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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, 2006
 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
    
    94-2942251(State or other jurisdiction
    
    (IRS Employer identification Number)of incorporation or organization)
 46897 Bayside Parkway, Fremont, California 94538
 (510) 661-5000
 o þ
  Large accelerated filer o
    
    Accelerated filer þ
    
    Non-accelerated filer o
 þ o
 o þ




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##### Table of Contents



ASYST TECHNOLOGIES, INC.
 TABLE OF CONTENTS
  
 PagePART I. FINANCIAL INFORMATIONItem 1. Financial Statements:
    
    
    3Condensed Consolidated Balance Sheets  September 30, 2006 and March 31, 2006
    
    
    3Condensed Consolidated Statements of Operations  Three and Six-Month Periods Ended
September 30, 2006 and September 30, 2005
    
    
    4Condensed Consolidated Statements of Cash Flows  Six-Month Periods Ended September 30,
2006 and September 30, 2005
    
    
    5Notes to Condensed Consolidated Financial Statements
    
    
    6Item 2.Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    29Item 3.Quantitative and Qualitative Disclosures About Market Risk
    
    
    40Item 4.Controls and Procedures
    
    
    41PART II. OTHER INFORMATIONItem 1.Legal Proceedings
    
    
    43Item 1A.Risk Factors
    
    
    44Item 6.Exhibits
    
    
    58Signatures
    
    
    59Exhibit IndexEXHIBIT 31.1EXHIBIT 31.2EXHIBIT 32.1
 2




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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 31,2006
    
    
    2006ASSETSCURRENT ASSETS:Cash and cash equivalents
    
    $
    87,466
    
    
    $
    94,622Short-term investments
    
    
    
    
    
    
    15,304Accounts receivable, net
    
    
    161,984
    
    
    
    141,453Inventories
    
    
    54,123
    
    
    
    33,219Prepaid expenses and other current assets
    
    
    23,529
    
    
    
    26,831Total current assets
    
    
    327,102
    
    
    
    311,429Property and equipment, net
    
    
    24,684
    
    
    
    23,108Goodwill
    
    
    83,077
    
    
    
    58,840Intangible assets, net
    
    
    53,843
    
    
    
    19,334Other assets
    
    
    6,815
    
    
    
    2,583Total assets
    
    $
    495,521
    
    
    $
    415,294LIABILITIES, MINORITY INTEREST AND SHAREHOLDERS EQUITYCURRENT LIABILITIES:Short-term loans and notes payable
    
    $
    23,506
    
    
    $
    1,443Current portion of long-term debt and capital leases
    
    
    7,221
    
    
    
    1,368Accounts payable
    
    
    89,182
    
    
    
    75,376Accounts payable-related parties
    
    
    22,462
    
    
    
    13,409Accrued and other liabilities
    
    
    81,714
    
    
    
    62,902Deferred margin
    
    
    7,609
    
    
    
    5,335Total current liabilities
    
    
    231,694
    
    
    
    159,833LONG-TERM LIABILITIESLong-term debt and capital leases, net of current
portion
    
    
    147,162
    
    
    
    87,168Deferred tax liability
    
    
    17,742
    
    
    
    3,119Other long-term liabilities
    
    
    10,381
    
    
    
    10,974Total long-term liabilities
    
    
    175,285
    
    
    
    101,261COMMITMENTS AND CONTINGENCIES (see Notes 13 and 14)MINORITY INTEREST
    
    
    116
    
    
    
    66,521SHAREHOLDERS EQUITYCommon stock, no par value:Authorized
shares  300,000,000Outstanding shares  48,977,188 and 48,462,235
shares at September 30, 2006 and March 31, 2006,
respectively
    
    
    477,371
    
    
    
    473,422Deferred stock-based compensation
    
    
    
    
    
    
    (1,319
    )Accumulated deficit
    
    
    (388,383
    )
    
    
    (385,178
    )Accumulated other comprehensive income
    
    
    (562
    )
    
    
    754Total shareholders equity
    
    
    88,426
    
    
    
    87,679Total liabilities, minority interest and
shareholders equity
    
    $
    495,521
    
    
    $
    415,294
  3




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ASYST TECHNOLOGIES, INC.
 
 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
 Three Months Ended
    
    
    Six Months EndedSeptember 30,
    
    
    September 30,2006
    
    
    2005
    
    
    2006
    
    
    2005(as restated)
    
    
    
    
    
    
    (as restated)NET SALES
    
    $
    122,649
    
    
    $
    124,595
    
    
    $
    239,630
    
    
    $
    242,046COST OF SALES
    
    
    88,139
    
    
    
    81,145
    
    
    
    164,063
    
    
    
    164,888Gross profit
    
    
    34,510
    
    
    
    43,450
    
    
    
    75,567
    
    
    
    77,158OPERATING EXPENSES:Research and development
    
    
    9,402
    
    
    
    7,118
    
    
    
    17,989
    
    
    
    14,220Selling, general and administrative
    
    
    20,434
    
    
    
    22,226
    
    
    
    41,838
    
    
    
    41,451Amortization of acquired intangible assets
    
    
    5,225
    
    
    
    4,714
    
    
    
    8,549
    
    
    
    9,632Restructuring and other charges (credits)
    
    
    (28
    )
    
    
    
    
    
    
    1,784
    
    
    
    93Total operating expenses
    
    
    35,033
    
    
    
    34,058
    
    
    
    70,160
    
    
    
    65,396Income from operations
    
    
    (523
    )
    
    
    9,392
    
    
    
    5,407
    
    
    
    11,762INTEREST AND OTHER EXPENSE, NET:Interest income
    
    
    539
    
    
    
    569
    
    
    
    1,276
    
    
    
    1,092Interest expense
    
    
    (2,319
    )
    
    
    (1,813
    )
    
    
    (3,946
    )
    
    
    (3,412
    )Other income, net
    
    
    1,010
    
    
    
    333
    
    
    
    1,796
    
    
    
    850Interest and other expense, net
    
    
    (770
    )
    
    
    (911
    )
    
    
    (874
    )
    
    
    (1,470
    )INCOME BEFORE INCOME TAXES AND MINORITY INTEREST
    
    
    (1,293
    )
    
    
    8,481
    
    
    
    4,533
    
    
    
    10,292PROVISION FOR INCOME TAXES
    
    
    (1,770
    )
    
    
    (6,583
    )
    
    
    (6,092
    )
    
    
    (9,684
    )MINORITY INTEREST
    
    
    338
    
    
    
    (3,533
    )
    
    
    (1,749
    )
    
    
    (5,937
    )NET LOSS PRIOR TO CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING
PRINCIPLE
    
    
    (2,725
    )
    
    
    (1,635
    )
    
    
    (3,308
    )
    
    
    (5,329
    )Cumulative effect of change in accounting principle
    
    
    
    
    
    
    
    
    
    
    103
    
    
    
    NET LOSS
    
    $
    (2,725
    )
    
    $
    (1,635
    )
    
    $
    (3,205
    )
    
    $
    (5,329
    )BASIC AND DILUTED NET LOSS PRIOR TO CUMULATIVE EFFECT OF CHANGE
IN ACCOUNTING PRINCIPLE
    
    $
    (0.06
    )
    
    $
    (0.03
    )
    
    $
    (0.07
    )
    
    $
    (0.11
    )Cumulative effect of change in accounting principle
    
    
    0.00
    
    
    
    0.00
    
    
    
    (0.00
    )
    
    
    0.00BASIC AND DILUTED NET LOSS PER SHARE
    
    $
    (0.06
    )
    
    $
    (0.03
    )
    
    $
    (0.07
    )
    
    $
    (0.11
    )SHARES USED IN THE PER SHARE CALCULATION  Basic and Diluted
    
    
    48,854
    
    
    
    47,963
    
    
    
    48,723
    
    
    
    47,879
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ASYST TECHNOLOGIES, INC.
 
