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2009 Annual Report
Life On BlackBerry

Table of contents

  • Page 1
    2009 Annual Report Life On BlackBerry

  • Page 2
    Connect to everything you love in life... your entertainment 2 your social networks 4 your information 6 year in review 8 financials 13

  • Page 3
    ... 10 years of BlackBerry®. With over 50 million smartphones shipped, RIM helps users all over the globe connect to the specific people, information and media that makes their worlds go round. The success of BlackBerry products and services is driven by passionate employees, outstanding partnerships...

  • Page 4
    ...mobile games when you have time on your hands. Take photos or shoot videos of friends. And use built-in GPS to ensure that you find that shop, restaurant or dinner party. Purchase a novel, order ï¬,owers, reserve concert tickets and book your next trip - all on your BlackBerry smartphone. 1984 RIM...

  • Page 5
    your passions 3

  • Page 6
    ... Stock Exchange (TSE: RIM) 1999 RIM introduces the BlackBerry wireless email solution RIM lists on the Nasdaq (Nasdaq: RIMM) 2002 RIM introduces the BlackBerry® 5810 with built-in phone RIM adds support for corporate data applications beyond email and support for personal email accounts 2003 RIM...

  • Page 7
    your contacts 5

  • Page 8
    ... presentation. Connecting to all of your important information while on the go has never been easier. 2004 RIM introduces the award winning BlackBerry® 7100 series with SureType® keyboard technology 2006 RIM introduces the incredibly sleek and stylish BlackBerry® Pearl™ smartphone 2007 RIM...

  • Page 9
    your info 7

  • Page 10
    ... mobile applications; • Expansion of manufacturing capabilities through the addition of new outsourcing partners around the world which allowed us to almost double the number of devices shipped during fiscal 2009; and • Receipt of the 2009 GSMA Chairman's Award in recognition of RIM's role...

  • Page 11
    ... for income taxes ...Net income ...Earnings per share ...Basic ...Diluted ...Operating data (percentage of revenue) Gross margin ...Research and development ...Selling, marketing and administration ...Balance Sheet data Cash, cash equivalents, short-term investments and investments ...Total assets...

  • Page 12
    ... to grow RIM's market share and profitability in fiscal 2010. Operating expenses for the year totaled approximately $2.38 billion and remained ï¬,at with the previous year as a percentage of revenue as we continued to invest in brand, channels and R&D. Net income in fiscal 2009 increased to...

  • Page 13
    ...advanced research, product development, standards and licensing. In order to support the growing demand for our products, we added significant capacity to our manufacturing organization by adding new outsourcing partners globally to increase ï¬,exibility and scalability. In addition, we invested in...

  • Page 14
    ... customer base. Four new initiatives were launched by the BlackBerry® Technical Support Services Team in fiscal 2009, including the BlackBerry® Certification Program to allow our partners to enhance their knowledge of BlackBerry hardware and software; BlackBerry® Support Community Forums...

  • Page 15
    ... Condition and Results of Operations Management's Responsibility for Financial Reporting Report of Independent Registered Public Accounting Firm on Internal Control Over Financial Reporting Report of Independent Registered Public Accounting Firm Consolidated Balance Sheets Consolidated Statements...

  • Page 16

  • Page 17
    ... Limited ("RIM" or the "Company") for the fiscal year ended February 28, 2009. The Consolidated Financial Statements have been prepared in accordance with United States generally accepted accounting principles ("U.S. GAAP"). All financial information herein is presented in United States dollars...

  • Page 18
    ... mobile communications market. Through the development of integrated hardware, software and services that support multiple wireless network standards, RIM provides platforms and solutions for seamless access to time-sensitive information, including email, phone, short messaging service, Internet...

  • Page 19
    .... Software revenues include fees from (i) licensing RIM's BlackBerry Enterprise Serverâ„¢ ("BES") software; (ii) client access licenses ("CALs"), which are charged for each subscriber using the BlackBerry service via a BES; (iii) maintenance and upgrades to software; and (iv) technical support. RIM...

