EX-99.2 3 f00724exv99w2.txt EXHIBIT 99.2 Exhibit 99.2 Reconciliation of Non-GAAP to GAAP Financial Measures The Company utilizes non-GAAP financial measures in analyzing financial results because they are useful to investors and management in evaluating the Company's ongoing operational performance. These financial measures facilitate making period-to-period comparisons exclusive of the impact of certain events, such as the acquisition of J.D. Edwards & Company, other restructuring charges, and the costs directly associated with responding to Oracle's hostile tender offer, which events might otherwise obscure the results of our core business when compared to our competitors or our own historical performance. In addition, presentation of these non-GAAP financial measures enables investors to evaluate the Company's performance under both the GAAP and pro forma measures that management and the Board of Directors use to evaluate the Company's performance. Where non-GAAP financial measures have been presented, the Company has provided the comparable GAAP measure and, in the table below, reconciled the GAAP to the non-GAAP measures. PeopleSoft's non-GAAP financial measures are not prepared in accordance with generally accepted accounting principles and may be different from non-GAAP financial measures used by other companies. PeopleSoft's non-GAAP financial measures should not be considered as a substitute for, or superior to, measures of financial performance prepared in accordance with GAAP. Reconciliation of Non-GAAP to GAAP financial measures (in thousands except margin percentages and per share amounts)
Q1 '03 Q2 '03 Q3 '03 Q4 '03 FY 2003 ----------- ----------- ----------- ----------- ----------- OPERATING INCOME RECONCILIATION: Proforma operating income $ 51,783 $ 77,521 $ 107,305 $ 123,735 $ 360,344 Revenue impact of deferred maintenance write-down -- -- (50,892) (49,958) (100,850) Acquired in-process research and development charges -- -- (14,500) -- (14,500) Restructuring charges -- (13,799) (8,773) (10,049) (32,621) Amortization of capitalized software and intangible assets -- -- (24,702) (28,443) (53,145) Adjustments to restructuring reserves -- -- -- -- -- Oracle response costs* -- (13,502) (17,891) (11,242) (42,635) ----------- ----------- ----------- ----------- ----------- GAAP operating income (loss) $ 51,783 $ 50,220 $ (9,453) $ 24,043 $ 116,593 =========== =========== =========== =========== =========== OPERATING MARGIN RECONCILIATION: Proforma operating margin 11.3% 15.6% 15.9% 16.8% 15.2% Revenue impact of deferred maintenance write-down -- -- (7.5)% (6.6)% (4.1)% Acquired in-process research and development charges -- -- (2.1)% -- (0.6)% Restructuring charges -- (2.8)% (1.3)% (1.4)% (1.4)% Amortization of capitalized software and intangible assets -- -- (3.8)% (3.8)% (2.2)% Adjustments to restructuring reserves -- -- -- -- -- Oracle response costs* -- (2.7)% (2.7)% (1.5)% (1.8)% ----------- ----------- ----------- ----------- ----------- GAAP operating margin 11.3% 10.1% (1.5)% 3.5% 5.1% =========== =========== =========== =========== =========== PROFORMA OPERATING EXPENSE RECONCILIATION: Proforma operating expenses $ 408,473 $ 419,921 $ 567,681 $ 611,449 $ 2,007,524 Acquired in-process research and development charges -- -- 14,500 -- 14,500 Restructuring charges -- 13,799 8,773 10,049 32,621 Amortization of capitalized software and intangible assets -- -- 24,702 28,443 53,145 Adjustments to restructuring charges -- -- -- -- Oracle response costs* -- 13,502 17,891 11,242 42,635 ----------- ----------- ----------- ----------- ----------- GAAP operating expense $ 408,473 $ 447,222 $ 633,547 $ 661,183 $ 2,150,425 =========== =========== =========== =========== =========== NET INCOME RECONCILIATION: Proforma net income $ 38,479 $ 53,783 $ 73,697 $ 81,135 $ 247,094 Revenue impact of deferred maintenance