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September 28, 2006
Research In Motion Reports Preliminary Second Quarter Results
Waterloo, ON - Research In Motion Limited (RIM) (NASDAQ:RIMM)(TSX:RIM), a world leader in the mobile communications market, today reported preliminary second quarter results for the three months ended September 2, 2006 (all figures in U.S. dollars).
The results reported today are preliminary pending a potential restatement related to RIM's historical non-cash charges associated with past option grants. As disclosed in a separate press release issued by RIM today, RIM is completing a management-initiated, voluntary review of RIM's historical option granting practices. It is the Company's belief that the potential impact of any restatement on GAAP and adjusted operating results for the first, second, and subsequent quarters of fiscal 2007, will be immaterial. RIM will file final financial statements for the second quarter of fiscal 2007 following the completion of the review.
Revenue for the second quarter of fiscal 2007 was $658.5 million, up 7.4% from $613.1 million in the previous quarter and up 34.4% from $490.1 million in the same quarter of last year. The revenue breakdown for the quarter was approximately 72% for handhelds, 19% for service, 6% for software, and 3% for other revenue. Approximately 705,000 BlackBerry subscriber accounts were added in the quarter. At the end of the quarter, the total BlackBerry subscriber account base was approximately 6.2 million. Revenue and subscriber account additions will not be impacted by any potential restatement referenced above.
"We are very pleased to report strong financial performance and momentum in our second quarter," said Jim Balsillie, Chairman and Co-CEO at RIM. "The second half of the fiscal year is promising to be one of the most interesting periods in our history with the launch of exciting new products, including the BlackBerry Pearl, on networks around the world. Our technology and business strategies continue to open new markets for RIM and expand our opportunities for growth."
Preliminary GAAP net income for the quarter was $140.8 million, or $0.74 per share diluted. Excluding regular stock option expense of $4.3 million, preliminary adjusted net income was $145.1 million, or $0.77 per share diluted. The preliminary net income, preliminary adjusted net income, preliminary net income per share and preliminary adjusted net income per share do not have any standardized meaning prescribed by GAAP and therefore are unlikely to be comparable to similar measures presented by other issuers. These adjusted measures should be considered in the context of RIM's GAAP results.
Revenue for the third quarter of fiscal 2007 ending December 2, 2006 is expected to be in the range of $780-$820 million. Subscriber account additions in the third quarter are expected to be approximately 800,000. GAAP earnings per share for the third quarter are expected to be in the range of 88-95 cents per share diluted. Adjusted earnings per share for the third quarter, which excludes regular stock option expense of approximately $4.5 million, are forecast to be in the range of 90-97 cents per share diluted.
The total of cash, cash equivalents, short-term and long-term investments was $1.2 billion as at September 2, 2006, compared to $1.3 billion at the end of the previous quarter, a decrease of $100 million over the prior quarter. Uses of cash in the quarter included a business acquisition, capital expenditures and common share repurchases.
| Reconciliation of preliminary GAAP net income to preliminary adjusted net income | |
| (United States dollars, in thousands except per share data) | |
| For the three months ended September 2 , 2006 | |
| | |
| Preliminary GAAP net income, as reported | $ 140,777 |
| Adjustment: | |
| Regular stock option expense | 4,300 |
| | |
| Preliminary adjusted net income | $ 145,077 |
| | |
| Preliminary adjusted net income per share, diluted | $ 0.77 |
| | |
| Note: Preliminary adjusted net income and preliminary adjusted net income per share do not have any standardized meaning prescribed by GAAP and thus are not comparable to similar measures presented by other issuers. Investors are encouraged to consider this adjusted measure in the context of RIM's GAAP results. | |
Highlights of the second quarter:
- RIM announced Hosted BlackBerry Enterprise Server(TM).
- Cingular launched the BlackBerry 7130c in the U.S.
- Rogers launched the BlackBerry 7130g in Canada.
- Amena launched the BlackBerry 8700g in Spain.
