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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
 
 
FORM 10-Q
 
 
(MARK ONE)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended July 3, 2021
OR
 
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from
                    
to
                    
Commission file number
0-26946
 
 
INTEVAC, INC.
(Exact name of registrant as specified in its charter)
 
 
 
Delaware
 
94-3125814
(State or other jurisdiction of
incorporation or organization)
 
(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
 
 
Securities registered pursuant to Section 12(b) of the Act:
 
Title of each class
 
Trading
Symbol(s)
 
Name of each exchange
on which registered
Common Stock ($0.001 par value)
 
IVAC
 
The Nasdaq Stock Market LLC (Nasdaq) Global Select
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    ☒  Yes    ☐  No
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation
S-T
(§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    ☒  Yes    ☐  No
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a
non-accelerated
filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in
Rule 12b-2
of the Exchange Act:
 
Large accelerated filer
 
  
Accelerated filer
 
Non-accelerated
filer
 
  
Smaller reporting company
 
    
Emerging growth company
 
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  ☐
Indicate by check mark whether the registrant is a shell company (as defined in
Rule 12b-2
of the Act).    ☐  Yes    ☒  No
On August 3, 2021, 24,585,984 shares of the Registrant’s Common Stock, $0.001 par value, were outstanding.
 
 
 

INTEVAC, INC.
INDEX
 
No.
      
Page
 
  
Item 1.
    
       3  
       4  
       5  
       6  
       7  
Item 2.
       24  
Item 3.
       31  
Item 4.
       31  
 
Item 1.
       32  
Item 1A.        32  
Item 2.        38  
Item 3.        38  
Item 4.        38  
Item 5.        38  
Item 6.        39  
     40  
 
2

PART I. FINANCIAL INFORMATION
 
Item 1.
Financial Statements
INTEVAC, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
 
    
July 3,

2021
   
January 2,

2021
 
    
(Unaudited)
(In thousands, except par value)
 
ASSETS
 
     
Current assets:
                
Cash and cash equivalents
   $ 32,856     $ 29,341  
Short-term investments
     15,805       14,839  
Trade and other accounts receivable, net of allowances of $0
 a
t both July 3, 2021 and January 2, 2021
     14,356       28,646  
Inventories
     20,524       21,689  
Prepaid expenses and other current assets
     1,691       1,893  
    
 
 
   
 
 
 
Total current assets
     85,232       96,408  
Long-term investments
     4,679       5,388  
Restricted cash
     787       787  
Property, plant and equipment, net
     9,683       11,004  
Operating lease
right-of-use-assets
     6,988       8,165  
Deferred income taxes and other long-term assets
     5,700       5,486  
    
 
 
   
 
 
 
Total assets
   $ 113,069     $ 127,238  
    
 
 
   
 
 
 
LIABILITIES AND STOCKHOLDERS’ EQUITY
 
     
Current liabilities:
                
Current operating lease liabilities
   $ 2,981     $ 2,853  
Accounts payable
     3,890       4,259  
Accrued payroll and related liabilities
     6,334       7,679  
Other accrued liabilities
     2,421       3,631  
    
 
 
   
 
 
 
Total current liabilities
     15,626       18,422  
Noncurrent liabilities:
                
Noncurrent operating lease liabilities
     5,267       6,803  
Other long-term liabilities
     428       457  
    
 
 
   
 
 
 
Total noncurrent liabilities
     5,695       7,260  
Stockholders’ equity:
                
Common stock, $0.001 par value
     24       24  
Additional
paid-in
capital
     196,064       193,173  
Treasury stock, 5,087 shares at both July 3, 2021 and at January 2, 2021
     (29,551     (29,551
Accumulated other comprehensive income
     571       640  
Accumulated deficit
     (75,360     (62,730
    
 
 
   
 
 
 
Total stockholders’ equity
     91,748       101,556  
    
 
 
   
 
 
 
Total liabilities and stockholders’ equity
   $ 113,069     $ 127,238  
    
 
 
   
 
 
 
Note: Amounts as of January 2, 2021 are derived from the January 2, 2021 audited consolidated financial statements.
See accompanying notes to the condensed consolidated financial statements.
 
3

INTEVAC, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
 
    
Three Months Ended
    
Six Months Ended
 
    
July 3,

2021
   
June 27,

2020
    
July 3,

2021
   
June 27,

2020
 
    
(Unaudited)
(In thousands, except per share amounts)
 
         
Net revenues:
                                 
Systems and components
   $ 10,651     $ 22,725      $ 23,710     $ 36,561  
Technology development
     3,162       6,117        6,344       11,121  
    
 
 
   
 
 
    
 
 
   
 
 
 
Total net revenues
     13,813       28,842        30,054       47,682  
Cost of net revenues:
                                 
Systems and components
     8,624       13,812        18,588       21,579  
Technology development
     2,081       3,610        5,304       6,526  
    
 
 
   
 
 
    
 
 
   
 
 
 
Total cost of net revenues
     10,705       17,422        23,892       28,105  
    
 
 
   
 
 
    
 
 
   
 
 
 
Gross profit
     3,108       11,420        6,162       19,577  
Operating expenses:
                                 
Research and development
     3,894       3,707        7,519       6,991  
Selling, general and administrative
     5,525       5,609        11,455       11,581  
    
 
 
   
 
 
    
 
 
   
 
 
 
Total operating expenses
     9,419       9,316        18,974       18,572  
    
 
 
   
 
 
    
 
 
   
 
 
 
Income (loss) from operations
     (6,311     2,104        (12,812     1,005  
Interest income and other income (expense), net
     20       62        50       204  
    
 
 
   
 
 
    
 
 
   
 
 
 
Income (loss) before provision for (benefit from) income taxes
     (6,291     2,166        (12,762     1,209  
Provision for (benefit from) income taxes
     (165     642        (132     909  
    
 
 
   
 
 
    
 
 
   
 
 
 
Net income (loss)
   $ (6,126   $ 1,524      $ (12,630   $ 300  
    
 
 
   
 
 
    
 
 
   
 
 
 
         
Net income (loss) per share:
                                 
Basic
   $ (0.25   $ 0.06      $ (0.52   $ 0.01  
Diluted
   $ (0.25   $ 0.06      $ (0.52   $ 0.01  
         
Weighted average common shares outstanding:
                                 
Basic
     24,241       23,561        24,137       23,522  
Diluted
     24,241       23,906        24,137       23,953  
See accompanying notes to the condensed consolidated financial statements.
 
