarter fiscal 2011 revenues to be between $25 and 30 million, as compared to $26 million in the third quarter of fiscal 2011.*

Based upon the anticipated gross profit margin and the operating expense run rate, the company expects net income of $2.5 to $3.5 million for the fourth quarter of fiscal 2011.* The company expects to use cash in operating activities in the fourth quarter, primarily based upon the expected timing of fourth quarter shipments.*

Conference Call DetailsFSI investors have the opportunity to listen to management’s discussion of its third quarter financial results on a conference call at 3:30 p.m. CT today. In addition, the company will discuss third quarter accomplishments and review expected fourth quarter financial performance guidance. The company invites all those interested to join the conference by calling 888.982.7296 and entering access code 4488646. For those who cannot listen to the live broadcast, a replay will be available shortly after the conference by calling 866.434.5262.

About FSIFSI 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. For more information, visit FSI’s website at http://www.fsi-intl.com, or call Benno Sand, 952.448.8936.

“Safe Harbor” Statement Under the Private Securities Litigation Reform Act of 1995This press release contains certain “forward-looking” statements (*), including, but not limited to expected additional fourth quarter orders, expected revenues, expected financial results, expected cash usage and other expected financial performance for the fourth 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; the impact of natural disasters on parts supply and demand for products; 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 and 10-Q quarterly reports. 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)   Third Quarter Ended Nine Months Ended May 28,     May 29, May 28,     May 29, 2011 2010 2011 2010 Sales $ 25,598 $ 28,653 $ 67,231 $ 62,195 Cost of goods   13,731   14,930   37,144     33,863   Gross margin 11,867 13,723 30,087 28,332 Selling, general and administrative expenses 4,675 4,716 14,303 12,777 Research and development expenses   3,155   3,398   9,327     9,417   Operating income 4,037 5,609 6,457 6,138 Interest and other income, net   80   345   71     381   Income before income taxes 4,117 5,954 6,528 6,519 Income tax expense (benefit)   6   90   (1 )   100   Net income $ 4,111 $ 5,864 $ 6,529   $ 6,419   Income per share – basic $ 0.11 $ 0.18 $ 0.17   $ 0.20 Income per share – diluted $ 0.10 $ 0.18 $ 0.17   $ 0.20   Weighted average common shares Basic 38,714 32,160 38,631 31,905 Diluted 39,248 32,606 39,079 32,211           FSI INTERNATIONAL, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (in thousands) (unaudited)   May 28, Aug. 28, 2011 2010 Assets   Current assets Cash, restricted cash and cash equivalents $ 27,563

$

34,687

Receivables, net 17,749 18,935 Inventories, net 45,667 26,145 Other current assets   4,519   3,673 Total current assets 95,498 83,440   Property, plant and equipment, net 13,618 13,204   Long-term marketable securities 1,907 3,612 Investment 460 460 Other assets   1,669   1,582 Total assets $ 113,152 $ 102,298   Liabilities and Stockholders’ Equity   Current liabilities Trade accounts payable $ 10,243 $ 8,396 Deferred profit* 4,073 2,669 Customer deposits 342 ─ Accrued expenses   6,864   8,020 Total current liabilities 21,522 19,085   Long-term liabilities 446 410   Total stockholders’ equity   91,184   82,803   Total liabilities and stockholders’ equity $ 113,152 $ 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)   Nine Months Ended May 28,     May 29, 2011 2010 Sales by Area   United States 43 % 44 % International 57 % 56 %   Cash Flow Statement   Capital expenditures $ 2,012 $ 541 Depreciation 1,582 1,961   As of May 28, May 29, 2011

2010

Miscellaneous Data   Total employees, including contract 347 286 Book value per share $ 2.35 $ 1.81 Shares outstanding 38,742 32,243