Intevac
Feb 3, 2009

Intevac Announces Fourth Quarter and Full Year 2008 Financial Results

SANTA CLARA, Calif., Feb 03, 2009 (BUSINESS WIRE) -- Intevac, Inc. (Nasdaq:IVAC) today reported financial results for the fourth quarter and year ended December 31, 2008.

The net loss for the quarter was $12.6 million, or $0.58 per diluted share, on 21.8 million weighted-average shares outstanding. The net loss included goodwill and intangible asset impairment charges of $10.5 million, equivalent to $0.34 per diluted share. The net loss also included $1.6 million of equity-based compensation expense, equivalent to $0.04 per diluted share. For the fourth quarter of 2007, the net loss was $2.4 million, or $0.11 per diluted share, on 21.6 million weighted-average shares outstanding, which included $1.7 million of equity-based compensation expense, equivalent to $0.05 per diluted share.

Revenues for the quarter were $16.4 million, including $11.9 million of Equipment revenues and Intevac Photonics revenues of $4.5 million. Equipment revenues included one 200 Lean® system. Intevac Photonics revenues consisted of $2.9 million of research and development contracts and $1.6 million of product sales. For the fourth quarter of 2007, revenues were $16.8 million, including $10.8 million of Equipment revenues and $6.0 million of Intevac Photonics revenues, which included $1.9 million of product sales.

Equipment and Intevac Photonics gross margins for the fourth quarter of 2008 were 41.4% and 19.5%, respectively, compared to 46.7% and 46.7% in the fourth quarter of 2007. The decrease in Equipment gross margin was primarily due to a lower mix of upgrades and spares revenue. The decrease in gross margin for Intevac Photonics reflected lower research and development contract revenues, lower factory absorption and higher warranty expense. Consolidated gross margins were 35.3%, compared to 46.7% in the fourth quarter of 2007.

Research and development and selling, general and administrative expenses for the quarter totaled $15.1 million, or 91.7% of revenues, compared to $14.9 million, or 89.0% of revenues, in the fourth quarter of 2007. Total operating expenses in the fourth quarter of 2008 were $25.6 million and included non-cash asset impairment charges of $10.5 million relating to the carrying amount of the goodwill on the Equipment business segment and certain other intangible assets. Excluding the impairment charge, operating expenses increased slightly compared to the fourth quarter of 2007 but declined nearly $900,000 from the third quarter of 2008 as a result of the previously announced Global Cost Reduction Plan.

The net loss for the full year 2008 was $15.3 million, or $0.71 per diluted share, on 21.7 million weighted-average shares outstanding. The net loss included the goodwill and intangibles asset impairment charges of $10.5 million, equivalent to $0.34 per diluted share. The net loss also included $6.6 million of equity-based compensation expense, equivalent to $0.18 per diluted share. For the full year 2007, net income was $27.3 million, or $1.23 per diluted share, on 22.2 million weighted-average shares outstanding, which included $6.3 million of equity-based compensation expense, equivalent to $0.22 per diluted share.

Revenues for the full year 2008 were $110.3 million, including $87.5 million of Equipment revenues and $22.8 million of Intevac Photonics revenues. Equipment revenues consisted of eleven 200 Lean® systems. Intevac Photonics revenues consisted of $14.3 million of research and development contracts and $8.5 million of product sales. For the full year 2007, revenues were $215.8 million, including $196.7 million of Equipment revenues and $19.1 million of Intevac Photonics revenues, which included $5.2 million of product sales.

Equipment and Intevac Photonics gross margins for the year were 40.9% and 33.0%, respectively, compared to 44.7% and 42.6% in 2007. Lower Equipment margins reflect lower revenues and unabsorbed factory costs. Intevac Photonics margins decreased primarily as a result of lower factory absorption, product mix and higher warranty expense. Consolidated gross margins were 39.3%, compared to 44.5% in 2007.

Total operating expenses for the fiscal year totaled $73.8 million, or 66.9% of revenues, compared to $68.6 million, or 31.8% of revenues, in 2007. Excluding the goodwill and intangible asset impairment charge taken in the fourth quarter of 2008, operating expenses for the year declined by $5.3 million as a result of decreased spending on development of new Equipment products, decreased legal expenses associated with patent litigation, global headcount reductions and overall cost reduction initiatives.

