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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 FORM 10-Q
  þ
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
 For the quarterly period ended September 30, 2005
 OR
 o
    
    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: 000-22430
 ASYST TECHNOLOGIES, INC.
 (Exact name of Registrant, as specified in its charter)
 California
(State or other jurisdiction
of incorporation or organization)
    
    94-2942251
(IRS Employer identification Number)
 48761 Kato Road, Fremont, California 94538
 (510) 661-5000
 þ o
 þ o
 o þ




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ASYST TECHNOLOGIES, INC.
 TABLE OF CONTENTS
 PagePART I. FINANCIAL INFORMATIONItem 1. Financial Statements:Condensed Consolidated Balance Sheets  September 30, 2005 and March 31, 2005
    
    
    3Condensed Consolidated Statements of Operations  Three and Six-Month Periods Ended
September 30, 2005 and September 30, 2004
    
    
    4Condensed Consolidated Statements of Cash Flows  Six-Month Periods Ended September 30,
2005 and September 30, 2004
    
    
    5Notes to Condensed Consolidated Financial Statements
    
    
    6Item 2.Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    20Item 3.Quantitative and Qualitative Disclosures About Market Risk
    
    
    41Item 4.Controls and Procedures
    
    
    42PART II. OTHER INFORMATIONItem 1.Legal Proceedings
    
    
    46Item 4.Submission of Matters to a Vote of Security Holders
    
    
    47Item 6.Exhibits
    
    
    48Signatures
    
    
    49Exhibit IndexEXHIBIT 10.60EXHIBIT 31.1EXHIBIT 31.2EXHIBIT 32.1
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##### Table of Contents



Part I  FINANCIAL INFORMATION
 
 ITEM 1  FINANCIAL STATEMENTS
 
 ASYST TECHNOLOGIES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
 September 30,
    
    
    March 31,2005ASSETSCURRENT ASSETS:Cash and cash equivalents
    
    $
    75,214
    
    
    $
    55,094Short-term investments
    
    
    29,194
    
    
    
    46,086Accounts receivable, net of allowances for doubtful accounts of
$10,952 and $6,980 at September 30 and March 31, 2005, respectively
    
    
    195,251
    
    
    
    189,943Inventories
    
    
    32,733
    
    
    
    33,515Prepaid expenses and other current assets
    
    
    20,458
    
    
    
    33,971Total current assets
    
    
    352,850
    
    
    
    358,609Property and equipment, net
    
    
    15,372
    
    
    
    15,458Goodwill
    
    
    61,086
    
    
    
    64,014Intangible assets, net
    
    
    28,836
    
    
    
    40,898Other assets
    
    
    4,337
    
    
    
    4,795Total assets
    
    $
    462,481
    
    
    $
    483,774LIABILITIES, MINORITY INTEREST AND SHAREHOLDERS EQUITYCURRENT LIABILITIES:Short-term loans and notes payable
    
    $
    39,082
    
    
    $
    20,563Current portion of long-term debt and capital leases
    
    
    2,198
    
    
    
    2,757Accounts payable
    
    
    78,030
    
    
    
    83,913Accounts payable  related parties
    
    
    22,350
    
    
    
    39,242Accrued and other liabilities
    
    
    66,597
    
    
    
    70,439Deferred margin
    
    
    6,826
    
    
    
    6,013Total current liabilities
    
    
    215,083
    
    
    
    222,927LONG-TERM LIABILITIESLong-term debt and capital leases, net of current portion
    
    
    87,740
    
    
    
    88,750Deferred tax liability
    
    
    4,745
    
    
    
    8,548Other long-term liabilities
    
    
    8,401
    
    
    
    9,771Total long-term liabilities
    
    
    100,886
    
    
    
    107,069COMMITMENTS AND CONTINGENCIES (see Note 9)MINORITY INTEREST
    
    
    63,920
    
    
    
    63,855SHAREHOLDERS EQUITYCommon stock
    
    
    452,020
    
    
    
    450,005Deferred stock-based compensation
    
    
    (1,877
    )
    
    
    (1,312
    )Accumulated deficit
    
    
    (371,371
    )
    
    
    (366,239
    )Accumulated other comprehensive income
    
    
    3,820
    
    
    
    7,469Total shareholders equity
    
    
    82,592
    
    
    
    89,923Total liabilities, minority interest and shareholders equity
    
    $
    462,481
    
    
    $
    483,774
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ASYST TECHNOLOGIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
 Three Months Ended
    
    
    Six Months EndedSeptember 30,
    
    
    September 30,2005
    
    
    2004
    
    
    2005
    
    
    2004NET SALES
    
    $
    124,595
    
    
    $
    168,606
    
    
    $
    242,046
    
    
    $
    308,031COST OF SALES
    
    
    81,119
    
    
    
    137,758
    
    
    
    164,836
    
    
    
    250,088Gross profit
    
    
    43,476
    
    
    
    30,848
    
    
    
    77,210
    
    
    
    57,943OPERATING EXPENSES:Research and development
    
    
    7,084
    
    
    
    9,073
    
    
    
    14,151
    
    
    
    18,752Selling, general and administrative
    
    
    22,196
    
    
    
    17,419
    
    
    
    41,375
    
    
    
    34,269Amortization of acquired intangible assets
    
    
    4,714
    
    
    
    5,040
    
    
    
    9,632
    
    
    
    10,092Restructuring and other charges
    
    
    
    
    
    
    368
    
    
    
    93
    
    
    
    587Total operating expenses
    
    
    33,994
    
    
    
    31,900
    
    
    
    65,251
    
    
    
    63,700Income (loss) from operations
    
    
    9,482
    
    
    
    (1,052
    )
    
    
    11,959
    
    
    
    (5,757
    )INTEREST AND OTHER INCOME (EXPENSE), NET:Interest income
    
    
    569
    
    
    
    381
    
    
    
    1,092
    
    
    
    718Interest expense
    
    
    (1,813
    )
    
    
    (1,635
    )
    
    
    (3,412
    )
    
    
    (3,262
    )Other income, net
    
    
    333
    
    
    
    449
    
    
    
    850
    
    
    
    1,183Interest and other expense, net
    
    
    (911
    )
    
    
    (805
    )
    
    
    (1,470
    )
    
    
    (1,361
    )INCOME (LOSS) BEFORE BENEFIT FROM
(PROVISION FOR) INCOME TAXES AND
MINORITY INTEREST
    
    
    8,571
    
    
    
    (1,857
    )
    
    
    10,489
    
    
    
    (7,118
    )BENEFIT FROM (PROVISION FOR) INCOME TAXES
    
    
    (6,583
    )
    
    
    (67
    )
    
    
    (9,684
    )
    
    
    1,587MINORITY INTEREST
    
    
    (3,533
    )
    
    
    93
    
    
    
    (5,937
    )
    
    
    1,414NET LOSS
    
    $
    (1,545
    )
    
    $
    (1,831
    )
    
    $
    (5,132
    )
    
    $
    (4,117
    )BASIC AND DILUTED NET LOSS PER SHARE
    
    $
    (0.03
    )
    
    $
    (0.04
    )
    
    $
    (0.11
    )
    
    $
    (0.09
    )SHARES USED IN THE PER SHARE CALCULATION 
Basic and Diluted
    
    
    47,963
    
    
    
    47,428
    
    
    
    47,879
    
    
    
    47,304
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ASYST TECHNOLOGIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
 Six Months EndedSeptember 30,2005
    
    
    2004CASH FLOWS FROM OPERATING ACTIVITIES:NET LOSS
    
    $
    (5,132
    )
    
    $
    (4,117
    )Adjustments to reconcile net loss to net cash provided by (used
in) operating activities:Depreciation and amortization
    
    
    13,259
    
    
    
    14,203Minority interest in net loss in consolidated subsidiary
    
    
    5,937
    
    
    
