Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.þx Yes¨ No

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).þx Yes¨ No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).¨ Yesþx No

On ~~November 1, 2012, 23,464,809~~April 30, 2013, 23,778,779 shares of the Registrant’s Common Stock, $0.001 par value, were outstanding.


	September 29, 2012		December 31, 2011		March 30, 2013			December 31, 2012
	(Unaudited)				(Unaudited)
	(In thousands, except par value)				(In thousands, except par value)
ASSETS
Current assets:
Cash and cash equivalents	$	16,859	$	23,560	$	24,842		$	24,261
Short-term investments		51,566		58,585		42,630			40,591
Trade, note and other accounts receivable, net of allowances of $0 at September 29, 2012 and of $41 at December 31, 2011		16,528		18,561
Trade and other accounts receivable, net of allowances of $0 at both March 30, 2013 and at December 31, 2012						10,342			19,822
Inventories		24,479		18,070		25,943			26,193
Prepaid expenses and other current assets		7,150		7,114		2,111			2,120
Deferred income tax assets		2,547		2,202

Total current assets		119,129		128,092		105,868			112,987
Property, plant and equipment, net		13,234		14,449		12,672			13,426
Long-term investments		30,356		32,677		26,154			27,317
Goodwill		18,389		18,389
Other intangible assets, net of amortization of $2,751 at September 29, 2012 and $2,344 at December 31, 2011		6,034		6,441
Intangible assets, net of amortization of $2,743 at March 30, 2013 and $2,887 at December 31, 2012						5,642			5,868
Deferred income taxes and other long-term assets		27,915		25,773		13,620			12,905

Total assets	$	215,057	$	225,821	$	163,956		$	172,503


LIABILITIES AND STOCKHOLDERS’ EQUITY

Current liabilities:
Accounts payable	$	6,166	$	4,857	$	3,308		$	4,479
Accrued payroll and related liabilities		4,644		4,205		4,571			4,194
Other accrued liabilities		7,751		9,887		7,783			8,489
Customer advances		2,819		5,040		1,438			2,193
Deferred income taxes						1,281			1,281

Total current liabilities		21,380		23,989		18,381			20,636
Other long-term liabilities		9,419		9,922		9,532			9,232
Stockholders’ equity:
Common stock, $0.001 par value		23		23		24			23
Additional paid-in capital		151,113		146,307		153,688			151,996
Accumulated other comprehensive income		617		414		748			769
Retained earnings		32,505		45,166
Accumulated deficit						(18,417	)		(10,153	)

Total stockholders’ equity		184,258		191,910		136,043			142,635

Total liabilities and stockholders’ equity	$	215,057	$	225,821	$	163,956		$	172,503

Note: Amounts as of December 31, ~~2011~~2012 are derived from the December 31, ~~2011~~2012 audited consolidated financial statements.

See accompanying ~~notes to the condensed consolidated financial statements.~~notes.


	Three Months Ended						Nine Months Ended						Three months ended
	September 29, 2012			October 1, 2011			September 29, 2012			October 1, 2011			March 30, 2013			March 31, 2012
	(Unaudited)												(Unaudited)
	(In thousands, except per share amounts)												(In thousands, except per share amounts)

Net revenues:
Systems and components	$	11,665		$	17,788		$	55,067		$	59,012		$	8,885		$	14,768
Technology development		5,169			1,533			10,874			5,317			4,097			2,547

Total net revenues		16,834			19,321			65,941			64,329			12,982			17,315
Cost of net revenues:
Systems and components		7,476			10,693			31,561			36,747			6,307			8,819
Technology development		3,626			1,110			7,569			3,547			3,161			1,672

Total cost of net revenues		11,102			11,803			39,130			40,294			9,468			10,491

Gross profit		5,732			7,518			26,811			24,035			3,514			6,824
Operating expenses:
Research and development		7,336			8,612			24,812			25,914			6,358			9,213
Selling, general and administrative		6,389			6,945			19,831			20,336			5,971			6,773
Bad debt expense		3,017			34			3,017			36

Total operating expenses		16,742			15,591			47,660			46,286			12,329			15,986

Gain on sale of mainframe technology		—			—			2,207			—
Gain (loss) on divestitures														(208	)		2,207

Loss from operations		(11,010	)		(8,073	)		(18,642	)		(22,251	)		(9,023	)		(6,955	)
Interest income and other, net		(8	)		140			411			438			80			372

Loss before income taxes		(11,018	)		(7,933	)		(18,231	)		(21,813	)		(8,943	)		(6,583	)
Benefit from income taxes		(3,011	)		(1,817	)		(5,570	)		(6,047	)		679			3,422

Net loss	$	(8,007	)	$	(6,116	)	$	(12,661	)	$	(15,766	)	$	(8,264	)	$	(3,161	)


Net loss per share:
Basic and diluted	$	(0.34	)	$	(0.27	)	$	(0.54	)	$	(0.69	)

Basic and Diluted													$	(0.35	)	$	(0.14	)
Weighted average common shares outstanding:
Basic and diluted		23,397			22,951			23,293			22,843
Basic and Diluted														23,663			23,218

See accompanying ~~notes to the condensed consolidated financial statements.~~notes.


	Three Months Ended						Nine Months Ended						Three months ended
	September 29, 2012			October 1, 2011			September 29, 2012			October 1, 2011			March 30, 2013			March 31, 2012
	(Unaudited)												(Unaudited)
	(In thousands, except per share amounts)												(In thousands)
Net loss	$	(8,007	)	$	(6,116	)	$	(12,661	)	$	(15,766	)	$	(8,264	)	$	(3,161	)

Other comprehensive income (loss), before tax
Change in unrealized net loss on available-for-sale investments		73			(46	)		305			267			(15	)		130
Foreign currency translation gains (losses)		19			(13	)		5			3			(6	)		12

Other comprehensive income (loss), before tax		92			(59	)		310			270			(21	)		142
Income tax (expense) benefit related to items in other comprehensive income (loss)		(26	)		16			(107	)		(94	)

Income tax provision related to items in other comprehensive income (loss)														—			45

Other comprehensive income (loss), net of tax		66			(43	)		203			176			(21	)		97

Comprehensive loss	$	(7,941	)	$	(6,159	)	$	(12,458	)	$	(15,590	)	$	(8,285	)	$	(3,064	)

See accompanying ~~notes to the condensed consolidated financial statements.~~notes.


	Nine months ended						Three months ended
	September 29, 2012			October 1, 2011			March 30, 2013			March 31, 2012
	(Unaudited)						(Unaudited)
	(In thousands)						(In thousands)
Operating activities
Net loss	$	(12,661	)	$	(15,766	)	$	(8,264	)	$	(3,161	)
Adjustments to reconcile net loss to net cash and cash equivalents used in operating activities:
Adjustments to reconcile net loss to net cash and cash equivalents provided by (used in) operating activities:
Depreciation and amortization		3,391			4,109			1,032			1,241
Net amortization of investment premiums and discounts		1,076			982			228			395
Net loss on sale of investments		210			283
Bad debt expense		3,017			36
Equity-based compensation		2,941			3,061			563			1,054
Change in the fair value of acquisition-related contingent consideration		443			917			111			278
Deferred income taxes		(5,418	)		(6,619	)		(768	)		(3,258	)
Gain on sale of mainframe technology		(2,207	)		—
Loss (gain) on disposal of equipment		168			(109	)
Loss (gain) on divestitures								208			(2,207	)
Changes in operating assets and liabilities		(5,430	)		3,044			7,267			(196	)

Total adjustments		(1,809	)		5,704			8,641			(2,693	)

Net cash and cash equivalents used in operating activities		(14,470	)		(10,062	)
Net cash and cash equivalents provided by (used in) operating activities								377			(5,854	)
Investing activities
Purchases of investments		(32,987	)		(99,599	)		(15,783	)		(16,091	)
Proceeds from sales and maturities of investments		41,346			32,338			14,664			13,405
Proceeds from sale of equipment		—			241
Proceeds from sale of DeltaNu assets								500			—
Proceeds from sale of mainframe technology		3,000			—			—			3,000
Purchases of leasehold improvements and equipment		(2,114	)		(4,744	)		(301	)		(852	)

Net cash and cash equivalents provided by (used in) investing activities		9,245			(71,764	)
Net cash and cash equivalents used in investing activities								(920	)		(538	)
Financing activities
Payment of acquisition-related contingent consideration		(3,345	)		(2,389	)
Net proceeds from issuance of common stock		1,865			2,625
Proceeds from issuance of common stock								1,130			863

Net cash and cash equivalents provided by (used in) financing activities		(1,480	)		236
Effect of exchange rate changes on cash		4			3
Net cash and cash equivalents provided by financing activities								1,130			863

Net decrease in cash and cash equivalents		(6,701	)		(81,587	)
Effect of exchange rate changes on cash and cash equivalents								(6	)		12

Net increase (decrease) in cash and cash equivalents								581			(5,517	)
Cash and cash equivalents at beginning of period		23,560			109,520			24,261			23,560

Cash and cash equivalents at end of period	$	16,859		$	27,933		$	24,842		$	18,043

See accompanying ~~notes to the condensed consolidated financial statements.~~notes.

In the opinion of management, the unaudited interim condensed consolidated financial statements of Intevac, Inc. and its subsidiaries (Intevac or the Company) included herein have been prepared on a basis consistent with the December 31, ~~2011~~2012 audited consolidated financial statements and include all material adjustments, consisting of normal recurring adjustments, necessary to fairly present the information set forth therein. These unaudited interim condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto included in Intevac’s Annual Report on Form 10-K for the fiscal year ended December 31, ~~2011 (2011~~2012 (2012 Form 10-K). Intevac’s results of operations for the three ~~and nine~~ months ended ~~September 29, 2012~~March 30, 2013 are not necessarily indicative of future operating results.

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make judgments, estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ materially from those estimates.

In July 2012, the Financial Accounting Standards Board amended its existing guidance for goodwill and other intangible assets. This authoritative guidance gives companies the option to first perform a qualitative assessment to determine whether it is more likely than not that an indefinite-lived intangible asset is impaired. To perform a qualitative assessment, a company must identify and evaluate changes in economic, industry and company-specific events and circumstances that could affect the significant inputs used to determine the fair value of an indefinite-lived intangible asset. If a company determines that it is more likely than not that the fair value of such an asset exceeds its carrying amount, it would not need to calculate the fair value of the asset in that year. This authoritative guidance becomes effective for Intevac in the first quarter of fiscal 2013, with early adoption permitted. The implementation of this authoritative guidance is not expected to have a material impact on Intevac’s financial position or results of operations.

Inventories are stated at the lower of average cost or market and consist of the following:


	September 29, 2012		December 31, 2011		March 30, 2013		December 31, 2012
	(In thousands)				(In thousands)
Raw materials	$	14,851	$	12,662	$	14,143	$	14,921
Work-in-progress		4,158		3,020		4,571		5,526
Finished goods		5,470		2,388		7,229		5,746

	$	24,479	$	18,070	$	25,943	$	26,193

Finished goods inventory consists primarily of completed systems at customer sites that are undergoing installation and acceptance testing and evaluation inventory.

At ~~September 29, 2012,~~March 30, 2013, Intevac had equity-based awards outstanding under the 2012 Equity Incentive Plan and the 2004 Equity Incentive Plan (the “Plans”) and the 2003 Employee Stock Purchase Plan (the “ESPP”). Intevac’s stockholders approved all of these plans. The Plans permit the grant of incentive or non-statutory stock options, restricted stock, stock appreciation rights, restricted stock units (“RSUs” also referred to as performance units) and performance shares.

The ESPP provides that eligible employees may purchase Intevac’s common stock through payroll deductions at a price equal to 85% of the lower of the fair market value at the beginning of the applicable offering period or at the end of each applicable purchase interval. Offering periods are generally two years in length, and consist of a series of six-month purchase intervals. Eligible employees may join the ESPP at the beginning of any six-month purchase interval. Under the terms of the ESPP, employees can choose to have up to 15% of their base earnings withheld to purchase Intevac common stock.

The effect of recording equity-based compensation for the ~~three~~three-month periods ended March 30, 2013 and ~~nine months ended September 29,~~March 31, 2012 ~~and October 1, 2011~~ was as follows:


	Three Months Ended						Nine Months Ended						Three Months Ended
	September 29, 2012			October 1, 2011			September 29, 2012			October 1, 2011			March 30, 2013			March 31, 2012
	(In thousands)												(In thousands)
Equity-based compensation by type of award:
Stock options	$	523		$	729		$	1,843		$	2,221		$	173		$	733
RSUs		88			—			111			—			76			6
Employee stock purchase plan		332			286			987			840			314			315

Total equity-based compensation		943			1,015			2,941			3,061			563			1,054
Tax effect on equity-based compensation		(205	)		(261	)		(706	)		(823	)		(5	)		(279	)

Net effect on net loss	$	738		$	754		$	2,235		$	2,238		$	558		$	775

Equity-based compensation expense is based on awards ultimately expected to vest and such amount has been reduced for estimated forfeitures. Forfeitures were estimated based on Intevac’s historical experience, which Intevac believes to be indicative of Intevac’s future experience.

