iRobot 2010 Annual Report Download - page 102

Internal Use Software
The Company capitalizes costs associated with the development and implementation of software obtained for
internal use. At January 1, 2011 and January 2, 2010, the Company had $5.8 million and $4.9 million respectively,
of costs related to enterprise-wide software included in fixed assets. Capitalized costs are being amortized over the
assets’ estimated useful lives. The Company has recorded $0.9 million, $0.9 million and $0.8 million of
amortization expense for the years ended January 1, 2011, January 2, 2010 and December 27, 2008, respectively.
Concentration of Credit Risk and Significant Customers
The Company maintains its cash in bank deposit accounts at high quality financial institutions. The individual
balances, at times, may exceed federally insured limits. At January 1, 2011 and January 2, 2010 the Company
exceeded the insured limit by $125.4 million and $79.4 million, respectively.
Financial instruments which potentially expose the Company to concentrations of credit risk consist of
accounts receivable. Management believes its credit policies are prudent and reflect normal industry terms and
business risk. At January 1, 2011 and January 2, 2010, 6% and 23%, respectively, of the Company’s accounts
receivable were due from the federal government. At January 1, 2011, two additional customers accounted for 22%
and 19% of the Company’s accounts receivable balance. The customer accounting for 22% of the Company’s
accounts receivable balance secured their balance with guaranteed letters of credit. For the years ended January 1,
2011, January 2, 2010, and December 27, 2008, revenue from U.S. federal government orders, contracts and
subcontracts, represented 38.4%, 36.9% and 40.3% of total revenue, respectively. For the fiscal year ended
January 1, 2011, we generated 17.4% of total revenue from The Boeing Company as a subcontractor under
U.S. federal government contracts.
Foreign Currency Forward Contracts
The Company periodically enters into foreign currency forward contracts to sell foreign currencies for United
States dollars. The Company’s objective in entering into these contracts was to reduce foreign currency exposure to
appreciation or depreciation in the value of its foreign currency based accounts receivable balances by partially
offsetting a portion of such exposure with gains or losses on the forward contracts.
These foreign currency contracts did not qualify for hedge accounting. Accordingly, the foreign currency
forward contracts were marked-to-market and recorded at fair value with unrealized gains and losses reported along
with foreign currency gains or losses in the caption “other income (expense), net” on the Company’s consolidated
statements of operations. As of January 1, 2011, the Company did not have any foreign currency forward contracts.
Stock-Based Compensation
The Company accounts for stock-based compensation through recognition of the fair value of the stock-based
compensation as a charge against earnings. Stock-based compensation cost for stock options is estimated at the
grant date based on each option’s fair-value as calculated by the Black-Scholes option-pricing model. Stock-based
compensation cost for restricted stock awards and restricted stock units is measured based on the closing fair market
value of the Company’s common stock on the date of grant. The Company recognizes stock-based compensation
cost as expense ratably on a straight-line basis over the requisite service period, net of estimated forfeitures.
Advertising Expense
The Company expenses advertising costs as they are incurred. During the years ended January 1, 2011,
January 2, 2010 and December 27, 2008 advertising expense totaled $13.8 million, $7.0 million and $11.6 million,
respectively.
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iROBOT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)