Research In Motion Limited
`Research In Motion Limited
`
`295 Phillip Street, Waterloo
`295 Phillip Street, Waterloo
`
`Ontario Canada N2L 3W8
`Ontario Canada N2L 3W8
`
`Tel : 519.888.7465
`Tel : 519.888.7465
`
`Fax : 519.888.6906
`Fax : 519.888.6906
`
`Web site : www.rim.net
`Web site : www.rim.net
`
`Email : investor_relations@rim.net
`Email : investor_relations@rim.net
`
`Research In Motion > 2001 Annual Report
`
`1
`
`APPLE 1019
`
`

`

`Research In Motion Limited is a leading
`
`designer, manufacturer and marketer
`
`of innovative wireless solutions for the
`
`mobile communications market.
`
`Through development and integration of hardware, software and services, RIM® provides
`
`solutions for seamless access to time-sensitive information including email, messaging,
`
`Internet and intranet-based applications. RIM technology also enables a broad array of
`
`third-party developers and manufacturers around the world to enhance their products and
`
`services with wireless connectivity. RIM’s portfolio of award-winning products includes the
`
`RIM Wireless Handheld™ product line, the BlackBerry™ wireless email solution, embedded
`
`radio modems and software development tools.
`
`Founded in 1984 and based in Waterloo, Ontario, RIM operates offices in Canada, the
`
`United States and England. RIM is listed on the Nasdaq Stock Market (Nasdaq: RIMM) and
`
`the Toronto Stock Exchange (TSE: RIM). Investors may contact investor_relations@rim.net.
`
`Web sites: www.rim.net and www.blackberry.net
`
`© 2001 Research In Motion Limited. All rights reserved. The BlackBerry and RIM families of related marks, images and symbols are
`the exclusive properties and trademarks of Research In Motion Limited. RIM, Research In Motion, “Always On, Always Connected”,
`the ‘envelope in motion’ symbol and the BlackBerry logo are registered with the U.S. Patent and Trademark Office and may be pending
`or registered in other countries. All other brands, product names, company names, trademarks and service marks are the properties of
`their respective owners.
`
`Forward-looking statements in this annual report are made pursuant to the “safe harbor” provisions of the United States Private
`Securities Litigation Reform Act of 1995. Investors are cautioned that such forward-looking statements involve risks and uncertainties,
`including, without limitation, risks relating to possible product defects and product liability, risks related to international sales and potential
`foreign currency exchange fluctuations, risks related to the year 2000 issue, continued acceptance of RIM’s products, increased levels
`of competition, technological changes, dependence on intellectual property rights and other risks detailed from time to time in RIM’s
`periodic reports filed with the United States Securities and Exchange Commission and other regulatory authorities. Printed in Canada.
`
`2
`
`

