<PAGE>   1
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

   
                                   FORM 10-Q/A
    
(Mark One)

[X]  QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
     EXCHANGE ACT OF 1934

     For the quarterly period ended November 30, 1998

[ ]  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)

        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 (January 8, 1999).

                  Common Stock, no par value: 16,143,234 shares
<PAGE>   2
                          SPEEDFAM INTERNATIONAL, INC.


                                      INDEX

<TABLE>
<CAPTION>
                                                                                                                 Page
<S>               <C>        <C>                                                                                 <C>
PART I            FINANCIAL INFORMATION
         Item 1.          Financial Statements

                             Condensed Consolidated Balance Sheets
                             November 30, 1998 and May 31, 1998...............................................    2

                             Condensed Consolidated Statements of Operations
                             Three Months and Six Months Ended November 30, 1998 and 1997.....................    3

                             Condensed Consolidated Statements of Cash Flows
                             Six Months Ended November 30, 1998 and 1997......................................    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..........................    18

PART II           OTHER INFORMATION

         Item 4.          Submission of Matters to a Vote of Security Holders.................................    19
         Item 6.          Exhibits and Reports on Form 8-K....................................................    19

SIGNATURE.....................................................................................................    20
</TABLE>


EXHIBIT INDEX


         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>
                                                                          NOVEMBER 30,           MAY 31,
                                                                              1998                1998
                                                                        ----------------     ----------------


                                ASSETS

 Current assets:
<S>                                                                         <C>                <C>
    Cash and cash equivalents                                                 $87,858            $ 90,384
    Short-term investments                                                     33,435              50,835
    Trade accounts and notes receivable, net                                   36,480              45,197
    Inventories                                                                41,551              55,532
    Other current assets                                                       12,648               8,195
                                                                            ---------           ---------
      Total current assets                                                    211,972             250,143
 Investments in affiliates                                                     27,968              24,299
 Property, plant and equipment, net                                            70,940              52,253
 Other assets                                                                   3,477               3,070
                                                                            ---------           ---------
      Total assets                                                          $ 314,357           $ 329,765
                                                                            =========           =========

                 LIABILITIES AND STOCKHOLDERS' EQUITY


 Current liabilities:

    Short-term borrowings and current portion of long-term debt                $  102              $  248
    Accounts payable and due to affiliates                                     10,924              23,901
    Customer deposits                                                           2,421               1,812
    Other current liabilities                                                  11,066              13,932
                                                                            ---------           ---------
      Total current liabilities                                                24,513              39,893
                                                                            ---------           ---------
 Deferred income taxes                                                          1,020               1,020
                                                                            ---------           ---------
 Stockholders' equity:
    Common stock, no par value, 60,000 shares authorized, 16,143 and
       15,962 shares issued and outstanding at November 30, 1998 and
       May 31, 1998, respectively                                                   1                   1
    Additional paid-in capital                                                228,054             226,729
    Retained earnings                                                          58,228              62,329
    Accumulated other comprehensive income                                      2,541               (207)
                                                                            ---------           ---------
      Total stockholders' equity                                              288,824             288,852
                                                                            ---------           ---------
        Total liabilities and stockholders' equity                          $ 314,357           $ 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 SIX MONTHS ENDED NOVEMBER 30, 1998 AND 1997
                      (in thousands, except per share data)



<TABLE>
<CAPTION>
                                                                   THREE MONTHS ENDED               SIX MONTHS ENDED
                                                                      NOVEMBER 30,                     NOVEMBER 30,
                                                               ------------------- -----         ----------------------
                                                                  1998             1997            1998            1997
                                                                  ----             ----            ----            ----
 Revenue:
<S>                                                             <C>               <C>           <C>             <C>
    Net sales                                                   $23,919           $53,899        $59,689         $105,814

    Commissions from affiliate                                      152             2,629            737            4,561
                                                              ---------           -------       --------         --------
      Total revenue                                              24,071            56,528         60,426          110,375

 Cost of sales                                                   16,791            31,769         40,217           62,600
                                                              ---------           -------       --------         --------
      Gross margin                                                7,280            24,759         20,209           47,775

    Research, development and engineering                        10,311             7,918         19,451           14,703

    Selling, general and administrative                           8,284             8,719         15,553           18,088
                                                              ---------           -------       --------         --------
 Operating profit (loss)                                        (11,315)            8,122        (14,795)          14,984

 Other income, net                                                1,775             1,510          3,587            2,269
                                                              ---------           -------       --------         --------
 Earnings (loss) from consolidated companies before
  income taxes                                                   (9,540)            9,632        (11,208)          17,253

 Income tax expense (benefit)                                    (4,582)            3,351         (5,678)           6,144
                                                              ---------           -------       --------         --------
 Earnings (loss) from consolidated companies                     (4,958)            6,281         (5,530)          11,109
 Equity in net earnings of affiliates                               701             1,339          1,429            2,068
                                                              ---------           -------       --------         --------
 Net earnings (loss)                                           $ (4,257)          $ 7,620       $ (4,101)        $ 13,177
                                                               ========           =======       ========         ========

 Net earnings (loss) per share:
    Basic                                                       $(0.26)            $ 0.52        $ (0.25)          $ 0.94
                                                              ========            =======       ========         ========
    Diluted                                                     $(0.26)            $ 0.49        $ (0.25)          $ 0.89
                                                              ========            =======       ========         ========

 Weighted average number of shares:
    Basic                                                       16,128             14,689         16,087           14,040
                                                              ========            =======       ========         ========
    Diluted                                                     16,128             15,530         16,087           14,883
                                                              ========            =======       ========         ========
</TABLE>


     See Accompanying Notes to Condensed Consolidated Financial Statements.



