Research In Motion Limited

Research In Motion Limited
2009 Annual Report
Nathalie Dos Santos Alves
ACG2021-001

Executive Summary
Research In Motion’s stock prices have suffered during the last couple of
years, just as the economy did. However, prices have been recovering for the
last couple of months, which could be a signal of slow recovery in this industry.
RIM managed to increase sales significantly during 2009, but costs and
expenses also increased throughout the year, leaving the company with a 2009
Net Income that is in proportion smaller than the 2008 Net Income. Assets,
Liabilities, and Stockholders’ Equity increased all by significant amounts, but
cash decreased from 2008 to 2009. RIM’s liquidity did not present significant
changes, but its profitability clearly decreased. Overall, the 2009 fiscal year
was productive for Research In Motion taking into account that the whole
economy was going through many difficulties during the year. 2009 was a
productive year for RIM mainly because of its significant growth in Sales and a
strong Balance Sheet.
Research In Motion's 2009 Annual Report
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Introduction
Jim Balsillie Co-CEO
Mike Lazaridis Co-CEO & President
RIM’s Home Office is located in Waterloo,
Ontario, Canada
Fiscal year ended February 28 th , 2009
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Research In Motion Limited (RIM) is a designer, manufacturer
and marketer of wireless solutions for the worldwide mobile
communications market. RIM’s most successful services and
technologies are the Blackberry Smartphones, the RIM
Wireless Handheld product line, and Software for Enterprises
and Small Business.
Research In Motion operates offices in North America, Europe
and Asia Pacific. The Blackberry Smartphones are sold
worldwide in more than 160 countries. The greatest
concentration of sales is in North America and the smallest
concentration is in Africa.
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Audit Report
Ernst & Young LLP were the auditors of RIM’s 2009
Annual Report
The auditors audited the consolidated balance
sheets for the 2008 and 2009 fiscal years, and the
statements of income, shareholders’ equity, and
cash flows for the 2007, 2008, and 2009 fiscal
years. They said these financial statements
represent accurately all material aspects in
accordance to United States generally accepted
accounting principles.
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Stock Market Information
The price of RIM’s stock is NASDAQ $70.13 and Toronto
Stock Exchange $74.20
The 52-week trading range of RIM’s stock is NASDAQ
$35.05 - $88.08 and Toronto Stock Exchange $44.23 –
$135.55
Research in Motion has not paid dividends since the 1998
fiscal year.
The above information is dated February 25 th , 2010.
RIM’s stock prices seem to be rising, but not at a constant
rate. It is hard to guess what to do, but I think that stock
should be held but not bought until a tendency to a
constant increase in value can be clearly identified.
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RIM’s Industry
Situation and Plans
Research in Motion Limited has been growing significantly during the last few
years; the company is now widely known and I believe its popularity will keep
growing substantially. RIM’s 2009 profits came mainly from the sales of the
Blackberry Smartphones. Blackberry was the number one selling smartphone brand
in North America, and number two Worldwide.
1 Qwerty Slider Blackberry Device
1 During 2009 RIM launched many
successful devices, such as the Blackberry Bold 9700, Blackberry Tour 9630,
Blackberry Storm 9550, and Blackberry Curve 8500. RIM is already working in two
more devices: the Blackberry Tour 9650 (which would be launched very soon) and
the first Blackberry Slider. 2 The company is constantly upgrading the Blackberry
Software and the number of available applications in the Blackberry Application
World has been increasing at a very fast rate. RIM is also opened to new partnerships
that could enhance the company and bring benefits and prosperity.
2 Blackberry Smartphones were #2 Most sold in 2009
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Income Statement
RIM’s accountants use a Multistep Income Statement.
2009
(in thousands of US $)
2008
(in thousands of US $)
% Change
2008-2009
Gross Profit 5,097,298 3,080,581 65%
Income from Operations 2,722,096 1,731,159 57%
Net Income 1,892,616 1,293,867 46%
Gross Profit, Income from Operations, and Net Income increased by 65,
57 and 46% respectively from 2008 to 2009. These increases are evidences
of the growth of Research In Motion. However, the 2009 Net Income
constitutes less than 40% of the Gross profit, whereas the 2008 Net
Income was over 45% of the Gross Profit. This tells us that the expenses
increased significantly over the year.
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Balance Sheet
Assets =
(in thousands of US $)
= Liabilities
(in thousands of US $)
+ Stockholders’ Equity
(in thousands of US $)
2009 8,101,372 = 2,227,244 + 5,874,128
2008 5,511,187 = 1,577,621 + 3,933,566
% Change
2008-2009
47% 41% 49%
There was a clear increase in the three accounts. Stockholders’
Equity leads with an increase of 49% from 2008 to 2009 fiscal year,
which means that more common stock was sold and/or earnings
retained than liabilities incurred during 2009.
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Statement of Cash Flows
(In thousands of Unites States dollars)
2009 2008
Cash Flows from Operations 1,451,845 1,576,759
Net Income 1,892,616 1,293,867
Cash Flows from Operations was less than Net Income in the 2009 fiscal
year. The difference between both numbers amounts to almost $450
billion. In the 2008 fiscal year Cash Flows from Operations surpassed Net
Income by almost $200 billion.
