Intevac, Inc. (Nasdaq: IVAC) today reported financial results for the fourth quarter and year ended December 31, 2012.
“2012 was a challenging year for our equipment business primarily due to the weakened macro- economic environment and the industry transition underway from PC-based storage to centralized or 'Cloud' based storage,” commented Norman Pond, chairman of the board and chief executive officer of Intevac. “In the hard drive market, we expect these factors to continue to impact demand for new capacity systems through this year. In the longer term however, media unit growth is expected to resume because the rate of data growth is expected to exceed the slowing rate of areal density improvement.
"We are pleased to report a return to growth in our Photonics business, with revenues up 10% for the year. This business has now turned the corner to operating profitability, with profits achieved in both the third and fourth quarters of 2012. Our Photonics business is well-positioned for continued growth, as we entered 2013 with a record level of backlog. Finally, we expect to see growth in our new equipment products in 2013 as we leverage the success of our first ENERGi™ tool qualification to penetrate additional customers in the solar market.”
| ($ Millions, except per share amounts) | Q4 2012 | FY 2012 | |||||||||||||||
| GAAP Results | Non-GAAP Results | GAAP Results | Non-GAAP Results | ||||||||||||||
| Net Revenues | $ | 17.5 | $ | 17.5 | $ | 83.4 | $ | 83.4 | |||||||||
| Operating Loss | $ | (23.9 | ) | $ | (5.5 | ) | $ | (42.5 | ) | $ | (23.3 | ) | |||||
| Net Loss | $ | (42.7 | ) | $ | (3.6 | ) | $ | (55.3 | ) | $ | (15.9 | ) | |||||
| Net Loss per Share | $ | (1.82 | ) | $ | (0.15 | ) | $ | (2.37 | ) | $ | (0.68 | ) | |||||
Fourth Quarter 2012 Summary
The net loss was $42.7 million, or $1.82 per share, and included a $23.4 million valuation allowance established on certain federal deferred tax assets and $18.4 million in goodwill and intangibles impairment charges, both referenced in the company's 8-Ks filed with the SEC on December 21, 2012 and January 24, 2013. The non-GAAP net loss was $3.6 million or $0.15 per share. This compares to a net loss of $6.2 million, or $0.27 per share, on both a GAAP and non-GAAP basis for the fourth quarter of 2011.
Revenues were $17.5 million, including $9.4 million of Equipment revenues and Intevac Photonics revenues of $8.1 million. Intevac Photonics revenues included $4.9 million of research and development contracts. In the fourth quarter of 2011, revenues were $18.6 million, including $12.5 million of Equipment revenues and Intevac Photonics revenues of $6.1 million, which included $1.8 million of research and development contracts.
Equipment gross margin was 46.0% compared to 36.4% in the fourth quarter of 2011, and increased primarily due to a higher mix of upgrades. Intevac Photonics gross margin of 37.4% improved compared to 30.0% in the fourth quarter of 2011. The increase was primarily a result of higher volumes, improved yields, and lower warranty costs for our night vision products. Consolidated gross margin was 42.0%, compared to 34.3% in the fourth quarter of 2011. Research and development and selling, general and administrative expenses totaled $12.8 million, compared to $14.9 million in the fourth quarter of 2011. Total operating expenses of $31.2 million included $18.4 million in non-cash goodwill and intangibles impairment charges primarily due to the decline in our market capitalization.
Order backlog totaled $35.2 million on December 31, 2012, compared to $40.0 million on September 29, 2012 and $32.9 million on December 31, 2011. Backlog as of December 31, 2012 and September 29, 2012 did not include any 200 Lean systems or Solar systems compared to one Solar system as of December 31, 2011.
Our balance sheet remains strong, with $92.2 million of cash and investments and $136.8 million in tangible book value.
Fiscal Year 2012 Summary
The net loss was $55.3 million, or $2.37 per share, and included a $23.4 million valuation allowance established on certain federal deferred tax assets and $18.4 million in goodwill and intangibles impairment charges, both referenced in the company's 8-Ks filed with the SEC on December 21, 2012 and January 24, 2013. The non-GAAP net loss was $15.9 million or $0.68 per share, and also excluded a $3.0 million bad debt expense and a $2.2 million gain on the sale of our mainframe technology. This compares to a net loss of $22.0 million, or $0.96 per share, on both a GAAP and non-GAAP basis for fiscal 2011.
Revenues were $83.4 million, including $52.5 million of Equipment revenues and Intevac Photonics revenues of $30.9 million, compared to revenues of $83.0 million, including $54.9 million of Equipment revenues and Intevac Photonics revenues of $28.1 million, for 2011.
