##### Table of Contents



SECURITIES AND EXCHANGE
    COMMISSION
 Washington, D.C.
    20549
      Form 10-K
   (Mark One)þ

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
    OF THE SECURITIES EXCHANGE ACT OF 1934For the fiscal year ended
    December 31, 2006oro

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
    OF THE SECURITIES EXCHANGE ACT OF 1934For the transition period
    from          to   Commission File Number 0-26946
  INTEVAC, INC.
 (Exact name of registrant as
    specified in its charter)
  California

94-3125814(State or other jurisdiction
    of
    incorporation or organization)

(I.R.S. Employer
    Identification No.)   3560 Bassett Street
 Santa Clara, California 95054
 (Address of principal executive
    office, including Zip Code)
  Registrants telephone number, including area code:(408) 986-9888
 Securities registered pursuant to Section 12(b) of the
    Act:
  Title of Each Class

Name of Each Exchange on Which RegisteredCommon Stock (no par value)

The Nasdaq Stock Market LLC   Securities registered pursuant to Section 12(g) of the
    Act:
 None.
      o þ
  o þ
  þ o
  Regulation S-K Form 10-K Form 10-K. o
  Rule 12b-2
  o þ o
  Rule 12b-2 o þ
      DOCUMENTS INCORPORATED BY REFERENCE.
  Form 10-K.




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TABLE OF CONTENTS  PART IItem 1. BusinessItem 1A. Risk FactorsItem 1B. Unresolved Staff CommentsItem 2. PropertiesItem 3. Legal ProceedingsItem 4. Submission of Matters to a Vote of Security-HoldersEXECUTIVE OFFICERSPART IIItem 5. Market for Registrants Common Equity, Related Shareholder Matters and Issuer Purchases of Equity SecuritiesItem 6. Selected Consolidated Financial DataItem 7. Managements Discussion and Analysis of Financial Condition and Results of OperationsItem 7A. Quantitative and Qualitative Disclosures About Market RiskItem 8. Financial Statements and Supplementary DataREPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRMCONSOLIDATED BALANCE SHEETSCONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)CONSOLIDATED STATEMENT OF SHAREHOLDERS EQUITYCONSOLIDATED STATEMENTS OF CASH FLOWSNOTES TO CONSOLIDATED FINANCIAL STATEMENTSItem 9. Changes In and Disagreements With Accountants on Accounting and Financial DisclosureItem 9A. Controls and ProceduresItem 9B. Other InformationItem 10. Directors, Executive Officers and Corporate GovernanceItem 11. Executive CompensationItem 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder MattersItem 13. Certain Relationships and Related Transactions, and Director IndependenceItem 14. Principal Accountant Fees and ServicesPART IVItem 15. Exhibits and Financial Statement SchedulesSIGNATURESEXHIBIT 10.5EXHIBIT 21.1EXHIBIT 23.1EXHIBIT 31.1EXHIBIT 31.2EXHIBIT 32.1    Table of Contents   This Annual Report on
    Form 10-K
    contains forward-looking statements, which involve risks and
    uncertainties. Words such as believes,
    expects, plans, anticipates
    and the like indicate forward-looking statements. These
    forward-looking statements include comments related to
    technology and market trends in the data storage, hard disk
    drive and magnetic disk market; comments related to technology
    and market trends in military and commercial markets for low
    light sensors, cameras and systems; projected seasonality and
    cyclicality in the market for our equipment products; projected
    sales of hard disk drives and magnetic disks for hard disk
    drives; expectations of our continued leadership position in
    magnetic disk manufacturing equipment; projected customer
    requirements for new capacity and for technology upgrades, such
    as for perpendicular recording, to their installed base of
    magnetic disk manufacturing equipment, as well as the ability of
    our products to meet these requirements; expectations regarding
    the extended sales cycles for our equipment and military
    products; projected technology roadmaps and deployment schedules
    for our military customers; discussions of expected features,
    performance, costs, and competitive advantages of products we
    are developing, including 200 Lean systems, LIVAR cameras and
    systems, NightVista cameras, MOSIR cameras, cameras for military
    head-mounted applications and commercial markets and low light
    level sensors; expectations of establishing relationships with
    development and distribution partners for our Imaging products;
    discussions of development of manufacturing systems for entry
    into the semiconductor equipment market; and discussions of the
    costs of complying with government regulations. Our actual
    results may differ materially from the results discussed in the
    forward-looking statements for a variety of reasons, including
    those set forth under Risk Factors.
 
  PART I
 
  Item 1.
    Business  Overview
         1




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(408) 986-9888. www.intevac.com Form 10-K, Form 10-Q, Form 8-K, 1-800-SEC-0330. www.sec.gov
  ® ® ® ®
  Equipment
    Business
    Storage
    Market Growth Drivers
    
    New consumer electronics applications, such as digital video and
    audio recorders, video game platforms, emerging HDTV
    applications and streaming video.
    Personal computers have evolved from devices operating simple
    applications such as word processing, to powerful machines that
    are capable of playing, recording and creating multimedia
    content, such as images, audio and video.
    Proliferation of personal computers into the emerging markets of
    Asia and Eastern Europe.
    Enterprise data storage requirements are increasing, as
    regulations and other business factors require companies to
    archive more information, such as documents and email.
    Additionally, companies are transitioning from paper-based
    storage to digital data-based storage and digital backup.
    Certain traditional analog storage applications are
    transitioning to digital hard disk-based storage. For example,
    the video surveillance industry, including home security, law
    enforcement, private security services, retail, transportation
    and government agencies, is transitioning from analog video
    tapes to digital hard disk storage.    Hard
    Disk Drive Market Dynamics
  Areal Density Increasing.
 2




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Transition from Longitudinal to Perpendicular
    Recording.
  New Equipment Required for Perpendicular
    Recording.
  Consolidation of Equipment
    Suppliers.
  Industry Consolidation.
  Equipment Selection Criteria.
  
    Cost of Ownership.  Cost of ownership of disk
    sputtering equipment includes factors such as equipment price,
    manufacturing yield, throughput, consumables cost, factory floor
    footprint and uptime. A lower cost of ownership for disk
    sputtering equipment is a key factor in lowering the
    manufacturers product cost.
    Extendibility and Flexibility.  We believe
    magnetic disk manufacturers need sputtering equipment that can
    address the needs of their evolving technology roadmaps. This
    equipment must be capable of incorporating new process steps and
    new technical capabilities, including the processes needed for
    producing magnetic disks capable of perpendicular recording.
    Additionally, these manufacturers are improving longitudinal
    processes and further developing the processes necessary for
    perpendicular recording, and as a result, they demand a flexible
    system that supports process reconfigurations and expansions
    with a minimum of effort.
    Compatibility with Existing Equipment.  We
    believe magnetic disk manufacturers prefer to standardize their
    processes around a single disk sputtering equipment supplier.
    Once a disk manufacturer has selected a particular
    suppliers equipment, that manufacturer generally relies
    upon that suppliers equipment and generally will continue
    to purchase any additional equipment from the same supplier.
    There are significant economies of scale related to the use of a
    single suppliers disk manufacturing system in product
    design, product qualification, manufacturing and support. 3




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
    Long-term Commitment of Supplier.  We believe
    magnetic disk manufacturers need sputtering equipment suppliers
    that are committed to meeting current and future technology
    requirements and to supporting this equipment throughout its
    useful life. As a result, magnetic disk manufacturers demand a
    supplier with the stability and capability to be a long-term
    technology partner.  Our
    Competitive Strengths
    
