þ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
o | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
Delaware (State or other jurisdiction of incorporation or organization) |
77-0259 335 (I.R.S. Employer Identification No.) |
|
Large accelerated filer o | Accelerated filer þ | Non-accelerated filer o (Do not check if a smaller reporting company) |
Smaller reporting company o |
Page | ||||||||
PART I: FINANCIAL INFORMATION |
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Item 1. Financial Statements |
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3 | ||||||||
4 | ||||||||
5 | ||||||||
6 | ||||||||
14 | ||||||||
23 | ||||||||
24 | ||||||||
24 | ||||||||
24 | ||||||||
25 | ||||||||
25 | ||||||||
26 | ||||||||
27 | ||||||||
28 | ||||||||
EX-10.1 | ||||||||
EX-31.1 | ||||||||
EX-31.2 | ||||||||
EX-32.1 | ||||||||
EX-101 INSTANCE DOCUMENT | ||||||||
EX-101 SCHEMA DOCUMENT | ||||||||
EX-101 CALCULATION LINKBASE DOCUMENT | ||||||||
EX-101 LABELS LINKBASE DOCUMENT | ||||||||
EX-101 PRESENTATION LINKBASE DOCUMENT | ||||||||
EX-101 DEFINITION LINKBASE DOCUMENT |
2
July 2, | January 1, | |||||||
2011 | 2011 | |||||||
(in thousands) | ||||||||
ASSETS |
||||||||
Current assets: |
||||||||
Cash and cash equivalents |
$ | 108,725 | $ | 108,383 | ||||
Short term investments |
13,816 | 13,928 | ||||||
Accounts receivable, net of allowance of $88 at July 2, 2011 and January 1, 2011 |
34,529 | 34,056 | ||||||
Unbilled revenue |
8,034 | 4,012 | ||||||
Inventory |
34,202 | 27,160 | ||||||
Deferred tax assets |
13,223 | 12,917 | ||||||
Other current assets |
10,910 | 6,137 | ||||||
Total current assets |
223,439 | 206,593 | ||||||
Property and equipment, net |
28,128 | 25,620 | ||||||
Deferred tax assets |
8,733 | 8,338 | ||||||
Other assets |
13,563 | 13,780 | ||||||
Total assets |
$ | 273,863 | $ | 254,331 | ||||
LIABILITIES, REDEEMABLE CONVERTIBLE PREFERRED STOCK AND STOCKHOLDERS
EQUITY |
||||||||
Current liabilities: |
||||||||
Accounts payable |
$ | 33,273 | $ | 38,689 | ||||
Accrued expenses |
13,854 | 15,790 | ||||||
Accrued compensation |
13,094 | 17,827 | ||||||
Deferred revenue and customer advances |
2,040 | 3,534 | ||||||
Total current liabilities |
62,261 | 75,840 | ||||||
Long term liabilities |
3,850 | 3,584 | ||||||
Commitments and contingencies (Note 6) |
||||||||
Redeemable convertible preferred stock, 5,000,000 shares authorized and none outstanding |
| | ||||||
Common stock, $0.01 par value, 100,000,000 shares authorized; 26,812,164 and 25,844,840
shares issued and outstanding at July 2, 2011 and January 1, 2011, respectively |
268 | 258 | ||||||
Additional paid-in capital |
173,859 | 156,620 | ||||||
Retained earnings |
33,450 | 17,949 | ||||||
Accumulated other comprehensive income |
175 | 80 | ||||||
Total stockholders equity |
207,752 | 174,907 | ||||||
Total liabilities, redeemable convertible preferred stock and stockholders equity |
$ | 273,863 | $ | 254,331 | ||||
3
Three Months Ended | Six Months Ended | |||||||||||||||
July 2, | July3, | July 2, | July 3, | |||||||||||||
2011 | 2010 | 2011 | 2010 | |||||||||||||
Revenue: |
||||||||||||||||
Product revenue |
$ | 97,396 | $ | 85,945 | $ | 194,107 | $ | 172,056 | ||||||||
Contract revenue |
10,686 | 11,859 | 20,252 | 20,678 | ||||||||||||
Total revenue |
108,082 | 97,804 | 214,359 | 192,734 | ||||||||||||
Cost of revenue: |
||||||||||||||||
Cost of product revenue (1) |
57,835 | 55,825 | 114,025 | 111,425 | ||||||||||||
Cost of contract revenue (1) |
7,711 | 8,009 | 14,344 | 14,622 | ||||||||||||
Total cost of revenue |
65,546 | 63,834 | 128,369 | 126,047 | ||||||||||||
Gross margin |
42,536 | 33,970 | 85,990 | 66,687 | ||||||||||||
Operating expenses: |
||||||||||||||||
Research and development (1) |
8,146 | 5,691 | 16,875 | 10,190 | ||||||||||||
Selling and marketing (1) |
12,767 | 10,581 | 25,748 | 20,225 | ||||||||||||
General and administrative (1) |
10,097 | 9,313 | 20,697 | 17,789 | ||||||||||||
Total operating expenses |
31,010 | 25,585 | 63,320 | 48,204 | ||||||||||||
Operating income |
11,526 | 8,385 | 22,670 | 18,483 | ||||||||||||
Other income, net |
112 | 40 | 350 | 69 | ||||||||||||
Income before income taxes |
11,638 | 8,425 | 23,020 | 18,552 | ||||||||||||
Income tax expense |
3,614 | 3,111 | 7,519 | 7,070 | ||||||||||||
Net income |
$ | 8,024 | $ | 5,314 | $ | 15,501 | $ | 11,482 | ||||||||
Net income per share |
||||||||||||||||
Basic |
$ | 0.30 | $ | 0.21 | $ | 0.59 | $ | 0.46 | ||||||||
Diluted |
$ | 0.29 | $ | 0.20 | $ | 0.56 | $ | 0.44 | ||||||||
Number of shares used in calculations per share |
||||||||||||||||
Basic |
26,667 | 25,294 | 26,388 | 25,217 | ||||||||||||
Diluted |
27,911 | 26,375 | 27,733 | 26,226 |
(1) | Total stock-based compensation recorded in the three and six months ended July 2, 2011 and July 3, 2010 included in the above figures breaks down by expense classification as follows: |
Three Months Ended | Six Months Ended | |||||||||||||||
July 2, | July 3, | July 2, | July 3, | |||||||||||||
2011 | 2010 | 2011 | 2010 | |||||||||||||
Cost of product revenue |
$ | 320 | $ | 355 | $ | 571 | $ | 687 | ||||||||
Cost of contract revenue |
156 | 110 | 250 | 236 | ||||||||||||
Research and development |
239 | 245 | 320 | 277 | ||||||||||||
Selling and marketing |
158 | 289 | 339 | 645 | ||||||||||||
General and administrative |
1,538 | 1,202 | 2,710 | 2,246 |
4
Six Months Ended | ||||||||
July 2, | July 3, | |||||||
2011 | 2010 | |||||||
Cash flows from operating activities: |
||||||||
Net income |
$ | 15,501 | $ | 11,482 | ||||
Adjustments to reconcile net income to net cash provided by (used in) operating activities: |
||||||||
Depreciation and amortization |
4,640 | 3,755 | ||||||
Loss on disposal of property and equipment |
473 | 47 | ||||||
Stock-based compensation |
4,190 | 4,091 | ||||||
Deferred income taxes, net |
(1,167 | ) | | |||||
Non-cash director deferred compensation |
82 | 66 | ||||||
Changes in operating assets and liabilities (use) source |
||||||||
Accounts receivable |
(473 | ) | 8,038 | |||||
Unbilled revenue |
(4,022 | ) | (482 | ) | ||||
Inventory |
(7,042 | ) | 1,722 | |||||
Other assets |
(4,809 | ) | 797 | |||||
Accounts payable |
(5,416 | ) | 1,209 | |||||
Accrued expenses |
(1,889 | ) | (1,031 | ) | ||||
Accrued compensation |
(4,733 | ) | (2,372 | ) | ||||
Deferred revenue |
(1,494 | ) | (1,939 | ) | ||||
Long term liabilities |
266 | (215 | ) | |||||
Net cash provided by (used in) operating activities |
(5,893 | ) | 25,168 | |||||
Cash flows from investing activities: |
||||||||
Additions of property and equipment |
(7,208 | ) | (5,668 | ) | ||||
Purchases of investments |
(5,000 | ) | (25,411 | ) | ||||
Sales of investments |
5,000 | 7,500 | ||||||
Net cash used in investing activities |
(7,208 | ) | (23,579 | ) | ||||
Cash flows from financing activities: |
||||||||
Proceeds from stock option exercises |
8,597 | 1,927 | ||||||
