##### Table of Contents



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 Washington, DC 20549
 FORM 10-Q
 (MARK ONE)
 þ
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the quarterly period ended June 27, 2009
 OR
 o
    
    TRANSITION REPORT PURSUANT TO
SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
 For the transition
period from                   to
 Commission file number 0-26946
 INTEVAC, INC.
 (Exact name of registrant as specified in its charter)
 Delaware
    
    94-3125814(State or other jurisdiction of
    
    (IRS Employer Identification No.)incorporation or organization)
 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
 þ o
 o o
  Large accelerated filer oAccelerated filer þNon-accelerated filer o(Do not check if a smaller reporting company)Smaller reporting company o o þ
 APPLICABLE ONLY TO CORPORATE ISSUERS:




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##### 



INTEVAC, INC.
 INDEX
 No.
    
    
    
    PagePART I. FINANCIAL INFORMATIONItem 1.
    
    Financial Statements (unaudited)Condensed Consolidated Balance Sheets
    
    
    3Condensed Consolidated Statements of Operations
    
    
    4Condensed Consolidated Statements of Cash Flows
    
    
    5Notes to Condensed Consolidated Financial Statements
    
    
    6Item 2.
    
    Managements Discussion and Analysis of Financial Condition
and Results of Operations
    
    
    19Item 3.
    
    Quantitative and Qualitative Disclosures About Market Risk
    
    
    28Item 4.
    
    Controls and Procedures
    
    
    29PART II. OTHER INFORMATIONItem 1.
    
    Legal Proceedings
    
    
    30Item 1A.
    
    Risk Factors
    
    
    31Item 2.
    
    Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    39Item 3.
    
    Defaults Upon Senior Securities
    
    
    39Item 4.
    
    Submission of Matters to a Vote of Security Holders
    
    
    39Item 5.
    
    Other Information
    
    
    39Item 6.
    
    Exhibits
    
    
    39SIGNATURES
    
    
    40EX-23.2EX-31.1EX-31.2EX-32.1
  2




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##### Table of Contents



PART I. FINANCIAL INFORMATION
 
 Item 1. Financial Statements
 INTEVAC, INC.
 
 CONDENSED CONSOLIDATED BALANCE SHEETS
 June 27,
    
    
    December 31,2009
    
    
    2008(Unaudited)(In thousands)ASSETSCurrent assets:Cash and cash equivalents
    
    $
    17,990
    
    
    $
    39,201Short-term investments
    
    
    11,990
    
    
    
    Trade and other accounts receivable, net of allowances of $16 at
June 27, 2009 and $145 at December 31, 2008
    
    
    17,051
    
    
    
    15,014Inventories
    
    
    19,627
    
    
    
    17,674Prepaid expenses and other current assets
    
    
    6,877
    
    
    
    4,806Deferred income tax assets
    
    
    3,935
    
    
    
    3,204Total current assets
    
    
    77,470
    
    
    
    79,899Property, plant and equipment, net
    
    
    14,013
    
    
    
    14,886Long-term investments
    
    
    66,187
    
    
    
    66,328Goodwill
    
    
    7,905
    
    
    
    7,905Other intangible assets, net of amortization of $971 at June 27,
2009 and $693 at December 31, 2008
    
    
    3,744
    
    
    
    4,054Deferred income taxes and other long-term assets
    
    
    18,647
    
    
    
    16,097Total assets
    
    $
    187,966
    
    
    $
    189,169LIABILITIES AND STOCKHOLDERS EQUITYCurrent liabilities:Note payable
    
    $
    
    
    
    $
    2,000Accounts payable
    
    
    4,502
    
    
    
    4,214Accrued payroll and related liabilities
    
    
    3,849
    
    
    
    3,395Other accrued liabilities
    
    
    6,823
    
    
    
    3,175Customer advances
    
    
    4,481
    
    
    
    2,807Total current liabilities
    
    
    19,655
    
    
    
    15,591Other long-term liabilities
    
    
    286
    
    
    
    509Stockholders equity:Common stock, $0.001 par value
    
    
    22
    
    
    
    22Additional paid-in capital
    
    
    131,866
    
    
    
    128,686Accumulated other comprehensive loss
    
    
    (2,772
    )
    
    
    (4,808
    )Retained earnings
    
    
    38,909
    
    
    
    49,169Total stockholders equity
    
    
    168,025
    
    
    
    173,069Total liabilities and stockholders equity
    
    $
    187,966
    
    
    $
    189,169
   3




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##### Table of Contents



INTEVAC, INC.
 
