-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, QdxnsALTF5tXuff7KatbrcDomctTG0aHL/7gtnTmRXsKSrBsHQ/cuCFMKnGO1UYK 5JXOubfWA3GtTgRmnfa0AA== 0000950131-96-003124.txt : 19960702 0000950131-96-003124.hdr.sgml : 19960702 ACCESSION NUMBER: 0000950131-96-003124 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19960525 FILED AS OF DATE: 19960701 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: FSI INTERNATIONAL INC CENTRAL INDEX KEY: 0000841692 STANDARD INDUSTRIAL CLASSIFICATION: SPECIAL INDUSTRY MACHINERY, NEC [3559] IRS NUMBER: 411223238 STATE OF INCORPORATION: MN FISCAL YEAR END: 0831 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-17276 FILM NUMBER: 96589478 BUSINESS ADDRESS: STREET 1: 322 LAKE HAZELTINE DR CITY: CHASKA STATE: MN ZIP: 55318 BUSINESS PHONE: 6124485440 MAIL ADDRESS: STREET 1: 322 LAKE HAZELTINE DRIVE CITY: CHASKA STATE: MN ZIP: 55318 10-Q 1 FORM 10-Q 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 MAY 25, 1996 ------------------------------------------------- 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 (I.R.S. Employer Identification No.) of incorporation or organization) 322 LAKE HAZELTINE DRIVE, CHASKA, MINNESOTA 55318 - ------------------------------------------------------------------------------- (Address of principal executive offices) (Zip Code) 612-448-5440 - ------------------------------------------------------------------------------- (Registrant's telephone number, including area code) ------------------------------------------------------------------------------ (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 - 22,315,480 SHARES OUTSTANDING AS OF JUNE 20, 1996 1 FSI INTERNATIONAL, INC. AND SUBSIDIARIES QUARTERLY REPORT ON FORM 10-Q
PART I. FINANCIAL INFORMATION PAGE NO. --------------------- ---- - --- Item 1. Consolidated Condensed Financial Statements: Consolidated Condensed Balance Sheets (Unaudited) as of May 25, 1996 and August 26, 1995 3 Consolidated Condensed Statements of Operations 5 (Unaudited) for the quarters ended May 25, 1996 and May 27, 1995 Consolidated Condensed Statements of Operations (Unaudited) 6 for the nine months ended May 25, 1996 and May 27, 1995 Consolidated Condensed Statements of Cash Flows (Unaudited) 7 for the nine months ended May 25, 1996 and May 27, 1995 Notes to the Consolidated Condensed Financial Statements (Unaudited) 8 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations: Results of Operations 10 Liquidity and Capital Resources 12 PART II. OTHER INFORMATION ----------------- Item 6. Exhibits and Reports on Form 8-K. 15 SIGNATURES 18 ----------
2 PART I. Item 1. FINANCIAL INFORMATION FSI INTERNATIONAL, INC. AND SUBSIDIARIES CONSOLIDATED CONDENSED BALANCE SHEETS MAY 25, 1996 AND AUGUST 26, 1995 (Unaudited) ASSETS
May 25, August 26, 1996 1995 ------------ ------------ Current assets: Cash and cash equivalents $ 30,400,564 $ 98,773,676 Marketable securities 50,527,681 14,059,682 Trade accounts receivable, net of allowance for doubtful accounts of $1,823,000 and $1,234,000 respectively 43,890,665 40,273,969 Trade accounts receivable from affiliates 14,400,654 13,069,739 Inventories 65,252,391 40,577,435 Deferred income tax benefit 7,328,018 5,828,018 Other current assets 3,193,670 4,668,052 ------------ ------------ Total current assets 214,993,643 217,250,571 ------------ ------------ Property, plant and equipment, at cost 54,463,886 36,339,024 Less accumulated depreciation and amortization (18,752,394) (16,212,905) ------------ ------------ 35,711,492 20,126,119 ------------ ------------ Investment in affiliates 13,027,884 8,813,370 Deposits and other assets 4,830,676 4,781,842 Deferred income tax benefit - long-term 595,085 595,085 ------------ ------------ $269,158,780 $251,566,987 ============ ============
See accompanying notes to consolidated condensed financial statements. 3 FSI INTERNATIONAL, INC. AND SUBSIDIARIES CONSOLIDATED CONDENSED BALANCE SHEETS MAY 25, 1996 AND AUGUST 26, 1995 (continued) (Unaudited) LIABILITIES AND STOCKHOLDERS' EQUITY
May 25, August 26, 1996 1995 ------------ ------------ Current liabilities: Current maturities of long-term debt $ 206,200 $ 160,928 Notes payable to bank 0 4,500,000 Trade accounts payable 20,999,802 27,012,150 Accrued expenses 25,317,509 23,977,855 Customer deposits 2,145,992 2,614,874 Deferred revenue 7,352,850 5,722,030 ------------ ------------ Total current liabilities 56,022,353 63,987,837 ------------ ------------ Long-term debt, less current maturities 350,293 231,011 Long-term deferred income taxes 18,288 0 Minority interest 933,457 681,558 Stockholders' Equity: Preferred stock, no par value; 10,000,000 shares authorized, none issued and outstanding 0 0 Common stock, no par value; 50,000,000 shares authorized, issued and outstanding; 22,183,929 and 21,999,818 shares at May 25, 1996 and August 26, 1995, respectively 156,742,539 144,387,884 Retained earnings 53,866,836 41,020,002 Cumulative translation adjustment 1,225,014 1,258,695 ----------- ------------ Total stockholders' equity 211,834,389 186,666,581 ----------- ------------ $269,158,780 $251,566,987 ============ ============
