8-K

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 8-K

CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

Date of Report (Date of earliest event reported) March 21, 2006

FSI International, Inc.

(Exact name of registrant as specified in its charter)

Minnesota	0-17276	41-1223238
(State or other jurisdiction) of incorporation	(Commission File Number)	(IRS Employer Identification No.)
3455 Lyman Boulevard
Chaska, Minnesota		55318
(Address of principal executive offices)		(Zip Code)
Telephone Number: (952) 448-5440
(Registrant’s Telephone Number, Including Area Code)

     Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

o Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

o Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

o Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

o Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

TABLE OF CONTENTS

	Item 2.02. Results of Operations and Financial Condition.
	Item 9.01. Financial Statements and Exhibits.
SIGNATURE
Exhibit Index
Press Release

Item 2.02. Results of Operations and Financial Condition.

     On March 21, 2006, FSI International, Inc. issued a press release, a copy of which is being furnished as an exhibit to this report and is incorporated herein by reference.

Item 9.01. Financial Statements and Exhibits.

     (c) Exhibits

     The following exhibit is being furnished pursuant to Item 2.02 “Results of Operations and Financial Condition” of this Form 8-K:

   Exhibit 99       Press Release dated March 21, 2006.

SIGNATURE

     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.
 

By /s/ Patricia M. Hollister  

Patricia M. Hollister 

Chief Financial Officer 

Date: March 21, 2006

Exhibit Index

Exhibit	Description
99	Press release dated March 21, 2006

EX-99

Exhibit 99

NEWS

For additional information contact:	Benno Sand-Investor and Financial Media (952) 448-8936
	Laurie Walker-Trade Media (952) 448-8066

FOR IMMEDIATE RELEASE

FSI International, Inc. Announces Second Quarter and First Half Fiscal 2006 Financial Results

First half fiscal 2006 orders are 37 percent higher than for the same period last year

     MINNEAPOLIS (March 21, 2006)—FSI International, Inc. (Nasdaq: FSII), a manufacturer of capital equipment for the microelectronics industry, today reported financial results for the second quarter of fiscal 2006 and for the six months ended February 25, 2006.

Fiscal 2006 Second Quarter and First Half

     Sales for the first half of fiscal 2006 were $40.9 million, compared to $43.6 million for the same period of fiscal 2005. The Company’s net loss for the first half of fiscal 2006 was $7.5 million, or $0.25 per share, compared to a net income of $0.6 million, or $0.02 per share, for the first half of fiscal 2005.

     Sales for the second quarter of fiscal 2006 were $22.3 million, compared to $24.2 million for the same period in fiscal 2005. The Company’s net loss for the second quarter of fiscal 2006 was $3.2 million, or $0.11 per share, compared to a net income of $3.9 million, or $0.13 per share, for the second quarter of fiscal 2005. In the second quarter of fiscal 2005, the Company accrued $250,000, or $0.01 per share, of litigation judgment costs and recorded a $7.0 million, or $0.23 per share, gain on the sale of its Allen, Texas facility.

     Backlog and deferred revenue nearly doubled to $36.9 million at the end of the second quarter of fiscal 2006, as compared to $19.7 million at the end of the second quarter last year. Orders for the second quarter of fiscal 2006 were $26.3 million, compared to $17.3 million in the second quarter of fiscal 2005 and $23.8 million in the first quarter of 2006. Increased demand for products that are used to process 200mm diameter and smaller silicon wafers contributed to the second quarter year-over-year order increase.

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FSI International, Inc.
March 21, 2006
Page Two

Accomplishments

     “We entered fiscal 2006 with a focused set of strategies and optimism that during the year we would begin to recognize results from our prior year’s initiatives,” said Don Mitchell, FSI chairman and CEO. “In general, we are pleased with the progress made to date, including:

• Increased orders of approximately 37 percent to $50.1 million for the first half of fiscal 2006, compared to $36.6 million for the comparable 2005 period;

• Expanding the process applications for which our flagship products can be used, including the introduction of the new ViPR™ photoresist strip technology on our ZETA^® Spray Cleaning Platform;

• Gaining acceptance of additional flagship products that were under evaluation by customers for specific applications, such as the PlatNiStrip™ nickel-platinum strip process; and

• Delivery of an initial MAGELLAN^® Immersion Cleaning System to another major U.S.-based semiconductor manufacturer.”

Balance Sheet

     As of the end of the fiscal 2006 second quarter, the Company had approximately $115.1 million in assets, including $26.2 million in cash, restricted cash, cash equivalents and marketable securities. At the end of the second quarter of fiscal 2006, the Company had a current ratio of 3.6 to 1.0, no debt and a book value of $3.07 per share.

