UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

FORM 10-Q

(Mark One)

For the quarterly period ended September 25, 2004

OR

For the transition period from __________to___________

Commission File number: 000-22430

ASYST TECHNOLOGIES, INC.

48761 Kato Road, Fremont, California 94538
(Address of principal executive offices, including zip code)

(510) 661-5000
(Registrant’s telephone number, including area code)

Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes o No þ

Indicate by check mark whether the Registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act).

Yes þ No o

The number of shares of the Registrant’s Common Stock, no par value, outstanding as of December 15, 2004 was [47,577,986].

EXPLANATORY NOTE

     We filed a Form 12b-25 with the SEC on November 4, 2004, to report that our filing of this Form 10-Q would be delayed because Asyst Shinko, Inc. (ASI), the company’s 51%-owned joint venture company in Japan, was not able to close its books in a timely manner. In the process of closing ASI’s books, we identified material accounting errors in ASI’s fiscal first quarter results, which led to our determination to restate those results in a Form 10-Q/A for our fiscal first quarter ended June 26, 2004, that we have filed on the date we filed this Form 10-Q. The company also made adjustments to the fiscal first quarter results reported for ATI, our base business.

     The restatement corrects accounting errors at ASI that understated ASI’s costs of goods sold for the fiscal first quarter by $3.6 million and its operating loss by $3.5 million, and adjusts ATI’s first quarter results to reduce its net sales by $1.7 million and its operating income by $216,000 to reflect the deferral of certain new product-related revenue that had been recognized in the quarter and reduce amortization of deferred stock-based compensation. The principal effects of the restatement adjustments on the consolidated fiscal first quarter results are to:

•		reduce consolidated net sales by $1.5 million, and increase consolidated cost of sales by $2.3 million;
•		reduce gross margin at ASI from 10% to 5%, and reduce consolidated gross margin from 23% to 21%;
•		increase consolidated net loss from $0.9 million to $2.3 million;
•		increase consolidated net loss per share from $0.02 to $0.05.

     Accordingly, the financial statements or information for our fiscal first quarter that have been included in our Form 10-Q filed on August 5, 2004, or included in announcements prior to our press release dated December 20, 2004, should not be relied upon.

     Information concerning the restatement is contained in Part I to this Form 10-Q in Note 2 to the Condensed Consolidated Financial Statements (Unaudited), Item 2 “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” and Item 4, “Controls and Procedures.” This information should be read in conjunction with relevant information in the company’s Form 10-Q/A referred to above. Note 2 to the Restated Condensed Consolidated Financial Statements contained in the Form 10-Q/A also includes a detailed statement of information “as reported” and “as restated” for the fiscal first quarter.

     The financial information in this Form 10-Q reflects the restated financial information in the company’s Form 10-Q/A for our fiscal first quarter.

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ASYST TECHNOLOGIES, INC.

TABLE OF CONTENTS

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Part I — FINANCIAL INFORMATION

ITEM 1 — FINANCIAL STATEMENTS

ASYST TECHNOLOGIES, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

The accompanying notes are an integral part of these condensed consolidated financial statements.

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ASYST TECHNOLOGIES, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

The accompanying notes are an integral part of these condensed consolidated financial statements.

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ASYST TECHNOLOGIES, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

The accompanying notes are an integral part of these condensed consolidated financial statements.

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ASYST TECHNOLOGIES, INC.

1. ORGANIZATION OF THE COMPANY

     The accompanying condensed consolidated financial statements include the accounts of Asyst Technologies, Inc., or Asyst, which was incorporated in California on May 31, 1984, our subsidiaries and our majority-owned joint venture. We develop, manufacture, sell and support integrated automation systems, primarily for the semiconductor and the flat panel display, or FPD, manufacturing industries.

     In April 2003, our majority-owned joint venture, Asyst Shinko, Inc., or ASI, acquired the portion of Shinko Technologies, Inc. that provides ongoing support to ASI’s North American Automated Material Handling Systems, or AMHS, customers from Shinko Electric, Co., Ltd., or Shinko. ASI renamed this subsidiary Asyst Shinko America, or ASAM.

     In October 2002, we purchased a 51.0 percent interest in ASI, a Japanese corporation.

     The above transactions, which were unrelated, were accounted for using the purchase method of accounting. Accordingly, our Condensed Consolidated Statements of Operations for the three- and six-month periods ended September 30, 2004 and 2003, and of Cash Flows for the six-month periods ended September 30, 2004 and 2003, respectively, include the results of these acquired entities for the periods subsequent to their respective acquisitions, as applicable. We consolidate fully the financial position and results of operations of ASI and account for the minority interest in the condensed consolidated financial statements.

