##### Table of Contents



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 December 31, 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
 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:Condensed Consolidated Balance Sheets  December 31, 2005 and March 31, 2005
    
    
    3Condensed Consolidated Statements of Operations  Three and Nine Month Periods Ended
December 31, 2005 and December 31, 2004
    
    
    4Condensed Consolidated Statements of Cash Flows  Nine Month Periods Ended December 31, 2005
and December 31, 2004
    
    
    5Notes to Condensed Consolidated Financial Statements
    
    
    6Item 2  Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    21Item 3  Quantitative and Qualitative Disclosures About Market Risk
    
    
    42Item 4  Controls and Procedures
    
    
    43PART II -OTHER INFORMATIONItem 1  Legal ProceedingsItem 6  Exhibits
    
    
    47Signatures
    
    
    49Exhibit Index
    
    
    50EXHIBIT 10.61EXHIBIT 10.62EXHIBIT 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
  December 31,
    
    
    March 31,2005
    
    
    2005ASSETSCURRENT ASSETS:Cash and cash equivalents
    
    $
    101,190
    
    
    $
    55,094Short-term investments
    
    
    27,244
    
    
    
    46,086Accounts receivable, net of allowances for doubtful accounts of
$10,530 and $6,980 at December 31 and March 31, 2005, respectively
    
    
    146,154
    
    
    
    189,943Inventories
    
    
    38,309
    
    
    
    33,515Prepaid expenses and other current assets
    
    
    23,904
    
    
    
    33,971Total current assets
    
    
    336,801
    
    
    
    358,609Property and equipment, net
    
    
    17,855
    
    
    
    15,458Goodwill
    
    
    58,708
    
    
    
    64,014Intangible assets, net
    
    
    23,001
    
    
    
    40,898Other assets
    
    
    3,796
    
    
    
    4,795Total assets
    
    $
    440,161
    
    
    $
    483,774LIABILITIES, MINORITY INTEREST AND SHAREHOLDERS EQUITYCURRENT LIABILITIES:Short-term loans and notes payable
    
    $
    19,388
    
    
    $
    20,563Current portion of long-term debt and capital leases
    
    
    1,776
    
    
    
    2,757Accounts payable
    
    
    71,196
    
    
    
    83,913Accounts payable-related parties
    
    
    21,656
    
    
    
    39,242Accrued and other liabilities
    
    
    72,985
    
    
    
    70,439Deferred margin
    
    
    6,770
    
    
    
    6,013Total current liabilities
    
    
    193,771
    
    
    
    222,927LONG-TERM LIABILITIESLong-term debt and capital leases, net of current portion
    
    
    87,422
    
    
    
    88,750Deferred tax liability
    
    
    3,222
    
    
    
    8,548Other long-term liabilities
    
    
    11,430
    
    
    
    9,771Total long-term liabilities
    
    
    102,074
    
    
    
    107,069COMMITMENTS AND CONTINGENCIES (see Note 10)MINORITY INTEREST
    
    
    61,839
    
    
    
    63,855SHAREHOLDERS EQUITYCommon stock
    
    
    452,080
    
    
    
    450,005Deferred stock-based compensation
    
    
    (1,597
    )
    
    
    (1,312
    )Accumulated deficit
    
    
    (368,392
    )
    
    
    (366,239
    )Accumulated other comprehensive income
    
    
    386
    
    
    
    7,469Total shareholders equity
    
    
    82,477
    
    
    
    89,923Total
liabilities, minority interest and shareholders equity
    
    $
    440,161
    
    
    $
    483,774
  3




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##### Table of Contents



ASYST TECHNOLOGIES, INC.
 
 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
  Three Months Ended
    
    
    Nine Months EndedDecember 31,
    
    
    December 31,2005
    
    
    2004
    
    
    2005
    
    
    2004NET SALES
    
    $
    106,824
    
    
    $
    161,383
    
    
    $
    348,870
    
    
    $
    469,414COST OF SALES
    
    
    64,828
    
    
    
    133,814
    
    
    
    229,664
    
    
    
    383,902Gross profit
    
    
    41,996
    
    
    
    27,569
    
    
    
    119,206
    
    
    
    85,512OPERATING EXPENSES:Research and development
    
    
    6,310
    
    
    
    8,485
    
    
    
    20,461
    
    
    
    27,237Selling, general and administrative
    
    
    21,075
    
    
    
    22,551
    
    
    
    62,450
    
    
    
    56,820Amortization of acquired intangible assets
    
    
    3,494
    
    
    
    5,086
    
    
    
    13,126
    
    
    
    15,178Restructuring charges (credits)
    
    
    (138
    )
    
    
    1,116
    
    
    
    (45
    )
    
    
    1,703Asset impairment charges
    
    
    
    
    
    
    4,645
    
    
    
    
    
    
    
    4,645Total operating expenses
    
    
    30,741
    
    
    
    41,883
    
    
    
    95,992
    
    
    
    105,583Income (loss) from operations
    
    
    11,255
    
    
    
    (14,314
    )
    
    
    23,214
    
    
    
    (20,071
    )INTEREST AND OTHER INCOME (EXPENSE), NET:Interest income
    
    
    706
    
    
    
    479
    
    
    
    1,798
    
    
    
    1,197Interest expense
    
    
    (1,714
    )
    
    
    (1,691
    )
    
    
    (5,126
    )
    
    
    (4,953
    )Other income, net
    
    
    3,417
    
    
    
    1,509
    
    
    
    4,267
    
    
    
    2,692Interest and other income (expense), net
    
    
    2,409
    
    
    
    297
    
    
    
    939
    
    
    
    (1,064
    )Income (loss) before benefit from
(provision for) income taxes and
minority interest
    
    
    13,664
    
    
    
    (14,017
    )
    
    
    24,153
    
    
    
    (21,135
    )BENEFIT FROM (PROVISION FOR) INCOME TAXES
    
    
    (6,507
    )
    
    
    962
    
    
    
    (16,191
    )
    
    
    2,549MINORITY INTEREST
    
    
    (4,178
    )
    
    
    1,411
    
    
    
    (10,115
    )
    
    
    2,825NET INCOME (LOSS)
    
    $
    2,979
    
    
    $
    (11,644
    )
    
    $
    (2,153
    )
    
    $
    (15,761
    )NET INCOME (LOSS) PER BASIC SHARE
    
    $
    0.06
    
    
    $
    (0.24
    )
    
    $
    (0.04
    )
    
    $
    (0.33
    )NET INCOME (LOSS) PER DILUTED SHARE
    
    $
    0.06
    
    
    $
    (0.24
    )
    
    $
    (0.04
    )
    
    $
    (0.33
    )SHARES USED IN THE PER SHARE CALCULATION- Basic
    
    
    48,019
    
    
    
    47,553
    
    
    
    47,918
    
    
    
    47,387 Diluted
    
    
    48,789
    
    
    
    47,553
    
    
    
    47,918
    
    
    
    47,387
  4




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ASYST TECHNOLOGIES, INC.
 
