##### 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 April 2, 2011
 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  oAccelerated filer þNon-accelerated filer o(Do not check if a smaller reporting company)Smaller reporting company o 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
    

    20Item 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
    

    37EX-10.2EX-10.3EX-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
 April 2,
    
    
    December 31,2011
    
    
    2010(Unaudited)(In thousands, exceptpar value)ASSETSCurrent assets:Cash and cash equivalents
    
    $
    25,879
    
    
    $
    109,520Short-term investments
    
    
    50,263
    
    
    
    4,994Trade, note and other accounts receivable, net of allowances of $55 at both
April 2, 2011 and December 31, 2010
    
    
    17,560
    
    
    
    25,911Inventories
    
    
    21,764
    
    
    
    20,671Prepaid expenses and other current assets
    
    
    6,890
    
    
    
    6,630Deferred income tax assets
    
    
    3,304
    
    
    
    3,124Total current assets
    
    
    125,660
    
    
    
    170,850Property, plant and equipment, net
    
    
    15,252
    
    
    
    13,918Long-term investments
    
    
    52,294
    
    
    
    22,866Goodwill
    
    
    18,389
    
    
    
    18,389Other intangible assets, net of amortization of $1,937 at April 2, 2011 and
$1,801 at December 31, 2010
    
    
    6,848
    
    
    
    6,984Deferred income taxes and other long-term assets
    
    
    20,333
    
    
    
    18,764Total assets
    
    $
    238,776
    
    
    $
    251,771LIABILITIES AND STOCKHOLDERS EQUITYCurrent liabilities:Accounts payable
    
    $
    5,147
    
    
    $
    5,562Accrued payroll and related liabilities
    
    
    4,578
    
    
    
    11,365Other accrued liabilities
    
    
    10,612
    
    
    
    11,104Customer advances
    
    
    4,805
    
    
    
    4,867Total current liabilities
    
    
    25,142
    
    
    
    32,898Other long-term liabilities
    
    
    10,973
    
    
    
    11,630Stockholders equity:Common stock, $0.001 par value
    
    
    23
    
    
    
    23Additional paid-in capital
    
    
    142,281
    
    
    
    139,824Accumulated other comprehensive income
    
    
    247
    
    
    
    255Retained earnings
    
    
    60,110
    
    
    
    67,141Total stockholders equity
    
    
    202,661
    
    
    
    207,243Total liabilities and stockholders equity
    
    $
    238,776
    
    
    $
    251,771
   3




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INTEVAC, INC.
 
 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
 Three months endedApril 2,
    
    
    April 3,2011
    
    
    2010(Unaudited)(In thousands, except per 
share amounts)Net revenues:Systems and components
    
    $
    15,491
    
    
    $
    28,911Technology development
    
    
    1,932
    
    
    
    4,231Total net revenues
    
    
    17,423
    
    
    
    33,142Cost of net revenues:Systems and components
    
    
    9,614
    
    
    
    15,902Technology development
    
    
    1,429
    
    
    
    2,762Total cost of net revenues
    
    
    11,043
    
    
    
    18,664Gross profit
    
    
    6,380
    
    
    
    14,478Operating expenses:Research and development
    
    
    9,012
    
    
    
    6,544Selling, general and administrative
    
    
    6,885
    
    
    
    6,567Total operating expenses
    
    
    15,897
    
    
    
    13,111Income (loss) from operations
    
    
    (9,517
    )
    
    
    1,367Interest income and other, net
    
    
    129
    
    
    
    391Income (loss) before income taxes
    
    
    (9,388
    )
    
    
    1,758Provision for (benefit from) income taxes
    
    
    (2,357
    )
    
    
    328Net income (loss)
    
    $
    (7,031
    )
    
    $
    1,430Net income (loss) per share:Basic
    
    $
    (0.31
    )
    
    $
    0.06Diluted
    
    $
    (0.31
    )
    
    $
    0.06Weighted average common shares outstanding:Basic
    
    
    22,727
    
    
    
    22,196Diluted
    
    
    22,727
    
    
    
    22,975
  4




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INTEVAC, INC.
 