    Broad Installed Base with Industry Leading
    Customers.  Our MDP-250 disk sputtering system
    gained wide acceptance in the magnetic disk manufacturing
    industry and by the late 1990s was being used in the manufacture
    of approximately half of the magnetic disks used in hard disk
    drives worldwide. Our 200 Lean, introduced in 2003, continues
    our strong industry position. We believe that there are
    approximately 111 legacy MDP-250 systems and 80 next
    generation 200 Lean systems currently available for use in
    production and research and development applications by
    customers such as Fuji Electric, Hitachi Global Storage
    Technology and Seagate. We believe there is significant
    potential for these customers to continue adding capacity and to
    upgrade the technical capability of their installed base to
    permit production of higher density disks capable of
    perpendicular recording.
    Technology Leadership with Modular Next Generation Advanced
    Platform.  In December 2003, we first delivered
    our latest-generation disk sputtering system, the 200 Lean,
    which provides enhanced capabilities relative to our installed
    base of MDP-250 systems. The 200 Leans compact design
    enables more disks to be manufactured per square-foot of factory
    clean-room space. The flexible design of the 200 Lean allows
    rapid reconfiguration to accommodate product changeovers and new
    disk technology. The modular design of the 200 Lean also allows
    disk manufacturers to add additional process stations, as
    advanced magnetic disk technologies, such as perpendicular
    recording, are introduced. We believe the Intevac 200 Lean
    system accounts for the majority of installed production
    capacity of next generation perpendicular-capable systems.
    Long-Term Commitment to Hard Disk Drive
    Industry.  We have been a hard disk drive
    equipment provider since 1991. We continue to develop new
    technologies, and introduced the 200 Lean disk sputtering system
    to meet the need for additional process stations necessary to
    economically produce magnetic disks capable of perpendicular
    recording. In addition, our headquarters and our support centers
    in Singapore, China and Malaysia are located in close proximity
    to many of our customers hard disk drive development
    centers and manufacturing facilities.    Our
    Equipment Strategy
    
    Be a Preferred Solutions Provider in the Magnetic Disk
    Industry.  Our goal is to be a preferred solutions
    provider to magnetic disk manufacturers. We believe that our 200
    Lean provides our customers with an advanced modular platform
    that can address their future disk sputtering needs. We believe
    we are also the leading provider of disk lubrication equipment,
    which is used to apply ultra-thin coatings of lubricant to
    magnetic disks after sputtering.
    Leverage Existing Technology into New
    Markets.  In addition to expansion within our
    existing customer base, we are targeting other markets where we
    can apply our expertise in complex manufacturing equipment. Our
    expertise includes the ability to design and manufacture
    complex, highly automated vacuum manufacturing systems. We are
    currently developing a new manufacturing system that addresses
    the etch segment of the semiconductor manufacturing market. We
    are devoting a significant portion of our business development
    and technical resources to developing this new product, and we
    plan to deliver evaluation 4




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units for this new system to multiple customers during 2007. We
    expect our initial customers will test evaluation systems for as
    long as twelve months before deciding whether to purchase
    production systems. Accordingly, we do not expect to recognize
    revenues from the sale of this new system until 2008.  
    Deliver Highest Customer Value
    Proposition.  Our goal is to maintain our
    leadership in complex manufacturing equipment by providing
    flexible, extendable equipment having the lowest cost of
    ownership. For example, the 200 Leans modular design
    provides customers the ability to reconfigure their disk
    manufacturing systems for rapid technology shifts and evolving
    technology roadmaps, and its compact footprint and increased
    throughput relative to the legacy MDP-250 systems enable
    increased output per square foot of factory clean-room space.
    Expand Consumables, Spare Parts and Service
    Offerings.  We plan to increase the sale of disk
    sputtering equipment consumables, spare parts and service in
    order to increase our revenue opportunity per customer. This
    will enable us to deepen and enhance our customer relationships.
    We believe that the close proximity of our service centers in
    Singapore, Shenzhen, China and Kulim, Malaysia to our
    customers facilities gives us a competitive advantage. We
    plan to add additional support centers as required in order to
    maintain close proximity to our customers operations.  Our
    Equipment Products
  200 Lean
    Disk Sputtering System
      
    Modular Design.  The 200 Leans modular
    design allows our customers to accommodate any number of disk
    manufacturing process steps required by their evolving
    technology roadmaps. The 200 Lean consists of a front-end
    robotic module that loads and unloads disks to and from the
    system, combined with any number of four-station process
    modules. Typical configurations of the 200 Lean have five of
    these four-station process modules, which results in systems
    capable of up to 20 process steps. Additional process modules
    can be easily added to already installed systems.
    Easy to Reconfigure.  Magnetic disk
    manufacturers produce many different designs that have short
    product life cycles, leading to frequent reconfiguration of disk
    sputtering equipment. The mechanical design and software control
    system of the 200 Lean allow rapid reconfiguration of systems by
    our customers. The 200 Lean is also easily reconfigured to
    process disks with glass or aluminum substrates of varying
    diameters and thicknesses.
    Higher Throughput with Smaller Footprint.  The
    200 Lean offers higher throughput (up to 800 disks per hour) and
    more process stations in a more compact package than our legacy
    MDP-250 system. We believe that the 200 Lean has the highest
    disk throughput per square foot of factory space for a system
    capable of manufacturing perpendicular media.
    High Availability.  The 200 Lean is designed to
    operate seven days a week, 24 hours a day with high
    availability. The 200 Lean can be run continuously for a week or
    more between preventative maintenance cycles.
    Single Disk Processing.  The 200 Lean processes
    each individual disk sequentially through a series of
    single-disk, vacuum-isolated, process chambers.
    Single-disk processing assures that each individual
    disk follows an identical path through the system, which leads
    to
    disk-to-disk
    uniformity, since each disk sees the same process conditions. 5




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
    High-Vacuum Capability.  The 200 Lean operates
    at significantly better vacuum levels compared to the installed
    base of MDP-250s. Better vacuum levels generally lead to
    improved magnetic media performance.
    Suite of Process Station Options.  The 200 Lean
    offers a wide range of process stations, providing capabilities
    such as metal deposition, heating, cooling and carbon
    overcoating onto both aluminum and glass disks.  DLS-100
    Disk Lubrication System
    DLS-100
  Equipment
    Business Sales and Marketing
      and/or and/or
  Equipment
    Business Customers
     6




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Equipment
    Business Customer Support
  start-up
    Equipment
    Business Competition
      Imaging
    Business
    Imaging
    Industry Overview
     7




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Our
    Imaging Solution
    Advanced Photocathode Technology
  Use of Low Power CMOS Imaging Chips
  Increased Silicon Sensor Sensitivity
  Compact Ultra-High Vacuum Sensor Packaging
  Low
    Light Imaging Market Opportunity
  Head Mounted Night Vision Systems
  Long Range Target Identification
 8




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Physical Sciences
  Life Sciences
  Our
    Imaging Strategy
  Collaborate with Leading Development
    Organizations
  Become Leading Provider of Extreme Low Light Imaging Sensor,
    Camera, and System Products for the Military
  
    Night Vision Camera Modules  Our extreme low-light
    sensor technology was selected in 2004 for use in a digital
    head-mounted and rifle-sight system for the military of a NATO
    ally. During 2006, we completed the development of a
    night-vision sensor and camera module for this application and
    entered into a purchasing agreement with our NATO customer to
    deliver 32,000 camera modules over seven years, valued in excess
    of $50 million over the term of the agreement. Orders under
    this agreement may be released annually. We expect to deliver
    pilot production units in 2007 and volume production units in
    2008.
    Digitally Enhanced Night Vision Goggles
    (DENVG)  We are jointly developing, with
    DRS Technologies, DENVG night vision goggle prototypes for the
    U.S. Army. These compact digital systems are being designed to
    display the imagery from our low-light night vision sensors in
    combination with imagery from DRS Technologys thermal
    imaging sensors. In 2007, we expect to deliver prototypes to the
    U.S. Army for field-testing and to pursue additional
    contracts to fund further development of this product.
    Laser Illuminated Viewing and Ranging
    (LIVAR)  Our LIVAR target identification
    system can be used to identify targets at distances of up to
    twenty kilometers and has been incorporated into
    U.S. weapons development programs such as the Airborne
    Laser (ABL), the Cost Effective Targeting System
    (CETS), and the Long-Range Identification System
    (LRID) programs. We expect to begin volume
    production deliveries of LIVAR cameras late in 2007.
    Intensified Photodiodes  We are developing devices
    that enable single photon detection at extremely high data rates
    and are designed for use in target identification and other
    military applications.  Become Leading Provider of Camera and Systems Products, based
    on Proprietary Sensor Technology, to Address Emerging Commercial
    Markets
  
    MOSIR Near Infrared Cameras  We began shipping our
    MOSIR line of commercial cameras during 2006. This camera
    provides previously unavailable high sensitivity in the near
    infrared portion of the spectrum and is well suited for
    low-light spectroscopy applications. We plan to continue to
    enlarge our product offerings of high-performance cameras for
    physical science, life science and industrial applications
    within the commercial imaging market.
    Raman Spectrometers  On February 1, 2007, we
    completed an acquisition of the assets and certain liabilities
    of DeltaNu, LLC, a company that pioneered development of
    miniature Raman spectrometer systems. Raman spectroscopy systems
    are used to identify materials by illuminating the material with
    a laser and measuring the characteristic spectrum of light
    scattered from the material. The process enables real- 9




