iRobot 2011 Annual Report Download - page 105

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iROBOT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
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 December 31, 2011,
January 1, 2011 and January 2, 2010 advertising expense totaled $20.4 million, $13.8 million and $7.0 million,
respectively.
Net Income Per Share
The following table presents the calculation of both basic and diluted net income per share:
Fiscal Year Ended
December 31,
2011
January 1,
2011
January 2,
2010
Net income ......................................... $40,191 $25,514 $ 3,330
Weighted-average shares outstanding .................... 26,712 25,394 24,998
Dilutive effect of employee stock options and restricted
shares ........................................... 1,212 1,074 642
Diluted weighted average shares outstanding .............. 27,924 26,468 25,640
Basic income per share ............................... $ 1.50 $ 1.00 $ 0.13
Diluted income per share .............................. $ 1.44 $ 0.96 $ 0.13
Potentially dilutive securities representing approximately 0.4 million, 1.0 million and 2.3 million shares of
common stock for the fiscal years ended December 31, 2011, January 1, 2011 and January 2, 2010, respectively,
were excluded from the computation of diluted earnings per share for these periods because their effect would
have been antidilutive.
Income Taxes
The Company is subject to taxation in the United States and various states and foreign jurisdictions. The
statute of limitations for assessment by the IRS and state tax authorities is closed for fiscal years prior to
December 31, 2008, although carryforward attributes that were generated prior to fiscal year 2008 may still be
adjusted upon examination by the IRS or state tax authorities if they either have been or will be used in a future
period. The IRS is currently beginning to examine the Company’s tax returns for the years 2009 and 2010.
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.
The Company monitors the realization of its deferred tax assets based on changes in circumstances, for
example recurring periods of income for tax purposes following historical periods of cumulative losses or
changes in tax laws or regulations. The Company’s income tax provisions and its assessment of the ability to
realize its deferred tax assets involve significant judgments and estimates.
In fiscal 2007, the Company completed an analysis of historical and projected future profitability which
resulted in the full release of the valuation allowance relating to federal deferred tax assets. In fiscal 2010, based
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