<PAGE>   1
================================================================================

                UNITED STATES 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 March 3, 2001

[ ]  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 (480) 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 (March 30, 2001).

                  Common Stock, no par value: 30,116,409 shares

================================================================================
<PAGE>   2
                               SPEEDFAM-IPEC, INC.


                                      INDEX

<TABLE>
<CAPTION>
                                                                                               Page
                                                                                               ----
<S>                                                                                            <C>
PART I           FINANCIAL INFORMATION

        Item 1.  Financial Statements

                    Condensed Consolidated Balance Sheets
                    March 3, 2001 and June 3, 2000..........................................    2

                    Condensed Consolidated Statements of Operations
                    Third Quarter Ended and Three Quarters Ended
                    March 3, 2001 and March 4, 2000.........................................    3

                    Condensed Consolidated Statements of Cash Flows
                    Three Quarters Ended March 3, 2001 and March 4, 2000....................    4

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

        Item 2.  Management's Discussion and Analysis of Financial Condition
                 and Results of Operations..................................................    13

        Item 3.  Quantitative and Qualitative Disclosures about Market Risk.................    25

PART II       OTHER INFORMATION.............................................................    25

SIGNATURES..................................................................................    26

EXHIBIT INDEX
</TABLE>
<PAGE>   3
PART I - FINANCIAL INFORMATION

                               SPEEDFAM-IPEC, INC.
                      CONDENSED CONSOLIDATED BALANCE SHEETS
                                 (in thousands)


<TABLE>
<CAPTION>
                                                                        MARCH 3,            JUNE 3,
                                                                          2001               2000
                                                                          ----               ----
<S>                                                                    <C>                <C>
                                ASSETS

Current assets:
   Cash and cash equivalents                                           $  58,309          $  72,060
   Short-term investments                                                 17,297             28,236
   Trade accounts receivable, net                                         78,129            129,102
   Inventories                                                            87,922             81,192
   Shipped systems pending acceptance                                     20,353                 --
   Other current assets                                                    3,738              3,301
                                                                       ---------          ---------
     Total current assets                                                265,748            313,891
Investments in affiliates                                                     --             19,810
Property, plant and equipment, net                                        82,920             87,913
Other assets                                                              11,068             13,466
                                                                       ---------          ---------
     Total assets                                                      $ 359,736          $ 435,080
                                                                       =========          =========

                LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:
   Current portion of long-term debt                                   $     264          $   1,077
   Accounts payable                                                       32,499             51,354
   Deferred systems revenue                                               59,360                 --
   Accrued liabilities                                                    29,081             23,264
                                                                       ---------          ---------
     Total current liabilities                                           121,204             75,695
                                                                       ---------          ---------
Long-term liabilities:
   Long-term debt                                                        115,039            115,162
   Other liabilities                                                       6,431              7,253
                                                                       ---------          ---------
     Total long-term liabilities                                         121,470            122,415
                                                                       ---------          ---------
Stockholders' equity:
   Common stock, no par value, 96,000 shares authorized,30,116
      and 29,703 shares issued and outstanding
        on March 3, 2001 and June 3, 2000, respectively                        1                  1
   Additional paid-in capital                                            434,288            430,706
   Retained earnings                                                    (317,314)          (194,489)
   Accumulated other comprehensive income                                     87                752
                                                                       ---------          ---------
     Total stockholders' equity                                          117,062            236,970
                                                                       ---------          ---------
       Total liabilities and stockholders' equity                      $ 359,736          $ 435,080
                                                                       =========          =========
</TABLE>


     See Accompanying Notes to Condensed Consolidated Financial Statements.

                                       3
<PAGE>   4
                               SPEEDFAM-IPEC, INC.
                 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
  THIRD QUARTER ENDED AND THREE QUARTERS ENDED MARCH 3, 2001 AND MARCH 4, 2000
                      (in thousands, except per share data)


<TABLE>
<CAPTION>
                                                               Third Quarter Ended       Three Quarters Ended
                                                              March 3,     March 4,      March 3,      March 4,
                                                                2001         2000          2001          2000
                                                                ----         ----          ----          ----
<S>                                                           <C>          <C>           <C>           <C>
Net sales                                                     $ 58,818      $73,058      $ 215,748      $179,162
Cost of sales                                                   74,107       48,589        187,968       121,485
                                                              --------      -------      ---------      --------
     Gross margin (deficit)                                    (15,289)      24,469         27,780        57,677
                                                              --------      -------      ---------      --------
Operating expenses:
     Research, development and engineering                      18,474       13,115         49,443        39,304
     Selling, general and administrative                        12,636       12,813         44,105        37,737
     Restructuring charges                                       3,460           --          8,583            --
                                                              --------      -------      ---------      --------
      Total operating expenses                                  34,570       25,928        102,131        77,041
                                                              --------      -------      ---------      --------
Operating loss                                                 (49,859)      (1,459)       (74,351)      (19,364)
       Other income (expense), net                              (1,070)         109         (1,279)        5,437
                                                              --------      -------      ---------      --------
Loss from consolidated companies                               (50,929)      (1,350)       (75,630)      (13,927)
     Loss on disposal of investment in affiliate                    --           --        (10,763)           --
     Equity in net earnings (loss) of affiliates                    --         (532)           110        (3,408)
                                                              --------      -------      ---------      --------
Loss before cumulative effect of change in accounting
principle                                                      (50,929)      (1,882)       (86,283)      (17,335)
Cumulative effect of change in accounting principle                 --           --        (36,542)           --
                                                              --------      -------      ---------      --------
Net loss                                                      $(50,929)     $(1,882)     $(122,825)     $(17,335)
                                                              ========      =======      =========      ========
Loss per share before cumulative effect of change in
accounting principle:
   Basic and diluted                                          $  (1.70)     $ (0.06)     $   (2.89)     $  (0.59)
Cumulative effect of change in accounting principle                 --           --          (1.22)           --
                                                              --------      -------      ---------      --------
Net loss per share:
     Basic and diluted                                        $  (1.70)     $ (0.06)     $   (4.11)     $  (0.59)
                                                              ========      =======      =========      ========
Weighted average number of shares:
   Basic and diluted                                            29,996       29,501         29,909        29,447
                                                              ========      =======      =========      ========
Pro forma amounts as if the change in accounting
principle related to revenue
was applied retroactively:
    Net sales                                                 $ 58,818      $62,452      $ 215,748      $149,608

     Net loss                                                 $(50,929)     $(7,939)     $ (86,283)     $(31,699)
     Net loss per share:
          Basic and diluted                                   $  (1.70)     $ (0.27)     $   (2.89)     $  (1.08)
</TABLE>


     See Accompanying Notes to Condensed Consolidated Financial Statements.


