================================================================================ 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 February 28, 1997 [_] 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 0-26784 SPEEDFAM INTERNATIONAL, INC. (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER) Illinois 36-2421613 - -------------------------------- ----------------------------- (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification Number) 7406 West Detroit, Chandler, Arizona 85226 - ----------------------------------------- ------------------------- (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code (602) 961-2175 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. Yes X No _______ ------ Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date (April 11, 1997). Common Stock, no par value: 13,274,563 shares ================================================================================ SpeedFam International, Inc. INDEX Page ---- Part I FINANCIAL INFORMATION Item 1. Financial Statements Condensed Consolidated Balance Sheets February 28, 1997 and May 31, 1996......................... 2 Condensed Consolidated Statements of Earnings Three Months and Nine Months Ended February 28, 1997 and February 29, 1996................................. 3 Condensed Consolidated Statements of Cash Flows Nine Months Ended February 28, 1997 and February 29, 1996...4 Notes to Condensed Consolidated Financial Statements........5 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations.....................................8 Part II OTHER INFORMATION Item 6. Exhibits and Reports on Form 8-K.............................14 SIGNATURE..................................................................15 EXHIBIT INDEX Exhibit 10.1 Employment Agreement between the Registrant and James N. Farley Exhibit 10.2 Employment Agreement between the Registrant and Makoto Kouzuma Exhibit 10.3 Employment Agreement between the Registrant and Roger K. Marach Exhibit 10.4 Employment Agreement between the Registrant and Christopher E. Augur Exhibit 10.5 Employment Agreement between the Registrant and Robert R. Smith Exhibit 11 Computation of Net Earnings Per Share Exhibit 27 Financial Data Schedule -1- Part I--Financial Information SpeedFam International, Inc. and Consolidated Subsidiaries Condensed Consolidated Balance Sheets (dollars in thousands) February 28, May 31, 1997 1996 ------------ ------- Assets Current assets: Cash and cash equivalents $ 77,366 $ 10,871 Trade accounts and notes receivable, net 41,768 34,693 Inventories 33,362 27,931 Other current assets 5,113 2,470 -------- -------- Total current assets 157,609 75,965 Investments in affiliates 23,171 20,450 Property, plant and equipment, net 18,682 9,969 Other assets 1,993 1,600 -------- -------- Total assets $201,455 $107,984 ======== ======== Liabilities and Shareholders' Equity Current liabilities: Short-term borrowings and current portion of long-term debt $ 250 $ 727 Accounts payable and due to affiliates 29,488 26,460 Customer deposits 5,013 4,814 Other current liabilities 15,150 12,771 -------- -------- Total current liabilities 49,901 44,772 -------- -------- Long-term liabilities: Long-term debt 337 2,593 Deferred income taxes 586 580 -------- -------- Total long-term liabilities 923 3,173 -------- -------- Shareholders' equity: Common stock, no par value, 20,000,000 shares authorized, 13,270,979 and 10,514,868 shares issued and outstanding at February 28, 1997 and May 31, 1996, respectively 1 1 Additional paid-in capital 105,501 26,174 Retained earnings 42,977 29,247 Foreign currency translation adjustment 2,152 4,617 -------- -------- Total shareholders' equity 150,631 60,039 -------- -------- Total liabilities and shareholders' equity $201,455 $107,984 ======== ======== See Accompanying Notes to Condensed Consolidated Financial Statements. -2- SpeedFam International, Inc. and Consolidated Subsidiaries Condensed Consolidated Statements of Earnings Three Months and Nine Months Ended February 28, 1997 and February 29, 1996 (dollars and shares in thousands, except per share data) Three Months Ended Nine Months Ended February 28, February 29, February 28, February 29, ------------ ------------ ------------ ------------ 1997 1996 1997 1996 ------------ ------------ ------------ ------------ Revenue: Net sales $40,918 $30,083 $115,202 $72,353 Commissions from affiliate 4,362 3,057 8,925 4,041 ------- ------- -------- ------- Total revenue 