iRobot 2012 Annual Report Download - page 112

Download and view the complete annual report

Please find page 112 of the 2012 iRobot annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.

Page out of 132

  • 1
  • 2
  • 3
  • 4
  • 5
  • 6
  • 7
  • 8
  • 9
  • 10
  • 11
  • 12
  • 13
  • 14
  • 15
  • 16
  • 17
  • 18
  • 19
  • 20
  • 21
  • 22
  • 23
  • 24
  • 25
  • 26
  • 27
  • 28
  • 29
  • 30
  • 31
  • 32
  • 33
  • 34
  • 35
  • 36
  • 37
  • 38
  • 39
  • 40
  • 41
  • 42
  • 43
  • 44
  • 45
  • 46
  • 47
  • 48
  • 49
  • 50
  • 51
  • 52
  • 53
  • 54
  • 55
  • 56
  • 57
  • 58
  • 59
  • 60
  • 61
  • 62
  • 63
  • 64
  • 65
  • 66
  • 67
  • 68
  • 69
  • 70
  • 71
  • 72
  • 73
  • 74
  • 75
  • 76
  • 77
  • 78
  • 79
  • 80
  • 81
  • 82
  • 83
  • 84
  • 85
  • 86
  • 87
  • 88
  • 89
  • 90
  • 91
  • 92
  • 93
  • 94
  • 95
  • 96
  • 97
  • 98
  • 99
  • 100
  • 101
  • 102
  • 103
  • 104
  • 105
  • 106
  • 107
  • 108
  • 109
  • 110
  • 111
  • 112
  • 113
  • 114
  • 115
  • 116
  • 117
  • 118
  • 119
  • 120
  • 121
  • 122
  • 123
  • 124
  • 125
  • 126
  • 127
  • 128
  • 129
  • 130
  • 131
  • 132

iROBOT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
62
Operating
Leases
2013 $ 3,158
2014 2,837
2015 2,820
2016 2,747
2017 2,505
Thereafter 5,682
Total minimum lease payments $ 19,749
Guarantees and Indemnification Obligations
The Company enters into standard indemnification agreements in the ordinary course of business. Pursuant to these
agreements, the Company indemnifies and agrees to reimburse the indemnified party for losses incurred by the indemnified
party, generally the Company’s customers, in connection with any patent, copyright, trade secret or other proprietary right
infringement claim by any third party with respect to the Company’s software. The term of these indemnification agreements is
generally perpetual any time after execution of the agreement. The maximum potential amount of future payments the
Company could be required to make under these indemnification agreements is unlimited. The Company has never incurred
costs to defend lawsuits or settle claims related to these indemnification agreements. As a result, the Company believes the
estimated fair value of these agreements is minimal. Accordingly, the Company has no liabilities recorded for these agreements
as of December 29, 2012 and December 31, 2011, respectively.
Government Contract Contingencies
Several of the Company’s prime contracts with the U.S. federal government do not contain a limitation of liability
provision, creating a risk of responsibility for direct and consequential damages. Several subcontracts with prime contractors
hold the prime contractor harmless against liability that stems from our work and do not contain a limitation of liability. These
provisions could cause substantial liability for the Company. In addition, the Company is subject to audits by the U.S. federal
government as part of routine audits of government contracts. As part of an audit, these agencies may review the Company’s
performance on contracts, cost structures and compliance with applicable laws, regulations and standards. If any of its costs are
found to be allocated improperly to a specific contract, the costs may not be reimbursed and any costs already reimbursed for
such contract may have to be refunded. Accordingly, an audit could result in a material adjustment to our revenue and results of
operations. Annually, the Company submits final indirect billing rates to DCMA based upon actual costs incurred throughout
the year. These final billing rates are subject to audit by DCAA. As of December 29, 2012, fiscal years 2007 through 2012 are
open for audit by DCAA.
Warranty
The Company provides warranties on most products and has established a reserve for warranty based on identified
warranty costs. The reserve is included as part of accrued expenses (Note 6) in the accompanying consolidated balance sheets.
Activity related to the warranty accrual was as follows:
Fiscal Year Ended
December 29,
2012 December 31,
2011 January 1,
2011
(In thousands)
Balance at beginning of period $ 10,306 $ 9,284 $ 6,105
Provision (*) (1,682) 4,091 6,402
Warranty usage(**) (2,567) (3,069) (3,223)
Balance at end of period $ 6,057 $ 10,306 $ 9,284
__________________________________
(*) During 2012, the Company recorded favorable adjustments relating to reductions in its international warranty accrual
for our home robots business related to our sustained improvements in product quality, resulting in a net credit for its
2012 warranty provision.
(**) Warranty usage includes costs incurred for warranty obligations and the pro rata expiration of product warranties not
utilized.