  • Page 20
    ... 2009/2008 March 3, 2007 Change 2008/2007 (in thousands, except for per share amounts) Revenue Cost of sales Gross margin Expenses Research and development Selling, marketing and administration Amortization Sub-total Income from operations Investment income Income before income taxes Provision...

  • Page 21
    ...the Fiscal Year Ended February 28, 2009 March 1, 2008 Change 2009/2008 March 3, 2007 Change 2008/2007 Revenue Cost of sales Gross margin Expenses Research and development Selling, marketing and administration Amortization Income from operations Investment income Income before income taxes Provision...

  • Page 22
    ...Certified Public Accountants Statement of Position 97-2, Software Revenue Recognition ("SOP 97-2"). Provisions are made at the time of sale for warranties, royalties, price protection, rebates and estimated product returns. If the historical data the Company uses to estimate product returns does not...

  • Page 23
    ... February 28, 2009, refer to Note 5 to the Consolidated Financial Statements. Intangible assets and goodwill Intangible assets are stated at cost less accumulated amortization and are comprised of patents, licenses and acquired technology. Patents include trademarks, internally developed patents, as...

  • 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 FEBRUARY 28, 2009 competition and other economic factors are potential indicators that the useful life of an intangible asset may be...

  • Page 25
    ... differences between the financial reporting and tax basis of assets and liabilities, including research and development costs and incentives, capital assets, non-deductible reserves and operating loss carryforwards, net of valuation allowances. The Company considers both positive evidence and...

  • Page 26
    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 FEBRUARY 28, 2009 arrangements in the ordinary course of business in which the tax treatment is not entirely certain. In particular,...

  • Page 27
    ... of fiscal 2010 and its effects are not material to the Company's results of operations and financial condition, as of the filing date, including an acquisition subsequent to year end. Noncontrolling Interests in Consolidated Financial Statements - an amendment of ARB 51 In December 2007, the FASB...

  • 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 FEBRUARY 28, 2009 Balsillie, the Co-Chief Executive Officer of the Company, Mike Lazaridis, the President and Co-Chief Executive ...

  • Page 29
    ... to the Company's Stock Option Granting Practices - In June 2007, the Board of Directors approved a formal policy on granting equity awards, the details of which are described in the Company's Management Information Circular, dated May 28, 2008 (the "Management Information Circular"), a copy of...

  • 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 FEBRUARY 28, 2009 Review Costs Included in the Company's selling, marketing and administration expenses in fiscal 2008 and fiscal ...

  • Page 31
    ...was attributable to increases in non-warranty repair, gains realized from revenue hedging instruments and sales of accessories. See "Market Risk of Financial Instruments - Foreign Exchange" for additional information on revenue hedging instruments. Gross Margin Consolidated gross margin increased by...

  • Page 32
    ... of financial condition and results of operations continued FOR THE THREE MONTHS AND FISCAL YEAR ENDED FEBRUARY 28, 2009 Research and Development Research and development expenditures consist primarily of salaries and benefits for technical personnel, new product development costs, travel, office...

  • Page 33
    ... annual basis, to use these rules as well as certain clarifications to the rules. In order to utilize the functional currency option for fiscal 2009, the Company filed an election pursuant to the draft legislation in the third quarter of fiscal 2009. Management believes that functional currency tax...

  • Page 34
    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 FEBRUARY 28, 2009 Stock Split The Company declared a 3-for-1 stock split of the Company's outstanding common shares on June 28, 2007...

  • Page 35
    ... to fiscal 2007, were attributable to salaries and benefits due to an increase in the average headcount associated with research and development activities, new product development costs, office and related staffing infrastructure costs and travel. Selling, Marketing and Administration Expenses...

  • Page 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 FEBRUARY 28, 2009 Amortization expense relating to certain capital and certain intangible assets increased by $31.2 million to $108...

