Company Quick10K Filing
iRobot
Price60.32 EPS3
Shares29 P/E19
MCap1,735 P/FCF-55
Net Debt-71 EBIT99
TEV1,664 TEV/EBIT17
TTM 2019-09-28, in MM, except price, ratios
10-Q 2020-09-26 Filed 2020-10-29
10-Q 2020-06-27 Filed 2020-07-30
10-Q 2020-03-28 Filed 2020-05-01
10-K 2019-12-28 Filed 2020-02-13
10-Q 2019-09-28 Filed 2019-10-31
10-Q 2019-06-29 Filed 2019-08-01
10-Q 2019-03-30 Filed 2019-05-02
10-K 2018-12-29 Filed 2019-02-14
10-Q 2018-09-29 Filed 2018-11-02
10-Q 2018-06-30 Filed 2018-08-03
10-Q 2018-03-31 Filed 2018-05-04
10-K 2017-12-30 Filed 2018-02-16
10-Q 2017-09-30 Filed 2017-11-03
10-Q 2017-07-01 Filed 2017-08-04
10-Q 2017-04-01 Filed 2017-05-05
10-K 2016-12-31 Filed 2017-02-17
10-Q 2016-10-01 Filed 2016-11-07
10-Q 2016-07-02 Filed 2016-08-05
10-Q 2016-04-02 Filed 2016-05-06
10-K 2016-01-02 Filed 2016-02-19
10-Q 2015-09-26 Filed 2015-10-30
10-Q 2015-06-27 Filed 2015-07-31
10-Q 2015-03-28 Filed 2015-05-01
10-K 2014-12-27 Filed 2015-02-13
10-Q 2014-09-27 Filed 2014-10-31
10-Q 2014-06-28 Filed 2014-08-01
10-Q 2014-03-29 Filed 2014-05-02
10-K 2013-12-28 Filed 2014-02-18
10-Q 2013-09-28 Filed 2013-11-01
10-Q 2013-06-29 Filed 2013-08-02
10-Q 2013-03-30 Filed 2013-05-03
10-K 2012-12-29 Filed 2013-02-15
10-Q 2012-09-29 Filed 2012-11-02
10-Q 2012-06-30 Filed 2012-08-03
10-Q 2012-03-31 Filed 2012-05-04
10-K 2011-12-31 Filed 2012-02-21
10-Q 2011-10-01 Filed 2011-11-04
10-Q 2011-07-02 Filed 2011-08-05
10-Q 2011-04-02 Filed 2011-05-06
10-K 2011-01-01 Filed 2011-02-18
10-Q 2010-10-02 Filed 2010-11-05
10-Q 2010-07-03 Filed 2010-08-06
10-Q 2010-04-03 Filed 2010-05-07
10-K 2010-01-02 Filed 2010-02-19
8-K 2020-10-20 Earnings, Exhibits
8-K 2020-09-14 Officers
8-K 2020-08-06 Other Events
8-K 2020-07-21 Earnings, Exhibits
8-K 2020-06-15
8-K 2020-05-20
8-K 2020-04-28
8-K 2020-03-24
8-K 2020-03-23
8-K 2020-03-10
8-K 2020-02-03
8-K 2019-10-22
8-K 2019-09-10
8-K 2019-07-23
8-K 2019-07-08
8-K 2019-05-22
8-K 2019-04-23
8-K 2019-02-06
8-K 2018-10-23
8-K 2018-07-24
8-K 2018-07-05
8-K 2018-06-26
8-K 2018-05-23
8-K 2018-04-24
8-K 2018-03-29
8-K 2018-02-27
8-K 2018-02-07

IRBT 10Q Quarterly Report

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations
Item 3. Quantitative and Qualitative Disclosure About Market Risk
Item 4. Controls and Procedures
Part II. Other Information
Item 1. Legal Proceedings
Item 1A. Risk Factors
Item 5. Other Information
Item 6. Exhibits
EX-31.1 irbtexhibit31192620.htm
EX-31.2 irbtexhibit31292620.htm
EX-32.1 irbtexhibit32192620.htm

iRobot Earnings 2020-09-26

Balance SheetIncome StatementCash Flow
0.90.70.50.40.20.02012201420172020
Assets, Equity
0.40.30.20.10.0-0.12012201420172020
Rev, G Profit, Net Income
0.10.0-0.0-0.1-0.1-0.22012201420172020
Ops, Inv, Fin

irbt-20200926
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
______________________________________________ 
FORM 10-Q
 ______________________________________________
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED September 26, 2020
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM              TO             
COMMISSION FILE NUMBER 001-36414
______________________________________________ 
iROBOT CORPORATION
(Exact name of registrant as specified in its charter)
 ______________________________________________
Delaware77-0259335
(State or other jurisdiction of
incorporation or organization)
(I.R.S. Employer
Identification No.)
8 Crosby Drive
Bedford, MA 01730
(Address of principal executive offices, including zip code)