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time, non-destructive identification of liquids and solids
    outside of the laboratory and is well suited to applications
    such as hazmat, forensics, homeland security, geology, gemology,
    medical, pharmaceutical and industrial quality assurance.  
    Near Infrared Raman Spectrometers  Raman
    spectrometers typically use lasers in the visible spectrum,
    which can lead to excessive background noise, or fluorescence,
    as well as potential eye-safety issues. These limitations can
    now be significantly reduced by using near infrared lasers in
    combination with our proprietary near infrared sensor
    technology. We plan to develop a new class of high-performance
    Raman spectrometer systems that integrate Intevacs near
    infrared sensors with DeltaNus low cost Raman
    spectrometers.  Low Manufacturing Costs
  Imaging
    Sales and Marketing
    state-of-the-art.
      Imaging
    Business Competition
     10




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Manufacturing
      Intellectual
    Property
    Customer
    Concentration
     11




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Employees
    Compliance
    with Environmental Regulations
   
  Item 1A.
    Risk
    Factors  Our
    operating results fluctuate significantly from quarter to
    quarter, which may cause the price of our stock to
    decline.
    
    our business is inherently subject to fluctuations in revenue
    from quarter to quarter due to factors such as timing of orders,
    acceptance of new systems by our customers or cancellation of
    those orders;
    changes in the demand, due to seasonality, cyclicality and other
    factors, for computer systems, storage subsystems and consumer
    electronics containing disks our customers produce with our
    systems; and
    delays or problems in the introduction and acceptance of our new
    products, or delivery of existing products;
    new products, services or technological innovations by us or our
    competitors.  quarter-to-quarter
  We are
    exposed to risks associated with a highly concentrated customer
    base.
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Our
    long term revenue growth is dependent on new products. If these
    new products are not successful, then our results of operations
    will be adversely affected.
               13




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Demand
    for capital equipment is cyclical, which subjects our business
    to long periods of depressed revenues interspersed with periods
    of unusually high revenues.
      If the
    projected growth in demand for hard disk drives does not
    materialize and our customers do not replace or upgrade their
    installed base of disk sputtering systems, then future sales of
    our disk sputtering systems will suffer.
        Our
    products are complex, constantly evolving and often must be
    customized to individual customer requirements.
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Our
    sales cycle is long and unpredictable, which requires us to
    incur high sales and marketing expenses with no assurance that a
    sale will result.
    state-of-the-art
    We
    operate in an intensely competitive marketplace, and our
    competitors have greater resources than we do.
    We
    experienced significant growth in our business and operations
    and if we do not appropriately manage this growth and any future
    growth, our operating results will be negatively
    affected.
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Our
    Imaging business depends heavily on government contracts, which
    are subject to immediate termination and are funded in
    increments. The termination of or failure to fund one or more of
    these contracts could have a negative impact on our
    operations.
        We may
    not be successful in maintaining and obtaining the necessary
    export licenses to conduct operations abroad, and the United
    States government may prevent proposed sales to foreign
    customers.
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Unexpected
    increases in the cost to develop or manufacture our products
    under fixed-price contracts may cause us to experience
    un-reimbursed cost overruns.
    Our
    sales of disk sputtering systems are dependent on substantial
    capital investment by our customers, far in excess of the cost
    of our products.
    Our
    stock price is volatile.
    
    our perceived prospects;
    hard disk drive market expectations;
    variations in our operating results and whether we achieve our
    key business targets;
    sales or purchases of large blocks of our stock;
    changes in, or our failure to meet, our revenue and earnings
    estimates;
    changes in securities analysts buy or sell recommendations;
    differences between our reported results and those expected by
    investors and securities analysts;
    announcements of new contracts, products or technological
    innovations by us or our competitors;
    market reaction to any acquisitions, joint ventures or strategic
    investments announced by us or our competitors;
    our high fixed operating expenses, including research and
    development expenses;
    developments in the financial markets; and
    general economic, political or stock market conditions in the
    United States and other major regions in which we do business.   17




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Changes
    in tax rates or tax liabilities could affect future
    results.
      Our
    future success depends on international sales and the management
    of global operations
    
    varying regional and geopolitical business conditions and
    demands;
    global trade issues;
    variations in protection of intellectual property and other
    legal rights in different countries;
    rising raw material and energy costs;
    variations in the ability to develop relationships with
    suppliers and other local businesses;
    changes in laws and regulations of the United States (including
    export restrictions) and other countries, as well as their
    interpretation and application;
    fluctuations in interest rates and currency exchange rates;
    the need to provide sufficient levels of technical support in
    different locations;
    political instability, natural disasters (such as earthquakes,
    hurricanes or floods), pandemics, terrorism or acts of war where
    we have operations, suppliers or sales;
    cultural differences; and
    shipping delays.  Changes
    in existing financial accounting standards or practices or
    taxation rules or practices may adversely affect our results of
    operations.
  ,
    Share-Based Payment, Accounting for Stock-Based Compensation.
 18




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We are
    required to evaluate our internal control over financial
    reporting under Section 404 of the Sarbanes-Oxley Act of
    2002, and any adverse results from such evaluation could result
    in a loss of investor confidence in our financial reports and
    have an adverse effect on our stock price.
  Form 10-K
    Our
    dependence on suppliers for certain parts, some of them
    sole-sourced, makes us vulnerable to manufacturing interruptions
    and delays, which could affect our ability to meet customer
    demand.
  sub-assemblies
  Our
    business depends on the integrity of our intellectual property
    rights and failure to protect our intellectual property rights
    adequately could have a material adverse effect on our
    business.
    
    any of our pending or future patent applications will be allowed
    or that any of the allowed applications will be issued as
    patents or will issue with claims of the scope we sought;
    any of our patents will not be invalidated, deemed
    unenforceable, circumvented or challenged;
    the rights granted under our patents will provide competitive
    advantages to us;
    other parties will not develop similar products, duplicate our
    products or design around our patents; or
    our patent rights, intellectual property laws or our agreements
    will adequately protect our intellectual property or competitive
    position.  We may
    be subject to claims of intellectual property
    infringement.
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Our
    success is dependent on recruiting and retaining a highly
    talented work force.
      Changes
    in demand caused by fluctuations in interest and currency
    exchange rates may reduce our international sales.
        Difficulties
    in integrating past or future acquisitions could adversely
    affect our business.
    We use
    hazardous materials and are subject to risks of non-compliance
    with environmental and safety regulations.
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Future
    sales of shares of our common stock by our officers, directors
    and affiliates could cause our stock price to
    decline.
    Anti-takeover
    provisions in our charter documents and under California law
    could prevent or delay a change in control, which could
    negatively impact the value of our common stock by discouraging
    a favorable merger or acquisition of us.
    We
    could be involved in litigation
    Business
    interruptions could adversely affect our
    operations.
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Item 1B.
    Unresolved
    Staff Comments   
  Item 2.
    Properties    Square


LeaseLocation

Footage


Expire

Principal UseSanta Clara, CA


179,583


Mar 2012

Corporate Headquarters; Marketing,
    Manufacturing, Engineering and Customer Support for Equipment
    and ImagingFremont, CA


9,505


Feb 2013

Imaging Sensor FabricationLaramie, WY


4,000


Feb 2008

Imaging Raman Spectrometer
    ManufacturingSingapore


31,947


Jun 2010

Manufacturing and Customer Support
    for EquipmentKorea


1,558


May 2007

Customer Support for EquipmentMalaysia


1,291


Aug 2008

Customer Support for EquipmentJapan


1,507


Nov 2008

Customer Support for EquipmentShenzhen, China


1,934


Jul 2008

Customer Support for Equipment    
  Item 3.
    Legal
    Proceedings  Patent
    Infringement Complaint against Unaxis
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Other
    Legal Matters
   
  Item 4.
    Submission
    of Matters to a Vote of Security-Holders  Form 10-K.
 
