DOCUMENT AND ENTITY INFORMATION
DOCUMENT AND ENTITY INFORMATION - shares | 3 Months Ended | |
Aug. 31, 2015 | Sep. 11, 2015 | |
Document and Entity Information [Abstract] | ||
Document Type | 10-Q | |
Amendment Flag | false | |
Document Period End Date | Aug. 31, 2015 | |
Document Fiscal Period Focus | Q1 | |
Document Fiscal Year Focus | 2,016 | |
Trading Symbol | ORCL | |
Entity Registrant Name | Oracle Corporation | |
Entity Central Index Key | 1,341,439 | |
Current Fiscal Year End Date | --05-31 | |
Entity Filer Category | Large Accelerated Filer | |
Entity Common Stock, Shares Outstanding (in shares) | 4,268,744,000 |
CONDENSED CONSOLIDATED BALANCE
CONDENSED CONSOLIDATED BALANCE SHEETS - USD ($) $ in Millions | Aug. 31, 2015 | May. 31, 2015 |
Current assets: | ||
Cash and cash equivalents | $ 16,739 | $ 21,716 |
Marketable securities | 39,191 | 32,652 |
Trade receivables, net of allowances for doubtful accounts of $291 and $285 as of August 31, 2015 and May 31, 2015, respectively | 3,475 | 5,618 |
Inventories | 251 | 314 |
Deferred tax assets | 671 | 663 |
Prepaid expenses and other current assets | 1,795 | 2,220 |
Total current assets | 62,122 | 63,183 |
Non-current assets: | ||
Property, plant and equipment, net | 3,896 | 3,686 |
Intangible assets, net | 5,955 | 6,406 |
Goodwill, net | 34,133 | 34,087 |
Deferred tax assets | 789 | 795 |
Other assets | 2,811 | 2,746 |
Total non-current assets | 47,584 | 47,720 |
Total assets | 109,706 | 110,903 |
Current liabilities: | ||
Notes payable, current | 2,000 | 1,999 |
Accounts payable | 422 | 806 |
Accrued compensation and related benefits | 1,384 | 1,839 |
Deferred revenues | 9,078 | 7,245 |
Other current liabilities | 2,507 | 3,402 |
Total current liabilities | 15,391 | 15,291 |
Non-current liabilities: | ||
Notes payable, non-current | 40,050 | 39,959 |
Income taxes payable | 4,408 | 4,386 |
Other non-current liabilities | 2,319 | 2,169 |
Total non-current liabilities | $ 46,777 | 46,514 |
Commitments and contingencies | ||
Oracle Corporation stockholders' equity: | ||
Preferred stock, $0.01 par value-authorized: 1.0 shares; outstanding: none | $ 0 | 0 |
Common stock, $0.01 par value and additional paid in capital-authorized: 11,000 shares; outstanding: 4,282 shares and 4,343 shares as of August 31, 2015 and May 31, 2015, respectively | 23,272 | 23,156 |
Retained earnings | 24,964 | 26,503 |
Accumulated other comprehensive loss | (1,139) | (996) |
Total Oracle Corporation stockholders' equity | 47,097 | 48,663 |
Noncontrolling interests | 441 | 435 |
Total equity | 47,538 | 49,098 |
Total liabilities and equity | $ 109,706 | $ 110,903 |
CONDENSED CONSOLIDATED BALANCE3
CONDENSED CONSOLIDATED BALANCE SHEETS PARENTHETICAL - USD ($) shares in Millions, $ in Millions | Aug. 31, 2015 | May. 31, 2015 |
Condensed Consolidated Balance Sheets | ||
Allowance for doubtful accounts receivable | $ 291 | $ 285 |
Preferred stock par value per share | $ 0.01 | $ 0.01 |
Preferred stock shares authorized | 1 | 1 |
Preferred stock shares outstanding | 0 | 0 |
Common stock par value per share | $ 0.01 | $ 0.01 |
Common stock shares authorized | 11,000 | 11,000 |
Common stock shares outstanding | 4,282 | 4,343 |
CONDENSED CONSOLIDATED STATEMEN
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS - USD ($) shares in Millions, $ in Millions | 3 Months Ended | ||
Aug. 31, 2015 | Aug. 31, 2014 | ||
Cloud and on-premise software revenues: | |||
Cloud software as a service and platform as a service | $ 451 | $ 337 | |
Cloud infrastructure as a service | 160 | 138 | |
Total cloud revenues | 611 | 475 | |
New software licenses | 1,151 | 1,370 | |
Software license updates and product support | 4,696 | 4,731 | |
Total on-premise software revenues | 5,847 | 6,101 | |
Total cloud and on-premise software revenues | 6,458 | 6,576 | |
Hardware revenues: | |||
Hardware products | 570 | 578 | |
Hardware support | 558 | 587 | |
Total hardware revenues | 1,128 | 1,165 | |
Total services revenues | 862 | 855 | |
Total revenues | 8,448 | 8,596 | |
Operating expenses: | |||
Sales and marketing | [1] | 1,731 | 1,706 |
Cloud software as a service and platform as a service | [1] | 276 | 149 |
Cloud infrastructure as a service | [1] | 89 | 79 |
Software license updates and product support | [1] | 291 | 272 |
Hardware products | [1] | 303 | 298 |
Hardware support | [1] | 180 | 192 |
Services | [1] | 711 | 691 |
Research and development | 1,390 | 1,329 | |
General and administrative | 257 | 276 | |
Amortization of intangible assets | 452 | 547 | |
Acquisition related and other | 31 | 25 | |
Restructuring | 83 | 69 | |
Total operating expenses | 5,794 | 5,633 | |
Operating income | 2,654 | 2,963 | |
Interest expense | (374) | (261) | |
Non-operating income, net | 30 | 16 | |
Income before provision for income taxes | 2,310 | 2,718 | |
Provision for income taxes | 563 | 534 | |
Net income | $ 1,747 | $ 2,184 | |
Earnings per share: | |||
Basic (in dollars per share) | $ 0.40 | $ 0.49 | |
Diluted (in dollars per share) | $ 0.40 | $ 0.48 | |
Weighted average common shares outstanding: | |||
Basic (in shares) | 4,317 | 4,451 | |
Diluted (in shares) | 4,412 | 4,548 | |
Dividends declared per common share (in dollars per share) | $ 0.15 | $ 0.12 | |
[1] | Exclusive of amortization of intangible assets, which is shown separately. |
CONDENSED CONSOLIDATED STATEME5
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME - USD ($) $ in Millions | 3 Months Ended | |
Aug. 31, 2015 | Aug. 31, 2014 | |
Net income | $ 1,747 | $ 2,184 |
Portion Attributable to Parent [Member] | ||
Net income | 1,747 | 2,184 |
Other comprehensive loss, net of tax: | ||
Net foreign currency translation losses | (1) | (83) |
Net unrealized gains on defined benefit plans | 13 | 3 |
Net unrealized (losses) gains on marketable securities | (126) | 16 |
Net unrealized (losses) gains on cash flow hedges | (29) | 35 |
Total other comprehensive loss, net | (143) | (29) |
Comprehensive income | $ 1,604 | $ 2,155 |
CONDENSED CONSOLIDATED STATEME6
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($) $ in Millions | 3 Months Ended | |
Aug. 31, 2015 | Aug. 31, 2014 | |
Cash flows from operating activities: | ||
Net income | $ 1,747 | $ 2,184 |
Adjustments to reconcile net income to net cash provided by operating activities: | ||
Depreciation | 219 | 160 |
Amortization of intangible assets | 452 | 547 |
Deferred income taxes | (30) | (68) |
Stock-based compensation | 253 | 215 |
Tax benefits on the exercise of stock options and vesting of restricted stock-based awards | 102 | 96 |
Excess tax benefits on the exercise of stock options and vesting of restricted stock-based awards | (25) | (51) |
Other, net | 45 | 46 |
Changes in operating assets and liabilities, net of effects from acquisitions: | ||
Decrease in trade receivables, net | 2,150 | 2,506 |
Decrease in inventories | 50 | 10 |
Decrease in prepaid expenses and other assets | 379 | 275 |
Decrease in accounts payable and other liabilities | (1,353) | (1,088) |
(Decrease) increase in income taxes payable | (204) | 80 |
Increase in deferred revenues | 2,071 | 1,816 |
Net cash provided by operating activities | 5,856 | 6,728 |
Cash flows from investing activities: | ||
Purchases of marketable securities and other investments | (11,669) | (10,340) |
Proceeds from maturities and sales of marketable securities and other investments | 4,644 | 3,878 |
Acquisitions, net of cash acquired | (37) | |
Capital expenditures | (446) | (201) |
Net cash used for investing activities | (7,471) | (6,700) |
Cash flows from financing activities: | ||
Payments for repurchases of common stock | (2,846) | (2,000) |
Proceeds from issuances of common stock | 296 | 593 |
Shares repurchased for tax withholdings upon vesting of restricted stock-based awards | (70) | (5) |
Payments of dividends to stockholders | (650) | (537) |
Proceeds from borrowings, net of issuance costs | 9,945 | |
Repayments of borrowings | (1,500) | |
Excess tax benefits on the exercise of stock options and vesting of restricted stock-based awards | 25 | 51 |
Distributions to noncontrolling interests | (25) | (27) |
Net cash (used for) provided by financing activities | (3,270) | 6,520 |
Effect of exchange rate changes on cash and cash equivalents | (92) | (138) |
Net (decrease) increase in cash and cash equivalents | (4,977) | 6,410 |
Cash and cash equivalents at beginning of period | 21,716 | 17,769 |
Cash and cash equivalents at end of period | 16,739 | 24,179 |
Non-cash investing and financing transactions: | ||
Increase in unsettled repurchases of common stock | 185 | |
Decrease in unsettled investment purchases | $ (342) | $ (78) |
BASIS OF PRESENTATION AND RECEN
BASIS OF PRESENTATION AND RECENT ACCOUNTING PRONOUNCEMENTS | 3 Months Ended |
Aug. 31, 2015 | |
Basis of Presentation and Recent Accounting Pronouncements [Abstract] | |