    (1,414
    )Deferred income tax
    
    
    (619
    )
    
    
    (3,735
    )Stock-based compensation
    
    
    824
    
    
    
    852Loss (gain) on disposal of fixed assets
    
    
    (391
    )
    
    
    151Changes in assets and liabilities:Accounts receivable
    
    
    (15,455
    )
    
    
    (71,119
    )Inventories
    
    
    (469
    )
    
    
    (18,129
    )Prepaid expenses and other assets
    
    
    12,324
    
    
    
    (7,996
    )Accounts payable, accrued and other liabilities and deferred margin
    
    
    (19,470
    )
    
    
    72,407Net cash
used in operating activities
    
    
    (9,192
    )
    
    
    (18,897
    )CASH FLOWS FROM INVESTING ACTIVITIES:Purchases of investments
    
    
    (116,413
    )
    
    
    (132,026
    )Sales or maturity of investments
    
    
    133,225
    
    
    
    98,874Release of restricted cash and cash equivalents
    
    
    
    
    
    
    1,904Purchases of property and equipment, net
    
    
    (2,987
    )
    
    
    (3,634
    )Net cash provided by (used in) investing activities
    
    
    13,825
    
    
    
    (34,882
    )CASH FLOW FROM FINANCING ACTIVITIES:Proceeds from lines of credit, net
    
    
    21,074
    
    
    
    20,141Payments of short-term loans
    
    
    
    
    
    
    (2,508
    )Dividends
paid to a minority shareholder
    
    
    (2,613
    )
    
    
    Principal payments on long-term debt and capital leases
    
    
    (2,245
    )
    
    
    Proceeds from issuance of common stock
    
    
    626
    
    
    
    2,639Net cash provided by financing activities
    
    
    16,842
    
    
    
    20,272Effect of exchange rate changes on cash and cash equivalents
    
    
    (1,355
    )
    
    
    (1,187
    )DECREASE IN CASH AND CASH EQUIVALENTS
    
    
    20,120
    
    
    
    (34,694
    )CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD
    
    
    55,094
    
    
    
    112,907CASH AND CASH EQUIVALENTS, END OF PERIOD
    
    $
    75,214
    
    
    $
    78,213
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ASYST TECHNOLOGIES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
 1. ORGANIZATION OF THE COMPANY
      2. SIGNIFICANT ACCOUNTING POLICIES
 Basis of Preparation
   6




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ASYST TECHNOLOGIES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
 Recent Accounting Pronouncements
 The Meaning of
Other-Than-Temporary Impairment and Its Application to Certain Investments.
 Inventory Costs  an Amendment of ARB No. 43, Chapter 4"
 Exchange of Nonmonetary Assets  an
amendment of APB Opinion No. 29
 Share Based Payment. Accounting for Stock-Based Compensation
 Accounting Changes and Error Corrections: a
Replacement of Accounting Principles Board Opinion No. 20 (APB 20) and FASB Statement No 3
 Accounting for
Rental Costs Incurred during a Construction Period
 The Meaning of Other-Than-Temporary Impairment and Its Application to Certain Investments,
 Reclassifications
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ASYST TECHNOLOGIES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
   As Reported
    
    
    As Reclassified:Cash and Cash
    
    
    Short-Term
    
    
    
    
    
    
    Cash and Cash
    
    
    Short-TermSeptember 30,
    
    Equivalents
    
    
    Investments
    
    
    Total
    
    
    Equivalents
    
    
    Investments
    
    
    Total2004
    
    $
    93,913
    
    
    $
    22,190
    
    
    $
    116,103
    
    
    $
    78,213
    
    
    $
    37,890
    
    
    $
    116,103
  As Reported
    
    
    As Reclassified:Sales /
    
    
    
    
    
    
    
    
    
    
    Sales /Purchase of
    
    
    Maturities of
    
    
    
    
    
    
    Purchase of
    
    
    Maturities ofAvailable for
    
    
    Available for
    
    
    
    
    
    
    Available for
    
    
    Available forSix-months ended September 30,
    
    Sale Securities
    
    
    Sale Securities
    
    
    Total
    
    
    Sale Securities
    
    
    Sale Securities
    
    
    Total2004
    
    $
    (18,452
    )
    
    $
    1,000
    
    
    $
    (17,452
    )
    
    $
    (132,026
    )
    
    $
    98,874
    
    
    $
    (33,152
    )
  Short-term Investments
  Cost
    
    
    Unrealized Loss
    
    
    Fair ValueSeptember 30, 2005Auction rate securities
    
    $
    12,400
    
    
    $
    
    
    
    $
    12,400Corporate debt securities
    
    
    7,858
    
    
    
    (40
    )
    
    
    7,818Federal agency notes
    
    
    9,000
    
    
    
    (24
    )
    
    
    8,976$
    29,258
    
    
    $
    (64
    )
    
    $
    29,194March 31, 2005Auction rate securities
    
    $
    19,803
    
    
    $
    
    
    
    $
    19,803Corporate debt securities
    
    
    9,915
    
    
    
    (47
    )
    
    
    9,868Municipal debt securities
    
    
    501
    
    
    
    (1
    )
    
    
    500International debt securities
    
    
    1,009
    
    
    
    (2
    )
    
    
    1,007Federal agency notes
    
    
    15,000
    
    
    
    (92
    )
    
    
    14,908$
    46,228
    
    
    $
    (142
    )
    
    $
    46,086
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ASYST TECHNOLOGIES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
 Accounts Receivable, net of allowance for doubtful accounts
  September 30,
    
    
    March 31,2005
    
    
    2005Trade receivables
    
    $
    84,414
    
    
    $
    77,196Trade receivables-related party
    
    
    19
    
    
    
    100Unbilled receivables
    
    
    111,755
    
    
    
    110,778Other
    
    
    10,015
    
    
    
    8,849Less: Allowance for doubtful accounts
    
    
    (10,952
    )
    
    
    (6,980
    )Total
    
    $
    195,251
    
    
    $
    189,943
    Inventories
  September 30,
    
    
    March 31,2005
    
    
    2005Raw materials
    
    $
    13,373
    
    
    $
    14,040Work-in-process
    
    
    17,930
    
    
    
    17,905Finished goods
    
    
    1,430
    
    
    
    1,570Total
    
    $
    32,733
    
    
    $
    33,515
   Goodwill and Other Intangible Assets, net
 Goodwill
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ASYST TECHNOLOGIES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
  FabAutomation
    
    
    AMHS
    
    
    TotalBalance at March 31, 2005
    
    $
    3,397
    
    
    $
    60,617
    
    
    $
    64,014Foreign currency translation
    
    
    
    
    
    
    (2,928
    )
    
    
    (2,928
    )Balance at September 30, 2005
    
    $
    3,397
    
    
    $
    57,689
    
    
    $
    61,086
 Intangible assets
  September 30, 2005
    
    
    March 31, 2005Gross
    
    
    
    
    
    
    
    
    
    
    GrossCarrying
    
    
    Accumulated
    
    
    
    
    
    
    Carrying
    
    
    AccumulatedAmount
    
    
    Amortization
    
    
    Net
    
    
    Amount
    
    
    Amortization
    
    
    NetAmortizable intangible assets:Developed technology
    
    $
    60,171
    
    
    $
    39,073
    
    
    $
    21,098
    
    
    $
    62,626
    
    
    $
    34,069
    
    
    $
    28,557Customer base and other
intangible assets
    
    
    32,731
    
    
    
    28,258
    
    
    
    4,473
    
    
    
    33,767
    
    
    
    25,167
    
    
    
    8,600Licenses and patents
    
    
    6,602
    
    
    
    3,337
    
    
    
    3,265
    
    
    
    6,989
    
    
    
    3,248
    
    
    
