13.

Segment Reporting

Intevac’s two reportable segments are: Thin-film Equipment and Photonics. Intevac’s chief operating decision-maker has been identified as the President 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 30, 2017 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 Thin-film Equipment segment designs, develops and markets vacuum process equipment solutions for high-volume manufacturing of small substrates with precise thin-film properties, such as for the hard drive, solar cell and DCP industries, as well as other adjacent thin-film markets.

The Photonics segment develops compact, cost-effective, high-sensitivity digital-optical products for the capture and display of low-light images. Intevac provides sensors, cameras and systems for government applications such as night vision.

Information for each reportable segment for the three and nine months ended September 30, 2017 and October 1, 2016 is as follows:

Net Revenues


	Three Months Ended				Nine Months Ended
	September 30, 2017		October 1, 2016		September 30, 2017		October 1, 2016
	(In thousands)
Thin-film Equipment	$	17,177	$	14,272	$	61,087	$	25,941
Photonics		9,549		8,287		26,990		25,201

Total segment net revenues	$	26,726	$	22,559	$	88,077	$	51,142

Operating Income (Loss)


	Three Months Ended						Nine Months Ended
	September 30, 2017			October 1, 2016			September 30, 2017			October 1, 2016
	(In thousands)
Thin-film Equipment	$	1,213		$	(998	)	$	4,821		$	(10,117	)
Photonics		1,417			1,737			3,646			3,656

Total segment operating income (loss)		2,630			739			8,467			(6,461	)

Unallocated costs		(1,362	)		(1,063	)		(3,768	)		(3,986	)

Income (loss) from operations		1,268			(324	)		4,699			(10,447	)
Interest income and other income (expense), net		28			60			265			184

Income (loss) before income taxes	$	1,296		$	(264	)	$	4,964		$	(10,263	)

Total assets for each reportable segment as of September 30, 2017 and December 31, 2016 are as follows:

Assets


	September 30, 2017		December 31, 2016
	(In thousands)
Thin-film Equipment	$	52,620	$	39,503
Photonics		16,563		16,071

Total segment assets		69,183		55,574

Cash, cash equivalents and investments		43,399		48,238
Restricted cash		1,400		1,602
Deferred income taxes		4		3
Other current assets		1,024		997
Common property, plant and equipment		1,698		1,039
Other assets		724		871

Consolidated total assets	$	117,432	$	108,324