UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

FORM 10-Q

(Mark One)

For the quarterly period ended December 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 R  No £

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

Yes R  No £

The number of shares of the Registrant’s Common Stock, no par value, outstanding as of January 31, 2005 was 47,583,079.

ASYST TECHNOLOGIES, INC.

TABLE OF CONTENTS

2

Part I — FINANCIAL INFORMATION

ITEM 1 — FINANCIAL STATEMENTS

ASYST TECHNOLOGIES, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited; in thousands)

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

3

ASYST TECHNOLOGIES, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited; in thousands, except per share amounts)

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

4

ASYST TECHNOLOGIES, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited; in thousands)

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

5

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 nine-month periods ended December 31, 2004 and 2003, and of Cash Flows for the nine-month periods ended December 31, 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 ended September 30, 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.

     Subsequently, this customer reaffirmed the flat panel display contracts with ASI, and paid all amounts then 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 then-applicable exchange rate. We filed the Form 10-Q for our fiscal second quarter on December 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 December 30, 2004. Additionally, the company made adjustments to the fiscal first quarter results reported for ATI, our base business.

6

     Summary of Restatement. The restatement corrected 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 adjusted 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 were 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.

     See also Part I, Item 2, “Risk Factors” — “We experienced additional risks and costs as a result of the delayed filing of the Form 10-Q for our fiscal second quarter” and Item 4 — Controls and Procedures.

     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 constituted 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 adjustments to 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.

     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 are strengthening our controls over financial reporting to address the above-noted material weaknesses by performing timely reviews and analysis of operations and financial results and are actively recruiting additional staff to fill critical roles in the financial organization.

     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 the Form 10-Q for the second fiscal quarter. On January 11, 2005, the panel approved our request to continue the listing of our common stock on the Nasdaq National Market and removed the fifth character, “E,” from our trading symbol effective with the opening of trading on January 12, 2005. While the panel determined that the company now appears to satisfy Nasdaq’s filing requirement, the panel will continue to monitor us to ensure our compliance with the filing requirement over the long term. The panel also determined to condition the company’s continued listing upon the company timely filing all periodic reports with the SEC and Nasdaq for all reporting periods ending on or before January 31, 2006. If the company fails to make any periodic report filing in accordance with this condition, the panel decision stated that a Nasdaq panel will promptly conduct a hearing with respect to such failure, and the company’s securities may be immediately de-listed from The Nasdaq Stock Market.

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. Such reclassifications did not have an effect on the prior periods net loss. We close our books on the last Saturday of each quarter and thus the actual dates of the quarter-end, December 25, 2004 and December 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

     In March 2004, the Financial Accounting Standards Board (FASB) approved the consensus reached on the Emerging Issues Task Force (EITF) Issue No. 03-1, The Meaning of Other-Than-Temporary Impairment and Its Application to Certain Investments. EITF 03-1 provides guidance for identifying impaired investments and new disclosure requirements for investments that are deemed to be temporarily impaired. On September 30, 2004, the FASB issued a final staff position (FSP) EITF Issue 03-1-1 that delays the effective date for the measurement and recognition guidance included in paragraphs 10 through 20 of EITF 03-1. Quantitative and qualitative disclosures required by EITF 03-1 remain unchanged by the staff position. We do not believe the impact of adoption of the measurement provisions of the EITF will be significant to our overall results of operations or financial position.

     In March 2004, the Financial Accounting Standards Board’s, or FASB’s Emerging Issues Task Force, or EITF, reached consensus on Issue 03-6. This Issue is intended to clarify what is a participating security for purposes of applying SFAS 128, “Earnings Per Share.” The Issue also provides further guidance on how to apply the two-class method of computing earnings per share, or EPS, once it is determined that a security is participating, including how to allocate undistributed earnings to such a security. The guidance in

7

this Issue was effective for reporting periods beginning after March 31, 2004 and requires the restatement of previously reported EPS. We have adopted this Issue and there is no effect on our basic and diluted EPS for the three- and nine-month periods ended December 31, 2004 and 2003.

     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. We are in the process of evaluating the impact of the adoption of the provisions of SFAS No. 151 on our financial position and results of operations.

