<PAGE>   1
                       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, 1999

[ ]      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-IPEC, 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)

       305 North 54th Street, Chandler, Arizona              85226
       (Address of principal executive offices)            (Zip Code)

      Registrant's telephone number, including area code (602) 705-2100

      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 9, 1999).

                  Common Stock, no par value: 29,262,330 shares
<PAGE>   2
                          SPEEDFAM INTERNATIONAL, INC.


                                      INDEX

                                                                            Page
PART I      FINANCIAL INFORMATION

      Item 1.     Financial Statements

                    Condensed Consolidated Balance Sheets
                    February 28, 1999 and May 31, 1998.........................2

                    Condensed Consolidated Statements of Operations
                    Three Months and Nine Months Ended February 28, 1999 and
                    1998.......................................................3

                    Condensed Consolidated Statements of Cash Flows
                    Nine Months Ended February 28, 1999 and 1998...............4

                    Notes to Condensed Consolidated Financial Statements.......5

      Item 2.     Management's Discussion and Analysis of Financial Condition
                  and Results of Operations...................................10

      Item 3.     Quantitative and Qualitative Disclosures about Market Risk..20

PART II     OTHER INFORMATION

      Item 6.     Exhibits and Reports on Form 8-K............................21

SIGNATURE.....................................................................22

EXHIBIT INDEX

                  Exhibit - 3.1     Amendment to the Articles of Incorporation

                  Exhibit - 4.1     First Supplemental Indenture by and among
                                    the Registrant, Integrated Process Equipment
                                    Corp. and State Street Bank and Trust 
                                    Company of California, N.A., as Trustee, 
                                    dated April 6, 1999

                  Exhibit - 10.1    Employment Agreement between the Registrant 
                                    and Ralph Hartung, dated April 6, 1999

                  Exhibit - 27      Financial Data Schedule
<PAGE>   3
PART I - FINANCIAL INFORMATION

           SPEEDFAM INTERNATIONAL, INC. AND CONSOLIDATED SUBSIDIARIES
                      CONDENSED CONSOLIDATED BALANCE SHEETS
                                 (in thousands)

<TABLE>
<CAPTION>
                                                       FEBRUARY 28,    MAY 31,
                                                          1999          1998
                                                        ---------     ---------
<S>                                                    <C>            <C>
                     ASSETS

Current assets:
  Cash and cash equivalents                             $  90,883     $  90,384
  Short-term investments                                   17,534        50,835
  Trade accounts and notes receivable, net                 46,962        45,197
  Inventories                                              38,474        55,532
  Other current assets                                     17,140         8,195
                                                        ---------     ---------
   Total current assets                                   210,993       250,143
Investments in affiliates                                  26,681        24,299
Property, plant and equipment, net                         76,952        52,253
Other assets                                                3,568         3,070
                                                        ---------     ---------
   Total assets                                         $ 318,194     $ 329,765
                                                        =========     =========

     LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:
  Short-term borrowings and current portion             $      26     $     248
  of long-term debt
  Accounts payable and due to affiliates                   15,530        23,901
  Customer deposits                                         2,852         1,812
  Other current liabilities                                11,491        13,932
                                                        ---------     ---------
   Total current liabilities                               29,899        39,893
                                                        ---------     ---------
Deferred income taxes                                       1,020         1,020
                                                        ---------     ---------
Stockholders' equity:
  Common stock, no par value, 60,000 shares
    authorized, 16,214 and 15,962 shares
    issued and outstanding                                      1             1
    at February 28, 1999 and May 31, 1998,
    respectively
  Additional paid-in capital                              229,088       226,729
  Retained earnings                                        56,177        62,329
  Accumulated other comprehensive income (loss)             2,009          (207)
                                                        ---------     ---------
   Total stockholders' equity                             287,275       288,852
                                                        ---------     ---------
     Total liabilities and stockholders' equity         $ 318,194     $ 329,765
                                                        =========     =========
</TABLE>

     See Accompanying Notes to Condensed Consolidated Financial Statements.


                                       2
<PAGE>   4
           SPEEDFAM INTERNATIONAL, INC. AND CONSOLIDATED SUBSIDIARIES
                 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
          THREE MONTHS AND NINE MONTHS ENDED FEBRUARY 28, 1999 AND 1998
                      (in thousands, except per share data)


<TABLE>
<CAPTION>
                                                         Three Months Ended         Nine Months Ended
                                                            February 28,               February 28,
                                                       ----------------------     ----------------------
                                                         1999          1998         1999          1998
                                                       --------      --------     --------      --------
<S>                                                    <C>           <C>          <C>           <C>
Revenue:
  Net sales                                            $ 31,295      $ 47,004     $ 90,985      $152,818
  Commissions from affiliate                                781         1,376        1,518         5,936
                                                       --------      --------     --------      --------
   Total revenue                                         32,076        48,380       92,503       158,754
Cost of sales                                            21,355        28,341       61,573        90,941
                                                       --------      --------     --------      --------
   Gross margin                                          10,721        20,039       30,930        67,813
  Research, development and engineering                   7,468         7,669       26,919        22,372
  Selling, general and administrative                     9,492         8,726       25,045        26,814
                                                       --------      --------     --------      --------
Operating profit (loss)                                  (6,239)        3,644      (21,034)       18,627
 Other income, net                                        1,645         1,581        5,233         3,851
                                                       --------      --------     --------      --------
Earnings (loss) from consolidated companies before
income taxes                                             (4,594)        5,225      (15,801)       22,478
Income tax expense (benefit)                             (2,332)        1,822       (8,009)        7,966
                                                       --------      --------     --------      --------
Earnings (loss) from consolidated companies              (2,262)        3,403       (7,792)       14,512
Equity in net earnings of affiliates                        211         1,740        1,640         3,808
                                                       --------      --------     --------      --------
Net earnings (loss)                                    $ (2,051)     $  5,143     $ (6,152)     $ 18,320
                                                       ========      ========     ========      ========

Net earnings (loss) per share:
  Basic                                                $  (0.13)     $   0.32     $  (0.38)     $   1.25
                                                       ========      ========     ========      ========
  Diluted                                              $  (0.13)     $   0.31     $  (0.38)     $   1.19
                                                       ========      ========     ========      ========

 Weighted average number of shares:
  Basic                                                  16,166        15,861       16,113        14,641
                                                       ========      ========     ========      ========
  Diluted                                                16,166        16,429       16,113        15,391
                                                       ========      ========     ========      ========
</TABLE>

    See Accompanying Notes to Condensed Consolidated Financial Statements.