                                       3
<PAGE>   5
           SPEEDFAM INTERNATIONAL, INC. AND CONSOLIDATED SUBSIDIARIES
                 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                   SIX MONTHS ENDED NOVEMBER 30, 1998 AND 1997
                                 (in thousands)
   
<TABLE>
<CAPTION>
                                                                               SIX MONTHS ENDED
                                                                                 NOVEMBER 30,
                                                                          ----------------------
                                                                             1998         1997
                                                                             ----         ----

 CASH FLOWS FROM OPERATING ACTIVITIES
<S>                                                                      <C>          <C>
   Net earnings (loss)                                                   $  (4,101)   $  13,177

   Adjustments to reconcile net earnings (loss)
    to net cash provided by (used in) operating activities:
       Equity in net earnings of affiliates                                 (1,429)      (2,068)
       Depreciation and amortization                                         3,445        1,760
       Dividend from affiliate                                                 521          875
       Other                                                                   339           (7)
       Changes in assets and liabilities:
         (Increase) decrease in trade accounts and notes receivable          8,336      (22,303)
         (Increase) decrease in inventories                                  7,576       (5,482)
         Increase in other current assets                                   (4,428)        (477)
         Increase (decrease) in accounts payable and due to affiliates     (13,033)       4,106
         Decrease in customer deposits and other current liabilities        (2,257)        (376)
                                                                         ---------    ---------
   Net cash used in operating activities                                    (5,031)     (10,795)
                                                                         ---------    ---------
CASH FLOWS FROM INVESTING ACTIVITIES
   Purchases of short-term investments                                     (39,141)     (28,618)
   Proceeds from the sale of short-term investments                         35,849         --
   Maturities of short-term investments                                     20,680       10,364
   Proceeds from sales of assets                                               600         --
   Capital expenditures                                                    (16,220)     (13,495)
   Other investing activities                                                 (437)        (353)
                                                                         ---------    ---------
   Net cash provided by (used in) investing activities                       1,331      (32,102)
                                                                         ---------    ---------
CASH FLOWS FROM FINANCING ACTIVITIES
   Net proceeds from issuance of common stock                                 --        116,732
   Proceeds from exercise of stock options                                     354          731
   Proceeds from sale of stock to employees                                    972        1,086
   Principal payments on long-term debt                                       (147)        (134)
                                                                         ---------    ---------
   Net cash provided by financing activities                                 1,179      118,415
                                                                         ---------    ---------
   Effects of foreign currency rate changes on cash                             (5)         194
                                                                         ---------    ---------
   Net  increase (decrease) in cash and cash equivalents                    (2,526)      75,712
   Cash and cash equivalents at beginning of year                           90,384       56,679
                                                                         ---------    ---------
   Cash and cash equivalents at November 30, 1998 and 1997              $  87,858    $ 132,391
                                                                         =========    =========
</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. 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 six months ended
        November 30, 1998 are not necessarily indicative of results to be
        expected for the full fiscal year.

(2)    EARNINGS (LOSS) PER SHARE

       In 1998, the Company adopted Statement of Financial Accounting Standards
       (SFAS) No. 128, "Earnings Per Share." SFAS No. 128 replaced the
       calculation of primary and fully diluted earnings per share with basic
       and diluted earnings per share. Unlike primary earnings per share, basic
       earnings per share excludes any dilutive effects of options, warrants and
       convertible securities. Diluted earnings per share includes the effect of
       all potential common shares that are dilutive and outstanding during the
       reporting period. Earnings (loss) per share amounts for all periods
       presented have been restated to conform to SFAS No. 128.



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


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


<TABLE>
<CAPTION>
                                                           Three Months Ended   Six Months Ended
                                                              November 30,          November 30,
                                                       ----------------------   -----------------
                                                          1998        1997       1998        1997
                                                       ----------  ----------   --------  -------
Numerator:
<S>                                                    <C>         <C>        <C>         <C>
      Net earnings (loss)                              $ (4,257)   $  7,620   $ (4,101)   $ 13,177
                                                       ========    ========   ========    ========
 Denominator:
   Denominator for basic earnings (loss) per share-
     weighted-average shares outstanding                 16,128      14,689     16,087      14,040

   Effect of dilutive securities:
     Employee stock options                                --           841       --           843
                                                       --------    --------   -------     --------
   Denominator for diluted earnings (loss) per share
     - adjusted weighted-average shares outstanding      16,128      15,530     16,087      14,883
                                                       ========    ========   ========    ========
 Basic earnings (loss) per share                       $  (0.26)   $   0.52   $  (0.25)   $   0.94
                                                       ========    ========   ========    ========

 Diluted earnings (loss) per share                     $  (0.26)   $   0.49   $  (0.25)   $   0.89
                                                       ========    ========   ========    ========
</TABLE>



     Employee stock options outstanding during the three and six months ended
     November 30, 1998, were not included in the computation of diluted loss per
     share because the effect would be antidilutive.

