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Financial News Details

Oracle Reports Q4 Earnings Per Share of $0.16 vs. $0.12 Last Year

June 12, 2003

Applications Sales Up, Database Sales Up, Total Revenues Up, Operating Margins Record 45%

Redwood Shores, Calif., June 12, 2003-- Today, Oracle Corporation announced financial results for its fiscal fourth quarter and full year 2003.

Fourth quarter net income increased 31% to $858 million, or $0.16 per share, compared to net income of $656 million, or $0.12 per share for the fourth quarter last year, which included an equity securities impairment charge of $104 million net of tax, or $0.02 per share related to Oracle’s investment in Liberate Technologies. Total revenues in Q4 increased 2% to $2.83 billion, new software license and other revenues rose 1% to $1.2 billion, software license updates and product support increased 12% to $1.1 billion, and services declined 11% to $580 million. Operating margin in the quarter reached a record 45% eclipsing the previous record of 44% in the fourth quarter of 2002.

For the full fiscal year 2003, net income increased 4% to $2.31 billion or $0.43 per share, compared with net income of $2.22 billion or $0.39 per share in fiscal year 2002, while total revenues declined 2% to $9.5 billion. The annual operating margin was 36%.

“This has been a very strong quarter for us, even with the war in Iraq and the SARS concerns right in the middle of it,” said Oracle CFO Jeff Henley. “In light of the continuing tight IT spending environment, we are particularly pleased that we executed well enough to deliver some top line growth in our business while improving both profits and margins.”

“We had a great applications quarter,” said Oracle CEO Larry Ellison. “The strength of our applications business is apparent when you compare our results to the results of our competitors. For the quarter our applications new software license revenues were flat at $246 million. Many of our major competitors showed significant license revenue decline in their most recently reported quarter. For instance, in PeopleSoft’s most recent quarter their applications new license revenues decreased 39% to $80 million. We believe that our growth and PeopleSoft’s decline resulted in part from an increase in our competitive win rate over PeopleSoft, and the fact that we are beginning to replace PeopleSoft at a number of major accounts.”

Oracle is the world’s largest enterprise software company. For more information about Oracle, including supplemental financial information, please call Investor Relations at (650) 506-4073 or visit Oracle on the web at

www.oracle.com/investor.

"Safe Harbor" Statement Under the Private Securities Litigation Reform Act of 1995: Information in this release relating to Oracle's future prospects (other than those statements relating to the tender offer) which are "forward -looking statements" are subject to certain risks and uncertainties that could cause actual results to differ materially, including, but not necessarily limited to, the following: (1) Economic, political and market conditions could continue to adversely affect purchasing decisions for computer software and services throughout the world. The war on terrorism and the potential for war or other hostilities in other parts of the world add to the climate of uncertainty that could adversely affect revenues. Delays in closing of sales, reductions in size of individual sales without an offsetting increase in volume or delays in product delivery can cause quarterly revenues and income to fall significantly short of anticipated levels. (2) Management's ability to forecast revenues and control expenses, especially on a quarterly basis, continues to be a challenge. An unexpected decline in revenues without a corresponding and timely slowdown in expense growth could have a material adverse effect on results of operations. (3) Oracle is introducing new or revised versions of its products and services, such as Oracle 9i Database, Oracle 9iAS Application Server, E-Business Suite, Oracle Collaboration Suite and Outsourcing; the market acceptance and contribution to Oracle's revenues of these new versions or products and services cannot be assured. (4) Oracle has made changes to its pricing model and sales organization, which could lead to a decline or delay in sales as its sales force and customers adjust to the new pricing policies and organizational changes. Intense competition in the various markets in which Oracle competes may also put pressure on Oracle to reduce prices on certain products. (5) The market for Oracle's products is intensely competitive and is characterized by rapid technological advances and frequent new product introductions. There can be no assurances that Oracle will continue to introduce new products and new versions of existing products that keep pace with technological developments, satisfy increasingly sophisticated customer requirements and achieve market acceptance. Oracle undertakes no obligation to update information contained in this release. For further information regarding risks and uncertainties associated with Oracle's business, please refer to the "Risk Factors" section of Oracle Corporation's SEC filings, including, but not limited to, its annual report on Form 10-K and quarterly reports on Form 10- Q, copies of which may be obtained by contacting Oracle Corporation's Investor Relations Department at (650) 506-4073 or Oracle's Investor Relations website at http://www.oracle.com/investor.