The fair value of stock options and ESPP awards is estimated at the grant date using the Black-Scholes option valuation model. The determination of fair value of stock options and ESPP awards on the date of grant using an option-pricing model is affected by Intevac’s stock price as well as assumptions regarding a number of highly complex and subjective variables. These variables include, but are not limited to, our expected stock price volatility over the term of the awards, and actual employee stock option exercise behavior.

Option activity as of March 30, 2013 and changes during the three months ended March 30, 2013 were as follows:

Intevac issued 246,000 shares under the ESPP during the three months ended March 30, 2013.

~~Option activity as of September 29, 2012 and changes during the nine months ended September 29, 2012 were as follows:~~

~~Intevac issued 301,000 shares under the ESPP during the nine months ended September 29, 2012.~~

Intevac estimated the weighted-average fair value of stock options and employee stock purchase rights using the following weighted-average assumptions:


	Three Months Ended						Nine Months Ended						Three Months Ended
	September 29, 2012			October 1, 2011			September 29, 2012			October 1, 2011			March 30, 2013			March 31, 2012
Stock Options:
Weighed-average fair value of grants per share													$	1.97		$	4.53
Expected volatility														55.57	%		65.25	%
Risk free interest rate														0.52	%		1.10	%
Expected term of options (in years)														3.9			5.2
Dividend yield														None			None
Stock Purchase Rights:
Weighed-average fair value of grants per share	$	2.31		$	3.60		$	3.01		$	4.84		$	1.60		$	3.49
Expected volatility		63.23	%		48.87	%		62.36	%		51.63	%		52.42	%		61.77	%
Risk free interest rate		0.21	%		0.19	%		0.28	%		0.44	%		0.26	%		0.33	%
Expected term of purchase rights (in years)		1.85			1.85			1.68			1.36			1.85			1.56
Dividend yield		None			None			None			None			None			None

The computation of the expected volatility assumptions used in the Black-Scholes calculations for new stock option grants and purchase rights is based on the historical volatility of Intevac’s stock price, measured over a period equal to the expected term of the stock option grant or purchase right. The risk-free interest rate is based on the yield available on U.S. Treasury Strips with an equivalent remaining term. The expected term of employee stock options represents the weighted-average period that the stock options are expected to remain outstanding and was determined based on historical experience of similar awards, giving consideration to the contractual terms of the equity-based awards and vesting schedules. The expected term of purchase rights represents the period of time remaining in the current offering period.

The dividend yield assumption is based on Intevac’s history of not paying dividends and the assumption of not paying dividends in the future.

~~During~~A summary of the ~~nine months ended September 29, 2012, Intevac granted 101,000 RSUs with a weighted-average estimated fair value of $7.56 per share.~~ RSU activity is as follows:

RSUs are converted into shares of Intevac common stock upon vesting on a one-for-one basis. RSUs typically are scheduled to vest over four years. Vesting of RSUs is subject to the grantee’s continued service with Intevac. The compensation expense related to these awards is determined using the fair market value of Intevac common stock on the date of the grant, and the compensation expense is recognized over the vesting period.

~~The following table represents a reconciliation of the allowance for doubtful accounts for the three- and nine month periods ended September 29, 2012 and October 1, 2011:~~

Intevac held a promissory note from a customer which was secured by the equipment sold to this customer in a prior year under a product and sales agreement. The note was to be repaid in monthly installment payments ending in March 2015. The revenue associated with this sale had been accounted for under the installment method of accounting whereby revenue was recognized only to the extent cash had been received. During the quarter ended September 29, 2012, the customer became delinquent in its monthly installment payments and the note was put on non-accrual status. On September 27, 2012, the customer liquidated its operating assets in an auction. The equipment which collateralized the promissory note was sold in the liquidation auction and Intevac received the proceeds. On September 28, 2012, the customer announced that it was discontinuing its operations effective October 9, 2012 and Intevac concluded that none of the carrying value of the promissory note receivable was collectible and recorded a bad debt charge.

Intevac evaluates the collectibility of trade accounts receivables and notes receivable on an ongoing basis and provides reserves against potential losses when appropriate. Management analyzes historical bad debts, customer concentrations, customer creditworthiness, changes in customer payment tendencies and current economic trends when evaluating the adequacy of the allowance for doubtful accounts. Customer accounts are written off against the allowance when the amount is deemed uncollectible.

~~The following table summarizes the components of the bad debt expense for the three- and nine month periods ended September 29, 2012 (in thousands):~~

Goodwill and ~~indefinite-life~~indefinite-lived intangible assets are tested for impairment on an annual basis or more frequently upon the occurrence of circumstances that indicate that goodwill and ~~indefinite-life~~indefinite-lived intangible assets may be impaired. In

Intevac performed its annual goodwill impairment test in the fourth quarter of fiscal ~~2011,~~2012, and, based on step one of the impairment analysis, Intevac ~~performed~~determined that the fair values of both its ~~annual~~Equipment and Intevac Photonics reporting units were less than their carrying value and potential impairment existed. Intevac completed the second step of the goodwill impairment analysis and ~~the results~~determined that there would be no remaining implied value attributable to goodwill in either reporting unit and accordingly, Intevac wrote off all of the ~~analysis indicated that Intevac’s~~ goodwill in both its Equipment and ~~purchased intangible assets with an indefinite useful life were not impaired.~~Intevac Photonics reporting units. In the second half of 2012, the Company experienced a significant decline in its stock price which resulted in the Company’s market capitalization falling significantly below the recorded value of its consolidated net assets.

~~Details~~As of ~~goodwill and~~March 30, 2013, indefinite-lived intangible assets ~~by segment as of September 29, 2012, are as follows.~~

~~Other intangible assets~~ consist ~~primarily~~ of in-process technology in the amount of $4.0 million in the Equipment segment, which will be subject to amortization upon commercialization. If an in-process technology is abandoned, the acquired technology will be written-off.

Details of finite-lived intangible assets by segment as of ~~September 29, 2012,~~March 30, 2013, are as follows.


	September 29, 2012							March 30, 2013
	Gross Carrying Amount		Accumulated Amortization			Net Carrying Amount		Gross Carrying Amount		Accumulated Amortization			Net Carrying Amount
	(In thousands)							(In thousands)
Equipment	$	3,170	$	(1,923	)	$	1,247	$	3,170	$	(2,142	)	$	1,028
Intevac Photonics		1,495		(828	)		667		1,215		(601	)		614

	$	4,665	$	(2,751	)	$	1,914	$	4,385	$	(2,743	)	$	1,642

Total amortization expense of finite-lived intangibles for the three ~~and nine~~ months ended ~~September 29, 2012~~March 30, 2013 was ~~$136,000 and $407,000 respectively.~~$136,000.

As of ~~September 29, 2012,~~March 30, 2013, future amortization expense is expected to be as follows.


(In thousands)
2012	$	135
2013		541	$	407
2014		363		363
2015		283		283
2016		281		281
2017				186
Thereafter		311		122

	$	1,914	$	1,642

In connection with the acquisition of Solar Implant Technologies, Inc. (“SIT”) ~~on November 19, 2010,~~, Intevac agreed to pay up to an aggregate of $7.0 million in cash to the selling shareholders if certain milestones ~~are~~were achieved over a specified period. Intevac has made payments to the selling shareholders for achievement of the first, second and third milestones. ~~Intevac estimated the fair value of the remaining contingent consideration on September 29, 2012 using a discounted cash flow model based on the probability that the~~The fourth and final ~~remaining~~ milestone ~~would be met and the payment would be made~~was not achieved on the targeted date outlined in the acquisition ~~agreement.~~agreement and will not be paid. There is no remaining contingent consideration obligation associated with the milestone payments at March 30, 2013.

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 revenue from commercial sales of certain products over a specified period up to an aggregate of $9.0 million. Intevac estimated the fair value of this contingent consideration on ~~September 29, 2012~~March 30, 2013 based on probability-based forecasted revenues reflecting Intevac’s own assumptions concerning future revenue from such products. ~~A change in~~As of March 30, 2013, Intevac has not made any payments associated with the ~~estimated probabilities of~~ revenue ~~achievement could have a material effect on the statement of operations and balance sheets in the period of change.~~earnout obligation.

The fair value measurement of contingent consideration is based on significant inputs not ~~observable~~observed in the market and thus represents a Level 3 measurement. The following table represents the quantitative range of the significant unobservable inputs used in the calculation of fair value of the continent consideration liability as of September 29, 2012. Significant increases or decreases in any of these inputs even in isolation would result in a significantly lower (higher) fair value measurement.

Any change in fair value of the contingent consideration subsequent to the acquisition date is recognized in operating income within the statement of operations. The following table represents a reconciliation of the change in the fair value measurement of the contingent consideration liability for the ~~three- and nine month~~three-month periods ended ~~September 29, 2012~~March 30, 2013 and ~~October 1, 2011:~~March 31, 2012:


	Three Months Ended						Nine Months Ended						Three months ended
	September 29, 2012			October 1, 2011			September 29, 2012			October 1, 2011			March 30, 2013		March 31, 2012
	(In thousands)												(In thousands)
Opening balance	$	6,969		$	10,430		$	8,715		$	9,857		$	5,151	$	8,715
Changes in fair value		(200	)		344			443			917			111		278
Cash payments made		(956	)		(2,389	)		(3,345	)		(2,389	)

Closing balance	$	5,813		$	8,385		$	5,813		$	8,385		$	5,262	$	8,993

The following table displays the balance sheet classification of the contingent consideration liability account at March 30, 2013 and at December 31, 2012:

The following table represents the quantitative range of the significant unobservable inputs used in the calculation of fair value of the continent consideration liability as of March 30, 2013. Significant increases or decreases in any of these inputs in isolation would result in a significantly lower (higher) fair value measurement.

$1.5 million. Under the terms of the agreement, the acquirer also assumed certain liabilities related to the purchased assets. Payment terms included $500,000 which was paid on the closing date, with the remaining balance to be paid in the form of an earnout of 5% of the acquirer’s Raman spectroscopy instrument sales for 5 years following the closing date which will be due and payable on or before each anniversary of the closing date or a minimum earnout payment of $100,000 annually, whichever is higher. The maximum earnout payments during the payment period shall not exceed $1.0 million.

As the earnout is collected over an extended period of time and in management’s judgment the degree of collectibility is uncertain, Intevac did not recognize the minimum earnout payments upon closing, but instead will record income in the period when the minimum earnout payments can be reasonably estimated for that period and payment is assured.

The following table ~~displays~~summarizes the ~~balance sheet classification~~components of the ~~contingent consideration liability account at September 29, 2012 and at December 31, 2011:~~loss (in thousands):

On January 6, 2012, the Company sold certain assets including intellectual property and residual assets which comprised its semiconductor mainframe technology to Brooks Automation Inc. ~~(“Brooks”).~~

Intevac provides for the estimated cost of warranty when revenue is recognized. Intevac’s warranty is per contract terms, and for systems sold directly the warranty typically ranges between 12 and 24 months from customer acceptance. For systems sold through a distributor, Intevac offers a 3 month warranty. The remainder of any warranty period is the responsibility of the distributor. During this warranty period any defective non-consumable

parts are replaced and installed at no charge to the customer. The warranty period on consumable parts is limited to their reasonable usable lives. Intevac uses estimated repair or replacement costs along with its historical warranty experience to determine its warranty obligation. Intevac generally provides a twelve month warranty on its Intevac Photonics products. The provision for the estimated future costs of warranty is based upon historical cost and product performance experience. Intevac exercises judgment in determining the underlying estimates.

On the condensed consolidated balance sheets, the short-term portion of the warranty provision is included in other accrued liabilities, while the long-term portion is included in other long-term liabilities. The expense associated with product warranties issued or adjusted is included in cost of net revenues on the condensed consolidated statements of operations.

The following table displays the activity in the warranty provision account for the ~~three~~three-month periods ended March 30, 2013 and ~~nine months ended September 29, 2012 and October 1, 2011:~~March 31, 2012:

The following table displays the balance sheet classification of the warranty provision account at ~~September 29, 2012~~March 30, 2013 and at December 31, ~~2011:~~2012:


	September 29,		December 31,
	2012		2011		March 30, 2013		December 31, 2012
	(In thousands)				(In thousands)
Other accrued liabilities	$	2,459	$	2,586	$	2,135	$	2,259
Other long-term liabilities		90		138		90		90

Total warranty provision	$	2,549	$	2,724	$	2,225	$	2,349

As permitted or required under Delaware law and to the maximum extent allowable under that law, Intevac has certain obligations to indemnify its current and former officers and directors for certain events or occurrences while the officer or director is, or was serving, at Intevac’s request in such capacity. These indemnification obligations are valid as long as the director or officer acted in good faith and in a manner the person reasonably believed to be in or not opposed to the best interests of the ~~corporation~~Company and, with respect to any criminal action or proceeding, had no reasonable cause to believe his or her conduct was unlawful. The maximum potential amount of future payments Intevac could be required to make under these indemnification obligations is unlimited; however, Intevac has a director and officer insurance policy that mitigates Intevac’s exposure and enables Intevac to recover a portion of any future amounts paid. As a result of Intevac’s insurance policy coverage, Intevac believes the estimated fair value of these indemnification obligations is not material.