 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
  Nine Months Ended December 31,2005
    
    
    2004CASH FLOWS FROM OPERATING ACTIVITIES:Net loss
    
    $
    (2,153
    )
    
    $
    (15,761
    )Adjustments to reconcile net loss to net cash provided by (used in) operating
activities:Depreciation and amortization
    
    
    18,189
    
    
    
    20,621Allowance for doubtful accounts receivable
    
    
    5,003
    
    
    
    3,634Asset impairment charges
    
    
    
    
    
    
    4,645Minority interest in net income (loss) of consolidated subsidiaries
    
    
    10,115
    
    
    
    (2,825
    )Loss on disposal of fixed assets
    
    
    464
    
    
    
    157Stock-based compensation expense
    
    
    1,095
    
    
    
    1,057Amortization of lease incentive
    
    
    (52
    )
    
    
    Deferred taxes, net
    
    
    (1,620
    )
    
    
    (5,502
    )Changes in assets and liabilities:Accounts receivable, net
    
    
    25,742
    
    
    
    (60,908
    )Inventories
    
    
    (7,517
    )
    
    
    (15,445
    )Prepaid expenses and other assets
    
    
    10,428
    
    
    
    (4,151
    )Accounts payable, accrued liabilities and deferred margin
    
    
    (16,695
    )
    
    
    70,155Net cash provided by (used in) operating activities
    
    
    42,999
    
    
    
    (4,323
    )CASH FLOWS FROM INVESTING ACTIVITIES:Purchase of short-term investments
    
    
    (184,638
    )
    
    
    (225,226
    )Sale or maturity of short-term investments
    
    
    203,375
    
    
    
    176,750Release of restricted cash and cash equivalents
    
    
    
    
    
    
    1,904Purchase of property and equipment, net
    
    
    (5,306
    )
    
    
    (3,856
    )Net cash provided by (used in) investing activities
    
    
    13,431
    
    
    
    (50,428
    )CASH FLOWS FROM FINANCING ACTIVITIES:Proceeds from (payments on) lines of credit, net
    
    
    1,794
    
    
    
    19,381Payments on short-term loans
    
    
    
    
    
    
    (3,692
    )Dividends paid to a minority shareholder
    
    
    (5,939
    )
    
    
    Principal payments on long-term debt and capital leases
    
    
    (2,994
    )
    
    
    Proceeds from issuance of common stock
    
    
    694
    
    
    
    2,999Net cash provided by (used in) financing activities
    
    
    (6,445
    )
    
    
    18,688Effect of exchange rate changes on cash and cash equivalents
    
    
    (3,889
    )
    
    
    1,205INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
    
    
    46,096
    
    
    
    (34,858
    )CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD
    
    
    55,094
    
    
    
    112,907CASH AND CASH EQUIVALENTS, END OF PERIOD
    
    $
    101,190
    
    
    $
    78,049
  5




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##### Table of Contents



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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Recent Accounting Pronouncements
 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,
 7




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Reclassifications
   As Reported
    
    As Reclassified:Cash and Cash
    
    Short-Term
    
    
    
    
    
    Cash and Cash
    
    Short-TermEquivalents
    
    Investments
    
    Total
    
    Equivalents
    
    Investments
    
    TotalDecember 31,2004
    
    $
    105,499
    
    
    $
    25,596
    
    
    $
    131,095
    
    
    $
    78,049
    
    
    $
    53,046
    
    
    $
    131,095
  As Reported
    
    As Reclassified:Sales /
    
    
    
    
    
    
    
    
    
    Sales /Purchase of
    
    Maturities of
    
    
    
    
    
    Purchase of
    
    Maturities ofAvailable for
    
    Available for
    
    
    
    
    
    Available for
    
    Available forSale Securities
    
    Sale Securities
    
    Net
    
    Sale Securities
    
    Sale Securities
    
    NetNine months ended December 31, 2004
    
    $
    (22,526
    )
    
    $
    1,500
    
    
    $
    (21,026
    )
    
    $
    (225,226
    )
    
    $
    176,750
    
    
    $
    (48,476
    )
   Short-term Investments
  Cost
    
    
    Unrealized Loss
    
    
    Fair ValueDecember 31, 2005Auction rate securities
    
    $
    17,475
    
    
    $
    
    
    
    $
    17,475Corporate debt securities
    
    
    6,805
    
    
    
    (26
    )
    
    
    6,779Federal agency notes
    
    
    3,000
    
    
    
    (10
    )
    
    
    2,990$
    27,280
    
    
    $
    (36
    )
    
    $
    27,244March 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
  8




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##### Table of Contents



Accounts Receivable, net of allowance for doubtful accounts
  December 31,
    
    
    March 31,2005
    
    
    2005Trade receivables
    
    $
    63,572
    
    
    $
    77,196Trade receivables-related party
    
    
    23
    
    
    
    100Unbilled receivables
    
    
    86,425
    
    
    
    110,778Other receivables
    
    
    6,664
    
    
    
    8,849Less: Allowance for doubtful accounts
    
    
    (10,530
    )
    
    
    (6,980
    )Total
    
    $
    146,154
    
    
    $
    189,943
    Inventories
  December 31,
    
    
    March 31,2005
    
    
    2005Raw materials
    
    $
    13,580
    
    
    $
    14,040Work-in-process
    
    
    23,943
    
    
    
    17,905Finished goods
    
    
    786
    
    
    
    1,570Total
    
    $
    38,309
    
    
    $
    33,515
   9




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##### Table of Contents



Goodwill and Other Intangible Assets, net
 Goodwill
   Fab Automation
    
    
    AMHS
    
    
    TotalBalance at March 31, 2005
    
    $
    3,397
    
    
    $
    60,617
    
    
    $
    64,014Foreign currency translation
    
    
    
