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 2020-06-27 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 2020-07-21 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 irbtexhibit31162720.htm
EX-31.2 irbtexhibit31262720.htm
EX-32.1 irbtexhibit32162720.htm

iRobot Earnings 2020-06-27

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

Document
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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 June 27, 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)
 ______________________________________________
Delaware
77-0259335
(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 class
Trading Symbol(s)
Name of each exchange on which registered
Common Stock, $0.01 par value
IRBT
The 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 filer
Accelerated filer
 
 
 
 
Non-accelerated filer
Smaller 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 July 25, 2020 was 28,005,989.

 
 
 
 
 
        




iROBOT CORPORATION
FORM 10-Q
FOR THE QUARTER ENDED JUNE 27, 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)
 
 
June 27, 2020
 
December 28, 2019
ASSETS
Current assets:
 
 
 
Cash and cash equivalents
$
230,734

 
$
239,392

Short term investments
11,560

 
17,032

Accounts receivable, net
128,334

 
146,161

Inventory
133,055

 
157,347

Other current assets
92,555

 
34,285

   Total current assets
596,238

 
594,217

Property and equipment, net
78,432

 
75,988

Operating lease right-of-use assets
45,978

 
47,478

Deferred tax assets
39,237

 
41,791

Goodwill
119,521

 
118,732

Intangible assets, net
10,424

 
12,352

Other assets
30,938

 
30,195

   Total assets
$
920,768

 
$
920,753

LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
 
 
 
Accounts payable
$
95,522

 
$
116,185

Accrued expenses
73,745

 
81,768

Deferred revenue and customer advances
3,512

 
4,549

   Total current liabilities
172,779

 
202,502

Operating lease liabilities
52,819

 
54,928

Deferred tax liabilities
1,042

 
912

Other long-term liabilities
12,066

 
10,342

   Total long-term liabilities
65,927

 
66,182

   Total liabilities
238,706

 
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; 27,998 and 28,352 shares issued and outstanding, respectively
280

 
284

Additional paid-in capital
184,436

 
196,455

Retained earnings
492,802

 
452,321

Accumulated other comprehensive income
4,544

 
3,009

   Total stockholders’ equity
682,062

 
652,069

   Total liabilities and stockholders’ equity
$
920,768

 
$
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 Ended
 
Six Months Ended
 
June 27, 2020
 
June 29, 2019
 
June 27, 2020
 
June 29, 2019
Revenue
$
279,883

 
$
260,172

 
$
472,418

 
$
497,833

Cost of revenue:
 
 
 
 
 
 
 
Cost of product revenue
100,686

 
138,891

 
214,981

 
253,929

Amortization of acquired intangible assets
1,185

 
3,111

 
1,470

 
6,188

Total cost of revenue
101,871

 
142,002

 
216,451

 
260,117

Gross profit
178,012

 
118,170

 
255,967

 
237,716

Operating expenses:
 
 
 
 
 
 
 
Research and development
36,557

 
35,650

 
73,316

 
70,919

Selling and marketing
49,062

 
56,409

 
85,656

 
95,245

General and administrative
21,856

 
20,592

 
46,429

 
43,499

Amortization of acquired intangible assets
254

 
269

 
508

 
540

Total operating expenses
107,729

 
112,920

 
205,909

 
210,203

Operating income
70,283

 
5,250

 
50,058

 
27,513

Other (expense) income, net
(384
)
 
1,533

 
(403
)
 
2,813

Income before income taxes
69,899

 
6,783

 
49,655

 
30,326

Income tax expense (benefit)
11,283

 
(424
)
 
9,174

 
599

Net income
$
58,616

 
$
7,207

 
$
40,481

 
$
29,727

Net income per share:
 
 
 
 
 
 
 
Basic
$
2.10

 
$
0.26

 
$
1.44

 
$
1.06

Diluted
$
2.07

 
$
0.25

 
$
1.42

 
$
1.03

Number of shares used in per share calculations:
 
 
 
 
 
 
 
Basic
27,923

 
28,079

 
28,110

 
27,970

Diluted
28,280

 
28,763

 
28,414

 
28,779


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 Ended
 
Six Months Ended
 
June 27, 2020
 
June 29, 2019
 
June 27, 2020
 
June 29, 2019
Net income
$
58,616

 
$
7,207

 
$
40,481

 
$
29,727

Other comprehensive income (loss):
 
 
 
 
 
 
 
Net foreign currency translation adjustments
2,178

 
1,794

 
1,264

 
(676
)
Net unrealized (losses) gains on cash flow hedges, net of tax
(2,634
)
 
(1,540
)
 
3,040

 
3,261

Net (gains) losses on cash flow hedge reclassified into earnings, net of tax
(1,321
)
 
(267
)
 
(2,789
)
 
(161
)
Net unrealized gains on marketable securities, net of tax
37

 
95

 
20

 
208

Total comprehensive income
$
56,876

 
$
7,289

 
$
42,016

 
$
32,359

The accompanying notes are an integral part of the consolidated financial statements.