                                       3
<PAGE>   5
           SPEEDFAM INTERNATIONAL, INC. AND CONSOLIDATED SUBSIDIARIES
                 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                  NINE MONTHS ENDED FEBRUARY 28, 1999 AND 1998
                                 (in thousands)

<TABLE>
<CAPTION>
                                                                                    NINE MONTHS ENDED
                                                                                       FEBRUARY 28,
                                                                                 ------------------------
                                                                                   1999           1998
                                                                                 ---------      ---------
<S>                                                                              <C>            <C>
 CASH FLOWS FROM OPERATING ACTIVITIES
  Net earnings (loss)                                                            $  (6,152)     $  18,320
  Adjustments to reconcile net earnings (loss)
   to net cash used in operating activities:
     Equity in net earnings of affiliates                                           (1,640)        (3,808)
     Depreciation and amortization                                                   5,595          2,948
     Dividend from affiliate                                                           521            875
     Other                                                                             887            267
     Changes in assets and liabilities:
      Increase in trade accounts and notes receivable                               (2,721)        (7,384)
      (Increase) Decrease in inventories                                            10,627         (7,413)
      Increase in other current assets                                              (7,971)          (297)
      Decrease in accounts payable and due to affiliates                            (8,330)        (5,010)
      Increase (Decrease) in customer deposits and other current liabilities        (1,373)           143
                                                                                 ---------      ---------
  Net cash used in operating activities                                            (10,557)        (1,359)
                                                                                 ---------      ---------
CASH FLOWS FROM INVESTING ACTIVITIES
  Purchases of short-term investments                                              (46,260)       (52,885)
  Proceeds from the sale of short-term investments                                  35,849             --
  Maturities of short-term investments                                              43,666         25,595
  Proceeds from sales of assets                                                        600             --
  Capital expenditures                                                             (24,316)       (17,833)
  Other investing activities                                                          (562)          (556)
                                                                                 ---------      ---------
  Net cash provided by (used in) investing activities                                8,977        (45,679)
                                                                                 ---------      ---------
CASH FLOWS FROM FINANCING ACTIVITIES
  Net proceeds from issuance of common stock                                            --        116,704
  Proceeds from exercise of stock options                                              360          1,074
  Proceeds from sale of stock to employees                                           1,999          2,088
  Principal payments on long-term debt                                                (223)          (203)
                                                                                 ---------      ---------
  Net cash provided by financing activities                                          2,136        119,663
                                                                                 ---------      ---------
  Effects of foreign currency rate changes on cash                                     (57)            11
                                                                                 ---------      ---------
  Net increase in cash and cash equivalents                                            499         72,636
  Cash and cash equivalents at beginning of year                                    90,384         56,679
                                                                                 ---------      ---------
  Cash and cash equivalents at February 28, 1999 and 1998                        $  90,883      $ 129,315
                                                                                 =========      =========
</TABLE>

     See Accompanying Notes to Condensed Consolidated Financial Statements.


                                       4
<PAGE>   6
           SPEEDFAM INTERNATIONAL, INC. AND CONSOLIDATED SUBSIDIARIES
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                    (in thousands, except per share amounts)


(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, 1998, as filed with the Securities and Exchange Commission
      on August 28, 1998 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 and nine months ended February 28, 1999 are not
      necessarily indicative of results to be expected for the full fiscal year.

(2)   EARNINGS (LOSS) PER SHARE

The following table sets forth the computation of basic and diluted earnings
(loss) per share:

<TABLE>
<CAPTION>
                                                               Three Months Ended      Nine Months Ended
                                                                   February 28,          February 28,
                                                               -------------------    -------------------
                                                                 1999       1998        1999       1998
                                                               --------   --------    --------   --------
<S>                                                            <C>        <C>         <C>        <C>
      Numerator:
         Net earnings (loss)                                   $ (2,051)  $  5,143    $ (6,152)  $ 18,320
                                                               ========   ========    ========   ========
      Denominator:
       Denominator for basic earnings (loss) per share - 
         weighted-average shares outstanding                     16,166     15,861      16,113     14,641
       Effect of dilutive securities:
         Employee stock options                                      --        568          --        750
                                                               --------   --------    --------   --------
       Denominator for diluted earnings (loss) per share -
         adjusted weighted-average shares outstanding            16,166     16,429      16,113     15,391
                                                               ========   ========    ========   ========
      Basic earnings (loss) per share                          $  (0.13)  $   0.32    $  (0.38)  $   1.25
                                                               ========   ========    ========   ========
      Diluted earnings (loss) per share                        $  (0.13)  $   0.31    $  (0.38)  $   1.19
                                                               ========   ========    ========   ========
</TABLE>

      Employee stock options outstanding during the three and nine months ended
      February 28, 1999, were not included in the computation of diluted loss
      per share because the effect would be antidilutive.


                                        5
<PAGE>   7
           SPEEDFAM INTERNATIONAL, INC. AND CONSOLIDATED SUBSIDIARIES
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                    (in thousands, except per share amounts)

(3)   INVENTORIES

      The components of inventory were:

<TABLE>
<CAPTION>
                                                   February 28,          May 31,
                                                       1999               1998
                                                      -------            -------
<S>                                                <C>                   <C>    
      Raw materials                                   $24,837            $25,223
      Work-in-process                                   6,473             11,423
      Finished goods                                    7,164             18,886
                                                      -------            -------
                                                      $38,474            $55,532
                                                      =======            =======
</TABLE>

(4)   SHORT-TERM INVESTMENTS

      In August, 1998 the company recorded a realized gain of $46 from the sale
      of tax exempt short-term investments, classified as held-to-maturity
      securities, with a carrying value of $35,803. The proceeds of $35,849 we
      re-invested. The Company sold investments originally intended to be
      held-to-maturity to take advantage of more favorable rates of return
      available on taxable securities. The Company's short-term investments are
      now classified as available-for-sale. The short-term investments are
      recorded at fair value and an unrealized loss of $23, net of income taxes
      of $23, is included as part of accumulated other comprehensive income
      (loss) within stockholders' equity at February 28, 1999.

