Irobot case

Running Head: INDIVIAUAL CASE STUDY 1

1

IROBOT

SWOT Analysis

Strengths

A major strength for iRobot is that they were the first company to product and sell robots in order to consumers to execute domestic chores in a new innovative and efficient manner. iRobot was able to minimize price for consumers when launching their products and make their products more attainable, giving the organization brand recognition and a healthy financial position. iRobot features core competencies of design, development, manufacturing, and marketing of robots. iRobot has a strong ability to from alliances with large companies and improve their products through these alliances. iRobot has an interest in entering new market segments and has a history of being successful doing so. Reference Appendix 1.

Weaknesses

iRobot is highly dependent on third-part suppliers to manufacture their products. The company also depends on sales from a limited market outreach, that concentrates only on a number of consumers. iRobot has also not focused on product innovation and reaching new customers. Reference Appendix 2.

Opportunities

iRobot has several opportunities. One of these is the continues economic upturn that has allowed consumers to change their spending habits and have more disposable income. Also, iRobot has growth potential in new markets through existing relationships with the United States armed forces. iRobot has the opportunity to use new advancements in technology to expand their market reach, introduce new products, and to improve the current product line to meet new customer demands. Reference Appendix 3.

Threats

A major threat to iRobot is increased competition within the robotics industry. New competition from larger companies could threaten their position as a market leader. Also changes in supply chain policies would be a threat to the company’s success as they are dependent upon their suppliers. Reference Appendix 4.

Financial Statements

Income Statement 2016, 2017, 2018 (retrieved from https://www.sec.gov/)

Balance Sheets

2018 (retrieved from https://www.sec.gov/)

2017 (retrieved from https://www.sec.gov/)

2016 (retrieved from https://www.sec.gov/)

Statement of Cash Flows 2016, 2017, 2018 (retrieved from https://www.sec.gov/)

Financial Ratios

Ratio

2018

2017

2016

Gross Profit Margin

50.836%

49.004%

48.336%

Operating Profit Margin

9.685%

8.223%

8.712%

Net Profit Margin

8.053%

5.765%

6.348%

Return on Assets

11.472%

7.369%

8.257%

Return on Invested Capital

16.437%

10.835%

10.782%

ROE

16.437%

10.835%

10.782%

Current

2.406

2.198

3.406

Debt to Assets

0

0

0

Long-term Debt to Capital

0

0

0

Debt to Equity

0

0

0

Financial Ratios Analysis

iRobot’s financial performance has made it a leading company within the robotic industry for the everyday consumer. The organization has displayed a consistent growth in Gross profit margin, increasing from 48.336% in 2016 to 50.836% in 2018, while continuing to maintain a net profit margin throughout these 3 years. The organization has continued to maintain an operating profit margin throughout all 3 years, without it only decreasing slightly between 2016 and 2017. iRobot operates under zero debt, offering the organization financial freedom from typical debts seen by some competitors. iRobot over the last three years of operation have showed consistent growth and profits and has attained maturity and competitiveness within the robotic industry.

Appendix 1

Appendix 2

Appendix 3

TOWS

Strengths (Internal)

1. High product quality

2. Healthy financial position

3. Strong brand portfolio

4. Ownership of intellectual property rights

Weaknesses (Internal)

1. Poor financial planning

2. Insufficient marketing and promotional activities

3. Poor inventory management

4. Lack of research and development

Opportunities (External)

1. Economic upturns

2. New customer trends

3. Development of new technologies

4. Rise in disposable income among consumers

High product quality and a healthy financial position allows iRobot to take advantage of new developments in technology and continue to gain profit during periods of economic upturns.

Better financial planning during economic upturns will allow the company to maintain a healthy financial position. Improving inventory management can better reflect how the company provides products to the consumer.

Threats (External)

1. Supplier bargaining power

2. Seasonal demand of products

3. Imitation/counterfeit products

4. Intense competition

Imitation and counterfeit products can be controlled through the organizations’ ownership intellectual property rights of its products, this also allows their high-quality products to be different from the competitors.

Better financial planning will supplement for greater supplier bargaining power and the seasonal demand of products.

