Mail Stop 6010
June 13, 2005
Charles B. Eddy, III
Chief Financial Officer
Intevac, Inc.
3560 Bassett Street
Santa Clara, CA 95054
Re: Intevac, Inc.
Registration Statement on Form S-3
Filed May 16, 2005
Amendment No. 1 to Registration Statement on Form S-3
Filed May 19, 2005
File No. 333-124978
Form 10-K for the Fiscal Year Ended December 31, 2004
File No. 0-26946
Dear Mr. Eddy:
We have reviewed your filing and have the following
comments.
Where indicated, we think you should revise your document in
response
to these comments. If you disagree, we will consider your
explanation as to why our comment is inapplicable or a revision is
unnecessary. Please be as detailed as necessary in your
explanation.
In some of our comments, we may ask you to provide us with
information so we may better understand your disclosure. After
reviewing this information, we may raise additional comments.
Please understand that the purpose of our review process is
to
assist you in your compliance with the applicable disclosure
requirements and to enhance the overall disclosure in your filing.
We look forward to working with you in these respects. We welcome
any questions you may have about our comments or any other aspect
of
our review. Feel free to call us at the telephone numbers listed
at
the end of this letter.
Form S-3
Prospectus Summary, page 1
1. Please provide independent and objective support for your
statements of industry leadership. For example, we note your
disclosure in the first sentence on page 1 that you are "the
world`s
leading supplier...."
2. Please provide a brief description of the products mentioned in
the registration statement. For example, we note the references
to
your MDP-250, 200 Lean and LIVAR systems.
Risk Factors, page 1
3. Please eliminate the second and third sentences of the
introductory paragraph and revise as necessary to include a
discussion of all material risks in the Risk Factors section.
We are exposed to risks associated with a highly concentrated
customer base, page 2
4. Please name each customer that accounted for 10% or more of
your
revenues and separately quantify the revenues provided by each
such
customer. If you have entered into agreements with any of these
customers, disclose the material terms of these agreements and
tell
us whether the customers can cancel the agreements without prior
notice. Also tell us whether you have filed any such agreements
as
exhibits to your Form 10-K.
The majority of our future revenue is dependent on new
products.... ,
page 2
5. Please provide the basis for your belief that margins on your
200
Lean systems will improve.
6. Your disclosure of your "substantial" investment in developing
a
new system to address the needs of a different market is vague.
Please describe the new system`s target market, the nature and
stage
of development of the new system, and the percentage of your
research
and development costs in each of the prior three fiscal years
attributable to the new system.
7. Please expand your disclosure in the last paragraph of this
risk
factor to include the fact that you do not expect to collect
significant revenues in 2005 from the LIVAR deployment and that,
to
date, sales of your commercial imaging products have not been
significant. We refer you to your disclosure in the fifth and
last
paragraphs on page 10 of your 10-K for the fiscal year ended
December
31, 2004.
Our Imaging business depends heavily on government contracts.... ,
page 5
8. Please disclose the percentage of your consolidated revenues
during the last three completed fiscal years that were derived
from
government contracts.
Our stock price is volatile, page 6
9. Please expand your disclosure to describe the "[r]ecent events"
that have caused fluctuations in your stock price. We refer you
to
the last paragraph of this risk factor.
Our future success depends on international sales...., page 7
10. Please disclose the specific countries that give rise to the
"various challenges" mentioned in this risk factor. Please also
apply this comment to the last risk factor on page 8.
Selling Stockholders, page 23
11. Please tell us how the selling shareholder acquired its shares
and disclose the nature of any material relationship the selling
shareholder has had within the past three years with Intevac or
any
of its predecessors or affiliates.
12. Please tell us whether the selling shareholder is a broker-
dealer
or is an affiliate of a broker-dealer. If the selling shareholder
is
a broker-dealer it must be identified in the prospectus as an
underwriter. In addition, if the selling shareholder is an
affiliate
of a broker-dealer it must be identified in the prospectus as an
underwriter unless the selling shareholder is able to make the
following representations in the prospectus:
* The selling shareholder purchased the shares being registered
for
resale in the ordinary course of business, and
* At the time of the purchase, the selling shareholder had no
agreements or understandings, directly or indirectly, with any
person
to distribute the securities.
Please revise accordingly.
Exhibit 5.1
13. Please tell us about the proceedings "being taken or
contemplated" by counsel. It is unclear why the opinion is
qualified
in this manner.
14. Please tell us the reason for the assumption that the shares
"when issued" will be legally and validly issued, fully paid and
nonassessable. If the shares are currently outstanding it appears
that this statement is not necessary.