BASIS OF PRESENTATION AND RECENT ACCOUNTING PRONOUNCEMENTS | 1. BASIS OF PRESENTATION AND RECENT ACCOUNTING PRONOUNCEMENTS Basis of Presentation We have prepared the condensed consolidated financial statements included herein pursuant to the rules and regulations of the U.S. Securities and Exchange Commission. Certain information and footnote disclosures normally included in financial statements prepared in accordance with U.S. generally accepted accounting principles (U.S. GAAP) have been condensed or omitted pursuant to such rules and regulations. However, we believe that the disclosures herein are adequate to ensure the information presented is not misleading. These unaudited condensed consolidated financial statements should be read in conjunction with the audited financial statements and the notes thereto included in our Annual Report on Form 10-K for the fiscal year ended May 31, 2015. We believe that all necessary adjustments, which consisted only of normal recurring items, have been included in the accompanying financial statements to present fairly the results of the interim periods. The results of operations for the interim periods presented are not necessarily indicative of the operating results to be expected for any subsequent interim period or for our fiscal year ending May 31, 2016. Certain prior year balances have been reclassified to conform to the current year presentation. Such reclassifications did not affect total revenues, operating income or net income. During the first quarter of fiscal 2016, we adopted Accounting Standards Update (ASU) No. 2015-15, Interest—Imputation of Interest (Subtopic 835-30): Presentation and Subsequent Measurement of Debt Issuance Costs Associated with Line-of-Credit Arrangements—Amendments to SEC Paragraphs Pursuant to Staff Announcement at June 18, 2015 EITF Meeting , and ASU 2015-11, Inventory (Topic 330): Simplifying the Measurement of Inventory , neither of which had an impact on our reported financial position or results of operations and cash flows. There have been no other significant changes in our reported financial position or results of operations and cash flows as a result of the adoption of new accounting pronouncements or to our significant accounting policies that were disclosed in our Annual Report on Form 10-K for the fiscal year ended May 31, 2015 that have had a significant impact on our consolidated financial statements or notes thereto. Acquisition Related and Other Expenses Acquisition related and other expenses consist of personnel related costs for transitional and certain other employees, stock-based compensation expenses, integration related professional services, certain business combination adjustments including certain adjustments after the measurement period has ended and certain other operating items, net. Stock-based compensation expenses included in acquisition related and other expenses result from unvested stock options and restricted stock -based awards assumed from acquisitions whereby vesting was accelerated upon termination of the employees pursuant to the original terms of those stock options and restricted stock -based awards. Three Months Ended August 31, (in millions) 2015 2014 Transitional and other employee related costs $ 24 $ 9 Stock-based compensation 3 3 Professional fees and other, net 4 13 Total acquisition related and other expenses $ 31 $ 25 Non-Operating Income, net Non-operating income, net consists primarily of interest income, net foreign currency exchange gains (losses), the noncontrolling interests in the net profits of our majority-owned subsidiaries (primarily Oracle Financial Services Software Limited and Oracle Japan) and net other income (losses), including net realized gains and losses related to all of our investments and net unrealized gains and losses related to the small portion of our investment portfolio that we classify as trading. Three Months Ended August 31, (in millions) 2015 2014 Interest income $ 117 $ 89 Foreign currency losses, net (25) (41) Noncontrolling interests in income (30) (46) Other (loss) income, net (32) 14 Total non-operating income, net $ 30 $ 16 Sales of Financing Receivables We offer certain of our customers the option to acquire our software products, hardware products and services offerings through separate long-term payment contracts. We generally sell these contracts that we have financed for our customers on a non-recourse basis to financial institutions within 90 days of the contracts’ dates of execution. We record the transfers of amounts due from customers to financial institutions as sales of financing receivables because we are considered to have surrendered control of these financing receivables. During the three months ended August 31, 2015 and 2014, $ 972 million and $ 724 million of financing receivables were sold to financial institutions, respectively. Recent Accounting Pronouncements Cloud Computing Arrangements that Include a Software Element: In April 2015, the Financial Accounting Standards Board (FASB) issued ASU 2015-05, Intangibles—Goodwill and Other—Internal-Use Software (Subtopic 350-40): Customer’s Accounting for Fees Paid in a Cloud Computing Arrangement (ASU 2015-05) . ASU 2015-05 provides guidance to customers about whether a cloud computing arrangement includes software . If a cloud computing arrangement includes a software license, the customer should account for the software license element of the arrangement consistent with the acquisition of other software licenses. If a cloud computing arrangement does not include a software license, the customer should account for the arrangement as a service contract. The new guidance does not change the accounting for a customer’s accounting for service contracts. ASU 2015-05 is effective for us in our first quarter of fiscal 2017 with early adoption permitted using either of two methods: (i) prospective to all arrangements entered into or materially modified after the effective date and represents a change in accounting principle; or (ii) retrospectively. We are currently evaluating the impact of our pending adoption of ASU 2015-05 on our consolidated financial statements. Revenue Recognition: In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers: Topic 606 (ASU 2014-09), to s upersede nearly all existing revenue recognition guidance under U.S. GAAP. The core principle of ASU 2014-09 is to recognize revenues when promised goods or services are transferred to customers in an amount that reflects the consideration that is expected to be received for those goods or services. ASU 2014-09 defines a five step process to achieve this core principle and, in doing so, it is possible more judgment and estimates may be required within the revenue recognition process than are required under existing U.S. GAAP, including identifying performance obligations in the contract, estimating the amount of variable consideration to include in the transaction price and allocating the transaction price to each separate performance obligation, among others. The original effective date of ASU 2014-09 would have required us to adopt the standard in our first quarter of fiscal 2018. In August 2015, the FASB issued ASU 2015-14, Revenue from Contracts with Customers (Topic 606): Deferral of the Effective Date (ASU 2015-14), which defers the effective date by one year while providing the option to early adopt the standard on the original effective date. Accordingly, we may adopt the standard either in our first quarter of fiscal 2018 or our first quarter of fiscal 2019 using either of two methods: (i) retrospective application of ASU 2014-09 to each prior reporting period presented with the option to elect certain practical expedients as defined within ASU 2014-09; or (ii) retrospective application of ASU 2014-09 with the cumulative effect of initially applying ASU 2014-09 recognized at the date of initial application and providing certain additional disclosures as defined per ASU 2014-09. We are currently evaluating the timing and the impact of our pending adoption of ASU 2014-09 on our consolidated financial statements. |
ACQUISITIONS
ACQUISITIONS | 3 Months Ended |
Aug. 31, 2015 | |
Acquisitions [Abstract] | |
ACQUISITIONS | 2. ACQUISITIONS Fiscal 2015 Acquisitions Acquisition of MICROS Systems, Inc. On June 22, 2014, we entered into an Agreement and Plan of Merger (Merger Agreement) with MICROS Systems, Inc. (MICROS), a provider of integrated software, hardware and services solutions to the hospitality and retail industries. On July 3, 2014, pursuant to the Merger Agreement, we commenced a tender offer to purchase all of the issued and outstanding shares of common stock of MICROS at a purchase price of $68.00 per share, net to the holder in cash, without interest thereon, based upon the terms and subject to the conditions set forth in the Merger Agreement. Between September 3, 2014 and September 8, 2014, pursuant to the terms of the tender offer, we accepted and paid for the substantial majority of outstanding shares of MICROS common stock. On September 8, 2014, we effectuated the merger of MICROS with and into a wholly-owned subsidiary of Oracle pursuant to the terms of the Merger Agreement and applicable Maryland law, and MICROS became an indirect, wholly-owned subsidiary of Oracle. Pursuant to the merger, shares of MICROS common stock that remained outstanding and were not acquired by us were converted into, and cancelled in exchange for, the right to receive $68.00 per share in cash. The unvested equity awards to acquire MICROS common stock that were outstanding immediately prior to the conclusion of the merger were converted into equity awards denominated in shares of Oracle common stock based on formulas contained in the Merger Agreement. We acquired MICROS to, among other things, expand our cloud and on-premise software, hardware and related services offerings for hotels, food and beverage industries, facilities, and retailers. We have included the financial results of MICROS in our consolidated financial statements from the date of acquisition. Pursuant to our business combinations accounting policy, we estimated the preliminary fair values of net tangible and intangible assets acquired and the excess of the consideration transferred over the aggregate of such fair values was recorded as goodwill. The preliminary fair values of net tangible assets and intangible assets acquired were based upon preliminary valuations and our estimates and assumptions are subject to change within the measurement period (up to one year from the acquisition date). The primary areas that remain preliminary relate to the fair values of intangible assets acquired, certain tangible assets and liabilities acquired, certain legal matters, income and non-income based taxes and residual goodwill. We expect to continue to obtain information to assist us in determining the fair values of the net assets acquired during the measurement period. The following table summarizes the estimated preliminary fair values of net assets acquired from MICROS: (in millions) Cash and cash equivalents $ 680 Trade receivables, net 182 Inventories 22 Goodwill 3,322 Intangible assets 2,030 Other assets 157 Accounts payable and other liabilities (360) Deferred tax liabilities, net (609) Deferred revenues (177) Total $ 5,247 We do not expect the goodwill recognized as a part of the MICROS acquisition to be deductible for income tax purposes. Other Fiscal 2015 Acquisitions During fiscal 2015, we acquired certain other companies and purchased certain technology and development assets primarily to expand our products and services