Blackberry 2008 Annual Report Download

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Research In Motion 2008 Annual Report

Table of contents

  • Page 1
    Research In Motion 2008 Annual Report

  • Page 2
    .... BlackBerry smartphones with built-in GPS (Global Positioning System) provide "out-of-the-box" support for a wide variety of LBS (Location Based Service) applications such as BlackBerry® Maps. BlackBerry Maps delivers turn-by-turn driving directions and the ability to track the route via GPS. You...

  • Page 3
    The BlackBerry® 8300 Series includes a selection of models that are perfect for people who want a well-rounded smartphone. In addition to renowned communications capabilities and easeof-use, they offer many new consumer-friendly features and some models offer built-in GPS. 1

  • Page 4
    ... Service). And BlackBerry smartphones are also designed to work with many online photo albums and social networking sites, so sharing life's important moments with friends and associates is fun and easy. "Being in contact makes for less work, more fun, more play." Terry McBride CEO, Nettwerk Music...

  • Page 5
    The stylish BlackBerry® 8100 Series includes a range of smartphones that are surprisingly small, but they come with an easy-to-use keyboard and trackball and they are packed with features like email, voice dialing, Internet, multimedia and expandable memory. All in a sleek and polished design. 3

  • Page 6
    "Worklife, nightlife, social life - it's all in here." Jason Pomeranc, Co-Founder, Thompson Hotels 4

  • Page 7
    ... listen to music while simultaneously managing your email or chatting with an IM contact. And a large and growing ecosystem of independent software vendors (ISVs) has developed a wide variety of other business and lifestyle applications for BlackBerry smartphones. BlackBerry smartphones have always...

  • Page 8
    ...and Wi-Fi® networks on certain BlackBerry smartphone models, there is even more ï¬,exibility in how you stay connected. Built-in Wi-Fi® is available with the BlackBerry® Pearlâ„¢ 8120, BlackBerry® Curveâ„¢ 8320 and BlackBerry® 8820 smartphones. Wi-Fi support is a perfect complement to cellular...

  • Page 9
    7

  • Page 10
    Financial Highlights (in thousands of U.S. dollars, except per share amounts) U.S. GAAP March 1, 2008 March 3, 2007 March 4, 2006 Statement of Operations data Revenue Gross margin Research & development and selling, general and administration Amortization Litigation Investment income Income before ...

  • Page 11
    ... thank our customers, partners and shareholders wholeheartedly for their support throughout fiscal 2008. Some of RIM's achievements during the past year included: • Revenue grew 98% to over $6 billion; • The BlackBerry subscriber account base reached over 14 million; • RIM shipped the 25...

  • Page 12
    ... Pearl 8120 smartphone with Wi-Fi and UMA support. We also announced plans to introduce BlackBerry® Unite!™, a free PC-based software product that allows small groups of people, such as a family or small office, to stay connected on the go with mobile access to shared calendars, pictures, music...

  • Page 13
    ... includes a selection of GSM and CDMA smartphones that support international roaming services so that you can stay connected, by phone or email, from just about anywhere. And with an integrated media player, travelers can enjoy their favorite music and videos when and where they choose. R&D and...

  • Page 14
    ... to grow our teams in other customer care centers; and expanded our multilingual training programs to include several new languages including French, Italian, German, Spanish, Simplified Chinese, Japanese and Brazilian Portuguese. In fiscal 2008, revenues from our technical support programs grew...

  • Page 15
    ... Independent Auditor's Report Consolidated Balance Sheets Consolidated Statements of Shareholders' Equity Consolidated Statements of Operations Consolidated Statements of Cash Flows Notes to the Consolidated Financial Statements Corporate Information Shareholder Information 15 46 47 48 49 50 51 52...

  • Page 16

  • Page 17
    ... previously filed financial statements as a result of its internal review of its stock option granting practices, and regulatory investigations or litigation relating to those matters, including possible sanctions or penalties against the Company or its directors or officers; • third-party claims...

  • Page 18
    ...of financial condition and results of operations continued FOR THE THREE MONTHS AND FISCAL YEAR ENDED MARCH 1, 2008 • the occurrence or perception of a breach of RIM's security measures, or an inappropriate disclosure of confidential or personal information; • RIM's ability to manage production...

  • Page 19
    ... phone, a personal information manager (PIM) including contact, calendar, tasks and memo functionality, which can synchronize with the user's desktop PIM system, and web-browsing capability. Certain BlackBerry devices also include multimedia capabilities. RIM generates service revenues from billings...