`

`R e s e a r c h I n M o t i o n L i m i t e d > 2 0 0 1 A n n u a l R e p o r t
`
`2 0 0 1 A n n u a l R e p o r t
`
`> R e s e a r c h I n M o t i o n L i m i t e d
`
`Annual Revenue
`Annual Revenue
`
`221.3
`221.3
`
`85.0 85.0
`
`47.3
`47.3
`
`20.9
`20.9
`
`6.6
`6.6
`
`97 98 99 00 01
`97 98 99 00 01
`
`Net Income
`Net Income
`(before write-down of
`(before write-down of
`long-term investments)
`long-term investments)
`
`8.5
`8.5
`
`10.5
`10.5
`
`250
`250
`225
`225
`200
`200
`175
`175
`150
`150
`125
`125
`100
`100
`75
`75
`50
`50
`25
`25
`0
`0
`
`12
`12
`
`10
`10
`
`$ millions
`$ millions
`
`Financial Highlights
`
`(in thousands of U.S. dollars, except per share amounts)
`
`2001
`
`2000
`
`1999
`
`Year ended last day of February
`
`Statement of Operations Data
`
`Revenue
`
`Gross margin
`
`Net income
`
`(before write-down of long-term investments)
`
`Write-down of long-term investments
`
`Net income (loss)
`
`$ 221,327
`
`$ 84,967
`
`$
`
`$
`
`$
`
`$
`
`87,475
`
`$ 36,393
`
`8,539
`
`$ 10,498
`
`14,750
`
`$
`
`–
`
`(6,211)
`
`$ 10,498
`
`$
`
`$
`
`$
`
`$
`
`$
`
`47,342
`
`18,575
`
`6,409
`
`–
`
`6,409
`
`Corporate Information
`
`Shareholder Information
`
`Officers
`
`Board of Directors
`
`Mike Lazaridis
`President and Co-Chief
`Executive Officer
`
`Jim Balsillie
`Chairman and Co-Chief
`Executive Officer
`
`Dennis Kavelman
`Chief Financial Officer
`
`Larry Conlee
`Chief Operating Officer,
`Engineering and
`Manufacturing
`
`Don Morrison
`Chief Operating Officer,
`BlackBerry
`
`Douglas Fregin
`Vice President,
`Operations
`
`Jim Balsillie
`Chairman and Co-Chief
`Executive Officer
`
`Mike Lazaridis
`President and Co-Chief
`Executive Officer
`
`Douglas Fregin
`Vice President,
`Operations
`
`Douglas Wright 1,2
`President Emeritus,
`University of Waterloo
`
`E. Kendall Cork 1,2
`Managing Director,
`Sentinel Associates Ltd.
`
`Jim Estill 1
`President & Chief
`Executive Officer,
`EMJ Data Systems Ltd.
`
`Annual Meeting of Shareholders
`Tuesday, July 31, 2001 at 6:30pm
`at the Canadian Clay and Glass Gallery
`25 Caroline Street North
`Waterloo, Ontario, Canada
`
`Shareholder Inquiries
`Investor Relations
`Research In Motion Limited
`295 Phillip Street
`Waterloo, Ontario, N2L 3W8
`Tel: (+1) 519.888.7465
`Fax: (+1) 519.888.6906
`Email: investor_relations@rim.net
`
`Transfer Agent
`Computershare Trust Company of Canada
`1800 McGill College Avenue, 6th Floor
`Montreal, Quebec, H3A 3K9
`Tel: (+1) 514.982.7295
`Fax: (+1) 514.982.7665
`
`6.4
`6.4
`
`0.4
`0.4
`0.0
`0.0
`
`97 98 99 00 01
`97 98 99 00 01
`
`8 6 4 2 0
`8 6 4 2 0
`
`$ millions
`$ millions
`
`Earnings per share
`
`(before write-down of long-term investments)
`
`Basic
`
`Diluted
`
`Earnings (loss) per share
`
`Basic
`
`Diluted
`
`Operating Data (percentage of revenue)
`
`Gross margin
`
`Gross research and development
`
`Selling, marketing and administration
`
`Balance Sheet Data
`
`$
`
`$
`
`$
`
`$
`
`0.12
`
`0.11
`
`(0.08)
`
`(0.08)
`
`39.5%
`
`11.6%
`
`29.5%
`
`$
`
`$
`
`$
`
`$
`
`0.16
`
`0.14
`
`0.16
`
`0.14
`
`$
`
`$
`
`$
`
`$
`
`42.8%
`
`14.4%
`
`16.4%
`
`0.10
`
`0.10
`
`0.10
`
`0.10
`
`39.2%
`
`16.7%
`
`13.8%
`
`Cash, cash equivalents and marketable securities
`
`$ 721,927
`
`$ 218,242
`
`$
`
`66,614
`
`Total assets
`
`Shareholders’ equity
`
`$ 970,063
`
`$ 337,227
`
`$ 117,898
`
`$ 902,933
`
`$ 311,391
`
`$ 107,505
`
`1 Audit Committee
`2 Compensation Committee
`
`Charles Meyer
`Chief Legal Officer and
`Corporate Secretary
`
`Valdis Martinsons
`Chief Information
`Officer
`
`David Yach
`Vice President,
`Software
`
`Auditors
`Ernst & Young LLP
`Chartered Accountants
`515 Riverbend Drive
`P.O. Box 9458, Station C
`Kitchener, Ontario, N2G 4W9
`
`Zeifman & Company LLP
`Chartered Accountants
`201 Bridgeland Avenue
`Toronto, Ontario, M6A 1Y7
`
`Stock Exchange Listings
`Nasdaq National Market
`Symbol: RIMM
`The Toronto Stock Exchange
`Symbol: RIM
`
`Corporate Office
`Research In Motion Limited
`295 Phillip Street
`Waterloo, Ontario, N2L 3W8
`
`Corporate Web Site
`www.rim.net
`
`> 36
`
`> 1
`
`3
`
`