4

INTEVAC, INC.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
 
    
Three Months Ended
    
Six Months Ended
 
    
July 3,

2021
   
June 27,

2020
    
July 3,

2021
   
June 27,

2020
 
    
(Unaudited)
(In thousands)
 
         
Net income (loss)
   $ (6,126   $ 1,524      $ (12,630   $ 300  
    
 
 
   
 
 
    
 
 
   
 
 
 
Other comprehensive income (loss), before tax:
                                 
Change in unrealized net gain on
available-for-sale
investments
     (9     51        (29     53  
Foreign currency translation gains (losses)
     28       20        (40     (75
    
 
 
   
 
 
    
 
 
   
 
 
 
Other comprehensive income (loss), before tax
     19       71        (69     (22
Income taxes related to items in other comprehensive income (loss)
     —         —          —         —    
    
 
 
   
 
 
    
 
 
   
 
 
 
Other comprehensive income (loss), net of tax
     19       71        (69     (22
    
 
 
   
 
 
    
 
 
   
 
 
 
Comprehensive income (loss)
   $ (6,107   $ 1,595      $ (12,699   $ 278  
    
 
 
   
 
 
    
 
 
   
 
 
 
See accompanying notes to the condensed consolidated financial statements.
 
5

INTEVAC, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
 
    
Six months ended
 
    
July 3,

2021
   
June 27,

2020
 
    
(Unaudited)
(In thousands)
 
     
Operating activities
                
Net income (loss)
   $ (12,630   $ 300  
Adjustments to reconcile net income (loss) to net cash and cash equivalents provided by operating activities:
                
Depreciation and amortization
     1,686       1,797  
Net amortization (accretion) of investment premiums and discounts
     62       (26
Equity-based compensation
     1,987       1,328  
Straight-line rent adjustment and amortization of lease incentives
     (231     (142
Deferred income taxes
     (202     426  
Changes in operating assets and liabilities
     12,692       (148
    
 
 
   
 
 
 
Total adjustments
     15,994       3,235  
    
 
 
   
 
 
 
Net cash and cash equivalents provided by operating activities
     3,364       3,535  
Investing activities
                
Purchases of investments
     (10,163     (12,213
Proceeds from sales and maturities of investments
     9,815       14,510  
Purchases of leasehold improvements and equipment
     (365     (1,837
    
 
 
   
 
 
 
Net cash and cash equivalents provided by (used in) investing activities
     (713     460  
Financing activities
                
Net proceeds from issuance of common stock
     1,436       994  
Common stock repurchases
     —         (393
Taxes paid related to net share settlement
     (532     (345
    
 
 
   
 
 
 
Net cash and cash equivalents provided by financing activities
     904       256  
Effect of exchange rate changes on cash and cash equivalents
     (40     (74
    
 
 
   
 
 
 
Net increase in cash, cash equivalents and restricted cash
     3,515       4,177  
Cash, cash equivalents and restricted cash at beginning of period
     30,128       20,554  
    
 
 
   
 
 
 
Cash, cash equivalents and restricted cash at end of period
   $ 33,643     $ 24,731  
    
 
 
   
 
 
 
     
Non-cash
investing and financing activity
                
Additions to
right-of-use-assets
obtained from new operating lease liabilities
   $ —       $ 128  
    
 
 
   
 
 
 
See accompanying notes to the condensed consolidated financial statements.
 
6

INTEVAC, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
 
1.
Description of Business and Basis of Presentation
Description of Business
Intevac, Inc. (together with its subsidiaries “Intevac,” the “Company” or “we”) is a provider of vacuum deposition equipment for a wide variety of thin-film applications, and a leading provider of digital night-vision technologies and products to the defense industry. The Company leverages its core capabilities in high-volume manufacturing of small substrates to provide process manufacturing equipment solutions to the hard disk drive (“HDD”), display cover panel (“DCP”), photovoltaic (“PV”) solar cell and advanced semiconductor packaging (“ASP”) industries. Intevac also provides sensors, cameras and systems for government applications such as night vision. Intevac’s customers include manufacturers of hard disk media, DCPs and solar cells as well as the U.S. government and its agencies, allies and contractors. Intevac reports two segments: Thin-film Equipment (“TFE”) and Photonics.
Basis of Presentation
In the opinion of management, the unaudited interim condensed consolidated financial statements of Intevac included herein have been prepared on a basis consistent with the January 2, 2021 audited consolidated financial statements and include all material adjustments, consisting of normal recurring adjustments, necessary to fairly present the information set forth therein.
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make judgments, estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. Actual results could differ materially from those estimates.
COVID-19
Update
The COVID-19
outbreak, which was declared a global pandemic by the World Health Organization in March 2020, has impacted all countries in which we operate. The impact of
COVID-19,
including changes in consumer behavior, pandemic fears, and market downturns as well as restrictions on business and individual activities has created significant volatility in the global economy and led to reduced economic activity. There have been extraordinary actions taken by federal, state, and local public health and governmental authorities to contain the spread of
COVID-19
and although many restrictions that were in place have eased in many localities, some areas that had previously eased restrictions have reverted to more stringent limitations. There remains significant uncertainty concerning the magnitude of the impact and the duration of the
COVID-19
pandemic. Given that, we are unable to predict the ultimate impact it may have on our business, future operations, financial position or cash flows. The extent that our operations will continue to be impacted by the
COVID-19
pandemic will depend on future developments, including any new potential waves of the virus, new strains of the virus, and the success of vaccination programs, all of which are highly uncertain and cannot be accurately predicted. However, we are monitoring the progression of the pandemic and its potential effect on our financial position, results of operations, and cash flows.
 
7

INTEVAC, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
(Unaudited)
 
2.
Revenue
The following tables represent a disaggregation of revenue from contracts with customers for the three and six months ended July 3, 2021 and June 27, 2020 along with the reportable segment for each category.
Major Products and Service Lines
 
TFE
  
Three Months Ended July 3, 2021
    
Three Months Ended June 27, 2020
 
    
(In thousands)
 
    
HDD
    
DCP
    
PV
    
ASP
    
Total
    
HDD
    
PV
    
Total
 
Systems, upgrades and spare parts
   $ 3,955      $ 3      $ 47      $ —        $ 4,005      $ 15,226      $ 61      $ 15,287  
Field service
     1,364        —          —          —          1,364        1,306        2        1,308  
    
 
 
    
 
 
    
 
 
    
 
 
    
 
 
    
 
 
    
 
 
    
 
 
 
Total TFE net revenues
   $ 5,319      $ 3      $ 47      $ —        $ 5,369      $ 16,532      $ 63      $ 16,595  
    
 
 
    
 
 
    
 
 
    
 
 
    
 
 
    
 
 
    
 
 
    
 
 
 
 
    
Six Months Ended July 3, 2021
    
Six Months Ended June 27, 2020
 
    
(In thousands)
 
    
HDD
    
DCP
    
PV
    
ASP
    
Total
    
HDD
    
PV
    
Total
 
Systems, upgrades and spare parts
   $ 7,539      $ 3      $ 158      $ 3,850      $ 11,550      $ 21,587      $ 269      $ 21,856  
Field service
     3,001        14        42        —          3,057        2,699        2        2,701  
    