- Mobiltel launched BlackBerry in Bulgaria.
- Globacom and Alcatel launch BlackBerry in Nigeria.
- LUXGSM launched the BlackBerry 8707v in Luxembourg.
- Vodafone Australia launched the BlackBerry 7130v and the BlackBerry 8707v in Australia.
- Vodafone Spain launched the BlackBerry 7130v and the BlackBerry 8707v in Spain.
- Vodafone Ireland launched the BlackBerry 8707v in Ireland.
- Vodafone Netherlands launched the BlackBerry 8707v in the Netherlands.
- Vodafone U.K. launched the BlackBerry 7130v in the U.K.
- Vodafone Italia launched the BlackBerry 7130v and the BlackBerry 8707v in Italy.
- Proximus launched the BlackBerry 8707v in Belgium.
- SmarTone-Vodafone launched the BlackBerry 8707v in Hong Kong.
- Optus launched the BlackBerry 7130g and the BlackBerry 8707g in Australia.
- Telstra launched the BlackBerry 7130g in Australia.
- Smart launched the BlackBerry 8700g in the Philippines.
- KPN launched the BlackBerry 7130g in the Netherlands.
- Taiwan Mobile announced plans to launch BlackBerry in Taiwan.
- T-Mobile launched the BlackBerry 7130g in the UK.
- Dobson Cellular Systems launched the BlackBerry 7130g in the U.S.
- M1 launched the BlackBerry 8707v in Singapore.
- NII Holdings launched BlackBerry 7100i for Nextel Mexico and Nextel Peru customers.
- Movistar launched BlackBerry Connect for the Palm Treo 650 Smartphone in Spain.
- Vodafone Australia launched BlackBerry Connect for the Palm Treo 650 Smartphone in Australia.
- Cingular Wireless launched BlackBerry Connect for the Palm Treo 650 Smartphone in the U.S.
- Indosat and Sony Ericsson launched BlackBerry Connect for the M600i Mobile Phone in Indonesia.
Highlights Subsequent to Quarter End:
- RIM introduced the new BlackBerry Pearl smartphone.
- T-Mobile USA launched the BlackBerry Pearl in the U.S.
- Mobistar launched the BlackBerry 7130g in Belgium.
- Verizon Wireless launched the BlackBerry 8703e in the U.S.
- Sprint launched the BlackBerry 8703e in the U.S.
- Bell launched the BlackBerry 8703e in Canada.
- NTT DoCoMo announced plans to launch the BlackBerry 8707h in Japan.
- Airtel announced plans to launch the BlackBerry 7130g in India.
- T-Mobile Slovakia launched the BlackBerry 8700g in Slovakia.
- Mobily and RIM announce plans to launch BlackBerry in Saudi Arabia.
- Maxis launched the BlackBerry 8707g in Malaysia.
The replay of the company's Q2 conference call can be accessed after 7 p.m. (eastern), September 28, 2006 until midnight (eastern), October 12, 2006. It can be accessed by dialing 416-640-1917 and entering passcode 21203222#. The conference will also appear on the RIM web site, live at 5:30 pm (eastern) and archived at http://www.rim.com/investors/events/index.shtml until midnight October 13, 2006.
About Research In Motion (RIM)
Research In Motion is a leading designer, manufacturer and marketer of innovative wireless solutions for the worldwide mobile communications market. Through the development of integrated hardware, software and services that support multiple wireless network standards, RIM provides platforms and solutions for seamless access to time-sensitive information including email, phone, SMS messaging, Internet and intranet-based applications. RIM technology also enables a broad array of third party developers and manufacturers to enhance their products and services with wireless connectivity. RIM's portfolio of award-winning products, services and embedded technologies are used by thousands of organizations around the world and include the BlackBerry(R) wireless platform, the RIM Wireless Handheld(TM) product line, software development tools, radio-modems and software/hardware licensing agreements. Founded in 1984 and based in Waterloo, Ontario, RIM operates offices in North America, Europe and Asia Pacific. RIM is listed on the Nasdaq Stock Market (NASDAQ:RIMM) and the Toronto Stock Exchange (TSX:RIM). For more information, visit www.rim.com or www.blackberry.com.