offerings. These acquisitions were not individually significant. We have included the financial results of the acquired companies in our consolidated financial statements from their respective acquisition dates and the results from each of these companies were not individually material to our consolidated financial statements. In the aggregate, the total preliminary purchase price for these acquisitions was approximately $1.7 billion, which consisted of approximately $1.7 billion in cash and $7 million for the fair values of stock options and restricted stock-based awards assumed. We have preliminarily recorded $14 million of net tangible assets and $388 million of identifiable intangible assets, based on their estimated fair values, and $1.3 billion of residual goodwill. The initial purchase price calculation and related accounting for certain of our acquisitions completed during fiscal 2015 is preliminary. The preliminary fair value estimates for the assets acquired and liabilities assumed for certain of our acquisitions completed during fiscal 2015 were based upon preliminary calculations and valuations and our estimates and assumptions for certain of these acquisitions are subject to change as we obtain additional information during the respective measurement periods (up to one year from the respective acquisition dates). The primary areas of those preliminary estimates that are not yet finalized relate to certain tangible assets and liabilities acquired, identifiable intangible assets, certain legal matters and income and non-income based taxes. Unaudited Pro Forma Financial Information The unaudited pro forma financial information in the table below summarizes the combined results of operations for Oracle, MICROS, and certain other companies that we acquired since the beginning of fiscal 2015 that were considered relevant for the purposes of unaudited pro forma financial information disclosure as if the companies were combined as of the beginning of fiscal 2015. The unaudited pro forma financial information for all periods presented also included the business combination accounting effects resulting from these acquisitions, including our amortization charges from acquired intangible assets (certain of which are preliminary), stock-based compensation charges for unvested stock options and restricted stock-based awards assumed, if any, and the related tax effects as though the aforementioned companies were combined as of the beginning of fiscal 2015. The unaudited pro forma financial information as presented below is for informational purposes only and is not necessarily indicative of the results of operations that would have been achieved if the acquisitions had taken place at the beginning of fiscal 2015. The unaudited pro forma financial information for the three months ended August 31, 2015 includes only the historical results of Oracle for the three months ended August 31, 2015 and is included below for comparative purposes only. The unaudited pro forma financial information for the three months ended August 31, 2014 combined the historical results of Oracle for the three months ended August 31, 2014 , the historical results of MICROS for the three months ended June 30, 2014 (due to differences in reporting periods), and the historical results of certain other companies that we acquired since the beginning of fiscal 2015 based upon their respective previous reporting periods and the dates these companies were acquired by us, and the effects of the pro forma adjustments listed above. The unaudited pro forma financial information was as follows: Three Months Ended August 31, (in millions, except per share data) 2015 2014 Total revenues $ 8,448 $ 9,029 Net income $ 1,747 $ 2,175 Basic earnings per share $ 0.40 $ 0.49 Diluted earnings per share $ 0.40 $ 0.48 |
FAIR VALUE MEASUREMENTS
FAIR VALUE MEASUREMENTS | 3 Months Ended |
Aug. 31, 2015 | |
Fair Value Measurements [Abstract] | |
FAIR VALUE MEASUREMENTS | 3. FAIR VALUE MEASUREMENTS We perform fair value measurements in accordance with the FASB Accounting Standards Codification (ASC) 820, Fair Value Measurement . ASC 820 defines fair value as the price that would be received from selling an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. When determining the fair value measurements for assets and liabilities required to be recorded at their fair values, we consider the principal or most advantageous market in which we would transact and consider assumptions that market participants would use when pricing the assets or liabilities, such as inherent risk, transfer restrictions and risk of nonperformance. ASC 820 establishes a fair value hierarchy that requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. An asset’s or a liability’s categorization within the fair value hierarchy is based upon the lowest level of input that is significant to the fair value measurement. ASC 820 establishes three levels of inputs that may be used to measure fair value: · Level 1: quoted prices in active markets for identical assets or liabilities; · Level 2: inputs other than Level 1 that are observable, either directly or indirectly, such as quoted prices in active markets for similar assets or liabilities, quoted prices for identical or similar assets or liabilities in markets that are not active, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities; or · Level 3: unobservable inputs that are supported by little or no market activity and that are significant to the fair values of the assets or liabilities. Assets and Liabilities Measured at Fair Value on a Recurring Basis Our assets and liabilities measured at fair value on a recurring basis, excluding accrued interest components, consisted of the following (Level 1 and 2 inputs are defined above): August 31, 2015 May 31, 2015 Fair Value Measurements Fair Value Measurements Using Input Types Using Input Types (in millions) Level 1 Level 2 Total Level 1 Level 2 Total Assets: U.S. Treasury securities $ 615 $ — $ 615 $ 668 $ — $ 668 Commercial paper debt securities — 10,170 10,170 — 9,203 9,203 Corporate debt securities and other 153 31,196 31,349 190 28,654 28,844 Derivative financial instruments — 75 75 — 74 74 Total assets $ 768 $ 41,441 $ 42,409 $ 858 $ 37,931 $ 38,789 Liabilities: Derivative financial instruments $ — $ 222 $ 222 $ — $ 244 $ 244 Our marketable securities investments consist of Tier 1 commercial paper debt securities, corporate debt securities and certain other securities. As of August 31, 2015 and May 31, 2015, approximately 35% and 28%, respectively, of our marketable securities investments mature within one year and 65% and 72%, respectively, mature within one to six years. Our valuation techniques used to measure the fair values of our marketable securities that were classified as Level 1 in the table above were derived from quoted market prices and active markets for these instruments exist. Our valuation techniques used to measure the fair values of Level 2 instruments listed in the table above, the counterparties to which have high credit ratings, were derived from the following: non-binding market consensus prices that were corroborated by observable market data, quoted market prices for similar instruments, or pricing models, such as discounted cash flow techniques, with all significant inputs derived from or corroborated by observable market data including LIBOR-based yield curves, among others. Based on the trading prices of our $42.0 billion of senior notes that were outstanding as of August 31, 2015 and May 31, 2015, the estimated fair values of our borrowings using Level 2 inputs at August 31, 2015 and May 31, 2015 were $43.3 billion and $44.1 billion, respectively. |
INVENTORIES
INVENTORIES | 3 Months Ended |
Aug. 31, 2015 | |
Inventories [Abstract] | |
INVENTORIES | 4. INVENTORIES Inventories consisted of the following: August 31, May 31, (in millions) 2015 2015 Raw materials $ 113 $ 112 Work-in-process 47 38 Finished goods 91 164 Total $ 251 $ 314 |
INTANGIBLE ASSETS AND GOODWILL
INTANGIBLE ASSETS AND GOODWILL | 3 Months Ended |
Aug. 31, 2015 | |
Intangible Assets and Goodwill [Abstract] | |
INTANGIBLE ASSETS AND GOODWILL | 5. INTANGIBLE ASSETS AND GOODWILL The changes in intangible assets for fiscal 2016 and the net book value of intangible assets as of August 31, 2015 and May 31, 2015 were as follows: Intangible Assets, Gross Accumulated Amortization Intangible Assets, Net (in millions) May 31, Additions August 31, May 31, Expense August 31, May 31, August 31, Software support agreements and related relationships $ 4,190 $ — $ 4,190 $ (2,700) $ (103) $ (2,803) $ 1,490 $ 1,387 Hardware support agreements and related relationships 1,012 — 1,012 (654) (36) (690) 358 322 Developed technology 4,602 1 4,603 (2,355) (157) (2,512) 2,247 2,091 Core technology 552 — 552 (411) (24) (435) 141 117 Customer relationships and contract backlog 2,197 — 2,197 (1,710) (65) (1,775) 487 422 SaaS, PaaS and IaaS agreements and related relationships and other 1,993 — 1,993 (508) (53) (561) 1,485 1,432 Trademarks 501 — 501 (303) (14) (317) 198 184 Total intangible assets, net $ 15,047 $ 1 $ 15,048 $ (8,641) $ (452) $ (9,093) $ 6,406 $ 5,955 Total amortization expense related to our intangible assets was $452 million and $547 million for the three months ended August 31, 2015 and 2014, respectively. As of August 31, 2015, estimated future amortization expenses related to intangible assets were as follows (in millions) : Remainder of Fiscal 2016 $ 1,173 Fiscal 2017 995 Fiscal 2018 848 Fiscal 2019 742 Fiscal 2020 598 Fiscal 2021 457 Thereafter 1,142 Total intangible assets, net $ 5,955 The changes in the carrying amounts of goodwill, which is generally not deductible for tax purposes, for our operating segments for the three months ended August 31, 2015 were as follows: (in millions) Software Consulting Other (2) Total Cloud License Software and Updates and On-Premise Product Hardware Software Support Support Balances as of May 31, 2015 $ 15,217 $ 14,461 $ 2,370 $ 1,759 $ 280 $ 34,087 Goodwill adjustments, net (1) 12 28 4 — 2 46 Balances as of August 31, 2015 $ 15,229 $ 14,489 $ 2,374 $ 1,759 $ 282 $ 34,133 __________ (1) Pursuant to our business combinations accounting policy, we recorded goodwill adjustments for the effect on goodwill of changes to net assets acquired during the measurement period (up to one year from the date of an acquisition). Goodwill adjustments were not significant to our previously reported operating results or financial position. (2) Represents goodwill allocated to our other operating segment. |
