##### 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 September 26, 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
(State or other jurisdiction of 
incorporation or organization)
    
    94-3125814
(IRS 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
 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
 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
    
    
    20Item 3.
    
    Quantitative and Qualitative Disclosures About Market Risk
    
    
    30Item 4.
    
    Controls and Procedures
    
    
    31PART II. OTHER INFORMATIONItem 1.
    
    Legal Proceedings
    
    
    32Item 1A.
    
    Risk Factors
    
    
    32Item 2.
    
    Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    40Item 3.
    
    Defaults Upon Senior Securities
    
    
    40Item 4.
    
    Submission of Matters to a Vote of Security Holders
    
    
    40Item 5.
    
    Other Information
    
    
    40Item 6.
    
    Exhibits
    
    
    40SIGNATURES
    
    
    41EX-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
 September      26,
    
    
    December 31,2009
    
    
    2008(Unaudited)(In thousands)ASSETSCurrent assets:Cash and cash equivalents
    
    $
    19,769
    
    
    $
    39,201Short-term investments
    
    
    11,997
    
    
    
    Trade and other accounts receivable, net of allowances of $33 at
September 26, 2009 and $145 at December 31, 2008
    
    
    12,313
    
    
    
    15,014Inventories
    
    
    22,792
    
    
    
    17,674Prepaid expenses and other current assets
    
    
    5,498
    
    
    
    4,806Deferred income tax assets
    
    
    3,356
    
    
    
    3,204Total current assets
    
    
    75,725
    
    
    
    79,899Property, plant and equipment, net
    
    
    13,290
    
    
    
    14,886Long-term investments
    
    
    65,973
    
    
    
    66,328Goodwill
    
    
    7,905
    
    
    
    7,905Other intangible assets, net of amortization of $1,108 at
September 26, 2009 and $693 at December 31, 2008
    
    
    3,660
    
    
    
    4,054Deferred income taxes and other long-term assets
    
    
    20,137
    
    
    
    16,097Total assets
    
    $
    186,690
    
    
    $
    189,169LIABILITIES AND STOCKHOLDERS EQUITYCurrent liabilities:Note payable
    
    $
    
    
    
    $
    2,000Accounts payable
    
    
    5,203
    
    
    
    4,214Accrued payroll and related liabilities
    
    
    3,176
    
    
    
    3,395Other accrued liabilities
    
    
    4,191
    
    
    
    3,175Customer advances
    
    
    5,745
    
    
    
    2,807Total current liabilities
    
    
    18,315
    
    
    
    15,591Other long-term liabilities
    
    
    203
    
    
    
    509Stockholders equity:Common stock, $0.001 par value
    
    
    22
    
    
    
    22Additional paid-in capital
    
    
    133,382
    
    
    
    128,686Accumulated other comprehensive loss
    
    
    (2,349
    )
    
    
    (4,808
    )Retained earnings
    
    
    37,117
    
    
    
    49,169Total stockholders equity
    
    
    168,172
    
    
    
    173,069Total liabilities and stockholders equity
    
    $
    186,690
    
    
    $
    189,169
   3




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##### Table of Contents



INTEVAC, INC.
 
 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
 Three Months Ended
    
    
    Nine Months EndedSeptember 26,
    
    
    September 27,
    
    
    September 26,
    
    
    September 27,2009
    
    
    2008
    
    
    2009
    
    
    2008(Unaudited)(In thousands, except per share amounts)Net revenues:Systems and components
    
    $
    14,619
    
    
    $
    25,263
    
    
    $
    32,277
    
    
    $
    82,403Technology development
    
    
    4,536
    
    
    
    3,297
    
    
    
    11,504
    
    
    
    11,464Total net revenues
    
    
    19,155
    
    
    
    28,560
    
    
    
    43,781
    
    
    93,867Cost of net revenues:Systems and components
    
    
    8,154
    
    
    
    17,687
    
    
    
    19,969
    
    
    
    49,674Technology development
    
    
    2,323
    
    
    
    1,788
    
    
    
    6,356
    
    
    
    6,664Total cost of net revenues
    
    
    10,477
    
    
    
    19,475
    
    
    
    26,325
    
    
    
    56,338Gross profit
    
    
    8,678
    
    
    
    9,085
    
    
    