 
 
    
 
 
    
 
 
    
 
 
    
 
 
    
 
 
    
 
 
    
 
 
 
Total TFE net revenues
   $ 10,540      $ 17      $ 200      $ 3,850      $ 14,607      $ 24,286      $ 271      $ 24,557  
    
 
 
    
 
 
    
 
 
    
 
 
    
 
 
    
 
 
    
 
 
    
 
 
 
 
    
Three Months
Ended
    
Six Months Ended
 
Photonics
  
July 3,

2021
    
June 27,

2020
    
July 3,

2021
    
June 27,

2020
 
    
(In thousands)
 
Products:
                                   
         
Military products
   $ 4,958      $ 5,446      $ 8,209      $ 10,811  
Commercial products
     50        39        178        118  
Repair and other services
     274        645        716        1,075  
    
 
 
    
 
 
    
 
 
    
 
 
 
Total Photonics product net revenues
     5,282        6,130        9,103        12,004  
Technology development:
                                   
Firm Fixed Price (“FFP”)
     1,543        5,462        3,348        9,892  
Cost Plus Fixed Fee (“CPFF”)
     1,619        655        2,996        1,229  
Time and materials
     —          —          —          —    
    
 
 
    
 
 
    
 
 
    
 
 
 
Total technology development net revenues
     3,162        6,117        6,344        11,121  
    
 
 
    
 
 
    
 
 
    
 
 
 
Total Photonics net revenues
   $ 8,444      $ 12,247      $ 15,447      $ 23,125  
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Primary Geographical Markets
 
    
Three Months Ended
    
Three Months Ended
 
    
July 3, 2021
    
June 27, 2020
 
    
(In thousands)
 
    
TFE
    
Photonics
    
Total
    
TFE
    
Photonics
    
Total
 
United States
   $ 2,121      $ 8,371      $ 10,492      $ 313      $ 12,125      $ 12,438  
Asia
     3,248        —          3,248        16,282        —          16,282  
Europe
     —          73        73        —          122        122  
    
 
 
    
 
 
    
 
 
    
 
 
    
 
 
    
 
 
 
Total net revenues
   $ 5,369      $ 8,444      $ 13,813      $ 16,595      $ 12,247      $ 28,842  
    
 
 
    
 
 
    
 
 
    
 
 
    
 
 
    
 
 
 
     
    
Six Months Ended
    
Six Months Ended
 
    
July 3, 2021
    
June 27, 2020
 
    
(In thousands)
 
    
TFE
    
Photonics
    
Total
    
TFE
    
Photonics
    
Total
 
United States
   $ 2,488      $ 15,331      $ 17,819      $ 832      $ 22,981      $ 23,813  
Asia
     8,269        —          8,269        23,725        —          23,725  
Europe
     3,850        116        3,966        —          144        144  
    
 
 
    
 
 
    
 
 
    
 
 
    
 
 
    
 
 
 
Total net revenues
   $ 14,607      $ 15,447      $ 30,054      $ 24,557      $ 23,125      $ 47,682  
    
 
 
    
 
 
    
 
 
    
 
 
    
 
 
    
 
 
 
 
8

INTEVAC, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
(Unaudited)
 
Timing of Revenue Recognition
 
    
Three Months Ended
    
Three Months Ended
 
    
July 3, 2021
    
June 27, 2020
 
    
(In thousands)
 
    
TFE
    
Photonics
    
Total
    
TFE
    
Photonics
    
Total
 
Products transferred at a point in time
   $ 5,369      $ 274      $ 5,643      $ 16,595      $ 645      $ 17,240  
Products and services transferred over time
     —          8,170        8,170        —          11,602        11,602  
    
 
 
    
 
 
    
 
 
    
 
 
    
 
 
    
 
 
 
     $ 5,369      $ 8,444      $ 13,813      $ 16,595      $ 12,247      $ 28,842  
    
 
 
    
 
 
    
 
 
    
 
 
    
 
 
    
 
 
 
     
    
Six Months Ended
    
Six Months Ended
 
    
July 3, 2021
    
June 27, 2020
 
    
(In thousands)
 
    
TFE
    
Photonics
    
Total
    
TFE
    
Photonics
    
Total
 
Products transferred at a point in time
   $ 14,607      $ 645      $ 15,252      $ 24,557      $ 1,075      $ 25,632  
Products and services transferred over time
     —          14,802        14,802        —          22,050        22,050  
    
 
 
    
 
 
    
 
 
    
 
 
    
 
 
    
 
 
 
     $ 14,607      $ 15,447      $ 30,054      $ 24,557      $ 23,125      $ 47,682  
    
 
 
    
 
 
    
 
 
    
 
 
    
 
 
    
 
 
 
The following table reflects the changes in our contract assets, which we classify as accounts receivable, unbilled or retainage, and our contract liabilities, which we classify as deferred revenue and customer advances, for the six months ended July 3, 2021:
    
July 3,

2021
    
January 2,

2021
    
Six Months

Change
 
    
(In thousands)
 
TFE:
                          
Contract assets:
                          
Accounts receivable, unbilled
   $ —        $ 369      $ (369
    
 
 
    
 
 
    
 
 
 
Contract liabilities:
                          
Deferred revenue
   $ 195      $ 482      $ (287
Customer advances
     1        33        (32
    
 
 
    
 
 
    
 
 
 
     $ 196      $ 515      $ (319
    
 
 
    
 
 
    
 
 
 
       
Photonics:
                          
Contract assets:
                          
Accounts receivable, unbilled
   $ 1,410      $ 5,439      $ (4,029
Retainage
     127        126        1  
    
 
 
    
 
 
    
 
 
 
     $ 1,537      $ 5,565      $ (4,028
    
 
 
    
 
 
    
 
 
 
Contract liabilities:
                          
Deferred revenue
   $ 275      $ 779      $ (504
    
 
 
    
 
 
    
 
 
 
Accounts receivable, unbilled in our TFE segment represents a contract asset for revenue that has been recognized in advance of billing the customer. For our system and certain upgrade sales, our TFE customers generally pay in three installments, with a portion of the system price billed upon receipt of an order, a portion of the price billed upon shipment, and the balance of the price due upon completion of installation and acceptance of the system at the customer’s factory. Accounts receivable, unbilled in our TFE segment generally represents the balance of the system price that is due upon completion of installation and acceptance, less the amount that has been deferred as revenue for the performance of the installation tasks. During the six months ended July 3, 2021, contract assets in our TFE segment decreased by $369,000 primarily due to the recognition of revenue for the installation portion of revenue for one system that completed installation and acceptance.
 
