Blackberry 2010 Annual Report Download - page 40

In the third quarter of fiscal 2010 the Company repurchased 12.3 million common shares at a cost of
$775.0 million pursuant to the Common Share Repurchase Program. The amounts paid in excess of the per
share paid-in capital of the common shares of $728.5 million in the third quarter of fiscal 2010 were charged to
retained earnings.
Auction Rate Securities
Auction rate securities are debt instruments with long-term nominal maturity dates for which the interest rates
are reset through a dutch auction process, typically every 7, 28 or 35 days. Interest is paid at the end of each
auction period, and the auction normally serves as the mechanism for securities holders to sell their existing
positions to interested buyers. As at February 27, 2010, the Company held $40.5 million in face value of
investment grade auction rate securities which are experiencing failed auctions as a result of more sell orders
than buy orders, and these auctions have not yet returned to normal operations. The interest rate for these
securities has been set at the maximum rate specified in the program documents and interest continues to be
paid every 28 days as scheduled. As a result of the lack of continuing liquidity in these securities, the
Company has adjusted the reported value to reflect an unrealized loss of $7.7 million, which the Company
considers temporary and is reflected in accumulated other comprehensive income (loss). In valuing these
securities, the Company used a multi-year investment horizon and considered the underlying risk of the
securities and the current market interest rate environment. The Company has the ability and intent to hold
these securities until such time that market liquidity returns to normal levels, and does not consider the
principal or interest amounts on these securities to be materially at risk at this time. As there is uncertainty as
to when market liquidity for auction rate securities will return to normal, the Company has classified the
auction rate securities as long-term investments on the balance sheet. As at February 27, 2010, the Company
does not consider these investments to be other-than-temporarily impaired.
Structured Investment Vehicle
A Structured Investment Vehicle (“SIV”) is a fund that seeks to generate investment returns by purchasing high
grade long-term fixed income instruments and funding those purchases by issuing short-term debt
instruments. Beginning in late 2008, widespread illiquidity in the market has prevented many SIVs, including
those held by the Company from accessing necessary funding for ongoing operations. In fiscal 2008, the
Company’s SIV holdings were placed with an enforcement manager to be restructured or sold at the election
of each senior note holder.
In the first nine months of fiscal 2010, the Company received a total of $2.4 million in principal payments from
the SIV holdings. In the third quarter of fiscal 2010, the Company elected to participate in the restructuring of
the securities and received a pro-rata distribution of proceeds from the income and principal payments on the
assets underlying the securities.
As at February 27, 2010, the Company held $21.3 million face value of assets received in the pro-rata
distribution of proceeds. During fiscal 2010, the Company received a total of $3.6 million in principal and
interest payments from the SIV and the assets received subsequent to distribution.
In determining the value for these assets, the Company has considered available evidence including changes
in general market conditions, the length of time and the extent to which the fair values have been less than
cost, the financial condition, the near-term prospects of the individual assets and the Company’s intent and
ability to hold the assets.
During fiscal 2010, the Company did not record any other-than-temporary impairment charges associated
with these investments. In fiscal 2008, the Company recorded an-other-than-temporary impairment charge of
$3.8 million on these securities. The Company has classified these securities as long-term investments.
Other
Since March 1, 2005, the Company has maintained an investment account with Lehman Brothers International
(Europe) (“LBIE”). As of September 30, 2008, the date of the last account statement received by the Company,
the Company held in the account $81.1 million in combined cash and aggregate principal amount of fixed-
income securities issued by third parties unrelated to LBIE or any other affiliate of Lehman Brothers Holdings
Inc (“LBHI”). The face value, including accrued interest, as at February 27, 2010 is $84.8 million. Due to the
insolvency proceedings instituted by LBHI and its affiliates, including LBIE, commencing on September 15,
2008, the Company’s regular access to information regarding the account has been disrupted. Following the
appointment of the Administrators to LBIE the Company has asserted a trust claim in specie (the “Trust Claim”)
over the assets held for it by LBIE for the return of those assets in accordance with the insolvency procedure in
the United Kingdom. In the first quarter of fiscal 2010, the Company received a Letter of Return (the “Letter”)
MD&A
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