iRobot 2015 Annual Report Download - page 114

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31
Research and Development Expenses
Research and development expenses consist primarily of:
• salaries and related costs for our engineers;
• costs for high technology components used in product and prototype development;
• costs of test equipment used during product development; and
• occupancy and other overhead costs.
We have significantly expanded our research and development capabilities and expect to continue to expand these
capabilities in the future. We are committed to consistently maintaining the level of innovative design and development of new
products as we strive to enhance our ability to serve our existing consumer markets as well as new markets for robots. We
anticipate that research and development expenses will increase in absolute dollars but remain relatively consistent as a
percentage of revenue in the foreseeable future.
For the fiscal years ended January 2, 2016, December 27, 2014 and December 28, 2013, research and development
expense was $76.1 million, $69.4 million and $63.6 million, or 12.3%, 12.5% and 13.1% of total revenue, respectively.
Selling, Marketing, General and Administrative Expenses
Our selling, marketing, general and administrative expenses consist primarily of:
• salaries and related costs for sales and marketing personnel;
• salaries and related costs for executives and administrative personnel;
• advertising, marketing and other brand-building costs;
• customer service costs;
• professional services costs;
• information systems and infrastructure costs;
• travel and related costs; and
• occupancy and other overhead costs.
We anticipate that in 2016, selling, marketing, general and administrative expenses will increase in absolute dollars and
as a percentage of revenue and will, for the foreseeable future thereafter, continue to increase in absolute dollars but remain
relatively consistent, or decrease slightly, as a percentage of revenue, as we continue to build the iRobot brand.
For the fiscal years ended January 2, 2016, December 27, 2014 and December 28, 2013 selling, marketing, general and
administrative expense was $152.2 million, $135.5 million and $124.9 million, or 24.7%, 24.3% and 25.6% of total revenue,
respectively.
Fiscal Periods
We operate and report using a 52-53 week fiscal year ending on the Saturday closest to December 31. Accordingly, our
fiscal quarters will end on the Saturday that falls closest to the last day of the third month of each quarter.
Critical Accounting Policies and Estimates
Our consolidated financial statements are prepared in accordance with accounting principles generally accepted in the
United States of America. The preparation of these consolidated financial statements requires us to make estimates and
assumptions that affect the reported amounts of assets, liabilities, revenue, costs and expenses, and related disclosures. We
evaluate our estimates and assumptions on an ongoing basis. Our actual results may differ from these estimates.
We believe that of our significant accounting policies, which are described in the notes to our consolidated financial
statements, the following accounting policies involve a greater degree of judgment and complexity. Accordingly, we believe
that the following accounting policies are the most critical to aid in fully understanding and evaluating our consolidated
financial condition and results of operations.