Equipment gross margin was 44.9%, compared to 40.7% in 2011, primarily as a result of a higher mix of upgrade revenue. Intevac Photonics gross margin of 34.2% improved compared to 28.9% in 2011, reflecting improved yields and lower warranty costs related to our night vision products. Consolidated gross margin was 40.9%, compared to 36.7% in 2011. Research and development and selling, general and administrative expenses totaled $57.5 million, compared to $61.1 million in 2011, and declined primarily due to reduced investment in new equipment products. Total operating expenses were $78.9 million, compared to $61.2 million in 2011, and increased primarily as a result of $18.4 million in non-cash goodwill and intangibles impairment charges and a $3.0 million bad debt charge.
Use of Non-GAAP Financial Measures
Intevac's non-GAAP results exclude the impact of the following, where applicable: deferred tax asset valuation allowance; certain bad debt charges; impairments of goodwill and intangible assets; and a gain or loss on sales of technology assets. A reconciliation of the GAAP and non-GAAP results is provided in the financial tables included in this release.
Management uses non-GAAP results to evaluate the company’s operating and financial performance in light of business objectives and for planning purposes. These measures are not in accordance with GAAP and may differ from non-GAAP methods of accounting and reporting used by other companies. Intevac believes these measures enhance investors’ ability to review the company’s business from the same perspective as the company’s management and facilitate comparisons of this period’s results with prior periods. The presentation of this additional information should not be considered a substitute for results prepared in accordance with GAAP.
Conference Call Information
The company will discuss its financial results and outlook in a conference call today at 1:30 p.m. PST (4:30 p.m. EST). To participate in the teleconference, please call toll-free (877) 334-0811 prior to the start time. For international callers, the dial-in number is (408) 427-3734. You may also listen live via the Internet at the company's website, www.intevac.com, under the Investors link, or at www.earnings.com. For those unable to attend, these web sites will host an archive of the call. Additionally, a telephone replay of the call will be available for 48 hours beginning today at 7:30 p.m. EST. You may access the replay by calling (855) 859-2056 or, for international callers, (404) 537-3406, and providing Replay Passcode 87592554.
About Intevac
Intevac was founded in 1991 and has two businesses: Equipment and Intevac Photonics.
In our Equipment business, we are a leader in the design, development and manufacturing of high-productivity, vacuum process equipment solutions. Our systems are production-proven for high-volume manufacturing of small substrates with precise thin film properties, such as those required in the hard drive and solar cell markets we currently serve.
In the hard drive industry, our 200 Lean® systems process approximately 60% of all magnetic disk media produced worldwide. In the solar cell manufacturing industry, our LEAN SOLAR™ systems increase the conversion efficiency of silicon solar cells.
In our Photonics business, we are a leader in the development and manufacture of leading-edge, high-sensitivity imaging products and vision systems as well as materials identification instruments utilizing Raman technology. Our products primarily address the defense markets in addition to the industrial, medical and scientific industries.
For more information call 408-986-9888, or visit the company's website at www.intevac.com.
200 Lean® is a registered trademark and ENERGi™ and LEAN SOLAR™ are trademarks of Intevac, Inc.
Safe Harbor Statement
This press release includes statements that constitute “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995 (the “Reform Act”). Intevac claims the protection of the safe-harbor for forward-looking statements contained in the Reform Act. These forward-looking statements are often characterized by the terms “may,” “believes,“ “projects,” “expects,” or “anticipates,” and do not reflect historical facts. Specific forward-looking statements contained in this press release include, but are not limited to: expected demand for hard drives, the continued profitability of Photonics, and the expansion of our product portfolio for the solar cell manufacturing market. The forward-looking statements contained herein involve risks and uncertainties that could cause actual results to differ materially from the company’s expectations. These risks include, but are not limited to: oversupply in the media industry, a further slowdown in demand for hard drives and the failure to introduce new products for the solar market, each of which could have a material impact on our business, our financial results, and the company's stock price. These risks and other factors are detailed in the company’s periodic filings with the U.S. Securities and Exchange Commission.
