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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
 -- 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
 -- Other Accounting Issues: Approximately $34 million in revenue was
 reversed because of erroneous calculations or unsupported

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 .

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.
 (In thousands, except per share amounts)
 March 31, March 31,
 2002 2001
 (As restated)
 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
 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
 (In thousands, except per share amounts)
 Year Ended March 31,
 2002 2001 2000
 (As restated) (As restated)
 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
 (In thousands)
 Year Ended March 31,
 2002 2001 2000
 (As restated) (As restated)
 Cash flows from operating
 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
 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
 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, +1-858-720-5609,, or investor relations, Larry De'Ath, +1-301-581-2596,, both of Peregrine Systems, Inc.

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Date:Feb 28, 2003
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