iRobot 2010 Annual Report Download - page 116

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income, at its former corporate headquarters in Burlington, MA. Future minimum rental payments under operating
leases were as follows as of January 1, 2011:
Operating
Leases
2011 ................................................................ $ 2,904
2012 ................................................................ 2,646
2013 ................................................................ 2,466
2014 ................................................................ 2,447
2015 ................................................................ 2,442
Thereafter ............................................................ 10,327
Total minimum lease payments .......................................... $23,232
Guarantees and Indemnification Obligations
The Company enters into standard indemnification agreements in the ordinary course of business. Pursuant to
these agreements, the Company indemnifies and agrees to reimburse the indemnified party for losses incurred by
the indemnified party, generally the Company’s customers, in connection with any patent, copyright, trade secret or
other proprietary right infringement claim by any third party with respect to the Company’s software. The term of
these indemnification agreements is generally perpetual any time after execution of the agreement. The maximum
potential amount of future payments the Company could be required to make under these indemnification
agreements is unlimited. The Company has never incurred costs to defend lawsuits or settle claims related to
these indemnification agreements. As a result, the Company believes the estimated fair value of these agreements is
minimal. Accordingly, the Company has no liabilities recorded for these agreements as of January 1, 2011 and
January 2, 2010, respectively.
Government Contract Contingencies
Several of the Company’s prime contracts with the U.S. federal government do not contain a limitation of
liability provision, creating a risk of responsibility for direct and consequential damages. Several subcontracts with
prime contractors hold the prime contractor harmless against liability that stems from our work and do not contain a
limitation of liability. These provisions could cause substantial liability for the Company. In addition, the Company
is subject to audits by the U.S. federal government as part of routine audits of government contracts. As part of an
audit, these agencies may review the Company’s performance on contracts, cost structures and compliance with
applicable laws, regulations and standards. If any of its costs are found to be allocated improperly to a specific
contract, the costs may not be reimbursed and any costs already reimbursed for such contract may have to be
refunded. Accordingly, an audit could result in a material adjustment to our revenue and results of operations.
Annually, the Company submits final indirect billing rates to DCMA based upon actual costs incurred throughout
the year. These final billing rates are subject to audit by DCAA. As of January 1, 2011, fiscal years 2007, 2008, 2009
and 2010 are open for audit by DCAA.
Warranty
The Company provides warranties on most products and has established a reserve for warranty based on
identified warranty costs. The reserve is included as part of accrued expenses (Note 6) in the accompanying balance
sheets.
70
iROBOT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)