                                       4
<PAGE>   5
                               SPEEDFAM-IPEC, INC.
                 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
              THREE QUARTERS ENDED MARCH 3, 2001 AND MARCH 4, 2000
                                 (in thousands)


<TABLE>
<CAPTION>
                                                                                       Three Quarters Ended
                                                                                 March 3, 2001      March 4, 2000
                                                                                 -------------      -------------
<S>                                                                              <C>                <C>
CASH FLOWS FROM OPERATING ACTIVITIES
   Net loss                                                                       $(122,825)           $(17,335)
   Adjustments to reconcile net loss
    to net cash used in operating activities:
       Equity in net earnings (loss) of affiliates                                     (110)              3,408
       Depreciation and amortization                                                 12,910              12,786
       Gain on sale of Fujimi Corporation                                                --              (5,603)
       Asset impairments and non-cash portion of restructuring charges               58,136                  --
       Cumulative effect of change in accounting principle                           36,542                  --
       Changes in assets and liabilities:
         (Increase) decrease in trade accounts receivable                            52,163              (7,600)
         (Increase) decrease in inventories                                         (41,050)              1,879
         (Increase) decrease in shipped systems pending acceptance                   (1,396)                 --
         (Increase) decrease in other current assets                                   (498)                875
         Increase (decrease) in accounts payable and due to affiliates              (12,593)              7,231
         Increase (decrease) in deferred systems revenue                                958                  --
         Increase (decrease) in accrued liabilities                                   6,810             (19,385)
                                                                                  ---------            --------
   Net cash used in operating activities                                            (10,953)            (23,744)
                                                                                  ---------            --------
CASH FLOWS FROM INVESTING ACTIVITIES
   Purchases of short-term investments                                              (19,797)            (60,361)
   Maturities of short-term investments                                              31,212              55,405
   Proceeds from licensing technology and transfer of associated assets                  --               2,335
   Proceeds from the sale of Fujimi Corporation                                          --              10,000
   Net proceeds from disposal of investment in affiliate                                661                  --
   Capital expenditures                                                             (13,419)             (8,995)
   Redemption of cash surrender value of life insurance                                 246               1,024
   Other investing activities                                                        (3,273)               (906)
                                                                                  ---------            --------
   Net cash used in investing activities                                             (4,370)             (1,498)
                                                                                  ---------            --------
CASH FLOWS FROM FINANCING ACTIVITIES
   Proceeds from exercise of stock options and employee stock purchases               3,581               3,028
   Principal payments on long-term debt                                              (1,581)               (765)
                                                                                  ---------            --------
   Net cash provided by financing activities                                          2,000               2,263
                                                                                  ---------            --------
   Effects of foreign currency rate changes on cash                                    (428)               (143)
                                                                                  ---------            --------
   Net  decrease in cash and cash equivalents                                       (13,751)            (23,122)
   Cash and cash equivalents at beginning of year                                    72,060              97,003
                                                                                  ---------            --------
   Cash and cash equivalents at March 3, 2001 and March 4, 2000                   $  58,309            $ 73,881
                                                                                  =========            ========
</TABLE>

     See Accompanying Notes to Condensed Consolidated Financial Statements.

                                       5
<PAGE>   6
                               SPEEDFAM-IPEC, INC.
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                    (in thousands, except per share amounts)


(1) BASIS OF PRESENTATION

         The accompanying unaudited condensed consolidated financial statements
have been prepared in accordance with accounting principles generally accepted
in the United States for interim financial information and with the instructions
to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include
all of the information and footnotes required for complete financial statements.
The preparation of financial statements in conformity with accounting principles
generally accepted in the United States requires the Company's management to
make estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements as well as the reported amounts of revenues and
expenses during the reporting period. In the opinion of management, all
adjustments (consisting of normal recurring items) considered necessary for a
fair presentation have been included. Actual results may differ from these
estimates. Operating results for the quarter ended March 3, 2001 are not
necessarily indicative of the results that may be expected for the year ending
June 2, 2001. For further information, refer to the consolidated financial
statements and notes thereto included in the Company's Annual Report on Form
10-K for the year ended June 3, 2000.

         The Company's fiscal year consists of 52 or 53 weeks ending on the
Saturday nearest May 31. Accordingly, the 2001 fiscal year ends on June 2, 2001
and contains 52 weeks whereas the 2000 fiscal year ended on June 3, 2000 and
contained 53 weeks. All references to quarters and years relate to fiscal
quarters and fiscal years unless otherwise noted.

         Since 1971, the Company had owned a 50% interest in SpeedFam-IPEC Co.,
Ltd. (together with its subsidiaries and joint ventures, also known as the Far
East Joint Venture) which was accounted for using the equity method of
accounting. The remaining 50% was owned by Obara Corporation, a publicly traded
Japanese company that supplies products to the automotive industry. On August
30, 2000, the Far East Joint Venture between the Company and Obara Corporation
was officially dissolved. Under the terms of the Master Reorganization
Agreement, ownership of the chemical mechanical planarization (or "CMP")
operations of the Far East Joint Venture was transferred to the Company. The CMP
operations, as of the date of dissolution, have been consolidated in the
accompanying unaudited condensed consolidated financial statements.

REVENUE RECOGNITION

         During the third quarter of 2001, the Company changed its revenue
recognition policy effective June 4, 2000, based on guidance provided in the
Securities and Exchange Commission (SEC) Staff Accounting Bulletin No. 101 (SAB
101), "Revenue Recognition in Financial Statements". The Company recognizes
revenue when persuasive evidence of an arrangement exists, delivery has occurred
or services have been rendered, the seller's price is fixed or determinable and
collectibility is reasonably assured. Certain of the Company's product sales are
accounted for as multiple-element arrangements. If the Company has met defined
customer acceptance experience levels with both the customer and the specific
type of equipment, the Company recognizes equipment revenue upon shipment and
transfer of title. Upon shipment, the contractual amount billable is recorded as
revenue and title is transferred. The remainder is recorded as revenue upon
customer acceptance. All other product sales with customer acceptance provisions
are recognized upon customer acceptance. The Company's CMP division, which is
comprised of the Company's development and production of chemical mechanical
planarization systems, is the only division historically impacted by SAB 101.
The Surface Technology Group, which is comprised of the thin film memory disk
media and silicon wafer manufacturers, and the Industrial Applications Group,
which is comprised of the development and production of high-throughput
precision surfacing processing equipment used in

                                       6
<PAGE>   7
                               SPEEDFAM-IPEC, INC.
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                    (in thousands, except per share amounts)

general industrial applications, will continue to recognize revenues upon
transfer of title which is generally upon shipment. Revenue related to spare
part sales is also recognized upon shipment. Revenue related to maintenance and
service contracts is recognized ratably over the duration of the contracts.

         In accordance with guidance provided in SAB 101, the Company recorded a
non-cash charge of $36.5 million, or ($1.22) per share, for the three quarters
ended March 3, 2001 to reflect the cumulative effect of the accounting change as
of the beginning of the fiscal year. The effect of the change on the third
quarter of 2001 was to decrease net loss before the cumulative effect of the
accounting change and net loss $1.9 million, or $0.06 per share; the effect of
the change on the three quarters ended March 3, 2001 was to increase net loss
before cumulative effect of a change in accounting principle and net loss $0.7
million, or ($0.02) per share. The pro forma amounts presented in the income
statement were calculated assuming the accounting change was retroactive to
prior periods. The effect of the change on the first quarter of 2001, before the
cumulative effect of the accounting change, was to increase net loss $3.8
million, or ($0.13) per share to $33.0 million, or ($1.11) per share. The effect
of the change on the first quarter of 2001, after the cumulative effect of
the accounting change, was to increase net loss $40.3 million, or ($1.35) per
share to $69.5 million, or ($2.33) per share. The effect of the change on the
second quarter of 2001 was to decrease net loss $1.2 million, or $0.04 per share
to $2.4 million, or ($0.08) per share.

         The deferred systems revenue balance as of June 4, 2000 was $60.8
million. This amount is comprised of equipment that was shipped and previously
recorded as revenue but had not been accepted or did not qualify for
multiple-element accounting as of June 3, 2000. In addition to deferred systems
revenue, the Company recorded deferred amounts related to cost of sales totaling
$21.3 million as of June 4, 2000. This amount represents costs related to
shipped systems that were pending acceptance as of June 3, 2000. Of the $60.8
million in deferred systems revenue and $21.3 million in deferred cost of sales,
$20.7 million was recognized as revenue and $4.5 million was recognized as cost
of sales, respectively, in 2001. As of June 4, 2000, the Company also reversed
accruals associated with its warranty and installation costs of $3.0 million
related to shipped systems pending customer acceptance.