The solicitation and the offer to buy PeopleSoft's common stock is only made pursuant to the Offer to Purchase and related materials that Oracle Corporation and Pepper Acquisition Corp. filed on June 9, 2003. Stockholders should read the Offer to Purchase and related materials carefully because they contain important information, including the terms and conditions of the offer. Stockholders can obtain the Offer to Purchase and related materials free at the SEC's website at www.sec.gov, from Credit Suisse First Boston LLC, the Dealer Manager for the offer, from MacKenzie Partners, the Information Agent for the offer, or from Oracle Corporation.

ORACLE CORPORATION

CONSOLIDATED STATEMENTS OF OPERATIONS ($ in thousands, except per share data)

 

 

Three Months Ended

 

 

Year Ended

 

 

 

May 31,

 

 

 

May 31,

 

 

 

2003

 

 

2002

 

 

2003

 

 

2002

REVENUES

 

 

 

 

 

 

 

 

 

 

 

New software licenses and other

$

1,186,859

$

1,172,620

$

3,270,080

$

3,512,954

Software license updates and product support

 

1,065,557

 

 

949,539

 

 

3,928,587

 

 

3,540,236

Services

 

579,590

 

 

651,622

 

 

2,276,290

 

 

2,619,403

Total Revenues

 

2,832,006

 

 

2,773,781

 

 

9,474,957

 

 

9,672,593

OPERATING EXPENSES

 

 

 

 

 

 

 

 

 

 

 

Sales and marketing

 

567,324

 

 

587,532

 

 

2,071,960

 

 

2,208,981

Software license updates and product support

 

119,497

 

 

115,644

 

 

473,914

 

 

461,575

Cost of services

 

461,038

 

 

452,600

 

 

1,868,469

 

 

1,943,936

Research and development

 

298,095

 

 

282,142

 

 

1,180,261

 

 

1,076,156

General and administrative

 

115,526

 

 

109,592

 

 

440,876

 

 

411,213

Total Operating Expenses

 

1,561,480

 

 

1,547,510

 

 

6,035,480

 

 

6,101,861

OPERATING INCOME

 

1,270,526

 

 

1,226,271

 

 

3,439,477

 

 

3,570,732

Net investment losses related to equity securities (1)

 

(3,085)

 

 

(229,316)

 

 

(111,243)

 

 

(243,515)

Other income (expense), net

 

6,092

 

 

(1,188)

 

 

96,366

 

 

80,987

INCOME BEFORE TAXES

 

1,273,533

 

 

995,767

 

 

3,424,600

 

 

3,408,204

Provision for income taxes (2)

 

415,442

 

 

339,846

 

 

1,117,574

 

 

1,184,199

NET INCOME

$

858,091

$

655,921

$

2,307,026

$

2,224,005

EARNINGS PER SHARE

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

$

0.16

$

0.12

$

0.44

$

0.40

Diluted

$

0.16

$

0.12

$

0.43

$

0.39

WEIGHTED SHARES OUTSTANDING

 

 

 

 

 

 

 

 

 

 

 

Basic

 

5,240,182

 

 

5,471,617

 

 

5,301,634

 

 

5,518,024

Diluted

 

5,355,760

 

 

5,610,626

 

 

5,418,488

 

 

5,688,960

 

 

 

 

 

 

 

 

 

 

 

 

(1)Net investment losses related to equity securities in the three months ended May 31, 2002 includes a $173,452 impairment charge related to Oracle’s investment in Liberate Technologies. Excluding the effect of this charge, net income and diluted earnings per share would have been $759,992 and $0.14 per share. Net investment losses related to equity securities in the year ended May 31, 2003 and 2002 include an $87,174 and $173,452 impairment charge related to Oracle’s investment in Liberate Technologies, respectively. Excluding the effect of this charge, net income and diluted earnings per share would have been $2,359,330 and $0.44 per share, and $2,328,076 and $0.41 per share for the twelve months ended May 31, 2003 and 2002, respectively.