 CONDENSED CONSOLIDATED
STATEMENTS OF CASH FLOWS
(Unaudited, in thousands)
 Six Months EndedSeptember 30,2006
    
    
    2005(as restated)CASH FLOWS FROM OPERATING ACTIVITIES:NET LOSS
    
    $
    (3,205
    )
    
    $
    (5,329
    )Adjustments to reconcile net loss to net cash provided by (used
in) operating activities:Depreciation and amortization
    
    
    12,896
    
    
    
    13,259Allowance for doubtful accounts
    
    
    (5,546
    )
    
    
    4,644Minority interest in net loss in consolidated subsidiary
    
    
    1,749
    
    
    
    5,937Loss (gain) on disposal of fixed assets
    
    
    320
    
    
    
    (391
    )Stock-based compensation expense
    
    
    3,153
    
    
    
    1,093Non-cash restructuring charges
    
    
    188
    
    
    
    In process
research and development
    
    
    1,519
    
    
    
    Cumulative effect of change in accounting principle
    
    
    (103
    )
    
    
    Amortization of lease incentive payments
    
    
    (312
    )
    
    
    Deferred taxes, net
    
    
    (4,431
    )
    
    
    (619
    )Changes in assets and liabilities, net of acquisitions:Accounts receivable
    
    
    (15,327
    )
    
    
    (20,099
    )Inventories, net
    
    
    (17,775
    )
    
    
    (469
    )Prepaid expenses and other assets
    
    
    (2,732
    )
    
    
    12,324Accounts payable, accrued and other liabilities and deferred margin
    
    
    32,044
    
    
    
    (19,542
    )Net cash provided by (used in) operating activities
    
    
    2,438
    
    
    
    (9,192
    )CASH FLOWS FROM INVESTING ACTIVITIES:Purchases of investments
    
    
    
    
    
    
    (116,413
    )Sales or maturity of investments
    
    
    15,300
    
    
    
    133,225Purchase of additional investment in subsidiary
    
    
    (105,188
    )
    
    
    Purchases of property and equipment, net
    
    
    (5,160
    )
    
    
    (2,987
    )Net cash provided by (used in) investing activities
    
    
    (95,048
    )
    
    
    13,825CASH FLOW FROM FINANCING ACTIVITIES:Net proceeds from line of credit
    
    
    22,102
    
    
    
    21,074Dividends paid to minority shareholder of ASI
    
    
    (6,317
    )
    
    
    (2,613
    )Proceeds from long-term debt
    
    
    82,340
    
    
    
    Principal payments on long-term debt and capital leases
    
    
    (14,812
    )
    
    
    (2,245
    )Proceeds from issuance of common stock
    
    
    2,085
    
    
    
    626Net cash provided by financing activities
    
    
    85,398
    
    
    
    16,842Effect of exchange rate changes on cash and cash equivalents
    
    
    56
    
    
    
    (1,355
    )INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
    
    
    (7,156
    )
    
    
    20,120CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD
    
    
    94,622
    
    
    
    55,094CASH AND CASH EQUIVALENTS, END OF PERIOD
    
    $
    87,466
    
    
    $
    75,214
  5




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##### Table of Contents



ASYST TECHNOLOGIES, INC.
 
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
 1.
BASIS OF PRESENTATION
   2. RESULTS OF INDEPENDENT DIRECTORS STOCK OPTION INVESTIGATION
     6




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CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
 Three Months EndedSeptember 30, 2005(as reported)
    
    
    (adjustments)
    
    
    (as restated)NET SALES
    
    $
    124,595
    
    
    $
    
    
    
    $
    124,595COST OF SALES
    
    
    81,119
    
    
    
    26
    
    
    
    81,145Gross profit
    
    
    43,476
    
    
    
    (26
    )
    
    
    43,450OPERATING EXPENSES:Research and development
    
    
    7,084
    
    
    
    34
    
    
    
    7,118Selling, general and administrative
    
    
    22,196
    
    
    
    30
    
    
    
    22,226Amortization of acquired intangible assets
    
    
    4,714
    
    
    
    
    
    
    
    4,714Restructuring charges
    
    
    
    
    
    
    
    
    
    
    Total operating expenses
    
    
    33,994
    
    
    
    64
    
    
    
    34,058INCOME FROM OPERATIONS
    
    
    9,482
    
    
    
    (90
    )
    
    
    9,392INTEREST AND OTHER INCOME, NETInterest income
    
    
    569
    
    
    
    
    
    
    
    569Interest expense
    
    
    (1,813
    )
    
    
    
    
    
    
    (1,813
    )Other income, net
    
    
    333
    
    
    
    
    
    
    
    333INCOME
BEFORE PROVISION FOR INCOME TAXES AND MINORITY
INTEREST
    
    
    8,571
    
    
    
    (90
    )
    
    
    8,481PROVISION FOR INCOME TAXES
    
    
    (6,583
    )
    
    
    
    
    
    
    (6,583
    )MINORITY INTEREST
    
    
    (3,533
    )
    
    
    
    
    
    
    (3,533
    )NET LOSS
    
    $
    (1,545
    )
    
    $
    (90
    )
    
    $
    (1,635
    )BASIC AND DILUTED NET LOSS PER SHARE
    
    $
    (0.03
    )
    
    $
    (0.00
    )
    
    $
    (0.03
    )SHARES USED IN THE PER SHARE CALCULATION  Basic and Diluted
    
    
    47,963
    
    
    
    47,963
    
    
    
    47,963
 CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
 Six Months EndedSeptember 30, 2005(as reported)
    
    
    (adjustments)
    
    
    (as restated)NET SALES
    
    $
    242,046
    
    
    $
    
    
    
    $
    242,046COST OF SALES
    
    
    164,836
    
    
    
    52
    
    
    
    164,888Gross profit
    
    
    77,210
    
    
    
    (52
    )
    
    
    77,158OPERATING EXPENSES:Research and development
    
    
    14,151
    
    
    
    69
    
    
    
    14,220Selling, general and administrative
    
    
    41,375
    
    
    
    76
    
    
    
    41,451Amortization of acquired intangible assets
    
    
    9,632
    
    
    
    
    
    
    
    9,632Restructuring charges
    
    
    93
    
    
    
    
    
    
    
    93Total operating expenses
    
    
    65,251
    
    
    
    145
    
    
    
    65,396INCOME FROM OPERATIONS
    
    
    11,959
    
    
    
    (197
    )
    
    
    11,762INTEREST AND OTHER INCOME, NETInterest income
    
    
    1,092
    
    
    
    
    
    
    
    1,092Interest expense
    
    
    (3,412
    )
    
    
    
    
    
    
    (3,412
    )Other income, net
    
    
    850
    
    
    
    
    
    
    
    850INCOME
BEFORE PROVISION FOR INCOME TAXES AND MINORITY
INTEREST
    
    
    10,489
    
    
    
    (197
    )
    
    
    10,292PROVISION FOR INCOME TAXES
    
    
    (9,684
    )
    
    
    
    
    
    
    (9,684
    )MINORITY INTEREST
    
    
    (5,937
    )
    
    
    
    
    
    
    (5,937
    )NET LOSS
    
    $
    (5,132
    )
    
    $
    (197
    )
    
    $
    (5,329
    )BASIC AND DILUTED NET LOSS PER SHARE
    
    $
    (0.11
    )
    
    $
    (0.00
    )
    
    $
    (0.11
    )SHARES USED IN THE PER SHARE CALCULATION  Basic and Diluted
    
    
    47,879
    
    
    
    47,879
    
    
    
    47,879
 CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
 Six Months EndedSeptember 30, 2005as reported
    
    
    adjustments
    
    
    as restatedCASH FLOWS FROM OPERATING ACTIVITIES:Net loss
    
    $
    (5,132
    )
    
    $
    (197
    )
    
    $
    (5,329
    )Adjustments to reconcile net loss to net cash used in operating activities:Depreciation and amortization
    
    
    13,259
    
    
    
    
    
    
    
    13,259Allowance for doubtful accounts
    
    
    4,644
    
    
    
    
    
    
    
    4,644Minority interest in net income in consolidated subsidiary
    
    
    5,937
    
    
    
    
    
    
    
    5,937Stock-based compensation expense
    
    
    824
    
    
    
    269
    
    
    
    1,093Deferred income tax
    
    
    (619
    )
    
    
    
    
    
    
    (619
    )Loss on disposal of fixed assets
    
    
    (391
    )
    
    
    
    
    
    
    (391
    )Changes in assets and liabilities:Accounts receivable
    
    
    (20,099
    )
    
    
    
    
    
    
    (20,099
    )Inventories,
net
    
    
    (469
    )
    
    
    
    
    