`

`> F o r t h e y e a r s e n d e d F e b r u a r y 2 8 , 2 0 01 , F e b r u a r y 2 9 , 2 0 0 0 a n d F e b r u a r y 2 8 , 1 9 9 9
`
`> >
`
`35
`
`(f) Accounting for stock compensation – Under U.S. GAAP, for any stock option with an exercise price that is
`less than the market price on the date of grant, the difference between the exercise price and the market price
`on the date of grant is recorded as compensation expense (“intrinsic value based method”). The Company grants
`stock options at the fair market value of the shares on the day preceding the date of the grant of the options.
`Consequently, no compensation expense is recognized. This method is consistent with U.S. GAAP, APB Opinion
`25, Accounting for Stock Issued to Employees.
`
`SFAS No. 123, Accounting for Stock-Based Compensation, requires proforma disclosures of net income and
`earnings per share, as if the fair value based method as opposed to the intrinsic value based method of accounting
`for employee stock options had been applied. The disclosures in the following table show the Company’s net
`income and earnings per share on a proforma basis using the fair value method as determined by using the
`Black-Scholes option pricing model include:
`
`Net income (loss) under U.S. GAAP
`Estimated stock-based compensation costs
`Net income (loss) under U.S. GAAP
`Proforma net income (loss) per common share
`Basic
`Diluted
`Weighted average number of shares (000’s)
`Basic
`Diluted
`
`February 28, 2001
`$
`(7,568)
`11,782
`(19,350)
`
`$
`
`For the year ended
`February 29, 2000
`$
`10,170
`3,261
`6,909
`
`$
`
`February 28, 1999
`$
`6,723
`1,656
`5,067
`
`$
`
`$
`$
`
`(0.26)
`(0.26)
`
`$
`$
`
`0.10
`0.09
`
`$
`$
`
`0.08
`0.08
`
`73,555
`73,555
`
`66,613
`72,996
`
`64,148
`66,855
`
`The weighted average fair value of options granted during the following periods were calculated as follows using
`the Black-Scholes option pricing model with the following assumptions:
`
`Weighted average Black-Scholes value of options
`Assumptions:
`Risk free interest rates
`Expected life in years
`Expected dividend yield
`Volatility
`
`February 28, 2001
`$
`34.82
`
`For the year ended
`February 29, 2000
`$
`10.77
`
`February 28, 1999
`$
`1.92
`
`4%
`3.5
`0%
`100%
`
`4% - 5%
`3.5
`0%
`60% - 90%
`
`4% - 5%
`4.0
`0%
`50%
`
`(g) Recently issued pronouncements – Under Staff Accounting Bulletin 74, the Company is required to disclose certain
`information related to new accounting standards which have not yet been adopted due to delayed effective dates.
`
`FASB Statement No.133, Accounting for Derivative Instruments and Hedging Activities, (“Statement 133”), as
`amended by FASB Statements No. 137 and 138, is effective for the Company’s year ending February 28, 2002.
`Statement 133 requires companies to recognize all of its derivative instruments as either assets or liabilities in the
`consolidated balance sheet at fair value and establish certain criteria to be met in order to designate a derivative
`instrument as a hedge and to deem a hedge as effective. The Company is currently assessing the impact of
`Statement 133 on its consolidated financial position and results of operations.
`
`“We are pleased to report that the BlackBerry
`
`user base increased substantially to
`
`165,000 users in over 7,800 companies.”
`
`2001 Letter to Shareholders
`
`Fellow Shareholders,
`
`In fiscal 2001 we continued RIM’s tradition of growth and accomplishment. Revenue grew
`
`from $85 million to $221 million (an impressive 160% organic growth rate) as the number
`
`of companies adopting BlackBerry grew from 2,900 to over 7,800.
`
`The specific goals we laid out in last year’s annual report were to substantially increase
`
`the BlackBerry user base, to deliver BlackBerry Enterprise Edition™ for Lotus® Domino™, to
`
`implement Java™ support and to develop next-generation wireless devices and enter new
`
`international markets.
`
`We are pleased to report that the BlackBerry user base increased substantially to 165,000
`
`users. BlackBerry for Lotus Domino was launched in January and is already being rolled
`
`out in hundreds of corporations. Java support has been integrated and will be running on
`
`all of RIM’s next-generation handhelds. We have completed our BlackBerry handheld for
`
`GPRS/GSM and have announced relationships with carriers in Europe including BT Cellnet®
`
`Limited, Esat Digifone, and Telfort Mobiel B.V.
`
`> 2
`
`4
`
`