INTEVAC, INC. CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited, in thousands, except percentages and per share amounts) | ||||||||||||||||||
| Three months ended | Year ended | |||||||||||||||||
December 31, |
December 31, |
December 31, |
December 31, | |||||||||||||||
| Net revenues | ||||||||||||||||||
| Equipment | $ | 9,358 | $ | 12,499 | $ | 52,538 | $ | 54,878 | ||||||||||
| Intevac Photonics | 8,125 | 6,146 | 30,886 | 28,096 | ||||||||||||||
| Total net revenues | 17,483 | 18,645 | 83,424 | 82,974 | ||||||||||||||
| Gross profit | 7,348 | 6,395 | 34,158 | 30,431 | ||||||||||||||
| Gross margin | ||||||||||||||||||
| Equipment | 46.0 | % | 36.4 | % | 44.9 | % | 40.7 | % | ||||||||||
| Intevac Photonics | 37.4 | % | 30.0 | % | 34.2 | % | 28.9 | % | ||||||||||
| Consolidated | 42.0 | % | 34.3 | % | 40.9 | % | 36.7 | % | ||||||||||
| Operating expenses | ||||||||||||||||||
| Research and development | 6,949 | 8,374 | 31,762 | 34,287 | ||||||||||||||
| Selling, general and administrative | 5,870 | 6,506 | 25,700 | 26,844 | ||||||||||||||
| Impairment of goodwill and intangible assets | 18,419 | — | 18,419 | — | ||||||||||||||
| Bad debt expense | — | 5 | 3,017 | 41 | ||||||||||||||
| Total operating expenses | 31,238 | 14,885 | 78,898 | 61,172 | ||||||||||||||
| Gain on sale of mainframe technology | — | — | 2,207 | — | ||||||||||||||
| Total operating loss | (23,890 | ) | (8,490 | ) | (42,533 | ) | (30,741 | ) | ||||||||||
| Operating loss | ||||||||||||||||||
| Equipment | (4,442 | ) | (5,899 | ) | (19,934 | ) | (20,321 | ) | ||||||||||
| Intevac Photonics | 733 | (1,117 | ) | (206 | ) | (4,141 | ) | |||||||||||
| Corporate1,2 | (20,181 | ) | (1,474 | ) | (22,393 | ) | (6,279 | ) | ||||||||||
| Total operating loss | (23,890 | ) | (8,490 | ) | (42,533 | ) | (30,741 | ) | ||||||||||
| Interest and other income | 43 | 198 | 454 | 635 | ||||||||||||||
| Loss before income taxes | (23,847 | ) | (8,292 | ) | (42,079 | ) | (30,106 | ) | ||||||||||
| Provision (benefit) for income taxes | 18,811 | (2,083 | ) | 13,240 | (8,131 | ) | ||||||||||||
| Net loss | $ | (42,658 | ) | $ | (6,209 | ) | $ | (55,319 | ) | $ | (21,975 | ) | ||||||
| Loss per share | ||||||||||||||||||
| Basic and Diluted | $ | (1.82 | ) | $ | (0.27 | ) | $ | (2.37 | ) | $ | (0.96 | ) | ||||||
| Weighted average common shares outstanding | ||||||||||||||||||
| Basic and Diluted | 23,465 | 23,084 | 23,336 | 22,903 | ||||||||||||||
1 The year ended December 31, 2012 includes the gain on sale of the mainframe technology of $2.2 million. 2 The three months and year ended December 31, 2012 include the goodwill and intangibles impairment charges of $18.4 million. | ||||||||||||||||||
| INTEVAC, INC. CONDENSED CONSOLIDATED BALANCE SHEETS (In thousands, except par value) | |||||||||
December 31, |
December 31, | ||||||||
| (Unaudited) | (see Note) | ||||||||
| ASSETS | |||||||||
| Current assets | |||||||||
| Cash, cash equivalents and short-term investments | $ | 64,852 | $ | 82,145 | |||||
| Accounts receivable, net | 19,822 | 18,561 | |||||||
| Inventories | 26,193 | 18,070 | |||||||
| Deferred income tax assets | — | 2,202 | |||||||
| Prepaid expenses and other current assets | 2,120 | 7,114 | |||||||
| Total current assets | 112,987 | 128,092 | |||||||
| Long-term investments | 27,317 | 32,677 | |||||||
| Property, plant and equipment, net | 13,426 | 14,449 | |||||||
| Deferred income tax assets | 12,176 | 21,717 | |||||||
| Goodwill | — | 18,389 | |||||||
| Other intangible assets, net | 5,868 | 6,441 | |||||||
| Other long-term assets | 729 | 4,056 | |||||||
| Total assets | $ | 172,503 | $ | 225,821 | |||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY | |||||||||
| Current liabilities | |||||||||
| Accounts payable | $ | 4,479 | $ | 4,857 | |||||
| Accrued payroll and related liabilities | 4,194 | 4,205 | |||||||
| Deferred income tax liabilities | 1,281 | — | |||||||
| Other accrued liabilities | 8,489 | 9,887 | |||||||
| Customer advances | 2,193 | 5,040 | |||||||
| Total current liabilities | 20,636 | 23,989 | |||||||
| Other long-term liabilities | 9,232 | 9,922 | |||||||