9

INTEVAC, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
(Unaudited)
 
Customer advances in our TFE segment generally represent a contract liability for amounts billed to the customer prior to transferring goods. The Company has elected to use the practical expedient to disregard the effect of the time value of money in a significant financing component when its payment terms are less than one year. These contract advances are liquidated when revenue is recognized. Deferred revenue in our TFE segment generally represents a contract liability for amounts billed to a customer for completed systems at the customer site that are undergoing installation and acceptance testing where transfer of control has not yet occurred, as Intevac does not yet have a demonstrated history of meeting the acceptance criteria upon the customer’s receipt of product. During the six months ended July 3, 2021, we recognized revenue in our TFE segment of $33,000 and $296,000 that was included in customer advances and deferred revenue, respectively, at the beginning of the period.
Accounts receivable, unbilled in our Photonics segment represents a contract asset for revenue that has been recognized in advance of billing the customer, which is common for contracts in the defense industry. In our Photonics segment, amounts are billed as work progresses in accordance with agreed-upon contractual terms, either at periodic intervals (e.g., monthly) or upon achievement of contractual milestones. Generally, billing occurs subsequent to revenue recognition, resulting in contract assets. Our contracts with the U.S. government may also contain retainage provisions. Retainage represents a contract asset for the portion of the contract price earned by us for work performed, but held for payment by the U.S. government as a form of security until satisfactory completion of the contract. The retainage is billable upon completion of the contract performance and approval of final indirect expense rates by the government. During the six months ended July 3, 2021, contract assets in our Photonics segment decreased by $4.0 million primarily due to the billing of contractual milestones, offset in part by the accrual of revenue for incurred costs under FFP and CPFF contracts.
Deferred revenue in our Photonics segment generally represents a contract liability for amounts billed to the customer upon achievement of contractual milestones. These amounts are liquidated when revenue is recognized. During the six months ended July 3, 2021, we recognized revenue in our Photonics segment of $
779
,000 that was included in deferred revenue at the beginning of the period.
On July 3, 2021, we had $51.7 million of remaining performance obligations, which we also refer to as backlog. Backlog at July 3, 2021 consisted of $18.9 million of TFE backlog and $32.7 million of Photonics backlog. We expect to recognize approximately 52% of our remaining performance obligations as revenue in 2021, 29% in 2022, and 19% in 2023.
 
3.
Inventories
Inventories are stated at the lower of average cost or net realizable value and consist of the following:
 
    
July 3,
2021
    
January 2,
2021
 
    
(In thousands)
 
Raw materials
   $ 11,007      $ 9,999  
Work-in-progress
     5,046        4,832  
Finished goods
     4,471        6,858  
    
 
 
    
 
 
 
     $ 20,524      $ 21,689  
    
 
 
    
 
 
 
Finished goods inventory at July 3, 2021 included one VERTEX SPECTRA system for DCP at a customer’s factory previously under evaluation for which the evaluation period has ended but the tool is being considered for another application at that site. Finished goods inventory at January 2, 2021 included one VERTEX SPECTRA system for DCP under evaluation at a customer’s factory and one MATRIX PVD system for advanced semiconductor packaging under evaluation at a customer’s factory.
 
4.
Equity-Based Compensation
At July 3, 2021, Intevac had equity-based awards outstanding under the 2020 Equity Incentive Plan and the 2012 Equity Incentive Plan (together, the “Plans”) and the 2003 Employee Stock Purchase Plan (the “ESPP”). Intevac’s stockholders approved all of these plans. The Plans permit the grant of incentive or
non-statutory
stock options, performance-based stock options (“PSOs”), restricted stock, stock appreciation rights, restricted stock units (“RSUs”), performance-based restricted stock units (“PRSUs”) and performance shares.
 
10

INTEVAC, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
(Unaudited)
 
The ESPP provides that eligible employees may purchase Intevac’s common stock through payroll deductions at a price equal to 85% of the lower of the fair market value at the entry date of the applicable offering period or at the end of each applicable purchase interval. Offering periods are generally two years in length, and consist of a series of
six-month
purchase intervals. Eligible employees may join the ESPP at the beginning of any
six-month
purchase interval. Under the terms of the ESPP, employees can choose to have up to 50% of their base earnings withheld to purchase Intevac common stock (not to exceed $25,000 per year).
Compensation Expense
The effect of recording equity-based compensation for the three and six months ended July 3, 2021 and June 27, 2020 was as follows:
 
    
Three Months Ended
    
Six Months Ended
 
    
July 3, 2021
    
June 27, 2020
    
July 3, 2021
    
June 27, 2020
 
    
(In thousands)
 
Equity-based compensation by type of award:
                                   
Stock options
   $ 57      $ 149      $ 132      $ 364  
RSUs
     656        450        1,200        816  
Employee stock purchase plan
     306        57        655        148  
    
 
 
    
 
 
    
 
 
    
 
 
 
Total equity-based compensation
   $ 1,019      $ 656      $ 1,987      $ 1,328  
    
 
 
    
 
 
    
 
 
    
 
 
 
Stock Options and ESPP
The fair value of stock options and ESPP awards is estimated at the grant date using the Black-Scholes option valuation model. The determination of fair value of stock options and ESPP awards on the date of grant using an option-pricing model is affected by Intevac’s stock price as well as assumptions regarding a number of highly complex and subjective variables. These variables include, but are not limited to, our expected stock price volatility over the term of the awards, and actual employee stock option exercise behavior. Intevac accounts for forfeitures as they occur, rather than estimating expected forfeitures.
Option activity as of July 3, 2021 and changes during the six months ended July 3, 2021 were as follows:
 
    
Shares
    
Weighted-Average

Exercise Price
 
Options outstanding at January 2, 2021
     1,814,467      $ 6.66  
Options granted
     —        $ —    
Options cancelled and forfeited
     (205,324    $ 6.72  
Options exercised
     (65,462    $ 5.89  
    
 
 
          
Options outstanding at July 3, 2021
     1,543,681      $ 6.57  
    
 
 
          
Options exercisable at July 3, 2021
     1,317,356      $ 6.78  
    
 
 
          
Intevac issued 208,516 shares of common stock under the ESPP during the six months ended July 3, 2021.
Intevac estimated the weighted-average fair value of stock options and ESPP purchase rights using the following weighted-average assumptions:
 
    
Six Months Ended
 
    
June 27, 2020
 
Stock Options:
        
Weighted-average fair value of grants per share
     $1.82  
Expected volatility
     46.06%  
Risk-free interest rate
     0.44%  
Expected term of options (in years)
     4.39  
Dividend yield
     None  
 
11

INTEVAC, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
(Unaudited)
 
    
Six Months Ended
 
    
July 3, 2021
   
June 27, 2020
 
ESPP Purchase Rights:
                