         Prior to 2001, the Company's revenue recognition policy was to
recognize revenue at the time the customer takes title to the product, generally
at the time of shipment. Revenue related to maintenance and service contracts
was recognized ratably over the duration of the contracts.

(2) INVENTORIES
    The components of inventory were:

<TABLE>
<CAPTION>
                                            March 3,          June 3,
                                              2001             2000
                                              ----             ----
<S>                                         <C>              <C>
                     Raw materials           $45,807         $54,058
                     Work-in-process          21,742          21,396
                     Finished goods           20,373           5,738
                                             -------         -------
                                             $87,922         $81,192
                                             =======         =======
</TABLE>


                                       7
<PAGE>   8
                               SPEEDFAM-IPEC, INC.
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                    (in thousands, except per share amounts)

(3) ACCRUED LIABILITIES

    Accrued liabilities are as follows:

<TABLE>
<CAPTION>
                                                                        March 3,            June 3,
                                                                          2001                2000
                                                                          ----                ----
<S>                                                                     <C>                 <C>

              Accrued warranty and installation costs                   $ 7,763             $ 8,665
              Accrued payroll and benefits                                4,669               4,588
              Accrued merger, integration, and restructuring
              costs                                                       3,732               1,952
              Other accrued liabilities                                  12,917               8,059
                                                                        -------             -------
                                                                        $29,081             $23,264
                                                                        =======             =======
</TABLE>

(4) COMPREHENSIVE LOSS

    The Company's comprehensive loss was as follows:

<TABLE>
<CAPTION>
                                                          Third Quarter Ended              Three Quarters Ended
                                                        March 3,        March 4,         March 3,         March 4,
                                                         2001             2000             2001             2000
                                                         ----             ----             ----             ----
<S>                                                    <C>              <C>             <C>               <C>
Net loss                                               $(50,929)        $(1,882)        $(122,825)        $(17,335)
Other comprehensive income (loss):
     Unrealized gain (loss) on securities                   164               3               477             (189)
     Foreign currency translation adjustment               (729)         (1,439)           (1,142)           1,612
                                                       --------         -------         ---------         --------
Comprehensive loss                                     $(51,494)        $(3,318)        $(123,490)        $(15,912)
                                                       ========         =======         =========         ========
</TABLE>

          Accumulated other comprehensive income (loss) was as follows:

<TABLE>
<CAPTION>
                                                                               Accumulated
                                           Foreign          Unrealized           Other
                                          Currency          Gain (Loss)       Comprehensive
                                         Translation       on Securities      Income (Loss)
                                         -----------       -------------      -------------
<S>                                      <C>               <C>                <C>
Balance at June 3, 2000                    $ 1,239            $(487)           $  752
     Three quarter period change            (1,142)             477              (665)
                                           -------            -----            ------
Balance at March 3, 2001                   $    97            $ (10)           $   87
                                           =======            =====            ======
Balance at May 31, 1999                    $    22            $(252)           $ (230)
     Three quarter period change             1,612             (189)            1,423
                                           -------            -----            ------
Balance at March 4, 2000                   $ 1,634            $(441)           $1,193
                                           =======            =====            ======
</TABLE>


                                       8
<PAGE>   9
                               SPEEDFAM-IPEC, INC.
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                    (in thousands, except per share amounts)

(5) RESTRUCTURING AND OTHER CHARGES ASSOCIATED WITH THE INDUSTRY DOWNTURN

         During the third quarter of 2001, slowing worldwide demand for
semiconductors resulted in a rapid decline in demand for manufacturing
equipment. Inventory buildups in telecommunication products, slower than
expected personal computer sales and slower global economic growth caused
semiconductor companies to reevaluate their capital spending plans. A number of
the Company's customers revised the timing of their capital spending and
rescheduled or canceled existing orders, resulting in the postponement or
cancellation of equipment delivery and a decline in new orders. As a result, the
Company was forced to record significant inventory write-downs and take swift
actions to substantially reduce overall operating expenses. Cost-cutting
measures included an 18-percent reduction in workforce, a 10-percent salary
cutback for executives, the deferment of management raises until business
conditions improve and a decrease in overall discretionary spending.

         During the third quarter ended March 3, 2001, the Company recorded
approximately $39.1 million in restructuring and other special charges which
included inventory write-downs of $31.3 million; asset impairments of $4.3
million; lease termination costs of $1.7 million; severance costs of $1.0
million for 247 employees, primarily manufacturing technicians, engineers and
field service representatives; and $0.8 million of other charges. The Company
anticipates expending approximately $8.8 million of cash over the next two
quarters as a result of these restructuring charges which primarily relate to
non-cancelable purchase commitments.

         These costs were classified in the statement of operations for the
third quarter ended March 3, 2001 in cost of sales and operating expenses. The
following table summarizes the classification of the restructuring and other
charges:

<TABLE>
<S>                                                                    <C>
              Cost of sales                                            $31,707
              Research and development costs                             3,623
              Selling, general and administrative costs                    296
              Restructuring charges                                      3,460
                                                                       -------
                                                                       $39,086
                                                                       =======
</TABLE>


(6) RESTRUCTURING AND OTHER CHARGES ASSOCIATED WITH DISPOSAL OF THE FAR EAST
    JOINT VENTURE

         On August 30, 2000, the Far East Joint Venture was officially
dissolved. Under the terms of the Master Reorganization Agreement with Obara
Corporation (Obara), ownership of the CMP operations of the Far East Joint
Venture was transferred to the Company and specific personnel involved in CMP
efforts became employees of the Company. Obara continues the non-CMP activities
of the Joint Venture, which include the manufacture of silicon wafer and thin
film memory disk polishing products.

         Under the terms of a distributor agreement signed on August 31, 2000,
the Company continues to act as a direct distributor in the United States and
Europe for the wafer and disk polishing products manufactured by Obara and is
prohibited from manufacturing these products.

                                       9
<PAGE>   10
                               SPEEDFAM-IPEC, INC.
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                    (in thousands, except per share amounts)

         During the first quarter of 2001, the Company recorded charges totaling
$10.8 million related to the loss on disposal of the Company's 50% investment
interest in the Far East Joint Venture and $8.4 million related to the Company's
exit from the manufacturing of wafer and disk polishing products as the Company
is prohibited from manufacturing these products. The $8.4 million is comprised
of inventory write-downs of raw materials and spare parts related to silicon
wafer and thin film memory disk polishing products; impairment of fixed assets
of the exited operations; severance costs for three employees including a former
executive of the Far East Joint Venture and other charges associated with the
Company's exit from the manufacturing of wafer and disk polishing products.

