Oracle Data Input

Income Statement Assumption

Period End: May 31st Output
Values in this worksheet are in thousands, except where noted.

1994 1995 1996 1997 1998 1999 2000

Net revenues 2,001,147.0 2,966,878.0 4,223,300.0 5,684,336.0 7,143,866.0 8,827,252.0 10,130,128.0

Cost of revenues 499,213.0 779,012.0 1,096,013.0 1,550,466.0 2,273,607.0 3,064,148.0 2,942,679.0
Gross profit 1,501,934.0 2,187,866.0 3,127,287.0 4,133,870.0 4,870,259.0 5,763,104.0 7,187,449.0
Gross margins 75.1% 73.7% 74.0% 72.7% 68.2% 65.3% 71.0%

Operating expenses:
Sales and marketing 749,796.0 1,103,345.0 1,549,231.0 1,970,394.0 2,371,306.0 2,622,379.0 2,616,749.0
R&D 197,086.0 260,597.0 389,093.0 555,476.0 719,143.0 841,406.0 1,009,882.0
General and administrative 135,099.0 174,203.0 233,141.0 308,215.0 368,556.0 426,438.0 480,658.0
Other
Total operating expenses 1,081,981.0 1,538,145.0 2,171,465.0 2,834,085.0 3,459,005.0 3,890,223.0 4,107,289.0

Income (loss) from operations 419,953.0 649,721.0 955,822.0 1,299,785.0 1,411,254.0 1,872,881.0 3,080,160.0
Operating margin 21.0% 21.9% 22.6% 22.9% 19.8% 21.2% 30.4%

Non-recurring costs 0.0 0.0 0.0 0.0 0.0 0.0 0.0

Acquired in-process R&D 0.0 0.0 50,931.0 36,800.0 167,054.0 0.0 0.0
Amortization of goodwill 0.0 0.0 0.0 0.0 0.0 0.0 0.0

Investment income, net 17,943.0 21,095.0 30,235.0 47,381.0 85,986.0 118,486.0 6,936,955.0
Other income (expense) -7,562.0 -4,864.0 -8,984.0 -20,033.0 14,291.0 12,135.0 125,213.0
Interest expense 6,871.0 6,970.0 6,632.0 6,806.0 16,658.0 21,424.0 18,894.0
Income (loss) before income taxes 423,463.0 658,982.0 919,510.0 1,283,527.0 1,327,819.0 1,982,078.0 10,123,434.0
Provision for income taxes 139,743.0 217,464.0 316,231.0 462,070.0 514,124.0 692,320.0 3,826,631.0

Net income (loss) 283,720.0 441,518.0 603,279.0 821,457.0 813,695.0 1,289,758.0 6,296,803.0
Adjusted net income 283,720.0 441,518.0 654,210.0 858,257.0 980,749.0 1,289,758.0 6,296,803.0
Net profit margins 14.2% 14.9% 15.5% 15.1% 13.7% 14.6% 62.2%

NOPAT
Reported net income 283,720.0 441,518.0 603,279.0 821,457.0 813,695.0 1,289,758.0 6,296,803.0
Add R&D 197,086.0 260,597.0 440,024.0 592,276.0 886,197.0 841,406.0 1,009,882.0
Add marketing expenses 749,796.0 1,103,345.0 1,549,231.0 1,970,394.0 2,371,306.0 2,622,379.0 2,616,749.0
Add tax paid on investment income 3,425.7 5,356.2 7,308.5 9,845.3 38,826.7 45,624.6 2,669,480.6
Add interest expense 6,871.0 6,970.0 6,632.0 6,806.0 16,658.0 21,424.0 18,894.0
Add change in deferred tax reserve 0.0 (11,426.0) (18,283.0) (1,805.0) 8,454.0 120,031.0 130,243.0
Add non-recurring costs 0.0 0.0 0.0 0.0 0.0 0.0 0.0
Add amortization of goodwill 0.0 0.0 0.0 0.0 0.0 0.0 0.0
Subtract R&D amortization 39,417.2 91,536.6 179,541.4 297,996.6 475,236.0 604,100.0 753,957.0
Subtract marketing amortization 249,932.0 617,713.7 1,134,124.0 1,540,990.0 1,963,643.7 2,321,359.7 2,536,811.3
Subtract investment income 10,381.0 16,231.0 21,251.0 27,348.0 100,277.0 130,621.0 7,062,168.0
Subtract tax shield from interest expense 2,267.4 2,300.1 2,280.8 2,450.2 6,449.9 7,483.2 7,141.9
Subtract change in deferred tax assets 0.0 0.0 0.0 0.0 0.0 0.0 0.0
NOPAT 938,901.1 1,078,578.9 1,250,994.3 1,530,188.5 1,589,530.1 1,877,058.8 2,381,973.4
Net Operating Margins 46.92% 36.35% 29.62% 26.92% 22.25% 21.26% 23.51%