(781) 430-3000
(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading Symbol(s)Name of each exchange on which registered
Common Stock, $0.01 par valueIRBTThe Nasdaq Stock Market LLC
______________________________________________ 
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  x    No  o
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes  x    No  o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
        

Large accelerated filerAccelerated filer
Non-accelerated filerSmaller reporting company
Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o    
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes      No  x 
The number of shares outstanding of the Registrant’s Common Stock as of October 24, 2020 was 28,127,338.
        



iROBOT CORPORATION
FORM 10-Q
FOR THE QUARTER ENDED SEPTEMBER 26, 2020
INDEX
 Page
PART I: FINANCIAL INFORMATION
Item 1. Financial Statements (unaudited)
2





iROBOT CORPORATION
CONSOLIDATED BALANCE SHEETS
(in thousands, except per share amounts)
(unaudited)
 
September 26, 2020December 28, 2019
ASSETS
Current assets:
Cash and cash equivalents$297,206 $239,392 
Short term investments60,130 17,032 
Accounts receivable, net179,709 146,161 
Inventory218,134 157,347 
Other current assets52,525 34,285 
   Total current assets807,704 594,217 
Property and equipment, net78,296 75,988 
Operating lease right-of-use assets45,186 47,478 
Deferred tax assets33,834 41,791 
Goodwill122,575 118,732 
Intangible assets, net10,146 12,352 
Other assets19,079 30,195 
   Total assets$1,116,820 $920,753 
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable$162,346 $116,185 
Accrued expenses94,769 81,768 
Deferred revenue and customer advances7,858 4,549 
   Total current liabilities264,973 202,502 
Operating lease liabilities51,897 54,928 
Deferred tax liabilities986 912 
Other long-term liabilities17,050 10,342 
   Total long-term liabilities69,933 66,182 
   Total liabilities334,906 268,684 
Commitments and contingencies (Note 11)
Preferred stock, 5,000 shares authorized and none outstanding  
Common stock, $0.01 par value, 100,000 shares authorized; 28,120 and 28,352 shares issued and outstanding, respectively281 284 
Additional paid-in capital194,628 196,455 
Retained earnings586,054 452,321 
Accumulated other comprehensive income951 3,009 
   Total stockholders’ equity781,914 652,069 
   Total liabilities and stockholders’ equity$1,116,820 $920,753 
The accompanying notes are an integral part of the consolidated financial statements.
3



iROBOT CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
(in thousands, except per share amounts)
(unaudited)
 
 Three Months EndedNine Months Ended
 September 26, 2020September 28, 2019September 26, 2020September 28, 2019
Revenue$413,145 $289,399 $885,563 $787,232 
Cost of revenue:
Cost of product revenue214,079 149,463 429,060 403,392 
Amortization of acquired intangible assets225 3,095 1,695 9,283 
Total cost of revenue
214,304 152,558 430,755 412,675 
Gross profit198,841 136,841 454,808 374,557 
Operating expenses:
Research and development38,613 33,401 111,929 104,320 
Selling and marketing50,488 42,257 136,144 137,502 
General and administrative28,490 18,372 74,919 61,871 
Amortization of acquired intangible assets256 256 764 796 
Total operating expenses117,847 94,286 323,756 304,489 
Operating income80,994 42,555 131,052 70,068 
Other income, net42,240 900 41,837 3,713 
Income before income taxes123,234 43,455 172,889 73,781 
Income tax expense29,982 7,923 39,156 8,522 
Net income$93,252 $35,532 $133,733 $65,259 
Net income per share:
Basic$3.33 $1.26 $4.76 $2.33 
Diluted$3.27 $1.24 $4.69 $2.27 
Number of shares used in per share calculations:
Basic28,031 28,154 28,084 28,029 
Diluted28,539 28,650 28,502 28,759 
The accompanying notes are an integral part of the consolidated financial statements.
4



iROBOT CORPORATION
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(in thousands)
(unaudited)
 