    
    
    
    (5,306
    )
    
    
    (5,306
    )Balances at December 31, 2005
    
    $
    3,397
    
    
    $
    55,311
    
    
    $
    58,708
 Intangible assets
  December 31, 2005
    
    
    March 31, 2005Gross
    
    
    
    
    
    
    
    
    
    
    GrossCarrying
    
    
    Accumulated
    
    
    
    
    
    
    Carrying
    
    
    AccumulatedAmount
    
    
    Amortization
    
    
    Net
    
    
    Amount
    
    
    Amortization
    
    
    NetAmortizable intangible assets:Developed technology
    
    $
    58,179
    
    
    $
    41,426
    
    
    $
    16,753
    
    
    $
    62,626
    
    
    $
    34,069
    
    
    $
    28,557Customer base and other
intangible assets
    
    
    31,889
    
    
    
    28,696
    
    
    
    3,193
    
    
    
    33,767
    
    
    
    25,167
    
    
    
    8,600Licenses and patents
    
    
    6,477
    
    
    
    3,422
    
    
    
    3,055
    
    
    
    6,989
    
    
    
    3,248
    
    
    
    3,741Total
    
    $
    96,545
    
    
    $
    73,544
    
    
    $
    23,001
    
    
    $
    103,382
    
    
    $
    62,484
    
    
    $
    40,898
   Fiscal Year ending March 31,Remaining portion of 2006
    
    $
    3,6602007
    
    
    11,9412008
    
    
    5,9802009
    
    
    6882010
    
    
    3682011 and thereafter
    
    
    364Total
    
    $
    23,001
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Warranty Accrual
  Three Months Ended
    
    
    Nine Months EndedDecember 31,
    
    
    December 31,2005
    
    
    2004
    
    
    2005
    
    
    2004Beginning Balance
    
    $
    11,374
    
    
    $
    11,934
    
    
    $
    13,509
    
    
    $
    8,165Accruals
    
    
    877
    
    
    
    9,085
    
    
    
    5,832
    
    
    
    16,180Settlements
    
    
    (2,529
    )
    
    
    (6,649
    )
    
    
    (9,064
    )
    
    
    (9,721
    )Foreign Currency Translation
    
    
    (392
    )
    
    
    589
    
    
    
    (947
    )
    
    
    335Ending Balance
    
    $
    9,330
    
    
    $
    14,959
    
    
    $
    9,330
    
    
    $
    14,959
  Revenue Recognition
 . .
 Accounting for Performance
of Construction-Type and Certain Production-Type Contracts.
 Software Revenue Recognition.
 Contract Loss Reserve
  11




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Comprehensive Loss
  Three Months Ended
    
    
    Nine Months EndedDecember 31,
    
    
    December 31,2005
    
    
    2004
    
    
    2005
    
    
    2004Net income (loss), as reported
    
    $
    2,979
    
    
    $
    (11,644
    )
    
    $
    (2,153
    )
    
    $
    (15,761
    )Foreign currency translation adjustments
    
    
    (3,461
    )
    
    
    4,144
    
    
    
    (7,188
    )
    
    
    1,368Unrealized gains (losses) on investments
    
    
    27
    
    
    
    (61
    )
    
    
    105
    
    
    
    (131
    )Comprehensive loss
    
    $
    (455
    )
    
    $
    (7,561
    )
    
    $
    (9,236
    )
    
    $
    (14,524
    )
 Net Income (Loss) Per Share
   Three Months Ended
    
    
    Nine Months EndedDecember 31,
    
    
    December 31,2005
    
    
    2004
    
    
    2005
    
    
    2004Basic and diluted net income (loss) per share:Numerator:Net income (loss)
    
    $
    2,979
    
    
    $
    (11,644
    )
    
    $
    (2,153
    )
    
    $
    (15,761
    )Denominator:Weighted average common shares outstanding
    
    
    47,945
    
    
    
    47,495
    
    
    
    47,872
    
    
    
    47,291Add: Weighted average vested but unissued restricted stock
    
    
    98
    
    
    
    58
    
    
    
    88
    
    
    
    96Less: Weighted average unvested restricted stock
    
    
    (24
    )
    
    
    
    
    
    
    (42
    )
    
    
    Denominator for basic calculation
    
    
    48,019
    
    
    
    47,553
    
    
    
    47,918
    
    
    
    47,387Effect of
dilutive securities:Add: Weighted average common stock options and unvested restricted
stock and restricted stock units
    
    
    770
    
    
    
    
    
    
    
    
    
    
    
    Denominator for diluted calculation
    
    
    48,789
    
    
    
    47,553
    
    
    
    47,918
    
    
    
    47,387Net income (loss) per share, basic
    
    $
    0.06
    
    
    $
    (0.24
    )
    
    $
    (0.04
    )
    
    $
    (0.33
    )Net income (loss) per share, diluted
    
    $
    0.06
    
    
    $
    (0.24
    )
    
    $
    (0.04
    )
    
    $
    (0.33
    )
  Three months Ended
    
    
    Nine months EndedDecember 31,
    
    
    December 31,2005
    
    
    2004
    
    
    2005
    
    
    2004Restricted stock options
    
    
    
    
    
    
    62
    
    
    
    478
    
    
    
    64Restricted stock units
    
    
    
    
    
    
    40
    
    
    
    37
    
    
    
    20Stock options
    
    
    3,831
    
    
    
    8,235
    
    
    
    6,958
    
    
    
    8,439Convertible notes
    
    
    5,682
    
    
    
    5,682
    
    
    
    5,682
    
    
    
    5,682Total
    
    
    9,513
    
    
    
    14,019
    
    
    
    13,155
    
    
    
    14,205
 12




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##### Table of Contents



Stock-Based Compensation
  Three Months Ended
    
    
    Nine Months EndedDecember 31,
    
    
    December 31,2005
    
    
    2004
    
    
    2005
    
    
    2004Net income (loss)  as reported
    
    $
    2,979
    
    
    $
    (11,644
    )
    
    $
    (2,153
    )
    
    $
    (15,761
    )Add: employee stock-based compensation
expense included in reported net income
(loss), net of tax
    
    
    271
    
    
    
    205
    
    
    
    1,095
    
    
    
