| ☒ | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
January 2, 2021
| ☐ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
Delaware | 94-3125814 | |
(State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) |
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 a check mark if disclosure of delinquent filers pursuant to Item 405 ofRegulation S-K(§ 229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of thisForm 10-K or any amendment to thisForm 10-K. ☒
| Large accelerated filer | ☐ | Accelerated filer | ☒ | |||
Non-accelerated filer | ☐ | Smaller reporting company | ☒ | |||
| Emerging growth company | ☐ |
Item 1. |
|
(the (the average number of disks per hard drive) and by new and emerging applications. The projected growth rates for digitally-stored data on HDDs exceed the rate of areal density improvements, at the same time as the tie ratio is increasing, which results in demand for magnetic disks outpacing HDD units.
Intevac has developed and is currently marketing a SP coating known as Optical Diamond-like-Carbon (“oDLC
coating provides a pleasing aesthetic and gives manufacturers flexibility with color customization. Decorative NCVM coatings have evolved from single color to multiple colors with complex transitions. Intevac has developed a proprietary technology that enables the creation of uniquely patterned NCVM coatings for the phone back cover. Several leading handset manufacturers are currently evaluating this technology for potential incorporation into their upcoming phone models.
oDLC and DiamondClad coatings.
Ion implantation is a solar cell processing technology whereby an impurity is added to a PV structure to improve its conductivity. In ion implantation, a beam of ions of a desired dopant element such as phosphorus or boron is electrostatically accelerated and directed toward the target material, introducing the impurity. In a subsequent thermal annealing step, the dopant is electrically activated. The ion implant processes enable precision engineering of the dose and of the depth of dopant elements to form emitter structures in working solar cells. Ion implantation is a technique being introduced to solar cell lines as a means to lower the cost per watt to manufacture the cell. Ion implantation can replace existing diffusion processes in existing solar processing lines for
TFE Products | Applications and Features | |
HDD Equipment Market | ||
200 Lean ® Disk Sputtering System | • Uses PVD and chemical vapor deposition (“CVD”) technologies. • Deposits magnetic films, non-magnetic films and protective carbon-based overcoats.• Provides high-throughput for small-substrate processing. • Over | |
Upgrades, spares, consumables and services (non-systems business) | • Upgrades to the installed base to support the continued growth in areal density or reduce the manufacturing cost per disk. | |
DCP Market | ||
INTEVAC VERTEX ® System | • Utilizes vertical sputtering for multiple film types. • Provides high-throughput for small-substrate processing. • Uses patented carbon deposition source. • Modular design enables expandability. • Enables low-temperature processing. | |
| ||
INTEVAC VERTEX ® Spectra System | • Extension of the VERTEX system. • Incorporates multiple source technologies in a single system. • Uses proprietary ion beam processing for deposition and etching. • Enables unique patterned NCVM and hard AR coatings. | |
INTEVAC VERTEX ® Marathon System | • Versatile platform for high volume manufacturing of multi-step, multi-layer optical coatings. • Enables diverse coatings — DiamondClad, patterned NCVM and AR films. | |
DIAMOND DOG ® | • Screen protectors for mobile devices, a consumer product line with DiamondClad tempered glass. • Provides long lasting protection against scratches and abrasion. • Preserves screen clarity and anti-fingerprint performance. | |
Solar PV Market | ||
INTEVAC MATRIX PVD System | • Deposits electrical contacts and conductor layers, reflective layers, and transparent conductive oxide layers, all of which are critical to the efficiency of solar cells. • Includes patented Linear Scanning Magnetic Array (“LSMA”) magnetron source, with industry-leading target utilization rate of over 65 percent. • Provides high-throughput for small-substrate processing. | |
INTEVAC MATRIX Implant System | • Utilizes the chambers and transport mechanism of the MATRIX platform while using the implant sources from the ENERG i | |
ENERG i ® Implant System | • Supports both phosphorus and boron dopant technologies. • Extendable to new advanced solar cell structures. | |
TFE Products | Applications and Features | |
Fan-Out Packaging Market | ||
INTEVAC MATRIX PVD System | • Deposits barrier/seed layers for fan-out RDL.• Includes LSMA magnetron source, with industry-leading target utilization rate of over 65 percent. • Provides high-throughput and low cost of ownership for small-substrate or large panel processing. • Provides flexibility for handling round, square, or rectangular substrates for fan-out packaging. | |
Adjacent Markets | ||
INTEVAC MATRIX System | • Incorporates multiple thin-film deposition techniques such as PVD, CVD, Etch, Implant, heating and cooling. • Consists of high-speed linear transport. • Flexible design enables handling of various different small substrate sizes and shapes. • Performs double-sided coating within vacuum. | |
Photonics products primarily address the high performancehigh-performance military night-vision market. Our products provide digital imagery in extremelyAdditionally, theThe Company is developing additional technologies to address soldier head-mounted and weapon-mounted applications.
| 2018 | 2017 | |||||||
Seagate Technology | 52 | % | 40 | % | ||||
HGST | 13 | % | * | |||||
U.S. Government | * | 15 | % | |||||
2019.
2020 | 2019 | |||||||
Seagate Technology | 42 | % | 49 | % | ||||
U.S. Government | 29 | % | 20 | % | ||||
Elbit Systems of America | 12 | % | * | |||||
Jolywood (Hongkong) Industrial Holdings Co., Limited | * | 14 | % | |||||
inGeneration-IIInight-vision devices. For long range airborne targeting applications, Intevac competes against camera providers using low light CMOS imagery. Intevac expects that other companies will develop digital night-vision products and aggressively promote their sales. Within thenear-eye display market, Intevac also currently faces competition from Rockwell-Collins, Kopin and Six 15 Technologies in the defense space and anticipates that in the future it will experience competition from lower performance, niche commercial HMD providers expanding into defense applications, all of which can offer cost-competitive products.
Intevac’s competitive position significantly depends on Intevac’s research, development, engineering, manufacturing and marketing capabilities, and not just on Intevac’s patent position. However, protection of Intevac’s technological assets by obtaining and enforcing intellectual property rights, including patents, is important. Therefore, Intevac’s practice is to file patent applications in the United States and other countries for inventions that Intevac considers important. Although Intevac does not consider Intevac’s business materially dependent upon any one patent, the rights of Intevac and the products made and sold under Intevac’s patents along with other intellectual property, including trademarks,
Employees
At December 29, 2018, Intevac had 257 employees, including 7 contract employees.
Compliance with Environmental
Intevac is
Executive Officers We are also subject to import/export controls, tariffs, and other trade-related regulations and restrictions in the countries in which we have operations or otherwise do business. These controls, tariffs, regulations, and restrictions (including those related to, or affected by, United States-China relations) have had, and we believe may continue to have, a material impact on our business, including our ability to sell products and to manufacture or source components. Our business is affected by numerous laws and regulations relating to the award, administration and performance of U.S. Government contracts. In addition, many federal and state laws materially affect our operations. These laws relate to ethics, labor, tax, and employment matters. As any employer is, we are subject to federal and state statutes and regulations governing their standards of business conduct with the government, including that government contracts typically contain provisions permitting government clients to terminate contracts without cause with limited notice or compensation. The development of additional statutes and regulations and interpretation of existing statutes and regulations with respect to our industry can be expected to evolve over time. As with any commercial enterprise, we cannot predict with certainty the nature or direction of the Registrant
development of federal statutes and regulations that will affect its business operations.
Name | Age | Position | ||||
| ||||||
Wendell T. Blonigan | President and Chief Executive Officer | |||||
James Moniz | Executive Vice President, Finance and Administration, Chief Financial Officer, Secretary and Treasurer | |||||
Timothy Justyn | 58 | Executive Vice President and General Manager, Photonics | ||||
Jay Cho | 56 |
| ||||
| Executive Vice President and General Manager, TFE | |||||
| ||||||
Verle Aebi | Chief Technology Officer, Photonics | |||||
Terry Bluck | Chief Technology Officer, TFE | |||||
Kimberly Burk | Senior Vice President, Global Human Resources | |||||
Item 1A. |
|
Sales of systems and upgrades for magnetic disk production in 2019 were slightly down from the levels in 2018 as this customer took delivery of four systems. Sales of systems and upgrades for magnetic disk production in 2020 were down from the levels in 2019 as this customer took delivery of only two systems. Intevac expects sales of systems and upgrades for magnetic disk production in 2021 will be at levels lower than the levels in 2020.
installed base of systems, then we tend to sell more upgrade products and fewer new systems, which can significantly reduce total revenue.
Our growth depends on development of technically advanced new products and processes.
We have invested heavily, and continue to invest, in the development of new products, such as our 200 Lean HDD and other PVD systems, our coating systems for DCP, our solar systems for PV applications, our digital night-vision products and ournear-eye display products. Our success in developing and selling new products depends upon a variety of factors, including our ability to: predict future customer requirements; make technological advances; achieve a low total cost of ownership for our products; introduce new products on schedule; manufacture products cost-effectively including transitioning production to volume manufacturing; commercialize and attain customer acceptance of our products; and achieve acceptable and reliable performance of our new products in the field. Our new product decisions and development commitments must anticipate continuously evolving industry requirements significantly in advance of sales. In addition, we are attempting to expand into new or related markets, including the PV and display cover glass markets. Our expansion into the PV and cover glass markets is dependent upon the success of our customers’ development plans. To date we have not recognized material revenue from such products. Failure to correctly assess the size of the markets, to successfully develop cost effective products to address the markets or to establish effective sales and support of the new products would have a material adverse effect on future revenues and profits. In addition, if we invest in products for which the market does not develop as anticipated, we may incur significant charges related to such investments.
Rapid technological change in our served markets requires us to rapidly develop new technically advanced products. Our future success depends in part on our ability to develop and offer new products with improved capabilities and to continue to enhance our existing products. If new products have reliability or quality problems, our performance may be impacted by reduced orders, higher manufacturing costs, delays in acceptance and payment for new products and additional service and warranty expenses.
customers’ specific capacity plans and market share shifts can lead to extreme variability in our revenue and financial results from period to period.
We may not be able to obtain export licenses from the U.S. government permitting delivery of our products to international customers.
Many of our products, especially Photonics products, require export licenses from U.S. government agencies under the Export Administration Act, the Trading with the Enemy Act of 1917, the Arms Export Act of 1976 or the International Traffic in Arms Regulations. These regulations limit the potential market for some of our products. We can give no assurance that we will be successful in obtaining all the licenses necessary to export our products. Heightened government scrutiny of export licenses for defense related products has resulted in lengthened review periods for our license applications. Exports to countries that are not considered by the U.S. government to be allies are likely to be prohibited, and even sales to U.S. allies may be limited. Failure to comply with export control laws, including identification and reporting of all exports andre-exports of controlled technology or exports made without correct license approval or improper license use could result in severe penalties and revocation of licenses. Failure to obtain export licenses, delays in obtaining licenses, or revocation of previously issued licenses would prevent us from selling the affected products outside the United States and could negatively impact our results of operations.
The 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.
We sell our Photonics products and services directly to the U.S. government, as well as to prime contractors for various U.S. government programs. The U.S government is considering significant changes in the level of existing,follow-on or replacement programs. We cannot predict the impact of potential changes in priorities due to military transformations and/or the nature of futurewar-related activities. A shift of government priorities to programs in which we do not participate and/or reductions in funding for or the termination of programs in which we do participate, unless offset by other programs and opportunities, could have a material adverse effect on our financial position, results of operations, or cash flows.
Funding of multi-year government programs is subject to congressional appropriations, and there is no guarantee that the U.S. government will make further appropriations. Sales to the U.S. government and its prime contractors may also be affected by changes in procurement policies, budget considerations and political developments in the United States or abroad. For example, if the U.S. government is less focused on defense spending or there is a decrease in hostilities, demand for our
products could decrease. The loss of funding for a government program would result in a loss of future revenues attributable to that program. The influence of any of these factors, which are beyond our control, could negatively impact our results of operations.
A significant portion of our U.S. government revenue is derived from fixed-price development and production contracts. Under fixed-price contracts, unexpected increases in the cost to develop or manufacture a product, whether due to inaccurate estimates in the bidding process, unanticipated increases in material costs, reduced production volumes, inefficiencies or other factors, are borne by us. We have experienced cost overruns in the past that have resulted in losses on certain contracts, and may experience additional cost overruns in the future. We are required to recognize the total estimated impact of cost overruns in the period in which they are first identified. Such cost overruns could have a material adverse effect on our results of operations.
Generally, government contracts contain provisions permitting termination, in whole or in part, without prior notice at the government’s convenience upon the payment of compensation only for work done and commitments made at the time of termination. We cannot ensure that one or more of the government contracts under which we, or our customers, operate will not be terminated under these circumstances. Also, we cannot ensure that we, or our customers, would be able to procure new government contracts to offset the revenues lost as a result of any termination of existing contracts, nor can we ensure that we, or our customers, will continue to remain in good standing as federal contractors.
As a U.S. government contractor we must comply with specific government rules and regulations and are subject to routine audits and investigations by U.S. government agencies. If we fail to comply with these rules and regulations, the results could include: (1) reductions in the value of our contracts; (2) reductions in amounts previously billed and recognized as revenue; (3) contract modifications or termination; (4) the assessment of penalties and fines; and (5) suspension or debarment from government contracting or subcontracting for a period of time or permanently.
Our business could be negatively impacted by cyber and other security threats or disruptions.
As a defense contractor, we face various cyber and other security threats, including espionage and attempts to gain unauthorized access to sensitive information and networks. Although we utilize various procedures and controls to monitor and mitigate the risk of these threats, there can be no assurance that these procedures and controls will be sufficient. These threats could lead to losses of sensitive information or capabilities; financial liabilities and damage to our reputation. If we are unable to maintain compliance with security standards applicable to defense contractors, we could lose business or suffer reputational harm.
Cyber threats to businesses in general are evolving and include, but are not limited to, malicious software, destructive malware, attempts to gain unauthorized access to data, disruption or denial of service attacks, and other electronic security breaches that could lead to disruptions in our systems, unauthorized release of confidential, personal or otherwise protected information (ours or that of our employees, customers or partners), and corruption of data, networks or systems. In addition, we could be impacted by cyber threats or other disruptions or vulnerabilities found in products we use or in our partners’ or customers’ systems that are used in connection with our business. These events, if not prevented or effectively mitigated, could damage our reputation, require remedial actions and lead to loss of business, regulatory actions, potential liability and other financial losses.
Changes to our effective tax rate affect our results of operations.
As a global company, we are subject to taxation in the United States, Singapore and various other countries. Significant judgment is required to determine and estimate worldwide tax liabilities. Our future effective tax rate could be affected by: (1) changes in tax laws; (2) the allocation of earnings to countries with differing tax rates; (3) changes in worldwide projected annual earnings in current and future years: (4) accounting pronouncements; or (5) changes in the valuation of our deferred tax assets and liabilities. Although we believe our tax estimates are reasonable, there can be no assurance that any final determination will not be different from the treatment reflected in our historical income tax provisions and accruals, which could result in additional payments by Intevac.
Our success is dependent on recruiting and retaining a highly talented work force.
Our employees are vital to our success, and our key management, engineering and other employees are difficult to replace. We do not maintain key person life insurance on any of our employees. The expansion of high technology companies worldwide has increased demand and competition for qualified personnel, and has made companies increasingly protective of prior employees. It may be difficult for us to locate employees who are not subject tonon-competition agreements and other restrictions.
The majority of our U.S. operations are located in California where the cost of living and of recruiting employees is high. Our operating results depend, in large part, upon our ability to retain and attract qualified management, engineering, marketing, manufacturing, customer support, sales and administrative personnel. Furthermore, we compete with industries such as the hard disk drive, semiconductor, and solar industries for skilled employees. Failure to retain existing key personnel, or to attract, assimilate or retain additional highly qualified employees to meet our needs in the future, could have a material and adverse effect on our business, financial condition and results of operations.
We are dependent on certain suppliers for parts used in our products.
We are a manufacturing business. Purchased parts constitute the largest component of our product cost. Our ability to manufacture depends on the timely delivery of parts, components and subassemblies from suppliers. We obtain some of the key components and subassemblies used in our products from a single supplier or a limited group of suppliers. If any of our suppliers fail to deliver quality parts on a timely basis, we may experience delays in manufacturing, which could result in delayed product deliveries, increased costs to expedite deliveries or develop alternative suppliers, or require redesign of our products to accommodate alternative suppliers. Some of our suppliers are thinly capitalized and may be vulnerable to failure.
Our business depends on the integrity of our intellectual property rights.
The success of our business depends upon the integrity of our intellectual property rights, and we cannot ensure that: (1) any of our pending or future patent applications will be allowed or that any of the allowed applications will be issued as patents or will issue with claims of the scope we sought; (2) any of our patents will not be invalidated, deemed unenforceable, circumvented or challenged; (3) the rights granted under our patents will provide competitive advantages to us; (4) other parties will not develop similar products, duplicate our products or design around our patents; or (5) our patent rights, intellectual property laws or our agreements will adequately protect our intellectual property or competitive position.
From time to time, we have received claims that we are infringing third parties’ intellectual property rights or seeking to invalidate our rights. We cannot ensure that third parties will not in the future claim that we have infringed current or future patents, trademarks or other proprietary rights relating to our products. Any claims, with or without merit, could be time-consuming, result in costly litigation, cause product shipment delays or require us to enter into royalty or licensing agreements. Such royalty or licensing agreements, if required, may not be available on terms acceptable to us.