 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
 Three Months Ended
    
    
    Six Months EndedJune 27,
    
    
    June 28,
    
    
    June 27,
    
    
    June 28,2009
    
    
    2008
    
    
    2009
    
    
    2008(Unaudited)(In thousands, except
per share amounts)Net revenues:Systems and components
    
    $
    8,981
    
    
    $
    28,126
    
    
    $
    17,658
    
    
    $
    57,140Technology development
    
    
    3,337
    
    
    
    4,006
    
    
    
    6,968
    
    
    
    8,167Total net revenues
    
    
    12,318
    
    
    
    32,132
    
    
    
    24,626
    
    
    
    65,307Cost of net revenues:Systems and components
    
    
    5,758
    
    
    
    16,597
    
    
    
    11,815
    
    
    
    31,987Technology development
    
    
    2,047
    
    
    
    2,402
    
    
    
    4,033
    
    
    
    4,876Total cost of net revenues
    
    
    7,805
    
    
    
    18,999
    
    
    
    15,848
    
    
    
    36,863Gross profit
    
    
    4,513
    
    
    
    13,133
    
    
    
    8,778
    
    
    
    28,444Operating expenses:Research and development
    
    
    7,385
    
    
    
    8,418
    
    
    
    15,415
    
    
    
    17,806Selling, general and administrative
    
    
    5,394
    
    
    
    7,413
    
    
    
    11,103
    
    
    
    14,477Total operating expenses
    
    
    12,779
    
    
    
    15,831
    
    
    
    26,518
    
    
    
    32,283Loss from operations
    
    
    (8,266
    )
    
    
    (2,698
    )
    
    
    (17,740
    )
    
    
    (3,839
    )Interest income and other, net
    
    
    228
    
    
    
    806
    
    
    
    658
    
    
    
    2,217Loss before income taxes
    
    
    (8,038
    )
    
    
    (1,892
    )
    
    
    (17,082
    )
    
    
    (1,622
    )Income tax benefit
    
    
    3,551
    
    
    
    955
    
    
    
    6,822
    
    
    
    2,248Net income (loss)
    
    $
    (4,487
    )
    
    $
    (937
    )
    
    $
    (10,260
    )
    
    $
    626Net income (loss) per share:Basic
    
    $
    (0.20
    )
    
    $
    (0.04
    )
    
    $
    (0.47
    )
    
    $
    0.03Diluted
    
    $
    (0.20
    )
    
    $
    (0.04
    )
    
    $
    (0.47
    )
    
    $
    0.03Weighted average common shares outstanding:Basic
    
    
    21,930
    
    
    
    21,691
    
    
    
    21,906
    
    
    
    21,669Diluted
    
    
    21,930
    
    
    
    21,691
    
    
    
    21,906
    
    
    
    22,115
  4




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INTEVAC, INC.
 
 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
 Six months endedJune 27,
    
    
    June 28,2009
    
    
    2008(Unaudited)(In thousands)Operating activitiesNet income (loss)
    
    $
    (10,260
    )
    
    $
    626Adjustments to reconcile net income (loss) to net cash and cash
equivalents used in operating activities:Depreciation and amortization
    
    
    2,578
    
    
    
    2,252Equity-based compensation
    
    
    2,709
    
    
    
    3,238Deferred income taxes
    
    
    (3,771
    )
    
    
    (2,800
    )Changes in operating assets and liabilities
    
    
    (988
    )
    
    
    (23,359
    )Total adjustments
    
    
    528
    
    
    
    (20,669
    )Net cash and cash equivalents used in operating activities
    
    
    (9,732
    )
    
    
    (20,043
    )Investing activitiesPurchases of investments
    
    
    (14,982
    )
    
    
    (7,000
    )Proceeds from maturities of investments
    
    
    6,500
    
    
    
    28,500Purchases of leasehold improvements and equipment
    
    
    (1,453
    )
    
