Blackberry 2003 Annual Report Download - page 22

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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
Write-Down฀of฀Investments฀
The฀Company฀made฀several฀strategic฀investments฀in฀technology฀companies฀in฀scal฀2001,฀representing฀
ownership฀positions฀of฀less฀than฀10%.฀The฀Company฀did฀not฀exercise฀signicant฀inuence฀with฀respect฀
to฀any฀of฀these฀companies.฀
The฀Company฀reviews฀the฀carrying฀values฀of฀its฀investments฀to฀determine฀if฀a฀decline฀in฀value฀other฀
than฀temporary฀in฀nature฀has฀occurred.฀During฀scal฀2002,฀the฀Company฀reviewed฀the฀remaining฀
carrying฀values฀of฀these฀investments฀and฀determined฀that฀the฀nancial,฀operational฀and฀strategic฀
circumstances฀relating฀to฀most฀of฀these฀investments฀warranted฀a฀write-down฀of฀the฀carrying฀values.฀
Consequently,฀the฀Company฀recorded฀a฀reduction฀of฀its฀investments฀in฀the฀amount฀of฀$5.3฀million฀
during฀the฀second฀quarter฀of฀2002.
Income฀Taxes
The฀Company฀recorded฀an฀income฀tax฀expense฀of฀$31.1฀million฀on฀its฀pre-tax฀loss฀of฀$117.6฀million.฀
During฀the฀third฀quarter฀of฀scal฀2003,฀the฀Company฀determined฀that฀it฀was฀no฀longer฀able฀to฀satisfy฀
the฀“more฀likely฀than฀not”฀standard฀under฀GAAP฀with฀respect฀to฀the฀valuation฀of฀its฀future฀income฀tax฀
asset฀balance.฀Consequently,฀the฀Company฀recorded฀a฀future฀income฀tax฀provision฀of฀$27.6฀million฀
for฀scal฀2003.฀The฀valuation฀allowance,฀combined฀with฀the฀decision฀to฀report฀results฀from฀operations฀
without฀tax฀effecting฀losses฀beginning฀in฀the฀third฀quarter฀of฀2003,฀resulted฀in฀unrecognized฀income฀tax฀
benets฀of฀$68.7฀million฀as฀at฀March฀1,฀2003.฀These฀net฀future฀tax฀assets฀have฀a฀substantially฀unlimited฀
life฀and฀remain฀available฀for฀use฀against฀taxes฀on฀future฀prots.฀The฀Company฀will฀continue฀to฀evaluate฀
and฀examine฀the฀valuation฀allowance฀on฀a฀regular฀basis฀and฀as฀future฀uncertainties฀are฀resolved,฀the฀
valuation฀allowance฀may฀be฀adjusted฀accordingly.฀The฀Company฀has฀not฀provided฀for฀Canadian฀future฀
income฀taxes฀or฀foreign฀withholding฀taxes฀that฀would฀apply฀on฀the฀distribution฀of฀the฀earnings฀of฀its฀
non-Canadian฀subsidiaries,฀since฀these฀earnings฀are฀intended฀to฀be฀reinvested฀indenitely.
The฀Company’s฀scal฀2002฀consolidated฀net฀effective฀tax฀rate฀was฀25.7%฀and฀was฀materially฀affected฀by฀
the฀impact฀of฀the฀write-down฀of฀investments,฀which฀resulted฀in฀an฀capital฀loss฀that฀was฀not฀tax฀effected฀
and฀varying฀tax฀rates฀in฀different฀foreign฀jurisdictions.
Net฀Loss฀
Net฀loss฀was฀$148.7฀million฀or฀$1.91฀basic฀and฀diluted฀in฀scal฀2003฀versus฀$28.5฀million฀or฀$0.36฀basic฀
and฀diluted฀in฀the฀prior฀year.฀
Liquidity฀and฀Capital฀Resources฀
Cash฀ows฀generated฀from฀operating฀activities฀were฀$2.8฀million฀in฀the฀current฀scal฀year฀compared฀
to฀cash฀ow฀generated฀from฀operating฀activities฀of฀$17.7฀million฀in฀the฀prior฀year.฀The฀primary฀factor฀in฀
the฀reduction฀was฀the฀increase฀in฀the฀pre-tax฀loss฀to฀$98.9฀million฀in฀scal฀2003฀from฀$38.3฀million฀in฀the฀
prior฀year.฀Non-cash฀working฀capital฀generated฀$72.4฀million฀in฀scal฀2003฀versus฀$40.0฀million฀in฀the฀
prior฀year,฀an฀increase฀of฀$32.4฀million,฀as฀summarized฀in฀the฀following฀table:
฀ ฀ ฀ ฀ ฀ Working฀capital฀
As฀at฀ ฀ March฀1,฀2003฀ March฀2,฀2002฀ ฀funds฀generated
Trade฀receivables฀ ฀ 40,803฀ ฀ 42,642฀ ฀ 1,839
Other฀receivables฀ ฀ 4,538฀ ฀ 5,976฀ ฀ 1,438
Inventories฀ ฀ 31,275฀ ฀ 37,477฀ ฀ 6,202
Accounts฀payable฀and฀accruals฀ ฀ 73,009฀ ฀ 46,934฀ ฀ 26,075
Accrued฀litigation฀ ฀ 32,037฀ ฀ –฀ ฀ 32,037
Deferred฀revenue฀ ฀ 14,336฀ ฀ 9,773฀ ฀ 4,563฀
Cash฀ows฀used฀in฀nancing฀activities฀were฀$24.0฀million฀for฀the฀current฀year,฀including฀the฀buyback฀
of฀common฀shares฀of฀$24.5฀million฀pursuant฀to฀the฀Company’s฀Common฀Share฀Purchase฀Program.฀
Cash฀ows฀used฀in฀nancing฀activities฀for฀scal฀2002฀were฀$4.3฀million฀for฀the฀current฀year฀which฀
included฀the฀buyback฀of฀common฀shares฀of฀$5.5฀million฀pursuant฀to฀the฀Company’s฀Common฀Share฀
Purchase฀Program.฀