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36
RESEARCH IN MOTION LIMITED
management’s discussion and analysis of financial
condition and results of operations continued
FOR THE THREE MONTHS AND FISCAL YEAR ENDED MARCH 3, 2007
The following table sets forth certain consolidated statement
of operations data expressed as a percentage of revenue for
the periods indicated:
For the Fiscal Year Ended
March 3, 2007
March 4, 2006
(as restated) (1) Change
2007/2006
February 26, 2005
(as restated) (1) Change
2006/2005
Revenue 100.0% 100.0% 0.0% 100.0% 0.0%
Cost of sales 45.4% 44.8% 0.6% 47.1% (2.3%)
Gross margin 54.6% 55.2% (0.6%) 52.9% 2.3%
Expenses
Research and development 7.8% 7.7% 0.1% 7.6% 0.1%
Selling, marketing and administration 17.7% 15.2% 2.5% 14.4% 0.8%
Amortization 2.5% 2.4% 0.1% 2.7% (0.3%)
Sub-total 28.0% 25.3% 2.7% 24.7% 0.6%
Litigation (2) 0.0% 9.8% (9.8%) 26.1% (16.3%)
28.0% 35.1% (7.1%) 50.8% (15.7%)
Income from operations 26.6% 20.1% 6.5% 2.1% 18.0%
Investment income 1.7% 3.2% (1.5%) 2.7% 0.5%
Income before income taxes 28.3% 23.3% 5.0% 4.8% 18.5%
Provision for (recovery of) income taxes (3) 7.5% 5.2% 2.3% (10.3%) 15.5%
Net income 20.8% 18.1% 2.7% 15.1% 3.0%
Notes:
(1) See “Explanatory Note Regarding Restatement of Previously
Issued Financial Statements” and note 4 to the Consolidated
Financial Statements.
(2) See “Results of Operations – Litigation” and note 13(b) to the
Consolidated Financial Statements.
(3) See “Results of Operations – Income Taxes” and note 10 to the
Consolidated Financial Statements.
As more fully disclosed under “Explanatory Note Regarding
Restatement of Previously Issued Financial Statements”, the
Company has determined that the cumulative, non-cash
stock-based compensation expense for options granted
between 1999 and 2006 was approximately $248.2 million
up to the end of fiscal 2006. The restatement adjustments
decreased the previously reported preliminary diluted net
income per share for fiscal 2007 and previously reported
diluted net income per share for fiscal 2006 and 2005 by
$0.02, $0.05 and $0.05 for the periods ended March 3,
2007, March 4, 2006, and February 26, 2005, respectively.
The restatement adjustments did not have any impact on
gross margin percentage for the periods indicated. The
restatement adjustments increased the percentage of
revenue impact on research and development by 0.1%,
0.1% and 0.1%, and the impact on selling, marketing and
administration expense by 0.1%, 0.1% and 0.3% for the same
periods noted above.
Executive Summary
Revenue for fiscal 2007 was $3.04 billion, an increase of
$971.3 million, or 47.0%, from $2.07 billion for fiscal 2006. The
number of BlackBerry devices sold increased by 2.4 million
units, or 58.6%, to approximately 6.4 million units in fiscal
2007, compared to approximately 4.0 million units in fiscal
2006. Device revenue increased by $776.3 million, or 53.9%,
to $2.22 billion, reflecting the higher number of devices sold,
partially offset by a 2.7% decrease in ASP. Service revenue
increased by $177.1 million, or 46.2%, to $560.1 million,
reflecting the Company’s increase in BlackBerry subscriber
accounts during the period. Software revenue increased by
$16.6 million, or 10.6%, to $173.2 million in fiscal 2007.
The Company’s net income increased by $256.9 million to
$631.6 million, or $3.41 basic earnings per share (“basic EPS”)
and $3.31 diluted earnings per share (“diluted EPS”), in fiscal
2007, compared to net income of $374.7 million, or $1.98 basic
EPS and $1.91 diluted EPS, in fiscal 2006. The $256.9 million
increase in net income in fiscal 2007 primarily reflects an
increase in gross margin in the amount of $517.6 million, which
was partially offset by an increase of $300.9 million in the
Company’s research and development expenses and sales
and marketing programs. Fiscal 2006 operating results also
included a litigation accrual in the amount of $201.8 million