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iROBOT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
61
state research and development credits related to the acquisition of Evolution Robotics that are limited by Section 382 and
Section 383, respectively, of the Internal Revenue Code. However, these limitations do not cause any of these net operating
loss carryforwards or federal and state research and development credits to expire unused.
The reconciliation of the expected tax (benefit) expense (computed by applying the federal statutory rate to income
before income taxes) to actual tax expense was as follows:
Fiscal Year Ended
December 29,
2012 December 31,
2011 January 1,
2011
(In thousands)
Expected federal income tax $ 8,962 $ 18,739 $ 11,891
Miscellaneous permanent items 338 (13) 164
State taxes 497 543 1,545
Federal and state research credits (418) (3,283) (997)
Domestic production activities deduction (1,100) (2,695) —
Other 31 59 (275)
Increase (decrease) in valuation allowance — —
(3,868)
$ 8,310 $ 13,350 $ 8,460
A summary of the Company’s adjustments to its uncertain tax position is the current year is as follows:
Fiscal Year Ended
December 29, 2012
Balance at beginning of period $ 2,439
Increase for tax positions related to the current year 162
Increase for tax positions related to prior years 1,868
Decreases for settlements with applicable taxing authorities —
Decreases for lapses of statute of limitations —
Balance at end of period $ 4,469
The Company recognizes interest and penalties related to unrecognized tax benefits in its tax provision. As of December
29, 2012, December 31, 2011 and January 1, 2011, there were no material amounts related to accrued interest or penalties. We
anticipate the settlement of federal tax audits may be finalized within the next twelve months and could result in a decrease in
our unrecognized tax benefits of up to $2.9 million. If all of our unrecognized tax benefits as of December 29, 2012 were to
become recognizable in the future, we would record a $3.9 million benefit to the income tax provision, reflective of federal
benefit on state items.
We follow the with and without approach for direct and indirect effects of the windfall tax deductions.
11. Commitments and Contingencies
Legal
From time to time and in the ordinary course of business, the Company is subject to various claims, charges and
litigation. The outcome of litigation cannot be predicted with certainty and some lawsuits, claims or proceedings may be
disposed of unfavorably to us, which could materially affect the Company's financial condition or results of operations.
Lease Obligations
The Company leases its facilities. Rental expense under operating leases for fiscal 2012, 2011 and 2010 amounted to $4.4
million, $4.1 million, and $3.7 million, respectively. Future minimum rental payments under operating leases were as follows
as of December 29, 2012:
Form 10-K