 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
 Three months endedApril 2,
    
    
    April 3,2011
    
    
    2010(Unaudited)(In thousands)Operating activitiesNet income (loss)
    
    $
    (7,031
    )
    
    $
    1,430Adjustments to reconcile net income (loss) to net cash and cash equivalents
provided by (used in) operating activities:Depreciation and amortization
    
    
    1,388
    
    
    
    1,489Net amortization of investment premiums and discounts
    
    
    222
    
    
    
    Equity-based compensation
    
    
    962
    
    
    
    617Change in the fair value of acquisition-related contingent consideration
    
    
    300
    
    
    
    Deferred income taxes
    
    
    (2,385
    )
    
    
    34Loss on disposal of equipment
    
    
    31
    
    
    
    Changes in operating assets and liabilities
    
    
    (1,070
    )
    
    
    19,772Total adjustments
    
    
    (552
    )
    
    
    21,912Net cash and cash equivalents provided by (used in) operating activities
    
    
    (7,583
    )
    
    
    23,342Investing activitiesPurchases of investments
    
    
    (76,940
    )
    
    
    (2,999
    )Proceeds from sales and maturities of investments
    
    
    1,995
    
    
    
    6,250Purchases of leasehold improvements and equipment
    
    
    (2,617
    )
    
    
    (791
    )Net cash and cash equivalents provided by (used in) investing activities
    
    
    (77,562
    )
    
    
    2,460Financing activitiesProceeds from issuance of common stock
    
    
    1,495
    
    
    
    916Net cash and cash equivalents provided by financing activities
    
    
    1,495
    
    
    
    916Effect of exchange rate changes on cash and cash equivalents
    
    
    9
    
    
    
    20Net increase (decrease) in cash and cash equivalents
    
    
    (83,641
    )
    
    
    26,738Cash and cash equivalents at beginning of period
    
    
    109,520
    
    
    
    17,592Cash and cash equivalents at end of period
    
    $
    25,879
    
    
    $
    44,330
  5




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INTEVAC, INC.
 
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
 1. Basis of Presentation
 Basis of Presentation
   2. New Accounting Pronouncement
  3. Inventories
  April 2,
    
    
    December 31,2011
    
    
    2010(In thousands)Raw materials
    
    $
    10,500
    
    
    $
    13,370Work-in-progress
    
    
    9,668
    
    
    
    5,295Finished goods
    
    
    1,596
    
    
    
    2,006$
    21,764
    
    
    $
    20,671
  6




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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 EndedApril 2,
    
    
    April 3,2011
    
    
    2010(In thousands)Equity-based compensation by type of award:Stock options
    
    $
    731
    
    
    $
    487Employee stock purchase plan
    
    
    231
    
    
    
    130Total equity-based compensation
    
    
    962
    
    
    
    617Tax effect on equity-based compensation
    
    
    (269
    )
    
    
    (193
    )Net effect on net income (loss)
    
    $
    693
    
    
    $
    424
 Valuation Assumptions
  7




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INTEVAC, INC.
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
(Unaudited)
  Three Months EndedApril 2,
    
    
    April 3,2011
    
    
    2010Stock Options:Expected volatility
    
    
    64.89
    %
    
    
    68.34
    %Risk free interest rate
    
    
    2.00
    %
    
    
    2.42
    %Expected term of options (in years)
    
    
    4.6
    
    
    
    4.5Dividend yield
    
    None
    
    NoneStock Purchase Rights:Expected volatility
    
    
    52.40
    %
    
    
    55.48
    %Risk free interest rate
    
    
    0.51
    %
    
    
    0.44
    %Expected term of purchase rights (in years)
    
    
    1.23
    
    
    
    0.75Dividend yield
    
    None
    
    None
   5. Business Combination, Goodwill and Purchased Intangible Assets, Net
  8




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INTEVAC, INC.
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
(Unaudited)
      (In thousands)Current assets (including cash of $38)
    