`

`R e s e a r c h I n M o t i o n L i m i t e d
`
`>
`
`I n c o r p o r a t e d U n d e r t h e L a w s o f O n t a r i o
`
`> U n i t e d S t a t e s d o l l a r s , i n t h o u s a n d s e x c e p t p e r s h a r e d a t a
`
`2 0 0 1 A n n u a l R e p o r t
`
`> R e s e a r c h I n M o t i o n L i m i t e d
`
`Don Morrison
`
`Chief Operating Officer,
`BlackBerry
`
`Management Team
`
`We have added significant strength to the RIM team across all levels and departments. Three
`
`significant additions are Don Morrison – Chief Operating Officer of BlackBerry, Larry Conlee –
`
`Chief Operating Officer of Production and Manufacturing, and Valdis Martinsons – Chief
`
`Information Officer.
`
`Don Morrison has operating responsibility for all customer-facing parts of RIM’s business,
`
`including all aspects of the BlackBerry service. Don’s background includes senior management
`
`positions with AT&T Corp. in the U.S. and internationally, as well as senior management
`
`positions with Bell Canada®.
`
`Larry Conlee has operating responsibility for all engineering and production related activities
`
`at RIM, including all product development. Larry spent over 20 years at Motorola™, Inc.,
`
`holding several senior management positions in their cellular and paging divisions.
`
`Valdis Martinsons is responsible for information technology and systems at RIM and oversees
`
`the network operations centre for the BlackBerry service. One of Valdis’ initial projects is the
`
`implementation of an SAP system (an Enterprise wide Resource Planning system) for the
`
`Company. Valdis formerly held the senior management position in Information Technology at
`
`ATI™ Technologies Inc.
`
`We are extremely pleased with these strong, experienced additions to the RIM team.
`
`Employee Growth by Department Fiscal 1999 – 2001 Fiscal 1999 – 2001
`
`
`Employee Growth by Department
`
`403
`403
`
`500
`500
`
`400
`400
`
`500
`500
`
`400
`400
`
`500
`500
`
`400
`400
`
`500
`500
`
`400
`400
`
`(a) Income taxes – For the years ended February 29, 2000 and February 28, 1999, under Canadian GAAP the
`Company used the deferral method of accounting for income taxes such that deferred assets or liabilities arise
`from differences between financial statement income and taxable income. For the year ended February 28, 2001,
`there is no longer any material difference in accounting for income taxes between Canadian GAAP and U.S.
`GAAP as a result of the accounting policy change in note 1(j).
`
`The tax effects of significant temporary differences in the prior year under U.S. GAAP are as follows:
`
`Assets
`Income tax losses available for carryforward
`Financing costs
`Research and development incentives
`
`Liabilities
`Capital assets
`Net future income tax assets
`
`February 29, 2000
`
`$
`
`$
`
`$
`
`1,212
`4,819
`2,945
`8,976
`
`4,270
`4,706
`
`(b) Start-up costs – The Company has capitalized as at February 28, 2001 the expenses incurred during the start-up