write-down -- -- (33,283) (31,891) (65,174) Acquired in-process research and development charges -- -- (14,500) -- (14,500) Restructuring charges -- (8,486) (5,493) (6,414) (20,394) Amortization of capitalized software and intangible assets -- -- (16,155) (18,157) (34,312) Adjustments to restructuring reserves -- -- -- -- -- Oracle response costs* -- (8,763) (11,611) (7,296) (27,670) ----------- ----------- ----------- ----------- ----------- GAAP net income $ 38,479 $ 36,534 $ (7,345) $ 17,376 $ 85,044 =========== =========== =========== =========== =========== NET INCOME PER SHARE RECONCILIATION: Proforma net income per share $ 0.12 $ 0.17 $ 0.20 $ 0.22 $ 0.72 Revenue impact of deferred maintenance write-down -- -- (0.09) (0.08) (0.19) Acquired in-process research and development charges -- -- (0.04) -- (0.04) Restructuring charges -- (0.03) (0.02) (0.02) (0.06) Amortization of capitalized software and intangible assets -- -- (0.04) (0.05) (0.10) Adjustments to restructuring reserves -- -- -- -- -- Oracle response costs* -- (0.03) (0.03) (0.02) (0.08) ----------- ----------- ----------- ----------- ----------- GAAP diluted income (loss) per share $ 0.12 $ 0.11 $ (0.02) $ 0.05 $ 0.25 =========== =========== =========== =========== ----------- diluted shares 319,831 318,630 357,289 374,543 344,100 TOTAL REVENUE RECONCILIATION Proforma total revenue $ 460,256 $ 497,442 $ 674,986 $ 735,184 $ 2,367,868 Revenue impact of deferred maintenance write-down -- -- (50,892) (49,958) (100,850) ----------- ----------- ----------- ----------- ----------- GAAP total revenue $ 460,256 $ 497,442 $ 624,094 $ 685,226 $ 2,267,018 =========== =========== =========== =========== =========== MAINTENANCE REVENUE RECONCILIATION Proforma maintenance revenue $ 199,921 $ 205,563 $ 285,474 $ 314,211 $ 1,005,169 Revenue impact of deferred maintenance write-down -- -- (50,892) (49,958) (100,850) ----------- ----------- ----------- ----------- ----------- GAAP maintenance revenue $ 199,921 $ 205,563 $ 234,582 $ 264,253 $ 904,319 =========== =========== =========== =========== =========== SERVICE MARGIN RECONCILIATION Proforma service margin 57% 57% 57% 58% 57% Intangible amortization in cost of services -- -- (4)% (2)% -- ----------- ----------- ----------- ----------- ----------- Proforma service margin net of intangible amortization 57% 57% 53.0% 56% 57% Revenue impact of deferred maintenance write-down -- -- (3)% (4)% (3)% ----------- ----------- ----------- ----------- ----------- GAAP service margin 57% 57% 50.0% 52% 54% =========== =========== =========== =========== =========== PRODUCT DEVELOPMENT EXPENSE RECONCILIATION Proforma product development expense $ 83,705 $ 84,646 $ 125,506 $ 133,934 $ 427,791 Intangible amortization in product development -- -- 2,205 3,015 5,220 ----------- ----------- ----------- ----------- ----------- GAAP product development expense $ 83,705 $ 84,646 $ 127,711 $ 136,949 $ 433,011 =========== =========== =========== =========== =========== PRODUCT DEVELOPMENT AS A PERCENTAGE OF REVENUES RECONCILIATION Proforma development as a percentage of pro forma revenues 18% 17% 19% 18% 18% Revenue impact of deferred maintenance write-down -- -- 1 % 2 % 1% ----------- ----------- ----------- ----------- ----------- Proforma product development expense as a percentage of revenues 18% 17% 20% 20% 19% Intangible amortization in product development -- -- -- -- -- ----------- ----------- ----------- ----------- ----------- GAAP product development expense as a percentage of revenues 18% 17% 20% 20% 19% =========== =========== =========== =========== =========== GENERAL AND ADMINISTRATIVE EXPENSE AS A PERCENTAGE OF REVENUES RECONCILIATION Proforma general and administrative as a percentage of pro forma revenues 7% 6% 7% 7% 7% Revenue impact of deferred maintenance write-down -- -- -- -- -- ----------- ----------- ----------- ----------- ----------- Proforma