Income tax withholding payment associated with restricted stock vesting |
(809 | ) | (279 | ) | ||||
Tax benefit of excess stock-based compensation deductions |
5,655 | 717 | ||||||
Net cash provided by financing activities |
13,443 | 2,365 | ||||||
Net increase in cash and cash equivalents |
342 | 3,954 | ||||||
Cash and cash equivalents, at beginning of period |
108,383 | 71,856 | ||||||
Cash and cash equivalents, at end of period |
$ | 108,725 | $ | 75,810 | ||||
Supplemental disclosure of cash flow information: |
||||||||
Cash paid for income taxes |
$ | 7,792 | $ | 7,726 |
5
6
Three Months Ended | Six Months Ended | |||||||||||||||
July 2, 2011 | July 3, 2010 | July 2, 2011 | July 3, 2010 | |||||||||||||
Net income |
$ | 8,024 | $ | 5,314 | $ | 15,501 | $ | 11,482 | ||||||||
Weighted-average shares outstanding |
26,667 | 25,294 | 26,388 | 25,217 | ||||||||||||
Dilutive effect of employee stock options and restricted shares |
1,244 | 1,081 | 1,345 | 1,009 | ||||||||||||
Diluted weighted-average shares outstanding |
27,911 | 26,375 | 27,733 | 26,226 | ||||||||||||
Basic income per share |
$ | 0.30 | $ | 0.21 | $ | 0.59 | $ | 0.46 | ||||||||
Diluted income per share |
$ | 0.29 | $ | 0.20 | $ | 0.56 | $ | 0.44 |
7
Three Months Ended | Six Months Ended | |||||||||||||||
July 2, 2011 | July 3, 2010 | July 2, 2011 | July 3, 2010 | |||||||||||||
Net income, as reported |
$ | 8,024 | $ | 5,314 | $ | 15,501 | $ | 11,482 | ||||||||
Unrealized losses on investments, net of tax |
121 | 124 | 95 | 77 | ||||||||||||
Total comprehensive income |
$ | 8,145 | $ | 5,438 | $ | 15,596 | $ | 11,559 | ||||||||
Fair Value Measurements as of July 2, 2011 | ||||||||||||
Level 1 | Level 2 | Level 3 | ||||||||||
Description | (In thousands) | |||||||||||
Assets: |
||||||||||||
Money Market Funds |
$ | 5,274 | $ | | $ | | ||||||
U.S. Government bonds |
| 2,516 | | |||||||||
Corporate bonds |
| 11,300 | | |||||||||
Total assets measured at fair value |
$ | 5,274 | $ | 13,816 | $ | | ||||||
8
Fair Value Measurements as of January 1, 2011 | ||||||||||||
Level 1 | Level 2 | Level 3 | ||||||||||
Description | (In thousands) | |||||||||||
Assets: |
||||||||||||
Money Market Funds |
$ | 5,090 | $ | | $ | | ||||||
U.S. Government bonds |
| 2,504 | | |||||||||
Corporate bonds |
| 11,424 | | |||||||||
Total assets measured at fair value |
$ | 5,090 | $ | 13,928 | $ | | ||||||
July 2, | January 1, | |||||||
2011 | 2011 | |||||||
(In thousands) | ||||||||
Raw materials |
$ | 7,946 | $ | 6,723 | ||||
Work in process |
28 | 27 | ||||||
Finished goods |
26,228 | 20,410 | ||||||
$ | 34,202 | $ | 27,160 | |||||
9
July 2, | January 1, | |||||||
2011 | 2011 | |||||||
(In thousands) | ||||||||
Accrued warranty |
$ | 9,472 | $ | 9,284 | ||||
Accrued direct fulfillment costs |
953 | 2,405 | ||||||
Accrued rent |
741 | 592 | ||||||
Accrued sales commissions |
252 | 432 | ||||||
Accrued accounting fees |
549 | 439 | ||||||
Accrued other |
1,887 | 2,638 | ||||||
$ | 13,854 | $ | 15,790 | |||||
Operating | ||||
Leases | ||||
(In thousands) | ||||
Remainder of 2011 |
$ | 1,439 | ||
2012 |
2,654 | |||
2013 |
2,467 | |||
2014 |
2,448 | |||
2015 |
2,442 | |||
Thereafter |
10,327 | |||
Total minimum lease payments |
$ | 21,777 | ||
10
Three Months Ended | Six Months Ended | |||||||||||||||
July 2, | July 3, | July 2, | July 3, | |||||||||||||
2011 | 2010 | 2011 | 2010 | |||||||||||||
(In thousands) | (In thousands) | |||||||||||||||
Balance at beginning of period |
$ | 9,670 | $ | 6,840 | $ | 9,284 | $ | 6,105 | ||||||||
Provision |
932 | 1,351 | 2,265 | 3,095 | ||||||||||||
Warranty usage(1) |
(1,130 | ) | (796 | ) | (2,077 | ) | (1,805 | ) | ||||||||
Balance at end of period |
$ | 9,472 | $ | 7,395 | $ | 9,472 | $ | 7,395 | ||||||||
(1) | Warranty usage includes the expiration of product warranties unutilized. |
11
Three Months Ended | Six Months Ended | |||||||||||||||
July 2, | July 3, | July 2, | July 3, | |||||||||||||
2011 | 2010 | 2011 | 2010 | |||||||||||||
Revenue: |
||||||||||||||||
Home Robots |
$ | 63,892 | $ | 52,904 | $ | 131,774 | $ | 105,451 | ||||||||
Government & Industrial |
44,190 | 44,900 | 82,585 | 87,283 | ||||||||||||
Total revenue |
108,082 | 97,804 | 214,359 | 192,734 | ||||||||||||
Cost of revenue: |
||||||||||||||||
Home Robots |
35,713 | 32,176 | 72,701 | 64,741 | ||||||||||||
Government & Industrial |
29,833 | 31,658 | 55,668 | 61,306 | ||||||||||||
Total cost of revenue |
65,546 | 63,834 | 128,369 | 126,047 | ||||||||||||
Gross margin: |
||||||||||||||||
Home Robots |
28,179 | 20,728 | 59,073 | 40,710 | ||||||||||||
Government & Industrial |
14,357 | 13,242 | 26,917 | 25,977 | ||||||||||||
Total gross margin |
42,536 | 33,970 | 85,990 | 66,687 | ||||||||||||
Research and development |
8,146 | 5,691 | 16,875 | 10,190 | ||||||||||||
Selling and marketing |
12,767 | 10,581 | 25,748 | 20,225 | ||||||||||||
General and administrative |
10,097 | 9,313 | 20,697 | 17,789 | ||||||||||||
Other income, net |
112 | 40 | 350 | 69 | ||||||||||||
Income before income taxes |
$ | 11,638 | $ | 8,425 | $ | 23,020 | $ | 18,552 | ||||||||
July 2, 2011 | January 1, 2011 | |||||||||||||||||||||||
Accumulated | Accumulated | |||||||||||||||||||||||
Cost | Amortization | Net | Cost | Amortization | Net | |||||||||||||||||||
(In thousands) | ||||||||||||||||||||||||
Completed technology |
$ | 3,700 | $ | 1,048 | $ | 2,652 | $ | 3,700 | $ | 865 | $ | 2,835 | ||||||||||||
Research contracts |
100 | 100 | | 100 | 100 | | ||||||||||||||||||
Tradename |
700 | 199 | 501 | 700 | 165 | 535 | ||||||||||||||||||
Total |
$ | 4,500 | $ | 1,347 | $ | 3,153 | $ | 4,500 | $ | 1,130 | $ | 3,370 | ||||||||||||
12
(In thousands) | ||||
Remainder of 2011 |
$ | 220 | ||
2012 |
440 | |||
2013 |
440 | |||
2014 |
440 | |||
2015 |
440 | |||
Total |
$ | 1,980 | ||
| the revision of the interest rate on loans to between LIBOR plus 1% and LIBOR plus 1.5%, based on the Companys ratio of indebtedness to Adjusted EBITDA; | ||
| the extension of the maturity date to June 30, 2014; | ||
| the replacement of the minimum tangible net worth covenant with a minimum consolidated net worth covenant; and | ||
| the replacement of the minimum Adjusted EBITDA covenant with a minimum ratio of indebtedness to Adjusted EBITDA covenant. |
| the increase of the amount available for borrowing from $40 million to $75 million; | ||
| the increase of the minimum deposit requirements; and | ||
| the increase of the maximum amount the Company can spend on an acquisition without consent of the lender. |
13
14
Three Months Ended | Six Months Ended | |||||||||||||||
July 2, | July 3, | July 2, | July 3, | |||||||||||||
2011 | 2010 | 2011 | 2010 | |||||||||||||
Revenue |
||||||||||||||||
Product revenue |
90.1 | % | 87.9 | % | 90.6 | % | 89.3 | % | ||||||||
Contract revenue |
9.9 | 12.1 | 9.4 | 10.7 | ||||||||||||
Total revenue |
