Blackberry 2006 Annual Report Download - page 33

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)
Annual Report 2006 31
For the years ended March 4, 2006, February 26, 2005 and February 28, 2004
Research and Development, Selling, Marketing and Administration, and Amortization Expense
The table below presents a comparison of Research and development, Selling, marketing and
administration, and Amortization expenses for the fourth quarter ended March 4, 2006 compared to
the quarter ended November 26, 2005 and the fourth quarter ended February 26, 2005. The Company
believes it is also meaningful to provide a comparison between the fourth quarter and the third quarter
of scal 2006, given the quarterly increases in revenue realized by the Company during scal 2006.
Three Month Fiscal Periods Ended
 November 26, 2005 February 26, 2005
  $ % of Revenue $ % of Revenue
Revenue   $ 560,596 $ 404,802
Research and
development     $ 41,567 7.4% $ 29,076 7.2%
Selling, marketing
and administration    83,965 15.0% 56,595 14.0%
Amortization    12,797 2.3% 9, 1 14 2.2%
    $ 138,329 24.7% $ 94,785 23.4%
NTP Litigation Matter
As at November 26, 2005, the Company had an accrued liability of $450.0 million in respect of the NTP
litigation which represented, at that time, management’s best current estimate as to the litigation expense
relating to this matter based on then current knowledge and consultation with legal counsel. As the full
and nal settlement amount paid on March 3, 2006 was $612.5 million, an additional charge to earnings in
the amount of $162.5 million was recorded in operating results in the three-month period ending March 4,
2006. During scal 2006, the Patent Ofce issued various ofce actions rejecting all claims in all NTP
patents. Accordingly, though the rulings of the Patent Ofce are subject to appeal by NTP, given the
conclusions and the strength of the conclusions reached by the Patent Ofce, no value has been ascribed
to the NTP license. See “Critical Accounting Policies and Estimates – Litigation”, “Results of Operations –
Litigation” and note 15 to the Consolidated Financial Statements.
Income Taxes
During the fourth quarter of scal 2006, the Company recorded a net income tax recovery of $4.5 million,
compared to a net tax recovery of $144.6 million in the fourth quarter of scal 2005. The scal 2006
income tax recovery on the incremental NTP settlement amount was in excess of the income tax expense
on pre-tax earnings excluding the litigation accrual.
Prior to the fourth quarter of scal 2006, the deferred income tax asset recorded on the balance sheet
primarily related to the NTP matter and the November 30, 2005 District Court ruling that the Term Sheet
was not binding. Pursuant to the NTP settlement on March 3, 2006, the litigation amount became fully
deductible for income tax purposes in the current quarter. This resulted in a reallocation of income tax
expense between deferred income taxes and current income taxes as well as between different
components of the Company’s deferred income tax asset.