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

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. TheCompany'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 $0.02per 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. TheCompany's net loss for the second quarter of fiscal 2006 was $3.2million, 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 thesecond quarter of fiscal 2005, the Company accrued $250,000, or $0.01per 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 atthe end of the second quarter of fiscal 2006, as compared to $19.7million at the end of the second quarter last year. Orders for thesecond quarter of fiscal 2006 were $26.3 million, compared to $17.3million in the second quarter of fiscal 2005 and $23.8 million in thefirst quarter of 2006. Increased demand for products that are used toprocess 200mm diameter and smaller silicon wafers contributed to thesecond quarter year-over-year order increase.

Accomplishments

"We entered fiscal 2006 with a focused set of strategies andoptimism that during the year we would begin to recognize results fromour prior year's initiatives," said Don Mitchell, FSI chairman andCEO. "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(TM) photoresist strip technology on our ZETA(R) Spray Cleaning Platform;

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

-- Delivery of an initial MAGELLAN(R) 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 hadapproximately $115.1 million in assets, including $26.2 million incash, restricted cash, cash equivalents and marketable securities. Atthe end of the second quarter of fiscal 2006, the Company had acurrent ratio of 3.6 to 1.0, no debt and a book value of $3.07 pershare.

Outlook

Given the quarter-to-date orders, the Company expects thirdquarter orders to increase to $30 to 35 million as compared to $26.3million in the second quarter of fiscal 2006(a). Based on the backlogand deferred revenue levels at the end of the second quarter andexpected additional third quarter orders, the Company expects thirdquarter fiscal 2006 revenues to increase to $26 to $30 million.(a)This reflects the anticipated acceptance of products previously placedwith customers for evaluation along with follow-on orders for theseand other products.(a)

Based upon the anticipated gross profit margin and the operatingexpense run rate, the Company expects a net loss in the $1.0 to $2.0million range for the quarter.(a) The Company expects to use $3.0 to4.0 million of net cash for operating activities in the third quarterincluding an expected increase in accounts receivable associated withthe anticipated shipment ramp.(a)

To address the future need of its customers, the Company plans tocontinue allocating resources to key product development andapplication expansion programs at the 65 and 45nm technology nodes.(a)

Conference Call Details

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

About FSI

FSI International, Inc. is a global supplier of surfaceconditioning equipment technology and support services formicroelectronics manufacturing. Using the Company's broad portfolio ofcleaning products, which include batch and single-wafer platforms forimmersion, spray, vapor and CryoKinetic technologies, customers areable to achieve their process performance, flexibility andproductivity goals. The Company's support services programs provideproduct and process enhancements to extend the life of installed FSIequipment, enabling worldwide customers to realize a higher return ontheir capital investment. FSI maintains a web site athttp://www.fsi-intl.com.

"Safe Harbor" Statement Under the Private Securities LitigationReform Act of 1995

This press release contains certain "forward-looking" statements(a), including, but not limited to, expected orders, expectedrevenues, anticipated gross margin, expected operating expense runrate, expected net loss, expected cash usage, expected accountsreceivable increase associated with the anticipated shipment ramp andother expected financial performance for the third quarter of fiscal2006. Except for the historical information contained herein, thematters discussed in this news release are forward-looking statementsinvolving risks and uncertainties, both known and unknown, that couldcause actual results to differ materially from those in suchforward-looking statements. Such risks and uncertainties include, butare not limited to, the length and extent of the current industryrecovery; order delays or cancellations; general economic conditions;changes in customer capacity requirements and demand formicroelectronics; the extent of demand for the Company's products andits ability to meet demand; global trade policies; worldwide economicand political stability; the Company's successful execution ofinternal performance plans; the cyclical nature of the Company'sbusiness; volatility of the market for certain products; performanceissues with key suppliers and subcontractors; the level of new orders;the timing and success of current and future product and processdevelopment programs; the success of the Company's affiliateddistributor in Japan; the success of the Company's direct distributionorganization; and the potential impairment of long-lived assets; aswell as other factors listed from time to time in the Company's SECreports including, but not limited to, the Company's Annual Report onForm 10-K for the fiscal 2005 and the Company's quarterly report onForm 10-Q for the first quarter of fiscal 2006. The Company assumes noduty 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,
2006 2005 2006 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




FSI INTERNATIONAL, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEET

(in thousands)

(unaudited)



Feb. 25, Aug. 27,
2006 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(b) 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
========= =========

--------------------------------
(b)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)



Feb. 25, Feb. 26,
2006 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