45,280 33,140 124,127 76,394 Cost of sales 25,591 20,295 75,465 51,481 ------- ------- -------- ------- Gross margin 19,689 12,845 48,662 24,913 Research, development and engineering 4,884 3,496 12,779 6,993 Selling, general and administrative 9,003 5,183 22,483 12,617 ------- ------- -------- ------- Operating profit 5,802 4,166 13,400 5,303 Interest expense (62) (90) (185) (615) Other income (expense), net 126 172 (216) 440 ------- ------- -------- ------- Earnings from consolidated companies before income taxes 5,866 4,248 12,999 5,128 Income tax expense 2,286 1,616 5,053 2,002 ------- ------- -------- ------- Earnings from consolidated companies 3,580 2,632 7,946 3,126 Equity in net earnings of affiliates 1,329 1,728 5,784 3,563 ------- ------- -------- ------- Net earnings $ 4,909 $ 4,360 $ 13,730 $ 6,689 ======= ======= ======== ======= Net earnings per share $ 0.42 $ 0.39 $ 1.20 $ 0.68 ======= ======= ======== ======= Weighted average common and common equivalent shares 11,801 11,211 11,463 9,790 ======= ======= ======== ======= See Accompanying Notes to Condensed Consolidated Financial Statements. -3- SpeedFam International, Inc. and Consolidated Subsidiaries Condensed Consolidated Statements of Cash Flows Nine Months Ended February 28, 1997 and February 29, 1996 (dollars in thousands) Nine Months Ended February 28, February 29, ------------ ------------ 1997 1996 ------------ ------------ Cash flows from operating activities Net earnings $ 13,730 $ 6,689 Adjustments to reconcile net earnings to net cash used in operating activities: Equity in net earnings of affiliates (5,784) (3,563) Depreciation and amortization 1,494 721 Other 550 13 Changes in assets and liabilities: Increase in trade accounts and notes receivable (7,419) (14,578) Increase in inventories (5,453) (7,910) Increase in other current assets (2,604) (1,866) Increase in accounts payable and due to affiliates 3,005 6,854 Increase in accrued expenses, customer deposits and other liabilities 2,539 7,507 -------- -------- Net cash provided by (used in) operating activities 58 (6,133) -------- -------- Cash flows from investing activities Capital expenditures (10,185) (5,579) Other investing activities 186 238 -------- -------- Net cash used in investing activities (9,999) (5,341) -------- -------- Cash flows from financing activities Proceeds from issuance of common stock 77,778 28,380 Proceeds from exercise of stock options 472 -- Proceeds from sale of stock to employees 887 -- Treasury stock transactions -- 16 Proceeds from long-term debt 414 3,999 Principal payments on long-term debt (3,155) (11,848) -------- -------- Net cash provided by financing activities 76,396 20,547 -------- -------- Effects of foreign currency rate changes on cash 40 (68) -------- -------- Net increase in cash and cash equivalents 66,495 9,005 Cash and cash equivalents at beginning of year 10,871 1,095 -------- -------- Cash and cash equivalents at February 28, 1997 and February 29, 1996 $ 77,366 $ 10,100 ======== ======== See Accompanying Notes to Condensed Consolidated Financial Statements. -4- SpeedFam International, Inc. and Consolidated Subsidiaries Notes to Condensed Consolidated Financial Statements (dollars in thousands) (1) Basis of Presentation The condensed consolidated financial statements included herein have been prepared by management without audit. Certain information and note disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted, although management believes that the disclosures made are adequate to make the information presented not misleading. These condensed consolidated financial statements should be read in conjunction with the consolidated financial statements of the Company for the year ended May 31, 1996, as filed with the Securities and Exchange Commission on September 5, 1996 as part of its Annual Report on Form 10-K/A. In the opinion of management the information furnished herein reflects all adjustments (consisting of normal recurring adjustments) necessary for a fair statement of results for the interim periods presented. Results of operations for the three months and nine months ended February 28, 1997 are not necessarily indicative of results to be expected for the full fiscal year. (2) Inventories The components of inventory were: February 28, May 31, 1997 1996 ------------ ------- Raw materials $16,467 $14,626 Work-in-process 11,502 10,777 Finished goods 5,393 2,528 ------- ------- $33,362 $27,931 ======= ======= (3) Investments in Affiliates The Company owns a 50% interest in SpeedFam Co., Ltd. The Company's equity interest in SpeedFam Co., Ltd. was $20,124 and $18,545 at February 28, 1997 and at May 31, 1996, respectively, based on the balance sheet of SpeedFam Co., Ltd. at January 31, 1997 and April 30, 1996, respectively. The remaining equity interest included in investments in affiliates relates to the Company's 50% ownership interest in Fujimi Corporation. Condensed consolidated financial statements of SpeedFam Co., Ltd., which are consolidated on a fiscal year that ends April 30, are as follows: -5- SpeedFam International, Inc. and Consolidated Subsidiaries Notes to Condensed Consolidated Financial Statements (dollars in thousands) Balance Sheets January 31, April 30, 1997 1996 ----------- --------- Assets Total current assets $110,120 $ 98,492 Investment in affiliates 765 891 Property, plant and equipment, net 24,288 20,161 Deferred income taxes and other assets 7,751 7,007 -------- -------- Total assets $142,924 $126,551 ======== ======== Liabilities and Stockholders' Equity Total current liabilities $ 87,657 $ 74,966 Long-term debt 8,117 9,106 Other long-term liabilities 6,903 5,388 Stockholders' equity Common stock 664 664 Retained earnings 35,266 26,943 Foreign currency translation adjustment 4,185 9,346 Unrealized gains on marketable securities 132 138 -------- -------- Total liabilities and stockholders' equity $142,924 $126,551 ======== ======== Statements of Earnings and Retained Earnings Three Months Ended Nine Months Ended January 31, January 31, ------------------ -------------------- 1997 1996 1997 1996 -------- --------- ---------- ---------- Net sales $45,219 $53,181 $156,073 $115,325 Costs and operating expenses 42,572 46,907 137,620 101,633 ------- ------- -------- -------- Earnings before income taxes 2,647 6,274 18,453 13,692 Income taxes 845 3,059 8,589 6,653 ------- ------- -------- -------- Net earnings before minority interest 1,802 3,215 9,864 7,039 Minority interest 132 (35) 634 244 ------- ------- -------- -------- Net earnings 1,670 3,250 9,230 6,795 Beginning retained earnings 33,596 20,851 26,943 18,036 Dividends -- -- (907) (276) Transfers to capital -- -- -- (454) ------- ------- -------- -------- Ending retained earnings $35,266 $24,101 $ 35,266 $ 24,101 ======= ======= ======== ======== -6- SPEEDFAM INTERNATIONAL, INC. AND CONSOLIDATED SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (dollars in thousands) The Company pays a commission to SpeedFam Co., Ltd. on sales of equipment produced by the Company in the U.S. and exported to Pacific Rim customers through SpeedFam Co., Ltd. As of February 28, 1997 the Company had accrued $1,965 of commission expense to SpeedFam Co., Ltd. (4) Long-Term Debt In fiscal year 1996, the Company entered into an unsecured credit agreement with two U.S. banks. The credit agreement includes a $22,500 revolving line of credit maturing April 14, 1999. During the third quarter ended February 28, 1997, the Company paid off the outstanding balance on the unsecured revolving line of credit, and as of February 28, 1997, no amounts were outstanding on this line of credit. As of September 13, 1996, the Company had negotiated an amendment to the $22,500 credit facility, providing for an additional $14,000 in a 5-year unsecured term loan to fund the construction of a new corporate headquarters and manufacturing facility in Chandler, Arizona. As of February 28, 1997, no amounts were outstanding on the term loan. Terms of the loan provide that principal would be repaid in fifteen (15) quarterly installments of $350 each beginning in October of 1997. The remaining outstanding balance would be repaid at the end of the loan's term. Interest on the term loan would accrue and be paid monthly on the outstanding balance based on a 90-day LIBOR rate plus 140 basis points. On October 31, 1996, SpeedFam Limited in the United Kingdom, a wholly owned subsidiary of SpeedFam International, Inc., entered into a (Pounds)950 ($1,522) Multi-Currency Revolving Line of Credit with the London branch of a U.S. bank. The revolving line of credit is secured by property and equipment of the subsidiary and is payable on demand. Interest accrues on the outstanding balance at 2.0% above the bank's base rate (6.0% at January 31, 1997) and is payable monthly. As of January 31, 1997 no amounts were outstanding on this credit facility. (5) Offering of Common Stock