##### 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 October 2, 2010
 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 o
    
    Accelerated filer þ
    
    Non-accelerated filer o
    
    Smaller reporting company o(Do not check if a smaller reporting company)
 o þ




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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
    
    
    27Item 4.
    
    Controls and Procedures
    
    
    28PART II. OTHER INFORMATIONItem 1.
    
    Legal Proceedings
    
    
    29Item 1A.
    
    Risk Factors
    
    
    29Item 2.
    
    Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    37Item 3.
    
    Defaults Upon Senior Securities
    
    
    37Item 4.
    
    (Removed and Reserved)
    
    
    37Item 5.
    
    Other Information
    
    
    37Item 6.
    
    Exhibits
    
    
    37SIGNATURES
    
    
    38EX-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
 October 2,
    
    
    December 31,2010
    
    
    2009(Unaudited)(In thousands)ASSETSCurrent assets:Cash and cash equivalents
    
    $
    118,843
    
    
    $
    17,592Short-term investments
    
    
    
    
    
    
    6,000Trade, note and other accounts receivable, net of allowances of $55 at
October 2, 2010 and $133 at December 31, 2009
    
    
    33,581
    
    
    
    44,756Inventories
    
    
    26,640
    
    
    
    19,100Prepaid expenses and other current assets
    
    
    6,967
    
    
    
    6,687Deferred income tax assets
    
    
    1,184
    
    
    
    1,515Total current assets
    
    
    187,215
    
    
    
    95,650Property, plant and equipment, net
    
    
    13,639
    
    
    
    12,351Long-term investments
    
    
    10,358
    
    
    
    66,249Goodwill
    
    
    7,905
    
    
    
    7,905Other intangible assets, net of amortization of $1,666 at October 2,
2010 and $1,248 at December 31, 2009
    
    
    3,120
    
    
    
    3,537Deferred income taxes and other long-term assets
    
    
    17,181
    
    
    
    17,686Total assets
    
    $
    239,418
    
    
    $
    203,378LIABILITIES AND STOCKHOLDERS EQUITYCurrent liabilities:Accounts payable
    
    $
    6,863
    
    
    $
    4,701Accrued payroll and related liabilities
    
    
    10,149
    
    
    
    2,784Other accrued liabilities
    
    
    6,519
    
    
    
    11,104Customer advances
    
    
    9,779
    
    
    
    13,180Total current liabilities
    
    
    33,310
    
    
    
    31,769Other long-term liabilities
    
    
    1,552
    
    
    
    252Stockholders equity:Common stock, $0.001 par value
    
    
    22
    
    
    
    22Additional paid-in capital
    
    
    138,253
    
    
    
    134,071Accumulated other comprehensive income (loss)
    
    
    243
    
    
    
    (1,828
    )Retained earnings
    
    
    66,038
    
    
    
    39,092Total stockholders equity
    
    
    204,556
    
    
    
    171,357Total liabilities and stockholders equity
    
    $
    239,418
    
    
    $
    203,378
   3




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INTEVAC, INC.
 
 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
 Three Months Ended
    
    
    Nine Months EndedOctober 2,
    
    
    September 26,
    
    
    October 2,
    
    
    September 26,2010
    
    
    2009
    
    
    2010
    
    
    2009(Unaudited)(In thousands, except per share amounts)Net revenues:Systems and components
    
    $
    59,404
    
    
    $
    14,619
    
    
    $
    152,282
    
    
    $
    32,277Technology development
    
    
    5,223
    
    
    
    4,536
    
    
    
    14,085
    
    
    
    11,504Total net revenues
    
    
    64,627
    
    
    
    19,155
    
    
    
    166,367
    
    
    
    43,781Cost of net revenues:Systems and components
    
    
    31,776
    
    
    
    8,154
    
    
    
    84,103
    
    
    
    19,969Technology development
    
    
    3,267
    
    
    
    2,323
    
    
    
    9,168
    
    
    
    6,356Total cost of net revenues
    
    
    35,043
    
    
    
    10,477
    
    
    
    93,271
    
    
    
    26,325Gross profit
    
    
    29,584
    
    
    
    8,678
    
    
    
    73,096
    
    
    
