Blackberry 2004 Annual Report Download

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2004
RESEARCH IN MOTION
ANNUAL REPORT
million thumbs and counting

Table of contents

  • Page 1
    RESEARCH IN MOTION ANNUAL REPORT 2004 million thumbs and counting

  • Page 2
    ... and reliability of RIM's products; RIM's ability to manage production facilities efficiently; risks associated with foreign operations; dependence on key personnel; continued use and expansion of the Internet; regulation, certification and health risks; control of RIM shares by management; and tax...

  • Page 3
    ... market. Through the development of integrated hardware, software and services that support multiple wireless network standards, RIM provides platforms and solutions for seamless access to time-sensitive information including email, phone, SMS messaging, Internet and intranet-based applications. RIM...

  • Page 4
    BlackBerry subscriber base surpasses 1,000,000 users worldwide. BlackBerry has emerged as the industry leading platform for the wireless enterprise. BlackBerry Subscriber Base (in thousands) 1,069 25 165 321 534 00 01 02 03 04 2

  • Page 5
    ... growth, global expansion and technology leadership. BlackBerry has evolved into a global wireless data platform that supports a wide range of applications on a variety of devices. And with many of the largest carriers and technology leaders in the world signed on as BlackBerry partners, it...

  • Page 6
    ... (recovery of) income taxes Net income (loss) Earnings (loss) per share Basic Diluted Operating Data (percentage of revenue) Gross margin Research and development Selling, marketing and administration Balance Sheet Data Cash, cash equivalents and investments Total assets Shareholders' equity $ 594...

  • Page 7
    ... Administration Revenues in fiscal 2004 grew 94% to $594.6 million from $307 million in fiscal 2003. This tremendous growth was driven by a number of factors including new product introductions, global carrier launches and the development of attractive end-user pricing plans by our carrier partners...

  • Page 8
    ... partners through the expansion of the number of applications supported both in the enterprise and prosumer segments, through our BlackBerry Connect partnerships which will offer device diversity to carriers and end-users, and through the continued global expansion of BlackBerry sales, service...

  • Page 9
    ... partners, a number of large enterprise customers have desired to maintain their strong technical support relationship with RIM. To meet the needs of these customers RIM has launched TSupport, our Technical Support Services program, which includes a suite of annual technical and software maintenance...

  • Page 10
    ... our products and introducing new, lower cost handhelds. On the software side, BlackBerry Enterprise Server version 4.0 is scheduled to be released this year and will offer a number of enhancements including improved IT manageability, complete wireless synchronization and wireless key generation and...

  • Page 11
    ... key handset vendors through its BlackBerry Connect program and to strengthen its infrastructure to support subscriber growth; RIM's revenue and earnings expectations; anticipated growth in RIM's subscriber base; monthly average revenue per unit for wireless service; and future product developments...

  • Page 12
    ... access to email, phone, SMS (short message service), organizer, Internet and intranetbased corporate data applications. RIM also licenses its technology to industry leading handset and software vendors to enable these companies to offer wireless data services using the BlackBerry Enterprise Server...

  • Page 13
    ...of end users, IT departments, carriers and licensees. Revenues are also generated from sales of radio modems to original equipment manufacturers ("OEMs"), non-recurring engineering services ("NRE"), accessories, technical support and repair and maintenance programs. Critical Accounting Policies and...

  • Page 14
    ...-2. Revenue from software maintenance, unspecified upgrades and technical support contracts is recognized over the period that such items are delivered or that services are provided. Other Revenue from the sale of OEM radios and accessories is recognized when title is transferred to the customer and...

  • Page 15
    ... anticipated number of units to be sold during the terms of the license agreements. See "Results of Operations - Amortization". Unforeseen events, changes in circumstances and market conditions, and material differences in the value of licenses and other long-lived and intangible assets and goodwill...

  • Page 16
    Research In Motion Limited • Incorporated Under the Laws of Ontario (In thousands of United States dollars, except per share data, and except as otherwise indicated) Warranty The Company provides for the estimated costs of product warranties at the time revenue is recognized. BlackBerry Handheld ...

