Warranty

6 Months Ended

Jul. 02, 2011

6. Warranty

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 and six months ended July 2, 2011 and July 3, 2010:


	Three Months Ended						Six Months Ended
	July 2,			July 3,			July 2,			July 3,
	2011			2010			2011			2010
	(In thousands)
Beginning balance	$	3,092		$	1,854		$	3,415		$	1,602
Expenditures incurred under warranties		(532	)		(523	)		(1,349	)		(1,114	)
Accruals for product warranties issued during the reporting period		619			1,589			999			2,353
Adjustments to previously existing warranty accruals		(52	)		66			62			145

Ending balance	$	3,127		$	2,986		$	3,127		$	2,986

The following table displays the balance sheet classification of the warranty provision account at July 2, 2011 and at December 31, 2010:


	July 2,		December 31,
	2011		2010
	(In thousands)
Other accrued liabilities	$	2,645	$	2,612
Other long-term liabilities		482		803

Total warranty provision	$	3,127	$	3,415