    17,456Operating expenses:Research and development
    
    
    7,063
    
    
    
    6,840
    
    
    
    20,618
    
    
    
    22,255Selling, general and administrative
    
    
    7,148
    
    
    
    5,551
    
    
    
    21,273
    
    
    
    16,654Total operating expenses
    
    
    14,211
    
    
    
    12,391
    
    
    
    41,891
    
    
    
    38,909Income (loss) from operations
    
    
    15,373
    
    
    
    (3,713
    )
    
    
    31,205
    
    
    
    (21,453
    )Interest income and other, net
    
    
    (84
    )
    
    
    122
    
    
    
    379
    
    
    
    780Income (loss) before income taxes
    
    
    15,289
    
    
    
    (3,591
    )
    
    
    31,584
    
    
    
    (20,673
    )Provision for (benefit from) income taxes
    
    
    2,110
    
    
    
    (1,799
    )
    
    
    4,638
    
    
    
    (8,621
    )Net income (loss)
    
    $
    13,179
    
    
    $
    (1,792
    )
    
    $
    26,946
    
    
    $
    (12,052
    )Net income (loss) per share:Basic
    
    $
    0.59
    
    
    $
    (0.08
    )
    
    $
    1.21
    
    
    $
    (0.55
    )Diluted
    
    $
    0.58
    
    
    $
    (0.08
    )
    
    $
    1.18
    
    
    $
    (0.55
    )Weighted average common shares outstanding:Basic
    
    
    22,383
    
    
    
    22,014
    
    
    
    22,288
    
    
    
    21,942Diluted
    
    
    22,887
    
    
    
    22,014
    
    
    
    22,931
    
    
    
    21,942
  4




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INTEVAC, INC.
 
 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
 Nine months endedOctober 2,
    
    
    September 26,2010
    
    
    2009(Unaudited)(In thousands)Operating activitiesNet income (loss)
    
    $
    26,946
    
    
    $
    (12,052
    )Adjustments to reconcile net income (loss) to net cash and cash
equivalents provided by (used in) operating activities:Depreciation and amortization
    
    
    4,396
    
    
    
    4,016Equity-based compensation
    
    
    2,413
    
    
    
    3,709Deferred income taxes
    
    
    3,032
    
    
    
    (4,267
    )Loss on disposal of equipment
    
    
    163
    
    
    
    Changes in operating assets and liabilities
    
    
    2,875
    
    
    
    86Total adjustments
    
    
    12,879
    
    
    
    3,544Net cash and cash equivalents provided by (used in) operating activities
    
    
    39,825
    
    
    
    (8,508
    )Investing activitiesPurchases of investments
    
    
    (3,093
    )
    
    
    (20,980
    )Proceeds from sales and maturities of investments
    
    
    68,050
    
    
    
    13,000Purchases of leasehold improvements and equipment
    
    
    (5,419
    )
    
    
    (2,009
    )Net cash and cash equivalents provided by (used in) investing activities
    
    
    59,538
    
    
    
    (9,989
    )Financing activitiesNet proceeds from issuance of common stock
    
    
    1,820
    
    
    
    1,021Repayment of note payable
    
    
    
    
    
    
    (2,000
    )Net cash and cash equivalents provided by (used in) financing activities
    
    
    1,820
    
    
    
    (979
    )Effect of exchange rate changes on cash
    
    
    68
    
    
    
    44Net increase (decrease) in cash and cash equivalents
    
    
    101,251
    
    
    
    (19,432
    )Cash and cash equivalents at beginning of period
    
    
    17,592
    
    
    
    39,201Cash and cash equivalents at end of period
    
    $
    118,843
    
    
    $
    19,769
  5




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




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INTEVAC, INC.
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
(Unaudited)
   2. New Accounting Pronouncement
  7




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INTEVAC, INC.
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
(Unaudited)
 3. Inventories
  October 2,
    
    
    December 31,2010
    
    
    2009(In thousands)Raw materials
    
    $
    13,592
    
    
    $
    10,147Work-in-progress
    
    
    12,064
    
    
    
    4,421Finished goods
    
    
    984
    
    
    