2. RESTATEMENT OF FINANCIAL STATEMENTS AND RELATED MATTERS

     Background. In a press release issued November 3, 2004, and Form 12b-25 filed on November 4, 2004, we announced that we would not timely file the Form 10-Q for our fiscal second quarter ending September 25, 2004, because:

•

As a result of a conversion in the fiscal first quarter to a new ERP information system within ASI, ASI was unable to provide timely reconciliation and reporting of inventory and cost information, which prevented us from completing our consolidated financial closing process for the fiscal second quarter on a timely basis.

•

ASI was in a contract dispute with a customer relating to three contracts for a large flat panel display project. The dispute concerned allegations that ASI and a customer employee had an arrangement by which competitive information was shared, and an agreement was made, allegedly, for a future payment of money to the customer employee.

     This customer has since reaffirmed the flat panel display contracts with ASI, and has paid all amounts currently due under the three contracts to ASI. The three contracts had an aggregate original value of $137.0 million at the time the contracts were booked. In conjunction with reaffirming the three contracts, certain terms were renegotiated, including an aggregate price reduction to the customer of approximately $7.0 million under the three contracts at the exchange rate as of September 30, 2004.

     Audit Committee Investigation. Upon notification by Asyst management of the customer dispute referred to above, the Audit Committee of our Board of Directors promptly initiated an independent legal and forensic investigation of this matter in October 2004, which has been completed. The Audit Committee concluded that Asyst management had prevented the payment to the customer employee, no evidence of other improper payments was discovered, and Asyst management was not involved in the improper conduct.

     Closing Process and Restatement. Asyst believes that the ERP system conversion issues that led to inventory reconciliation difficulties at ASI have been addressed and that the system will support the timely preparation and submission of its consolidated financial statements in future reporting periods.

     In the process of closing ASI’s books, we identified material accounting errors in ASI’s fiscal first quarter results, which led to our determination to restate those results in the Form 10-Q/A filed on the same date that we have filed this Form 10-Q for our fiscal second quarter. Additionally, the company made adjustments to the fiscal first quarter results reported for ATI, our base business.

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ASYST TECHNOLOGIES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

     Summary of Restatement. All applicable financial information contained in this Form 10-Q reflects the restatement described above. The financial statements or information for the fiscal first quarter included in our Form 10-Q filed on August 5, 2004, or included in announcements prior to our press release dated December 20, 2004, should not be relied upon.

     The restatement corrects accounting errors at Asyst Shinko, Inc. (ASI), our 51%-owned joint venture company in Japan, that understated ASI’s costs of goods sold for the fiscal first quarter by $3.6 million and its operating loss by $3.5 million, and adjusts ATI’s first quarter results to reduce its net sales by $1.7 million and its operating income by $216,000 to reflect the deferral of certain new product-related revenue that had been recognized in the quarter and reduce amortization of deferred stock-based compensation. The principal effects of the restatement adjustments on the consolidated fiscal first quarter results are to:

•

reduce consolidated net sales by $1.5 million, and increase consolidated cost of sales by $2.3 million;

•

reduce gross margin at ASI from 10% to 5%, and reduce consolidated gross margin from 23% to 21%;

•

increase consolidated net loss from $0.9 million to $2.3 million;

•

increase consolidated net loss per share from $0.02 to $0.05.

     The information contained in these Condensed Consolidated Financial Statements (Unaudited) should be read in conjunction with the relevant information contained in the Form 10-Q/A we have filed for our fiscal first quarter on the date we filed this Form 10-Q. Note 2 to the Restated Condensed Consolidated Financial Statements contained in the Form 10-Q/A also includes a detailed statement of information “as reported” and “as restated” for the fiscal first quarter.

     Nasdaq Notification. We previously announced that Asyst received a letter from the Nasdaq Listing Qualifications Department indicating that, because of the company’s delay in timely filing its Quarterly Report on Form 10-Q for its fiscal second quarter ended September 25, 2004, Asyst is not in compliance with the filing requirements for continued listing on Nasdaq as set forth in Nasdaq Marketplace Rule 4310(c)(14). As a result, Asyst’s common shares are subject to delisting from the Nasdaq National Market, and the trading symbol for Asyst’s common stock was changed from “ASYT” to “ASYTE” at the opening of business on November 18, 2004.

     We appeared before a Nasdaq Listing Qualifications Panel on December 15, 2004, to discuss our filing delay relating to this Form 10-Q for the second fiscal quarter. The panel took no action on that date, and the matter remains open. Although we are hopeful that the panel will accept our submission and our filing of this report and our fiscal first quarter Form 10-Q/A in December 2004 as a basis to continue the listing of our common stock on the Nasdaq National Market, we cannot predict the panel’s decision. If we are delisted, it could severely impact our ability to raise future capital and may have an adverse impact on our overall future liquidity.