  • Page 37
    ... 2009/2008 Revenue Cost of sales Gross margin Expenses Research and development Selling, marketing and administration Amortization Income from operations Investment income Income before income taxes Provision for income taxes (1) Net income Earnings per share Basic Diluted Weighted-average number...

  • Page 38
    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 FEBRUARY 28, 2009 Revenue Revenue for the fourth quarter of fiscal 2009 was $3.46 billion, an increase of $1.58 billion, or 83.9%, ...

  • Page 39
    ... 2009 given the quarterly increases in revenue realized by the Company during fiscal 2009. Three Month Fiscal Periods Ended (in thousands) February 28, 2009 % of Revenue November 29, 2008 % of Revenue March 1, 2008 % of Revenue Revenue Research and development Selling, marketing and administration...

  • 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 FEBRUARY 28, 2009 Amortization expense relating to certain capital and certain intangible assets licenses increased by $30.3 million...

  • Page 41
    ...Fiscal Year 2008 Third Quarter Second Quarter First Quarter Revenue Gross margin Research and development, Selling, marketing and administration, and Amortization Investment income Income before income taxes Provision for income taxes (1) Net income Earnings per share (2) Basic Diluted Research and...

  • 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 FEBRUARY 28, 2009 for Canadian income tax purposes to adopt these rules in the third quarter of fiscal 2009, the Company cannot ...

  • Page 43
    ... for the use of intellectual property, software, messaging services and other BlackBerry-related features and several agreements to acquire portfolios of patents relating to wireless communication technologies totalling $279 million. All acquired patents were recorded as Intangible assets and are...

  • Page 44
    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 FEBRUARY 28, 2009 Auction Rate Securities Auction rate securities are debt instruments with long-term nominal maturity dates for ...

  • Page 45
    ...-term investments and long-term investments were $2.24 billion as at February 28, 2009. The Company believes its financial resources, together with expected future earnings, are sufficient to meet funding requirements for current financial commitments, for future operating and capital expenditures...

  • 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 FEBRUARY 28, 2009 in Canadian dollars. See "Income Taxes" and "Non-GAAP Financial Measures". At February 28, 2009, approximately 36%...

  • Page 47
    ...which 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 February 28, 2009, the Company did not record an other-than-temporary impairment charge. See...

  • Page 48
    ... Management of Research In Motion Limited is responsible for the preparation and presentation of the Consolidated Financial Statements and all of the financial information in this Annual Report. The Consolidated Financial Statements were prepared in accordance with United States generally accepted...

  • Page 49
    ... as at February 28, 2009 and March 1, 2008 and the consolidated statements of operations, shareholders' equity and cash flows for the years ended February 28, 2009, March 1, 2008 and March 3, 2007 of the Company and our report dated April 7, 2009 expressed an unqualified opinion thereon. Kitchener...

  • Page 50
    ...1, 2008, and the related consolidated statements of income, shareholders' equity, and cash flows for the years ended February 28, 2009, March 1, 2008 and March 3, 2007. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these...

  • Page 51
    RESEARCH IN MOTION LIMITED Incorporated under the Laws of Ontario consolidated balance sheets (United States dollars, in thousands) As at February 28, 2009 March 1, 2008 Assets Current Cash and cash equivalents (note 4) Short-term investments (note 4) Trade receivables Other receivables Inventory...

  • Page 52
    ... to earnings during the year 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 February 28, 2009 See notes to the consolidated financial statements. $ 2,068...

  • Page 53
    RESEARCH IN MOTION LIMITED consolidated statements of operations (United States dollars, in thousands, except per share data) For the Year Ended February 28, 2009 March 1, 2008 March 3, 2007 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 February 28, 2009 March 1, 2008 March 3, 2007 Cash flows from operating activities Net income Items not requiring an outlay of cash: Amortization Deferred income taxes Income taxes payable Stock...

  • Page 55
    ... worldwide mobile communications market. Through the development of integrated hardware, software and services that support multiple wireless network standards, RIM provides platforms and solutions for seamless access to time-sensitive information including email, phone, short messaging service (SMS...