RESTRUCTURING ACTIVITIES
RESTRUCTURING ACTIVITIES | 3 Months Ended |
Aug. 31, 2015 | |
Restructuring Activities [Abstract] | |
RESTRUCTURING ACTIVITIES | 6. RESTRUCTURING ACTIVITIES Fiscal 2015 Oracle Restructuring Plan During the second quarter of fiscal 2015, our management approved, committed to and initiated plans to restructure and further improve efficiencies in our operations due to our acquisition of MICROS and certain other operational activities (2015 Restructuring Plan). The total estimated restructuring costs associated with the 2015 Restructuring Plan are up to $626 million and will be recorded to the restructuring expense line item within our consolidated statements of operations as they are incurred. We recorded $83 million of restructuring expenses in connection with the 2015 Restructuring Plan in the first quarter of fiscal 2016 and we expect to incur the majority of the estimated remaining $443 million through the end of fiscal 2016. Any changes to the estimates of executing the 2015 Restructuring Plan will be reflected in our future results of operations. Summary of All Plans Three Months Ended August 31, 2015 (in millions) Accrued (2) Initial Costs (3) Adj. to Costs (4) Cash Payments Others (5) Accrued (2) Total Costs Accrued to Date Total Expected Program Costs Fiscal 2015 Oracle Restructuring Plan (1) Cloud software and on-premise software $ 11 $ 31 $ (1) $ (21) $ — $ 20 $ 57 $ 110 Software license updates and product support 5 13 — (8) 1 11 20 209 Hardware business 6 16 — (10) 1 13 36 65 Services business 9 10 (1) (9) — 9 30 101 General and administrative and other 5 15 — (7) — 13 40 141 Total Fiscal 2015 Oracle Restructuring Plan $ 36 $ 85 $ (2) $ (55) $ 2 $ 66 $ 183 $ 626 Total other restructuring plans (6) $ 84 $ — $ — $ (9) $ — $ 75 Total restructuring plans $ 120 $ 85 $ (2) $ (64) $ 2 $ 141 __________ (1) Restructuring costs recorded for individual line items primarily related to employee severance costs. (2) The balances at August 31, 2015 and May 31, 2015 included $109 million and $86 million, respectively, recorded in other current liabilities, and $32 million and $34 million, respectively, recorded in other non-current liabilities. (3) Costs recorded for the respective restructuring plans during the current period presented. (4) All plan adjustments were changes in estimates whereby increases and decreases in costs were generally recorded to operating expenses in the period of adjustments. (5) Represents foreign currency translation and certain other adjustments. (6) Other restructuring plans presented in the table above included condensed information for other Oracle-based plans and other plans associated with certain of our acquisitions whereby we continued to make cash outlays to settle obligations under these plans during the period presented but for which the current impact to our consolidated statements of operations was not significant. |
DEFERRED REVENUES
DEFERRED REVENUES | 3 Months Ended |
Aug. 31, 2015 | |
Deferred Revenues [Abstract] | |
DEFERRED REVENUES | 7. DEFERRED REVENUES Deferred revenues consisted of the following: (in millions) August 31, May 31, 2015 2015 Software license updates and product support $ 7,287 $ 5,635 Hardware support and other 764 703 Services 380 379 Cloud SaaS, PaaS and IaaS 512 404 New software licenses 135 124 Deferred revenues, current 9,078 7,245 Deferred revenues, non-current (in other non-current liabilities) 525 393 Total deferred revenues $ 9,603 $ 7,638 Deferred software license updates and product support revenues and deferred hardware support revenues represent customer payments made in advance for support contracts that are typically billed on a per annum basis in advance with corresponding revenues being recognized ratably over the support periods. Deferred services revenues include prepayments for our services business and revenues for these services are generally recognized as the services are performed. Deferred cloud software as a service (SaaS), platform as a service (PaaS) and infrastructure as a service (IaaS) revenues generally result from customer payments made in advance for our cloud-based offerings that are recognized over the corresponding contractual term. Deferred new software licenses revenues typically result from undelivered products or specified enhancements, customer specific acceptance provisions, customer payments made in advance for time-based license arrangements and software license transactions that cannot be separated from undelivered consulting or other services. In connection with our acquisitions, we have estimated the fair values of the cloud SaaS and PaaS, software license updates and product support, and hardware support obligations, among others, assumed from our acquired companies. We generally have estimated the fair values of these obligations assumed using a cost build-up approach. The cost build-up approach determines fair value by estimating the costs related to fulfilling the obligations plus a normal profit margin. The sum of the costs and operating profit approximates, in theory, the amount that we would be required to pay a third party to assume these acquired obligations. These aforementioned fair value adjustments recorded for obligations assumed from our acquisitions reduced the cloud SaaS and PaaS, software license updates and product support and hardware support deferred revenues balances that we recorded as liabilities from these acquisitions and also reduced the resulting revenues that we recognized or will recognize over the terms of the acquired obligations during the post-combination periods. |
DERIVATIVE FINANCIAL INSTRUMENT
DERIVATIVE FINANCIAL INSTRUMENTS | 3 Months Ended |
Aug. 31, 2015 | |
Derivative Financial Instruments and Hedging Activities Disclosure [Abstract] | |
DERIVATIVE FINANCIAL INSTRUMENTS | 8. DERIVATIVE FINANCIAL INSTRUMENTS Fair Value Hedges — Interest Rate Swap Agreements In July 2014, we entered into certain interest rate swap agreements that have the economic effect of modifying the fixed interest obligations associated with our $2.0 billion of 2.25% senior notes due October 2019 (2019 Notes) and our $1.5 billion of 2.80% senior notes due July 2021 (2021 Notes) so that the interest payable on these senior notes effectively became variable based on LIBOR. In July 2013, we entered into certain interest rate swap agreements that have the economic effect of modifying the fixed interest obligations associated with our $1.5 billion of 2.375% senior notes due January 2019 (January 2019 Notes) so that the interest payable on these senior notes effectively became variable based on LIBOR. The critical terms of the interest rate swap agreements match the critical terms of the 2019 Notes, 2021 Notes and the January 2019 Notes that the interest rate swap agreements pertain to, including the notional amounts and maturity dates. We have designated the aforementioned interest rate swap agreements as qualifying hedging instruments and are accounting for them as fair value hedges pursuant to ASC 815, Derivatives and Hedging (ASC 815). These transactions are characterized as fair value hedges for financial accounting purposes because they protect us against changes in the fair values of certain of our fixed-rate borrowings due to benchmark interest rate movements. The changes in fair values of these interest rate swap agreements are recognized as interest expense in our consolidated statements of operations with the corresponding amounts included in other assets or other non-current liabilities in our consolidated balance sheets. The amount of net gain (loss) attributable to the risk being hedged is recognized as interest expense in our consolidated statements of operations with the corresponding amount included in notes payable, non-current. The periodic interest settlements for the interest rate swap agreements for the 2019 Notes, 2021 Notes and the January 2019 Notes are recorded as interest expense and are included as a part of cash flows from operating activities. We do not use any interest rate swap agreements for trading purposes. Cash Flow Hedges — Cross-Currency Swap Agreements In connection with the issuance of our €1.25 billion of 2.25% senior notes due January 2021 (January 2021 Notes), we entered into certain cross-currency swap agreements to manage the related foreign currency exchange risk by effectively converting the fixed-rate, Euro denominated January 2021 Notes, including the annual interest payments and the payment of principal at maturity, to fixed-rate, U.S. Dollar denominated debt. The economic effect of the swap agreements was to eliminate the uncertainty of the cash flows in U.S. Dollars associated with the January 2021 Notes by fixing the principal amount of the January 2021 Notes at $1.6 billion with a fixed annual interest rate of 3.53%. We have designated these cross-currency swap agreements as qualifying hedging instruments and are accounting for these as cash flow hedges pursuant to ASC 815. The critical terms of the cross-currency swap agreements correspond to the January 2021 Notes, including the annual interest payments being hedged, and the cross-currency swap agreements mature at the same time as the January 2021 Notes. We used the hypothetical derivative method to measure the effectiveness of our cross-currency swap agreements. The fair values of these cross-currency swap agreements are recognized as other assets or other non-current liabilities in our consolidated balance sheets. The effective portions of the changes in fair values of these cross-currency swap agreements are reported in accumulated other comprehensive loss in our consolidated balance sheets and an amount is reclassified out of accumulated other comprehensive loss into non-operating income, net in the same period that the carrying value of the Euro denominated January 2021 Notes is remeasured and the