100.0 | 100.0 | 100.0 | 100.0 | ||||||||||||
Cost of revenue |
||||||||||||||||
Cost of product revenue |
53.5 | 57.1 | 53.2 | 57.8 | ||||||||||||
Cost of contract revenue |
7.1 | 8.2 | 6.7 | 7.6 | ||||||||||||
Total cost of revenue |
60.6 | 65.3 | 59.9 | 65.4 | ||||||||||||
Gross margin |
39.4 | 34.7 | 40.1 | 34.6 | ||||||||||||
Operating expenses |
||||||||||||||||
Research and development |
7.6 | 5.8 | 7.9 | 5.3 | ||||||||||||
Selling and marketing |
11.8 | 10.8 | 12.0 | 10.5 | ||||||||||||
General and administrative |
9.3 | 9.5 | 9.6 | 9.2 | ||||||||||||
Total operating expenses |
28.7 | 26.1 | 29.5 | 25.0 | ||||||||||||
Operating income |
10.7 | 8.6 | 10.6 | 9.6 | ||||||||||||
Other income, net |
0.1 | | 0.1 | | ||||||||||||
Income before income taxes |
10.8 | 8.6 | 10.7 | 9.6 | ||||||||||||
Income tax expense |
3.4 | 3.2 | 3.5 | 3.6 | ||||||||||||
Net income |
7.4 | % | 5.4 | % | 7.2 | % | 6.0 | % | ||||||||
Three Months Ended | Six Months Ended | |||||||||||||||||||||||||||||||
July 2, | July 3, | Dollar | Percent | July 2, | July 3, | Dollar | Percent | |||||||||||||||||||||||||
2011 | 2010 | Change | Change | 2011 | 2010 | Change | Change | |||||||||||||||||||||||||
Total revenue |
$ | 108,082 | $ | 97,804 | $ | 10,278 | 10.5 | % | $ | 214,359 | $ | 192,734 | $ | 21,625 | 11.2 | % |
15
16
Three Months Ended | Six Months Ended | |||||||||||||||||||||||||||||||
July 2, | July 3, | Dollar | Percent | July 2, | July 3, | Dollar | Percent | |||||||||||||||||||||||||
2011 | 2010 | Change | Change | 2011 | 2010 | Change | Change | |||||||||||||||||||||||||
(In thousands) | ||||||||||||||||||||||||||||||||
Total cost of revenue |
$ | 65,546 | $ | 63,834 | $ | 1,712 | 2.7 | % | $ | 128,369 | $ | 126,047 | $ | 2,322 | 1.8 | % | ||||||||||||||||
As a percentage of total revenue |
60.6 | % | 65.3 | % | 59.9 | % | 65.4 | % |
Three Months Ended | Six Months Ended | |||||||||||||||||||||||||||||||
July 2, | July 3, | Dollar | Percent | July 2, | July 3, | Dollar | Percent | |||||||||||||||||||||||||
2011 | 2010 | Change | Change | 2011 | 2010 | Change | Change | |||||||||||||||||||||||||
(In thousands) | ||||||||||||||||||||||||||||||||
Total gross margin |
$ | 42,536 | $ | 33,970 | $ | 8,566 | 25.2 | % | $ | 85,990 | $ | 66,687 | $ | 19,303 | 28.9 | % | ||||||||||||||||
As a percentage of
total revenue |
39.4 | % | 34.7 | % | 40.1 | % | 34.6 | % |
17
Three Months Ended | Six Months Ended | |||||||||||||||||||||||||||||||
July 2, | July 3, | Dollar | Percent | July 2, | July 3, | Dollar | Percent | |||||||||||||||||||||||||
2011 | 2010 | Change | Change | 2011 | 2010 | Change | Change | |||||||||||||||||||||||||
(In thousands) | ||||||||||||||||||||||||||||||||
Total research and development |
$ | 8,146 | $ | 5,691 | $ | 2,455 | 43.1 | % | $ | 16,875 | $ | 10,190 | $ | 6,685 | 65.6 | % | ||||||||||||||||
As a percentage of total revenue |
7.6 | % | 5.8 | % | 7.9 | % | 5.3 | % |
Three Months Ended | Six Months Ended | |||||||||||||||||||||||||||||||
July 2, | July 3, | Dollar | Percent | July 2, | July 3, | Dollar | Percent | |||||||||||||||||||||||||
2011 | 2010 | Change | Change | 2011 | 2010 | Change | Change | |||||||||||||||||||||||||
(In thousands) | ||||||||||||||||||||||||||||||||
Total selling and marketing |
$ | 12,767 | $ | 10,581 | $ | 2,186 | 20.7 | % | $ | 25,748 | $ | 20,225 | $ | 5,523 | 27.3 | % | ||||||||||||||||
As a percentage of total revenue |
11.8 | % | 10.8 | % | 12.0 | % | 10.5 | % |
18
Three Months Ended | Six Months Ended | |||||||||||||||||||||||||||||||
July 2, | July 3, | Dollar | Percent | July 2, | July 3, | Dollar | Percent | |||||||||||||||||||||||||
2011 | 2010 | Change | Change | 2011 | 2010 | Change | Change | |||||||||||||||||||||||||
(In thousands) | ||||||||||||||||||||||||||||||||
Total general and administrative |
$ | 10,097 | $ | 9,313 | $ | 784 | 8.4 | % | $ | 20,697 | $ | 17,789 | $ | 2,908 | 16.3 | % | ||||||||||||||||
As a percentage of total revenue |
9.3 | % | 9.5 | % | 9.6 | % | 9.2 | % |
Three Months Ended | Six Months Ended | |||||||||||||||||||||||||||||||
July 2, | July 3, | Dollar | Percent | July 2, | July 3, | Dollar | Percent | |||||||||||||||||||||||||
2011 | 2010 | Change | Change | 2011 | 2010 | Change | Change | |||||||||||||||||||||||||
(In thousands) | ||||||||||||||||||||||||||||||||
Total other income, net |
$ | 112 | $ | 40 | $ | 72 | Not | $ | 350 | $ | 69 | $ | 281 | Not | ||||||||||||||||||
As a percentage of total revenue |
0.1 | % | 0.0 | % | Meaningful | 0.1 | % | 0.0 | % | Meaningful |
Three Months Ended | Six Months Ended | |||||||||||||||||||||||||||||||
July 2, | July 3, | Dollar | Percent | July 2, | July 3, | Dollar | Percent | |||||||||||||||||||||||||
2011 | 2010 | Change | Change | 2011 | 2010 | Change | Change | |||||||||||||||||||||||||
(In thousands) | ||||||||||||||||||||||||||||||||
Total income tax expense |
$ | 3,614 | $ | 3,111 | $ | 503 | 16.2 | % | $ | 7,519 | $ | 7,070 | $ | 449 | 6.4 | % | ||||||||||||||||
As a percentage of total
revenue |
3.4 | % | 3.2 | % | 3.5 | % | 3.6 | % |
19
| An increase in cash of $4.0 million resulting from net income of $15.5 million in 2011 versus a net income of $11.5 million in 2010; | ||
| An increase in cash of $1.3 million resulting from non-cash depreciation and amortization of $4.6 million and losses on the disposition of fixed assets of $0.5 million in 2011 versus non-cash depreciation and amortization of $3.8 million and losses on the disposition of fixed assets of $47,000 in 2010. The losses on disposition of fixed assets in 2011 relate to four robots sent to Japan to explore reactor buildings at the Fukushima Daiichi nuclear plant; | ||
| A decrease in cash of $12.1 million resulting from an increase in accounts receivable (including unbilled revenue) of $4.5 million in 2011 versus a decrease of $7.6 million in 2010, primarily due to growth in revenue and an increase in unbilled revenue related to revenue recorded on contract research and development projects to be invoiced upon DCAA approval of our 2011 provisional indirect cost rates; | ||
| A decrease in cash of $8.8 million resulting from an increase in inventory of $7.1 million in 2011 versus a decrease of $1.7 million in 2010, primarily due to increased inventory requirements to support growth in our home robot division revenue and expansion of the home robot product line; | ||
| A decrease in cash of $5.6 million resulting from an increase in other current assets of $4.8 million in 2011 versus a decrease of $0.8 million in 2010 primarily due to an increase in prepaid income taxes including the tax benefit associated with excess stock based compensation deductions; | ||
| A decrease in cash of $6.6 million resulting from an decrease in accounts payable of $5.4 million in 2011 versus an increase of $1.2 million in 2010, primarily due to the timing of purchases and payments to suppliers; |
20