As is customary in Intevac’s industry, many of Intevac’s contracts provide remedies to certain third parties such as defense, settlement, or payment of ~~judgment~~judgments for intellectual property claims related to the use of its products. Such indemnification obligations may not be subject to maximum loss clauses. Historically, payments made related to these indemnifications have been immaterial.

Cash and cash equivalents, short-term investments and long-term investments consist of:


	September 29, 2012								March 30, 2013
	Amortized Cost		Unrealized Holding Gains		Unrealized Holding Losses		Fair Value		Amortized Cost		Unrealized Holding Gains		Unrealized Holding Losses		Fair Value
	(In thousands)								(in thousands)
Cash and cash equivalents:
Cash	$	7,563	$	—	$	—	$	7,563	$	10,758	$	—	$	—	$	10,758
Money market funds		9,296		—		—		9,296		14,084		—		—		14,084

Total cash and cash equivalents	$	16,859	$	—	$	—	$	16,859	$	24,842	$	—	$	—	$	24,842
Short-term investments:
Commercial paper									$	3,497	$	1	$	—	$	3,498
Corporate bonds and medium-term notes	$	30,954	$	45	$	1	$	30,998		18,212		30		9		18,233
FDIC insured corporate bonds		3,612		4		—		3,616
Municipal bonds		3,305		—		—		3,305		1,202		—		—		1,202
U.S. treasury and agency securities		13,281		21		—		13,302		19,476		26		—		19,502
Variable rate demand notes (“VRDNs”)		345		—		—		345		195		—		—		195

Total short-term investments	$	51,497	$	70	$	1	$	51,566	$	42,582	$	57	$	9	$	42,630
Long-term investments:
Corporate bonds and medium-term notes	$	8,439	$	32	$	1	$	8,470	$	17,132	$	10	$	8	$	17,134
Municipal bonds		1,000		3		—		1,003		1,000		5		—		1,005
U.S. treasury and agency securities		19,192		30		—		19,222		8,010		5		—		8,015
Auction rate security (“ARS”)		1,900		—		239		1,661

Total long-term investments	$	30,531	$	65	$	240	$	30,356	$	26,142	$	20	$	8	$	26,154

Total cash, cash equivalents, and investments	$	98,887	$	135	$	241	$	98,781	$	93,566	$	77	$	17	$	93,626


	December 31, 2011								December 31, 2012
	Amortized Cost		Unrealized Holding Gains		Unrealized Holding Losses		Fair Value		Amortized Cost		Unrealized Holding Gains		Unrealized Holding Losses		Fair Value
	(In thousands)								(in thousands)
Cash and cash equivalents:
Cash	$	14,268	$	—	$	—	$	14,268	$	5,939	$	—	$	—	$	5,939
Money market funds		4,845		—		—		4,845		18,322		—		—		18,322
Commercial paper		4,447		—		—		4,447

Total cash and cash equivalents	$	23,560	$	—	$	—	$	23,560	$	24,261	$	—	$	—	$	24,261
Short-term investments:
Commercial paper	$	1,050	$	—	$	—	$	1,050	$	2,495	$	—	$	—	$	2,495
Corporate bonds and medium-term notes		26,665		28		78		26,615		19,539		13		4		19,548
FDIC insured corporate bonds		9,596		23		—		9,619
Municipal bonds		4,898		10		—		4,908		1,203		1		—		1,204
U.S. treasury and agency securities		13,987		56		—		14,043		16,976		23		—		16,999
VRDNs		2,350		—		—		2,350		345		—		—		345

Total short-term investments	$	58,546	$	117	$	78	$	58,585	$	40,558	$	37	$	4	$	40,591
Long-term investments:
Corporate bonds and medium-term notes	$	14,761		16		77	$	14,700	$	16,776	$	33	$	7	$	16,802
Municipal bonds										1,000		2		—		1,002
U.S. treasury and agency securities		13,466		22		1		13,487		9,499		14		—		9,513
ARS		4,900		—		410		4,490

Total long-term investments	$	33,127	$	38	$	488	$	32,677	$	27,275	$	49	$	7	$	27,317

Total cash, cash equivalents, and investments	$	115,233	$	155	$	566	$	114,822	$	92,094	$	86	$	11	$	92,169

The contractual maturities of available-for-sale securities at ~~September 29, 2012~~March 30, 2013 are presented in the following table.

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 ~~September 29, 2012.~~March 30, 2013.

~~The following table represents the fair value hierarchy of Intevac’s available-for-sale securities measured at fair value on a recurring basis as of September 29, 2012.~~

All prices for the fixed maturity securities including U.S. Treasury and agency securities, commercial paper, ~~FDIC insured corporate bonds,~~ corporate bonds, VRDNs and municipal bonds are received from independent pricing services utilized by Intevac’s outside investment manager. This investment manager performs a review of the pricing methodologies and inputs utilized by the independent pricing services for each asset type priced by the vendor. In addition, on at least an annual basis, the investment manager conducts due diligence visits and interviews with each pricing vendor to verify the inputs utilized for each asset class. The due diligence visits include a review of the procedures performed by each vendor to ensure that pricing evaluations are representative of the price that would be received 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.

As of September 29, 2012, the Company’s Level 3 financial instrument consisted of an ARS that failed at auction. There was insufficient observable market information to determine fair value for this financial instrument. The Company estimated the fair value for this security by incorporating assumptions that it believed market participants would use in their estimates of fair value. Some of these assumptions included credit quality, collateralization, final stated maturity, estimates of the probability of being called or becoming liquid prior to final

maturity, redemptions of similar ARS, previous market activity for the same investment security, impact due to extended periods of maximum auction rates and valuation models. The Company subsequently sold this ARS in October 2012 for $1.7 million and recognized a realized loss of $152,000.

The following table represents the ~~quantitative range of the significant unobservable inputs used in the calculation of~~ fair value hierarchy of ~~the ARS~~Intevac’s available-for-sale securities measured at fair value on a recurring basis as of ~~September 29, 2012.~~March 30, 2013.

The following table presents the changes in Level 3 instruments ~~consisting~~which consisted of ~~ARS~~Auction Rate Securities (“ARS”) which were classified as available-for-sale securities and which ~~are~~were measured on a recurring basis for the three ~~and nine months~~month period ended ~~September 29, 2012 and October 1, 2011.~~March 31, 2012.

The Company did not hold any ARS as of or during the quarter ended March 30, 2013.

The Company uses foreign currency forward contracts to mitigate variability in gains and losses generated from the re-measurement of certain monetary assets and liabilities denominated in foreign currencies. These hedges do not qualify for special hedge accounting treatment. These derivatives are carried at fair value with changes recorded in interest income and other, net in the condensed consolidated statements of operations. Changes in the fair value of these derivatives are largely offset by re-measurement of the underlying assets and liabilities. Cash flows from such

derivatives are classified as operating activities. The derivatives have maturities of approximately one month. The notional amount of Company’s foreign currency derivatives was ~~$736,000~~$582,000 at ~~September 29, 2012. There were no outstanding foreign currency derivatives~~March 30, 2013 and $491,000 at December 31, ~~2011.~~

The components of accumulated other comprehensive income at ~~September 29, 2012~~March 30, 2013 and December 31, ~~2011~~2012 were as follows:


	September 29, 2012			December 31, 2011			March 30, 2013		December 31, 2012
	(In thousands)						(In thousands)
Accumulated net unrealized holding loss on available-for-sale investments, net of tax	$	(69	)	$	(267	)
Accumulated net unrealized holding gain on available-for-sale investments							$	60	$	75
Foreign currency translation gains		686			681			688		694

Total accumulated other comprehensive income	$	617		$	414		$	748	$	769

The changes in accumulated other comprehensive income by component for the three months ended March 30, 2013, are as follows.

The following table sets forth the computation of basic and diluted loss per share:


	Three Months Ended						Nine Months Ended						Three months ended
	September 29, 2012			October 1, 2011			September 29, 2012			October 1, 2011			March 30, 2013			March 31, 2012
	(In thousands, except per share amounts)												(In thousands)
Net loss	$	(8,007	)	$	(6,116	)	$	(12,661	)	$	(15,766	)	$	(8,264	)	$	(3,161	)

Weighted-average shares — basic		23,397			22,951			23,293			22,843			23,663			23,218
Effect of dilutive potential common shares		—			—			—			—			—			—

Weighted-average shares — diluted		23,397			22,951			23,293			22,843			23,663			23,218

Net loss per share — basic and diluted	$	(0.34	)	$	(0.27	)	$	(0.54	)	$	(0.69	)
Net loss per share — basic													$	(0.35	)	$	(0.14	)

Net loss per share — diluted													$	(0.35	)	$	(0.14	)

Antidilutive shares based on employee awards excluded		3,175			3,024			2,999			1,589			2,703			2,951

Potentially dilutive common shares consist of shares issuable upon exercise of employee stock options and vesting of RSUs and are excluded from the calculation of diluted EPS when their effect would be anti-dilutive.

Intevac’s two reportable segments are: Equipment and Intevac Photonics. Intevac’s chief operating decision-maker has been identified as the ~~President~~Chairman and CEO, who reviews operating results to make decisions about allocating resources and assessing performance for the entire Company. Segment information is presented based upon Intevac’s management organization structure as of ~~September 29, 2012~~March 30, 2013 and the distinctive nature of each segment. Future changes to this internal financial structure may result in changes to the reportable segments disclosed.

Each reportable segment is separately managed and has separate financial results that are reviewed by Intevac’s chief operating decision-maker. Each reportable segment contains closely related products that are unique to the particular segment. Segment operating profit is determined based upon internal performance measures used by the chief operating decision-maker.

Intevac derives the segment results from its internal management reporting system. The accounting policies Intevac uses to derive reportable segment results are substantially the same as those used for external reporting purposes. Management measures the performance of each reportable segment based upon several metrics, including orders, net revenues and operating income. Management uses these results to evaluate the performance of, and to assign resources to, each of the reportable segments. Intevac manages certain operating expenses separately at the

corporate level. Intevac allocates certain of these corporate expenses to the segments in an amount equal to 3% of net revenues. Segment operating income excludes interest income/expense and other financial charges and income taxes according to how a particular reportable segment’s management is measured. Management does not consider impairment charges, gains and losses on divestitures and sales of intellectual property, and unallocated costs in measuring the performance of the reportable segments.

The Equipment segment designs, develops and ~~manufactures~~markets vacuum process equipment ~~and~~ solutions for ~~the~~high-volume manufacturing of small substrates with precise thin film properties for hard ~~disk~~ drive ~~industry~~ and ~~offers high-productivity technology solutions to the photovoltaic (“PV”) industry.~~solar cell manufacturers. Historically, the majority of Intevac’s revenue has been derived from the Equipment segment and Intevac expects that the majority of its revenues for the next several years will continue to be derived from the Equipment segment.

The Intevac Photonics segment develops compact, cost-effective, high-sensitivity digital-optical products for the capture and ~~manufactures leading-edge, high-sensitivity imaging products and vision systems as well as materials identification instruments utilizing Raman technology.~~display of low-light images. Intevac provides sensors, cameras and systems for government applications such as night vision and long-range target ~~identification and for commercial applications in the inspection, scientific and medical industries.~~identification.

Information for each reportable segment for the three ~~and nine~~ months ended ~~September 29,~~March 30, 2013 and March 31, 2012 ~~and October 1, 2011~~ is as follows:

Total assets for each reportable segment as of ~~September 29, 2012~~March 30, 2013 and December 31, ~~2011~~2012 are as follows:


	September 29, 2012		December 31, 2011		March 30, 2013		December 31, 2012
	(In thousands)				(In thousands)
Equipment	$	46,225	$	48,133	$	33,280	$	37,376
Intevac Photonics		32,092		29,947		20,479		27,052

Total segment assets		78,317		78,080		53,759		64,428

Cash, cash equivalents and investments		98,781		114,822		93,626		92,169
Deferred income taxes		29,688		23,919		12,944		12,176
Other current assets		6,428		6,848		1,859		1,870
Common property, plant and equipment		1,131		1,366		1,183		1,211
Other assets		712		786		585		649

Consolidated total assets	$	215,057	$	225,821	$	163,956	$	172,503

On February 1, 2013, Intevac announced a global cost reduction plan (the “Plan”) to reduce the global workforce by 13 percent. Implementation of the Plan was substantially completed in the first quarter of fiscal 2013. The cost of implementing the Plan was reported under cost of products sold and operating expenses in the condensed consolidated statements of operations. Substantially all cash outlays in connection with the Plan occurred in the first quarter of fiscal 2013. Implementation of the Plan is expected to reduce salary, wages and other employee-related expenses by approximately $4.5 million to $5.0 million on an annual basis.