Form 10-K for the Fiscal Year Ended December 31, 2004
15. Please revise your future filings, including your future
periodic
reports, as appropriate, in accordance with the preceding
comments.
Item 1. Business, page 1
Overview, page 1
16. Please tell us the basis for listing the particular customers
in
the second paragraph on page 1. For example, if these customers
were
your largest by revenue during 2004, please disclose this fact in
your response and in future filings.
Our Competitive Strengths, page 4
17. Please tell us the basis of your belief that the majority of
your
customers are utilizing most of their capacity and of the
significant
potential that these customers will resume adding capacity and
upgrade their technical capabilities.
Imaging Business, page 8
Our Imaging Strategy, page 9
18. Please provide the material terms of your collaboration
agreements with these government research organizations.
Specifically, tell us whether you or the particular research
organization retains ownership of any technologies developed
through
these collaborations.
19. Please provide additional disclosure regarding your
"developing
relationships" with the systems manufacturers mentioned in the
third
paragraph on page 10. Specifically, tell us whether any revenue-
generating contracts have developed from these relationships.
Intellectual Property, page 11
20. Please describe, and in future filings provide, the importance
to
your business and the duration and effect of all material patents.
Refer to Item 101 (c) (iv) of Regulation S-K.
Item 7. Management`s Discussion and Analysis of Financial
Condition
and Results of Operations, page 26
Results of Operations, page 28
21. In future filings, where changes in financial statement line
items are the result of several factors, each significant factor
should be separately quantified and discussed. For example, you
say
that the increase in selling, general and administrative expense
was
"primarily the result of increases in marketing and business
development headcount and Sarbanes-Oxley compliance activities,
partially offset by a reduction of surplus facility costs being
recorded in selling, general and administrative expense." However,
you do not quantify the impact of each of these factors.
22. In future filings, please explain in greater detail why you
expect your Imaging business revenue to grow. We refer you to
your
disclosure on page 29, third paragraph.
Item 8. Financial Statements and Supplementary Data, page 34
Note 2. Summary of Significant Accounting Policies, page 40
Property, Plant and Equipment, page 45
23. Please expand your disclosure in future filings to disclose
the
estimated useful life, or range of useful lives, over which
machinery
and equipment is depreciated.
Inventories, page 45
24. We noted that your inventory reserves are significant and
comprise approximately 39% and 44% of gross inventory as of
December
31, 2004 and December 31, 2003, respectively. In addition, we
noted
your response to comment number eleven included in our letter to
you
dated September 17, 2002. It appears from your discussion and the
inventory rollforward in the table on page 68 of Form 10-K that
inventory reserves have increased each year as a result of your
review of obsolete and slow-moving inventory. Please further
explain
to us why your reserve remains at such significant levels. Please
clearly address the following in your response and in future
filings:
* Tell us if the obsolete and slow-moving inventory reserved for
in
prior years remains in inventory and if so, why. Also, discuss
the
impact on profit margins of any items sold during the periods
presented that were previously written-off or reduced by reserves.
* Tell us at what point you reduce the allowance for obsolete
inventory and credit inventory.
Note 5. Equity Investments, page 50
25. We noted that Intevac and certain shareholders of Intevac
formed
601 California Avenue LLC. Please clarify for us what percentage
of
ownership you own in 601 California Avenue LLC and why you utilize
the cost method to account for the investment.
Note 9. Segment Reporting, page 52
26. Revise your disclosure in future filings to provide more
information as to the factors used to identify your reportable
segments and to further discuss the types of products and services
from which each reportable segment derives its revenues. See
paragraph 26 of SFAS 131.
27. It appears that you maintain assets at certain subsidiaries
outside of the United States. Expand your disclosures in future
filings to disclose long-lived assets by geographic location, or
if
immaterial, state such fact. See paragraph 38(b) of SFAS 131.
Item 9A. Controls and Procedures, page 59
Management`s Report on Assessment of Internal Control Over
Financial
Reporting,
page 59
28. We note your disclosure that three control deficiencies that
constitute material weaknesses were identified. Please tell us
when
the material weaknesses first began.
29. Please tell us how, if at all, the discovery of the identified
material weaknesses in the company`s internal controls impacted
the
effectiveness determinations that the company`s CEO and CFO made
with
respect to the company`s disclosure controls and procedures in
prior
periods.