We are subject to risks ofnon-compliance with environmental and other governmental regulations.
We are subject to a variety of governmental regulations relating to the use, storage, discharge, handling, emission, generation, manufacture, treatment and disposal of toxic or otherwise hazardous substances, chemicals, materials or waste. If we fail to comply with current or future regulations, such failure could result in suspension of our operations, alteration of our manufacturing process, remediation costs or substantial civil penalties or criminal fines against us or our officers, directors or employees. Additionally, these regulations could require us to acquire expensive remediation or abatement equipment and incur substantial expenses to comply with them.
Item 1B. |
|
Item 2. |
|
Location | Square Footage | Principal Use | ||||
Santa Clara, | 169,583 | Corporate Headquarters; TFE and Photonics Marketing, Manufacturing, Engineering and Customer Support | ||||
| ||||||
Singapore | 31,947 | TFE Manufacturing and Customer Support | ||||
Malaysia | 1,291 | TFE Customer Support | ||||
Shenzhen, China | 2,568 | TFE Customer Support | ||||
Item 3. |
|
Item 4. |
|
Item 5. |
|
The following table provides information as of December 29, 2018 with respect to the shares of Intevac did not make any common stock repurchased by Intevacrepurchases during the fourth quarter of fiscal 2018.
| Total Number of Shares Purchased | Average Price Paid per Share | Aggregate Price Paid | Total Number of Shares Purchased as Part of Publicly Announced Program | Maximum Dollar Value of Shares That May Yet be Purchased Under the Program | ||||||||||||||||
| (in thousands, except per share data) | ||||||||||||||||||||
September 30, 2018 to October 27, 2018 | — | $ | — | $ | — | 4,845 | $ | 11,507 | ||||||||||||
October 28, 2018 to November 24, 2018 | 3 | $ | 4.75 | $ | 15 | 4,848 | $ | 11,492 | ||||||||||||
November 25, 2018 to December 29, 2018 | 117 | $ | 4.63 | $ | 543 | 4,965 | $ | 10,949 | ||||||||||||
Equity Plan Information
The following table summarizes the number of outstanding options and RSUs granted to employees and directors, as well as the number of securities remaining available for future issuance, under Intevac’s equity compensation plans at December 29, 2018.
| (a) | (b) | (c) | ||||||||||
Plan Category | Number of securities to be issued upon exercise of outstanding options, warrants and rights | Weighted-average exercise price of outstanding options, warrants and rights (1) | Number of securities remaining available for future issuance under equity compensation plans | |||||||||
| (2) | ||||||||||||
Equity compensation plans approved by security holders(3) | 2,533,158 | $ | 6.76 | 2,870,185 | ||||||||
Equity compensation plans not approved by security holders | — | — | — | |||||||||
|
|
|
|
|
| |||||||
Total | 2,533,158 | $ | 6.76 | 2,870,185 | ||||||||
|
|
|
|
|
| |||||||
|
|
|
Item 6. |
|
Item 7. |
|
|
|
|
|
| Fiscal Year | 2018 | 2017 | Change 2018 vs. 2017 | |||||||||
| (in thousands, except percentages and per share amounts) | ||||||||||||
Net revenues | $ | 95,114 | $ | 112,847 | $ | (17,733 | ) | |||||
Gross profit | $ | 32,694 | $ | 45,663 | $ | (12,969 | ) | |||||
Gross margin percent | 34.4 | % | 40.5 | % | (6.1) points | |||||||
Operating income (loss) | $ | (4,217 | ) | $ | 4,848 | $ | (9,065 | ) | ||||
Net income | $ | 3,581 | * | $ | 4,118 | $ | (537 | ) | ||||
Net income per diluted share | $ | 0.16 | * | $ | 0.18 | $ | (0.02 | ) | ||||
|
Fiscal Year | 2020 | 2019 | Change 2020 vs. 2019 | |||||||||
(in thousands, except percentages and per share amounts) | ||||||||||||
Net revenues | $ | 97,824 | $ | 108,885 | $ | (11,061 | ) | |||||
Gross profit | $ | 40,545 | $ | 40,868 | $ | (323 | ) | |||||
Gross margin percent | 41.4 | % | 37.5 | % | 3.9 points | |||||||
Operating income | $ | 2,555 | $ | 3,925 | $ | (1,370 | ) | |||||
Net income | $ | 1,056 | $ | 1,148 | $ | (92 | ) | |||||
Net income per diluted share | $ | 0.04 | $ | 0.05 | $ | (0.01 | ) | |||||
ENERGi implant systems which were installed in fiscal 2018. In fiscal 2017, lower Photonics’ product sales were offset by higher Photonics’ contract R&D. Photonics margins and operating results were negatively impacted by ahigher-mix of lower margin technology development contracts versus product sales. The fiscal 2017 net income reflected higher net revenues and higher gross margins, offset in part by higher operating expenses as the Company recorded higher variable compensation expenses as a result of the return to profitability. During fiscal 2017, the Company did not recognize an income tax benefit onresumed its U.S. net operating loss.
Fiscal 2018 HDD equipment sales were at the same levels as 2017 as our HDD customers took delivery of fewer systems but more upgrades.growth trajectory. Intevac recognized revenue on four 200 Lean HDD systems with an additional six in backlog at the end of the year as our HDD customer upgraded the technology level of their manufacturing capacity.systems. In 2018,2019, Intevac recognized revenue on nine solar implant ENERG
2020, the Company’s expenses included approximately $159,000 due to costs related to actions taken in response
| 2018 | 2017 | Change 2018 vs. 2017 | ||||||||||
| (in thousands) | ||||||||||||
TFE | $ | 69,348 | $ | 79,004 | $ | (9,656 | ) | |||||
Photonics | ||||||||||||
Products | 15,972 | 25,852 | (9,880 | ) | ||||||||
Contract R&D | 9,794 | 7,991 | 1,803 | |||||||||
|
|
|
|
|
| |||||||
| 25,766 | 33,843 | (8,077 | ) | |||||||||
|
|
|
|
|
| |||||||
Total net revenues | $ | 95,114 | $ | 112,847 | $ | (17,733 | ) | |||||
|
|
|
|
|
| |||||||
2020 | 2019 | Change 2020 vs. 2019 | ||||||||||
(in thousands) | ||||||||||||
TFE | $ | 52,128 | $ | 73,678 | $ | (21,550 | ) | |||||
Photonics | ||||||||||||
Contract R&D | 22,945 | 19,657 | 3,288 | |||||||||
Products | 22,751 | 15,550 | 7,201 | |||||||||
| 45,696 | 35,207 | 10,489 | ||||||||||
Total net revenues | $ | 97,824 | $ | 108,885 | $ | (11,061 | ) | |||||
development on the IVAS program.
| December 29, 2018 | December 30, 2017 | |||||||
| (in thousands) | ||||||||
TFE | $ | 64,803 | $ | 51,719 | ||||
Photonics | 43,711 | 12,302 | ||||||
|
|
|
| |||||
Total backlog | $ | 108,514 | $ | 64,021 | ||||
|
|
|
| |||||
January 2, 2021 | December 28, 2019 | |||||||
(in thousands) | ||||||||
TFE | $ | 5,623 | $ | 21,391 | ||||
Photonics | 41,317 | 71,015 | ||||||
Total backlog | $ | 46,940 | $ | 92,406 | ||||
| 2018 | 2017 | |||||||
Seagate Technology | 52 | % | 40 | % | ||||
HGST | 13 | % | * | |||||
U.S. Government | * | 15 | % | |||||
|
2019.
2020 | 2019 | |||||||
Seagate Technology | 42 | % | 49 | % | ||||
U.S. Government | 29 | % | 20 | % | ||||
Elbit Systems of America | 12 | % | * | |||||
Jolywood (Hongkong) Industrial Holdings Co., Limited | * | 14 | % | |||||
| 2018 | 2017 | |||||||||||||||||||||||
| (in thousands) | ||||||||||||||||||||||||
| TFE | Photonics | Total | TFE | Photonics | Total | |||||||||||||||||||
United States | $ | 4,050 | $ | 23,862 | $ | 27,912 | $ | 5,487 | $ | 31,824 | $ | 37,311 | ||||||||||||
Asia | 65,298 | 31 | 65,329 | 73,517 | 8 | 73,525 | ||||||||||||||||||
Europe | — | 1,648 | 1,648 | — | 884 | 884 | ||||||||||||||||||
Rest of World | — | 225 | 225 | — | 1,127 | 1,127 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Total net revenues | $ | 69,348 | $ | 25,766 | $ | 95,114 | $ | 79,004 | $ | 33,843 | $ | 112,847 | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
2020 | 2019 | |||||||||||||||||||||||
(in thousands) | ||||||||||||||||||||||||
TFE | Photonics | Total | TFE | Photonics | Total | |||||||||||||||||||
United States | $ | 6,450 | $ | 45,363 | $ | 51,813 | $ | 1,306 | $ | 34,664 | $ | 35,970 | ||||||||||||
Asia | 45,611 | — | 45,611 | 72,372 | — | 72,372 | ||||||||||||||||||
Europe | 67 | 333 | 400 | — | 543 | 543 | ||||||||||||||||||
Total net revenues | $ | 52,128 | $ | 45,696 | $ | 97,824 | $ | 73,678 | $ | 35,207 | $ | 108,885 | ||||||||||||
2019.
Rest of World includes contract R&D for the Australian government as part of a program under the Department of Defense’s Coalition Warfare Program which is funded by the U.S. government and several foreign nation coalition partners.
TFE gross profit % of TFE net revenues Photonics gross profit % of Photonics net revenues Total gross profit % of net revenues Fiscal Year Change
2018 vs. 2017 2018 2017 (in thousands, except percentages) $ 25,328 $ 33,750 $ (8,422 ) 36.5 % 42.7 % $ 7,366 $ 11,913 $ (4,547 ) 28.6 % 35.2 % $ 32,694 $ 45,663 $ (12,969 ) 34.4 % 40.5 %
Fiscal Year | Change 2020 vs. 2019 | |||||||||||
2020 | 2019 | |||||||||||
(in thousands, except percentages) | ||||||||||||
TFE gross profit | $ | 22,417 | $ | 27,377 | $ | (4,960 | ) | |||||
% of TFE net revenues | 43.0 | % | 37.2 | % | ||||||||
Photonics gross profit | $ | 18,128 | $ | 13,491 | $ | 4,637 | ||||||
% of Photonics net revenues | 39.7 | % | 38.3 | % | ||||||||
Total gross profit | $ | 40,545 | $ | 40,868 | $ | (323 | ) | |||||
% of net revenues | 41.4 | % | 37.5 | % | ||||||||
| Fiscal Year | Change 2018 vs. 2017 | |||||||||||
| 2018 | 2017 | |||||||||||
| (in thousands) | ||||||||||||
Research and development expense | $ | 16,862 | $ | 17,724 | $ | (862 | ) | |||||
Fiscal Year | Change 2020 vs. 2019 | |||||||||||
2020 | 2019 | |||||||||||
(in thousands) | ||||||||||||
Research and development expense | $ | 14,093 | $ | 14,309 | $ | (216 | ) | |||||
2019 due to lower spending on semiconductor
| Fiscal Year | Change 2018 vs. 2017 | |||||||||||
| 2018 | 2017 | |||||||||||
| (in thousands) | ||||||||||||
Selling, general and administrative expense | $ | 20,188 | $ | 23,314 | $ | (3,126 | ) | |||||
Fiscal Year | Change 2020 vs. 2019 | |||||||||||
2020 | 2019 | |||||||||||
(in thousands) | ||||||||||||
Selling, general and administrative expense | $ | 23,897 | $ | 22,634 | $ | 1,263 | ||||||
Selling, general and administrative expenses decreasedincreased in 20182020 over the amount spent in 20172019 primarily due to cost control initiatives implementedhigher variable compensation expenses, incremental
Acquisition-related (benefit), net
| Fiscal Year | Change 2018 vs. 2017 | |||||||||||
| 2018 | 2017 | |||||||||||
| (in thousands) | ||||||||||||
Acquisition-related (benefit), net | $ | (139 | ) | $ | (223 | ) | $ | 84 | ||||
Acquisition-related (benefit), net, represents the change in the fair value of contingent consideration arrangements related to the SIT acquisition. See Note 8 “Contingent Consideration” in the notes to the consolidated financial statements for additional information related to the fair value of contingent consideration. Increases in the assessed likelihood of a higher payout under a contingent consideration arrangement contribute to increases in the fair value of the related liability. Conversely, decreases in the assessed likelihood of a higher payout under a contingent consideration arrangement contribute to decreases in the fair value of the related liability.
The benefits recognized during fiscal 2018 and fiscal 2017 are associated with changes in the fair value of the contingent consideration related to the revenue earnout obligation. We recorded liabilities on our consolidated balance sheet of $4.1 million as of the original acquisition date for this contingent consideration arrangement and subsequently remeasured the liability to fair value, with changes in fair value reported in earnings. As a result of this remeasurement, we recorded a net gain of $139,000 and $223,000, respectively during fiscal 2018 and fiscal 2017.
Cost reduction plan
During the first quarter of fiscal 2018,2020, Intevac substantially completed implementation of the 20182020 cost reduction plan (the “2018“2020 Plan”), which reduced expenses and reduced its workforce by 61 percent. The total cost of implementing the 20182020 Plan was $95,000$103,000, of which $61,000$16,000 was reported under cost of net revenues and $34,000$87,000 was reported under operating expenses. Substantially all cash outlays in connection with the 20182020 Plan were completed in fiscal 2018.2020. Implementation of the 20182020 Plan reduced salary, wages and other employee-related expenses by approximately $1.8 million$864,000 on an annual basis.
| Fiscal Year | Change 2018 vs. 2017 | |||||||||||
| 2018 | 2017 | |||||||||||
| (in thousands) | ||||||||||||
Interest income and other income (expense), net | $ | 622 | $ | 373 | $ | 249 | ||||||
Fiscal Year | Change 2020 vs. 2019 | |||||||||||
2020 | 2019 | |||||||||||
(in thousands) | ||||||||||||
Interest income and other income (expense), net | $ | 212 | $ | 582 | $ | (370 | ) | |||||
| Fiscal Year | Change 2018 vs. 2017 | |||||||||||
| 2018 | 2017 | |||||||||||
| (in thousands) | ||||||||||||
Provision for (benefit from) income taxes | $ | (7,176 | ) | $ | 1,103 | $ | (8,279 | ) | ||||
During
Fiscal Year | Change 2020 vs. 2019 | |||||||||||
2020 | 2019 | |||||||||||
(in thousands) | ||||||||||||
Provision for income taxes | $ | 1,711 | $ | 3,359 | $ | (1,648 | ) | |||||
credits. Intevac’s effective income tax rate was 199.6% for fiscal 2018 and 21.1% for fiscal 2017. Our effective income tax rate in 2018, excluding the impact of the reduction in our deferred income tax asset valuation allowance was (20.4%). Intevac’s tax rate differs from the applicableU.S. statutory ratesrate in both 2020 and 2019 primarily due primarily to establishment and reversal of a valuation allowance, the utilization of deferred and current credits and the effect of permanent differences and adjustments of prior permanent differences. Intevac’s future effectiveCompany not recognizing an income tax rate dependsbenefit on various factors including, the level of Intevac’s projected earnings, the geographic composition of worldwide earnings, tax regulations governing each region, net operating loss carry forwards, availability of tax credits and the effectiveness of Intevac’s tax planning strategies. Management carefully monitors these factors and timely adjusts the effectivedomestic loss.
On December 22, 2017,expense for 2020 was largely the Tax Cutsresult of foreign withholding taxes and Jobs Act (“Tax Reform”)income taxes in foreign jurisdictions. The income tax expense for 2019 was signed into law that significantly reformslargely the Internal Revenue Coderesult of 1986, as amended. Tax Reform, among other things, permanently lowered the U.S. federalforeign withholding taxes, income taxes in foreign jurisdictions, and fully reserving a contested tax rate to 21% from the then existing maximum rate of 35%, allowed for the expensing of capital expenditures, and put into effect the migration from a “worldwide” system of taxationdeposit related to a territorial system. In fiscal 2017 we revalued our net deferred tax assets and liabilities ataudit in Singapore.
In fiscal 2014,longer support a valuation allowance of $9.4 million was established to record the portion of the Singapore deferred tax asset. The Company concluded that, as of December 29, 2018, it is more likely than not thatposition. Accordingly, the Company will generate sufficient taxable income in Singapore to realize its deferred tax assets and reversed the valuation allowance during the fourth quarter of 2018. This reversal resulted in the recognition of anon-cash income tax benefit of $7.9 million for fiscal 2018. The Company has considered all positive and negative evidence regarding the ability to fully realize the deferred tax asset, including past operating results and the forecast of future taxable income. This conclusion, and the resulting reversal of the deferred tax asset valuation allowance, is based upon consideration of a number of factors, including the Company’s completion of 7 consecutive quarters of profitability and its forecast of future profitability under multiple scenarios that support the utilization of net operating loss carryforwards. After recognizing the reversal, the Company does not have a remaining valuation allowance against the deferred tax assets in Singapore at December 29, 2018. The Company recorded a valuation allowance decreasecharge of $603,000$732,000 in provision for fiscal 2017.