1994 1995 1996 1997 1998 1999 2000

Effective tax rate 33.0% 33.0% 34.4% 36.0% 38.7% 34.9% 37.8%
Oracle
Balance Sheet Data Input

Period Ends: May 31

ASSETS 1994 1995 1996 1997 1998 1999 2000

Current assets:
Cash and cash equivalents 404,810.0 480,158.0 715,742.0 890,162.0 1,273,681.0 1,785,715.0 7,429,206.0
Short-term investments in marketable securities 59,948.0 105,660.0 125,166.0 323,028.0 645,518.0 777,049.0 332,792.0
Accounts receivable 515,669.0 846,342.0 1,203,976.0 1,708,939.0 2,065,024.0 2,478,996.0 2,790,167.0
Prepaid and refundable income taxes 53,765.0 135,491.0 171,560.0 274,366.0 260,624.0 299,670.0 212,829.0
Prepaid expenses and other current assets 41,420.0 49,543.0 68,021.0 74,601.0 78,203.0 105,844.0 118,340.0
Total current assets 1,075,612.0 1,617,194.0 2,284,465.0 3,271,096.0 4,323,050.0 5,447,274.0 10,883,334.0

Fixed assets:
Long-term investments in marketable securities 41,963.0 116,337.0 186,511.0 249,547.0 110,000.0
Property and equipment, net 378,483.0 535,034.0 685,754.0 868,948.0 934,350.0 987,482.0 934,455.0
Computer software development costs, net 100,329.0 99,855.0 99,072.0 98,981.0 99,012.0 98,870.0 94,609.0
Intangibles and other assets 40,560.0 172,434.0 245,989.0 268,953.0 276,088.0 476,481.0 1,054,381.0
R&D expenditures, net 157,668.8 326,729.2 587,211.8 881,491.2 1,292,452.2 1,529,758.2 1,785,683.2
Marketing expenditures, net 499,864.0 985,495.3 1,400,602.3 1,830,006.3 2,237,668.7 2,538,688.0 2,618,625.7
Cumulative non-recurring costs
Total fixed assets 1,176,904.8 2,119,547.5 3,060,592.1 4,064,716.5 5,026,081.9 5,880,826.2 6,597,753.9
Total assets 2,252,516.8 3,736,741.5 5,345,057.1 7,335,812.5 9,349,131.9 11,328,100.2 17,481,087.9

LIABILITIES AND SHAREHOLDERS' EQUITY

Current liabilities:
Notes payable and current maturities of long-term debt 6,898.0 9,599.0 5,623.0 3,361.0 2,924.0 3,638.0 2,691.0
Accounts payable 95,799.0 124,773.0 169,895.0 185,444.0 239,698.0 283,896.0 287,495.0
Income taxes payable 62,591.0 134,121.0 181,999.0 203,646.0 181,354.0 277,700.0 2,821,776.0
Accrued compensation and related benefits 136,488.0 211,643.0 295,048.0 394,153.0 541,809.0 693,525.0 725,860.0
Customer advances and unearned revenues 227,118.0 316,273.0 434,435.0 602,862.0 877,087.0 1,007,149.0 1,133,482.0
Value added tax and sales tax payable 44,781.0 67,449.0 99,409.0 121,914.0 119,600.0 128,774.0 165,304.0
Other accrued liabilities 108,426.0 191,291.0 268,555.0 410,759.0 521,693.0 651,741.0 725,630.0
Total current liabilities 682,101.0 1,055,149.0 1,454,964.0 1,922,139.0 2,484,165.0 3,046,423.0 5,862,238.0

