Peregrine Systems(R) Files Audited Financial Statements for Three Fiscal Years Ended March 31, 2002; Restates Fiscal Years 2001 and 2000.

-- -- Audited statements for three years submitted to Bankruptcy Court  and SEC -- Statements for fiscal 2001 and 2000, and three quarters of fiscal 2002 restated -- New management implements compliance policy, creates compliance officer and internal auditor positions

SAN DIEGO, Feb. 28 /PRNewswire-FirstCall/ -- Peregrine Systems, Inc. today filed audited annual financial statements for the three fiscal years ended March 31, 2002, which included restatements of fiscal years 2001 and 2000. Peregrine submitted the audited financial statements to the U.S. Bankruptcy Court in the District of Delaware and the Securities and Exchange Commission (SEC) on Form 8-K.

For the restatement period, between April 1, 1999 and Dec. 31, 2001, Peregrine reduced previously reported revenue of $1.34 billion by $509 million. Of that revenue reduction, approximately $259 million was reversed for non-substantiated transactions, while $70 million was reversed and used to reduce acquisition or investment costs. The remaining $180 million will be reported as revenue in future periods, assuming all relevant criteria for revenue recognition are eventually satisfied.

Completion of the audited statements marks the culmination of an intensive worldwide financial review that Peregrine's board of directors and new management initiated after accounting irregularities were discovered in May 2002. The company hired new senior management in June 2002 and replaced its independent accountants with PricewaterhouseCoopers.

"Peregrine's commitment to putting our financial house in order gave rise to an exhaustive review to ensure the accuracy and reliability of financial results for the three fiscal years," said Gary Greenfield, Peregrine's CEO, who joined the company in June 2002. "We conducted a thorough investigation, identified issues and have taken corrective measures to prevent or detect future occurrences. The restatement is behind us, and we are now creating a foundation to ensure that the company's financial policies and practices meet the highest standards in the future."

Audited Results -- Fiscal 2002, 2001 and 2000

The total revenue reported from continuing operations for the three fiscal years was $441.2 million for fiscal 2002, $213.4 million for fiscal 2001, and $131.6 million for fiscal 2000. Reported revenue came from Peregrine's core business and other non-core product lines (Remedy, FacilityCenter, Transportation, Telco) that were divested after the fiscal year ended March 31, 2002. The results exclude revenue from Peregrine's Supply Chain Enablement (SCE) business of $123.9 million and $97.2 million for fiscal 2002 and 2001, respectively. The SCE business, which was acquired in June 2000 in the Harbinger Corp. transaction and sold in June 2002, was treated as a discontinued operation in the audited financial statements.

For fiscal 2002, the company posted a loss from continuing operations of $1.5 billion ($8.64 per share), compared with a loss of $374.8 million ($2.71 per share) in fiscal 2001. The loss from continuing operations for fiscal 2000 was $217.4 million ($2.12 per share). A substantial portion of these losses resulted from one-time acquisition costs, non-cash impairment charges for long-term assets related to acquisitions, and amortization of stock-based compensation.

"Our license fee revenue in our ongoing business grew substantially during the period, climbing by about 50 percent from fiscal 2000 to 2001 and approximately 75 percent between 2001 and 2002," said Greenfield. "This growth in revenue during the audited period, along with recent business activity, gives us confidence in our ongoing business. The company continues to perform well against the operating plan adopted last September, and we are on track to expand our leadership in consolidated asset and service management software."

Restatement -- Fiscal 2000 and 2001, first three quarters of fiscal 2002

Revenue adjustments of $509 million for the restatement period related to five areas:

   -- Reseller Sales:  Revenue from sales to resellers has been reduced by
      $225 million, predominantly for non-substantiated transactions.  For
      much of the restatement period, Peregrine recognized revenue when it
      "sold in" to a third-party reseller at the time of the initial
      transaction, regardless of whether there was a firm commitment.  In
      the restatement, the company recognized revenue on sale to an end-user
      customer.
   -- Reciprocal Transactions:  Peregrine made permanent revenue adjustments
      of $70 million related to reciprocal transactions in connection with
      acquisitions, investments and license exchanges.  The cash received by
      the company has now been applied to reduce the costs of the
      acquisitions or investments, rather than recognized as revenue.
   -- Installment Contracts:  In the past, Peregrine recognized revenue on
      long-term installment contracts when it entered into the contract.
      Based on collection history, Peregrine recognized installment revenue
      in the restatement when it was collected.  This change resulted in a
      $100 million revenue reduction.  Some revenue from these transactions
      is due in the future and will be recognized when cash is received and
      all other revenue criteria are met.
   -- Other Timing Issues:  Approximately $80 million represents
      transactions in which the revenue has been deferred to future periods
      and will be recognized when all remaining revenue criteria are
      satisfied.
   -- Other Accounting Issues:  Approximately $34 million in revenue was
      reversed because of erroneous calculations or unsupported
      transactions.