In fiscal 2012, a valuation allowance of $23.4 millionincome taxes. During 2020 the Company appealed the decision to the Singapore High Court, which was addeddenied. Management decided not to record onlypursue additional appeals and the portion ofmatter is fully settled. Presently, there are no other active income tax examinations in the U.S. federal deferred tax assetjurisdictions where Intevac operates.
January 2, 2021.
units.
| December 29, 2018 | December 30, 2017 | |||||||
| (in thousands) | ||||||||
Cash and cash equivalents | $ | 18,715 | $ | 19,941 | ||||
Restricted cash | 1,169 | 1,000 | ||||||
Short-term investments | 16,076 | 15,698 | ||||||
Long-term investments | 4,372 | 6,849 | ||||||
|
|
|
| |||||
Total cash, cash-equivalents, restricted cash and investments | $ | 40,332 | $ | 43,488 | ||||
|
|
|
| |||||
January 2, 2021 | December 28, 2019 | |||||||
(in thousands) | ||||||||
Cash and cash equivalents | $ | 29,341 | $ | 19,767 | ||||
Restricted cash | 787 | 787 | ||||||
Short-term investments | 14,839 | 16,720 | ||||||
Long-term investments | 5,388 | 5,537 | ||||||
Total cash, cash-equivalents, restricted cash and investments | $ | 50,355 | $ | 42,811 | ||||
management.
2019.
2020 and $111,000 in 2019.
2019.
On December 31, 2017, we adopted the new accounting standard ASC 606, Revenue from Contracts with Customers and all the related amendments (“new revenue standard”) to all contracts using the modified retrospective method. We recognized the cumulative effect of initially applying the new revenue standard as an adjustment to the opening balance of the accumulated deficit. The comparative information has not been restated and continues to be reported under the accounting standards in effect for those periods. We expect the impact of the adoption of the new standard to be immaterial to our net income on an ongoing basis.
Under the new revenue standard, inIn our TFE segment, we recognize revenue for equipment sales at a point in time following the transfer of control of such products to the customer, which typically occurs upon shipment or delivery depending on the terms of the underlying contracts. Intevac recognizes revenue in certain circumstances before delivery has occurred (commonly referred to as bill and hold transactions). In such circumstances, among other things, risk of ownership has passed to the customer, the customer has made a written fixed commitment to purchase the finished goods, the customer has requested the finished goods be held for future delivery as scheduled and designated by them, and no additional performance obligations exist by Intevac. For these transactions, the finished goods are segregated from inventory and normal billing and credit terms granted. Our contracts with customers may include multiple performance obligations. For such arrangements, underUnder the new revenue standard we allocate revenue for such arrangements to each performance obligation based on its relative standalone selling price. We generally determine standalone selling prices based on the prices charged to customers or by using expected cost plus margin. Under the new revenue standard, the expected costs associated with our base warranties continue to be recognized as expense when the equipment is sold.
Under the new revenue standard, in
by contractual termination clauses or by our rights to payment for work performed to date to deliver products or services that do not have an alternative use to the Company. Under the newrevenue standard, the
Under the new revenue standard, in
Prior to December 31, 2017, Intevac recognized revenue when persuasive evidence of an arrangement existed, delivery had occurred and title and risk of loss had passed to Intevac’s customer or services had been rendered, the price was fixed or determinable, and collectibility was reasonably assured. Intevac’s revenue recognition policy generally resulted in revenue recognition at the following points: (1) for all transactions where legal title passed to the customer upon shipment, Intevac recognized revenue upon shipment for all products that had been demonstrated to meet product specifications prior to shipment; the portion of revenue associated with certain installation-related tasks was deferred, and that revenue was recognized upon completion of the installation-related tasks; (2) for products that had not been demonstrated to meet product specifications prior to shipment, revenue was recognized at customer acceptance; and (3) for arrangements containing multiple elements, the revenue relating to the undelivered elements was deferred until delivery of the deferred elements. When a sales arrangement contained multiple elements, Intevac allocated revenue to each element based on a selling price hierarchy. The selling price for a deliverable was based on its vendor specific evidence (“VSOE”) if available, third party evidence (“TPE”) if VSOE was not available, or best estimate of selling price (“ESP”) if neither VSOE nor TPE was available. Intevac generally utilized the ESP due to the nature of its products. In certain cases, technology upgrade sales were accounted for as multiple-element arrangements, usually split between delivery of the parts and installation on the customer’s systems. In these cases, Intevac recognized revenue for the relative sales price of the parts upon shipment and transfer of title, and recognized revenue for the
relative sales price of installation services when those services were completed. Revenue related to sales of spare parts was generally recognized upon shipment. Intevac recognized revenue in certain circumstances before delivery had occurred (commonly referred to as bill and hold transactions). In such circumstances, among other things, risk of ownership had passed to the customer, the customer had made a written fixed commitment to purchase the finished goods, the customer had requested the finished goods be held for future delivery as scheduled and designated by them, and no additional performance obligations existed by Intevac. For those transactions, the finished goods were segregated from inventory and normal billing and credit terms granted. Revenue related to services was generally recognized upon completion of the services. In addition, Intevac used the installment method to record revenue based on cash receipts in situations where the account receivable was collected over an extended period of time and in management’s judgment the degree of collectibility was uncertain.
Revenue on CPFF contracts was recognized to the extent of costs actually incurred plus a proportionate amount of the fee earned. Intevac considered fixed fees under CPFF contracts to be earned in proportion to the allowable costs actually incurred in performance of the contract. Revenue on FFP contracts was recognized on a milestone method orpercentage-of-completion method of contract accounting. For contracts structured as milestone agreements, revenue was recognized when a specified milestone was achieved, provided that (1) the milestone event was substantive in nature and there was substantial uncertainty about the achievement of the milestone at the inception of the agreement, (2) the milestone payment wasnon-refundable, and (3) there was no continuing performance obligations associated with the milestone payment. Any milestone payments received prior to satisfying these revenue recognition criteria were deferred. Intevac generally determined the percentage completed based on the percentage of costs incurred to date in relation to total estimated costs expected through completion of the contract. When estimates of total costs to be incurred on a contract exceeded estimates of total revenue to be earned, a provision for the entire loss on the contract was recorded in the period the loss is determined.
existing taxable temporary differences, projected future taxable income,
Item 7A. |
|
Item 8. |
|
Page | ||||
| 35 | ||||
| 37 | ||||
| 38 | ||||
| 39 | ||||
| 40 | ||||
| 41 | ||||
| 42 | ||||
of
Change in Accounting Principle
As discussed in Note 1 to the consolidated financial statements, the Company changed its method of accounting for revenues from contracts with customers in 2018 due to the adoption of the new revenue standard.
/s/ BPM LLP
We have served
San Jose, California
February 13, 2019
/s/ BPM LLP |
We have served as the Company’s auditor since 2015. |
San Jose, California |
February 17, 2021 |
| December 29, 2018 | December 30, 2017 | |||||||
| (In thousands, except par value) | ||||||||
ASSETS | ||||||||
Current assets: | ||||||||
Cash and cash equivalents | $ | 18,715 | $ | 19,941 | ||||
Short-term investments | 16,076 | 15,698 | ||||||
Trade and other accounts receivable, net of allowances of $0 at both December 29, 2018 and December 30, 2017 | 27,717 | 20,474 | ||||||
Inventories | 30,597 | 33,792 | ||||||
Prepaid expenses and other current assets | 2,528 | 2,524 | ||||||
|
|
|
| |||||
Total current assets | 95,633 | 92,429 | ||||||
Property, plant and equipment, net | 11,198 | 12,478 | ||||||
Long-term investments | 4,372 | 6,849 | ||||||
Restricted cash | 1,169 | 1,000 | ||||||
Intangible assets, net of amortization of $7,498 and $6,884 at December 29, 2018 and December 30, 2017, respectively | 889 | 1,503 | ||||||
Deferred income taxes and other long-term assets | 8,809 | 764 | ||||||
|
|
|
| |||||
Total assets | $ | 122,070 | $ | 115,023 | ||||
|
|
|
| |||||
LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||
Current liabilities: | ||||||||
Accounts payable | $ | 6,053 | $ | 3,949 | ||||
Accrued payroll and related liabilities | 4,689 | 6,818 | ||||||
Other accrued liabilities | 4,952 | 7,688 | ||||||
Customer advances | 14,314 | 11,026 | ||||||
|
|
|
| |||||
Total current liabilities | 30,008 | 29,481 | ||||||
Other long-term liabilities | 2,438 | 2,879 | ||||||
Commitments and contingencies | ||||||||
Stockholders’ equity: | ||||||||
Undesignated preferred stock, $0.001 par value, 10,000 shares authorized, no shares issued and outstanding | — | — | ||||||
Common stock, $0.001 par value : | ||||||||
Authorized shares — 50,000 issued and outstanding shares — 22,700 and 21,811 at December 29, 2018 and December 30, 2017, respectively | 23 | 22 | ||||||
Additionalpaid-in capital | 183,204 | 177,521 | ||||||
Treasury stock, 4,965 shares at December 29, 2018 and 4,845 shares at December 30, 2017 | (29,047 | ) | (28,489 | ) | ||||
Accumulated other comprehensive income | 378 | 490 | ||||||
Accumulated deficit | (64,934 | ) | (66,881 | ) | ||||
|
|
|
| |||||
Total stockholders’ equity | 89,624 | 82,663 | ||||||
|
|
|
| |||||
Total liabilities and stockholders’ equity | $ | 122,070 | $ | 115,023 | ||||
|
|
|
| |||||
January 2, 2021 | December 28, 2019 | |||||||
(In thousands, except par | ||||||||
ASSETS | ||||||||
Current assets: | ||||||||
Cash and cash equivalents | $ | 29,341 | $ | 19,767 | ||||
Short-term investments | 14,839 | 16,720 | ||||||
Trade and other accounts receivable, net of allowances of $0 at both January 2, 2021 and December 28, 2019 | 28,646 | 28,619 | ||||||
Inventories | 21,689 | 24,907 | ||||||
Prepaid expenses and other current assets | 1,893 | 1,504 | ||||||
Total current assets | 96,408 | 91,517 | ||||||
Property, plant and equipment, net | 11,004 | 11,598 | ||||||
Operating lease right-of-use-assets | 8,165 | 10,279 | ||||||
Long-term investments | 5,388 | 5,537 | ||||||
Restricted cash | 787 | 787 | ||||||
Deferred income taxes and other long-term assets | 5,486 | 6,604 | ||||||
Total assets | $ | 127,238 | $ | 126,322 | ||||
LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||
Current liabilities: | ||||||||
Current operating lease liabilities | $ | 2,853 | $ | 2,524 | ||||
Accounts payable | 4,259 | 4,199 | ||||||
Accrued payroll and related liabilities | 7,679 | 6,488 | ||||||
Other accrued liabilities | 3,598 | 3,593 | ||||||
Customer advances | 33 | 4,007 | ||||||
Total current liabilities | 18,422 | 20,811 | ||||||
Noncurrent liabilities: | ||||||||
Noncurrent operating lease liabilities | 6,803 | 9,532 | ||||||
Other long-term liabilities | 457 | 186 | ||||||
Total noncurrent liabilities | 7,260 | 9,718 | ||||||
Commitments and contingencies | 0 | 0 | ||||||
Stockholders’ equity: | ||||||||
Undesignated preferred stock, $0.001 par value, 10,000 shares authorized, 0 shares issued and outstanding | 0— | 0— | ||||||
Common stock, $0.001 par value : | ||||||||
Authorized shares — 50,000 issued and outstanding shares — 23,874 and 23,346 at January 2, 2021 and December 28, 2019, respectively | 24 | 23 | ||||||
Additional paid-in capital | 193,173 | 188,290 | ||||||
Treasury stock, 5,087 shares at January 2, 2021 and 4,989 shares at December 28, 2019 | (29,551 | ) | (29,158 | ) | ||||
Accumulated other comprehensive income | 640 | 424 | ||||||
Accumulated deficit | (62,730 | ) | (63,786 | ) | ||||
Total stockholders’ equity | 101,556 | 95,793 | ||||||
Total liabilities and stockholders’ equity | $ | 127,238 | $ | 126,322 | ||||
| Year Ended, | ||||||||
| December 29, 2018 | December 30, 2017 | |||||||
| (In thousands, except per share amounts) | ||||||||
Net revenues: | ||||||||
Systems and components | $ | 85,320 | $ | 104,856 | ||||
Technology development | 9,794 | 7,991 | ||||||
|
|
|
| |||||
Total net revenues | 95,114 | 112,847 | ||||||
Cost of net revenues: | ||||||||
Systems and components | 53,334 | 60,120 | ||||||
Technology development | 9,086 | 7,064 | ||||||
|
|
|
| |||||
Total cost of net revenues | 62,420 | 67,184 | ||||||
Gross profit | 32,694 | 45,663 | ||||||
Operating expenses: | ||||||||
Research and development | 16,862 | 17,724 | ||||||
Selling, general and administrative | 20,188 | 23,314 | ||||||
Acquisition-related (benefit), net | (139 | ) | (223 | ) | ||||
|
|
|
| |||||
Total operating expenses | 36,911 | 40,815 | ||||||
|
|
|
| |||||
Operating income (loss) | (4,217 | ) | 4,848 | |||||
|
|
|
| |||||
Interest income | 516 | 291 | ||||||
Other income (expense), net | 106 | 82 | ||||||
|
|
|
| |||||
Income (loss) before income taxes | (3,595 | ) | 5,221 | |||||
Provision for (benefit from) income taxes | (7,176 | ) | 1,103 | |||||
|
|
|
| |||||
Net income | $ | 3,581 | $ | 4,118 | ||||
|
|
|
| |||||
Net income per share: | ||||||||
Basic | $ | 0.16 | $ | 0.19 | ||||
Diluted | $ | 0.16 | $ | 0.18 | ||||
Weighted average shares outstanding: | ||||||||
Basic | 22,519 | 21,555 | ||||||
Diluted | 22,904 | 22,920 | ||||||
Year Ended, | ||||||||
January 2, 2021 | December 28, 2019 | |||||||
(In thousands, except per share amounts) | ||||||||
Net revenues: | ||||||||
Systems and components | $ | 74,879 | $ | 89,228 | ||||
Technology development | 22,945 | 19,657 | ||||||
Total net revenues | 97,824 | 108,885 | ||||||
Cost of net revenues: | ||||||||
Systems and components | 42,231 | 55,678 | ||||||
Technology development | 15,048 | 12,339 | ||||||
Total cost of net revenues | 57,279 | 68,017 | ||||||
Gross profit | 40,545 | 40,868 | ||||||
Operating expenses: | ||||||||
Research and development | 14,093 | 14,309 | ||||||
Selling, general and administrative | 23,897 | 22,634 | ||||||
Total operating expenses | 37,990 | 36,943 | ||||||
Operating income | 2,555 | 3,925 | ||||||
Interest income | 284 | 574 | ||||||
Other income (expense), net | (72 | ) | 8 | |||||
Income before provision for income taxes | 2,767 | 4,507 | ||||||
Provision for income taxes | 1,711 | 3,359 | ||||||
Net income | $ | 1,056 | $ | 1,148 | ||||
Net income per share: | ||||||||
Basic | $ | 0.04 | $ | 0.05 | ||||
Diluted | $ | 0.04 | $ | 0.05 | ||||
Weighted average shares outstanding: | ||||||||
Basic | 23,669 | 23,063 | ||||||
Diluted | 24,151 | 23,340 | ||||||
| Year Ended, | ||||||||
| December 29, 2018 | December 30, 2017 | |||||||
| (In thousands) | ||||||||
Net income | $ | 3,581 | $ | 4,118 | ||||
Other comprehensive income (loss), before tax | ||||||||
Change in unrealized net loss onavailable-for-sale investments | 18 | (23 | ) | |||||
Foreign currency translation gains and losses | (130 | ) | 192 | |||||
|
|
|
| |||||
Other comprehensive income (loss), before tax | (112 | ) | 169 | |||||
Income tax expense related to items in other comprehensive income (loss) | — | — | ||||||
|
|
|
| |||||
Other comprehensive income (loss), net of tax | (112 | ) | 169 | |||||
|
|
|
| |||||
Comprehensive income | $ | 3,469 | $ | 4,287 | ||||
|
|
|
| |||||
Year Ended, | ||||||||
January 2, 2021 | December 28, 2019 | |||||||
(In thousands) | ||||||||
Net income | $ | 1,056 | $ | 1,148 | ||||
Other comprehensive income (loss), before tax | ||||||||
Change in unrealized net gain on available-for-sale | (5 | ) | 70 | |||||
Foreign currency translation gains and (losses) | 221 | (24 | ) | |||||
Other comprehensive income, before tax | 216 | 46 | ||||||
Income tax expense related to items in other comprehensive income | 0 | — | ||||||
Other comprehensive income, net of tax | 216 | 46 | ||||||
