iRobot 2009 Annual Report Download - page 103

Download and view the complete annual report

Please find page 103 of the 2009 iRobot annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.

Page out of 132

  • 1
  • 2
  • 3
  • 4
  • 5
  • 6
  • 7
  • 8
  • 9
  • 10
  • 11
  • 12
  • 13
  • 14
  • 15
  • 16
  • 17
  • 18
  • 19
  • 20
  • 21
  • 22
  • 23
  • 24
  • 25
  • 26
  • 27
  • 28
  • 29
  • 30
  • 31
  • 32
  • 33
  • 34
  • 35
  • 36
  • 37
  • 38
  • 39
  • 40
  • 41
  • 42
  • 43
  • 44
  • 45
  • 46
  • 47
  • 48
  • 49
  • 50
  • 51
  • 52
  • 53
  • 54
  • 55
  • 56
  • 57
  • 58
  • 59
  • 60
  • 61
  • 62
  • 63
  • 64
  • 65
  • 66
  • 67
  • 68
  • 69
  • 70
  • 71
  • 72
  • 73
  • 74
  • 75
  • 76
  • 77
  • 78
  • 79
  • 80
  • 81
  • 82
  • 83
  • 84
  • 85
  • 86
  • 87
  • 88
  • 89
  • 90
  • 91
  • 92
  • 93
  • 94
  • 95
  • 96
  • 97
  • 98
  • 99
  • 100
  • 101
  • 102
  • 103
  • 104
  • 105
  • 106
  • 107
  • 108
  • 109
  • 110
  • 111
  • 112
  • 113
  • 114
  • 115
  • 116
  • 117
  • 118
  • 119
  • 120
  • 121
  • 122
  • 123
  • 124
  • 125
  • 126
  • 127
  • 128
  • 129
  • 130
  • 131
  • 132

Form 10-K
additional compensation expense in connection with the stock option exchange program. The Company incurred no
additional compensation expense in connection with the program.
The fair value of each option grant for the fiscal years ended January 2, 2010 (excluding the new options issued
in conjunction with the stock option exchange program described in the preceding paragraph for which no
incremental compensation expense was realized), December 27, 2008 and December 29, 2007 was computed on the
grant date using the Black-Scholes option-pricing model with the following assumptions:
Fiscal Year Ended
January 2,
2010
Fiscal Year Ended
December 27,
2008
Fiscal Year Ended
December 29,
2007
Risk-free interest rate ........... 1.45% — 2.50% 2.24% — 3.45% 3.23% — 4.90%
Expected dividend yield ......... — — —
Expected life ................. 3.50 — 4.75 years 3.50 — 4.75 years 3.50 — 4.75 years
Expected volatility . ............ 55.0% — 56.5% 55.0% 50.0% — 55.0%
The risk-free interest rate is derived from the average U.S. Treasury constant maturity rate, which approx-
imates the rate in effect at the time of grant, commensurate with the expected life of the instrument. The dividend
yield is zero based upon the fact the Company has never paid and has no present intention to pay cash dividends. The
expected term calculation is based upon the simplified method provided under the relevant authoritative guidance,
the expected term is developed by averaging the contractual term of the stock option grants (7 or 10 years) with the
associated vesting term (typically 4 to 5 years). Given the Company’s initial public offering in November 2005 and
the resulting short history as a public company, the Company could not rely solely on company specific historical
data for purposes of establishing expected volatility. Consequently, the Company performed an analysis that
included company specific historical data combined with data of several peer companies with similar expected
option lives to develop expected volatility assumptions.
Based upon the above assumptions, the weighted average fair value of each stock option granted for the fiscal
year ended January 2, 2010 was $4.91, excluding the new options issued in conjunction with the stock option
exchange program for which no incremental compensation expense was realized.
The Company has assumed a forfeiture rate for all stock options granted subsequent to the Company’s initial
filing of its Form S-1 with the SEC. In the future, the Company will record incremental stock-based compensation
expense if the actual forfeiture rates are lower than estimated and will record a recovery of prior stock-based
compensation expense if the actual forfeitures are higher than estimated.
69
iROBOT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)