Blackberry 2012 Annual Report Download - page 213

Research In Motion Limited
Management’s Discussion and Analysis of Financial Condition and Results of Operations
Income Taxes
For the fourth quarter of fiscal 2012, the Company’s income tax recovery was $12 million, resulting in an effective tax rate of 8.8%
compared to income tax expense of $309 million and an effective tax rate of 24.8% for the same period last year. The Company’s
lower effective tax rate in the fourth quarter of fiscal 2012 primarily reflects the unfavourable impact of an impairment charge relating
to non-deductible goodwill partially offset by the geographic mix of income in jurisdictions with different tax rates and the higher
proportional effect of tax incentives on earnings.
The Company has not provided for Canadian income taxes or foreign withholding taxes that would apply on the distribution of
income of its non-Canadian subsidiaries, as this income is intended to be reinvested indefinitely by these subsidiaries.
Net Income
The Company’s net loss for the fourth quarter of fiscal 2012 was $125 million, a decrease of $1.0 billion, compared to net income of
$934 million in the fourth quarter of fiscal 2011. Excluding the impact of charges related to the Q4 Goodwill Impairment Charge and
the Q4 BlackBerry 7 Inventory Provision, the decrease in net income in the fourth quarter of fiscal 2012 was approximately $516
million compared to the same period in fiscal 2011. This decrease primarily reflects a decrease in gross margin, resulting from a
lower volume of BlackBerry handheld devices shipped and a shift in the mix of BlackBerry handheld devices sold during the fourth
quarter of fiscal 2012, which were weighted towards in-life products with lower average selling prices and gross margins. The
decrease was partially offset by a decrease in the provision for income taxes, as well as a decrease in operating expenses as a result of
the Company’s Cost Optimization and CORE programs.
Basic and diluted loss per share were both $0.24 in the fourth quarter of fiscal 2012 compared to $1.79 basic EPS and $1.78 diluted
EPS in the fourth quarter of fiscal 2011.
The weighted average number of shares outstanding was 524 million common shares for basic and diluted EPS for the quarter ended
March 3, 2012 compared to 523 million common shares for basic EPS and 524 million common shares for diluted EPS for the fourth
quarter of fiscal 2011.
The Company believes it is extremely important to focus on increasing sales of its BlackBerry 7 handheld devices ahead of its
BlackBerry 10 launch and throughout the remainder of fiscal 2013. In order to drive increased demand for BlackBerry 7 products and
services in the United States, the Company commenced a comprehensive advertising and promotional program in the fourth quarter
of fiscal 2012. This is expected to create pressure on earnings in the coming fiscal quarters as the Company invests in an attempt to
maintain and grow the BlackBerry brand and awareness of the BlackBerry 7 product family. The Company has also increased its
spending on advertising and promotional activities in a number of key global markets. The Company also plans to aggressively
incentivize sales of BlackBerry 7 handheld devices through the implementation of programs to both drive upgrades from older
BlackBerry products to BlackBerry 7 handheld devices, and to onboard feature phone customers to BlackBerry 7 for their first
smartphone experience. The Company anticipates that these investments will also lay the groundwork for the launch of
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