    17,456
    
    
    
    37,529Operating expenses:Research and development
    
    
    6,840
    
    
    
    8,620
    
    
    
    22,255
    
    
    
    26,426Selling, general and administrative
    
    
    5,551
    
    
    
    7,341
    
    
    
    16,654
    
    
    
    21,818Total operating expenses
    
    
    12,391
    
    
    
    15,961
    
    
    
    38,909
    
    
    
    48,244Loss from operations
    
    
    (3,713
    )
    
    
    (6,876
    )
    
    
    (21,453
    )
    
    
    (10,715
    )Interest income and other, net
    
    
    122
    
    
    
    884
    
    
    
    780
    
    
    
    3,101Loss before income taxes
    
    
    (3,591
    )
    
    
    (5,992
    )
    
    
    (20,673
    )
    
    
    (7,614
    )Income tax benefit
    
    
    1,799
    
    
    
    2,639
    
    
    
    8,621
    
    
    
    4,887Net loss
    
    $
    (1,792
    )
    
    $
    (3,353
    )
    
    $
    (12,052
    )
    
    $
    (2,727
    )Net loss per share:Basic
    
    $
    (0.08
    )
    
    $
    (0.15
    )
    
    $
    (0.55
    )
    
    $
    (0.13
    )Diluted
    
    $
    (0.08
    )
    
    $
    (0.15
    )
    
    $
    (0.55
    )
    
    $
    (0.13
    )Weighted average common shares outstanding:Basic
    
    
    22,014
    
    
    
    21,761
    
    
    
    21,942
    
    
    
    21,700Diluted
    
    
    22,014
    
    
    
    21,761
    
    
    
    21,942
    
    
    
    21,700
  4




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##### Table of Contents



INTEVAC, INC.
 
 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
 Nine months endedSeptember 26,
    
    
    September 27,2009
    
    
    2008(Unaudited)(In thousands)Operating activitiesNet loss
    
    $
    (12,052
    )
    
    $
    (2,727
    )Adjustments to reconcile net loss to net cash and cash equivalents used in
operating activities:Depreciation and amortization
    
    
    4,016
    
    
    
    3,734Equity-based compensation
    
    
    3,709
    
    
    
    5,004Deferred income taxes
    
    
    (4,267
    )
    
    
    (4,514
    )Changes in operating assets and liabilities
    
    
    86
    
    
    
    (7,498
    )Total adjustments
    
    
    3,544
    
    
    
    (3,274
    )Net cash and cash equivalents used in operating activities
    
    
    (8,508
    )
    
    
    (6,001
    )Investing activitiesPurchases of investments
    
    
    (20,980
    )
    
    
    (7,000
    )Proceeds from maturities of investments
    
    
    13,000
    
    
    
    42,650Acquisition of Oerlikon assets, net of cash acquired
    
    
    
    
    
    
    (15,093
    )Purchases of leasehold improvements and equipment
    
    
    (2,009
    )
    
    
    (3,142
    )Net cash and cash equivalents provided by (used in) investing activities
    
    
    (9,989
    )
    
    
    17,415Financing activitiesNet proceeds from issuance of common stock
    
    
    1,021
    
    
    
    1,803Repayment of note payable
    
    
    (2,000
    )
    
    
    (2,000
    )Net cash and cash equivalents used in financing activities
    
    
    (979
    )
    
    
    (197
    )Effect of exchange rate changes on cash
    
    
    44
    
    
    
    (65
    )Net increase (decrease) in cash and cash equivalents
    
    
    (19,432
    )
    
    
    11,152Cash and cash equivalents at beginning of period
    
    
    39,201
    
    
    
    27,673Cash and cash equivalents at end of period
    
    $
    19,769
    
    
    $
    38,825
  5




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##### Table of Contents



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




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INTEVAC, INC.
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
(Unaudited)
     3. Inventories
  September 26,
    
    
    December 31,2009
    
    
    2008(In thousands)Raw materials
    
    $
    12,137
    
    
    $
    10,470Work-in-progress
    
    
    9,000
    
    
    
    4,932Finished goods
    
    
    1,655
    
    
    
    2,272$
    22,792
    
    
    $
    17,674
 8




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##### Table of Contents



INTEVAC, INC.
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
(Unaudited)
   4. Equity-Based Compensation
    Compensation Expense
  Three Months Ended
    