| A decrease in cash of $2.3 million resulting from a decrease in accrued compensation of $4.7 million in 2011 versus a decrease of $2.4 million in 2010, primarily due to the impact of improving profitability on the incentive compensation expense in 2010 and related payment in 2011; and | ||
| A decrease in cash of $1.2 million resulting from an increase in deferred tax assets of $1.2 million in 2011 compared to no change in 2010, primarily due to the recognition of future tax benefits available to us in connection with our latest estimate of tax credits and temporary book-tax differences. |
| Purchase of investments of $5.0 million, offset by the proceeds from the sale of investments of $5.0 million in 2011, compared to the purchase of investments, net of the proceeds from the sale of investments, of $17.9 million in 2010; and | ||
| The purchase of property and equipment of $7.2 million in 2011, compared to $5.7 million in 2010, primarily due to an increase in self-constructed and demonstration assets, and leasehold improvements associated with expansion of the office space at our headquarters facility. |
21
| the revision of the interest rate on loans to between LIBOR plus 1% and LIBOR plus 1.5%, based on our ratio of indebtedness to Adjusted EBITDA; | ||
| the extension of the maturity date to June 30, 2014; | ||
| the replacement of the minimum tangible net worth covenant with a minimum consolidated net worth covenant; and | ||
| the replacement of the minimum Adjusted EBITDA covenant with a minimum ratio of indebtedness to Adjusted EBITDA covenant. |
| the increase of the amount available for borrowing from $40 million to $75 million; | ||
| the increase of the minimum deposit requirements; and | ||
| the increase of the maximum amount we can spend on an acquisition without consent of the lender. |
22
Payments Due by Period | ||||||||||||||||||||
Less Than | 1 to 3 | 3 to 5 | More Than | |||||||||||||||||
1 Year | Years | Years | 5 Years | Total | ||||||||||||||||
(In thousands) | ||||||||||||||||||||
Operating leases |
$ | 2,812 | $ | 4,973 | $ | 4,858 | $ | 9,134 | $ | 21,777 | ||||||||||
Minimum contractual payments |
3,028 | 2,090 | | | 5,118 | |||||||||||||||
Other obligations |
414 | | | | 414 | |||||||||||||||
Total |
$ | 6,254 | $ | 7,063 | $ | 4,858 | $ | 9,134 | $ | 27,309 | ||||||||||
23
24
(c) Total | (d) Maximum | |||||||||||||||
Number of | Number (or | |||||||||||||||
(b) | Shares (or Units) | Approximate Dollar | ||||||||||||||
(a) Total | Average | Purchased as | Value) of Shares (or | |||||||||||||
number | Price | Part of Publicly | Units) that May Yet | |||||||||||||
of Shares | Paid per | Announced | Be Purchased Under | |||||||||||||
(or Units) | Share (or | Plans or | the Plans or | |||||||||||||
Period | Purchased | Unit) | Programs | Programs | ||||||||||||
Fiscal month beginning April 3, 2011 and ended
April 30, 2011 |
2,779 | (1) | $ | 36.37 | (2) | | | |||||||||
Fiscal month beginning May 1, 2011 and ended
May 28, 2011 |
1,390 | (1) | $ | 31.58 | (2) | | | |||||||||
Fiscal month beginning May 29, 2011 and ended
July 2, 2011 |
6,263 | (1) | $ | 33.75 | (2) | | | |||||||||
Total |
10,432 | (1) | $ | 34.16 | (3) | | | |||||||||
(1) | Represents shares of our common stock withheld by us to satisfy the minimum tax withholding obligation in connection with the vesting of restricted stock units held by executive officers. | |
(2) | The amount represents the last reported sale price of our common stock on the NASDAQ Global Market on the applicable vesting date. | |
(3) | The amount represents the weighted average sale price of all shares of our common stock repurchased during the three months ended July 2, 2011. |
25
Exhibit | ||
Number | Description | |
10.1*
|
Registrants Senior Executive Incentive Compensation Plan, as amended and restated | |
31.1*
|
Certification Pursuant to Rule 13a-14(a) or Rule 15d-14(a) of the Securities Exchange Act of 1934 | |
31.2*
|
Certification Pursuant to Rule 13a-14(a) or Rule 15d-14(a) of the Securities Exchange Act of 1934 | |
32.1*
|
Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 | |
101**
|
The following materials from the Registrants Quarterly Report on Form 10-Q for the quarter ended July 2, 2011 formatted in XBRL (eXtensible Business Reporting Language): (i) the Consolidated Balance Sheets, (ii) the Consolidated Statements of Operations, (iii) the Consolidated Statements of Cash Flows, and (iv) related notes to these financial statements |
* | Filed herewith | |
** | As provided in Rule 406T of Regulation S-T, this information is furnished and not filed for purposes of Sections 11 and 12 of the Securities Act of 1933 and Section 18 of the Securities Exchange Act of 1934 | |
| Indicates a management contract or any compensatory plan, contract or arrangement |
26
iROBOT CORPORATION |
||||
Date: August 5, 2011 | By: | /s/ JOHN LEAHY | ||
John Leahy | ||||
Executive Vice President, Chief Financial Officer and Treasurer (Duly Authorized Officer and Principal Financial Officer) |
27
Exhibit | ||
Number | Description | |
10.1*
|
Registrants Senior Executive Incentive Compensation Plan, as amended and restated | |
31.1*
|
Certification Pursuant to Rule 13a-14(a) or Rule 15d-14(a) of the Securities Exchange Act of 1934 | |
31.2*
|
Certification Pursuant to Rule 13a-14(a) or Rule 15d-14(a) of the Securities Exchange Act of 1934 | |
32.1*
|
Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 | |
101**
|
The following materials from the Registrants Quarterly Report on Form 10-Q for the quarter ended July 2, 2011 formatted in XBRL (eXtensible Business Reporting Language): (i) the Consolidated Balance Sheets, (ii) the Consolidated Statements of Operations, (iii) the Consolidated Statements of Cash Flows, and (iv) related notes to these financial statements |
* | Filed herewith | |
** | As provided in Rule 406T of Regulation S-T, this information is furnished and not filed for purposes of Sections 11 and 12 of the Securities Act of 1933 and Section 18 of the Securities Exchange Act of 1934 | |
| Indicates a management contract or any compensatory plan, contract or arrangement |
28
Page 1 of 2
Page 2 of 2
1. | I have reviewed this Quarterly Report on Form 10-Q of iRobot Corporation; | |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; | |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; | |
4. | The registrants other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; | ||
b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; | ||
c) | Evaluated the effectiveness of the registrants disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and | ||
d) | Disclosed in this report any change in the registrants internal control over financial reporting that occurred during the registrants most recent fiscal quarter (the registrants fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrants internal control over financial reporting; and |