See accompanying notes to consolidated condensed financial statements. 4 FSI INTERNATIONAL, INC. AND SUBSIDIARIES CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS FOR THE QUARTERS ENDED MAY 25, 1996 AND MAY 27, 1995 (Unaudited)
May 25, May 27, 1996 1995 ----------- ----------- Sales (including sales to affiliates of $17,260,000 and $17,160,000, respectively) $67,465,704 $60,008,162 Cost of goods sold 37,758,600 35,351,000 ----------- ----------- Gross profit 29,707,104 24,657,162 Selling, general and administrative expenses 14,813,261 11,684,601 Research and development expenses 10,186,062 7,231,886 ----------- ----------- Operating income 4,707,781 5,740,675 Interest expense (144,657) (48,865) Interest income 1,269,116 740,429 Other income (expense), net (3,792) 28,423 ----------- ----------- Income before income taxes 5,828,448 6,460,662 Income tax expense 828,394 1,777,180 ----------- ----------- Income before minority interest and equity in earnings of affiliates 5,000,054 4,683,482 Minority interest 7,421 0 Equity in earnings of affiliates 763,838 804,502 ----------- ----------- Net income $ 5,756,471 $ 5,487,984 =========== =========== Net income per common share $0.25 $0.27 Weighted average common shares and common share equivalents 23,061,313 20,229,785 Pro forma Data: (See Note 6) Income tax expense $ 888,394 $ 1,959,180 Net income $ 5,696,471 $ 5,305,984 Net income per common share $.25 $.26
See accompanying notes to consolidated condensed financial statements. 5 FSI INTERNATIONAL, INC. AND SUBSIDIARIES CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS FOR THE NINE-MONTHS ENDED MAY 25, 1996 AND MAY 27, 1995 (Unaudited)
May 25, May 27, 1996 1995 ------------ ------------ Sales (including sales to affiliates of $47,316,000 and $35,638,000, respectively) $213,241,843 $146,361,960 Cost of goods sold 120,745,246 83,804,943 ------------ ------------ Gross profit 92,496,597 62,557,017 Selling, general and administrative expenses 41,802,433 28,405,985 Research and development expenses 28,190,987 19,765,245 ------------ ------------ Operating income 22,503,177 14,385,787 Interest expense (379,121) (78,897) Interest income 3,972,973 1,013,480 Other income (expense), net (77,363) 108,717 ------------ ------------ Income before income taxes 26,019,666 15,429,087 Income tax expense 7,878,661 3,815,847 ------------ ------------ Income before minority interest and equity in earnings of affiliates 18,141,005 11,613,240 Minority interest 285,585 0 Equity in earnings of affiliates 4,214,514 2,127,402 ------------ ------------ Net income $ 22,069,934 $ 13,740,642 ============ ============ Net income per common share $.95 $.78 Weighted average common shares and common share equivalents 23,167,428 17,670,137 Pro forma Data: (See Note 6) Income tax expense $ 8,184,661 $ 4,447,847 Net income $ 21,763,934 $ 13,108,642 Net income per common share $.94 $.74
See accompanying notes to consolidated condensed financial statements. 6 FSI INTERNATIONAL, INC. AND SUBSIDIARIES CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS FOR THE NINE MONTHS ENDED MAY 25, 1996 AND MAY 27, 1995 (Unaudited)
May 25, May 27, 1996 1995 ----------- ----------- OPERATING ACTIVITIES: Net income $ 22,069,934 $13,740,642 Adjustments to reconcile net income to net cash provided by (used in) operating activities: Minority interest 285,585 0 Provision for deferred income taxes (1,481,712) (238,222) Depreciation and amortization 4,999,937 2,549,965 Equity in earnings of affiliates (4,214,514) (2,127,402) Stock issued for services 0 65,643 Gain on sale of equipment 0 (8,000) Changes in operating assets and liabilities: Trade accounts receivable (4,962,161) (29,644,267) Inventories (24,674,956) (11,886,140) Other current assets 1,489,832 (2,848,681) Trade accounts payable (6,012,348) 4,854,368 Accrued expenses 4,873,655 6,555,337 Customer deposits (468,883) 250,439 Deferred revenue 1,630,820 2,955,796 Other (67,367) 0 ------------ ----------- Net cash used in operating activities (6,532,178) (15,780,522) ------------ ----------- INVESTING ACTIVITIES: Acquisition of property, plant and equipment (20,128,631) (7,403,088) Purchase of marketable securities (88,823,637) 0 Sales of marketable securities 38,493,521 0 Maturities of marketable securities 13,862,117 0 Increase in deposits and other assets (263,903) (807,060) Proceeds from sale of equipment 0 8,000 ------------ ----------- Net cash used in investing activities (56,860,533) (8,202,148) ------------ ----------- FINANCING ACTIVITIES: Additions to long-term debt 105,265 279,400 Principal payments on long-term debt (182,321) (194,956) Advances on notes payable to bank 9,906,741 5,200,000 Payment on notes payable to bank (14,406,741) (3,350,000) Net proceeds from issuance of common stock 225,755 51,470,744 S Corporation Distribution Payments (629,100) (1,872,000) ----------- ----------- Net cash provided by (used in) financing activities (4,980,401) 51,533,188 ----------- ----------- Increase (decrease) in cash and cash equivalents (68,373,112) 27,550,518 Cash and cash equivalents at beginning of period 98,773,676 12,982,329 ----------- ----------- $ 30,400,564 $40,532,847 =========== ===========
See accompanying notes to consolidated condensed financial statements. 7 FSI INTERNATIONAL, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (Unaudited) (1) RECLASSIFICATIONS Certain fiscal 1995 amounts have been reclassified to conform to the fiscal 1996 presentation. (2) 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. 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. For further information, refer to the Consolidated Financial Statements and footnotes thereto included in the Company's Annual Report on 10-K for the fiscal year ended August 26, 1995 previously filed with the Securities and Exchange Commission. Results of interim periods are not necessarily indicative of the results that may be achieved for the entire year. (3) INVENTORIES Inventories are summarized as follows:
May 25, August 26, 1996 1995 ----------- ----------- Finished goods $10,844,373 $ 7,935,392 Work-in-process 19,535,591 12,571,693 Subassemblies 3,627,999 3,717,924 Raw materials and purchased parts 31,244,428 16,352,426 ----------- ----------- $65,252,391 $40,577,435 =========== ===========
(4) SUPPLEMENTARY CASH FLOW INFORMATION
Nine Months Ended ----------------------- May 25, May 27, 1996 1995 ---------- ---------- Schedule of interest and income taxes paid: Interest $ 381,821 $ 89,216 Income taxes, net of refunds received $8,397,219 $3,773,416 Supplemental Disclosure of Non-Cash Investing and Financing Activities Tax benefit of dispositions of stock options $3,534,000 $ 733,877 Acquisition of property, plant and equipment through capital leases $ 241,600 $ 0
8 FSI INTERNATIONAL, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (Unaudited) (5) ACQUISITION OF SEMICONDUCTOR SYSTEMS, INC. (SEMICONDUCTOR SYSTEMS) On April 4, 1996, the Company completed the acquisition of Semiconductor Systems. In connection with the acquisition, which was accounted for as a pooling of interests, the Company issued approximately 1,739,200 shares of its common stock. In addition, the Company issued options of approximately 60,800 shares of the Company's common stock in substitution of previously outstanding options to acquire shares of Semiconductor Systems common stock. This transaction was accounted for as a pooling of interests, therefore, all financial statements presented have been restated to reflect the merger. Semiconductor Systems prepared its financial statements on a December 31 calendar year-end prior to the merger. Sales and net income included in the Company's consolidated statements of operations are as follows:
Quarters Ended Nine Months Ended ------------------------- --------------------------- May 25, May 27, May 25, May 27, 1996 1995 1996 1995 ------------ ------------ ------------ ------------ Sales: Semiconductor Systems $ 7,271,800 $ 6,505,000 $ 25,049,800 $ 19,947,000 60,193,904 53,503,162 188,192,043 126,414,960 FSI ----------- ----------- ------------ ------------ $67,465,704 $60,008,162 $213,241,843 $146,361,960 ----------- ----------- ------------ ------------ Net income: Semiconductor Systems $ 445,100 $ 482,000 $ 1,069,500 $ 1,594,998 5,311,371 5,005,984 21,000,434 12,145,644 FSI ----------- ----------- ------------ ------------ $ 5,756,471 $ 5,487,984 $ 22,069,934 $ 13,740,642 ----------- ----------- ------------ ------------
In connection with the merger, approximately $800,000 of merger costs and expenses were incurred and have been charged to selling, general and administrative expenses in the Company's third quarter of fiscal 1996. The charge includes professional fees and other direct transaction costs associated with the merger. In addition, the Company recorded a net deferred tax asset and tax benefit of approximately $1,500,000 for temporary differences of Semiconductor Systems. The tax benefit is a result of Semiconductor Systems' conversion from an S Corporation to a C Corporation upon closing of the merger. The Company, upon completion of the merger, also reclassified the undistributed earnings of Semiconductor Systems of approximately $8,600,000 to common stock from retained earnings as a result of Semiconductor Systems conversion from an S Corporation to a C Corporation upon closing of the merger. (6) Pro forma data reflects the impact on income tax expense as if Semiconductor Systems would have been a C Corporation versus an S Corporation prior to the merger. 