  • Page 17
    ...28, 2004 March 1, 2003 Change 2004/2003 March 2, 2002 Revenue Cost of sales Gross margin Expenses Research and development Selling, marketing and administration Amortization Sub-total Restructuring charges Litigation Restructuring and litigation Income (loss) from operations Investment income Write...

  • Page 18
    ...except per share data) Revenue Gross margin(1) Research and development, Selling, marketing and administration(1), and Amortization(1) Litigation(2) Investment income Income (loss) before income taxes Recovery of income taxes(4) Net income (loss) Earnings (loss) per share Basic Diluted Research and...

  • Page 19
    ...BlackBerry network operations centre and its technical and service support operations centre to Cost of sales. Such costs were previously included in Selling, marketing and administration expense. In addition, amortization expense related to manufacturing operations and BlackBerry network operations...

  • Page 20
    Research In Motion Limited • Incorporated Under the Laws of Ontario (In thousands of United States dollars, except per share data, and except as otherwise indicated) Results of Operations Fiscal year ended February 28, 2004 compared to the fiscal year ended March 1, 2003 Revenue Revenue for ...

  • Page 21
    ... of salaries and benefits for technical personnel, costs of related engineering materials, and software tools and maintenance fees. Compensation expense increased by $2.8 million as a result of the increase in employees supporting the Company's growth and new BlackBerry Handheld product development...

  • Page 22
    ... certain intangible asset expenditures during fiscal 2004. Amortization expense with respect to capital assets employed in the Company's manufacturing operations and BlackBerry service operations was $7.9 million in fiscal 2004 compared to $7.7 million in fiscal 2003 and is charged to Cost of sales...

  • Page 23
    ... States District Court for the Eastern District of Virginia (the "Court") ruled on NTP's request for an injunction with respect to RIM continuing to sell the BlackBerry solution (handhelds, software and service) in the United States as well as entered judgment with respect to several previously...

  • Page 24
    ... provide BlackBerry service in the United States and to continue to use, sell or manufacture its wireless handhelds and software in, or to import them into, the United States, which is the largest market for RIM's products and services, unless RIM is able to negotiate a license with NTP at that time...

  • Page 25
    ... of capital assets and intangible assets of $39.7 million and $31.0 million, respectively, and acquisitions of subsidiaries of $22.0 million. There were net proceeds from the sale of investments of $304.1 million. Cash and cash equivalents, short-term investments and investments increased...

  • Page 26
    ... Under the Laws of Ontario (In thousands of United States dollars, except per share data, and except as otherwise indicated) A comparative summary of cash and cash equivalents, short-term investments and investments is set out below. As At February 28, 2004 March 1, 2003 Change 2004/2003 Cash and...

  • Page 27
    ... obligations and the periods in which payments are due as at February 28, 2004: Total Less than One Year One to Three Years Four to Five Years More than Five Years Long-term debt Operating lease obligations Purchase obligations and commitments Total $ 6,433 8,008 168,449 182,890 $ 193 2,165...

  • Page 28
    Research In Motion Limited • Incorporated Under the Laws of Ontario (In thousands of United States dollars, except per share data, and except as otherwise indicated) Market Risk of Financial Instruments The Company is engaged in operating and financing activities that generate risk in three ...

  • Page 29
    ...'s global footprint and to extend our enterprise market leadership into the prosumer market. Through the BlackBerry Connect program, RIM plans to increase the addressable market for BlackBerry through the strategic licensing of the BlackBerry platform. RIM anticipates strong revenue and net earnings...

  • Page 30
    ... Motion Limited • Incorporated Under the Laws of Ontario (In thousands of United States dollars, except per share data, and except as otherwise indicated) Management's Responsibility for Financial Reporting To the Shareholders of Research In Motion Limited Management of Research In Motion Limited...

  • Page 31
    ... 28, 2004, March 1, 2003 and March 2, 2002 Independent Auditors' Report To the Shareholders of Research In Motion Limited We have audited the consolidated balance sheet of Research In Motion Limited as at February 28, 2004 and the consolidated statement of operations, shareholders' equity and cash...

  • Page 32
    ...Motion Limited • Incorporated Under the Laws of Ontario (In thousands of United States dollars, except per share data, and except as otherwise indicated) consolidated balance sheets As at February 28, 2004 March 1, 2003 US GAAP (note 1) Assets Current Cash and cash equivalents (note 4) Trade...

