Oracle Q2 Earnings 10 Cents Per Share
Wednesday December 18, 4:01 pm ET
Q2 Operating margin is 34%
REDWOOD SHORES, Calif., Dec. 18 /PRNewswire-FirstCall/ -- ( oracle.com ) Today, Oracle Corporation announced second quarter revenue of $2.31 billion and net income of $535 million or $0.10 per share. This compares to $2.38 billion in revenue and net income of $549 million and $0.10 per share a year ago. License revenues were $765 million, down 7%, while License updates and product support revenues were $954 million, up 8%. Services revenues were $590 million, down 11%. Second quarter operating margin was 34%, equal to last year.
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"Even during an economic downturn Oracle's installed base of customers continues to grow, so our revenues from license update rights continue to rise. That's the underlying strength in our business model. That's what allows us to maintain our profitability at high levels even though we increased research and development spending by 15%," said Oracle CFO Jeff Henley.
"We're pleased that our database business started to grow again this quarter," said Oracle CEO Larry Ellison. "We have never been in a stronger position relative to our competitors. Morgan Stanley's December 2002 Enterprise Software Survey asked CIOs to name their preferred database: 54% chose Oracle, Microsoft was second at 26%, and IBM was a distant third at 9%. This survey shows that Oracle is preferred by more than 2 to 1 over Microsoft, and fully 6 to 1 over IBM."
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 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 conditions will continue to adversely affect purchasing decisions for computer software and services throughout the world. 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. The economic, political and other uncertainties caused (or exacerbated) by the war on terrorism add to this 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 oracle.com.
ORACLE CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
($ in thousands, except per share data)
(unaudited)
Three Months Ended Six Months Ended
November 30, November 30,
------------------ -----------------
2002 2001 2002 2001
---- ---- ---- ----
REVENUES
Licenses and other $764,887 $819,324 $1,327,921 $1,550,756
License updates and
product support (1) 953,622 881,135 1,858,717 1,724,300
Services (1), (2) 589,999 679,978 1,149,418 1,370,436
---------- ---------- ---------- ----------
Total Revenues 2,308,508 2,380,437 4,336,056 4,645,492
---------- ---------- ---------- ----------
OPERATING EXPENSES
Sales and marketing 512,327 571,152 983,594 1,106,633
Licenses updates and
product support 117,377 116,676 234,358 233,235
Services (1) 480,619 516,264 952,929 1,032,588
Research and development 295,331 257,484 581,410 510,783
General and administrative 108,913 98,917 210,708 196,531
---------- ---------- ---------- ----------
Total Operating
Expenses 1,514,567 1,560,493 2,962,999 3,079,770
---------- ---------- ---------- ----------
OPERATING INCOME 793,941 819,944 1,373,057 1,565,722
Net investment losses
related to equity
securities (3) (21,849) (3,388) (102,420) (6,689)
Other income, net 27,947 28,770 51,126 71,904
---------- ---------- ---------- ----------
INCOME BEFORE TAXES 800,039 845,326 1,321,763 1,630,937
Provision for income
taxes (4) 265,173 295,864 444,169 570,828
---------- ---------- ---------- ----------
NET INCOME $534,866 $549,462 $877,594 $1,060,109
========== ========== ========== ==========
EARNINGS PER SHARE
Basic 0.10 0.10 0.16 0.19
Diluted 0.10 0.10 0.16 0.18
SHARES OUTSTANDING
Basic 5,308,868 5,528,372 5,353,843 5,554,092
Diluted 5,419,831 5,695,860 5,467,405 5,737,940
-----------------------------------------------------------
(1) On March 1, 2002, Oracle adopted Financial Accounting Standards Board
Emerging Issues Task Force No. 01-14, Income Statement
Characterization of Reimbursements Received for 'Out-of-Pocket'
Expenses Incurred. EITF 01-14 requires reimbursements received for
out-of-pocket expenses be reflected as revenues and to reclassify
prior period financial statements to conform with the current period
presentation. Prior to the adoption of EITF 01-14, reimbursable out-
of-pocket expenses were reflected as net amounts in "Services"
expenses. Reimbursable out-of-pocket expenses reclassified as
revenues in the three months ended November 30, 2001 were $23,102.
Reimbursable out-of-pocket expenses reclassified as revenues in the
six months ended November 30, 2001 were $46,112.
(2) Services revenues include consulting, advanced product services and
education. Advanced product services was previously included in
license updates and product support.