  • Page 56
    ... for hedge accounting under SFAS 133, changes in fair value are recognized in current earnings and will generally offset the changes in the U.S. dollar value of the associated hedged asset or liability. (j) Inventories Raw materials are stated at the lower of cost and replacement cost. Work in...

  • Page 57
    ... differences between the financial reporting and tax basis of assets and liabilities, including research and development costs and incentives, capital assets, non-deductible reserves and operating loss carryforwards, net of valuation allowances. The Company considers both positive evidence and...

  • 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
    ...calculated using the MPT approach is recognized on a prospective basis 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...

  • Page 60
    ...costs are included in Selling, marketing and administration. 2. ADOPTION OF ACCOUNTING POLICIES The Fair Value Option for Financial Assets and Financial Liabilities - Including an amendment of SFAS 115 In February 2007, the Financial Accounting Standards Board ("FASB") issued Statement of Financial...

  • Page 61
    ... of fiscal 2010 and its effects are not material to the Company's results of operations and financial condition, as of the filing date, including an acquisition subsequent to year end. Noncontrolling Interests in Consolidated Financial Statements - an amendment of ARB 51 In December 2007, the FASB...

  • Page 62
    ...-term Investments Long-term Investments Cost Basis As at February 28, 2009 Bank balances Money market fund Bank certificates of deposit Auction-rate securities Commercial paper and corporate notes / bonds US treasury notes Government sponsored enterprise notes Asset-backed securities Other cost...

  • Page 63
    ... related fair values were as follows: Less than 12 months Fair Value Unrealized losses 12 months or more Fair Value Unrealized losses Fair Value Total Unrealized losses As at February 28, 2009 Government sponsored enterprise notes Commercial paper and corporate bonds U.S. treasury notes Asset...

  • 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 A Structured Investment Vehicle ("SIV") is a fund that seeks to generate investment returns by purchasing high grade long-term...

  • Page 65
    ...) $ 396,267 6. CAPITAL ASSETS Capital assets are comprised of the following: February 28, 2009 Cost Accumulated amortization Net book value Land Buildings, leaseholds and other BlackBerry operations and other information technology Manufacturing equipment, research and development equipment, and...

  • Page 66
    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 As at February 28, 2009, the carrying amount of assets under construction is $88.9 million (March 1, 2008 - ...

  • Page 67
    ... at the date of acquisition along with prior year's acquisition allocations: For the year ended February 28, 2009 March 1, 2008 March 3, 2007 Assets purchased Current assets Capital assets Deferred income tax asset Acquired technology In-process research and development Patents Goodwill Liabilities...

  • 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 income taxes and the amount computed ...

  • Page 69
    ...income tax assets Liabilities Capital assets Research and development Unrealized gains on financial instruments Net deferred income tax liabilities Net deferred income tax asset Deferred income tax asset - current Deferred income tax liability - current Deferred income tax asset - long term Deferred...

  • Page 70
    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 As at February 28, 2009, the total unrecognized income tax benefits of $137.4 million includes approximately...

  • Page 71
    ...awards as a financing activity in the consolidated statement of cash flows. Options granted under the plan generally vest over a period of five years and are generally exercisable over a period of six years to a maximum of ten years from the grant date. The Company issues new shares to satisfy stock...

  • Page 72
    ...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 As previously disclosed, the Company's Co-Chief Executive Officers voluntarily offered to assist the Company in defraying costs...

  • Page 73
    ...following assumptions: For the year ended March 1, 2008 March 3, 2007 Number of options granted (000's) Weighted-average BSM value of each option Assumptions: Risk-free interest rate Expected life in years Expected dividend yield Volatility The Company has not paid a dividend in the previous eleven...

  • Page 74
    ... 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 February 28, 2009. On May 1, 2006, Visto Corporation ("Visto") filed a complaint in the...