    
    (469
    )Prepaid expenses and other assets
    
    
    12,324
    
    
    
    
    
    
    
    12,324Accounts payable, accrued liabilities and deferred margin
    
    
    (19,470
    )
    
    
    (72
    )
    
    
    (19,542
    )Net cash used in operating activities
    
    
    (9,192
    )
    
    
    
    
    
    
    (9,192
    )CASH FLOWS FROM INVESTING ACTIVITIES:Purchase of short-term investments
    
    
    (116,413
    )
    
    
    
    
    
    
    (116,413
    )Sales or maturity of investments
    
    
    133,225
    
    
    
    
    
    
    
    133,225Purchase of property and equipment, net
    
    
    (2,987
    )
    
    
    
    
    
    
    (2,987
    )Net cash
provided by investing activities
    
    
    13,825
    
    
    
    
    
    
    
    13,825CASH FLOWS FROM FINANCING ACTIVITIES:Proceeds from line of credit
    
    
    21,074
    
    
    
    
    
    
    
    21,074Principal payments on long-term debt and capital leases
    
    
    (2,245
    )
    
    
    
    
    
    
    (2,245
    )Dividends paid to a minority shareholder
    
    
    (2,613
    )
    
    
    
    
    
    
    (2,613
    )Proceeds from issuance of common stock
    
    
    626
    
    
    
    
    
    
    
    626Net cash provided by financing activities
    
    
    16,842
    
    
    
    
    
    
    
    16,842Effect of exchange rate changes on cash and cash equivalents
    
    
    (1,355
    )
    
    
    
    
    
    
    (1,355
    )INCREASE IN CASH AND CASH EQUIVALENTS
    
    
    20,120
    
    
    
    
    
    
    
    20,120CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD
    
    
    55,094
    
    
    
    
    
    
    
    55,094CASH AND CASH EQUIVALENTS, END OF PERIOD
    
    $
    75,214
    
    
    $
    
    
    
    $
    75,214
 8




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3. LIQUIDITY
      
    
    Under a senior secured credit agreement (Credit Facility) entered into in June 2006
with Bank of America, N.A., as lender and administrative agent and other lenders, we
borrowed an aggregate amount of approximately $81.5 million to fund the purchase of ASI
shares from Shinko on July 14, 2006, and a letter of credit in favor of Shinko for
approximately $11 million related to the equity option on Shinkos remaining 4.9% ASI
share ownership as discussed below. This credit agreement provides a $115 million senior
secured credit facility consisting of a $90 million revolving credit facility, including
a $20 million sub-limit for letters of credit and $10 million sub-limit for swing-line
loans, and a $25 million term loan facility. The credit agreement will terminate and all
amounts outstanding will be due July 13, 2009, provided that Asysts outstanding 53⁄4% convertible subordinated notes due July 3, 2008, are
redeemed or repurchased, or the maturity of the notes extended, on terms reasonably
satisfactory to the administrative agent on or before March 31, 2008; otherwise, amounts
outstanding under the credit agreement will be due on March 31, 2008.
    
    We have approximately $86.3 million outstanding under
our 53⁄4% convertible subordinated notes privately issued in
July 2001. These notes are convertible, at the option of the holder, at any time on or
prior to maturity into shares of our common stock at a conversion price of $15.18 per
share. We are required to pay interest on these convertible notes on January 3 and July
3 of each year. These notes mature July 3, 2008 and are currently redeemable at our
option.
  9




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NASDAQ Delisting Proceedings
  
    
    On or before September 27, 2006, the Company submits supplemental information outlined in
the letter concerning the previously announced Special Committee investigation into stock
option grants and practices; and
    
    On or before November 30, 2006, the Company files its Form 10-K for the fiscal year ended
March 31, 2006, its Form 10-Q for the quarter ended June 30, 2006, and all required
restatements (if any).
  4. SIGNIFICANT ACCOUNTING POLICIES
 Basis of Preparation
  Comprehensive Income (Loss)
  10




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Three Months Ended
    
    
    Six Months EndedSeptember 30,
    
    
    September 30,2006
    
    
    2005
    
    
    2006
    
    
    2005(as restated)
    
    
    
    
    
    (as restated)Net loss, as reported
    
    $
    (2,725
    )
    
    $
    (1,635
    )
    
    $
    (3,205
    )
    
    $
    (5,329
    )Foreign currency translation adjustments
    
    
    (2,015
    )
    
    
    (1,677
    )
    
    
    (1,305
    )
    
    
    (3,727
    )Change in unrealized gains (losses) on investments
    
    
    
    
    
    
    30
    
    
    
    (11
    )
    
    
    78Comprehensive loss
    
    $
    (4,740
    )
    
    $
    (3,282
    )
    
    $
    (4,521
    )
    
    $
    (8,978
    )
 Net Income (Loss) Per Share
  Three Months Ended
    
    
    Six Months EndedSeptember 30,
    
    
    September 30,2006
    
    
    2005
    
    
    2006
    
    
    2005(as restated)
    
    
    
    
    
    
    (as restated)(in thousands, except per share amounts)Numerator:Net loss
    
    $
    (2,725
    )
    
    $
    (1,635
    )
    
    $
    (3,205
    )
    
    $
    (5,329
    )Denominator:Weighted average common shares
outstanding, excluding unvested
restricted stock units
    
    
    48,854
    
    
    
    47,963
    
    
    
    48,723
    
    
    
    47,879Denominator for
basic and diluted
calculation
    
    
    48,854
    
    
    
    47,963
    
    
    
    48,723
    
    
    
    47,879Net loss per share  basic and diluted
    
    $
    (0.06
    )
    
    $
    (0.03
    )
    
    $
    (0.07
    )
    
    $
    (0.11
    )
  As of September 30,2006
    
    
    2005Restricted stock awards and stock units
    
    
    228
    
    
    
    541Stock options
    
    
    3,810
    
    
    
    7,140Convertible notes
    
    
    5,682
    
    
    
    5,6829,720
    
    
    
    13,363
 Recent Accounting Pronouncements
  11




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##### Table of Contents



Accounting for Uncertainty in Income
Taxes: An Interpretation of FASB Statement No. 109
 Accounting for Sabbatical Leave and Other Similar Benefits Pursuant to FASB
Statement No. 43
  Fair Value Measurements
 Accounting for Defined Benefit
Pension and Other Postretirement Plans  an amendment of FASB Statements No.87, 88, 106, and
132(R
 5. BALANCE SHEET COMPONENTS
 Short-term Investments
   Cost
    
    
    Unrealized Losses
    
    
    Fair ValueMarch 31, 2006Auction rate securities
    
    $
    8,300
    
    
    $
    
    
    
    $
    8,300Corporate debt securities
    
    
    6,014
    
    
    
    (9
    )
    
    
    6,005Federal agency notes
    
    
    1,000
    
    
    
    (1
    )
    
    
    999$
    15,314
    
    
    $
    (10
    )
    
    $
    15,304
 12




---



##### Table of Contents



Accounts Receivable, net of allowance for doubtful accounts
  September 30,
    
    
    March 31,2006
    
    
    2006Trade receivables
    
    $
    100,147
    
    
    $
    83,008Trade receivables-related party
    
    
    4
    
    
    
    90Unbilled receivables
    
    
    61,324
    
    
    
    63,435Other receivables
    
    
    6,651
    
    
    
    6,788Less: Allowance for doubtful accounts
    
    
    (6,142
    )
    
    
    (11,868
    )Total
    
    $
    161,984
    
    
    $
    141,453
       Inventories
  September 30,
    
    
    March 31,2006
    
    
    2006Raw materials
    
    $
    17,371
    
    
    $
    9,882Work-in-process
    
    
    35,735
    
    
    
    22,180Finished goods
    
    
    1,017
    
    
    
    1,157Total
    
    $
    54,123
    
    
    $
    33,219
   13




---



##### Table of Contents



Goodwill and Intangible Assets, net
 Goodwill
  Fab Automation
    
    
    AMHS
    
    
    TotalBalances at March 31, 2006
    
    $
    3,398
    
    
    $
    55,442
    
    
    $
    58,840Acquisition of ASI minority interest
    
    
    
    
    
    
    25,642
    
    
    
    25,642Foreign currency translation
    
    
    
    
    
    
    (1,405
    )
    