9 FSI INTERNATIONAL, INC. AND SUBSIDIARIES ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS RESULTS OF OPERATIONS THIRD QUARTER AND FIRST NINE MONTHS OF FISCAL 1996 COMPARED WITH THE THIRD QUARTER AND FIRST NINE MONTHS OF FISCAL 1995 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 certain risks and uncertainties. In addition to the factors discussed below, other factors that could cause actual results to differ materially from those described in the forward-looking statements include: volatility in the demand and price for semiconductors; risk of push-outs of delivery dates for equipment orders; risk of order cancellations; risk of delays in introducing new products and the market's acceptance of such products; risks related to new facilities construction; the successful integration of the personnel, products and operations of Semiconductor Systems with those of FSI (see note 5); and other risk factors described in the Company's most recently filed SEC documents. Readers are cautioned not to place undue reliance on these forward-looking statements which speak as to matters only as of the date hereof 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 events or unanticipated occurrences. The Company completed the acquisition of Semiconductor Systems on April 4, 1996. The acquisition is intended to expand the Company's microlithography product line. The acquisition of Semiconductor Systems was accounted for as a pooling of interests. Accordingly, all historical financial information for FSI International, Inc. and subsidiaries has been restated to include the operations of Semiconductor Systems as though the two entities have always been combined. The following table sets forth for the third quarters and for the nine months indicated, certain income and expense items as a percent of total sales:
Percent of Sales ----------------------------------------------------------- Third Quarters Ended Nine Months Ended --------------------------- ---------------------------- May 25, May 27, May 25, May 27, 1996 1995 1996 1995 --------- -------- --------- --------- Sales 100.0% 100.0% 100.0% 100.0% Cost of goods sold 56.0% 58.9% 56.6% 57.3% Gross profit 44.0% 41.1% 43.4% 42.7% Selling, general and administrative 21.9% 19.5% 19.6% 19.4% Research and development 15.1% 12.0% 13.2% 13.5% Operating income 7.0% 9.6% 10.6% 9.8% Other income 1.6% 1.2% 1.6% 0.7% Income before income taxes 8.6% 10.8% 12.2% 10.5% Income tax expense 1.2% 3.0% 3.7% 2.6% Minority interest 0.0% 0.0% 0.1% 0.0% Equity in earnings of affiliates 1.1% 1.3% 2.0% 1.5% Net income 8.5% 9.1% 10.4% 9.4%
10 Sales for the third quarter ended May 25, 1996 increased $7.5 million from $60.0 million to $67.5 million, or approximately 12.4%, from the comparable prior fiscal year quarter. Sales for the nine months ended May 27, 1996 increased $66.8 million from $146.4 million to $213.2 million, or approximately 45.7%, from the nine months ended May 27, 1995. The increase in sales occurred in all product categories and was generally attributable to increased unit sales and to a lesser extent to increases in the average selling price of FSI's products resulting from additional features added to standard product configuration. The increase in unit sales is due to the construction of new and the expansion of existing semiconductor manufacturing facilities by our customers. The Company believes its ability to continue to increase sales is dependent upon a number of factors, including increased demand for all three of the Company's product lines, successful introduction of new products, sales growth in international markets, a stable industry and worldwide economic conditions. The Company ended the third fiscal quarter with a strong backlog due to strong order activity in the quarter in the Company's Microlithography and Chemical Management core businesses. Because of the timing and relative size of orders and the possibility of cancellations or customer delays, backlog is not necessarily indicative of sales for future periods. With the strong backlog and anticipated new orders, the Company expects to report sequential sales and net income growth in the fourth quarter of fiscal 1996, as compared to the third quarter. Based upon the quarter end backlog, anticipated new orders and expected safety certification, we expect to report record fiscal 1996 sales of approximately $300 million. However, certain semiconductor manufacturers have recently announced their intent to delay the construction, facilitization