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 second quarter of fiscal 2012 and for the six months ended February 25, 2012.

Fiscal 2012 Second Quarter and First Half

Second quarter fiscal 2012 sales increased 25 percent to $38.5 million, compared to $30.8 million for the same period of fiscal 2011. The company’s net income for the second quarter of fiscal 2012 was $3.7 million, or $0.09 per share, compared to net income of $4.9 million, or $0.13 per share, for the second quarter of fiscal 2011.

Sales for the first half of fiscal 2012 increased 24 percent to $51.7 million, compared to $41.6 million for the same period of fiscal 2011. The company’s net income for the first half of fiscal 2012 was $0.7 million, or $0.02 per share, compared to net income of $2.4 million, or $0.06 per share, for the first half of fiscal 2011.

Orders for the second quarter of fiscal 2012 increased 123 percent to $51.4 million, as compared to $23.1 million in the prior year period. First half fiscal 2012 orders increased 34 percent to $74.4 million, as compared to $55.4 million in the first half of fiscal 2011.

The second quarter financial results included $409,000 and $216,000 of stock based compensation in fiscal 2012 and 2011, respectively. Stock based compensation was $762,000 and $403,000 for the first half of fiscal 2012 and 2011, respectively.

Balance Sheet

Cash, cash equivalents, restricted cash and long-term securities at the end of the second quarter were $23.8 million. The company generated $4.1 million and $2.8 million of cash from operations during the second quarter and first half of fiscal 2012, respectively. Inventory decreased from $48.6 million at the end of fiscal 2011 to $42.0 million at the end of the second quarter of fiscal 2012, as the company’s second quarter shipments were $48.8 million. At the end of the second quarter, the company had a current ratio of 4.3 to 1.0 and a book value of $2.44 per share and no debt.

Outlook

The Company does not supply specific order guidance, however, based upon quarter-to-date orders and the visible order opportunities, fiscal 2012 third quarter orders are expected to remain strong as compared to the $51.4 million second quarter order level.*

Based on the backlog and deferred revenue levels at the end of the second quarter, quarter-to-date third quarter orders and expected additional third quarter orders, the company expects third quarter fiscal 2012 revenues to exceed $50.0 million, as compared to $38.5 million in the second quarter of fiscal 2012.*

Based upon the anticipated improvement in third quarter gross profit margin and the expected operating expense run rate, the company believes its net income will be in the $7.0 to $9.0 million range for the third quarter of fiscal 2012.* The company expects to generate cash from operating activities in the third quarter, as operating income increases and we continue to manage inventory and accounts receivable levels.*

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. CDT today. The company invites all those interested to join the call by dialing 800.779.7169 and entering access code 4372101. For those who cannot listen to the live broadcast, a replay will be available shortly after the call by dialing 800.756.6991.

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 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 1995

This press release contains certain “forward-looking” statements (*), including, but not limited to expected strong third quarter orders, third quarter beginning backlog and deferred revenue, third quarter-to-date orders, expected third quarter revenues, anticipated third quarter gross margin and expected third quarter operating expense levels, expected third quarter net income and expected cash generation from operating activities. 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; 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; the ability to attract, retain and motivate a sufficient number of qualified employees; as well as other factors listed herein or from time to time in the company’s SEC reports, including our latest 10-K annual reports and 10-Q quarterly report. The company assumes no duty to update the information in this press release.

    FSI INTERNATIONAL, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENT OF OPERATIONS (in thousands, except per share data) (unaudited)       Second Quarter Ended     Six Months Ended Feb. 25,     Feb. 26, Feb. 25,     Feb. 26, 2012 2011 2012 2011 Sales $ 38,457 $ 30,752 $ 51,739 $ 41,633 Cost of goods sold   25,947     17,703     33,691     23,413     Gross margin 12,510 13,049 18,048 18,220 Selling, general and administrative expenses 5,411 4,957 10,680 9,628 Research and development expenses   3,332     3,172     7,028     6,172     Operating income 3,767 4,920 340 2,420 Interest and other (expense) income, net   (22 )   (1 )   292     (9 )   Income before income taxes 3,745 4,919 632 2,411 Income tax expense (benefit)   42     (1 )   (27 )   (7 )   Net income $ 3,703   $ 4,920   $ 659   $ 2,418     Income per share – basic $ 0.09   $ 0.13   $ 0.02   $ 0.06   Income per share – diluted $ 0.09   $ 0.13   $ 0.02   $ 0.06     Weighted average common shares Basic 39,010 38,635 38,927 38,589 Diluted 39,614 39,176 39,305 38,995     FSI INTERNATIONAL, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEET (in thousands) (unaudited)       Feb. 25,     Aug. 27, 2012 2011 Assets   Current assets Cash, restricted cash and cash equivalents $ 21,879 $ 20,693 Receivables, net 28,634 23,196 Inventories 42,011 48,630 Other current assets   4,822   4,241 Total current assets 97,346 96,760   Property, plant and equipment, net 16,766 14,805   Long-term securities 1,907 1,907 Investment 677 677 Other assets   1,638   1,677 Total assets $ 118,334 $ 115,826   Liabilities and Stockholders’ Equity   Current liabilities Trade accounts payable $ 10,033 $ 11,226 Accrued expenses 7,602 7,473 Customer deposits 585

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Deferred profit*   4,190   2,997 Total current liabilities 22,410 21,696   Long-term liabilities 339 392   Total stockholders’ equity   95,585   93,738   Total liabilities and stockholders’ equity $ 118,334 $ 115,826  

*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)       Six Months Ended Feb. 25,     Feb. 26, 2012 2011 Sales by Area   United States 20 % 46 % International 80 % 54 %   Cash Flow Statement   Capital expenditures $ 2,620 $ 1,004 Depreciation $ 1,245 $ 1,097   Miscellaneous Data   Total employees, including contract 397 325 Book value per share $ 2.44 $ 2.24 Shares outstanding 39,174 38,699