     In December 2004, the FASB issued FASB Statement No. 153, “Exchange of Nonmonetary Assets – an amendment of APB Opinion No. 29” (“SFAS No. 153”). SFAS No. 153 amends APB Opinion No. 29 to eliminate the exception for nonmonetary exchanges of similar productive assets and replaces it with a general exception for exchanges of nonmonetary assets that do not have commercial substance. A nonmonetary exchange has commercial substance if the future cash flows of the entity are expected to change significantly as a result of the exchange. The provisions of this Statement are effective for nonmonetary asset exchanges occurring in fiscal periods beginning after June 15, 2005. The adoption of the provisions of SFAS No. 153 is not expected to have a material impact on our financial position or results of operations.

     In December 2004, the FASB issued FASB Statement No. 123(R), Share Based Payment (FAS 123(R)). FAS 123(R) revises FASB Statement No. 123, Accounting for Stock-Based Compensation and requires companies to expense the fair value of employee stock options and other forms of stock-based compensation. The standard is effective for our quarter ending September 30, 2005 and will apply to our employee stock option and stock purchase plans. We are currently evaluating the impact of the adoption of FAS 123(R) and have not selected a transition method or valuation model. As such, we are unable to estimate the expected effect on our financial statements, but believe it will 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, at which time the restriction lapsed.

     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, for some of our operations, 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. During the three-month period ended December 31, 2004, we wrote off $0.4 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.

     Other includes notes receivable from customers in Japan in settlement of trade accounts receivable balances.

     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 December 31, 2004, our billed accounts receivable aging, before allowance for doubtful accounts, was as follows (in thousands):

8

     Our subsidiaries in Japan, AJI, and ASI have agreements with certain Japanese banking institutions to sell certain trade receivables. For the nine-month period ended December 31, 2004, AJI and ASI sold approximately $9.0 million and $15.7 million, respectively, of accounts receivable without recourse.

     Inventories

     Inventories consist of the following (in thousands):

     We outsourced a majority of our fab automation product manufacturing to Solectron Corporation, or Solectron. As part of the arrangement, Solectron purchased 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 December 31, 2004 and March 31, 2004, we had total inventory reserves of approximately $18.9 million and $14.7 million, respectively.

     Goodwill and Other Intangible Assets, net

     Goodwill

     In accordance with SFAS No. 142, we completed an annual goodwill impairment test in the third quarter of fiscal 2005 and there was no goodwill impairment charge required to be recognized.

     Goodwill balances and the changes in the carrying amount of goodwill during the nine-month period ended December 31, 2004 were as follows (in thousands):

     Intangible assets

     Intangible assets were as follows (in thousands):

     Amortization expense totaled $5.1 million and $5.3 million for the three-month periods ended December 31, 2004 and 2003, respectively. Amortization expense totaled $15.2 million and $14.8 million for the nine-month periods ended December 31, 2004 and 2003, respectively.

9

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

     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 prior to shipment and delivery. Our primary shipping terms are FOB shipping point. Therefore, revenue for these types of products is recognized when title transfers. Certain of our product sales are accounted for as multiple-element arrangements. If we have met defined customer acceptance experience levels with both the customer and the specific type of equipment, we recognize the product revenue at the time of shipment and transfer of title, with the remainder when the other elements, primarily installation, have been completed. Some of our other products are highly customized systems and cannot be completed or adequately tested to customer specifications prior to shipment from the factory. We do not recognize revenue for these products until formal acceptance by the customer. Revenue for spare parts sales is recognized at the time of shipment and the transfer of title. Deferred revenue consists primarily of product shipments creating legally enforceable receivables that did not meet our revenue recognition policy. Revenue related to maintenance and service contracts is recognized ratably over the duration of the contracts. Unearned maintenance and service contract revenue is not significant and is included in accrued liabilities and other.

     We recognize revenue for long-term contracts at ASI in accordance with the American Institute of Certified Public Accountants, or AICPA, Statement of Position 81-1, “Accounting for Performance of Construction-Type and Certain Production-Type Contracts.” We use the percentage-of-completion method to calculate revenue and related costs of these contracts because they are long-term in nature and estimates of cost to complete and extent of progress toward completion of long-term contracts are available and reasonably dependable. We record revenue each period based on the percentage of completion to date on each contract, measured by costs incurred to date relative to the total estimated costs of each contract. We treat contracts as substantially complete when we receive technical acceptance of our work by the customer. We disclose material changes in our financial results that result from changes in estimates.

     We account for software revenue in accordance with the AICPA Statement of Position 97-2, “Software Revenue Recognition.” Revenue for integration software work is recognized on a percentage-of-completion basis. Software license revenue, which is not material to the consolidated financial statements, is recognized when persuasive evidence of an arrangement exists, delivery has occurred or services have been rendered, the selling price is fixed or determinable, and collectibility is probable.

10