(5)   INVESTMENTS IN AFFILIATES

      The Company owns a 50% interest in SpeedFam Co., Ltd. The Company's equity
      interest in SpeedFam Co., Ltd. was $23,255 and $20,543 at February 28,
      1999 and at May 31, 1998, respectively, based on the balance sheet of
      SpeedFam Co., Ltd. at January 31, 1999 and April 30, 1998, 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:


                                       6
<PAGE>   8
                                 BALANCE SHEETS

<TABLE>
<CAPTION>
                                                             JANUARY 31,    APRIL 30,
                                                                1999          1998
                                                              ---------     ---------
<S>                                                          <C>            <C>
                                     ASSETS

      Total current assets                                    $  96,502     $ 128,379
      Investment in affiliates                                      870           853
      Property, plant and equipment, net                         38,122        35,763
      Deferred income taxes and other assets                     10,548         8,287
                                                              ---------     ---------
            Total assets                                      $ 146,042     $ 173,282
                                                              =========     =========
        LIABILITIES AND STOCKHOLDERS' EQUITY
      Total current liabilities                               $  70,755     $ 106,765
      Long-term debt                                             20,885        18,095
      Other long-term liabilities                                 7,891         7,336
      Stockholders' equity
        Common stock                                                664           664
        Retained earnings                                        41,944        41,162
        Foreign currency translation adjustment                   3,844          (844)
        Unrealized gain on marketable securities                     59           104
                                                              ---------     ---------
          Total liabilities and stockholders' equity          $ 146,042     $ 173,282
                                                              =========     =========
</TABLE>

                  STATEMENTS OF OPERATIONS AND RETAINED EARNINGS

<TABLE>
<CAPTION>
                                                 Three Months Ended          Nine Months Ended
                                                     January 31,                January 31,
                                               -----------------------    -----------------------
                                                 1999          1998         1999          1998
                                               ---------     ---------    ---------     ---------
<S>                                            <C>           <C>          <C>           <C>      
      Net sales                                $  32,344     $  55,098    $ 105,382     $ 168,893
      Costs and operating expenses                32,432        51,059      101,838       160,208
                                               ---------     ---------    ---------     ---------
      Earnings (loss) before income taxes            (88)        4,039        3,544         8,685
      Income taxes                                   169         1,303        2,269         3,983
                                               ---------     ---------    ---------     ---------
      Net earnings (loss) before minority 
      interest                                      (257)        2,736        1,275         4,702
      Minority interest                             (204)           95         (549)         (153)
                                               ---------     ---------    ---------     ---------
      Net earnings (loss)                            (53)        2,641        1,824         4,855
      
      Beginning retained earnings                 41,997        37,513       41,162        37,049
      Dividends                                       --            --       (1,042)       (1,750)
                                               ---------     ---------    ---------     ---------
      Ending retained earnings                 $  41,944     $  40,154    $  41,944     $  40,154
                                               =========     =========    =========     =========
</TABLE>

      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, 1999 the Company had accrued
      $3,209 of commission expense to SpeedFam Co., Ltd.


                                       7
<PAGE>   9
(6)   DERIVATIVE FINANCIAL INSTRUMENTS

      The Company uses derivative financial instruments to offset exposure to
      market risks arising from changes in foreign exchange rates. Derivative
      financial instruments currently utilized by the Company include foreign
      currency forward contracts. The Company evaluates and monitors
      consolidated net exposures by currency and maturity, and external
      derivative financial instruments correlate with that net exposure in all
      material respects. Gains and losses on hedges of existing assets and
      liabilities are included in the carrying amounts of those assets or
      liabilities and are ultimately recognized in income when those carrying
      amounts are converted. Gains or losses related to hedges of firm
      commitments are deferred and included in the bases of the transaction when
      they are completed. Gains or losses on unhedged foreign currency
      transactions, if any, are included in income as part of cost of sales.
      Gains and losses on derivative financial instruments which protect the
      Company from exposure in a particular currency, but do not currently have
      a designated underlying transaction, are also included in income as part
      of cost of sales. If a hedged item matures, or is sold, extinguished,
      terminated, or is related to an anticipated transaction that is no longer
      likely to take place, the derivative financial instrument is closed and
      the related gain or loss is included in income as part of cost of sales.

(7)   COMPREHENSIVE INCOME (LOSS)

      Effective June 1, 1998, the Company adopted Statement of Financial
      Accounting Standards No. 130, "Reporting Comprehensive Income" which
      establishes standards to report and display comprehensive income and its
      components in a full set of general purpose financial statements. The
      company's comprehensive income (loss) was as follows:

                           COMPREHENSIVE INCOME (LOSS)

<TABLE>
<CAPTION>
                                                     Three Months Ended         Nine Months Ended
                                                         February 28,             February 28,
                                                    ---------------------     ---------------------
                                                      1999         1998         1999         1998
                                                    --------     --------     --------     --------
<S>                                                 <C>          <C>          <C>          <C>     
      Net income (loss)                             $ (2,051)    $  5,143     $ (6,152)    $ 18,320
      Other comprehensive income (loss):
        Foreign currency translation adjustments        (516)      (2,289)       2,239       (1,370)
      
        Unrealized holding losses, net
        of income taxes of $18 and $23
        for the three months and nine
        months ended February 28, 1999                   (16)          --          (23)          --
                                                    --------     --------     --------     --------
      Comprehensive income (loss)                   $ (2,583)    $  2,854     $ (3,936)    $ 16,950
                                                    ========     ========     ========     ========
</TABLE>

                  ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)

                                                                     
<TABLE>
<CAPTION>
                                         Foreign      Unrealized   Accumulated Other
                                        Currency       Losses on     Comprehensive
                                       Translation    Securities      Income (Loss)
                                         -------        -------         -------
<S>                                    <C>            <C>          <C>
      Balance at May 31, 1998            $  (207)                       $  (207)     
      Nine month period change             2,239            (23)          2,216
                                         -------        -------         -------
      Balance at February 28, 1999       $ 2,032        $   (23)        $ 2,009
                                         =======        =======         =======
</TABLE>
                                                                    

                                       8
<PAGE>   10
(8)   RECENT DEVELOPMENTS

      On April 6, 1999, the shareholders and stockholders of the Company and
      Integrated Process Equipment Corp. ("IPEC"), respectively, approved the
      merger agreement between these two companies. The Company's shareholders
      also approved an amendment to the Company's Articles of Incorporation
      changing the name of the Company to SpeedFam-IPEC, Inc. Under terms 
      of the merger agreement entered into on November 19, 1998, each share 
      of IPEC common stock was exchanged for 0.71 shares of the Company's 
      common stock. The Company expects to issue approximately 13,049 shares 
      of the Company's common stock to IPEC stockholders. The merger will be 
      accounted for as a pooling of interests. Had the merger taken place on 
      or prior to February 28, 1999, the combined restated financial results 
      would have been as follows:

<TABLE>
<CAPTION>
                                                          Nine Months Ended
                                                             February 28,
                                                       -------------------------
                                                         1999            1998
                                                       ---------       ---------
<S>                                                    <C>             <C>      
      Revenue                                          $ 152,709       $ 309,221
      Net earnings (loss)                              $ (46,468)      $  18,650
      
