iRobot 2005 Annual Report Download - page 77

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iROBOT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Ì (Continued)
recognized revenue based on progress under the percentage-of-completion method of accounting. In addition
to the milestone payments, the Customer has advanced the Company funds to purchase long-lead inventory
components in advance of the production contemplated in the contract. The Company has been paid
3.7 million Great Britain Pounds (approximately $6.4 million at the December 31, 2005 exchange rate),
which includes 0.7 million Great Britain Pounds (approximately $1.2 million) for long-lead inventory items.
In its termination letter, the Customer has demanded a refund of all monies paid under the contract. The
Company has engaged legal counsel in anticipation of a negotiated settlement with the Customer. Manage-
ment believes that it has adequately provided for the possibility of refunding some portion of the payments
made to date under the contract.
Lease Obligations
The Company leases its facilities. Rental expense under operating leases for 2005, 2004 and 2003
amounted to $1.3 million, $0.9 million, and $1.1 million, respectively. Future minimum rental payments under
operating leases were as follows as of December 31, 2005:
Operating
Leases
2006 ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $1,785
2007 ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 1,663
2008 ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 1,418
2009 ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 118
2010 ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 74
Thereafter ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Ì
Total minimum lease payments ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $5,058
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 with respect to the
Company's software. 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 31, 2005 and 2004, respectively.
Warranty
The Company provides warranties on most products and has established a reserve for warranty based on
identified warranty costs. The reserve is included as part of accrued expenses (Note 5) in the accompanying
balance sheets.
73