iRobot 2014 Annual Report Download - page 135

iROBOT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
62
Warranty
The Company provides warranties on most products and has established a reserve for warranty based on estimated
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 27,
2014 December 28, 2013 December 29, 2012
(In thousands)
Balance at beginning of period $ 6,497 $ 6,057 $ 10,306
Provision (*) 6,410 1,744 (1,682)
Warranty usage(**) (5,138)(1,304)(2,567)
Balance at end of period $ 7,769 $ 6,497 $ 6,057
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(*) 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.
Sales Taxes
The Company collects and remits sales tax in jurisdictions in which it has a physical presence or it believes nexus exists,
which therefore obligates the Company to collect and remit sales tax. The Company continually evaluates whether it has
established a nexus in new jurisdictions with respect to sales tax. The Company has recorded a liability for potential exposure
in several states where there is uncertainty about the point in time at which the Company established a sufficient business
connection to create nexus. The Company continues to analyze possible sales tax exposure, but does not currently believe that
any individual claim or aggregate claims that might arise will ultimately have a material effect on its consolidated results of
operations, financial position or cash flows.
12. Employee Benefits
The Company sponsors a retirement plan under Section 401(k) of the Internal Revenue Code (the “Retirement Plan”). All
Company employees, with the exception of temporary, contract and international employees are eligible to participate in the
Retirement Plan after satisfying age and length of service requirements prescribed by the plan. Under the Retirement Plan,
employees may make tax-deferred contributions, and the Company, at its sole discretion, and subject to the limits prescribed by
the IRS, may make either a nonelective contribution on behalf of all eligible employees or a matching contribution on behalf of
all plan participants.
The Company elected to make a matching contribution of approximately $1.7 million, $1.5 million and $1.7 million for
the plan years ended December 27, 2014, December 28, 2013 and December 29, 2012 (“Plan-Year 2014,” “Plan-Year 2013”
and “Plan-Year 2012”), respectively. The employer contribution represents a matching contribution at a rate of 50% of each
employee’s first six percent contribution. Accordingly, each employee participating during Plan-Year 2014, Plan-Year 2013 and
Plan-Year 2012 is entitled up to a maximum of three percent of his or her eligible annual payroll. The employer matching
contribution for Plan-Year 2014 is included in accrued compensation in the accompanying consolidated balance sheet.
13. Acquisition of Evolution Robotics, Inc.
On October 1, 2012, the Company acquired 100% of the equity of Evolution Robotics, Inc. (Evolution) for $74.8 million
in cash, including the effect of working capital adjustments and cash received, with $8.88 million of the purchase price placed
into an escrow account to settle certain claims for indemnification for breaches or inaccuracies in Evolution’s representations
and warranties, covenants and agreements. As of December 27, 2014, all indemnification claims and escrow balances have
been released. Evolution was the developer of Mint and Mint Plus automatic floor cleaning robots, based in Pasadena,
California, and is included in the Company's home robots business unit.
Form 10-K