Blackberry 2016 Annual Report Download - page 114

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BlackBerry Limited
Management’s Discussion and Analysis of Financial Condition and Results of Operations
6
As the Company’s recent acquisitions are integrated into its overall business structure and strategy, the Company is expecting
to change the internal reporting utilized by the CODM for decision making and performance assessment. As a result, the
Company expects that during fiscal 2017 adjustments in its management approach will result in a change in the Company’s
disclosure to present multiple operating segments.
Non-GAAP Financial Measures
The Consolidated Financial Statements have been prepared in accordance with U.S. GAAP, and information contained in this
MD&A is presented on that basis. On April 1, 2016, the Company announced financial results for the three months and fiscal
year ended February 29, 2016, which included certain non-GAAP financial measures, including non-GAAP revenue, gross
margin, gross margin percentage, loss before income taxes, net loss and loss per share.
The Company has included additional non-GAAP adjustments (software deferred revenue acquired, stock compensation
expense, amortization of intangible assets acquired through business combinations and business acquisition and integration
costs incurred through business combinations) that are consistent with common practice in the software industry, and has
applied those adjustments to comparative periods. The Company believes this is appropriate due to its increased emphasis on
software and its acquisitions of software firms with recurring revenue streams.
For the three months ended February 29, 2016, these measures were adjusted for the following (collectively, the “Q4 Fiscal
2016 Non-GAAP Adjustments”):
• the Q4 Fiscal 2016 Debentures Fair Value Adjustment (as defined below under “Fiscal 2016 Summary Results of
Operations – Financial Highlights – Debentures Fair Value Adjustment”) of approximately $40 million (pre-tax and
after tax);
• RAP charges, consisting of amounts associated with employee termination benefits, facilities, manufacturing network
simplification costs, and certain other costs of approximately $180 million (pre-tax and after tax);
• cost optimization and resource efficiency (“CORE”) program charges of approximately $2 million (pre-tax and after
tax);
• software deferred revenue acquired but not recognized due to business combination accounting rules of approximately
$23 million (pre-tax and after tax);
• stock compensation expense of approximately $17 million (pre-tax and after tax);
• amortization of intangible assets acquired through business combinations of approximately $28 million (pre-tax and
after tax); and
• business acquisition and integration costs incurred through business combinations of approximately $10 million (pre-
tax and after tax).
For the fiscal year ended February 29, 2016, these measures (collectively, the “Fiscal 2016 Non-GAAP Adjustments”)
consisted of:
• the Fiscal 2016 Debentures Fair Value Adjustment (as defined below under “Fiscal 2016 Summary Results of
Operations – Financial Highlights – Debentures Fair Value Adjustment”) of approximately $430 million (pre-tax and
after tax);
• RAP charges, consisting of employee termination benefits, facilities, manufacturing network simplification costs, and
certain other costs of approximately $344 million (pre-tax and after tax);
• CORE program charges of approximately $11 million (pre-tax and after tax);
• software deferred revenue acquired but not recognized due to business combination accounting rules of approximately
$33 million (pre-tax and after tax);
• stock compensation expense of approximately $60 million (pre-tax and after tax);
• amortization of intangible assets acquired through business combinations of approximately $66 million (pre-tax and
after tax); and
• business acquisition and integration costs incurred through business combinations of approximately $22 million (pre-
tax and after tax).