         Through March 3, 2001 the Company incurred $15.8 million in asset
write-offs and paid and charged to the liability $2.6 million. The remaining
restructuring accrual is approximately $0.9 million which the Company believes
is adequate to cover the remaining liabilities. The following table summarizes
the components of the restructuring and other charges:

<TABLE>
<CAPTION>
                                          Activity During the Three quarters
                                               Ended March 3, 2001              Accrued
                                         Assets               Cash            Liability at
                                       Write-offs         Expenditures       March 3, 2001
                                       ----------         ------------       -------------
<S>                                    <C>                <C>                <C>
Loss on disposal of investment          $ 9,741              $  926              $ 96
Inventory write-downs                     3,351                  --                --
Fixed asset impairments                   2,700                  --                --
Severance costs                              --               1,191                --
Other costs                                  --                 461               771
                                        -------              ------              ----
                                        $15,792              $2,578              $867
                                        =======              ======              ====
</TABLE>

         These costs were classified in the statement of operations for the
first three quarters ended March 3, 2001 in cost of sales, loss on disposal of
investment in affiliate and operating expenses. The following table summarizes
the classification of the restructuring and other charges:

<TABLE>
<S>                                                                  <C>
              Cost of sales                                          $ 3,351
              Restructuring charges                                    5,123
              Loss on disposal of investment in affiliate             10,763
                                                                     -------
                                                                     $19,237
                                                                     =======
</TABLE>

         Also included in the first three quarters ended March 3, 2001 was $2.4
million of asset impairment charges for CMP equipment that was designed by the
Far East Joint Venture that is no longer used in ongoing research and
development programs. These charges were classified in the statement of
operations for the first three quarters ended March 3, 2001 as research and
development expenses.

                                       10
<PAGE>   11
                               SPEEDFAM-IPEC, INC.
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                    (in thousands, except per share amounts)

(7) MERGER, INTEGRATION, AND RESTRUCTURING COSTS ASSOCIATED WITH THE 1999 MERGER

         In connection with the merger of SpeedFam International, Inc. and
Integrated Process Equipment Corp. in April 1999, the Company recorded various
merger, integration and restructuring costs. Direct merger costs primarily
consisted of professional fees related to investment banking, legal and
accounting services incurred through the date of the merger. The Company
recorded integration and restructuring costs for lease terminations, the
write-off of duplicative equipment previously used for demonstration purposes,
the write-down of inventory and equipment related to product lines that are no
longer supported, and severance costs resulting from workforce reductions.

         Severance and other related employee costs provided for the reduction
of approximately 70 employment positions resulting from facility closures, and
the elimination of duplicate positions or positions no longer necessary due to
the streamlining of operations.

         Through March 3, 2001, the Company incurred $27.0 million in asset
write-downs and paid and charged to the liability $20.0 million. The remaining
restructuring accrual for lease terminations associated with the merger is
approximately $6.9 million which the Company believes is adequate to cover the
remaining liabilities. Lease termination costs on certain vacated facilities
(which were included in the restructuring charge) primarily related to remaining
rent, related utilities and common area maintenance on the closed Phoenix,
Arizona manufacturing and administrative facility not recoverable through
sublease income. Sublease activity began in May 2000 (as reflected in the
remaining accrual) and is projected to be carried out through the end of the
Company's lease term. The Company's management has been and is currently in the
process of securing additional subleases or other negotiated agreements for the
Phoenix, Arizona manufacturing and administrative facility. The following table
summarizes the components of the merger, integration, and restructuring costs:

<TABLE>
<CAPTION>
                                              Activity During the
                                             Three quarters ended
                                                 March 3, 2001
                                   Accrued                            Accrued
                                Liability at          Cash          Liability at
                                June 3, 2000      Expenditures      March 3, 2001
                                ------------      ------------      -------------
<S>                             <C>               <C>               <C>
Lease termination costs           $8,565             $1,631             $6,934
Severance costs                      372                372                 --
Other costs                          264                264                 --
                                  ------             ------             ------
                                  $9,201             $2,267             $6,934
                                  ======             ======             ======
</TABLE>


                                       11
<PAGE>   12
                               SPEEDFAM-IPEC, INC.
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                    (in thousands, except per share amounts)


(8) BUSINESS SEGMENT INFORMATION

         The Company classifies its products into three core business segments:
(i) the CMP Group, which is comprised of the Company's development and
production of chemical mechanical planarization systems; (ii) the Surface
Technology Group (STG), which is comprised of the distribution of
high-throughput precision surface processing equipment used in thin film memory
disk media and silicon wafer industries and the manufacture of polyvinyl alcohol
products; and (iii) the Industrial Applications Group (IAG), which is comprised
of the development and production of high-throughput precision surface
processing equipment used in general industrial applications. Information
concerning the Company's business segments during the third quarter ended and
three quarters ended March 3, 2001 and March 4, 2000 is as follows (in
thousands):

<TABLE>
<CAPTION>
                                                    Third Quarter Ended         Three Quarters Ended
                                                  March 3,       March 4,       March 3,       March 4,
                                                    2001          2000           2001           2000
                                                    ----          ----           ----           ----
<S>                                               <C>            <C>           <C>            <C>
Net sales:
   CMP Group                                      $ 47,710       $62,082       $183,535       $147,462
   Surface Technology Group                          5,178         7,591         17,916         22,015
   Industrial Applications Group                     5,930         3,385         14,297          9,685
                                                  --------       -------       --------       --------
Total net sales to unaffiliated customers           58,818        73,058        215,748        179,162
                                                  --------       -------       --------       --------
Segment operating profit (loss):
   CMP Group                                       (46,605)        2,395        (53,484)        (7,373)
   Surface Technology Group                           (493)         (407)        (3,196)        (1,016)
   Industrial Applications Group                       916           386          2,429          1,550
                                                  --------       -------       --------       --------
Total segment operating profit (loss)              (46,182)        2,374        (54,251)        (6,839)
General corporate expense, net                      (3,891)       (3,576)       (19,660)        (6,316)
Interest expense, net                                 (856)         (148)        (1,719)          (772)
                                                  --------       -------       --------       --------
Loss from consolidated companies                  $(50,929)      $(1,350)      $(75,630)      $(13,927)
                                                  ========       =======       ========       ========
</TABLE>


                                       12
<PAGE>   13
                      MANAGEMENT'S DISCUSSION AND ANALYSIS
                OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

         The Company sells its products and services to three market segments:
(1) semiconductor device manufacturers (CMP Group), (2) thin film memory disk
media and silicon wafer manufacturers (Surface Technology Group), and (3)
manufacturers of general industrial components (Industrial Applications Group).

         On August 30, 2000, the 30-year-old Far East Joint Venture between the
Company and Obara Corporation was officially dissolved. Under the terms of the
Master Reorganization Agreement with Obara Corporation, ownership of the CMP
sales and service operations of the Far East Joint Venture was transferred to
the Company and specific personnel involved in CMP efforts became employees of
the Company. Obara Corporation continues the non-CMP activities of the former
Joint Venture, which include the manufacturing of silicon wafer and thin film
memory disk polishing products. The Company will not compete with the non-CMP
business and Obara will not compete with the CMP business for an initial period
of five (5) years. The Company has indemnified Obara for any claims relating to
the CMP business and Obara has indemnified the Company for any claims relating
to the non-CMP business. Under the terms of a distributor agreement signed on
August 31, 2000, the Company continues to act as a direct distributor in the
United States and Europe for the wafer and disk polishing products manufactured
by Obara Corporation and is prohibited from manufacturing these products.

         The Company's fiscal year consists of 52 or 53 weeks ending on the
Saturday nearest May 31. Accordingly, the 2001 fiscal year ends on June 2, 2001
and contains 52 weeks whereas the 2000 fiscal year ended on June 3, 2000 and
contained 53 weeks. All references to quarters and years relate to fiscal
quarters and fiscal years unless otherwise noted.