| Stockholders’ equity | |||||||||
| Common stock ($0.001 par value) | 23 | 23 | |||||||
| Additional paid in capital | 151,996 | 146,307 | |||||||
| Accumulated other comprehensive income | 769 | 414 | |||||||
| Retained earnings (accumulated deficit) | (10,153 | ) | 45,166 | ||||||
| Total stockholders’ equity | 142,635 | 191,910 | |||||||
| Total liabilities and stockholders’ equity | $ | 172,503 | $ | 225,821 | |||||
Note: Amounts as of December 31, 2011 are derived from the December 31, 2011 audited consolidated financial statements. | |||||||||
INTEVAC, INC. RECONCILIATION OF GAAP TO NON-GAAP RESULTS (Unaudited, in thousands, except per share amounts) | |||||||||||||||||
| Three months ended | Year ended | ||||||||||||||||
December 31, |
December 31, |
December 31, |
December 31, | ||||||||||||||
| Non-GAAP Loss from Operations | |||||||||||||||||
| Reported operating loss (GAAP basis) | $ | (23,890 | ) | $ | (8,490 | ) | $ | (42,533 | ) | $ | (30,741 | ) | |||||
| Impairment of goodwill and intangible assets | 18,419 | — | 18,419 | — | |||||||||||||
| Write-off of promissory note receivable1 | — | — | 3,017 | — | |||||||||||||
| Gain on sale of mainframe technology2 | — | — | (2,207 | ) | — | ||||||||||||
| Non-GAAP Operating Loss | $ | (5,471 | ) | $ | (8,490 | ) | $ | (23,304 | ) | $ | (30,741 | ) | |||||
| Non-GAAP Net Loss | |||||||||||||||||
| Reported net loss (GAAP basis) | $ | (42,658 | ) | $ | (6,209 | ) | $ | (55,319 | ) | $ | (21,975 | ) | |||||
| Impairment of goodwill and intangible assets | 18,419 | — | 18,419 | — | |||||||||||||
| Write-off of promissory note receivable | — | — | 3,017 | — | |||||||||||||
| Gain on sale of mainframe technology | — | — | (2,207 | ) | — | ||||||||||||
| Valuation allowance on deferred tax assets3 | 23,437 | — | 23,437 | — | |||||||||||||
| Income tax effect of non-GAAP adjustments4 | (2,777 | ) | — | (3,279 | ) | — | |||||||||||
| Non-GAAP Net Loss | $ | (3,579 | ) | $ | (6,209 | ) | $ | (15,932 | ) | $ | (21,975 | ) | |||||
| Non-GAAP Loss Per Diluted Share | |||||||||||||||||
| Reported loss per diluted share (GAAP basis) | $ | (1.82 | ) | $ | (0.27 | ) | $ | (2.37 | ) | $ | (0.96 | ) | |||||
| Impairment of goodwill and intangible assets | 0.67 | — | 0.67 | — | |||||||||||||
| Write-off of promissory note receivable | — | — | 0.08 | — | |||||||||||||
| Gain on sale of mainframe technology | — | — | (0.07 | ) | — | ||||||||||||
| Valuation allowance on deferred tax assets | 1.00 | — | 1.00 | — | |||||||||||||
| Non-GAAP Loss Per Diluted Share | $ | (0.15 | ) | $ | (0.27 | ) | $ | (0.68 | ) | $ | (0.96 | ) | |||||
| Weighted average number of diluted shares | 23,465 | 23,084 | 23,336 | 22,903 | |||||||||||||
1The year ended December 31, 2012 includes a write-off of a promissory note from a customer in the amount of $3.0 million due to the insolvency of the customer. 2The year ended December 31, 2012 includes the gain on sale of the mainframe technology of $2.2 million. On January 6, 2012, the Company sold certain assets including intellectual property and residual assets which comprised its semiconductor mainframe technology for proceeds of $3.0 million. 3In accordance with ASC Topic 740, Income Taxes, the Company determined based upon an evaluation of all available objectively verifiable evidence, including but not limited to the Company’s U.S. operations falling into a cumulative three year loss, that a non-cash valuation allowance should be established against its U.S. deferred tax assets which are comprised of accumulated and unused U.S. tax credits, and net operating losses and other temporary book-tax differences. The establishment of a non-cash valuation allowance on the Company’s U.S. deferred tax assets does 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. 4The amount represents the estimated income tax effect of the non-GAAP adjustments. The Company calculated the tax effect of non-GAAP adjustments by applying an applicable estimated jurisdictional tax rate to each specific non-GAAP item. | |||||||||||||||||
Contacts:
Jeff Andreson, 408-986-9888
Chief Financial
Officer
or
Claire McAdams, 530-265-9899
Investor Relations