    $
    40Property, plant, and equipment
    
    
    3IPR&D
    
    
    4,000Goodwill
    
    
    10,484Long-term deferred tax assets
    
    
    697Total assets acquired
    
    
    15,224Notes payable to sellers
    
    
    177Current liabilities
    
    
    526Long-term deferred tax liabilities
    
    
    1,524Total liabilities assumed
    
    
    2,227Net assets acquired
    
    $
    12,997
   9




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##### Table of Contents



INTEVAC, INC.
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
(Unaudited)
   6. Warranty
    Three months endedApril 2,
    
    
    April 3,2011
    
    
    2010(In thousands)Beginning balance
    
    $
    3,415
    
    
    $
    1,602Expenditures incurred under warranties
    
    
    (817
    )
    
    
    (591
    )Accruals for product warranties issued during the reporting period
    
    
    380
    
    
    
    764Adjustments to previously existing warranty accruals
    
    
    114
    
    
    
    79Ending balance
    
    $
    3,092
    
    
    $
    1,854
  April 2,
    
    
    December 31,2011
    
    
    2010(In thousands)Other accrued liabilities
    
    $
    2,371
    
    
    $
    2,612Other long-term liabilities
    
    
    721
    
    
    
    803Total warranty provision
    
    $
    3,092
    
    
    $
    3,415
 10




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INTEVAC, INC.
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
(Unaudited)
 7. Guarantees
 Officer and Director Indemnifications
  Other Indemnifications
  8. Cash, Cash Equivalents and Investments
  April 2, 2011Unrealized
    
    
    UnrealizedAmortized
    
    
    Holding
    
    
    HoldingCost
    
    
    Gains
    
    
    Losses
    
    
    Fair Value(In thousands)Cash and cash equivalents:Cash
    
    $
    19,091
    
    
    $
    
    
    
    $
    
    
    
    $
    19,091Commercial paper
    
    
    3,000
    
    
    
    
    
    
    
    
    
    
    
    3,000Money market funds
    
    
    3,788
    
    
    
    
    
    
    
    
    
    
    
    3,788Total cash and cash equivalents
    
    $
    25,879
    
    
    $
    
    
    
    $
    
    
    
    $
    25,879Short-term investments:Commercial paper
    
    $
    19,237
    
    
    $
    4
    
    
    $
    
    
    
    $
    19,241Corporate bonds and medium-term notes
    
    
    9,892
    
    
    
    10
    
    
    
    2
    
    
    
    9,900Municipal bonds
    
    
    2,232
    
    
    
    
    
    
    
    1
    
    
    
    2,231U.S. treasury and agency securities
    
    
    7,513
    
    
    
    3
    
    
    
    
    
    
    
    7,516Variable rate demand notes (VRDNs)
    
    
    11,375
    
    
    
    
    
    
    
    
    
    
    
    11,375Total short-term investments
    
    $
    50,249
    
    
    $
    17
    
    
    $
    3
    
    
    $
    50,263Long-term investments:Corporate bonds and medium-term notes
    
    $
    24,653
    
    
    $
    1
    
    
    $
    42
    
    
    $
    24,612Municipal bonds
    
    
    3,432
    
    
    
    4
    
    
    
    
    
    
    
    3,436U.S. treasury and agency securities
    
    
    13,977
    
    
    
    
    
    
    
    12
    
    
    
    13,965Auction rate securities (ARS)
    
    
    10,900
    
    
    
    
    
    
    
    619
    
    
    
    10,281Total long-term investments
    
    $
    52,962
    
    
    $
    5
    
    
    $
    673
    
    
    $
    52,294Total cash, cash equivalents, and investments
    
    $
    129,090
    
    
    $
    22
    
    
    $
    676
    
    
    $
    128,436
 11




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INTEVAC, INC.
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
(Unaudited)
 December
31, 2010Unrealized
    
    
    UnrealizedAmortized
    
    
    Holding
    
    
    HoldingCost
    
    
    Gains
    
    
    Losses
    
    
    Fair Value(In thousands)Cash and cash equivalents:Cash
    
    $
    22,887
    
    
    $
    
    
    
