Blackberry 2014 Annual Report Download - page 121

BlackBerry Limited
Notes to the Consolidated Financial Statements
In millions of United States dollars, except share and per share data, and except as otherwise indicated
32
The Company has entered into indemnification agreements with its directors and current and former executive officers.
Under these agreements, the Company agreed, subject to applicable law, to indemnify its directors and executive officers
against all costs, charges and expenses reasonably incurred by such individuals in respect of any civil, criminal or
administrative action which could arise by reason of their status as directors or officers. The Company maintains liability
insurance coverage for the benefit of its directors and current and former executive officers. The Company has not
encountered material costs as a result of such indemnifications in the current year. See the Company’s Management
Information Circular for fiscal 2013 for additional information regarding the Company’s indemnification agreements with
its directors and current and former executive officers.
11. COST OPTIMIZATION PROGRAMS
Fiscal 2013 Cost Optimization and Resource Efficiency (“CORE”) Program
In March 2012, the Company commenced the CORE program with the objective of improving the Company’s operations
and increasing efficiency. The program includes, among other things, the streamlining of the BlackBerry smartphone
product portfolio, the optimization of the Company’s global manufacturing footprint, the outsourcing of global repair
services, the alignment of the Company’s sales and marketing teams and a reduction in the global workforce. On
September 20, 2013, the Company announced that it had commenced implementation of a further workforce reduction of
approximately 4,500 positions to bring the total workforce to approximately 7,000 full-time global employees and that it
was targeting an approximate 50% reduction in operating expenditures by the end of the first quarter of fiscal 2015. The
Company expects to incur approximately $100 million in additional cash and non-cash, pre-tax charges related to the
CORE program by the end of the first quarter of fiscal 2015.
The Company incurred approximately $512 million in total pre-tax charges related to the CORE program and strategic
review process in fiscal 2014, related to one-time employee termination benefits, facilities and manufacturing network
simplification costs as well as legal and financial advisory costs related to the recently completed strategic review process.
Other charges and cash costs may occur as programs are implemented or changes are completed.
The following table sets forth the activity in the Company’s CORE program liability for fiscal 2013 and fiscal 2014:
Employee
Termination
Benefits Facilities Costs Manufacturing Costs Total
Balance as at March 3, 2012 $ — $ — $ — $ —
Charges incurred 123 32 65 220
Cash payments made (114)(14)(63)(191)
Balance as at March 2, 2013 9 18 2 29
Charges incurred 190 93 65 348
Cash payments made (186)(58)(41)(285)
Balance as at March 1, 2014 $ 13 $ 53 $ 26 $ 92
The CORE program charges incurred in fiscal 2013 and fiscal 2014 were as follows:
For the year ended
March 1, 2014 March 2, 2013
Cost of sales $ 103 $ 96
Research and development 76 27
Selling, marketing and administration(1) 333 97
Total CORE program charges $ 512 $ 220
(1) CORE program charges in selling, marketing and administration include costs associated with the Company's recently
completed strategic review process as well as losses incurred related to the write-down to fair value less costs to sell of the
assets classified as held for sale, as noted below.
There were no CORE charges incurred during fiscal 2012.
As part of the CORE program, the Company has decided to sell certain redundant assets and discontinue certain
operations to drive cost savings and efficiencies in the Company. As a result, certain property, plant and equipment assets