(3)     INVENTORIES
        The components of inventory were:

<TABLE>
<CAPTION>
                                                                        November 30,           May 31,
                                                                           1998                  1998
                                                                           ----                  ----
<S>                                                                     <C>                  <C>
              Raw materials                                             $ 26,267             $ 25,223
              Work-in-process                                              9,421               11,423
              Finished goods                                               5,863               18,886
                                                                        --------             --------
                                                                        $ 41,551             $ 55,532
                                                                        ========             ========
</TABLE>



                                       6
<PAGE>   8
           SPEEDFAM INTERNATIONAL, INC. AND CONSOLIDATED SUBSIDIARIES
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                    (in thousands, except per share amounts)
   
(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 were 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 $7, net of income taxes of $5, is included as part of accumulated
        other comprehensive income within stockholders' equity at November 30,
        1998.
    

   

(5)     INVESTMENTS IN AFFILIATES
    

        The Company owns a 50% interest in SpeedFam Co., Ltd. The Company's
        equity interest in SpeedFam Co., Ltd. was $23,752 and $20,543 at
        November 30, 1998 and at May 31, 1998, respectively, based on the
        balance sheet of SpeedFam Co., Ltd. at October 31, 1998 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:

                                 BALANCE SHEETS

<TABLE>
<CAPTION>
                                                                              OCTOBER 31,           APRIL 30,
                                                                                 1998                 1998
                                                                               ---------           ---------

                                      ASSETS
<S>                                                                            <C>                 <C>
            Total current assets                                               $ 117,190           $ 128,379
            Investment in affiliates                                                 791                 853
            Property, plant and equipment, net                                    39,562              35,763
            Deferred income taxes and other assets                                10,802               8,287
                                                                               ---------           ---------
                     Total assets                                              $ 168,345           $ 173,282
                                                                               =========           =========

                       LIABILITIES AND STOCKHOLDERS' EQUITY

            Total current liabilities                                           $ 90,938            $106,765
            Long-term debt                                                        21,799              18,095
            Other long-term liabilities                                            8,105               7,336
            Stockholders' equity
               Common stock                                                          664                 664
               Retained earnings                                                  41,993              41,162
               Foreign currency translation adjustment                             4,851                (844)
               Unrealized gain (loss) on marketable securities                        (5)                104
                                                                               ---------           ---------
                  Total liabilities and stockholders' equity                   $ 168,345           $ 173,282
                                                                               =========           =========
</TABLE>




                                       7
<PAGE>   9
           SPEEDFAM INTERNATIONAL, INC. AND CONSOLIDATED SUBSIDIARIES
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                    (in thousands, except per share amounts)


                  STATEMENTS OF EARNINGS AND RETAINED EARNINGS

<TABLE>
<CAPTION>
                                                                   Three Months Ended                 Six Months Ended
                                                                    October 31,                         October 31,
                                                                 1998              1997             1998             1997
                                                              --------          --------         --------         --------

<S>                                                           <C>               <C>              <C>              <C>
           Net sales                                          $ 33,415          $ 53,681         $ 73,038         $113,795
           Costs and operating expenses                         31,641            49,860           69,406          109,149
                                                              --------          --------         --------         --------
           Earnings before income taxes                          1,774             3,821            3,632            4,646
           Income taxes                                            918             2,256            2,100            2,680
                                                              --------          --------         --------         --------
           Net earnings before minority interest                   856             1,565            1,532            1,966
           Minority interest                                      (113)             (123)            (345)            (248)
                                                              --------          --------         --------         --------
           Net earnings                                            969             1,688            1,877            2,214

           Beginning retained earnings                          41,028            35,825           41,162           37,049
           Transfers to capital                                    (4)                 -               (4)                -
           Dividends                                                 -                 -           (1,042)          (1,750)
                                                              --------          --------         --------         --------
           Ending retained earnings                           $ 41,993          $ 37,513         $ 41,993         $ 37,513
                                                              ========          ========         ========         ========
</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 November 30, 1998 the Company had accrued
     $1,160 of commission expense to SpeedFam Co., Ltd.
   
(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.
    



                                       8
<PAGE>   10
          SPEEDFAM INTERNATIONAL, INC. AND CONSOLIDATED SUBSIDIARIES
             NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                    (IN THOUSANDS, EXCEPT PER SHARE DATA)

   
(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) and accumulated other comprehensive
       income (loss) were as follows:
    

                          COMPREHENSIVE INCOME (LOSS)
   
<TABLE>
<CAPTION>
                                           THREE MONTHS ENDED  SIX MONTHS ENDED
                                              NOVEMBER 30,       NOVEMBER 30,  
                                           ------------------  ----------------
                                             1998     1997       1998      1997
                                           -------   ------    -------   -------
<S>                                        <C>       <C>       <C>       <C>
Net income (loss)........................  $(4,257)  $7,620    $(4,101)  $13,177

Other comprehensive income (loss):   

  Foreign currency translation
    adjustments..........................    4,542     (180)     2,755       919

Unrealized holding losses, net of
  income taxes of $7 and $5 for the
  three months and six months
  ended November 30, 1998................      (11)      --         (7)       --
                                          --------   ------    -------   -------
Comprehensive income (loss).............. $   274   $7,440    $(1,353)  $14,096
                                          ========   ======    ========  =======
</TABLE>
    

                 ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)

   
<TABLE>
<CAPTION>
                                    FOREIGN     UNREALIZED       ACCUMULATED
                                    CURRENCY    LOSSES ON    OTHER COMPREHENSIVE
                                  TRANSLATION   SECURITIES      INCOME (LOSS)

<S>                               <C>           <C>          <C>
Balance at May 31, 1998........       (207)         --              (207)
Six month period change........      2,755          (7)            2,748        
                                     -----          --             -----
Balance at November 30, 1998...      2,548          (7)            2,541
                                     =====          ==             =====
</TABLE>
    

(8)  RECENT DEVELOPMENTS

     On November 19, 1998, the Company entered into a definitive merger
     agreement with Integrated Process Equipment Corp. ("IPEC"). Under terms of
     the agreement, the Company's shareholders will retain their existing shares
     of common stock. IPEC stockholders will receive 0.71 of a share of the
     Company's common stock for each share of IPEC common stock that they
     currently own. The transaction is expected to be consummated within
     approximately the next 120 days. The merger is subject to shareholder and
     regulatory approval. There is no assurance that the transaction will be
     consummated.



