Blackberry 2007 Annual Report Download - page 52

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50
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
to earnings in the amount of $162.5 million was recorded
in operating results in the three-month period ending
March 4, 2006. During fiscal 2006, the Patent Office issued
various office actions rejecting all claims in all NTP patents.
Accordingly, though the rulings of the Patent Office are
subject to appeal by NTP, given the conclusions and the
strength of the conclusions reached by the Patent Office,
no value has been ascribed to the NTP license. See “Critical
Accounting Policies and Estimates – Litigation”, “Results of
Operations – Litigation” and note 13(b) to the Consolidated
Financial Statements.
Investment Income
Investment income decreased by $4.4 million to $14.8 million
in the fourth quarter of fiscal 2007 from $19.2 million in the
comparable period of fiscal 2006. The decrease reflects the
decrease in cash, cash equivalents, short-term investments
and investments when compared to the prior year’s quarter
resulting primarily from the funding of the NTP litigation
settlement in the amount of $612.5 million in the fourth
quarter of fiscal 2006 as well as the common shares of the
Company repurchased as part of the Company’s Common
Share Repurchase Program at an aggregate cost of $203.9
million offset, in part, by improved interest rate yields.
Income Taxes
For the fourth quarter of fiscal 2007, the Company’s income
tax expense was $68.3 million resulting in an effective tax
rate of 26.7% compared to an income tax recovery of $3.4
million for the same period last year. The fiscal 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.
The Company has not provided for Canadian income
taxes or foreign withholding taxes that would apply on the
distribution of the earnings of its non-Canadian subsidiaries,
as these earnings are intended to be reinvested indefinitely
by these subsidiaries.
Net Income
The Company’s net income increased by $171.8 million to
$187.4 million, or $1.01 basic EPS and $0.98 diluted EPS, in
the fourth quarter of fiscal 2007, compared to $15.6 million,
or $0.08 basic EPS and $0.08 diluted EPS, in the fourth
quarter of fiscal 2006. The $171.8 million increase in net
income in the fourth quarter of fiscal 2007 reflects primarily
an increase in gross margin in the amount of $188.8 million,
which was partially offset by an increase of $96.8 million in the
Company’s research and development expenses, sales and
marketing programs and an increase in legal, accounting and
other professional costs incurred in the fourth quarter of fiscal
2007 in connection with the Review, the Restatement and
related matters. The fiscal 2007 fourth quarter net income
also includes the effect of the Company adopting SFAS
123(R), resulting in stock-based compensation expense in an
after-tax amount of $5.2 million, or $0.03 diluted EPS. The
fourth quarter of fiscal 2006 included a litigation provision of
$162.5 million relating to the NTP litigation matter.
The weighted average number of shares outstanding was
185.7 million common shares for basic EPS and 190.3 million
common shares for diluted EPS for the quarter ended March
3, 2007 compared to 185.6 million common shares for basic
EPS and 191.9 million common shares for diluted EPS for the
comparable period last year.
Liquidity and Capital Resources
Cash and cash equivalents, short-term investments and
investments increased by $163.5 million to $1.41 billion as
at March 3, 2007 from $1.25 billion as at March 4, 2006.
The majority of the Company’s cash and cash equivalents,
short-term investments and investments are denominated in
U.S. dollars as at March 3, 2007.
A comparative summary of cash and cash equivalents,
short-term investments and investments is set out below.
As at
March 3, 2007 March 4, 2006 Change - Fiscal
2007/2006
Cash and cash equivalents $ 677,144 $ 459,540 $ 217,604
Short-term investments 310,082 175,553 134,529
Investments 425,652 614,309 (188,657)
Cash, cash equivalents, short-term investments and investments $ 1,412,878 $ 1,249,402 $ 163,476