  EXECUTIVE
    OFFICERS
    Name

Age


PositionExecutive Officers:Norman H. Pond


68


Chairman of the BoardKevin Fairbairn


53


President and Chief Executive
    OfficerMichael Barnes


48


Vice President and Chief Technical
    OfficerKimberly Burk


41


Sr. Director, Human ResourcesCharles B. Eddy III


56


Vice President, Finance and
    Administration, Chief Financial Officer, Treasurer and SecretaryRalph Kerns


60


Vice President, Business
    Development, Equipment ProductsLuke Marusiak


44


Chief Operating OfficerJoseph Pietras


52


Vice President and General
    Manager, ImagingOther Key Officers:Verle Aebi


52


Chief Technology Officer, ImagingJames Birt


42


Vice President, Customer Support,
    Equipment ProductsTerry Bluck


47


Vice President, Technology,
    Equipment ProductsTimothy Justyn


44


Vice President, Manufacturing,
    Equipment ProductsDave Kelly


44


Vice President, Engineering,
    Imaging   Mr. Pond
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Mr. Fairbairn
  Dr. Barnes
  Ms. Burk
  Mr. Eddy
  Mr. Kerns
  Mr. Marusiak
  Mr. Pietras
  Mr. Aebi
  Mr. Birt
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Mr. Bluck
  Mr. Justyn
  Mr. Kelly
 
  PART II
 
  Item 5.
    Market
    for Registrants Common Equity, Related Shareholder Matters
    and Issuer Purchases of Equity Securities  Price
    Range of Common Stock
      High


LowFiscal 2005:First Quarter

$
9.81


$
7.06Second Quarter


12.00



8.42Third Quarter


14.94



9.75Fourth Quarter


13.95



8.88Fiscal 2006:First Quarter

$
28.80


$
13.42Second Quarter


30.60



18.86Third Quarter


25.35



14.81Fourth Quarter


27.94



16.29   Dividend
    Policy
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Performance
    Graph
    COMPARISON
    OF CUMULATIVE TOTAL RETURN SINCE DECEMBER 31, 2001
    AMONG INTEVAC, NASDAQ STOCK MARKET TOTAL RETURN INDEX AND
    NASDAQ COMPUTER MANUFACTURERS TOTAL RETURN INDEX
  
  12/31/01



12/31/02



12/31/03



12/31/04



12/30/05



12/29/06Intevac, Inc.


$
100



$
128



$
451



$
242



$
422



$
829Nasdaq Stock Market Total Return
    Index



100




69




103




113




115




126Nasdaq Computer Manufacturers
    Total Return Index



100




66




92




120




123




126  26




---



##### Table of Contents



Item 6.
    Selected
    Consolidated Financial Data    Year Ended December 31,2006


2005


2004


2003


2002(In thousands, except per share data)Consolidated Statement of
    Operations Data:Net revenues:Systems and components

$
250,158


$
130,168


$
61,326


$
27,738


$
27,625Technology development


9,717



7,061



8,289



8,556



6,159Total net revenues


259,875



137,229



69,615



36,294



33,784Cost of net revenues:Systems and components


151,287



87,525



45,528



19,689



20,009Technology development


6,102



5,253



6,856



6,032



5,150Inventory provisions


1,527



873



1,375



743



1,316Total cost of net revenues


158,916



93,651



53,759



26,464



26,475Gross profit


100,959



43,578



15,856



9,830



7,309Operating expenses:Research and development


30,036



14,384



11,580



12,037



10,846Selling, general and administrative


22,924



14,477



9,525



8,448



7,752Total operating expenses


52,960



28,861



21,105



20,485



18,598Operating income (loss)


47,999



14,717



(5,249
)


(10,655
)


(11,289
)Interest income


3,501



1,303



634



269



284Other income (expense), net


277



552



381



(1,879
)


13,187Income (loss) before income taxes


51,777



16,572



(4,234
)


(12,265
)


2,182Provision for (benefit from)
    income taxes


5,079



421



110



38



(6,592
)Net income (loss)

$
46,698


$
16,151


$
(4,344
)

$
(12,303
)

$
8,774Basic earnings (loss) per share:Net income (loss)

$
2.22


$
0.79


$
(0.22
)

$
(0.95
)

$
0.73Shares used in per share
    calculations


21,015



20,462



19,749



12,948



12,077Diluted earnings (loss) per share:Net income (loss)

$
2.13


$
0.76


$
(0.22
)

$
(0.95
)

$
0.66Shares used in per share
    calculations


21,936



21,202



19,749



12,948



15,262Consolidated Balance Sheet
    Data:Cash, cash equivalents and short
    investments

$
95,035


$
49,731


$
42,034


$
19,507


$
28,457Working capital


118,061



77,353



53,100



22,638



31,309Total assets


206,003



130,444



79,622



55,975



60,298Long-term debt


















30,568Total shareholders equity


144,310



87,874



69,375



30,869



10,545  27




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##### Table of Contents



Item 7.
    Managements
    Discussion and Analysis of Financial Condition and Results of
    Operations  The following discussion and analysis contains
    forward-looking statements which involve risks and
    uncertainties. Words such as believes,
    expects, anticipates and the like
    indicate forward-looking statements. These forward looking
    statements include comments related to our projected revenue,
    gross margin, operating expense, profitability, income tax
    expense, effective tax rate, capital spending and cash balances;
    the adequacy of our cash balances to fund our operations;
    projected volatility in our financial results; projected
    customer requirements for new capacity and technology upgrades
    for our installed base of magnetic disk manufacturing equipment
    and when, and if, our customers will place orders for these
    products; projected change from period to period in the
    customers, and location of customers, that constitute the
    majority of our revenues; the length of development, marketing
    and deployment cycles for military customers; Imagings
    ability to proliferate its technology into major military
    weapons programs and to develop and introduce commercial
    products; and the timing of delivery
    and/or
    acceptance of our backlog for revenue. Our actual results may
    differ materially from the results discussed in the
    forward-looking statements for a variety of reasons, including
    those set forth under Risk Factors and should be
    read in conjunction with the Consolidated Financial Statements
    and related Notes contained elsewhere in this Annual Report on
    Form 10-K.
  Overview
    Equipment
    Business
       28




---



##### Table of Contents



Imaging
    Business
      Critical
    Accounting Policies
         29




---



##### Table of Contents



Revenue
    Recognition
        percentage-of-completion
  Inventories
  first-in, cost-to-market work-in-progress
  Warranty
    Income
    Taxes
   30




---



##### Table of Contents



Results
    of Operations
  Net
    revenues
  Year Ended December 31,


% Change


% Change2006


2005


2004


2006 vs. 2005


2005 vs. 2004(In thousands, except percentages)Equipment net revenues

$
248,482


$
129,280


$
60,490



92
%


114
%Imaging net revenues


11,393



7,949



9,125



43
%


(13
)%Total net revenues

$
259,875


$
137,229


$
69,615



89
%


97
%          31




---



##### Table of Contents



Gross
    margin.
  Year Ended December 31,


% Change


% Change2006


2005


2004


2006 vs. 2005


2005 vs. 2004(In thousands, except percentages)Equipment gross profit

$
97,161


$
42,623


$
15,016



128
%


184
%% of Equipment net revenues


39.1
%


33.0
%


24.8
%Imaging gross profit

$
3,798


$
955


$
840



298
%


14
%% of Imaging net revenues


33.3
%


12.0
%


9.2
%Total gross profit

$
100,959


$
43,578


$
15,856



132
%


175
%% of net revenues


38.8
%


31.8
%


22.8
%     start-up
 32




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##### Table of Contents



Research
    and development
  Year Ended December 31,


% Change


% Change2006


2005


2004


2006 vs. 2005


2005 vs. 2004(In thousands, except percentages)Research and development expense

$
30,036


$
14,384


$
11,580



109
%


24
%% of net revenues


11.6
%


10.5
%


16.6
%         Selling,
    general and administrative.
  Year Ended December 31,


% Change


% Change2006


2005


2004


2006 vs. 2005


2005 vs. 2004(In thousands, except percentages)Selling, general and
    administrative expense

$
22,924


$
14,477


$
9,525



58
%


52
%% of net revenues


8.8
%


10.5
%


13.7
%    33




---



##### Table of Contents



Interest
    income and other, net.
  Year Ended December 31,

% Change

% Change2006

2005

2004

2006 vs. 2005

2005 vs. 2004(In thousands, except percentages)Interest income and other, net

$
3,778


$
1,855


$
1,015



104
%


83
%     Provision
    for income taxes.
  Year Ended December 31,

% Change

% Change2006

2005

2004

2006 vs. 2005

2005 vs. 2004(In thousands, except percentages)Provision for income taxes

$
5,079


$
421


$
110



1106
%


283
%         Liquidity
    and Capital Resources
   34




---



##### Table of Contents



work-in-progress,
          Contractual
    Obligations
    Payments Due by PeriodTotal