    961Less: total employee stock-based compensation
expense determined under fair value, net of
tax
    
    
    (1,463
    )
    
    
    (2,868
    )
    
    
    (4,598
    )
    
    
    (8,107
    )As adjusted net income (loss)
    
    $
    1,787
    
    
    $
    (14,307
    )
    
    $
    (5,656
    )
    
    $
    (22,907
    )Basic net income (loss) per share  As reported
    
    $
    0.06
    
    
    $
    (0.24
    )
    
    $
    (0.04
    )
    
    $
    (0.33
    )Basic net income (loss) per share  As adjusted
    
    $
    0.04
    
    
    $
    (0.30
    )
    
    $
    (0.12
    )
    
    $
    (0.48
    )Diluted net income (loss) per share  As reported
    
    $
    0.06
    
    
    $
    (0.24
    )
    
    $
    (0.04
    )
    
    $
    (0.33
    )Diluted net income (loss) per share  As adjusted
    
    $
    0.04
    
    
    $
    (0.30
    )
    
    $
    (0.12
    )
    
    $
    (0.48
    )Basic shares used in computing As Reported and
As Adjusted net income (loss) per share
    
    
    48,019
    
    
    
    47,553
    
    
    
    47,918
    
    
    
    47,387Diluted shares used in computing As Reported and
As Adjusted net income (loss) per share
    
    
    48,789
    
    
    
    47,553
    
    
    
    47,918
    
    
    
    47,387
 Defined Benefit Pension Plans
   3. RESTRUCTURING CHARGES
  Severance and Benefits
    
    
    Excess Facilities
    
    
    TotalBalance, 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
    )
    
    
    0
    
    
    
    (1
    )Balance, September 30, 2005
    
    
    
    
    
    
    415
    
    
    
    415Reduction in accrual
    
    
    
    
    
    
    (138
    )
    
    
    (138
    )Non-cash utilization
    
    
    
    
    
    
    44
    
    
    
    44Amounts paid in cash
    
    
    
    
    
    
    (78
    )
    
    
    (78
    )Balance, December 31, 2005
    
    $
    
    
    
    $
    243
    
    
    $
    243
 13




---



##### Table of Contents



Severance and Benefits
    
    
    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
    
    
    409
    
    
    
    (41
    )
    
    
    368Amounts paid in cash
    
    
    (388
    )
    
    
    (279
    )
    
    
    (667
    )Foreign currency
translation adjustment
    
    
    (1
    )
    
    
    (7
    )
    
    
    (8
    )Balance, September 30, 2004
    
    
    53
    
    
    
    1,695
    
    
    
    1,748Additional accruals
    
    
    1,182
    
    
    
    (66
    )
    
    
    1,116Amounts paid in cash
    
    
    (522
    )
    
    
    (324
    )
    
    
    (846
    )Foreign currency
translation adjustment
    
    
    4
    
    
    
    12
    
    
    
    16Balance, December 31, 2004
    
    $
    717
    
    
    $
    1,317
    
    
    $
    2,034
  4.
ASSET IMPAIRMENT CHARGES
   5. INCOME TAXES
  Three Months Ended
    
    Nine months EndedDecember 31,
    
    December 31,2005
    
    2004
    
    2005
    
    2004Benefit from (provision for) income taxes
    
    
    ($6,507
    )
    
    $
    962
    
    
    
    ($16,191
    )
    
    $
    2,549
 14




---



##### Table of Contents



6. REPORTABLE SEGMENTS
    December 31,
    
    
    March 31,2005
    
    
    2005AMHS:Total Assets
    
    $
    276,994
    
    
    $
    312,391Fab Automation Products:Total Assets
    
    $
    163,167
    
    
    $
    171,383Consolidated:Total Assets
    
    $
    440,161
    
    
    $
    483,774
 Three Months Ended
    
    
    Nine Months EndedDecember 31,
    
    
    December 31,2005
    
    
    2004
    
    
    2005
    
    
    2004AMHS:Net sales
    
    $
    67,337
    
    
    $
    109,255
    
    
    $
    230,135
    
    
    $
    276,714Cost of Sales
    
    
    41,775
    
    
    
    98,316
    
    
    
    155,837
    
    
    
    251,636Gross Profit
    
    $
    25,562
    
    
    $
    10,939
    
    
    $
    74,298
    
    
    $
    25,078Income (loss) from operations
    
    $
    14,520
    
    
    $
    (3,011
    )
    
    $
    36,013
    
    
    $
    (8,809
    )Fixed Assets Additions
    
    $
    1,500
    
    
    $
    220
    
    
    $
    2,949
    
    
    $
    1,962Amortization and Depreciation
    
    $
    3,089
    
    
    $
    4,349
    
    
    $
    11,939
    
    
    $
    13,025Fab Automation Products:Net sales
    
    $
    39,487
    
    
    $
    52,128
    
    
    $
    118,735
    
    
    $
    192,700Cost of Sales
    
    
    23,053
    
    
    
    35,498
    
    
    
    73,827
    
    
    
    132,266Gross Profit
    
    $
    16,434
    
    
    $
    16,630
    
    
    $
    44,908
    
    
    $
    60,434Loss from operations
    
    $
    (3,265
    )
    
    $
    (11,303
    )
    
    $
    (12,799
    )
    
    $
    (11,262
    )Fixed Assets Additions
    
    $
    3,395
    
    
    $
    
    
    
    $
    4,932
    
    
    $
    1,892Amortization and Depreciation
    
    $
    2,178
    
    
    $
    1,925
    
    
    $
    6,429
    
    
    $
    7,307Consolidated:Net sales
    
    $
    106,824
    
    
    $
    161,383
    
    
    $
    348,870
    
    
    $
    469,414Cost of Sales
    
    
    64,828
    
    
    
    133,814
    
    
    
    229,664
    
    
    
    383,902Gross Profit
    
    $
    41,996
    
    
    $
    27,569
    
    
    $
    119,206
    
    
    $
    85,512Income (loss) from operations
    
    $
    11,255
    
    
    $
    (14,314
    )
    