A substantial portion of the uncollectible revenue had previously been improperly charged as bad debt expense, cost of acquisitions or accrued liabilities. These inappropriate charges have been removed from expenses and included as a reduction in revenue as described above.

Peregrine also generally underestimated the value of the total cost of acquisitions and non-cash impairment charges. The company, for example, did not always calculate the fair market value of stock options as an acquisition cost or correctly value Peregrine shares issued in some acquisitions.

In addition, the company has corrected its accounting for receivables financing. Peregrine had earlier accounted for these transactions as true sales of the receivables to the financial institutions without recourse, rather than appropriately as loans from the banks secured by the receivables. As a result, a loan balance of $141.6 million was added to the balance sheet as of March 31, 2002.

Corporate Governance, Compliance Policy

Peregrine's board and management are taking decisive steps to ensure the company adheres to strict financial reporting and accounting standards. In Oct. 2002, Peregrine adopted a corporate compliance policy, with the intent of creating a company-wide environment in which Peregrine and anyone acting on behalf of the company adheres to the highest standards of conduct in complying with the laws, regulations and accounting principles

that govern business practices on a global basis.

To implement the compliance policy, Peregrine's board established two new positions: a corporate compliance officer, a senior-level position reporting directly to the board's audit committee, and an internal auditor, whose role is to assist in compliance activities related to the company's financial and operating condition.

"This marks the beginning of a new chapter in Peregrine's history," said Greenfield. "We have already taken many concrete steps to help ensure that our business practices are strong, professional and above reproach, and there are more initiatives to come. It's our intent to rebuild trust and renew confidence in our company as we leverage Peregrine's heritage of innovation and thought leadership as a strategic enterprise software vendor. We are pleased that our customers continue to buy our products, and we sincerely appreciate their loyalty."

About Peregrine Systems, Inc.

Founded in 1981, Peregrine Systems develops and sells application software to help large global organizations manage and protect their technology resources. With a heritage of innovation and market leadership in consolidated asset, service and change management software, the company's flagship offerings include ServiceCenter(R) and AssetCenter(R), complemented by its Employee Self Service, Automation and Integration product lines. Headquartered in San Diego, Calif., Peregrine's solutions facilitate the automation of business processes, resulting in increased productivity, reduced costs and accelerated return on investment for its more than 3,500 customers worldwide. Peregrine filed a voluntary Chapter 11 petition on Sept. 22, 2002 with the Delaware bankruptcy court. The company filed its proposed plan of reorganization and disclosure statement with the court on Jan. 20. More information about Peregrine is available at http://www.peregrine.com/ .

Forward-Looking Statements

This press release contains forward-looking statements about Peregrine Systems and its business, including, for example, statements regarding future performance and revenues that may be recognized in the future. These statements are based on management's beliefs and certain assumptions, estimates, and projections. As a result, they are subject to numerous risks and uncertainties that could cause actual results to differ materially from those contemplated by the forward-looking statements. Although the company is not able to predict all of the factors that may affect the forward-looking statements, some of the factors that could affect the outcome materially, or an investor's decision making process, include the following:

   -- Since the announcement of the company's internal investigation into
      accounting irregularities and restatement, the company has been served
      with numerous shareholder lawsuits and the company's accounting
      practices continue to be investigated by the SEC and the Department of
      Justice.  These lawsuits and investigations are ongoing and the
      company can provide no assurance when they will be completed or their
      impact on the company, its financial condition, results of operations
      and liquidity.
   -- Uncertainty arising from the company's bankruptcy filing, the
      company's financial results and condition and the restatement could
      cause customers to cancel, delay, or defer purchases of its products.
      Continuing to address these internal accounting issues, the bankruptcy
      reorganization process and the pending litigation and investigations
      will require substantial management time and attention, which may
      impair the company's relationships with customers and result in
      substantial expense.  As a result, the company's financial results may
      be adversely affected in future periods.
   -- The company has not restated quarterly results for quarters within the
      restatement period or issued quarterly results for quarters subsequent
      to the restatement period (i.e., for the quarters ended March 31,
      2002, June 30, 2002, Sept. 31, 2002, and Dec. 31, 2002).  The company
      has not filed with the SEC amended Form 10-Q reports or Form 10-K
      reports for periods covered by the restatement, and it has not filed a
      Form 10-K for the period ended March 31, 2002, or a Form 10-Q report
      for any subsequent quarter.