  • Page 20
    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 1, 2008 Fiscal 2008 Operating Results - Executive Summary The following table sets forth certain consolidated statement of ...

  • Page 21
    ... sets forth certain consolidated statement of operations data expressed as a percentage of revenue for the periods indicated: For the Fiscal Year Ended March 1, 2008 March 3, 2007 Change 2008/2007 March 4, 2006 Change 2007/2006 Revenue Cost of sales Gross margin Expenses Research and development...

  • Page 22
    ... LIMITED management's discussion and analysis of financial condition and results of operations continued FOR THE THREE MONTHS AND FISCAL YEAR ENDED MARCH 1, 2008 The Company's critical accounting policies and estimates have been reviewed and discussed with the Company's Audit Committee and are set...

  • Page 23
    ..., product life cycle and development plans, component cost trends, product pricing and quality issues. If customer demand subsequently differs from the Company's forecasts, requirements for inventory write-offs that differ from the Company's estimates could become necessary. If management believes...

  • Page 24
    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 1, 2008 to protect its patents, RIM will review the related intangible asset balance, including previously capitalized ...

  • Page 25
    ...and penalties, accounting in interim periods and disclosure and transitions. For further details, refer to Note 9 to the Consolidated Financial Statements. The Company's provision for income taxes is based on a number of estimates and assumptions as determined by management and is calculated in each...

  • Page 26
    ... 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 1, 2008 earned in Canada versus other operating jurisdictions and the rate of taxes payable in respect of those other operating...

  • Page 27
    ... compliance with applicable accounting, regulatory and disclosure rules. The Special Committee did not find intentional misconduct on the part of any director, officer or employee responsible for the administration of the Company's stock option grant program. Each of the SEC, the Ontario Securities...

  • Page 28
    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 1, 2008 • Benefits from Option Grants - All directors and each of RIM's co-Chief Executive Officers and Chief Operating ...

  • Page 29
    ... 2007, the Ontario Superior Court of Justice issued an order extending the opt-out deadline to January 22, 2008 for customers of Goldman Sachs Exchange & Clearing L.P., who did not receive notice of the settlement in the initial mailing. As a result of that extension, additional shareholders holding...

  • Page 30
    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 1, 2008 been settled, additional lawsuits, including purported class actions and additional derivative actions, may be filed ...

  • Page 31
    ... files or submits under the Exchange Act is (i) recorded, processed, summarized and reported, within the time periods specified in the SEC's rules and forms, and (ii) accumulated and communicated to management, including its principal executive and principal financial officers, or persons performing...

  • Page 32
    ... of financial condition and results of operations continued FOR THE THREE MONTHS AND FISCAL YEAR ENDED MARCH 1, 2008 as a process designed by, or under the supervision of, the Company's principal executive and principal financial officers and effected by the Company's Board of Directors, management...

  • Page 33
    ... of the increase in BlackBerry subscriber accounts and a decline in certain fixed costs as a percentage of consolidated revenue as the Company continues to realize economies of scale in its manufacturing operations. Research and Development, Selling, Marketing and Administration, and Amortization...

  • Page 34
    ... MOTION LIMITED management's discussion and analysis of financial condition and results of operations continued FOR THE THREE MONTHS AND FISCAL YEAR ENDED MARCH 1, 2008 Research and Development Research and development expenditures consist primarily of salaries and benefits for technical personnel...

  • Page 35
    ... for diluted EPS for the same period last year. Both the weighted average number of shares outstanding and the basic and diluted EPS for year ended March 1, 2008 and year ended March 3, 2007 reflects the 3-for-1 stock split implemented by way of a stock dividend that was paid in the second quarter...

  • Page 36
    ... MOTION LIMITED management's discussion and analysis of financial condition and results of operations continued FOR THE THREE MONTHS AND FISCAL YEAR ENDED MARCH 1, 2008 Device revenue increased by $776.3 million, or 53.9%, to $2.22 billion, or 73.0% of consolidated revenue in fiscal 2007 compared...

  • Page 37
    ... and its partners to sell the Company's products and services completely free and clear of any claim by NTP, including any claims that NTP may have against wireless carriers, channel partners, suppliers or customers in relation to the Company's products or services, (including BlackBerry Connect and...

