Blackberry 2015 Annual Report Download - page 144

BlackBerry Limited
Management’s Discussion and Analysis of Financial Condition and Results of Operations
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Cash, cash equivalents, and investments were $3.3 billion as at February 28, 2015. The Company's management remains
focused on maintaining appropriate cash balances, efficiently managing working capital balances and managing the liquidity
needs of the business. In addition, the Company continues to pursue opportunities to attain further cost savings in the coming
fiscal quarters. Based on its current financial projections, the Company believes its financial resources, together with expected
future operating cash generating and operating expense reduction activities and access to other potential financing
arrangements, should be sufficient to meet funding requirements for current financial commitments and future operating
expenditures not yet committed, and should provide the necessary financial capacity for the foreseeable future. The Company
expects to maintain its strong cash position.
The Company does not have any off-balance sheet arrangements as defined in Item 303(a)(4)(ii) of Regulation S-K under the
Securities Exchange Act of 1934, as amended, or under applicable Canadian securities laws.
Legal Proceedings
The Company is involved in litigation in the normal course of its business, both as a defendant and as a plaintiff. Management
reviews all of the relevant facts for each claim and applies judgment in evaluating the likelihood and, if applicable, the amount
of any potential loss. Where a potential loss is considered probable and the amount is reasonably estimable, provisions for loss
are made based on management’s assessment of the likely outcome. Where a range of loss can be reasonably estimated with no
best estimate in the range, the Company records the minimum amount in the range. The Company does not provide for claims
for which the outcome is not determinable or claims for which the amount of the loss cannot be reasonably estimated. Any
settlements or awards under such claims are provided for when reasonably determinable.
As of February 28, 2015, there are no claims outstanding for which the Company has assessed the potential loss as both
probable to result and reasonably estimable, therefore no accrual has been made. Please see Note 14 (Commitments and
Contingencies) to the Consolidated Financial Statements for a further discussion of the Company’s legal matters.
Market Risk of Financial Instruments
The Company is engaged in operating and financing activities that generate risk in three primary areas:
Foreign Exchange
The Company is exposed to foreign exchange risk as a result of transactions in currencies other than its functional currency, the
U.S. dollar. The majority of the Company’s revenues in fiscal 2015 were transacted in U.S. dollars. Portions of the revenues
were denominated in Canadian dollars, Euros and British Pounds. Purchases of raw materials are primarily transacted in U.S.
dollars. Other expenses, consisting mainly of salaries, certain operating costs and manufacturing overhead are incurred
primarily in Canadian dollars. At February 28, 2015, approximately 26% of cash and cash equivalents, 30% of accounts
receivables and 13% of accounts payable were denominated in foreign currencies (March 1, 2014 – 35%, 26% and 12%,
respectively). These foreign currencies primarily include the Canadian dollar, Euro and British Pound. As part of its risk
management strategy, the Company maintains net monetary asset and/or liability balances in foreign currencies and engages in
foreign currency hedging activities using derivative financial instruments, including currency forward contracts and currency
options. The Company does not use derivative instruments for speculative purposes. Please see Note 5 to the Consolidated
Financial Statements for information concerning the Company's foreign currency hedging activities.
Interest Rate
Cash and cash equivalents and investments are invested in certain instruments of varying maturities. Substantially all of these
investments carry fixed interest rates. Consequently, the Company is exposed to interest rate risk as a result of holding
investments of varying maturities and fixed interest rates. The fair value of investments, as well as the investment income
derived from the investment portfolio, will fluctuate with changes in prevailing interest rates. The Company has also issued the
Debentures with a fixed interest rate. Consequently, the Company is exposed to interest rate risk as a result of the long term of
the Debentures. The fair value of the Debentures will fluctuate with changes in prevailing interest rates. The Company does
not currently utilize interest rate derivative instruments to hedge its investment portfolio.
Credit and Customer Concentration
The Company has historically been dependent on an increasing number of significant telecommunication carriers and
distribution partners and on larger more complex contracts with respect to sales of the majority of its products and services. The
Company, in the normal course of business, monitors the financial condition of its customers and reviews the credit history of
each new customer. The Company establishes an allowance for doubtful accounts (“AFDA”) that corresponds to the specific
credit risk of its customers, historical trends and economic circumstances. The AFDA as at February 28, 2015 was $10 million
(March 1, 2014 - $17 million). There were no customers that comprised more than 10% of accounts receivable as at