In 2009 RIM increased the acquisition of capital and intangible assets and
decreased the acquisition of long-term investments with respect to 2008.
RIM’s primary source of financing are stock sales.
Cash increased over the 2008 fiscal year from $677,144 to $1,184,398.
Over the 2009 fiscal year cash decreased from $1,184,398 to $835,546.
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Accounting Policies
Revenue Recognition: “The Company recognizes revenue when it is
realized or realizable and earned. The Company considers revenue realized
or realizable and earned when it has persuasive evidence of an
arrangement, the product has been delivered or the services have been
provided to the customer, the sales price is fixed or determinable and
collectability is reasonably assured.”
Cash and cash equivalents: “Cash and cash equivalents consist of balances
with banks and liquid investments with maturities of three months or less
at the date of acquisition and are carried on the consolidated balance
sheets at fair value.”
Short-term investments: “Investments with maturities of less than one
year, as well as any investments that management intends to hold for less
than one year, are classified as Short-term investments.”
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Accounting Policies
Inventories: “Raw materials are stated at the lower of cost and replacement
cost. Work in process and finished goods inventories are stated at the lower
of cost and net realizable value. Cost includes the cost of materials plus
direct labor applied to the product and the applicable share of
manufacturing overhead. Cost is determined on a first-in-first-out basis.”
Capital assets: “Capital assets are stated at cost less accumulated
amortization. No amortization is provided for construction in progress until
the assets are ready for use. Amortization is provided using the following
rates and methods:
- Buildings, leaseholds and other
- Blackberry operations and other information technology
- Manufacturing equipment, research and development equipment and tooling
- Furniture and fixtures
- Straight-line over terms between 5 and 40 years
- Straight-line over terms between 3 and 5 years
- Straight-line over terms between 2 and 8 years
- Declining balance at 20% per annum.”
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Topics of the Notes to
The Financial Statements
Summary of Significant Accounting Policies
Adoption of Accounting Policies
Recently Issued Pronouncements
Cash and Cash Equivalents and
Investments
Inventory
Capital Assets
Intangible Assets
Business Acquisitions
Income Taxes
Long-Term Debt
Capital Stock
Commitments and Contingencies
Product Warranty
Earnings Per Share
Comprehensive Income (Loss)
Supplemental Information
Financial Instruments
Segment Disclosures
Subsequent Events
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Financial Analysis
Liquidity Ratios
(In times, unless otherwise indicated)
2009 2008
Working Capital $2,726,235,000 $2,002,923,000
Current Ratio 2.29 2.36
Receivable Turnover 6.73 6.88
Average Days’ Sales Uncollected 54.21 53.07
Inventory Turnover 11.07 8.98
Average Days’ Inventory on Hand 32.99 40.64
Even though Working Capital increased about 35% from 2008 to 2009, the Current Ratio decreased
from 2.36 to 2.29 times. This indicates that Current Liabilities increased proportionally more than
Current Assets. Receivable Turnover also decreased from 6.88 to 6.73 times, and consequently
Average Days’ Sales Uncollected increased. Inventory Turnover increased from 11.07 to 8.98 times;
therefore, Average Days’ Inventory on Hand decreased from 40.64 to 32.99 times. Overall, these ratios
tell us that Research In Motion is selling its inventory faster, but the company is taking more time to
collect the receivables. Therefore, RIM’s liquidity stayed relatively the same.
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Financial Analysis
Profitability Ratios
(In percentages, unless otherwise indicated)
2009 2008
Profit Margin 17.10 21.53
Asset Turnover 1.63 times 1.40 times
Return on Assets 27.81 30.09
Return on Equity 38.59 40.33
Profit Margin decreased by around 20%; this tells us that the cost of goods sold and/or expenses
increased at a greater rate than net sales. The Asset Turnover, which increased from 1.63 to 1.40 times,
tells us that RIM used its assets to produce sales more efficiently during 2009 than during 2008.
However, Return on Assets decreased by around 8%. This confirms the profit margin results: Sales
increased, but Net Income constitutes a smaller part of Sales in 2009 than in 2008. This explains a
decrease in both, Profit Margin and Return on Assets. Return on Equity also decreased from 40.33 to
38.59 times. Overall, RIM’s profitability decreased during 2009.
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Financial Analysis
Solvency Ratio
2009 2008
(In percentages)
Debt to Equity 37.92 40.11
Debt to Equity decreased by around 5%. This is a good
signal because it indicates that in 2009, Stockholders’
Equity increased at a greater rate than Liabilities.
Therefore, Research in Motion is mainly being controlled
by its stockholders instead of by its creditors.
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Financial Analysis
Market Strength Ratios
2009 2008
Price/Earnings per Share Basic Diluted Basic Diluted
NASDAQ 26.26 26.66 35.45 36.24
Toronto Stock Exchange 28.10 28.52 36.35 37.15
On average, Research In Motion’s 2009 Stock Prices were higher than
its 2008 Stock Prices, in both the NASDAQ and Toronto Stock Exchange.
The decrease in Price/Earnings per Share in 2009 was mainly because
Earnings per Share increased significantly from 2008 to 2009. This is
definitely good news to RIM’s stockholders.
Research in Motion has not paid dividends since the 1998 fiscal year.
RIM has retained all the earnings and reinvested them because its current
main purpose is to stimulate the growth of the Company.
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