Intevac
Feb 2, 2010

Intevac Announces Fourth Quarter and Full Year 2009 Financial Results

SANTA CLARA, Calif., Feb 02, 2010 (BUSINESS WIRE) -- Intevac, Inc. (Nasdaq:IVAC) today reported financial results for the fourth quarter and year ended December 31, 2009.

Net income for the quarter was $2.0 million, or $0.09 per diluted share, on 22.7 million weighted-average shares outstanding. Net income included $546,000 of equity-based compensation expense, equivalent to $0.02 per diluted share. For the fourth quarter of 2008, the net loss was $12.6 million, or $0.58 per diluted share, on 21.8 million weighted-average shares outstanding, which included goodwill and intangible asset impairment charges of $10.5 million, equivalent to $0.34 per diluted share, and $1.6 million of equity-based compensation expense, equivalent to $0.06 per diluted share.

Revenues for the quarter were $34.2 million, including $26.9 million of Equipment revenues and Intevac Photonics revenues of $7.3 million. Equipment revenues included three 200 Lean(R) systems, as well as upgrades, spares and service. Intevac Photonics revenues consisted of $4.6 million of research and development contracts and $2.7 million of product sales or 37.1% of Photonics revenues. For the fourth quarter of 2008, revenues were $16.4 million, including $11.9 million of Equipment revenues and $4.5 million of Intevac Photonics revenues, which included $1.6 million of product sales or 36.4% of Photonics revenues.

Equipment gross margin was 48.8%, compared to 48.2% in the third quarter of 2009 and 41.4% in the fourth quarter of 2008. The sequential improvement in Equipment gross margin reflected increased business levels partially offset by a higher mix of systems, while the year-over-year increase reflected increased business levels and improved system margins. Intevac Photonics gross margin was 29.2%, compared to 40.1% in the third quarter of 2009 and 19.5% in the fourth quarter of 2008. The sequential decrease in Photonics gross margin reflected initial higher costs as we began to ramp to high-volume production of our digital night-vision camera module to our NATO customer, while the year-over-year increase reflected improved overall product margins. Consolidated gross margin was 44.6%, compared to 45.3% in the third quarter of 2009 and 35.3% in the fourth quarter of 2008.

Research and development and selling, general and administrative expenses for the quarter totaled $11.2 million, a decline of 25.9% compared to $15.1 million, in the fourth quarter of 2008 and a decline of 9.9% compared to $12.4 million in the third quarter of 2009. These declines resulted from our global cost reduction plan.

The net loss for the full year 2009 was $10.1 million, or $0.46 per diluted share, on 22.0 million weighted-average shares outstanding. The net loss included $4.3 million of equity-based compensation expense, equivalent to $0.14 per diluted share. 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 2008 net loss included the goodwill and intangibles asset impairment charges of $10.5 million, equivalent to $0.34 per diluted share. The 2008 net loss also included $6.6 million of equity-based compensation expense, equivalent to $0.22 per diluted share.

Revenues for the full year 2009 were $78.0 million, including $51.4 million of Equipment revenues and $26.6 million of Intevac Photonics revenues. Equipment revenues consisted of four 200 Lean(R) systems as well as disk lubrication systems, equipment upgrades, spares and service. Intevac Photonics revenues consisted of $16.1 million of research and development contracts and $10.5 million of product sales or 39.5% of Photonics revenues. For the full year 2008, revenues were $110.3 million, including $87.5 million of Equipment revenues and $22.8 million of Intevac Photonics revenues, which included $8.5 million of product sales or 37.2% of Photonics revenues.

Equipment and Intevac Photonics gross margins for the year were 45.3% and 35.6%, respectively, compared to 40.9% and 33.0% in 2008. The improvement in Equipment gross margin reflected changes in product mix to higher-margin technology upgrades partially offset by lower revenues and factory absorption. The increase in Intevac Photonics margin reflected higher-margin development contracts and an increased percentage of revenue derived from higher-margin product shipments. Consolidated gross margins were 42.0%, compared to 39.3% in 2008.

Research and development and selling, general and administrative expenses for the full year totaled $50.1 million, and declined 20.9% from $63.3 million in 2008, primarily due to decreased spending on development of new Equipment products as well as cost savings resulting from our global cost reduction plan. Total operating expenses in 2008 were $73.8 million and included non-cash asset impairment charges of $10.5 million.

Order backlog totaled $73.8 million on December 31, 2009, compared to $52.2 million on September 26, 2009 and $20.2 million on December 31, 2008. Backlog at year end includes ten 200 Lean(R) systems, compared to five on September 26, 2009 and one on December 31, 2008.

"We are pleased to report our return to profitability in the fourth quarter of 2009," commented Kevin Fairbairn, president and chief executive officer of Intevac. "2009 started off as a challenging year for the hard drive industry, yet by the second half the industry was struggling to keep up with demand with our customers' factories running at record utilization rates. Customers and analysts are predicting ongoing growth for 2010 and indicative of these positive market dynamics are our recently-announced multiple-system orders for incremental new capacity and legacy tool retirements.