On February 20, 1997, the Company completed a public offering of common stock. In connection therewith, the Company issued 2,500,000 shares of common stock and received proceeds of $77.8 million, net of underwriters' discounts and commissions and offering expenses. -7- MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Segments The Company's total revenue consists of net sales in two segments: (i) equipment, parts and expendables, and (ii) slurries, as well as commissions earned on the distribution in the U.S. and Europe of products produced by SpeedFam Co., Ltd., the Company's Far East Joint Venture. Results of Operations The following table sets forth certain consolidated statements of earnings data for the periods indicated as a percentage of total revenue: Three Months Ended Nine Months Ended February 28, February 29, February 28, February 29, ------------ ------------ ------------ ------------ 1997 1996 1997 1996 ------------ ------------ ------------ ------------ Revenue: Net sales 90.4% 90.8% 92.8% 94.7% Commissions from affiliate 9.6 9.2 7.2 5.3 ------------ ------------ ------------ ------------ Total revenue 100.0 100.0 100.0 100.0 Cost of sales 56.5 61.2 60.8 67.4 ------------ ------------ ------------ ------------ Gross margin 43.5 38.8 39.2 32.6 Research, development and engineering 10.8 10.5 10.3 9.2 Selling, general and administrative 19.9 15.7 18.1 16.5 ------------ ------------- ------------ ------------ Operating profit 12.8 12.6 10.8 6.9 Interest expense (0.1) (0.3) (0.1) (0.8) Other income (expense), net 0.3 0.5 (0.2) 0.6 ------------ ------------ ------------ ------------ Earnings from consolidated companies before income taxes 13.0 12.8 10.5 6.7 Income tax expense 5.1 4.9 4.1 2.6 ------------ ------------ ------------ ------------ Earnings from consolidated companies 7.9 7.9 6.4 4.1 Equity in net earnings of affiliates 2.9 5.3 4.7 4.7 ------------ ------------ ------------ ------------ Net earnings 10.8% 13.2% 11.1% 8.8% ============ ============ ============ ============ -8- Net Sales. The Company's net sales for the three months ended February 28, 1997 were $40.9 million, an increase of 36.0% over net sales of $30.1 million for the corresponding period in the prior year. This increase in net sales resulted from growth in the equipment, parts and expendables segment. Sales of equipment, parts and expendables increased to $35.3 million or 86.2% of net sales in the third quarter of fiscal 1997 as compared to $23.2 million or 77.3% of net sales in the same period of fiscal 1996. The growth in this segment was attributable to higher sales of the Company's CMP planarization systems to the semiconductor industry. The Company believes that the market for thin film memory disk polishing equipment is evolving from manual load/unload systems to automated load/unload systems. Consequently, the historical growth rate in sales of manual disk polishing machines to the thin film memory disk market may not be sustained in the future as several of the Company's customers have begun the process of evaluating how to migrate from manual to automated systems. Currently, the automated disk polishing machine is manufactured exclusively by SpeedFam Co., Ltd. (Far East Joint Venture). Revenue from the sale of automated disk polishing systems by the Company would be recognized as commission revenue since these systems are solely produced by the Far East Joint Venture. The Company is currently evaluating whether to begin producing automated machines in the U.S., although it expects that any decision to do so will take a number of months to implement. Sales of slurries decreased to $5.7 million or 13.8% of net sales in the third quarter of fiscal 1997 from $6.8 million or 22.7% of net sales in the comparable period of fiscal 1996. This decrease is specifically due to certain manufacturers of thin film memory disk media using slurry formulations that achieve certain desired surface characteristics, but which the Company does not currently sell. The Company is working with its supplier of memory disk slurry to develop new slurry formulations, but expects that sales of slurries to the thin film memory disk media market will remain at current levels in the near future. Net sales for the nine months ended February 28, 1997 were $115.2 million, up 59.2% over net sales of $72.4 million for the same period in fiscal 1996. Equipment, parts and expendables accounted for 84.1% of net sales in the first