    3,741Total
    
    $
    99,504
    
    
    $
    70,668
    
    
    $
    28,836
    
    
    $
    103,382
    
    
    $
    62,484
    
    
    $
    40,898
   Fiscal Year ending March 31,Remaining portion of 2006
    
    $
    7,8992007
    
    
    12,5632008
    
    
    6,9562009
    
    
    6842010
    
    
    3682011 and thereafter
    
    
    366Total
    
    $
    28,836
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ASYST TECHNOLOGIES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
 Warranty
Accrual
  Three-months Ended
    
    
    Six-months EndedSeptember 30,
    
    
    September 30,2005
    
    
    2004
    
    
    2005
    
    
    2004Balance at beginning of period
    
    $
    12,427
    
    
    $
    9,322
    
    
    $
    13,509
    
    
    $
    8,185Accruals for warranties issued during the period
    
    
    2,245
    
    
    
    4,527
    
    
    
    4,955
    
    
    
    7,096Settlements made (in cash or in kind)
    
    
    (3,095
    )
    
    
    (1,714
    )
    
    
    (6,535
    )
    
    
    (3,090
    )Foreign currency translation
    
    
    (203
    )
    
    
    (201
    )
    
    
    (555
    )
    
    
    (257
    )Balance at end of period
    
    $
    11,374
    
    
    $
    11,934
    
    
    $
    11,374
    
    
    $
    11,934
  Revenue Recognition
 We recognize revenue in accordance with SEC Staff Accounting Bulletin No. 104 (SAB 104). We
recognize revenue when persuasive evidence of an arrangement exists, product delivery has occurred
or service has been rendered, the sellers price is fixed or determinable, and collectibility is
reasonably assured. Some of our products are large volume consumables that are tested to industry
and/or customer acceptance criteria prior to shipment and delivery. Our primary shipping terms are
FOB shipping point. Therefore, revenue for these types of products is recognized when title
transfers. Certain of our product sales are accounted for as multiple-element arrangements. If we
have met defined customer acceptance experience levels with both the customer and the specific type
of equipment, we recognize the product revenue at the time of shipment and transfer of title, with
the remainder when the other elements, primarily installation, have been completed.Multiple
element transactions are primarily comprised of system sales with extended warranty contracts and
services bundled into them. We allocate consideration to multiple element transactions based on
relative object evidence of fair values, which we determine based on prices charged for such items
when sold on a stand alone basis.Some of our other products are highly customized systems and
cannot be completed or adequately tested to customer specifications prior to shipment from the
factory. We do not recognize revenue for these products until formal acceptance by the customer.
Revenue for spare parts sales is recognized at the time of shipment. Deferred margin consists
primarily of product shipments and associated costs for which a legally enforceable receivable has
been created but for which the transaction has not yet met our revenue recognition policy in
compliance with SAB 104. Revenue related to maintenance and service contracts is recognized
ratably over the duration of the contracts. Unearned maintenance and service contract revenue is
not significant and is included in deferred margin. We recognize revenue for long-term contracts at ASI in accordance with the American Institute
of Certified Public Accountants (AICPA) Statement of Position 81-1, Accounting for Performance
of Construction-Type and Certain Production-Type Contracts.We use the percentage-of-completion
method to calculate revenue and related costs of these contracts because they are long-term in
nature and estimates of cost to complete and extent of progress toward completion of long-term
contracts are available and reasonably dependable. We record revenue each period based on the
percentage of completion to date on each contract, measured by costs incurred to date relative to
the total estimated costs of each contract. We treat contracts as substantially complete when we
receive technical acceptance of our work by the customer. We disclose material changes in our
financial results that result from changes in estimates. We account for software revenue in accordance with the AICPA Statement of Position 97-2,
Software Revenue Recognition.Revenue for integration software work is recognized on a
percentage-of-completion basis. Software license revenue, which is not material to the consolidated
financial statements, is recognized when persuasive evidence of an arrangement exists, delivery has
occurred or services have been rendered, the selling price is fixed or determinable, and
collectibility is probable. Contract Loss Reserve
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ASYST TECHNOLOGIES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
 Comprehensive Loss
  Three-months Ended
    
    
    Six-months EndedSeptember 30,
    
    
    September 30,2005
    
    
    2004
    
    
    2005
    
    
    2004Net loss, as reported
    
    $
    (1,545
    )
    
    $
    (1,831
    )
    
    $
    (5,132
    )
    
    $
    (4,117
    )Foreign currency translation adjustments
    
    
    (1,677
    )
    
    
    (2,017
    )
    
    
    (3,727
    )
    
    
    (2,777
    )Unrealized gains (losses) on investments
    
    
    30
    
    
    
    30
    
    
    
    78
    
    
    
    (70
    )Comprehensive loss
    
    $
    (3,192
    )
    
    $
    (3,818
    )
    
    $
    (8,781
    )
    
    $
    (6,964
    )
 Earnings (Loss) Per Share
   Three-months Ended
    
    
    Six-months EndedSeptember 30,
    
    
    September 30,2005
    
    
    2004
    
    
    2005
    
    
    2004Restricted stock options
    
    
    504
    
    
    
    62
    
    
    
    469
    
    
    
    64Restricted stock units
    
    
    37
    
    
    
    40
    
    
    
    37
    
    
    
    20Stock options
    
    
    7,140
    
    
    
    8,235
    
    
    
    7,310
    
    
    
    8,439Convertible notes
    
    
    5,682
    
    
    
    5,682
    
    
    
    5,682
    
    
    
    5,682Total
    
    
    13,363
    
    
    
    14,019
    
    
    
    13,498
    
    
    
    14,205
 Stock-Based Compensation
  Three-months Ended
    
    
    Six-months EndedSeptember 30,
    
    
    September 30,2005
    
    
    2004
    
    
    2005
    
    
    2004Net loss  as reported
    
    $
    (1,545
    )
    
    $
    (1,831
    )
    
    $
    (5,132
    )
    
    $
    (4,117
    )Add: employee stock-based compensation expense
included in reported net loss, net of tax
    
    
    289
    
    
    
    431
    
    
    
    824
    
    
    
    756Less: total employee stock-based compensation
expense determined under fair value, net of tax
    
    
    (1,424
    )
    
    
    (2,486
    )
    
    
    (3,084
    )
    
    
    (5,239
    )Net loss
 as adjusted
    
    $
    (2,680
    )
    
    $
    (3,886
    )
    
    $
    (7,392
    )
    
    $
    (8,600
    )Basic and diluted net loss per share  As reported
    
    $
    (0.03
    )
    
    $
    (0.04
    )
    
    $
    (0.11
    )
    
    $
    (0.09
    )Basic and diluted net loss per share  As adjusted
    
    $
    (0.06
    )
    
    $
    (0.08
    )
    
    $
    (0.15
    )
    
    $
    (0.18
    )Shares used in computing As Reported and As
Adjusted net loss per share
    
    
    47,963
    
    
    
    47,428
    
    
    
    47,879
    
    
    
    47,304
 12




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##### Table of Contents



ASYST TECHNOLOGIES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
 Defined Benefit Pension Plans
   3. RESTRUCTURING CHARGES
  Severance andBenefits
    
    
    Excess Facilities
    
    
    TotalBalance, March 31, 2005
    
    $
    67
    
    
    $
    816
    
    
    $
    883Additional accruals
    
    
    0
    
    
    
    93
    
    
    
    93Non-cash utilization
    
    
    27
    
    
    
    (16
    )
    
    
    11Amounts paid in cash
    
    
    0
    
    
    
    (370
    )
    
    
    (370
    )Foreign currency
translation adjustment
    
    
    (1
    )
    
    
    (1
    )
    
    
    (2
    )Balance, June 30, 2005
    
    
    93
    
    
    
    522
    
    
    
    615Non-cash utilization
    
    
    (92
    )
    
    
    15
    
    
    