 Three Months EndedNine Months Ended
 September 26, 2020September 28, 2019September 26, 2020September 28, 2019
Net income$93,252 $35,532 $133,733 $65,259 
Other comprehensive income (loss):
Net foreign currency translation adjustments5,600 (4,902)6,864 (5,578)
Net unrealized (losses) gains on cash flow hedges, net of tax(8,418)8,175 (5,379)11,437 
Net gains on cash flow hedge reclassified into earnings, net of tax(745)(138)(3,533)(300)
Net unrealized (losses) gains on marketable securities, net of tax(30)36 (10)244 
Total comprehensive income$89,659 $38,703 $131,675 $71,062 
The accompanying notes are an integral part of the consolidated financial statements.
5



iROBOT CORPORATION
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(in thousands)
(unaudited)
Three Months Ended
Common StockAdditional
Paid-In
Capital
Retained
Earnings
Accumulated
Other
Comprehensive
Income ("AOCI")
Stockholders’
Equity
SharesValue
Balance at June 27, 202027,998 $280 $184,436 $492,802 $4,544 $682,062 
Issuance of common stock under employee stock plans10  358 358 
Vesting of restricted stock units113 1 (1) 
Stock-based compensation9,843 9,843 
Stock withheld to cover tax withholdings requirements upon restricted stock vesting(1) (29)(29)
Other comprehensive loss(3,593)(3,593)
Directors' deferred compensation21 21 
Net income93,252 93,252 
Balance at September 26, 202028,120 $281 $194,628 $586,054 $951 $781,914 

Nine Months Ended
Common StockAdditional
Paid-In
Capital
Retained
Earnings
Accumulated
Other
Comprehensive
Income ("AOCI")
Stockholders’
Equity
SharesValue
Balance at December 28, 201928,352 $284 $196,455 $452,321 $3,009 $652,069 
Issuance of common stock under employee stock plans122 1 4,047 4,048 
Vesting of restricted stock units356 3 (3) 
Stock-based compensation20,904 20,904 
Stock withheld to cover tax withholdings requirements upon restricted stock vesting(46)(1,845)(1,845)
Other comprehensive loss(2,058)(2,058)
Directors' deferred compensation63 63 
Stock repurchases(664)(7)(24,993)(25,000)
Net income133,733 133,733 
Balance at September 26, 202028,120 $281 $194,628 $586,054 $951 $781,914 
The accompanying notes are an integral part of the consolidated financial statements.











6



iROBOT CORPORATION
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(in thousands)
(unaudited)
Three Months Ended
Common StockAdditional
Paid-In
Capital
Retained
Earnings
Accumulated
Other
Comprehensive
Income (Loss) ("AOCI")
Stockholders’
Equity
SharesValue
Balance at June 29, 201928,123 $281 $184,663 $396,748 $(2,116)$579,576 
Issuance of common stock under employee stock plans9  301 301 
Vesting of restricted stock units113 1 (1) 
Stock-based compensation4,284 4,284 
Other comprehensive income3,171 3,171 
Directors' deferred compensation21 21 
Net Income35,532 35,532 
Balance at September 28, 201928,245 $282 $189,268 $432,280 $1,055 $622,885 

Nine Months Ended
Common StockAdditional
Paid-In
Capital
Retained
Earnings
Accumulated
Other
Comprehensive
Income (Loss) ("AOCI")
Stockholders’
Equity
SharesValue
Balance at December 29, 201827,788 $278 $172,771 $367,021 $(4,748)$535,322 
Issuance of common stock under employee stock plans125 1 4,980 4,981 
Vesting of restricted stock units391 4 (4) 
Stock-based compensation18,742 18,742 
Stock withheld to cover tax withholdings requirements upon restricted stock vesting(59)(1)(7,276)(7,277)
Other comprehensive income5,803 5,803 
Directors' deferred compensation55 55 
Net Income65,259 65,259 
Balance at September 28, 201928,245 $282 $189,268 $432,280 $1,055 $622,885 
The accompanying notes are an integral part of the consolidated financial statements.
7



iROBOT CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)
 Nine Months Ended
 September 26, 2020September 28, 2019
Cash flows from operating activities:
Net income$133,733 $65,259 
Adjustments to reconcile net income to net cash provided by (used in) operating activities, net of the effects of acquisition:
Depreciation and amortization25,705 27,744 
Gain on equity investment(43,480) 
Stock-based compensation20,904 18,742 
Deferred income taxes, net10,939 (5,873)
Other 4,785 4,687 
Changes in operating assets and liabilities — (use) source
Accounts receivable(32,572)(10,948)
Inventory(61,006)(83,863)
Other assets(20,718)(8,155)
Accounts payable46,098 (27,256)
Accrued expenses and other liabilities12,358 (11,916)
Net cash provided by (used in) operating activities96,746 (31,579)
Cash flows from investing activities:
Additions of property and equipment(25,031)(27,080)
Change in other assets(3,729)(5,336)
Cash paid for business acquisition, net of cash acquired (2,817)
Sales and maturities of investments10,500 9,380 
Net cash used in investing activities(18,260)(25,853)
Cash flows from financing activities:
Proceeds from employee stock plans4,048 4,981 
Income tax withholding payment associated with restricted stock vesting(1,845)(7,277)
Stock repurchases(25,000) 
Net cash used in financing activities(22,797)(2,296)
Effect of exchange rate changes on cash and cash equivalents2,125 (103)
Net increase (decrease) in cash and cash equivalents57,814 (59,831)
Cash and cash equivalents, at beginning of period239,392 130,373 
Cash and cash equivalents, at end of period$297,206 $70,542 
The accompanying notes are an integral part of the consolidated financial statements.
8



