iRobot 2012 Annual Report Download - page 79

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29
experience by product, at the time we recognize product revenue. Actual results could differ from these estimates, which could
cause increases or decreases to our warranty reserves in future periods.
Inventory Valuation
We value our inventory at the lower of the actual cost of our inventory or its current estimated market value. We write
down inventory for obsolescence or unmarketable inventories based upon assumptions about future demand and market
conditions. Actual demand and market conditions may be lower than those that we project and this difference could have a
material adverse effect on our gross margin if inventory write-downs beyond those initially recorded become necessary.
Alternatively, if actual demand and market conditions are more favorable than those we estimated at the time of such a write-
down, our gross margin could be favorably impacted in future periods.
Overview of Results of Operations
The following table sets forth our results of operations for the periods shown:
Fiscal Year Ended
December 29,
2012
December 31,
2011
January 1,
2011
(In thousands)
Revenue
Product revenue $ 418,550 $ 426,525 $ 360,394
Contract revenue 17,694 38,975 40,558
Total revenue 436,244 465,500 400,952
Cost of Revenue
Cost of product revenue(1) 239,745 246,905 228,403
Cost of contract revenue(1) 16,783 26,477 27,117
Total cost of revenue 256,528 273,382 255,520
Gross margin 179,716 192,118 145,432
Operating Expenses
Research and development(1) 37,215 36,498 24,809
Selling and marketing(1) 71,631 58,544 50,535
General and administrative(1) 45,698 43,753 36,618
Total operating expenses 154,544 138,795 111,962
Operating Income 25,172 53,323 33,470
Other Income (Expense), Net 435 218 504
Income Before Income Taxes 25,607 53,541 33,974
Income Tax Expense 8,310 13,350 8,460
Net Income $ 17,297 $ 40,191 $ 25,514
___________________
(1) Stock-based compensation recorded in fiscal 2012, 2011 and 2010 breaks down by expense classification as follows.
Fiscal Year Ended
December 29,
2012
December 31,
2011
January 1,
2011
(In thousands)
Cost of product revenue $ 1,187 $ 1,197 $ 1,311
Cost of contract revenue 410 478 446
Research and development 1,195 743 725
Selling and marketing 808 724 1,161
General and administrative 7,383 5,642 4,522
Form 10-K