The changes in restructuring reserves associated with the Plan for the three months ended March 30, 2013, are as follows.

Intevac recorded income tax benefits of ~~$3.0 million~~$679,000 and ~~$5.6~~$3.4 million for the three ~~and nine~~ months ended ~~September 29,~~March 30, 2013 and March 31, 2012, ~~respectively. Intevac recorded income tax benefits of $1.8 million and $6.0 million for the three and nine months ended October 1, 2011,~~ respectively. The income tax provision for ~~each~~the three ~~and nine~~ month ~~period is~~periods are based upon estimates of annual income (loss), annual permanent differences and statutory tax rates in the various jurisdictions in which Intevac operates, except that certain discrete items are treated separately.

At the end of 2012 Intevac established a valuation allowance against the majority of the U.S. deferred tax assets. As a result, Intevac did not recognize a benefit on the U.S. net operating loss for the three months ended March 30, 2013. The income tax benefit for the ~~nine~~three months ended ~~September 29,~~March 31, 2012 ~~includes the following discrete income tax items: (i) $1.1 million tax benefit related to~~was reduced by a bad debt write-off, (ii) $108,000 tax benefit from the release of a valuation allowance and (iii) $188,000 in tax refunds received from Singapore and California, which were offset in part by (iv) $554,000net $252,000 discrete income tax charge related to the gain on the sale of the mainframe ~~technology.~~

~~The effective~~technology, which was partially offset by the release of a valuation allowance related to certain deferred tax ~~rates for all periods presented differ~~assets and tax refunds received from Singapore and California. Intevac’s tax rate differs from the ~~U.S. federal~~applicable statutory ~~tax rate~~rates due primarily to establishment of ~~35% primarily due to foreign income taxed in lower rate jurisdictions.~~valuation allowances, the utilization of deferred and current credits and the effect of permanent differences and adjustments of prior permanent differences. Intevac’s future effective income tax rate depends 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,~~carryforwards, availability of tax credits and the effectiveness of Intevac’s tax planning strategies. Management carefully monitors these factors and timely adjusts the effective income tax rate accordingly.

Intevac is subject to income taxes in the U.S. federal jurisdiction, and various state and foreign jurisdictions. Tax regulations within each jurisdiction are subject to the interpretation of the related tax laws and regulations and require significant judgment to apply. With few exceptions, Intevac is not subject to U.S. federal, state and local, or international jurisdictions income tax examinations by tax authorities for the years before ~~2006.~~2007. Tax years 1999 through ~~2006~~2007 are subject to income tax examinations by U.S. federal and California tax authorities to the extent of tax credit carry forwards remaining or utilized in an otherwise open year. ~~During~~Tax years 2008 through 2012 generally remain open for examinations by the ~~quarter ended June 30,~~tax authorities. During 2012, the Internal Revenue Service ~~concluded~~completed its review of the Company’s fiscal year 2009 tax return which arose from an income tax refund generated by a carry-back ~~claim and the examination is pending approval from the U.S. Joint Committee on Taxation.~~claim. Additionally, the Singapore Inland Revenue Authority is conducting an examination of the fiscal 2009 and 2010 tax returns of the Company’s wholly-owned subsidiary, Intevac Asia Pte. Ltd. Presently there are no other active income tax examinations in the jurisdictions where Intevac operates.

From time to time, Intevac may have certain contingent liabilities that arise in the ordinary course of its business activities. Intevac accounts for contingent liabilities when it is probable that future expenditures will be made and such expenditures can be reasonably estimated.

Item 2.Management’s

~~Management’s~~ Discussion and Analysis of Financial Condition and Results of Operations

This Quarterly Report on Form 10-Q contains forward-looking statements, which involve risks and uncertainties. Words such as “believes,” “expects,” “anticipates” and the like indicate forward-looking statements. These forward-looking statements include comments related to Intevac’s shipments, projected revenue recognition, product costs, gross margin, operating expenses, interest income, income taxes, cash balances and financial results in ~~2012~~2013 and beyond; projected customer requirements for Intevac’s new and existing products, and when, and if, Intevac’s customers will place orders for these products; Intevac’s ability to proliferate its Photonics technology into major military programs and to develop and introduce commercial imaging products; the timing of delivery and/or acceptance of the systems and products that comprise Intevac’s backlog for ~~revenue; legal proceedings;~~revenue and ~~internal controls.~~the Company’s ability to achieve cost savings. Intevac’s actual results may differ materially from the results discussed in the forward-looking statements for a variety of reasons, including those set forth under “Risk Factors” and in other documents we file from time to time with the Securities and Exchange Commission, including our Annual Report on Form 10-K filed on February ~~21, 2012,~~22, 2013, and our periodic Form 10-Q’s and Form 8-K’s.

Intevac provides process manufacturing equipment solutions to the hard disk drive industry and high-productivity process manufacturing equipment ~~and inspection solutions~~ to the PVphotovoltaic (“PV”) industry. Intevac also provides sensors, cameras and systems for government applications such as night vision and long-range target ~~identification and for commercial applications in the inspection, medical, scientific and security industries.~~identification. Intevac’s customers include manufacturers of hard disk drives and PV cells as well as the U.S. government and its agencies and ~~contractors; and medical, scientific and security companies.~~contractors. Intevac reports two segments: Equipment and Intevac Photonics. During the first quarter of 2012, Intevac sold certain assets comprising its semiconductor mainframe ~~technology to Brooks.~~technology. During the ~~third~~first quarter of ~~2012,~~2013, Intevac ~~wrote-off~~sold certain assets comprising its Raman spectroscopy instruments product line, also known as DeltaNu. During the first quarter of 2013, Intevac announced a ~~promissory note receivable~~global cost reduction plan and ~~a deferred profit liability related to certain thin-film PV equipment sold in a previous year due to the insolvency of the customer.~~reduced its workforce by 13 percent.

Product development and manufacturing activities occur in North America and Asia. Intevac has field offices in Asia to support its equipment customers. Intevac’s equipment and service products are highly technical and ~~with the exception of Japan,~~ are sold primarily through aIntevac’s direct sales force. InIntevac also sells its products through distributors in Japan ~~sales are typically made by Intevac’s Japanese distributor, Matsubo.~~and China.

Intevac’s results are driven by worldwide demand for hard disk drives, which in turn depends on the growth in digital data creation and storage, the rate of areal density improvements, the end-user demand for personal computers, enterprise data storage, including on-line, cloud storage and near-line applications, personal audio and video players and video game platforms that include such drives. Demand for Intevac’s equipment is impacted by Intevac’s customers’ relative market share positions and production capacity needs. Intevac continues to execute its strategy of equipment diversification into new markets by introducing products for PV solar cell manufacturing. Intevac believes that expansion into this market, which is significantly larger than the hard disk drive deposition equipment market, will result in incremental equipment revenues for Intevac and decrease Intevac’s dependence on the hard disk drive industry. Intevac’s equipment business is subject to cyclical industry conditions, as demand for manufacturing equipment and services can change depending on supply and demand for hard disk drives and PV cells, as well as other factors such as global economic conditions and technological advances in fabrication processes.

The following table presents certain significant measurements for the three ~~and nine~~ months ended ~~September 29, 2012~~March 30, 2013 and ~~October 1, 2011:~~March 31, 2012:


	Three months ended									Nine months ended								Three months ended
	September 29, 2012			October 1, 2011			Change over prior period			September 29, 2012			October 1, 2011			Change over prior period		March 30, 2013			March 31, 2012			Change over prior period
	(In thousands, except percentages and per share amounts)																	(In thousands, except percentages and per share amounts)
Net revenues	$	16,834		$	19,321		$	(2,487	)	$	65,941		$	64,329		$	1,612	$	12,982		$	17,315		$	(4,333	)
Gross profit	$	5,732		$	7,518		$	(1,786	)	$	26,811		$	24,035		$	2,776	$	3,514		$	6,824		$	(3,310	)
Gross margin percent		34.1	%		38.9	%		(4.8) points			40.7	%		37.4	%		3.3 points		27.1	%		39.4	%		(12.3) points
Net loss	$	(8,007	)	$	(6,116	)	$	(1,891	)	$	(12,661	)	$	(15,766	)	$	3,105	$	(8,264	)	$	(3,161	)	$	(5,103	)
Loss per diluted share	$	(0.34	)	$	(0.27	)	$	(0.07	)	$	(0.54	)	$	(0.69	)	$	0.15	$	(0.35	)	$	(0.14	)	$	(0.21	)

~~Financial results for~~Net revenues decreased during the ~~third~~first quarter of fiscal ~~2012 declined~~2013 compared to the same period in the prior ~~year. Net revenues decreased during the third quarter of fiscal 2012~~year primarily due to lower ~~upgrade~~equipment sales to disk manufacturers and lower Intevac ~~Photonics~~Photonics’ product sales offset in part by higher Intevac Photonics’ technology development contracts. ~~The~~Intevac Equipment did not recognize revenue on any 200 Lean systems or solar tools in the first quarter of either fiscal 2013 or fiscal 2012. In the first quarter of 2013, Intevac shipped its first production order for its solar implant ENERGi™ system, which Intevac expects to complete the installation and recognize revenue in the second half of fiscal 2013.The net loss for the ~~third~~first quarter of fiscal ~~2012~~2013 increased compared to the same period in the prior year due ~~primarily~~ to ~~a bad debt charge,~~ lower revenues, ~~and~~ lower gross margins, offset in part by decreased operating spending and recognition of a larger income tax benefit. Financial results for the first nine months of fiscal 2012 improved over the same period in the prior year. Net revenues increased during the first nine months of fiscal 2012 primarily due to higher Intevac Photonics’ technology development contracts, and higher upgrade sales to disk manufacturers, offset in part by lower Intevac Photonics’ product sales. The net loss for the first nine months of fiscal 2012 decreased compared to the same period in the prior year due to higher revenues, improved gross margins, lower operating spending and the gain recognized on the sale of the mainframe technology to Brooks offset in part by a bad debt charge, and recognition of a smaller income tax ~~benefit.~~

~~Forecasted hard drive unit shipments~~benefit, offset in part by ~~hard drive manufacturers have declined since~~lower operating expenses as a result of savings from the ~~beginning~~global cost reduction program implemented in the first quarter of 2013. Also in the ~~third~~first quarter of fiscal ~~2012. The current economic environment in both developed and developing economies has slowed resulting in lower forecasted sales~~2012, Intevac recognized a gain on the sale of ~~personal computers and consumer electronic applications for the remainder of 2012. The hard drive industry continues to expect growth~~semiconductor mainframe technology in the ~~enterprise data storage market segment~~amount of $2.2 million which ~~includes on-line, cloud storage and near-line applications. With hard drive unit shipments down approximately twenty percent as compared to~~did not re-occur in the ~~third~~first quarter of fiscal ~~2011,~~2013. The income tax benefit declined from $3.4 million in the ~~Company does not expect to ship any additional 200 Lean~~^® systems for capacity for the remainder of the year. However, Intevac continues to believe that long-term demand for hard disk drives will increase, driven by growth in demand for digital storage, the need for corporations to replace and update employee computers, increased information technology spending, declining growth rate in areal density improvements and the proliferation of personal computers into emerging economies. The number of disk manufacturing systems needed to support this growth as well as future technology transitions and improvements is expected to vary fromprior year to ~~year depending~~$679,000 in the first quarter of fiscal 2013 primarily due to the fact that Intevac did not recognize a benefit on the ~~factors noted above. In~~U.S. net operating loss in the first quarter of fiscal ~~2012, Intevac expects to complete additional customer qualifications on its PV manufacturing products and start to obtain repeat orders from customers.~~2013.

In fiscal ~~2012,~~2013, Intevac expects that the effect of macro-economic environment conditions on demand for personal computers from consumers and corporations, the continued proliferation of tablets and the increase in centralized storage will continue to negatively impact the hard drive equipment business. The Company therefore expects that capacity shipments of Intevac equipment to hard disk drive manufacturers will be approximately at the same levels as 2012. In 2013, Intevac expects increased sales of PV equipment as Intevac completes its production qualifications, which Intevac believes will lead to production orders and additional customers in the solar market. For fiscal 2013, Intevac expects that Intevac Photonics business levels will ~~grow driven primarily by~~be relatively flat as compared to 2012 as the ~~recovery~~business completes its major contract with the U.S. Army to develop a pilot night vision system for the Apache helicopter in advance of the ~~contract research and development (“R&D”) business, as several key U.S. defense programs received budgetary funding~~first large scale production shipments that will begin in late 2011 and the U.S. military continues to develop night vision solutions based on Intevac’s digital low-light sensor technology. Substantial growth in future Intevac Photonics revenues is dependent on the proliferation of Intevac’s technology into major military programs, continued defense spending, the ability to obtain export licenses for foreign customers, obtaining production subcontracts for these programs, and Intevac’s development and market acceptance of commercial products.2013.