iROBOT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
1. Description of Business
iRobot Corporation ("iRobot" or the "Company") designs and builds robots that empower people to do more both inside and outside of the home. iRobot's consumer robots help people find smarter ways to clean and accomplish more in their daily lives. The Company's portfolio of solutions features proprietary technologies for the connected home and advanced concepts in cleaning, mapping and navigation, human-robot interaction and physical solutions. Leveraging this portfolio, our engineers are building an ecosystem of robots to empower the smart home. The Company’s revenue is primarily generated from product sales through a variety of distribution channels, including chain stores and other national retailers, through the Company's own website and app, dedicated e-commerce websites, the online arms of traditional retailers, and through value-added distributors and resellers worldwide.
2. Summary of Significant Accounting Policies
Basis of Presentation
The accompanying consolidated financial statements include those of iRobot and its subsidiaries, after elimination of all intercompany balances and transactions. iRobot has prepared the accompanying unaudited consolidated financial statements in conformity with accounting principles generally accepted in the United States of America ("GAAP").
In the opinion of management, all adjustments necessary to the unaudited interim consolidated financial statements have been made to state fairly the Company's financial position. Interim results are not necessarily indicative of results for the full fiscal year or any future periods. The information included in this Form 10-Q should be read in conjunction with the Company's audited consolidated financial statements and notes thereto included in its Annual Report on Form 10-K for the fiscal year ended December 28, 2019, filed with the Securities and Exchange Commission on February 13, 2020.
The Company operates and reports using a 52-53 week fiscal year ending on the Saturday closest to December 31. Accordingly, the Company’s fiscal quarters end on the Saturday that falls closest to the last day of the third month of each quarter.
Recently Adopted Accounting Standards
In June 2016, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") No. 2016-13, "Measurement of Credit Losses on Financial Instruments," which amends the impairment model by requiring entities to use a forward-looking approach based on expected losses rather than incurred losses to estimate credit losses on certain types of financial instruments. The Company adopted the standard effective December 29, 2019 which resulted in no adjustment to the allowance for credit losses upon adoption. See the description of the Company’s "Credit Losses" accounting policy below.
In August 2018, the FASB issued ASU No. 2018-13, "Fair Value Measurement: Disclosure Framework—Changes to the Disclosure Requirements for Fair Value Measurement." The amendment modifies disclosure requirements related to fair value measurement. The Company adopted this standard effective December 29, 2019 which did not have a material impact on the Company's consolidated financial statements and related disclosures.
In August 2018, the FASB issued ASU No. 2018-15, "Intangibles - Goodwill and Other - Internal-Use Software." The new standard aligns the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software (and hosting arrangements that include an internal use software license). The Company adopted the standard using the prospective method effective December 29, 2019 which did not have a material impact on the Company's consolidated financial statements.
Recently Issued Accounting Standards
In December 2019, the FASB issued ASU No. 2019-12, "Income Taxes - Simplifying the Accounting for Income Taxes." The ASU simplifies the accounting for income taxes by removing certain exceptions to the general principles as well as clarifying and amending existing guidance to improve consistent application. The amendments to this ASU are effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2020, with early adoption permitted. Depending on the amendment, adoption may be applied on the retrospective, modified retrospective or prospective basis. The Company intends to adopt the ASU effective January 3, 2021, and is currently evaluating the impact to the consolidated financial statements.
From time to time, new accounting pronouncements are issued by FASB that are adopted by the Company as of the specified effective date. Unless otherwise discussed, the Company believes that recently issued standards, which are not yet effective, will not have a material impact on the Company’s consolidated financial statements upon adoption.
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iROBOT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (continued)
Impact of COVID-19
The global pandemic related to the novel coronavirus ("COVID-19") has resulted in significant economic disruption. The pandemic and associated actions and measures implemented by governments around the world to slow the spread of COVID-19 have altered macroeconomic conditions and created recession-like environments around the world. These dynamics had an adverse impact on the Company's financial and operating results during the first quarter of 2020. At the same time, mandated orders to "shelter-in-place" and other social distancing measures have directly and indirectly affected sales and supply chain activities.
During the second quarter of 2020, the Company observed increased demand as maintaining a clean home took on greater prominence during the pandemic with sell-through momentum building globally. The favorable demand environment continued to strengthen in the third quarter of 2020 with stronger-than-anticipated retail orders and robust growth in direct-to-consumer sales. As the global pandemic situation remains dynamic and subject to rapid and possibly material changes, additional impacts may arise of which the Company is not currently aware. The nature and extent of such impacts will depend on future developments, which are still highly uncertain. The Company will continue to actively monitor the situation and may take further actions that alter the business operations as may be required by federal, state, local or foreign authorities, or that the Company determines are in the best interests of its employees, customers, and stockholders.
In light of the COVID-19 pandemic, the Company evaluated its assets for impairment, including strategic investments, goodwill and long-lived assets. The Company considered the current and expected future economic and market conditions and determined that no impairment existed as of September 26, 2020. However, the Company is unable to predict how long the pandemic will persist or the timing and speed of any economic recovery that may follow. Any measures that prolong shelter-in-place or restrict business activities are highly likely to be harmful to the consumer product retail industry in general, and consequently, to the Company's business.
    Use of Estimates