nine months of fiscal 1997 compared to 73.6% in the same period of fiscal 1996. CMP planarization equipment accounted for a significant portion of this sales growth. In addition, net sales for the nine month period have increased due to higher levels of equipment shipments to the thin film memory disk media market. Sales of slurries as a percent of net sales decreased to 15.9% in the first nine months of fiscal 1997 from 26.4% in the comparable period of fiscal 1996. -9- Commissions from Affiliate. Commissions from affiliate increased to $4.4 million during the third quarter of fiscal 1997 from $3.1 million in the corresponding period of fiscal 1996. Commissions from affiliate increased to $8.9 million in the first nine months of fiscal 1997 compared to $4.0 million in the first nine months of fiscal 1996. The increases in the three and nine month periods, as compared to the respective periods in fiscal 1996, were due primarily to the continuing demand in the silicon wafer industry for polishing systems developed and manufactured by the Far East Joint Venture. In addition, sales of cleaning and polishing systems, also produced by the Far East Joint Venture, to customers in the thin film memory disk media market increased significantly in the third quarter and first nine months of fiscal 1997 over the same periods in the prior year. Gross Margin. Gross margin increased to $19.7 million or 43.5% of total revenue for the three months ended February 28, 1997 from $12.8 million or 38.8% of total revenue for the three months ended February 29, 1996. For the first nine months of fiscal 1997, gross margin was $48.7 million or 39.2% of total revenue compared to $24.9 million or 32.6% of total revenue for the first nine months of fiscal 1996. The increase in gross margin and gross margin percentage for both the three and nine months ended February 28, 1997 over the respective prior year periods is due to a higher level of net sales in total as well as a continuing increase in sales of higher-margin equipment, especially systems for planarization of semiconductor devices. In addition, higher commission revenue contributed to the increased gross margins in the three and nine month periods. Research, Development and Engineering. Research, development and engineering expense increased to $4.9 million or 10.8% of total revenue in the third quarter of fiscal 1997 from $3.5 million or 10.5% of total revenue in third quarter of fiscal 1996. In the nine months ended February 28, 1997, research, development and engineering expense increased to $12.8 million or 10.3% of total revenue compared to $7.0 million or 9.2% of total revenue in the first nine months of fiscal 1996. The increase in both the dollar amount and as a percent of total revenue is a result of the continued investment in the development of the CMP process and products for key markets, particularly for the semiconductor sector, and increasing the Company's field suport organization throughout the world. Such expenditures have resulted in the development and sale of the Auriga machine, the next generation of the CMP-V system, and the development of the Capella post-CMP cleaning system. Two Capella systems were shipped into two beta sites during the third quarter of fiscal 1997. Selling, General and Administrative. Selling, general and administrative expense increased to $9.0 million in the third quarter of fiscal 1997 from $5.2 million in the third quarter of fiscal 1996. For the three month period ended February 28, 1997, selling, general and administrative expense as a percent of total revenue increased to 19.9% compared to 15.7% of total revenue in the similar period of fiscal 1996. Selling, general and administrative expense increased to $22.5 million in the first nine months of fiscal 1997 from $12.6 million in the corresponding period in the prior year. As a percentage of total revenue, selling, general and administrative expense increased to 18.1% from 16.5% in the first nine months of fiscal 1996. Higher levels of spending were required to support the sales growth in the first nine months of fiscal 1997. This increase in selling, general and administrative expense as a percentage of revenue reflects continued investments in sales and administrative infrastructure, as well as increased commissions paid to the Far East Joint Venture as a result of increased sales of CMP systems produced by the Company in the U.S. and exported to Pacific Rim