Comprehensive income | $ | 1,272 | $ | 1,194 | ||||
| Common Stock | Additional Paid-In Capital | Treasury Stock | Accumulated Other Comprehensive Income | Accumulated Deficit | Total Stockholders’ Equity | |||||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | |||||||||||||||||||||||||||||
Balance at December 31, 2016 | 20,939 | $ | 21 | $ | 171,314 | 4,845 | $ | (28,489 | ) | $ | 321 | $ | (69,901 | ) | $ | 73,266 | ||||||||||||||||
Cumulative effect of accounting change | — | — | 1,098 | — | — | — | (1,098 | ) | — | |||||||||||||||||||||||
Shares issued in connection with: | ||||||||||||||||||||||||||||||||
Exercise of stock options | 135 | — | 878 | — | — | — | — | 878 | ||||||||||||||||||||||||
Settlement of RSUs | 505 | — | — | — | — | — | — | — | ||||||||||||||||||||||||
Employee stock purchase plan | 406 | 1 | 1,550 | — | — | — | — | 1,551 | ||||||||||||||||||||||||
Shares withheld in connection with net share settlement of RSUs | (174 | ) | — | (1,999 | ) | — | — | — | — | (1,999 | ) | |||||||||||||||||||||
Equity-based compensation expense | — | — | 4,075 | — | — | — | — | 4,075 | ||||||||||||||||||||||||
Grant of RSUs to settle accrued bonus | — | — | 605 | — | — | — | — | 605 | ||||||||||||||||||||||||
Net income | — | — | — | — | — | — | 4,118 | 4,118 | ||||||||||||||||||||||||
Other comprehensive income | — | — | — | — | — | 169 | — | 169 | ||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Balance at December 30, 2017 | 21,811 | $ | 22 | $ | 177,521 | 4,845 | $ | (28,489 | ) | $ | 490 | $ | (66,881 | ) | $ | 82,663 | ||||||||||||||||
Cumulative effect of accounting change | — | — | — | — | — | — | (1,634 | ) | (1,634 | ) | ||||||||||||||||||||||
Shares issued in connection with: | ||||||||||||||||||||||||||||||||
Exercise of stock options | 323 | — | 1,573 | — | — | — | — | 1,573 | ||||||||||||||||||||||||
Settlement of RSUs | 434 | — | — | — | — | — | — | — | ||||||||||||||||||||||||
Employee stock purchase plan | 411 | 1 | 1,634 | — | — | — | — | 1,635 | ||||||||||||||||||||||||
Shares withheld in connection with net share settlement of RSUs | (159 | ) | — | (831 | ) | — | — | — | — | (831 | ) | |||||||||||||||||||||
Equity-based compensation expense | — | — | 3,307 | — �� | — | — | — | 3,307 | ||||||||||||||||||||||||
Net income | — | — | — | — | — | — | 3,581 | 3,581 | ||||||||||||||||||||||||
Other comprehensive loss | — | — | — | — | — | (112 | ) | — | (112 | ) | ||||||||||||||||||||||
Common stock repurchases | (120 | ) | — | — | 120 | (558 | ) | — | — | (558 | ) | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Balance at December 29, 2018 | 22,700 | $ | 23 | $ | 183,204 | 4,965 | $ | (29,047 | ) | $ | 378 | $ | (64,934 | ) | $ | 89,624 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Common Stock | Additional Paid-In Capital | Treasury Stock | Accumulated Other Comprehensive Income | Accumulated Deficit | Total Stockholders’ Equity | |||||||||||||||||||||||||||
Shares | Amount | Shares | Amount | |||||||||||||||||||||||||||||
Balance at December 28, 2019 | 22,700 | $ | 23 | $ | 183,204 | 4,965 | $ | (29,047 | ) | $ | 378 | $ | (64,934 | ) | $ | 89,624 | ||||||||||||||||
Shares issued in connection with: | ||||||||||||||||||||||||||||||||
Exercise of stock options | 175 | — | 799 | — | — | — | — | 799 | ||||||||||||||||||||||||
Settlement of RSUs | 199 | — | — | — | — | — | — | — | ||||||||||||||||||||||||
Employee stock purchase plan | 370 | — | 1,466 | — | — | — | — | 1,466 | ||||||||||||||||||||||||
Shares withheld in connection with net share settlement of RSUs | (74 | ) | — | (404 | ) | — | — | — | — | (404 | ) | |||||||||||||||||||||
Equity-based compensation expense | — | — | 3,225 | — | — | — | — | 3,225 | ||||||||||||||||||||||||
Net income | — | — | — | — | — | — | 1,148 | 1,148 | ||||||||||||||||||||||||
Other comprehensive income | — | — | — | — | — | 46 | — | 46 | ||||||||||||||||||||||||
Common stock repurchases | (24 | ) | — | — | 24 | (111 | ) | — | — | (111 | ) | |||||||||||||||||||||
Balance at December 28, 2019 | 23,346 | $ | 23 | $ | 188,290 | 4,989 | $ | (29,158 | ) | $ | 424 | $ | (63,786 | ) | $ | 95,793 | ||||||||||||||||
Shares issued in connection with: | ||||||||||||||||||||||||||||||||
Exercise of stock options | 67 | — | 326 | — | — | — | — | 326 | ||||||||||||||||||||||||
Settlement of RSUs | 244 | — | — | — | — | — | — | — | ||||||||||||||||||||||||
Employee stock purchase plan | 392 | 1 | 1,570 | — | — | — | — | 1,571 | ||||||||||||||||||||||||
Shares withheld in connection with net share settlement of RSUs | (77 | ) | — | (402 | ) | — | — | — | — | (402 | ) | |||||||||||||||||||||
Equity-based compensation expense | — | — | 3,389 | — | — | — | — | 3,389 | ||||||||||||||||||||||||
Net income | — | — | — | — | — | — | 1,056 | 1,056 | ||||||||||||||||||||||||
Other comprehensive income | — | — | — | — | — | 216 | — | 216 | ||||||||||||||||||||||||
Common stock repurchases | (98 | ) | — | — | 98 | (393 | ) | — | — | (393 | ) | |||||||||||||||||||||
Balance at January 2, 2021 | 23,874 | $ | 24 | $ | 193,173 | 5,087 | $ | (29,551 | ) | $ | 640 | $ | (62,730 | ) | $ | 101,556 | ||||||||||||||||
| Year Ended | ||||||||
| December 29, 2018 | December 30, 2017 | |||||||
| (In thousands) | ||||||||
Operating activities | ||||||||
Net income | $ | 3,581 | $ | 4,118 | ||||
Adjustments to reconcile net income to net cash and cash equivalents used in operating activities: | ||||||||
Depreciation & amortization | 3,999 | 3,116 | ||||||
Net amortization (accretion) of investment premiums and discounts | (97 | ) | 42 | |||||
Amortization of intangible assets | 615 | 755 | ||||||
Equity-based compensation | 3,307 | 4,178 | ||||||
Deferred income taxes | (7,909 | ) | (1 | ) | ||||
Change in the fair value of acquisition-related contingent consideration | (139 | ) | (223 | ) | ||||
Loss on disposal of equipment | 442 | — | ||||||
Changes in assets and liabilities: | ||||||||
Accounts receivable | (7,243 | ) | (3,027 | ) | ||||
Inventories | 3,278 | (8,916 | ) | |||||
Prepaid expenses and other assets | (141 | ) | (621 | ) | ||||
Accounts payable | 2,104 | (1,374 | ) | |||||
Accrued payroll and other accrued liabilities | (6,801 | ) | (6,029 | ) | ||||
Customer advances | 3,288 | 5,604 | ||||||
|
|
|
| |||||
Total adjustments | (5,297 | ) | (6,496 | ) | ||||
|
|
|
| |||||
Net cash and cash equivalents used in operating activities | (1,716 | ) | (2,378 | ) | ||||
Investing activities | ||||||||
Purchase of investments | (27,353 | ) | (26,581 | ) | ||||
Proceeds from sales and maturities of investments | 29,567 | 25,164 | ||||||
Purchase of equipment | (3,244 | ) | (4,356 | ) | ||||
|
|
|
| |||||
Net cash and cash equivalents used in investing activities | (1,030 | ) | (5,773 | ) | ||||
Financing activities | ||||||||
Proceeds from issuance of common stock | 3,208 | 2,429 | ||||||
Common stock repurchases | (558 | ) | — | |||||
Taxes paid related to net share settlement | (831 | ) | (1,999 | ) | ||||
Payment of acquisition-related contingent consideration | — | (174 | ) | |||||
|
|
|
| |||||
Net cash and cash equivalents provided by financing activities | 1,819 | 256 | ||||||
Effect of exchange rate changes on cash | (130 | ) | 191 | |||||
|
|
|
| |||||
Net decrease in cash, cash equivalents and restricted cash | (1,057 | ) | (7,704 | ) | ||||
Cash, cash equivalents and restricted cash at beginning of period | 20,941 | 28,645 | ||||||
|
|
|
| |||||
Cash, cash equivalents and restricted cash at end of period | $ | 19,884 | $ | 20,941 | ||||
|
|
|
| |||||
Cash paid (received) for: | ||||||||
Income taxes | $ | 991 | $ | 902 | ||||
Income tax refund | $ | — | $ | (19 | ) | |||
Year Ended | ||||||||
January 2, 2021 | December 28, 2019 | |||||||
(In thousands) | ||||||||
Operating activities | ||||||||
Net income | $ | 1,056 | $ | 1,148 | ||||
Adjustments to reconcile net income to net cash and cash equivalents provided by operating activities: | ||||||||
Depreciation and amortization | 3,206 | 2,976 | ||||||
Net amortization (accretion) of investment premiums and discounts | 12 | (75 | ) | |||||
Amortization of intangible assets | 274 | 615 | ||||||
Equity-based compensation | 3,389 | 3,225 | ||||||
Straight-line rent adjustment and amortization of lease incentives | (286 | ) | (289 | ) | ||||
Deferred income taxes | 917 | 1,661 | ||||||
Change in the fair value of acquisition-related contingent consideration | — | 7 | ||||||
Loss on disposal of equipment | — | 120 | ||||||
Changes in assets and liabilities: | ||||||||
Accounts receivable | (27 | ) | (902 | ) | ||||
Inventories | 3,218 | 6,301 | ||||||
Prepaid expenses and other assets | (462 | ) | 1,621 | |||||
Accounts payable | 60 | (1,850 | ) | |||||
Accrued payroll and other accrued liabilities | 1,467 | 694 | ||||||
Customer advances | (3,974 | ) | (10,307 | ) | ||||
Total adjustments | 7,794 | 3,797 | ||||||
Net cash and cash equivalents provided by operating activities | 8,850 | 4,945 | ||||||
Investing activities | ||||||||
Purchase of investments | (23,342 | ) | (23,306 | ) | ||||
Proceeds from sales and maturities of investments | 25,355 | 21,642 | ||||||
Purchase of leasehold improvements and equipment | (2,612 | ) | (4,107 | ) | ||||
Net cash and cash equivalents used in investing activities | (599 | ) | (5,771 | ) | ||||
Financing activities | ||||||||
Proceeds from issuance of common stock | 1,897 | 2,265 | ||||||
Common stock repurchases | (393 | ) | (111 | ) | ||||
Taxes paid related to net share settlement | (402 | ) | (404 | ) | ||||
Payment of acquisition-related contingent consideration | — | (230 | ) | |||||
Net cash and cash equivalents provided by financing activities | 1,102 | 1,520 | ||||||
Effect of exchange rate changes on cash | 221 | (24 | ) | |||||
Net increase in cash, cash equivalents and restricted cash | 9,574 | 670 | ||||||
Cash, cash equivalents and restricted cash at beginning of period | 20,554 | 19,884 | ||||||
Cash, cash equivalents and restricted cash at end of period | $ | 30,128 | $ | 20,554 | ||||
Cash paid (received) for: | ||||||||
Income taxes | $ | 850 | $ | 1,016 | ||||
Income tax refund | $ | (157 | ) | $ | (157 | ) | ||
INTEVAC, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
INTEVAC, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
On December 31, 2017, we adopted the new accounting standard ASC 606, Revenue from Contracts with Customers and all the related amendments (“new revenue standard”) to all contracts using the modified retrospective method. We recognized the cumulative effect of initially applying the new revenue standard as an adjustment to the opening balance of the accumulated deficit. The comparative information has not been restated and continues to be reported under the accounting standards in effect for those periods. We expect the impact of the adoption of the new standard to be immaterial to our net income on an ongoing basis.continues to bewhich includes systems, technology upgrades, service and spare parts is recognized when products are shipped from our manufacturing facilities. Revenue recognition for our equipment sales arrangements, which includes systems, technology upgrades, service and spare parts, remains materially consistent with our historical practice.Under the new revenue standard, inIn our TFE segment, we recognize revenue for equipment sales at a point in time following the transfer of control of such products to the customer, which typically occurs upon shipment or delivery depending on the terms of the underlying contracts. Intevac recognizes revenue in certain circumstances before delivery has occurred (commonly referred to as bill and hold transactions). In such circumstances, among other things, risk of ownership has passed to the customer, the customer has made a written fixed commitment to purchase the finished goods, the customer has requested the finished goods be held for future delivery as scheduled and designated by them, and no additional performance obligations exist by Intevac. For these transactions, the finished goods are segregated from inventory and normal billing and credit terms granted. Our contracts with customers may include multiple performance obligations. For such arrangements, under the new revenue standard we allocate revenue to each performance obligation based on its relative standalone selling price. We generally determine standalone selling prices based on the prices charged to customers or by using expected cost plus margin. Under the new revenue standard, the expected costs associated with our base warranties continue to beare recognized as expense when the equipment is sold.INTEVAC, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)Under the new revenue standard, inwill continue to beare recognized over time because of the continuous transfer of control to the customer. For U.S. government contracts, this continuous transfer of control to the customer is supported by clauses in the contract that allow the customer to unilaterally terminate the contract for convenience, pay us for costs incurred plus a reasonable profit and take control of any work in process. Similarly, fornewrevenue standard, the
Under the new revenue standard, in
Prior
recognized revenue upon shipment for all products that had been demonstrated to meet product specifications prior to shipment; the portion of revenue associated with certain installation-related tasks was deferred, and that revenue was recognized upon completion of the installation-related tasks; (2) for products that had not been demonstrated to meet product specifications prior to shipment, revenue was recognized at customer acceptance; and (3) for arrangements containing multiple elements, the revenue relating to the undelivered elements was deferred until delivery of the deferred elements. When a sales arrangement contained multiple elements, Intevac allocated revenue to each element based on a selling price hierarchy. The selling price for a deliverable was based on its VSOE if available, TPE if VSOE was not available, or best ESP if neither VSOE nor TPE was available. Intevac generally utilized the ESP due to the nature of its products. In certain cases, technology upgrade sales were accounted for as multiple-element arrangements, usually split between delivery of the parts and installation on the customer’s systems. In those cases, Intevac recognized revenue for the relative sales price of the parts upon shipment and transfer of title, and recognized revenue for the relative sales price of installation services when those services were completed. Revenue related to sales of spare parts was generally recognized upon shipment. Intevac recognized revenue in certain circumstances before delivery had occurred (commonly referred to as bill and hold transactions). In such circumstances, among other things, risk of ownership had passed to the customer, the customer had made a written fixed commitment to purchase the finished goods, the customer had requested the finished goods be held for future delivery as scheduled and designated by them, and no additional performance obligations existed by Intevac. For those transactions, the finished goods were segregated from inventory and normal billing and credit terms granted. Revenue related to services was generally recognized upon completion of the services. In addition, Intevac used the installment method to record revenue based on cash receipts in situations where the account receivable was collected over an extended period of time and in management’s judgment the degree of collectibility was uncertain.
Revenue on CPFF contracts was recognized to the extent of costs actually incurred plus a proportionate amount of the fee earned. Intevac considered fixed fees under CPFF contracts to be earned in proportion to the allowable costs actually incurred in performance of the contract. Revenue on FFP contracts was recognized on a milestone method orpercentage-of-completion method of contract accounting. For contracts structured as milestone agreements, revenue was recognized when a specified milestone was achieved, provided that (1) the milestone event is substantive in nature and there is substantial uncertainty about the achievement of the milestone at the inception of the agreement, (2) the milestone payment isnon-refundable, and (3) there is no continuing performance obligations associated with the milestone payment. Any milestone payments received prior to satisfying these revenue recognition criteria were deferred. Intevac generally determined the percentage completed based on the percentage of costs incurred to date in relation to total estimated costs expected through completion of the contract. When estimates of total costs to be incurred on a contract exceeded estimates of total revenue to be earned, a provision for the entire loss on the contract was recorded in the period the loss is determined.