      Net earnings (loss) per share:
      Basic                                            $   (1.61)      $    0.69
      Diluted                                          $   (1.61)      $    0.64
</TABLE>


                                       9
<PAGE>   11
                      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 "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:

<TABLE>
<CAPTION>
                                                   Three Months Ended    Nine Months Ended
                                                       February 28,         February 28,
                                                     ----------------     ----------------
                                                     1999       1998      1999       1998
                                                     -----      -----     -----      -----
<S>                                                <C>          <C>      <C>         <C>
      Revenue:
      Net sales                                       97.6%      97.2%     98.4%      96.3%
      Commissions from affiliate                       2.4        2.8       1.6        3.7
                                                     -----      -----     -----      -----
      Total revenue                                  100.0      100.0     100.0      100.0
      Cost of sales                                   66.6       58.6      66.6       57.3
                                                     -----      -----     -----      -----
      Gross margin                                    33.4       41.4      33.4       42.7
      Research, development and engineering           23.3       15.9      29.0       14.1
      Selling, general and administrative             29.6       18.0      27.1       16.9
                                                     -----      -----     -----      -----
      Operating profit (loss)                        (19.5)       7.5     (22.7)      11.7
      Other income, net                                5.2        3.3       5.6        2.4
                                                     -----      -----     -----      -----
      Earnings (loss) from consolidated companies
      before income taxes                            (14.3)      10.8     (17.1)      14.1
      Income tax expense (benefit)                    (7.2)       3.8      (8.7)       5.0
                                                     -----      -----     -----      -----
      Earnings (loss) from consolidated companies     (7.1)       7.0      (8.4)       9.1
      Equity in net earnings of affiliates             0.7        3.6       1.7        2.4
                                                     -----      -----     -----      -----
      Net earnings (loss)                             (6.4)%     10.6%     (6.7)%     11.5%
                                                     =====      =====     =====      =====
</TABLE>

      Net Sales. The Company's net sales for the third quarter of fiscal 1999
      were $31.3 million, down 33.4% from net sales of $47.0 million for the
      corresponding period in the prior year. Sales of equipment, parts and
      expendables decreased to $25.5 million or 81.6% of net sales in the third
      quarter of fiscal 1999, against $40.9 million or 87.0% of net sales in the
      same period of fiscal 1998. The sales decline in this segment was
      primarily attributable to lower sales of the Company's CMP systems to the
      semiconductor industry. Sales of CMP systems generated $19.1 million, or
      61.1% of net sales in the third quarter of fiscal 1999, down from the
      $28.0 million, or 59.5% of net sales, reported a year earlier. The
      Company's net sales in this quarter were affected by the continued
      worldwide slowdown in overall demand for semiconductor manufacturing
      equipment, including CMP systems, which is due to the over-capacity
      situation in the semiconductor device market worldwide. In addition, the
      Company has experienced increased competition in the sales of CMP systems
      to semiconductor manufacturers currently making equipment buying
      decisions. The Company believes that these market uncertainties will
      likely have an adverse effect on sales of CMP systems, as well as other
      equipment products the Company sells, through the next 12 to 18 months.


                                       10
<PAGE>   12
      Sales to the thin film memory disk market in the third quarter of fiscal
      1999 accounted for $6.1 million, or 19.5% of net sales, compared with
      $13.0 million, or 27.0% of net sales, for the third quarter of fiscal
      1998. The technology of thin film memory disks has shifted to the use of
      alternative substrates (e.g., glass), and a majority of those substrates
      are being produced by Far East manufacturers. Consequently, thin film
      memory disk manufacturers in the United States have experienced
      manufacturing over-capacity which in turn has reduced capital spending for
      equipment the Company supplies from its U.S. operations. The Company
      expects these manufacturing over-capacity problems to continue in the U.S.
      at least through the next 12 months.

      Net sales for the nine months ended February 28, 1999 were $91.0 million,
      down 40.5% against net sales of $152.8 million in the first nine months of
      fiscal 1998. A decline in sales of CMP equipment accounted for the
      significant portion of this sales decline. In the first nine months of
      fiscal 1999, sales of CMP systems were $53.2 million, or 58.5% of net
      sales, compared to $93.4 million or 61.1% of net sales, reported a year
      earlier. In addition, net sales in the nine months ended February 28, 1999
      decreased due to a decline in sales to the thin film memory disk market.
      In the nine months ended February 28, 1999, sales to the thin film memory
      disk market were $19.5 million compared to $42.5 million in the same nine
      months of the prior year. Equipment sales to the thin film memory disk
      market have declined during this period due to the reasons set forth
      above.

      The decrease in net sales in the three and nine months ended February 28,
      1999 was also attributable to a decrease in sales of slurries. Slurries
      revenue decreased to $5.8 million or 18.4% of net sales in the third
      quarter of fiscal 1999 from $6.1 million or 13.0% in the comparable period
      of fiscal 1998. In the first nine months of fiscal 1999, sales of slurries
      were $17.2 million or 18.9% of net sales compared to the $22.2 million or
      14.5% in the same period of fiscal 1998.

      Commissions from Affiliate. Commissions from affiliate decreased to
      $781,000 during the third quarter of fiscal 1999 from $1.4 million in the
      corresponding period of fiscal 1998. During the first nine months of this
      fiscal year, commissions from affiliate decreased to $1.5 from $5.9
      million in the first nine months of fiscal 1998. The decline in commission
      revenue in the three and nine months ended February 28, 1999 was due to
      the continued slowdown in demand for capital equipment primarily from the
      silicon wafer market and, to a lesser extent, the thin film memory disk
      industry. The Company believes that capital equipment spending will
      continue to be weak in the thin film memory and silicon wafer industries
      through the next 12 months, in turn further lowering commissions from
      affiliate compared to prior year periods.

      Gross Margin. Gross margin decreased to $10.7 million or 33.4% of total
      revenue for the three months ended February 28, 1999 from $20.0 million or
      41.4% of total revenue for the three months ended February 28, 1998. For
      the first nine months of fiscal 1999, gross margin was $30.9 million or
      33.4% of total revenue, compared to $67.8 million or 42.7% of total
      revenue in fiscal 1998. Gross margin, both in dollars and as a percentage
      of total revenue, was down year over year primarily due to higher material
      costs for the Company's mainline CMP tool, the Auriga-C integrated
      dry-in/dry-out system, higher overhead costs due to excess production
      capacity, lower commission revenue, pricing pressure in all markets, and
      shifts in the product mix.