  • Page 38
    ... in the Company's research and development expenses, sales and marketing programs and an increase in legal, accounting and other professional costs incurred in fiscal 2007 in connection with the Review, the Restatement and related matters. Results for the fiscal year ended March 3, 2007 also include...

  • Page 39
    ... of revenue for the interim periods indicated: For the Three Months Ended March 1, 2008 March 3, 2007 Change-Fiscal 2008/2007 (in thousands, except for per share amounts) Revenue Cost of sales Gross margin Expenses Research and development Selling, marketing and administration Amortization...

  • Page 40
    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 1, 2008 Revenue Revenue for the fourth quarter of fiscal 2008 was $1.88 billion, an increase of $952.3 million, or 102.4% from...

  • Page 41
    ... the quarterly increases in revenue realized by the Company during fiscal 2008. Three Month Fiscal Periods Ended March 1, 2008 $ % of Revenue December 1, 2007 $ % of Revenue March 3, 2007 $ % of Revenue Revenue Research and development Selling, marketing and administration Amortization $ 1,882,705...

  • Page 42
    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 1, 2008 Net Income The Company's net income increased by $225.1 million to $412.5 million, or $0.73 basic EPS and $0.72 ...

  • Page 43
    ... length of time and the extent to which the fair value has been less than cost, the financial condition, the near-term prospects of the individual investment and the Company's intent and ability to hold the debt securities. One of the programs with a $25.0 million face amount included in the total...

  • Page 44
    ...of this net increase. Fiscal Year Ended March 1, 2008 March 3, 2007 Change-Fiscal 2008/2007 Net income Amortization Deferred income taxes Stock-based compensation Changes in: Trade receivables Other receivables Inventory Accounts payable Accrued liabilities Income taxes payable All other Cash flows...

  • Page 45
    ... in Income tax payable as of March 1, 2008 and the Company intends to fund these obligations from existing financial resources and cash flows. The Company has not declared any cash dividends in the last three fiscal years. Cash and cash equivalents, short-term investments and long-term investments...

  • Page 46
    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 1, 2008 Market Risk of Financial Instruments The Company is engaged in operating and financing activities that generate risk ...

  • Page 47
    ...the fair value has been less than cost, the financial condition, the near-term prospects of the individual investment and the Company's ability and intent to hold the debt securities to maturity. As of March 1, 2008, the Company has recorded a $5.6 million other-than-temporary impairment on specific...

  • Page 48
    ... Financial Statements have been reviewed by the Audit Committee and approved by the Board of Directors of Research In Motion Limited. In fulfilling its responsibility for the reliability and integrity of financial information, management has developed and maintains systems of accounting and internal...

  • Page 49
    ... shareholders' equity and cash flows for the years ended March 1, 2008, March 3, 2007 and March 4, 2006 and our auditors' report dated April 16, 2008 expressed an unqualified opinion thereon. Kitchener, Canada, April 16, 2008. Chartered Accountants Accountants Chartered Licensed Public Accountants...

  • Page 50
    ...In Motion Limited (the "Company") as at March 1, 2008 and March 3, 2007 and the consolidated statements of operations, shareholders' equity and cash flows for the years ended March 1, 2008, March 3, 2007 and March 4, 2006. These financial statements are the responsibility of the Company's management...

  • Page 51
    ... Current Accounts payable Accrued liabilities (notes 13 and 17(c)) Income taxes payable (note 9) Deferred revenue Current portion of long-term debt (note 10) Long-term debt (note 10) Deferred income tax liability (note 9) Income taxes payable (note 9) Shareholders' Equity Capital stock (note...

  • Page 52
    ... to earnings during the year Other paid-in capital Shares issued: Exercise of stock options Transfers to capital stock from stock option exercises Stock-based compensation Excess tax benefits from stock-based compensation Balance as at March 1, 2008 See notes to the consolidated financial statements...

  • Page 53
    RESEARCH IN MOTION LIMITED consolidated statements of operations (United States dollars, in thousands, except per share data) For the Year Ended March 1, 2008 March 3, 2007 March 4, 2006 Revenue Devices and other Service and software Cost of sales Devices and other Service and software Gross ...

  • Page 54
    ... LIMITED consolidated statements of cash flows (United States dollars, in thousands) For the Year Ended March 1, 2008 March 3, 2007 March 4, 2006 Cash flows from operating activities Net income Items not requiring an outlay of cash: Amortization Deferred income taxes Income taxes payable Stock...