Changes in Internal Controls, page 60
30. We note your disclosure that "with the exception of the
changes
noted...none of the changes in the Company`s internal control over
financial reporting...materially affected, or are reasonably
likely
to materially affect, the Company`s internal control over
financial
reporting." Please clarify future filings to state clearly, if
correct, that there were changes in your internal control over
financial reporting that occurred during this quarter that have
materially affected, or are reasonably likely to materially
affect,
your internal control over financial reporting.
Item 11. Executive Compensation, page 63
Employment Contracts..., page 14
31. Tell us why you have not filed Mr. Fairbairn`s employment
agreement as an exhibit. Refer to Item 601(b)(10)(iii)(A) of
Regulation S-K.
Report of the Compensation Committee on Executive Compensation,
page
15
32. Tell us on what authority you base your statement that the
report
of the Compensation Committee shall not be deemed to be filed with
the SEC.
Form 10-Q for the quarterly period Ended April 2, 2005
Item 2. Management`s Discussion and Analysis of Financial
Condition
and Results of Operations, page 12
Gross Margin, page 14
33. We see you indicate equipment gross margin for the three
months
ended April 2, 2005 was adversely impacted by the establishment of
a
$510,000 reserve for costs you expect to incur related to
obtaining
final customer acceptance of a flat panel manufacturing system
shipped in 2003. Please tell us more about these costs and why
you
believe they were recorded in the correct accounting period
required
by generally accepted accounting principles. We may have further
comment after reviewing your response. Note that even if we do
not
object to your accounting for the costs, we believe your
disclosures
herein and in future filings should clearly describe why the costs
were recorded in the correct accounting period.
Item 4. Controls and Procedures, page 27
34. We note your disclosure that you believe one of your material
weaknesses was remediated during the first quarter of fiscal 2005.
Please revise future filings to clarify whether the other material
weaknesses still exist at the end of the period covered by the
report. Please also update your disclosures regarding when you
expect the weaknesses to be fully addressed.
* * *
As appropriate, please amend your registration statement in
response to these comments. You may wish to provide us with
marked
copies of the amendment to expedite our review. Please furnish a
cover letter with your amendment that keys your responses to our
comments and provides any requested information. Detailed cover
letters greatly facilitate our review. Please understand that we
may
have additional comments after reviewing your amendment and
responses
to our comments.
We urge all persons who are responsible for the accuracy and
adequacy of the disclosure in the filing to be certain that the
filing includes all information required under the Securities Act
of
1933 and that they have provided all information investors require
for an informed investment decision. Since the company and its
management are in possession of all facts relating to a company`s
disclosure, they are responsible for the accuracy and adequacy of
the
disclosures they have made.
Notwithstanding our comments, in the event the company
requests
acceleration of the effective date of the pending registration
statement, it should furnish a letter, at the time of such
request,
acknowledging that:
* should the Commission or the staff, acting pursuant to delegated
authority, declare the filing effective, it does not foreclose the
Commission from taking any action with respect to the filing;
* the action of the Commission or the staff, acting pursuant to
delegated authority, in declaring the filing effective, does not
relieve the company from its full responsibility for the adequacy
and
accuracy of the disclosure in the filing; and
* the company may not assert staff comments and the declaration of
effectiveness as a defense in any proceeding initiated by the
Commission or any person under the federal securities laws of the
United States.
In addition, please be advised that the Division of
Enforcement
has access to all information you provide to the staff of the
Division of Corporation Finance in connection with our review of
your
filing or in response to our comments on your filing.
We will consider a written request for acceleration of the
effective date of the registration statement as confirmation of
the
fact that those requesting acceleration are aware of their
respective
responsibilities under the Securities Act of 1933 and the
Securities
Exchange Act of 1934 as they relate to the proposed public
offering
of the securities specified in the above registration statement.
We
will act on the request and, pursuant to delegated authority,
grant
acceleration of the effective date.
We direct your attention to Rules 460 and 461 regarding
requesting acceleration of a registration statement. Please allow
adequate time after the filing of any amendment for further review
before submitting a request for acceleration. Please provide this
request at least two business days in advance of the requested
effective date.
You may contact Julie Sherman at (202) 551-3640 or Angela
Crane
at (202) 551-3554 if you have questions regarding comments on the
financial statements and related matters. Please contact Adelaja
Heyliger at (202) 551-3636 or me at (202) 551-3625 with any other
questions.
Sincerely,
Mary Beth Breslin
Attorney-Advisor
cc (via fax): Herbert P. Fockler, Esq., Wilson Sonsini
Goodrich
& Rosati P.C. 650.493.6811
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Charles B. Eddy, III
Intevac, Inc.
June 13, 2005
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