< 1 Year


13 Years


35 Years


> 5 Years(In thousands)Operating lease obligations

$
12,617


$
2,700


$
4,525


$
4,612


$
780Purchase obligations


19,433



19,433











Total

$
32,050


$
22,133


$
4,525


$
4,612


$
780   Off-Balance
    Sheet Arrangements
  Regulation S-K).
 35




---



##### Table of Contents



Item 7A.
    Quantitative
    and Qualitative Disclosures About Market Risk  Interest rate risk.
    Fair2007


2008


2009


Beyond


Total


ValueCash equivalentsFixed rate amounts

$
2,680














$
2,680


$
2,680Weighted-average rate


5.26
%Variable rate amounts

$
11,484














$
11,484


$
11,482Weighted-average rate


5.25
%










Short-term investmentsFixed rate amounts

$
55,596














$
55,596


$
55,596Weighted-average rate


5.24
%










Long-term investmentsFixed rate amounts





$
8,000










$
8,000


$
7,989Weighted-average rate






5.28
%






Total investment portfolio

$
69,760


$
8,000










$
77,760


$
77,747     Foreign exchange risk.
 36




---



##### Table of Contents



Item 8.
    Financial
    Statements and Supplementary Data  INTEVAC,
    INC.
  CONSOLIDATED
    FINANCIAL STATEMENTS
  Contents
  PageReport of Independent Registered
    Public Accounting Firm


38Consolidated Balance Sheets


39Consolidated Statements of
    Operations and Comprehensive Income (Loss)


40Consolidated Statement of
    Shareholders Equity


41Consolidated Statements of Cash
    Flows


42Notes to Consolidated Financial
    Statements


43  37




---



##### Table of Contents



REPORT OF
    INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
             Share-Based Payment
    
    38




---



##### Table of Contents



INTEVAC,
    INC.
  CONSOLIDATED BALANCE SHEETS
  December 31,2006


2005(In thousands)ASSETSCurrent assets:Cash and cash equivalents

$
39,440


$
15,255Short-term investments


55,595



34,476Trade and other accounts
    receivable, net of allowances of $143 and $154 at
    December 31, 2006 and 2005


39,927



42,847Inventories, including $5,765 and
    $3,464 held at customer locations at December 31, 2006 and
    2005


37,942



24,837Prepaid expenses and other current
    assets


2,506



1,814Deferred tax assets


3,269



Total current assets


178,679



119,229Property, plant and equipment, at
    cost:Leasehold improvements


11,062



7,587Machinery and equipment


23,926



20,83434,988



28,421Less accumulated depreciation and
    amortization


21,442



20,44113,546



7,980Long-term investments


8,000



Investment in 601 California
    Avenue LLC


2,431



2,431Other long term assets


3,347



804Total assets

$
206,003


$
130,444LIABILITIES AND
    SHAREHOLDERS EQUITYCurrent liabilities:Accounts payable

$
15,994


$
7,049Accrued payroll and related
    liabilities


11,769



5,509Other accrued liabilities


6,612



6,182Customer advances


26,243



23,136Total current liabilities


60,618



41,876Other long-term liabilities


1,075



694Shareholders equity:Undesignated preferred stock, no
    par value, 10,000 shares authorized, no shares issued and
    outstanding






Common stock, no par value:Authorized
    shares  50,000Issued and outstanding
    shares  21,188 and 20,669 at December 31, 2006
    and 2005, respectively


99,468



95,978Additional
    paid-in-capital


7,319



1,187Accumulated other comprehensive
    income


354



238Retained earnings (accumulated
    deficit)


37,169



(9,529
)Total shareholders equity


144,310



87,874Total liabilities and
    shareholders equity

$
206,003


$
130,444    39




---



##### Table of Contents



INTEVAC,
    INC.
  CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME
    (LOSS)
  Years Ended December 31,2006


2005


2004(In thousands, except per share amounts)Net revenues:Systems and components

$
250,158


$
130,168


$
61,326Technology development


9,717



7,061



8,289Total net revenues


259,875



137,229



69,615Cost of net revenues:Systems and components


151,287



87,525



45,528Technology development


6,102



5,253



6,856Inventory provisions


1,527



873



1,375Total cost of net revenues


158,916



93,651



53,759Gross profit


100,959



43,578



15,856Operating expenses:Research and development


30,036



14,384



11,580Selling, general and administrative


22,924



14,477



9,525Total operating expenses


52,960



28,861



21,105Operating income (loss)


47,999



14,717



(5,249
)Interest income


3,501



1,303



634Other income


277



552



381Income (loss) before income taxes


51,777



16,572



(4,234
)Provision for income taxes


5,079



421



110Net income (loss)

$
46,698


$
16,151


$
(4,344
)Other comprehensive income, net of
    income taxes:Foreign currency translation
    adjustments


116



(15
)


30Total comprehensive income (loss)

$
46,814


$
16,136


$
(4,314
)Basic income (loss) per share:Net income (loss)

$
2.22


$
0.79


$
(0.22
)Shares used in per share amounts


21,015



20,462



19,749Diluted income (loss) per share:Net income (loss)

$
2.13


$
0.76


$
(0.22
)Shares used in per share amounts


21,936



21,202



19,749    40




---



##### Table of Contents



INTEVAC,
    INC.
  CONSOLIDATED STATEMENT OF SHAREHOLDERS EQUITY
  Accumulated


RetainedOther


Earnings


TotalCommon Stock


Additional


Comprehensive


(Accumulated -


ShareholdersShares


Amount


Paid-In Capital


Income


Deficit)


Equity(In thousands)Balance at December 31, 2003


16,953


$
50,814


$
1,168


$
223


$
(21,336
)

$
30,869Shares issued in connection with:Exercise of stock options


178



856















856Employee stock purchase plan


82



403















403Secondary public offering


2,969



41,561















41,561Foreign currency translation
    adjustment














30







30Net loss


















(4,344
)


(4,344
)Balance at December 31, 2004


20,182


$
93,634


$
1,168


$
253


$
(25,680
)

$
69,375Shares issued in connection with:Exercise of stock options


358



1,856















1,856Employee stock purchase plan


129



488















488Compensation expense in the form
    of stock options










19











19Foreign currency translation
    adjustment














(15
)






(15
)Net income


















16,151



16,151Balance at December 31, 2005


20,669


$
95,978


$
1,187


$
238


$
(9,529
)

$
87,874Shares issued in connection with:Exercise of stock options


360



2,666















2,666Employee stock purchase plan


159



824















824Income tax benefits realized from
    activity in employee stock plans










2,707











2,707Stock-based compensation expense










3,425











3,425Foreign currency translation
    adjustment














116







116Net income


















46,698



46,698Balance at December 31, 2006


21,188


$
99,468


$
7,319


$
354


$
37,169


$
144,310    41




---



##### Table of Contents



INTEVAC,
    INC.
  CONSOLIDATED STATEMENTS OF CASH FLOWS
  Years Ended December 31,2006


2005


2004(In thousands)Operating activitiesNet income (loss)

$
46,698


$
16,151


$
(4,344
)Adjustments to reconcile net
    income (loss) to net cash and cash equivalents provided by (used
    in) operating activities:Depreciation


2,846



2,150



2,031Amortization of debt offering costs










1Net amortization (accretion) of
    investment premiums and discounts


(264
)


(55
)


233Inventory provisions


1,527



873



1,375Equity-based compensation


3,425



19



Deferred income taxes


(4,581
)






Tax benefit from equity-based
    compensation


(2,707
)






Loss on disposal of equipment


39



4



86Changes in assets and liabilities:Accounts receivable


2,928



(38,081
)


9,261Inventory


(14,590
)


(10,354
)


(4,309
)Prepaid expenses and other assets


(1,903
)


(1,661
)


161Accounts payable


8,904



5,402



(1,749
)Accrued payroll and other accrued
    liabilities


9,762



7,645



449Customer advances


3,107



19,303



(12,599
)Total adjustments


8,493



(14,755
)


(5,060
)Net cash and cash equivalents
    provided by (used in) operating activities


55,191



1,396



(9,404
)Investing activitiesPurchase of investments


(152,280
)


(100,140
)


(45,864
)Proceeds from sales and maturities
    of investments


123,425



98,350



13,000Proceeds from sale of equipment










10Purchase of equipment


(8,423
)


(4,140
)


(1,620
)Net cash and cash equivalents used
    in investing activities


(37,278
)


(5,930
)