Adoption of New Accounting Standard
Upon adoption of the new revenue standard, we recorded a cumulative effect adjustment to the beginning balance of our consolidated December 31, 2017 balance sheet for the impact of the allocation and the timing of the recognition of revenues for an open Photonics military product agreement with a tiered pricing structure. This change will also result in increased revenue in subsequent periods from this agreement. The cumulative effect of the changes made to our consolidated December 31, 2017 balance sheet were as follows (in thousands):
| Balance at December 30, 2017 | Adjustments Due to ASC 606 | Balance at December 31, 2017 | ||||||||||
Other accrued liabilities | $ | 7,688 | $ | 1,634 | $ | 9,322 | ||||||
|
|
|
|
|
| |||||||
Accumulated deficit | $ | (66,881 | ) | $ | (1,634 | ) | $ | (68,515 | ) | |||
|
|
|
|
|
| |||||||
INTEVAC, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
In accordance with the new revenue standard requirements, the disclosure of the impact of adoption on our selected consolidated statement of income line items was as follows (in thousands):
Consolidated Statement of Income
| For the Year Ended December 29, 2018 | ||||||||||||
| As Reported | Balances without ASC 606 | Effect of Change | ||||||||||
Systems and components revenues | $ | 85,320 | $ | 84,787 | $ | 533 | ||||||
|
|
|
|
|
| |||||||
Total net revenues | $ | 95,114 | $ | 94,581 | $ | 533 | ||||||
|
|
|
|
|
| |||||||
Gross profit | $ | 32,694 | $ | 32,161 | $ | 533 | ||||||
|
|
|
|
|
| |||||||
Loss from operations | $ | (4,217 | ) | $ | (4,750 | ) | $ | 533 | ||||
|
|
|
|
|
| |||||||
Loss before income taxes | $ | (3,595 | ) | $ | (4,128 | ) | $ | 533 | ||||
|
|
|
|
|
| |||||||
Net income | $ | 3,581 | $ | 3,048 | $ | 533 | ||||||
|
|
|
|
|
| |||||||
In accordance with the new revenue standard requirements, the disclosure of the impact of adoption on select consolidated balance sheet line items was as follows (in thousands):
Consolidated Balance Sheet
| As of December 29, 2018 | ||||||||||||
| As Reported | Balances without ASC 606 | Effect of Change | ||||||||||
Other accrued liabilities | $ | 4,952 | $ | 3,851 | $ | 1,101 | ||||||
|
|
|
|
|
| |||||||
Total current liabilities | $ | 30,008 | $ | 28,907 | $ | 1,101 | ||||||
|
|
|
|
|
| |||||||
Accumulated deficit | $ | (64,934 | ) | $ | (63,833 | ) | $ | (1,101 | ) | |||
|
|
|
|
|
| |||||||
Total stockholders’ equity | $ | 89,624 | $ | 90,725 | $ | (1,101 | ) | |||||
|
|
|
|
|
| |||||||
Balance at December 31, 2016 Other comprehensive income (loss) before reclassification Amounts reclassified from other comprehensive income (loss) Net current-period other comprehensive income (loss) Balance at December 30, 2017 Other comprehensive income (loss) before reclassification Amounts reclassified from other comprehensive income (loss) Net current-period other comprehensive income (loss) Balance at December 29, 2018 28, 2019:effecteffects of foreign currency translation adjustments are included in stockholders’ equity as a component of accumulated other comprehensive income in the accompanying consolidated balance sheets. The effects of foreign currency transactions are included in other income (expense), net in the determination of net income (loss). Gains (losses)income. Losses from foreign currency transactions were ($80,000)$139,000 and ($107,000)$85,000 in 20182020 and 2017,2019, respectively.INTEVAC, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)December 29, 2018January 2, 2021 and December 30, 2017: Foreign
currency Unrealized holding
gains (losses) on
available-for-sale
investments Total (in thousands) $ 343 $ (22 ) $ 321 192 (23 ) 169 — — — 192 (23 ) 169 $ 535 $ (45 ) $ 490 (130 ) 18 (112 ) — — — (130 ) 18 (112 ) $ 405 $ (27 ) $ 378
currency
gains (losses) on
investments $ 405 $ (27 ) $ 378 (24 ) 70 46 — — — (24 ) 70 46 $ 381 $ 43 $ 424 221 (5 ) 216 — — — 221 (5 ) 216 $ 602 $ 38 $ 640 performanceperformance-based restricted stock units (“PRSUs”) and performance bonus awards.shares. In addition, these plans provide for the grant of
In May 2017, the FASB issued ASU2017-09,Compensation—Stock Compensation: Scope of Modification Accounting, which provides guidance about which changes to the terms or conditions of a share-based payment award require an entity to apply modification accounting. An entity will account for the effects of a modification unless the fair value of the modified award is the same as the original award, the vesting conditions of the modified award are the same as the original award and the classification of the modified award as an equity instrument or liability instrument is the same as the original award. This update becomes effective and will be adopted by Intevac in the first quarter of fiscal 2019. The update is to be adopted prospectively to an award modified on or after the adoption date. Intevac does not expect the adoption of this update to have a material impact on its consolidated financial statements.
INTEVAC, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
In March 2017, the FASB issued ASU2017-08,Receivables – Nonrefundable Fees and Other Costs (Subtopic310-20): Premium Amortization on Purchased Callable Debt Securities. ASU2017-08 amends the amortization period for certain purchased callable debt securities held at a premium, shortening such period to the earliest call date. This update becomes effective and will be adopted by Intevac in the first quarter of fiscal 2019. Intevac does not expect the adoption of this update to have a material impact on its consolidated financial statements.
In January 2017, the FASB issued ASU2017-04,Intangibles—Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment. ASU2017-04 eliminates Step 2 from the goodwill impairment test. Under Step 2, an entity had to perform procedures to determine the fair value at the impairment testing date of its assets and liabilities (including unrecognized assets and liabilities) following the procedure that would be required in determining the fair value of assets acquired and liabilities assumed in a business combination. Instead, under the amendments in ASU2017-04, an entity should perform its annual, or interim, goodwill impairment test by comparing the fair value of a reporting unit with its carrying amount. An entity should recognize an impairment charge for the amount by which the carrying amount exceeds the reporting unit’s fair value; however, the loss recognized should not exceed the total amount of goodwill allocated to that reporting unit. Additionally, an entity should consider income tax effects from any tax deductible goodwill on the carrying amount of the reporting unit when measuring the goodwill impairment loss, if applicable. An entity still has the option to perform the qualitative assessment for a reporting unit to determine if the quantitative impairment test is necessary. This update becomes effective and will be adopted by Intevac in the first quarter of fiscal 2020. Early adoption is permitted for interim or annual goodwill impairment tests performed on testing dates after January 1, 2017. Intevac does not expect the adoption of this update to have a material impact on its consolidated financial statements.
In June 2016, the FASB issued ASU(TopicThe requirementsThis update becomes effective and will be adopted by Intevac in the first quarter of this ASU are effective for interim and annual reporting periods beginning after December 15, 2019.fiscal 2023. We are currently assessing how the adoption of this standard will impact our consolidated financial statements.
In February 2016, the FASB issued ASU2016-02,Leases. The new standard requires lessees to record assets and liabilities on the balance sheet for all leases with terms longer than 12 months. Leases will be classified as either finance or operating, with classification affecting the pattern of expense recognition in the income statement.
Intevac leases certain facilities undernon-cancelable operating leases that expire at various times up to March 2024 and has options to renew most leases, with rentals to be negotiated. Certain of Intevac’s leases contain provisions for rental adjustments. Operating lease rentals are expensed on a straight-line basis over the life of the lease beginning on the date we take possession of the property. At lease inception, we determine the lease term by assuming the exercise of those renewal options that are reasonably assured. The exercise of lease renewal options is at our sole discretion. The lease term is used to determine whether a lease is financing or operating and is used to calculate straight-line rent expense. Additionally, the depreciable life of leasehold improvements is limited by the expected lease term.
We plan to adopt the standard as of December 30, 2018, the beginning of fiscal 2019. We will elect the package of practical expedients permitted under the transition guidance within the new standard, which, among other things, allows us to carry forward the historical lease classification. In addition, we are electing the hindsight practical expedient to determine the reasonably certain lease term for existing leases. We will make an accounting policy election to keep leases with an initial term of 12 months or less off of the balance sheet. We will recognize those lease payments in the consolidated statements of income on a straight-line basis over the lease term. We also plan to elect the practical expedient that allow us to apply the new lease guidance at its effective date, December 30, 2018, without adjusting the comparative financial statements.
We are currently completing the assessment phase of the implementation project and are finalizing our review of the impact of adoption. We expect the adoption of these accounting changes will materially increase our assets and liabilities, but will not have a material impact on our results of operations, equity, or cash flows.
INTEVAC, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
TFE | 2018 | 2017 | ||||||||||||||||||||||||||||||
| (in thousands) | ||||||||||||||||||||||||||||||||
| HDD | DCP | PV | Total | HDD | DCP | PV | Total | |||||||||||||||||||||||||
Systems, upgrades and spare parts | $ | 55,793 | $ | 1 | $ | 5,253 | $ | 61,047 | $ | 51,146 | $ | 13,139 | $ | 9,275 | $ | 73,560 | ||||||||||||||||
Field service | 8,255 | — | 46 | 8,301 | 5,436 | — | 8 | 5,444 | ||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Total TFE net revenues | $ | 64,048 | $ | 1 | $ | 5,299 | $ | 69,348 | $ | 56,582 | $ | 13,139 | $ | 9,283 | $ | 79,004 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Photonics | 2018 | 2017 | ||||||
| (in thousands) | ||||||||
Products: | ||||||||
Military products | $ | 13,828 | $ | 24,373 | ||||
Commercial products | 335 | 237 | ||||||
Repair and other services | 1,809 | 1,242 | ||||||
|
|
|
| |||||
Total Photonics product net revenues | 15,972 | 25,852 | ||||||
Technology development: | ||||||||
CPFF | 7,258 | 3,983 | ||||||
FFP | 2,463 | 3,984 | ||||||
Time and materials | 73 | 24 | ||||||
|
|
|
| |||||
Total technology development net revenues | 9,794 | 7,991 | ||||||
|
|
|
| |||||
Total Photonics net revenues | $ | 25,766 | $ | 33,843 | ||||
|
|
|
| |||||
TFE | 2020 | 2019 | ||||||||||||||||||||||||||||||
(in thousands) | ||||||||||||||||||||||||||||||||
HDD | DCP | PV | Total | HDD | DCP | PV | Total | |||||||||||||||||||||||||
Systems, upgrades and spare parts | $ | 45,620 | $ | — | $ | 426 | $ | 46,046 | $ | 52,759 | $ | 0 | $ | 15,653 | $ | 68,412 | ||||||||||||||||
Field service | 6,080 | 0 | 2 | 6,082 | 5,210 | 2 | 54 | 5,266 | ||||||||||||||||||||||||
Total TFE net revenues | $ | 51,700 | $ | 0— | $ | 428 | $ | 52,128 | $ | 57,969 | $ | 02 | $ | 15,707 | $ | 73,678 | ||||||||||||||||
Photonics | 2020 | 2019 | ||||||
(in thousands) | ||||||||
Products: | ||||||||
Military products | $ | 20,409 | $ | 12,480 | ||||
Commercial products | 395 | 640 | ||||||
Repair and other services | 1,947 | 2,430 | ||||||
Total Photonics product net revenues | 22,751 | 15,550 | ||||||
Technology development: | ||||||||
FFP | 19,648 | 12,521 | ||||||
CPFF | 3,297 | 7,134 | ||||||
Time and materials | 0 | 2 | ||||||
Total technology development net revenues | 22,945 | 19,657 | ||||||
Total Photonics net revenues | $ | 45,696 | $ | 35,207 | ||||
| 2018 | 2017 | |||||||||||||||||||||||
| (in thousands) | ||||||||||||||||||||||||
| TFE | Photonics | Total | TFE | Photonics | Total | |||||||||||||||||||
United States | $ | 4,050 | $ | 23,862 | $ | 27,912 | $ | 5,487 | $ | 31,824 | $ | 37,311 | ||||||||||||
Asia | 65,298 | 31 | 65,329 | 73,517 | 8 | 73,525 | ||||||||||||||||||
Europe | — | 1,648 | 1,648 | — | 884 | 884 | ||||||||||||||||||
Rest of World | — | 225 | 225 | — | 1,127 | 1,127 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Total net revenues | $ | 69,348 | $ | 25,766 | $ | 95,114 | $ | 79,004 | $ | 33,843 | $ | 112,847 | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Timing of Revenue Recognition
| 2018 | ||||||||||||
| TFE | Photonics | Total | ||||||||||
| (in thousands) | ||||||||||||
Products transferred at a point in time | $ | 69,348 | $ | 1,809 | $ | 71,157 | ||||||
Products and services transferred over time | — | 23,957 | 23,957 | |||||||||
|
|
|
|
|
| |||||||
| $ | 69,348 | $ | 25,766 | $ | 95,114 | |||||||
|
|
|
|
|
| |||||||
2020 | 2019 | |||||||||||||||||||||||
(in thousands) | ||||||||||||||||||||||||
TFE | Photonics | Total | TFE | Photonics | Total | |||||||||||||||||||
United States | $ | 6,450 | $ | 45,363 | $ | 51,813 | $ | 1,306 | $ | 34,664 | $ | 35,970 | ||||||||||||
Asia | 45,611 | 0— | 45,611 | 72,372 | — | 72,372 | ||||||||||||||||||
Europe | 67 | 333 | 400 | — | 543 | 543 | ||||||||||||||||||
Total net revenues | $ | 52,128 | $ | 45,696 | $ | 97,824 | $ | 73,678 | $ | 35,207 | $ | 108,885 | ||||||||||||
2020 | 2019 | |||||||||||||||||||||||
(in thousands) | ||||||||||||||||||||||||
TFE | Photonics | Total | TFE | Photonics | Total | |||||||||||||||||||
Products transferred at a point in time | $ | 52,128 | $ | 1,947 | $ | 54,075 | $ | 73,678 | $ | 2,430 | $ | 76,108 | ||||||||||||
Products and services transferred over time | — | 43,749 | 43,749 | — | 32,777 | 32,777 | ||||||||||||||||||
Total net revenues | $52,128 | $ | 45,696 | $ | 97,824 | $ | 73,678 | $ | 35,207 | $ | 108,885 | |||||||||||||
| December 29, 2018 | December 30, 2017 | Change | ||||||||||
| (in thousands) | ||||||||||||
TFE: | ||||||||||||
Contract assets: | ||||||||||||
Accounts receivable, unbilled | $ | 514 | $ | 1,368 | $ | (854 | ) | |||||
|
|
|
|
|
| |||||||
Contract liabilities: | ||||||||||||
Deferred revenue | $ | 633 | $ | 5,190 | $ | (4,557 | ) | |||||
Customer advances | 14,314 | 10,204 | 4,110 | |||||||||
|
|
|
|
|
| |||||||
| $ | 14,947 | $ | 15,394 | $ | (447 | ) | ||||||
|
|
|
|
|
| |||||||
Photonics: | ||||||||||||
Contract assets: | ||||||||||||
Accounts receivable, unbilled | $ | 1,493 | $ | 1,346 | $ | 147 | ||||||
Retainage | 157 | 281 | (124 | ) | ||||||||
|
|
|
|
|
| |||||||
| $ | 1,650 | $ | 1,627 | $ | 23 | |||||||
|
|
|
|
|
| |||||||
Contract liabilities: | ||||||||||||
Deferred revenue | $ | 1,101 | $ | 97 | $ | 1,004 | ||||||
Customer advances | — | 822 | (822 | ) | ||||||||
|
|
|
|
|
| |||||||
| $ | 1,101 | $ | 919 | $ | 182 | |||||||
|
|
|
|
|
| |||||||
2020:
January 2, 2021 | December 28, 2019 | Change | ||||||||||
(In thousands) | ||||||||||||
TFE: | ||||||||||||
Contract assets: | ||||||||||||
Accounts receivable, unbilled | $ | 369 | $ | 760 | $ | (391 | ) | |||||
Contract liabilities: | ||||||||||||
Deferred revenue | $ | 482 | $ | 320 | $ | 162 | ||||||
Customer advances | 33 | 4,007 | (3,974 | ) | ||||||||
| $ | 515 | $ | 4,327 | $ | (3,812 | ) | ||||||
Photonics: | ||||||||||||
Contract assets: | ||||||||||||
Accounts receivable, unbilled | $ | 5,439 | $ | 3,210 | $ | 2,229 | ||||||
Retainage | 126 | 99 | 27 | |||||||||
| $ | 5,565 | $ | 3,309 | $ | 2,256 | |||||||
Contract liabilities: | ||||||||||||
Deferred revenue | $ | 779 | $ | — | $ | 779 | ||||||
January 2, 2021.
INTEVAC, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
approval of final indirect expense rates by the government. During fiscal 2018,2020, contract assets in our Photonics segment increased by $23,000$2.3 million primarily due to the revenue recognized on FFP contracts in advance of billing and the accrual of revenue incurred costs under CPFF contracts, offset in part by the completion of certain CPFF contracts and the final settlement of retainage amounts under certain CPFF contracts.
Customer advances in our Photonics segment generally represent deposits from customers upon contract execution and upon achievement of contractual milestones which represents a contract liability. These deposits are liquidated when revenue is recognized.
is recognized.
2024.
13, 2030.