or equipping of new manufacturing facilities. Therefore, order cancellations or delays by customers are possible and could have an adverse effect on the Company's financial results for the fourth quarter of fiscal 1996 and for fiscal 1997. Gross profit margins were approximately 44.0% of sales in the third quarter of fiscal 1996 as compared to approximately 41.1% of sales in the prior year's comparable period. The increased gross profit margin is generally due to product mix, along with improved margins in the Chemical Management division. Gross margins also improved for the first nine months of fiscal 1996 to 43.4% compared to 42.7% for the first nine months of fiscal 1995. The increase in gross profit margin for the nine month period of fiscal 1996 as compared to the nine month period of fiscal 1995 is due to product mix, including improved margins in the Chemical Management division offset by slightly decreased margins in the Microlithography division. The Company's gross profit margin may fluctuate from quarter to quarter as a result of a number of factors, including the mix of products sold, the proportion of international sales, and competitive pricing pressures. Selling, general and administrative expenses were 21.9% and 19.6% of sales, respectively, for the third quarter and for the nine months ended May 25, 1996, as compared to 19.5% and 19.4% of sales for the third quarter and for the nine months ended May 27, 1995, respectively. The dollar increases of approximately $3.1 million for the third quarter of fiscal 1996 and $13.4 million for the first nine months of fiscal 1996 as compared to prior fiscal periods are due primarily to costs associated with personnel additions and expanded customer support and marketing associated with the Company's growth. In addition, for the third quarter and first nine months of fiscal 1996 as compared to the third quarter and first nine months of fiscal 1995, there were increased management incentive bonus accruals and employee profit sharing accruals, and increased costs associated with the computer system upgrades. There was also approximately $800,000 of merger costs in the third quarter and for the first nine months of fiscal 1995 and 1996 for the 1995 merger with Applied Chemical Solutions (ACS) and for the 1996 merger with Semiconductor Systems. The Company expects that the amount of selling, general and administrative expenses will increase during the fourth quarter of fiscal 1996 as a result of costs associated with the computer system upgrades and implementing the Company's divisionalization strategies. Research and development expense was approximately 15.1% of sales, or $10.2 million, for the third quarter of fiscal 1996 as compared to 12.0% or $7.2 million for the third quarter of fiscal 1995. For the first nine months of fiscal 1996, research and development expenses were 13.2% of net sales, or $28.2 million, as compared to 13.5%, or $19.8 million, for the first nine months of fiscal 1995. The increase of approximately $3 million for the third quarter of fiscal 1996 and $8.4 million for the first nine months of fiscal 1996 as compared to the prior fiscal periods resulted primarily from the Company's continued development efforts on new and existing products, 11 including the ARIES(R) cryogenic aerosol cleaning system, Zeta(TM) automated surface conditioning system, the ORION(TM) vacuum-based gas phase (dry) cleaning system, two new Polaris(R) cluster models and certain new ChemFill(R) models. The successful introduction of new products is important to the long term growth of the Company. The Company expects the quarterly amount of research and development expenses to increase during the fourth quarter of fiscal 1996. The Company recently announced plans to construct and equip a new 88,000 square- foot laboratory and engineering facility at a cost of approximately $27 million, for the Surface Conditioning Division in Chaska, Minnesota scheduled to be completed by late calendar 1996. The laboratory facility will be equipped with certain new advanced surface conditioning products which will be introduced at the end of fiscal 1996 or in fiscal 1997. The Company also announced its the intention to build and equip a 150,000 square-foot engineering, manufacturing and laboratory facility in Allen, Texas by the end of the first quarter of calendar 1997, to expand the manufacturing and development capabilities of the Company's Microlithography. Other income, net increased approximately $.4 million in the third quarter of fiscal 1995 and increased approximately $2.5 million for the first nine months of fiscal 1996 as compared to the first nine months of fiscal 1995. The increases are primarily due to an increases in interest earned by the Company on the increased