iRobot 2011 Annual Report Download - page 104

Form 10-K
iROBOT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Research and Development
Costs incurred in the research and development of the Company’s products, classified as cost of contract
and research and development, are expensed as incurred.
Internal Use Software
The Company capitalizes costs associated with the development and implementation of software obtained
for internal use. At December 31, 2011 and January 1, 2011, the Company had $8.3 million and $5.8 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
$0.9 million of amortization expense for the years ended December 31, 2011, January 1, 2011 and January 2,
2010, 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 December 31, 2011 and January 1, 2011
the Company exceeded the insured limit by $187.5 million and $125.4 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 December 31, 2011 four customers accounted for a total of 63% of the Company’s accounts
receivable balance, each of which was greater than 10% of the balance. Two of the customers accounting for
29% of the Company’s accounts receivable balance secured their balance with guaranteed letters of credit. At
January 1, 2011, two 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 December 31, 2011, January 1, 2011, and January 2, 2010,
revenue from U.S. federal government orders, contracts and subcontracts, represented 36.1%, 38.4% and 36.9%
of total revenue, respectively. For the fiscal year ended December 31, 2011 and January 1, 2011, the Company
generated 9.4% and 17.4%, respectively of total revenue from The Boeing Company as a subcontractor under
U.S. federal government contracts. For the fiscal year ended December 31, 2011, the Company generated 23.6%
of total revenue from two of its international distributors of home robots products.
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 income. As of December 31, 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
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