customers through its joint venture affiliate. Interest Expense. The decreases in interest expense for the three and nine months ended February 28, 1997, were due to the reduction of long-term debt since the end of the first quarter of fiscal 1996 using funds received from the initial public offering completed in October 1995 and the public offering completed in February 1997. -10- Other Income (Expense), Net. Other income decreased to $126,000 in the third quarter of fiscal 1997 from $172,000 in the comparable period of fiscal 1996. Other expense increased to $216,000 in the first nine months of fiscal 1997 from $440,000 of other income in the comparable period of fiscal 1996. Other expense for the first nine months of fiscal 1997 consists primarily of charges associated with the Company's public common stock offering in the first quarter of fiscal 1997 which was subsequently canceled. These charges were partially offset by interest income. Equity in Net Earnings of Affiliates. Equity in net earnings of affiliates decreased to $1.3 million for the three months ended February 28, 1997 from $1.7 million in the comparable period of fiscal 1996. While revenue of the Far East Joint Venture reported in yen grew from the same quarter a year ago, a change in product mix lowered gross margin. In addition, operating expenses increased in relation to the buildup of the Far East Joint Venture's CMP organization throughout the Pacific Rim. The equity contribution from the Far East Joint Venture was also down due to a declining yen relationship against the U.S. dollar versus the same period last year. Equity in net earnings of affiliates increased to $5.8 million in the first nine months of fiscal 1997 from $3.6 million in the corresponding period in the prior year. The Company's share of the net earnings of its other joint venture, Fujimi Corporation, were significantly higher than in the comparable periods of fiscal 1996 due primarily to increased sales and improved margins realized on slurry products sold by Fujimi Corporation to the U.S. silicon wafer market. -11- Liquidity and Capital Resources For the first nine months ended February 28, 1997, $58,000 in cash was provided by operating activities. Cash provided by net earnings and increases in current liabilities was almost all offset by increases in accounts receivable, inventories and other current assets. Through February 28, 1997, the Company had spent approximately $12.0 million in land and construction costs for a new corporate headquarters and manufacturing facility in Chandler, Arizona. The Company presently estimates the total costs to be incurred for the project will be approximately $20.4 million. The current total estimated project cost has increased from previous estimates due to changes in equipment production capacity and waste neutralization requirements, power and HVAC demands. On February 20, 1997, the Company completed a public offering of common stock. In connection therewith, the Company issued 2,500,000 shares of common stock and received proceeds of $77.8 million, net of underwriters' discounts and commissions and offering expenses. In addition, for the nine months ended February 28, 1997, $1.4 million was provided by the sale of stock to employees through the Company's Employee Stock Purchase Plan and through the exercise of stock options. Using proceeds from the February 1997 stock offering, the Company paid off $2.8 million of the outstanding balance on a $22.5 million unsecured revolving line of credit maturing April 14, 1999. As of February 28, 1997, no amounts were outstanding on this line of credit. As of September 13, 1996, the Company had successfully negotiated an amendment to its then existing $22.5 million unsecured credit facility, in which its U.S. bank group provided the Company an additional $14.0 million in an unsecured term loan to fund the remaining costs to construct the new corporate headquarters and manufacturing facility in Chandler, Arizona. At February 28, 1997, no amounts were outstanding on the term loan. On October 31, 1996, a wholly owned subsidiary of SpeedFam International, Inc. entered into a (pounds) 950,000 ($1.5 million) Multi-Currency Revolving Line of Credit. The credit facility was provided to support the operating and working capital needs of the Company's British subsidiary. As of January 31, 1997, no amounts were outstanding on this line of credit. The Company believes that current bank