iRobot 2012 Annual Report Download - page 86

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Income Tax Provision
Fiscal Year Ended
December 31,
2011
January 1,
2011 Dollar Change Percent Change
(In thousands)
Income tax provision $ 13,350
$ 8,460 $ 4,890 57.8%
As a percentage of pre-tax income 24.9 % 24.9 %
We recorded a tax provision of $13.4 million and $8.5 million for fiscal 2011 and fiscal 2010, respectively. The
$13.4 million provision for fiscal 2011 was based upon a 2011 effective income tax rate of 29.7% offset primarily by a net tax
benefit of $3.5 million resulting from the completion in the period of a comprehensive evaluation of our research and
development credit and domestic manufacturing deductions. The $8.5 million provision for fiscal 2010 was based upon a
projected 2010 effective tax rate of 31.5% offset by a $2.3 million one-time benefit associated with the full release of our
valuation allowance relating to state deferred tax assets.
The decrease in the projected effective tax rates from 31.5% in 2010 to 29.7% in 2011 was primarily due to higher
domestic manufacturing deductions in 2011, partially offset by the release of our valuation allowance relating to state deferred
tax assets in fiscal 2010.
Liquidity and Capital Resources
At December 29, 2012, our principal sources of liquidity were cash and cash equivalents totaling $126.8 million, short-
term investments of $12.4 million and accounts receivable of $29.4 million.
We manufacture and distribute our products through contract manufacturers and third-party logistics providers. 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 December 29, 2012 and December 31,
2011, we spent $6.8 million and $13.0 million, respectively, on capital equipment.
Our strategy for delivering home robots products to our distributors and retail customers gives us the flexibility to
provide container shipments directly to the retailer from China and, alternatively, allows our distributors and 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 distributor, retail and direct-to-consumer sales. Our inventory of
defense and security products consists mostly of components, as finished goods are generally built to order. Our contract
manufacturers are also responsible for purchasing and stocking components required for the production of our products, and
they typically invoice us when the finished goods are shipped.
The balance of cash, cash equivalents and short-term investments of $139.2 million at December 29, 2012 is primarily
the result of our on-going focus on managing working capital. In 2012, we generated $37.9 million of cash from operations and
we made investments of $82.4, including $74.5 million for the acquisition of Evolution Robotics, Inc. and $6.0 million for an
equity interest in InTouch Technologies, Inc. As of December 29, 2012, we did not have any borrowings outstanding under
our working capital line of credit and had $1.5 million in letters of credit outstanding under our revolving letter of credit
facility.
Discussion of Cash Flows
Net cash provided by operating activities for the fiscal year ended December 29, 2012 was $37.9 million, a decrease of
$17.9 million compared to the $55.7 million of net cash provided by operating activities for the fiscal year ended December 31,
2011. The decrease in net cash provided by operating activities was primarily driven by a decrease in cash of $22.9 million
resulting from net income of $17.3 million in 2012 compared to net income of $40.2 million in 2011, as well as a decrease in
cash of $18.4 million resulting from a decrease in accounts payable of $8.7 million in fiscal 2012 compared to a $9.7 million
increase in accounts payable in fiscal 2011 as a result of normal purchasing and vendor payment activities, and a decrease of
$9.9 million resulting from an increase in deferred tax assets of $3.8 million in 2012 compared to a decrease of $6.2 million in
2011, primarily due to the addition of deferred tax assets associated with the acquisition of Evolution Robotics and the net
effect of changes in deferred tax assets and liabilities associated with operating assets and liabilities. These decreases were
partially offset by an increase in cash of $24.4 million resulting from a decrease in accounts receivable (including unbilled
revenue) of $16.7 million in fiscal 2012 compared to an increase of $7.6 million in 2011, primarily due to a decline in fiscal
2012 revenue and a reduction in the 2012 DSO (days sales outstanding) to 28 days from 32 days in 2011, as well as other net
increases of $8.9 million due to normal operating activities.
Net cash used in investing activities for the fiscal year ended December 29, 2012 was $82.4 million, representing an
increase of $65.2 million compared to the $17.2 million of net cash used in investing activities for the fiscal year ended
December 31, 2011. This increase in net cash used in investing activities was primarily driven by the purchase of Evolution