Blackberry 2015 Annual Report Download - page 134

BlackBerry Limited
Management’s Discussion and Analysis of Financial Condition and Results of Operations
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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 2014, 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 completed strategic review process. Selling, marketing and administration related headcount
decreased by approximately 36%, compared to the end 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 from continuing operations for fiscal 2014 compared to fiscal 2013. Intangible assets
are comprised of patents, licenses and acquired technology.
For the Fiscal Year 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 $ 321 $ 402 $ (81) $ 211 $ 319 $ (108)
Intangible assets 285 312 (27) 453 874 (421)
Total $ 606 $ 714 $ (108) $ 664 $ 1,193 $ (529)
Amortization
Amortization expense relating to certain property, plant and equipment and intangible assets decreased by $108 million to $606
million for fiscal 2014, compared to $714 million for fiscal 2013. The decrease in amortization expense reflected the lower cost
base of LLA as a result of the Q3 Fiscal 2014 LLA Impairment Charge, as well as reduced spending on capital 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 intangible assets employed in the Company’s
manufacturing operations and BlackBerry service operations decreased by $529 million to $664 million for fiscal 2014,
compared to $1.2 billion for fiscal 2013. This decrease primarily reflected the impact of amortizing intangible assets over lower
shipment volumes and the lower cost base of LLA as a result of the Q3 Fiscal 2014 LLA Impairment Charge recorded in fiscal
2014. The decrease was partially offset by renewed or amended licensing agreements and certain property, plant and
equipment asset additions made over the prior four quarters.
Impairment of Long-Lived Assets
During fiscal 2014, the Company performed an LLA impairment test and based on the results of that test, the Company
recorded the Q3 Fiscal 2014 LLA Impairment Charge of approximately $2.7 billion.
Impairment of Goodwill
Due to business conditions and a continued significant decline in the Company’s market capitalization, the Company concluded
that goodwill impairment indicators existed and an interim goodwill impairment assessment was required for the first quarter of
fiscal 2013. The Company used a two-step impairment test to identify potential goodwill impairment and measured the amount
of the goodwill impairment loss to be recognized. As a result of the test performed, the Company recorded the 2013 Goodwill
Impairment Charge of $335 million, which eliminated the remaining carrying value of its goodwill, and reported this amount as
a separate line item in the consolidated statements of operations. The Company’s share price and control premium are
significant factors in assessing the Company’s fair value for purposes of the goodwill impairment assessment. The Company’s
share price can be affected by, among other things, changes in industry or market conditions, including the effect of