Non-current liabilities
Long term debt 82,845.0 81,721.0 897.0 300,836.0 304,337.0 304,140.0 300,770.0
Other 12,139.0 10,361.0 21,726.0 24,226.0 57,095.0 77,937.0 186,178.0
Deferred income taxes 38,916.0 27,490.0 9,207.0 7,402.0 15,856.0 135,887.0 266,130.0
Total non-current liabilities 133,900.0 119,572.0 31,830.0 332,464.0 377,288.0 517,964.0 753,078.0
Total Liabilities 816,001.0 1,174,721.0 1,486,794.0 2,254,603.0 2,861,453.0 3,564,387.0 6,615,316.0

Put warrants 38,430.0 38,438.0

Postretirement and other postemployment benefits
Minority interest

Equity equivalents 657,532.8 1,312,224.5 1,987,814.1 2,711,497.5 3,530,120.9 4,068,446.2 4,404,308.9

Shareholders' equity:
Total shareholders' equity 740,553.0 1,211,358.0 1,870,449.0 2,369,712.0 2,957,558.0 3,695,267.0 6,461,463.0
Total liabilities and shareholders' equity 2,252,516.8 3,736,741.5 5,345,057.1 7,335,812.5 9,349,131.9 11,328,100.2 17,481,087.9

Invested Capital

Net working capital (64,349.0) (14,174.0) (5,784.0) 139,128.0 (77,390.0) (158,275.0) (2,738,211.0)
Net property plant & equipment 378,483.0 535,034.0 685,754.0 868,948.0 934,350.0 987,482.0 934,455.0
Other assets 140,889.0 272,289.0 345,061.0 367,934.0 375,100.0 575,351.0 1,148,990.0
Equity equivalents 657,532.8 1,312,224.5 1,987,814.1 2,711,497.5 3,530,120.9 4,068,446.2 4,404,308.9
Operating cash (2% of cash and cash equivalents) 8,096.2 9,603.2 14,314.8 17,803.2 25,473.6 35,714.3 148,584.1
Total invested capital 1,120,652.0 2,114,976.7 3,027,160.0 4,105,310.8 4,787,654.5 5,508,718.5 3,898,127.0
Average capital 1,617,814.3 2,571,068.3 3,566,235.4 4,446,482.6 5,148,186.5 4,703,422.7
Beginning capital 1,120,652.0 2,114,976.7 3,027,160.0 4,105,310.8 4,787,654.5 5,508,718.5
Increase in capital 994,324.7 912,183.3 1,078,150.8 682,343.7 721,064.0 (1,610,591.5)
Amortization Schedule for Equity Equivalents

R&D Capitalization 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007

New R&D Expenditures 197,086.0 260,597.0 440,024.0 592,276.0 886,197.0 841,406.0 1,009,882.0 - - - - - - -
Depreciation 39,417.2 39,417.2 39,417.2 39,417.2 39,417.2
52,119.4 52,119.4 52,119.4 52,119.4 52,119.4
88,004.8 88,004.8 88,004.8 88,004.8 88,004.8
118,455.2 118,455.2 118,455.2 118,455.2 118,455.2
177,239.4 177,239.4 177,239.4 177,239.4 177,239.4
168,281.2 168,281.2 168,281.2 168,281.2 168,281.2
201,976.4 201,976.4 201,976.4 201,976.4 201,976.4
* R&D amortized over 5 years

Depreciation 39,417.2 91,536.6 179,541.4 297,996.6 475,236.0 604,100.0 753,957.0 665,952.2 547,497.0 370,257.6 201,976.4 - - -
Net Cum. R&D Expenditures 157,668.8 326,729.2 587,211.8 881,491.2 1,292,452.2 1,529,758.2 1,785,683.2 1,119,731.0 572,234.0 201,976.4 - - - -

Sales & Marketing Capitalization 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007

New Sales & Mktg Inv. 749,796.0 1,103,345.0 1,549,231.0 1,970,394.0 2,371,306.0 2,622,379.0 2,616,749.0 - - - - - - -
Depreciation 249,932.0 249,932.0 249,932.0
367,781.7 367,781.7 367,781.7
516,410.3 516,410.3 516,410.3
656,798.0 656,798.0 656,798.0
790,435.3 790,435.3 790,435.3
874,126.3 874,126.3 874,126.3
872,249.7 872,249.7 872,249.7
*Sales and marketing investments amortized over 3 years