  • Page 75
    ... in these consolidated financial statements as at February 28, 2009. On August 28, 2007, Visto filed a new complaint in the Marshall District Court, against the Company alleging infringement of two U.S. Patents (U.S. Patent No. 5,857,201 and 6,324,542). On October 18, 2007, RIM filed its answer...

  • Page 76
    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 On June 15, 2007, RIM filed in the United States District Court for the Northern District of California a ...

  • Page 77
    ...2008, the parties completed settlement of the lawsuit for an amount that is not material to these consolidated financial statements. On June 6, 2007, Minerva Industries ("Minerva") filed a complaint in the Marshall District Court against the Company alleging infringement of U.S. Patent No. 6,681,120...

  • Page 78
    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 an injunction and monetary damages. On January 22, 2008, Minerva filed a second complaint in the Marshall ...

  • Page 79
    ... Court alleging infringement of U.S. Patent No. 7,330,715. This patent generally relates to transferring contact information using a cell phone. The Texas Court has set a trial date for October 2010. On July 29th, 2008, Aloft filed a second patent infringement lawsuit against the Company in the...

  • Page 80
    ... patent generally relates to the provisions of traffic information to mobile users. The complaint seeks an injunction and monetary damages. Additional lawsuits and claims, including purported class actions and derivative actions, may be filed or made based upon the Company's historical stock option...

  • Page 81
    ... outstanding benefit arising from incorrectly priced stock options granted to all RIM employees from 1996 to 2006, and (ii) a total of CAD $44.8 million to RIM (CAD $15.0 million of which had previously been paid) to defray costs incurred by RIM in the investigation and remediation of stock option...

  • Page 82
    ... and diluted earnings per share. For the year ended February 28, 2009 March 1, 2008 March 3, 2007 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 (000's): Stock-based...

  • Page 83
    ... working capital items are as follows: $ $ (88) 545 457 $ 7,073 23,210 $ (6,394) (5,122) $ 30,283 $ (11,516) For the year ended February 28, 2009 March 1, 2008 March 3, 2007 Trade receivables Other receivables Inventory Other current assets Accounts payable Accrued liabilities Income taxes...

  • Page 84
    ... 2007 Interest paid during the year Income taxes paid during the year (c) The following items are included in the accrued liabilities balance: $ 502 $ 518 $ $ 494 32,101 $ 946,237 $ 216,095 As at February 28, 2009 March 1, 2008 Marketing costs Warranty (note 13) Royalties Revenue rebates...

  • Page 85
    ... utilizes internally developed models to estimate fair value. The fair value of currency forward contracts has been estimated using market quoted currency spot rates and interest rates. The fair value of long-term debt has been estimated using market quoted interest rates. The estimates presented...

  • Page 86
    ... Portion) For the Year Ended February 28, 2009 Currency Forward Contracts Currency Forward Contracts Currency Forward Contracts Currency Forward Contracts $ 47,272 $ (9,991) $ (14,986) $ (24,977) Revenue Cost of sales Selling, marketing and administration Research and development $ 43,212...

  • Page 87
    ... not currently utilize interest rate derivative instruments in its investment portfolio. The Company, in the normal course of business, monitors the financial condition of its customers and reviews the credit history of each new customer. The Company establishes an allowance for doubtful accounts...

  • Page 88
    ... organized and managed as a single reportable business segment. The Company's operations are substantially all related to the research, design, manufacture and sales of wireless communications products, services and software. Selected financial information is as follows: For the year ended February...

  • Page 89
    ...were funded with the Company's cash on hand. Certicom technology protects the value of content, applications and devices with government approved security using Elliptic Curve Cryptography. On March 12, 2009, the Government of Canada enacted changes to the Income Tax Act (Canada) that allows RIM to...

  • Page 90
    ... Market Symbol: RIMM The 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...

  • Page 91
    Life On BlackBerry Years of BlackBerry

  • Page 92
    Life On BlackBerry Research In Motion 2009 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]