iRobot 2009 Annual Report Download - page 22

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• 10% of his target cash incentive was tied to achieving divisional inventory levels at fiscal year end at or
below $30.0 million, with the ability to earn 125% of the target cash incentive for this element by
achieving divisional inventory levels at fiscal year end at or below $27.0 million.
For our president, government & industrial robots, his target cash incentive had four elements:
• 25% of his target cash incentive was tied to achieving an Adjusted EBITDA, excluding cash incentive
compensation expense, of $26.4 million, with the ability to earn 125% of the target cash incentive for
this element by achieving an Adjusted EBITDA, excluding cash incentive compensation expense, of
$29.0 million.
• 15% of his target cash incentive was tied to achieving divisional revenue of $140.8 million, with a
threshold payment of 50% of the target cash incentive for this element by achieving divisional revenue
of $112.7 million.
• 50% of his target cash incentive was tied to achieving a target level of divisional contribution margin
with the ability to earn 125% of the target cash incentive for this element by achieving a divisional
contribution margin in excess of this target. Generally, contribution margin was calculated as division
specific revenue less cost of sales and operating expenses, excluding cash incentive and stock based
compensation. Since the specific contribution margin targets are highly confidential, we do not publicly
disclose these targets. Disclosing the contribution margin targets would provide competitors and other
third parties with insights into our internal confidential strategic and planning processes, sales and
marketing budgets and other confidential matters, which might allow our competitors to predict certain
business strategies, thereby causing competitive harm. The contribution margin targets were positioned
to be aggressive, but achievable.
• 10% of his target cash incentive was tied to achieving divisional inventory levels at fiscal year end at or
below $8.0 million, with the ability to earn 125% of the target cash incentive for this element by
achieving divisional inventory levels at fiscal year end at or below $7.2 million.
The compensation committee chose this mix of financial targets for cash incentive compensation because
it believed that executive officers should be focused on a small set of critical financial and operating metrics
that reflect both corporate and divisional strategies in a manner that reinforce the executive’s role and impact.
Moreover, the compensation committee believed that the metrics should encourage collaboration and account-
ability within divisions and with corporate functions.
Identical financial measures, although with differing weightings, were used for the company’s perfor-
mance incentive plan, which is the cash incentive program that applies to all employees at the manager level
and above.
The following table shows the company’s achievement against the various metrics used for calculating the
cash incentive compensation for our executive officers:
Metric
Minimum
(50% earned)
Target
(100%)
Maximum
(125%) Performance
Percentage
Earned
in millions
Adjusted EBITDA, excluding cash incentive
compensation expense ................. $ 21.1 $ 26.4 $ 29.0 $ 29.4 125%
Operating Cash Flow ................... $ 7.3 $ 9.1 $ 10.0 $ 40.6 125%
Home Robots Divisional Revenue .......... $131.5 $164.3 $180.8 $165.9 102%
Government & Industrial Divisional
Revenue ........................... $112.7 $140.8 $154.9 $132.7 86%
Home Robots Divisional Contribution
Margin............................ * * * * 113%
Government & Industrial Divisional
Contribution Margin .................. * * * * 85%
Home Robots Divisional Inventory ......... $ 36.0 $ 30.0 $ 27.0 $ 23.7 125%
Government & Industrial Divisional
Inventory .......................... $ 9.6 $ 8.0 $ 7.2 $ 8.7 78%
20