5. | The registrants other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrants auditors and the audit committee of the registrants board of directors (or persons performing the equivalent functions): |
a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrants ability to record, process, summarize and report financial information; and | ||
b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrants internal control over financial reporting. |
Date: August 5, 2011 | /s/ Colin M. Angle | |||
Colin M. Angle | ||||
Chairman of the Board and Chief Executive Officer |
29
1. | I have reviewed this Quarterly Report on Form 10-Q of iRobot Corporation; | |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; | |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; | |
4. | The registrants other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; | ||
b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; | ||
c) | Evaluated the effectiveness of the registrants disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and | ||
d) | Disclosed in this report any change in the registrants internal control over financial reporting that occurred during the registrants most recent fiscal quarter (the registrants fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrants internal control over financial reporting; and |
5. | The registrants other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrants auditors and the audit committee of the registrants board of directors (or persons performing the equivalent functions): |
a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrants ability to record, process, summarize and report financial information; and | ||
b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrants internal control over financial reporting. |
Date: August 5, 2011 | /s/ John Leahy | |||
John Leahy | ||||
Chief Financial Officer |
30
Dated August 5, 2011 | /s/ Colin M. Angle | |||
Colin M. Angle | ||||
Chairman of the Board and Chief Executive Officer | ||||
Dated August 5, 2011 | /s/ JOHN LEAHY | |||
John Leahy | ||||
Chief Financial Officer | ||||
31
Consolidated Balance Sheets (Unaudited) (Parenthetical) (USD $)
In Thousands, except Per Share data |
Jul. 02, 2011
|
Jan. 01, 2011
|
---|---|---|
Current assets: | Â | Â |
Net allowances on Accounts receivables | $ 88 | $ 88 |
LIABILITIES, REDEEMABLE CONVERTIBLE PREFERRED STOCK AND STOCKHOLDERS' EQUITY | Â | Â |
Preferred stock, shares authorized | 5,000,000 | 5,000,000 |
Preferred stock, shares outstanding | 0 | 0 |
Common stock, par value | $ 0.01 | $ 0.01 |
Common stock, shares authorized | 100,000,000 | 100,000,000 |
Common stock, shares issued | 26,812,164 | 25,844,840 |
Common stock, shares outstanding | 26,812,164 | 25,844,840 |
Consolidated Statements of Operations (Unaudited) (USD $)
In Thousands, except Per Share data |
3 Months Ended | 6 Months Ended | 3 Months Ended | 6 Months Ended | ||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Jul. 02, 2011
|
Jul. 03, 2010
|
Jul. 02, 2011
|
Jul. 03, 2010
|
Jul. 02, 2011
Stock-based Compensation
|
Jul. 03, 2010
Stock-based Compensation
|
Jul. 02, 2011
Stock-based Compensation
|
Jul. 03, 2010
Stock-based Compensation
|
|||||||
Revenue: | Â | Â | Â | Â | Â | Â | Â | Â | ||||||
Product revenue | $ 97,396 | $ 85,945 | $ 194,107 | $ 172,056 | Â | Â | Â | Â | ||||||
Contract revenue | 10,686 | 11,859 | 20,252 | 20,678 | Â | Â | Â | Â | ||||||
Total revenue | 108,082 | 97,804 | 214,359 | 192,734 | Â | Â | Â | Â | ||||||
Cost of revenue: | Â | Â | Â | Â | Â | Â | Â | Â | ||||||
Cost of product revenue | 57,835 | [1] | 55,825 | [1] | 114,025 | [1] | 111,425 | [1] | 320 | 355 | 571 | 687 | ||
Cost of contract revenue | 7,711 | [1] | 8,009 | [1] | 14,344 | [1] | 14,622 | [1] | 156 | 110 | 250 | 236 | ||
Total cost of revenue | 65,546 | 63,834 | 128,369 | 126,047 | Â | Â | Â | Â | ||||||
Gross margin | 42,536 | 33,970 | 85,990 | 66,687 | Â | Â | Â | Â | ||||||
Operating expenses: | Â | Â | Â | Â | Â | Â | Â | Â | ||||||
Research and development | 8,146 | [1] | 5,691 | [1] | 16,875 | [1] | 10,190 | [1] | 239 | 245 | 320 | 277 | ||
Selling and marketing | 12,767 | [1] | 10,581 | [1] | 25,748 | [1] | 20,225 | [1] | 158 | 289 | 339 | 645 | ||
General and administrative | 10,097 | [1] | 9,313 | [1] | 20,697 | [1] | 17,789 | [1] | 1,538 | 1,202 | 2,710 | 2,246 | ||
Total operating expenses | 31,010 | 25,585 | 63,320 | 48,204 | Â | Â | Â | Â | ||||||
Operating income | 11,526 | 8,385 | 22,670 | 18,483 | Â | Â | Â | Â | ||||||
Other income (expense), net | 112 | 40 | 350 | 69 | Â | Â | Â | Â | ||||||
Income before income taxes | 11,638 | 8,425 | 23,020 | 18,552 | Â | Â | Â | Â | ||||||
Income tax expense | 3,614 | 3,111 | 7,519 | 7,070 | Â | Â | Â | Â | ||||||
Net income | $ 8,024 | $ 5,314 | $ 15,501 | $ 11,482 | Â | Â | Â | Â | ||||||
Net income per share | Â | Â | Â | Â | Â | Â | Â | Â | ||||||
Basic | $ 0.30 | $ 0.21 | $ 0.59 | $ 0.46 | Â | Â | Â | Â | ||||||
Diluted | $ 0.29 | $ 0.20 | $ 0.56 | $ 0.44 | Â | Â | Â | Â | ||||||
Number of shares used in calculations per share | Â | Â | Â | Â | Â | Â | Â | Â | ||||||
Basic | 26,667 | 25,294 | 26,388 | 25,217 | Â | Â | Â | Â | ||||||
Diluted | 27,911 | 26,375 | 27,733 | 26,226 | Â | Â | Â | Â | ||||||
|
Document and Entity Information (USD $)
|
6 Months Ended | ||
---|---|---|---|
Jul. 02, 2011
|
Jul. 29, 2011
|
Jul. 02, 2010
|
|
Document and Entity Information [Abstract] | Â | Â | Â |
Entity Registrant Name | IROBOT CORP | Â | Â |
Entity Central Index Key | 0001159167 | Â | Â |
Document Type | 10-Q | Â | Â |
Document Period End Date | Jul. 02, 2011 | ||
Amendment Flag | false | Â | Â |
Document Fiscal Year Focus | 2011 | Â | Â |
Document Fiscal Period Focus | Q2 | Â | Â |
Current Fiscal Year End Date | --12-31 | Â | Â |
Entity Well-known Seasoned Issuer | No | Â | Â |
Entity Voluntary Filers | No | Â | Â |
Entity Current Reporting Status | Yes | Â | Â |
Entity Filer Category | Accelerated Filer | Â | Â |
Entity Public Float | Â | Â | $ 383,300,000 |
Entity Common Stock, Shares Outstanding | Â | 26,857,073 | Â |
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Industry Segment, Geographic Information and Significant Customers
|
6 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jul. 02, 2011
|
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Industry Segment, Geographic Information and Significant Customers [Abstract] | Â | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Industry Segment, Geographic Information and Significant Customers |
7. Industry Segment, Geographic Information and Significant Customers
The Company operates in two reportable segments, the home robots division and government and
industrial division. The nature of products and types of customers for the two segments vary
significantly. As such, the segments are managed separately.