general and administrative expense as a percentage of revenues 7% 6% 7% 7% 7% Oracle response costs in general and administrative expense -- 2% 3% 1% 1% ----------- ----------- ----------- ----------- ----------- GAAP general and administrative expense as a percentage of revenues 7% 8% 10% 8% 8% =========== =========== =========== =========== =========== DEFERRED MAINTENANCE REVENUE RECONCILIATION (AT RECONCILIATION) Deferred maintenance prior to purchase accounting write-down $ 636,816 Deferred maintenance write-down (146,641) Revenue impact of deferred maintenance write-down 53,614 ----------- GAAP deferred maintenance revenue $ 543,789 =========== LICENSE MARGIN RECONCILIATION Proforma license margin 89% 91% 92% 92% 92% Intangible amortization in cost of license -- -- (6)% (6)% (4)% ----------- ----------- ----------- ----------- ----------- GAAP license margin 89% 91% 86% 86% 88% =========== =========== =========== =========== =========== SALES AND MARKETING EXPENSE RECONCILIATION Proforma sales and marketing expense $ 119,558 $ 129,196 $ 163,094 $ 185,840 $ 597,688 Intangible amortization in sales and marketing -- -- 2,839 3,771 6,610 Oracle response costs in sales and marketing -- 2,296 2,621 232 5,149 ----------- ----------- ----------- ----------- ----------- GAAP sales and marketing expense $ 119,558 $ 131,492 $ 168,554 $ 189,843 $ 609,447 =========== =========== =========== =========== =========== SALES AND MARKETING EXPENSE AS A PERCENTAGE OF REVENUES RECONCILIATION Proforma sales and marketing as a percentage of pro forma revenues 26% 26% 24% 25% 25% Revenue impact of deferred maintenance write-down -- -- 2% 2% 1% ----------- ----------- ----------- ----------- ----------- Proforma sales and marketing as a percentage of revenues 26% 26% 26% 27% 26% Intangible amortization in sales and marketing -- -- 1% 1 % 1% ----------- ----------- ----------- ----------- ----------- GAAP sales and marketing expense as a percentage of revenues 26% 26% 27% 28% 27% =========== =========== =========== =========== ----------- IMPACT OF ORACLE RESPONSE COSTS: ----------- Operating expenses excluding Oracle response costs $ 408,473 $ 433,720 $ 615,656 $ 649,941 $ 2,107,790 Oracle response costs -- 13,502 17,891 11,242 42,635 ----------- ----------- ----------- ----------- ----------- GAAP costs and expenses $ 408,473 $ 447,222 $ 633,547 $ 661,183 $ 2,150,425 =========== =========== =========== =========== =========== General and administrative expenses excluding Oracle response costs $ 33,015 $ 29,818 $ 46,609 $ 46,583 $ 156,025 Oracle response costs -- 11,206 15,270 11,010 37,486 ----------- ----------- ----------- ----------- ----------- GAAP general and administrative expenses $ 33,015 $ 41,024 $ 61,879 $ 57,593 $ 193,511 =========== =========== =========== =========== =========== Sales and marketing expenses excluding Oracle response costs $ 119,558 $ 129,196 $ 165,933 $ 189,611 $ 604,298 Oracle response costs -- 2,296 2,621 232 5,149 ----------- ----------- ----------- ----------- ----------- GAAP sales and marketing expenses $ 119,558 $ 131,492 $ 168,554 $ 189,843 $ 609,447 =========== =========== =========== =========== =========== GAAP net income per share excluding Oracle response costs $ 0.12 $ 0.14 $ 0.01 $ 0.07 $ 0.33 Oracle response costs -- (0.03) (0.03) (0.02) (0.08) ----------- ----------- ----------- ----------- ----------- GAAP diluted income (loss) per share $ 0.12 $ 0.11 $ (0.02) $ 0.05 $ 0.25 =========== =========== =========== =========== -----------
Reconciliation of Non-GAAP to GAAP financial measures (in thousands except margin percentages and per share amounts)
