iRobot 2008 Annual Report Download - page 128

Sales Taxes
The Company collects and remits sales tax in jurisdictions in which it has a physical presence or it believes a
nexus exists, which therefore obligates the Company to collect and remit sales tax. The Company has recently been
audited by one state and has recorded a liability, in the year ended December 27, 2008, for the expected sales tax
exposure resulting from this audit. The Company is not currently aware of any asserted claims for sales tax
liabilities for prior taxable periods in any other state.
The Company has conducted an evaluation of whether it has established a nexus in various jurisdictions with
respect to sales tax. In conjunction with this evaluation, the Company has approached several states pursuant to
voluntary disclosure arrangements. As a result of this process, the Company has agreed to register and file
prospectively in four states in accordance with the terms of the voluntary disclosure agreements, and has recorded a
liability for potential exposure in other states. 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 and contract 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 $0.9 million, $0.8 million and
$0.7 million for the plan years ended December 27, 2008, December 29, 2007 and December 30, 2006 (“Plan-Year
2008,” “Plan-Year 2007” and “Plan-Year 2006”), 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 2008 Plan-Year 2007 and Plan-Year 2006 is entitled up to a maximum of three
percent of his or her eligible annual payroll. The employer matching contribution for Plan-Year 2008 is included in
accrued compensation.
13. Acquisition of Nekton Research, LLC
In September 2008 the Company acquired Nekton, an unmanned underwater robot technology company based
in Raleigh, North Carolina. The Company acquired Nekton for a purchase price of $10 million, consisting primarily
of cash and direct acquisition costs, with the potential for additional consideration up to $5 million based on the
achievement of certain business and financial milestones. In connection with the acquisition, the Company assumed
$0.1 million in net liabilities, and recorded $4.5 million of intangible assets and $5.4 million of goodwill.
Approximately $0.2 million of the purchase price was allocated to in-process research and development and was
expensed upon completion of the acquisition.
The condensed consolidated financial statements for the year ended December 27, 2008 include the results of
operations of Nekton commencing as of September 8, 2008, the acquisition date. No supplemental pro forma
information is presented for the acquisition due to the immaterial effect of the acquisition on the Company’s results
of operations.
14. Goodwill and other intangible assets
The carrying amount of the goodwill at December 27, 2008 of $5.4 million is from the acquisition of Nekton
completed in September 2008.
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iROBOT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)