  • Page 55
    ...relationships to promote the sales of its products and services as well as its own supporting sales and marketing teams. The Company was incorporated on March 7, 1984 under the Ontario Business Corporations Act. The Company's shares are traded on The Toronto Stock Exchange under the symbol "RIM" and...

  • Page 56
    ... filings or material deterioration in the customer's operating results or financial position, and payment experiences), RIM records a specific bad debt provision to reduce the customer's related trade receivable to its estimated net realizable value. If circumstances related to specific customers...

  • Page 57
    ... basis based upon the anticipated number of units sold during the terms of the license agreements Straight-line over 17 years or over estimated useful life Patents (m) Impairment of long-lived assets The Company reviews long-lived assets such as property, plant and equipment and intangible assets...

  • Page 58
    ...Certified Public Accountants Statement of Position 97-2, Software Revenue Recognition ("SOP 97-2"). The Company records reductions to revenue for estimated commitments related to price protection and for customer incentive programs, including reseller and end-user rebates. The estimated cost of the...

  • Page 59
    ... value. This vendor specific objective evidence of fair value is established through prices charged for each revenue element when that element is sold separately. The revenue recognition policies described above are then applied to each unit of accounting. (q) Research and development Research costs...

  • Page 60
    ... in the financial statements for all new and unvested stock options that are ultimately expected to vest as the requisite service is rendered beginning in the Company's fiscal 2007 year. Stock-based compensation expense for awards granted prior to fiscal 2007 is based on the grant-date fair value as...

  • Page 61
    ... SFAS 123(R). These awards are measured at their fair value on the date of issuance, and remeasured at each reporting period, until settlement. (v) Warranty The Company provides for the estimated costs of product warranties at the time revenue is recognized. BlackBerry devices are generally covered...

  • Page 62
    ... LIMITED notes to the consolidated financial statements continued In thousands of United States dollars, except share and per share data, and except as otherwise indicated The Fair Value Option for Financial Assets and Financial Liabilities - Including an Amendment of SFAS 115 In February 2007...

  • Page 63
    ... follows: Cost Basis Unrealized Gains Unrealized Losses Recorded Basis Cash and Cash Equivalents Short-term Investments Long-term Investments As at March 1, 2008 Bank balances Bank term deposits Bank certificates of deposit Auction-rate securities Commercial paper and corporate notes / bonds...

  • Page 64
    ... LIMITED notes to the consolidated financial statements continued In thousands of United States dollars, except share and per share data, and except as otherwise indicated Investments with continuous unrealized losses for less than and greater than 12 months and their related fair values were...

  • Page 65
    ... length of time and the extent to which the fair value has been less than cost, the financial condition, the near-term prospects of the individual investment and the Company's intent and ability to hold the debt securities. One of the programs with a $25.0 million face amount included in the total...

  • Page 66
    ... $6,579), is included in BlackBerry operations and other information technology; and $9,588 (March 3, 2007 - $2,353) is included in Manufacturing equipment, research and development equipment, and tooling. For the year ended March 1, 2008, amortization expense related to capital assets was $133,048...

  • Page 67
    ... estimated fair value of the assets acquired and liabilities assumed at the date of acquisition along with prior year's acquisition allocations: For the year ended March 1, 2008 March 3, 2007 March 4, 2006 Assets purchased Current assets Capital assets Deferred income tax asset Acquired technology...

  • Page 68
    RESEARCH IN MOTION LIMITED notes to the consolidated financial statements continued In thousands of United States dollars, except share and per share data, and except as otherwise indicated 9. INCOME TAXES The difference between the amount of the provision for (recovery of) income taxes and the ...

  • Page 69
    ... tax benefit related to ITCs on research and development expenditures. A reconciliation of the beginning and end amount of unrecognized tax benefits is as follows: (in millions) Unrecognized tax benefits balance as at March 4, 2007 Gross increase for tax positions of prior years Settlement of tax...

  • Page 70
    ... 11. CAPITAL STOCK (1) Includes federal as well as provincial and state jurisdictions, as applicable. The Company regularly assesses the status of these examinations and the potential for adverse outcomes to determine the adequacy of the provision for income taxes. Specifically, the Canada Revenue...

  • Page 71
    ... to independent directors in fiscal 2008. Prior to fiscal 2007, the Company accounted for stock-based compensation using APB 25 and related interpretations. Under APB 25, compensation expense is measured as of the date on which the number of shares subject to the option and exercise price becomes...