    $
    
    
    
    $
    22,887Commercial paper
    
    
    2,999
    
    
    
    
    
    
    
    1
    
    
    
    2,998Corporate bonds
    
    
    1,259
    
    
    
    
    
    
    
    
    
    
    
    1,259Money market funds
    
    
    82,376
    
    
    
    
    
    
    
    
    
    
    
    82,376Total cash and cash equivalents
    
    $
    109,521
    
    
    $
    
    
    
    $
    1
    
    
    $
    109,520Short-term investments:Commercial paper
    
    $
    2,995
    
    
    $
    
    
    
    $
    
    
    
    $
    2,995U.S. treasury and agency securities
    
    
    1,999
    
    
    
    
    
    
    
    
    
    
    
    1,999Total short-term investments
    
    $
    4,994
    
    
    $
    
    
    
    $
    
    
    
    $
    4,994Long-term investments:U.S. treasury and agency securities
    
    $
    6,978
    
    
    $
    5
    
    
    $
    
    
    
    $
    6,983Corporate bonds and medium-term notes
    
    
    5,615
    
    
    
    
    
    
    
    5
    
    
    
    5,610ARS
    
    
    10,900
    
    
    
    
    
    
    
    627
    
    
    
    10,273Total long-term investments
    
    $
    23,493
    
    
    $
    5
    
    
    $
    632
    
    
    $
    22,866Total cash, cash equivalents, and investments
    
    $
    138,008
    
    
    $
    5
    
    
    $
    633
    
    
    $
    137,380
  AmortizedCost
    
    
    Fair Value(In thousands)Due in one year or less
    
    $
    44,661
    
    
    $
    44,676Due after one through five years (1)
    
    
    41,042
    
    
    
    40,988Due after five through ten years (2)
    
    
    1,500
    
    
    
    1,500Due after ten years(3)
    
    
    22,796
    
    
    
    22,181$
    109,999
    
    
    $
    109,345
 
 (1)
    
    Includes $575,000 in par value of VRDNs.(2)
    
    Includes $1.5 million in par value of VRDNs.(3)
    
    Includes $9.3 million in par value of VRDNs and $10.9 million in par value of ARS. 12




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INTEVAC, INC.
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
(Unaudited)
  April 2, 2011In Loss Position for
    
    
    In Loss Position forLess than 12 Months
    
    
    Greater than 12 MonthsGross
    
    
    
    
    
    
    GrossUnrealized
    
    
    
    
    
    
    UnrealizedFair Value
    
    
    Losses
    
    
    Fair Value
    
    
    Losses(In thousands)Corporate bonds and medium-term notes
    
    $
    23,938
    
    
    $
    44
    
    
    $
    
    
    
    $
    Municipal bonds
    
    
    1,231
    
    
    
    1
    
    
    
    
    
    
    
    U.S. treasury and agency securities
    
    
    14,482
    
    
    
    12
    
    
    
    
    
    
    
    ARS
    
    
    
    
    
    
    
    
    
    
    10,281
    
    
    
    619$
    39,651
    
    
    $
    57
    
    
    $
    10,281
    
    
    $
    619
     13




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




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INTEVAC, INC.
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
(Unaudited)
  Fair Value Measurements at April 2, 2011Total
    
    
    Level 1
    
    
    Level 2
    
    
    Level 3(In thousands)Assets:Money market funds
    
    $
    3,788
    
    
    $
    3,788
    
    
    $
    
    
    
    $
    U.S. treasury and agency securities
    
    
    21,481
    
    
    
    7,987
    
    
    
    13,494
    
    
    
    Commercial paper
    
    
    22,241
    
    
    
    
    
    
    
    22,241
    
    
    
    Corporate bonds and medium-term notes
    
    
    34,512
    
    
    
    
    
    
    
    34,512
    
    
    
    Municipal bonds
    
    
    5,667
    
    
    
    
    
    
    
    5,667
    
    
    
    VRDNs
    
    
    11,375
    
    
    
    
    