    
    Nine Months EndedSeptember 26,
    
    
    September 27,
    
    
    September 26,
    
    
    September 27,2009
    
    
    2008
    
    
    2009
    
    
    2008(in thousands, except per share amounts)Equity-based compensation by type of award:Stock options
    
    $
    834
    
    
    $
    1,311
    
    
    $
    3,051
    
    
    $
    3,960Employee stock purchase plan
    
    
    174
    
    
    
    478
    
    
    
    624
    
    
    
    978Amounts (capitalized as inventory) released to
cost of sales
    
    
    (9
    )
    
    
    (23
    )
    
    
    34
    
    
    
    66Total equity-based compensation
    
    
    999
    
    
    
    1,766
    
    
    
    3,709
    
    
    
    5,004Tax effect on equity-based compensation
    
    
    (291
    )
    
    
    (512
    )
    
    
    (1,077
    )
    
    
    (1,499
    )Net effect on net loss
    
    $
    708
    
    
    $
    1,254
    
    
    $
    2,632
    
    
    $
    3,505
 Valuation Assumptions
  9




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##### Table of Contents



INTEVAC, INC.
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
(Unaudited)
  Three Months Ended
    
    
    Nine Months EndedSeptember 26,
    
    
    September 27,
    
    
    September 26,
    
    
    September 27,2009
    
    
    2008
    
    
    2009
    
    
    2008Stock Options:Expected volatility
    
    
    67.84
    %
    
    
    65.54
    %
    
    
    67.16
    %
    
    
    65.40
    %Risk free interest rate
    
    
    2.14
    %
    
    
    2.89
    %
    
    
    2.00
    %
    
    
    2.94
    %Expected term of options (in years)
    
    
    4.58
    
    
    
    4.48
    
    
    
    4.47
    
    
    
    4.46Dividend yield
    
    
    None
    
    
    
    None
    
    
    
    None
    
    
    
    NoneThree Months Ended
    
    
    Nine Months EndedSeptember 26,
    
    
    September 27,
    
    
    September 26,
    
    
    September 27,2009
    
    
    2008
    
    
    2009
    
    
    2008Stock Purchase Rights:Expected volatility
    
    
    85.39
    %
    
    
    64.22
    %
    
    
    82.56
    %
    
    
    62.65
    %Risk free interest rate
    
    
    0.45
    %
    
    
    1.90
    %
    
    
    0.85
    %
    
    
    1.68
    %Expected term of purchase rights (in years)
    
    
    1.00
    
    
    
    1.92
    
    
    
    1.85
    
    
    
    1.87Dividend yield
    
    
    None
    
    
    
    None
    
    
    
    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)
(Unaudited)
      6. Warranty
   11




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##### Table of Contents



INTEVAC, INC.
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
(Unaudited)
  Three Months Ended
    
    
    Nine Months EndedSeptember 26,
    
    
    September 27,
    
    
    September 26,
    
    
    September 27,2009
    
    
    2008
    
    
    2009
    
    
    2008(in thousands)Beginning balance
    
    $
    1,183
    
    
    $
    2,136
    
    
    $
    1,695
    
    
    $
    3,092Expenditures incurred under warranties
    
    
    (310
    )
    
    
    (842
    )
    
    
    (1,070
    )
    
    
    (2,053
    )Accruals for product warranties issued during the reporting period
    
    
    588
    
    
    
    409
    
    
    
    1,037
    
    
    
    1,199Acquired in a business combination
    
    
    
    
    
    
    85
    
    
    
    
    
    
    
    85Adjustments to previously existing
warranty accruals
    
    
    46
    
    
    
    121
    
    
    
    (155
    )
    
    
    (414
    )Ending balance
    
    $
    1,507
    
    
    $
    1,909
    
    
    $
    1,507
    
    
    $
    1,909
  September 26,
    
    
    December 31,2009
    
    
    2008(In thousands)Other accrued liabilities
    
    $
    1,479
    
    
    $
    1,286Other long-term liabilities
    
    
    28
    
    
    
    409Total warranty provision
    
    $
    1,507
    
    
    $
    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)
(Unaudited)
 8. Cash, Cash Equivalents and Investments
   September 26,
    