The preparation of these financial statements in conformity with GAAP requires the Company to make estimates and assumptions that affect the reported amounts of assets and liabilities and revenues and expenses. These estimates and judgments include, but are not limited to, revenue recognition, including performance obligations, variable consideration and other obligations such as product returns and incentives; allowance for credit losses; warranty costs; valuation of goodwill and acquired intangible assets; valuation of financial instruments; evaluating loss contingencies; accounting for stock-based compensation including performance-based assessments; and accounting for income taxes and related valuation allowances. The Company bases these estimates and judgments on historical experience, market participant fair value considerations, projected future cash flows and various other factors that the Company believes are reasonable under the circumstances. Actual results may differ from the Company’s estimates.
Credit Losses
The Company is exposed to credit losses primarily through sales of its products. The Company assesses each customer's ability to pay by conducting a credit review which includes consideration of established credit ratings or an internal assessment of the customer's creditworthiness based on an analysis of their financial information when a credit rating is not available. The Company monitors the credit exposure through active review of customer balances. The Company's expected loss methodology for accounts receivable is developed using historical collection experience, current customer credit ratings, current and future economic and market conditions and a review of the current status of customers' account balances. Although the Company historically has not experienced significant credit losses as it relates to trade accounts receivable, the COVID-19 pandemic has caused uncertainty in some customer accounts. The Company recorded its estimate of credit losses, resulting in an increase to the reserve and bad debt expense, of $1.0 million and $5.5 million during the three and nine months ended September 26, 2020, respectively. As of September 26, 2020 and December 28, 2019, the Company had an allowance for credit losses of $6.5 million and $1.2 million, respectively.
The Company's exposure to credit losses may increase if its customers are adversely affected by changes in economic pressures or uncertainty associated with local or global economic recessions or other customer-specific factors. It is possible that there could be a material adverse impact to the carrying amount of accounts receivables if the liquidity of retailers, resellers and distributors continues to be impacted by disruptions related to the COVID-19 pandemic.
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iROBOT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (continued)
Tariff Refunds
On April 24, 2020, the Company was granted a temporary exclusion from Section 301 List 3 tariffs by the United States Trade Representative ("USTR"). This exclusion, as extended in August 2020, eliminates the 25% tariff on Roomba products imported from China until December 31, 2020 and entitled the Company to a refund of approximately $60.3 million in tariffs paid since the date the Section 301 List 3 tariffs were imposed. The Section 301 tariffs from which these products are now excluded were implemented at 10% beginning in September 2018 and increased to 25% in June 2019. While tariff refund claims are subject to the approval of U.S. Customs, the Company currently expects to recover the entire balance of $60.3 million within the next nine months. During the nine months ended September 26, 2020, the Company recognized approximately $40.0 million of refunds for tariffs paid in 2018 and 2019 as operating income (reduction to cost of product revenue). As of September 26, 2020, the Company had received $34.9 million of the tariff refund and the outstanding refund receivable was approximately $25.4 million which is recorded in other current assets on the consolidated balance sheet.
Strategic Investments
The Company holds non-marketable equity securities as part of its strategic investments portfolio. The Company classifies the majority of these securities as equity securities without readily determinable fair values and measures these investments at cost, less any impairment, adjusted for observable price changes. At September 26, 2020 and December 28, 2019, the Company's equity securities without readily determinable fair values and an equity method investment totaled $15.3 million and $21.0 million, respectively, and are included in other assets on the consolidated balance sheets.
On July 1, 2020, Teladoc Health, Inc. ("Teladoc") closed on its previously announced acquisition of InTouch Health, of which the Company held non-marketable equity securities. In exchange for its shares of InTouch Health, the Company received 0.2 million shares of Teladoc and recorded a gain of $38.6 million to other income, net during the three months ended September 26, 2020. The Teladoc shares received are subject to time based contractual sales restrictions which expire in January 2021. These shares are accounted for as marketable equity securities and measured at fair value with unrealized gains and losses recognized in other income, net at the end of each reporting period. As a result, the Company entered into an economic hedge in July 2020 to reduce the Company's exposure to stock price fluctuations during the restricted period. During the three months ended September 26, 2020, the Company recorded a net gain of $4.9 million from the remeasurements of Teladoc shares and related hedge. As of September 26, 2020, the shares in Teladoc were valued at $52.1 million and are recorded in short term investments on the consolidated balance sheet.
Net Income Per Share
Basic income per share is calculated using the Company's weighted-average outstanding common shares. Diluted income
per share is calculated using the Company's weighted-average outstanding common shares including the dilutive effect of stock
awards as determined under the treasury stock method.
The following table presents the calculation of both basic and diluted net income per share (in thousands, except per share amounts): 
 Three Months EndedNine Months Ended
 September 26, 2020September 28, 2019September 26, 2020September 28, 2019
Net income$93,252 $35,532 $133,733 $65,259 
Basic weighted-average common shares outstanding28,031 28,154 28,084 28,029 
Dilutive effect of employee stock awards508 496 418 730 
Diluted weighted-average common shares outstanding28,539 28,650 28,502 28,759 
Net income per share - Basic$3.33 $1.26 $4.76 $2.33 
Net income per share - Diluted$3.27 $1.24 $4.69 $2.27 
Employee stock awards representing approximately 0.1 million and 0.4 million shares of common stock for the three months ended September 26, 2020 and September 28, 2019, respectively, and approximately 0.2 million and 0.1 million shares of common stock for the nine months ended September 26, 2020 and September 28, 2019, respectively, were excluded from the computation of diluted earnings per share as their effect would have been antidilutive.