    4,532$
    26,640
    
    
    $
    19,100
  4. Equity-Based Compensation
    8




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INTEVAC, INC.
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
(Unaudited)
 Compensation Expense
  Three Months Ended
    
    
    Nine Months EndedOctober 2,
    
    
    September 26,
    
    
    October 2,
    
    
    September 26,2010
    
    
    2009
    
    
    2010
    
    
    2009(In thousands)Equity-based compensation by type of award:Stock options
    
    $
    764
    
    
    $
    827
    
    
    $
    2,107
    
    
    $
    3,079Employee stock purchase plan
    
    
    66
    
    
    
    172
    
    
    
    306
    
    
    
    630Total equity-based compensation
    
    
    830
    
    
    
    999
    
    
    
    2,413
    
    
    
    3,709Tax effect on equity-based compensation
    
    
    (266
    )
    
    
    (291
    )
    
    
    (768
    )
    
    
    (1,077
    )Net effect on net income (loss)
    
    $
    564
    
    
    $
    708
    
    
    $
    1,645
    
    
    $
    2,632
 Valuation Assumptions
   Three Months Ended
    
    
    Nine Months EndedOctober 2,
    
    
    September 26,
    
    
    October 2,
    
    
    September 26,2010
    
    
    2009
    
    
    2010
    
    
    2009Stock Options:Expected volatility
    
    
    67.62
    %
    
    
    67.84
    %
    
    
    67.90
    %
    
    
    67.16
    %Risk free interest rate
    
    
    1.22
    %
    
    
    2.14
    %
    
    
    1.67
    %
    
    
    2.00
    %Expected term of options (in years)
    
    
    4.50
    
    
    
    4.58
    
    
    
    4.51
    
    
    
    4.47Dividend yield
    
    None
    
    
None
    
    
None
    
    
None
 Three Months Ended
    
    
    Nine Months EndedOctober 2,
    
    
    September 26,
    
    
    October 2,
    
    
    September 26,2010
    
    
    2009
    
    
    2010
    
    
    2009Stock Purchase Rights:Expected volatility
    
    
    52.60
    %
    
    
    85.39
    %
    
    
    55.20
    %
    
    
    82.56
    %Risk free interest rate
    
    
    0.12
    %
    
    
    0.45
    %
    
    
    0.41
    %
    
    
    0.85
    %Expected term of purchase rights (in years)
    
    
    0.50
    
    
    
    1.00
    
    
    
    0.73
    
    
    
    1.85Dividend yield
    
None
    
    
None
    
    
None
    
    
None
 9




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INTEVAC, INC.
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
(Unaudited)
   5. Goodwill and Purchased Intangible Assets, Net
   10




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INTEVAC, INC.
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
(Unaudited)
 6. Warranty
    Three Months Ended
    
    
    Nine Months EndedOctober 2,
    
    
    September 26,
    
    
    October 2,
    
    
    September 26,2010
    
    
    2009
    
    
    2010
    
    
    2009(In thousands)Beginning balance
    
    $
    2,986
    
    
    $
    1,183
    
    
    $
    1,602
    
    
    $
    1,695Expenditures incurred under warranties
    
    
    (970
    )
    
    
    (310
    )
    
    
    (2,084
    )
    
    
    (1,070
    )Accruals for product warranties
issued during the reporting period
    
    
    1,132
    
    
    
    588
    
    
    
    3,485
    
    
    
    1,037Adjustments to previously existing
warranty accruals
    
    
    231
    
    
    
    46
    
    
    
    376
    
    
    
    (155
    )Ending balance
    
    $
    3,379
    
    
    $
    1,507
    
    
    $
    3,379
    
    
    $
    1,507
  October 2,
    
    
    December 31,2010
    
    
    2009(In thousands)Other accrued liabilities
    
    $
    2,933
    
    
    $
    1,550Other long-term liabilities
    
    
    446
    
    
    
    52Total warranty provision
    
    $
    3,379
    
    
    $
    1,602
 7. Guarantees
 Officer and Director Indemnifications
  11




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INTEVAC, INC.
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
(Unaudited)
  Other Indemnifications
  8. Cash, Cash Equivalents and Investments
   October 2,
    
