Forward-looking statements
Any statements contained in the review of operations that are not historical facts are forward-looking statements as defined in the U.S. Private Securities Litigation Reform Act of 1995. Words such as “anticipate”, “assume”, “believe”, “counting on”, “continue”, “estimate”, “expect”, “forecast”, “intend”, “is confident”, “may”, “plan”, “predict”, “project”, “should”, “target”, “wants”, “will” and “would” and similar expressions as they relate to SAP are intended to identify such forward-looking statements. SAP undertakes no obligation to publicly update or revise any forward-looking statements. All forward-looking statements are subject to various risks and uncertainties that could cause actual results to differ materially from expectations. The factors that could affect the Company's future financial results are discussed more fully in SAP's filings with the U.S. Securities and Exchange Commission (SEC), including SAP's most recent annual report on Form 20-F for 2002 filed with the SEC and SAP's Form 20-F annual report for 2003, which will be filed with the SEC before June 30, 2004. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of their dates.
Non-GAAP measures
The review of operations and other sections of this annual report disclose certain financial measures, such as pro-forma operating income and pro-forma expenses, pro-forma net income and pro-forma earnings per share (EPS), cash earnings according to DVFA/SG and currency-adjusted year-on-year changes in revenue and operating income. These measures are not prepared in accordance with generally accepted accounting principles and are therefore considered non-GAAP financial measures. The non-GAAP measures included in this annual report are reconciled to the nearest U.S. GAAP measure, as is required under SEC rules regarding the use of non-GAAP financial measures. However the non-GAAP measures should be considered in addition to, and not as a substitute for, or superior to, operating income, cash flows, or other measures of financial performance prepared in accordance with generally accepted accounting principles. The pro-forma measures used by SAP may be different from pro-forma measures used by other companies.
Management believes that pro-forma operating income, pro-forma expenses, pro-forma net income and pro-forma EPS provide supplemental meaningful information to the investor to fully assess the financial performance of our core operations. The pro-forma operating measures disclosed are the same SAP uses in its internal management reporting and as criteria for variable elements of management compensation.
Eliminated expenses in pro-forma expenses, pro-forma operating income, pro-forma net income, and pro-forma EPS are defined as follows:
- Stock-based compensation includes expenses for stock-based compensation as defined under U.S. GAAP (STAR and LTI) as well as expenses related to the settlement of stock-based compensation plans in the context of mergers and acquisitions. Management excludes stock-based compensation expenses because SAP has no direct influence over the actual expense of these awards once the Company enters into stock-based compensation plans.
- Acquisition-related charges include amortization of intangible assets acquired in acquisitions.
- Impairment-related charges include other-than-temporary impairment charges on minority equity investments.
Pro-forma expenses and pro-forma operating income reconcile to the nearest U.S. GAAP measure as follows:
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Reconcilation |
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U.S. GAAP |
Stock-based compensation |
Acquisition-related charges |
Pro-forma |
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€ million |
€ million |
€ million |
€ million |
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2003 |
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Cost of product |
839 |
10 |
24 |
805 |
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Cost of service |
1,694 |
32 |
- |
1,662 |
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Research and development |
996 |
43 |
2 |
951 |
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Sales and marketing |
1,411 |
30 |
- |
1,381 |
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General and administration |
354 |
15 |
- |
339 |
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Operating income |
1,724 |
130 |
26 |
1,880 |
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2002 |
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Cost of product |
860 |
1 |
24 |
835 |
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Cost of service |
1,956 |
6 |
0 |
1,950 |
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Research and development |
910 |
10 |
2 |
898 |
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Sales and marketing |
1,627 |
5 |
0 |
1,622
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General and administration |
399 |
14 |
0 |
385 |
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Operating income |
1,626 |
36 |
26 |
1,688 |
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Pro-forma net income and pro-forma EPS reconcile to the nearest U.S. GAAP measure as follows:
Currency-adjusted year-on-year changes in revenue and operating income are calculated based on those figures for the fiscal year 2003 that result from a translation into euros of the income statements of foreign operations using the average exchange rates of the respective prior-year periods. Management believes that such currency-adjusted measures provide supplemental meaningful information to the investor as they show about how the Company would have performed if it had not been affected by changes in currencies.
Currency-adjusted year-on-year changes in revenue and operating income reconcile to the respective unadjusted year-on-year changes as follows:
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