interest expense is recognized. The ineffective portion of the unrealized gains and losses on these cross-currency swaps, if any, is recorded immediately to non-operating income, net. We evaluate the effectiveness of our cross-currency swap agreements on a quarterly basis. We did not record any ineffectiveness for the three months ended August 31, 2015 or 2014. The cash flows related to the cross-currency swap agreements that pertain to the periodic interest settlements are classified as operating activities and the cash flows that pertain to the principal balance are classified as financing activities. We do not use any cross-currency swap agreements for trading purposes. Net Investment Hedge — Foreign Currency Borrowings In July 2013, we designated our €750 million of 3.125% senior notes due July 2025 (2025 Notes) as a net investment hedge of our investments in certain of our international subsidiaries that use the Euro as their functional currency in order to reduce the volatility in stockholders’ equity caused by the changes in foreign currency exchange rates of the Euro with respect to the U.S. Dollar. We used the spot method to measure the effectiveness of our net investment hedge. Under this method, for each reporting period, the change in the carrying value of the Euro denominated 2025 Notes due to remeasurement of the effective portion is reported in accumulated other comprehensive loss in our consolidated balance sheet and the remaining change in the carrying value of the ineffective portion, if any, is recognized in non-operating income, net in our consolidated statements of operations. We evaluate the effectiveness of our net investment hedge at the beginning of every quarter. We did not record any ineffectiveness for the three months ended August 31, 2015 or 2014. Foreign Currency Forward Contracts Not Designated as Hedges We transact business in various foreign currencies and have established a program that primarily utilizes foreign currency forward contracts to offset the risks associated with the effects of certain foreign currency exposures. We neither use these foreign currency forward contracts for trading purposes nor do we designate these forward contracts as hedging instruments pursuant to ASC 815 (refer to Note 11 of Notes to Consolidated Financial Statements as included in our Annual Report on Form 10-K for the fiscal year ended May 31, 2015 for additional information regarding these contracts). As of August 31, 2015 and May 31, 2015, respectively, the notional amounts of the forward contracts we held to purchase U.S. Dollars in exchange for other major international currencies were $2.0 billion and $2.2 billion, respectively, and the notional amounts of forward contracts we held to sell U.S. Dollars in exchange for other major international currencies were $956 million and $1.2 billion, respectively. The fair values of our outstanding foreign currency forward contracts were nominal as of August 31, 2015 and May 31, 2015. Included in our non-operating income, net were $97 million and $(31) million of net gains (losses) related to these forward contracts for the three months ended August 31, 2015 and 2014, respectively. The cash flows related to these foreign currency contracts are classified as operating activities. The effects of derivative and non-derivative instruments designated as hedges on certain of our consolidated financial statements were as follows as of or for each of the respective periods presented below (amounts presented exclude any income tax effects): Fair Values of Derivative and Non-Derivative Instruments Designated as Hedges in Condensed Consolidated Balance Sheets Fair Value (in millions) Balance Sheet Location August 31, 2015 May 31, 2015 Interest rate swap agreements designated as fair value hedges Other assets $ 75 $ 74 Cross-currency swap agreements designated as cash flow hedges Other non-current liabilities $ (222) $ (244) Foreign currency borrowings designated as net investment hedge Notes payable, non-current $ (942) $ (981) Effects of Derivative and Non-Derivative Instruments Designated as Hedges on Income and Other Comprehensive Income (OCI) or Loss (OCL) Amount of Gain (Loss) Recognized in Accumulated OCI or OCL (Effective Portion) Location and Amount of Gain (Loss) Reclassified from Accumulated OCI or OCL into Income (Effective Portion) Three Months Ended Three Months Ended (in millions) 2015 2014 2015 2014 Cross-currency swap agreements designated as cash flow hedges $ 22 $ (17) Non-operating income, net 51 $ (52) Foreign currency borrowings designated as net investment hedge $ (31) $ 32 Not applicable $ — $ — Location and Amount of Gain (Loss) Location and Amount of (Loss) Gain on Hedged Item Recognized in Income Attributable to Risk Being Hedged Three Months Ended August 31, Three Months Ended August 31, (in millions) 2015 2014 2015 2014 Interest rate swap agreements designated as fair value hedges Interest expense $ 1 $ (16) Interest expense $ (1) $ 16 |
STOCKHOLDERS' EQUITY
STOCKHOLDERS' EQUITY | 3 Months Ended |
Aug. 31, 2015 | |
Stockholders' Equity [Abstract] | |
STOCKHOLDERS' EQUITY | 9. STOCKHOLDERS’ EQUITY Common Stock Repurchases Our Board of Directors has approved a program for us to repurchase shares of our common stock. Approximately $6.2 billion remained available for stock repurchases as of August 31, 2015, pursuant to our stock repurchase program. We repurchased 75.7 million shares for $3.0 billion during the three months ended August 31, 2015 (including 5.0 million shares for $185 million that were repurchased but not settled) and 48.8 million shares for $2.0 billion during the three months ended August 31, 2014 under the stock repurchase program. Our stock repurchase authorization does not have an expiration date and the pace of our repurchase activity will depend on factors such as our working capital needs, our cash requirements for acquisitions and dividend payments, our debt repayment obligations or repurchase of our debt, our stock price, and economic and market conditions. Our stock repurchases may be effected from time to time through open market purchases or pursuant to a Rule 10b5-1 plan. Our stock repurchase program may be accelerated, suspended, delayed or discontinued at any time. Dividends on Common Stock During the first quarter of fiscal 2016, our Board of Directors declared cash dividends of $0.15 per share of our outstanding common stock, which we paid during the same period. In September 2015, our Board of Directors declared a quarterly cash dividend of $0.15 per share of our outstanding common stock. The dividend is payable on October 28, 2015 to stockholders of record as of the close of business on October 14, 2015. Future declarations of dividends and the establishment of future record and payment dates are subject to the final determination of our Board of Directors. Stock-Based Compensation Expense and Valuations of Stock Awards During the first quarter of fiscal 2016 , we issued 24 million stock options and 28 million restricted stock-based awards (consisting of 26 million service-based restricted stock units (RSUs) and 2 million performance-based restricted stock units (PSUs)) . Substantially all of the awards were issued as a part of our annual stock-based award process and are subject to service-based vesting restrictions, with the PSUs also having performance-based vesting restrictions, that are of a similar nature to those described in Note 14 of Notes to Consolidated Financial Statements included in our Annual Report on Form 10-K for the fiscal year ended May 31, 2015. Approximately 7 million of the 24 million stock options granted during the first quarter of fiscal 2016 were to our Chief Executive Officers and Chief Technology Officer and had contractual lives of 5 years in comparison to the 10 year contractual lives for the other stock options granted. Our 2016 stock-based award issuances were partially offset by forfeitures and cancellations of 4 million shares during the first quarter of fiscal 2016. Stock-based compensation expense is included in the following operating expense line items in our condensed consolidated statements of operations: Three Months Ended August 31, (in millions) 2015 2014 Sales and marketing $ 51 $ 43 Cloud software as a service and platform as a service 4 2 Cloud infrastructure as a service 1 1 Software license updates and product support 6 5 Hardware products 2 1 Hardware support 1 1 Services 8 6 Research and development 148 108 General and administrative 29 45 Acquisition related and other 3 3 Total stock-based compensation $ 253 $ 215 |
INCOME TAXES
INCOME TAXES | 3 Months Ended |
Aug. 31, 2015 | |
Income Taxes [Abstract] | |
INCOME TAXES | 10. INCOME TAXES The effective tax rate for the periods presented is the result of the mix of income earned in various tax jurisdictions that apply a broad range of income tax rates. Our provision for income taxes differs from the tax computed at the U.S. federal statutory income tax rate due primarily to certain earnings considered as indefinitely reinvested in foreign operations, state taxes, the U.S. research and development tax credit, acquisition related settlements with tax authorities and the U.S. domestic production activity deduction. Our effective tax rate was 24.4% and 19.7% for the three months ended August 31, 2015 and 2014, respectively. Our net deferred tax assets were $1.0 billion and $993 million as of August 31, 2015 and May 31, 2015, respectively. We believe it is more likely than not that the net deferred tax assets will be realized in the foreseeable future. Realization of our net deferred tax assets is dependent upon our generation of sufficient taxable income in future years in appropriate tax jurisdictions to obtain benefit from the reversal of temporary differences, net operating loss carryforwards and tax credit carryforwards. The amount of net deferred tax assets considered realizable is subject to adjustment in future periods if estimates of future taxable income change. Domestically, U.S. federal and state taxing authorities are currently examining income tax returns of Oracle and various acquired entities for years through fiscal 2013. Our U.S. federal and, with some exceptions, our state income tax returns have been examined for all years prior to fiscal 2003 and we are no longer subject to audit for those periods. Internationally, tax authorities for numerous non-U.S. jurisdictions are also examining returns affecting our unrecognized tax benefits. With some exceptions, we are generally no longer subject to tax examinations in non-U.S. jurisdictions for years prior to fiscal 1997. We believe that we have adequately provided under U.S. GAAP for outcomes related to our tax audits. However, there can be no assurances as to the possible outcomes or any related financial statement effect thereof. On July 27, 2015, in Altera Corp. v. Commissioner, the U.S. Tax Court issued an opinion related to the treatment of stock-based compensation expense in an intercompany cost-sharing arrangement. A final decision has yet to be issued by the Tax Court due to other outstanding issues related to the case. At this time, the U.S. Department of the Treasury has not withdrawn the requirement to include stock-based compensation from its regulations. We have reviewed this case and its impact on Oracle and concluded that no adjustment to the consolidated financial statements is appropriate at this time. We will continue to monitor ongoing developments and potential impacts to our consolidated financial statements. |