    
    (1,405
    )Balances at September 30, 2006
    
    $
    3,398
    
    
    $
    79,679
    
    
    $
    83,077
  Intangible assets, net
  September 30, 2006
    
    
    
    
    
    
    
    
    
    
    March 31, 2006Gross
    
    
    
    
    
    
    
    
    
    
    GrossCarrying
    
    
    Accumulated
    
    
    
    
    
    
    Carrying
    
    
    AccumulatedAmount
    
    
    Amortization
    
    
    Net
    
    
    Amount
    
    
    Amortization
    
    
    NetAmortizable intangible assets:Developed technology
    
    $
    81,195
    
    
    $
    49,999
    
    
    $
    31,196
    
    
    $
    58,289
    
    
    $
    44,275
    
    
    $
    14,014Customer base and other intangible assets
    
    
    53,210
    
    
    
    32,120
    
    
    
    21,090
    
    
    
    31,935
    
    
    
    29,419
    
    
    
    2,516Licenses and patents
    
    
    5,236
    
    
    
    3,679
    
    
    
    1,557
    
    
    
    6,316
    
    
    
    3,512
    
    
    
    2,804Total
    
    $
    139,641
    
    
    $
    85,798
    
    
    $
    53,843
    
    
    $
    96,540
    
    
    $
    77,206
    
    
    $
    19,334
   Fiscal Year ending March 31,Remaining portion of 2007
    
    $
    11,5002008
    
    
    16,8222009
    
    
    11,5802010
    
    
    7,1452011
    
    
    5,0512012 and thereafter
    
    
    1,745Total
    
    $
    53,843
 Warranty Accrual
  14




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##### Table of Contents



Three Months Ended
    
    
    Six Months EndedSeptember 30,
    
    
    September 30,2006
    
    
    2005
    
    
    2006
    
    
    2005Beginning Balance
    
    $
    7,383
    
    
    $
    12,427
    
    
    $
    7,967
    
    
    $
    13,509Accruals
    
    
    4,685
    
    
    
    2,245
    
    
    
    9,026
    
    
    
    4,955Settlements
    
    
    (4,396
    )
    
    
    (3,095
    )
    
    
    (9,394
    )
    
    
    (6,535
    )Foreign Currency Translation
    
    
    89
    
    
    
    (203
    )
    
    
    162
    
    
    
    (555
    )Ending Balance
    
    $
    7,761
    
    
    $
    11,374
    
    
    $
    7,761
    
    
    $
    11,374
  6. ACQUISITION
      Purchase Price:Total Cash Consideration
    
    $
    102,043Liability to
purchase remaining 4.9% interest plus future fixed dividends
    
    
    11,480Transaction costs
    
    
    5,556Total Purchase Price
    
    $
    119,079Allocation of purchase price to assets acquired and liabilities assumed:Net tangible assets
    
    $
    32,560In-Process Research & Development
    
    
    1,519Acquired identifiable intangible assets:Developed technology
    
    
    29,008Backlog
    
    
    2,940Customer relationships
    
    
    16,464Trademark
    
    
    2,499Deferred tax liabilities
    
    
    (19,414
    )Goodwill
    
    
    53,503Total Purchase Price
    
    $
    119,079
 Intangible Assets
  15




---



##### Table of Contents



In-Process Research and Development
      Cash
    
    $
    13,169Accounts
receivable
    
    
    56,319Inventories
    
    
    21,462Property plant and equipment
    
    
    4,706Other assets
    
    
    1,935Deferred tax assets, net
    
    
    4,414Accounts payable and other current liabilities
    
    
    (59,587
    )Long-term debt
    
    
    (6,607
    )Pension and other long-term liabilities
    
    
    (3,251
    )Net tangible assets acquired
    
    $
    32,560
  Three Months Ended
    
    
    Six Months EndedSeptember 30,
    
    
    September 30,2006
    
    
    
    2005
    
    
    
    2006
    
    
    
    2005Net sales
    
    $
    122,649
    
    
    $
    124,595
    
    
    $
    239,630
    
    
    $
    242,046Pro forma
net loss prior to cumulative effect of change in accounting
principle
    
    
    (427
    )
    
    
    (750
    )
    
    
    (5,090
    )
    
    
    (8,229
    )Cumulative effect of change in accounting principle
    
    
    
    
    
    
    
    
    
    
    103
    
    
    
    Pro forma
net loss
    
    $
    (427
    )
    
    $
    (750
    )
    
    $
    (4,987
    )
    
    $
    (8,229
    )Pro forma
basic and diluted net loss per share prior to cumulative effect of
change in accounting principle
    
    $
    (0.01
    )
    
    $
    (0.02
    )
    
    $
    (0.10
    )
    
    $
    (0.17
    )Cumulative effect of change in accounting principle
    
    
    0.00
    
    
    
    0.00
    
    
    
    (0.00
    )
    
    
    0.00Pro forma
basic and diluted net loss per share
    
    $
    (0.01
    )
    
    $
    (0.02
    )
    
    $
    (0.10
    )
    
    $
    (0.17
    )Shares used
in the per share calculation - Basic and Diluted
    
    
    48,854
    
    
    
    47,963
    
    
    
    48,723
    
    
    
    47,879
 7. STOCK-BASED COMPENSATION
 Share-Based
Payment
 Accounting for Stock Issued to Employees Accounting for Certain Transactions Involving Stock Compensation, an Interpretation of APB Opinion
No. 25 Accounting for Stock Appreciation Rights and Other Variable Stock Option or
Award Plans Accounting for Stock-Based
Compensation Accounting for Stock Based Compensation  Transition and Disclosure
 an amendment of FAS No. 123
 Accounting for Equity Instruments That Are Issued to Other Than
Employees for Acquiring, or in Conjunction with Selling, Goods or Services
 16




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##### Table of Contents



Prior to the adoption of SFAS No. 123(R)
 Accounting for Stock-Based Compensation  Transition and
Disclosures
  Three Months
    
    
    Six MonthsEnded
    
    
    EndedSeptember 30, 2005
    
    
    September 30, 2005(as restated)
    
    
    (as restated)Net loss  as reported
    
    $
    (1,635
    )
    
    $
    (5,329
    )Add: employee stock-based compensation expense
included in reported net loss, net of tax
    
    
    345
    
    
    
    978Less: total employee stock-based compensation
expense determined under fair value, net of tax
    
    
    (1,702
    )
    
    
    (3,602
    )As adjusted net loss
    
    $
    (2,992
    )
    
    $
    (7,953
    )Basic and diluted net loss per share  as reported
    
    $
    (0.03
    )
    
    $
    (0.11
    )Basic and diluted net loss per share  pro forma
    
    $
    (0.06
    )
    
    $
    (0.17
    )Shares used in EPS calculation  basic and diluted
    
    
    47,963
    
    
    
    47,879
  Impact of the adoption of SFAS No. 123(R)
  Three Months
    
    
    Six MonthsEnded
    
    
    EndedSeptember 30, 2006
    
    
    September 30, 2006Stock-based compensation expense by category:Cost of Sales
    
    $
    107
    
    
    $
    233Research and Development
    
    
    292
    
    
    
    495Selling , General and Administrative
    
    
    1,324
    
    
    
    2,425Total stock-based compensation expense
    
    $
    1,723
    
    
    $
    3,153Stock-based compensation expense by type of award:Employee stock options
    
    $
    1,234
    
    
    $
    2,036Employee stock purchase plan
    
    
    153
    
    
    
    246Restricted stock and restricted stock units
    
    
    391
    
    
    
    957Amounts capitalized as inventory
    
    
    (55
    )
    
    
    (86
    )Total stock-based compensation expense
    
    
    1,723
    
    
    
    3,153Tax effect on stock-based compensation
    
    
    
    
    
    
    Net stock-based compensation expense
    
    $
    1,723
    
    
    $
    3,153Effect on EPSBasic and Diluted
    
    $
    0.04
    
    
    $
    0.06Shares used in EPS calculationBasic and Diluted
    
    
    48,854
    
    
    
    48,723
 17




---



##### Table of Contents



Valuation Assumptions
  Stock Options Plans
     18




---



##### Table of Contents



Employees Stock Purchase Plan
   Three Months Ended
    
    
    Six Months EndedSeptember 30,
    
    
    September 30,2006
    
    
    2005
    
    
    2006
    
    
    2005Stock option
plans:Risk-free interest rate
    
    
    4.70
    %
    
    
    4.01
    %
    
    
    4.70
    %
    
    
    3.58
    %Expected term of options (in years)
    
