iRobot 2014 Annual Report Download - page 134

iROBOT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
61
11. Commitments and Contingencies
Legal
From time to time and in the ordinary course of business, the Company is subject to various claims, charges and
litigation. The outcome of litigation cannot be predicted with certainty and some lawsuits, claims or proceedings may be
disposed of unfavorably to us, which could materially affect the Company's financial condition or results of operations.
Lease Obligations
The Company leases its facilities. Rental expense under operating leases for fiscal 2014, 2013 and 2012 amounted to $4.8
million, $5.3 million, and $4.4 million, respectively. Future minimum rental payments under operating leases were as follows
as of December 27, 2014:
Operating
Leases
2015 $ 3,460
2016 2,670
2017 2,383
2018 2,383
2019 2,383
Thereafter 794
Total minimum lease payments $ 14,073
Outstanding Purchase Orders
At December 27, 2014, we had outstanding purchase orders aggregating approximately $78.1 million. The purchase
orders, the majority of which are with our contract manufacturers for the purchase of inventory in the normal course of
business, are for manufacturing and non-manufacturing related goods and services, and are generally cancelable without
penalty. In circumstances where we determine that we have financial exposure associated with any of these commitments, we
record a liability in the period in which that exposure is identified.
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. 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 27, 2014 and
December 28, 2013, 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 27, 2014, fiscal years 2012 through 2014 are
open for audit by DCAA.