Q1 '04 Q2 '04 FY 2004 ----------- ----------- ----------- OPERATING INCOME RECONCILIATION: Proforma operating income $ 105,244 $ 77,376 $ 182,620 Revenue impact of deferred maintenance write-down (24,356) (14,889) (39,245) Acquired in-process research and development charges -- -- -- Restructuring charges (8,229) (4,043) (12,272) Amortization of capitalized software and intangible assets (26,919) (26,919) (53,838) Adjustments to restructuring reserves -- -- -- Oracle response costs* (12,810) (17,208) (30,018) ----------- ----------- ----------- GAAP operating income (loss) $ 32,930 $ 14,317 $ 47,247 =========== =========== =========== OPERATING MARGIN RECONCILIATION: Proforma operating margin 15.7% 11.7% 13.7% Revenue impact of deferred maintenance write-down (3.5)% (2.2)% (2.9)% Acquired in-process research and development charges -- -- -- Restructuring charges (1.2)% (0.6)% (0.9)% Amortization of capitalized software and intangible assets (4.0)% (4.1)% (4.0)% Adjustments to restructuring reserves -- -- -- Oracle response costs* (1.9)% (2.6)% (2.3)% ----------- ----------- ----------- GAAP operating margin 5.1% 2.2% 3.6 % =========== =========== =========== PROFORMA OPERATING EXPENSE RECONCILIATION: Proforma operating expenses $ 562,231 $ 584,778 $ 1,147,009 Acquired in-process research and development charges -- -- -- Restructuring charges 8,229 4,043 12,272 Amortization of capitalized software and intangible assets 26,919 26,919 53,838 Adjustments to restructuring charges -- -- -- Oracle response costs* 12,810 17,208 30,018 ----------- ----------- ----------- GAAP operating expense $ 610,189 $ 632,948 $ 1,243,137 =========== =========== =========== NET INCOME RECONCILIATION: Proforma net income $ 70,620 $ 50,536 $ 121,156 Revenue impact of deferred maintenance write-down (16,572) (10,252) (26,824) Acquired in-process research and development charges -- -- -- Restructuring charges (5,090) (2,460) (7,550) Amortization of capitalized software and intangible assets (16,555) (16,377) (32,932) Adjustments to restructuring reserves -- -- -- Oracle response costs* (8,198) (10,469) (18,667) ----------- ----------- ----------- GAAP net income $ 24,205 $ 10,978 $ 35,183 =========== =========== =========== NET INCOME PER SHARE RECONCILIATION: Proforma net income per share $ 0.19 $ 0.14 $ 0.33 Revenue impact of deferred maintenance write-down (0.05) (0.03) (0.08) Acquired in-process research and development charges -- -- -- Restructuring charges (0.01) (0.01) (0.02) Amortization of capitalized software and intangible assets (0.04) (0.04) (0.08) Adjustments to restructuring reserves -- -- -- Oracle response costs* (0.02) (0.03) (0.05) ----------- ----------- ----------- GAAP diluted income (loss) per share 0.07 $ 0.03 $ 0.10 =========== =========== =========== diluted shares 370,776 368,517 369,741 ----------- ----------- ----------- TOTAL REVENUE RECONCILIATION Proforma total revenue $ 667,475 $ 662,154 $ 1,329,629 Revenue impact of deferred maintenance write-down (24,356) (14,889) (39,245) ----------- ----------- ----------- GAAP total revenue $ 643,119 $ 647,265 $ 1,290,384 =========== =========== =========== MAINTENANCE REVENUE RECONCILIATION Proforma maintenance revenue $ 321,206 $ 317,137 $ 638,343 Revenue impact of deferred maintenance write-down (24,356) (14,889) (39,245) ----------- ----------- ----------- GAAP maintenance revenue $ 296,850 $ 302,248 $ 599,098 =========== =========== =========== SERVICE MARGIN RECONCILIATION Proforma service margin 60% 59% 60% Intangible amortization in cost of services (2)% (1)% (2)% ----------- ----------- ----------- Proforma service margin net of intangible amortization 58% 58% 58% Revenue impact of deferred maintenance write-down (2)% (2)% (2)% ----------- ----------- ----------- GAAP service margin 56% 56% 56% =========== =========== =========== PRODUCT DEVELOPMENT EXPENSE RECONCILIATION Proforma product development expense $ 124,359 $ 134,923 $ 259,282 Intangible amortization in product development 3,015 3,015 6,030 ----------- ----------- ----------- GAAP product development expense $ 127,374 $ 