(34,474
)Financing activitiesProceeds from issuance of common
    stock


3,490



2,344



42,820Tax benefit from equity-based
    compensation


2,707







Payoff of convertible notes due
    2004










(1,025
)Net cash and cash equivalents
    provided by financing activities


6,197



2,344



41,795Effect of exchange rate changes on
    cash


75



(10
)


31Net increase (decrease) in cash
    and cash equivalents


24,185



(2,200
)


(2,052
)Cash and cash equivalents at
    beginning of period


15,255



17,455



19,507Cash and cash equivalents at end
    of period

$
39,440


$
15,255


$
17,455Cash paid for:Interest

$



$



$
33Income taxes


5,722



2



2Other non-cash changes:Inventories transferred to
    property, plant and equipment

$



$



$
706    42




---



##### Table of Contents



INTEVAC,
    INC.
  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
  1.
    Business
    and Nature of Operations          2.
    Summary
    of Significant Accounting Policies  Basis
    of Presentation
    Revenue
    Recognition
      Accounting Treatment for Systems.
     43




---



##### Table of Contents



INTEVAC,
    INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    Other Systems and Non-System Revenue
    Recognition.
  Obligations After Shipment.
    Technology Development Revenue Recognition.
    SOP 81-1 percentage-of-
  paid-up
  Trade
    Receivables and Doubtful Accounts
   44




---



##### Table of Contents



INTEVAC,
    INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
     Warranty
        2006


2005(In thousands)Beginning balance

$
3,399


$
1,116Expenditures incurred under
    warranties


(3,695
)


(1,428
)Accruals for product warranties
    issued during the reporting period


4,354



3,422Adjustments to previously existing
    warranty accruals


1,225



289Ending balance

$
5.283


$
3,399     December 31,2006


2005(In thousands)Other accrued liabilities

$
4,208


$
2,705Other long-term liabilities


1,075



694Total warranty provision

$
5,283


$
3,399   Guarantees
    Income
    Taxes
   45




---



##### Table of Contents



INTEVAC,
    INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
        Customer
    Advances
    Cash,
    Cash Equivalents and Short-term Investments
    available-for-sale held-to-maturity. Available-for-sale Held-to-maturity
  46




---



##### Table of Contents



INTEVAC,
    INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  December 31,


December 31,2006


2005(In thousands)Amortized Principal Amount:Debt securities issued by
    U.S. government agencies

$
8,000


$
10,991Auction rate securities


53,595



15,000Corporate debt securities


2,000



8,485Total investments in debt
    securities

$
63,595


$
34,476Short-term investments

$
55,595


$
34,476Long-term investments


8,000



Total investments in debt
    securities

$
63,595


$
34,476Approximate fair value of
    investments in debt securities

$
63,585


$
34,408   03-01, other-than-temporarily
    Valuation
    of Long-lived and Intangible Assets
    
    significant underperformance relative to expected historical or
    projected future operating results;
    significant changes in the manner of our use of the acquired
    assets or the strategy for our overall business; and
    significant negative industry or economic trends.    Prototype
    Costs
    Foreign
    Exchange Contracts
   47




---



##### Table of Contents



INTEVAC,
    INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  one-to-one
    Foreign
    Currency Translation
    Financial
    Instruments
    Inventories
  first-in,
  December 31,2006


2005(In thousands)Raw materials

$
19,906


$
15,070Work-in-progress


12,271



6,303Finished goods


5,765



3,464$
37,942


$
24,837     work-in-progress Work-in-progress
   48




---



##### Table of Contents



INTEVAC,
    INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
     Property,
    Plant and Equipment
      Computers and software

3 yearsMachinery and equipment

5 yearsFurniture

7 yearsVehicles

4 yearsLeasehold improvements

Remaining lease term   Comprehensive
    Income
    Employee
    Stock Plans
    Financial
    Presentation
   49




---



##### Table of Contents



INTEVAC,
    INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
   Net
    income (loss) per share
    2006


2005


2004(In thousands)Numerator:Numerator for diluted earnings
    (loss) per share  income (loss) available to common
    stockholders

$
46,698


$
16,151


$
(4,344
)Denominator:Denominator for basic earnings
    (loss) per share  weighted-average shares


21,015



20,462



19,749Effect of dilutive securities:Employee stock options(2)


921



740



61/2% convertible
    notes(1)










Dilutive potential common shares


921



740



Denominator for diluted earnings
    (loss) per share  adjusted weighted-average shares
    and assumed conversions


21,936



21,202



19,749     (1)
    
    Diluted EPS for the twelve-month period ended December 31,
    2004 excludes as converted treatment of the
    convertible notes, as their inclusion would be anti-dilutive.
    The number of as converted shares excluded from the
    twelve-month period ended December 31, 2004 was 8,568. The
    $1.0 million balance of the notes was repaid in March 2004.(2)
    
    Potentially dilutive securities, consisting of shares issuable
    upon exercise of employee stock options, are excluded from the
    calculation of diluted EPS if their effect would be
    anti-dilutive. The weighted average number of employee stock
    options excluded from the twelve-month periods ended
    December 31, 2006, 2005, and 2004 was 426,606, 226,804, and
    1,605,593 respectively.  Use of
    Estimates
    New
    Accounting Pronouncements
     50




---



##### Table of Contents



INTEVAC,
    INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
        3.
    Stock-Based
    Compensation       51




---



##### Table of Contents



INTEVAC,
    INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
     Descriptions
    of Plans
  2004
    Equity Incentive Plan
        2003
    Employee Stock Purchase Plan
     52




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##### Table of Contents



INTEVAC,
    INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
   Impact
    of the Adoption of SFAS 123(R)
    Stock-based compensation by type
    of award:Stock options

$
2,803Employee stock purchase plan


622Amounts capitalized as inventory


(69
)Total stock-based compensation


3,356Tax effect on stock-based
    compensation


(403
)Net effect on net income

$
2,953Effect on earnings per share:Basic

$
0.14Diluted

$
0.13     Valuation
    Assumptions
      Employee StockStock Options


Purchase PlanExpected volatility


74.44
%


59.25
%Risk free interest rate


4.68
%


4.67
%Expected term of options and
    purchase rights (in years)


4.71



1.92Dividend yield


None



None    53




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##### Table of Contents



INTEVAC,
    INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    Stock
    Plan Activity
  2004
    Equity Incentive Plan
    WeightedAverage Remaining


AggregateWeighted Average


Contractual Term


IntrinsicShares


Exercise Price


(Years)


ValueOptions outstanding at
    December 31, 2005


1,867,570


$
7.19



7.55


$
11,482,717Options granted


942,600


$
18.13Options forfeited


(95,577
)

$
8.72Options exercised


(360,378
)

$
7.39Options outstanding at
    December 31, 2006


2,354,215


$
11.47



7.93


$
34,107,462Vested and expected to vest at
    December 31, 2006


2,005,688


$
10.96



7.33


$
30,088,807Options exercisable at
    December 31, 2006


915,450


$
7.25



6.38


$
17,120,100       Options OutstandingWeighted Average





Options ExercisableRemaining


Weighted


Number


WeightedNumber of Shares


Contractual Term


Average


Vested and


AverageRange of Exercise Prices

Outstanding


(In Years)


Exercise Price


Exercisable


Exercise Price$ 2.63 - $ 3.51


294,370



5.03


$
2.72



289,703


$
2.72$ 3.63 - $ 6.75


294,420



6.18


$
4.65



172,647


$
4.79$ 7.22 - $ 7.84


300,900



7.88


$
7.63



33,625


$
7.65$ 7.93 - $10.01


297,200



7.90


$
9.00



187,400


$
9.62$10.69 - $15.81


399,575



8.31


$
13.96



232,075


$
12.76$16.13 - $16.13


374,750



9.66


$
16.13






$
$16.87 - $28.55


393,000



9.44


$
20.99






$
$ 2.63 - $28.55


2,354,215



7.93


$
11.47



915,450


$
7.25    54




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##### Table of Contents



INTEVAC,
    INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
   2003
    Employee Stock Purchase Plan
    Prior to
    the Adoption of SFAS No. 123(R)
    2005


2004(In thousands, exceptper share amounts)Net income (loss), as reported





$
16,151


$
(4,344
)Deduct: Total stock-based employee
    compensation expense determined under fair value based method
    for all awards, net of related tax effects






(2,907
)


(1,378
)Pro forma net income (loss)