Intevac’s trademarks, include the following: “200 Lean^®,” “AccuLuber™,” ~~“DeltaNu~~^®,” “EBAPS^®,” “ENERGi™~~,” “ExaminerR™~~,” “I-Port™,” “LEAN SOLAR™,” “LithoPrime™,” “LIVAR^®,” “MicroVista^®,” “NanoVista™”, “LEAN SOLAR NanoTexture™,” “NightVista^®,” and “Night Port™,.” ~~“PHARMA-ID™,” and “RAPID-ID™~~^”.


	Three months ended							Nine months ended							Three months ended
	September 29, 2012		October 1, 2011		Change over prior period			September 29, 2012		October 1, 2011		Change over prior period			March 30, 2013		March 31, 2012		Change over prior period
	(In thousands)														(In thousands)
Equipment	$	7,401	$	12,384	$	(4,983	)	$	43,179	$	42,379	$	800		$	5,368	$	10,719	$	(5,351	)
Intevac Photonics
Contract R&D	$	5,169	$	1,533	$	3,636		$	10,874	$	5,317	$	5,557
Contract Research and Development (“R&D”)																4,097		2,547		1,550
Products		4,264		5,404		(1,140	)		11,888		16,633		(4,745	)		3,517		4,049		(532	)

		9,433		6,937		2,496			22,762		21,950		812			7,614		6,596		1,018

Total net revenues	$	16,834	$	19,321	$	(2,487	)	$	65,941	$	64,329	$	1,612		$	12,982	$	17,315	$	(4,333	)

Equipment revenue for the three months ended September 29, 2012 decreased compared to the same period in the prior year as a result of fewer sales of disk lubrication systems and technology upgrades offset in part by higher sales of spare parts. During the third quarter of 2012 IntevacMarch 30, 2013 included revenue recognized ~~revenue on~~for two AccuLuber^TM systems, disk equipment technology upgrades and spare parts. ~~During~~Equipment revenue for the ~~third quarter of 2011 Intevac~~three months ended March 31, 2012 included revenue recognized ~~revenue on~~for four AccuLuber systems, disk equipment technology upgrades and spare parts. Equipment revenue for both the ~~nine~~three months ended ~~September 29,~~March 30, 2013 and March 31, 2012 ~~increased over the same period in the prior year as a result of higher~~did not include any sales of technology upgrades and spare parts, offset in part by fewer sales of disk sputtering systems. Equipment revenue for the nine months ended September 29, 2012 included revenue recognition for two 200 Lean^® systems, eight AccuLuber systems, one LEAN SOLAR NanoTexture™ etch system, upgrades and spare parts. Equipment revenue for the nine months ended October 1, 2011 included revenue recognition for three 200 Lean systems ~~eight AccuLuber systems, three wafer handling systems, upgrades and spare parts.~~or solar tools.

Intevac Photonics revenue for the three ~~and nine~~ months ended ~~September 29, 2012~~March 30, 2013 increased over the same periods in the prior year as a result of increased contract R&D work offset in part by lower product sales. The increase in contract R&D revenue was the result of a higher volume of contracts related to two large U.S. government defense programs and due to the continued expansion of Intevac’s low-light camera and sensor products in military applications. The decrease in product revenue was a result of lower sales levels of our low-light camera ~~module to our NATO customer and a lower level of shipment volumes for our long-range imaging products~~modules as well as lower sales of ~~products for commercial applications such~~Raman spectroscopy products. On March 29, 2013, Intevac sold certain assets comprising its Raman spectroscopy instruments product line, also known as ~~Intevac’s~~DeltaNu, and no longer offers Raman spectroscopy products. Intevac expects that volumes of low-light camera and sensor products will return to previous levels in ~~late 2012 and early~~mid 2013.

Equipment backlog ~~of orders~~ at ~~September 29, 2012 was $40.0 million, compared to $32.9 million~~March 30, 2013 included one ENERGi™ LEAN SOLAR system. Equipment backlog at March 30, 2013 and December 31, ~~2011 and $26.2 million at October 1, 2011. The $40.0 million of backlog at September 29,~~ 2012 consisted of $15.7 million of Equipment backlog and $24.3 million of Intevac Photonics backlog. The $32.9 million of backlog at December 31, 2011 consisted of $17.9 million of Equipment backlog and $15.0 million of Intevac Photonics backlog. Backlog at September 29, 2012 doesdid not include any ~~LEAN SOLAR™ or~~200 Lean systems. Equipment backlog at March 31, 2012 included two 200 Lean systems ~~as compared to one LEAN SOLAR system at December 31, 2011~~ and one LEAN SOLAR ~~system at October 1, 2011.~~system.


	Three months ended							Nine months ended							Three months ended
	September 29, 2012		October 1, 2011		Change over prior period			September 29, 2012		October 1, 2011		Change over prior period			March 30, 2013		March 31, 2012		Change over prior period
	(In thousands)														(In thousands)
United States	$	9,949	$	6,875	$	3,074		$	22,607	$	20,677	$	1,930		$	7,333	$	5,844	$	1,489
Asia		5,421		10,951		(5,530	)		39,349		38,452		897			4,485		9,843		(5,358	)
Europe		670		1,383		(713	)		3,188		4,586		(1,398	)		1,164		1,628		(464	)
Rest of world		794		112		682			797		614		183

Total net revenues	$	16,834	$	19,321	$	(2,487	)	$	65,941	$	64,329	$	1,612		$	12,982	$	17,315	$	(4,333	)

International sales include products shipped to overseas operations of U.S. companies. The decrease in international sales for the three months ended ~~September 29, 2012~~March 30, 2013 was primarily due to a decrease in net revenues from ~~disk lubrication~~AccuLuber systems and Equipment technology ~~upgrades. The decrease in international~~upgrades and lower sales ~~for the nine months ended September 29, 2012 was primarily due to lower net revenues from~~of Intevac Photonics’ digital night-vision ~~camera~~cameras to a NATO customer. The mix of domestic versus international sales will change from period to period depending on the location of Intevac’s largest customers in each period.


	Three months ended									Nine months ended								Three months ended
	September 29, 2012			October 1, 2011			Change over prior period			September 29, 2012			October 1, 2011			Change over prior period		March 30, 2013			March 31, 2012			Change over prior period
	(In thousands, except percentages)																	(In thousands, except percentages)
Equipment gross profit	$	2,637		$	5,556		$	(2,919	)	$	19,285		$	17,763		$	1,522	$	1,203		$	4,836		$	(3,633	)
% of Equipment net revenues		35.6	%		44.9	%					44.7	%		41.9	%				22.4	%		45.1	%
Intevac Photonics gross profit	$	3,095		$	1,962		$	1,133		$	7,526		$	6,272		$	1,254	$	2,311		$	1,988		$	323
% of Intevac Photonics net revenues		32.8	%		28.3	%					33.1	%		28.6	%				30.4	%		30.1	%
Total gross profit	$	5,732		$	7,518		$	(1,786	)	$	26,811		$	24,035		$	2,776	$	3,514		$	6,824		$	(3,310	)
% of net revenues		34.1	%		38.9	%					40.7	%		37.4	%				27.1	%		39.4	%

Cost of net revenues consists primarily of purchased materials and costs attributable to contract ~~research and development,~~R&D, and also includes fabrication, assembly, test and installation labor and overhead, customer-specific engineering costs, warranty costs, royalties, provisions for inventory reserves and scrap.

Equipment gross margin ~~was 35.6%~~of 22.4% in the three months ended ~~September 29, 2012~~March 30, 2013 was lower compared to ~~44.9%~~45.1% reported in the three months ended ~~October 1, 2011 and was 44.7% in the nine months ended September 29, 2012 compared to 41.9% in the nine months ended October 1, 2011.~~March 31, 2012. The lower gross margin ~~for the three months ended September 29, 2012~~ was due primarily to lower upgrade revenues and lower factory utilization. The higher gross margin for the nine months ended September 29, 2012 was due primarily to a higher mix of upgrades and spares shipments as well as higher system margins, offset in part by lower factory utilization and higher provisions for inventory reserves. Gross margins in the Equipment business will vary depending on a number of factors, including revenue levels, product mix, product cost, system configuration and pricing, factory utilization, and provisions for excess and obsolete inventory.

Intevac Photonics gross margin was ~~32.8%~~30.4% in the three months ended ~~September 29, 2012~~March 30, 2013 and increased slightly compared to ~~28.3%~~30.1% in the three months ended October 1, 2011 and was 33.1% in the nine months ended September 29, 2012 compared to 28.6% in the nine months ended October 1, 2011. Gross margin percentages improved during the three months ended September 29, 2012 compared to the same period in the prior year due to a favorable mix of higher-margin product sales and cost reductions associated with digital night-vision products and warranty as well as higher margins on contract R&D. Gross margin percentages improved during the nine months ended September 29, 2012 compared to the

same period in the prior year due to cost reductions associated with digital night-vision products and warranty offset by slightly lower margins on contract R&D. Gross margins during the nine months ended October 1, 2011 reflected a charge recognized for inventory write-offs that did not reoccur during fiscalMarch 31, 2012. Gross margins in the Intevac Photonics business will vary depending on a number of factors, including product mix, product cost, pricing, factory utilization, and provisions for excess and obsolete inventory.

~~Equipment research~~Research and development spending decreased in Equipment and in Intevac Photonics during the three ~~and nine~~ months ended ~~September 29, 2012~~March 30, 2013 as compared to the ~~same periods~~three months ended March 31, 2012. The decrease in ~~the prior year~~Equipment spending was due primarily to ~~lower spending on prototype materials for~~decreased PV development. The decrease in Intevac Photonics research and development ~~spending decreased during the three and nine months ended September 29, 2012 as compared to the same periods in the prior year~~was due ~~primarily~~

to a higher volume of billable contract ~~R&D efforts~~research and ~~cost containment efforts taken earlier in 2012.~~development efforts. Research and development expenses do not include costs of ~~$3.6~~$3.2 million and ~~$7.6~~$1.7 million for the ~~three~~three-month periods ended March 30, 2013 and ~~nine months ended September 29,~~March 31, 2012, ~~respectively, or $1.1 million and $3.5 million for the three and nine months ended October 1, 2011,~~ respectively, which are related to customer-funded contract R&D programs at Intevac Photonics and therefore included in cost of net revenues.

Selling, general and administrative expense consists primarily of selling, marketing, customer support, financial and management costs. The decrease in selling, general and administrative spending in the three ~~and nine~~ months ended ~~September 29, 2012 compared to the three and nine months ended October 1, 2011~~March 30, 2013 was primarily the result of lower ~~charges~~equity compensation expense and savings from the global cost reduction program offset in part by increased accruals for variable compensation programs and costs associated with the ~~change~~implementation of the global cost reduction program.

During the first quarter of fiscal 2013, Intevac announced a global cost reduction plan (the “Plan”) to reduce the global workforce by 13 percent. Implementation of the Plan was substantially completed in the ~~fair value~~first quarter. The total cost of implementing the Plan was $502,000 of which $179,000 was reported under cost of products sold and $323,000 was reported under operating expenses. Substantially all cash outlays in connection with the Plan occurred in the first quarter of fiscal 2013. Implementation of the ~~contingent consideration obligations related~~Plan is expected to ~~the SIT acquisition~~reduce salary, wages and ~~cost containment efforts.~~

During the quarter ended September 29, 2012 Intevac wrote off a promissory note receivable and the related deferred profit liability from the sale of certain thin-film PV equipment in a previous year and incurred bad debt expense of $3.0other employee-related expenses by approximately $4.5 million ~~due~~ to ~~the insolvency of the customer. See Note 5 “Allowance for Doubtful Accounts” in the notes to the condensed consolidated financial statements for additional information related to the write-off.~~$5.0 million on an annual basis.

On March 29, 2013, the Company sold certain assets, including existing tangible and intangible assets, which comprised its Raman spectroscopy instruments product line, also known as DeltaNu, for consideration not to exceed $1.5 million, of which $500,000 was received in cash upon closing, and recorded a loss of $208,000. On January 6, 2012, the Company sold certain assets, including intellectual property and residual assets, which comprised its semiconductor mainframe technology for $3.0 million in cash ~~to Brooks~~ and recorded a gain of $2.2 million. See Note ~~8 “Sale of Mainframe Technology”~~6 “Divestitures” in the notes to the condensed consolidated financial statements for additional information related to the gain (loss) on ~~sale of the mainframe technology.~~divestitures.

Interest income and other, net ~~is comprised~~in the three months ended March 30, 2013 included $82,000 of interest income on investments and ~~realized gains and losses on sales~~various other income of ~~investments,~~$11,000 partially offset by $13,000 of foreign currency ~~gains and losses,~~losses. Interest income and other, net in the three months ended March 31, 2012 included $211,000 of interest income on investments, forfeiture of a customer deposit of $97,000 and ~~expense such as gains~~various other income of $94,000 partially offset by $30,000 of foreign currency losses. The decrease in interest income in the three months ended March 30, 2013 resulted from lower invested balances and ~~losses on sales of fixed assets.~~lower interest rates.