1

Consolidated Balance Sheets - USD ($) $ in Thousands Dec. 30, 2017 Dec. 31, 2016 Current assets: Cash and cash equivalents $ 128,635 $ 214,523 Short term investments 37,225 39,930 Accounts receivable, net 142,829 73,048 Inventory 106,932 50,578 Other current assets 19,105 5,591 Total current assets 434,726 383,670 Property and equipment, net 44,579 27,532 Deferred tax assets 31,531 30,585 Goodwill 121,440 41,041 Intangible assets, net 44,712 12,207 Other assets 14,534 12,877 Total assets 691,522 507,912 Current liabilities: Accounts payable 116,316 67,281 Accrued expenses 73,647 40,869 Deferred revenue and customer advances 7,761 4,486 Total current liabilities 197,724 112,636 Deferred tax liabilities 9,539 0 Other long term liabilities 13,932 6,320 Total long term liabilities 23,471 6,320 Total liabilities 221,195 118,956 Commitments and contingencies (Note 14): Preferred stock, 5,000,000 shares authorized and none outstanding 0 0 Common stock, $0.01 par value, 100,000,000 shares authorized; 27,945,144 and 27,237,870 shares issued and outstanding at December 30, 2017 and December 31, 2016, respectively

279 272

Additional paid-in capital 190,067 161,885 Retained earnings 277,989 226,950 Accumulated other comprehensive income (loss) 1,992 (151) Total stockholders’ equity 470,327 388,956 Total liabilities and stockholders’ equity $ 691,522 $ 507,912

Consolidated Balance Sheets - USD ($) $ in Thousands Dec. 30, 2017Dec. 31, 2016

Current assets:

Cash and cash equivalents $ 128,635$ 214,523

Short term investments 37,22539,930

Accounts receivable, net 142,82973,048

Inventory 106,93250,578

Other current assets 19,1055,591

Total current assets 434,726383,670

Property and equipment, net 44,57927,532

Deferred tax assets 31,53130,585

Goodwill 121,44041,041

Intangible assets, net 44,71212,207

Other assets 14,53412,877

Total assets 691,522507,912

Current liabilities:

Accounts payable 116,31667,281

Accrued expenses 73,64740,869

Deferred revenue and customer advances 7,7614,486

Total current liabilities 197,724112,636

Deferred tax liabilities 9,539 0

Other long term liabilities 13,9326,320

Total long term liabilities 23,4716,320

Total liabilities 221,195118,956

Commitments and contingencies (Note 14):

Preferred stock, 5,000,000 shares authorized and none outstanding 0 0

Common stock, $0.01 par value, 100,000,000 shares authorized; 27,945,144 and 27,237,870 shares

issued and outstanding at December 30, 2017 and December 31, 2016, respectively

279272

Additional paid-in capital 190,067161,885

Retained earnings 277,989226,950

Accumulated other comprehensive income (loss) 1,992(151)

Total stockholders’ equity 470,327388,956

Total liabilities and stockholders’ equity $ 691,522$ 507,912

Consolidated Balance Sheets - USD ($) $ in Thousands Dec. 31, 2016 Jan. 02, 2016 Current assets: Cash and cash equivalents $ 214,523 $ 179,915 Short term investments 39,930 33,124 Accounts receivable, net of allowance of $29 at December 31, 2016 and $33 at January 2, 2016 72,909 104,679 Unbilled revenue 139 452 Inventory 50,578 61,678 Other current assets 5,591 9,501 Total current assets 383,670 389,349 Property and equipment, net 27,532 26,850 Deferred tax assets 30,585 31,721 Goodwill 41,041 48,751 Intangible assets, net 12,207 15,664 Other assets 12,877 9,408 Total assets 507,912 521,743 Current liabilities: Accounts payable 67,281 61,655 Accrued expenses 19,854 15,954 Accrued compensation 21,015 15,752 Deferred Revenue, Current 4,486 3,265 Total current liabilities 112,636 96,626 Long term liabilities 6,320 7,706 Commitments and contingencies (Note 11): Redeemable convertible preferred stock, 5,000,000 shares authorized and no shares issued or outstanding 0 0

Common stock, $0.01 par value, 100,000,000 shares authorized; and 27,237,870 and 29,091,806 shares issued and outstanding at December 31, 2016 and January 2, 2016, respectively