`of the Company’s United Kingdom operations, scheduled to commence later in fiscal 2002. U.S. GAAP, Statement
`of Position 98-5, Reporting on the Cost of Start-up Activities, prescribes that start-up costs should be expensed
`as incurred.
`
`(c) Change in functional currency – Effective August 31, 1999, the Company adopted the U.S. dollar as its
`reporting currency. Prior to this change the Canadian dollar had been used as the Company’s reporting currency.
`Under Canadian GAAP, the Company’s financial statements for all periods presented through August 31, 1999
`have been translated from Canadian dollars to U.S. dollars using the exchange rate in effect at August 31, 1999.
`Under U.S. GAAP, the financial statements for the periods prior to the change in reporting currency must be
`translated to U.S. dollars using the current rate method, which uses specific year end and specific annual average
`exchange rates as appropriate. The significant differences arising from the application of the current rate
`method to the periods presented are the effects on net income and comprehensive income described above.
`
`(d) Statements of comprehensive income – U.S. GAAP, SFAS 130, Reporting Comprehensive Income, establishes
`standards for the reporting and display of comprehensive income and its components in general-purpose financial
`statements. Comprehensive income is defined as the change in net assets of a business enterprise during a period
`from transactions and other events and circumstances from non-owner sources, and includes all changes in equity
`during a period except those resulting from investments by owners and distributions to owners. The only reportable
`item of comprehensive income is the foreign currency translation in note 17 (c).
`
`(e) Earnings per share – The following table sets forth the computation of basic and diluted earnings per share
`under U.S. GAAP.
`
`February 28, 2001
`
`For the year ended
`February 29, 2000
`
`February 28, 1999
`
`136
`136
`
`104
`104
`
`99 00 01
`99 00 01
`
`Manufacturing
`Manufacturing
`
`300
`300
`
`200
`200
`
`100
`100
`
`0
`0
`
`213
`213
`
`7070
`
`34
`34
`
`99 00 01
`99 00 01
`
`300
`300
`
`200
`200
`
`100
`100
`
`0
`0
`
`309
`309
`
`120
`120
`
`41
`41
`
`99 00 01
`99 00 01
`
`300
`300
`
`200
`200
`
`100
`100
`
`0
`0
`
`331
`331
`
`186
`186
`
`118
`118
`
`99 00 01
`99 00 01
`
`300
`300
`
`200
`200
`
`100
`100
`
`0
`0
`
`Research and Development
`Research and Development
`
`Sales and Marketing
`Sales and Marketing
`
`Finance, Administration and IT
`Finance, Administration and IT
`
`Numerator for basic and diluted earnings (loss) per share
`available to common stockholders
`Denominator for diluted earnings (loss) per share –
`adjusted weighted average shares
`and assumed conversions
`Earnings (loss) per share under U.S. GAAP
`Basic
`Diluted
`
`$
`
`(7,568)
`
`$
`
`10,170
`
`$
`
`6,723
`
`73,555
`
`72,996
`
`66,855
`
`$
`$
`
`(0.10)
`(0.10)
`
`$
`$
`
`0.15
`0.14
`
`$
`$
`
`0.10
`0.10
`
`> 34
`
`> 3
`
`5
`
`