    
    December 31,2010
    
    
    2009(In thousands)Carrying value:Short-term investments-U.S. treasury bills
    
    $
    
    
    
    $
    6,000Long-term investments-Auction rate securities (ARS)
    
    
    10,263
    
    
    
    66,249Total investments in debt securities
    
    $
    10,263
    
    
    $
    72,249Approximate fair value of investments in debt securities
    
    $
    10,263
    
    
    $
    72,249
    12




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INTEVAC, INC.
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
(Unaudited)
     13




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INTEVAC, INC.
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
(Unaudited)
  Three Months Ended
    
    
    Nine Months EndedOctober 2,
    
    
    September 26,
    
    
    October 2,
    
    
    September 26,2010
    
    
    2009
    
    
    2010
    
    
    2009(In thousands)Beginning balance
    
    $
    61,632
    
    
    $
    66,187
    
    
    $
    66,249
    
    
    $
    66,328Net
unrealized gains and losses included
in other
comprehensive loss
    
    
    3,481
    
    
    
    286
    
    
    
    3,064
    
    
    
    3,645Redemptions at par
    
    
    (54,850
    )
    
    
    (500
    )
    
    
    (59,050
    )
    
    
    (4,000
    )Ending balance
    
    $
    10,263
    
    
    $
    65,973
    
    
    $
    10,263
    
    
    $
    65,973
 9. Terminated Borrowing Facility
  10. Other Comprehensive Income (Loss)
  October 2,
    
    
    December 31,2010
    
    
    2009(In thousands)Accumulated
net unrealized holding loss on available-for-sale investments, net of tax
    
    $
    (413
    )
    
    $
    (2,405
    )Foreign currency translation gains
    
    
    656
    
    
    
    577Total accumulated other comprehensive income (loss)
    
    $
    243
    
    
    $
    (1,828
    )
 14




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INTEVAC, INC.
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
(Unaudited)
  Three Months Ended
    
    
    Nine Months EndedOctober 2,
    
    
    September 26,
    
    
    October 2,
    
    
    September 26,2010
    
    
    2009
    
    
    2010
    
    
    2009(In thousands)Net income (loss)
    
    $
    13,179
    
    
    $
    (1,792
    )
    
    $
    26,946
    
    
    $
    (12,052
    )Unrealized holding gains on
available-for-sale investments, net of
taxes:Decrease in unrealized holding losses
    
    
    3,481
    
    
    
    286
    
    
    
    3,064
    
    
    
    3,645Income tax expense
    
    
    (1,218
    )
    
    
    (100
    )
    
    
    (1,072
    )
    
    
    (1,275
    )2,263
    
    
    
    186
    
    
    
    1,992
    
    
    
    2,370Foreign currency translation gains
    
    
    46
    
    
    
    237
    
    
    
    79
    
    
    
    89Total comprehensive income (loss)
    
    $
    15,488
    
    
    $
    (1,369
    )
    
    $
    29,017
    
    
    $
    (9,593
    )
 11. Net Income (Loss) Per Share
  Three Months Ended
    
    
    Nine Months EndedOctober 2,
    
    
    September 26,
    
    
    October 2,
    
    
    September 26,2010
    
    
    2009
    
    
    2010
    
    
    2009(in thousands, except per share amounts)Net income (loss)
    
    $
    13,179
    
    
    $
    (1,792
    )
    
    $
    26,946
    
    
    $
    (12,052
    )Weighted-average shares  basic
    
    
    22,383
    
    
    
    22,014
    
    
    
    22,288
    
    
    
    21,942Effect of dilutive potential common shares
    
    
    504
    
    
    
    
    
    
    
    643
    
    
    
    Weighted-average shares  diluted
    
    
    22,887
    
    
    
    22,014
    
    
    
    22,931
    
    
    
    21,942Net income
(loss) per share  basic
    
    $
    0.59
    
    
    $
    (0.08
    )
    
    $
    1.21
    
    
    $
    (0.55
    )Net income (loss) per share  diluted
    
    $
    0.58
    
    
    $
    (0.08
    )
    
    $
    1.18
    
    
    $
    (0.55
    )Antidilutive shares based on employee
awards excluded
    
    
    2,293
    
    
    