3. Revenue Recognition
The Company primarily derives its revenue from product sales. The Company sells products directly to consumers through on-line stores and indirectly through resellers and distributors. Revenue is recognized upon transfer of control of promised products or services to customers, generally as title and risk of loss passes, in an amount that reflects the consideration the Company expects to receive in exchange for those products or services. Revenue is recognized only to the extent that it is
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iROBOT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (continued)
probable that a significant reversal of revenue will not occur. Taxes collected from customers, which are subsequently remitted to governmental authorities, are excluded from revenue. Shipping and handling expenses are considered fulfillment activities and are expensed as incurred.
The Company’s product portfolio includes various consumer robots, many of which are Wi-Fi connected. The consumer robots are generally highly dependent on, and interrelated with, the embedded software and cannot function without the software. As such, the consumer robots are accounted for as a single performance obligation, and the revenue is recognized at a point in time when the control is transferred to distributors, resellers or directly to end customers through on-line stores. For certain consumer robots with Wi-Fi capability ("connected robots"), each sale represents an arrangement with multiple promises consisting of the robot, an app, cloud services and potential future unspecified software upgrades. The Company has determined that the app, cloud services and potential future unspecified software upgrades represent one promised service to the customer to enhance the functionality and interaction with the robot (referred to collectively as "Cloud Services").
For contracts that contain multiple performance obligations, the transaction price is allocated to each performance obligation based on a relative standalone selling price ("SSP"). The SSP reflects the Company's best estimate of what the selling prices of performance obligations would be if they were sold regularly on a standalone basis. Revenue allocated to the robots is recognized at a point in time when control is transferred. Revenue allocated to the Cloud Services is deferred and recognized on a straight-line basis over the estimated period the software upgrades and services are expected to be provided. For contracts with a duration of greater than one year, the transaction price allocated to performance obligations that are unsatisfied as of September 26, 2020 is $7.3 million. The Company does not disclose the value of unsatisfied performance obligations for contracts with an original expected duration of one year or less.
The Company’s products generally carry a one-year or two-year limited warranty that promises customers that delivered products are as specified. The Company does not consider these assurance-type warranties as a separate performance obligation and therefore, the Company accounts for such warranties under ASC 460, "Guarantees."
The Company provides limited rights of returns for direct-to-consumer sales generated through its on-line stores and certain resellers and distributors. The Company records an allowance for product returns based on specific terms and conditions included in the customer agreements or based on historical experience and the Company's expectation of future returns. In addition, the Company may provide other credits or incentives which are accounted for as variable consideration when estimating the amount of revenue to recognize. Where appropriate, these estimates take into consideration relevant factors such as the Company’s historical experience, current contractual requirements, specific known market events and forecasted inventory level in the channels. Overall, these reserves reflect the Company’s best estimates, and the actual amounts of consideration ultimately received may differ from the Company’s estimates. Returns and credits are estimated at contract inception and updated at the end of each reporting period as additional information becomes available and only to the extent that it is probable that a significant reversal of any incremental revenue will not occur. As of September 26, 2020, the Company has reserves for product returns of $51.5 million and other credits and incentives of $86.6 million. As of December 28, 2019, the Company had reserves for product returns of $55.2 million and other credits and incentives of $134.0 million. Revenue recognized during the three and nine months ended September 26, 2020 related to performance obligations satisfied in a prior period was not material.
Disaggregation of Revenue
The following table provides information about disaggregated revenue by geographical region (in thousands):
Three Months EndedNine Months Ended
September 26, 2020September 28, 2019September 26, 2020September 28, 2019
United States$206,276 $117,929 $428,389 $356,466 
EMEA114,477 93,688 252,184 251,150 
Other92,392 77,782 204,990 179,616 
Total revenue$413,145 $289,399 $885,563 $787,232 
Contract Balances
The following table provides information about receivables and contract liabilities from contracts with customers (in thousands):
September 26, 2020December 28, 2019
Accounts receivable, net$179,709 $146,161 
Contract liabilities12,063 6,991 
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iROBOT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (continued)
The Company invoices customers based upon contractual billing schedules, and accounts receivable are recorded when the right to consideration becomes unconditional. Contract liabilities include deferred revenue associated with the Cloud Services as well as prepayments received from customers in advance of product shipments. The change in the opening and closing balances of the Company’s contract assets and contract liabilities primarily results from the timing difference between the Company’s performance and the customer’s payment. During the three months ended September 26, 2020 and September 28, 2019, the Company recognized $1.8 million and $1.7 million, respectively, of the contract liability balance as revenue upon transfer of the products or services to customers. During the nine months ended September 26, 2020 and September 28, 2019, the Company recognized $4.6 million and $5.8 million, respectively, of the contract liability balance as revenue upon transfer of the products or services to customers.