    (77
    )Amounts paid in cash
    
    
    0
    
    
    
    (122
    )
    
    
    (122
    )Foreign currency
translation adjustment
    
    
    (1
    )
    
    
    0
    
    
    
    (1
    )Balance, September 30, 2005
    
    $
    
    
    
    $
    415
    
    
    $
    415
   Severance andBenefits
    
    
    Excess Facilities
    
    
    TotalBalance, March 31, 2004
    
    $
    64
    
    
    $
    2,190
    
    
    $
    2,254Additional accruals
    
    
    6
    
    
    
    213
    
    
    
    219Amounts paid in cash
    
    
    (37
    )
    
    
    (385
    )
    
    
    (422
    )Foreign currency translation adjustment
    
    
    
    
    
    
    4
    
    
    
    4Balance, June 30, 2004
    
    $
    33
    
    
    $
    2,022
    
    
    $
    2,055Additional accruals
    
    
    482
    
    
    
    (114
    )
    
    
    368Non-cash utilization
    
    
    
    
    
    
    73
    
    
    
    73Amounts paid in cash
    
    
    (461
    )
    
    
    (279
    )
    
    
    (740
    )Foreign currency translation adjustment
    
    
    (1
    )
    
    
    (7
    )
    
    
    (8
    )Balance, September 30, 2004
    
    $
    53
    
    
    $
    1,695
    
    
    $
    1,748
  13




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##### Table of Contents



ASYST TECHNOLOGIES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
 4. INCOME TAXES
 Three-Months Ended
    
    
    Six-Months Ended(in thousands)
    
    September 30,
    
    
    September 30,2005
    
    
    2004
    
    
    2005
    
    
    2004Provision
for (benefit from) income taxes
    
    
    ($6,583
    )
    
    
    ($67
    )
    
    
    ($9,684
    )
    
    $
    1,587
    5. REPORTABLE SEGMENTS
    September 30,
    
    
    March 31,(in thousands)
    
    2005
    
    
    2005AMHS:Total Assets
    
    $
    301,287
    
    
    $
    312,391Fab Automation Products:Total Assets
    
    $
    161,194
    
    
    $
    171,383Consolidated:Total Assets
    
    $
    462,481
    
    
    $
    483,774
 Three-Months Ended
    
    
    Six-Months EndedSeptember 30,
    
    
    September 30,(in thousands)
    
    2005
    
    
    2004
    
    
    2005
    
    
    2004AMHS:Net Sales
    
    $
    85,421
    
    
    $
    99,789
    
    
    $
    162,798
    
    
    $
    167,459Cost of Sales
    
    
    56,965
    
    
    
    90,768
    
    
    
    114,062
    
    
    
    153,320Gross Profit
    
    $
    28,456
    
    
    $
    9,021
    
    
    $
    48,736
    
    
    $
    14,139Income (loss) from operations
    
    $
    13,664
    
    
    $
    (896
    )
    
    $
    21,492
    
    
    $
    (5,798
    )Fixed Assets Additions
    
    $
    1,121
    
    
    $
    1,131
    
    
    $
    1,449
    
    
    $
    1,590Amortization and Depreciation
    
    $
    4,371
    
    
    $
    4,161
    
    
    $
    8,850
    
    
    $
    8,676Fab Automation Products:Net Sales
    
    $
    39,174
    
    
    $
    68,817
    
    
    $
    79,248
    
    
    $
    140,572Cost of Sales
    
    
    24,154
    
    
    
    46,990
    
    
    
    50,774
    
    
    
    96,768Gross Profit
    
    $
    15,020
    
    
    $
    21,827
    
    
    $
    28,474
    
    
    $
    43,804Income (loss) from operations
    
    $
    (4,182
    )
    
    $
    (156
    )
    
    $
    (9,533
    )
    
    $
    41Fixed Assets Additions
    
    $
    1,077
    
    
    $
    1,647
    
    
    $
    1,538
    
    
    $
    2,044Amortization and Depreciation
    
    $
    2,056
    
    
    $
    3,022
    
    
    $
    4,251
    
    
    $
    5,382Consolidated:Net Sales
    
    $
    124,595
    
    
    $
    168,606
    
    
    $
    242,046
    
    
    $
    308,031Cost of Sales
    
    
    81,119
    
    
    
    137,758
    
    
    
    164,836
    
    
    
    250,088Gross Profit
    
    $
    43,476
    
    
    $
    30,848
    
    
    $
    77,210
    
    
    $
    57,943Income (loss) from operations
    
    $
    9,482
    
    
    $
    (1,052
    )
    
    $
    11,959
    
    
    $
    (5,757
    )Fixed Assets Additions
    
    $
    2,198
    
    
    $
    2,778
    
    
    $
    2,987
    
    
    $
    3,634Amortization and Depreciation
    
    $
    6,427
    
    
    $
    7,183
    
    
    $
    13,101
    
    
    $
    14,058
 14




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##### Table of Contents



ASYST TECHNOLOGIES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
   6. DEBT
   September 30,
    
    
    March 31,2005
    
    
    2005Convertible subordinated notes
    
    $
    86,250
    
    
    $
    86,250Secured straight bonds
    
    
    1,929
    
    
    
    2,482Long-term loans
    
    
    1,080
    
    
    
    1,915Capital leases
    
    
    679
    
    
    
    860Total long-term debt
    
    
    89,938
    
    
    
    91,507Less: Current portion of long-term debt and capital leases
    
    
    (2,198
    )
    
    
    (2,757
    )Long-term debt and capital leases net of current portion
    
    $
    87,740
    
    
    $
    88,750
  Fiscal Year Ending March 31,Remaining portion of 2006
    
    $
    1,3092007
    
    
    1,4242008
    
    
    7532009
    
    
    86,4522010 and thereafter
    
    
    $
    89,938
 Convertible Subordinated Notes
  Secured Straight Bonds
  15




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##### Table of Contents



ASYST TECHNOLOGIES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
 Lines of Credit
      7. STOCKHOLDERS EQUITY
 Employee Stock Option Grants
  16




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##### Table of Contents



ASYST TECHNOLOGIES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
 Employee Stock Purchase Plan
  Fair Value Disclosures
   Three-months Ended
    
    
    Six-months EndedSeptember 30,
    
    
    September 30,2005
    
    
    2004
    
    
    2005
    
    
    2004Risk-free interest rate
    
    
    4.01
    %
    
    
    3.21
    %
    
    
    3.58
    %
    
    
    3.28
    %Expected term of options (in years)
    
    
    4.7
    
    
    
    4.6
    
    
    
    4.7
    
    
    
    4.6Expected volatility
    
    
    88.2
    %
    
    
    92.5
    %
    
    
    88.2
    %
    
    
    92.0
    %Expected dividend yield
    
    
    0
    %
    
    
    0
    %
    
    
    0
    %
    
    
    0
    %
   Three-months Ended
    
    
    Six-months EndedSeptember 30,
    
    
    September 30,2005
    
    
    2004
    
    
    2005
    
    
    2004Risk-free interest rate
    
    
    3.31
    %
    
    
    2.08
    %
    
    
    3.31
    %
    
    
    1.83
    %Expected term of options (in years)
    
    
    0.5
    
    
    
    0.5
    
    
    
    0.5
    
    
    
    0.5Expected volatility
    
    
    45.7
    %
    
    
    90.4
    %
    
    
    45.7
    %
    
    
    85.0
    %Expected dividend yield
    
    
    0
    %
    
    
    0
    %
    
    
    0
    %
    
    
    0
    %
 Dividends
  8. RELATED PARTY TRANSACTIONS
  September 30,
    
    
    March 31,2005
    
    
    2005Accounts payable due to Shinko
    
    $
    22,350
    
    
    $
    39,221Accrued liabilities due to Shinko
    
    
    631
    
    
    