amount of cash and cash equivalents and marketable securities resulting from the February and June 1995 common stock offerings. Income tax expense for the third quarter of fiscal 1996 was approximately $828,000 or 14.2% of pre-tax profit compared to approximately $1,777,000 or 27.5% of pre-tax profit for the third quarter of fiscal 1995. Income tax expense for the first nine months of fiscal 1996 was approximately $7,879,000 or 30.3% of pre-tax profit compared to approximately $3,816,000 or 24.7% of pre-tax profit for the first nine months of fiscal 1995. Included in income tax expense in the third quarter and the nine months ended May 25, 1996 is approximately a $1.5 million tax benefit for net deferred tax assets relating to existing temporary differences of Semiconductor Systems recorded upon its conversion from an S Corporation to a C Corporation upon closing of the merger. The Company anticipates its effective tax rate will range from 34% to 36% in fiscal 1996, excluding the previously discussed tax benefit of Semiconductor Systems and the approximately $800,000 of non-deductible merger expenses. Equity in earnings of affiliates was approximately $764,000 for the third quarter of fiscal 1996, compared to $805,000 for the third quarter of fiscal 1995. For the first nine months of fiscal 1996, earnings in equity of affiliates was approximately $4,215,000 as compared to $2,127,000 for the first nine months of fiscal 1995. The decrease in the third quarter of fiscal 1996 as compared to third quarter 1995 is due to delayed shipments by Metron Technology B.V. due to CE labeling requirements in Europe and delayed revenue recognition in Japan as a result of late customer acceptance on certain products. The increase for the first nine months of fiscal 1996 as compared to the first nine months of fiscal 1995 is due to improved earnings at all affiliates due to expansion by semiconductor device manufacturers in Europe and Japan and the continued strong growth taking place in the Asia Pacific market. LIQUIDITY AND CAPITAL RESOURCES The Company's cash and cash equivalents and marketable securities approximated $80.9 million as of May 25, 1996, a decrease of $31.9 million from the end of fiscal year 1995. The decrease in cash, cash equivalents and marketable securities resulted primarily from the use of cash to support operations in response to growth, to fund facilities expansion and to pay off the Semiconductor Systems notes payable to bank. The Company's accounts receivable increased by approximately 9.3%, or $4.9 million, from the end of fiscal 1995. The increase in accounts receivable is mainly due to increased sales of chemical management products, which typically have higher retainages by the customer. In addition, these retainages generally take longer to collect. The Company's inventory increased approximately $24.7 million to $65.3 million as of May 25, 1996 as compared to $40.6 million at the end of fiscal 1995. Finished goods and work-in-process increased approximately $9.9 million from fiscal year-end 1995 to the end of the fiscal 1996 third quarter. This increase is primarily due to customer 12 requested delays in shipping certain equipment orders which are planned to ship in the fourth quarter and delays in receiving independent third party safety certification required for shipments into the European market. The increase in raw materials and purchased parts of approximately $14.9 million is due primarily to the increased sales order activities and new product introduction programs. As of May 25, 1996, the Company's ratio of current assets to current liabilities was 3.8 to 1.0 and working capital was $159 million. The Company had acquisitions of buildings, leasehold improvements and equipment of $20.1 million for the first nine months of fiscal 1996 as compared to $7.4 million for the first nine months of fiscal 1995. The increase in acquisitions reflects the investments in computer equipment and facilities expansion including the completion of the new manufacturing facility in Chaska, Minnesota. The Company does not have a credit facility, however, the Company has negotiated the terms of a new credit facility, which it expects to enter into during calendar 1996. The Company believes that existing cash, cash equivalents, marketable securities and internally generated funds will be sufficient to meet the Company's currently projected working capital and other cash requirements through at least the end of fiscal 1996. The Company believes that success in its industry requires substantial capital in order 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 effect additional equity or debt financings to fund such activities. The issuance of additional equity or debt securities could result in additional dilution to the Company's shareholders. 