Intevac: Fiscal 3Q11 Financial Results

Intevac, Inc. reported financial results for the quarter and nine months ended October 1, 2011.

"We continue to manage through the current uncertainties stemming from the pending drive industry consolidations and, more recently, the further complication of the supply chain constraints resulting from the flooding in Thailand," commented Kevin Fairbairn, president and chief executive officer of Intevac. "Whereas a significant portion of the world’s hard drives are assembled in Thailand, the vast majority of disk media capacity is located in other regions and has not been directly affected by the floods. While uncertainty in the hard drive industry is expected to continue over the next few quarters, the third quarter ended on a positive note, with hard drive shipments reaching a new record high."

"We have made progress in diversifying our equipment business for future growth. We completed the installation of our second LEAN SOLAR deposition system and expect to ship our first LEAN SOLAR etch system to a leading solar manufacturer before year-end. In our Photonics business, we received a sizeable follow-on production order for our LIVAR cameras, and received a significant award for the continued development of our next generation EBAPS sensor technology," concluded Mr. Fairbairn.

Third Quarter 2011 Summary
The net loss was $6.1 million, or $0.27 per diluted share, compared to net income of $13.2 million, or $0.58 per diluted share, in the third quarter of 2010.

Revenues were $19.3 million, including $12.4 million of Equipment revenues and Intevac Photonics revenues of $6.9 million. Equipment revenues consisted of upgrades, spares and service. Intevac Photonics revenues consisted of $1.5 million of research and development contracts and $5.4 million of product sales or 78% of Photonics revenues. In the third quarter of 2010, revenues were $64.6 million, including $55.9 million of Equipment revenues and Intevac Photonics revenues of $8.8 million, which included $3.5 million of product sales.

Equipment gross margin was 44.9%, compared to 48.8% in the third quarter of 2010, primarily as a result of decreased revenues and lower factory utilization. Intevac Photonics gross margin of 28.3% improved compared to 26.4% in the third quarter of 2010. The increase was primarily a result of improved manufacturing and warranty costs related to our night vision camera module for our NATO customer. Consolidated gross margin was 38.9%, compared to 45.8% in the third quarter of 2010. Operating expenses were $15.6 million, compared to $14.2 million in the third quarter of 2010, and increased primarily as a result of additional R&D investments in new equipment products.

Order backlog totaled $26.2 million on October 1, 2011, compared to $36.9 million on July 2, 2011 and $64.9 million on October 2, 2010. Backlog as of October 1, 2011 included one Solar system and no 200 Lean systems. Backlog as of October 2, 2010 included six 200 Lean systems.

First Nine Months 2011 Summary
The net loss was $15.8 million, or $0.69 per diluted share, compared to net income of $26.9 million, or $1.18 per diluted share, for the first nine months of 2010.

Revenues were $64.3 million, including $42.3 million of Equipment revenues and Intevac Photonics revenues of $22.0 million, compared to revenues of $166.4 million, including $141.5 million of Equipment revenues and Intevac Photonics revenues of $24.9 million, for the first nine months of 2010.

Equipment gross margin was 41.9%, compared to 47.1% in the first nine months of 2010, primarily as a result of lower revenues and lower factory utilization. Intevac Photonics gross margin of 28.6% improved compared to 25.7% in the first nine months of 2010, reflecting lower manufacturing and warranty costs related to our night vision camera module for our NATO customer. Consolidated gross margin was 37.4%, compared to 43.9% in the first nine months of 2010. Operating expenses were $46.3 million, compared to $41.9 million in the first nine months of 2010, and increased primarily as a result of additional R&D investments in new equipment products.