    
    
    11,375
    
    
    
    ARS
    
    
    10,281
    
    
    
    
    
    
    
    
    
    
    
    10,281Total assets
    
    $
    109,345
    
    
    $
    11,775
    
    
    $
    87,289
    
    
    $
    10,281Liabilities:Acquisition-related contingent consideration
    
    $
    10,157
    
    
    $
    
    
    
    $
    
    
    
    $
    10,157
   Three months endedApril 2,
    
    
    April 3,2011
    
    
    2010(In thousands)Beginning balance
    
    $
    10,273
    
    
    $
    66,249Net unrealized gains (losses) included in earnings
    
    
    
    
    
    
    Net unrealized gains (losses) included in other
comprehensive income (loss)
    
    
    8
    
    
    
    (670
    )Redemptions at par
    
    
    
    
    
    
    (250
    )Ending balance
    
    $
    10,281
    
    
    $
    65,329
 15




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INTEVAC, INC.
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
(Unaudited)
 9. Other Comprehensive Income
  April 2,
    
    
    December 31,2011
    
    
    

2010(In thousands)Accumulated net unrealized holding
loss on available-for-sale investments, net
of tax
    
    $
    (425
    )
    
    $
    (408
    )Foreign currency translation gains
    
    
    672
    
    
    
    663Total accumulated other comprehensive income
    
    $
    247
    
    
    $
    255
  Three months endedApril 2,
    
    
    April 3,2011
    
    
    2010(In thousands)Net income (loss)
    
    $
    (7,031
    )
    
    $
    1,430Unrealized holding gains (losses) on available-for-sale investments, net of taxes:Increase in unrealized holding losses
    
    
    (26
    )
    
    
    (670
    )Income tax benefit
    
    
    9
    
    
    
    234(17
    )
    
    
    (436
    )Foreign currency translation gains
    
    
    9
    
    
    
    20Total comprehensive income (loss)
    
    $
    (7,039
    )
    
    $
    1,014
 10. Net Income (Loss) Per Share
  Three months endedApril 2,
    
    
    April 3,2011
    
    
    2010(In thousands)Net income (loss)
    
    $
    (7,031
    )
    
    $
    1,430Weighted-average shares  basic
    
    
    22,727
    
    
    
    22,196Effect of dilutive potential common shares
    
    
    
    
    
    
    779Weighted-average shares  diluted
    
    
    22,727
    
    
    
    22,975Net income (loss) per share basic
    
    $
    (0.31
    )
    
    $
    0.06Net income (loss) per share diluted
    
    $
    (0.31
    )
    
    $
    0.06Antidilutive shares based on employee awards excluded
    
    
    1,793
    
    
    
    1,155
  16




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INTEVAC, INC.
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
(Unaudited)
 11. Segment Reporting
       Net Revenues
 Three months endedApril 2,
    
    
    April 3,2011
    
    
    2010(In thousands)Equipment
    
    $
    10,180
    
    
    $
    25,557Intevac Photonics
    
    
    7,243
    
    
    
    7,585Total segment net revenues
    
    $
    17,423
    
    
    $
    33,142
 17




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##### Table of Contents



INTEVAC, INC.
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
(Unaudited)
 Operating Income (Loss)
 Three months endedApril 2,
    
    
    April 3,2011
    
    
    2010(In thousands)Equipment
    
    $
    (6,270
    )
    
    $
    3,880Intevac Photonics
    
    
    (1,583
    )
    
    
    (1,184
    )Total income (loss) from segment operations
    
    
    (7,853
    )
    
    
    2,696Unallocated costs
    
    
    (1,664
    )
    
    
    (1,329
    )Income (loss) from operations
    
    
    (9,517
    )
    
    
    1,367Interest income, net
    
    
    246
    
    
    
    405Other income and expense, net
    
    
    (117
    )
    
    
    (14
    )Income (loss) before income taxes
    
    $
    (9,388
    )
    