    
    3.3
    
    
    
    4.7
    
    
    
    3.3
    
    
    
    4.7Expected volatility
    
    
    67.0
    %
    
    
    88.2
    %
    
    
    67.0
    %
    
    
    88.2
    %Expected dividend yield
    
    
    0
    %
    
    
    0
    %
    
    
    0
    %
    
    
    0
    %
 Three Months Ended
    
    
    Six Months EndedSeptember 30,
    
    
    September 30,2006
    
    
    2005
    
    
    2006
    
    
    2005Employees Stock purchase plan:Risk-free interest rate
    
    
    4.92
    %
    
    
    3.31
    %
    
    
    4.92
    %
    
    
    3.31
    %Expected term of options (in years)
    
    
    0.5
    
    
    
    0.5
    
    
    
    0.5
    
    
    
    0.5Expected volatility
    
    
    51.7
    %
    
    
    45.7
    %
    
    
    68.3
    %
    
    
    45.7
    %Expected dividend yield
    
    
    0
    %
    
    
    0
    %
    
    
    0
    %
    
    
    0
    %
 Stock Option Plans
 19




---



##### Table of Contents



Weighted-AverageTotal Number
    
    
    Weighted-Average
    
    
    Remaining
    
    
    Aggregateof Shares
    
    
    Exercise Price
    
    
    Contractual Term
    
    
    Intrinsic ValueOptions outstanding as of March 31, 2006
    
    
    6,876,412
    
    
    $
    9.19Granted
    
    
    36,000
    
    
    
    8.45Exercised
    
    
    (291,504
    )
    
    
    5.22Cancelled
    
    
    (552,402
    )
    
    
    7.20Options outstanding as of September 30, 2006
    
    
    6,068,506
    
    
    $
    9.56
    
    
    
    5.24
    
    
    $
    5,881,591Exercisable as of September 30, 2006
    
    
    4,561,457
    
    
    $
    10.67
    
    
    
    5.20
    
    
    $
    3,578,371
    Restricted Stock Awards and Restricted Stock Units
  Total Number
    
    
    Weighted-Averageof Shares
    
    
    Grant Date Fair ValueNon-vested as of March 31, 2006
    
    
    402,874
    
    
    $
    5.73Granted
    
    
    626,930
    
    
    
    Vested
    
    
    (88,740
    )
    
    
    11.08Forfeited or Expired
    
    
    (88,214
    )
    
    
    3.95Non-vested as of September 30, 2006
    
    
    852,850
    
    
    $
    4.17
  Defined Benefit Pension Plans
   8. RESTRUCTURING CHARGES
  Excess FacilitiesBalance, March 31, 2006
    
    $
    105Additional accruals
    
    
    1,812Non-cash utilization
    
    
    (188
    )Amounts paid in cash
    
    
    (533
    )Balance, June 30, 2006
    
    
    1,196Reduction in accruals
    
    
    (26
    )Amounts paid in cash
    
    
    (186
    )Balance, September 30, 2006
    
    $
    984
 20




---



##### Table of Contents



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
   9. INCOME TAXES
 Three Months Ended
    
    
    Six Months EndedSeptember 30,
    
    
    September 30,(in thousands, except percentage)
    
    2006
    
    
    2005
    
    
    2006
    
    
    2005Provision for income taxes
    
    $
    (1,770
    )
    
    $
    (6,583
    )
    
    $
    (6,092
    )
    
    $
    (9,684
    )
      21




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##### Table of Contents



10. REPORTABLE SEGMENTS
    September 30,
    
    
    March 31,2006
    
    
    2006AMHS:Total Assets
    
    $
    288,575
    
    
    $
    251,477Fab Automation Products:Total Assets
    
    $
    206,946
    
    
    $
    163,817Consolidated:Total Assets
    
    $
    495,521
    
    
    $
    415,294
 Three Months Ended
    
    
    Six Months EndedSeptember 30,
    
    
    September 30,2006
    
    
    2005
    
    
    2006
    
    
    2005(as restated)
    
    
    
    
    
    
    (as restated)AMHS:Net sales
    
    $
    72,444
    
    
    $
    85,402
    
    
    $
    138,701
    
    
    $
    162,751Cost of Sales
    
    
    56,527
    
    
    
    56,965
    
    
    
    103,083
    
    
    
    114,062Gross Profit
    
    $
    15,917
    
    
    $
    28,437
    
    
    $
    35,618
    
    
    $
    48,689Income from operations
    
    $
    8,459
    
    
    $
    13,646
    
    
    $
    16,602
    
    
    $
    21,446Fixed assets additions
    
    $
    2,820
    
    
    $
    1,121
    
    
    $
    3,669
    
    
    $
    1,449Amortization and Depreciation
    
    $
    3,234
    
    
    $
    4,297
    
    
    $
    6,404
    
    
    $
    8,607Fab Automation Products:Net sales
    
    $
    50,205
    
    
    $
    39,193
    
    
    $
    100,929
    
    
    $
    79,295Cost of Sales
    
    
    31,612
    
    
    
    24,180
    
    
    
    60,980
    
    
    
    50,826Gross Profit
    
    $
    18,593
    
    
    $
    15,013
    
    
    $
    39,949
    
    
    $
    28,469Income (loss) from operations
    
    $
    (8,982
    )
    
    $
    (4,254
    )
    
    $
    (11,195
    )
    
    $
    (9,684
    )Fixed assets additions
    
    $
    415
    
    
    $
    1,077
    
    
    $
    1,885
    
    
    $
    1,538Amortization and Depreciation
    
    $
    3,512
    
    
    $
    1,868
    
    
    $
    5,349
    
    
    $
    3,641Consolidated:Net sales
    
    $
    122,649
    
    
    $
    124,595
    
    
    $
    239,630
    
    
    $
    242,046Cost of Sales
    
    
    88,139
    
    
    
    81,145
    
    
    
    164,063
    
    
    
    164,888Gross Profit
    
    $
    34,510
    
    
    $
    43,450
    
    
    $
    75,567
    
    
    $
    77,158Income (loss) from operations
    
    $
    (523
    )
    
    $
    9,392
    
    
    $
    5,407
    
    
    $
    11,762Fixed assets additions
    
    $
    3,235
    
    
    $
    2,198
    
    
    $
    5,554
    
    
    $
    2,987Amortization and Depreciation
    
    $
    6,746
    
    
    $
    6,165
    
    
    $
    11,753
    
    
    $
    12,248
 22




---



##### Table of Contents



11. DEBT
    September 30,
    
    
    March 31,2006
    
    
    2006Convertible subordinated notes
    
    $
    86,250
    
    
    $
    86,250Long-Term loans
    
    
    67,701
    
    
    
    1,762Capital leases
    
    
    432
    
    
    
    524Total long-term debt
    
    
    154,383
    
    
    
    88,536Less: Current portion of long-term
debt and capital leases
    
    
    (7,221
    )
    
    
    (1,368
    )Long-term debt and capital leases net
of current portion
    
    $
    147,162
    
    
    $
    87,168
  Fiscal Year Ending March 31,
    
    AmountRemaining portion of 2007
    
    $
    3,0632008
    
    
    9,4752009
    
    
    96,4462010
    
    
    45,3952011
    
    
    42012 and thereafter
    
    
    $
    154,383
 Credit Facility
  23




---



##### Table of Contents



Convertible Subordinated Notes
    Lines of Credit
     24




---



##### Table of Contents



12. RELATED PARTY TRANSACTIONS
  September 30,
    
    
    March 31,2006
    
    
    2006Accounts payable due to Shinko
    
    $
    22,439
    
    
    $
    13,406Accrued liabilities due to Shinko
    
    $
    188
    
    
    $
    59Accounts receivable from MECS Korea
    
    $
    4
    
    
    $
    90Accounts payable due to MECS Korea
    
    $
    24
    
    
    $
    3Accrued liabilities due to MECS Korea
    
    $
    47
    
    
    $
    81
  Three Months Ended
    
    
    Six Months EndedSeptember 30,
    
    
    September 30,2006
    
    
    2005
    
    
    2006
    
    
    2005Material and service purchases from Shinko
    
    $
    18,662
    
    
    $
    17,388
    
    
    $
    31,920
    
    
    $
    28,564Sales to MECS Korea
    
    $
    4
    
    
    $
    105
    
    
    $
    32
    
    
    $
    228Purchase from MECS Korea
    
    $
    24
    
    
    $
    
    
    