5




iROBOT CORPORATION
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(in thousands)
(unaudited)

 
Common Stock
 
Additional
Paid-In
Capital
 
Retained
Earnings
 
Accumulated
Other
Comprehensive
Income ("AOCI")
 
Stockholders’
Equity
 
Shares
 
Value
 
Balance at March 28, 2020
27,876

 
$
279

 
$
175,790

 
$
434,186

 
$
6,284

 
$
616,539

Issuance of common stock under employee stock plans
72

 
1

 
2,755

 
 
 
 
 
2,756

Vesting of restricted stock units
50

 

 

 
 
 
 
 

Stock-based compensation
 
 
 
 
5,870

 
 
 
 
 
5,870

Other comprehensive loss
 
 
 
 
 
 
 
 
(1,740
)
 
(1,740
)
Directors' deferred compensation
 
 
 
 
21

 
 
 
 
 
21

Net income
 
 
 
 
 
 
58,616

 
 
 
58,616

Balance at June 27, 2020
27,998

 
$
280

 
$
184,436

 
$
492,802

 
$
4,544

 
$
682,062


 
Common Stock
 
Additional
Paid-In
Capital
 
Retained
Earnings
 
Accumulated
Other
Comprehensive
Income ("AOCI")
 
Stockholders’
Equity
 
Shares
 
Value
 
Balance at December 28, 2019
28,352

 
$
284

 
$
196,455

 
$
452,321

 
$
3,009

 
$
652,069

Issuance of common stock under employee stock plans
112

 
1

 
3,689

 

 

 
3,690

Vesting of restricted stock units
243

 
2

 
(2
)
 

 

 

Stock-based compensation


 


 
11,061

 

 

 
11,061

Stock withheld to cover tax withholdings requirements upon restricted stock vesting
(45
)
 

 
(1,816
)
 

 

 
(1,816
)
Other comprehensive income


 


 


 

 
1,535

 
1,535

Directors' deferred compensation


 


 
42

 

 


 
42

Stock repurchases
(664
)
 
(7
)
 
(24,993
)
 

 

 
(25,000
)
Net income


 


 


 
40,481

 

 
40,481

Balance at June 27, 2020
27,998

 
$
280

 
$
184,436

 
$
492,802

 
$
4,544

 
$
682,062

The accompanying notes are an integral part of the consolidated financial statements.













6




iROBOT CORPORATION
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(in thousands)
(unaudited)
 
Common Stock
 
Additional
Paid-In
Capital
 
Retained
Earnings
 
Accumulated
Other
Comprehensive
Income (Loss) ("AOCI")
 
Stockholders’
Equity
 
Shares
 
Value
 
Balance at March 30, 2019
28,038

 
$
280

 
$
175,000

 
$
389,541

 
$
(2,198
)
 
$
562,623

Issuance of common stock under employee stock plans
39

 

 
2,117

 
 
 
 
 
2,117

Vesting of restricted stock units
47

 
1

 
(1
)
 
 
 
 
 

Stock-based compensation
 
 
 
 
7,594

 
 
 
 
 
7,594

Stock withheld to cover tax withholdings requirements upon restricted stock vesting
(1
)
 

 
(65
)
 
 
 
 
 
(65
)
Other comprehensive income
 
 
 
 
 
 
 
 
82

 
82

Directors' deferred compensation
 
 
 
 
18

 
 
 
 
 
18

Net Income
 
 
 
 
 
 
7,207

 
 
 
7,207

Balance at June 29, 2019
28,123

 
$
281

 
$
184,663

 
$
396,748


$
(2,116
)
 
$
579,576


 
Common Stock
 
Additional
Paid-In
Capital
 
Retained
Earnings
 
Accumulated
Other
Comprehensive
Income (Loss) ("AOCI")
 
Stockholders’
Equity
 
Shares
 
Value
 
Balance at December 29, 2018
27,788

 
$
278

 
$
172,771

 
$
367,021

 
$
(4,748
)
 