RESULTS OF OPERATIONS

The following table sets forth certain consolidated statements of operations
data for the periods indicated as a percentage of total net sales:

<TABLE>
<CAPTION>
                                                           Third Quarter Ended       Three Quarters Ended
                                                          March 3,      March 4,     March 3,    March 4,
                                                           2001          2000         2001         2000
                                                           ----          ----         ----         ----
<S>                                                       <C>           <C>          <C>         <C>
Net sales                                                  100.0%       100.0%       100.0%       100.0%
Cost of sales                                              126.0         66.5         87.1         67.8
                                                           -----         ----        -----         ----
     Gross margin                                          (26.0)        33.5         12.9         32.2
Research, development and engineering                       31.4         18.0         23.0         21.9
Selling, general and administrative                         21.5         17.5         20.4         21.1
Restructuring                                                5.9           --          4.0           --
                                                           -----         ----        -----         ----
     Operating loss                                        (84.8)        (2.0)       (34.5)       (10.8)
 Other income (expense), net                                (1.8)         0.2         (0.6)         3.0
                                                           -----         ----        -----         ----
     Loss from consolidated companies                      (86.6)        (1.8)       (35.1)        (7.8)
Loss on disposal of investment in affiliate                   --           --         (5.0)          --
Equity in net earnings (loss) of affiliates                   --         (0.8)         0.1         (1.9)
                                                           -----         ----        -----         ----
      Loss before cumulative effect of
        change in accounting principle                     (86.6)        (2.6)       (40.0)        (9.7)
Cumulative effect of change in accounting principle           --           --        (16.9)          --
                                                           -----         ----        -----         ----
     Net loss                                              (86.6)%       (2.6)%      (56.9)%       (9.7)%
                                                           =====         ====        =====         ====
</TABLE>

                                       13
<PAGE>   14
         Net Sales. Net sales for the third quarter of 2001 were $58.8 million,
down 20% from net sales of $73.1 million in the third quarter of 2000. Net sales
of CMP systems for the third quarter of 2001 totaled $47.7 million or 81% of net
sales compared to $62.1 million or 85% of net sales in the third quarter of
2000. Total net sales for the first three quarters of 2001 were $215.7 million,
an increase of 20% over $179.2 million reported for the same period a year ago.
Net sales of CMP systems for the first three quarters of 2001 totaled $183.5
million, or 85% of net sales, compared to $147.5 million, or 82% of net sales,
for the same period a year ago. Net sales during the three quarters ended March
3, 2001 have increased compared to the same period last year primarily due to
stronger demand in the first quarter of 2001 driven by semiconductor
manufacturers' needs for additional capacity and advanced technology. During the
third quarter of 2001, slowing worldwide demand for semiconductors resulted in a
rapid decline in demand for manufacturing equipment. Inventory buildups in
telecommunication products, slower than expected personal computer sales and
slower global economic growth caused semiconductor companies to reevaluate their
capital spending plans. A number of the Company's customers revised the timing
of their capital spending and rescheduled delivery or canceled existing orders,
resulting in the postponement of equipment delivery and a decline in new orders
and net sales. Net sales as stated above for the third quarter and first three
quarters of 2001 reflect the Company's adoption of SAB 101, discussed below in
"Impact of Recently Issued Accounting Standards".

         From a geographic standpoint, for the third quarter of 2001,
approximately 45% of the CMP revenue was generated in the Far East with
approximately 20% of CMP revenue in Europe and 35% in the United States.

         Net sales of the Surface Technology Group (STG) in the third quarter of
2001 accounted for $5.2 million, or 9% of net sales, as compared to $7.6
million, or 10% of net sales, in the third quarter of 2000. Net sales for the
first three quarters of 2001 totaled $17.9 million, or 8% of net sales, as
compared to $22.0 million, or 12% of net sales, for the same period a year ago.
With the dissolution of the Far East Joint Venture, the Company has exited from
the manufacturing of silicon wafer and thin film memory disk polishing
equipment, as required by the agreement with Obara Corporation. However, the
Company will continue to act as a direct distributor in the United States and
Europe for the wafer and disk polishing products manufactured by Obara
Corporation.

         Net sales of the Industrial Applications Group (IAG) in the third
quarter of 2001 increased to $5.9 million, or 10% of net sales, compared to $3.4
million or 5% of net sales, for the same period last year. Net sales for the
first three quarters of 2001 were $14.3 million, or 7% of net sales, compared to
$9.7 million, or 5% of net sales, for the same period last year. Sales increased
due to increased shipments in European markets.

         Gross Margin. In the third quarter of 2001, gross margin was $(15.3)
million, or (26)% of net sales, compared to $24.5 million, or 34% of net sales,
in the third quarter of 2000. Excluding inventory write-downs of $31.3 million
and $0.4 million of other restructuring charges, gross margin was $16.4 million,
or 28% of sales, during the third quarter of 2001. Excluding restructuring
charges of $31.7 million related to the industry slowdown and $3.4 million
related to the exit from the manufacturing of wafer and disk polishing
equipment, gross margin for the three quarters ended March 3, 2001 was $62.9
million, or 29% of net sales, compared to $57.7 million, or 32% of net sales,
for the same period last year. During the quarter ended March 3, 2001, the
decrease in gross margin in dollars and as a percentage of sales was primarily
due to the mix of CMP shipments including a higher percentage of orbital tools,
which historically have had a lower gross margin than rotational platforms and
increased per unit manufacturing overhead costs due to lower overall
manufacturing volume. During the industry downturn, the Company expects this
trend of reduced gross margins to continue. Gross margins as stated above for
the third

                                       14
<PAGE>   15
quarter and first three quarters of 2001 reflect the Company's adoption of SAB
101, discussed below in "Impact of Recently Issued Accounting Standards".

Research and Development. During the quarter ended March 3, 2001, research and
development expenses increased to $18.5 million, or 31% of net sales, compared
to $13.1 million, or 18% of net sales, in the third quarter of 2000. This
increase includes an asset impairment charge of $3.6 million related to the
industry slowdown. For the three quarters ended March 3, 2001, research and
development expenses totaled $49.4 million, or 23% of net sales, compared to
$39.3 million, or 21% of net sales, for the same period a year ago. The
increase, in dollars, for the three quarters of 2001 includes the $3.6 million
asset impairment charge related to the industry slowdown and an additional $2.4
million asset impairment charge for CMP equipment that was designed by the Far
East Joint Venture that is no longer used in ongoing research and development
programs. As the Company has been finalizing the production model of the
Momentum(TM) tool and its design process requirements to reach 300 millimeter
capabilities, additional research and development costs have been incurred
during the first three quarters of 2001.

         Selling, General and Administrative. In the third quarter of 2001, the
dollar amount of selling, general and administrative expenses remained
essentially unchanged at $12.6 million, or 22% of net sales, compared to $12.8
million, or 18% of net sales, in the third quarter of 2000. For the three
quarters ended March 3, 2001, selling, general and administrative expenses
totaled $44.1 million, or 20% of net sales compared to $37.7 million, or 21% of
net sales, for the same period last year. During the first three quarters of
2001, the Company also recorded approximately $4.4 million of selling, general
and administrative expenses directly related to the new Far East operations. In
addition, during the three quarters ended March 3, 2001, significant marketing
and promotional costs were incurred in connection with product launch activities
related to the introduction of the Company's new products, the Momentum(TM) and
the Auriga Vision(TM) .