Weighted-average fair value of grants per share
     $2.69       $1.66  
Expected volatility
     58.56%       36.69%  
Risk-free interest rate
     0.08%       1.56%  
Expected term of purchase rights (in years)
     1.0       0.5  
Dividend yield
     None       None  
The computation of the expected volatility assumptions used in the Black-Scholes calculations for new stock option grants and ESPP purchase rights is based on the historical volatility of Intevac’s stock price, measured over a period equal to the expected term of the stock option grant or purchase right. The risk-free interest rate is based on the yield available on U.S. Treasury Strips with an equivalent remaining term. The expected term of employee stock options represents the weighted-average period that the stock options are expected to remain outstanding and was determined based on historical experience of similar awards, giving consideration to the contractual terms of the equity-based awards and vesting schedules. The expected term of purchase rights represents the period of time remaining in the current offering period. The dividend yield assumption is based on Intevac’s history of not paying dividends and the assumption of not paying dividends in the future.
RSUs
RSU activity as of July 3, 2021 and changes during the six months ended July 3, 2021 were as follows:
 
    
Shares
    
Weighted-Average

Grant Date

Fair Value
 
Non-vested
RSUs at January 2, 2021
     901,634      $ 5.30  
Granted
     538,022      $ 6.29  
Vested
     (293,824    $ 6.08  
Cancelled and forfeited
     (44,775    $ 3.96  
    
 
 
          
Non-vested
RSUs at July 3, 2021
     1,101,057      $ 5.63  
    
 
 
          
Time-based RSUs are converted into shares of Intevac common stock upon vesting on a
one-for-one
basis. Time-based RSUs typically are scheduled to vest over four years. Vesting of time-based RSUs is subject to the grantee’s continued service with Intevac. The compensation expense related to these awards is determined using the fair market value of Intevac common stock on the date of the grant, and the compensation expense is recognized over the vesting period.
In May 2021, we granted 126,320 performance-based restricted stock units (“PRSUs”) to members of our senior management. The number of PRSUs that will vest is determined by our common stock achieving a certain Total Shareholder Return (“TSR”) for the Company, relative to the TSR of a specified peer group over a measurement period of two years from the time of grant. The fair value of each PRSU award was estimated on the date of grant using a Monte Carlo simulation. PRSU activity is included in the above RSU tables. At the end of the performance measurement period, the Compensation Committee of the Board of Directors (the “Compensation Committee”) will determine the achievement against the performance objectives. Depending on the Company’s TSR relative to the peer group TSR, the actual number of shares that will be vested for each PRSU grant can range from zero to 200% of the initial grant.
Intevac estimated the weighted-average fair value of PRSUs using the following weighted-average assumptions:
 
    
Three Months Ended
    
July 3, 2021
Weighted-average fair value of grants per share
   $7.65
Expected volatility
   56.26%
Risk-free interest rate
   0.15%
Dividend yield
   None
 
12

INTEVAC, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
(Unaudited)
 
In May 2020, we granted 109,465 PRSUs to members of our senior management. The PRSUs were issued collectively in four separate tranches with individual
one-year
performance periods beginning in May 2020, 2021, 2022 and 2023, respectively. Vesting of the PRSUs is based on the performance of our common stock relative to the performance of a specified peer group. The fair value of each PRSU award was estimated on the date of grant using a Monte Carlo simulation. PRSU activity is included in the above RSU tables. At the end of each performance measurement period, the Compensation Committee will determine the achievement against the performance objectives. Any earned PRSU awards will vest 100% after the end of the applicable performance measurement period. The first performance measurement period ended in May 2021 and the metric was not achieved and 27,366 PRSUs were cancelled.
Intevac estimated the weighted-average fair value of PRSUs using the following weighted-average assumptions:
 
    
Three Months Ended
 
    
June 27, 2020
 
Weighted-average fair value of grants per share
   $ 3.16  
Expected volatility
     46.7
Risk-free interest rate
     0.25
Dividend yield
     None  
 
5.
Warranty
Intevac provides for the estimated cost of warranty when revenue is recognized. Intevac’s warranty is subject to contract terms and, for its HDD manufacturing, DCP manufacturing, solar cell manufacturing and advanced semiconductor packaging manufacturing systems, the warranty typically ranges between 12 and 24 months from customer acceptance. During this warranty period any defective
non-consumable
parts are replaced and installed at no charge to the customer. Intevac uses estimated repair or replacement costs along with its historical warranty experience to determine its warranty obligation. The provision for the estimated future costs of warranty is based upon historical cost and product performance experience. Intevac exercises judgment in determining the underlying estimates.
On the condensed consolidated balance sheets, the short-term portion of the warranty provision is included in other accrued liabilities, while the long-term portion is included in other long-term liabilities. The expense associated with product warranties issued or adjusted is included in cost of net revenues on the condensed consolidated statements of operations.
The following table displays the activity in the warranty provision account for the three and six months ended July 3, 2021 and June 27, 2020:
 
    
Three Months Ended
    
Six Months Ended
 
    
July 3,

2021
    
June 27,

2020
    
July 3,

2021
    
June 27,

2020
 
    
(In thousands)
 
Opening balance
   $ 590      $ 725      $ 480      $ 1,022  
Expenditures incurred under warranties
     (217      (189      (415      (308
Accruals for product warranties issued during the reporting period
     198        135        473        159  
Adjustments to previously existing warranty accruals
     1        (9      34        (211
    
 
 
    
 
 
    
 
 
    
 
 
 
Closing balance
   $ 572      $ 662      $ 572      $ 662  
    
 
 
    
 
 
    
 
 
    
 
 
 
The following table displays the balance sheet classification of the warranty provision account at July 3, 2021 and at January 2, 2021.
 
    
July 3,
2021
    
January 2,
2021
 
    
(In thousands)
 
Other accrued liabilities
   $ 527      $ 405  
Other long-term liabilities
     45        75  
    
 
 
    
 
 
 
Total warranty provision
   $ 572      $ 480  
    
 
 
    
 
 
 
 
13

INTEVAC, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
(Unaudited)
 
6.
Guarantees
Officer and Director Indemnifications
As permitted or required under Delaware law and to the maximum extent allowable under that law, Intevac has certain obligations to indemnify its current and former officers and directors for certain events or occurrences while the officer or director is, or was, serving at Intevac’s request in such capacity. These indemnification obligations are valid as long as the director or officer acted in good faith and in a manner the person reasonably believed to be in or not opposed to the best interests of the Company and, with respect to any criminal action or proceeding, had no reasonable cause to believe his or her conduct was unlawful. The maximum potential amount of future payments Intevac could be required to make under these indemnification obligations is unlimited; however, Intevac has a director and officer insurance policy that mitigates Intevac’s exposure and enables Intevac to recover a portion of any future amounts paid. As a result of Intevac’s insurance policy coverage, Intevac believes the estimated fair value of these indemnification obligations is not material.
Other Indemnifications
As is customary in Intevac’s industry, many of Intevac’s contracts provide remedies to certain third parties such as defense, settlement, or payment of judgments for intellectual property claims related to the use of its products. Such indemnification obligations may not be subject to maximum loss clauses. Historically, payments made related to these indemnifications have been immaterial.
Letters of Credit
As of July 3, 2021, we had letters of credit and bank guarantees outstanding totaling $787,000, including the standby letter of credit outstanding under the Santa Clara, California facility lease and various other guarantees with our bank. These letters of credit and bank guarantees are collateralized by $787,000 of restricted cash.
 