$
535,322

Issuance of common stock under employee stock plans
116

 
1

 
4,679

 
 
 
 
 
4,680

Vesting of restricted stock units
278

 
3

 
(3
)
 
 
 
 
 

Stock-based compensation

 

 
14,458

 
 
 
 
 
14,458

Stock withheld to cover tax withholdings requirements upon restricted stock vesting
(59
)
 
(1
)
 
(7,276
)
 
 
 
 
 
(7,277
)
Other comprehensive income
 
 
 
 

 
 
 
2,632

 
2,632

Directors' deferred compensation
 
 
 
 
34

 
 
 
 
 
34

Net Income
 
 
 
 
 
 
29,727

 
 
 
29,727

Balance at June 29, 2019
28,123

 
$
281

 
$
184,663

 
$
396,748

 
$
(2,116
)
 
$
579,576



7




iROBOT CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)
 
Six Months Ended
 
June 27, 2020
 
June 29, 2019
Cash flows from operating activities:
 
 
 
Net income
$
40,481

 
$
29,727

Adjustments to reconcile net income to net cash provided by operating activities, net of the effects of acquisition:
 
 
 
Depreciation and amortization
17,784

 
17,905

Stock-based compensation
11,061

 
14,458

Deferred income taxes, net
2,579

 
535

Other
3,162

 
3,106

Changes in operating assets and liabilities — (use) source
 
 
 
Accounts receivable
17,891

 
67,808

Inventory
24,137

 
(27,112
)
Other current assets
(57,813
)
 
(14,246
)
Accounts payable
(20,576
)
 
(52,835
)
Accrued expenses and other liabilities
(10,549
)
 
(18,043
)
Net cash provided by operating activities
28,157

 
21,303

Cash flows from investing activities:
 
 
 
Additions of property and equipment
(18,968
)
 
(14,705
)
Change in other assets
(2,125
)
 
(4,541
)
Cash paid for business acquisition, net of cash acquired

 
(2,817
)
Sales and maturities of investments
7,000

 
5,880

Net cash used in investing activities
(14,093
)
 
(16,183
)
Cash flows from financing activities:
 
 
 
Proceeds from employee stock plans
3,690

 
4,680

Income tax withholding payment associated with restricted stock vesting
(1,816
)
 
(7,277
)
Stock repurchases
(25,000
)
 

Net cash used in financing activities
(23,126
)
 
(2,597
)
Effect of exchange rate changes on cash and cash equivalents
404

 
(101
)
Net (decrease) increase in cash and cash equivalents
(8,658
)
 
2,422

Cash and cash equivalents, at beginning of period
239,392

 
130,373

Cash and cash equivalents, at end of period
$
230,734

 
$
132,795

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 its on-line stores, 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.

9

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 have had an adverse impact on the Company's financial and operating results. 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.
The Company observed increased demand during the second quarter of 2020 as maintaining a clean home has taken on greater prominence during the pandemic with sell-through momentum building globally over the past several months. However, the Company expects to continue to be impacted as the 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 June 27, 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 $0.0 million and $4.5 million during the three and six months ended June 27, 2020, respectively. As of June 27, 2020 and December 28, 2019, the Company had an allowance for credit losses of $5.7 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.

10

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. This exclusion eliminates the 25% tariff on Roomba products until August 7, 2020 and entitles the Company to a refund of approximately $57.2 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 $57.2 million. During the three months ended June 27, 2020, the Company recognized approximately $48.7 million of operating income (reduction to cost of product revenue) related to tariff refunds while $8.5 million relates to product on hand and has been recognized as reductions to inventory. All tariff refunds are expected to be received within the next twelve months and are recorded in other current assets on the consolidated balance sheet. As of June 27, 2020, the outstanding tariff refund was approximately $56.7 million.
Other Assets
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 June 27, 2020 and December 28, 2019, other assets consisted primarily of equity securities without readily determinable fair values and an equity method investment totaling $21.7 million and $21.0 million, respectively. On July 1, 2020, Teladoc Health, Inc. 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 Teledoc and will record a gain of approximately $38.6 million to other (expense) income, net during the third quarter of 2020. The Teledoc shares received are subject to time based contractual sales restrictions which expire in January 2021. These shares will be accounted for as marketable equity securities and measured at fair value with unrealized gains and losses recognized in other (expense) 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.
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 Ended
 
