Blackberry 2008 Annual Report Download - page 38

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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
36
Investment Income
Investment income decreased by $14.1 million to $52.1 million
in fiscal 2007 from $66.2 million for the same period last year.
The decrease reflects the decrease in cash, cash equivalents,
short-term investments and long-term investments when
compared to the prior year 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 $595.1 million, offset in part by improved
interest rate yields.
Income Taxes
For fiscal 2007, the Company’s income tax expense was
$227.4 million resulting in an effective tax rate of 26.5%
compared to an income tax expense of $106.9 million or
a 22.2% effective tax rate for the same period last year.
During the first quarter of fiscal 2006, the tax provision
was reduced by $27.0 million as a result of the Company
recognizing incremental cumulative ITCs attributable to prior
fiscal years. ITCs are generated as a result of the Company
incurring eligible SR&ED expenditures, which, under the
“flow-through” method, are credited as a reduction of
income tax expense. The Company recorded this $27.0 million
reduction in its deferred income tax provision as a result of a
favorable tax ruling involving another Canadian technology
corporation, which is also applicable to the Company.
Net Income
The Company’s net income increased by $256.9 million to
$631.6 million, or $1.14 per share basic and $1.10 per share
diluted, in fiscal 2007 compared to net income of
$374.7 million, or $0.66 per share basic and $0.64 per share
diluted, in fiscal 2006. The $256.9 million increase in net
income in fiscal 2007 reflects primarily an increase in gross
margin in the amount of $517.6 million, which was offset by
an increase of $300.9 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 fiscal 2007 in connection with the Review, the
Restatement and related matters.
Results for the fiscal year ended March 3, 2007 also include
the effect of the Company adopting SFAS 123(R), resulting
in an after-tax stock-based compensation expense in the
amount of $18.8 million, or $0.03 diluted EPS.
The weighted average number of shares outstanding
was 556.1 million common shares for basic EPS and
571.8 million common shares for diluted EPS for the year
ended March 3, 2007, compared to 566.7 million common
shares for basic EPS and 588.5 million common shares for
diluted EPS for the comparable period last year. Both the
weighted average number of shares outstanding and the
basic and diluted EPS for both fiscal 2007 and fiscal 2006
reflects the 3-for-1 stock split implemented by way of a stock
dividend in the second quarter of fiscal 2008.