    
    (2,263
    )Net cash and cash equivalents provided by (used in) investing activities
    
    
    (9,935
    )
    
    
    19,237Financing activitiesNet proceeds from issuance of common stock
    
    
    513
    
    
    
    940Repayment of note payable
    
    
    (2,000
    )
    
    
    (2,000
    )Net cash and cash equivalents used in financing activities
    
    
    (1,487
    )
    
    
    (1,060
    )Effect of exchange rate changes on cash
    
    
    (57
    )
    
    
    153Net decrease in cash and cash equivalents
    
    
    (21,211
    )
    
    
    (1,713
    )Cash and cash equivalents at beginning of period
    
    
    39,201
    
    
    
    27,673Cash and cash equivalents at end of period
    
    $
    17,990
    
    
    $
    25,960
  5




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##### Table of Contents



INTEVAC, INC.
 
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 1. Basis of Presentation and Significant Accounting Policies
 Basis of Presentation
    Revenue Recognition
   6




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INTEVAC, INC.
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
 Goodwill and Purchased Intangible Assets
   2. New Accounting Pronouncements
   7




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INTEVAC, INC.
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
    3. Inventories
  June 27,
    
    
    December 31,2009
    
    
    2008(In thousands)Raw materials
    
    $
    9,526
    
    
    $
    10,470Work-in-progress
    
    
    6,518
    
    
    
    4,932Finished goods
    
    
    3,583
    
    
    
    2,272$
    19,627
    
    
    $
    17,674
   4. Equity-Based Compensation
   8




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INTEVAC, INC.
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
   Compensation Expense
  Three Months Ended
    
    
    Six Months EndedJune 27,
    
    
    June 28,
    
    
    June 27,
    
    
    June 28,2009
    
    
    2008
    
    
    2009
    
    
    2008Equity-based compensation by type of award:Stock options
    
    $
    1,105
    
    
    $
    1,325
    
    
    $
    2,217
    
    
    $
    2,649Employee stock purchase plan
    
    
    216
    
    
    
    297
    
    
    
    450
    
    
    
    500Amounts released to cost of sales
    
    
    (9
    )
    
    
    20
    
    
    
    42
    
    
    
    89Total equity-based compensation
    
    
    1,312
    
    
    
    1,642
    
    
    
    2,709
    
    
    
    3,238Tax effect on equity-based compensation
    
    
    (382
    )
    
    
    (494
    )
    
    
    (786
    )
    
    
    (987
    )Net effect on net income (loss)
    
    $
    930
    
    
    $
    1,148
    
    
    $
    1,923
    
    
    $
    2,251
 Valuation Assumptions
   9




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INTEVAC, INC.
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
 Three Months Ended
    
    Six Months EndedJune 27,
    
    
    June 28,
    
    
    June 27,
    
    
    June 28,2009
    
    
    2008
    
    
    2009
    
    
    2008Stock Options:Expected volatility
    
    
    68.82
    %
    
    
    65.16
    %
    
    
    67.15
    %
    
    
    65.16
    %Risk free interest rate
    
    
    2.23
    %
    
    
    3.13
    %
    
    
    2.00
    %
    
    
    3.04
    %Expected term of options (in years)
    
    
    4.3
    
    
    
    4.4
    
    
    
    4.5
    
    
    
    4.4Dividend yield
    
    None
    
    
    None
    
    
    None
    
    
    None
 Six Months EndedJune
27,2009
    
    

June
28,2008Stock Purchase Rights:Expected volatility
    
    
    82.23
    %
    
    
    61.26
    %Risk free interest rate
    
    
    0.9
    %
    
    
    1.5
    %Expected term of purchase rights (in years)
    
    
    2.0
    
    
    
    1.3Dividend yield
    
    None
    
    
    None
   5. Business Combination, Goodwill and Purchased Intangible Assets, Net
   10




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##### Table of Contents



INTEVAC, INC.
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
    6. Warranty
    Three Months Ended
    
    
    Six Months EndedJune 27,
    
    
    June 28,
    
    
    June 27,
    
    
    June 28,2009
    
    
    2008
    
    
    2009
    
    
    2008(in thousands)Beginning balance
    
    $
    1,463
    
    
    $
    2,578
    
    
    $
    1,695
    
    
    $
    3,092Expenditures incurred under warranties
    
    
    (423
    )
    