Six Months Ended
 
June 27, 2020
 
June 29, 2019
 
June 27, 2020
 
June 29, 2019
Net income
$
58,616

 
$
7,207

 
$
40,481

 
$
29,727

Basic weighted-average common shares outstanding
27,923

 
28,079

 
28,110

 
27,970

Dilutive effect of employee stock awards
357

 
684

 
304

 
809

Diluted weighted-average common shares outstanding
28,280

 
28,763

 
28,414

 
28,779

Net income per share - Basic
$
2.10

 
$
0.26

 
$
1.44

 
$
1.06

Net income per share - Diluted
$
2.07

 
$
0.25

 
$
1.42

 
$
1.03

Employee stock awards representing approximately 0.2 million shares of common stock for the three months ended June 27, 2020 and June 29, 2019, and approximately 0.3 million and 0.1 million shares of common stock for the six months ended June 27, 2020 and June 29, 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 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.

11

iROBOT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (continued)

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 June 27, 2020 is $5.3 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 June 27, 2020, the Company has reserves for product returns of $49.2 million and other credits and incentives of $76.6 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 six months ended June 27, 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 Ended
 
Six Months Ended
 
June 27, 2020
 
June 29, 2019
 
June 27, 2020
 
June 29, 2019
United States
$
140,146

 
$
124,472

 
$
222,113

 
$
238,537

EMEA
71,048

 
82,893

 
137,707

 
157,462

Other
68,689

 
52,807

 
112,598

 
101,834

Total revenue
$
279,883

 
$
260,172

 
$
472,418

 
$
497,833


Contract Balances
The following table provides information about receivables and contract liabilities from contracts with customers (in thousands):
 
June 27, 2020
 
December 28, 2019
Accounts receivable, net
$
128,334

 
$
146,161

Contract liabilities
6,578

 
6,991

The Company invoices customers based upon contractual billing schedules, and accounts receivable are recorded when the right to consideration becomes unconditional. Contract liabilities include customer deposits which relate to prepayments received from customers in advance of product shipments as well as deferred revenue associated with the Cloud Services. The

12

iROBOT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (continued)

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 June 27, 2020 and June 29, 2019, the Company recognized $3.8 million and $5.3 million, respectively, of the contract liability balance as revenue upon transfer of the products or services to customers. During the six months ended June 27, 2020 and June 29, 2019, the Company recognized $4.3 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 June 27, 2020, the Company's weighted average discount rate was 3.58%, while the weighted average remaining lease term was 8.75 years.
The components of lease expense were as follows (in thousands):
 
Three Months Ended
 
Six Months Ended
 
June 27, 2020
 
June 29, 2019
 
June 27, 2020
 
June 29, 2019
Operating lease cost
$
2,289

 
$
1,969

 
$
4,645

 
$
3,939

Variable lease cost
882

 
1,316

 
2,004

 
2,136

Total lease cost
$
3,171

 
$
3,285

 
$
6,649

 
$
6,075


Supplemental cash flow information related to leases was as follows (in thousands):
 
Three Months Ended
 
Six Months Ended
 
June 27, 2020
 
June 29, 2019
 
June 27, 2020
 
June 29, 2019
Cash paid for amounts included in the measurement of lease liabilities:
 
 
 
 
 
 
 
Operating cash flows from operating leases
$
2,710

 
$
2,865

 
$
4,737

 
$
4,881

Right-of-use assets obtained in exchange for lease obligations:
 
 
 
 
 
 
 
Operating leases
$
1,566

 
$

 
$
1,566

 
$
52,767



13

iROBOT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (continued)

Maturities of operating lease liabilities were as follows as of June 27, 2020 (in thousands):
 
Operating leases
Remainder of 2020
$
4,308

2021
8,529

2022
8,245

2023
7,345

2024
6,508

Thereafter
34,963

Total minimum lease payments
$
69,898

Less: imputed interest
10,405

Present value of future minimum lease payments
$
59,493

Less: current portion of operating lease liabilities (Note 7)
6,674

Long-term lease liabilities
$
52,819



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):
 
June 27, 2020
 
December 28, 2019
Raw materials
$
198

 
$
2,825

Finished goods
132,857

 
154,522

 
$
133,055

 
$
157,347



6. Goodwill and Other Intangible Assets
The following table summarizes the activity in the carrying amount of goodwill for the six months ended June 27, 2020 (in thousands):
Balance as of December 28, 2019
$
118,732

