Blackberry 2014 Annual Report Download - page 151

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BlackBerry Limited
Management’s Discussion and Analysis of Financial Condition and Results of Operations
21
(4) In fiscal 2014, the Company recorded a non-cash net charge associated with the change in the fair value of the
Debentures of $377 million, including the Q4 Fiscal 2014 Debentures Fair Value Adjustment of approximately $382
million. See “Overview - Debentures Fair Value Adjustment”.
Operating expenses increased by $2.5 billion, or 52.5%, to $7.1 billion or 104.5% of consolidated revenue in fiscal 2014,
compared to $4.7 billion or 42.1% of consolidated revenue in fiscal 2013. Excluding the impact of the LLA Impairment Charge
of approximately $2.7 billion, the Q4 Fiscal 2014 Debentures Fair Value Adjustment of approximately $382 million and
charges incurred as part of the the Company’s CORE program and strategic review process during fiscal 2014, of which $409
million were attributable to operating expenditures (see “Non-GAAP Financial Measures”), as well as the impact of the 2013
Goodwill Impairment Charge of approximately $335 million and charges incurred as part of the CORE program during fiscal
2013, of which $124 million were attributable to operating expenditures, operating expenses decreased by $629 million. This
decrease was primarily attributable to decreases in salaries and benefits costs due to a reduction in headcount related to the
CORE program, legal expenses and marketing and advertising costs. The decrease was partially offset by an increase in
consulting costs related to the Company's recently completed strategic review process.
Research and Development Expenses
Research and development expenses consist primarily of salaries and benefits for technical personnel, new product
development costs, travel, office and building infrastructure costs and other employee costs.
Research and development expenses decreased by $223 million, or 14.8%, to $1.3 billion in fiscal 2014, compared to $1.5
billion in fiscal 2013. Excluding the impact of charges incurred as part of the CORE program during fiscal 2014, of which $76
million was attributable to research and development expenditures, and the impact of the charges incurred as part of the CORE
program during fiscal 2013, of which $27 million was attributable to research and development expenditures, research and
development expenses decreased by $272 million. The decrease was primarily attributable to decreases in salaries and benefits
costs due to a reduction in headcount and other costs savings related to the CORE program, a decrease in research and
development device costs as a result of the cancellation of two planned devices. Research and development-related headcount
decreased by approximately 30% compared to the end of fiscal 2013.
Selling, Marketing and Administration Expenses
Selling, marketing and administration expenses consist primarily of marketing, advertising and promotion, salaries and
benefits, external advisory fees, information technology costs, office and related staffing infrastructure costs and travel
expenses.
Selling, marketing and administration expenses decreased by $8 million, or 0.4%, to $2.1 billion in fiscal 2014 compared to
$2.1 billion in fiscal 2013. Excluding the impact of charges incurred as part of the CORE program during fiscal 2014, of which
$333 million was attributable to selling, marketing and administration expenditures, and the impact of the charges incurred as
part of the Company’s CORE program and strategic review process during fiscal 2013, of which $97 million was attributable to
selling, marketing and administration expenditures, selling, marketing and administration expenses decreased by $244 million.
The decrease was primarily attributable to decreases in salaries and benefits costs due to a reduction in headcount related to the
CORE program, legal expenses and marketing and advertising expenses, partially offset by an increase in consulting costs
related to the Company's recently completed strategic review process. Selling, marketing and administration related headcount
decreased by approximately 36%, compared to the end of fiscal 2013.