                                       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   Six Months Ended
                                                    November 30,       November 30,
                                                 ---------------      --------------
                                                 1998       1997      1998      1997
                                                 ----       ----      ----      ----
Revenue:
<S>                                             <C>       <C>       <C>       <C>
Net sales                                         99.4%     95.3%     98.8%     95.9%
Commissions from affiliate                         0.6       4.7       1.2       4.1
                                                 -----     -----     -----     -----
Total revenue                                    100.0     100.0     100.0     100.0
Cost of sales                                     69.8      56.2      66.6      56.7
                                                 -----     -----     -----     -----
Gross margin                                      30.2      43.8      33.4      43.3
Research, development and engineering             42.8      14.0      32.2      13.3
Selling, general and administrative               34.4      15.4      25.7      16.4
                                                 -----     -----     -----     -----
Operating profit (loss)                          (47.0)     14.4     (24.5)     13.6

Other income, net                                  7.4       2.6       6.0       2.0
                                                 -----     -----     -----     -----
Earnings (loss) from consolidated companies  
 before income taxes                             (39.6)     17.0     (18.5)     15.6
Income tax expense (benefit)                     (19.0)      5.9      (9.3)      5.5
                                                 -----     -----     -----     -----
Earnings (loss) from consolidated companies      (20.6)     11.1      (9.2)     10.1
Equity in net earnings of affiliates               2.9       2.4       2.4       1.8
                                                 =====     =====     =====     =====
Net earnings (loss)                              (17.7)%    13.5%     (6.8)%    11.9%
                                                 =====     =====     =====     =====
</TABLE>

   
         Net Sales. The Company's net sales for second quarter of fiscal 1999
were $23.9 million, down 55.6% from net sales of $53.9 million for the
corresponding period in the prior year. Sales of equipment, parts and
expendables decreased to $18.2 million or 75.9% of net sales in the second
quarter of fiscal 1999, against $46.0 million or 85.3% of net sales reported 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 $11.1 million, or 46.6% of net sales in
the second quarter of fiscal 1999, down from the $34.7 million, or 64.4% of net
sales, reported a year earlier. The Company's net sales in this quarter were
affected by the continued 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. As a result,
semiconductor manufacturers are expected to continue to reduce or delay their
investment in manufacturing equipment. In addition, the semiconductor device
market has been affected by the poor general economic conditions of many Asian
countries, particularly Korea and Japan, who are both users and producers of
semiconductors.
    


                                       10
<PAGE>   12
The Company believes that these market and economic 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.

         Sales to the thin film memory disk market in the second quarter of
fiscal 1999 accounted for $6.7 million, or 27.9% of net sales, compared with
$13.4 million, or 24.8% of net sales, for the second quarter of fiscal 1998. The
technology of thin film memory disks has shifted to the use of more alternative
substrates, 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. through the current fiscal year.

         Net sales for the six months ended November 30, 1998 were $59.7
million, down 43.6% against net sales of $105.8 million in the first six months
of fiscal 1998. A decline in sales of CMP equipment accounted for the
significant portion of this sales decline. In the first half of fiscal 1999,
sales of CMP systems were $34.1 million, or 57.1% of net sales, against the
$65.4 million or 61.8% of net sales, reported a year earlier. In addition, net
sales in the six months ended November 30, 1998 decreased due to a decline in
sales to the thin film memory disk market. In the six months ended November 30,
1998, sales to the thin film memory disk market were $13.4 million compared to
$28.9 million in the same six 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 six months ended November
30, 1998 was also attributable to a decrease in sales of slurries. Slurries
revenue decreased to $5.8 million or 24.1% of net sales in the second quarter of
fiscal 1999 from $7.9 million or 14.7% in the comparable period of fiscal 1998.
In the first six months of fiscal 1999, sales of slurries were $11.4 million or
19.1% of net sales compared to the $16.0 million or 15.2% in the same period of
fiscal 1998.

         Commissions from Affiliate. Commissions from affiliate decreased to
$152,000 during the second quarter of fiscal 1999 from $2.6 million in the
corresponding period of fiscal 1998. During the first six months of this fiscal
year, commissions from affiliate decreased to $737,000 from $4.6 million in the
first six months of fiscal 1998. The decline in commission revenue in the three
and six months ended November 30, 1998 was due to the continued slowdown in
demand for capital equipment from both the thin film memory disk and silicon
wafer markets. The Company believes that capital equipment spending will
decline further in the thin film memory and silicon wafer industries in the
current fiscal year, in turn further lowering commissions from affiliate
compared to prior year periods.