    $
    1,758
  Assets
 April 2,
    
    
    December 31,2011
    
    
    2010(In thousands)Equipment
    
    $
    52,702
    
    
    $
    57,130Intevac Photonics
    
    
    29,053
    
    
    
    31,275Total segment assets
    
    
    81,755
    
    
    
    88,405Cash, cash equivalents and investments
    
    
    128,436
    
    
    
    137,380Deferred income taxes
    
    
    19,720
    
    
    
    17,718Other current assets
    
    
    6,421
    
    
    
    5,889Common property, plant and equipment
    
    
    1,826
    
    
    
    1,803Other assets
    
    
    618
    
    
    
    576Consolidated total assets
    
    $
    238,776
    
    
    $
    251,771
 12. Income Taxes
    18




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



Three months endedApril 2,
    
    April 3,
    
    Change over2011
    
    2010
    
    prior period(In thousands, except percentages and per share amounts)Net revenues
    
    $
    17,423
    
    
    $
    33,142
    
    
    $
    (15,719
    )Gross profit
    
    $
    6,380
    
    
    $
    14,478
    
    
    $
    (8,098
    )Gross margin percent
    
    
    36.6
    %
    
    
    43.7
    %
    
    (7) pointsNet income (loss)
    
    $
    (7,031
    )
    
    $
    1,430
    
    
    $
    (8,461
    )Earnings (loss) per diluted share
    
    $
    (0.31
    )
    
    $
    0.06
    
    
    $
    (0.37
    )
   ® ® ® I-Port, ® ® ® PHARMA-ID
 Results of Operations
 Net revenues
 Change overThree months ended
    
    
    prior periodApril 2,
2011
    
    
    April 3, 
2010
    
    
    Amount
    
    
    %(In thousands, except percentages)Equipment
    
    $
    10,180
    
    
    $
    25,557
    
    
    $
    (15,377
    )
    
    
    (60.2
    )%Intevac Photonics
    
    
    7,243
    
    
    
    7,585
    
    
    
    (342
    )
    
    
    (4.5
    )%Total net revenues
    
    $
    17,423
    
    
    $
    33,142
    
    
    $
    (15,719
    )
    
    
    (47.4
    )%
 21




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##### Table of Contents



TM
    Gross profit
 Three months endedApril 2, 
2011
    
    April 3, 
2010
    
    %Change(In thousands, except percentages)Equipment gross profit
    
    $
    4,608
    
    
    $
    12,453
    
    
    
    (63.0
    )%% of Equipment net revenues
    
    
    45.3
    %
    
    
    48.7
    %Intevac Photonics gross profit
    
    $
    1,772
    
    
    $
    2,025
    
    
    
    (12.5
    )%% of Intevac Photonics net revenues
    
    
    24.5
    %
    
    
    26.7
    %Total gross profit
    
    $
    6,380
    
    
    $
    14,478
    
    
    
    (55.9
    )%% of net revenues
    
    
    36.6
    %
    
    
    43.7
    %
 22




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##### Table of Contents



Research and development
 Change overThree
months ended
    

prior
periodApril 2, 
2011
    
    April 3, 
2010
    
    Amount
    
    %(In thousands, except percentages)Research and development expense
    
    $
    9,012
    
    
    $
    6,544
    
    
    $
    2,468
    
    
    
    37.7
    %% of net revenues
    
    
    51.7
    %
    
    
    19.7
    %
  Selling, general and administrative
 Change overThree months ended
    
    prior periodApril 2, 
2011
    
    April 3, 
2010
    
    Amount
    
    %(In thousands, except percentages)Selling, general and administrative expense
    
    $
    6,885
    
    
    $
    6,567
    
    
    $
    318
    
    
    
    4.8
    %% of net revenues
    
    
    39.5
    %
    
    
    19.8
    %
  23




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##### Table of Contents



Interest income and other, net
 Change overThree months ended
    
    prior periodApril 2, 
2011
    
    April 3, 
2010
    
    Amount
    
    %(In thousands, except percentages)Interest income and other, net
    
    $
    129
    
    
    $
    391
    
    
    $
    (262
    )
    
