iRobot 2014 Annual Report Download - page 124

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iROBOT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
51
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 time-
based restricted stock units and performance-based restricted stock units is measured based on the closing fair market value of
the Company's common stock on the date of grant. For performance-based restricted stock units, the compensation costs will be
subsequently adjusted for assumptions of achievement during the period in which the assumption of achievement changes, as
applicable. 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 27, 2014, December 28,
2013 and December 29, 2012 advertising expense totaled $46.1 million, $38.2 million and $34.9 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 27,
2014 December 28,
2013 December 29,
2012
Net income $ 37,803 $ 27,641 $ 17,297
Weighted-average shares outstanding 29,485 28,495 27,577
Dilutive effect of employee stock options and restricted shares 725 859 724
Diluted weighted average shares outstanding 30,210 29,354 28,301
Basic income per share $ 1.28 $ 0.97 $ 0.63
Diluted income per share $ 1.25 $ 0.94 $ 0.61
Potentially dilutive securities representing approximately 0.2 million, 0.7 million and 0.8 million shares of common stock
for the fiscal years ended December 27, 2014, December 28, 2013 and December 29, 2012, 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 examinations by federal and state tax authorities is closed for fiscal years prior to 2011. Federal and state
carryforward attributes that were generated prior to fiscal year 2011 may still be adjusted upon examination by the Internal
Revenue Service (IRS) or state tax authorities if they either have been or will be used in a period for which the statute of
limitations is still open.
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, generation of tax credits
compared to future utilization of credits, or changes in tax laws or regulations. The Company's income tax provision and its
assessment of the ability to realize its deferred tax assets involve significant judgments and estimates. The Company is
currently generating state research credits that exceed the amount being utilized. As a result of this trend, a valuation allowance
may be needed in the future related to these state tax credits.
As of December 28, 2013, the Company maintained a valuation allowance of $2.1 million related to certain state tax
attributes from the Evolution Robotics, Inc. acquisition. During the year ended December 27, 2014, this valuation allowance
was released when the realization of these state tax attributes became more likely than not.
Comprehensive Income
Accumulated other comprehensive income includes unrealized gains and losses on certain investments. The differences
between net income and comprehensive income were related to unrealized gains (losses) on investments, net of tax.