         Gross Margin. Gross margin decreased to $7.3 million or 30.2% of total
revenue for the three months ended November 30, 1998 from $24.8 million or 43.8%
of total revenue for the three months ended November 30, 1997. For the first six
months of fiscal 1999, gross margin was $20.2 million or 33.4% of total revenue
compared to $47.8 million or 43.3% of total revenue in fiscal 1998. Gross
margin, both in dollars and as a percentage of total revenue, was down year over
year due primarily 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 $10.3 million or 42.8% of total revenue in the second
quarter of fiscal 1999, up from $7.9 million or 14.0% of total revenue in the
second quarter of fiscal 1998. In the six months ended November 30, 1998,
research, development and engineering expense increased to $19.5 million or
32.2% of total revenue compared to $14.7 million or 13.3% of total revenue in
the same period of fiscal year 1998. The increase in both the three and six
month periods of fiscal 1999 ended November 30, 1998 is a result of the


                                       11
<PAGE>   13
`Company's significant investment in CMP systems' reliability and productivity
improvements, various process technologies for the semiconductor device market
and growing technical support costs due to the greater number of CMP systems now
in the field. Research, development and engineering expense as a percentage of
total revenue also increased substantially due to reduced revenues in fiscal
1999.

         Selling, General and Administrative. In the second quarter of fiscal
1999, selling, general and administrative expense was $8.3 million, or 34.4% of
total revenue, down from $8.7 million, or 15.4%, last year. Selling, general and
administrative expense decreased to $15.6 million or 25.7% of total revenue in
the first six months of fiscal 1999 from $18.1 million or 16.4% of total revenue
in the first six months of fiscal 1998. The dollar decrease in the second
quarter and first six months of fiscal 1999 as compared to the prior year was
due to lower commissions paid to the Far East Joint Venture as a result of
decreased sales of CMP systems manufactured in the United States and sold into
the Asian markets. Selling, general and administrative expense also declined 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 six month periods
ended November 30, 1998. This was primarily due to reduced revenues in fiscal
1999.

         Other Income, Net. Other income increased to $1.8 million in the second
quarter of fiscal 1999 from $1.5 million in the comparable period of fiscal
1998. Other income increased to $3.6 million in the first six months of fiscal
1999 from $2.3 million in the comparable period of fiscal 1998. Other income
consisted almost entirely of interest income in the second quarter of fiscal
1999. Interest income increased in the second quarter and first six 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.

         Income Tax Benefit. In the second quarter and first six 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 $701,000 for the second quarter, compared to
$1.3 million a year ago. For the first six months of fiscal 1999, equity in net
earnings of affiliates decreased to $1.4 million from $2.1 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 current fiscal year by both the slow down in
demand for equipment sold into the thin film memory disk and silicon wafer
markets, as well as the current economic and currency crises facing many Far
East economies.

   
LIQUIDITY AND CAPITAL RESOURCES

         As of November 30, 1998, the Company had $121.3 million in cash, cash
equivalents and short-term investments, compared to $141.2 million at May 31,
1998. The Company used $5.0 million of 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 other current assets.

         Accounts payable and due to affiliates decreased to $10.9 million at
November 30, 1998, from $23.9 million at May 31, 1998. This decrease was a
result of management's efforts to control inventory purchasing in anticipation
of lower sales volume in the first and second quarters of fiscal year 1999. Cash
used in operations was partially offset by reductions in accounts receivable and
inventories.

         Accounts receivable decreased to $36.5 million at November 30, 1998,
from $45.2 million at May 31, 1998. The decrease in accounts receivable was
primarily due to lower sales volume in the first six months of fiscal year 1999,
combined with management's efforts to collect on outstanding receivables.
    

                                       12
<PAGE>   14
   
       Inventory decreased to $41.6 million at November 30, 1998, 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. The Company established
an obsolescence reserve for inventories in the amount of $1.4 million and $1.7
million at May 31, 1998 and November 30, 1998, respectively.

       The Company made capital expenditures of $16.2 million. The majority of
the cash was used to fund the continued construction of a new 109,000 square
foot Technology Center next to its corporate headquarters in Chandler, Arizona.
Maturities of short-term investments provided $20.7 million of cash during the
first six months of fiscal 1999. Sales of short-term investments also provided
$35.8 million in cash. In total, $39.1 million in cash was invested in
short-term securities in the six months ended November 30, 1998.

       Financing activities provided $1.2 million in cash, primarily through the
sale of stock to employees and the exercise of stock options, offset by debt
repayments. The Company has available a $60.0 million credit facility with its
U.S. bank group. The Company also has a [pound sterling] 950,000 ($1.6 million)
revolving line of credit with the London branch of the U.S. bank. As of February
3, 1999, no amounts were outstanding on either loan facility. The Company
believes that the Company's cash, cash equivalents and short-term investments
combined with the available proceeds from the 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.
    

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 has
addressed the potential computing difficulties it could face 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.

RECENT DEVELOPMENTS

       On November 19, 1998, the Company entered into a definitive merger
agreement with Integrated Process Equipment Corp. ("IPEC"). Under terms of the
agreement, the Company's shareholders will retain their existing shares of
common stock. IPEC stockholders will receive 0.71 of a share of the Company's
common stock for each share of IPEC common stock that they currently own. The
transaction is expected to be consummated within approximately the next 120
days. The merger is subject to shareholder and regulatory approval.
There is no assurance that the transaction will be consummated.