Effect of foreign currency translation
789

Balance as of June 27, 2020
$
119,521



14

iROBOT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (continued)


Intangible assets consisted of the following (in thousands):
 
June 27, 2020
 
December 28, 2019
 
Cost
 
Accumulated
Amortization
 
Net
 
Cost
 
Accumulated
Amortization
 
Net
Completed technology
$
28,100

 
$
26,075

 
$
2,025

 
$
28,100

 
$
24,605

 
$
3,495

Tradename
100

 
100

 

 
100

 
100

 

Customer relationships
11,165

 
2,787

 
8,378

 
11,095

 
2,302

 
8,793

Reacquired distribution rights
31,972

 
31,972

 

 
31,680

 
31,680

 

Non-competition agreements
258

 
237


21

 
256

 
192

 
64

Total
$
71,595

 
$
61,171

 
$
10,424

 
$
71,231

 
$
58,879

 
$
12,352


Amortization expense related to acquired intangible assets was $1.4 million and $3.4 million for the three months ended June 27, 2020 and June 29, 2019, respectively. Amortization expense related to acquired intangible assets was $2.0 million and $6.7 million for the six months ended June 27, 2020 and June 29, 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 Revenue
 
Operating Expenses
 
Total
Remainder of 2020
$
450

 
$
493

 
$
943

2021
900

 
786

 
1,686

2022
675

 
786

 
1,461

2023

 
786

 
786

2024

 
786

 
786

Thereafter

 
4,762

 
4,762

Total
$
2,025

 
$
8,399

 
$
10,424



7. Accrued Expenses
Accrued expenses consisted of the following at (in thousands):
 
June 27, 2020
 
December 28, 2019
Accrued other compensation
$
14,907

 
$
13,331

Accrued warranty
13,769

 
13,856

Accrued federal and state income taxes
10,265

 
3,378

Accrued bonus
7,821

 
12,541

Accrued sales and other indirect taxes payable
7,134

 
12,440

Current portion of operating lease liabilities
6,674

 
6,843

Accrued direct fulfillment costs
4,194

 
10,582

Accrued other
8,981

 
8,797

 
$
73,745

 
$
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 June 27, 2020 and December 28, 2019, the Company had outstanding cash flow hedges with a total notional value of $411.2 million and $424.6 million, respectively.

15

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 June 27, 2020 and December 28, 2019, the Company had outstanding economic hedges with a total notional value of $61.1 million and $58.4 million, respectively.
The fair values of derivative instruments are as follows (in thousands):
 
 
 
Fair Value
 
Classification
 
June 27, 2020
 
December 28, 2019
Derivatives not designated as hedging instruments:
 
 
 
Foreign currency forward contracts
Other current assets
 
$
1,473

 
$
1,855

Foreign currency forward contracts
Accrued expenses
 
679

 
297

Derivatives designated as cash flow hedges:
 
 
 
Foreign currency forward contracts
Other current assets
 
$
5,737

 
$
4,347

Foreign currency forward contracts
Other assets
 
8,691

 
9,112

Foreign currency forward contracts
Accrued expenses
 
27

 
47

Foreign currency forward contracts
Long-term liabilities
 
600

 
414


Gains (losses) associated with derivative instruments not designated as hedging instruments are as follows (in thousands):
 
 
 
Three Months Ended
 
Six Months Ended
 
Classification
 
June 27, 2020
 
June 29, 2019
 
June 27, 2020
 
June 29, 2019
Loss recognized in income
Other (expense) income, net
 
$
(701
)
 
$
(1,085
)
 
$
(1,247
)
 
$
(652
)


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 Ended
 
Six Months Ended
 
 
June 27, 2020
 
June 29, 2019
 
June 27, 2020
 
June 29, 2019
Foreign currency forward contracts
 
$
(3,512
)
 
$
(2,054
)
 
$
4,053

 
$
4,350


(1)
The amount represents the change in fair value of derivative contracts due to changes in spot rates.
 
 
Gain (loss) recognized in earnings on cash flow hedging instruments
 
 
Three Months Ended
 
Six Months Ended
 
 
June 27, 2020
 
June 29, 2019
 
June 27, 2020
 
June 29, 2019
 
 
Revenue
 
Revenue
Consolidated statements of operations in which the effects of cash flow hedging instruments are recorded
 
$
279,883

 
$
260,172

 
$
472,418

 
$
497,833

 
 
 
 
 
 
 
 
 
Gain (loss) on cash flow hedging relationships: