iRobot 2010 Annual Report Download - page 87

Income Tax Provision
January 2,
2010
December 27,
2008 Dollar Change Percent Change
Fiscal Year Ended
(In thousands)
Income tax provision (benefit) ....... $2,026 $369 $1,657 Not Meaningful
As a percentage of total revenue ..... 0.7% 0.1%
In fiscal 2009, we recorded a $2.0 million tax provision based on an effective income tax rate of 37.8%. The
provision for income taxes for fiscal 2009 consists of $1.6 million of federal taxes and $0.4 million of state taxes.
Included in the 2009 provision is a $0.2 million provision associated with an out-of-period error correction with
respect to the earnings of our India subsidiary and a $0.3 million one-time benefit from the conversion of incentive
stock options to non-qualified stock options as a result of our stock option exchange program which concluded in
our second fiscal quarter of 2009.
In fiscal 2008, we recorded a $0.4 million tax provision based on an effective income tax rate of 32.8%. The
provision for income taxes for fiscal 2008 consisted of $0.1 million of federal alternative minimum taxes and
$0.3 million of state taxes.
Liquidity and Capital Resources
At January 1, 2011, our principal sources of liquidity were cash and cash equivalents totaling $108.4 million,
short-term investments of $13.9 million and accounts receivable of $34.1 million.
We manufacture and distribute our products through contract manufacturers and third-party logistics pro-
viders. We believe that this approach gives us the advantages of relatively low capital investment and significant
flexibility in scheduling production and managing inventory levels. By leasing our office facilities, we also
minimize the cash needed for expansion. Accordingly, our capital spending is generally limited to leasehold
improvements, computers, office furniture, product-specific production tooling, internal use software and test
equipment. In the fiscal years ended January 1, 2011 and January 2, 2010, we spent $12.6 million and $5.0 million,
respectively, on capital equipment.
Our strategy for delivering products to our retail customers gives us the flexibility to provide container
shipments directly to the retailer from China and, alternatively, allows our retail partners to take possession of
product on a domestic basis. Accordingly, our home robots product inventory consists of goods shipped to our third-
party logistics providers for the fulfillment of retail orders and direct-to-consumer sales. Our inventory of
government and industrial products is relatively low as they are generally built to order. Our contract manufacturers
are responsible for purchasing and stocking the majority of components required for the production of our products,
and they invoice us when the finished goods are shipped.
The balance of cash and short-term investments of $122.3 million at January 1, 2011 is primarily the result of
improving profitability and our significant focus over the past two years on managing working capital. As of
January 1, 2011, we did not have any borrowings outstanding under our working capital line of credit and had
$1.9 million letters of credit outstanding under our working capital line of credit.
Discussion of Cash Flows
Net cash provided by operating activities for the fiscal year ended January 1, 2011 was $49.2 million, an
increase of $8.6 million compared to the $40.6 million of net cash provided by operating activities for the fiscal year
ended January 2, 2010. The increase in net cash provided by operating activities was primarily driven by the
following factors:
• An increase in cash of $22.2 million resulting from net income of $25.5 million in 2010 versus a net income
of $3.3 million in 2009;
• A decrease in cash of $4.3 million resulting from an increase in deferred tax assets of $7.6 million in 2010
versus an increase of $3.3 million in 2009;
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Form 10-K