    $
    23,214
    
    
    $
    (20,071
    )Fixed Assets Additions
    
    $
    4,894
    
    
    $
    220
    
    
    $
    7,881
    
    
    $
    3,854Amortization and Depreciation
    
    $
    5,267
    
    
    $
    6,274
    
    
    $
    18,368
    
    
    $
    20,332
 15




---



##### Table of Contents



Three Months Ended
    
    
    Nine Months Ended
    
    
    Three Months Ended
    
    
    Nine Months EndedDecember 31,
    
    
    December 31,
    
    
    December 31,
    
    
    December 31,2005
    
    
    2005
    
    
    2004
    
    
    2004Customer A
    
    
    13.6%
    
    
    
    6.2%
    
    
    
    0.0%
    
    
    
    0.0%Customer B
    
    
    13.0%
    
    
    
    7.9%
    
    
    
    3.0%
    
    
    
    3.3%Customer C
    
    
    8.3%
    
    
    
    13.6%
    
    
    
    11.0%
    
    
    
    20.0%Customer D
    
    
    1.8%
    
    
    
    5.7%
    
    
    
    24.0%
    
    
    
    8.3%
  7. DEBT
   December 31,
    
    
    March 31,2005
    
    
    2005Convertible subordinated notes
    
    $
    86,250
    
    
    $
    86,250Secured straight bonds
    
    
    1,683
    
    
    
    2,482Long-term loans
    
    
    679
    
    
    
    1,915Capital leases
    
    
    586
    
    
    
    860Total long-term debt
    
    
    89,198
    
    
    
    91,507Less: Current portion of long-term debt and capital leases
    
    
    (1,776
    )
    
    
    (2,757
    )Long-term debt and capital leases net of current portion
    
    $
    87,422
    
    
    $
    88,750
 16




---



##### Table of Contents



Fiscal Year Ending March 31,Remaining portion of 2006
    
    $
    6672007
    
    
    1,3662008
    
    
    7222009
    
    
    86,4432010 and thereafter
    
    
    $
    89,198
 Convertible Subordinated Notes
  Secured Straight Bonds
  Lines of Credit
    17




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##### Table of Contents



8.
SHAREHOLDERS EQUITY
 Employee Stock Option Grants
  Employee Stock Purchase Plan
  Fair Value Disclosures
   Three months Ended
    
    Nine months EndedDecember 31,
    
    December 31,2005
    
    2004
    
    2005
    
    2004Risk-free interest rate
    
    
    4.38
    %
    
    
    3.27
    %
    
    
    3.81
    %
    
    
    3.30
    %Expected term of options (in years)
    
    
    4.7
    
    
    
    4.6
    
    
    
    4.7
    
    
    
    4.4Expected volatility
    
    
    88.1
    %
    
    
    91.5
    %
    
    
    88.3
    %
    
    
    91.8
    %Expected dividend yield
    
    
    0
    %
    
    
    0
    %
    
    
    0
    %
    
    
    0
    %
 18




---



##### Table of Contents



Three months Ended
    
    Nine months EndedDecember 31,
    
    December 31,2005
    
    2004
    
    2005
    
    2004Risk-free interest rate
    
    
    4.29
    %
    
    
    2.31
    %
    
    
    3.81
    %
    
    
    2.08
    %Expected term of options (in years)
    
    
    0.5
    
    
    
    0.5
    
    
    
    0.5
    
    
    
    0.5Expected volatility
    
    
    52.3
    %
    
    
    82.8
    %
    
    
    48.6
    %
    
    
    83.9
    %Expected dividend yield
    
    
    0
    %
    
    
    0
    %
    
    
    0
    %
    
    
    0
    %
 9. RELATED PARTY TRANSACTIONS
  December 31,
    
    March 31,2005Amounts due to Shinko
    
    $
    21,650
    
    
    $
    39,221Accounts receivable from MECS Korea
    
    
    23
    
    
    
    100Amounts due to MECS Korea
    
    
    6
    
    
    
    21
  10. COMMITMENTS AND CONTINGENCIES
 Lease Commitments
  Fiscal Year Ending March 31,
    
    Capital Lease
    
    
    Operating LeaseRemaining portion of 2006
    
    $
    65
    
    
    $
    1,5932007
    
    
    234
    
    
    
    2,1642008
    
    
    162
    
    
    
    2,8072009
    
    
    146
    
    
    
    1,3922010 and thereafter
    
    
    
    
    
    
    5,667Total
    
    
    607
    
    
    $
    13,623Less: interest
    
    
    (21
    )Present value of minimum lease payments
    
    
    586Less: current portion of capital leases
    
    
    (229
    )Capital leases, net of current portion
    
    $
    357
 19




---



##### Table of Contents



Legal Commitments
    Indemnifications
  20




---



##### 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 on Form 10-K for
the year ended March 31, 2005. Certain prior period amounts have been reclassified to conform to
current period presentation.
  Overview
        21




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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.
 Critical Accounting Policies and Estimates
   Results of Operations
  22




---



##### Table of Contents



Three Months Ended
    
    
    Nine Months EndedDecember 31,
    
    
    
    
    
    
    
    
    
    
    December 31,2005
    
    
    2004
    
    
    2005
    
    
    2004AMHS:Net sales
    
    
    67,337
    
    
    
    100.0
    %
    
    
    109,255
    
    
    
    100.0
    %
    
    
    230,135
    
    
    
    100.0
    %
    
    
    276,714
    
    
    
    100.0
    %Cost of Sales
    
    
    41,775
    
    
    
    62.0
    %
    
    
    98,316
    
    
    
    90.0
    %
    
    
    155,837
    
    
    
    67.7
    %
    
    
    251,636
    
    
    
    90.9
    %Gross Profit
    
    
    25,562
    
    
    
    38.0
    %
    
    
    10,939
    
    
    
    10.0
    %
    
    
    74,298
    
    
    
    32.3
    %
    
    
    25,078
    
    
    
    9.1
    %Income (loss) from
operations
    
    $
    14,520
    
    
    
    21.6
    %
    
    $
    (3,011
    )
    
    
    (2.8
    )%
    
    $
    36,013
    
    
    
    15.6
    %
    
    $
    (8,809
    )
    
    
    (3.2
    )%Fab Automation Products:Net sales
    
    
    39,487
    
    
    
    100.0
    %
    
    
    52,128
    
    
    
    100.0
    %
    
    
    118,735
    
    
    
    100.0
    %
    
    
    192,700
    
    
    
    100.0
    %Cost of Sales
    
    
    23,053
    
    
    
    58.4
    %
    
    
    35,498
    
    
    
    68.1
    %
    
    
    73,827
    
    
    