     Material Weaknesses. In connection with the matters described above, our company’s management identified and reported to our Audit Committee the following control deficiencies each of which constitutes a material weakness in our internal control over financial reporting as of September 30, 2004:

•

inability to provide timely reconciliation and reporting of inventory and cost information at ASI as a result of conversion to a new ERP system, which in turn prevented the company from completing its consolidated financial closing process for the fiscal second quarter on a timely basis.

•

internal information from ASI indicating that an improper payment was offered by ASI to a customer employee, which in turn created a risk that the customer in the dispute referenced above could claim a right to cancel the contracts.

•

accounting errors at ASI and ATI that led to the restatement of our fiscal first quarter results, primarily relating to errors at ASI that understated ASI’s costs of goods sold for the fiscal first quarter by $3.6 million and its operating loss by $3.5 million, and adjusts ATI’s first quarter results to reduce its net sales by $1.7 million and its operating income by $216,000 to reflect the deferral of certain new product-related revenue that had been recognized in the quarter and reduce amortization of deferred stock-based compensation.

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ASYST TECHNOLOGIES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

     Under the Public Company Accounting Oversight Board Accounting Standard No. 2, a material weakness is a significant deficiency, or a combination of significant deficiencies, that results in more than a remote likelihood that a material misstatement of the annual or interim financial statements will not be prevented or detected.

     We intend to strengthen our controls over financial reporting to address the above-noted material weaknesses by strengthening timely reviews and analysis of operations and financial results and increasing the level of staffing in critical functional areas, including cost accounting and internal audit.

3. SIGNIFICANT ACCOUNTING POLICIES

  Basis of Preparation

     While the financial information furnished is unaudited, the condensed consolidated financial statements included in this report reflect all adjustments (consisting of normal recurring accruals) which we consider necessary for the fair presentation of the results of operations for the interim periods covered, and of our financial condition at the date of the interim balance sheets. Certain information and footnote disclosures included in the financial statements, prepared in accordance with generally accepted accounting principles, have been omitted in these interim statements, as allowed by the Securities and Exchange Commission, or SEC, rules and regulations. However, we believe that the disclosures are adequate to make the information presented not misleading. All significant intercompany accounts and transactions have been eliminated. Minority shareholders’ interest represents the minority shareholders’ proportionate share of the net assets and results of operations of our majority-owned joint venture, ASI, and our majority-owned subsidiary Asyst Japan, Inc., or AJI. Certain prior-year amounts in the condensed consolidated financial statements and the notes thereto have been reclassified where necessary to conform to the current presentations. We close our books on the last Saturday of each quarter and thus the actual dates of the quarter-end, September 25, 2004 and September 27, 2003, are different from the month-end dates used for reference throughout this Quarterly Report on Form 10-Q. This presentation is for convenience purposes. The results for interim periods are not necessarily indicative of the results for the entire year. The year-end condensed consolidated data was derived from audited financial statements but does not include all disclosures required by accounting principles generally accepted in the United States of America. As such, these condensed consolidated financial statements should be read in connection with our consolidated financial statements for the year ended March 31, 2004 included in our Annual Report on Form 10-K.

  Recent Accounting Pronouncements

     At its March 2004 meeting, the Emerging Issues Task Force, or EITF, reached a consensus on recognition and measurement guidance previously discussed under EITF 03-01. The consensus clarifies the meaning of other-than-temporary impairment and its application to investments classified as either available-for-sale or held-to-maturity under Statement of Financial Accounting Standards, or SFAS, No. 115 and investments accounted for under the cost method or the equity method. The recognition and measurement guidance for which the consensus was reached in the March 2004 meeting is to be applied to other-than-temporary impairment evaluations in reporting periods effective at the beginning of the first interim period beginning after June 15, 2004. We do not believe that this consensus on the recognition and measurement guidance will have a significant impact on our consolidated results of operations.

     In November 2004, the EITF issued EITF Issue No. 04-8, “The Effect of Contingently Convertible Debt on Diluted Earnings per Share,” which addressed the issue of when the dilutive effect of contingently convertible debt instruments, or Co-Cos, should be included in diluted earnings per share computations regardless of whether the market price trigger has been met. The provisions of this EITF are effective with fiscal periods ending after December 15, 2004. We do not believe this consensus will have a significant impact on our reported earnings per share.

     In November 2004, the FASB issued FASB Statement No. 151, “Inventory Costs - - an Amendment of ARB No. 43, Chapter 4” (“SFAS No. 151”). SFAS No. 151 amends ARB 43, Chapter 4, to clarify that abnormal amounts of idle facility expense, freight, handling costs, and wasted materials (spoilage) should be recognized as current-period charges. In addition, this Statement requires that allocation of fixed production overheads to the costs of conversion be based on the normal capacity of the production facilities. The provisions of this Statement are effective for inventory costs incurred during fiscal years beginning after June 15, 2005. The adoption of the provisions of SFAS No. 151 is not expected to have a material impact on our financial position or results of operations.