     Restructuring Charges. During the three quarters ended March 3, 2001, the
Company recorded restructuring charges of $8.6 million. Approximately $5.1
million related to restructuring associated with the Company's exit from the
manufacturing of silicon wafer and thin film memory disk polishing equipment, as
required by the distribution agreement with Obara Corporation signed August 31,
2000 and $3.5 million of restructuring charges were recorded during the quarter
ended March 3, 2001 as a result of the industry slowdown. In regards to the $5.1
million restructuring charges, $2.7 million related to fixed asset impairments;
$1.2 million related to severance costs for three employees including a former
executive of the Far East Joint Venture; $1.2 million related to other
restructuring charges associated with the Company's plan to exit the
manufacturing of wafer and disk polishing products. During the third quarter
ended March 3, 2001, slowing worldwide demand for semiconductors resulted in a
rapid decline in demand for manufacturing equipment which forced the Company to
take swift actions to substantially reduce overall operating expenses.
Cost-cutting measures included an 18-percent reduction in workforce, a
10-percent salary cutback for executives, the deferment of management raises
until business conditions improve and a decrease in overall discretionary
spending. As a result, the Company recorded approximately $3.5 million in
restructuring and other special charges related to lease termination costs of
$1.7 million; severance costs of $1.0 million for 247 employees, primarily
manufacturing technicians, engineers and field service representatives; and $0.8
million of other charges.

         Other Income (Expense). Other income (expense) decreased to ($1.1
million) during the third quarter ended March 3, 2001 from $0.1 million during
the same period a year ago. This decrease during the third quarter of 2001
primarily stemmed from lower average balances in cash, cash equivalents and
short-term investments yielding lower interest income. Other income (expense)
decreased to ($1.3 million) during the three quarters ended March 3, 2001 from
$5.4 million during the same period a year ago. The significant decrease
primarily stems from a $5.6 million gain recorded during the three quarters of
2000 on the sale of the Company's 50% interest in its joint venture, Fujimi
Corporation. In addition,

                                       15
<PAGE>   16
lower average balances in cash, cash equivalents and short-term investments
during the three quarters of 2001 yielded lower interest income when compared to
the same period a year ago.

         Provision for Income Taxes. At the end of the third quarter of 2001 and
2000, the Company established a valuation allowance for deferred tax assets
generated by its operating losses and is in a net operating loss carry-forward
position. As a result, the effective tax rate for the third quarter of 2001 and
2000 was zero. While the Company will reassess its tax situation each quarter,
the Company expects that its effective tax rate will approximate zero throughout
2001.

         Loss on Disposal of Investment in Affiliate and Equity in Net Earnings
(Loss) of Affiliates. At the end of the first quarter of 2001, the Company
reported a $10.8 million loss on disposal of investment in affiliate in
connection with the dissolution of the Far East Joint Venture. The 30-year-old
Far East Joint Venture between the Company and Obara Corporation was officially
dissolved on August 30, 2000.

         For the first three quarters of 2001, equity in net earnings (loss) of
affiliates improved to $0.1 million compared to ($3.4 million) in the same
period of 2000. This improvement was due to increased sales volume of the former
Far East Joint Venture. Also, during the second quarter of 2000, the former Far
East Joint Venture recorded a charge for certain asset impairments, severance
costs and other reorganization costs to account for the slowdown in the thin
film memory disk media market and the transition of CMP research and development
operations to the Company. The Company's share of this charge was approximately
$1.4 million. With the integration of the former Far East Joint Venture's CMP
operations into current operations, the Company does not anticipate any
significant changes in financial reporting and trends. Historically, the Company
recorded the CMP costs of the joint venture in operating expenses under a
cost-plus arrangement. With the integration of CMP operations related to the
former Far East Joint Venture, the Company has incurred these same costs as
direct expenses and beginning in the second quarter of 2001, no longer reported
equity in net earnings (loss) of affiliates on the income statement.

LIQUIDITY AND CAPITAL RESOURCES

         As of March 3, 2001, the Company had $75.6 million in cash, cash
equivalents and short-term investments, compared to $100.3 million at June 3,
2000. During the first three quarters of 2001, the Company had $11.0 million of
cash used in operating activities compared to cash used of $23.8 million in
operating activities during the same period in 2000.

         Approximately, $4.4 million in cash was provided due to a decrease in
working capital. The net loss of $122.8 million included non-cash items totaling
$107.4 million: fixed asset impairments and the non-cash portion of
restructuring charges of $58.1 million; cumulative effect of change in
accounting principle of $36.5 million; depreciation and amortization expense of
$12.9 million, offset by equity in net earnings of affiliates of $0.1 million.

         Net cash used in investing activities totaled $4.4 million during the
first three quarters of 2001 compared with net cash used of $1.5 million during
the same period in 2000. Cash was primarily used for capital expenditures of
$13.4 million during the first three quarters of 2001. During the three quarters
ended March 3, 2001, cash was also used to purchase short-term investments of
$19.8 million offset by proceeds of maturing investments totaling $31.2 million.

         Financing activities provided cash of $2.0 million during the first
three quarters of 2001 compared with approximately $2.3 million during the same
period of 2000. The sale of stock to

                                       16
<PAGE>   17
employees and the exercise of stock options generated proceeds of $3.6 million
and principal payments on capital lease obligations amounted to $1.6 million
during the first three quarters ended March 3, 2001.

         The Company believes that its current cash, cash equivalents and
short-term investments will be sufficient to meet the Company's cash needs for
at least the next 12 months.

IMPACT OF RECENTLY ISSUED ACCOUNTING STANDARDS

         Statement of Financial Accounting Standards (SFAS) No. 133, "Accounting
for Derivative Instruments and Hedging Activities" and No. 138, "Accounting for
Certain Derivative Instruments and Certain Hedging Activities", established
accounting and reporting standards for derivative financial instruments and
hedging activities. These statements require that the Company recognize all
derivatives as either assets or liabilities on the balance sheet and measure
those instruments at fair value. Derivatives that are not hedges must be
adjusted to fair value through income. If the derivative is a hedge, depending
on the nature of the hedge, changes in the fair value of derivatives will either
be offset against changes in the fair value of the hedged assets, liabilities,
or firm commitments through earnings or included in other comprehensive income
until the hedged item is recognized in earnings. The ineffective portion of a
derivative's change in fair value will be immediately recognized in earnings. In
June 1999, the Financial Accounting Standards Board issued SFAS No. 137,
"Accounting for Derivative Instruments and Hedging Activities --- Deferral of
the Effective Date of SFAS No. 133", which extended the effective date for
fiscal years beginning after June 15, 2000. Therefore, the Company will adopt
SFAS No. 133 and No. 138 in the first quarter of 2002, and does not expect the
adoption to have a material effect on its financial condition or results of
operations.

         In December 1999, the Staff of the Securities and Exchange Commission
(SEC) issued Staff Accounting Bulletin No. 101 (SAB 101), "Revenue Recognition
in Financial Statements". The SEC Staff addressed several issues in SAB 101,
including the timing of revenue recognition for sales that involve contractual
customer acceptance provisions and installation of the product if these events
occur after shipment and transfer of title. On June 26, 2000, the Staff of the
SEC issued Staff Accounting Bulletin No. 101B (SAB 101B), which permitted the
delay in the Company's implementation date of SAB 101 until the fourth quarter
of 2001. The Company has elected an early adoption of SAB 101 for the third
quarter of 2001. Changes in the Company's revenue recognition policy resulting
from the implementation of SAB 101 and SAB 101B do not involve the restatement
of prior financial statements, but do, to the extent applicable, result in a
cumulative change in accounting principle as of the third quarter of 2001,
calculated as of the first day of 2001.