    
    (537
    )
    
    
    (759
    )
    
    
    (1,211
    )Accruals for product warranties
issued during the reporting period
    
    
    147
    
    
    
    430
    
    
    
    448
    
    
    
    790Adjustments to previously existing
warranty accruals
    
    
    (4
    )
    
    
    (335
    )
    
    
    (201
    )
    
    
    (535
    )Ending balance
    
    $
    1,183
    
    
    $
    2,136
    
    
    $
    1,183
    
    
    $
    2,136
 11




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INTEVAC, INC.
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
  June 27,
    
    
    December 31,2009
    
    
    2008(In thousands)Other accrued liabilities
    
    $
    1,047
    
    
    $
    1,286Other long-term liabilities
    
    
    136
    
    
    
    409Total warranty provision
    
    $
    1,183
    
    
    $
    1,695
 7. Guarantees
 Officer and Director Indemnifications
  Other Indemnifications
  12




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##### Table of Contents



INTEVAC, INC.
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
 8. Cash, Cash Equivalents and Investments
   June 27,
    
    
    December 31,2009
    
    
    2008(in thousands)Carrying value:Short-term investments-U.S. treasury bills
    
    $
    11,990
    
    
    $
    Long-term investments-Auction rate securities
    
    
    66,187
    
    
    
    66,328Total investments in debt securities
    
    $
    78,177
    
    
    $
    66,328Approximate fair value of investments in debt securities
    
    $
    78,182
    
    
    $
    66,328
     13




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INTEVAC, INC.
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
     Three Months Ended
    
    
    Six Months EndedJune 27,
    
    
    June 28,
    
    
    June 27,
    
    
    June 28,2009
    
    
    2008
    
    
    2009
    
    
    2008(in thousands)Beginning balance
    
    $
    66,961
    
    
    $
    76,783
    
    
    $
    66,328
    
    
    $
    81,450Net unrealized gains and losses included
in other comprehensive loss
    
    
    2,626
    
    
    
    12
    
    
    
    3,359
    
    
    
    (1,555
    )Purchases and settlements, net
    
    
    (3,400
    )
    
    
    (600
    )
    
    
    (3,500
    )
    
    
    (3,700
    )Ending balance
    
    $
    66,187
    
    
    $
    76,195
    
    
    $
    66,187
    
    
    $
    76,195Net change in unrealized gains and losses
    
    $
    2,626
    
    
    $
    12
    
    
    $
    3,359
    
    
    $
    (1,555
    )
 9. Borrowing Facility
  14




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INTEVAC, INC.
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
 10. Other Comprehensive Loss
  June 27,
    
    
    December 31,2009
    
    
    2008(in thousands)Accumulated net unrealized holding loss on
available-for-sale investments, net of tax
    
    $
    (3,063
    )
    
    $
    (5,247
    )Foreign currency translation gains
    
    
    291
    
    
    
    439Total accumulated other comprehensive loss
    
    $
    (2,772
    )
    
    $
    (4,808
    )
  Three Months Ended
    
    
    Six Months EndedJune 27,
    
    
    June 28,
    
    
    June 27,
    
    
    June 28,2009
    
    
    2008
    
    
    2009
    
    
    2008(in thousands)Net income (loss)
    
    $
    (4,487
    )
    
    $
    (937
    )
    
    $
    (10,260
    )
    
    $
    626Unrealized holding gains (losses) on
available-for-sale investments, net of
taxesIncrease (decrease) in unrealized
holding gains (losses) on
available-for-sale investments
    
    
    2,626
    
    
    
    12
    
    
    
    3,359
    
    
    
    (1,555
    )Income tax expense
    
    
    (918
    )
    
    
    
    
    
    
    (1,175
    )
    
    
    1,708
    
    
    
    12
    
    
    
    2,184
    
    
    
    (1,555
    )Foreign currency translation gains (losses)
    
    
    221
    
    
    
    129
    
    
    
    (148
    )
    
    
    361Total comprehensive loss
    
    $
    (2,558
    )
    
    $
    (796
    )
    