137,938 $ 265,312 =========== =========== =========== PRODUCT DEVELOPMENT AS A PERCENTAGE OF REVENUES RECONCILIATION Proforma development as a percentage of pro forma revenues 19% 20% 20% Revenue impact of deferred maintenance write-down 1% 1% 1% ----------- ----------- ----------- Proforma product development expense as a percentage of revenues 20% 21% 21% Intangible amortization in product development -- -- -- ----------- ----------- ----------- GAAP product development expense as a percentage of revenues 20% 21% 21% =========== =========== =========== GENERAL AND ADMINISTRATIVE EXPENSE AS A PERCENTAGE OF REVENUES RECONCILIATION Proforma general and administrative as a percentage of pro forma revenues 7% 7% 7% Revenue impact of deferred maintenance write-down -- -- -- ----------- ----------- ----------- Proforma general and administrative expense as a percentage of revenues 7% 7% 7% Oracle response costs in general and administrative expense 2% 3% 2% ----------- ----------- ----------- GAAP general and administrative expense as a percentage of revenues 9% 10% 9% =========== =========== =========== DEFERRED MAINTENANCE REVENUE RECONCILIATION (AT RECONCILIATION) Deferred maintenance prior to purchase accounting write-down Deferred maintenance write-down Revenue impact of deferred maintenance write-down GAAP deferred maintenance revenue LICENSE MARGIN RECONCILIATION Proforma license margin 91% 90% 90% Intangible amortization in cost of license (9)% (9)% (8)% ----------- ----------- ----------- GAAP license margin 82% 81% 82% =========== =========== =========== SALES AND MARKETING EXPENSE RECONCILIATION Proforma sales and marketing expense $ 165,400 $ 172,442 $ 337,842 Intangible amortization in sales and marketing 3,771 3,772 7,543 Oracle response costs in sales and marketing -- 376 376 ----------- ----------- ----------- GAAP sales and marketing expense $ 169,171 $ 176,590 $ 345,761 =========== =========== =========== SALES AND MARKETING EXPENSE AS A PERCENTAGE OF REVENUES RECONCILIATION Proforma sales and marketing as a percentage of pro forma revenues 25% 26% 25% Revenue impact of deferred maintenance write-down 1% 1% 1% ----------- ----------- ----------- Proforma sales and marketing as a percentage of revenues 26% 27% 26% Intangible amortization in sales and marketing -- -- 1% ----------- ----------- ----------- GAAP sales and marketing expense as a percentage of revenues 26% 27% 27% =========== =========== =========== IMPACT OF ORACLE RESPONSE COSTS: Operating expenses excluding Oracle response costs $ 597,379 $ 615,740 $ 1,213,119 Oracle response costs 12,810 17,208 30,018 ----------- ----------- ----------- GAAP costs and expenses $ 610,189 $ 632,948 $ 1,243,137 =========== =========== =========== General and administrative expenses excluding Oracle response costs $ 46,265 $ 46,330 $ 92,595 Oracle response costs 12,810 16,832 29,642 ----------- ----------- ----------- GAAP general and administrative expenses $ 59,075 $ 63,162 $ 122,237 =========== =========== =========== Sales and marketing expenses excluding Oracle response costs $ 169,171 $ 176,214 $ 345,385 Oracle response costs -- 376 376 ----------- ----------- ----------- GAAP sales and marketing expenses $ 169,171 $ 176,590 $ 345,761 =========== =========== =========== GAAP net income per share excluding Oracle response costs $ 0.09 $ 0.06 $ 0.15 Oracle response costs (0.02) (0.03) (0.05) ----------- ----------- ----------- GAAP diluted income (loss) per share $ 0.07 $ 0.03 $ 0.10 =========== =========== ===========
FOOTNOTES: For a complete set of financial statements, see the Company's 2003 Annual Report of Form 10-K and quarterly filings on Form 10-Q on the Company's website located at www.peoplesoft.com. *Beginning in Q2 2004, our non-GAAP financial measures exclude Oracle response costs. Prior results have been conformed to reflect this presentation.