    450Accounts receivable from MECS Korea
    
    
    19
    
    
    
    100Accounts payable due to MECS Korea
    
    
    
    
    
    
    21
 17




---



##### Table of Contents



ASYST TECHNOLOGIES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
  Three-Months Ended September 30,2005
    
    
    2004Material and service purchases from Shinko
    
    $
    17,388
    
    
    $
    8,100Sales to MECS Korea
    
    
    105
    
    
    
    136
 9. COMMITMENTS AND CONTINGENCIES
 Lease Commitments
  Fiscal Year Ending March 31,
    
    Capital Lease
    
    
    Operating Lease
    
    
    Sublease IncomeRemaining portion of 2006
    
    $
    137
    
    
    $
    3,158
    
    
    $
    (261
    )2007
    
    
    246
    
    
    
    2,042
    
    
    
    (44
    )2008
    
    
    169
    
    
    
    1,636
    
    
    
    2009
    
    
    153
    
    
    
    73
    
    
    
    2010 and thereafter
    
    
    
    
    
    
    85
    
    
    
    Total
    
    
    705
    
    
    $
    6,994
    
    
    $
    (305
    )Less: interest
    
    
    (26
    )Present value of minimum lease payments
    
    
    679Less: current portion of capital leases
    
    
    (234
    )Capital leases, net of current portion
    
    $
    445
  Legal Commitments
  18




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##### Table of Contents



ASYST TECHNOLOGIES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
   Indemnifications
  10. SUBSEQUENT EVENT
  19




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##### Table of Contents



ITEM
2  MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
 Forward Looking Statements
 Except for the historical information contained herein, the following discussion includes
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 that involve risks and uncertainties. We intend
such forward-looking statements to be covered by the safe harbor provisions for forward-looking
statements contained in the Private Securities Litigation Reform Act of 1995, and we are including
this statement for purposes of complying with these safe harbor provisions. We have based these
forward-looking statements on our current expectations and projections about future events. Our
actual results could differ materially. These forward-looking statements are not guarantees of
future performance and are subject to risks, uncertainties and assumptions, including those set
forth in this section as well as those under the caption, Risk Factors. Words such as expect,
anticipate, intend, plan, believe, estimate and variations of such words and similar
expressions are intended to identify such forward-looking statements. We undertake no obligation to
publicly update or revise any forward-looking statements, whether as a result of new information,
future events or otherwise. In light of these risks, uncertainties and assumptions, the
forward-looking events discussed in this document and in our Annual Report on Form 10-K might not
occur. The following discussion should be read in conjunction with the unaudited condensed
consolidated financial statements and related notes included in this report and our audited
consolidated financial statements and related notes as of March 31, 2005 and 2004, and for each of
the three years in the period ended March 31, 2005 as filed in our Annual Report Form 10-K for the
year ended March 31, 2005. Certain prior period amounts have been reclassified to conform to
current period presentation.
  Overview
         20




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##### Table of Contents



Status of Material Weaknesses
  If we continue to fail to achieve and
maintain effective disclosure controls and procedures and internal control over financial reporting
on a consolidated basis, our stock price and investor confidence in our company could be materially
and adversely affected We experienced additional risks and costs as a result of the delayed
filing of the Form 10-Q for our fiscal 2005 second quarter and delayed filing of the Form 10-K for
fiscal year 2005.
 Critical Accounting Policies and Estimates
   Results of Operations
  Three-Months Ended
    
    
    Six-Months EndedSeptember 30,
    
    
    September 30,(in thousands)
    
    2005
    
    
    2004
    
    
    2005
    
    
    2004AMHS:Net Sales
    
    $
    85,421
    
    
    $
    99,789
    
    
    $
    162,798
    
    
    $
    167,459Cost of Sales
    
    
    56,965
    
    
    
    90,768
    
    
    
    114,062
    
    
    
    153,320Gross Profit
    
    $
    28,456
    
    
    $
    9,021
    
    
    $
    48,736
    
    
    $
    14,139Income (loss) from operations
    
    $
    13,664
    
    
    $
    (896
    )
    
    $
    21,492
    
    
    $
    (5,798
    )Fab Automation Products:Net Sales
    
    $
    39,174
    
    
    $
    68,817
    
    
    $
    79,248
    
    
    $
    140,572Cost of Sales
    
    
    24,154
    
    
    
    46,990
    
    
    
    50,774
    
    
    
    96,768Gross Profit
    
    $
    15,020
    
    
    $
    21,827
    
    
    $
    28,474
    
    
    $
    43,804Income (loss) from operations
    
    $
    (4,182
    )
    
    $
    (156
    )
    
    $
    (9,533
    )
    
    $
    41Consolidated:Net Sales
    
    $
    124,595
    
    
    $
    168,606
    
    
    $
    242,046
    
    
    $
    308,031Cost of Sales
    
    
    81,119
    
    
    
    137,758
    
    
    
    164,836
    
    
    
    250,088Gross Profit
    
    $
    43,476
    
    
    $
    30,848
    
    
    $
    77,210
    
    
    $
    57,943Income (loss) from operations
    
    $
    9,482
    
    
    $
    (1,052
    )
    
    $
    11,959
    
    
    $
    (5,757
    )
 Three-Months Ended
    
    
    Six-Months EndedSeptember 30,
    
    
    September 30,(in thousands)
    
    2005
    
    
    2004
    
    
    2005
    
    
    2004AMHS:Net Sales
    
    
    68.6
    %
    
    
    59.2
    %
    
    
    67.2
    %
    
    
    54.4
    %Cost of Sales
    
    
    45.7
    %
    
    
    53.8
    %
    
    
    47.1
    %
    
    
    49.8
    %Gross Profit
    
    
    22.9
    %
    
    
    5.4
    %
    
    
    20.1
    %
    
    
    4.6
    %Income (loss) from operations
    
    
    11.0
    %
    
    
    (0.5
    )%
    
    
    8.8
    %
    
    
    (1.9
    )%Fab Automation Products:Net Sales
    
    
    31.4
    %
    
    
    40.8
    %
    
    
    32.8
    %
    
    
    45.6
    %Cost of Sales
    
    
    19.4
    %
    
    
    27.9
    %
    
    
    21.0
    %
    
    
    31.4
    %Gross Profit
    
    
    12.0
    %
    
    
    12.9
    %
    
    
    11.8
    %
    
    
    14.2
    %Income (loss) from operations
    
    
    (3.4
    )%
    
    
    (0.1
    )%
    
    
    (3.9
    )%
    
    
    0.0
    %Consolidated:Net Sales
    
    
    100.0
    %
    
    
    100.0
    %
    
    
    100.0
    %
    
    
    100.0
    %Cost of Sales
    
    
    65.1
    %
    
    
    81.7
    %
    
    
    68.1
    %
    
    
    81.2
    %Gross Profit
    
    
    34.9
    %
    
    
    18.3
    %
    
    
    31.9
    %
    
    
    18.8
    %Income (loss) from operations
    
    
    7.6
    %
    
    
    (0.6
    )%
    
    
    4.9
    %
    
    
    (1.9
    )%
 21




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##### Table of Contents



Net Sales
 Consolidated
 AMHS
 Fab Automation
 Comparison
of Expenses, Gross Margin, Interest & Other, and Income Taxes
  Three Months Ended
    