    $
    (8,224
    )
    
    $
    (568
    )
 15




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##### Table of Contents



INTEVAC, INC.
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
 11. Net Income (Loss) Per Share
  Three Months ended
    
    
    Six Months EndedJune 27,
    
    
    June 28,
    
    
    June 27,
    
    
    June 28,2009
    
    
    2008
    
    
    2009
    
    
    2008(in thousands)Numerator:Numerator for
diluted earnings
per share 
income (loss)
available to
common
stockholders
    
    $
    (4,487
    )
    
    $
    (937
    )
    
    $
    (10,260
    )
    
    $
    626Denominator:Denominator for basic earnings per share 
weighted-average shares
    
    
    21,930
    
    
    
    21,691
    
    
    
    21,906
    
    
    
    21,669Effect of dilutive securities:Employee stock options (1)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    446Dilutive potential common shares
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    446Denominator for diluted earnings per share 
adjusted weighted-average shares and assumed
conversions
    
    
    21,930
    
    
    
    21,691
    
    
    
    21,906
    
    
    
    22,115
 
 (1)
    
    Potentially dilutive securities, consisting of shares issuable upon exercise of employee stock
options, are excluded from the calculation of diluted EPS when their effect would be anti-dilutive.
The weighted average number of employee stock options excluded for the three-month periods ended
June 27, 2009 and June 28, 2008 was 3,240,360 and 2,592,022, respectively, and the number of
employee stock options excluded for the six-month periods ended June 27, 2009 and June 28, 2008 was
2,560,645 and 1,603,924, respectively. 12. Segment Reporting
    16




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##### Table of Contents



INTEVAC, INC.
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
 ®
   Net Revenues
 Three Months Ended
    
    
    Six Months EndedJune 27,
    
    
    June 28,
    
    
    June 27,
    
    
    June 28,2009
    
    
    2008
    
    
    2009
    
    
    2008(in thousands)Equipment
    
    $
    6,066
    
    
    $
    25,730
    
    
    $
    12,184
    
    
    $
    52,703Intevac Photonics
    
    
    6,252
    
    
    
    6,402
    
    
    
    12,442
    
    
    
    12,604Total segment net revenues
    
    $
    12,318
    
    
    $
    32,132
    
    
    $
    24,626
    
    
    $
    65,307
 Operating Loss
 Three Months Ended
    
    
    Six Months EndedJune 27,
    
    
    June 28,
    
    
    June 27,
    
    
    June 28,2009
    
    
    2008
    
    
    2009
    
    
    2008(in thousands)Equipment
    
    $
    (5,659
    )
    
    $
    (633
    )
    
    $
    (12,470
    )
    
    $
    (137
    )Intevac Photonics
    
    
    (1,399
    )
    
    
    (1,070
    )
    
    
    (2,620
    )
    
    
    (1,891
    )Total loss from segment operations
    
    
    (7,058
    )
    
    
    (1,703
    )
    
    
    (15,090
    )
    
    
    (2,028
    )Unallocated costs
    
    
    (1,208
    )
    
    
    (995
    )
    
    
    (2,650
    )
    
    
    (1,811
    )Loss from operations
    
    
    (8,266
    )
    
    
    (2,698
    )
    
    
    (17,740
    )
    
    
    (3,839
    )Interest income and other, net
    
    
    228
    
    
    
    806
    
    
    
    658
    
    
    
    2,217Loss before income taxes
    
    $
    (8,038
    )
    
    $
    (1,892
    )
    
    $
    (17,082
    )
    
    $
    (1,622
    )
 17




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##### Table of Contents



INTEVAC, INC.
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
  Assets
 June 27,
    
    
    December 31,2009
    
    
    2008(in thousands)Equipment
    
    $
    35,383
    
    
    $
    33,132Intevac Photonics
    
    
    25,146
    
    
    
    23,839Total segment assets
    
    
    60,529
    
    
    
    56,971Cash, cash equivalents and investments
    
    
    96,167
    
    
    
    105,529Deferred income taxes
    
    
    21,492
    
    
    
    17,969Other current assets
    
    
    5,561
    
    
    
    3,753Common property, plant and equipment
    
    
    3,151
    
    
    