This news release contains forward-looking statements within the meaning of the U.S. Private Securities Litigation Reform Act of 1995 and Canadian securities laws, including statements relating to RIM's revenue and earnings expectations for the third quarter of fiscal 2006, anticipated growth in subscribers, plans relating to RIM, including plans for new product launches, and its expectations regarding its carrier partners, and RIM's expectations relating to the outcome of its ongoing management-initiated, voluntary review of its historical option granting practices. The terms and phrases, "belief", "will", "is promising", "continue to", "expected", "forecast", "plans" and similar terms and phrases are intended to identify these forward-looking statements. Forward-looking statements are based on estimates and assumptions made by RIM in light of its experience and its perception of historical trends, current conditions and expected future developments, as well as other factors that RIM believes are appropriate in the circumstances. Many factors could cause RIM's actual results, performance or achievements to differ materially from those expressed or implied by the forward-looking statements, including, without limitation: risks relating to RIM's ongoing management-initiated, voluntary review of its historical option granting practices, including the risk that the financial impact may be different or larger than the Company currently expects; risks relating to RIM's intellectual property rights, including; RIM's ability to enhance current products and develop new products; RIM's reliance on carrier partners, third-party network developers and suppliers; and intense competition. These risk factors and others relating to RIM are discussed in greater detail in the "Risk Factors" section of RIM's Annual Information Form, which is included in its Annual Report on Form 40-F (copies of which filings may be obtained at www.sedar.com or www.sec.gov). These factors should be considered carefully, and readers should not place undue reliance on RIM's forward-looking statements. RIM has no intention and undertakes no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.
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 and BlackBerry 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.
Research In Motion Limited
Incorporated under the Laws of Ontario
(United States dollars, in thousands except per share data)
Preliminary Consolidated Statements of Operations
| For the three months ended | |||
| (unaudited) | September 2, 2006 | June 3, 2006 | August 27, 2005 |
| | |||
| Revenue | $ 658,541 | $ 613,116 | $ 490,082 |
| Cost of sales | 288,369 | 275,269 | 221,067 |
| | |||
| Gross margin | 370,172 | 337,847 | 269,015 |
| | |||
| Gross Margin % | 56.2% | 55.1% | 54.9% |
| Expenses | |||
| Research and development | 55,622 | 51,518 | 37,677 |
| Selling, marketing and administration | 115,860 | 107,255 | 72,263 |
| Amortization | 18,453 | 16,071 | 11,549 |
| Litigation | - | - | 6,640 |
| | |||
| 189,935 | 174,844 | 128,129 | |
| | |||
| Income from operations | 180,237 | 163,003 | 140,886 |
| Investment income | 12,606 | 12,051 | 15,700 |
| | |||
| Income before income taxes | 192,843 | 175,054 | 156,586 |
| | |||
| Provision for income taxes | |||
| Current | 30,740 | 11,255 | 6,681 |
| Deferred | 21,326 | 34,026 | 38,850 |
| | |||
| 52,066 | 45,281 | 45,531 | |
| | |||
| Net Income | $ 140,777 | $ 129,773 | $ 111,055 |
| | |||
| Earnings per share | |||
| | |||
| Basic | $ 0.76 | $ 0.70 | $ 0.58 |
| | |||
| Diluted | $ 0.74 | $ 0.68 | $ 0.56 |
| | |||
| Weighted average number of common shares outstanding (000’s) | |||