    
    December 31,2009
    
    
    2008(in thousands)Carrying value:Short-term investments-U.S. treasury bills
    
    $
    11,997
    
    
    $
    Long-term investments-Auction rate securities
    
    
    65,973
    
    
    
    66,328Total investments in debt securities
    
    $
    77,970
    
    
    $
    66,328Approximate fair value of investments in debt securities
    
    $
    77,972
    
    
    $
    66,328
    13




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INTEVAC, INC.
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
(Unaudited)
     Three Months Ended
    
    
    Nine Months EndedSeptember 26,
    
    
    September 27,
    
    
    September 26,
    
    
    September 27,2009
    
    
    2008
    
    
    2009
    
    
    2008(in thousands)Beginning balance
    
    $
    66,187
    
    
    $
    76,195
    
    
    $
    66,328
    
    
    $
    81,450Net unrealized gains and losses included in other comprehensive loss
    
    
    286
    
    
    
    63
    
    
    
    3,645
    
    
    
    (1,492
    )Purchases and settlements, net
    
    
    (500
    )
    
    
    (3,150
    )
    
    
    (4,000
    )
    
    
    (6,850
    )Ending balance
    
    $
    65,973
    
    
    $
    73,108
    
    
    $
    65,973
    
    
    $
    73,108Net change in unrealized gains and losses
    
    $
    286
    
    
    $
    63
    
    
    $
    3,645
    
    
    $
    (1,492
    )
 9. Borrowing Facility
  14




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INTEVAC, INC.
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
(Unaudited)
 10. Other Comprehensive Loss
  September  26,
    
    
    December 31,2009
    
    
    2008(in thousands)Accumulated net unrealized holding
loss on available-for-sale investments,
net of tax
    
    $
    (2,877
    )
    
    $
    (5,247
    )Foreign currency translation gains
    
    
    528
    
    
    
    439Total accumulated other comprehensive loss
    
    $
    (2,349
    )
    
    $
    (4,808
    )
  Three Months Ended
    
    
    Nine Months EndedSeptember 26,
    
    
    September 27,
    
    
    September 26,
    
    
    September 27,2009
    
    
    2008
    
    
    2009
    
    
    2008(in thousands)Net loss
    
    $
    (1,792
    )
    
    $
    (3,353
    )
    
    $
    (12,052
    )
    
    $
    (2,727
    )Unrealized holding gains (losses) on
available-for-sale investments, net of taxes:Increase (decrease) in unrealized holding gains
(losses)
    
    
    286
    
    
    
    63
    
    
    
    3,645
    
    
    
    (1,492
    )Income tax expense
    
    
    (100
    )
    
    
    
    
    
    
    (1,275
    )
    
    
    186
    
    
    
    63
    
    
    
    2,370
    
    
    
    (1,492
    )Foreign currency translation gains (losses)
    
    
    237
    
    
    
    (438
    )
    
    
    89
    
    
    
    (77
    )Total comprehensive loss
    
    $
    (1,369
    )
    
    $
    (3,728
    )
    
    $
    (9,593
    )
    
    $
    (4,296
    )
 15




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INTEVAC, INC.
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
(Unaudited)
 11. Net Loss Per Share
  Three Months Ended
    
    
    Nine Months EndedSeptember 26,
    
    
    September 27,
    
    
    September 26,
    
    
    September 27,2009
    
    
    2008
    
    
    2009
    
    
    2008(in thousands)Numerator:Numerator for
diluted loss per
share (loss)
available to
common
stockholders
    
    $
    (1,792
    )
    
    $
    (3,353
    )
    
    $
    (12,052
    )
    
    $
    (2,727
    )Denominator:Denominator for basic loss per share 
weighted-average shares
    
    
    22,014
    
    
    
    21,761
    
    
    
    21,942
    
    
    
    21,700Effect of dilutive securities:Employee stock options (1)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Dilutive potential common shares
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Denominator for diluted loss per share  adjusted
weighted-average shares and assumed conversions
    
    
    22,014
    
    
    
    21,761
    
    
    
    21,942
    
    
    
    21,700
 
 (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
September 26, 2009 and September 27, 2008 was 3,261,639 and 2,886,011, respectively, and the number
of employee stock options excluded for the nine-month periods ended September 26, 2009 and
September 27, 2008 was 2,361,456 and 2,679,915, respectively. 12. Segment Reporting
    16




