iRobot 2010 Annual Report Download - page 60

• costs of freight;
• changes in our rate of returns for our consumer products;
• our ability to introduce new products and enhancements to our existing products on a timely basis;
• warranty costs associated with our consumer products;
• the amount of government funding and the political, budgetary and purchasing constraints of our govern-
ment agency customers; and
• cancellations, delays or contract amendments by government agency customers.
We cannot be certain that our revenues will grow at rates that will allow us to maintain profitability during
every fiscal quarter, or even every fiscal year. We base our current and future expense levels on our internal
operating plans and sales forecasts, including forecasts of holiday sales for our consumer products. A significant
portion of our operating expenses, such as research and development expenses, certain marketing and promotional
expenses and employee wages and salaries, do not vary directly with sales and are difficult to adjust in the short
term. As a result, if sales for a quarter, particularly the final quarter of a fiscal year, are below our expectations, we
might not be able to reduce operating expenses for that quarter and, therefore, we would not be able to reduce our
operating expenses for the fiscal year. Accordingly, a sales shortfall during a fiscal quarter, and in particular the
fourth quarter of a fiscal year, could have a disproportionate effect on our operating results for that quarter or that
year. Because of quarterly fluctuations, we believe that quarter-to-quarter comparisons of our operating results are
not necessarily meaningful. Moreover, our operating results may not meet expectations of equity research analysts
or investors. If this occurs, the trading price of our common stock could fall substantially either suddenly or over
time.
Global economic conditions and any associated impact on consumer spending could have a material
adverse effect on our business, results of operations and financial condition.
Continued economic uncertainty and reductions in consumer spending may result in reductions in sales of our
consumer robots. Additionally, disruptions in credit markets may materially limit consumer credit availability and
restrict credit availability of our retail customers, which would also impact purchases of our consumer robots. Any
reduction in sales of our consumer robots, resulting from reductions in consumer spending or continued disruption
in the availability of credit to retailers or consumers, could materially and adversely affect our business, results of
operations and financial condition.
Our business currently depends on our consumer robots, and our sales growth and operating results
would be negatively impacted if we are unable to enhance our current consumer robots or develop new
consumer robots at competitive prices or in a timely manner.
For the years ended January 1, 2011 and January 2, 2010, we derived 57.2% and 55.5% of our total revenue
from our consumer robots, respectively. For the foreseeable future, we expect that a significant portion of our
revenue will be derived from sales of consumer robots in general and home floor care products in particular.
Accordingly, our future success depends upon our ability to further penetrate the consumer home care market, to
enhance our current consumer products and develop and introduce new consumer products offering enhanced
performance and functionality at competitive prices. The development and application of new technologies involve
time, substantial costs and risks. Our inability to achieve significant sales of our newly introduced robots, or to
enhance, develop and introduce other products in a timely manner, or at all, would materially harm our sales growth
and operating results.
We depend on the U.S. federal government for a significant portion of our revenue, and any reduction in
the amount of business that we do with the U.S. federal government would negatively impact our
operating results and financial condition.
For the years ended January 1, 2011 and January 2, 2010, we derived 38.4% and 36.9% of our total revenue,
respectively, directly or indirectly, from the U.S. federal government and its agencies. Any reduction in the amount
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