$
13,244


$
(5,722
)Earnings (loss) per share:Basic  as reported





$
0.79


$
(0.22
)Basic  pro forma





$
0.65


$
(0.29
)Diluted  as reported





$
0.76


$
(0.22
)Diluted  pro forma





$
0.62


$
(0.29
)     Stock
    Options
  2005


2004Expected volatility


92.30
%


94.62
%Risk free interest rate


4.30
%


3.60
%Expected term of options and
    purchase rights (in years)


5.99



5.60Dividend yield


None



None   Employee
    Stock Purchase Plan
  2005


2004Expected volatility


91.74
%


95.20
%Risk free interest rate


3.89
%


2.37
%Expected term of options and
    purchase rights (in years)


1.27



1.92Dividend yield


None



None   out-of-the-money
 55




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##### Table of Contents



INTEVAC,
    INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    4.
    Concentrations  Credit
    Risk and Significant Customers
      Products
    5.
    Equity
    Investments  601
    California Avenue LLC
   56




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##### Table of Contents



INTEVAC,
    INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
     6.
    Commitments
    and Contingencies  Leases
      2007

$
2,7062008


2,2382009


2,2952010


2,3022011


2,310Beyond


780Total

$
12,631     Contingencies
         57




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##### Table of Contents



INTEVAC,
    INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
     7.
    Employee
    Benefit Plan  Employee
    Savings and Retirement Plan
    Employee
    Bonus Plans
    8.
    Segment
    Reporting  Segment
    Description
      Segment
    Profit or Loss and Segment Assets
    Business
    Segment Net Revenues
  2006


2005


2004(In thousands)Equipment

$
248,482


$
129,280


$
60,490Imaging


11,393



7,949



9,125Total

$
259,875


$
137,229


$
69,615  58




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##### Table of Contents



INTEVAC,
    INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  Business
    Segment Profit (Loss)
  2006


2005


2004(In thousands)Equipment(1)

$
52,223


$
20,413


$
(377
)Imaging(2)


(4,826
)


(5,798
)


(4,114
)Corporate activities


602



102



(758
)Operating income (loss)


47,999



14,717



(5,249
)Interest income


3,501



1,303



634Other income and expense, net


277



552



381Income (loss) before income taxes

$
51,777


$
16,572


$
(4,234
)     (1)
    
    Includes inventory provisions of $1,403,000, $782,000, and
    $1,263,000 in 2006, 2005, and 2004, respectively.(2)
    
    Includes inventory provisions of $124,000, $91,000, and $112,000
    in 2006, 2005, and 2004, respectively.  Business
    Segment Assets
  2006


2005(In thousands)Equipment

$
84,366


$
68,672Imaging


7,379



7,665Corporate activities


115,847



54,107Total assets

$
207,592


$
130,444   Business
    Segment Property, Plant & Equipment
  Additions

2006


2005(In thousands)Equipment

$
5,702


$
2,184Imaging


979



934Corporate activities


1,742



1,022Total additions

$
8,423


$
4,140   Depreciation

2006


2005


2004(In thousands)Equipment

$
1,120


$
822


$
561Imaging


1,217



1,054



1,188Corporate activities


509



274



282Total depreciation

$
2,846


$
2,150


$
2,031   Geographic Breakdown

2006


2005(In thousands)United States

$
12,690


$
7,773Asia


856



207Net property, plant &
    equipment

$
13,546


$
7,980  59




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##### Table of Contents



INTEVAC,
    INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  Geographic
    Area Net Trade Revenues
  2006


2005


2004(In thousands)United States

$
26,473


$
39,754


$
22,545Asia


233,158



96,694



46,452Europe


244



781



618Total revenues

$
259,875


$
137,229


$
69,615     9.
    Income
    Taxes    Years Ended December 31,2006


2005


2004Federal:Current

$
9,479


$
392


$
Deferred


(3,750
)






5,729



392



State:Current


2



9



115Deferred


(831
)






(829
)


9



115Foreign:Current


179



20



(5
)Total

$
5,079


$
421


$
110     Years Ended December 31,2006


2005


2004U.S.

$
51,004


$
16,319


$
(4,312
)Foreign


773



253



78$
51,777


$
16,572


$
(4,234
)    60




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##### Table of Contents



INTEVAC,
    INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
     December 31,2006


2005Deferred tax assets:Vacation, rent, warranty and other
    accruals

$
2,090


$
1,581Depreciation


44



1,409Inventory valuation


3,135



3,893Deferred income


248



544Equity-based compensation


1,084



Research and other tax credit
    carry-forwards


590



637Federal and State NOL
    carry-forwards






6,502Other


234



4667,425



15,032Valuation allowance for deferred
    tax assets


(2,844
)


(15,032
)Net deferred tax assets

$
4,581


$
As reported on the balance sheet:Current assetsDeferred tax assets

$
4,488


$
4,424Valuation allowance for deferred
    tax assets


(1,219
)


(4,424
)Net current deferred tax assets


3,269



Other long term assetsDeferred tax assets


2,937



10,608Valuation allowance for deferred
    tax assets


(1,625
)


(10,608
)Net non-current deferred tax assets


1,312



Net deferred tax assets

$
4,581


$
       Years Ended December 31,2006


2005


2004Income taxes (benefit) at the
    federal statutory rate

$
18,122


$
5,795


$
(1,472
)State income taxes, net of federal
    benefit


(539
)


6



75Effect of foreign operations taxes
    at various rates


(93
)


(39
)


Research tax credits


(2,128
)






Effect of tax rate changes,
    permanent differences and adjustments of prior deferrals


(38
)


(430
)


(1,751
)Stock-based compensation


1,943







Change in valuation allowance


(12,188
)


(4,911
)


3,258Total

$
5,079


$
421


$
110  61




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##### Table of Contents



INTEVAC,
    INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  10.
    Other
    Accrued Liabilities  December 31,2006


2005(In thousands)Accrued product warranties

$
4,208


$
2,705Accrued taxes


1,533



2,000Deferred income


573



1,254Other


298



223Total other accrued liabilities

$
6,612


$
6,182   11.
    Quarterly
    Consolidated Results of Operations (Unaudited)  Three Months EndedApril 1,


July 1,


Sept. 30,


Dec. 31,2006


2006


2006


2006(In thousands, except per share data)Net sales

$
49,620


$
59,542


$
54,829


$
95,884Gross profit


17,306



21,262



23,280



39,111Net income


7,011



9,333



9,013



21,341Basic income per share

$
0.34


$
0.44


$
0.43


$
1.01Diluted income per share


0.32



0.42



0.41



0.97   Three Months EndedApril 2,


July 2,


Oct. 1,


Dec. 31,2005


2005


2005


2005(In thousands, except per share data)Net sales

$
10,605


$
30,418


$
43,507


$
52,699Gross profit


1,995



9,661



13,554



18,368Net income (loss)


(3,897
)


3,927



6,191



9,930Basic income (loss) per share

$
(0.19
)

$
0.19


$
0.30


$
0.48Diluted income (loss) per share


(0.19
)


0.19



0.29



0.46   12.
    Subsequent
    Events   62




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##### Table of Contents



Item 9.
    Changes
    In and Disagreements With Accountants on Accounting and
    Financial Disclosure   
  Item 9A.
    Controls
    and Procedures  Managements
    Report on Assessment of Internal Controls Over Financial
    Reporting
  Rules 13a-15(f) 15d-15(f)
  
    Pertain to the maintenance of records that in, reasonable
    detail, accurately and fairly reflect the transactions and
    dispositions of the assets of our company;
    provide reasonable assurance that transactions are recorded as
    necessary to permit preparation of financial statements in
    accordance with generally accepted accounting principles, and
    that receipts and expenditures of the Company are being made
    only in accordance with authorizations of our management and
    directors; and
    provide reasonable assurance regarding prevention or timely
    detection of unauthorized acquisition, use or disposition of our
    assets that could have a material affect on the financial
    statements.        Changes
    in Internal Control over Financial Reporting.
   63




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##### Table of Contents



Evaluation
    of disclosure controls and procedures
  Form 10-K Rule 13a-15(b)
  Limitations
    on the Effectiveness of Controls
   64




---



##### Table of Contents



REPORT OF
    INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
    ON INTERNAL CONTROL OVER FINANCIAL REPORTING
                 
     65




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##### Table of Contents



Item 9B.
    Other
    Information    PART III
 
  Item 10.
    Directors,
    Executive Officers and Corporate Governance  Form 10-K.
 