`

`Finance
`
`RIM’s revenue grew 160% from $85 million to $221 million. Revenue growth was driven by
`
`BlackBerry, as well as new handheld supply relationships with companies such as America
`
`Online, Inc. (“AOL”) and continued handheld sales to our carrier partners at Cingular SM
`
`Interactive LLC (formerly BellSouth Wireless Data) and Motient™ Corporation.
`
`RIM has an extremely strong balance sheet after completing a follow-on equity offering
`
`in November 2000 that raised $580 million. At year-end, RIM had over $720 million in
`
`cash, cash equivalents and short-term marketable securities. We believe that these financial
`
`assets will provide the resources necessary to continue to grow the business.
`
`BlackBerry
`
`BlackBerry continues to grow as the core driver of RIM’s business, establishing itself as
`
`the corporate standard for wireless data communications in North America over the past
`
`year. Users within corporations and government rely on BlackBerry to keep them connected
`
`to information and each other.
`
`As we launch in Europe this summer, we believe BlackBerry will enjoy the same rapid
`
`take-up and level of success as it has in North America.
`
`The launch of BlackBerry Enterprise Edition for Lotus Domino effectively doubles our
`
`potential market in North America. Companies using Lotus Notes® and Domino have
`
`previously been only able to read about BlackBerry and see others using it. With the
`
`widespread availability of BlackBerry for Lotus Domino, we believe there is a significant
`
`opportunity for growth.
`
`In North America, we added many channel partners for BlackBerry during the past year.
`
`Aether™ Systems Inc., Bell Mobility®, Cingular, Compaq® Computer Corporation, GoAmerica
`
`Communications Corp., Motient, SkyTel® Communications, Inc., Rogers™ AT&T®, Vaultus,
`
`Inc., and now IBM® (International Business Machines) all began selling BlackBerry as part
`
`of their product offerings.
`
`Larry Conlee
`
`Chief Operating Officer,
`Production and
`Manufacturing
`
`> 4
`
`> F o r t h e y e a r s e n d e d F e b r u a r y 2 8 , 2 0 01 , F e b r u a r y 2 9 , 2 0 0 0 a n d F e b r u a r y 2 8 , 1 9 9 9
`
`For periods up to and including August 31, 1999, the monetary assets and liabilities of the Company denominated
`in a currency other than the Canadian dollar were translated into Canadian dollars using the exchange rate in
`effect at the period-end and revenues and expenses were translated at the average rate during the period. Any
`resulting gains or losses were included in income. For periods subsequent to August 31, 1999, transactions
`which were incurred in currencies other than the U.S. dollar (the new functional currency) have been converted
`to U.S. dollars at the exchange rate in effect at the transaction date. Carrying values of non-U.S. dollar monetary
`assets and liabilities are adjusted at each balance sheet date to reflect the functional currency rate in effect
`at that date and any gains and losses from this restatement are included in income. Non-monetary assets are
`translated at the historical exchange rate on the date of acquisition.
`
`Historical financial statements and notes thereto up to and including August 31, 1999 have been restated into
`U.S. dollars, in accordance with Canadian GAAP, using the August 31, 1999 closing exchange rate being a rate
`of Cdn.$1.4888 per U.S.$1.00.
`
`17. Summary of Material Differences Between Generally Accepted Accounting Principles
`(GAAP) in Canada and the United States
`
`The consolidated financial statements of the Company have been prepared in accordance with accounting
`principles generally accepted in Canada (“Canadian GAAP”) which conform in all material respects with
`accounting principles generally accepted in the United States (“U.S. GAAP”) except as set forth below:
`
`>
`
`Consolidated Balance Sheets
`
`Total assets under Canadian GAAP
`Adjustment – Future income taxes (a)
`Adjustment – Start-up costs (b)
`Total assets under U.S. GAAP
`Total shareholders’ equity under Canadian GAAP
`Adjustment – Future income taxes (a)
`Adjustment – Start-up costs (b)
`Total shareholders’ equity under U.S. GAAP
`
`Consolidated Statements of Operations
`
`Net income (loss) under Canadian GAAP
`Adjustments
`Future income taxes (a)
`Start-up costs (b)
`Foreign currency translation (c)
`Net income (loss) under U.S. GAAP
`Earnings (loss) per share under U.S. GAAP
`Basic
`Diluted
`Other comprehensive income (loss) (d):
`Net income (loss) under U.S. GAAP
`Foreign currency translation adjustment (c)
`Comprehensive income (loss) under U.S. GAAP
`
`February 28, 2001
`$
`970,063
`–
`(1,357)
`968,706
`902,933
`–
`(1,357)
`901,576
`
`$
`$
`
`$
`
`February 29, 2000
`$
`337,227
`1,158
`–
`338,385
`311,391
`1,158
`–
`312,549
`
`$
`$
`
`$
`
`February 28, 2001
`$
`(6,211)
`
`For the year ended
`February 29, 2000
`$
`10,498
`
`February 28, 1999
`$
`6,409
`
`–
`(1,357)
`–
`(7,568)
`
`(0.10)
`(0.10)
`
`(7,568)
`–
`(7,568)
`
`$
`
`$
`$
`
`$
`
`$
`
`(336)
`–
`8
`10,170
`
`0.15
`0.14
`
`10,170
`1,474
`11,644
`
`336
`–
`(22)
`6,723
`
`0.10
`0.10
`
`6,723
`(6,236)
`487
`
`$
`
`$
`$
`
`$
`
`$
`
`$
`
`$
`$
`
`$
`
`$
`
`> 33
`
`6
`
`