    3,262
    
    
    
    1,668
    
    
    
    2,361
  12. Segment Reporting
   15




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INTEVAC, INC.
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
(Unaudited)
     Net Revenues
 Three Months Ended
    
    
    Nine Months EndedOctober 2,
    
    
    September 26,
    
    
    October 2,
    
    
    September 26,2010
    
    
    2009
    
    
    2010
    
    
    2009(in thousands)Equipment
    
    $
    55,868
    
    
    $
    12,293
    
    
    $
    141,453
    
    
    $
    24,477Intevac Photonics
    
    
    8,759
    
    
    
    6,862
    
    
    
    24,914
    
    
    
    19,304Total segment net revenues
    
    $
    64,627
    
    
    $
    19,155
    
    
    $
    166,367
    
    
    $
    43,781
 Operating Income (Loss)
 Three Months Ended
    
    
    Nine Months EndedOctober  2,
    
    
    September 26,
    
    
    October  2,
    
    
    September 26,2010
    
    
    2009
    
    
    2010
    
    
    2009(in thousands)Equipment
    
    $
    16,878
    
    
    $
    (1,836
    )
    
    $
    37,534
    
    
    $
    (14,306
    )Intevac Photonics
    
    
    (876
    )
    
    
    (628
    )
    
    
    (3,501
    )
    
    
    (3,248
    )Total segment operating income (loss)
    
    
    16,002
    
    
    
    (2,464
    )
    
    
    34,033
    
    
    
    (17,554
    )Unallocated costs
    
    
    (629
    )
    
    
    (1,249
    )
    
    
    (2,828
    )
    
    
    (3,899
    )Income (loss) from operations
    
    
    15,373
    
    
    
    (3,713
    )
    
    
    31,205
    
    
    
    (21,453
    )Interest income and other, net
    
    
    (84
    )
    
    
    122
    
    
    
    379
    
    
    
    780Income (loss) before income taxes
    
    $
    15,289
    
    
    $
    (3,591
    )
    
    $
    31,584
    
    
    $
    (20,673
    )
 16




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INTEVAC, INC.
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
(Unaudited)
  Assets
 October 2,
    
    
    December 31,2010
    
    
    2009(In thousands)Equipment
    
    $
    56,511
    
    
    $
    61,136Intevac Photonics
    
    
    31,703
    
    
    
    25,529Total segment assets
    
    
    88,214
    
    
    
    86,665Cash, cash equivalents and investments
    
    
    129,201
    
    
    
    89,841Deferred income taxes
    
    
    13,951
    
    
    
    18,056Other current assets
    
    
    5,548
    
    
    
    5,171Common property, plant and equipment
    
    
    1,970
    
    
    
    2,802Other assets
    
    
    534
    
    
    
    843Consolidated total assets
    
    $
    239,418
    
    
    $
    203,378
 13. Income Taxes
     17




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INTEVAC, INC.
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
(Unaudited)
 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
    
    Nine months endedOctober 2,
    
    September 26,
    
    
    
    
    
    October 2,
    
    September 26,2010
    
    2009
    
    % Change
    
    2010
    
    2009
    
    % Change(In thousands, except percentages and per share amounts)Net revenues
    
    $
    64,627
    
    
    $
    19,155
    
    
    
    237.4
    %
    
    $
    166,367
    
    
    $
    43,781
    
    
    
    280.0
    %Gross profit
    
    $
    29,584
    
    
    $
    8,678
    
    
    
    240.9
    %
    
    $
    73,096
    
    
    $
    17,456
    
    
    
    318.7
    %Gross margin percent
    
    
    45.8
    %
    
    
    45.3
    %
    
    0.5 points
    
    
    43.9
    %
    
    
    39.9
    %
    
    4.0 pointsNet income (loss)
    
    $
    13,179
    
    
    $
    (1,792
    )
    
    
    835.4
    %
    
    $
    26,946
    
    
    $
    (12,052
    )
    
    
    323.6
    %Earnings (loss) per
diluted share
    
    $
    0.58
    
    
    $
    (0.08
    )
    