Order backlog totaled $20.2 million on December 31, 2008, compared to $18.5 million on September 27, 2008 and $34.2 million on December 31, 2007. Backlog at year end includes one 200 Lean® system, compared to one on September 27, 2008 and two on December 31, 2007.

"We exceeded our revenue guidance for the quarter and lowered our cost structure, demonstrating our commitment to effectively manage the business through this challenging economic environment. During the quarter we implemented a Global Cost Reduction program, which is expected to achieve approximately $10 to $12 million in annual savings," commented Kevin Fairbairn, president and chief executive officer of Intevac. "In 2009, Intevac will focus on developing the first Hard Disk Drive Patterned Media 200 Lean® production tool, qualifying our Lean EtchTM tool through our alliance with TES in Korea and continuing to ramp our strong Photonics product portfolio."

Conference Call Information

The company will discuss its financial results and outlook in a conference call today at 1:30 p.m. PT (4:30 p.m. ET). To participate in the teleconference, please call toll-free (800) 291-8929 prior to the start time. For international callers, the dial-in number is (706) 634-0478. You may also listen live via the Internet at the company's website, www.Intevac.com, under the Investors link, or at www.earnings.com. For those unable to attend, these web sites will host an archive of the call. Additionally, a telephone replay of the call will be available for 48 hours beginning today at 7:30 p.m. ET. You may access the playback by calling (800) 642-1687, or for international callers (706) 645-9291, and providing conference ID 81361001.

About Intevac

Intevac was founded in 1991 and has two businesses: Equipment and Intevac Photonics.

Equipment Business: We are a leader in the design, manufacture and marketing of high-productivity lean manufacturing systems and have been producing Lean Thinking platforms since 1994. We are the leading supplier of magnetic media sputtering equipment to the hard disk drive industry and offer advanced etch technology systems to the semiconductor industry.

Intevac Photonics: We are a leader in the development of leading edge, high-sensitivity imaging products, vision systems and miniature Raman instruments. Markets addressed include military, industrial, physical science and life science.

For more information call 408-986-9888, or visit the company's website at www.intevac.com.

200 Lean® is a registered trademark, and Lean EtchTM is a trademark, of Intevac, Inc.

Safe Harbor Statement

This press release includes statements that constitute "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995 (the "Reform Act"). Intevac claims the protection of the safe-harbor for forward-looking statements contained in the Reform Act. These forward-looking statements are often characterized by the terms "may," "believes," "projects," "expects," or "anticipates," and do not reflect historical facts. Specific forward-looking statements contained in this press release include, but are not limited to; expected success of the company's alliance with TES Co., Ltd., impact of the company's Global Cost Reduction Plan, and new product development success. The forward-looking statements contained herein involve risks and uncertainties that could cause actual results to differ materially from the company's expectations. These risks include, but are not limited to: failure to manage operating expenses or introduce new products, each of which could have a material impact on our business, our financial results, and the company's stock price. These risks and other factors are detailed in the company's regular filings with the U.S. Securities and Exchange Commission.































































































































CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except per share amounts)

(Unaudited)

  Three months ended

 

Year ended

December 31,
2008

 

December 31,
2007

December 31,
2008



 

December 31,
2007

Net revenues    

Equipment $

11,911
$ 10,801 $ 87,469 $ 196,686

Intevac Photonics



 
4,529       5,950  

 
22,838       19,148  


Total net revenues
16,440 16,751 110,307

215,834
 
Gross profit 5,810

7,819 43,339 96,043
Gross margin

Equipment 41.4 %

46.7 % 40.9 % 44.7 %


 
Intevac Photonics   19.5 %     46.7 %   33.0 %     42.6 %
Consolidated 35.3 % 46.7 %

39.3 % 44.5 %


 
Operating expenses

Research and development 8,657

8,860 35,083 40,137
Selling, general and administrative

6,411 6,056 28,229

28,470
Impairment of goodwill and intangible assets   10,498      

--     10,498      

--  
Total operating expenses 25,566 14,916 73,810

68,607
 
Operating income (loss)
Equipment (5,430 ) (6,405 )

