Blackberry 2003 Annual Report Download - page 18

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Research฀In฀Motion฀Limited฀฀|฀฀Incorporated฀Under฀the฀Laws฀of฀Ontario฀(United฀States฀dollars,฀in฀thousands฀except฀per฀share฀data฀or฀as฀otherwise฀indicated)
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For฀the฀years฀ended฀March฀1,฀2003,฀March฀2,฀2002฀and฀February฀28,฀2001
The฀table฀below฀provides฀a฀scal฀2003฀quarterly฀summary,฀excluding฀Restructuring฀charges฀and฀Litigation:
฀ ฀ ฀ Fiscal฀2003฀ Fourth฀Quarter฀ Third฀Quarter฀ Second฀Quarter฀ First฀Quarter
Research฀and฀development฀฀ ฀ ฀ ฀ ฀
฀ Gross฀ ฀ $฀ 64,952฀ $฀ 14,389฀ $฀ 16,858฀ $฀ 17,516฀ $฀ 16,189
฀ Government฀funding฀ ฀ 9,036฀ ฀ 1,854฀ ฀ 15฀ ฀ 3,603฀ ฀ 3,564
Research฀and฀
฀ development฀(net)฀ ฀ ฀ 55,916฀ ฀ 12,535฀ ฀ 16,843฀ ฀ 13,913฀ ฀ 12,625
Selling,฀marketing฀
฀ and฀administration฀ ฀ ฀฀117,984฀ ฀ 28,067฀ ฀ 33,415฀ ฀ 28,529฀ ฀ 27,973
Amortization฀ ฀ ฀ 30,445฀ ฀ 8,455฀ ฀ 7,798฀ ฀ 7,032฀ ฀ 7,160
฀ ฀ ฀ $฀204,345฀ $฀ 49,057฀ $฀ 58,056฀ $฀ 49,474฀ $฀ 47,758฀
Research฀and฀Development
Gross฀research฀and฀development฀expenditures,฀primarily฀composed฀of฀salaries฀for฀technical฀personnel,฀
costs฀of฀related฀engineering฀materials,฀software฀tools฀and฀related฀information฀technology฀infrastruc-
ture฀support,฀as฀well฀as฀subcontracted฀research฀and฀development฀costs,฀increased฀by฀$15.5฀million฀or฀
31.3%฀to฀$65.0฀million฀or฀21.2%฀of฀revenue฀in฀the฀year฀ended฀March฀1,฀2003฀compared฀to฀$49.5฀million฀
or฀16.8%฀of฀revenue฀in฀the฀previous฀year.฀Continued฀focus฀on฀the฀development฀of฀2.5G฀handhelds฀
for฀Europe,฀Asia฀and฀North฀America,฀together฀with฀ongoing฀work฀on฀the฀BlackBerry฀platform,฀have฀
accounted฀for฀most฀of฀this฀increase.
Compensation฀accounts฀for฀the฀majority฀of฀the฀year฀over฀year฀increase฀at฀$11.0฀million.฀Other฀increases฀
were฀in฀external฀professional฀services,฀travel฀and฀engineering฀materials฀consumed.
Net฀research฀and฀development฀expense,฀after฀accounting฀for฀government฀funding฀in฀the฀form฀
of฀expense฀reimbursements฀and฀scientic฀research฀investment฀tax฀credits฀(“ITC’s”)฀in฀scal฀2003฀of฀
$9.0฀million฀(2002฀–฀$12.1฀million),฀represented฀$55.9฀million฀or฀18.2%฀of฀revenue฀versus฀$37.4฀million฀
or฀12.7%฀of฀revenue฀in฀the฀previous฀year.฀
The฀Company’s฀current฀development฀agreement฀with฀Technology฀Partnerships฀Canada฀(“TPC”)฀was฀
related฀to฀a฀three-year฀research฀and฀development฀project฀under฀which฀total฀contributions฀from฀TPC฀
would฀be฀a฀maximum฀of฀$23.3฀million.฀The฀Company฀has฀recorded฀all฀of฀the฀contributions฀as฀at฀March฀
1,฀2003.฀No฀further฀TPC฀funding฀reimbursements฀are฀due฀to฀RIM฀under฀this฀agreement.฀The฀Company฀is฀
continuously฀pursuing฀government฀programs,฀but฀there฀can฀be฀no฀assurance฀as฀to฀any฀future฀funding฀
at฀this฀time.
Government฀funding฀in฀the฀form฀of฀ITC’s฀for฀the฀current฀scal฀year฀were฀nil฀–฀see฀Income฀Taxes฀and฀
notes฀8฀and฀12(a)฀to฀the฀Consolidated฀Financial฀Statements.฀
Selling,฀Marketing฀and฀Administration฀Expenses
Selling,฀marketing฀and฀administrative฀expenses฀were฀$118.0฀million฀for฀the฀current฀year฀compared฀
to฀$102.4฀million฀for฀scal฀2002,฀an฀increase฀of฀$15.6฀million.฀
Consistent฀with฀its฀long-term฀strategic฀objectives,฀RIM฀continued฀to฀increase฀its฀expense฀levels฀
to฀support฀BlackBerry฀and฀other฀sales฀and฀distribution฀channels฀in฀the฀following฀areas:฀
•฀ increased฀BlackBerry฀sales฀and฀marketing฀initiatives฀with฀the฀Company’s฀carrier฀customers฀
•฀ branding฀penetration฀in฀Europe฀and฀the฀Asia฀Pacic฀region฀(“AsiaPac”)
•฀ continued฀focus฀on฀joint฀channel฀marketing฀activities฀
•฀ international฀sales฀and฀marketing฀infrastructure฀in฀AsiaPac,฀Australia฀and฀South฀America
•฀ increased฀infrastructure฀and฀stafng฀in฀customer฀fullment฀activities฀such฀as฀call฀centre,฀order฀entry฀
and฀processing,฀enhancements฀to฀billing฀systems,฀etc.
•฀ increased฀infrastructure฀and฀stafng฀to฀support฀the฀Company’s฀revenue฀growth฀opportunities฀
in฀licensing฀BlackBerry฀Connect฀and฀Technical฀Support฀Services