13 FSI INTERNATIONAL, INC. AND SUBSIDIARIES PART II. OTHER INFORMATION ----------------- ITEM 1. LEGAL PROCEEDINGS None ITEM 2. CHANGE IN SECURITIES None ITEM 3. DEFAULTS UPON SENIOR SECURITIES None ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS None ITEM 5. OTHER INFORMATION None 14 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 dated February 5, 1996 by and among the Company, Spectre Acquisition Corp. and Semiconductor Systems, Inc. (14) 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 FSI Corporation Stock Purchase Agreement dated March 20, 1981. (4) 4.2 Stock Purchase Agreement dated September 15, 1982. (4) 4.3 Common Stock and Common Stock Purchase Warrants Agreement dated October 15, 1985. (4) 4.4 Second Amendment, dated as of January 9, 1989, to Common Stock and Common Stock Warrants Purchase Agreement dated as of October 15, 1985. (5) 4.5 Registration and Preemptive Rights Agreement dated October 15, 1985. (4) *10.1 1983 Incentive Stock Option Plan. (4) *10.2 1982 Nonqualified Stock Option Plan. (4) *10.3 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 Timothy D. Krieg have been omitted, but will be filed upon the request of the Commission). (4) 10.4 Lease dated June 27, 1985, between the Company and Lake Hazeltine Properties. (7) 10.5 Lease dated September 1, 1985, between the Company and Elftmann, Wyers, Blackwood Partnership. (7) 10.6 Lease dated September 1, 1985, between the Company and Elftmann, Wyers Partnership. (7) *10.7 1989 Stock Option Plan. (5) *10.8 Amended and Restated Employees Stock Purchase Plan. (3) *10.9 Directors Nonstatutory Stock Option Plan. (3) 10.10 Shareholders Agreement among FSI International, Inc. and Mitsui & Co., Ltd. and Chlorine Engineers Corp. Ltd. dated as of August 14, 1991. (8) 10.11 FSI Exclusive Distributorship Agreement dated as of August 14, 1991 between FSI International, Inc. and m.FSI, Ltd. (8) 10.12 FSI Licensing Agreement dated as of August 14, 1991, between FSI International, Inc. and m.FSI, Ltd. (8) 10.13 License Agreement, dated October 15, 1991, between the Company and Texas Instruments Incorporated. (9) 10.14 Amendment No. 1, dated April 10, 1992, to the License Agreement, dated October 15, 1991, between the Company and Texas Instruments Incorporated. (9) 15 10.15 Amendment effective October 1, 1993 to the License Agreement, dated October 15, 1991 between the Company and Texas Instruments Incorporated. (10) *10.16 Amended and Restated Directors' Nonstatutory Stock Option Plan. (11) *10.17 Management Agreement between FSI International, Inc. and Robert E. Cavins, effective as of March 28, 1994. (11) *10.18 Management Agreement between FSI International, Inc. and Dale A. Courtney, effective as of March 28, 1994. (11) *10.19 Management Agreement between FSI International, Inc. and Joel A. Elftmann, effective as of March 28, 1994. (11) *10.20 Management Agreement between FSI International, Inc. and Timothy D. Krieg, effective as of March 28, 1994. (11) *10.21 Management Agreement between FSI International, Inc. and Peter A. Pope, effective as of March 28, 1994. (11) *10.22 Management Agreement between FSI International, Inc. and Benno G. Sand, effective as of March 31, 1994. (11) *10.23 Management Agreement between FSI International, Inc. and Benjamin J. Sloan, effective as of March 28, 1994. (11) *10.24 Management Agreement between FSI International, Inc. and J. Wayne Stewart, effective as of March 28, 1994. (11) *10.25 FSI International, Inc. 1994 Omnibus Stock Plan. (12) *10.26 FSI International, Inc. 1995 Incentive Plan (13) *10.27 FSI International, Inc. 1996 Incentive Plan (13) 10.28 First Amendment to Lease made and entered into October 31, 1995 by and between Lake Hazeltine Properties and FSI International, Inc. (13) 10.29 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) (13) 10.30 Lease dated August 9, 1995 between Skyline Builders, Inc. and FSI International, Inc. (13) 10.31 Lease Rider dated August 9, 1995 between Skyline Builders, Inc. and FSI International, Inc. (13) 10.32 Lease Amendment dated November 15, 1995 between Roland A. Stinski and FSI International, Inc. (Exhibits to Amendment omitted) (13) 11.1 Computation of Per Share Earnings of FSI International, Inc. 27.0 Financial Data Schedule - -------------------------- (1) Filed as an Exhibit to the Company's Report on Form 8-K dated January 5, 1995, as amended, SEC 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 25, 1990, as amended by Form 8 dated December 20, 1990, and by Form 8 dated February 5, 1991, SEC File No. 0-17276, and incorporated by reference. Similar agreements between the Company and each of Robert E. Cavins, J. Wayne Stewart, Benjamin J. Sloan, Dale A. Courtney, Peter A. 16 Pope, Benno G. Sand and Timothy D. Krieg have