SEGMENT INFORMATION
SEGMENT INFORMATION | 3 Months Ended |
Aug. 31, 2015 | |
Segment Information [Abstract] | |
SEGMENT INFORMATION | 11. SEGMENT INFORMATION ASC 280, Segment Reporting , establishes standards for reporting information about operating segments. Operating segments are defined as components of an enterprise about which separate financial information is available that is evaluated regularly by the chief operating decision maker, or decision making group, in deciding how to allocate resources and in assessing performance. Our chief operating decision makers are our Chief Executive Officers. We are organized geographically and by line of business. While our Chief Executive Officers evaluate results in a number of different ways, the line of business management structure is the primary basis for which the allocation of resources and financial results are assessed. We have three businesses—cloud and on-premise software, hardware and services—which are further divided into certain operating segments. Our cloud and on-premise software business is comprised of three operating segments: (1) cloud software and on-premise software, which includes our cloud SaaS and PaaS offerings, (2) cloud infrastructure as a service and (3) software license updates and product support. Our hardware business is comprised of two operating segments: (1) hardware products and (2) hardware support. All other operating segments are combined under our services business. Our cloud software and on-premise software line of business markets, sells and delivers our application and platform technologies, including our SaaS and PaaS offerings, which provide customers a choice of software applications and platforms that are delivered via a cloud-based IT environment that we host, manage and support, and the licensing of our software products including Oracle Applications, Oracle Database, Oracle Fusion Middleware and Java, among others. The cloud infrastructure as a service line of business provides comprehensive software and hardware management and maintenance services for customer IT infrastructure for a fee for a stated term that is hosted at our data center facilities, select partner data centers or physically on-premise at customer facilities; deployment and management offerings for our software and hardware and related IT infrastructure including virtual machine instances that are subscription-based and designed for computing and reliable and secure object storage; and certain of our Oracle Engineered Systems and related support offerings that are deployed in our customers’ data centers for a monthly fee. The software license updates and product support line of business provides customers with rights to software product upgrades and maintenance releases, patches released, internet access to technical content, as well as internet and telephone access to technical support personnel during the support period. The hardware line of business provides Oracle Engineered Systems, servers, storage, networking, industry specific hardware, virtualization software, operating systems including the Oracle Solaris Operating System and management software to support diverse IT environments, including cloud computing environments. Our hardware support line of business provides customers with software updates for the software components that are essential to the functionality of our hardware products, such as Oracle Solaris and certain other software products, and can include product repairs, maintenance services and technical support services. Our services business is comprised of the remainder of our operating segments and offers consulting, advanced customer support services and education services. Our consulting line of business primarily provides services to customers in business and IT strategy alignment, enterprise architecture planning and design, initial product implementation and integration and ongoing product enhancements and upgrades. Advanced customer support provides support services, both on-premise and remote, to our customers to enable increased performance and higher availability of their products and services. Education services provide training to customers, partners and employees as a part of our mission of accelerating the adoption and use of our software and hardware products and to create opportunities to grow our product revenues. We do not track our assets by operating segments. Consequently, it is not practical to show assets by operating segment. The following table presents summary results for each of our three businesses and for the operating segments of our cloud and on-premise software and hardware businesses: Three Months Ended August 31, (in millions) 2015 2014 Cloud software and on-premise software: Revenues (1) $ 1,603 $ 1,707 Cloud software as a service and platform as a service expenses 268 143 Sales and distribution expenses 1,286 1,279 Margin (2) $ 49 $ 285 Cloud infrastructure as a service: Revenues $ 160 $ 138 Cloud infrastructure as a service expenses 85 76 Sales and distribution expenses 22 18 Margin (2) $ 53 $ 44 Software license updates and product support: Revenues (1) $ 4,697 $ 4,731 Software license updates and product support expenses 271 257 Margin (2) $ 4,426 $ 4,474 Total cloud and on-premise software business: Revenues (1) $ 6,460 $ 6,576 Expenses 1,932 1,773 Margin (2) $ 4,528 $ 4,803 Hardware products: Revenues $ 570 $ 578 Hardware products expenses 301 297 Sales and distribution expenses 204 201 Margin (2) $ 65 $ 80 Hardware support: Revenues (1) $ 559 $ 588 Hardware support expenses 172 184 Margin (2) $ 387 $ 404 Total hardware business: Revenues (1) $ 1,129 $ 1,166 Expenses 677 682 Margin (2) $ 452 $ 484 Total services business: Revenues (1) $ 862 $ 857 Services expenses 678 665 Margin (2) $ 184 $ 192 Totals: Revenues (1) $ 8,451 $ 8,599 Expenses 3,287 3,120 Margin (2) $ 5,164 $ 5,479 __________ (1) Cloud software and on-premise software revenues for management reporting included revenues related to cloud SaaS and PaaS contracts that would have otherwise been recorded by the acquired businesses as independent entities but were not recognized in the accompanying condensed consolidated statements of operations in the amounts of $1 million and $2 million for the three months ended August 31, 2015 and 2014, respectively. Software license updates and product support revenues for management reporting included revenues related to s oftware support contracts that would have otherwise been recorded by the acquired businesses as independent entities but were not recognized in the accompanying condensed consolidated statements of operations in the amount of $1 million for the three months ended August 31, 2015. In addition, we did not recognize hardware support revenues related to hardware support contracts that would have otherwise been recorded by the acquired businesses as independent entities in the amount of $ 1 million for each of the three months ended August 31, 2015 and 2014, respectively. See Note 7 for an explanation of these adjustments and the table below for a reconciliation of our total operating segment revenues to our total revenues. Our new software license and services revenues for management reporting also differ from amounts reported per our consolidated statements of operations for the periods presented due to certain insignificant reclassifications between these lines for management reporting purposes. (2) The margins reported reflect only the direct controllable costs of each line of business and do not include allocations of product development, marketing and partner programs, and corporate, general and administrative and information technology expenses. Additionally, the margins reported do not reflect amortization of intangible assets, acquisition related and other expenses, restructuring expenses, stock-based compensation, interest expense or certain other income (expense), net. The following table reconciles total operating segment revenues to total revenues as well as total operating segment margin to income before provision for income taxes: Three Months Ended August 31, (in millions) 2015 2014 Total revenues for operating segments $ 8,451 $ 8,599 Cloud software as a service and platform as a service revenues (1) (1) (2) Software license updates and product support revenues (1) (1) — Hardware support revenues (1) (1) (1) Total revenues $ 8,448 $ 8,596 Total margin for operating segments $ 5,164 $ 5,479 Cloud software as a service and platform as a service revenues (1) (1) (2) Software license updates and product support revenues (1) (1) — Hardware support revenues (1) (1) (1) Product development (1,188) (1,174) Marketing and partner program expenses (109) (119) Corporate, general and administrative and information technology expenses (394) (367) Amortization of intangible assets (452) (547) Acquisition related and other (31) (25) Restructuring (83) (69) Stock-based compensation (250) (212) Interest expense (374) (261) Non-operating income, net 30 16 Income before provision for income taxes $ 2,310 $ 2,718 __________ (1) Cloud software as a service and platform as a service revenues, software license updates and product support revenues and hardware support revenues for management reporting included revenues that would have otherwise been recorded by our acquired businesses as independent entities but were not recognized in the accompanying condensed consolidated statements of operations for the periods presented due to business combination accounting requirements. Refer to footnote one to our business and operating segments summary results table above in this Note 11 for additional information. |