At ~~September 29, 2012,~~March 30, 2013, Intevac had ~~$98.8~~$93.6 million in cash, cash equivalents, and investments compared to ~~$114.8~~$92.2 million at December 31, ~~2011.~~2012. During the first ~~nine~~three months of ~~2012~~2013, cash, ~~cash equivalents~~cash-equivalents and investments ~~decreased~~increased by ~~$16.0~~$1.4 million due primarily to cash ~~used~~generated by operating activities, ~~payment of acquisition-related contingent consideration and purchases of fixed assets partially offset by~~ cash received from ~~the sale of the mainframe technology and~~ the sale of Intevac common stock to Intevac’s employees through Intevac’s employee benefit ~~plans.~~plans, and cash received from the sale of the assets of DeltaNu, partially offset by purchases of fixed assets.

Cash, ~~cash equivalents~~cash-equivalents and investments consist of the following:


	September 29, 2012		December 31, 2011		March 30, 2013		December 31, 2012
	(In thousands)				(In thousands)
Cash and cash equivalents	$	16,859	$	23,560	$	24,842	$	24,261
Short-term investments		51,566		58,585		42,630		40,591
Long-term investments		30,356		32,677		26,154		27,317

Total cash, cash equivalents and investments	$	98,781	$	114,822	$	93,626	$	92,169

Operating activities generated cash of $377,000 during the first three months of 2013 and used cash of ~~$14.5~~$5.9 million during the first ~~nine~~three months of ~~2012 and of $10.1 million during the first nine months of 2011.~~2012. The increase in cash ~~used in~~generated by operating activities was due primarily to ~~an increase~~changes in ~~the Company’s non-cash net~~ working capital ~~position~~ during the first ~~nine~~three months of ~~2012 compared to the same period in the prior year~~2013, which was mostly offset ~~in part~~ by a ~~lower~~larger net loss.

Accounts receivable totaled ~~$16.5~~$10.3 million at ~~September 29, 2012,~~March 30, 2013, compared to ~~$18.6~~$19.8 million at December 31, ~~2011.~~2012. The decrease of ~~$2.0~~$9.5 million in the receivable balance was due primarily to lower revenue levels and the ~~write-off~~collection of outstanding receivables from the ~~customer promissory note.~~U.S. government. Total net inventories ~~increased~~decreased slightly to ~~$24.5~~$25.9 million at ~~September 29, 2012,~~March 30, 2013, compared to ~~$18.1~~$26.2 million at December 31, ~~2011~~2012 as the Company ~~invested in~~continues to carry inventories ~~for~~to support its next generation PV products including ~~placing~~ systems currently under evaluation agreements at customers. Accounts payable ~~increased~~decreased to ~~$6.2~~$3.3 million at ~~September 29, 2012~~March 30, 2013 compared to ~~$4.9~~$4.5 million at December 31, ~~2011~~2012 in line with business levels. Customer deposits decreased to ~~$2.8~~$1.4 million at ~~September 29, 2012~~March 30, 2013 compared to ~~$5.0~~$2.2 million at December 31, ~~2011 as the Company consumed system backlog.~~2012.

Investing activities in the first ~~nine~~three months of ~~2012 generated~~2013 used cash of ~~$9.2 million. Proceeds~~$920,000. Purchases of investments net of proceeds from sales of investments ~~net of purchases of investments~~ totaled ~~$8.4~~$1.1 million. On ~~January 6, 2012,~~March 29, 2013, the Company sold certain assets which comprised its ~~semiconductor mainframe technology for $3.0 million~~Raman spectroscopy instruments product line, also known as DeltaNu, and received $500,000 in cash upon closing. See Note 6 “Divestitures” in the notes to ~~Brooks.~~the condensed consolidated financial statements for additional information related the sale of the assets of DeltaNu. Capital expenditures for the ~~nine~~three months ended ~~September 29, 2012~~March 30, 2013 were ~~$2.1 million.~~$301,000.

Financing activities in the first ~~nine~~three months of ~~2012 used cash of $1.5 million. Intevac~~2013 generated cash of ~~$1.9~~$1.1 million from the sale of Intevac common stock to Intevac’s employees through Intevac’s employee benefit plans. In connection with the acquisition of SIT, Intevac agreed to pay up to an aggregate of $7.0 million in cash to the selling shareholders if certain milestones are achieved over a specified period. On April 12, 2012, and July 1, 2012 Intevac made $2.4 million and $956,000 in payments, respectively, to the selling shareholders of SIT for achievement of the second and third milestones under the SIT acquisition agreement.

Intevac’s investment portfolio consists principally of investment grade money market mutual funds, ~~FDIC insured corporate bonds,~~ U.S. Treasury and agency securities, commercial paper, municipal bonds, corporate bonds and VRDNs. Intevac regularly monitors the credit risk in its investment portfolio and takes measures, which may include the sale of certain securities, to manage such risks in accordance with its investment policies.

As of September 29, 2012, Intevac’s Level 3 available-for-sale security was a $1.9 million par value ARS, less a temporary valuation adjustment of $239,000 to reflect its current lack of liquidity. As described in note 11 of notes to condensed consolidated financial statements, the fair value of the ARS was estimated at $1.7 million using a discounted cash flow model. The estimates of future cash flows are based on certain key assumptions, such as

discount rates appropriate for the type of asset and risk, credit quality, collateralization, final stated maturity, estimates of the probability of being called or becoming liquid prior to final maturity, redemptions of similar ARS, previous market activity for the same investment security, impact due to extended periods of maximum auction rates and valuation models. Intevac subsequently sold this ARS in October 2012 for $1.7 million and recognized a realized loss of $152,000. In May 2012, Intevac participated in a tender offer, sold an ARS with a par value of $3.0 million, collected $2.8 million and recognized a realized loss on the sale of $229,000.

During the nine months ended of September 29, 2012, Intevac recorded a bad debt provision of $3.0 million as a result of a customer’s insolvency and liquidation. While Intevac believes that no allowance for doubtful accounts is required at September 29, 2012, it will continue to closely monitor customer liquidity and economic conditions.

~~As of September 29, 2012,~~March 30, 2013, approximately ~~$5.3~~$11.1 million of cash and cash equivalents and ~~$12.8~~$4.7 million of investments were domiciled in foreign tax jurisdictions. Intevac expects a significant portion of these funds to remain off shore in the short term. If the Company chose to repatriate these funds to the United States, it would be required to accrue and pay additional taxes on any portion of the repatriation where no United States income tax had been previously provided.

Intevac believes that its existing cash, cash equivalents and investments will be sufficient to meet its cash requirements for the foreseeable future. Intevac intends to undertake approximately ~~$2.0~~$5.5 million to $6.0 million in capital expenditures during the remainder of ~~2012.~~2013.

The preparation of financial statements and related disclosures in conformity with accounting principles generally accepted in the United States of America (“US GAAP”) requires management to make judgments, assumptions and estimates that affect the amounts reported. Intevac’s significant accounting policies are described in Note 1 to the consolidated financial statements included in Item 8 of Intevac’s Annual Report on Form 10-K filed on February ~~21, 2012.~~22, 2013. Certain of these significant accounting policies are considered to be critical accounting policies, as defined below.

A critical accounting policy is defined as one that is both material to the presentation of Intevac’s financial statements and requires management to make difficult, subjective or complex judgments that could have a material effect on Intevac’s financial conditions and results of operations. Specifically, critical accounting estimates have the following attributes: 1) Intevac is required to make assumptions about matters that are highly uncertain at the time of the estimate; and 2) different estimates Intevac could reasonably have used, or changes in the estimate that are reasonably likely to occur, would have a material effect on Intevac’s financial condition or results of operations.

Estimates and assumptions about future events and their effects cannot be determined with certainty. Intevac bases its estimates on historical experience and on various other assumptions believed to be applicable and

reasonable under the circumstances. These estimates may change as new events occur, as additional information is obtained and as Intevac’s operating environment changes. These changes have historically been minor and have been included in the consolidated financial statements as soon as they become known. In addition, management is periodically faced with uncertainties, the outcomes of which are not within its control and will not be known for prolonged periods of time. Many of these uncertainties are discussed in the section below entitled “Risk Factors.” Based on a critical assessment of Intevac’s accounting policies and the underlying judgments and uncertainties affecting the application of those policies, management believes that Intevac’s consolidated financial statements are fairly stated in accordance with US GAAP, and provide a meaningful presentation of Intevac’s financial condition and results of operation.

For further information about Intevac’s other critical accounting policies, see the discussion of critical accounting policies in Intevac’s ~~2011~~2012 Form 10-K. Management believes that there has been no significant change during the ~~nine~~three months ended ~~September 29, 2012~~March 30, 2013 to the items identified as critical accounting policies in Intevac’s ~~2011~~2012 Form 10-K.

Interest rate risk.Intevac’s exposure to market risk for changes in interest rates relates primarily to its investment portfolio. Intevac does not use derivative financial instruments in Intevac’s investment portfolio. The Company has adopted an investment policy and established guidelines relating to credit quality, diversification and maturities of its investments in order to preserve principal and maintain liquidity. All investment securities in Intevac’s portfolio have an investment grade credit rating. Investments typically consist of commercial paper, ~~FDIC insured corporate bonds,~~ obligations of the U.S. government and its agencies, corporate debt securities, municipal bonds ~~VRDNs~~ and ~~ARS.~~VRDNs.

The table below presents principal amounts and related weighted-average interest rates by year of expected maturity for Intevac’s investment portfolio at ~~September 29, 2012.~~March 30, 2013.

At September 29, 2012, Intevac held a $1.9 million par value ARS with an estimated fair value of $1.7 million. The Company subsequently sold this ARS in October 2012 for $1.7 million and recognized a realized loss of $152,000.

Foreign exchange risk.From time to time, Intevac enters into foreign currency forward exchange contracts to hedge certain of its anticipated foreign currency re-measurement exposures. The objective of these contracts is to minimize the impact of foreign currency exchange rate movements on Intevac’s operating results. The notional amount of Company’s foreign currency derivatives was ~~$736,000~~$582,000 at ~~September 29, 2012.~~March 30, 2013.

Intevac maintains a set of disclosure controls and procedures that are designed to ensure that information relating to Intevac, Inc. required to be disclosed in periodic filings under the Securities Exchange Act of 1934, or Exchange Act, is recorded, processed, summarized and reported in a timely manner under the Exchange Act. In connection with the filing of this Form 10-Q for the quarter ended ~~September 29, 2012,~~March 30, 2013, as required under Rule 13a-15(b) of the Exchange Act, an evaluation was carried out under the supervision and with the participation of

management, including the Chief Executive Officer and Chief Financial Officer, of the effectiveness of Intevac’s disclosure controls and procedures as of the end of the period covered by this quarterly report. Based on this evaluation, Intevac’s Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective as of ~~September 29, 2012.~~March 30, 2013.

Attached as exhibits to this Quarterly Report are certifications of the CEO and the CFO, which are required in accordance with Rule 13a-14 of the Exchange Act. This Controls and Procedures section includes the information concerning the controls evaluation referred to in the certifications, and it should be read in conjunction with the certifications for a more complete understanding of the topics presented.

Disclosure Controls are controls and procedures designed to ensure that information required to be disclosed in our reports filed under the Exchange Act, such as this Quarterly Report, is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms. Disclosure Controls are also designed to ensure that such information is accumulated and communicated to our management, including the CEO and CFO, as appropriate to allow timely decisions regarding required disclosure. Our Disclosure Controls include components of our internal control over financial reporting, which consists of control processes designed to provide reasonable assurance regarding the reliability of our financial reporting and the preparation of financial statements in accordance with generally accepted accounting principles in the U.S. To the extent that components of our internal control over financial reporting are included within our Disclosure Controls, they are included in the scope of our quarterly controls evaluation.

Intevac’s management, including the CEO and CFO, does not expect that Intevac’s Disclosure Controls or Intevac’s internal control over financial reporting will prevent all error and all fraud. A control system, no matter how well designed and operated, can provide only reasonable, not absolute, assurance that the control system’s objectives will be met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within Intevac have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty and that breakdowns can occur because of simple error or mistake. Controls can also be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the controls. The design of any system of controls is based in part on certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Over time, controls may become inadequate because of changes in conditions or deterioration in the degree of compliance with policies or procedures. Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected.

There were no changes in our internal controls over financial reporting that occurred during the period covered by this Quarterly Report on Form 10-Q that have materially affected, or are reasonably likely to materially affect, Intevac’s internal control over financial reporting.

From time to time, Intevac is involved in claims and legal proceedings that arise in the ordinary course of business. Intevac expects that the number and significance of these matters will increase as Intevac’s business expands. Any claims or proceedings against us, whether meritorious or not, could be time consuming, result in costly litigation,

require significant amounts of management time, result in the diversion of significant operational resources, or require us to enter into royalty or licensing agreements which, if required, may not be available on terms favorable to us or at all. Intevac is not presently a party to any lawsuit or proceeding that, in Intevac’s opinion, is likely to seriously harm Intevac’s business.