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FSI International, Inc.
March 21, 2006
Page 3

Outlook

     Given the quarter-to-date orders, the Company expects third quarter orders to increase to $30 to 35 million as compared to $26.3 million in the second quarter of fiscal 2006*. Based on the backlog and deferred revenue levels at the end of the second quarter and expected additional third quarter orders, the Company expects third quarter fiscal 2006 revenues to increase to $26 to $30 million.* This reflects the anticipated acceptance of products previously placed with customers for evaluation along with follow-on orders for these and other products.*

     Based upon the anticipated gross profit margin and the operating expense run rate, the Company expects a net loss in the $1.0 to $2.0 million range for the quarter.* The Company expects to use $3.0 to 4.0 million of net cash for operating activities in the third quarter including an expected increase in accounts receivable associated with the anticipated shipment ramp.*

     To address the future need of its customers, the Company plans to continue allocating resources to key product development and application expansion programs at the 65 and 45nm technology nodes.*

Conference Call Details

     Investors will have the opportunity to listen to the conference call at 3:30 p.m. CST over the Internet. The webcast is being distributed over CCBN’s Investor Distribution Network to both institutional and individual investors. Individual investors can listen to the call through CCBN’s individual investor center at www.fulldisclosure.com or by visiting any of the investor sites in CCBN’s Individual Investor Network. Institutional investors can access the call via CCBN’s password-protected event management site, StreetEvents (www.streetevents.com). For those who cannot listen to the live broadcast, a replay will be available shortly after the call.

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 CryoKinetic 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.

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FSI International, Inc.
March 21, 2006
Page 3

“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, anticipated gross margin, expected operating expense run rate, expected net loss, expected cash usage, expected accounts receivable increase associated with the anticipated shipment ramp and other expected financial performance for the third quarter of fiscal 2006. 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, the length and extent of the current industry recovery; 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 affiliated distributor in Japan; the success of the Company’s direct distribution organization; and the potential impairment of long-lived assets; as well as other factors listed from time to time in the Company’s SEC reports including, but not limited to, the Company’s Annual Report on Form 10-K for the fiscal 2005 and the Company’s quarterly report on Form 10-Q for the first quarter of fiscal 2006. The Company assumes no duty to update the information in this press release.

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FSI INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF OPERATIONS
(in thousands, except per share data)
(unaudited)

	Second Quarter Ended					Six Months Ended
	Feb. 25, 2006			Feb. 26, 2005		Feb. 25, 2006			Feb. 26, 2005
Sales	$	22,287		$	24,153	$	40,910		$	43,598
Cost of goods		10,201			13,408		18,912			22,445
Gross margin		12,086			10,745		21,998			21,153
Selling, general and administrative expenses		9,540			8,899		18,004			17,364
Research and development expenses		6,199			5,444		12,074			10,867
Gain on sale of facility		¯			7,015		¯			7,015
Operating (loss) income		(3,653	)		3,417		(8,080	)		(63	)
Interest and other income, net		338			134		691			293
(Loss) income before income taxes		(3,315	)		3,551		(7,389	)		230
Income tax expense		12			12		25			25
(Loss) income before equity in earnings (loss) of affiliate		(3,327	)		3,539		(7,414	)		205
Equity in earnings (loss) of affiliate		105			372		(103	)		430
Net (loss) income	$	(3,222	)	$	3,911	$	(7,517	)	$	635
(Loss) income per share — basic	$	(0.11	)	$	0.13	$	(0.25	)	$	0.02
(Loss) income per share — diluted	$	(0.11	)	$	0.13	$	(0.25	)	$	0.02
Weighted average common shares
Basic		29,980			29,985		29,931			29,964
Diluted		29,980			30,253		29,931			30,248

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FSI INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
(in thousands)
(unaudited)

	Feb. 25, 2006		Aug. 27, 2005
Assets
Current assets
Cash, restricted cash, cash equivalents and marketable securities	$	26,247	$	31,880
Receivables, net		20,871		24,896
Inventories		27,762		24,717
Other current assets		7,724		6,924
Total current assets		82,604		88,417
Property, plant and equipment, net		21,573		21,556
Investment in affiliate		7,740		8,484
Intangible assets, net		1,515		1,784
Other assets		1,698		1,698
Total assets	$	115,130	$	121,939
Liabilities and Stockholders’ Equity
Current liabilities
Trade accounts payable	$	7,693	$	5,203
Deferred profit*		4,453		5,220
Customer deposits		1,012		1,220
Accrued expenses		9,860		11,160
Total current liabilities		23,018		22,803
Total stockholders’ equity		92,112		99,136
Total liabilities and stockholders’ equity	$	115,130	$	121,939

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

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FSI INTERNATIONAL, INC. AND SUBSIDIARIES
MISCELLANEOUS FINANCIAL INFORMATION
(in thousands, except percentages, per share and total employee data)
(unaudited)

	Feb. 25, 2006			Feb. 26, 2005
Sales by Area
United States		41	%		29	%
International		59	%		71	%
Cash Flow Statement
Capital expenditures	$	1,720		$	1,106
Depreciation		1,703			1,944
Amortization		269			514
Miscellaneous Data
Total employees, including contract		526			505
Book value per share	$	3.07		$	3.73
Shares outstanding		30,043			30,008

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