iRobot 2012 Annual Report Download - page 81

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31
generated under research and development contracts, and a $5.1 million decrease in product life cycle revenue (spare parts,
accessories). The $81.1 million decrease in defense and security robots revenue was primarily due to a decrease in sales of
higher price PackBot and SUGV units in 2012 as compared to 2011. Net average selling price decreased by 38.2% due to
product mix primarily attributable to FirstLook units shipped in 2012 which have a lower selling price than the PackBot and
SUGV units that comprised a larger portion of the units shipped in 2011. Total defense and security robots shipped in 2012
were 289 units compared to 773 units in 2011. The $21.3 million decrease in recurring contract development revenue generated
under research and development contracts was primarily the result of decreases in government funding for our SUGV,
Research and Maritime programs. The $5.1 million decrease in product life cycle revenue is due to reduction in spares
associated with lower robot sales and a decrease in PackBot upgrades. Continued funding delays for government contracts have
reduced our near-term visibility in our defense and security robots business unit and contributed to the decrease in period-over-
period revenue in this business unit. We cannot predict with any certainty the extent to which these funding delays will
continue.
Cost of Revenue
Fiscal Year Ended
December 29,
2012
December 31,
2011 Dollar Change Percent Change
(In thousands)
Total cost of revenue $ 256,528
$ 273,382
$ (16,854) (6.2 )%
As a percentage of total revenue 58.8 % 58.7 %
Total cost of revenue decreased to $256.5 million in fiscal 2012, compared to $273.4 million in fiscal 2011. The decrease
is primarily due to the 62.6% decrease in defense and security units shipped and the product mix of those units, as well as
excess and obsolete inventory costs, offset by the 18.2% increase in home robot units shipped in fiscal 2012 as compared to
fiscal 2011, as well as favorable adjustments relating to reductions in our international warranty accrual for our home robots
business that were directly attributable to declining warranty cost experience.
Gross Margin
Fiscal Year Ended
December 29,
2012
December 31,
2011 Dollar Change Percent Change
(In thousands)
Total gross margin $ 179,716
$ 192,118
$ (12,402) (6.5 )%
As a percentage of total revenue 41.2 % 41.3 %
Gross margin decreased $12.4 million, or 6.5%, to $179.7 million (41.2% of revenue) in fiscal 2012 from $192.1 million
(41.3% of revenue) in fiscal 2011. The decrease in gross margin as a percentage of revenue was the result of the home robots
business unit gross margin increasing 4.3 percentage points offset by the defense and security robots business unit gross margin
decreasing 31.5 percentage points. The 4.3 percentage point increase in the home robots business unit is attributable to
favorable adjustments to our return provision due to gradual improvement in returns resulting from sustained investment in
product quality, changes in customer and product mix to higher margin home robots products including the introduction of our
Roomba 700 series and Scooba 230 robots, favorable adjustments relating to reductions in our international warranty accrual
for our home robots business that were directly attributable to declining warranty cost experience, and improved leverage of
our overhead expense against higher revenue in fiscal 2012 as compared to fiscal 2011. The 31.5 percentage point decrease in
the defense and security robots business unit is primarily attributable to unfavorable absorption of our overhead expense against
lower revenue, restructuring charges, scrap, rework and excess and obsolete inventory costs in fiscal 2012 as compared to fiscal
2011, and product mix primarily attributable to the lower-margin FirstLook units shipped in fiscal 2012 compared to PackBot
and SUGV units shipped in fiscal 2011.
Form 10-K