         The Company derives revenues from three sources - equipment sales,
spare part sales and service contracts. The Company's CMP division is the only
division historically impacted by SAB 101. Revenue recognition for STG, IAG and
spare parts will continue to be upon transfer of title, which is generally upon
shipment. Revenue related to maintenance and service contracts is recognized
ratably over the duration of the contracts.

         The Company's previous revenue recognition policy for CMP systems was
to recognize revenue at the time the customer takes title to the product,
generally at the time of shipment. There are different revenue recognition
points under SAB 101, which are described as follows:

         Acceptance: For equipment sales to a new customer, existing products
with new specifications and/or a new product, revenue is recognized upon
customer acceptance.

         Shipment and acceptance: Equipment sales to existing customers, who
have purchased the same equipment with the same customer-specified acceptance
provisions in the past, are accounted for as

                                       17
<PAGE>   18
multiple-element arrangement sales. Upon shipment, the contractual amount
billable is recorded as revenue and title is transferred. The remainder is
recorded as revenue upon customer acceptance.

         As a result of SAB 101, the Company changed its method of accounting
for revenue recognition. The Company has reported this change in accounting
principle in accordance with SFAS No. 3, "Reporting Accounting Changes in
Interim Financial Statements", by a cumulative effect adjustment. The Company
adopted SAB 101 in the third quarter of 2001, but no cumulative effect of the
change is included in the net loss in the third quarter ended March 3, 2001.
Instead, SFAS No. 3 requires that the change be made as of the beginning of the
year (June 4, 2000) and financial information for interim periods reported prior
to the change, in this case the first two quarters of 2001, be restated by
applying SAB 101 to those periods.

         In accordance with guidance provided in SAB 101, the Company recorded a
non-cash charge of $36.5 million, or ($1.22) per share, to reflect the
cumulative effect of the accounting change as of the beginning of the fiscal
year. The effect of the change on the third quarter of 2001 was to decrease net
loss before the cumulative effect of the accounting change and net loss $1.9
million, or $0.06 per share; the effect of the change on the three quarters
ended March 3, 2001 was to increase net loss before cumulative effect of a
change in accounting principle and net loss $0.7 million, or ($0.02) per share.
The pro forma amounts presented in the income statement were calculated assuming
the accounting change was retroactive to prior periods. The effect of the
change on the first quarter of 2001, before the cumulative effect of the
accounting change, was to increase net loss $3.8 million, or ($0.13) per share
to $33.0 million, or ($1.11) per share. The effect of the change on the first
quarter of 2001, after the cumulative effect of the accounting change, was to
increase net loss $40.3 million, or ($1.35) per share to $69.5 million, or
($2.33) per share. The effect of the change on the second quarter of 2001 was
to decrease net loss $1.2 million, or $0.04 per share to $2.4 million, or
($0.08) per share.

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

This report contains forward-looking statements within the meaning of Section
27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act
of 1934. Actual results could differ materially from those projected in the
forward-looking statements because of a number of factors, risks and
uncertainties, including the risk factors described in this discussion and
elsewhere in this report. Such forward-looking statements include, but are not
limited to, statements that relate to the Company's future revenue, product
development, product backlog, customers, demand, acceptance and market share,
competitiveness, gross margins, levels of research and development and operating
expenses, intellectual property, management's plans and objectives for current
and future operations of the Company, the effects of the Company's
reorganization of the Far East Joint Venture, and the markets in which the
Company does business. In addition, the words "anticipate", "expect", "intend",
"believe" and similar expressions generally identify forward-looking statements.
The information included in this report is as of the filing date with the
Securities and Exchange Commission and future events or circumstances could
differ significantly from the forward-looking statements included herein.

CERTAIN FACTORS AFFECTING THE COMPANY'S BUSINESS

The Company's business is subject to numerous risks, including those discussed
below. If any of the events described in these risks occurs, the Company's
business, financial condition and results of operations could be seriously
harmed.

The Company depends on selling a small number of high-priced machines. The
Company derives a significant portion of its revenue from the sale of a
relatively small number of CMP systems. Thus, order,

                                       18
<PAGE>   19
delivery, and customer acceptance delays and cancellations, even of one or two
systems, may cause the Company to miss quarterly revenue and profit
expectations.

Downturn in the semiconductor industry may lead to decreased revenue for the
Company. During the third quarter of 2001, slowing worldwide demand for
semiconductors had resulted in significant inventory buildups for semiconductor
companies and a rapid decline in demand for semiconductor manufacturing
equipment. Presently, the Company has no visibility regarding how long the
semiconductor industry downturn will last or how severe the downturn will be. In
the quarter ending March 3, 2001, the Company experienced certain cancellations
and pushouts of orders for its products. If the downturn continues or worsens,
the Company may experience greater levels of cancellations and/or pushouts of
orders for its products in the future.

The Company's current business model is predicated on closing and fulfilling
expected orders for its Momentum(TM) product. A significant portion of the
Company's projected revenue depends on sales of its Momentum(TM) product.
Although initial customer reaction to Momentum(TM) has been positive, this
response may not translate into sales of Momentum(TM) on the scale or on the
time frame the Company anticipates. For instance, market conditions in the
semiconductor industry may cause potential purchasers of Momentum(TM) to delay
investment in new equipment, which could reduce demand for Momentum(TM). In
addition, rollout of Momentum(TM) may be slowed due to manufacturing problems,
unforeseen technical problems with the Momentum(TM) product itself or changes in
the CMP marketplace that differ from our expectations. If the Company is unable
to close anticipated orders for the Momentum(TM) product or fulfill orders for
the Momentum(TM) product, the Company's revenue will be adversely affected.

The Company must succeed in selling CMP equipment for 300 millimeter and copper
applications in order to increase its revenue and maintain market share.
Semiconductor manufacturers currently purchase CMP equipment predominantly to
manufacture 200 millimeter wafers, using CMP to polish the tungsten and oxide
layers of these wafers. Many of those same manufacturers are now beginning to
develop the ability to make 300 millimeter wafers and to process copper layers
for both 200 millimeter and 300 millimeter wafers. Many of these manufacturers
are currently qualifying CMP equipment for 300 millimeter tungsten, 300
millimeter oxide and for copper layers for both the 200 millimeter and 300
millimeter wafers. In the future, it is anticipated that semiconductor
manufacturers will purchase CMP equipment for volume production of 300
millimeter and/or copper-based wafers. If the Company does not win qualification
contests for 300 millimeter and/or copper-based wafers, it may experience
difficulty achieving volume sales of this next-generation equipment to
semiconductor manufacturers, which could result in declining revenues.

The Company's quarterly operating results may fluctuate for reasons not within
its control, which may affect the Company's stock price. The Company's quarterly
operating results may 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 of new product introductions

    -   ability to develop and implement new technologies

    -   timing, cancellation or delay of customer orders, shipments and
        acceptance

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

                                       19
<PAGE>   20
    -   foreign currency exchange rates

    -   changes in analysts' earnings estimates

    -   announcements regarding restructuring, technological innovations,
        departures of key officers or employees, or the introduction of new
        products

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. The Company's stock price may also
fluctuate due to factors specific to the semiconductor industry, which has
experienced significant price fluctuations in recent periods. Investors in the
Company's stock should be willing to incur the risk of such price fluctuations.

If the market price of the Company's stock is adversely affected, the Company
may experience difficulty in raising capital or making acquisitions. In
addition, the Company may become the object of securities class action
litigation. If the Company is sued in a securities class action, the Company may
incur substantial costs and management's attention and resources may be
diverted.

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. These reasons include:

    -   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.

    -   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.