lines of credit, the term loan and the funds provided by the recent sale of common stock will be sufficient to meet the Company's capital requirements during the next 12 months. Statement of Financial Accounting Standards No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of" was issued in March 1995 and is effective for fiscal years beginning after December 15, 1995. Management has reviewed the Statement and determined that its provisions do not have a material effect upon the financial condition or results of operations of the Company. Statement of Financial Accounting Standards No. 123, "Accounting for Stock- Based Compensation Plans" was issued in October 1995. The Statement will be effective for the Company's fiscal year 1997. As allowed by the new Statement, the Company plans to continue to use Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees" in accounting for its stock options. Certain pro forma and other information will be disclosed in the annual financial statements as if the Company had measured compensation costs in a manner consistent with the new Statement. Management has reviewed the Statement and determined that its provisions do not have a material effect upon the financial condition or results of operations of the Company. -12- Certain statements and information in this Form 10-Q constitute "forward- looking statements" within the meaning of the federal securities laws. Such forward-looking statements involve risks and uncertainties which may cause the actual results, performance or achievements of the Company to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. Factors that may affect the Company's business and may therefore affect actual results include, among others, the cyclical nature of the Company's business and the industries which it serves, the Company's dependence on new product development and the effects of rapid technological change in the semiconductor and disk media industries, including the effects of significant competition in these industries, the normal fluctuations in the Company's quarterly operating results, including the effects of the Far East Joint Venture's results of operations. This is only a summary of some of the important factors that could cause actual results to vary. For a more complete description of these and other factors, refer to "Certain Factors Affecting the Company's Business" in the Company's Form 10-K/A filed with the Securities and Exchange Commission. The Company undertakes no obligation to update the information, including the forward-looking statements, in the Form 10-Q. -13- SpeedFam International, Inc. Part II Other Information Item 6. Exhibits and Reports on Form 8-K. (a) Exhibits. Exhibit - 10.1 Employment Agreement between the Registrant and James N. Farley Exhibit - 10.2 Employment Agreement between the Registrant and Makoto Kouzuma Exhibit - 10.3 Employment Agreement between the Registrant and Roger K. Marach Exhibit - 10.4 Employment Agreement between the Registrant and Christopher E. Augur Exhibit - 10.5 Employment Agreement between the Registrant and Robert R. Smith Exhibit - 11 Computation of Net Earnings Per Share Exhibit - 27 Financial Data Schedule (b) Reports on Form 8-K. One report on Form 8-K was filed February 18, 1997 to disclose that the Registrant had entered into an underwriting agreement. Pursuant to the underwriting agreement, the Registrant and certain shareholders of the Registrant proposed to sell 3,000,000 shares of the Registrant's common stock and grant the underwriters an over-allotment option to purchase up to 450,000 additional shares solely from the Company. -14- SpeedFam International, Inc. 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. SpeedFam International, Inc. /s/ Roger K. Marach ------------------------------------------ Date: April 14, 1997 By Roger K. Marach Treasurer and Chief Financial Officer (As Chief Accounting Officer and Duly Authorized Officer of SpeedFam International, Inc.) -15- EXHIBIT INDEX EXHIBIT NUMBER DESCRIPTION - ------- ----------- 10.1 Employment Agreement between the Registrant and James N. Farley 10.2 Employment Agreement between the Registrant and Makoto Kouzuma 10.3 Employment Agreement between the Registrant and Roger K. Marach 10.4 Employment Agreement between the Registrant and Christopher E. Augur 10.5 Employment Agreement between the Registrant and Robert R. Smith 11 Computation of Net Earnings Per Share 27 Financial Data Schedule