      Research, Development and Engineering. Research, development and
      engineering expense was $7.5 million or 23.3% of total revenue in the
      third quarter of fiscal 1999, down slightly from $7.7 million or 15.9% of
      total revenue in the third quarter of fiscal 1998. In the nine months
      ended February 28, 1999, research, development and engineering expense
      increased to $26.9 million or 29.0% of total revenue compared to $22.4
      million or 14.1% of total revenue in the same period of fiscal year 1998.
      Research, development and engineering expense in the three month period
      ended February 28, 1999, was comparable to the prior year. However, the
      increase in the nine month period of fiscal 1999 ended February 28, 1999
      from the same period in fiscal 1998 is a result of the Company continuing
      to invest significant amounts of money in its CMP systems' reliability and
      productivity improvements, various process technologies for the
      semiconductor device market and growing its technical support organization
      due to the greater number of the Company's CMP systems now in the field
      worldwide. The Company will continue to make significant investments in
      research, development and engineering to maintain technological
      competitiveness and meet the process requirements of its customers.
      Research, development and engineering expense as a percentage of total
      revenue increased substantially due to reduced revenues in fiscal 1999.


                                       11
<PAGE>   13
      Selling, General and Administrative. In the third quarter of fiscal 1999,
      selling, general and administrative expense was $9.5 million, or 29.6% of
      total revenue, up from $8.7 million, or 18.0%, last year. Selling, general
      and administrative expense decreased to $25.0 million or 27.1% of total
      revenue in the first nine months of fiscal 1999 from $26.8 million or
      16.9% of total revenue in the first nine months of fiscal 1998. The dollar
      increase in the third quarter of fiscal 1999 as compared to the prior year
      was due to higher commissions paid to the Far East Joint Venture as a
      result of increased sales of CMP systems manufactured in the United States
      and sold into the Asian markets. Selling, general and administrative
      expense declined in the first nine months of fiscal 1999 from fiscal 1998
      due to management's efforts to control expenses to align them with lower
      revenue expectations, including decreased travel, an across the board
      reduction in all management salaries, a freeze on new hires, and
      reductions in the Company's global workforce. Selling, general and
      administrative expense as a percentage of total revenue increased
      substantially in both the three and nine month periods ended February
      28,1999. This was primarily due to reduced revenues in fiscal 1999.

      Other Income, Net. At $1.6 million, other income in the third quarter of
      fiscal 1999 was level with that recorded in the third quarter of
      fiscal 1998. Other income increased to $5.2 million in the first nine
      months of fiscal 1999 from $3.9 million in the comparable period of fiscal
      1998. Other income consisted almost entirely of interest income in the
      third quarter of fiscal 1999. Interest income increased in the first nine
      months of fiscal 1999 compared to the prior year period as a result of the
      cash infusion from the Company's equity offering in October 1997, as well
      as, a change in investment strategy to higher yielding taxable investments
      in the first quarter of fiscal 1999.

      Income Tax Benefit. In the third quarter and first nine months of fiscal
      1999, the Company provided for a tax benefit due to the operating losses
      reported. The tax benefit has been recorded at a rate significantly above
      the federal benefit rate of 35% due to the impact of significant research
      and development tax credits.

      Equity in Net Earnings of Affiliates. The Company's equity in the net
      earnings of its joint ventures was $211,000 for the third quarter,
      compared to $1.7 million a year ago. For the first nine months of fiscal
      1999, equity in net earnings of affiliates decreased to $1.6 million from
      $3.8 million in the corresponding period in the prior year. The Company
      believes that the earnings of the Company's largest joint venture, the Far
      East Joint Venture, may be adversely affected for at least the next 12
      months by both the slow down in demand for equipment sold into the thin
      film memory disk and silicon wafer markets, as well as current economic
      challenges facing many Far East economies.

      LIQUIDITY AND CAPITAL RESOURCES

      As of February 28, 1999, the Company had $108.4 million in cash, cash
      equivalents and short-term investments, compared to $141.2 million at May
      31, 1998. The Company used $10.6 million of net cash in operating
      activities. Cash from operations was used primarily to pay down accounts
      payable and amounts due to affiliates, reduce other current liabilities
      and increase accounts receivable and other current assets.

      Accounts payable and due to affiliates decreased to $15.5 million at
      February 28, 1999, from $23.9 million at May 31, 1998. This decrease was a
      result of management's ongoing efforts to control inventory purchasing in
      anticipation of lower sales volume in the first nine months of fiscal year
      1999. Cash used in operations was partially offset by reductions in
      inventories.

      Accounts receivable increased to $47.0 million at February 28, 1999, from
      $45.2 million at May 31, 1998. The small increase in accounts receivable
      was primarily due to the effects of extended payment terms on sales of
      equipment to certain customers in fiscal 1999.


                                       12
<PAGE>   14
      Inventory decreased to $38.5 at February 28, 1999, from $55.5 million at
      May 31, 1998. Inventory had increased substantially in fiscal year 1998
      due to a build up of CMP systems in the third and fourth quarters of
      fiscal 1998, which did not ship until the first and second quarters of
      fiscal year 1999. In addition, inventories decreased due to decreased
      production in anticipation of lower sales volume in fiscal year 1999.
      SpeedFam established an obsolescence reserve for inventories at February 
      28, 1999 and May 31, 1998, respectively.

      The Company made capital expenditures of $24.3 million in the first nine
      months of fiscal 1999. The majority of the cash was used to fund the
      construction of a new 109,000 square foot Technology Center next to its
      corporate headquarters in Chandler, Arizona. Through the nine months ended
      February 28, 1999, short-term investments of the Company matured or were
      sold providing cash of $75.9 million. Sales of short-term investments also
      provided $35.8 million in cash. In total, $46.3 million in cash was
      invested in short-term securities in the nine months ended February 28,
      1999.

      Financing activities provided $2.1 million in cash, primarily through the
      sale of stock to employees and the exercise of stock options. In response
      to the merger with IPEC, the Company's new management believed its
      combined financial resources allowed it to reduce its bank lines of
      credit. Consequently, the Company has terminated its $60.0 million credit
      facility, and is replacing it with a new $25.0 million secured revolving
      line of credit. The Company also has a pound sterling 950,000 ($1.6
      million) revolving credit facility with the London branch of a U.S. bank.
      As of April 6, 1999, no amounts were outstanding on any loan facility. The
      Company believes that the Company's cash, cash equivalents and short-term
      investments combined with the available proceeds from available loan
      facilities will be sufficient to meet the Company's capital requirements
      during at least the next 12 months.