(9,924
) 32,903
Intevac Photonics (2,959 ) 161 (6,674 ) (2,919 )
Corporate1   (11,367 )     (853 )   (13,873 )     (2,548 )

Total operating profit (loss)

(19,756

)
(7,097 ) (30,471 ) 27,436


 
Interest and other income

 
831       3,487  

 
3,932       8,142  


Profit (loss) before income taxes
(18,925 ) (3,610 ) (26,539 ) 35,578


Provision (benefit) for income taxes
  (6,307 )     (1,194 )   (11,194 )  

  8,233  
Net income (loss) $ (12,618 )

$

(2,416

)

$ (15,345 ) $ 27,345  
 

Income (loss) per share

Basic $ (0.58 )

$



(0.11

) $ (0.71 ) $ 1.28
Diluted $ (0.58 )

$

(0.11

) $ (0.71 )

$
1.23
Weighted average common shares outstanding


Basic
21,796 21,580 21,724

21,447
Diluted 21,796 21,580

21,724 22,150
 

1 Q408 and FY 2008 include goodwill and intangibles impairment charges of $10.5 million.

 






























































CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands)

 

December 31,
2008

 

December 31,
2007



(Unaudited)  

(see Note)
ASSETS
 
Current assets
Cash, cash equivalents and short-term investments $ 39,201 $ 138,658
Accounts receivable, net 15,014 14,142
Inventories

17,674 22,133
Deferred tax assets 3,204

3,609
Prepaid expenses and other current assets  

4,806    

 
4,162
Total current assets

79,899 182,704
 
Long-term investments 66,328 2,009
Property, plant and equipment, net 14,886

15,402
Deferred tax assets 14,765 3,740


Goodwill
7,905 7,905
Other intangible assets, net 4,054 1,782
Other long-term assets

  1,332    

  1,871
Total assets $ 189,169   $ 215,413


 
LIABILITIES AND STOCKHOLDERS' EQUITY

 
Current liabilities


Note payable
$ 2,000 $ 1,992
Accounts payable

4,214 7,678
Accrued payroll and related liabilities 3,395

8,610
Other accrued liabilities 3,175 4,163
Customer advances

  2,807    

  5,631
Total current liabilities 15,591 28,074
 
Other long-term liabilities 509

2,176
Stockholders' equity
Common stock ($0.001 par value) 22

22
Paid in capital 128,686 120,022
Accumulated other comprehensive income (loss) (4,808 ) 605
Retained earnings

 
49,169       64,514
Total stockholders' equity   173,069    

  185,163
Total liabilities and stockholders' equity $ 189,169   $ 215,413


 

Note: Amounts as of December 31, 2007 are derived from the December 31, 2007 audited consolidated financial statements.



 






































SUPPLEMENTAL INFORMATION REGARDING EQUITY-BASED COMPENSATION EXPENSE



(In thousands, except per share amounts)

(Unaudited)

 

The effects of recording equity-based compensation for the three months and years ended December 31, 2008, and December 31, 2007 were as follows:

 
 


 
Three Months Ended   Year Ended

December 31,
2008

 

December 31,
2007

December 31,
2008



 

December 31,
2007

Equity-based compensation by type of award:    

Stock options $

1,290
$ 1,525 $ 5,252 $ 5,517
Employee Stock Purchase Plan

270
246 1,247 864

Amounts (capitalized as inventory) released to cost of sales  

13



   

(80



)

 

78



   

(111



)

Total equity-based compensation 1,573 1,691

6,577 6,270
Tax effect on equity-based compensation  



(613

)

 

(580

)

 

(2,565

)



 

(1,451

)

Net effect on net income (loss) $ 960  

$ 1,111   $ 4,012   $ 4,819  
 

Effect on earnings per share:

Basic $ 0.04 $ 0.05

$ 0.18 $ 0.22
Diluted $ 0.04 $ 0.05

$ 0.18 $ 0.22

SOURCE: Intevac, Inc.

Intevac, Inc.
Jeff Andreson, 408-986-9888
Chief Financial Officer
or
Claire McAdams, 530-265-9899 (Investor Relations)