    
    825.0
    %
    
    $
    1.18
    
    
    $
    (0.55
    )
    
    
    314.6
    %
   ® ® ® ® ® ® ®
 Results of Operations
 Net revenues
 Three months ended
    
    
    Nine months endedOctober 2,
    
    
    September 26,
    
    
    
    
    
    
    October 2,
    
    
    September 26,2010
    
    
    2009
    
    
    % Change
    
    
    2010
    
    
    2009
    
    
    % Change(In thousands, except percentages)Equipment
    
    $
    55,868
    
    
    $
    12,293
    
    
    
    354.5
    %
    
    $
    141,453
    
    
    $
    24,477
    
    
    
    477.9
    %Intevac Photonics
    
    
    8,759
    
    
    
    6,862
    
    
    
    27.6
    %
    
    
    24,914
    
    
    
    19,304
    
    
    
    29.1
    %Total net revenues
    
    $
    64,627
    
    
    $
    19,155
    
    
    
    237.4
    %
    
    $
    166,367
    
    
    $
    43,781
    
    
    
    280.0
    %
  20




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21




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Gross profit
 Three months ended
    
    Nine months endedOctober 2,
    
    September 26,
    
    
    
    
    
    October 2,
    
    September 26,2010
    
    2009
    
    % Change
    
    2010
    
    2009
    
    % Change(In thousands, except percentages)Equipment gross profit
    
    $
    27,271
    
    
    $
    5,925
    
    
    
    360.3
    %
    
    $
    66,686
    
    
    $
    10,132
    
    
    
    558.2
    %% of Equipment net revenues
    
    
    48.8
    %
    
    
    48.2
    %
    
    
    
    
    
    
    47.1
    %
    
    
    41.4
    %Intevac Photonics gross
profit
    
    $
    2,313
    
    
    $
    2,753
    
    
    
    (16.0
    )%
    
    $
    6,410
    
    
    $
    7,324
    
    
    
    (12.5
    )%% of Intevac Photonics net
revenues
    
    
    26.4
    %
    
    
    40.1
    %
    
    
    
    
    
    
    25.7
    %
    
    
    37.9
    %Total gross profit
    
    $
    29,584
    
    
    $
    8,678
    
    
    
    240.9
    %
    
    $
    73,096
    
    
    $
    17,456
    
    
    
    318.7
    %% of net revenues
    
    
    45.8
    %
    
    
    45.3
    %
    
    
    
    
    
    
    43.9
    %
    
    
    39.9
    %
    Research and development
 Three months ended
    
    Nine months endedOctober 2,
    
    September 26,
    
    
    
    
    
    October 2,
    
    September 26,2010
    
    2009
    
    % Change
    
    2010
    
    2009
    
    % Change(In thousands, except percentages)Research and
development expense
    
    $
    7,063
    
    
    $
    6,840
    
    
    
    3.3
    %
    
    $
    20,618
    
    
    $
    22,255
    
    
    
    (7.4
    )%% of net revenues
    
    
    10.9
    %
    
    
    35.7
    %
    
    
    
    
    
    
    12.4
    %
    
    
    50.8
    %
  22




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Selling, general and administrative
 Three months ended
    
    Nine months endedOctober 2,
    
    September 26,
    
    
    
    
    
    October 2,
    
    September 26,2010
    
    2009
    
    % Change
    
    2010
    
    2009
    
    % Change(In thousands, except percentages)Selling,
general and
administrative
expense
    
    $
    7,148
    
    
    $
    5,551
    
    
    
    28.8
    %
    
    $
    21,273
    
    
    $
    16,654
    
    
    
    27.7
    %% of net revenues
    
    
    11.1
    %
    
    
    29.0
    %
    
    
    
    
    
    
    12.8
    %
    
    
    38.0
    %
  Interest income and other, net
 Three months ended
    
    Nine months endedOctober 2,
    
    September 26,
    
    
    
    
    
    October 2,
    
    September 26,2010
    
    2009
    
    % Change
    
    2010
    
    2009
    
    % Change(In thousands, except percentages)Interest
income and other,
net
    
    $
    (84
    )
    
    $
    122
    
    
    
    (168.9
    )%
    
    $
    379
    
    
    $
    780
    
    
    