EARNINGS PER SHARE
EARNINGS PER SHARE | 3 Months Ended |
Aug. 31, 2015 | |
Earnings Per Share [Abstract] | |
EARNINGS PER SHARE | 12. EARNINGS PER SHARE Basic earnings per share is computed by dividing net income for the period by the weighted average number of common shares outstanding during the period. Diluted earnings per share is computed by dividing net income for the period by the weighted average number of common shares outstanding during the period, plus the dilutive effect of outstanding stock options, restricted stock-based awards and shares issuable under the employee stock purchase plan using the treasury stock method. The following table sets forth the computation of basic and diluted earnings per share: Three Months Ended August 31, (in millions, except per share data) 2015 2014 Net income $ 1,747 $ 2,184 Weighted average common shares outstanding 4,317 4,451 Dilutive effect of employee stock plans 95 97 Dilutive weighted average common shares outstanding 4,412 4,548 Basic earnings per share $ 0.40 $ 0.49 Diluted earnings per share $ 0.40 $ 0.48 Shares subject to anti-dilutive stock options and restricted stock-based awards excluded from calculation (1) 57 26 __________ (1) These weighted shares relate to anti-dilutive stock options and restricted stock-based awards as calculated using the treasury stock method and could be dilutive in the future. |
LEGAL PROCEEDINGS
LEGAL PROCEEDINGS | 3 Months Ended |
Aug. 31, 2015 | |
Legal Proceedings [Abstract] | |
LEGAL PROCEEDINGS | 13. LEGAL PROCEEDINGS Hewlett-Packard Company Litigation On June 15, 2011, Hewlett-Packard Company (“HP”) filed a complaint in the California Superior Court, County of Santa Clara against Oracle Corporation alleging numerous causes of action including breach of contract, breach of the covenant of good faith and fair dealing, defamation, intentional interference with prospective economic advantage, and violation of the California Unfair Business Practices Act. The complaint alleged that when Oracle announced on March 22 and 23, 2011 that it would no longer develop future versions of its software to run on HP’s Itanium-based servers, it breached a settlement agreement signed on September 20, 2010 between HP and Mark Hurd (the “Hurd Settlement Agreement”), who was both HP’s former chief executive officer and chairman of HP’s board of directors. HP sought a judicial declaration of the parties’ rights and obligations under the Hurd Settlement Agreement, and other equitable and monetary relief. Oracle answered the complaint and filed a cross-complaint, which was amended on December 2, 2011. The amended cross-complaint alleged claims including violation of the Lanham Act. Oracle alleged that HP had secretly agreed to pay Intel to continue to develop and manufacture the Itanium microprocessor, and had misrepresented to customers that the Itanium microprocessor had a long roadmap, among other claims. Oracle sought equitable rescission of the Hurd Settlement Agreement, and other equitable and monetary relief. The court bifurcated the trial and tried HP’s causes of action for declaratory relief and promissory estoppel without a jury in June 2012. The court issued a final statement of decision on August 28, 2012, finding that the Hurd Settlement Agreement required Oracle to continue to develop certain of its software products for use on HP’s Itanium-based servers and to port such products at no cost to HP for as long as HP sells those servers. Oracle has announced that it is appealing this decision. The issues of breach, HP’s performance, causation and damages, HP’s tort claims, and Oracle’s cross-claims will all be tried before a jury. As of April 8, 2013, the trial was stayed pending Oracle’s appeal of the court’s denial of its anti-SLAPP motion. On August 27, 2015, the Court of Appeal affirmed the trial court’s denial of Oracle’s anti-SLAPP motion. The Court of Appeal’s decision becomes final on September 26, 2015, and absent any further appeal by Oracle, the matter will be remanded to the trial court for further proceedings and trial. We cannot currently estimate a reasonably possible range of loss for this action. We believe that we have meritorious defenses against this action, and we will continue to vigorously defend it. State of Oregon Litigation On August 22, 2014, the Attorney General for the State of Oregon, the State of Oregon, and the Oregon Health Insurance Exchange Corporation, doing business as Cover Oregon (“Cover Oregon”) filed a lawsuit in the Circuit Court of the State of Oregon for the County of Marion against Oracle, our then-President and Chief Financial Officer, three current and two former Oracle employees, and Mythics, Inc. The complaint alleges claims related to the work Oracle performed on Oregon’s healthcare exchange website and Oregon’s system for delivering health and human services to low-income residents. Thereafter, Cover Oregon was dissolved, and the Oregon Department of Consumer and Business Services continued to assert Cover Oregon’s claims. Also, one of the former Oracle employees was dismissed from the lawsuit. A First Amended Complaint was filed on August 10, 2015. The complaint alleges claims against Oracle for fraud, violations of Oregon’s False Claims Act, breach of contract, and violations of the Oregon Civil Racketeer Influenced and Corrupt Organizations Act, and alleges a violation of Oregon’s False Claims Act against each of the individuals. The complaint seeks monetary damages, statutory penalties, attorneys’ fees and costs, and a permanent injunction prohibiting Oracle from marketing to or entering into a contract with any public corporation or agency of the State of Oregon. Specifically, the complaint alleges that Oracle committed fraud by making false statements about the capabilities and functionality of its products and about the amount of time and effort it would take Oracle’s consulting and managed cloud services operations to perform the requested work. It also alleges that Oracle breached the contracts by failing to provide what was required under the contracts and failing to perform the services in a professional manner consistent with industry standards. The complaint alleges that Oracle violated Oregon’s False Claims Act by making false statements in order to obtain payment of invoices and by presenting invoices for payment that were false. The claims for violation of Oregon’s Civil Racketeer Influenced and Corrupt Organizations Act allege that Oracle violated the statute by making false statements in writing about the capabilities of Oracle’s products and the functionality and readiness of the healthcare exchange website, and by using those false statements to obtain the signatures necessary to secure the contracts and enable payment. The claims against the individuals allege that one former employee violated Oregon’s False Claims Act by making false statements that fraudulently induced the State of Oregon to enter into its contracts with Oracle, and that the other four employees violated the statute by making false statements in order to get invoices paid. Oracle responded to the original complaint on December 2, 2014, and filed a response to the First Amended Complaint on August 20, 2015. Oracle denied all claims and allegations and filed counterclaims against the Department of Consumer and Business Services for breach of contract, quantum meruit (a claim requesting payment for the value of services provided), and breach of the implied covenant of good faith and fair dealing. The court granted the State of Oregon’s motion to dismiss Oracle’s claims for breach of contract and the breach of the implied covenant of good faith and fair dealing. Oracle will seek leave to amend its allegations to reassert both dismissed claims and to add a claim for promissory estoppel (a claim seeking to enforce promises that Oracle relied upon in providing services). Oracle seeks monetary damages to compensate it for the value of unpaid services and its attorneys’ fees and costs. We cannot currently estimate a reasonably possible range of loss for this action. We believe that we have meritorious defenses against this action, and will continue to vigorously defend it. On August 8, 2014, Oracle filed a lawsuit in the U.S. District Court, District of Oregon in Portland against Cover Oregon. The complaint alleged claims for breach of contract and quantum meruit and sought monetary damages to compensate Oracle for the value of unpaid services. On September 8, 2014, Oracle filed a First Amended Complaint adding two State of Oregon agencies as defendants and adding causes of action for copyright infringement and breach of the implied covenant of good faith and fair dealing. On January 27, 2015, Oracle filed a Second Amended Complaint. Cover Oregon, now the Department of Consumer and Business Services, is a defendant as to all causes of action; the other state agencies are defendants to the cause of action for copyright infringement. In addition to monetary damages, Oracle seeks an injunction prohibiting infringement of its copyrights. All defendants have moved for judgment in their favor, claiming that the state entities cannot be sued in federal court. Other Litigation We are party to various other legal proceedings and claims, either asserted or unasserted, which arise in the ordinary course of business, including proceedings and claims that relate to acquisitions we have completed or to companies we have acquired or are attempting to acquire. While the outcome of these matters cannot be predicted with certainty, we do not believe that the outcome of any of these matters, individually or in the aggregate, will result in losses that are materially in excess of amounts already recognized, if any. |