    
    (67.0
    )%
  Income tax provision (benefit)
 Change overThree months ended
    
    prior periodApril 2, 
2011
    
    April 3, 
2010
    
    Amount
    
    %(In thousands, except
percentages)Income tax provision (benefit)
    
    $
    (2,357
    )
    
    $
    328
    
    
    $
    (2,685
    )
    
    
    (818.6)
    %
   Liquidity and Capital Resources
   April 2,
    
    
    December 31,2011
    
    
    2010(In thousands)Cash and cash equivalents
    
    $
    25,879
    
    
    $
    109,520Short-term investments
    
    
    50,263
    
    
    
    4,994Long-term investments
    
    
    52,294
    
    
    
    22,866Total cash, cash equivalents and investments
    
    $
    128,436
    
    
    $
    137,380
  24




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Critical Accounting Policies and Estimates
  25




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26




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##### Table of Contents



Item 3. Quantitative and Qualitative Disclosures About Market Risk
 Interest rate risk.
  Fair2011
    
    2012
    
    2013
    
    2014
    
    2015
    
    Beyond
    
    Total
    
    Value(In thousands, except percentages)Cash equivalents
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Fixed rate amounts
    
    $
    3,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    3,000
    
    
    $
    3,000Weighted-average rate
    
    
    0.31
    %
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Variable rate amounts
    
    $
    3,788
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    3,788
    
    
    $
    3,788Weighted-average rate
    
    
    0.10
    %
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Short-term investments
Fixed rate amounts
    
    $
    24,990
    
    
    $
    12,884
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    37,874
    
    
    $
    37,888Weighted-average rate
    
    
    0.68
    %
    
    
    3.19
    %
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Variable rate amounts
    
    $
    12,375
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    12,375
    
    
    $
    12,375Weighted-average rate
    
    
    0.40
    %
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Long-term investments
Fixed rate amounts
    
    
    
    
    
    $
    35,880
    
    
    $
    6,182
    
    
    
    
    
    
    
    
    
    
    $
    10,900
    
    
    $
    52,962
    
    
    $
    52,294Weighted-average rate
    
    
    
    
    
    
    2.82
    %
    
    
    2.41
    %
    
    
    
    
    
    
    
    
    
    
    3.38
    %Total investment portfolio
    
    $
    44,153
    
    
    $
    48,764
    
    
    $
    6,182
    
    
    
    
    
    
    
    
    
    
    $
    10,900
    
    
    $
    109,999
    
    
    $
    109,345
    Foreign exchange risk.
 27




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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
  28




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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.
    29




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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.
     We operate in an intensely competitive marketplace, and our competitors have greater resources
than we do.
  30




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##### Table of Contents



We are exposed to risks associated with a highly concentrated customer base and industry
consolidation.
   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.
  31




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##### Table of Contents



Adverse economic conditions and volatility and disruption of the capital and credit markets may
negatively impact our revenues and our ability to access financing.
   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.
   32




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##### 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.
   33




---



##### Table of Contents



We may be subject to additional impairment charges due to potential declines in the fair value of
our assets.
  The liquidity of our auction rate securities is impaired, which could impact our ability to meet
cash requirements and require additional financing.
  Our success is dependent on recruiting and retaining a highly talented work force.
  34




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##### Table of Contents



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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##### 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.
   36




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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. (Removed and Reserved)
 
 Item 5. Other Information
  
 Item 6. Exhibits
  ExhibitNumber
    
    Description10.2
    
    The Registrants 2003 Employee Stock Purchase Plan, as amended10.3
    
    The Registrants 2004 Equity Incentive Plan, as amended23.2
    
    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:  May 3, 2011
    By:
    /s/   KEVIN FAIRBAIRNKevin FairbairnPresident, Chief Executive Officer and Director
(Principal Executive Officer)Date:  May 3, 2011
    By:
    /s/   JEFFREY ANDRESONJeffrey AndresonExecutive Vice President, Finance and Administration,
Chief Financial Officer,

Treasurer and Secretary
(Principal Financial and Accounting Officer) 38