  • Page 72
    ...'s Co-Chief Executive Officers voluntarily offered to assist the Company in defraying costs incurred in connection with the Review and the Restatement by contributing CAD $10.0 million (CAD $5.0 million by each Co-CEO) of those costs. As part of a settlement agreement reached with a pension fund as...

  • Page 73
    ... The intrinsic value of stock options exercised during fiscal 2008, calculated using the average market price during the period, was approximately $70 per share. A summary of unvested stock options since March 3, 2007 is shown below: Options Outstanding Average Grant Date Fair Value Number (in 000...

  • Page 74
    ...dollars, except share and per share data, and except as otherwise indicated The weighted-average fair value of stock options granted during the year was calculated using the BSM option-pricing model with the following assumptions: For the year ended March 1, 2008 March 3, 2007 March 4, 2006 Number...

  • Page 75
    ... professional fees in connection with this litigation. By letter dated February 16, 2004, T-Mobile Deutschland GmbH ("TMO-DG") and T-Mobile International AG (collectively, "TMO") served RIM's wholly-owned UK subsidiary, Research In Motion UK Limited ("RIM-UK"), with a third party notice in relation...

  • Page 76
    ... of damages or recoveries and the ultimate amounts, if any, with respect to the litigation (or any related litigation) is not determinable. Accordingly, no amount has been recorded in these consolidated financial statements as at March 1, 2008. On August 28, 2007, Visto filed a new complaint in the...

  • Page 77
    ..., 2008. On June 1, 2007, RIM commenced an action in the Ontario Superior Court of Justice against Visto Corporation and two of its executive officers. The action seeks damages for conspiracy, for false and misleading statements in contravention of the Competition Act, for contravention of the Trade...

  • Page 78
    ... financial statements as at March 1, 2008 On January 24, 2007, RIM was served with a Notice of Application that was filed with the Ontario Superior Court of Justice - Commercial List by a pension fund that alleges it was a shareholder, seeking various orders against the Company and named directors...

  • Page 79
    ...7,330,715. This patent generally relates to transferring contact information using a cell phone. FlashPoint Technology Inc. - On March 7, 2008, FlashPoint Technology Inc. filed a patent infringement lawsuit against Research In Motion LTD and Research In Motion Corporation in the District of Delaware...

  • Page 80
    ... in the Company's financial statements for any potential loss. 13. PRODUCT WARRANTY The Company estimates its warranty costs at the time of revenue recognition based on historical warranty claims experience and records the expense in Cost of sales. The warranty accrual balance is reviewed quarterly...

  • Page 81
    ...per share. For the year ended March 1, 2008 March 3, 2007 March 4, 2006 Net income for basic and diluted earnings per share available to common shareholders Weighted-average number of shares outstanding (000's) - basic Effect of dilutive securities: Employee stock options Weighted-average number of...

  • Page 82
    ...in working capital items are as follows: For the year ended March 1, 2008 March 3, 2007 March 4, 2006 Trade receivables Other receivables Inventory Other current assets Accounts payable Accrued liabilities Accrued litigation and related expenses Restricted cash Income taxes payable Deferred revenue...

  • Page 83
    ... determined using observable market data based on quoted prices and interest rates. Where observable market data is unavailable due to a lack of trading activity, the Company utilizes internally developed models to estimate fair value. The fair value of currency forward contracts has been estimated...

  • Page 84
    RESEARCH IN MOTION LIMITED notes to the consolidated financial statements continued In thousands of United States dollars, except share and per share data, and except as otherwise indicated The Company has entered into forward contracts to hedge exposures relating to foreign currency anticipated ...

  • Page 85
    ... are substantially all related to the research, design, manufacture and sales of wireless communications products, services and software. Selected financial information is as follows: Revenue Canada United States United Kingdom Other March 1, 2008 For the year ended March 3, 2007 March 4, 2006...

  • Page 86
    ... Toronto Stock Exchange Symbol: RIM Corporate Office Research In Motion Limited 295 Phillip Street Waterloo, Ontario, N2L 3W8 Corporate Website www.rim.com Jim Balsillie Co-Chief Executive Officer Brian Bidulka Chief Accounting Officer Robin Bienfait Chief Information Officer Larry Conlee Chief...

  • Page 87
    The World's Leading Smartphone

  • Page 88
    Research In Motion 2008 Annual Report Research In Motion 295 Phillip Street, Waterloo, Ontario, Canada N2L 3W8 www.rim.com T: 519.888.7465 F: 519.888.6906 E: [email protected]