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##### Table of Contents



INTEVAC, INC.
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
(Unaudited)
     Net Revenues
 Three Months Ended
    
    
    Nine Months EndedSeptember 26,
    
    
    September 27,
    
    
    September 26,
    
    
    September 27,2009
    
    
    2008
    
    
    2009
    
    
    2008(in thousands)Equipment
    
    $
    12,293
    
    
    $
    22,855
    
    
    $
    24,477
    
    
    $
    75,558Intevac Photonics
    
    
    6,862
    
    
    
    5,705
    
    
    
    19,304
    
    
    
    18,309Total segment net revenues
    
    $
    19,155
    
    
    $
    28,560
    
    
    $
    43,781
    
    
    $
    93,867
 Operating Loss
 Three Months Ended
    
    
    Nine Months EndedSeptember 26,
    
    
    September 27,
    
    
    September 26,
    
    
    September 27,2009
    
    
    2008
    
    
    2009
    
    
    2008(in thousands)Equipment
    
    $
    (1,836
    )
    
    $
    (4,357
    )
    
    $
    (14,306
    )
    
    $
    (4,494
    )Intevac Photonics
    
    
    (628
    )
    
    
    (1,824
    )
    
    
    (3,248
    )
    
    
    (3,715
    )Total segment operating loss
    
    
    (2,464
    )
    
    
    (6,181
    )
    
    
    (17,554
    )
    
    
    (8,209
    )Unallocated costs
    
    
    (1,249
    )
    
    
    (695
    )
    
    
    (3,899
    )
    
    
    (2,506
    )Operating loss
    
    
    (3,713
    )
    
    
    (6,876
    )
    
    
    (21,453
    )
    
    
    (10,715
    )Interest income and other, net
    
    
    122
    
    
    
    884
    
    
    
    780
    
    
    
    3,101Loss before income taxes
    
    $
    (3,591
    )
    
    $
    (5,992
    )
    
    $
    (20,673
    )
    
    $
    (7,614
    )
 17




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##### Table of Contents



INTEVAC, INC.
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
(Unaudited)
  Assets
 September 26,
    
    
    December 31,2009
    
    
    2008(in thousands)Equipment
    
    $
    33,484
    
    
    $
    33,132Intevac Photonics
    
    
    25,215
    
    
    
    23,839Total segment assets
    
    
    58,699
    
    
    
    56,971Cash, cash equivalents and investments
    
    
    97,739
    
    
    
    105,529Deferred income taxes
    
    
    22,236
    
    
    
    17,969Other current assets
    
    
    4,134
    
    
    
    3,753Common property, plant and equipment
    
    
    2,927
    
    
    
    3,643Other assets
    
    
    955
    
    
    
    1,304Consolidated total assets
    
    $
    186,690
    
    
    $
    189,169
 13. Income Taxes
     18




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INTEVAC, INC.
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
(Unaudited)
 14. Contingencies
  19




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Item 2.
    
    Managements Discussion and Analysis of Financial Condition and Results of Operations
  Overview
  ®
  20




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Three months ended
    
    Nine months endedSeptember 26,
    
    September 27,
    
    %
    
    September 26,
    
    September 27,
    
    %2009
    
    2008
    
    Change
    
    2009
    
    2008
    
    Change(in thousands, except percentages and per share amounts)Net revenues
    
    $
    19,155
    
    
    $
    28,560
    
    
    
    (32.9
    )%
    
    $
    43,781
    
    
    $
    93,867
    
    
    
    (53.4
    )%Gross margin
    
    $
    8,678
    
    
    $
    9,085
    
    
    
    (4.5
    )%
    
    $
    17,456
    
    
    $
    37,529
    
    
    
    (53.5
    )%Gross margin percent
    
    
    45.3
    %
    
    
    31.8
    %
    
    
    13.5
    %
    
    
    39.9
    %
    
    
    40.0
    %
    
    
    (0.1)
    %Net loss
    
    $
    (1,792
    )
    
    $
    (3,353
    )
    
    
    46.6
    %
    
    $
    (12,052
    )
    
    $
    (2,727
    )
    
    
    (342.0
    )%Loss per diluted share
    
    $
    (0.08
    )
    
