iRobot 2005 Annual Report Download - page 68

iROBOT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Ì (Continued)
The weighted average fair value of options granted during 2005 prior to and subsequent to the initial
public offering date of November 9, 2005 was calculated using 0% and 65% volatility, respectively. Until the
Company went public the use of the minimum value methodology was acceptable under SFAS No. 123.
Earnings Per Share
Basic and diluted net income per share available to common stockholders is presented in conformity with
SFAS No. 128, ""Earnings per Share'' and related interpretation Emerging Issues Task Force 03-06,
""Participating Securities and the Two Ì Class Method under FASB Statement No. 128.'' Basic net income
per share available to common stockholders is computed by dividing net income available to common
stockholders by the weighted-average number of common shares outstanding during the period, excluding the
dilutive effects of common stock equivalents. Income available to common stockholders excludes earnings
allocated to participating preferred stockholders. Common stock equivalents include stock options, restricted
stock and, in certain circumstances, convertible securities such as the preferred stock. Diluted net income per
share assumes the conversion of the preferred stock using the ""if converted'' method, if dilutive, and includes
the dilutive effect of stock options under the treasury stock method. For the years ended December 31, 2005
and 2004 net income allocated to preferred stockholders was approximately $1.1 million and $0.1 million,
respectively.
Year Ended December 31,
2005 2004 2003
(In thousands except per share
amounts)
Net Income (loss) attributable to common shareholders ÏÏÏÏÏÏÏ $ 1,553 $ 118 $(7,411)
Weighted average shares outstanding ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 12,007 9,660 9,352
Dilutive effect of employee stock options, restricted shares and
warrants ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 2,324 1,181 Ì
Dilutive effect of assumed conversion of preferred stock ÏÏÏÏÏÏÏÏ Ì 8,342 Ì
Diluted weighted average shares outstandingÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 14,331 19,183 9,352
Basic earnings (loss) per share ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $ 0.13 $ 0.01 $ (0.79)
Diluted earnings (loss) per share ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $ 0.11 $ 0.01 $ (0.79)
For the fiscal year ended December 31, 2005, the assumed conversion of 8,169 preferred shares were not
included in the calculation of earnings per share allocable to common shareholders, because the effect would
have been antidilutive. For the fiscal year ended December 31, 2003, the weighted effect of options to
purchase common stock, the assumed conversion of preferred stock and warrants totaling 8,536 were not
included in the calculation because the effect would have been anitdilutive.
Advertising Expense
The Company expenses advertising costs as they are incurred. During the years ended December 31,
2005, 2004 and 2003, advertising expense totaled $10.5 million, $7.8 million and $10.1 million, respectively.
Income Taxes
Deferred taxes are determined based on the difference between the financial statement 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.
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