    
    Six Months EndedSeptember 30,
    
    
    September 30,2005
    
    
    2004
    
    
    2005
    
    
    2004NET SALES
    
    
    100.0
    %
    
    
    100.0
    %
    
    
    100.0
    %
    
    
    100.0
    %COST OF SALES
    
    
    65.1
    %
    
    
    81.7
    %
    
    
    68.1
    %
    
    
    81.2
    %Gross profit
    
    
    34.9
    %
    
    
    18.3
    %
    
    
    31.9
    %
    
    
    18.8
    %OPERATING EXPENSES:Research and development
    
    
    5.7
    %
    
    
    5.4
    %
    
    
    5.8
    %
    
    
    6.1
    %Selling, general and administrative
    
    
    17.8
    %
    
    
    10.3
    %
    
    
    17.2
    %
    
    
    11.1
    %Amortization of acquired intangible assets
    
    
    3.8
    %
    
    
    3.0
    %
    
    
    4.0
    %
    
    
    3.3
    %Restructuring and other charges
    
    
    0.0
    %
    
    
    0.2
    %
    
    
    0.0
    %
    
    
    0.2
    %Total operating expenses
    
    
    27.3
    %
    
    
    18.9
    %
    
    
    27.0
    %
    
    
    20.7
    %Income (loss) from operations
    
    
    7.6
    %
    
    
    (0.6
    %)
    
    
    4.9
    %
    
    
    (1.9
    %)
 22




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##### Table of Contents



Three Months Ended
    
    
    Six Months EndedSeptember 30,
    
    
    September 30,2005
    
    
    2004
    
    
    2005
    
    
    2004INTEREST AND OTHER INCOME (EXPENSE), NET:Interest income
    
    
    0.5
    %
    
    
    0.2
    %
    
    
    0.5
    %
    
    
    0.2
    %Interest expense
    
    
    (1.5
    %)
    
    
    (1.0
    %)
    
    
    (1.5
    %)
    
    
    (1.0
    %)Other income, net
    
    
    0.3
    %
    
    
    0.3
    %
    
    
    0.4
    %
    
    
    0.4
    %Interest and other expense, net
    
    
    (0.7
    %)
    
    
    (0.5
    %)
    
    
    (0.6
    %)
    
    
    (0.4
    %)INCOME
(LOSS) BEFORE BENEFIT FROM (PROVISION FOR)
     INCOME TAXES AND
MINORITY INTEREST
    
    
    6.9
    %
    
    
    (1.1
    %)
    
    
    4.3
    %
    
    
    (2.3
    %)BENEFIT FROM (PROVISION FOR) INCOME TAXES
    
    
    (5.3
    %)
    
    
    (0.1)
    %
    
    
    (4.0
    %)
    
    
    0.5
    %MINORITY INTEREST
    
    
    (2.8
    %)
    
    
    0.1
    %
    
    
    (2.5
    %)
    
    
    0.5
    %NET LOSS
    
    
    (1.2
    %)
    
    
    (1.1
    %)
    
    
    (2.2
    %)
    
    
    (1.3
    %)
 Gross Margin
 Consolidated
   AMHS
  Fab
Automation
    23




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##### Table of Contents



Research and Development
 Three-months Ended
    
    
    
    
    
    
    Six-months Ended(in thousands, except percentage)
    
    September 30,
    
    
    
    
    
    
    September 30,2005
    
    
    2004
    
    
    Change
    
    
    2005
    
    
    2004
    
    
    ChangeResearch and development
    
    $
    7,084
    
    
    $
    9,073
    
    
    
    ($1,989
    )
    
    $
    14,151
    
    
    $
    18,752
    
    
    
    ($4,601
    )Percentage of total net sales
    
    
    5.7
    %
    
    
    5.4
    %
    
    
    
    
    
    
    5.8
    %
    
    
    6.1
    %
   Selling, General and Administrative
 Three-months Ended
    
    
    
    
    
    
    Six-months Ended(in thousands, except percentage)
    
    September 30,
    
    
    
    
    
    
    September 30,2005
    
    
    2004
    
    
    Change
    
    
    2005
    
    
    2004
    
    
    ChangeSelling, general and administrative
    
    $
    22,196
    
    
    $
    17,419
    
    
    $
    4,777
    
    
    $
    41,375
    
    
    $
    34,269
    
    
    $
    7,106Percentage of total net sales
    
    
    17.8
    %
    
    
    10.3
    %
    
    
    
    
    
    
    17.2
    %
    
    
    11.1
    %
  Amortization of Acquired Intangible Assets
 Three-Months Ended
    
    
    Six-Months Ended(in thousands, except percentage)
    
    September 30,
    
    
    September 30,2005
    
    
    2004
    
    
    Change
    
    
    2005
    
    
    2004
    
    
    ChangeAmortization of acquired intangible assets
    
    $
    4,714
    
    
    $
    5,040
    
    
    
    ($326
    )
    
    $
    9,632
    
    
    $
    10,092
    
    
    
    ($460
    )Percentage of total net sales
    
    
    3.8
    %
    
    
    3.0
    %
    
    
    
    
    
    
    4.0
    %
    
    
    3.3
    %
  Restructuring Charges
  Three-Months Ended
    
    
    Six-Months Ended(in thousands, except percentage)
    
    September 30,
    
    
    September 30,2005
    
    
    2004
    
    
    Change
    
    
    2005
    
    
    2004
    
    
    ChangeRestructuring charges
    
    
    
    
    
    $
    368
    
    
    
    ($368
    )
    
    $
    93
    
    
    $
    587
    
    
    
    ($494
    )Percentage of total net sales
    
    
    0.0
    %
    
    
    0.2
    %
    
    
    
    
    
    
    0.0
    %
    
    
    0.2
    %
 24




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##### Table of Contents



(in thousands)
    
    Severance and
    
    
    Excess Facilities
    
    
    TotalBenefitsBalance, March 31, 2005
    
    $
    67
    
    
    $
    816
    
    
    $
    883Additional accruals
    
    
    
    
    
    
    93
    
    
    
    93Non-cash utilization
    
    
    27
    
    
    
    (16
    )
    
    
    11Amounts paid in cash
    
    
    
    
    
    
    (370
    )
    
    
    (370
    )Foreign currency
translation adjustment
    
    
    (1
    )
    
    
    (1
    )
    
    
    (2
    )Balance, June 30, 2005
    
    
    93
    
    
    
    522
    
    
    
    615Non-cash utilization
    
    
    (92
    )
    
    
    15
    
    
    
    (77
    )Amounts paid in cash
    
    
    
    
    
    
    (122
    )
    
    
    (122
    )Foreign currency
translation adjustment
    
    
    (1
    )
    
    
    
    
    
    
    (1
    )Balance, September 30, 2005
    
    $
    
    
    
    $
    415
    
    
    $
    415
 Interest
Income, Interest Expense and Other Income, Net
 Three-Months Ended
    
    
    Six-Months Ended(in thousands)
    
    September 30,
    
    
    September 30,2005
    
    
    2004
    
    
    Change
    
    
    2005
    
    
    2004
    
    
    ChangeInterest income
    
    $
    569
    
    
    $
    381
    
    
    $
    188
    
    
    $
    1,092
    
    
    $
    718
    
    
    $
    374Interest expense
    
    $
    1,813
    
    
    $
    1,635
    
    
    $
    178
    
    
    $
    3,412
    
    
    $
    3,262
    
    
    $
    150Other income, net
    
    $
    333
    
    
    $
    449
    
    
    
    ($116
    )
    
    $
    850
    
    
    $
    1,183
    
    
    
    ($333
    )
    Income Taxes
 Three-Months Ended
    
    
    Six-Months Ended(in thousands, except percentage)
    
    September 30,
    
    
    September 30,2005
    
    
    2004
    
    
    Change
    
    
    2005
    
    
    2004
    
    
    ChangeBenefit from (provision for) income taxes
    
    
    ($6,583
    )
    
    
    ($67
    )
    
    
    ($6,516
    )
    
    
    ($9,684
    )
    
    $
    1,587
    
    
    
    ($11,271
    )Percentage of total net sales
    
    
    (5.3
    %)
    
    
    (0.1%
    )
    
    
    
    
    
    
    (4.0
    %)
    
    
    0.5
    %
   25




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Liquidity and Capital Resources
    Six-Months Ended(in thousands)
    