    3,643Other assets
    
    
    1,066
    
    
    
    1,304Consolidated total assets
    
    $
    187,966
    
    
    $
    189,169
 13. Income Taxes
    14. Contingencies
  18




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Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
  Overview
 ®
 ®
  19




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Three months ended
    
    Six months endedJune 27,
    
    June 28,
    
    %
    
    June 27,
    
    June 28,
    
    %2009
    
    2008
    
    Change
    
    2009
    
    2008
    
    Change(in thousands, except percentages and per share amounts)Net revenues
    
    $
    12,318
    
    
    $
    32,132
    
    
    
    (61.7
    )%
    
    $
    24,626
    
    
    $
    65,307
    
    
    
    (62.3
    )%Gross profit
    
    $
    4,513
    
    
    $
    13,133
    
    
    
    (65.6
    )%
    
    $
    8,778
    
    
    $
    28,444
    
    
    
    (69.1
    )%Gross margin percent
    
    
    36.6
    %
    
    
    40.9
    %
    
    
    (4.3
    )%
    
    
    35.7
    %
    
    
    43.6
    %
    
    
    (7.9)
    %Net income (loss)
    
    $
    (4,487
    )
    
    $
    (937
    )
    
    
    (378.9
    )%
    
    $
    (10,260
    )
    
    $
    626
    
    
    
    (1,739.0
    )%Earnings (loss) per
diluted share
    
    $
    (0.20
    )
    
    $
    (0.04
    )
    
    
    (400.0
    )%
    
    $
    (0.47
    )
    
    $
    0.03
    
    
    
    (1,666.7
    )%
   ® ® ® ® ® ®
 Results of Operations
 Net revenues
 Three months ended
    
    
    Six months endedJune 27,
    
    
    June 28,
    
    
    %
    
    
    June 27,
    
    
    June 28,
    
    
    %2009
    
    
    2008
    
    
    Change
    
    
    2009
    
    
    2008
    
    
    Change(in thousands, except percentages)Equipment
    
    $
    6,066
    
    
    $
    25,730
    
    
    
    (76.4
    )%
    
    $
    12,184
    
    
    $
    52,703
    
    
    
    (76.9
    )%Intevac Photonics
    
    
    6,252
    
    
    
    6,402
    
    
    
    (2.3
    )%
    
    
    12,442
    
    
    
    12,604
    
    
    
    (1.3
    )%Total net revenues
    
    $
    12,318
    
    
    $
    32,132
    
    
    
    (61.7
    )%
    
    $
    24,626
    
    
    $
    65,307
    
    
    
    (62.3
    )%
  20




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TM
    21




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Gross profit
 Three months ended
    
    Six months endedJune 27,
    
    June 28,
    
    %
    
    June 27,
    
    June 28,
    
    %2009
    
    2008
    
    Change
    
    2009
    
    2008
    
    Change(in thousands, except percentages)Equipment gross profit
    
    $
    2,379
    
    
    $
    10,898
    
    
    
    (78.2
    )%
    
    $
    4,207
    
    
    $
    23,606
    
    
    
    (82.2
    )%% of Equipment net
revenues
    
    
    39.2
    %
    
    
    42.4
    %
    
    
    
    
    
    
    34.5
    %
    
    
    44.8
    %Intevac Photonics
gross profit
    
    $
    2,134
    
    
    $
    2,235
    
    
    
    (4.5
    )%
    
    $
    4,571
    
    
    $
    4,838
    
    
    
    (5.5
    )%% of Intevac
Photonics net
revenues
    
    
    34.1
    %
    
    
    34.9
    %
    
    
    
    
    
    
    36.7
    %
    
    
    38.4
    %Total gross profit
    
    $
    4,513
    
    
    $
    13,133
    
    
    
    (65.6
    )%
    
    $
    8,778
    
    
    $
    28,444
    
    
    
    (69.1
    )%% of net revenues
    
    
    36.6
    %
    
    
    40.9
    %
    
    
    
    
    
    
    35.6
    %
    
    
    43.6
    %
    Research and development
 Three months ended
    
    Six months endedJune 27,
    
    June 28,
    
    %
    
    June 27,
    
    June 28,
    
    %2009
    
    2008
    
    Change
    
    2009
    
    2008
    
    Change(in thousands, except percentages)Research and
development expense
    
    $
    7,385
    
    
    $
    8,418
    
    
    