  • Page 33
    ...: Exercise of stock options Common shares repurchased pursuant to Common Share Purchase Program Balance March 1, 2003 Comprehensive income (loss): Net Income Net change in unrealized gains on investments available for sale Net change in derivative fair value during the year Amounts classified to...

  • Page 34
    ... share data, and except as otherwise indicated) consolidated statements of operations For the year ended February 28, 2004 March 1, 2003 US GAAP (note 1) March 2, 2002 Revenue Cost of sales Gross margin Expenses Research and development, net of government funding (note 14) Selling, marketing...

  • Page 35
    ... (gain) on foreign currency translation of long-term debt Write-down of investments Net changes in working capital items: Trade receivables Other receivables Inventory Other current assets Accounts payable Accrued liabilities Accrued litigation and related expenses Increase in restricted cash Income...

  • Page 36
    ... integrated hardware, software and services that support multiple wireless network standards, the Company provides platforms and solutions for seamless access to time-sensitive information including email, phone, SMS messaging, Internet 1. Summary of Significant Accounting Policies (a) General These...

  • Page 37
    ...-term investments are available for sale investments and are carried on the balance sheet at fair value. (g) Trade receivables Trade receivables are presented net of allowance for doubtful accounts. The allowance was $2,379 at February 28, 2004 (March 1, 2003 - $2,331). Bad debt expense (recovery...

  • Page 38
    Research In Motion Limited • Incorporated Under the Laws of Ontario (In thousands of United States dollars, except per share data, and except as otherwise indicated) (j) Inventories Raw materials are stated at the lower of cost and replacement cost. Work in process and finished goods inventories ...

  • Page 39
    ... revenue, shipping and handling costs are included in Cost of sales, otherwise they are included in Selling, Marketing and Administration. (q) Research and development The Company is engaged at all times in research and development work. Research and development costs, other than capital asset...

  • Page 40
    ... Company's net income (loss) and earnings (loss) per share on a proforma basis using the fair value method as determined using the Black-Scholes option pricing model: February 28, 2004 March 1, 2003 March 2, 2002 For the year ended Net income (loss) - as reported Stock-based compensation costs for...

  • Page 41
    ... 28, 2004 March 1, 2003 March 2, 2002 Number of options granted (000's) Weighted average Black-Scholes value of each option Assumptions: Risk free interest rate Expected life in years Expected dividend yield Volatility (v) Warranty The Company estimates its warranty costs at the time of revenue...

  • Page 42
    Research In Motion Limited • Incorporated Under the Laws of Ontario (In thousands of United States dollars, except per share data, and except as otherwise indicated) 3. Recently Issued Pronouncements In December 2003, the FASB amended Interpretation No. 46 ("FIN 46"), Consolidation of Variable ...

  • Page 43
    ... Work in process Finished goods Provision for excess and obsolete inventory $ $ 35,119 8,713 7,679 (8,675) 42,836 $ $ 34,446 8,205 4,286 (15,662) 31,275 6. Capital Assets Capital assets are comprised of: Cost Accumulated amortization Net book value As at February 28, 2004 Land Buildings and...

  • Page 44
    Research In Motion Limited • Incorporated Under the Laws of Ontario (In thousands of United States dollars, except per share data, and except as otherwise indicated) Cost Accumulated amortization Net book value As at March 1, 2003 Land Buildings and leaseholds Information technology Furniture,...

  • Page 45
    ...wireless access to major email systems including corporate, proprietary and POP3/IMAP4 using a handheld device. In addition, effective September 2002, the Company also acquired 100% of the common shares of a small company with expertise and technology For the year ended related to wireless networks...

  • Page 46
    Research In Motion Limited • Incorporated Under the Laws of Ontario (In thousands of United States dollars, except per share data, and except as otherwise indicated) The acquisitions were accounted for using the purchase method whereby assets acquired and liabilities assumed were recorded at ...

  • Page 47
    ... of the following temporary differences: February 28, 2004 March 1, 2003 Assets Financing costs Non-deductible reserves Research and development incentives Tax losses Capital assets Other tax carryforwards Less: valuation allowance Net deferred income tax assets During the third quarter of fiscal...