`

`R e s e a r c h I n M o t i o n L i m i t e d
`
`>
`
`I n c o r p o r a t e d U n d e r t h e L a w s o f O n t a r i o
`
`> U n i t e d S t a t e s d o l l a r s , i n t h o u s a n d s e x c e p t p e r s h a r e d a t a
`
`2 0 0 1 A n n u a l R e p o r t
`
`> R e s e a r c h I n M o t i o n L i m i t e d
`
`The Company mitigates this risk in part by maintaining Canadian dollar funds. The Company also utilizes certain
`financial instruments to manage the risk associated with fluctuations in foreign exchange rates. As at February
`28, 2001 the Company has entered into foreign exchange contracts, which have been designated as hedge
`instruments, to sell U.S. dollars and purchase Canadian dollars with an aggregate value amount of U.S. $44.5
`million (2000– nil). These contracts mature at varying dates with the latest being February 22, 2002. Gains
`and losses on these hedging instruments are recognized in the same period as, and as part of, the hedged
`transaction. There was no significant unrealized gain or loss on these contracts as at February 28, 2001.
`
`Marketable securities are subject to market risk in that their value will fluctuate as a result of changes in market
`prices. In order to reduce credit risk, the Company has invested only in securities of investment grade. Marketable
`securities from one issuer comprised 14% (2000 – one issuer comprised 34%) of the total marketable securities.
`
`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 that
`corresponds to the specific credit risk of its customers, historical trends and economic circumstances. The
`allowance as at February 28, 2001 is $4,976 (2000 – $64).
`
`While the Company sells to a variety of customers, one customer comprised 25% of trade receivables as at
`February 28, 2001 (2000 – two customers, 46% and 18%). Additionally, 18% of the Company’s sales were to
`one customer (2000 – two customers, 31% and 25%).
`
`For certain of the Company’s financial instruments, including trade receivables, other receivables, accounts
`payable and accrued liabilities, the carrying amounts approximate their respective fair values due to their short
`maturities. Cash and cash equivalents, marketable securities and long-term debt are carried at cost, which
`approximates their respective fair values.
`
`15. Segment Disclosures
`
`The Company is organized and managed as a single reportable business segment. The Company’s operations are
`substantially all related to the research, design, manufacture and sales of wireless data communications products.
`Operations include the manufacture of radios and other network access devices for the original equipment
`manufacturers as well as wireless products for the aftermarket. Substantially all revenue is derived from sales to
`customers in the United States. 8% of sales are to customers outside of the United States (2000 – 7%).
`
`Financial information on the Company’s geographic areas is as follows:
`
`February 28, 2001
`
`February 29, 2000
`
`February 28, 1999
`
`Sales
`Canada
`United States
`
`Total Assets
`Canada
`United States
`United Kingdom
`
`$
`
`$
`
`3,246
`44,096
`47,342
`
`$
`
`$
`
`$
`
`$
`
`16,721
`204,606
`221,327
`
`246,446
`717,744
`5,873
`970,063
`
`$
`
`$
`
`$
`
`$
`
`6,187
`78,780
`84,967
`
`337,227
`–
`–
`337,227
`
`16. Comparative Figures
`
`Certain of the prior years’ figures have been reclassified for consistency with the current presentation.
`
`The Company historically measured and presented its financial statements in Canadian dollars. Effective
`September 1, 1999, as a result of the Company’s increased economic activity in the United States, the U.S.
`dollar became the functional currency of the Company’s operations and for the financial statements of the
`Company. Effective the same date, the U.S. dollar was adopted as the reporting currency.
`
`This allows us to focus on our core areas of expertise and to leverage the strength of the
`
`combined sales and support resources of these channel partners.
`
`Technology
`
`RIM’s core area of expertise continues to be industry-leading
`
`wireless technology and enterprise software. In the past, we high-
`
`lighted our focus on these fundamentals and this focus has not
`
`changed. As in the past, we continue to invest heavily in recruiting
`
`the most outstanding people and providing them with the best
`
`possible tools and equipment to extend RIM’s technology lead.
`
`We have 331 technical personnel at RIM, up from 186 last year. We are also substantially
`
`expanding our technical facilities in Waterloo and Kanata, and have added a new facility
`
`in Toronto. We increased gross research and development (R&D) spending during the year
`
`from $12.2 million to $25.7 million and expect to continue deploying more resources in this
`
`area during the upcoming year.
`
`Major projects in the upcoming year include the launch of next-generation products, the
`
`development of new product form-factors, the extension of RIM’s enterprise software
`
`capabilities and continuous improvements to the BlackBerry offering.
`
`Sales and Marketing
`
`Last year we discussed the goal of increasing the strength and awareness of the
`
`BlackBerry brand.
`
`The level of BlackBerry brand awareness has increased substantially in the past year.
`
`Targeted advertising and the advertising campaigns of our partners, combined with a
`
`tremendous amount of press and word of mouth, has led to high BlackBerry brand
`
`awareness in the corporate community and in popular culture.
`
`A major initiative for the sales and marketing group going forward will be preparing to
`
`enter and support the European market as well as bringing online many new channel and
`
`GPRS network partners.
`
`Valdis Martinsons
`
`Chief Information Officer
`
`> 32
`
`> 5
`
`7
`
`