    -   Once a semiconductor manufacturer commits to purchase a competitor's
        equipment, the manufacturer generally relies on that equipment for an
        entire production line and continues to purchase that equipment
        exclusively for an extended period of time.

Increased competitive pressure could lead to lost revenue from sales for the
Company's products, thereby damaging the Company's business. There can be no
assurance that the Company will be able to compete successfully in the future.

Lost revenue from semiconductor industry downturn, general economic slowdown
and/or increased competition could lead to operating losses. If the Company
experiences continued reductions in revenue from lost sales or price reductions
for its products for any reason, including a downturn in the

                                       20
<PAGE>   21
semiconductor industry, a general economic slowdown in the United States or
increased competition, the Company's gross margins will continue to be reduced
and could lead to operating losses.

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. The success of the Company in
developing, introducing and selling new and enhanced systems depends upon a
variety of factors including:

    -   product selection

    -   timely and efficient completion of product design and development

    -   timely and efficient implementation of manufacturing and assembly
        processes

    -   product performance in the field

    -   effective sales and marketing

The Company's business is highly cyclical. The Company's business depends
substantially on the capital expenditures of semiconductor manufacturers and, to
a lesser extent, thin film memory disk and silicon wafer manufacturers. These
industries are highly cyclical and semiconductor manufacturers are currently
experiencing periodic downturns, which have had 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 have in the
past and are expected in the future to materially adversely affect the business
and operating results of the Company. These events have negatively impacted the
Company's results of operations.

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.

There can be no assurance that the Company will be successful in preventing
product and process development problems that could potentially harm the
Company's results of operations.

The Company depends on a small number of major customers. Currently, and 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. The loss of a significant customer or a
substantial reduction in orders by any significant customer, including
reductions due to customer departures from recent buying patterns, market,
economic or competitive conditions in the semiconductor industry, could damage
the Company's business.

                                       21
<PAGE>   22
Orders in backlog may not result in future revenue if customers cancel or
reschedule orders. The Company includes in backlog only those customer orders
for which it has accepted purchase orders. Expected revenue may be lower if
customers cancel or reschedule orders, which they can generally do without
penalty.

The Company's success depends on international sales, particularly in Asia and
Europe. International sales accounted for 65% of the Company's total revenue for
the first three quarters of 2001, 70% for 2000 and 38% for 1999. The Company
expects that international sales will continue to account for a significant
portion of total revenue in future periods.

    International sales are subject to risks, including:

    -   foreign exchange issues

    -   political, economic and regulatory environment of the countries where
        customers are located

    -   collecting accounts receivable

    -   inadequate intellectual property protection

    -   intense price competition

The Company derives a substantial portion of its revenues from customers in
Asian countries particularly Taiwan and Korea. Economic developments in late
1997 and early 1998 resulted in decreased capital investments by Asian
customers. Recent economic developments indicate that the economies of Taiwan,
Korea and other Asian countries have recovered somewhat from 1997 and 1998
levels. Any negative economic developments or delays in the economic recovery of
Asian countries could result in the cancellation or delay of orders for the
Company's products from Asian customers, thus damaging the Company's business.

The Company may not realize the potential benefits of the reorganization of the
Far East Joint Venture. The reorganization of the Far East Joint Venture makes
the Company more dependent on the CMP business. If this market fails to continue
to develop, the Company will suffer.

Also, the success of the Company's CMP operations in Asia after the
reorganization depends upon its ability to retain key employees. None of the key
employees in Asia have long-term employment contracts. The Company does not have
any direct experience managing operations in Asia. Some employees may decide to
leave after the reorganization for this and other reasons. This may negatively
affect the Company's operations in Asia, which represent a large portion of the
Company's total revenue.

If the Company is unable to protect its intellectual property, its business
could suffer. The Company's intellectual property portfolio is very important to
its success. 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

                                       22
<PAGE>   23
    -   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 allegedly
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. In the
event the Company loses any of its intellectual property rights or otherwise
determines that it needs to obtain licenses to third party intellectual
property, there is no assurance that the Company will be able to obtain such
licenses on reasonable terms, if at all. The Company currently licenses the
right to manufacture CMP machines employing an orbital motion in its Avant Gaard
676, 776, 876 and Momentum(TM) from a semiconductor manufacturer.

The Company may be subject to risks associated with acquisitions and
dispositions. The Company continually evaluates strategic acquisitions of other
businesses and dispositions of portions of its business that it determines are
not complementary to its strategy. If the Company were to consummate an
acquisition, the Company would be subject to a number risks, including the
following:

    -   difficulty in assimilating the acquired operations and retaining
        acquired personnel

    -   limits on the Company's ability to retain acquired distribution channels
        and customers

    -   disruption of the Company's ongoing business

    -   limits on the Company's ability to successfully incorporate acquired
        technology and rights into its product and service offerings

    -   maintenance of uniform standards, controls, procedures and policies

The Company is dependent on key management and technical personnel. The
Company's performance and ability to execute is substantially dependent on the
performance of the Company's executive officers and key technical and
engineering employees. The loss of the services of any of these executive
officers or key employees could damage the Company's business.

The Company's future success also depends on its ability to identify, hire,
train and retain other highly qualified managerial and technical personnel.
Competition for such personnel is intense. If the Company is not successful in
identifying, hiring, training and retaining such personnel, it could damage the
Company's business.

The Company uses financial instruments that potentially subject it to
concentrations of credit risk. The Company enters into foreign exchange
contracts to hedge certain firm commitments denominated in foreign currencies,
principally Japanese Yen. The Company also invests its cash in deposits in
banks,

                                       23
<PAGE>   24
money market funds, government and corporate debt securities. The Company does
not use derivative financial instruments in its investment portfolio. The
Company places its investments with high credit quality issuers and by policy,
limits the amount of credit exposure to any one issuer. The Company mitigates
default risk by investing in only the safest and highest credit quality
securities and by monitoring the credit rating of investment issuers. The
portfolio includes only marketable securities with active secondary or resale
markets to ensure portfolio liquidity. To date, the Company has not experienced
material losses on these investments. However, there can be no assurance that
the Company will not in the future experience losses that could damage the
Company's business.



                                       24
<PAGE>   25
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

For financial market risks related to changes in interest rates and foreign
currency exchange rates, refer to Part II, Item 7A, Quantitative and Qualitative
Disclosures About Market Risk, in the Company's Annual Report on Form 10-K for
the year ended June 3, 2000.

PART II - OTHER INFORMATION

Item 1. Legal Proceedings

         None

Item 2. Changes in Securities

         None

Item 3. Defaults upon Senior Securities

         None

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

         None

Item 5. Other Information

         None

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

         (a) Exhibits.

                  10.37    Amendment to the 1995 Stock Plan for Employees and
                           Directors of SpeedFam-IPEC, Inc.


         (b) Reports on Form 8-K.

                  None
<PAGE>   26
                               SPEEDFAM-IPEC, 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.



                                         /s/  J. Michael Dodson
                                         ----------------------
Date:  April 6, 2001
                                         By J. Michael Dodson
                                         Secretary and Chief Financial Officer
                                         (Principal Financial Officer)



                                         /s/  G. Michael Latta
                                         ---------------------
Date:  April 6, 2001
                                         By G. Michael Latta
                                         Corporate Controller
                                         (Principal Accounting Officer)


                                       26
<PAGE>   27
                                  EXHIBIT INDEX

EXHIBIT
NUMBER     DESCRIPTION


10.37      Amendment to the 1995 Stock Plan for Employees and Directors of
           SpeedFam-IPEC, Inc.



                                       27