    (12.3
    )%
    
    $
    15,415
    
    
    $
    17,806
    
    
    
    (13.4
    )%% of net revenues
    
    
    60.0
    %
    
    
    26.2
    %
    
    
    
    
    
    
    62.6
    %
    
    
    27.3
    %
  22




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Selling, general and administrative
 Three months ended
    
    Six months endedJune 27,
    
    June 28,
    
    %
    
    June 27,
    
    June 28,
    
    %2009
    
    2008
    
    Change
    
    2009
    
    2008
    
    Change(in thousands, except percentages)Selling, general
and administrative
expense
    
    $
    5,394
    
    
    $
    7,413
    
    
    
    (27.2
    )%
    
    $
    11,103
    
    
    $
    14,477
    
    
    
    (23.3
    )%% of net revenues
    
    
    43.8
    %
    
    
    23.1
    %
    
    
    
    
    
    
    45.1
    %
    
    
    22.2
    %
  Interest income and other, net
 Three months ended
    
    Six months endedJune 27,
    
    June 28,
    
    %
    
    June 27,
    
    June 28,
    
    %2009
    
    2008
    
    Change
    
    2009
    
    2008
    
    Change(in thousands, except percentages)Interest income and
other, net
    
    $
    228
    
    
    $
    806
    
    
    
    (71.7
    )%
    
    $
    658
    
    
    $
    2,217
    
    
    
    (70.3
    )%
  23




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Income tax benefit
 Three months ended
    
    Six months endedJune 27,
    
    June 28,
    
    %
    
    June 27,
    
    June 28,
    
    %2009
    
    2008
    
    Change
    
    2009
    
    2008
    
    Change(in thousands, except percentages)Income tax benefit
    
    $
    3,551
    
    
    $
    955
    
    
    
    271.8
    %
    
    $
    6,822
    
    
    $
    2,248
    
    
    
    203.5
    %
   Liquidity and Capital Resources
   June 27,
    
    
    December 31,2009
    
    
    2008(In thousands)Cash and cash equivalents
    
    $
    17,990
    
    
    $
    39,201Short-term investments
    
    
    11,990
    
    
    
    Long-term investments
    
    
    66,187
    
    
    
    66,328Total cash, cash equivalents and investments
    
    $
    96,167
    
    
    $
    105,529
   24




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Critical Accounting Policies and Estimates
  25




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Revenue Recognition
   26




---



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Inventories
  Warranty
  Income Taxes
    Goodwill and Purchased Intangible Assets
  27




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Equity-Based Compensation
  
 Item 3. Quantitative and Qualitative Disclosures About Market Risk
 Interest rate risk.
 28




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Fair2009
    
    2010
    
    2011
    
    Beyond
    
    Total
    
    Value(in thousands, except percentages)Cash equivalentsFixed rate amounts
    
    $
    6,670
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    6,670
    
    
    $
    6,670Weighted-average rate
    
    
    0.25
    %
    
    
    
    
    
    
    
    
    
    
    Variable rate amounts
    
    $
    3,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    3,000
    
    
    $
    3,000Weighted-average rate
    
    
    0.52
    %
    
    
    
    
    
    
    
    
    
    
    Short-term investments
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Fixed rate amounts
    
    $
    11,990
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    11,990
    
    
    $
    11,994Weighted-average rate
    
    
    0.40
    %
    
    
    
    
    
    
    
    
    
    
    Long-term investmentsFixed rate amounts
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    66,187
    
    
    $
    66,187
    
    
    $
    66,187Weighted-average rate
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1.32
    %Total investment portfolio
    
    $
    21,660
    
    
    
    
    
    
    
    
    
    
    $
    66,187
    
    
    $
    87,847
    
    
    $
    87,851
    Foreign exchange risk.
 