14

INTEVAC, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
(Unaudited)
 
7.
Cash, Cash Equivalents and Investments
Cash and cash equivalents, short-term investments and long-term investments consist of:
 
    
July 3, 2021
 
    
Amortized Cost
    
Unrealized
Holding Gains
    
Unrealized
Holding Losses
    
Fair Value
 
    
(In thousands)
 
         
Cash and cash equivalents:
                                   
Cash
   $ 28,477      $ —        $ —        $ 28,477  
Money market funds
     4,379        —          —          4,379  
    
 
 
    
 
 
    
 
 
    
 
 
 
Total cash and cash equivalents
   $ 32,856      $ —        $ —        $ 32,856  
Short-term investments:
                                   
Certificates of deposit
   $ 7,550      $ 3      $ —        $ 7,553  
Corporate bonds and medium-term notes
     4,505        2        —          4,507  
Municipal bonds
     740        —          —          740  
U.S. treasury and agency securities
     2,999        6        —          3,005  
    
 
 
    
 
 
    
 
 
    
 
 
 
Total short-term investments
   $ 15,794      $ 11      $ —        $ 15,805  
Long-term investments:
                                   
Certificates of deposit
   $ 500      $ —        $ 1      $ 499  
Corporate bonds and medium-term notes
     2,020        —          1        2,019  
U.S. treasury and agency securities
     2,161        1        1        2,161  
    
 
 
    
 
 
    
 
 
    
 
 
 
Total long-term investments
   $ 4,681      $ 1      $ 3      $ 4,679  
    
 
 
    
 
 
    
 
 
    
 
 
 
Total cash, cash equivalents, and investments
   $ 53,331      $ 12      $ 3      $ 53,340  
    
 
 
    
 
 
    
 
 
    
 
 
 
   
    
January 2, 2021
 
    
Amortized Cost
    
Unrealized
Holding Gains
    
Unrealized
Holding Losses
    
Fair Value
 
    
(In thousands)
 
         
Cash and cash equivalents:
                                   
Cash
   $ 24,729      $ —        $ —        $ 24,729  
Money market funds
     3,612        —          —          3,612  
Certificates of deposit
     1,000        —          —          1,000  
    
 
 
    
 
 
    
 
 
    
 
 
 
Total cash and cash equivalents
   $ 29,341      $ —        $ —        $ 29,341  
Short-term investments:
                                   
Certificates of deposit
   $ 6,450      $ 2      $ —        $ 6,452  
Commercial paper
     500        —          —          500  
Corporate bonds and medium-term notes
     2,929        6        —          2,935  
Municipal bonds
     400        —          —          400  
U.S. treasury and agency securities
     4,527        25        —          4,552  
    
 
 
    
 
 
    
 
 
    
 
 
 
Total short-term investments
   $ 14,806      $ 33      $ —        $ 14,839  
Long-term investments:
                                   
Certificates of deposit
   $ 500      $ —        $      $ 500  
Corporate bonds and medium-term notes
     3,474        4        —          3,478  
U.S. treasury and agency securities
     1,409        1        —          1,410  
    
 
 
    
 
 
    
 
 
    
 
 
 
Total long-term investments
   $ 5,383      $ 5      $ —        $ 5,388  
    
 
 
    
 
 
    
 
 
    
 
 
 
Total cash, cash equivalents, and investments
   $ 49,530      $ 38      $ —        $ 49,568  
    
 
 
    
 
 
    
 
 
    
 
 
 
 
15

INTEVAC, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
(Unaudited)
 
The contractual maturities of
available-for-sale
securities at July 3, 2021 are presented in the following table.
 
    
Amortized
Cost
    
Fair
Value
 
    
(In thousands)
 
Due in one year or less
   $ 20,173      $ 20,184  
Due after one through five years
     4,681        4,679  
    
 
 
    
 
 
 
     $ 24,854      $ 24,863  
    
 
 
    
 
 
 
The following table provides the fair market value of Intevac’s investments with unrealized losses that are not deemed to be other-than temporarily impaired as of July 3, 2021.
 
    
July 3, 2021
 
    
In Loss Position for

Less than 12 Months
    
In Loss Position for

Greater than 12 Months
 
    
Fair Value
    
Gross

Unrealized
Losses
    
Fair Value
    
Gross

Unrealized
Losses
 
    
(In thousands)
 
Certificates of deposit
   $ 999      $ 1      $ —        $ —    
Corporate bonds and medium-term notes
     3,085        1        —          —    
U.S. treasury and agency securities
     751        1        —          —    
    
 
 
    
 
 
    
 
 
    
 
 
 
     $ 4,835      $ 3      $ —        $ —    
    
 
 
    
 
 
    
 
 
    
 
 
 
All prices for the fixed maturity securities including U.S. treasury and agency securities, certificates of deposit, commercial paper, corporate bonds, asset backed securities and municipal bonds are received from independent pricing services utilized by Intevac’s outside investment manager. This investment manager performs a review of the pricing methodologies and inputs utilized by the independent pricing services for each asset type priced by the vendor. In addition, on at least an annual basis, the investment manager conducts due diligence visits and interviews with each pricing vendor to verify the inputs utilized for each asset class. The due diligence visits include a review of the procedures performed by each vendor to ensure that pricing evaluations are representative of the price that would be received if a security were to be sold in an orderly transaction. Any pricing where the input is based solely on a broker price is deemed to be a Level 3 price. Intevac uses the pricing data obtained from its outside investment manager as the primary input to make its assessments and determinations as to the ultimate valuation of the above-mentioned securities and has not made, during the periods presented, any material adjustments to such inputs.
The following table represents the fair value hierarchy of Intevac’s
available-for-sale
securities measured at fair value on a recurring basis as of July 3, 2021.
 