"Further, we continued to demonstrate our operational capabilities in the fourth quarter, exceeding guidance in profitability, by focusing on driving short term incremental business while exercising tight control of expenses. Finally, our Intevac Photonics business achieved record revenues for the fourth quarter and full year, and made positive progress in 2009 with several new contracts and higher-volume production ramps on multiple platforms utilizing our digital low-light camera and Raman system technologies," concluded Mr. Fairbairn.

Conference Call Information

The company will discuss its financial results and outlook in a conference call today at 1:30 p.m. PST (4:30 p.m. EST). To participate in the teleconference, please call toll-free (888) 397-5351 prior to the start time. For international callers, the dial-in number is (719) 325-2350. 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. EST. You may access the replay by calling (888) 203-1112 or, for international callers, (719) 457-0820, and providing Replay Passcode 4509151.

About Intevac

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

Equipment Business: We are a leader in the design, development 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 processing systems to the hard drive industry and offer highly efficient technology solutions to the photovoltaic and semiconductor industries.

Intevac Photonics: We are a leader in the development and manufacture of leading edge, high-sensitivity imaging products and vision systems, as well as table-top and handheld 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(R) is a registered 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; tightness in media supply and expected momentum of the Photonics business. 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: oversupply in the media industry, failure to achieve historical growth rates for the Photonics business, 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,

2009

December 31,

2008

December 31,

2009

December 31,

2008

Net revenues
Equipment $26,912 $11,911 $51,389 $87,469
Intevac Photonics 7,288 4,529 26,592 22,838
Total net revenues 34,200 16,440 77,981 110,307
Gross profit 15,264 5,810 32,720 43,339
Gross margin
Equipment 48.8% 41.4% 45.3% 40.9%
Intevac Photonics 29.2% 19.5% 35.6% 33.0%
Consolidated 44.6% 35.3% 42.0% 39.3%
Operating expenses
Research and development 5,808 8,657 28,064 35,083
Selling, general and administrative 5,351 6,411 22,003 28,229
Impairment of goodwill and intangible assets -- 10,498 -- 10,498
Total operating expenses 11,159 25,566 50,067 73,810
Operating income (loss)
Equipment 5,480 (5,430) (8,826) (9,924)
Intevac Photonics (886) (2,959) (4,133) (6,674)
Corporate1 (489) (11,367) (4,388) (13,873)
Total operating profit (loss) 4,105 (19,756) (17,347) (30,471)
Interest and other income 475 831 1,254 3,932
Profit (loss) before income taxes 4,580 (18,925) (16,093) (26,539)
Provision (benefit) for income taxes 2,605 (6,307) (6,016) (11,194)
Net income (loss)

$1,975

$(12,618) $(10,077) $(15,345)
Income (loss) per share
Basic $0.09 $(0.58) $(0.46) $(0.71)
Diluted $0.09 $(0.58) $(0.46) $(0.71)
Weighted average common shares outstanding
Basic 22,073 21,796 21,975 21,724
Diluted 22,668 21,796 21,975 21,724

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

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands)

December 31,

2009

December 31,

2008

(Unaudited) (see Note)
ASSETS
Current assets
Cash, cash equivalents and short-term investments $ 23,592 $ 39,201
Accounts receivable, net 44,756 15,014
Inventories 19,100 17,674
Deferred tax assets 1,515 3,204
Prepaid expenses and other current assets 6,687 4,806
Total current assets 95,650 79,899
Long-term investments 66,249 66,328
Property, plant and equipment, net 12,351 14,886
Deferred tax assets 16,541 14,765
Goodwill 7,905 7,905
Other intangible assets, net 3,537 4,054
Other long-term assets 1,145 1,332
Total assets $ 203,378 $ 189,169
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Note payable $ -- $ 2,000
Accounts payable 4,701 4,214
Accrued payroll and related liabilities 2,784 3,395
Other accrued liabilities 11,104 3,175
Customer advances 13,180 2,807
Total current liabilities 31,769 15,591
Other long-term liabilities 252 509
Stockholders' equity
Common stock ($0.001 par value) 22 22
Additional paid in capital 134,071 128,686
Accumulated other comprehensive loss (1,828) (4,808)
Retained earnings 39,092 49,169
Total stockholders' equity 171,357 173,069
Total liabilities and stockholders' equity $ 203,378 $ 189,169

Note: Amounts as of December 31, 2008 are derived from the December 31, 2008 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, 2009, and December, 2008 were as follows:

Three months ended Year ended

December 31,

2009

December 31,

2008

December 31,

2009

December 31,

2008

Equity-based compensation by type of award:
Stock options $366 $1,290 $3,418 $5,252
Employee Stock Purchase Plan 153 270 776 1,247

Amounts

(capitalized

as inventory)

released to cost of sales

27 13 61 78

Total equity-based

compensation

546 1,573 4,255 6,577

Tax effect on equity-based compensation

(147) (286) (1,224) (1,785)
Net effect on net income (loss) $399 $1,287 $3,031 $4,792
Effect on earnings per share:
Basic $0.02 $0.06 $0.14 $0.22
Diluted $0.02 $0.06 $0.14 $0.22

SOURCE: Intevac, Inc.

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

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