iRobot 2008 Annual Report Download - page 87

increasing number of engineering personnel in India and Hong Kong to serve as a liaison between our U.S.-based
engineering staff and our outsourced manufacturer in China. We are committed to consistently maintaining the level
of innovative design and development of new products as we strive to enhance our ability to serve our existing
consumer and military markets as well as new markets for robots. We anticipate that research and development
expenses will remain level or decrease in absolute dollars for the foreseeable future.
For the fiscal years ended December 27, 2008 and December 29, 2007, research and development expense was
$17.6 million and $17.1 million, or 5.7% and 6.9% of total revenue, respectively.
In addition to our internal research and development activities discussed above, we incur research and
development expenses under funded development arrangements with both governments and other third parties. For
the fiscal years ended December 27, 2008 and December 29, 2007, these expenses amounted to $23.9 million and
$18.8 million, respectively. In accordance with generally accepted accounting principles, these expenses have been
classified as cost of revenue rather than research and development expense.
Selling, General and Administrative Expenses
Our selling, general and administrative expenses consist primarily of:
• salaries and related costs for sales and marketing personnel;
• salaries and related costs for executives and administrative personnel;
• advertising, marketing and other brand-building costs;
• fulfillment costs associated with direct-to-consumer sales through our on-line store;
• customer service costs;
• professional services costs;
• information systems and infrastructure costs;
• travel and related costs; and
• occupancy and other overhead costs.
We anticipate that selling, general and administrative expenses will remain relatively flat at current levels as
we continue to build the iRobot brand and also maintain company profitability.
For the fiscal years ended December 27, 2008 and December 29, 2007, selling, general and administrative
expense was $75.7 million and $65.8 million, or 24.6% and 26.4% of total revenue, respectively.
Litigation and Related Expenses
In fiscal 2007, we incurred $2.3 million of litigation and settlement-related costs associated with two related
lawsuits filed by us in August 2007. The first of these lawsuits was filed in Massachusetts Superior Court, and
subsequently transferred to the United States District Court for the District of Massachusetts, against Robotic FX,
Inc. and Jameel Ahed alleging, among other things, misappropriation of trade secrets and breach of contract. The
second lawsuit was filed in the United States District Court for the Northern District of Alabama against Robotic
FX, Inc. alleging willful infringement of two patents owned by us. See Note 11 to the Consolidated Financial
Statements included elsewhere in this Annual Report on Form 10-K for a more detailed discussion of this litigation
and related settlement.
Fiscal Periods
Historically, our fiscal year ended on December 31 and our fiscal quarters ended on March 31, June 30,
September 30 and December 31. Reference to fiscal 2004, for example, refers to the fiscal year ended December 31,
2004. Beginning in fiscal 2005, we began to operate and report using a 52-53 week fiscal year ending on the
Saturday closest to December 31. Accordingly, each of our fiscal quarters ends on the Saturday that falls closest to
the last day of the third calendar month of the quarter.
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Form 10-K