    62.2
    %
    
    
    132,266
    
    
    
    68.6
    %Gross Profit
    
    
    16,434
    
    
    
    41.6
    %
    
    
    16,630
    
    
    
    31.9
    %
    
    
    44,908
    
    
    
    37.8
    %
    
    
    60,434
    
    
    
    31.4
    %Loss from operations
    
    $
    (3,265
    )
    
    
    (8.3
    )%
    
    $
    (11,303
    )
    
    
    (21.7
    )%
    
    $
    (12,799
    )
    
    
    (10.8
    )%
    
    $
    (11,262
    )
    
    
    (5.8
    )%Consolidated:Net sales
    
    
    106,824
    
    
    
    100.0
    %
    
    
    161,383
    
    
    
    100.0
    %
    
    
    348,870
    
    
    
    100.0
    %
    
    
    469,414
    
    
    
    100.0
    %Cost of Sales
    
    
    64,828
    
    
    
    60.7
    %
    
    
    133,814
    
    
    
    82.9
    %
    
    
    229,664
    
    
    
    65.8
    %
    
    
    383,902
    
    
    
    81.8
    %Gross Profit
    
    
    41,996
    
    
    
    39.3
    %
    
    
    27,569
    
    
    
    17.1
    %
    
    
    119,206
    
    
    
    34.2
    %
    
    
    85,512
    
    
    
    18.2
    %Income (loss) from
operations
    
    $
    11,255
    
    
    
    10.5
    %
    
    $
    (14,314
    )
    
    
    (8.9
    )%
    
    $
    23,214
    
    
    
    6.7
    %
    
    $
    (20,071
    )
    
    
    (4.3
    )%
  Three Months Ended
    
    Nine Months EndedDecember 31,
    
    December 31,2005
    
    2004
    
    2005
    
    2004AMHS:Net Sales
    
    
    63.0
    %
    
    
    67.7
    %
    
    
    66.0
    %
    
    
    58.9
    %Cost of Sales
    
    
    39.1
    %
    
    
    60.9
    %
    
    
    44.7
    %
    
    
    53.6
    %Gross Profit
    
    
    23.9
    %
    
    
    6.8
    %
    
    
    21.3
    %
    
    
    5.3
    %Income (loss) from operations
    
    
    13.6
    %
    
    
    (1.9
    )%
    
    
    10.3
    %
    
    
    (1.9
    )%Fab Automation Products:Net Sales
    
    
    37.0
    %
    
    
    32.3
    %
    
    
    34.0
    %
    
    
    41.1
    %Cost of Sales
    
    
    21.6
    %
    
    
    22.0
    %
    
    
    21.1
    %
    
    
    28.2
    %Gross Profit
    
    
    15.4
    %
    
    
    10.3
    %
    
    
    12.9
    %
    
    
    12.9
    %Loss from operations
    
    
    (3.1
    )%
    
    
    (7.0
    )%
    
    
    (3.6
    )%
    
    
    (2.4
    )%Consolidated:Net Sales
    
    
    100.0
    %
    
    
    100.0
    %
    
    
    100.0
    %
    
    
    100.0
    %Cost of Sales
    
    
    60.7
    %
    
    
    82.9
    %
    
    
    65.8
    %
    
    
    81.8
    %Gross Profit
    
    
    39.3
    %
    
    
    17.1
    %
    
    
    34.2
    %
    
    
    18.2
    %Income (loss) from operations
    
    
    10.5
    %
    
    
    (8.9
    )%
    
    
    6.7
    %
    
    
    (4.3
    )%
 Net Sales
 Consolidated
 AMHS
 Fab Automation
 23




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##### Table of Contents



Comparison of Expenses, Gross Margin, Interest & Other, and Income Taxes
  Three Months Ended
    
    Nine Months EndedDecember 31,
    
    December 31,2005
    
    2004
    
    2005
    
    2004NET SALES
    
    
    100.0
    %
    
    
    100.0
    %
    
    
    100.0
    %
    
    
    100.0
    %COST OF SALES
    
    
    60.7
    %
    
    
    82.9
    %
    
    
    65.8
    %
    
    
    81.8
    %Gross profit
    
    
    39.3
    %
    
    
    17.1
    %
    
    
    34.2
    %
    
    
    18.2
    %OPERATING EXPENSES:Research and development
    
    
    5.9
    %
    
    
    5.3
    %
    
    
    5.9
    %
    
    
    5.8
    %Selling, general and administrative
    
    
    19.7
    %
    
    
    13.9
    %
    
    
    17.8
    %
    
    
    12.1
    %Amortization of acquired intangible assets
    
    
    3.3
    %
    
    
    3.2
    %
    
    
    3.8
    %
    
    
    3.2
    %Restructuring and other charges
    
    
    (0.1
    )%
    
    
    3.6
    %
    
    
    (0.0
    )%
    
    
    1.4
    %Total operating expenses
    
    
    28.8
    %
    
    
    26.0
    %
    
    
    27.5
    %
    
    
    22.5
    %Income (loss) from operations
    
    
    10.5
    %
    
    
    (8.9
    )%
    
    
    6.7
    %
    
    
    (4.3
    )%INTEREST AND OTHER INCOME (EXPENSE),NET:Interest income
    
    
    0.7
    %
    
    
    0.3
    %
    
    
    0.5
    %
    
    
    0.3
    %Interest expense
    
    
    (1.6
    )%
    
    
    (1.0
    )%
    
    
    (1.5
    )%
    
    
    (1.1
    )%Other income, net
    
    
    3.2
    %
    
    
    0.9
    %
    
    
    1.2
    %
    
    
    0.6
    %Interest and other income (expense), net
    
    
    2.3
    %
    
    
    0.2
    %
    
    
    0.2
    %
    
    
    (0.2
    )%Income (loss) before benefit from
(provision for) income taxes and
minority interest
    
    
    12.8
    %
    
    
    (8.7
    )%
    
    
    6.9
    %
    
    
    (4.5
    )%BENEFIT FROM (PROVISION FOR) INCOMETAXES
    
    
    (6.1
    )%
    
    
    0.6
    %
    
    
    (4.6
    )%
    
    
    0.5
    %MINORITY INTEREST
    
    
    (3.9
    )%
    
    
    0.9
    %
    
    
    (2.9
    )%
    
    
    0.6
    %NET INCOME (LOSS)
    
