Applications Sales Up, Database Sales Up, Total Revenues Up, Operating Margins Record 45%
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 http://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 http://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 (A) (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 (B) 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 (A) 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. (B) 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 $433,001 for the three months ended May 31, 2003. The change in effective tax rate did not change basic or diluted earnings per share for the three or twelve months ended May 31, 2003. The effective tax rate for the year ended May 31, 2003 is 32.6%, which includes 33.5% on operating and other income, partially offset by the tax benefit of 40% on the impairment charge on Liberate Technologies, as well as a benefit from the release of previously accrued taxes relating to our Foreign Sales Corporation. ORACLE CORPORATION CONSOLIDATED STATEMENTS OF OPERATIONS DATA Percen- Percen- Percentages tage tage of Revenue Percentages Change Change Three Months of Revenue Three FY 03 Ended Year Ended Months vs. May 31, May 31, FY02 FY 02 2003 2002 2003 2002 REVENUES New software licenses and other 42% 42% 35% 36% 1% (7%) Software license updates and product support 38% 34% 41% 37% 12% 11% Services 20% 24% 24% 27% (11%) (13%) Total Revenues 100% 100% 100% 100% 2% (2%) OPERATING EXPENSES Sales and marketing 20% 21% 22% 23% (3%) (6%) Software license updates and product support 4% 4% 5% 5% 3% 3% Cost of services 16% 17% 20% 20% 2% (4%) Research and development 11% 10% 12% 11% 6% 10% General and administrative 4% 4% 5% 4% 5% 7% Total Operating Expenses 55% 56% 64% 63% 1% (1%) OPERATING INCOME 45% 44% 36% 37% 4% (4%) Net investment losses related to equity securities 0% (8%) (1%) (3%) (99%) (54%) Other income (expense), net 0% 0% 1% 1% (613%) 19% INCOME BEFORE TAXES 45% 36% 36% 35% 28% 0% Provision for income taxes 15% 12% 12% 12% 22% (6%) NET INCOME 30% 24% 24% 23% 31% 4% ORACLE CORPORATION CONDENSED CONSOLIDATED BALANCE SHEETS ($ 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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+1-650-506-4073, or Jim Finn, Vice President, Corporate Communications,
+1-212-521-4805, both of Oracle Corporation