(2)Provision for income taxes in the three months ended May 31, 2003 of $415,442 includes a $17,559 adjustment related to a decrease in Oracle's year to date effective income tax rate on operating and other income from 34% to 33.5%. Excluding the effect of this adjustment, the provision for income taxes would have been $433,001 for the three months ended May 31, 2003. The change in effective tax rate did not change basic or diluted earnings per share for the three or twelve months ended May 31, 2003. The effective tax rate for the year ended May 31, 2003 is 32.6%, which includes 33.5% on operating and other income, partially offset by the tax benefit of 40% on the impairment charge on Liberate Technologies, as well as a benefit from the release of previously accrued taxes relating to our Foreign Sales Corporation.

ORACLE CORPORATION

CONSOLIDATED STATEMENTS OF OPERATIONS DATA

 

Percentage of Revenues

 

Percentage of Revenues

Percentage Change

Percentage Change

 

Three Months

 

 

 

 

 

Three Months FY03

FY 03

 

Ended

 

 

Year Ended

vs.

vs.

 

May 31,

 

 

May 31,

 

Three Months FY02

FY 02

 

2003

 

 

2002

2003

 

 

2002

 

 

REVENUES

 

 

 

 

 

 

 

 

 

 

 

New software licenses and other

42%

 

 

42%

35%

 

 

36%

1%

(7%)

Software license updates and product support

38%

 

 

34%

41%

 

 

37%

12%

11%

Services

20%

 

 

24%

 

24%

 

 

27%

(11%)

(13%)

Total Revenues

100%

 

 

100%

100%

 

 

100%

2%

(2%)

OPERATING EXPENSES

 

 

 

 

 

 

 

 

 

 

 

Sales and marketing

20%

 

 

21%

22%

 

 

23%

(3%)

(6%)

Software license updates and product support

4%

 

 

4%

5%

 

 

5%

3%

3%

Cost of services

16%

 

 

17%

20%

 

 

20%

2%

(4%)

Research and development

11%

 

 

10%

12%

 

 

11%

6%

10%

General and administrative

4%

 

 

4%

 

5%

 

 

4%

5%

7%

Total Operating Expenses

55%

 

 

56%

 

64%

 

 

63%

1%

(1%)

OPERATING INCOME

45%

 

 

44%

36%

 

 

37%

4%

(4%)

Net investment losses related to

 

 

 

 

 

 

 

 

 

 

 

equity securities

0%

 

 

(8%)

(1%)

 

 

(3%)

(99%)

(54%)

Other income (expense), net

0%

 

 

0%

 

1%

 

 

1%

(613%)

19%

INCOME BEFORE TAXES

45%

 

 

36%

36%

 

 

35%

28%

0%

Provision for income taxes

15%

 

 

12%

 

12%

 

 

12%

22%

(6%)

NET INCOME

30%

 

 

24%

 

24%

 

 

23%

31%

4%

ORACLE CORPORATION

CONDENSED CONSOLIDATED BALANCE SHEETS ($ in thousands)

 

 

May 31,

 

 

May 31,

 

 

2003

 

 

2002

ASSETS

 

 

 

 

 

Current Assets

 

 

 

 

 

Cash and cash equivalents

$

4,737,257

$

3,095,109

Short-term investments

 

1,781,763

 

 

2,746,069

Trade receivables, net

 

1,920,291

 

 