      SFAS No. 133, "Accounting for Derivative Instruments and Hedging
      Activities" is effective for financial years beginning after June 15,
      1999. SFAS No. 133 establishes accounting and reporting standards for
      derivative instruments and hedging activities. The Company is evaluating
      the new Statement's provisions and has not yet determined its impact. The
      Company will adopt SFAS No. 133 effective June 1, 2000.

RECENT DEVELOPMENTS

On April 6, 1999, the shareholders and stockholders of the Company and
Integrated Process Equipment Corp. ("IPEC"), respectively, approved the merger
agreement between these two companies. The Company's shareholders also approved
an amendment to the Company's Articles of Incorporation changing the name of the
Company to SpeedFam-IPEC, Inc. Under the terms of the merger agreement entered
into on November 19, 1998, each share of IPEC common stock was exchanged for
0.71 shares of the Company's common stock. The Company expects to issue
approximately 13,048,540 shares of the Company's common stock to IPEC
stockholders.

The Company has incurred and will incur substantial expenses to complete the
merger, including estimated costs of approximately $6.5 million for financial
accounting and legal advisors and for the special meetings of shareholders.

The Company is evaluating its strategic alternatives to increase the
profitability of the Company. These strategies relate to work force reductions,
discontinuing product lines and eliminating duplicate facilities. The Company
expects that these strategies will result in recoverability issues for certain
assets. The Company expects to incur in the fourth quarter of its fiscal year
1999, which ends May 31, 1999, a charge for severance costs, inventory
adjustments and asset impairments related to discontinued products lines,
cancellations of real estate leases and other merger expenses totaling an
estimated $50 to $70 million. Additional costs presently unknown may also
negatively impact the results of operations following the merger.


                                       13
<PAGE>   15
YEAR 2000

The Company has addressed the issues associated with the programming code in
existing computer systems as the millennium (Year 2000) approaches. The Year
2000 computer software problem is pervasive and complex, as virtually every
computer operation will be affected in some way. The Company is aware of and is
addressing the potential computing difficulties that may be triggered by the
Year 2000 problem.

The Company has substantially completed a Year 2000 date review and conversion
project to address all the necessary changes, testing and implementation issues.
The project encompassed three major areas of review: internal systems (hardware
and software), supplier compliance and Company products. The Company has
identified the changes required to its computer programs and hardware. The
necessary modifications to the Company's centralized financial, manufacturing
and operational information systems have been completed. The Company's major
suppliers have been sent letters requesting information regarding their own Year
2000 plan, as well as requesting confirmation that the components supplied by
these vendors are Year 2000 compliant. The Company has evaluated the vendor
responses which have been received and concluded that the vendors which have
responded either are Year 2000 compliant or are proceeding with their own Year
2000 compliance programs. The Company will continue to follow-up with vendors
with which the Company has a material relationship and who have not responded to
obtain assurances that they expect to be Year 2000 compliant in time. Equipment
and systems manufactured and supplied by the Company have been evaluated and
determined to be free of any material problems that could be caused by the Year
2000 issue. Management estimates that the Company's remaining Year 2000
compliance expense will be immaterial. The Company believes that Year 2000
problems related to its own internal systems and equipment and systems it sells
have been addressed and resolved and will not have a material effect on the
Company's business, financial condition and results of operations. However,
there can be no assurance that the systems of other companies upon which the
Company's systems and business rely will be timely converted or that any such
failure to convert by another company would not have a material adverse effect
on the Company's business, financial conditions or results of operations. To
mitigate this risk, the Company is reviewing its vendor relationships and
building alternative sources of supply should the business operations of any one
vendor be interrupted due to the Year 2000 problems.


                CERTAIN FACTORS AFFECTING THE COMPANY'S BUSINESS

      Discussed below are certain factors which may affect the Company's
business. This discussion is not exclusive of other factors that may also affect
the Company's business and should be read in conjunction with the other
information contained in this Form 10-Q including, without limitation,
information provided in "Management's Discussion and Analysis of Financial
Condition and Results of Operations."

RISKS RELATED TO THE MERGER WITH IPEC

IF THE COMPANY DOES NOT INTEGRATE THE TECHNOLOGY AND OPERATIONS OF THE COMPANY
AND IPEC QUICKLY AND EFFECTIVELY, THE POTENTIAL BENEFITS OF THE RECENT MERGER
MAY NOT OCCUR. Achieving the merger's potential benefits will require the
Company to reduce excess personnel and redundant facilities and equipment.
Management's choices in this regard may not prove optimal in the long term. In
addition, the Company must integrate all components of the Company's and IPEC's
previously individual operations, including the following:

-     Sales and marketing operations, including international distribution
      channels. Prior to the merger, internationally, the Company distributed
      its products through a direct sales force while IPEC used distributors.
      Combining international sales channels could result in expense or customer
      confusion.

-     Product offerings, including marketing of products to the other's
      customers.

-     Research and development programs.


                                       14
<PAGE>   16
-     Manufacturing operations and philosophies. Prior to the merger, the
      Company assembled components purchased from multiple vendors, while IPEC
      manufactured many of its products' components and purchased others from
      vendors.

-     Field service support for CMP equipment.

-     Management information and reporting systems. Since the Company and IPEC
      used different management information systems, the Company may face
      difficulties obtaining timely and accurate information, data and reports
      to operate the combined Company effectively until integration is
      completed.

The Company cannot be certain that it can achieve integration of these
components without adversely impacting operations. To the extent management
focuses on integration, it may not be able to develop the business.

SUBSTANTIAL EXPENSES RESULTING FROM THE MERGER. The Company has incurred, and
will incur, substantial expenses to complete the merger, including estimated
costs of approximately $6.5 million for financial, accounting and legal advisors
and for the special meetings of shareholders.

The Company is evaluating its strategic alternatives to increase the
profitability of the Company. These strategies relate to work force reductions,
discontinuing product lines and eliminating duplicate facilities. The Company
expects that these strategies will result in recoverability issues for certain
assets. The Company expects to incur in the fourth quarter of its fiscal year
1999, which ends May 31, 1999, a charge for severance costs, inventory
adjustments and asset impairments related to discontinued products lines,
cancellations of real estate leases and other merger expenses totaling an
estimated $50 to $70 million. Additional costs presently unknown may also
negatively impact the results of operations following the merger.

THE MERGER MAY RESULT IN A LOSS OF KEY EMPLOYEES. The Company's success
following the merger depends on retaining and integrating the Company and IPEC
personnel. The Company has signed agreements with a few key IPEC employees to
retain their services. However, Company employees may leave for many reasons,
including:

-     As integration proceeds, the Company anticipates eliminating excess
      personnel in many functional areas. Other employees may leave for varied
      reasons, such as increased workloads or the mistaken assumption that the
      individual's job will be terminated.