The following factors could materially affect Intevac’s business, financial condition or results of operations and should be carefully considered in evaluating the Company and its business, in addition to other information presented elsewhere in this report.

The majority of our revenue is derived from the sale of equipment used to manufacture commodity technology products such as disk drives and PV solar cells. This subjects us to business cycles, the timing, length and volatility of which can be difficult to predict. When demand for commodity technology products exceeds production capacity, then demand for new capital equipment such as ours tends to be amplified. Conversely, when supply of commodity technology products exceeds demand, then demand for new capital equipment such as ours tends to be depressed. For example, sales of systems for magnetic disk production were ~~severely~~ depressed from ~~mid-1998 until mid-2003 and grew rapidly from 2004 through 2006, followed by a downturn in the cycle in~~ late 2007 ~~which continued~~ through 2009. The number of new systems delivered increased in 2010 as customers increased their production capacity in response to increased demand for digital storage, but decreased in 2011 and 2012, as the hard disk drive industry did not add the same level of capacity that it did in 2010. We cannot predict with any certainty when these cycles will begin or ~~end but believe~~end. For example, while we previously believed that our sales ~~will~~would continue to be depressed through 2012, we now believe that the cycle will continue through at least ~~through the remainder of 2012.~~2013.

Our equipment represents only a portion of the capital expenditure that our customers incur when they upgrade or add production capacity. Accordingly, our customers generally commit to making large capital expenditures far in excess of the cost of our systems alone when they decide to purchase our systems. The magnitude of these capital expenditures requires our customers to have access to large amounts of capital. Our customers generally reduce their level of capital investment during downturns in the overall economy or during a downturn in their industries.

We must effectively manage our resources and production capacity to meet rapidly changing demand. Our business experiences rapid growth and contraction, which stresses our infrastructure, internal systems and managerial resources. During periods of increasing demand for our products, we must have sufficient manufacturing capacity and inventory to meet customer demand; attract, retain and motivate a sufficient number of qualified individuals; and effectively manage our supply chain. During periods of decreasing demand for our products, we must be able to align our cost structure with prevailing market conditions; motivate and retain key employees and effectively manage our supply chain.

Sales of our equipment are primarily dependent on our customers’ upgrade and capacity expansion plans and whether our customers select our equipment.

We have no control over our customers’ upgrade and capacity expansion plans, and we cannot be sure they will select, or continue to select, our equipment when they upgrade or expand their capacity. The sales cycle for our equipment systems can be a year or longer, involving individuals from many different areas of Intevac and numerous product presentations and demonstrations for our prospective customers. Our sales process also commonly includes production of samples, customization of our products, and installation of evaluation systems in the factories of our prospective customers. We do not enter into long-term contracts with our customers, and until an order is actually submitted by a customer there is no binding commitment to purchase our systems.

Intevac Photonics’ business is also subject to long sales cycles because many of its products, such as our military imaging products, often must be designed into the customers’ end products, which are often complex state-of-the-art products. These development cycles are typically multi-year, and our sales are contingent on our customers successfully integrating our product into their product, completing development of their product and then obtaining production orders for their product from the U.S. government or its allies.

Sales of new manufacturing systems are also dependent on obsolescence and replacement of the installed base of our customers’ existing equipment with newer, more capable equipment. If upgrades are developed that extend the useful life of the installed base of systems, then we tend to sell more upgrade products and fewer new systems, which can significantly reduce total revenue. For example, some of our 200 Lean customers continue to use legacy systems for the production of perpendicular media, which delayed the replacement of such systems with new 200 Lean systems.

Our 200 Lean customers also experience competition from companies that produce alternative storage technologies like flash memory, which offer smaller size, lower power consumption and more rugged designs. These storage technologies are being used increasingly in enterprise applications and smaller form ~~factor~~factors such as tablets, smart-phones, ultra-books, notebook ~~and~~ personal computers ~~and other electronics devices~~ instead of hard disk ~~drives, and new classes of such products, including tablet~~drives. Tablet computing devices and ~~mobile phones with advanced capabilities, or “smartphones,”~~smart-phones have never contained, nor are they likely in the future to contain, a disk drive. Products using alternative technologies, such as flash memory, optical storage and other storage technologies are becoming increasingly common and could become a significant source of competition to particular applications of the products of our 200 Lean customers, which could adversely affect our results of operations. If alternative technologies, such as flash memory, replace hard disk drives as a significant method of digital storage, then demand for our hard disk manufacturing products would decrease.

We operate in an intensely competitive marketplace, and our competitors have greater resources than we do.

In the market for our disk sputtering systems, we experience competition primarily from Canon Anelva, which has sold a substantial number of systems worldwide. ~~Intevac is attempting to enter~~In the PV equipment market, ~~and~~Intevac faces competition from large established competitors including Applied Materials, Centrotherm Photovoltaics, Amtech, Jusung and Von ~~Ardenne and cell module manufacturers that are internally developing manufacturing equipment that may be sold externally in the future.~~Ardenne. In the market for our military imaging products we experience competition from companies such as ITT ~~Industries~~Exelis and BAE Systems. In the markets for our commercial imaging products we compete with companies such as Andor, Dalsa, E2V, Hamamatsu and Roper Industries for sensor and camera products, and with companies such as Ahura, B&W Tek, GE Security, Horiba–Jobin Yvon, Ocean Optics, Renishaw, Thermo Scientific and Smiths Detection for Raman spectrometer products.L-3 Communications. Some of our competitors have substantially greater financial, technical, marketing, manufacturing and other resources than we do, especially in the PV equipment market. Our competitors may develop enhancements to, or future generations of, competitive products that offer superior price or performance features, and new competitors may enter our markets and develop such enhanced products. Moreover, competition for our customers is intense, and our competitors have historically offered substantial pricing concessions and incentives to attract our customers or retain their existing customers.

We are exposed to risks associated with a highly concentrated customer ~~base and industry consolidation.~~base.

Historically, a significant portion of our revenue in any particular period has been attributable to sales of our disk sputtering systems to a limited number of customers. This concentration of customers, when combined with changes in the customers’ specific capacity plans and market share shifts can lead to extreme variability in our revenue and financial results from period to period.

Industry consolidation can limit the number of potential customers for our products. Seagate acquired Maxtor in 2006 and Samsung’s hard disk drive business in 2011. Western Digital acquired Komag in 2007, Hoya’s magnetic media operations in 2010 and Hitachi Global Storage Technology in 2012. The concentration of our customer base may enable our customers to demand pricing and other terms unfavorable to Intevac, and makes us more vulnerable to changes in demand by a given customer. Orders from a relatively limited number of manufacturers have accounted for, and will likely continue to account for, a substantial portion of our revenues. The loss of one of these large customers, or delays in purchasing by them, could have a material and adverse effect on our revenues.

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

system, our LEAN SOLAR systems for PV applications, our digital night-vision ~~products, our Raman system~~ products and our near-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 market. Our expansion into the PV market is dependent upon the success of our customers’ development ~~plans, some of which are start-ups and in their preliminary stages of development, as well as their ability to raise capital to fund their future development and capacity expansion.~~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.

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.

Our operating results fluctuate significantly from quarter to quarter, which can lead to volatility in the price of our common stock.

Our quarterly revenues and common stock price have fluctuated significantly. We anticipate that our revenues, operating margins and common stock price will continue to fluctuate for a variety of reasons, including: (1) changes in the demand, due to seasonality, cyclicality and other factors in the markets for computer systems, storage subsystems and consumer electronics containing disks our customers produce with our systems; (2) delays or problems in the introduction and acceptance of our new products, or delivery of existing products; (3) timing of orders, acceptance of new systems by our customers or cancellation of those orders; (4) new products, services or technological innovations by our competitors or us; (5) changes in our manufacturing costs and operating expense; (6) changes in general economic, political, stock market and industry conditions; and (7) any failure of our operating results to meet the expectations of investment research analysts or investors.

Any of these, or other factors, could lead to volatility and/or a rapid change in the trading price of our common shares. In the past, securities class action litigation has been instituted against companies following periods of volatility in the market price of their securities. Any such litigation, if instituted against Intevac, could result in substantial costs and diversion of management time and attention.

Adverse economic conditions and volatility and disruption of the capital and credit markets may negatively impact our revenues and our ability to access financing.

Economic conditions worldwide have contributed to decreased spending by our customers and a slowdown in the hard disk drive industry. These factors have adversely impacted our operating results ~~in prior periods~~ and have caused us to be cautious about our future outlook. Our customers also continue to remain cautious about the economy. Negative macroeconomic and global recessionary factors, further volatility or disruption in the capital and credit markets or further uncertainty or weakening in key markets could negatively impact spending for our products and may materially adversely affect our business, operating results and financial condition.

In addition, while we intend to finance operations with existing cash and cash flow from operations, if necessary, we may require financing to support our continued operations. Due to the existing uncertainty in the capital and credit markets, our access to capital may not be available on terms acceptable to us or at all.

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 Intevac 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 and re-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 Intevac 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 future war-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, particularly given the U.S. government’s recent focus on spending in other areas. 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.

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.

Intevac ~~enjoys~~has benefitted from a tax holiday in Singapore ~~through~~which is scheduled to expire at the ~~tax years ending in~~end of 2015. The tax holiday provides a lower income tax rate on certain classes of income so long as certain thresholds of business investment and employment levels are met in Singapore. We ~~may lose our eligibility for such benefits if, among other things, these requirements~~ are presently in discussion with the Singapore tax authority to terminate this tax holiday effective January 1, 2013 due to current conditions in the hard disk drive business, which will not ~~met or if~~allow Intevac ~~incurs net losses in~~to be able to meet the conditions required to continue benefitting from the tax holiday. We expect the Singapore ~~for which it cannot claim~~tax authorities to issue the terms and conditions allowing us to terminate the tax holiday early during the second quarter of 2013. The terms and conditions could include a ~~deduction. Loss~~claw back by the Singapore government of ~~these~~ tax benefits ~~could result~~received in ~~our income in Singapore being taxed at the statutory rate of 17% instead of the agreed Pioneer Tax Holiday rate of 0%.~~previous years. A ~~loss~~claw back of all or part of these tax benefits would adversely affect our results of operations and cash flows.

We booked significant tax benefits in 2008, 2009, ~~2011~~ and ~~2012~~2011 based on our belief that we could both carry back losses and tax credits to years Intevac paid income taxes and carry forward losses and tax credits to future years where we ~~believe~~believed we ~~may~~would generate taxable income. In 2012, the Company established a $23.4 million non-cash valuation allowance against certain of its U.S. deferred tax assets based upon an evaluation of all available objectively verifiable evidence, including but not limited to the cumulative loss incurred over the three-year period ended December 31, 2012 by the Company’s U.S. operations. The establishment of the non-cash valuation allowance on the Company’s U.S. deferred tax assets did not have any impact on its cash, nor does such an allowance preclude the Company from utilizing its tax losses, tax credits or other deferred tax assets in future periods.

Intevac will need to generate approximately ~~$67.3 million of taxable income in the United States in order to fully realize the Federal deferred tax assets and $36.1~~$48.7 million of taxable income in Singapore in order to fully realize the foreign deferred tax assets ~~each as~~ recorded as of ~~September 29, 2012.~~March 30, 2013. If our expectations of future income are incorrect, we could be required to establish aadditional valuation allowance against some or ~~all of~~ the entire remaining deferred tax ~~assets.~~assets which are primarily attributable to our Singapore operation.

Our success depends on international sales and the management of global operations.

The majority of our revenues come from regions outside the United States. Most of our international sales are to customers in Asia, which includes products shipped to overseas operations of U.S. companies. We currently have manufacturing facilities in California ~~Wyoming~~ and Singapore and international customer support offices in Singapore, ~~Taiwan,~~ China, and Malaysia. We expect that international sales will continue to account for a significant portion of our total revenue in future years. Certain of our suppliers are also located outside the United States.

Managing our global operations presents challenges including, but not limited to, those arising from: (1) global trade issues; (2) variations in protection of intellectual property and other legal rights in different countries; (3) concerns of U.S. governmental agencies regarding possible national commercial and/or security issues posed by growing manufacturing business in Asia; (4) fluctuation of interest rates, raw material costs, labor and operating costs, and exchange rates, including the weakening relative position of the U.S. dollar; (5) variations in the ability to develop relationships with suppliers and other local businesses; (6) changes in the laws and regulations of the United States, including export restrictions, and other countries, as well as their interpretation and application; (7) the need to provide technical and spares support in different locations; (8) political and economic instability;

(9) cultural differences; (10) varying government incentives to promote development; (11) shipping costs and delays; (12) adverse conditions in credit markets; (13) variations in tariffs, quotas, tax codes and other market barriers; and (14) barriers to movement of cash.

We must regularly assess the size, capability and location of our global infrastructure and make appropriate changes to address these issues.

We may be subject to additional impairment charges due to potential declines in the fair value of our assets.