The financial statements should be read in conjunction with footnotes available in the company's filing with the SEC on Form 8-K. Peregrine does not undertake any duty to update forward-looking statements. Additional risk factors are contained in the company's Disclosure Statement on file with the United States Bankruptcy Court in Delaware. For more information about the risks and uncertainties facing Peregrine's business, please refer to the matters discussed in the company's recent Form 8-K filings and the discussion under the caption "Factors that may affect our future operating results" in the Form 10-K and Forms 10-Q filed with the SEC.

Peregrine Systems, ServiceCenter and AssetCenter are registered trademarks of Peregrine Systems, Inc. or its affiliates. All other marks are the property of their respective owners.

                         PEREGRINE SYSTEMS, INC.
                       CONSOLIDATED BALANCE SHEETS
                 (In thousands, except per share amounts)
                                                  March 31,     March 31,
                                                    2002           2001
                                                              (As restated)
  ASSETS
  Current Assets:
    Cash and cash equivalents                      $83,490       $145,339
    Short-term investments                          17,606        119,865
    Accounts receivable, net                        97,231         41,496
    Other current assets                            20,830         66,844
  Total current assets                             219,157        373,544
  Property and equipment, net                       72,349         45,932
  Net assets of discontinued operations                 --        252,152
  Goodwill, net                                         --        243,662
  Other intangible assets, net                     156,875         47,193
  Investments and other assets                      25,030         37,487
  Total assets                                    $473,411       $999,970
  LIABILITIES AND STOCKHOLDERS' (DEFICIT) EQUITY
  Current Liabilities:
    Accounts payable                               $60,984        $24,056
    Accrued expenses                               113,961         71,955
    Net liabilities of discontinued operations      25,973             --
    Current portion of deferred revenue            180,504         89,976
    Bank loans - factor arrangements               141,572        166,941
    Current portion of long-term debt                2,801             36
  Total current liabilities                        525,795        352,964
  Deferred revenue, net of current portion          23,014          8,301
  Long-term debt, net of current portion             4,856             61
  Convertible subordinated notes                   270,000        270,000
    Total liabilities                              823,665        631,326
  Guaranteed value - common stock                    9,520             --
  Stockholders' (Deficit) Equity:
    Common stock                                       195            151
    Additional paid-in capital                   3,901,453      2,590,208
    Subscriptions receivable                       (13,366)        (3,441)
    Accumulated deficit                         (4,150,163)    (2,118,770)
    Unearned portion of deferred compensation      (82,242)       (86,129)
    Treasury stock, at cost                        (10,697)        (9,425)
    Accumulated other comprehensive loss            (4,954)        (3,950)
    Total stockholders' (deficit) equity          (359,774)       368,644
  Total liabilities and
   stockholders' (deficit) equity                 $473,411       $999,970
                         PEREGRINE SYSTEMS, INC.
                  CONSOLIDATED STATEMENTS OF OPERATIONS
                 (In thousands, except per share amounts)
                                           Year Ended March 31,
                                   2002            2001           2000
                                              (As restated)   (As restated)
  Revenues:
    Licenses                     $204,383         $94,918       $53,329
    Services                      236,812         118,435        78,303
  Total revenues                  441,195         213,353       131,632
  Costs and Expenses:
    Cost of licenses               40,426          12,252         3,109
    Cost of services              149,090          88,765        54,755
    Sales and marketing           301,501         235,877       109,127
    Research and development       89,196          64,588        33,491
    General and administrative    120,990          61,313        27,660
    Impairments, amortization
     and other                  1,262,150         113,533       108,843
  Total operating costs and
   expenses                     1,963,353         576,328       336,985
  Loss from continuing
   operations before interest
   and income tax expenses     (1,522,158)       (362,975)     (205,353)
  Interest expense, net           (15,186)         (6,192)       (2,005)
  Loss from continuing
   operations before income