-     New and different corporate culture. Prior to the merger, the Company and
      IPEC had different corporate cultures. IPEC's employees had greater
      autonomy than in the Company's organization, which emphasized, and
      continues to emphasize, more centralized planning and control methods.

-     Competition for qualified personnel in the industry served by the Company,
      particularly in the Phoenix metropolitan area, is intense. The Company and
      IPEC had experienced difficulty in attracting qualified personnel in the
      past. The Company expects to experience the same difficulty in the future.

-     Competitors may continue to recruit employees during integration. This is
      common in mergers in the technology industry.

RISKS RELATED TO BUSINESS OPERATIONS

THE COMPANY'S GROWTH DEPENDS ON CONTINUED AND INCREASED ACCEPTANCE OF CMP AMONG
SEMICONDUCTOR MANUFACTURERS. While CMP is used by a number of advanced logic
semiconductor manufacturers, CMP has been used to manufacture advanced memory
devices only in the past 2 years. Continued and increased acceptance of CMP
systems depends on many factors considered by potential customers, including the
CMP product's:

-     Cost of ownership

-     Throughput


                                       15
<PAGE>   17
-     Process flexibility

-     Performance, including reliability

-     Customer support

Failure to adequately meet potential customers' needs with respect to one or
more of these factors will result in decreased acceptance of CMP and, therefore,
the Company's CMP systems, which will in turn negatively impact the Company's
profitability.

THE COMPANY MAY NOT DEVELOP PRODUCTS IN TIME TO MEET CHANGING TECHNOLOGIES.
Semiconductor manufacturing equipment and processes are subject to rapid
technological changes and product obsolescence. Developing new products in the
rapidly evolving industry in which the Company operates involves a number of
risks:

-     Products may be introduced behind schedule or after customers have made
      buying decisions.

-     Products may not be accepted in the marketplace.

After the merger, competitive pressures will require the Company to continue to
develop or enhance products, including both the copper and dual damascene
processes, end-point detection metrology, post-CMP cleaning and a 300 mm CMP
system to address current and future needs of semiconductor manufacturers. The
Company will also continue to develop products and processes for thin film
memory disk manufacturers and to enhance the plasma-assisted chemical etch
processes.


PRODUCT OR PROCESS DEVELOPMENT PROBLEMS COULD HARM THE COMPANY'S RESULTS OF
operations. The company's products are complex, and from time to time have
defects or "bugs" that are difficult and costly to fix. This can harm results of
operations for the company in two ways: 

-     The company incurs substantial costs to ensure the functionality and
      reliability of products earlier in their life cycle. This can reduce
      orders, increase manufacturing costs, adversely impact working capital and
      increase service and warranty expenses.

-     The company requires significant lead-times between product introduction
      and commercial shipment. As a result, the company may have to write off
      inventory and other assets related to products and could lose customers
      and revenue.

THE CURRENT SLOWDOWN IN THE SEMICONDUCTOR INDUSTRY CONTINUES TO NEGATIVELY
IMPACT THE COMPANY'S PROFITABILITY. The Company is currently experiencing a
slowdown in product demand and volatility in product pricing for the following
reasons:

-     The cyclical nature of the semiconductor industry

-     General over-capacity of customers

-     The financial crisis in Asia

This slowdown has reduced the revenue to the Company in recent periods. The
Company believes that the slowdown will continue to negatively impact revenue
performance for at least the next 12 to 18 months. Despite the slowdown,
however, the Company will continue to invest in research and development and
customer support to remain competitive. This will result in reduced
profitability for the Company.


                                       16
<PAGE>   18
BOTH THE COMPANY AND IPEC HAD LOSSES PRIOR TO THE MERGER AND THE COMPANY EXPECTS
LOSSES IN THE NEAR FUTURE. The Company had net losses of $2.1 million in the
quarter ended February 28, 1999, $4.3 million in the quarter ended November 30,
1998, and $5.5 million in the quarter ended May 31, 1998. The Company did not
have a net loss for the quarter ended August 31, 1998, but did have an operating
loss of $3.5 million. IPEC had net losses of $16.1 million in the quarter ended
March 31, 1999, $14.0 million in the quarter ended December 31, 1998, and $10.1
million in the quarter ended September 30, 1998. These losses were primarily the
result of the slowdown in the industry combined with increasing investment in
research and development. The Company currently believes it will continue to
experience losses as long as the industry slowdown continues.

THE COMPANY FACES INTENSE COMPETITION, INCLUDING FROM COMPANIES WITH GREATER
RESOURCES. Several companies currently market CMP systems that directly compete
with the Company's products, including Applied Materials, Inc. and Ebara
Corporation. For several reasons, the Company may not compete effectively with
competitors, including:

-     Some competitors may have greater financial resources than the Company.
      They also may have more extensive engineering, manufacturing, marketing
      and customer service and support capabilities.

-     Some competitors may supply a broader range of semiconductor capital
      equipment than the Company. As a result, these competitors may have better
      relationships with semiconductor manufacturers, including current and
      potential customers of the Company.

-     The Company expects competitors to continue to improve their existing
      technology and introduce new products. This could cause a decline in the
      Company's sales or lead to intensified price-based competition.

-     Other capital equipment manufacturers not currently involved in the 
      development of CMP systems may enter the market or develop technology 
      that reduces the need for the Company's products.

THE ASIAN FINANCIAL CRISIS IS HARMING THE COMPANY'S BUSINESS. The Company
expects reduced sales to Asian customers for at least the next 12 to 18 months,
which will negatively impact the Company's sales growth and revenue performance.
A substantial portion of worldwide semiconductor manufacturing capacity is
located in the Far East. Pacific Rim countries are experiencing severe currency
and financing problems that are contributing to economic slowdowns or recessions
in those countries. The Company's U.S. dollar-denominated products have become
more expensive in certain Asian countries. In addition, some customers in these
countries may not be able to obtain satisfactory financing terms to allow them
to place volume orders or pay for equipment that has been shipped.