As a result of our acquisitions, we have significant ~~goodwill~~intangible assets and ~~intangible assets~~had significant goodwill on our balance sheet. We test ~~goodwill and intangible~~these assets for impairment on a periodic basis as required, and whenever events or changes in circumstances indicate that the carrying value may not be recoverable. The events or changes that could require us to test our ~~goodwill and~~ intangible assets for impairment include: a significant reduction in our stock price, and as a result market capitalization, changes in our estimated future cash flows, as well as changes in rates of growth in our industry or in any of our reporting units. In the fourth quarter of ~~2008, we recorded an impairment charge~~2012, as a result of ~~$10.5 million for goodwill due to~~ a decline in our market capitalization and ~~certain purchased technology intangible assets due to lower~~a reduction in our revenue ~~expectations.~~expectations we recorded a goodwill impairment charge in the amount of $18.4 million. We will continue to evaluate the carrying value of our ~~remaining goodwill and~~ intangible assets and if we determine in the future that there is a potential further impairment, ~~in any of our reporting units,~~ we may be required to record additional charges to earnings which could materially adversely affect our financial results and could also materially adversely affect our business. See Note 64 “Goodwill and Purchased Intangible Assets” in the ~~notes~~Notes to the ~~condensed consolidated financial statements~~Condensed Consolidated Financial Statements for additional information related to impairment of goodwill and intangible assets.

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 generally do not have employment contracts with our key employees. Further, 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 to non-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 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 given recent economic conditions.

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.

From time to time we may be involved in litigation of various types, including litigation alleging infringement of intellectual property rights and other claims. Litigation is expensive, subjects us to the risk of significant damages and requires significant management time and attention and could have a material and adverse effect on our business, financial condition and results of operations.

Difficulties in integrating past or future acquisitions could adversely affect our business.

We have completed a number of acquisitions during our operating history. For example, in 2007, we acquired certain assets of DeltaNu, LLC and certain assets of Creative Display Systems, LLC, in 2008 we acquired certain assets of OC Oerlikon Balzers Ltd., in 2010 we acquired the outstanding shares of ~~Solar Implant Technologies, Inc., and~~SIT, in 2012 we completed the sale of certain semiconductor mainframe technology assets ~~to Brooks.~~and in 2013 we completed the sale of the assets of DeltaNu. We have spent and may continue to spend significant resources identifying and pursuing future acquisition opportunities. Acquisitions involve numerous risks including: (1) difficulties in integrating the operations, technologies and products of the acquired companies; (2) the diversion of our management’s attention from other business concerns; and (3) the potential loss of key employees of the acquired companies. Failure to achieve the anticipated benefits of the prior and any future acquisitions or to successfully integrate the operations of the companies we acquire could have a material and adverse effect on our business, financial condition and results of operations. Any future acquisitions could also result in potentially dilutive issuance of equity securities, acquisition- or divestiture-related write-offs or the assumption of debt and contingent liabilities. In addition, we have made and will continue to consider making strategic divestitures. With any divestiture, there are risks that future operating results could be unfavorably impacted if targeted objectives, such as cost savings, are not achieved or if other business disruptions occur as a result of the divestiture or activities related to the divestiture.

We ~~use hazardous materials and~~ are subject to risks of non-compliance with environmental and ~~safety~~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 or to incur substantial expenses to comply with them.

We are also subject to a variety of other governmental regulations and may incur significant costs associated with the compliance with these regulations. For example rules adopted by the SEC to implement the Dodd-Frank Wall Street Reform and Consumer Protection Act impose diligence and disclosure requirements regarding the use of “conflict” minerals mined from the Democratic Republic of Congo and adjoining countries in the products we manufacture. Compliance with these regulations is likely to result in additional costs and expenses or may affect the sourcing and availability of the components used in the products we manufacture.

Our operations are vulnerable to interruption by fire, earthquake, floods or other natural disaster, quarantines or other disruptions associated with infectious diseases, national catastrophe, terrorist activities, war, disruptions in our computing and communications infrastructure due to power loss, telecommunications failure, human error, physical or electronic security breaches and computer viruses, and other events beyond our control. We do not have a detailed disaster recovery plan. Despite our implementation of network security measures, our tools and servers may be vulnerable to computer viruses, break-ins and similar disruptions from unauthorized tampering with our computer systems and tools located at customer sites. Political instability could cause us to incur increased costs in transportation, make such transportation unreliable, increase our insurance costs or cause international currency markets to fluctuate. All these unforeseen disruptions and instabilities could have the same effects on our suppliers and their ability to timely deliver their products. In addition, we do not carry sufficient business interruption insurance to compensate us for all losses that may occur, and any losses or damages incurred by us could have a material adverse effect on our business and results of operations. For example, we self-insure earthquake risks because we believe this is the prudent financial decision based on the high cost of the limited coverage available in

the earthquake insurance market. An earthquake could significantly disrupt our operations, most of which are conducted in California. It could also significantly delay our research and engineering effort on new products, most of which is also conducted in California. We take steps to minimize the damage that would be caused by business interruptions, but there is no certainty that our efforts will prove successful.

We are required to evaluate our internal control over financial reporting under Section 404 of the Sarbanes-Oxley Act of 2002, and any adverse results from such evaluation could result in a loss of investor confidence in our financial reports and have an adverse effect on our stock price.

Pursuant to Section 404 of the Sarbanes-Oxley Act of 2002, our management must perform evaluations of our internal control over financial reporting. Beginning in 2004, our Form 10-K has included a report by management of their assessment of the adequacy of such internal control. Additionally, our independent registered public accounting firm must publicly attest to the effectiveness of our internal control over financial reporting.

We have completed the evaluation of our internal controls over financial reporting as required by Section 404 of the Sarbanes-Oxley Act. Although our assessment, testing, and evaluation resulted in our conclusion that as of December 31, ~~2011,~~2012, our internal controls over financial reporting were effective, we cannot predict the outcome of our testing in future periods. Ongoing compliance with this requirement is complex, costly and time-consuming. If Intevac fails to maintain effective internal control over financial reporting; our management does not timely assess the adequacy of such internal control; or our independent registered public accounting firm does not deliver an unqualified opinion as to the effectiveness of our internal control over financial reporting, then we could be subject to restatement of previously reported financial results, regulatory sanctions and a decline in the public’s perception of Intevac, which could have a material and adverse effect on our business, financial condition and results of operations.



32.1		Certifications Pursuant to U.S.C. 1350 Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

101.INS		XBRL Instance Document *

101.SCH		XBRL Taxonomy Extension Schema *

101.CAL		XBRL Taxonomy Extension Calculation Linkbase Document *

101.DEF		XBRL Taxonomy Extension Definition Linkbase Document *

101.LAB		XBRL Taxonomy Extension Label Linkbase Document *

101.PRE		XBRL Taxonomy Extension Presentation Linkbase Document *

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.


Large accelerated filer ¨		Accelerated filer þx		Non-accelerated filer ¨ (Do not check if a smaller reporting company)		Smaller reporting company ¨


No.		Page ~~No.~~
PART I. FINANCIAL INFORMATION

Item 1.	Financial Statements (unaudited)
	Condensed Consolidated Balance Sheets		3
	Condensed Consolidated Statements of Operations		4
	Condensed Consolidated Statements of Comprehensive Income (Loss)		5
	Condensed Consolidated Statements of Cash Flows		6
	Notes to Condensed Consolidated Financial Statements		7
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations		23	22
Item 3.	Quantitative and Qualitative Disclosures About Market Risk		31	29
Item 4.	Controls and Procedures		31	30

PART II. OTHER INFORMATION

Item 1.	Legal Proceedings		32	31
Item 1A.	Risk Factors		33	31
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds		40	38
Item 3.	Defaults Upon Senior Securities		40	38
Item 4.	Mine Safety Disclosures		40	38
Item 5.	Other Information		40	38
Item 6.	Exhibits		40	39
SIGNATURES			42	40


	Shares			Weighted Average Exercise Price
Options outstanding at December 31, 2012		3,128,408		$	11.52
Options granted		14,500		$	4.71
Options cancelled and forfeited		(435,625	)	$	12.82
Options exercised		(64,813	)	$	3.91
Options outstanding at March 30, 2013		2,642,470		$	11.45
Vested and expected to vest at March 30, 2013		2,548,559		$	11.53
Options exercisable at March 30, 2013		1,926,833		$	12.12


	Shares			Weighted Average Exercise Price
Options outstanding at December 31, 2011		3,391,925		$	12.03
Options granted		384,505		$	7.67
Options forfeited		(359,109	)	$	13.55
Options exercised		(41,412	)	$	3.35
Options outstanding at September 29, 2012		3,375,909		$	11.47
Vested and expected to vest at September 29, 2012		3,221,395		$	11.57
Options exercisable at September 29, 2012		2,343,746		$	12.33


	Shares			Weighted Average Grant Date Fair Value
Non-vested RSUs at December 31, 2012		100,461		$	7.33
Granted		9,125		$	4.76
Vested		(2,500	)	$	8.24
Cancelled and forfeited		(8,133	)	$	7.55
Non-vested RSUs at March 30, 2013		98,953		$	7.05


Promissory note	$	4,085
Deferred profit on installment sale		(1,028	)
Cash recovery from liquidation sale		(40	)

Bad debt expense	$	3,017


	September 29, 2012
	Goodwill		Other Intangible Assets		Total
	(In thousands)
Equipment	$	10,484	$	4,000	$	14,484
Intevac Photonics		7,905		120		8,025

	$	18,389	$	4,120	$	22,509


Quantitative Information about Level 3 Fair Value Measurements at September 29, 2012
	Fair Value		Valuation Technique	Unobservable Input	Range (Weighted Average)
	(In thousands, except for percentages)
Milestone Payable	$	693	Discounted cash flow	Discount rate	4.7%
				Probability of achieving remaining milestone	97.5%
Revenue Earnout	$	5,120	Discounted cash flow	Weighted average cost of capital	14.2%
				Probability weighting of achieving revenue forecasts	2.0% - 43.0% (29.5%)


Cash proceeds	$	500
Assets sold:
Accounts receivable		147
Inventories		320
Other current assets		27
Property, plant and equipment		159
Trade name		90

Total assets sold		743
Liabilities divested:
Accounts payable		59
Other accrued expenses		6

Total liabilities divested		65
Transaction and other costs		30

Loss on sale	$	(208	)


	September 29, 2012
	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)
Corporate bonds and medium-term notes	$	5,797	$	2	$	—	$	—
ARS		—		—		1,661		239

	$	5,797	$	2	$	1,661	$	239


	March 30, 2013
	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)
Corporate bonds and medium-term notes	$	15,829	$	17	$	—	$	—


	Fair Value Measurements at September 29, 2012
	Total		Level 1		Level 2		Level 3
	(In thousands)
Recurring fair value measurements:
Available-for-sale securities
Money market funds	$	9,296	$	9,296	$	—	$	—
U.S. treasury and agency securities		32,524		12,708		19,816		—
FDIC insured corporate bonds		3,616		—		3,616		—
Corporate bonds and medium-term notes		39,468		—		39,468		—
Municipal bonds		4,308		—		4,308		—
VRDNs		345		—		345		—
ARS		1,661		—		—		1,661

Total recurring fair value measurements	$	91,218	$	22,004	$	67,553	$	1,661


	Fair Value Measurements at March 30, 2013
	Total		Level 1		Level 2
	(in thousands)
Recurring fair value measurements:
Available-for-sale securities
Money market funds	$	14,084	$	14,084	$	—
U.S. treasury and agency securities		27,517		8,699		18,818
Commercial paper		3,498		—		3,498
Corporate bonds and medium-term notes		35,367		—		35,367
Municipal bonds		2,207		—		2,207
VRDNs		195		—		195

Total recurring fair value measurements	$	82,868	$	22,783	$	60,085


	Foreign currency			Unrealized holding gains on available- for-sale investments			Total
	(In thousands)
Beginning balance	$	694		$	75		$	769
Other comprehensive income (loss) before reclassification		(6	)		(15	)		(21	)
Amounts reclassified from other comprehensive income		—			—			—

Net current-period other comprehensive income (loss)		(6	)		(15	)		(21	)

Ending balance	$	688		$	60		$	748


	Severance and other employee- related costs
	(In thousands)
Beginning balance	$	—
Provision for restructuring reserves		502
Cash payments made		(461	)

Ending balance	$	41


Exhibit Number		Description

31.1		Certification of President and Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

31.2		Certification of Executive Vice President, Finance and Administration, Chief Financial Officer, Treasurer and Secretary Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.


		INTEVAC, INC.

Date: ~~November 1, 2012~~April 30, 2013	By:	/S/ ~~KEVIN FAIRBAIRN~~NORMAN POND
		~~Kevin Fairbairn~~Norman Pond
		~~President,~~Chairman and Chief Executive Officer ~~and Director~~ (Principal Executive Officer)


Date: ~~November 1, 2012~~April 30, 2013	By:	/s/ JEFFREY ANDRESON
		Jeffrey Andreson
		Executive Vice President, Finance and Administration, Chief Financial Officer, Treasurer and Secretary (Principal Financial and Accounting Officer)