Home Robots
The Company’s home robots division offers products to consumers through a network of retail
businesses throughout the United States, to various countries through international distributors
and retailers, and through the Company’s on-line store. The Company’s home robots division includes
mobile robots used in the maintenance of domestic households.
Government and Industrial
The Company’s government and industrial division offers products through a small U.S.
government-focused sales force, while products are sold to a limited number of countries, other
than the United States, primarily through international distributors but also through a small
internationally focused sales team. The Company’s government and industrial robots are used by
various U.S. and foreign governments, primarily for reconnaissance and bomb disposal missions.
The table below presents segment information about revenue, cost of revenue, gross margin and
income before income taxes:
Geographic Information
For the three months ended July 2, 2011 and July 3, 2010, sales to non-U.S. customers
accounted for 39.1% and 40.2% of total revenue, respectively, and for the six months ended July 2,
2011 and July 3, 2010, sales to non-U.S. customers accounted for 46.8% and 43.0% of total revenue,
respectively.
Significant Customers
For the three months ended July 2, 2011 and July 3, 2010, U.S. federal government orders,
contracts and subcontracts accounted for 31.5% and 42.5% of total revenue, respectively, and for
the six months ended July 2, 2011 and July 3, 2010, U.S. federal government orders, contracts and
subcontracts accounted for 30.2% and 39.8% of total revenue, respectively. For the three and six
months ended July 2, 2011, the Company generated 7.1% and 9.9%, respectively, of total revenue from
The Boeing Company as a subcontractor under U.S. federal government contracts. For the three and
six months ended July 2, 2011, the Company generated 10.4% and 10.0%, respectively, of total revenue
from its Japanese distributor of home robot products.
|
Inventory
|
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Jul. 02, 2011
|
|||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Inventory [Abstract] | Â | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Inventory |
3. Inventory
Inventory consists of the following:
|
Subsequent Event
|
6 Months Ended | |||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Jul. 02, 2011
|
||||||||||||||||||||||||||||||||||
Subsequent Events [Abstract] | Â | |||||||||||||||||||||||||||||||||
Subsequent Events [Text Block] |
9. Subsequent Event
On July 12, 2011, the Company entered into a fifth amendment to its revolving credit facility
dated June 5, 2007 and a second amendment to its revolving letter of credit facility dated January
4, 2011. Each of the amendments provide for, among other things:
The revolving credit facility amendment also provides for:
|
Goodwill and Other Intangible Assets
|
6 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jul. 02, 2011
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Goodwill and Other Intangible Assets [Abstract] | Â | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Goodwill and Other Intangible Assets |
8. Goodwill and Other Intangible Assets
The carrying amount of the goodwill at July 2, 2011 of $7.9 million is from the acquisition of
Nekton Research, LLC completed in September 2008.
Other intangible assets include the value assigned to completed technology, research
contracts, and a trade name. The estimated useful lives for all of these intangible assets are two
to ten years. The intangible assets are being amortized on a straight-line basis, which is
consistent with the pattern that the economic benefits of the intangible assets are expected to be
utilized.
Intangible assets at July 2, 2011 and January 1, 2011 consisted of the following:
Amortization expense related to acquired intangible assets was $110,000 and $220,000 for the
three and six months ended July 2, 2011, respectively. The estimated future amortization expense
related to current intangible assets in the current fiscal year and each of the four succeeding
fiscal years is expected to be as follows:
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Description of Business
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6 Months Ended |
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Jul. 02, 2011
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Description of Business [Abstract] | Â |
Description of Business |
1. Description of Business
iRobot Corporation (“iRobot” or the “Company”) develops robotics and artificial intelligence
technologies and applies these technologies in producing and marketing robots. The majority of the
Company’s revenue is generated from product sales and government and industrial research and
development contracts.
The Company is subject to risks common to companies in high-tech industries including, but not
limited to, uncertainty of progress in developing technologies, new technological innovations,
dependence on key personnel, protection of proprietary technology, compliance with government
regulations, uncertainty of market acceptance of products, the need to obtain financing, if
necessary, global economic conditions and associated impact on consumer spending, and changes in
policies and spending priorities of the U.S. federal government and other government agencies.
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Stock Option Plans
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6 Months Ended |
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Jul. 02, 2011
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Stock Option Plans [Abstract] | Â |
Stock Option Plans |
4. Stock Option Plans
The Company has options outstanding under three stock incentive plans: the 1994 Stock Option
Plan (the “1994 Plan”), the 2004 Stock Option and Incentive Plan (the “2004 Plan”) and the 2005
Stock Option and Incentive Plan (the “2005 Plan” and together with the 1994 Plan and the 2004 Plan,
the “Plans”). The 2005 Plan is the only one of the three plans under which new awards may currently
be granted. Under the 2005 Plan, which became effective October 10, 2005, 1,583,682 shares were
initially reserved for issuance in the form of incentive stock options, non-qualified stock
options, stock appreciation rights, deferred stock awards and restricted stock awards.
Additionally, the 2005 Plan provides that the number of shares reserved and available for issuance
under the plan will automatically increase each January 1, beginning in 2007, by 4.5% of the
outstanding number of shares of common stock on the immediately preceding December 31. Stock
options returned to the Plans as a result of their expiration, cancellation or termination are
automatically made available for issuance under the 2005 Plan. Eligibility for incentive stock
options is limited to those individuals whose employment status would qualify them for the tax
treatment associated with incentive stock options in accordance with the Internal Revenue Code of
1986, as amended. As of July 2, 2011, there were 2,684,629 shares available for future grant under
the 2005 Plan.