| Basic | 185,054 | 186,282 | 190,896 |
| Diluted | 189,627 | 192,061 | 198,417 |
| Total common shares outstanding (000's) | 183,808 | 186,523 | 191,024 |
Research In Motion Limited
Incorporated under the Laws of Ontario
(United States dollars, in thousands except per share data)
Preliminary Consolidated Balance Sheets
| As at (unaudited) | September 2, 2006 | March 4, 2006 |
| | ||
| Assets | ||
| Current | ||
| Cash and cash equivalents | $ 459,648 | $ 459,540 |
| Short-term investments | 237,670 | 175,553 |
| Trade receivables | 376,510 | 315,278 |
| Other receivables | 32,178 | 31,861 |
| Inventory | 195,665 | 134,523 |
| Other current assets | 50,266 | 45,035 |
| Deferred income tax asset | 38,988 | 94,789 |
| | ||
| 1,390,925 | 1,256,579 | |
| Investments | 467,324 | 614,309 |
| Capital assets | 397,144 | 326,313 |
| Intangible assets | 128,678 | 85,929 |
| Goodwill | 111,659 | 29,026 |
| | ||
| $ 2,495,730 | $ 2,312,156 | |
| | ||
| Liabilities | ||
| Current | ||
| Accounts payable | $ 120,685 | $ 94,954 |
| Accrued liabilities | 178,939 | 144,912 |
| Income taxes payable | 38,943 | 17,584 |
| Deferred revenue | 24,094 | 20,968 |
| Current portion of long-term debt | 278 | 262 |
| | ||
| 362,939 | 278,680 | |
| | ||
| Long-term debt | 6,883 | 6,851 |
| Deferred income tax liability | 30,193 | 27,858 |
| | ||
| 400,015 | 313,389 | |
| Shareholders’ equity | 2,095,715 | 1,998,767 |
| | ||
| $ 2,495,730 | $ 2,312,156 | |
| | ||
Research In Motion Limited
Incorporated under the Laws of Ontario
(United States dollars, in thousands except per share data)
Preliminary Consolidated Statements of Cash Flows
| (unaudited) | For the three months ended September 2, 2006 | For the six months ended September 2, 2006 |
| | ||
| Cash flows from operating activities | ||
| Net income | $ 140,777 | $ 270,550 |
| Items not requiring an outlay of cash: | ||
| Amortization | 30,590 | 57,399 |
| Deferred income taxes | 21,422 | 52,852 |
| Share-based payments | 4,389 | 8,909 |
| Other | (632) | (451) |
| Net changes in working capital items | 54,019 | (38,572) |
| | ||
| Net cash provided by operating activities | 250,565 | 350,687 |
| | ||
| Cash flows from financing activities | ||
| Issuance of share capital | 6,880 | 17,200 |
| Common shares repurchased pursuant to Common Share Repurchase Program | (203,933) | (203,933) |
| Repayment of long-term debt | (66) | (129) |
| | ||
| Net cash used in financing activities | (197,119) | (186,862) |
| | ||
| Cash flows from investing activities | ||
| Acquisition of investments | (3,912) | (9,012) |
| Proceeds on sale or maturity of investments | 17,821 | 35,701 |
| Acquisition of capital assets | (68,639) | (112,704) |
| Acquisition of intangible assets | (8,601) | (30,692) |
| Business acquisitions | (72,578) | (111,456) |
| Acquisition of short-term investments | (20,978) | (21,756) |
| Proceeds on sale and maturity of short-term investments | 5,609 | 85,596 |
| | ||
| Net cash used in investing activities | (151,278) | (164,323) |
| | ||
| Effect of foreign exchange gain on cash and cash equivalents | 606 | 606 |
| | ||
| Net increase (decrease) in cash and cash equivalents for the period | (97,226) | 108 |
| Cash and cash equivalents, beginning of period | 556,874 | 459,540 |
| | ||
| Cash and cash equivalents, end of period | $ 459,648 | $ 459,648 |
| | ||
| As at | September 2, 2006 | June 3, 2006 |
| | ||
| Cash and cash equivalents | $ 459,648 | $ 556,874 |
| Short-term investments | 237,670 | 166,275 |
| Investments | 467,324 | 532,749 |
| | ||
| Cash, cash equivalents, short-term and long-term investments | $ 1,164,642 | $ 1,255,898 |
| | ||