    
Fair Value Measurements
at July 3, 2021
 
    
Total
    
Level 1
    
Level 2
 
    
(In thousands)
 
Recurring fair value measurements:
                          
Available-for-sale
securities
                          
Money market funds
   $ 4,379      $ 4,379      $ —    
U.S. treasury and agency securities
     5,166        5,166        —    
Certificates of deposit
     8,052        —          8,052  
Corporate bonds and medium-term notes
     6,526        —          6,526  
Municipal bonds
     740        —          740  
    
 
 
    
 
 
    
 
 
 
Total recurring fair value measurements
   $ 24,863      $ 9,545      $ 15,318  
    
 
 
    
 
 
    
 
 
 
 
16

INTEVAC, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
(Unaudited)
 
8.
Derivative Instruments
The Company uses foreign currency forward contracts to mitigate variability in gains and losses generated from the
re-measurement
of certain monetary assets and liabilities denominated in foreign currencies and to offset certain operational exposures from the impact of changes in foreign currency exchange rates. These derivatives are carried at fair value with changes recorded in interest income and other income (expense), net in the condensed consolidated statements of operations. Changes in the fair value of these derivatives are largely offset by
re-measurement
of the underlying assets and liabilities. Cash flows from such derivatives are classified as operating activities. The derivatives have maturities of approximately
30
days.
The following table summarizes the Company’s outstanding derivative instruments on a gross basis as recorded in its condensed consolidated balance sheets as of July 3, 2021 and January 2, 2021.
 
    
Notional Amounts
    
Derivative Liabilities
 
Derivative Instrument
  
July 3,

2021
    
January 2,

2021
    
July 3,

2021
    
January 2,

2021
 
                  
Balance

Sheet

Line
    
Fair

Value
    
Balance

Sheet

Line
    
Fair

Value
 
    
(In thousands)
 
Undesignated Hedges:
                                                     
Forward Foreign Currency Contracts
   $ 520      $ 983       
*
 
     $ 3       
*
 
 
 
   $ 3  
    
 
 
    
 
 
             
 
 
             
 
 
 
Total Hedges
   $ 520     
$
983               $ 3               $ 3  
    
 
 
    
 
 
             
 
 
             
 
 
 
 
*
Other accrued liabilities
 
9.
Equity
Stock Repurchase Program
On November 21, 2013, Intevac’s Board of Directors approved a stock repurchase program authorizing up to $30.0 million in repurchases. On August 15, 2018, Intevac’s Board of Directors approved a $10.0 million increase to the original stock repurchase program for an aggregate authorized amount of up to $40.0 million. At July 3, 2021, $10.4 million remains available for future stock repurchases under the repurchase program.
Intevac records treasury stock purchases under the cost method using the
first-in,
first-out
method. Upon reissuance of treasury stock, amounts in excess of the acquisition cost are credited to additional
paid-in
capital. If Intevac reissues treasury stock at an amount below its acquisition cost and additional
paid-in
capital associated with prior treasury stock transactions is insufficient to cover the difference between the acquisition cost and the reissue price, this difference is recorded against accumulated deficit.
The following table summarizes Intevac’s stock repurchases:
 
    
Three Months Ended
    
Six Months Ended
 
    
July 3,

2021
    
June 27,

2020
    
July 3,

2021
    
June 27,

2020
 
    
(In thousands, except per share amounts)
 
Shares of common stock repurchased
     —          —          —          98  
Cost of stock repurchased
   $ —        $ —        $ —        $ 393  
Average price paid per share
   $ —        $ —        $ —        $ 3.97  
 
17

INTEVAC, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
(Unaudited)
 
Condensed Consolidated Statement of Changes in Equity
The changes in stockholders’ equity by component for the three and six months ended July 3, 2021 and June 27, 2020, are as follows (in thousands):
 
    
Three months ended July 3, 2021
 
    
Common
Stock and
Additional
Paid-in

Capital
   
Treasury
Stock
   
Accumulated
Other
Comprehensive
Income
   
Accumulated
Deficit
   
Total
Stockholders’
Equity
 
Balance at April 3, 2021
   $ 195,388     $ (29,551   $ 552     $ (69,234   $ 97,155  
Common stock issued under employee plans
     193       —         —         —         193  
Shares withheld for net share settlement of RSUs
     (512     —         —         —         (512
Equity-based compensation expense
     1,019       —         —         —         1,019  
Net loss
     —         —         —         (6,126     (6,126
Other comprehensive income
     —         —         19       —         19  
    
 
 
   
 
 
   
 
 
   
 
 
   
 
 
 
Balance at July 3, 2021
   $ 196,088     $ (29,551   $ 571     $ (75,360   $ 91,748  
    
 
 
   
 
 
   
 
 
   
 
 
   
 
 
 
   
    
Six months ended July 3, 2021
 
    
Common
Stock and
Additional
Paid-in

Capital
   
Treasury
Stock
   
Accumulated
Other
Comprehensive
Income
   
Accumulated
Deficit
   
Total
Stockholders’
Equity
 
Balance at January 2, 2021
   $ 193,197     $
(29, 551
  $ 640     $ (62,730   $ 101,556  
Common stock issued under employee plans
     1,436       —         —         —         1,436  
Shares withheld for net share settlement of RSUs
     (532     —         —         —         (532
Equity-based compensation expense
     1,987       —         —         —         1,987  
Net loss
     —         —         —         (12,630     (12,630
Other comprehensive loss
     —         —         (69     —         (69
    
 
 
   
 
 
   
 
 
   
 
 
   
 
 
 
Balance at July 3, 2021
   $ 196,088     $ (29,551   $ 571     $ (75,360   $ 91,748  
    
 
 
   
 
 
   
 
 
   
 
 
   
 
 
 
   
    
Three months ended June 27, 2020
 
    
Common
Stock and
Additional
Paid-in

Capital
   
Treasury
Stock
   
Accumulated
Other
Comprehensive
Income
   
Accumulated
Deficit
   
Total
Stockholders’
Equity
 
Balance at March 28, 2020
   $ 189,899     $ (29,551   $ 331     $ (65,010   $ 95,669  
Common stock issued under employee plans
     44       —         —         —         44  
Shares withheld for net share settlement of RSUs
     (309     —         —         —         (309
Equity-based compensation expense
     656       —         —         —         656  
Net income
     —         —         —         1,524       1,524  
Other comprehensive income
     —         —         71       —         71  
    
 
 
   
 
 
   
 
 
   
 
 
   
 
 
 
Balance at June 27, 2020
   $ 190,290     $ (29,551   $ 402     $ (63,486   $ 97,655  
    
 
 
   
 
 
   
 
 
   
 
 
   
 
 
 
   
    
Six months ended June 27, 2020
 
    
Common
Stock and
Additional
Paid-in

Capital
   
Treasury
Stock
   
Accumulated
Other
Comprehensive
Income
   
Accumulated
Deficit
   
Total
Stockholders’
Equity
 
Balance at December 28, 2019
   $ 188,313     $ (29,158   $ 424     $ (63,786   $ 95,793  
Common stock issued under employee plans
     994       —         —         —         994  
Shares withheld for net share settlement of RSUs
     (345     —         —         —         (345
Equity-based compensation expense
     1,328       —         —         —         1,328  
Net income
     —         —         —         300       300  
Other comprehensive loss
     —         —         (22     —         (22
Common stock repurchases
     —         (393     —         —         (393
    
 
 
   
 
 
   
 
 
   
 
 
   
 
 
 
Balance at June 27, 2020
   $ 190,290     $ (29,551   $ 402     $ (63,486   $ 97,655  
    
 
 
   
 
 
   
 
 
   
 
 
   
 
 
 
 
18

INTEVAC, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
(Unaudited)
 
Accumulated Other Comprehensive Income
The changes in accumulated other comprehensive income by component for the three and six months ended July 3, 2021 and June 27, 2020, are as follows.
 