Options granted under the Plans are subject to terms and conditions as determined by the
compensation committee of the board of directors, including vesting periods. Options granted under
the Plans are exercisable in full at any time subsequent to vesting, generally vest over periods
from zero to five years, and expire seven or ten years from the date of grant or, if earlier, 60 or
90 days from employee termination. The exercise price of incentive stock options is equal to the
closing price on the NASDAQ Global Market on the date of grant. The exercise price of nonstatutory
options may be set at a price other than the fair market value of the common stock.
On July 1, 2011,
the Company granted one member of the Board of Directors 6,118 restricted
stock units in connection with the commencement of her appointment. These restricted stock units
will vest 25% on each anniversary of the grant date. Also on July 1, 2011, the Company granted each
of its nine non-employee board members 3,059 restricted stock units. These restricted stock units
will vest 100% on the first anniversary of the grant.
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Accrued Expenses
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Jul. 02, 2011
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Accrued Expenses [Abstract] | Â | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Accrued Expenses |
5. Accrued Expenses
Accrued expenses consist of the following:
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Commitments and Contingencies
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Jul. 02, 2011
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Commitments and Contingencies [Abstract] | Â | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Commitments and Contingencies |
6. Commitments and Contingencies
Lease Obligations
Rental expense under operating leases for the three months ended July 2, 2011 and July 3, 2010
were $1.0 million and $0.9 million, respectively, and for the six months ended July 2, 2011 and
July 3, 2010 were $2.0 million and $1.8 million, respectively. Future minimum rental payments under
operating leases were as follows as of July 2, 2011:
Sales Taxes
The Company collects and remits sales tax in jurisdictions in which it has a physical presence
or it believes nexus exists, which therefore obligates the Company to collect and remit sales tax.
The Company continually evaluates whether it has established a nexus in new jurisdictions with
respect to sales tax. The Company has recorded a liability for potential exposure in several states
where there is uncertainty about the point in time at which the Company established a sufficient
business connection to create nexus. The Company continues to analyze possible sales tax exposure,
but does not currently believe that any individual claim or aggregate claims that might arise will
ultimately have a material effect on its consolidated results of operations, financial position or
cash flows.
Guarantees and Indemnification Obligations
The Company enters into standard indemnification agreements in the ordinary course of
business. Pursuant to these agreements, the Company indemnifies and agrees to reimburse the
indemnified party for losses incurred by the indemnified party, generally the Company’s customers,
in connection with any patent, copyright, trade secret or other proprietary right infringement
claim by any third party with respect to the Company’s products. The term of these indemnification
agreements is generally perpetual any time after execution of the agreement. The maximum potential
amount of future payments the Company could be required to make under these indemnification
agreements is unlimited. The Company has never incurred costs to defend lawsuits or settle claims
related to these indemnification agreements. As a result, the Company believes the estimated fair
value of these agreements is minimal. Accordingly, the Company has no liabilities recorded for
these agreements as of July 2, 2011 and January 1, 2011, respectively.
Warranty
The Company provides warranties on most products and has established a reserve for warranty
based on identified or estimated warranty costs. The reserve is included as part of accrued
expenses (Note 5) in the accompanying balance sheets.
Activity related to the warranty accrual was as follows:
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Summary of Significant Accounting Policies
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Summary of Significant Accounting Policies [Abstract] | Â | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Summary of Significant Accounting Policies |
2. Summary of Significant Accounting Policies
Basis of Presentation
The accompanying consolidated financial statements include those of iRobot and its
subsidiaries, after elimination of all intercompany accounts and transactions. iRobot has prepared
the accompanying consolidated financial statements in conformity with accounting principles
generally accepted in the United States of America.
The accompanying financial data as of July 2, 2011 and for the three and six months ended July
2, 2011 and July 3, 2010 has been prepared by the Company, without audit, pursuant to the rules and
regulations of the Securities and Exchange Commission (“SEC”). Certain information and footnote
disclosures normally included in financial statements prepared in accordance with accounting
principles generally accepted in the United States have been condensed or omitted pursuant to such
rules and regulations. However, the Company believes that the disclosures are adequate to make the
information presented not misleading. The year-end balance sheet data was derived from audited
financial statements, but does not include all disclosures required by accounting principles
generally accepted in the United States. These consolidated financial statements should be read in
conjunction with the Company’s audited consolidated financial statements and the notes thereto
included in its Annual Report on Form 10-K for the fiscal year ended January 1, 2011, filed with
the SEC on February 18, 2011.
In the opinion of management, all adjustments necessary to state fairly its statement of
financial position as of July 2, 2011 and results of operations and cash flows for the periods
ended July 2, 2011 and July 3, 2010 have been made. The results of operations and cash flows for
any interim period are not necessarily indicative of the operating results and cash flows for the
full fiscal year or any future periods.
Use of Estimates
The preparation of these financial statements in conformity with accounting principles
generally accepted in the United States requires the Company to make estimates and judgments that
affect the reported amounts of assets, liabilities, revenues and expenses, and disclosure of
contingent assets and liabilities. On an ongoing basis, management evaluates these estimates and
judgments, including those related to revenue recognition, sales returns, bad debts, warranty
claims, inventory reserves, valuation of investments, assumptions used in valuing stock-based
compensation instruments and income taxes. The Company bases these estimates on historical and
anticipated results, and trends and on various other assumptions that the Company believes are
reasonable under the circumstances, including assumptions as to future events. These estimates form
the basis for making judgments about the carrying values of assets and liabilities that are not
readily apparent from other sources. By their nature, estimates are subject to an inherent degree
of uncertainty. Actual results may differ from the Company’s estimates.
Fiscal Year-End
The Company operates and reports using a 52-53 week fiscal year ending on the Saturday closest
to December 31. Accordingly, the Company’s fiscal quarters end on the Saturday that falls closest
to the last day of the third month of each quarter.
Revenue Recognition
The Company derives its revenue from product sales, government research and development
contracts, and commercial research and development contracts. The Company sells products directly
to customers and indirectly through resellers and distributors. The Company recognizes revenue from
sales of home robots under the terms of the customer agreement upon transfer of title and risk of
loss to the customer, net of estimated returns, provided that collection is determined to be
reasonably assured and no significant obligations remain. Sales to resellers are typically subject
to agreements allowing for limited rights of return for defective products only, rebates and price
protection. The Company has typically not taken product returns except for defective products.
Accordingly, the Company reduces revenue for its estimates of liabilities for these rights at the
time the related sale is recorded. The Company makes an estimate of sales returns for products sold
by resellers directly based on historical returns experience and other relevant data. The Company’s
international distributor agreements do not currently allow for product returns and, as a result,
no reserve for returns is established for this group of customers. The Company has aggregated and
analyzed historical returns from resellers and end users which form the basis of its estimate of
future sales returns by resellers or end users. When a right of return exists, the provision for
these estimated returns is recorded as a reduction of revenue at the time that the related revenue
is recorded. If actual returns differ significantly from its estimates, such differences could have
a material impact on the Company’s results of operations for the period in which the returns become
known. The estimates for returns are adjusted periodically based upon historical rates of returns.
The estimates and reserve for rebates and price protection are based on specific programs, expected
usage and historical experience. Actual results could differ from these estimates.