    $
    (0.15
    )
    
    
    46.7
    %
    
    $
    (0.55
    )
    
    $
    (0.13
    )
    
    
    (323.1
    )%
    ® ® ® ® ® ® 
 21




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##### Table of Contents



Results of Operations
 Net revenues
 Three months ended
    
    
    Nine months endedSeptember 26,
    
    
    September 27,
    
    
    %
    
    
    September 26,
    
    
    September 27,
    
    
    %2009
    
    
    2008
    
    
    Change
    
    
    2009
    
    
    2008
    
    
    Change(in thousands, except percentages)Equipment
    
    $
    12,293
    
    
    $
    22,855
    
    
    
    (46.2
    )%
    
    $
    24,477
    
    
    $
    75,558
    
    
    
    (67.6
    )%Intevac Photonics
    
    
    6,862
    
    
    
    5,705
    
    
    
    20.3
    %
    
    
    19,304
    
    
    
    18,309
    
    
    
    5.4
    %Total net revenues
    
    $
    19,155
    
    
    $
    28,560
    
    
    
    (32.9
    )%
    
    $
    43,781
    
    
    $
    93,867
    
    
    
    (53.4
    )%
      22




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##### Table of Contents



Gross profit
 Three months ended
    
    Nine months endedSeptember 26,
    
    September 27,
    
    %
    
    September 26,
    
    September 27,
    
    %2009
    
    2008
    
    Change
    
    2009
    
    2008
    
    Change(in thousands, except percentages)Equipment gross profit
    
    $
    5,925
    
    
    $
    7,263
    
    
    
    (18.4
    )%
    
    $
    10,132
    
    
    $
    30,869
    
    
    
    (67.2
    )%% of Equipment net revenues
    
    
    48.2
    %
    
    
    31.8
    %
    
    
    
    
    
    
    41.4
    %
    
    
    40.9
    %Intevac Photonics gross
profit
    
    $
    2,753
    
    
    $
    1,822
    
    
    
    51.1
    %
    
    $
    7,324
    
    
    $
    6,660
    
    
    
    10.0
    %% of Intevac Photonics net
revenues
    
    
    40.1
    %
    
    
    31.9
    %
    
    
    
    
    
    
    37.9
    %
    
    
    36.4
    %Total gross profit
    
    $
    8,678
    
    
    $
    9,085
    
    
    
    (4.5
    )%
    
    $
    17,456
    
    
    $
    37,529
    
    
    
    (53.5
    )%% of net revenues
    
    
    45.3
    %
    
    
    31.8
    %
    
    
    
    
    
    
    39.9
    %
    
    
    40.0
    %
    23




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##### Table of Contents



Research and Development
 Three months ended
    
    Nine months endedSeptember 26,
    
    September 27,
    
    %
    
    September 26,
    
    September 27,
    
    %2009
    
    2008
    
    Change
    
    2009
    
    2008
    
    Change(in thousands, except percentages)Research and
development expense
    
    $
    6,840
    
    
    $
    8,620
    
    
    
    (20.6
    )%
    
    $
    22,255
    
    
    $
    26,426
    
    
    
    (15.8
    )%% of net revenues
    
    
    35.7
    %
    
    
    30.2
    %
    
    
    
    
    
    
    50.8
    %
    
    
    28.2
    %
  Selling, general and administrative
 Three months ended
    
    Nine months endedSeptember 26,
    
    September 27,
    
    %
    
    September 26,
    
    September 27,
    
    %2009
    
    2008
    
    Change
    
    2009
    
    2008
    
    Change(in thousands, except percentages)Selling,
general and
administrative
expense
    
    $
    5,551
    
    
    $
    7,341
    
    
    
    (24.4
    )%
    
    $
    16,654
    
    
    $
    21,818
    
    
    
    (23.7
    )%% of net revenues
    
    
    29.0
    %
    
    
    25.7
    %
    
    
    
    
    
    
    38.0
    %
    
    
    23.2
    %
  24




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Interest income and other, net
 Three months ended
    
    Nine months endedSeptember 26,
    
    September 27,
    
    %
    
    September 26,
    
    September 27,
    
    %2009
    
    2008
    
    Change
    
    2009
    
    2008
    
    Change(in thousands, except percentages)Interest
income and other,
net
    
    $
    122
    
    
    $
    884
    
    
    