2,034,996

Deferred tax assets

 

380,892

 

 

451,994

Other current assets

 

407,478

 

 

399,776

Total Current Assets

 

9,227,681

 

 

8,727,944

Long-term investments

 

232,501

 

 

405,883

Property, net

 

1,062,313

 

 

986,970

Deferred tax assets

 

196,773

 

 

233,359

Intangible and other assets

 

345,110

 

 

446,206

TOTAL ASSETS

$

11,064,378

$

10,800,362

LIABILITIES AND STOCKHOLDERS' EQUITY

 

 

 

 

 

 

 

 

 

 

Current Liabilities

 

 

 

 

 

Current portion of long-term debt

$

153,126

$

450

Accounts payable

 

227,903

 

 

226,943

Income taxes payable

 

891,967

 

 

1,091,293

Other current liabilities

 

1,476,557

 

 

1,399,660

Deferred revenues

 

1,409,234

 

 

1,241,471

Total Current Liabilities

 

4,158,787

 

 

3,959,817

Long-term debt

 

175,455

 

 

298,391

Deferred tax liabilities

 

185,859

 

 

204,073

Other long-term liabilities

 

224,521

 

 

220,791

Stockholders' equity

 

6,319,756

 

 

6,117,290

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY

$

11,064,378

$ 10,800,362

 

 

 

 

 

ORACLE CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS ($ in thousands)

Year Ended

 

 

May 31,

 

 

 

2003

 

 

2002

Cash Flows From Operating Activities:

 

 

 

 

 

Net income

$

2,307,026

$

2,224,005

Adjustments to reconcile net income to net cash provided by operating activities:

 

 

 

 

 

Depreciation

 

242,700

 

 

273,890

Amortization of intangible assets

 

83,623

 

 

89,593

Provision for trade receivable accounts

 

128,207

 

 

194,975

Net investment losses related to equity securities

 

111,243

 

 

243,515

Deferred income taxes

 

89,600

 

 

(160,004)

Changes in assets and liabilities:

 

 

 

 

 

Decrease in trade receivables

 

118,922

 

 

229,631

(Increase) decrease in prepaid expenses and other assets

 

40,731

 

 

(22,886)

Decrease in accounts payable and other current liabilities

 

(87,664)

 

 

(339,650)

Increase (decrease) in income taxes payable

 

(80,960)

 

 

383,779

Increase in deferred revenues

 

65,489

 

 

4,609

Increase in other long-term liabilities

 

3,951

 

 

13,820

Net cash provided by operating activities

 

3,022,868

 

 

3,135,277

Cash Flows From Investing Activities:

 

 

 

 

 

Purchases of investments

 

(4,712,942)

 

 

(6,087,047)

Proceeds from maturities and sale of investments

 

5,942,066

 

 

4,384,419

Capital expenditures

 

(123,218)

 

 

(278,025)

Purchase of office buildings

 

(168,165)

 

 

-

Increase in other assets

 

(42,723)

 

 

(49,350)

Net cash provided by (used for) investing activities

 

895,018

 

 

(2,030,003)

Cash Flows From Financing Activities:

 

 

 

 

 

Payments for repurchase of common stock

 

(2,653,033)

 

 

(2,793,198)

Proceeds from issuance of common stock

 

356,373

 

 

332,602

Settlement of forward contract

 

(166,260)

 

 

-

Borrowings (repayments) under notes payable and long-term debt

 

9,050

 

 

(4,945)

Net cash used for financing activities

 

(2,453,870)

 

 

(2,465,541)

Effect of exchange rate changes on cash and cash equivalents

 

178,132

 

 

6,210

Net increase (decrease) in cash and cash equivalents

 

1,642,148

 

 

(1,354,057)

Cash and cash equivalents at beginning of period

 

3,095,109

 

 

4,449,166

Cash and cash equivalents at end of period

$

4,737,257

 

$

3,095,109

 

 

 

 

 

 

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