    
Three Months Ended
    
Six Months Ended
 
    
July 3, 2021
 
    
Foreign

currency
    
Unrealized
holding gains
(losses) on
available-for-sale

investments
   
Total
    
Foreign
currency
   
Unrealized
holding gains
(losses) on
available-for-sale

investments
   
Total
 
    
(In thousands)
 
Beginning balance
   $ 534      $ 18     $ 552      $ 602     $ 38     $ 640  
Other comprehensive income (loss) before reclassification
     28        (9     19        (40     (29     (69
Amounts reclassified from other comprehensive income
     —          —         —          —         —         —    
    
 
 
    
 
 
   
 
 
    
 
 
   
 
 
   
 
 
 
Net current-period other comprehensive income (loss)
     28        (9     19        (40     (29     (69
    
 
 
    
 
 
   
 
 
    
 
 
   
 
 
   
 
 
 
Ending balance
   $ 562      $ 9     $ 571      $ 562     $ 9     $ 571  
    
 
 
    
 
 
   
 
 
    
 
 
   
 
 
   
 
 
 
     
    
Three Months Ended
    
Six Months Ended
 
    
June 27, 2020
 
    
Foreign

currency
    
Unrealized
holding gains on
available-for-sale

investments
   
Total
    
Foreign
currency
   
Unrealized
holding gains on
available-for-sale

investments
   
Total
 
    
(In thousands)
 
Beginning balance
   $ 286      $ 45     $ 331      $ 381     $ 43     $ 424  
Other comprehensive income (loss) before reclassification
     20        51       71        (75     53       (22
Amounts reclassified from other comprehensive income
     —          —         —          —         —         —    
    
 
 
    
 
 
   
 
 
    
 
 
   
 
 
   
 
 
 
Net current-period other comprehensive income (loss)
     20        51       71        (75     53       (22
    
 
 
    
 
 
   
 
 
    
 
 
   
 
 
   
 
 
 
Ending balance
   $ 306      $ 96     $ 402      $ 306     $ 96     $ 402  
    
 
 
    
 
 
   
 
 
    
 
 
   
 
 
   
 
 
 
 
10.
Net Income (Loss) Per Share
The following table sets forth the computation of basic and diluted net income (loss) per share:
 
    
Three Months Ended
    
Six Months Ended
 
    
July 3, 2021
    
June 27, 2020
    
July 3, 2021
    
June 27, 2020
 
    
(In thousands, except per share amounts)
 
Net income (loss)
   $ (6,126    $ 1,524      $ (12,630    $ 300  
Weighted-average shares – basic
     24,241        23,561        24,137        23,522  
Effect of dilutive potential common shares
     —          345        —          431  
    
 
 
    
 
 
    
 
 
    
 
 
 
Weighted-average shares – diluted
     24,241        23,906        24,137        23,953  
    
 
 
    
 
 
    
 
 
    
 
 
 
Net income (loss) per share – basic
   $ (0.25    $ 0.06      $ (0.52    $ 0.01  
    
 
 
    
 
 
    
 
 
    
 
 
 
Net income (loss) per share – diluted
   $ (0.25    $ 0.06      $ (0.52    $ 0.01  
    
 
 
    
 
 
    
 
 
    
 
 
 
 
19

INTEVAC, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
(Unaudited)
 
The following potentially dilutive securities were excluded (as common stock equivalents) from the computation of diluted net income (loss) per share for the periods presented as their effect would have been antidilutive:
 
    
Three Months Ended
    
Six Months Ended
 
    
July 3, 2021
    
June 27, 2020
    
July 3, 2021
    
June 27, 2020
 
    
(In thousands)
 
         
Stock options to purchase common stock
     1,544        1,596        1,544        1,596  
RSUs
     1,101        19        1,101        19  
Employee stock purchase plan
     8        2        8        2  
 
11.
Segment Reporting
Intevac’s two reportable segments are TFE and Photonics. Intevac’s chief operating decision-maker has been identified as the President and CEO, who reviews operating results to make decisions about allocating resources and assessing performance for the entire Company. Segment information is presented based upon Intevac’s management organization structure as of July 3, 2021 and the distinctive nature of each segment. Future changes to this internal financial structure may result in changes to the reportable segments disclosed.
Each reportable segment is separately managed and has separate financial results that are reviewed by Intevac’s chief operating decision-maker. Each reportable segment contains closely related products that are unique to the particular segment. Segment operating profit is determined based upon internal performance measures used by the chief operating decision-maker.
Intevac derives the segment results from its internal management reporting system. The accounting policies Intevac uses to derive reportable segment results are substantially the same as those used for external reporting purposes. Management measures the performance of each reportable segment based upon several metrics, including orders, net revenues and operating income. Management uses these results to evaluate the performance of, and to assign resources to, each of the reportable segments. Intevac manages certain operating expenses separately at the corporate level. Intevac allocates certain of these corporate expenses to the segments in an amount equal to 3% of net revenues. Segment operating income excludes interest income/expense and other financial charges and income taxes according to how a particular reportable segment’s management is measured. Management does not consider impairment charges, gains and losses on divestitures and sales of intellectual property, or unallocated costs in measuring the performance of the reportable segments.
The TFE segment designs, develops and markets vacuum process equipment solutions for high-volume manufacturing of small substrates with precise thin-film properties, such as for the hard drive, solar cell, DCP and advanced semiconductor packaging industries, as well as other adjacent thin-film markets.
The Photonics segment develops compact, cost-effective, high-sensitivity digital-optical products for the capture and display of
low-light
images. Intevac provides sensors, cameras and systems for government applications such as night vision.
Information for each reportable segment for the three and six months ended July 3, 2021 and June 27, 2020 is as follows:
Net Revenues
 
    
Three Months Ended
    
Six Months Ended
 
    
July 3,

2021
    
June 27,

2020
    
July 3,

2021
    
June 27,

2020
 
    
(In thousands)
 
         
TFE
   $ 5,369      $ 16,595      $ 14,607      $ 24,557  
Photonics
     8,444        12,247        15,447        23,125  
    
 
 
    
 
 
    
 
 
    
 
 
 
Total segment net revenues
   $ 13,813      $ 28,842      $ 30,054      $ 47,682  
    
 
 
    
 
 
    
 
 
    
 
 
 
 
20

INTEVAC, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
(Unaudited)
 
Operating Income (Loss)
 
    
Three Months Ended
   
Six Months Ended
 
    
July 3,

2021