Depreciation & Amortization 249,932.0 617,713.7 1,134,124.0 1,540,990.0 1,963,643.7 2,321,359.7 2,536,811.3 1,746,376.0 - - - - - -
Net Cum. Sales & Mktg Inv. 499,864.0 985,495.3 1,400,602.3 1,830,006.3 2,237,668.7 2,538,688.0 2,618,625.7 872,249.7 872,249.7 872,249.7 872,249.7 872,249.7 872,249.7 872,249.7

Cumulative Goodwill Amortization 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007

Goodwill Amortization - - 50,931 36,800 167,054 - - - - - - - - -

Cumulative Goodwill Amortization - - 50,931.0 87,731.0 254,785.0 254,785.0 254,785.0 254,785.0 254,785.0 254,785.0 254,785.0 254,785.0 254,785.0 254,785.0

Cumulative Non-Recurring Costs 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007

Non-recurring costs - - - - - - - - - - - - - -
Cumulative non-recurring costs - - - - - - - - - - - - - -
 Return On Invested Capital Analysis

1998 1999 2000

AVG capital 4,446,482.6 5,148,186.5 4,703,422.7
NOPAT 1,589,530.1 1,877,058.8 2,381,973.4
ROIC 35.7% 36.5% 50.6%
EVA 925,127.8 1,107,806.4 1,679,178.6

1999 2000
Incremental capital 701,703.9 -444,763.8
Incremental NOPAT 287,528.6 504,914.7
Return on incremental capital 41.0% -113.5%

1998 1999 2000

Beginning capital 4,105,310.8 4,787,654.5 5,508,718.5
NOPAT 1,589,530.1 1,877,058.8 2,381,973.4
ROIC 38.7% 39.2% 43.2%
EVA 976,106.4 1,161,677.8 1,558,849.7

1999 2000
Incremental capital 682,343.7 721,064.0
Incremental NOPAT 287,528.6 504,914.7
Return on incremental capital 42.1% 70.0%

ROIC-WACC Spread 35.70%

ROIC-to-WACC Ratio 3.39

EV (minus cash) 222,838,002 15-Aug-00

IC 3,898,127
EV/IC Ratio 57.17
 Balance Sheet Analysis

1995 1996 1997

Inventory turnover 0.0 0.0 0.0
Days in inventory 0.0 0.0 0.0

A/R turnover 4.4 4.1 3.9

Days in receivables 83.8 88.6 93.5

A/P turnover 7.1 7.4 8.7

Days in payables 51.7 49.1 41.8

CCC 32.1 39.5 51.7

Flow ratio 0.99 1.00 1.07

Cash Flow Analysis

1997 1998 1999

Cash earnings 1,215,665.0 1,416,227.0 1,737,674.0
Cash from change in NWC -185,161.0 198,352.0 69,425.0
CAPEX -390,741.0 -328,358.0 -346,592.0
CFO 1,030,504.0 1,614,579.0 1,807,099.0
Operating CF margin 18.1% 22.6% 20.5%
Free cash flow 639,763.0 1,286,221.0 1,460,507.0
Cash king margin 11.3% 18.0% 16.5%

Free Cash Flow using The Quest for Value Methodology

NOPAT 1,530,188.5 1,589,530.1 1,877,058.8

Increase (decrease) in invested capital 1,078,150.8 682,343.7 721,064.0
Free cash flow 452,037.7 907,186.4 1,155,994.7
Cash king margin 8.0% 12.7% 13.1%
 1998 1999 2000
0.0 0.0 0.0
0.0 0.0 0.0

3.8 3.9 3.8

96.4 93.9 94.9

10.7 11.7 10.3

34.1 31.2 35.4

62.3 62.8 59.5

0.97 0.95 0.53

2000
-113,915.0
3,037,479.0
-263,443.0
2,923,564.0
28.9%
2,660,121.0
26.3%

2,381,973.4
-1,610,591.5
3,992,564.9
39.4%
Cost of Equity (CAPM)

Beta 1.46 (Source: Market Guide)

L-T risk-free rate 5.72%
Historical MRP 6.32%
Cost of Equity 14.94%

Cost of Debt

Average interest rate 6.90%

Effective tax rate 37.80%
After-tax cost of debt 4.29%

Capital Structure (Market Values)

Total debt-to-equity & debt 0.00
Total equity to (equity + debt) 1.00

WACC 14.94%
rket Guide)