    $
    24
    
    
    $
    
 13. COMMITMENTS AND CONTINGENCIES
 Lease Commitments
  Fiscal Year Ending March 31,
    
    Capital Lease
    
    
    Operating LeaseRemaining portion of 2007
    
    $
    113
    
    
    $
    1,9982008
    
    
    168
    
    
    
    3,4402009
    
    
    153
    
    
    
    1,8792010
    
    
    6
    
    
    
    1,4402011 and thereafter
    
    
    6
    
    
    
    4,186Total
    
    $
    446
    
    
    $
    12,943Less: interest
    
    
    (14
    )Present value of minimum lease payments
    
    
    432Less: current portion of capital leases
    
    
    (187
    )Capital leases, net of current portion
    
    $
    245
 25




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##### Table of Contents



Legal Commitments
    26




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##### Table of Contents



In re Asyst Technologies, Inc. Derivative Litigation Forlenzo v. Schwartz, et a et.
seq
  Indemnifications
   27




---



##### Table of Contents



14. SUBSEQUENT EVENTS
 Notice of default relating to Convertible Subordinated Notes
    28




---



##### 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 filed in our Annual Report Form 10-K , as
amended on October 27, 2006 for the
year ended March 31, 2006. Certain prior period amounts have been reclassified to conform to
current period presentation.
   Overview
       29




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##### Table of Contents



Status of Material Weaknesses
  Critical Accounting Policies and Estimates
   Stock-Based Compensation
 Share-Based Payment
 Accounting
for Stock Issued to Employees
  Results of Operations
  30




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##### Table of Contents



Three Months Ended
    
    
    Six Months EndedSeptember 30,
    
    
    September 30,2006
    
    
    2005
    
    
    2006
    
    
    2005(as restated)
    
    
    
    
    
    
    (as restated)AMHS:Net sales
    
    $
    72,444
    
    
    $
    85,402
    
    
    $
    138,701
    
    
    $
    162,751Cost of sales
    
    
    56,527
    
    
    
    56,965
    
    
    
    103,083
    
    
    
    114,062Gross profit
    
    $
    15,917
    
    
    $
    28,437
    
    
    $
    35,618
    
    
    $
    48,689Income from operations
    
    $
    8,459
    
    
    $
    13,646
    
    
    $
    16,602
    
    
    $
    21,446Fab Automation Products:Net sales
    
    $
    50,205
    
    
    $
    39,193
    
    
    $
    100,929
    
    
    $
    79,295Cost of sales
    
    
    31,612
    
    
    
    24,180
    
    
    
    60,980
    
    
    
    50,826Gross profit
    
    $
    18,593
    
    
    $
    15,013
    
    
    $
    39,949
    
    
    $
    28,469Income (loss) from operations
    
    $
    (8,982
    )
    
    $
    (4,254
    )
    
    $
    (11,195
    )
    
    $
    (9,684
    )Consolidated:Net sales
    
    $
    122,649
    
    
    $
    124,595
    
    
    $
    239,630
    
    
    $
    242,046Cost of sales
    
    
    88,139
    
    
    
    81,145
    
    
    
    164,063
    
    
    
    164,888Gross profit
    
    $
    34,510
    
    
    $
    43,450
    
    
    $
    75,567
    
    
    $
    77,158Income (loss) from operations
    
    $
    (523
    )
    
    $
    9,392
    
    
    $
    5,407
    
    
    $
    11,762
  Three Months Ended
    
    
    Six Months EndedSeptember 30,
    
    
    September 30,2006
    
    
    2005
    
    
    2006
    
    
    2005(as restated)
    
    
    
    
    
    
    (as restated)AMHS:Net sales
    
    
    59.1
    %
    
    
    68.5
    %
    
    
    57.9
    %
    
    
    67.2
    %Cost of sales
    
    
    46.1
    %
    
    
    45.7
    %
    
    
    43.0
    %
    
    
    47.1
    %Gross profit
    
    
    13.0
    %
    
    
    22.8
    %
    
    
    14.9
    %
    
    
    20.1
    %Income from operations
    
    
    6.9
    %
    
    
    11.0
    %
    
    
    6.9
    %
    
    
    8.9
    %Fab Automation Products:Net sales
    
    
    40.9
    %
    
    
    31.5
    %
    
    
    42.1
    %
    
    
    32.8
    %Cost of sales
    
    
    25.8
    %
    
    
    19.4
    %
    
    
    25.4
    %
    
    
    21.0
    %Gross profit
    
    
    15.1
    %
    
    
    12.1
    %
    
    
    16.7
    %
    
    
    11.8
    %Income (loss) from operations
    
    
    (7.3
    )%
    
    
    (3.5
    )%
    
    
    (4.7
    )%
    
    
    (4.0
    )%Consolidated:Net sales
    
    
    100.0
    %
    
    
    100.0
    %
    
    
    100.0
    %
    
    
    100.0
    %Cost of sales
    
    
    71.9
    %
    
    
    65.1
    %
    
    
    68.5
    %
    
    
    68.1
    %Gross profit
    
    
    28.1
    %
    
    
    34.9
    %
    
    
    31.5
    %
    
    
    31.9
    %Income (loss) from operations
    
    
    (0.4
    )%
    
    
    7.5
    %
    
    
    2.2
    %
    
    
    4.9
    %
 Net Sales
 Consolidated
 AMHS
  31




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##### Table of Contents



Fab Automation
  Comparison of Expenses, Gross Margin, Interest & Other, and Income Taxes
  Three Months Ended
    
    
    Six Months EndedSeptember 30,
    
    
    September 30,2006
    
    
    2005
    
    
    2006
    
    
    2005(as restated)
    
    
    
    
    
    
    (as restated)CONSOLIDATED:NET SALES
    
    
    100.0
    %
    
    
    100.0
    %
    
    
    100.0
    %
    
    
    100.0
    %COST OF SALES
    
    
    71.9
    %
    
    
    65.1
    %
    
    
    68.5
    %
    
    
    68.1
    %Gross profit
    
    
    28.1
    %
    
    
    34.9
    %
    
    
    31.5
    %
    
    
    31.9
    %OPERATING EXPENSES:Research and development
    
    
    7.7
    %
    
    
    5.7
    %
    
    
    7.5
    %
    
    
    5.9
    %Selling, general and administrative
    
    
    16.7
    %
    
    
    17.9
    %
    
    
    17.5
    %
    
    
    17.1
    %Amortization of acquired intangible assets
    
    
    4.3
    %
    
    
    3.8
    %
    
    
    3.6
    %
    
    
    4.0
    %Restructuring and other charges
    
    
    0
    %
    
    
    0.0
    %
    
    
    0.7
    %
    
    
    0.0
    %Total operating expenses
    
    
    28.7
    %
    
    
    27.4
    %
    
    
    29.3
    %
    
    
    27.0
    %Income from operations
    
    
    (0.4
    )%
    
    
    7.5
    %
    
    
    2.2
    %
    
    
    4.9
    %INTEREST AND OTHER INCOME (EXPENSE), NET:Interest income
    
    
    0.4
    %
    
    
    0.5
    %
    
    
    0.5
    %
    
    
    0.5
    %Interest expense
    
    
    (1.9
    )%
    
    
    (1.5
    )%
    
    
    (1.6
    )%
    
    
    (1.4
    )%Other income, net
    
    
    0.8
    %
    
    
    0.3
    %
    
    
    0.8
    %
    
    
    0.3
    %Interest and other expense, net
    
    
    (0.7
    )%
    
    
    (0.7
    )%
    
    
    (0.3
    )%
    
    
    (0.6
    )%INCOME BEFORE INCOME TAXES AND
MINORITY INTEREST
    
    
    (1.1
    )%
    
    
    6.8
    %
    
    
    1.9
    %
    
    
    4.3
    %PROVISION FOR INCOME TAXES
    
    
    (1.4
    )%
    
    
    (5.3
    )%
    
    
    (2.5
    )%
    
    
    (4.0
    )%MINORITY INTEREST
    
    
    0.3
    %
    
    
    (2.8
    )%
    
    
    (0.7
    )%
    
    
    (2.5
    )%NET LOSS
    
    
    (2.2
    )%
    
    
    (1.3
    )%
    
    
    (1.3
    )%
    
    
    (2.2
    )%
 Gross Margin
 Consolidated
  32




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##### Table of Contents



AMHS
  Fab
Automation
  Research and Development
 Three Months Ended
    
    
    