(3) Net investment losses related to equity securities in the three
months ended November 30, 2002 of $21,849 include a $15,030
impairment charge related to Oracle's investment in Liberate
Technologies. Excluding the effect of the Liberate Technologies
impairment charge, the effective income tax rate and provision for
income taxes would have been 33.3% and $271,185, respectively, and
net income and fully diluted earnings per share would have been
$543,884 and $0.10, respectively. Net investment losses related to
equity securities in the six months ended November 30, 2002 of
$102,420 include an $87,174 impairment charge related to Oracle's
investment in Liberate Technologies. Excluding the effect of the
Liberate Technologies impairment charge, the effective income tax
rate and provision for income taxes would have been 34% and $479,038
and net income and fully diluted earnings per share would have been
$929,899 and $0.17.
(4) Provision for income taxes in the three months ended November 30,
2002 of $265,173 includes a $5,939 cumulative catch-up adjustment
related to a decrease in Oracle's effective income tax rate on
operating and other income from 35% to 34%. Excluding the effect of
this adjustment, the provision for income taxes would have been $
271,112 and net income and fully diluted earnings per share would
have been $528,927 and $0.10.
ORACLE CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS DATA
(unaudited)
Percentage of Percentage of Percentage Percentage
Revenues Revenues Change Change
------------- ------------- ---------- ----------
Three Months Six Months Three Months FY03 Six Months FY03
Ended Ended vs. vs.
November 30, November 30, Three Months FY02 Six Months FY02
------------- ------------ ----------------- ---------------
2002 2001 2002 2001
---- ---- ---- ----
REVENUES
Licenses
and other 33% 34% 31% 33% (7%) (14%)
License
updates
and product
support 41% 37% 43% 37% 8% 8%
Services 26% 29% 26% 30% (13%) (16%)
---- ---- ---- ----
Total Rev-
enues 100% 100% 100% 100% (3%) (7%)
---- ---- ---- ----
OPERATING EXPENSES
Sales and
marketing 22% 24% 24% 24% (10%) (11%)
License
updates
and product
support 5% 5% 5% 5% 0% 0%
Services 21% 22% 22% 22% (7%) (8%)
Research and
develop-
ment 13% 11% 13% 11% 15% 14%
General and
admini-
strative 5% 4% 5% 4% 10% 7%
---- ---- ---- ----
Total
Operating
Expenses 66% 66% 69% 66% (3%) (4%)
---- ---- ---- ----
OPERATING
INCOME 34% 34% 31% 34% (3%) (12%)
Net investment
losses related
to equity
securities (1%) 0% (2%) 0% 545% 1431%
Other income,
net 1% 1% 1% 1% (3%) (29%)
---- ---- ---- ----
INCOME BEFORE
TAXES 34% 35% 30% 35% (5%) (19%)
Provision
for income
taxes 11% 12% 10% 12% (10%) (22%)
---- ---- ---- ----
NET INCOME 23% 23% 20% 23% (3%) (17%)
==== ==== ==== ====
ORACLE CORPORATION
SUPPLEMENTAL ANALYSIS OF EFFECT OF
IMPAIRMENT CHARGE FOR EQUITY INVESTMENTS
(unaudited, $ in thousands, except per share data)
Three Months Ended Six Months Ended
November 30, 2002 November 30, 2002
------------------ ------------------
Adjustment for Adjustment for
Impairment Impairment
Charge for Charge for
Liberate Liberate
GAAP Tech- As GAAP Tech- As
Basis nologies Adjusted Basis nologies Adjusted
---------------------------------------------------------
REVENUES
Licenses and
other $764,887 $-- $764,887 $1,327,921 $-- $1,327,921
License updates
and product
support 953,622 -- 953,622 1,858,717 1,858,717
Services 589,999 -- 589,999 1,149,418 -- 1,149,418
----------------------------------------------------------
Total
Revenues 2,308,508 -- 2,308,508 4,336,056 -- 4,336,056
OPERATING EXPENSES
Sales and
marketing 512,327 -- 512,327 983,594 -- 983,594
License updates
and product
support 117,377 -- 117,377 234,358 234,358
Services 480,619 -- 480,619 952,929 -- 952,929
Research and
development 295,331 -- 295,331 581,410 -- 581,410
General and
admini-
strative 108,913 -- 108,913 210,708 -- 210,708
----------------------------------------------------------
Total
Operating
Expenses 1,514,567 -- 1,514,567 2,962,999 -- 2,962,999
OPERATING
INCOME 793,941 -- 793,941 1,373,057 -- 1,373,057
Net investment
losses related
to equity sec-
urities (1) (21,849) 15,030 (6,819) (102,420) 87,174 (15,246)
Other income,
net 27,947 -- 27,947 51,126 -- 51,126
----------------------------------------------------------
INCOME BEFORE
TAXES 800,039 15,030 815,069 1,321,763 87,174 1,408,937
Provision for
income taxes 265,173 6,012 271,185 444,169 34,869 479,038
----------------------------------------------------------
NET INCOME $534,866 $9,018 $543,884 $877,594 $52,305 $929,899
==========================================================
EARNINGS PER SHARE
Basic $0.10 $0.00 $0.10 $0.16 $0.01 $0.17
Diluted $0.10 $0.00 $0.10 $0.16 $0.01 $0.17
----------------------------------------------------------
(1) Net investment losses related to equity securities in the three
months ended November 30, 2002 of $21,849 include a $15,030
impairment charge related to Oracle's investment in Liberate
Technologies. Excluding the effect of the Liberate Technologies
impairment charge, the effective income tax rate would have been
33.3%. Net investment losses related to equity securities in the six
months ended November 30, 2002 of $102,420 include a $87,174
impairment charge related to Oracle's investment in Liberate
Technologies. Excluding the effect of the Liberate Technologies
impairment charge, the effective income tax rate would have been
34.0%.
