Blackberry 2014 Annual Report Download - page 165

BlackBerry Limited
Management’s Discussion and Analysis of Financial Condition and Results of Operations
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expenditures, and charges incurred as part of the CORE program during the fourth quarter of fiscal 2013 of $3 million, that
were attributable to research and development expenditures, research and development expenses decreased by $155 million.
This decrease was primarily attributable to decreases in salaries and benefits costs due to a reduction in headcount related to the
CORE program, consulting and outsourcing costs, and 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 fourth
quarter of fiscal 2013.
Selling, Marketing and Administration Expenses
Selling, marketing and administration expenses decreased by $193 million, or 35.2% to $355 million in the fourth quarter of
fiscal 2014 compared to $548 million for the third quarter of fiscal 2014. Excluding the impact of charges related to the CORE
program incurred during the fourth quarter of fiscal 2014, of which $110 million was attributable to selling, marketing and
administration expenditures, and the charges incurred as part of the CORE program during the third quarter of fiscal 2014, of
which $153 million was attributable to selling, marketing and administration, selling marketing and administration expenses
decreased by $150 million. This decrease was primarily attributable to consulting, advertising and promotion spend as well as
salaries and benefit costs due to a reduction in headcount related to the CORE program. Selling, marketing and administration
related headcount decreased by approximately 14%, compared to the third quarter of fiscal 2014.
Selling, marketing and administration expenses decreased by $168 million, or 32.1% to $355 million in the fourth quarter of
fiscal 2014 compared to $523 million in the fourth quarter of fiscal 2013. Excluding the impact of charges incurred as part of
the CORE program during the fourth quarter of fiscal 2014, of which $110 million was attributable to selling, marketing and
administration expenditures, and the charges incurred as part of the CORE program during the fourth quarter of fiscal 2013, of
which $30 million was attributable to selling, marketing and administration, selling, marketing and administration expenses
decreased by $248 million. This decrease was primarily attributable to advertising and promotion spend as well as salaries and
benefit costs due to a reduction in headcount related to the CORE program. Headcount related to selling, marketing and
administration functions decreased by approximately 36%, as compared to the fourth quarter of fiscal 2013.
Amortization Expense
The table below presents a comparison of amortization expense relating to property, plant and equipment and intangible assets
recorded as amortization or cost of sales for the quarter ended March 1, 2014 compared to the quarter ended March 2, 2013.
Intangible assets are comprised of intellectual property and acquired technology.
For the Three Months Ended
(in millions)
Included in Amortization Included in Cost of sales
March 1, 2014 March 2, 2013 Change March 1, 2014 March 2, 2013 Change
Property, plant and equipment $ 51 $ 103 $ (52) $ 16 $ 77 $ (61)
Intangible assets 56 78 (22) 80 136 (56)
Total $ 107 $ 181 $ (74) $ 96 $ 213 $ (117)
Amortization
Amortization expense relating to certain property, plant and equipment and certain intangible assets decreased by $74 million to
$107 million for the fourth quarter of fiscal 2014 compared to $181 million for the fourth quarter of fiscal 2013. The decrease
in amortization expense reflects the lower cost base of LLA as a result of the LLA Impairment Charge recorded on November
4, 2013, in the third quarter of fiscal 2014 as well as reduced spending on capital and intangible assets, partially offset by
certain property, plant and equipment and intangible asset additions made over the last four quarters.
Cost of sales
Amortization expense relating to certain property, plant and equipment and certain intangible assets employed in the
Company’s manufacturing operations and BlackBerry service operations decreased by $117 million to $96 million for the
fourth quarter of fiscal 2014 compared to $213 million for the fourth quarter of fiscal 2013. This decrease primarily reflects the
impact of amortizing intangible assets over lower shipment volumes and the lower cost base of LLA as a result of the LLA
Impairment Charge recorded on November 4, 2013, in the third quarter of fiscal 2014. The decrease was partially offset by
renewed or amended licensing agreements and certain property, plant and equipment asset additions made over the last four
quarters.