                                       13
<PAGE>   15
                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 PROPOSED MERGER WITH IPEC

      Difficulties of Integrating Two Companies. The anticipated benefits of the
merger will not be achieved unless the operations of IPEC are successfully
combined with those of the Company in a timely and efficient manner. Integrating
the Company and IPEC will be a complex, time consuming and expensive process and
may negatively impact results of operations. Before the merger, the Company and
IPEC operated independently, each with its own business, products, business
culture, customers, employees and systems. After the merger, the combined
company must operate as a combined organization using common management
information systems, operating procedures, financial controls and human resource
practices, including benefit, training and professional development programs.
There may be substantial difficulties, costs and delays involved in integrating
the Company and IPEC. These may include:

-        distracting management from the business of the combined company

-        costs and delays in integrating product offerings and inability to
         market each company's products to the other's customer

-        inability to successfully integrate research and development programs

-        costs and delays in integrating manufacturing operations and
         philosophies

-        inability to successfully integrate sales and marketing efforts,
         including international distribution channels

-        inability to retain and integrate key management, administrative,
         technical, sales and customer support personnel

-        costs and inefficiencies in delivering field service support to the
         customers of the combined company

-        inability to successfully integrate management information and
         reporting systems

-        incompatibility of business cultures

-        inability to obtain the consents of third parties required because of
         the merger

The combined company may not be able to retain and successfully integrate its
key management, administrative, technical, sales and customer support personnel,
or to realize any of the anticipated benefits of the merger.

      Substantial Expenses Resulting from the Merger. The negotiation and
implementation of the merger will result in substantial expenses to the Company
and IPEC, primarily costs associated with combining the operations of the two
companies and the fees of financial advisors, attorneys and accountants. Total
combined expenses to be incurred by the two Companies relating to these
professional advisors and other costs of the special meetings are estimated
to be $6.5 million, but may be higher. These expenses will negatively impact
results of operations in the quarter in which the merger occurs.

In addition, the Company expects to incur significant charges in integrating and
restructuring the operations of the Company and IPEC. The Company and IPEC are
preparing an integration plan but have not yet completed their work. As a
result, the Company and IPEC cannot estimate these expenses with any certainty
at this time, but expect these expenses to negatively impact operating results
for at least one year after the merger is completed. These expenses include, but
are not limited to, those relating to severance costs, inventory adjustments,
relocation costs, cancellation of real estate leases and the implementation of a
uniform management information system.


                                       14
<PAGE>   16
The Company may also consider selling duplicative assets or those not necessary
to the post-merger business strategy. If the price received is less than the
book value of the assets sold, the Company would incur a loss.

DEPENDENCE ON CMP SYSTEMS

    The Company believes that its future growth, if any, depends in large part
upon its ability to grow revenues attributable to its CMP systems and its
technology. Revenue growth attributable to the Company's CMP systems depends
upon numerous factors, including cost of ownership, throughput, process
flexibility, performance and reliability and availability of customer support.
The Company intends to periodically develop and introduce enhanced versions of
its CMP system. Failure to continually develop the Company's CMP system may
impact its ability to grow revenue attributable to its CMP systems. In addition,
the continuing slow down in the semiconductor industry impacts the Company's
ability to recognize consistent growth in revenue attributable to CMP systems.
There can be no assurance that the Company will be successful in growing revenue
attributable to its current CMP systems, or any future enhanced version of the
system. The failure of the Company to accomplish these objectives would have a
material adverse effect on the Company.

DEPENDENCE ON NEW PRODUCT DEVELOPMENT; RAPID TECHNOLOGICAL CHANGE

    The Company believes that its future success will depend, in part, on its
ability to enhance existing products and processes and develop and manufacture
new products and processes. The markets in which the Company and its customers
compete are characterized by evolving industry standards and frequent
improvements in products and services. To compete effectively in such markets,
the Company must continually improve its products and its process technologies
and develop new technologies and products that compete effectively on the basis
of price and performance. The Company expects to continue to make significant
investments in research, development and engineering even during economic
down-turns in the markets the Company serves, or if such investments negatively
impact operating profits in a reporting period. There can be no assurance that
the Company will be able to improve its existing products and its process
technologies or develop new products and technologies. The Company intends to
continually develop and/or introduce enhanced versions of its integrated CMP
system. There can be no assurance that the Company's development of new or
enhanced products, such as enhanced versions of the CMP system, will be
cost-effective or introduced in a timely manner or accepted in the marketplace.
Failure by the Company to develop or introduce new products and product
enhancements in a timely manner would have a material adverse effect on the
Company's business, financial condition and results of operations.

    Due to the complexity of the Company's products, significant delays can
occur between a system's introduction and the commencement of commercial
shipments. The Company has from time to time experienced delays in the
introduction of, and certain technical and manufacturing difficulties with,
certain of its systems and enhancements, and may experience such delays and
technical and manufacturing difficulties in future introductions or volume
production of new systems or enhancements. In addition, the Company may incur
substantial unanticipated costs to ensure the functionality and reliability of
its future product introductions early in the product's life cycle. If new
products experience reliability or quality problems, the Company could encounter
a number of problems, including reduced orders, higher manufacturing costs,
delays in collection of accounts receivable and additional service and warranty
expenses, each of which could materially adversely affect the Company's business
and results of operations. In addition, in the event the Company does not manage
product transitions successfully, sales of existing Company products could be
adversely affected.