   tax expense                 (1,537,344)       (369,167)     (207,358)
  Income tax expense on
   continuing operations            8,040           5,613        10,060
  Loss from continuing
   operations                  (1,545,384)       (374,780)     (217,418)
  Discontinued Operations:
    Loss from discontinued
     operations of SCE business,
     net of income tax benefit
     of $82 and expense of
     $998, respectively          (438,189)     (1,469,737)           --
    Loss on disposal of
     SCE business, net of income
     Taxes                        (47,820)             --            --
  Loss from discontinued
   operations, net of income tax
   benefit of $82 and expense of
   $998, respectively            (486,009)     (1,469,737)           --
  Net loss                    $(2,031,393)    $(1,844,517)    $(217,418)
  Net loss per share,
   basic and diluted:
    Loss per share from
     continuing operations         $(8.64)         $(2.71)        $(2.12)
    Loss per share from
     discontinued operations       $(2.72)        $(10.62)           $--
    Net loss per share            $(11.36)        $(13.32)        $(2.12)
    Shares used in computation    178,875         138,447        102,332
                         PEREGRINE SYSTEMS, INC.
                  CONSOLIDATED STATEMENTS OF CASH FLOWS
                              (In thousands)
                                           Year Ended March 31,
                                  2002             2001            2000
                                              (As restated)   (As restated)
  Cash flows from operating
   activities:
  Loss from continuing
   operations                 $(1,545,384)      $(374,780)    $(217,418)
    Adjustments to reconcile
     loss from continuing
     operations to net cash,
     provided by (used in)
     operating activities:
      Depreciation and
       amortization                25,567          21,266        13,798
      Amortization of
       deferred compensation       54,719          50,783        17,709
      Impairment and
       amortization of
       goodwill and
       Intangibles              1,208,444         113,328        85,187
      In-process research &
       development                 86,000           6,000        25,000
      Deferred taxes                   --              --         5,798
      Increase (decrease) in
       cash resulting from
       changes, net of
       businesses acquired in:
        Accounts receivable       (23,629)        (13,406)       13,706
        Other assets               68,892            (852)        6,068
        Accounts payable           32,203           3,703           963
        Accrued expenses            2,024          40,751        (1,171)
        Deferred revenue           50,927          55,891        15,598
    Net cash used in
     continuing operations        (40,237)        (97,316)      (34,762)
  Cash flows from investing
   activities:
    Issuance of note receivable
     to employees                      --          (1,311)           --
    Purchases of property
     and equipment                (25,007)        (42,368)      (20,363)
    Purchases of investments      (19,275)        (22,890)      (10,074)
    Cash expenditures related
     to acquisitions              (79,203)        (47,174)       12,395
    Maturities (purchases) of
     short-term investments       102,259        (119,865)           --
    Net cash used in investing
     activities                   (21,226)       (233,608)      (18,042)
  Cash flows from financing
   activities:
    Advances under lines of
     credit, net of fees paid     170,000              --            --
    Repayments of lines of
     credit                      (170,000)             --            --
    Advances from factored
     receivables                  135,245         180,372        90,885
    Repayments of factored
     receivables                 (160,614)        (75,604)      (28,712)
    Issuance of long-term debt      2,904         270,000           129
    Repayment of long-term debt      (716)           (726)       (8,576)
    Bank overdrafts                12,445              --            --
    Issuance of common stock,
     employee plans                37,679          38,422        21,697
    Exercise of warrants              173              --            --
    Treasury stock purchased       (1,272)         (6,415)       (1,285)
    Net cash provided by
     financing activities          25,844         406,049        74,138
  Effect of exchange rate
   changes on cash                 (1,004)         (3,284)         (148)
  Net cash flows from
   discontinued operations        (25,226)         39,987            --
  Net increase (decrease)
   in cash and cash equivalents   (61,849)        111,828        21,186
  Cash and cash equivalents,
   beginning of year              145,339          33,511        12,325
  Cash and cash equivalents,
   end of year                    $83,490        $145,339       $33,511

CONTACT: media relations, MeeLin Nakata, [phone], [e-mail], or investor relations, Larry De'Ath, [phone], [e-mail], both of Peregrine Systems, Inc.

Web site: http://www.peregrine.com/