    (51.4
    )%
  Income tax provision (benefit)
 Three months ended
    
    Nine months endedOctober 2,
    
    September 26,
    
    
    
    
    
    October 2,
    
    September 26,2010
    
    2009
    
    % Change
    
    2010
    
    2009
    
    % Change(In thousands, except percentages)Income tax
provision (benefit)
    
    $
    2,110
    
    
    $
    (1,799
    )
    
    
    217.3
    %
    
    $
    4,638
    
    
    $
    (8,621
    )
    
    
    153.8
    %
   23




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Liquidity and Capital Resources
   October 2,
    
    
    December 31,2010
    
    
    2009(In thousands)Cash and cash equivalents
    
    $
    118,843
    
    
    $
    17,592Short-term investments
    
    
    
    
    
    
    6,000Long-term investments
    
    
    10,358
    
    
    
    66,249Total cash, cash equivalents and investments
    
    $
    129,201
    
    
    $
    89,841
    24




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Critical Accounting Policies and Estimates
   25




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Revenue Recognition
  26




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Item 3.
    
    Quantitative and Qualitative Disclosures About Market Risk
 Interest rate risk.
  Fair2010
    
    2011
    
    2012
    
    Beyond
    
    Total
    
    Value(In thousands, except percentages)Cash equivalentsFixed rate amounts
    
    $
    3,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    3,000
    
    
    $
    3,000Weighted-average rate
    
    
    0.06
    %
    
    
    
    
    
    
    
    
    
    
    Variable rate amounts
    
    $
    80,289
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    80,289
    
    
    $
    80,289Weighted-average rate
    
    
    0.10
    %
    
    
    
    
    
    
    
    
    
    
    Long-term investmentsFixed rate amounts
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    10,900
    
    
    $
    10,900
    
    
    $
    10,263Weighted-average rate
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    0.68
    %Total investment portfolio
    
    $
    83,289
    
    
    
    
    
    
    
    
    
    
    $
    10,900
    
    
    $
    94,189
    
    
    $
    93,552
  27




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Foreign exchange risk.
 
 Item 4.
    
    Controls and Procedures
 Evaluation of disclosure controls and procedures
   Definition of disclosure controls
  28




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Limitations on the effectiveness of controls
  Changes in internal controls over financial reporting
  
 PART II. OTHER INFORMATION
 
 Item 1.
    
    Legal Proceedings
  
 Item 1A.
    
    Risk Factors
  The industries we serve are cyclical, volatile and unpredictable.
  29




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Sales of our equipment are primarily dependent on our customers upgrade and capacity expansion
plans and whether our customers select our equipment.
     We are exposed to risks associated with a highly concentrated customer base and industry
consolidation.
  30




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Our growth depends on development of technically advanced new products and processes.
   Our operating results fluctuate significantly from quarter to quarter, which can lead to
volatility in the price of our common stock.
   Adverse economic conditions and volatility and disruption of the capital and credit markets may
negatively impact our revenues and our ability to access financing.
  31




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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.
  We may not be able to obtain export licenses from the U.S. government permitting delivery of our
products to international customers.
  32




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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.
     Changes to our effective tax rate affect our results of operations.
  33




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The liquidity of our auction rate securities is impaired, which could impact our ability to meet
cash requirements and require additional financing.
  Our success depends on international sales and the management of global operations.
    34




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Our success is dependent on recruiting and retaining a highly talented work force.
   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.
  35




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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.
   36




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Item 2.
    
    Unregistered Sales of Equity Securities and Use of Proceeds
  
 Item 3.
    
    Defaults upon Senior Securities
  
 Item 4.
    
    (Removed and Reserved)
 
 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.
 37




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INTEVAC, INC.Date:  November 2, 2010
    By:
    /s/  KEVIN FAIRBAIRNKevin FairbairnPresident, Chief Executive Officer and Director
(Principal Executive Officer) Date:  November 2, 2010
    By:
    /s/  JEFFREY ANDRESONJeffrey AndresonExecutive Vice President, Finance and Administration,
Chief Financial Officer, Treasurer and Secretary
(Principal Financial and Accounting Officer) 38