CYCLICAL NATURE OF THE COMPANY'S BUSINESS

    The Company's business depends substantially on the capital expenditures of
semiconductor, thin film


                                       15
<PAGE>   17
memory disk media and silicon wafer manufacturers (its primary markets), which,
in turn, depend upon the current and anticipated market demand for semiconductor
devices, memory disks and silicon wafers. Sales of capital equipment to these
manufacturers are expected to continue to represent a significant portion of the
Company's total revenue. These industries are highly cyclical and have
historically experienced periodic downturns characterized by oversupply and weak
demand, which often have a material adverse effect on the acquisition of capital
equipment and other products used in the manufacturing process, including
products offered by the Company. These downturns generally have materially
adversely affected the business and operating results of capital equipment
suppliers, including the Company. The semiconductor, thin film memory disk and
silicon wafer industries are currently experiencing downturns which have led
many semiconductor, memory disk and silicon wafer manufacturers to delay or
cancel capital expenditures. The Company's business and results of operations
will continue to be materially adversely affected by these downturns in its
primary markets.

    Sales of the Company's capital equipment depend, in large part, upon the
decision of a prospective customer to increase manufacturing capacity or respond
to advances in technology by upgrading or expanding existing manufacturing
facilities or constructing new manufacturing facilities, all of which typically
involve a significant capital commitment. Certain of the Company's capital
equipment have lengthy sales cycles while the customer evaluates and receives
approvals for the purchase of the Company's systems and completes the upgrading
or expansion of existing facilities or the construction of new facilities. The
Company may expend substantial funds and management effort during the sales
cycle. The cyclicality and rapid technological change present in certain of the
industries served by the Company may also cause prospective customers to
postpone decisions regarding major capital expenditures, including purchases of
the Company's equipment. In addition, the need for continued investment in
research and development, marketing and customer support limits the Company's
ability to reduce expenses in response to downturns in the industries it serves.

INTERNATIONAL BUSINESS

    In the first six months of fiscal 1999 and 1998, 50.7% and 33.9%,
respectively, of the Company's total revenue was attributable to sales outside
the United States. The Company expects that international sales will continue to
represent a significant portion of its total revenue. Sales to customers outside
the United States are subject to numerous risks, including exposure to currency
fluctuations, the imposition of government controls, the need to comply with a
wide variety of foreign and U.S. export laws, political and economic
instability, trade restrictions, changes in tariffs and taxes typically
associated with foreign sales, the greater difficulty of administering business
overseas and general economic conditions. In addition, the laws of certain
foreign countries may not protect the Company's intellectual property to the
same extent as do the laws of the United States. Moreover, slurries marketed and
distributed by both the Company and the Fujimi Joint Venture are purchased from
Fujimi Incorporated, a Japanese company. The Company also purchases in Japanese
yen certain equipment from the Far East Joint Venture that the Company then
sells in the U.S. and Europe. Fluctuations in exchange rates have in the past
resulted, and may in the future result, in increases in the cost to the Company
of such products. Also, because the value of the net assets of the Company's
foreign subsidiaries and its equity interest in the Far East Joint Venture
fluctuate based upon exchange rates and because the Company does not hedge the
value of such net assets, fluctuations in exchange rates may have an adverse
effect on the Company's shareholders' equity.

    The Company anticipates that the recent turmoil in Asian economies and the
recent deterioration of the underlying economic conditions in certain Asian
countries will continue to have an impact on its sales, and the sales of its
joint ventures, to customers located in or whose end-user customers are located
in those countries. In addition, revenue and profits may continue to be impacted
as a result of currency fluctuations on the relative price of the Company's
products, or the products of its joint ventures, and restrictions on government
spending. In addition, customers in those countries have faced reduced access to
working capital to fund purchases of the Company's products, or the products of
its joint ventures, due to higher interest rates, reduced bank lending or the
deterioration in the customer's or its bank's financial condition or the
inability to access other financing which has impacted sales to those customers.



                                       16
<PAGE>   18
FLUCTUATIONS IN QUARTERLY OPERATING RESULTS

    The Company's quarterly operating results have historically and may in the
future vary significantly due to a number of factors. Factors that may influence
the Company's operating results in a given quarter include: (i) customer demand,
such as economic conditions in the semiconductor, memory disk and silicon wafer
industries, market acceptance of products of both the Company and its customers,
changes in product mix, and the timing, cancellation or delay of customer orders
and shipments; (ii) competition, such as competitive pressures on prices of the
Company's products and the introduction or announcement of new products by
competitors; (iii) manufacturing and operations, such as fluctuations in
availability and cost of raw materials and production capacity; (iv)
fluctuations in foreign currency exchange rates; (v) new product development,
such as increased research, development and engineering, as well as marketing,
expenses associated with new product introductions, including the effect of
transitioning to new or enhanced products, and the Company's ability to
introduce new products and technologies on a timely basis; (vi) sales and
marketing, such as concentrations of customers, and discounts that may be
granted to certain customers; and (vii) the quarterly operating results of the
Company's joint ventures, which the Company accounts for on the equity method;
as well as other factors, such as levels of expenses relative to revenue levels,
personnel changes and generally prevailing economic conditions.

    During a given quarter, a significant portion of the Company's revenue may
be derived from the sale of a relatively small number of machines and systems.
Accordingly, a small change in the number of machines and systems actually
shipped may cause significant changes in operating results. Moreover, customers
may cancel or reschedule shipments, and production difficulties could delay
shipments. In addition, because of the significantly different gross margins
attributable to the Company's two segments, changes in product mix may cause
fluctuations in operating results. Further, the lengthy sales cycle for certain
of the Company's capital equipment may result in the Company incurring
significant expenses prior to the receipt of customer orders. In addition, the
introduction of new products has in the past contributed, and may continue to
contribute, to fluctuations in quarterly operating results. These same factors
also could materially and adversely affect annual results of operations. In
addition, the need for continued investment in research and development,
marketing and customer support limits the Company's ability to reduce expenses
in response to downturns in the industries it serves.