4. Leases
The Company's leasing arrangements primarily consist of operating leases for its facilities which include corporate, sales and marketing and research and development offices. For leases with terms greater than 12 months, the Company records the related right-of-use asset and lease obligation at the present value of lease payments over the term. The Company's leases typically include rental escalation clauses, renewal options and/or termination options that are factored into the determination of lease payments when appropriate. The Company does not separate lease and nonlease components of contracts and excludes all variable lease payments from the measurement of right-of-use assets and lease liabilities. The Company's variable lease payments generally include usage based nonlease components. The Company's lease agreements do not contain any residual value guarantees or restrictive covenants. Leases with an initial term of 12 months or less are not recorded on the balance sheet. Lease expense is recognized on a straight-line basis over the lease term.
The Company's existing leases do not provide a readily determinable implicit rate. Therefore, the Company estimates its incremental borrowing rate to discount the lease payments based on information available at December 30, 2018 (date of initial application) or the lease commencement date for new leases post adoption. At September 26, 2020, the Company's weighted average discount rate was 3.56%, while the weighted average remaining lease term was 8.50 years.
The components of lease expense were as follows (in thousands):
Three Months EndedNine Months Ended
September 26, 2020September 28, 2019September 26, 2020September 28, 2019
Operating lease cost$2,287 $2,250 $6,932 $6,539 
Variable lease cost823 828 2,827 2,965 
Total lease cost$3,110 $3,078 $9,759 $9,504 
Supplemental cash flow information related to leases was as follows (in thousands):
Three Months EndedNine Months Ended
September 26, 2020September 28, 2019September 26, 2020September 28, 2019
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases$2,750 $2,566 $7,516 $7,447 
Right-of-use assets obtained in exchange for lease obligations:
Operating leases$744 $460 $2,310 $53,227 
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iROBOT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (continued)
Maturities of operating lease liabilities were as follows as of September 26, 2020 (in thousands):
Remainder of 2020$1,613 
20218,845 
20228,564 
20237,592 
20246,535 
Thereafter35,017 
Total minimum lease payments$68,166 
Less: imputed interest9,926 
Present value of future minimum lease payments$58,240 
Less: current portion of operating lease liabilities (Note 7)6,343 
Long-term lease liabilities$51,897 