    
    
    
    
    
    
    
    Six Months Ended(in thousands, except percentage)
    
    
    
    
    
    September 30,
    
    
    
    
    
    
    
    
    
    
    September 30,2006
    
    
    2005
    
    
    Change
    
    
    2006
    
    
    2005
    
    
    Change(as restated)
    
    
    
    
    
    
    
    
    
    
    (as restated)Research and development
    
    $
    9,402
    
    
    $
    7,118
    
    
    $
    2,284
    
    
    $
    17,989
    
    
    $
    14,220
    
    
    $
    3,769Percentage of total net sales
    
    
    7.7
    %
    
    
    5.7
    %
    
    
    
    
    
    
    7.5
    %
    
    
    5.9
    %
    Selling, General and Administrative
 Three Months Ended
    
    
    
    
    
    
    
    
    
    
    Six Months Ended(in thousands, except percentage)
    
    
    
    
    
    September 30,
    
    
    
    
    
    
    
    
    
    
    September 30,2006
    
    
    2005
    
    
    Change
    
    
    2006
    
    
    2005
    
    
    Change(as restated)
    
    
    
    
    
    
    
    
    
    
    (as restated)Selling, general and administrative
    
    $
    20,434
    
    
    $
    22,226
    
    
    $
    (1,792
    )
    
    $
    41,838
    
    
    $
    41,451
    
    
    $
    387Percentage of total net sales
    
    
    16.7
    %
    
    
    17.9
    %
    
    
    
    
    
    
    17.5
    %
    
    
    17.1
    %
 33




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##### Table of Contents



Amortization of Acquired Intangible Assets
 Three Months Ended
    
    
    Six Months Ended(in thousands, except percentage)
    
    September 30,
    
    
    September 30,2006
    
    
    2005
    
    
    Change
    
    
    2006
    
    
    2005
    
    
    ChangeAmortization of acquired intangible assets
    
    $
    5,225
    
    
    $
    4,714
    
    
    $
    511
    
    
    $
    8,549
    
    
    $
    9,632
    
    
    $
    (1,083
    )Percentage of total net sales
    
    
    4.3
    %
    
    
    3.8
    %
    
    
    
    
    
    
    3.6
    %
    
    
    4.0
    %
  Restructuring
Charges (credits)
  Three Months Ended
    
    
    Six Months Ended(in thousands, except percentage)
    
    September 30,
    
    
    September 30,2006
    
    
    2005
    
    
    Change
    
    
    2006
    
    
    2005
    
    
    ChangeRestructuring charges (credits)
    
    $
    (26
    )
    
    $
    
    
    
    $
    (26
    )
    
    $
    1,786
    
    
    $
    93
    
    
    $
    1,693Percentage of total net sales
    
    
    0.0
    %
    
    
    0.0
    %
    
    
    
    
    
    
    0.7
    %
    
    
    0.0
    %
   (in thousands):
    
    Excess FacilitiesBalance, March 31, 2006
    
    $
    105Additional accruals
    
    
    1,812Non-cash utilization
    
    
    (188
    )Amounts paid in cash
    
    
    (533
    )Balance, June 30, 2006
    
    
    1,196Reduction in accruals
    
    
    (26
    )Amounts paid in cash
    
    
    (186
    )Balance, September 30, 2006
    
    $
    984
 34




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##### Table of Contents



Interest Income, Interest Expense and Other Income, Net
 Three Months Ended
    
    
    
    
    
    
    
    
    
    
    Six Months Ended(in thousands)
    
    
    
    
    
    September 30,
    
    
    
    
    
    
    
    
    
    
    September 30,2006
    
    
    2005
    
    
    Change
    
    
    2006
    
    
    2005
    
    
    ChangeInterest income
    
    $
    539
    
    
    $
    569
    
    
    $
    (30
    )
    
    $
    1,276
    
    
    $
    1,092
    
    
    $
    184Interest expense
    
    $
    (2,319
    )
    
    $
    (1,813
    )
    
    $
    (506
    )
    
    $
    (3,946
    )
    
    $
    (3,412
    )
    
    $
    (534
    )Other income, net
    
    $
    1,010
    
    
    $
    333
    
    
    $
    677
    
    
    $
    1,796
    
    
    $
    850
    
    
    $
    946
    Income Taxes
 Three Months Ended
    
    
    Six Months Ended(in thousands, except percentage)
    
    
    
    
    
    September 30,
    
    
    
    
    
    
    
    
    
    
    September 30,2006
    
    
    2005
    
    
    Change
    
    
    2006
    
    
    2005
    
    
    ChangeProvision for income taxes
    
    $
    1,770
    
    
    $
    6,583
    
    
    $
    (4,813
    )
    
    $
    6,092
    
    
    $
    9,684
    
    
    $
    (3,592
    )Percentage of total net sales
    
    
    (1.4
    )%
    
    
    (5.3
    )%
    
    
    
    
    
    
    (2.5
    )%
    
    
    (4.0
    )%
    35




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##### Table of Contents



Liquidity and Capital Resources
    Six Months EndedSeptember 30,2006
    
    
    2005(as restated)Net cash provided by (used in) operating
activities
    
    $
    2.4
    
    
    $
    (9.2
    )Net cash provided by (used in)
investing activities
    
    $
    (95.0
    )
    
    $
    13.8Net cash provided by financing activities
    
    $
    85.4
    
    
    $
    16.8
 Cash Flows from Operating Activities
 Net loss
    
    $
    (3.2
    )Depreciation and amortization
    
    
    12.9Minority interest in net income of consolidated subsidiary
    
    
    1.7Stock-based compensation
    
    
    3.2Deferred taxes, net
    
    
    (4.4
    )Non-cash charges
    
    
    (4.0
    )Increase in accounts receivable
    
    
    (15.4
    )Increase in inventories
    
    
    (17.8
    )Decrease in prepaid expenses and other assets
    
    
    (2.7
    )Increase in accounts payable, accrued liabilities and deferred margin
    
    
    32.1Net cash provided by operating activities
    
    $
    2.4
      36




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##### Table of Contents



Cash Flows from Investing Activities
   Cash Flows from Financing Activities
    Notice of Default Relating to Convertible Subordinated Notes
   Other Debt Financing Arrangements
 37




---



##### Table of Contents



8
billion
 Acquisition and Related Debt Financing Facility
     Other Liquidity Considerations
  Form 10-Q
  38




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##### Table of Contents



NASDAQ Delisting Proceedings
    Recent Accounting Pronouncements
  Accounting for Uncertainty in Income
Taxes: An Interpretation of FASB Statement No. 109
  39




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##### Table of Contents



Fair Value Measurements
 Accounting for Defined Benefit
Pension and Other Postretirement Plans  an amendment of FASB Statements No.87, 88, 106, and
132(R
 
 ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
  Interest Rate Risk.
   Foreign Currency Exchange Risk
 Strengthening in
    
    No change inJapanese Yen of
    
    Japanese YenX percent
    
    exchange rate10%
    
    5%Net
loss for the six
month ended
September 30, 2006
    
    $
    (1,374
    )
    
    $
    (2,337
    )
    
    $
    (3,205
    )
   40




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##### Table of Contents



ITEM 4. CONTROLS AND PROCEDURES
 Evaluation of Disclosure Controls and Procedures
      41




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Managements Remediation Initiatives
  Changes in Internal Control over Financial Reporting
  42




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PART II  OTHER INFORMATION
 
 ITEM 1. LEGAL PROCEEDINGS
     In re Asyst Technologies, Inc. Derivative Litigation Forlenzo v. Schwartz, et a et. seq
 43




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##### Table of Contents



ITEM 1A. RISK FACTORS
 We have a history of significant losses.
  We face significant pending and potential risks in connection with our outstanding indebtedness;
if we are not able to resolve existing uncertainties and restructure portions of this debt on a
timely basis on desired terms in the future, our ability to discharge our obligations under this
indebtedness, liquidity and business may be materially harmed.
  