 Item 4. Controls and Procedures
 Evaluation of disclosure controls and procedures
  29




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Definition of disclosure controls
  Limitations on the effectiveness of controls
  Changes in internal controls over financial reporting
  
 PART II. OTHER INFORMATION
 
 Item 1. Legal Proceedings
  30




---



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Item 1A. Risk Factors
  The industries we serve are cyclical, volatile and unpredictable.
    Sales of our equipment are primarily dependent on our customers upgrade and capacity expansion
plans and whether our customers select our equipment.
  31




---



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We are exposed to risks associated with a highly concentrated customer base.
   Our growth depends on development of technically advanced new products and processes.
  32




---



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Adverse economic conditions and volatility and disruption of the capital and credit markets may
negatively impact our revenues and our ability to access financing.
   Our operating results fluctuate significantly from quarter to quarter, which can lead to
volatility in the price of our common stock.
    The liquidity of our auction rate securities is impaired, which could impact our ability to
meet cash requirements and require additional debt financing.
  33




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We may be subject to additional impairment charges due to potential declines in the fair value of
our assets.
  We operate in an intensely competitive marketplace, and our competitors have greater resources
than we do.
  34




---



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We may not be able to obtain export licenses from the U.S. government permitting delivery of our
products to international customers.
  The Intevac Photonics business is dependent on U.S. government contracts, which are subject to
fixed pricing, immediate termination and a number of procurement rules and regulations.
     35




---



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Changes to our effective tax rate affect our results of operations.
   Our success depends on international sales and the management of global operations.
    Our success is dependent on recruiting and retaining a highly talented work force.
   36




---



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We are dependent on certain suppliers for parts used in our products.
  Our business depends on the integrity of our intellectual property rights.
   We could be involved in litigation.
  Difficulties in integrating past or future acquisitions could adversely affect our business.
  37




---



##### Table of Contents



We use hazardous materials and are subject to risks of non-compliance with environmental and
safety regulations.
  Business interruptions could adversely affect our operations.
  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.
   38




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Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
  
 Item 3. Defaults upon Senior Securities
  
 Item 4. Submission of Matters to a Vote of Security-Holders
  AbstentionsAffirmative
    
    Negative
    
    Votes
    
    and BrokerVotes
    
    Votes
    
    Withheld
    
    Non-Votes(a) Election of DirectorsNorman H. Pond
    
    
    19,908,231
    
    
    
    
    
    
    
    197,065
    
    
    
    Kevin Fairbairn
    
    
    19,939,882
    
    
    
    
    
    
    
    165,414
    
    
    
    David S. Dury
    
    
    19,782,024
    
    
    
    
    
    
    
    323,272
    
    
    
    Stanley J. Hill
    
    
    19,721,732
    
    
    
    
    
    
    
    383,564
    
    
    
    Robert Lemos
    
    
    19,777,861
    
    
    
    
    
    
    
    327,435
    
    
    
    Ping Yang
    
    
    19,878,347
    
    
    
    
    
    
    
    226,949
    
    
    
    (b) Proposal to approve an
amendment to the Intevac 2003
Employee Stock Purchase Plan to
increase the number
of shares reserved for
issuance thereunder
by 600,000 shares
    
    
    17,237,799
    
    
    
    66,408
    
    
    
    
    
    
    
    2,801,089(c) Ratification of Grant
Thornton LLP as
independent public accountants
for the fiscal year
ending December 31, 2009
    
    
    19,841,166
    
    
    
    237,007
    
    
    
    
    
    
    
    27,123
 
 Item 5. Other Information
  
 Item 6. Exhibits
  ExhibitNumber
    
    Description23.2
    
    Consent of Independent Valuation Firm31.1
    
    Certification of President and Chief Executive Officer Pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002.31.2
    
    Certification of Executive Vice President, Finance and Administration, Chief Financial
Officer, Treasurer and Secretary Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.32.1
    
    Certifications Pursuant to U.S.C. 1350 Adopted Pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.
 39




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SIGNATURES
  INTEVAC, INC.Date:  July 31, 2009
    By:
    /s/  KEVIN FAIRBAIRNKevin FairbairnPresident, Chief Executive Officer and Director
(Principal Executive Officer)Date:  July 31, 2009
    By:
    /s/  JEFFREY ANDRESONJeffrey AndresonExecutive Vice President, Finance and
 Administration, Chief Financial Officer, Treasurer and Secretary(Principal Financial and
 Accounting Officer) 40