    September 30,2005
    
    
    2004Net cash used in operating activities
    
    $
    (9.2
    )
    
    $
    (18.9
    )Net cash provided by (used in) investing
activities
    
    $
    13.8
    
    
    $
    (34.9
    )Net cash provided by financing activities
    
    $
    16.8
    
    
    $
    20.3
 Cash Flows from Operating Activities
     Cash Flows from Investing Activities
   26




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Cash Flows from Financing Activities
        27




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Recent Accounting Pronouncements
 The Meaning of
Other-Than-Temporary Impairment and Its Application to Certain Investments.
 Inventory Costs  an Amendment of ARB No. 43,
Chapter 4
 28




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##### Table of Contents



Exchange of Nonmonetary Assets  an
amendment of APB Opinion No. 29"
 Share Based Payment. Accounting for Stock-Based Compensation
 Accounting Changes and Error Corrections: a
Replacement of Accounting Principles Board Opinion No. 20 (APB 20) and FASB Statement No 3
 Accounting for
Rental Costs Incurred during a Construction Period
 The Meaning of Other-Than-Temporary Impairment and Its Application to Certain Investments,
 Risk Factors
 Risks Related to Our Business
 We have a history of significant losses.
  If we continue to fail to achieve and maintain effective disclosure controls and procedures and
internal control over financial reporting on a consolidated basis, our stock price and investor
confidence in our company could be materially and adversely affected.
  29




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We experienced additional risks and costs as a result of the delayed filing of the Form 10-Q for
our fiscal year 2005 second quarter and delayed filing of the Form 10-K for fiscal year 2005.
  30




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If we fail to manage effectively our ASI joint venture, our sales of Automated Material Handling
Systems could be adversely affected and the sales mix between AMHS and our other products could
affect our overall financial performance.
   31




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If we are unable to increase our sales of AMHS to FPD manufacturers, or if the FPD industry enters
a cyclical downturn, our growth prospects could be negatively affected.
   Our gross margins on 300mm products may be lower than on 200mm products, which could adversely
affect our ability to become and remain profitable.
   Most of our manufacturing is outsourced and we rely on a single contract manufacturer for much of
our Fab Automation Product manufacturing, which could disrupt the availability of our Fab
Automation Products and adversely affect our gross margins.
   32




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Shortages of components necessary for product assembly by Solectron or us can delay shipments to
our customers and can lead to increased costs, which may negatively impact our financial results.
  We
may have additional tax liabilities that could be materially higher
than we expect.
   We have significant existing debts; the restrictive covenants under some of our debt agreements
may limit our ability to expand or pursue our business strategy; if we are forced to prepay some
or all of this indebtedness our financial position would be severely and adversely affected.
    33




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##### Table of Contents




    
    incur additional indebtedness;
    
    pay dividends and make distributions in respect of our capital stock;
    
    redeem capital stock;
    
    make investments or other restricted payments;
    
    engage in transactions with shareholders and affiliates;
    
    create liens;
    
    sell or otherwise dispose of assets;
    
    make payments on our debt, other than in the ordinary course; and
    
    engage in mergers and acquisitions.
    We may need additional financing in the future to meet our capital needs; if we do need to secure
financing, it may not be available on favorable terms.
  34




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If our fully integrated tool front-end solutions are not widely accepted, our growth prospects
could be negatively affected.
  Because we do not have long-term contracts with our customers, our customers may cease purchasing
our products at any time.
  
    
    our customers can cease purchasing our products at any time, without penalty;
    
    our customers are free to purchase products from our competitors;
    
    we are exposed to competitive price pressure on each order; and
    
    our customers are not required to make minimum purchases.
  We depend on large purchases from a few significant customers, and any loss, cancellation,
reduction or delay in purchases by, or failure to collect receivables from, these customers could
harm our business.
   35




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If we are unable to develop and introduce new products and technologies in a timely manner, our
business could be negatively affected.
  We may be unable to protect our intellectual property rights and we may become involved in
litigation concerning the intellectual property rights of others.
     36




---



##### Table of Contents



We may not be able to integrate efficiently the operations of our acquisitions, and may incur
substantial losses in the divestiture of assets or operations.
  As our quarterly and yearly operating results are subject to variability, comparisons between
periods may not be meaningful; this variability in our results could cause our stock price to
decline.
  
    
    general trends in the overall economy, electronics industry and semiconductor and FPD
manufacturing industries;
    
    fluctuations in the semiconductor and FPD equipment markets;
    
    changes in customer buying patterns;
    
    the degree of competition we face;
    
    the size, timing and product mix of customer orders;
    
    lost sales due to any failure in the outsourcing of our manufacturing;
    
    the availability of key components;
    
    the timing of product shipment and acceptance, which are factors in determining when we
recognize revenue; and
    
    the timely introduction and acceptance of new products.
  Our operations are vulnerable to interruption or loss due to natural disasters, power loss,
strikes and other events beyond our control, which would adversely affect our business.
 37




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##### Table of Contents



We face significant economic and regulatory risks because a majority of our net sales are derived
from outside the United States.
  
    
    exposure to currency fluctuations;
    
    the imposition of governmental controls;
    
    the laws of certain foreign countries may not protect our intellectual property to the
same extent as do the laws of the United States;
    
    the need to comply with a wide variety of foreign and U.S. export laws;
    
    political and economic instability;
    
    terrorism and anti-American sentiment;
    
    trade restrictions;
    
    slowing economic growth and availability of investment capital and credit;
    
    changes in tariffs and taxes;
    
    longer product acceptance and payment cycles;
    
    the greater difficulty in administering business overseas; and
    
    inability to enforce payment obligations or recourse to legal protections accorded
creditors to the same extent within the U.S.
  38




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##### Table of Contents



Our current and planned operations may strain our resources and increase our operating expenses.
   If we lose any of our key personnel or are unable to attract, train or retain qualified personnel,
our business would be harmed.
    When we account for employee stock options using the fair value method, it will significantly
impact our results from operations.
  39




---



##### Table of Contents



Risks Related to our Industry
 The semiconductor manufacturing equipment industry is highly cyclical and is affected by recurring
downturns in the semiconductor industry, and these cycles can harm our operating results.
    We may not effectively compete in a highly competitive semiconductor manufacturing equipment
industry.
     40




---



##### Table of Contents



ITEM 3  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
  Interest Rate Risk.
 Foreign Currency Exchange Risk
 41




---



##### Table of Contents



ITEM 4  CONTROLS AND PROCEDURES
 Evaluation of Disclosure Controls and Procedures
    Status of Material Weaknesses
    Internal Control  Integrated Framework
 42




---



##### Table of Contents



43




---



##### Table of Contents



44




---



##### Table of Contents



Changes in Internal Control Over Financial Reporting
  Managements Remediation Initiatives and Interim Measures
   General plan for hiring and training of personnel.
 
    
    We plan to hire additional qualified accounting personnel in the U.S. and Japan, in the
areas of general accounting, compliance reporting, internal audit and tax; and
    
    We plan to implement an enhanced formal training process for financial staff in an effort
to ensure that personnel have the necessary competency, training and supervision for their
assigned level of responsibility and the nature and complexity of our business.
 Accurate Preparation and Review of Financial Statements, Reconciliations, and Journal
Entries.
 
    
    training and improved monitoring of financial staff;
    
    implementing new month-end closing procedures with improved reconciliation and controls
over standardized checklists to help ensure such procedures are consistently and effectively
applied throughout the organization; and
    
    implementing procedures to more effectively accumulate and analyze financial information.
 General plan for documenting and enhancing internal controls at ASI.
 45




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##### Table of Contents



Interim Measures
    
    
    We hired a chief financial officer in June for our majority-owned joint venture ASI and
in July a controller for our corporate headquarters in California;
    
    We retained on an interim basis outside consultants with relevant international tax
experience, working under the supervision and direction of our management, to assist with
the fiscal 2006 interim reporting process;
    
    Corporate finance staff spent several weeks at ASI during the close process for both the first and second quarter of fiscal year 2006
and conducted a detailed review of the reporting process at ASI and performed additional
analyses and reconciliations in an effort to ensure the accuracy of financial reporting;
    
    Training and instruction has been provided to ASI accounting staff to enhance their
understanding of relevant U.S. accounting principles and regulatory reporting requirements;
    
    New corporate accounting policies are being implemented at ASI and will be reviewed on a
regular basis for compliance; and
    
    We conducted a detailed and extensive review of the following matters: revenue
recognition, income taxes, stock and stock option transactions, account reconciliations and
journal entries.
 