In 2003, Intevac’s stockholders approved adoption of the ESPP, which serves as the successor to the Employee Stock Purchase Plan originally adopted in 1995. Upon adoption of the ESPP, all shares available for issuance under the prior plan were transferred to the ESPP.
| 2018 | 2017 | |||||||
Equity-based compensation by type of award: | ||||||||
Stock options | $ | 775 | $ | 1,176 | ||||
RSUs | 1,251 | 2,598 | ||||||
Employee stock purchase plan | 1,281 | 404 | ||||||
|
|
|
| |||||
Total equity-based compensation | $ | 3,307 | $ | 4,178 | ||||
|
|
|
| |||||
2020 | 2019 | |||||||
Equity-based compensation by type of award: | ||||||||
Stock options | $504 | $819 | ||||||
RSUs | 1,936 | 1,657 | ||||||
Employee stock purchase plan | 949 | 749 | ||||||
Total equity-based compensation | $ | 3,389 | $ | 3,225 | ||||
| 2018 | 2017 | |||||||
Stock Options: | ||||||||
Weighted-average fair value of grants per share | $ | 1.97 | $ | 4.52 | ||||
Expected volatility | 43.83 | % | 40.49 | % | ||||
Risk free interest rate | 2.58 | % | 1.81 | % | ||||
Expected term of options (in years) | 4.4 | 4.22 | ||||||
Dividend yield | None | None | ||||||
2020 | 2019 | |||||||
Stock Options: | ||||||||
Weighted-average fair value of grants per share | $ | 1.82 | $ | 2.06 | ||||
Expected volatility | 46.06 | % | 43.23 | % | ||||
Risk free interest rate | 0.44% | 1.86% | ||||||
Expected term of options (in years) | 4.39 | 4.60 | ||||||
Dividend yield | NaN | NaN | ||||||
2019 | ||||
Weighted-average fair value of grants per share | $ | 1.75 | ||
Expected volatility | 43.43 | % | ||
| Risk free interest rate | 1.96% | |||
Expected term (in years) | 4.60 | |||
Dividend yield | NaN | |||
| Shares | Weighted Average Exercise Price | Weighted Average Remaining Contractual Term (years) | Aggregate Intrinsic Value | |||||||||||||
Options outstanding at December 30, 2017 | 2,925,861 | $ | 7.62 | 3.00 | $ | 2,292,521 | ||||||||||
Options granted | 430,125 | $ | 5.11 | |||||||||||||
Options cancelled and forfeited | (962,171 | ) | $ | 9.27 | ||||||||||||
Options exercised | (323,066 | ) | $ | 4.87 | ||||||||||||
|
| |||||||||||||||
Options outstanding at December 29, 2018 | 2,070,749 | $ | 6.76 | 3.78 | $ | 339,821 | ||||||||||
|
| |||||||||||||||
Options exercisable at December 29, 2018 | 1,333,415 | $ | 6.59 | 2.70 | $ | 186,019 | ||||||||||
INTEVAC, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
Shares | Weighted Average Exercise Price | Weighted Average Remaining Contractual Term (years) | Aggregate Intrinsic Value | |||||||||||||
Options outstanding at December 28, 2019 | 2,096,610 | $ | 6.63 | 3.75 | $ | 2,048,964 | ||||||||||
Options granted | 6,000 | $ | 4.88 | |||||||||||||
Options cancelled and forfeited | (220,971 | ) | $ | 6.88 | ||||||||||||
Options exercised | (67,172 | ) | $ | 4.85 | ||||||||||||
Options outstanding at January 2, 2021 | 1,814,467 | $ | 6.66 | 3.08 | $ | 2,520,722 | ||||||||||
Options exercisable at January 2, 2021 | 1,372,871 | $ | 6.77 | 2.52 | $ | 1,798,938 | ||||||||||
| Shares | Weighted Average Grant Date Fair Value | Weighted Average Remaining Contractual Term (years) | Aggregate Intrinsic Value | |||||||||||||
Non-vested RSUs at December 30, 2017 | 769,451 | $ | 7.84 | 0.97 | $ | 5,270,739 | ||||||||||
Granted | 230,917 | $ | 5.04 | |||||||||||||
Vested | (433,534 | ) | $ | 7.14 | ||||||||||||
Cancelled | (104,425 | ) | $ | 8.64 | ||||||||||||
|
| |||||||||||||||
Non-vested RSUs at December 29, 2018 | 462,409 | $ | 6.92 | 1.47 | $ | 2,362,910 | ||||||||||
|
| |||||||||||||||
Shares | Weighted Average Grant Date Fair Value | Weighted Average Remaining Contractual Term (years) | Aggregate Intrinsic Value | |||||||||||||
Non-vested RSUs at December 28, 2019 | 553,355 | $ | 6.15 | 1.30 | $ | 3,713,012 | ||||||||||
Granted | 668,413 | $ | 4.87 | |||||||||||||
Vested | (243,312 | ) | $ | 6.38 | ||||||||||||
Cancelled | (76,822 | ) | $ | 4.26 | ||||||||||||
Non-vested RSUs at January 2, 2021 | 901,634 | $ | 5.30 | 1.50 | $ | 6,500,781 | ||||||||||
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
2020 | ||||
Weighted-average fair value of grants per share | $ | 3.16 | ||
Expected volatility | 46.7 | % | ||
Risk-free interest rate | 0.25 | % | ||
Dividend yield | NaN | |||
| 2018 | 2017 | |||||||
Stock Purchase Rights: | ||||||||
Weighted-average fair value of grants per share | $ | 2.24 | $ | 2.75 | ||||
Expected volatility | 47.64 | % | 43.51 | % | ||||
Risk free interest rate | 2.01 | % | 1.22 | % | ||||
Expected term of purchase rights (in years) | 1.33 | 0.65 | ||||||
Dividend yield | None | None | ||||||
2020 | 2019 | |||||||
Stock Purchase Rights: | ||||||||
Weighted-average fair value of grants per share | $ | 2.20 | $ | 1.73 | ||||
Expected volatility | 51.49 | % | 45.81 | % | ||||
Risk free interest rate | 0.14 | % | 2.28 | % | ||||
Expected term of purchase rights (in years) | 1.24 | 0.91 | ||||||
Dividend yield | NaN | NaN | ||||||
| 2018 | 2017 | |||||||
| (in thousands, except per share amounts) | ||||||||
Shares purchased | 411 | 406 | ||||||
Weighted-average purchase price per share | $ | 3.98 | $ | 3.82 | ||||
Aggregate intrinsic value of purchase rights exercised | $ | 750 | $ | 2,673 | ||||
INTEVAC, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
2020 | 2019 | |||||||
(in thousands, except per share amounts) | ||||||||
Shares purchased | 392 | 370 | ||||||
Weighted-average purchase price per share | $ | 4.01 | $ | 3.96 | ||||
Aggregate intrinsic value of purchase rights exercised | $ | 765 | $ | 513 | ||||
| 2018 | 2017 | |||||||
| (in thousands, except per share amounts) | ||||||||
Net income | $ | 3,581 | $ | 4,118 | ||||
|
|
|
| |||||
Weighted-average shares – basic | 22,519 | 21,555 | ||||||
Effect of dilutive potential common shares | 385 | 1,365 | ||||||
|
|
|
| |||||
Weighted-average shares – diluted | 22,904 | 22,920 | ||||||
|
|
|
| |||||
Net income per share – basic | $ | 0.16 | $ | 0.19 | ||||
|
|
|
| |||||
Net income per share – diluted | $ | 0.16 | $ | 0.18 | ||||
|
|
|
| |||||
2020 | 2019 | |||||||
(in thousands, except per share amounts) | ||||||||
Net income | $ | 1,056 | $ | 1,148 | ||||
| Weighted-average shares – basic | 23,669 | 23,063 | ||||||
Effect of dilutive potential common shares | 482 | 277 | ||||||
| Weighted-average shares – diluted | 24,151 | 23,340 | ||||||
| Net income per share –basic | $ | 0.04 | $ | 0.05 | ||||
| Net income per share –diluted | $ | 0.04 | $ | 0.05 | ||||
| 2018 | 2017 | |||||||
| (in thousands, except per share amounts) | ||||||||
Stock options to purchase common stock | 1,612 | 867 | ||||||
RSUs | 124 | 218 | ||||||
Employee stock purchase plan | 254 | — | ||||||
2020 | 2019 | |||||||
(in thousands) | ||||||||
Stock options to purchase common stock | 935 | 1,235 | ||||||
RSUs | 5 | 5 | ||||||
Employee stock purchase plan | 103 | 3 | ||||||
| 2018 | 2017 | |||||||
Seagate Technology | 45 | % | 70 | % | ||||
HGST | 25 | % | * | |||||
2020 | 2019 | |||||||
Seagate Technology | 45 | % | 60 | % | ||||
U.S. Government | 26 | % | 25 | % | ||||
HGST | 14 | % | 0* | |||||
| * | Less than 10% |
INTEVAC, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
| 2018 | 2017 | |||||||
Seagate Technology | 52 | % | 40 | % | ||||
HGST | 13 | % | * | |||||
U.S. Government | * | 15 | % | |||||
2020 | 2019 | |||||||
Seagate Technology | 42 | % | 49 | % | ||||
U.S. Government | 29 | % | 20 | % | ||||
Elbit Systems of America | 12 | % | 0* | |||||
Jolywood (Hongkong) Industrial Holdings Co., Limited | 0* | 14 | % | |||||
| * | Less than 10% |
20182020 and 2017.2019. Intevac expects that the ability to maintain or expand its current levels of revenues in the future will depend upon continuing market demand for its products; its success in enhancing its existing systems and developing and manufacturing competitive disk manufacturing equipment, such as the 200 Lean; its success in utilizing Intevac’s expertise in complex manufacturing equipment to develop and sell new manufacturing equipment products for PV, DCP and DCP manufacturingadvanced semiconductor packaging and Intevac’s success in developing military products based on its
28, 2019:
| December 29, | December 30, | |||||||
| 2018 | 2017 | |||||||
| (in thousands) | ||||||||
Trade receivables and other | $ | 25,397 | $ | 17,479 | ||||
Unbilled costs and accrued profits | 2,164 | 2,995 | ||||||
Income tax receivable | 156 | — | ||||||
Less: allowance for doubtful accounts | — | — | ||||||
|
|
|
| |||||
| $ | 27,717 | $ | 20,474 | |||||
|
|
|
| |||||
January 2, | December 28, | |||||||
2021 | 2019 | |||||||
(in thousands) | ||||||||
Trade receivables and other | $ | 22,712 | $ | 24,472 | ||||
Unbilled costs and accrued profits | 5,934 | 4,069 | ||||||
Income tax receivable | — | 78 | ||||||
Less: allowance for doubtful accounts | — | — | ||||||
| $ | 28,646 | $ | 28,619 | |||||
| December 29, | December 30, | |||||||
| 2018 | 2017 | |||||||
| (in thousands) | ||||||||
Raw materials | $ | 16,354 | $ | 19,881 | ||||
Work-in-progress | 9,134 | 9,433 | ||||||
Finished goods | 5,109 | 4,478 | ||||||
|
|
|
| |||||
| $ | 30,597 | $ | 33,792 | |||||
|
|
|
| |||||
January 2, | December 28, | |||||||
2021 | 2019 | |||||||
(in thousands) | ||||||||
Raw materials | $ | 9,999 | $ | 15,286 | ||||
Work-in-progress | 4,832 | 4,748 | ||||||
Finished goods | 6,858 | 4,873 | ||||||
| $ | 21,689 | $ | 24,907 | |||||
January 2, 2021 | December 28, 2019 | |||||||
(in thousands) | ||||||||
Leasehold improvements | $ | 16,323 | $ | 15,037 | ||||
Machinery and equipment | 46,846 | 46,674 | ||||||
| 63,169 | 61,711 | |||||||
Less accumulated depreciation and amortization | 52,165 | 50,113 | ||||||
Total property, plant and equipment, net | $ | 11,004 | $ | 11,598 | ||||
January 2, 2021 | December 28, 2019 | |||||||
(in thousands) | ||||||||
Deferred income taxes | $ | 5,335 | $ | 6,252 | ||||
Prepaid expenses | 151 | — | ||||||
Purchased intangible assets, net | — | 274 | ||||||
Income tax receivable | — | 78 | ||||||
| $ | 5,486 | $ | 6,604 | |||||
Property, Plant and Equipment
| December 29, 2018 | December 30, 2017 | |||||||
| (in thousands) | ||||||||
Leasehold improvements | $ | 14,923 | $ | 15,035 | ||||
Machinery and equipment | 45,032 | 44,766 | ||||||
|
|
|
| |||||
| 59,955 | 59,801 | |||||||
Less accumulated depreciation and amortization | 48,757 | 47,323 | ||||||
|
|
|
| |||||
Total property, plant and equipment, net | $ | 11,198 | $ | 12,478 | ||||
|
|
|
| |||||
Deferred Income Taxes and Other Long-Term Assets
| December 29, 2018 | December 30, 2017 | |||||||
| (in thousands) | ||||||||
Deferred income taxes | $ | 7,913 | $ | 4 | ||||
Contested tax deposits | 723 | 743 | ||||||
Income tax receivable | 157 | — | ||||||
Other | 16 | 17 | ||||||
|
|
|
| |||||
| $ | 8,809 | $ | 764 | |||||
|
|
|
| |||||
| December 29, 2018 | December 30, 2017 | |||||||
| (in thousands) | ||||||||
Deferred revenue | $ | 1,734 | $ | 5,287 | ||||
Other taxes payable | 928 | 860 | ||||||
Accrued product warranties | 839 | 757 | ||||||
Income taxes payable | 389 | 262 | ||||||
Provision for estimated losses on uncompleted contracts | 278 | 189 | ||||||
Acquisition-related contingent consideration | 223 | 103 | ||||||
Other | 561 | 230 | ||||||
|
|
|
| |||||
Total other accrued liabilities | $ | 4,952 | $ | 7,688 | ||||
|
|
|
| |||||
January 2, 2021 | December 28, 2019 | |||||||
(in thousands) | ||||||||
Deferred revenue | $ | 1,261 | $ | 320 | ||||
Other taxes payable | 935 | 1,155 | ||||||
Accrued product warranties | 405 | 846 | ||||||
Income taxes payable | 263 | 403 | ||||||
Other | 734 | 869 | ||||||
Total other accrued liabilities | $ | 3,598 | $ | 3,593 | ||||
| December 29, 2018 | December 30, 2017 | |||||||
| (in thousands) | ||||||||
Deferred rent | $ | 2,270 | $ | 2,299 | ||||
Accrued product warranties | 158 | 237 | ||||||
Acquisition-related contingent consideration | — | 259 | ||||||
Accrued income taxes | 10 | 84 | ||||||
|
|
|
| |||||
Total other long-term liabilities | $ | 2,438 | $ | 2,879 | ||||
|
|
|
| |||||
INTEVAC, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
January 2, 2021 | December 28, 2019 | |||||||
(in thousands) | ||||||||
Employer payroll taxes | $ | 382 | $ | — | ||||
Accrued product warranties | 75 | 176 | ||||||
Accrued income taxes | — | 10 | ||||||
Total other long-term liabilities | $ | 457 | $ | 186 | ||||
Information regarding
| December 29, 2018 | December 30, 2017 | |||||||||||||||||||||||
| Gross Carrying Amount | Accumulated Amortization | Net Carrying Amount | Gross Carrying Amount | Accumulated Amortization | Net Carrying Amount | |||||||||||||||||||
| (in thousands) | ||||||||||||||||||||||||
Customer relationships | $ | 3,119 | $ | 3,040 | $ | 79 | $ | 3,119 | $ | 2,997 | $ | 122 | ||||||||||||
Purchased technology | 5,148 | 4,338 | 810 | 5,148 | 3,767 | 1,381 | ||||||||||||||||||
Covenants not to compete | 40 | 40 | — | 40 | 40 | — | ||||||||||||||||||
Backlog | 80 | 80 | — | 80 | 80 | — | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Total amortizable intangible assets | $ | 8,387 | $ | 7,498 | $ | 889 | $ | 8,387 | $ | 6,884 | $ | 1,503 | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Intangiblehad reached the end of their useful lives and did not have any remaining carrying value. The carrying value of acquisition-related intangible assets by segmentsubject to amortization, excluding fully amortized intangible assets, as of December 29, 2018 are as follows: TFE; $810,000 and Photonics; $79,000.
28, 2019 is set forth in the following table:
December 28, 2019 | ||||||||||||
Gross Carrying Amount | Accumulated Amortization | Net Carrying Amount | ||||||||||
(in thousands) | ||||||||||||
Customer relationships | $ | 560 | $ | 524 | $ | 36 | ||||||
Purchased technology | 4,000 | 3,762 | 238 | |||||||||
Total amortizable intangible assets | $ | 4,560 | $ | 4,286 | $ | 274 | ||||||
Estimated future amortization expense related to finite-lived purchased intangible assets as of December 29, 2018, is as follows.
| (in thousands) | ||||
2019 | $ | 615 | ||
2020 | 274 | |||
|
| |||
| $ | 889 | |||
|
| |||
for fiscal 2019.
In connection with the acquisition of SIT, Intevac also agreed to pay to the selling shareholders in cash a revenue earnout on Intevac’s net revenuerevenues from commercial sales of certain products over a specified period up to an aggregate of $9.0 million. Intevac estimated the fair value of thisThe earnout period terminated on June 30, 2019. There is 0 remaining contingent consideration on December 29, 2018 based on forecasted revenues reflecting Intevac’s own assumptions concerning future revenue from such products.
The fair value measurement of contingent consideration is based on significant inputs not observable inobligation associated with the market and thus represents a Level 3 measurement. The following table represents the significant unobservable input used in the calculation of fair value of the contingent consideration liability as of December 29, 2018. Significant increases or decreases in this input would result in a significantly lower (higher) fair value measurement.