been omitted, but will be filed upon the request of the Commission. (7) Filed as an Exhibit to the Company's Registration Statement on Form S-1, SEC File No. 33-25035, and incorporated by reference. (8) 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. (9) Filed as an Exhibit to the Company's Report on Form 10-Q for the fiscal quarter ended February 29, 1992, 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, 1993, SEC File No. 0-17276, and incorporated by reference. (11) 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. (12) 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. (13) 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. (14) Filed as an Exhibit to the Company's Registration Statement on Form S-4, SEC File No. 333-01509, and incorporated by reference. (b) The Company filed an 8-K on April 17, 1996 regarding the acquisition of Semiconductor Systems. The following financial statements were incorporated by reference or included in the Form 8-K: (i) Financial Statements of Business Acquired ----------------------------------------- Financial Statements of Semiconductor Systems, Inc. Reports of Independent Accountants. Balance Sheets as of December 31, 1994 and 1995. Statement of Operations for the years ended December 31, 1993, 1994 and 1995. Statements of Cash Flows for the years ended December 31, 1993, 1994 and 1995. Statements of Shareholders' Equity for the years ended December 31, 1993, 1994 and 1995. Notes to Financial Statements. (ii) Description of the Pro Forma Combined Financial Information ----------------------------------------------------------- Unaudited Pro Forma Combined Statements of Operations for the quarters and six months ended February 24, 1996 and February 25, 1995 and the fiscal years ended August 28, 1993, August 27, 1994 and August 26, 1995. Unaudited Pro Forma Combined Balance Sheet as of February 24, 1996. Notes to Unaudited Pro Forma Combined Financial Information. 17 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: July 1, 1996 By: /s/ Benno Sand ---------------------------- Benno Sand Executive Vice President and Chief Financial Officer on behalf of the Registrant and as Principal Financial Officer 18 EX-11.1 2 COMPUTATION OF INCOME PER COMMON SHARE Exhibit 11.1 -------------- FSI INTERNATIONAL, INC. COMPUTATION OF INCOME PER COMMON SHARE
QUARTERS ENDED: NINE MONTHS ENDED: ------------------------------- ------------------------------ May 25, 1996 May 27, 1995 May 25, 1996 May 27, 1995 ------------------------------- ------------------------------ PRIMARY: AVERAGE SHARES OUTSTANDING 22,179,731 18,800,586 22,116,311 16,361,024 NET EFFECT OF DILUTIVE STOCK OPTIONS AND WARRANTS -- BASED ON THE TREASURY STOCK METHOD 881,582 1,429,199 1,051,117 1,309,113 ----------- ----------- ----------- ----------- TOTAL 23,061,313 20,229,785 23,167,428 17,670,137 =========== =========== =========== =========== NET INCOME $ 5,756,471 $ 5,487,984 $22,069,934 $13,740,642 =========== =========== =========== =========== PRIMARY PER SHARE AMOUNTS $ 0.25 $ 0.27 $ 0.95 $ 0.78 =========== =========== =========== =========== FULLY DILUTED: AVERAGE SHARES OUTSTANDING 22,179,731 18,800,586 22,116,311 16,361,024 NET EFFECT OF DILUTIVE STOCK OPTIONS AND WARRANTS -- BASED ON THE TREASURY STOCK METHOD 867,038 1,475,551 963,636 1,381,497 ----------- ----------- ----------- ----------- TOTAL 23,046,769 20,276,137 23,079,947 17,742,521 =========== =========== =========== =========== NET INCOME $ 5,756,471 $ 5,487,984 $22,069,934 $13,740,642 =========== =========== =========== =========== FULLY DILUTED PER SHARE AMOUNTS $ 0.25 $ 0.27 $ 0.96 $ 0.77 =========== =========== =========== ===========
EX-27 3 FINANCIAL DATA SCHEDULE
5 This schedule contains summary financial information extracted from FSI International Inc.'s Quarterly Report on Form 10-Q for the period ended May 25, 1996 and is qualified in its entirety by reference to such financial statements. 9-MOS 9-MOS AUG-31-1996 AUG-26-1995 AUG-27-1995 AUG-28-1994 MAY-25-1996 MAY-27-1995 30,400,564 40,532,847 50,527,681 0 60,114,319 54,871,471 1,823,000 1,033,500 65,252,391 33,082,005 214,993,643 136,693,464 54,463,886 26,116,638 18,752,394 14,904,258 269,158,780 160,795,484 56,022,353 45,763,817 0 0 156,742,539 80,997,682 0 0 0 0 55,091,850 33,770,352 269,158,780 160,795,484 213,241,843 146,361,960 213,241,843 146,361,960 120,745,246 120,745,246 120,745,246 120,745,246 0 0 589,000 500,000 379,121 78,895 26,019,666 15,429,087 7,878,661 3,815,847 22,069,934 13,740,642 0 0 0 0 0 0 22,069,934 13,740,642 .95 .78 .96 .77 All financial statements have been restated to reflect the merger with Semiconductor Systems, Inc. on April 4, 1996. The merger was accounted for as a pooling of interests.
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