 PART II  OTHER INFORMATION
 
 Item 1  Legal Proceedings
  46




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##### Table of Contents



Item 4  Submission of Matters to a Vote of Security Holders
  Proposal 1
 Director
    
    Votes For
    
    Votes WithheldStephen S. Schwartz, Ph.D.
    
    37,020,814
    
    2,385,258Stanley Grubel
    
    37,094,387
    
    2,311,685Tsuyoshi Kawanishi
    
    34,077,759
    
    5,328,313Robert A. McNamara
    
    38,270,917
    
    1,135,155Anthony E Santelli
    
    37,092,237
    
    2,313,835William Simon
    
    38,267,997
    
    1,138,075Walter W. Wilson
    
    38,271,425
    
    1,134,647
 Proposal 2
  "For"
    
    "Against"
    
    "Abstain"
    
    Broker Non-Votes12,489,209
    
    5,886,109
    
    229,090
    
    20,801,664
 Proposal 3
  "For"
    
    "Against"
    
    "Abstain"
    
    Broker Non-Votes39,309,419
    
    56,464
    
    40,189
    
    -0-
 47




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##### Table of Contents



ITEM 6  EXHIBITS
 Exhibit
    
    
    
    Incorporated by Reference
    
    FiledNumber
    
    Exhibit Description
    
    Form
    
    File No.
    
    Filing Date
    
    Herewith3.1
    
    Amended and Restated Articles of Incorporation of the Company.
    
    S-1
    
    333-66184
    
    7/19/19933.2
    
    Bylaws of the Company.
    
    S-1
    
    333-66184
    
    7/19/19933.3
    
    Certificate of Amendment of the Amended and Restated Articles of
Incorporation, filed September 24, 1999.
    
    10-Q
    
    000-22430
    
    10/21/19993.4
    
    Certificate of Amendment of the Amended and Restated Articles of
Incorporation, filed October 5, 2000.
    
    DEF 14A
    
    000-22430
    
    7/31/20004.1
    
    Rights Agreement among the Company and Bank of Boston, N.A., as
Rights Agent, dated June 25, 1998.
    
    8-K
    
    000-22430
    
    6/29/19984.2
    
    Common Stock Purchase Agreement between the Company and various
purchasers, dated as of May 26, 1999.
    
    8-K
    
    000-22430
    
    6/18/19994.3
    
    Indenture dated as of July 3, 2001 between the Company, State
Street Bank and Trust Company of California, N.A., as trustee,
including therein the forms of the notes.
    
    10-Q
    
    000-22430
    
    8/14/20014.4
    
    Registration Rights Agreement dated as of July 3, 2001 between
the Company and Merrill Lynch & Co., Merrill Lynch, Pierce,
Fenner & Smith, Incorporated, and ABN Amro Rothschild LLC.
    
    10-Q
    
    000-22430
    
    8/14/20014.5
    
    Amendment to Rights Agreement among the Company and Bank of
Boston, N.A. as Rights Agent, dated November 30, 2001.
    
    10-K
    
    000-22430
    
    6/28/200210.59
    
    2003 Equity Incentive Plan as amended by amendments approved by
the Registrants shareholders on September 21, 2004 and August
23, 2005.
    
    8-K
    
    000-22430
    
    8/29/200510.60
    
    Employment Agreement dated as of August 29, 2005, between the
Company and Alan S. Lowe.
    
    
    
    
    
    
    
    X31.1
    
    Certification of the Chief Executive Officer required by Rule
13a-14(a). (pursuant to Section 302 of the Sarbanes-Oxley Act of
2002).
    
    
    
    
    
    
    
    X31.2
    
    Certification of the Chief Financial Officer required by Rule
13a-14(a). (pursuant to Section 302 of the Sarbanes-Oxley Act of
2002).
    
    
    
    
    
    
    
    X32.1
    
    Combined Certifications of the Chief Executive Officer and Chief
Financial Officer required by Rule 13a-14(b). (pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002).
    
    
    
    
    
    
    
    X
 48




---



##### Table of Contents



SIGNATURES
  ASYST TECHNOLOGIES, INC.Date: November 9, 2005
    By:
    /s/  Robert J. NiklRobert J. NiklSenior Vice President and
Chief Financial Officer  49




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##### Table of Contents



EXHIBIT INDEX
 Exhibit
    
    
    
    Incorporated by Reference
    
    FiledNumber
    
    Exhibit Description
    
    Form
    
    File No.
    
    Filing Date
    
    Herewith3.1
    
    Amended and Restated Articles of Incorporation of the Company.
    
    S-1
    
    333-66184
    
    7/19/19933.2
    
    Bylaws of the Company.
    
    S-1
    
    333-66184
    
    7/19/19933.3
    
    Certificate of Amendment of the Amended and Restated Articles of
Incorporation, filed September 24, 1999.
    
    10-Q
    
    000-22430
    
    10/21/19993.4
    
    Certificate of Amendment of the Amended and Restated Articles of
Incorporation, filed October 5, 2000.
    
    DEF 14A
    
    000-22430
    
    7/31/20004.1
    
    Rights Agreement among the Company and Bank of Boston, N.A., as
Rights Agent, dated June 25, 1998.
    
    8-K
    
    000-22430
    
    6/29/19984.2
    
    Common Stock Purchase Agreement between the Company and various
purchasers, dated as of May 26, 1999.
    
    8-K
    
    000-22430
    
    6/18/19994.3
    
    Indenture dated as of July 3, 2001 between the Company, State
Street Bank and Trust Company of California, N.A., as trustee,
including therein the forms of the notes.
    
    10-Q
    
    000-22430
    
    8/14/20014.4
    
    Registration Rights Agreement dated as of July 3, 2001 between
the Company and Merrill Lynch & Co., Merrill Lynch, Pierce,
Fenner & Smith, Incorporated, and ABN Amro Rothschild LLC.
    
    10-Q
    
    000-22430
    
    8/14/20014.5
    
    Amendment to Rights Agreement among the Company and Bank of
Boston, N.A. as Rights Agent, dated November 30, 2001.
    
    10-K
    
    000-22430
    
    6/28/200210.59
    
    2003 Equity Incentive Plan as amended by amendments approved by
the Registrants shareholders on September 21, 2004 and August
23, 2005.
    
    8-K
    
    000-22430
    
    8/29/200510.60
    
    Employment Agreement dated as of August 29, 2005, between the
Company and Alan S. Lowe.
    
    
    
    
    
    
    
    X31.1
    
    Certification of the Chief Executive Officer required by Rule
13a-14(a). (pursuant to Section 302 of the Sarbanes-Oxley Act of
2002).
    
    
    
    
    
    
    
    X31.2
    
    Certification of the Chief Financial Officer required by Rule
13a-14(a). (pursuant to Section 302 of the Sarbanes-Oxley Act of
2002).
    
    
    
    
    
    
    
    X32.1
    
    Combined Certifications of the Chief Executive Officer and Chief
Financial Officer required by Rule 13a-14(b). (pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002).
    
    
    
    
    
    
    
    X