Quantitative Information about Level 3 Fair Value Measurements at December 29, 2018 | ||||||||
| Fair Value | Valuation Technique | Unobservable Input | Weighted Average | |||||
| (in thousands, except for percentages) | ||||||||
| Revenue Earnout | $ 223 | Discounted cash flow | Weighted-average cost of capital | 11.3% | ||||
Any change in fair value of the contingent consideration subsequent to the acquisition date is recognized in operating income within the consolidated statement of income.
| 2018 | 2017 | |||||||
| (in thousands) | ||||||||
Beginning balance | $ | 362 | $ | 759 | ||||
Changes in fair value | (139 | ) | (223 | ) | ||||
Cash payments made | — | (174 | ) | |||||
|
|
|
| |||||
Ending balance | $ | 223 | $ | 362 | ||||
|
|
|
| |||||
2019:
2019 | ||||
(in thousands) | ||||
Beginning balance | $ | 223 | ||
Changes in fair value | 7 | |||
Cash payments made | (230 | ) | ||
Ending balance | $ | — | ||
| December 29, 2018 | ||||||||||||||||
| Amortized Cost | Unrealized Holding Gains | Unrealized Holding Losses | Fair Value | |||||||||||||
| (in thousands) | ||||||||||||||||
Cash and cash equivalents: | ||||||||||||||||
Cash | $ | 13,334 | $ | — | $ | — | $ | 13,334 | ||||||||
Money market funds | 3,335 | — | — | 3,335 | ||||||||||||
U.S. treasury and agency securities | 2,046 | — | — | 2,046 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Total cash and cash equivalents | $ | 18,715 | $ | — | $ | — | $ | 18,715 | ||||||||
Short-term investments: | ||||||||||||||||
Certificates of deposit | $ | 5,299 | $ | 1 | $ | 1 | $ | 5,299 | ||||||||
Commercial paper | 2,242 | — | 1 | 2,241 | ||||||||||||
Corporate bonds and medium-term notes | 4,759 | — | 13 | 4,746 | ||||||||||||
Municipal bonds | 500 | — | 2 | 498 | ||||||||||||
U.S. treasury and agency securities | 3,297 | — | 5 | 3,292 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Total short-term investments | $ | 16,097 | $ | 1 | $ | 22 | $ | 16,076 | ||||||||
Long-term investments: | ||||||||||||||||
Certificates of deposit | $ | 500 | $ | — | $ | — | $ | 500 | ||||||||
Corporate bonds and medium-term notes | 2,879 | 4 | 4 | 2,879 | ||||||||||||
U.S. treasury and agency securities | 999 | — | 6 | 993 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Total long-term investments | $ | 4,378 | $ | 4 | $ | 10 | $ | 4,372 | ||||||||
|
|
|
|
|
|
|
| |||||||||
Total cash, cash equivalents, and investments | $ | 39,190 | $ | 5 | $ | 32 | $ | 39,163 | ||||||||
|
|
|
|
|
|
|
| |||||||||
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 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 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 | ||||||||
| December 30, 2017 | ||||||||||||||||
| Amortized Cost | Unrealized Holding Gains | Unrealized Holding Losses | Fair Value | |||||||||||||
| (in thousands) | ||||||||||||||||
Cash and cash equivalents: | ||||||||||||||||
Cash | $ | 13,195 | $ | — | $ | — | $ | 13,195 | ||||||||
Money market funds | 6,746 | — | — | 6,746 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Total cash and cash equivalents | $ | 19,941 | $ | — | $ | — | $ | 19,941 | ||||||||
Short-term investments: | ||||||||||||||||
Certificates of deposit | $ | 2,500 | $ | 1 | $ | 1 | $ | 2,500 | ||||||||
Commercial paper | 3,291 | — | — | 3,291 | ||||||||||||
Corporate bonds and medium-term notes | 4,502 | — | 5 | 4,497 | ||||||||||||
Municipal bonds | 500 | — | 3 | 497 | ||||||||||||
U.S. treasury and agency securities | 4,917 | — | 4 | 4,913 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Total short-term investments | $ | 15,710 | $ | 1 | $ | 13 | $ | 15,698 | ||||||||
Long-term investments: | ||||||||||||||||
Asset backed securities | $ | 500 | $ | — | $ | — | $ | 500 | ||||||||
Corporate bonds and medium-term notes | 4,384 | — | 21 | 4,363 | ||||||||||||
U.S. treasury and agency securities | 1,998 | — | 12 | 1,986 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Total long-term investments | $ | 6,882 | $ | — | $ | 33 | $ | 6,849 | ||||||||
|
|
|
|
|
|
|
| |||||||||
Total cash, cash equivalents, and investments | $ | 42,533 | $ | 1 | $ | 46 | $ | 42,488 | ||||||||
|
|
|
|
|
|
|
| |||||||||
December 28, 2019 | ||||||||||||||||
Amortized Cost | Unrealized Holding Gains | Unrealized Holding Losses | Fair Value | |||||||||||||
(in thousands) | ||||||||||||||||
Cash and cash equivalents: | ||||||||||||||||
Cash | $ | 16,512 | $ | — | $ | — | $ | 16,512 | ||||||||
Money market funds | 3,255 | — | — | 3,255 | ||||||||||||
Total cash and cash equivalents | $ | 19,767 | $ | — | $ | — | $ | 19,767 | ||||||||
Short-term investments: | ||||||||||||||||
Certificates of deposit | $ | 3,000 | $ | 1 | $ | — | $ | 3,001 | ||||||||
Commercial paper | 1,891 | 2 | — | 1,893 | ||||||||||||
Corporate bonds and medium-term notes | 6,383 | 25 | — | 6,408 | ||||||||||||
U.S. treasury securities | 5,417 | 1 | — | 5,418 | ||||||||||||
Total short-term investments | $ | 16,691 | $ | 29 | $ | — | $ | 16,720 | ||||||||
Long-term investments: | ||||||||||||||||
Certificates of deposit | $ | 499 | $ | 1 | $ | — | $ | 500 | ||||||||
Corporate bonds and medium-term notes | 2,530 | 12 | — | 2,542 | ||||||||||||
U.S. treasury securities | 2,494 | 1 | — | 2,495 | ||||||||||||
Total long-term investments | $ | 5,523 | $ | 14 | $ | — | $ | 5,537 | ||||||||
Total cash, cash equivalents, and investments | $ | 41,981 | $ | 43 | $ | — | $ | 42,024 | ||||||||
| Amortized Cost | Fair Value | |||||||
| (in thousands) | ||||||||
Due in one year or less | $ | 21,478 | $ | 21,457 | ||||
Due after one through five years | 4,378 | 4,372 | ||||||
|
|
|
| |||||
| $ | 25,856 | $ | 25,829 | |||||
|
|
|
| |||||
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 December 29, 2018.
| December 29, 2018 | ||||||||||||||||
| 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 | $ | 3,797 | $ | 1 | $ | — | $ | — | ||||||||
Commercial paper | 2,241 | 1 | — | — | ||||||||||||
Corporate bonds and medium-term notes | 2,675 | 6 | 3,537 | 11 | ||||||||||||
Municipal bonds | 498 | 2 | — | — | ||||||||||||
U.S. treasury and agency securities | 1,492 | 6 | 1,994 | 5 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
| $ | 10,703 | $ | 16 | $ | 5,531 | $ | 16 | |||||||||
|
|
|
|
|
|
|
| |||||||||
Amortized Cost | Fair Value | |||||||
(in thousands) | ||||||||
Due in one year or less | $ | 19,418 | $ | 19,451 | ||||
Due after one through five years | 5,383 | 5,388 | ||||||
| $ | 24,801 | $ | 24,839 | |||||
INTEVAC, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
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 to sell a security 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.
| Fair Value Measurements at December 29, 2018 | ||||||||||||
| Total | Level 1 | Level 2 | ||||||||||
| (in thousands) | ||||||||||||
Recurring fair value measurements: | ||||||||||||
Available-for-sale securities | ||||||||||||
Money market funds | $ | 3,335 | $ | 3,335 | $ | — | ||||||
U.S. treasury and agency securities | 6,331 | 5,331 | 1,000 | |||||||||
Certificates of deposit | 5,799 | — | 5,799 | |||||||||
Commercial paper | 2,241 | — | 2,241 | |||||||||
Corporate bonds and medium-term notes | 7,625 | — | 7,625 | |||||||||
Municipal bonds | 498 | — | 498 | |||||||||
|
|
|
|
|
| |||||||
Total recurring fair value measurements | $ | 25,829 | $ | 8,666 | $ | 17,163 | ||||||
|
|
|
|
|
| |||||||
January 2, 2021.
Fair Value Measurements at January 2, 2021 | ||||||||||||
Total | Level 1 | Level 2 | ||||||||||
(in thousands) | ||||||||||||
Recurring fair value measurements: | ||||||||||||
Available-for-sale | ||||||||||||
Money market funds | $ | 3,612 | $ | 3,612 | $ | — | ||||||
U.S. treasury securities | 5,962 | 5,962 | — | |||||||||
Certificates of deposit | 7,952 | — | 7,952 | |||||||||
Commercial paper | 500 | — | 500 | |||||||||
Corporate bonds and medium-term notes | 6,413 | — | 6,413 | |||||||||
Municipal bonds | 400 | — | 400 | |||||||||
Total recurring fair value measurements | $ | 24,839 | $ | 9,574 | $ | 15,265 | ||||||
| Notional Amounts | Derivative Liabilities | |||||||||||||||||||||||
Derivative Instrument | December 29, 2018 | December 30, 2017 | December 29, 2018 | December 30, 2017 | ||||||||||||||||||||
| Balance Sheet Line | Fair Value | Balance Sheet Line | Fair Value | |||||||||||||||||||||
| (In thousands) | ||||||||||||||||||||||||
Undesignated Hedges: | ||||||||||||||||||||||||
Forward Foreign Currency Contracts | $ | 1,764 | 1,276 | * | $ | 8 | * | $ | 5 | |||||||||||||||
|
|
|
|
|
|
|
| |||||||||||||||||
Total Hedges | $ | 1,764 | 1,276 | $ | 8 | $ | 5 | |||||||||||||||||
|
|
|
|
|
|
|
| |||||||||||||||||
Notional Amounts | Derivative Liabilities | |||||||||||||||||||||||
Derivative Instrument | January 2, 2021 | December 28, 2019 | January 2, 2021 | December 28, 2019 | ||||||||||||||||||||
Balance Sheet Line | Fair Value | Balance Sheet Line | Fair Value | |||||||||||||||||||||
(in thousands) | ||||||||||||||||||||||||
Undesignated Hedges: | ||||||||||||||||||||||||
Forward Foreign Currency Contracts | $ | 983 | 1,035 | * | $ | 3 | * | $ | 4 | |||||||||||||||
Total Hedges | $ | 983 | 1,035 | $ | 3 | $ | 4 | |||||||||||||||||
| * | Other accrued liabilities |
INTEVAC, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
repurchase program authorizing up to $40.0 million. Under this authorization, Intevac purchases shares of its common stock under a systematic stock repurchase program and may also make supplemental stock repurchases from time to time, depending on market conditions, stock price and other factors.
| 2018 | 2017 | |||||||
| (in thousands, except per share amounts) | ||||||||
Shares of common stock repurchased | 120 | — | ||||||
Cost of stock repurchased | $ | 558 | $ | — | ||||
Average price paid per share | $ | 4.63 | $ | — | ||||
2019:
2020 | 2019 | |||||||
(in thousands, except per share amounts) | ||||||||
Shares of common stock repurchased | 98 | 24 | ||||||
Cost of stock repurchased | $ | 393 | $ | 111 | ||||
Average price paid per share | $ | 3.97 | $ | 4.67 | ||||
the accumulated deficit.
| 2018 | 2017 | |||||||
Federal: | ||||||||
Current | $ | (313 | ) | $ | — | |||
Deferred | — | — | ||||||
|
|
|
| |||||
| (313 | ) | — | ||||||
State: | ||||||||
Current | 5 | 13 | ||||||
Deferred | — | — | ||||||
|
|
|
| |||||
| 5 | 13 | |||||||
Foreign: | ||||||||
Current | 1,041 | 1,091 | ||||||
Deferred | (7,909 | ) | (1 | ) | ||||
|
|
|
| |||||
| (6,868 | ) | 1,090 | ||||||
Total | $ | (7,176 | ) | $ | 1,103 | |||
|
|
|
| |||||
2020 | 2019 | |||||||
Federal: | ||||||||
Current | $ | (915 | ) | $ | — | |||
Deferred | 0 | 0 | ||||||
| (915 | ) | — | ||||||
State: | ||||||||
Current | 4 | 4 | ||||||
Deferred | 0 | 0 | ||||||
| 4 | 4 | |||||||
Foreign: | ||||||||
Current | 1,705 | 1,694 | ||||||
Deferred | 917 | 1,661 | ||||||
| 2,622 | 3,355 | |||||||
Total | $ | 1,711 | $ | 3,359 | ||||
| 2018 | 2017 | |||||||
U.S | $ | (11,634 | ) | $ | (794 | ) | ||
Foreign | 8,039 | 6,015 | ||||||
|
|
|
| |||||
| $ | (3,595 | ) | $ | 5,221 | ||||
|
|
|
| |||||
Effective tax rate | 199.6 | % | 21.1 | % | ||||
|
|
|
| |||||
2020 | 2019 | |||||||
U.S | $ | (3,293 | ) | $ | (4,875 | ) | ||
Foreign | 6,060 | 9,382 | ||||||
| $ | 2,767 | $ | 4,507 | |||||
Effective tax rate | 61.8 | % | 74.5 | % | ||||
| December 29, 2018 | December 30, 2017 | |||||||
Deferred tax assets: | ||||||||
Vacation, warranty and other accruals | $ | 515 | $ | 601 | ||||
Depreciation and amortization | 656 | 91 | ||||||
Intangible amortization | 902 | 1,071 | ||||||
Inventory valuation | 1,401 | 1,341 | ||||||
Deferred income | 256 | 22 | ||||||
Equity-based compensation | 1,411 | 2,636 | ||||||
Net operating loss, research and other tax credit carryforwards | 53,595 | 52,882 | ||||||
Other | 545 | 543 | ||||||
|
|
|
| |||||
| 59,281 | 59,187 | |||||||
Valuation allowance for deferred tax assets | (50,804 | ) | (58,455 | ) | ||||
|
|
|
| |||||
Total deferred tax assets | 8,477 | 732 | ||||||
|
|
|
| |||||
Deferred tax liabilities: | ||||||||
Purchased technology | (181 | ) | (307 | ) | ||||
Unbilled revenue | (383 | ) | (421 | ) | ||||
|
|
|
| |||||
Total deferred tax liabilities | (564 | ) | (728 | ) | ||||
|
|
|
| |||||
Net deferred tax assets | $ | 7,913 | $ | 4 | ||||
|
|
|
| |||||
As reported on the balance sheet: | ||||||||
Non-current deferred tax assets | $ | 7,913 | $ | 4 | ||||
|
|
|
| |||||
January 2, 2021 | December 28, 2019 | |||||||
Deferred tax assets: | ||||||||
Vacation, warranty and other accruals | $ | 651 | $ | 635 | ||||
Depreciation and amortization | — | 89 | ||||||
Intangible amortization | 551 | 804 | ||||||
Purchased technology | 14 | — | ||||||
Inventory valuation | 1,101 | 1,288 | ||||||
Equity-based compensation | 1,494 | 1,593 | ||||||
Net operating loss, research and other tax credit carryforwards | 55,322 | 54,818 | ||||||
Other | 30 | 43 | ||||||
| 59,163 | 59,270 | |||||||
Valuation allowance for deferred tax assets | (52,088 | ) | (52,099 | ) | ||||
Total deferred tax assets | 7,075 | 7,171 | ||||||
Deferred tax liabilities: | ||||||||
Depreciation and amortization | (341 | ) | — | |||||
Purchased technology | — | (45 | ) | |||||
Unbilled revenue | (1,399 | ) | (874 | ) | ||||
Total deferred tax liabilities | (1,740 | ) | (919 | ) | ||||
Net deferred tax assets | $ | 5,335 | $ | 6,252 | ||||
As reported on the balance sheet: | ||||||||
Non-current deferred tax assets | $ | 5,335 | $ | 6,252 | ||||
January 2, 2021.
INTEVAC, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
tax temporary differences and deferred research and other tax credits that are not realizable in the foreseeable future. The amount of the deferred tax asset considered realizable, however, could be adjusted if estimates of future taxable income during the carryforward period are reduced or increased, or if objective negative evidence in the form of cumulative losses is no longer present and additional weight may be given to subjective evidence such as our projections for growth.
Tax Reform
The U.S. federal corporate alternative minimum tax (“AMT”) has been repealed for tax years beginning after December 31, 2017. Intevac has recorded income tax receivables 2020.
liabilities. The Company also utilized the employee retention tax credit under the CARES Act for certain qualifying employee salary and wage expenditures. Tax benefits under the employee retention tax credit are not significant. Additionally, the CARES Act accelerated the timing of the refund for alternative minimum tax (“AMT”) credits. The entire balance of the income tax refund receivable of $157,000 was received in fiscal 2020.