    
    Under a senior secured credit agreement entered into in June 2006 with Bank of America,
N.A., as lender and administrative agent and other lenders, we borrowed an aggregate amount
of approximately $81.5 million to fund the purchase of ASI shares from Shinko on July 14,
2006, and issued a letter of credit in favor of Shinko for approximately $11 million
related to the equity option on Shinkos remaining 4.9% ASI share ownership. This credit
agreement provides a $115 million senior secured credit facility consisting of a $90
million revolving credit facility, including a $20 million sub-limit for letters of credit
and $10 million sub-limit for swing-line loans, and a $25 million term loan facility. The
credit agreement will terminate and all amounts outstanding will be due in three years
after July 14, 2006, provided that Asysts outstanding 5 3/4% convertible subordinated notes
due July 3, 2008, are redeemed or repurchased, or the maturity of the notes extended, on
terms reasonably satisfactory to the administrative agent on or before March 31, 2008;
otherwise, amounts outstanding under the credit agreement will be due on March 31, 2008.
At September 30, 2006, the outstanding balance under this credit facility was $67.7
million.
    
    We have approximately $86.3 million outstanding under our 5 3/4% convertible subordinated
notes privately issued in July 2001. These notes are convertible, at the option of the
holder, at any time on or prior to maturity into shares of our common stock at a conversion
price of $15.18 per share. We are required to pay interest on these convertible notes on
January 3 and July 3 of each year. These notes mature July 3, 2008 and are redeemable at
our option.
    
    In a letter delivered to us and dated August 16, 2006, U.S. Bank National Association, as the trustee under the indenture
relating to these notes, asserted that Asyst is in default under the notes indenture
because of the previously announced delays in filing with the SEC and the trustee the
report on Form 10-K and in filing with the SEC our Form 10-Q for the fiscal quarter ended
June 30, 2006. The letter stated that this asserted default was not an Event of Default
under the indenture if the Company cures the default within 60 days after receipt of the
notice, or if the default is waived by the holders of a majority in aggregate principal
amount of the notes outstanding.
    
    If an Event of Default were to occur, and is continuing under the indenture, the
trustee or the holders of at least 25% in aggregate principal amount of the notes at the
time outstanding may accelerate maturity of the notes.
    
    Asyst does not agree with the trustees assertion that the delays in filing of the
annual and quarterly reports constitutes a default under its indenture. However, on
October 13, 2006, as amended on October 27, 2006 we filed with the SEC our reports on Form 10-K for the year ended March
31, 2006 and Form 10-Q for the fiscal quarter ended June 30, 2006, and delivered copies of
those reports to the trustee, and that delivery cured any purported defaults under the
indenture and asserted by the trustee in its letter referenced above.
    
    At September 30, 2006, ASI had five revolving lines of credit with Japanese banks.
These lines allow aggregate borrowing of up to 6 billion Japanese Yen, or approximately $51
million at the exchange rate as of March 31, 2006. As of September 30, 2006, the amount
available under these lines of credit
 44




---



##### Table of Contents



was 3.45 billion Japanese Yen or approximately $29.3 million at the exchange rate as of
September 30, 2006.
    
    Comerica Bank has agreed to continue to maintain a letter of credit in the amount of
$750,000 in favor of the landlord under our current headquarters lease in Fremont,
California, on an unsecured basis, notwithstanding the previously reported termination of
the Amended and Restated Loan and Security Agreement dated as of May 15, 2004, between
Asyst and Comerica Bank (which termination became effective with the borrowing described
above under the senior secured credit facility). There were no amounts outstanding for
borrowed money under the Comerica Bank line of credit that otherwise was scheduled to
expire on July 30, 2007.
      45




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##### Table of Contents



We face additional risks and costs as a result of the delayed filing of our SEC reports described
below and the time, cost and outcome of our Special Committee investigation into past stock option
grants and practices.
   46




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47




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##### Table of Contents



In re Asyst Technologies, Inc. Derivative
Litigation Forlenzo v. Schwartz, et al
   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.
  48




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If we fail to manage effectively our ASI subsidiary, our sales and profitability of AMHS could be
adversely affected and the sales mix between AMHS and our other products could affect our overall
financial performance.
     49




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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.
 ASI sells AMHS to FPD manufacturers.
  Our gross margins on 300mm products may be lower, which could adversely affect our ability to
remain profitable.
  Most of our Fab Automation Product manufacturing is outsourced and we rely on a single contract
manufacturer for much of this manufacturing, which could disrupt the availability of our Fab
Automation Products and adversely affect our gross margins.
   50




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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.
   51




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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;
    
    our customers are not required to make minimum purchases; and
    
    our customers may reschedule or cancel existing orders, and we may not be able to
recover the costs we have incurred to manufacture that product from the customer.
  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.
  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.
 52




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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.
  53




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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;
    
    pricing pressures causing lower gross margins or lost orders;
    
    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.
  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;
 54




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
    
    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.
    Our current and planned operations may strain our resources and increase our operating expenses.
   55




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We have continued to experience unexpected turnover in our finance department, and this has had an
adverse impact on our business; if we lose any of our key personnel or are unable to attract,
train or retain qualified personnel, our business would be further harmed.
      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.
  56




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We may not effectively compete in a highly competitive semiconductor manufacturing equipment
industry.
     57




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ITEM 6. EXHIBITS
 Exhibit
    
    
    
    Incorporated by Reference
    
    
    
    FiledNumber
    
    Exhibit Description
    
    Form
    
    Ex. No.
    
    File No.
    
    Filing Date
    
    Herewith3.1
    
    Amended and Restated Articles of Incorporation of the Company.
    
    S-1
    
    
    3.1
    
    
    333-66184
    
    7/19/19933.2
    
    Bylaws of the Company.
    
    S-1
    
    
    3.2
    
    
    333-66184
    
    7/19/19933.3
    
    Certificate of Amendment of the Amended and Restated Articles
of Incorporation, filed September 24, 1999.
    
    10-Q
    
    
    3.2
    
    
    000-22430
    
    10/21/19993.4
    
    Certificate of Amendment of the Amended and Restated Articles
of Incorporation, filed October 5, 2000.
    
    DEF 14A
    
    App.
    
    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
    
    
    99.2
    
    
    000-22430
    
    6/29/19984.2
    
    Common Stock Purchase Agreement between the Company and
various purchasers, dated as of May 26, 1999.
    
    8-K
    
    
    4.2
    
    
    000-22430
    
    6/18/1999.4.3
    
    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
    
    
    4.3
    
    
    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
    
    
    4.4
    
    
    000-22430
    
    8/14/200131.1
    
    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
 58




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SIGNATURES
  ASYST TECHNOLOGIES, INC.Date:  
November 14, 2006
    By:
    /s/ Richard H. JanneyRichard H. JanneyInterim Chief Financial Officer  59




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##### Table of Contents



EXHIBIT INDEX
 Exhibit
    
    
    
    Incorporated by Reference
    
    
    
    FiledNumber
    
    Exhibit Description
    
    Form
    
    Ex. No.
    
    File No.
    
    Filing Date
    
    Herewith3.1
    
    Amended and Restated Articles of Incorporation of the Company.
    
    S-1
    
    
    3.1
    
    
    333-66184
    
    7/19/19933.2
    
    Bylaws of the Company.
    
    S-1
    
    
    3.2
    
    
    333-66184
    
    7/19/19933.3
    
    Certificate of Amendment of the Amended and Restated Articles
of Incorporation, filed September 24, 1999.
    
    10-Q
    
    
    3.2
    
    
    000-22430
    
    10/21/19993.4
    
    Certificate of Amendment of the Amended and Restated Articles
of Incorporation, filed October 5, 2000.
    
    DEF 14A
    
    App.
    
    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
    
    
    99.2
    
    
    000-22430
    
    6/29/19984.2
    
    Common Stock Purchase Agreement between the Company and
various purchasers, dated as of May 26, 1999.
    
    8-K
    
    
    4.2
    
    
    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
    
    
    4.3
    
    
    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
    
    
    4.4
    
    
    000-22430
    
    8/14/200131.1
    
    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
 60