  • Page 48
    Research In Motion Limited • Incorporated Under the Laws of Ontario (In thousands of United States dollars, except per share data, and except as otherwise indicated) 10. Long-Term Debt At February 28, 2004 long-term debt consisted of mortgages with interest rates ranging between 6.88% and 7.90%, ...

  • Page 49
    ... 2, 2002 Exercise of options Common shares repurchased pursuant to Common Share Purchase Program Balance as at March 1, 2003 Exercise of options Exercise of warrants Common shares pursuant to public share offering, net of related costs Balance as at February 28, 2004 $ 890,644 1,491 6,325 (4,080...

  • Page 50
    Research In Motion Limited • Incorporated Under the Laws of Ontario (In thousands of United States dollars, except per share data, and except as otherwise indicated) On January 22, 2004 the Company completed a public share issue of 12.1 million common shares for proceeds of $905,240, net of ...

  • Page 51
    ... well as ongoing quarterly royalties. The lump-sum settlement amount was received subsequent to February 28, 2004 and will be credited to Intangible Assets in the first quarter of fiscal 2005, as a recovery of costs incurred by the Company. The settlement of this dispute will not be material to the...

  • Page 52
    Research In Motion Limited • Incorporated Under the Laws of Ontario (In thousands of United States dollars, except per share data, and except as otherwise indicated) The Company is involved with in a dispute with Inpro II Licensing, S.a.r.l. ("Inpro") in connection with two of Inpro's patents. In...

  • Page 53
    ... agreements with Technology Partnerships Canada ("TPC"), which provide partial funding for certain research and development projects. Funding from TPC for the first agreement ("TPC-1") totalled $3,900 and was repayable in the form of royalties of 2.2% on gross product revenues resulting from...

  • Page 54
    ... In Motion Limited • Incorporated Under the Laws of Ontario (In thousands of United States dollars, except per share data, and except as otherwise indicated) 15. Restructuring Charges During the third quarter of 2003, as part of the implementation of a plan to improve operating results (the "Plan...

  • Page 55
    ...postjudgment interest for the period August 6, 2003 to August 30, 2003 and other net adjustments. The Company funded $7.6 million, attributable to the enhanced compensatory damages amount, into an escrow account subsequent to the end of the second quarter of fiscal 2004. The Company sought a stay of...

  • Page 56
    Research In Motion Limited • Incorporated Under the Laws of Ontario (In thousands of United States dollars, except per share data, and except as otherwise indicated) 17. Write-Down of Investments Periodically the Company undertakes a review of the carrying value of companies in which it holds ...

  • Page 57
    ... of financial instruments outstanding at fiscal year-ends were as follows: February 28, 2004 Assets (Liabilities) Notional Amount Carrying Amount Estimated Fair Value Cash and cash equivalents Available-for-sale investments Held-to-maturity investments Long-term debt Currency forward contracts...

  • Page 58
    Research In Motion Limited • Incorporated Under the Laws of Ontario (In thousands of United States dollars, except per share data, and except as otherwise indicated) For certain of the Company's financial instruments, including trade receivables, other receivables, accounts payable and accrued ...

  • Page 59
    ... 15% and 13% of the Company's sales (March 1, 2003 - one customer comprised 12%). research, design, manufacture and sales of wireless communications products. February 28, 2004 March 1, 2003 February 28, 2002 Sales Canada United States Other Sales Canada United States Other $ $ 54,847 446...

  • Page 60
    ... Deputy Chairman, London Insurance Group Shareholder Information Annual Meeting of Shareholders Monday, July 12, 2004 at 6:30pm At the Canadian Clay and Glass Gallery 25 Caroline Street North Waterloo, Ontario, Canada Shareholder Inquiries Investor Relations Research In Motion Limited 295 Phillip...

  • Page 61
    ...In Motion Limited. The BlackBerry and RIM families of related marks, images and symbols, including "Always On, Always Connected", are the exclusive properties and trademarks of Research In Motion Limited. RIM, Research In Motion and BlackBerry are registered with the U.S. Patent and Trademark Office...

  • Page 62
    295 Phillip Street Waterloo, Ontario, Canada N2L 3W8 Tel: (519) 888-7465 Fax: (519) 888-6906 email: [email protected] www.rim.com