Theone-time transition tax is based on our total post-1986 earnings and profits (“E&P”) for which we have previously deferred from U.S. income taxes. In fiscal 2017, we recorded a provisional amount of $1.8 million for ourone-time transition tax liability for seven of our foreign subsidiaries, resulting in no increase in income tax expense due to current losses. We finalized our calculations of the transition tax liability during 2018 and adjusted our provisional amount by $1.8 million, which is included as a component of income tax expense from operations.
Tax Reform subjects a U.S. parent to tax on Global IntangibleLow-Taxed Income (“GILTI’) earned by certain foreign subsidiaries. The FASB Staff Q&A, Topic 740, No. 5, Accounting for Global IntangibleLow-Taxed Income, states that an entity can make an accounting policy election to either recognize deferred taxes for temporary basis differences expected to reverse as GILTI in future years or to provide for the tax expense related to GILTI in the year the tax is incurred as a period expense only. Because we were evaluating the provision of GILTI as of December 30, 2017, we recorded no GILTI-related deferred amounts in 2017. After further consideration in the current year, we have elected to account for GILTI in the year the tax is incurred.
INTEVAC, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
| 2018 | 2017 | |||||||
Income tax (benefit) at the federal statutory rate | $ | (756 | ) | $ | 1,827 | |||
State income taxes, net of federal benefit | 5 | 13 | ||||||
Change in valuation allowance: | ||||||||
U.S | 930 | (6,873 | ) | |||||
Foreign | (9,286 | ) | (603 | ) | ||||
Effect of foreign operations taxed at various rates | (254 | ) | (1,036 | ) | ||||
Research tax credits | (1,883 | ) | (2,267 | ) | ||||
Change in federal tax rate | — | 9,201 | ||||||
Effect of tax rate changes, permanent differences and adjustments of prior deferrals | 4,142 | 639 | ||||||
Unrecognized tax benefits | (74 | ) | 202 | |||||
|
|
|
| |||||
Total | $ | (7,176 | ) | $ | 1,103 | |||
|
|
|
| |||||
2020 | 2019 | |||||||
Income tax at the federal statutory rate | $ | 581 | $ | 947 | ||||
State income taxes, net of federal benefit | 4 | 4 | ||||||
Change in valuation allowance: | ||||||||
U.S | (416 | ) | (689 | ) | ||||
Foreign | 0— | — | ||||||
Effect of foreign operations taxed at various rates | (235 | ) | (397 | ) | ||||
Research tax credits | (1,306 | ) | (1,710 | ) | ||||
Effect of tax rate changes, permanent differences and adjustments of prior deferrals | 2,504 | 3,685 | ||||||
Unrecognized tax benefits | 579 | 1,519 | ||||||
Total | $ | 1,711 | $ | 3,359 | ||||
| 2018 | 2017 | |||||||
Beginning balance | $ | 5,678 | $ | 7,544 | ||||
Additions based on tax positions related to the current year | 784 | 898 | ||||||
Settlements | (233 | ) | — | |||||
Change in federal tax rate | — | (2,764 | ) | |||||
Lapse of statute of limitations | (65 | ) | — | |||||
|
|
|
| |||||
Ending balance | $ | 6,164 | $ | 5,678 | ||||
|
|
|
| |||||
2019:
2020 | 2019 | |||||||
Beginning balance | $ | 7,683 | $ | 6,164 | ||||
Additions based on tax positions related to the current year | 589 | 1,519 | ||||||
Settlements | 0— | — | ||||||
Lapse of statute of limitations | (945 | ) | — | |||||
Ending balance | $ | 7,327 | $ | 7,683 | ||||
INTEVAC, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
sheets. The ultimate outcome of this examination is subject to uncertainty. The Company’s management and its advisors continue to believe thatlaw. During 2019, the Company is “more likely than not”received an unfavorable decision on its appeal to successfully defend that the tax treatment was proper and in accordance with Singapore tax regulations. Based onIncome Tax Board of Review. The Company appealed the information currently available,decision to the Singapore High Court. In October 2020, the Company doesreceived an unfavorable decision on its appeal to the Singapore High Court. Management decided not anticipate a significant increase or decrease to its unrecognized tax benefits for thispursue additional appeals and the matter within the next twelve months. We believe that adequate amounts have been reserved for any adjustments that may ultimately result from this or other examinations.is fully settled. Presently, there are no other active income tax examinations in the jurisdictions where Intevac operates.
2019.
January 2, 2021 | December 28, 2019 | |||||||
(in thousands) | ||||||||
Assets: | ||||||||
Operating lease right-of-use | $ | 8,165 | $ | 10,279 | ||||
Liabilities: | ||||||||
Current operating lease liabilities | $ | 2,853 | $ | 2,524 | ||||
Noncurrent operating lease liabilities | 6,803 | 9,532 | ||||||
| $ | 9,656 | $ | 12,056 | |||||
2020 | 2019 | |||||||
(in thousands) | ||||||||
Operating lease cost | $ | 2,942 | $ | 3,112 | ||||
Short-term lease cost | 93 | 78 | ||||||
Total lease cost | $ | 3,035 | $ | 3,190 | ||||
(In thousands) | ||||
2021 | $ | 3,388 | ||
2022 | 3,474 | |||
2023 | 3,289 | |||
2024 | 541 | |||
Total lease payments | 10,692 | |||
Less: Interest | (1,036 | ) | ||
Present value of lease liabilities | $ | 9,656 | ||
January 2, 2021 | December 28, 2019 | |||||||
Weighted-average remaining lease term (in years) | 3.09 | 4.08 | ||||||
Weighted-average discount rate | 6.39 | % | 6.37 | % | ||||
As of December 29, 2018, future minimum lease payments are
| (in thousands) | ||||
2019 | $ | 3,261 | ||
2020 | 2,858 | |||
2021 | 2,874 | |||
2022 | 2,960 | |||
2023 | 3,049 | |||
Thereafter | 767 | |||
|
| |||
| $ | 15,769 | |||
|
| |||
follows (in thousands):
2020 | 2019 | |||||||
(in thousands) | ||||||||
Operating cash outflows from operating leases | $ | 3,332 | $ | 3,484 | ||||
Right-of-use | $ | 128 | $ | 934 | ||||
| 2018 | 2017 | |||||||
| (in thousands) | ||||||||
Beginning balance | $ | 994 | $ | 1,007 | ||||
Expenditures incurred under warranties | (561 | ) | (773 | ) | ||||
Accruals for product warranties | 641 | 854 | ||||||
Adjustments to previously existing warranty accruals | (77 | ) | (94 | ) | ||||
|
|
|
| |||||
Ending balance | $ | 997 | $ | 994 | ||||
|
|
|
| |||||
2019:
2020 | 2019 | |||||||
(in thousands) | ||||||||
Beginning balance | $ | 1,022 | $ | 997 | ||||
Expenditures incurred under warranties | (512 | ) | (625 | ) | ||||
Accruals for product warranties | 280 | 955 | ||||||
Adjustments to previously existing warranty accruals | (310 | ) | (305 | ) | ||||
Ending balance | $ | 480 | $ | 1,022 | ||||
Intevac’s two
| 2018 | 2017 | |||||||
| (in thousands) | ||||||||
Net Revenues | ||||||||
TFE | $ | 69,348 | $ | 79,004 | ||||
Photonics | 25,766 | 33,843 | ||||||
|
|
|
| |||||
Total segment net revenues | $ | 95,114 | $ | 112,847 | ||||
|
|
|
| |||||
| 2018 | 2017 | |||||||
| (in thousands) | ||||||||
Operating Profit (Loss) | ||||||||
TFE | $ | (1,335 | ) | $ | 6,116 | |||
Photonics | 440 | 3,900 | ||||||
|
|
|
| |||||
Total segment operating profit (loss) | (895 | ) | 10,016 | |||||
|
|
|
| |||||
Unallocated costs | (3,322 | ) | (5,168 | ) | ||||
|
|
|
| |||||
Operating income (loss) | (4,217 | ) | 4,848 | |||||
|
|
|
| |||||
Interest income | 516 | 291 | ||||||
Other income (expense), net | 106 | 82 | ||||||
|
|
|
| |||||
Income (loss) before income taxes | $ | (3,595 | ) | $ | 5,221 | |||
|
|
|
| |||||
| 2018 | 2017 | |||||||
| (in thousands) | ||||||||
Depreciation and Amortization | ||||||||
TFE | $ | 2,387 | $ | 1,773 | ||||
Photonics | 1,870 | 1,750 | ||||||
|
|
|
| |||||
Total segment depreciation and amortization | 4,257 | 3,523 | ||||||
|
|
|
| |||||
Unallocated costs | 357 | 348 | ||||||
|
|
|
| |||||
Total consolidated depreciation and amortization | $ | 4,614 | $ | 3,871 | ||||
|
|
|
| |||||
| 2018 | 2017 | |||||||
| (in thousands) | ||||||||
Capital Additions | ||||||||
TFE | $ | 1,640 | $ | 2,137 | ||||
Photonics | 1,295 | 1,643 | ||||||
|
|
|
| |||||
Total segment capital additions | 2,935 | 3,780 | ||||||
|
|
|
| |||||
Unallocated | 309 | 576 | ||||||
|
|
|
| |||||
Total consolidated capital additions | $ | 3,244 | $ | 4,356 | ||||
|
|
|
| |||||
Net Revenues | 2020 | 2019 | ||||||
(in thousands) | ||||||||
TFE | $ | 52,128 | $ | 73,678 | ||||
Photonics | 45,696 | 35,207 | ||||||
Total segment net revenues | $ | 97,824 | $ | 108,885 | ||||
Operating Profit (Loss) | 2020 | 2019 | ||||||
(in thousands) | ||||||||
TFE | $ | (1,978 | ) | $ | 1,747 | |||
Photonics | 10,064 | 6,434 | ||||||
Total segment operating profit | 8,086 | 8,181 | ||||||
Unallocated costs | (5,531 | ) | (4,256 | ) | ||||
Operating income | 2,555 | 3,925 | ||||||
Interest income | 284 | 574 | ||||||
Other income (expense), net | (72 | ) | 8 | |||||
Income before provision for income taxes | $ | 2,767 | $ | 4,507 | ||||
Depreciation and Amortization | 2020 | 2019 | ||||||
(in thousands) | ||||||||
TFE | $ | 1,817 | $ | 1,909 | ||||
Photonics | 1,159 | 1,310 | ||||||
Total segment depreciation and amortization | 2,976 | 3,219 | ||||||
Unallocated costs | 504 | 372 | ||||||
Total consolidated depreciation and amortization | $ | 3,480 | $ | 3,591 | ||||
Capital Additions | 2020 | 2019 | ||||||
(in thousands) | ||||||||
TFE | $ | 1,336 | $ | 2,611 | ||||
Photonics | 636 | 832 | ||||||
Total segment capital additions | 1,972 | 3,443 | ||||||
Unallocated | 640 | 664 | ||||||
Total consolidated capital additions | $ | 2,612 | $ | 4,107 | ||||
| 2018 | 2017 | |||||||
| (in thousands) | ||||||||
Segment Assets | ||||||||
TFE | $ | 53,867 | $ | 52,156 | ||||
Photonics | 16,721 | 16,364 | ||||||
|
|
|
| |||||
Total segment assets | 70,588 | 68,520 | ||||||
|
|
|
| |||||
Cash and investments | 39,163 | 42,488 | ||||||
Restricted cash | 1,169 | 1,000 | ||||||
Deferred income taxes | 7,913 | 4 | ||||||
Other current assets | 1,341 | 1,001 | ||||||
Common property, plant and equipment | 1,017 | 1,267 | ||||||
Other assets | 879 | 743 | ||||||
|
|
|
| |||||
Consolidated total assets | $ | 122,070 | $ | 115,023 | ||||
|
|
|
| |||||
Segment Assets | 2020 | 2019 | ||||||
(in thousands) | ||||||||
TFE | $ | 44,335 | $ | 51,153 | ||||
Photonics | 22,923 | 22,071 | ||||||
Total segment assets | 67,258 | 73,224 | ||||||
Cash and investments | 49,568 | 42,024 | ||||||
Restricted cash | 787 | 787 | ||||||
Deferred income taxes | 5,335 | 6,252 | ||||||
Other current assets | 1,093 | 752 | ||||||
Common property, plant and equipment | 1,443 | 1,307 | ||||||
Common operating lease right-of-use | 1,603 | 1,898 | ||||||
Other assets | 151 | 78 | ||||||
Consolidated total assets | $ | 127,238 | $ | 126,322 | ||||
| December 29, 2018 | December 30, 2017 | |||||||
| (in thousands) | ||||||||
United States | $ | 11,113 | $ | 12,363 | ||||
Asia | 85 | 115 | ||||||
|
|
|
| |||||
Net property, plant & equipment | $ | 11,198 | $ | 12,478 | ||||
|
|
|
| |||||
January 2, 2021 | December 28, 2019 | |||||||
(in thousands) | ||||||||
United States | $ | 10,678 | $ | 11,420 | ||||
Asia | 326 | 178 | ||||||
Net property, plant & equipment | $ | 11,004 | $ | 11,598 | ||||
2020 | ||||
(in thousands) | ||||
Balance at the beginning of the year | $ | — | ||
Provision for restructuring charges | ||||
Cash payments made | ( | ) | ||
Balance at the end of the year | $ | — | ||
Item 9. |
|
Item 9A. |
|
Beginning December 31, 2017, we implemented ASC 606, Revenue from Contracts with Customers. We implemented changes to our processes related to revenue recognition and the control activities within them. These included the development of new policies based on the five-step model provided in the new revenue standard, ongoing contract review requirements, and gathering of information provided for disclosures.
of
/s/ BPM LLP |
San Jose, California |
February |
Item 9B. |
|
Item 10. |
|
Item 11. |
|
Item 12. |
|
Item 13. |
|
Item 14. |
|
Item 15. |
|
Exhibit Number | Description | |
| | Change in Control Agreement with Jay Cho dated December 10, 2013 | |
| | ||
| | Change in Control Agreement with James Moniz dated October 29, 2014 | |
| |
| |
Change in Control Agreement with Timothy Justyn dated March 2, 2018 | ||
| | ||
| 21.1 | ||
| 23.1 | ||
| 24.1 | ||
| 31.1 | Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 | |
| 31.2 | Certification of Vice-President, Finance and Administration, Chief Financial Officer and Treasurer 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 | |
| The following financial statements from the Registrant’s Annual Report on Form 10-K for the year ended January 2, 2021, formatted in Inline XBRL | ||
| Cover Page Interactive Data File (formatted as inline XBRL | ||
|
| |
| (1) | Previously filed as an exhibit to the Company’s Report on Form 8-K filed July 23, 2007 |
| (2) | Previously filed as an exhibit to the Company’s Report on Form 8-K filed March 15, 2012 |
| (3) | Previously filed as an exhibit to the Registration Statement on Form S-1 (No.33-97806) |
| (4) | Previously filed as an exhibit to the Company’s Form 10-K filed February 12, 2020 |
| (5) | Previously filed as an exhibit to the Company’s Form 10-Q filed May 3, 2011 |
Previously filed as an exhibit to the Company’s Definitive Proxy Statement filed April 6, 2020. |
| (7) | Previously filed as an exhibit to the Company’s Definitive Proxy Statement filed April 11, |
Previously filed as an exhibit to the Company’s Form 10-Q filed May 1, 2012 |
Previously filed as an exhibit to the Company’s Form 10-Q filed |
Previously filed as an exhibit to the Company’s Form 10-Q filed April 29, 2014 |
| (11) | Previously filed as an exhibit to the Registration Statement on Form S-8 filed May 14, 2020 (No.33-238262) |
| (12) | Previously filed as an exhibit to the Company’s Form 10-K filed March 14, 2008 |
Previously filed as an exhibit to the Company’s Report on Form 8-K filed July 9, 2013 |
Previously filed as an exhibit to the Company’s Form 10-Q filed October 28, 2014 |
Previously filed as an exhibit to the Company’s Report on Form 8-K filed October 31, 2014 |
Previously filed as an exhibit to the Company’s Form 10-Q filed May 1, 2018 |
Previously filed as an exhibit to the Company’s Report on Form 8-K filed November 15, 2016 |
| (P) | Paper exhibit. |
| + | Management compensatory plan or arrangement required to be filed as an exhibit pursuant to Item 15(b) of Form 10-K |
INTEVAC, INC. |
/s/ JAMES MONIZ |
James Moniz |
| Executive Vice President, Finance and Administration |
|
Signature Title Date /s/ WENDELL T. BLONIGAN /s/ JAMES MONIZ Executive Vice President, Finance and Secretary /s/ DAVID S. DURY Chairman of Board (David S. Dury) /s/ KEVIN D. BARBER Director (Kevin D. Barber) /s/ Director ( /s/ Director ( /s/ Director ( /s/ Director ( President, February 17, 2021 (Wendell T. Blonigan) President, February 13, 2019(James Moniz) February 17, 2021 (James Moniz) February 13, 2019 February 13, 201917, 2021 February 13, 201917, 2021 STEPHEN A. JAMISON February 13, 201917, 2021Stephen A. Jamison) MARK P. POPOVICH February 13, 201917, 2021Mark P. Popovich) THOMAS M. ROHRS February 13, 201917, 2021Thomas M. Rohrs) JOHN F. SCHAEFER February 13, 201917, 2021John F. Schaefer) /s/ THOMAS M. ROHRS Director February 17, 2021 (Thomas M. Rohrs)
72