  Item 11.
    Executive
    Compensation   
  Item 12.
    Security
    Ownership of Certain Beneficial Owners and Management and
    Related Stockholder Matters  Securities authorized for issuance under equity compensation
    plans.
  (c)(a)





Number of SecuritiesNumber of Securities


(b)


Remaining Availableto be Issued Upon


Weighted-Average


for Future IssuanceExercise of


Exercise Price of


Under EquityOutstanding Options,


Outstanding Options,


Compensation PlansPlan Category

Warrants and Rights


Warrants and Rights(1)Equity compensation plans approved
    by security holders(2)


2,354,215


$
11.47



674,307Equity compensation plans not
    approved by security holders





$




Total


2,354,215


$
11.47



674,307     (1)
    
    Excludes securities reflected in column (a).(2)
    
    Included in the column (c) amount are 387,937 shares
    available for future issuance under Intevacs 2003 Employee
    Stock Purchase Plan.   
  Item 13.
    Certain
    Relationships and Related Transactions, and Director
    Independence   66




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##### Table of Contents



Item 14.
    Principal
    Accountant Fees and Services   
  PART IV
 
  Item 15.
    Exhibits
    and Financial Statement Schedules  Form 10-K.
  Form 10-K:
                Form 10-K:
        ExhibitNumber

Description3
.1(1)

Amended and Restated Articles of
    Incorporation of the Registrant3
.2(5)

Amended and Restated Bylaws of the
    Registrant10
.1+(1)

The Registrants 1991 Stock
    Option/Stock Issuance Plan10
.2+(1)

The Registrants 1995 Stock
    Option/Stock Issuance Plan, as amended10
.3+(1)

The Registrants Employee
    Stock Purchase Plan, as amended10
.4+(2)

The Registrants 2004 Equity
    Incentive Plan10
.5

Lease, dated February 5, 2001
    regarding the space located at 3510, 3544, 3560, 3570 and 3580
    Bassett Street, Santa Clara, California, as amended10
.7(1)

601 California Avenue LLC Limited
    Liability Operating Agreement, dated July 28, 199510
.8+(1)

The Registrants 401(k)
    Profit Sharing Plan10
.9+(3)

The Registrants 2005
    Executive Incentive Plan 67




---



##### Table of Contents



ExhibitNumber

Description10
.10+(4)

The Registrants Executive
    Incentive Plan21
.1

Subsidiaries of the Registrant23
.1

Consent of Independent Registered
    Public Accounting Firm24
.1

Power of Attorney (see
    page 65)31
.1

Certification of President and
    Chief Executive Officer Pursuant to Section 302 of the
    Sarbanes-Oxley Act of 200231
.2

Certification of Vice-President,
    Finance and Administration, Chief Financial Officer, Treasurer
    and Secretary Pursuant to Section 302 of the Sarbanes-Oxley
    Act of 200232
.1

Certifications Pursuant to U.S.C.
    1350, adopted Pursuant to Section 906 of the Sarbanes-Oxley
    Act of 2002     (1)
    
    Previously filed as an exhibit to the Registration Statement on
    Form S-1
    (No. 33-97806)(2)
    
    Previously filed as an exhibit to the Companys Definitive
    Proxy Statement filed March 31, 2004(3)
    
    Previously filed as an exhibit to the Companys Report on
    Form 8-K
    filed February 7, 2005(4)
    
    Previously filed as an exhibit to the Companys Report on
    Form 8-K
    filed February 7, 2006(5)
    
    Previously filed as an exhibit to the Companys Report on
    Form 8-K
    filed November 1, 2006+
    
    Management compensatory plan or arrangement required to be filed
    as an exhibit pursuant to Item 15(c) of
    Form 10-K 68




---



##### Table of Contents



SIGNATURES
    INTEVAC, INC.
  By:
    /s/  CHARLES
    B. EDDY III       POWER OF
    ATTORNEY
  attorneys-in-fact Form 10-K, attorneys-in-fact attorneys-in-fact
    Signature

Title

Date/s/  KEVIN
    FAIRBAIRN(Kevin
    Fairbairn)

President, Chief Executive Officer
    and Director (Principal Executive Officer)

March 15, 2007/s/  NORMAN
    H. POND(Norman
    H. Pond)

Chairman of the Board

March 15, 2007/s/  CHARLES
    B.
    EDDY III(Charles
    B. EDDY III)

Vice President, Finance and
    Administration, Chief Financial Officer Treasurer and Secretary
    (Principal Financial and Accounting Officer)

March 15, 2007/s/  DAVID
    DURY(David
    Dury)

Director

March 15, 2007/s/  STANLEY
    J. HIL(Stanley
    J. Hill)

Director

March 15, 2007/s/  ROBERT
    LEMOS(Robert
    Lemos)

Director

March 15, 2007 69




---



##### Table of Contents



Signature

Title

Date/s/  ARTHUR
    L. MONEY(Arthur
    L. Money)

Director

March 15, 2007/s/  PING
    YANG(Ping
    Yang)

Director

March 15, 2007  70




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##### Table of Contents



SCHEDULE II 
    VALUATION AND QUALIFYING ACCOUNTS
  INTEVAC,
    INC.
  Additions (Reductions)Balance at


Charged (Credited)


Charged (Credited)





Balance atBeginning


to Costs and


to Other





EndDescription

of Period


Expenses


Accounts


Deductions - Describe


of Period(In thousands)Year ended December 31, 2004:Deducted from asset accounts:Allowance for doubtful accounts

$
22


$
218


$
(23
)

$



$
217Inventory provisions


10,192



1,375



(121
)


1,583
(2)


9,863Year ended December 31, 2005:Deducted from asset accounts:Allowance for doubtful accounts

$
217


$
211


$
(268
)

$
6
(1)

$
154Inventory provisions


9,863



873



376



124
(2)


10,988Year ended December 31, 2006:Deducted from asset accounts:Allowance for doubtful accounts

$
154


$
(14
)

$
3


$



$
143Inventory provisions


10,988



1,527



(32
)


3,355
(2)


9,128     (1)
    
    Write-offs of amounts deemed uncollectible.(2)
    
    Write-off of inventory having no future use or value to the
    Company 71




---



##### Table of Contents



Exhibit
    Index
  ExhibitNumber

Description3
.1(1)

Amended and Restated Articles of
    Incorporation of the Registrant3
.2(5)

Amended and Restated Bylaws of the
    Registrant10
.1+(1)

The Registrants 1991 Stock
    Option/Stock Issuance Plan10
.2+(1)

The Registrants 1995 Stock
    Option/Stock Issuance Plan, as amended10
.3+(1)

The Registrants Employee
    Stock Purchase Plan, as amended10
.4+(2)

The Registrants 2004 Equity
    Incentive Plan10
.5

Lease, dated February 5, 2001
    regarding the space located at 3510, 3544, 3560, 3570 and 3580
    Bassett Street, Santa Clara, California, as amended10
.7(1)

601 California Avenue LLC Limited
    Liability Operating Agreement, dated July 28, 199510
.8+(1)

The Registrants 401(k)
    Profit Sharing Plan10
.9+(3)

The Registrants 2005
    Executive Incentive Plan10
.10+(4)

The Registrants Executive
    Incentive Plan21
.1

Subsidiaries of the Registrant23
.1

Consent of Independent Registered
    Public Accounting Firm24
.1

Power of Attorney (see
    page 65)31
.1

Certification of President and
    Chief Executive Officer Pursuant to Section 302 of the
    Sarbanes-Oxley Act of 200231
.2

Certification of Vice-President,
    Finance and Administration, Chief Financial Officer, Treasurer
    and Secretary Pursuant to Section 302 of the Sarbanes-Oxley
    Act of 200232
.1

Certifications Pursuant to U.S.C.
    1350, adopted Pursuant to Section 906 of the Sarbanes-Oxley
    Act of 2002     (1)
    
    Previously filed as an exhibit to the Registration Statement on
    Form S-1
    (No. 33-97806)(2)
    
    Previously filed as an exhibit to the Companys Definitive
    Proxy Statement filed March 31, 2004(3)
    
    Previously filed as an exhibit to the Companys Report on
    Form 8-K
    filed February 7, 2005(4)
    
    Previously filed as an exhibit to the Companys Report on
    Form 8-K
    filed February 7, 2006(5)
    
    Previously filed as an exhibit to the Companys Report on
    Form 8-K
    filed November 1, 2006  +
    
    Management compensatory plan or arrangement required to be filed
    as an exhibit pursuant to Item 15(c) of
    Form 10-K 72