Under cost-plus-fixed-fee (“CPFF”) type contracts, the Company recognizes revenue based on
costs incurred plus a pro rata portion of the total fixed fee. Costs incurred include labor and
material that are directly associated with individual CPFF contracts plus indirect overhead and
general and administrative type costs based upon billing rates submitted by the Company to the
Defense Contract Management Agency (“DCMA”). Annually, the Company submits final indirect billing
rates to DCMA based upon actual costs incurred throughout the year. These final billing rates are
subject to audit by the Defense Contract Audit Agency (“DCAA”) which can occur several years after
the final billing rates are submitted and may result in material adjustments to revenue recognized
based on estimated final billing rates. As of July 2, 2011, fiscal years 2007, 2008, 2009 and 2010
are open for audit by DCAA. In the situation where the Company’s anticipated actual billing rates
will be lower than the provisional rates currently in effect, the Company records a cumulative
revenue adjustment in the period in which the rate differential is identified. Revenue on firm
fixed price (“FFP”) contracts is recognized using the percentage-of-completion method. For
government product FFP contracts revenue is recognized as the product is shipped or in accordance
with the contract terms. Costs and estimated gross margins on contracts are recorded as revenue as
work is performed based on the percentage that incurred costs compare to estimated total costs
utilizing the most recent estimates of costs and funding. Changes in job performance, job
conditions, and estimated profitability, including those arising from final contract settlements
and government audit, may result in revisions to costs and income and are recognized in the period
in which the revisions are determined. Since many contracts extend over a long period of time,
revisions in cost and funding estimates during the progress of work have the effect of adjusting
earnings applicable to past performance in the current period. When the current contract estimate
indicates a loss, a provision is made for the total anticipated loss in the current period. Revenue
earned in excess of billings, if any, is recorded as unbilled revenue. Billings in excess of
revenue earned, if any, are recorded as deferred revenue.
Accounting for Share-Based Payments
The Company accounts for share-based payments to employees, including grants of employee stock
options and awards in the form of restricted shares and restricted stock units by establishing the
fair value of each option grant using the Black-Scholes option- pricing model and the fair value of
awards based on stock price at the time of grant. The fair value of share-based payments is
recorded by the Company as a charge against earnings. The Company recognizes share-based payment
expense over the requisite service period of the underlying grants and awards. The Company’s
share-based payment awards are accounted for as equity instruments.
Net Income Per Share
The following table presents the calculation of both basic and diluted net income per share:
Potentially dilutive securities representing approximately 0.4 million and 1.0 million shares
of common stock for the three month periods ended July 2, 2011 and July 3, 2010, respectively, and
approximately 0.4 million and 1.1 million shares of common stock for the six month periods ended
July 2, 2011 and July 3, 2010, respectively, were excluded from the computation of diluted earnings
per share for these periods because their effect would have been antidilutive.
Income Taxes
Deferred taxes are determined based on the difference between the book and tax basis of assets
and liabilities using enacted tax rates in effect in the years in which the differences are
expected to reverse. Valuation allowances are provided, if based upon the weight of available
evidence, it is more likely than not that some or all of the deferred tax assets will not be
realized.
At July 2, 2011, the Company had total deferred tax assets of $22.0 million.
The Company has projected an effective 2011 income tax rate of 33%. The Company has recorded a
tax provision of $3.6 million for the three month period ended July 2, 2011, which reflects the
projected 2011 tax rate. This $3.6 million expense compares to $3.1 million tax expense for the
three months ended July 3, 2010 based on a projected effective 2010 income tax rate of 38%. The
Company has recorded a tax provision of $7.5 million for the six month period ended July 2, 2011,
which reflects the projected 2011 tax rate. This $7.5 million expense compares to $7.1 million tax
expense for the six months ended July 3, 2010 based on a projected effective 2010 income tax rate
of 38%. This decrease in the projected annual effective tax rate was primarily due to the benefit
of research and development tax credits anticipated in 2011 as compared to fiscal 2010 when this
credit was not approved by the U.S. federal government until the fourth quarter, and lower anticipated
state tax, net of federal benefit.
The Company is currently
exploring alternative tax strategies related to research and development credits and Section
199 manufacturing deductions and may record additional benefits in future periods as a
result of this evaluation. In connection with the recording of any additional tax benefits, the
Company will also assess the need to establish any associated reserves for uncertain tax positions
and will record such reserves as appropriate.
Comprehensive Income
Comprehensive income includes unrealized losses on certain investments. The differences
between net income and comprehensive income were as follows:
Fair Value Measurements
The authoritative guidance for fair value establishes a three-tier fair value hierarchy, which
prioritizes the inputs used in measuring fair value. These tiers include: Level 1, defined as
observable inputs such as quoted prices in active markets; Level 2, defined as inputs other than
quoted prices in active markets that are either directly or indirectly observable; and Level 3,
defined as unobservable inputs in which little or no market data exists, therefore requiring an
entity to develop its own assumptions.
The Company’s assets measured at fair value on a recurring basis at July 2, 2011, were as
follows:
The Company’s assets measured at fair value on a recurring basis at January 1, 2011, were as
follows:
In each table above, the bond investments are valued based on observable market inputs as of
the Company’s reporting date and are included in Level 2 inputs. In determining the fair value of
our Level 2 bond investments, the Company considers the appropriateness of a model and assumptions
used by a pricing vendor to price the investments. The pricing vendor’s model relies on a
comprehensive multi-dimensional relational model that uses standard inputs including benchmark
yields, reported trades, broker/dealer quotes, issue spreads, two-sided markets, benchmark
securities, bids, offers and reference data including market research publications. The bond
investments are recorded at fair value and marked-to-market at the end of each reporting period and
realized and unrealized gains and losses are included in comprehensive income (loss) for that
period. The fair value of the Company’s bond investments are included in short term investments in
its consolidated balance sheet.
Goodwill
Goodwill is recorded as the difference, if any, between the aggregate consideration paid for
an acquisition and the fair value of the net tangible and intangible assets acquired. The Company
tests goodwill for impairment at the reporting unit level (operating segment or one level below an
operating segment) annually or more frequently if the Company believes indicators of impairment
exist. The performance of the test involves a two-step process. The first step of the impairment
test involves comparing the fair values of the applicable reporting units with their aggregate
carrying values, including goodwill. If the carrying amount of a reporting unit exceeds the
reporting unit’s fair value, the Company performs the second step of the goodwill impairment test
to determine the amount of impairment loss. The second step of the goodwill impairment test
involves comparing the implied fair value of the affected reporting unit’s goodwill with the
carrying value of that goodwill.
Recent Accounting Pronouncements
In May 2011, the Financial Accounting Standards Board (“FASB”) issued amended guidance on fair
value measurement and related disclosures. The new guidance clarifies the concepts applicable for
fair value measurement of non-financial assets and requires the disclosure of quantitative
information about the unobservable inputs used in a fair value measurement. This guidance will be
effective for reporting periods beginning after December 15, 2011, and will be applied
prospectively. The Company does not anticipate a material impact on its consolidated financial
statements as a result of the adoption of this amended guidance.
In June 2011, the FASB amended its accounting guidance on the presentation of other
comprehensive income (OCI) in an entity’s financial statements. The amended guidance eliminates
the option to present the components of OCI as part of the statement of changes in shareholders
equity and provides two options for presenting OCI: in a statement included in the income statement
or in a separate statement immediately following the income statement. The amendments do not
change the guidance for the items that have to be reported in OCI or when an item of OCI has to be
moved into net income. For public entities, the amendments are effective for fiscal years, and
interim periods within those years, beginning after December 15, 2011. The Company does not
anticipate that its adoption of this guidance will have a material impact on its consolidated
results.
From time to time, new accounting pronouncements are issued by FASB that are adopted by the
Company as of the specified effective date. Unless otherwise discussed, the Company believes that
the impact of recently issued standards, which are not yet effective, will not have a material
impact on the Company’s consolidated financial statements upon adoption.
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