    (86.2
    )%
    
    $
    780
    
    
    $
    3,101
    
    
    
    (74.8
    )%
  Income tax benefit
 Three months ended
    
    Nine months endedSeptember 26,
    
    September 27,
    
    %
    
    September 26,
    
    September 27,
    
    %2009
    
    2008
    
    Change
    
    2009
    
    2008
    
    Change(in thousands, except percentages)Income tax benefit
    
    $
    1,799
    
    
    $
    2,639
    
    
    
    (31.8
    )%
    
    $
    8,621
    
    
    $
    4,887
    
    
    
    76.4
    %
    Liquidity and Capital Resources
  25




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September 26,
    
    
    December 31,2009
    
    
    2008(In thousands)Cash and cash equivalents
    
    $
    19,769
    
    
    $
    39,201Short-term investments
    
    
    11,997
    
    
    
    Long-term investments
    
    
    65,973
    
    
    
    66,328Total cash, cash equivalents and investments
    
    $
    97,739
    
    
    $
    105,529
        26




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Critical Accounting Policies and Estimates
    27




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Revenue Recognition
   Inventories
  Warranty
  Income Taxes
  28




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##### Table of Contents



Goodwill and Purchased Intangible Assets
   Equity-Based Compensation
  29




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Item 3.
    
    Quantitative and Qualitative Disclosures About Market Risk
 Interest rate risk.
  Fair2009
    
    2010
    
    2011
    
    Beyond
    
    Total
    
    Value(in thousands, except percentages)Cash equivalentsFixed rate amounts
    
    $
    9,404
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    9,404
    
    
    $
    9,404Weighted-average rate
    
    
    0.09
    %
    
    
    
    
    
    
    
    
    
    
    Short-term investmentsFixed rate amounts
    
    $
    11,997
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    11,997
    
    
    $
    11,999Weighted-average rate
    
    
    0.23
    %
    
    
    
    
    
    
    
    
    
    
    Long-term investmentsFixed rate amounts
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    70,400
    
    
    $
    70,400
    
    
    $
    65,973Weighted-average rate
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1.40
    %Total investment portfolio
    
    $
    21,401
    
    
    
    
    
    
    
    
    
    
    $
    70,400
    
    
    $
    91,801
    
    
    $
    87,376
    Foreign exchange risk.
 30




---



##### Table of Contents



Item 4.
    
    Controls and Procedures
 Evaluation of disclosure controls and procedures
   Definition of disclosure controls
  Limitations on the effectiveness of controls
  Changes in internal controls over financial reporting
  31




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##### Table of Contents



PART II. OTHER INFORMATION
 
 Item 1.
    
    Legal Proceedings
   
 Item 1A.
    
    Risk Factors
  The industries we serve are cyclical, volatile and unpredictable.
    32




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##### Table of Contents



Sales of our equipment are primarily dependent on our customers upgrade and capacity expansion
plans and whether our customers select our equipment.
    Adverse economic conditions and volatility and disruption of the capital and credit markets may
negatively impact our revenues and our ability to access financing.
   33




---



##### Table of Contents



We are exposed to risks associated with a highly concentrated customer base.
   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.
   34




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##### Table of Contents



The liquidity of our auction rate securities is impaired, which could impact our ability to
meet cash requirements and require additional debt financing.
   We may be subject to additional impairment charges due to potential declines in the fair value of
our assets.
  35




---



##### Table of Contents



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.
  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.
   36




---



##### Table of Contents



Changes to our effective tax rate affect our results of operations.
   Our success depends on international sales and the management of global operations.
   37




---



##### Table of Contents



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.
  38




---



##### Table of Contents



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.
  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.
  39




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##### Table of Contents



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
  
 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.
 40




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SIGNATURES
  INTEVAC, INC.Date:  October 27, 2009
    /s/  KEVIN FAIRBAIRNKevin FairbairnPresident, Chief Executive Officer and Director
(Principal Executive Officer)Date:  October 27, 2009
    /s/  JEFFREY ANDRESONJeffrey AndresonExecutive Vice President, Finance and
Administration, Chief Financial Officer,
Treasurer and Secretary
(Principal Financial and
Accounting Officer) 41