iRobot 2008 Annual Report Download - page 99

In fiscal 2007, we recorded an $8.6 million tax benefit, which was primarily attributable to the full release of
the valuation allowance relating to federal deferred tax assets. The provision for income taxes for fiscal 2006
consists of $0.2 million of federal alternative minimum taxes and $0.1 million of state taxes.
Liquidity and Capital Resources
At December 27, 2008 our principal sources of liquidity were cash and cash equivalents totaling $40.9 million and
accounts receivable of $35.9 million. Prior to our initial public offering in November 2005, we funded our growth
primarily with proceeds from the issuance of convertible preferred stock for aggregate net cash proceeds of $37.5 million,
occasional borrowings under a working capital line of credit and cash generated from operations. In the initial public
offering, we raised $70.4 million net of underwriting and professional fees associated with this offering.
We manufacture and distribute our products through contract manufacturers and third-party logistics pro-
viders. We believe that this approach gives us the advantages of relatively low capital investment and significant
flexibility in scheduling production and managing inventory levels. By leasing our office facilities, we also
minimize the cash needed for expansion. Accordingly, our capital spending is generally limited to leasehold
improvements, computers, office furniture and product-specific production tooling, internal use software and test
equipment. In fiscal 2008 and 2007, we spent $14.8 million and $10.4 million, respectively, on capital equipment.
Our strategy for delivering product to our retail customers gives us the flexibility to provide container
shipments directly to the retailer from China and allows our retail partners to take possession of product on a
domestic basis. Accordingly, our home robots product inventory consists of goods shipped to our third-party logistic
providers for the fulfillment of retail orders and direct-to-consumer sales. Our inventory of government and
industrial products is minimal as they are generally built to order. Our contract manufacturers are responsible for
purchasing and stocking the components required for the production of our products, and they invoice us when the
finished goods are shipped.
Our consumer product sales are, and are expected to continue to be, highly seasonal. This seasonality typically
results in a net use of cash in support of operating needs during the first half of the year with the low point generally
occurring in the middle of the third quarter, and a favorable cash flow during the second half of the year. We have
relied on, and we will continue to rely on, our working capital line of credit to cover short-term cash needs resulting
from the seasonality of our consumer business.
Discussion of Cash Flows
Net cash provided by our operating activities in fiscal 2008 was $19.1 million compared to net cash used by
operating activities of $15.7 million in fiscal 2007 and net cash provided by operating activities of $0.6 million in
fiscal 2006. The cash provided by our operating activities in fiscal 2008 was primarily due to net income of
$0.8 million, a decrease in accounts receivable (including unbilled revenue) of $12.5 million, a decrease in
inventory of $10.7 million, an increase in deferred revenue and customer advances of $1.0 million, and an increase
in long term liabilities of $4.4 million, offset by an increase in other current assets of $1.0 million, and a decrease in
accounts payable, accrued expenses and accrued compensation of $20.7 million. In addition, in fiscal 2008, we had
depreciation and amortization of approximately $7.0 million, a loss on the disposal of fixed asset of $0.2 million, a
write-off of in-process research and development associated with our acquisition of Nekton of $0.2 million,
deferred compensation of $0.1 million and stock-based compensation of $5.9 million, offset by a $2.0 million
benefit from deferred tax assets which are non-cash items. The cash used by our operating activities in fiscal 2007
was primarily due to an increase in accounts receivable (including unbilled revenue) of $19.5 million and an
increase in inventory of $24.3 million, offset by net income of $9.1 million, a decrease in other current other assets
of $0.6 million, an increase in accounts payable and accrued expenses of $17.4 million and an increase in deferred
revenue of $1.1 million. In addition, in fiscal 2007, we had depreciation and amortization of approximately
$5.3 million and amortization of deferred compensation of $4.7 million, offset by a $10.2 million benefit from
deferred tax assets, all of which are non-cash items. The increase in accounts receivable, inventory and liabilities in
fiscal 2007 are directly attributable to the 31.9% growth in revenue from the comparable period in fiscal 2006. The
cash provided by our operating activities in fiscal 2006 was primarily due to net income of $3.6 million and an
increase in accounts payable, accrued expenses and accrued compensation of $8.7 million, offset by an increase in
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Form 10-K