Financial Statement Impact of Adopting ASC 842
The Company adopted ASC 842 effective December 30, 2018 using the alternative transition method. Under this alternative transition method, a company is permitted to use its effective date as the date of initial application without restating comparative period financial statements. The Company elected the package of practical expedients permitted under the transition guidance, which allowed the Company to carryforward its historical assessments of (1) whether contracts are or contain leases, (2) lease classification and (3) initial direct costs. In addition, the Company elected the practical expedient to use hindsight in determining lease term. The adoption of the new standard resulted in the recognition of right-of-use assets and lease liabilities of approximately $52.8 million and $67.3 million, respectively. The standard did not materially impact the Company's consolidated income or cash flows.

5. Inventory
Inventory consists of the following (in thousands):
September 26, 2020December 28, 2019
Raw materials$479 $2,825 
Finished goods217,655 154,522 
$218,134 $157,347 

6. Goodwill and Other Intangible Assets
The following table summarizes the activity in the carrying amount of goodwill for the nine months ended September 26, 2020 (in thousands):
Balance as of December 28, 2019$118,732 
Effect of foreign currency translation3,843 
Balance as of September 26, 2020$122,575 
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iROBOT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (continued)

Intangible assets consisted of the following (in thousands):
 September 26, 2020December 28, 2019
 CostAccumulated
Amortization
NetCostAccumulated
Amortization
Net
Completed technology$28,100 $26,300 $1,800 $28,100 $24,605 $3,495 
Tradename100 100  100 100  
Customer relationships11,436 3,090 8,346 11,095 2,302 8,793 
Reacquired distribution rights33,100 33,100  31,680 31,680  
Non-competition agreements268 268  256 192 64 
Total$73,004 $62,858 $10,146 $71,231 $58,879 $12,352 
Amortization expense related to acquired intangible assets was $0.5 million and $3.4 million for the three months ended September 26, 2020 and September 28, 2019, respectively. Amortization expense related to acquired intangible assets was $2.5 million and $10.1 million for the nine months ended September 26, 2020 and September 28, 2019, respectively.
The estimated future amortization expense related to current intangible assets in each of the five succeeding fiscal years is expected to be as follows (in thousands):
Cost of RevenueOperating ExpensesTotal
Remainder of 2020$225 $242 $467 
2021900 804 1,704 
2022675 804 1,479 
2023 804 804 
2024 804 804 
Thereafter 4,888 4,888 
Total$1,800 $8,346 $10,146 

7. Accrued Expenses
Accrued expenses consisted of the following at (in thousands):
September 26, 2020December 28, 2019
Accrued bonus$23,575 $12,541 
Accrued compensation and benefits18,858 13,331 
Accrued warranty14,661 13,856 
Accrued sales and other indirect taxes payable10,239 12,440 
Accrued federal and state income taxes6,511 3,378 
Current portion of operating lease liabilities6,343 6,843 
Accrued direct fulfillment costs4,330 10,582 
Accrued other10,252 8,797 
$94,769 $81,768 

8. Derivative Instruments
The Company operates internationally and, in the normal course of business, is exposed to fluctuations in foreign currency exchange rates. The foreign currency exposures typically arise from transactions denominated in currencies other than the functional currency of the Company's operations, primarily the British Pound, Canadian Dollar, Euro and Japanese Yen. The Company uses derivative instruments that are designated in cash flow hedge relationships to reduce or eliminate the effects of foreign exchange rate changes on sales. These contracts typically have maturities of thirty-seven months or less. At September 26, 2020 and December 28, 2019, the Company had outstanding cash flow hedges with a total notional value of $430.2 million and $424.6 million, respectively.
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iROBOT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (continued)
The Company also enters into economic hedges that are not designated as hedges from an accounting standpoint to reduce or eliminate the effects of foreign exchange rate changes typically related to short term trade receivables and payables. These contracts typically have maturities of twelve months or less. At September 26, 2020 and December 28, 2019, the Company had outstanding foreign currency economic hedges with a total notional value of $26.8 million and $58.4 million, respectively.
As described in Note 2, during July 2020, the Company entered into a forward sale contract as an economic hedge to reduce the Company's exposure to stock price fluctuations on its marketable equity securities. The contract has a maturity date of January 2021. At September 26, 2020, the total notional value of this economic hedge was $51.5 million.
The fair values of derivative instruments are as follows (in thousands):
Fair Value
ClassificationSeptember 26, 2020December 28, 2019
Derivatives not designated as hedging instruments:
Foreign currency forward contractsOther current assets$724 $1,855 
Foreign currency forward contractsAccrued expenses1,177 297 
Forward sale contractAccrued expenses626  
Derivatives designated as cash flow hedges:
Foreign currency forward contractsOther current assets$2,781 $4,347 
Foreign currency forward contractsOther assets3,136 9,112 
Foreign currency forward contractsAccrued expenses435 47 
Foreign currency forward contractsLong-term liabilities3,689 414 

Gains (losses) associated with derivative instruments not designated as hedging instruments are as follows (in thousands):
Three Months EndedNine Months Ended
ClassificationSeptember 26, 2020September 28, 2019September 26, 2020September 28, 2019
Gain (loss) recognized in incomeOther income, net$(2,232)$852 $(3,475)$200 

The following tables reflect the effect of derivatives designated as cash flow hedging (in thousands): 
Gain (loss) recognized in OCI on Derivative (1)
Three Months EndedNine Months Ended
September 26, 2020September 28, 2019September 26, 2020September 28, 2019
Foreign currency forward contracts$(11,230)$10,905 $(7,177)