INTELLECTUAL PROPERTY RIGHTS

    The Company currently holds numerous United States patents and additional
foreign patents in Japan and several Asian and European countries and has
numerous United States and foreign patent applications pending. In addition, the
Company believes that such factors as continued innovation, technical expertise
and know-how of its personnel and other factors are also important. There can be
no assurance that the Company will be able to protect its technology or that
competitors will not be able to develop similar technology independently. No
assurance can be given that the claims allowed on these patents held or acquired
by the Company will be sufficiently broad to protect the Company's technologies.
In addition, no assurance can be given that any existing or future patents
issued to the Company will not be challenged, invalidated, or circumvented or
that the rights granted thereunder will provide competitive advantages to the
Company. In that event, the Company's results of operations could be adversely
affected. Moreover, the Company may choose to incur significant costs in an
attempt to defend its patent rights.

    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


                                       17
<PAGE>   19
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.

POSSIBLE VOLATILITY OF STOCK PRICE

    The stock price of the Company may be subject to wide fluctuations and
possible rapid increases or declines in a short time period. These fluctuations
may be due to factors specific to the Company such as variations in quarterly
operating results or changes in analysts' earnings estimates, or to factors
relating to the industries in which the Company operates and sells or to the
securities markets in general, which, in recent years, have experienced
significant price fluctuations, or to global economic events. These fluctuations
often have been unrelated to the operating performance of the specific companies
whose stocks are traded.

SOLE OR LIMITED SOURCES OF SUPPLY

    The Company relies to a substantial extent on outside suppliers to
manufacture many of the components and subassemblies used in the Company's
capital equipment, some of which are obtained from a single supplier or a
limited group of suppliers. The Company's reliance on outside suppliers
generally, and a sole or a limited group of suppliers in particular, involves
several risks, including a potential inability to obtain an adequate supply of
required components and reduced control over quality, pricing and timing of
delivery of components. In the past, the Company has experienced delays in
receiving materials from suppliers, sometimes resulting in delays in the
delivery of products by the Company. Such delays, or other significant supplier
or supply quality issues may occur in the future, which could result in a
material adverse effect on the Company. Because the manufacture of certain of
these components and subassemblies is specialized and requires long lead times,
there can be no assurance that delays or shortages caused by suppliers will not
reoccur. Any inability to obtain adequate deliveries, or any other circumstance
that would require the Company to seek alternative sources of supply or to
manufacture such components internally, could delay shipment of the Company's
products, increase its cost of goods sold and have a material adverse effect on
the Company's business and results of operations.


         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 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.



                                       18
<PAGE>   20
                          SPEEDFAM INTERNATIONAL, INC.

PART II - OTHER INFORMATION

Item 4.    Submission of Matters to a Vote of Security Holders.

         At the Company's Annual Meeting of Shareholders held on October 8,
         1998, shareholders elected Messrs. James Farley, Makoto Kouzuma, Neil
         R. Bonke, Richard S. Hill, Dr. Stuart Meyer and Robert M. Miller to
         serve the Company as directors for a one-year term or until respective
         successors have been elected. The results of the voting for each
         director were as follows:

<TABLE>
<CAPTION>
                                                 For          Withheld
                                            ----------        --------
<S>                                         <C>               <C>
                           Farley           14,050,648        264,409
                           Kouzuma          14,051,881        263,176
                           Bonke            14,055,580        259,477
                           Hill             14,055,335        259,722
                           Meyer            14,055,880        259,177
                           Miller           14,052,630        262,427
</TABLE>

         Shareholders approved a proposal to amend the 1995 Stock Plan for
         Employees and Directors for SpeedFam International, Inc. as amended May
         22, 1997, to increase the maximum aggregate number of shares of the
         Company's Common Stock reserved for issuance thereunder from 1,000,000
         to 1,800,000. The results of the voting for the matter were as follows:

<TABLE>
<CAPTION>
             For               Against             Abstained             Broker Non-Vote
         ----------           ----------           ---------             ---------------
<S>                           <C>                   <C>                    <C>
         10,001,116           1,690,235             51,962                 2,571,744
</TABLE>

         Shareholders approved a proposal to amend the 1995 Employee Stock
         Purchase Plan of SpeedFam International, Inc. to increase the maximum
         aggregate number of shares of the Company's Common Stock reserved for
         issuance thereunder from 500,000 to 1,000,000. The results of the
         voting for the matter were as follows:

<TABLE>
<CAPTION>
             For               Against              Abstained            Broker Non-Vote
         ----------            -------              ---------            ---------------
<S>                            <C>                   <C>                   <C>
         11,250,006            472,434               20,873                2,571,744
</TABLE>

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

             (a)    Exhibits.

                      Exhibit - 27    Financial Data Schedule

             (b) Reports on Form 8-K.

   
                      Form 8-K (Item 5) was filed November 23, 1998.
    




                                       19
<PAGE>   21
                          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:    March 4, 1999             By Roger K. Marach
                                   Treasurer and Chief Financial Officer
                                   (As Chief Accounting Officer and Duly
                                   Authorized Officer of
                                   SpeedFam International, Inc.)
    



                                       20
<PAGE>   22
                                  EXHIBIT INDEX

           EXHIBIT
            NUMBER                                  DESCRIPTION
            ------                                  -----------
              27                               Financial Data Schedule


                                       21