     In December 2004, the Financial Accounting Standards Board issued its final standard on accounting for share-based payments (SBP), FASB Statement No. 123R (revised 2004), that requires companies to expense the value of employee stock options and similar awards. The standard is effective for public companies for interim and annual periods beginning after June 15, 2005, and applies to all outstanding and unvested SBP awards at a company’s

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ASYST TECHNOLOGIES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

adoption date. We are still evaluating the impact of the adoption of the provisions of SFAS No. 123R, but believe it may have a significant adverse impact on our results from operations.

  Restricted Cash and Cash Equivalents

     Restricted cash and cash equivalents at March 31, 2004 primarily represents amounts that were restricted as to their use in accordance with Japanese debt agreements. The debt was fully paid in the first quarter of fiscal 2005, and there was no longer such a requirement.

  Accounts Receivable, net of allowance for doubtful accounts

     Accounts receivable, net of allowance for doubtful accounts were as follows (in thousands):

     We estimate our allowance for doubtful accounts based on a combination of specifically identified amounts and an additional reserve calculated based on the aging of receivables. The additional reserve is provided for the remaining accounts receivable after specific allowances at a range of percentages from 1.25 percent to 50.0 percent based on the aging of receivables. If circumstances change (such as an unexpected material adverse change in a major customer’s ability to meet its financial obligations to us or its payment trends), we may adjust our estimates of the recoverability of amounts due to us. Included in the allowance for doubtful accounts are specific allowances of $0.7 million and $2.8 million at September 30, 2004 and March 31, 2004, respectively. During the three-month period ended September 30, 2004, we wrote off $1.5 million of accounts receivable which we determined to be uncollectible and for which we had recorded specific reserves in previous quarters. We do not record interest on outstanding and overdue accounts receivable.

     We offer both open accounts and letters of credit to our customer base. Our standard open accounts are net 30 days; however, the customary local industry practices may differ and prevail where applicable. As of September 30, 2004, our gross accounts receivable aging, before allowance for doubtful accounts, was as follows (in thousands):

     Our Japan subsidiary, AJI, and ASI have agreements with certain Japanese banking institutions to sell some of our trade receivables. For the six-month period September 30, 2004, AJI and ASI sold approximately $0.1 million and $10.1 million, respectively, of accounts receivable without recourse.

  Inventories

     Inventories consist of the following (in thousands):

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ASYST TECHNOLOGIES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

     During the fiscal year ended March 31, 2003, we began to transition substantially all of our U.S. manufacturing to Solectron Corporation, or Solectron. As part of the arrangement, Solectron purchased $20.0 million of inventory from us. No revenue was recorded for the sale of this inventory to Solectron. On an on-going basis, we may be obligated to acquire inventory purchased by Solectron if the inventory is not used over a certain specified period of time per the terms of our agreement. As of September 30, 2004, we have total inventory reserves of approximately $15.3 million of which $5.5 million is for our obligation to repurchase inventory at Solectron.

  Goodwill and Other Intangible Assets, net

     Goodwill

     In accordance with SFAS No. 142, we expect to complete a periodic goodwill impairment test in the third quarter of fiscal 2005. During the third quarter of fiscal 2004, we completed an annual goodwill impairment test and concluded that there was no impairment of goodwill and intangible assets.

     Goodwill balances and the changes in the carrying amount of goodwill during the six-month period ended September 30, 2004 were as follows (in thousands):

     Intangible assets

     Intangible assets were as follows (in thousands):

     Amortization expense totaled $5.0 million and $4.8 million for the three-month periods ended September 30, 2004 and 2003, respectively. Amortization expense totaled $10.1 million and $9.6 million for the six-month periods ended September 30, 2004 and 2003, respectively.

     Expected future intangible amortization expense, based on current balances, for the remainder of fiscal 2005 and subsequent fiscal years, is as follows (in thousands):

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ASYST TECHNOLOGIES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

Warranty Reserve

     We provide for the estimated cost of product warranties at the time revenue is recognized. The following table presents the activity in our warranty reserve (in thousands):

     The warranty reserve balance at the end of the period is reflected in accrued liabilities and other.

  Revenue Recognition

     We recognize revenue when persuasive evidence of an arrangement exists, product delivery has occurred or service has been rendered, the seller’s price is fixed or determinable, and collectibility is reasonably assured. Some of our products are large volume consumables that are tested to industry and/or customer acceptance criteria