`

`> F o r t h e y e a r s e n d e d F e b r u a r y 2 8 , 2 0 0 1 , F e b r u a r y 2 9 , 2 0 0 0 a n d F e b r u a r y 2 8 , 1 9 9 9
`
`(b) Capital assets – The Company received $2,585 in government assistance towards the cost of capital assets
`used in research and development activities (2000 – $2,177).
`
`The Company was in compliance with all terms and conditions in respect to its two project development
`agreements with TPC as at February 28, 2001 and February 29, 2000.
`
`11. Write-Down of Long-Term Investments
`
`During the year, the Company undertook a comprehensive review of the companies in which it had made long-term
`investments earlier in the fiscal year. Based upon that review, the Company determined that impairment in the
`carrying values of certain of its long-term investments did occur; the Company further determined that for certain
`of these investments the decline in value suffered was other than temporary in nature. Consequently the Company
`recorded a write-down in values totalling $14,750.
`
`12. Earnings Per Share
`
`The treasury stock method assumes that proceeds received upon the exercise of all warrants and options outstanding
`in the period are used to repurchase the Company’s shares at the average share price during the period.
`
`The following table sets forth the computation of basic and diluted earnings per share.
`
`Numerator for basic and diluted earnings per share
`available to common stockholders
`Denominator for basic earnings per share –
`weighted average shares outstanding (000’s)
`Effect of dilutive securities:
`Warrants
`Employee stock options
`Dilutive potential common shares:
`Denominator for diluted earnings per share – adjusted
`weighted average shares and assumed conversions
`Earnings (loss) per share
`Basic
`Diluted
`
`February 28, 2001
`
`For the year ended
`February 29, 2000
`
`February 28, 1999
`
`$
`
`(6,211)
`
`$
`
`10,498
`
`$
`
`6,409
`
`73,555
`
`66,613
`
`64,148
`
`–
`–
`–
`
`180
`6,203
`6,383
`
`64
`2,643
`2,707
`
`73,555
`
`72,996
`
`66,855
`
`$
`$
`
`(0.08)
`(0.08)
`
`$
`$
`
`0.16
`0.14
`
`$
`$
`
`0.10
`0.10
`
`13. Statement of Cash Flows Supplemental Information
`
`The following summarizes interest and income taxes paid:
`
`Interest paid during the year
`Income taxes paid during the year
`
`February 28, 2001
`$
`456
`897
`
`Year ended
`February 29, 2000
`$
`–
`756
`
`February 28, 1999
`$
`–
`389
`
`14. Financial Instruments
`
`The majority of the Company’s revenues and purchases of raw materials are realized in U.S. dollars while other
`operating expenses, consisting generally of salaries and overhead, are incurred primarily in Canadian dollars.
`As a result, the Company is exposed to a risk relating to foreign exchange fluctuations. At February 28, 2001,
`approximately $16,426 or 3% of cash and cash equivalents, 11% of trade receivables and 27% of accounts
`
`payable and accrued liabilities are denominated in Canadian dollars (2000 –157%, 18%, and 25%, respectively). >
`
`Manufacturing
`
`Our manufacturing team successfully scaled production levels to match increased demand
`
`over the past year without compromising quality. We have purchased a significantly larger
`
`manufacturing facility and expect it to be operational later this year. This new facility will
`
`increase capacity from approximately one million units per year to over six million and will
`
`be capable of manufacturing our current products as well as next-generation products. We
`
`expect this new facility to support our growth over the next several years.
`
`We believe our strategy of manufacturing RIM’s products in-house remains correct. The
`
`benefits of integrating manufacturing with research and development, maintaining tight
`
`control over quality and closely managing relationships with suppliers directly has been
`
`strategic and effective.
`
`Partnerships and Alliances
`
`“We grew quite attached
`
`to BlackBerry... and
`
`would recommend it to
`
`anyone who wants a
`
`RIM has been able to successfully leverage partnerships and alliances due to our strategy
`
`of enabling and extending the business plans of our partners rather than placing ourselves
`
`in contention with other members of the value chain. To be integrated with the wireless
`
`mobile email product.”
`
`plan of so many carriers, computer manufacturers, software companies, portals and Internet
`
`InformationWeek
`
`Service Providers (ISPs) is a testament to the fact that RIM is seen as an enabler of their
`
`business plans.
`
`In addition to channels and customers, RIM also partners with strategic suppliers.
`
`Incorporating suppliers into our plans and vision early in the design process has produced
`
`significant benefits, including preferred access to the best and newest component and chip
`
`technologies.
`
`> 6
`
`> 31
`
`8
`
`

`

`R e s e a r c h I n M o t i o n L i m i t e d
`
`>
`
`I n c o r p o r a t e d U n d e r t h e L a w s o f O n t a r i o
`
`> U n i t e d S t a t e s d o l l a r s , i n t h o u s a n d s e x c e p t p e r s h a r e d a t a
`
`2 0 0 1 A n n u a l R e p o r t
`
`> R e s e a r c h I n M o t i o n L i m i t e d
`
`The weighted average characteristics of options outstanding as at February 28, 2001 are as follows
`(in Canadian dollars):
`
`Range of
`exercise prices
`$3.40 - $5.00
`$5.25 - $9.60
`$11.25 - $27.60
`$29.40 - $73.50
`$74.50 - $179.00
`Total
`
`Options Outstanding (000’s)
`Number
`Weighted average
`Outstanding at
`remaining
`February 28, 2001
`life in years
`2,430
`5.72
`2,115
`4.78
`1,076
`5.07
`1,553
`6.35
`746
`6.59
`7,920
`
`Weighted average
`exercise price
`$ 3.62