ORACLE CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
($ in thousands)
November 30, May 31,
2002 2002
----------- -----------
(unaudited)
ASSETS
Current Assets
Cash, cash equivalents and short-term
investments $5,481,336 $5,841,178
Trade receivables, net 1,528,761 2,034,996
Deferred tax assets 447,448 451,994
Other current assets 330,533 399,776
----------- -----------
Total Current Assets 7,788,078 8,727,944
----------- -----------
Long-term investments 413,648 405,883
Property, net 948,869 986,970
Deferred tax assets 231,612 233,359
Intangible and other assets 369,766 446,206
---------- -----------
TOTAL ASSETS $9,751,973 $10,800,362
========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Accounts payable $216,672 $227,393
Income taxes payable 1,011,631 1,091,293
Other current liabilities 1,282,745 1,399,660
Deferred revenues 1,248,307 1,241,471
---------- -----------
Total Current Liabilities 3,759,355 3,959,817
---------- -----------
Long-term debt 312,543 298,391
Deferred tax liabilities 168,839 204,073
Other long-term liabilities 212,649 220,791
Stockholders' equity 5,298,587 6,117,290
---------- -----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $9,751,973 $10,800,362
========== ===========
ORACLE CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
($ in thousands)
(unaudited)
Six Months Ended
November 30,
-----------------
2002 2001
---- ----
Cash Flows From Operating Activities:
Net income $877,594 $1,060,109
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation 122,218 124,247
Amortization of intangible assets 43,866 36,647
Net investment losses related to equity
securities 102,420 6,689
Changes in assets and liabilities:
Decrease in trade receivables 528,147 616,247
Decrease in prepaid expenses and other assets 85,847 4,667
(Increase) decrease in tax related assets 9,428 (199,130)
Decrease in accounts payable and accrued
liabilities (95,327) (208,491)
Increase (decrease) in tax related
liabilities (184,786) 188,154
Increase (decrease) in deferred revenues (12,623) (126,848)
Increase (decrease) in other long-term
liabilities (8,164) 7,364
----------- -----------
Net cash provided by operating activities 1,468,620 1,509,655
----------- -----------
Cash Flows From Investing Activities:
Purchases of investments (2,464,610) (3,503,483)
Proceeds from sale of investments 2,740,190 1,878,883
Capital expenditures (75,067) (159,652)
Increase in other assets (67,544) (26,510)
----------- -----------
Net cash provided by (used for) investing
activities 132,969 (1,810,762)
----------- -----------
Cash Flows From Financing Activities:
Payments for repurchase of common stock (1,707,168) (1,857,865)
Proceeds from issuance of common stock 147,019 189,287
Settlement of forward contract (166,260) --
Payments under notes payable -- (1,742)
Net cash used for financing activities (1,726,409) (1,670,320)
----------- -----------
Effect of exchange rate changes on cash and cash
equivalents 42,607 (10,224)
----------- -----------
Net decrease in cash and cash equivalents (82,213) (1,981,651)
Cash and cash equivalents at beginning of
period 3,095,109 4,449,166
----------- -----------
Cash and cash equivalents at end of period $3,012,896 $2,467,515
=========== ===========
--------------------------------------------------------------------------------
Source: Oracle Corporation
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