272 291

Additional paid-in capital 161,885 232,345 Retained earnings 226,950 185,011 Accumulated other comprehensive loss (151) (236) Total stockholders’ equity 388,956 417,411 Total liabilities, redeemable convertible preferred stock and stockholders’ equity $ 507,912 $ 521,743

Consolidated Balance Sheets - USD ($) $ in Thousands Dec. 31, 2016Jan. 02, 2016

Current assets:

Cash and cash equivalents $ 214,523$ 179,915

Short term investments 39,93033,124

Accounts receivable, net of allowance of $29 at December 31, 2016 and $33 at January 2, 2016 72,909104,679

Unbilled revenue 139452

Inventory 50,57861,678

Other current assets 5,5919,501

Total current assets 383,670389,349

Property and equipment, net 27,53226,850

Deferred tax assets 30,58531,721

Goodwill 41,04148,751

Intangible assets, net 12,20715,664

Other assets 12,8779,408

Total assets 507,912521,743

Current liabilities:

Accounts payable 67,28161,655

Accrued expenses 19,85415,954

Accrued compensation 21,01515,752

Deferred Revenue, Current 4,4863,265

Total current liabilities 112,63696,626

Long term liabilities 6,3207,706

Commitments and contingencies (Note 11):

Redeemable convertible preferred stock, 5,000,000 shares authorized and no shares issued or outstanding 0 0

Common stock, $0.01 par value, 100,000,000 shares authorized; and 27,237,870 and 29,091,806 shares

issued and outstanding at December 31, 2016 and January 2, 2016, respectively

272291

Additional paid-in capital 161,885232,345

Retained earnings 226,950185,011

Accumulated other comprehensive loss (151)(236)

Total stockholders’ equity 388,956417,411

Total liabilities, redeemable convertible preferred stock and stockholders’ equity $ 507,912$ 521,743

Dec. 29, 2018 Dec. 30, 2017 Dec. 31, 2016 Cash flows from operating activities: Net income $ 87,992 $ 50,964 $ 41,939 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 36,574 25,499 13,606 Gain on business acquisition 0 (2,243) 0 Stock-based compensation 25,804 19,751 15,995 Deferred income taxes, net (10,848) (999) 3,557 Tax benefit of excess stock-based compensation deductions 0 0 (2,971) Deferred rent 1,374 0 0 Other 463 864 (2,361) Changes in operating assets and liabilities — (use) source Accounts receivable (23,920) (53,251) 25,682 Inventory (58,546) (1,470) (981) Other assets (8,533) (10,562) 3,187 Accounts payable 22,470 17,457 6,502 Accrued expenses (3,618) 23,447 10,181 Deferred revenue and customer advances 2,392 2,149 2,996 Long-term liabilities 81 4,709 (908) Net cash provided by operating activities 71,685 76,315 116,424 Cash flows from investing activities: Additions of property and equipment (32,422) (23,371) (10,817) Change in other assets (2,363) (1,542) (2,093) Proceeds from sale of equity investments 856 1,267 634 Proceeds from sale of business unit 0 0 23,520 Cash paid for business acquisitions, net of cash acquired 0 (148,765) 0 Purchases of investments (6,438) (10,578) (16,554) Sales and maturities of investments 14,000 13,066 9,500 Net cash (used in) provided by investing activities (26,367) (169,923) 4,190 Cash flows from financing activities: Proceeds from employee stock plans 10,366 10,573 9,344 Income tax withholding payment associated with restricted stock vesting (3,532) (2,983) (1,300) Stock repurchases (50,000) 0 (97,021) Tax benefit of excess stock-based compensation deductions 0 0 2,971 Net cash (used in) provided by financing activities (43,166) 7,590 (86,006) Effect of exchange rate changes on cash and cash equivalents (414) 130 0 Net increase (decrease) in cash and cash equivalents 1,738 (85,888) 34,608 Cash and cash equivalents, at beginning of period 128,635 214,523 179,915 Cash and cash equivalents, at end of period 130,373 128,635 214,523 Supplemental disclosure of cash flow information Cash paid for income taxes 39,517 25,879 14,061 Additions of property and equipment included in accounts payable $ 2,795 $ 5,001 $ 1,550