    
    2.8
    %
    
    
    (7.2
    )%
    
    
    (0.6
    )%
    
    
    (3.4
    )%
 Gross Margin
 Consolidated
   24




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##### Table of Contents



AMHS
  Fab Automation
    Research and Development
 Three Months Ended
    
    
    
    
    
    
    Nine Months EndedDecember 31,
    
    
    
    
    
    
    December 31,(in thousands, except percentage)
    
    2005
    
    
    2004
    
    
    Change
    
    
    2005
    
    
    2004
    
    
    ChangeResearch and development
    
    $
    6,310
    
    
    $
    8,485
    
    
    
    ($2,175
    )
    
    $
    20,461
    
    
    $
    27,237
    
    
    
    ($6,776
    )Percentage of total net sales
    
    
    5.9
    %
    
    
    5.3
    %
    
    
    (25.6
    )%
    
    
    5.9
    %
    
    
    5.8
    %
    
    
    (24.9
    )%
    25




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##### Table of Contents



Selling, General and Administrative
 Three Months Ended
    
    
    
    
    
    
    Nine Months Ended(in thousands, except percentage)
    
    December 31,
    
    
    
    
    
    
    December 31,2005
    
    
    2004
    
    
    Change
    
    
    2005
    
    
    2004
    
    
    ChangeSelling, general and administrative
    
    $
    21,075
    
    
    $
    22,551
    
    
    
    ($1,476
    )
    
    $
    62,450
    
    
    $
    56,820
    
    
    $
    5,630Percentage of total net sales
    
    
    19.7
    %
    
    
    13.9
    %
    
    
    (6.5
    )%
    
    
    17.8
    %
    
    
    12.1
    %
    
    
    9.9
    %
   Amortization of Acquired Intangible Assets
 Three Months Ended
    
    
    
    
    
    
    Nine Months Ended(in thousands, except percentage)
    
    December 31,
    
    
    
    
    
    
    December 31,2005
    
    
    2004
    
    
    Change
    
    
    2005
    
    
    2004
    
    
    ChangeAmortization of acquired intangible assets
    
    $
    3,494
    
    
    $
    5,086
    
    
    
    ($1,592
    )
    
    $
    13,126
    
    
    $
    15,178
    
    
    
    ($2,052
    )Percentage of total net sales
    
    
    3.3
    %
    
    
    3.2
    %
    
    
    (31.3
    )%
    
    
    3.8
    %
    
    
    3.2
    %
    
    
    (13.5
    )%
  Restructuring Charges (Credits)
  Three Months Ended
    
    
    
    
    
    
    Nine Months Ended(in thousands, except percentages)
    
    December 31,
    
    
    
    
    
    
    December 31,2005
    
    
    2004
    
    
    Change
    
    
    2005
    
    
    2004
    
    
    ChangeRestructuring charges (credits)
    
    
    ($138
    )
    
    $
    1,116
    
    
    
    ($1,254
    )
    
    
    ($45
    )
    
    $
    1,703
    
    
    
    ($1,748
    )Percentage of total net sales
    
    
    (0.1
    )%
    
    
    0.7
    %
    
    
    (112.4
    )%
    
    
    0.0
    %
    
    
    0.4
    %
    
    
    (102.7
    )%
   26




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##### Table of Contents



Severance and Benefits
    
    Excess Facilities
    
    TotalBalance, 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
    
    
    
    415Additional accruals
    
    
    
    
    
    
    (138
    )
    
    
    (138
    )Non-cash utilization
    
    
    
    
    
    
    44
    
    
    
    44Amounts paid in cash
    
    
    
    
    
    
    (78
    )
    
    
    (78
    )Balance, December 31, 2005
    
    $
    
    
    
    $
    243
    
    
    $
    243
 Asset
Impairment Charges
   Interest and other Income (Expense), Net
 Three Months Ended
    
    
    
    
    
    
    Nine Months Ended(in thousands)
    
    December 31,
    
    
    
    
    
    
    December 31,2005
    
    
    2004
    
    
    Change
    
    
    2005
    
    
    2004
    
    
    ChangeInterest income
    
    $
    706
    
    
    $
    479
    
    
    $
    227
    
    
    $
    1,798
    
    
    $
    1,197
    
    
    $
    601Interest expense
    
    ($
    1,714
    )
    
    ($
    1,691
    )
    
    ($
    23
    )
    
    ($
    5,126
    )
    
    ($
    4,953
    )
    
    ($
    173
    )Other income, net
    
    $
    3,417
    
    
    $
    1,509
    
    
    $
    1,908
    
    
    $
    4,267
    
    
    $
    2,692
    
    
    $
    1,575
 27




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##### Table of Contents



Income Taxes
 Three Months Ended
    
    
    
    
    
    
    Nine Months Ended(in thousands, except percentage)
    
    December 31,
    
    
    
    
    
    
    December 31,2005
    
    
    2004
    
    
    Change
    
    
    2005
    
    
    2004
    
    
    ChangeBenefit from (provision for)
income taxes
    
    
    ($6,507
    )
    
    $
    962
    
    
    
    ($7,469
    )
    
    
    ($16,191
    )
    
    $
    2,549
    
    
    
    ($18,740
    )Percentage of total net sales
    
    
    (6.1
    )%
    
    
    0.6
    %
    
    
    
    
    
    
    (4.6
    )%
    
    
    0.5
    %
     Liquidity and Capital Resources
    Nine Months EndedDecember 31,2005
    
    
    2004Net cash provided by (used in) operating activities
    
    $
    43.0
    
    
    $
    (4.3
    )Net cash provided by (used in) investing activities
    
    $
    13.4
    
    
    $
    (50.4
    )Net cash provided by (used in) financing activities
    
    $
    (6.5
    )
    
    $
    18.7
 Cash Flows from Operating Activities
  Net loss
    
    $
    (2.2
    )Non-cash charges
    
    
    33.3Decrease in accounts receivable
    
    
    25.7Increase in inventories
    
    
    (7.5
    )Decrease in prepaid expenses and other assets
    
    
    10.4Decrease in accounts payable, accrued liabilities
and deferred margin
    
    
    (16.7
    )Net cash provided by operating activities
    
    $
    43.0
 28




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Cash Flows from Investing Activities
   Cash Flows from Financing Activities
    29




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30




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##### Table of Contents



Recent Accounting Pronouncements
 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,
 31




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Risk Factors
 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.
       32




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##### Table of Contents



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.
    33




---



##### Table of Contents



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 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.
   34




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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.
   35




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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.
  36




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##### Table of Contents



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;
    
    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.
   37




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##### Table of Contents



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.
    38




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##### 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;
    
    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.
 39




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##### Table of Contents




    
    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.
    Our current and planned operations may strain our resources and increase our operating expenses.
  40




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If we lose any of our key personnel or are unable to attract, train or retain qualified personnel,
our business would be harmed.
    Our operations are vulnerable to interruption or loss due to earthquakes and other events beyond
our control, which would adversely affect our business.
  When we account for employee stock options using the fair value method, it will significantly
impact our results from operations.
  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.
 41




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##### Table of Contents



We may not effectively compete in a highly competitive semiconductor manufacturing equipment
industry.
     
 ITEM 3  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
  Interest Rate Risk.
 42




---



##### Table of Contents



Foreign Currency Exchange Risk
 
  Strengthening in
    
    
    
    
    
    
    Weakening inJapanese Yen of
    
    
    
    
    
    Japanese Yen ofX Percent
    
    
    No Change in
    
    
    X PercentJapanese Yen10%
    
    
    5%
    
    

Exchange
Rate
    
    
    5%
    
    
    10%Net income
(loss) for the
nine-months ended
December 31, 2005
    
    $
    956
    
    
    $
    (680
    )
    
    $
    (2,153
    )
    
    $
    (3,485
    )
    
    $
    (4,696
    )
 ITEM 4  CONTROLS AND PROCEDURES
 Evaluation of Disclosure Controls and Procedures
    Status of Material Weaknesses
   43




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##### Table of Contents



Internal Control  Integrated Framework
      44




---



##### Table of Contents



45




---



##### 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 have hired additional qualified accounting personnel in
the U.S. and we plan to hire additional qualified accounting
personnel in 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.
 Interim Measures
 46




---



##### Table of Contents




    
    We hired a chief financial officer in June 2005 for our majority-owned joint venture ASI
and in July 2005 a controller for our corporate headquarters in California;
    
    We continue to utilize 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 continues to spend time at ASI during the close process of the
first three quarters of fiscal year 2006 and assisted the newly-hired ASI chief financial
officer in conducting 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;
    
    Corporate finance personnel, along with the ASI chief financial officer, continue to
provide training and instruction to ASI accounting staff to enhance their understanding of
relevant U.S. accounting principles and regulatory reporting requirements. The ASI chief
financial officer has developed policies and procedures and has conducted financial training
sessions with members of ASIs accounting staff;
    
    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
  47




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48




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##### Table of Contents



ITEM 6  EXHIBITS
 Incorporated by ReferenceExhibit
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    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
    
    
    10-Q
    
    
    
    000-22430
    
    
    
    10/21/1999of Incorporation, filed September 24, 1999.3.4
    
    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.,
    
    
    8-K
    
    
    
    000-22430
    
    
    
    6/29/1998as Rights Agent, dated June 25, 1998.4.2
    
    Common Stock Purchase Agreement between the Company and
    
    
    8-K
    
    
    
    000-22430
    
    
    
    6/18/1999.various purchasers, dated as of May 26, 1999.4.3
    
    Indenture dated as of July 3, 2001 between the Company, State
    
    
    10-Q
    
    
    
    000-22430
    
    
    
    8/14/2001Street Bank and Trust Company of California, N.A., astrustee, including therein the forms of the notes.4.4
    
    Registration Rights Agreement dated as of July 3, 2001
    
    
    10-Q
    
    
    
    000-22430
    
    
    
    8/14/2001between the Company and Merrill Lynch & Co., Merrill Lynch,Pierce, Fenner & Smith, Incorporated, and ABN Amro RothschildLLC.4.5
    
    Amendment to Rights Agreement among the Company and Bank of
    
    
    10-K
    
    
    
    000-22430
    
    
    
    6/28/2002Boston, N.A. as Rights Agent, dated November 30, 2001.10.61
    
    Amendment No. 2 to Amended and Restated Loan and Security
    
    
    
    
    
    
    
    
    
    
    
    
    
    XAgreement between the Company and Comerica Bank dated as ofNovember 21, 2005.10.62
    
    Industrial Space Lease (Single Tenant Net) between the
    
    
    
    
    
    
    
    
    
    
    
    
    
    XCompany and JER Bayside, LLC dated November 29, 2005.10.63
    
    First Amendment dated December 16, 2005, to Change-in-Control
    
    
    8-K
    
    
    
    000-22430
    
    
    
    12/16/2005Agreement dated October 20, 2003, between the Company andStephen S. Schwartz31.1
    
    Certification of the Chief Executive Officer required by Rule
    
    
    
    
    
    
    
    
    
    
    
    
    
    X13a-14(a) (pursuant to Section 302 of the Sarbanes-Oxley Actof 2002).31.2
    
    Certification of the Chief Financial Officer required by Rule
    
    
    
    
    
    
    
    
    
    
    
    
    
    X13a-14(a) (pursuant to Section 302 of the Sarbanes-Oxley Actof 2002).32.1
    
    Combined Certifications of the Chief Executive Officer and
    
    
    
    
    
    
    
    
    
    
    
    
    
    XChief Financial Officer required by Rule 13a-14(b) (pursuantto Section 906 of the Sarbanes-Oxley Act of 2002).
 49




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##### Table of Contents



SIGNATURES
  ASYST TECHNOLOGIES, INC.Date: February 6, 2006
    
    By:
    
    /s/ Robert J. NiklRobert J. NiklSenior Vice President andChief Financial Officer
  50




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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
    
    6/28/200210.61
    
    Amendment No. 2 to Amended and Restated Loan and Security
Agreement between the Company and Comerica Bank dated as of
November 21, 2005.
    
    
    
    
    
    
    
    X10.62
    
    Industrial Space Lease (Single Tenant Net) between the
Company and JER Bayside, LLC dated November 29, 2005.
    
    
    
    
    
    
    
    X10.63
    
    First Amendment dated December 16, 2005, to Change-in-Control
Agreement dated October 20, 2003, between the Company and
Stephen S. Schwartz
    
    8-K
    
    000-22430
    
    12/16/200531.1
    
    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