THE COMPANY'S FUTURE SUCCESS DEPENDS ON INTERNATIONAL SALES. International sales
accounted for 31.7% of the Company's net sales for fiscal year 1998, 31.2% for
fiscal year 1997 and 21.7% for fiscal year 1996. International sales accounted
for 45.5% of IPEC's revenue in its fiscal 1998, 26.6% in fiscal 1997 and 27.8%
in fiscal 1996. The Company expects that international sales will continue to
account for a significant portion of the Company's net sales in future periods.
International sales are subject to risks, including:

-     Foreign exchange issues

-     Political, economic and regulatory environments of the countries where
      customers are located

-     Collectability of accounts receivable

-     Inadequate intellectual property protection


                                       17
<PAGE>   19
Foreign exchange issues also affect the value of the Company's foreign
subsidiaries and the Company's equity interest in its Far East joint venture.
The Company does not manage this balance sheet risk through currency
transactions known as "hedging," which are designed to minimize this risk. The
Company does try to manage near-term currency risks through "hedging." However,
efforts may not be enough to decrease the risks involved.

FLUCTUATIONS IN QUARTERLY OPERATING RESULTS The Company's quarterly operating 
results will fluctuate due to a variety of factors, including:

-     Industry demand for capital equipment, which depends on economic
      conditions in the semiconductor, memory disk and silicon wafer markets.

-     Timing, cancellation or delay of customer orders and shipments. The
      Company derives a significant portion of revenue from the sale of a
      relatively small number of machines during a given quarter. Order and
      delivery delays and cancellations, even of one or two systems, may cause
      the Company to miss quarterly revenue and profit projections.

-     Unexpected costs associated with sales and service of the CMP tools and
      processes.

-     The quarterly operating results of the Company's joint ventures, which the
      Company accounts for on the equity method.

-     Foreign currency exchange rates.

Results of operations in any period are not an indication of future results.
Fluctuations in the Company's operating results may also result in fluctuations
in the Company's common stock price. In future quarters, operating results may
not meet the expectations of public market analysts or investors and the trading
price of the Company's common stock could decline.

ORDERS IN BACKLOG MAY NOT RESULT IN FUTURE REVENUE. The Company includes in
backlog only those customer orders for which the Company has accepted purchase
orders. Expected revenue may be lower if customers cancel or reschedule orders,
which they can generally do without penalty. For example, IPEC removed orders of
approximately $12.0 million from its backlog in the fourth quarter of fiscal
1997, primarily due to delays in, and ultimately the suspension of, construction
of a wafer fabrication facility for a customer in Thailand.

THE COMPANY WILL DEPEND ON A SMALL NUMBER OF MAJOR CUSTOMERS. For the
foreseeable future, the Company expects that it will sell machines to a limited
number of major customers. To date, the CMP process has been used primarily to
fabricate advanced semiconductors, which accounts for only a portion of the
overall semiconductor market.

In fiscal 1998, no customer accounted for 10.0% or more of the Company's total
revenue. In fiscal 1997, AMD accounted for 12.8% and Komag accounted for 10.3%
of the Company's total revenue. In fiscal 1998, Intel represented 38.3% and
Tokyo Electron represented 12.0% of IPEC's revenue. In fiscal 1997, Intel
represented 51.0% of IPEC's revenue.


                                       18
<PAGE>   20

IF THE COMPANY IS UNABLE TO PROTECT ITS INTELLECTUAL PROPERTY, ITS BUSINESS
COULD SUFFER. The Company's intellectual property portfolio is very important to
the potential success of the Company. However, the Company may not be able to
protect its technology because:

-     Pending and new patent applications may not be approved in a timely manner
      or approved at all

-     Third parties may try to challenge or invalidate existing patents and new
      patents

-     Policing unauthorized use of intellectual property is difficult and
      expensive

-     The laws of some foreign countries do not protect intellectual property
      rights as much as U.S. laws

-     Competitors may independently develop similar technology or design around
      intellectual property owned by the Company

THIRD PARTIES MAY PREVENT THE COMPANY FROM SELLING PRODUCTS THAT INFRINGE ON
THOSE THIRD PARTIES' INTELLECTUAL PROPERTY RIGHTS. The Company cannot be certain
that third parties will not in the future claim that its products infringe their
intellectual property rights. Third parties may:

-     Bring claims of patent, copyright or trademark infringement

-     Obtain patents or other intellectual property rights that limit the
      Company's ability to do business or require the Company to license or
      cross-license technology

-     Bring costly, time-consuming lawsuits

Third parties hold many patents relating to CMP machines and processes. The
Company licenses the right to manufacture CMP machines employing an orbital
motion in its AvantGaard 676, 776 and 876 from a semiconductor manufacturer.

In addition, although the Company believes that its products do not infringe any
valid existing proprietary rights of others, there can be no assurance that
third parties will not assert infringement claims in the future. In the CMP
market the Company serves, there are a number of patents relating to the CMP
process held by third parties. Accordingly, the Company, as a CMP equipment
manufacturer, may be required to attempt to obtain licenses from the holders of
one or more of such patents, which may impede the use of CMP technology by the
Company. There also may be pending patent applications or issued patents of
which the Company is not aware, and which would require the Company to license
or challenge such patents, at significant expense to the Company. There can be
no assurance that any such license would be available on acceptable terms, if at
all, or that the Company would prevail in any such challenge.


                                       19
<PAGE>   21
      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" elsewhere herein and 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.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

      Not applicable.


                                       20
<PAGE>   22
                          SPEEDFAM INTERNATIONAL, INC.


PART II - OTHER INFORMATION

Item 6. Exhibits and Reports on Form 8-K.

      (a)   Exhibits.

               Exhibit - 3.1  Amendment to the Articles of Incorporation 

               Exhibit - 4.1  First Supplemental Indenture by and among the
                              Registrant, Integrated Process Equipment Corp. and
                              State Street Bank and Trust Company of California,
                              N.A., as Trustee, dated April 6, 1999

               Exhibit - 10.1 Employment Agreement between the Registrant and
                              Ralph Hartung, dated April 6, 1999

               Exhibit - 27   Financial Data Schedule


      (b)   Reports on Form 8-K.

            None


                                       21
<PAGE>   23
                          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, 1999                    -------------------------------------
                                        By Roger K. Marach
                                        Treasurer and Chief Financial Officer
                                        (As Chief Accounting Officer and Duly 
                                        Authorized Officer of SpeedFam-IPEC, 
                                        Inc.)


                                       22
<PAGE>   24
                                  EXHIBIT INDEX

      EXHIBIT
      NUMBER                      DESCRIPTION
      ------                      -----------

      3.1         Amendment to the Articles of Incorporation

      4.1         First Supplemental Indenture by and among the Registrant,
                  Integrated Process Equipment Corp. and State Street Bank and
                  Trust Company of California, N.A., as Trustee, dated April 6,
                  1999

      10.1        Employment Agreement between the Registrant and Ralph Hartung,
                  dated April 6, 1999

      27          Financial Data Schedule


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