ACCOUNTING POLICIES (Policy)
ACCOUNTING POLICIES (Policy) | 3 Months Ended |
Aug. 31, 2015 | |
Accounting Policies [Abstract] | |
Recent Accounting Pronouncements | Recent Accounting Pronouncements Cloud Computing Arrangements that Include a Software Element: In April 2015, the Financial Accounting Standards Board (FASB) issued ASU 2015-05, Intangibles—Goodwill and Other—Internal-Use Software (Subtopic 350-40): Customer’s Accounting for Fees Paid in a Cloud Computing Arrangement (ASU 2015-05) . ASU 2015-05 provides guidance to customers about whether a cloud computing arrangement includes software . If a cloud computing arrangement includes a software license, the customer should account for the software license element of the arrangement consistent with the acquisition of other software licenses. If a cloud computing arrangement does not include a software license, the customer should account for the arrangement as a service contract. The new guidance does not change the accounting for a customer’s accounting for service contracts. ASU 2015-05 is effective for us in our first quarter of fiscal 2017 with early adoption permitted using either of two methods: (i) prospective to all arrangements entered into or materially modified after the effective date and represents a change in accounting principle; or (ii) retrospectively. We are currently evaluating the impact of our pending adoption of ASU 2015-05 on our consolidated financial statements. Revenue Recognition: In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers: Topic 606 (ASU 2014-09), to s upersede nearly all existing revenue recognition guidance under U.S. GAAP. The core principle of ASU 2014-09 is to recognize revenues when promised goods or services are transferred to customers in an amount that reflects the consideration that is expected to be received for those goods or services. ASU 2014-09 defines a five step process to achieve this core principle and, in doing so, it is possible more judgment and estimates may be required within the revenue recognition process than are required under existing U.S. GAAP, including identifying performance obligations in the contract, estimating the amount of variable consideration to include in the transaction price and allocating the transaction price to each separate performance obligation, among others. The original effective date of ASU 2014-09 would have required us to adopt the standard in our first quarter of fiscal 2018. In August 2015, the FASB issued ASU 2015-14, Revenue from Contracts with Customers (Topic 606): Deferral of the Effective Date (ASU 2015-14), which defers the effective date by one year while providing the option to early adopt the standard on the original effective date. Accordingly, we may adopt the standard either in our first quarter of fiscal 2018 or our first quarter of fiscal 2019 using either of two methods: (i) retrospective application of ASU 2014-09 to each prior reporting period presented with the option to elect certain practical expedients as defined within ASU 2014-09; or (ii) retrospective application of ASU 2014-09 with the cumulative effect of initially applying ASU 2014-09 recognized at the date of initial application and providing certain additional disclosures as defined per ASU 2014-09. We are currently evaluating the timing and the impact of our pending adoption of ASU 2014-09 on our consolidated financial statements. |
BASIS OF PRESENTATION AND REC21
BASIS OF PRESENTATION AND RECENT ACCOUNTING PRONOUNCEMENTS (Tables) | 3 Months Ended |
Aug. 31, 2015 | |
Basis of Presentation and Recent Accounting Pronouncements [Abstract] | |
Acquisition Related and Other Expenses | Three Months Ended August 31, (in millions) 2015 2014 Transitional and other employee related costs $ 24 $ 9 Stock-based compensation 3 3 Professional fees and other, net 4 13 Total acquisition related and other expenses $ 31 $ 25 |
Non-Operating Income, net | Three Months Ended August 31, (in millions) 2015 2014 Interest income $ 117 $ 89 Foreign currency losses, net (25) (41) Noncontrolling interests in income (30) (46) Other (loss) income, net (32) 14 Total non-operating income, net $ 30 $ 16 |
ACQUISITIONS (Tables)
ACQUISITIONS (Tables) | 3 Months Ended |
Aug. 31, 2015 | |
Acquisitions [Abstract] | |
Preliminary Fair Values of Net Assets Acquired from MICROS | (in millions) Cash and cash equivalents $ 680 Trade receivables, net 182 Inventories 22 Goodwill 3,322 Intangible assets 2,030 Other assets 157 Accounts payable and other liabilities (360) Deferred tax liabilities, net (609) Deferred revenues (177) Total $ 5,247 |
Unaudited Pro Forma Financial Information | Three Months Ended August 31, (in millions, except per share data) 2015 2014 Total revenues $ 8,448 $ 9,029 Net income $ 1,747 $ 2,175 Basic earnings per share $ 0.40 $ 0.49 Diluted earnings per share $ 0.40 $ 0.48 |
FAIR VALUE MEASUREMENTS (Tables
FAIR VALUE MEASUREMENTS (Tables) | 3 Months Ended |
Aug. 31, 2015 | |
Fair Value Measurements [Abstract] | |
Assets and Liabilities Measured at Fair Value on a Recurring Basis | August 31, 2015 May 31, 2015 Fair Value Measurements Fair Value Measurements Using Input Types Using Input Types (in millions) Level 1 Level 2 Total Level 1 Level 2 Total Assets: U.S. Treasury securities $ 615 $ — $ 615 $ 668 $ — $ 668 Commercial paper debt securities — 10,170 10,170 — 9,203 9,203 Corporate debt securities and other 153 31,196 31,349 190 28,654 28,844 Derivative financial instruments — 75 75 — 74 74 Total assets $ 768 $ 41,441 $ 42,409 $ 858 $ 37,931 $ 38,789 Liabilities: Derivative financial instruments $ — $ 222 $ 222 $ — $ 244 $ 244 |
INVENTORIES (Tables)
INVENTORIES (Tables) | 3 Months Ended |
Aug. 31, 2015 | |
Inventories [Abstract] | |
Inventories | August 31, May 31, (in millions) 2015 2015 Raw materials $ 113 $ 112 Work-in-process 47 38 Finished goods 91 164 Total $ 251 $ 314 |
INTANGIBLE ASSETS AND GOODWILL
INTANGIBLE ASSETS AND GOODWILL (Tables) | 3 Months Ended |
Aug. 31, 2015 | |
Intangible Assets and Goodwill [Abstract] | |
Intangible Assets | Intangible Assets, Gross Accumulated Amortization Intangible Assets, Net (in millions) May 31, Additions August 31, May 31, Expense August 31, May 31, August 31, Software support agreements and related relationships $ 4,190 $ — $ 4,190 $ (2,700) $ (103) $ (2,803) $ 1,490 $ 1,387 Hardware support agreements and related relationships 1,012 — 1,012 (654) (36) (690) 358 322 Developed technology 4,602 1 4,603 (2,355) (157) (2,512) 2,247 2,091 Core technology 552 — 552 (411) (24) (435) 141 117 Customer relationships and contract backlog 2,197 — 2,197 (1,710) (65) (1,775) 487 422 SaaS, PaaS and IaaS agreements and related relationships and other 1,993 — 1,993 (508) (53) (561) 1,485 1,432 Trademarks 501 — 501 (303) (14) (317) 198 184 Total intangible assets, net $ 15,047 $ 1 $ 15,048 $ (8,641) $ (452) $ (9,093) $ 6,406 $ 5,955 |
Estimated Future Amortization Expenses Related to Intangible Assets | Remainder of Fiscal 2016 $ 1,173 Fiscal 2017 995 Fiscal 2018 848 Fiscal 2019 742 Fiscal 2020 598 Fiscal 2021 457 Thereafter 1,142 Total intangible assets, net $ 5,955 |
Goodwill | (in millions) Software Consulting Other (2) Total Cloud License Software and Updates and On-Premise Product Hardware Software Support Support Balances as of May 31, 2015 $ 15,217 $ 14,461 $ 2,370 $ 1,759 $ 280 $ 34,087 Goodwill adjustments, net (1) 12 28 4 — 2 46 Balances as of August 31, 2015 $ 15,229 $ 14,489 $ 2,374 $ 1,759 $ 282 $ 34,133 __________ (1) Pursuant to our business combinations accounting policy, we recorded goodwill adjustments for the effect on goodwill of changes to net assets acquired during the measurement period (up to one year from the date of an acquisition). Goodwill adjustments were not significant to our previously reported operating results or financial position. (2) Represents goodwill allocated to our other operating segment. |
RESTRUCTURING ACTIVITIES (Table
RESTRUCTURING ACTIVITIES (Tables) | 3 Months Ended |
Aug. 31, 2015 | |
Restructuring Activities [Abstract] | |
Summary of All Plans | Three Months Ended August 31, 2015 (in millions) Accrued (2) Initial Costs (3) Adj. to Costs (4) Cash Payments Others (5) Accrued (2) Total Costs Accrued to Date Total Expected Program Costs Fiscal 2015 Oracle Restructuring Plan (1) Cloud software and on-premise software $ 11 $ 31 $ (1) $ (21) $ — $ 20 $ 57 $ 110 Software license updates and product support 5 13 — (8) 1 11 20 209 Hardware business 6 16 — (10) 1 13 36 65 Services business 9 10 (1) (9) — 9 30 101 General and administrative and other 5 15 — (7) — 13 40 141 Total Fiscal 2015 Oracle Restructuring Plan $ 36 $ 85 $ (2) $ (55) $ 2 $ 66 $ 183 $ 626 Total other restructuring plans (6) $ 84 $ — $ — $ (9) $ — $ 75 Total restructuring plans $ 120 $ 85 $ (2) $ (64) $ 2 $ 141 __________ (1) Restructuring costs recorded for individual line items primarily related to employee severance costs. (2) The balances at August 31, 2015 and May 31, 2015 included $109 million and $86 million, respectively, recorded in other current liabilities, and $32 million and $34 million, respectively, recorded in other non-current liabilities. (3) Costs recorded for the respective restructuring plans during the current period presented. (4) All plan adjustments were changes in estimates whereby increases and decreases in costs were generally recorded to operating expenses in the period of adjustments. (5) Represents foreign currency translation and certain other adjustments. (6) Other restructuring plans presented in the table above included condensed information for other Oracle-based plans and other plans associated with certain of our acquisitions whereby we continued to make cash outlays to settle obligations under these plans during the period presented but for which the current impact to our consolidated statements of operations was not significant. |
DEFERRED REVENUES (Tables)
DEFERRED REVENUES (Tables) | 3 Months Ended |
Aug. 31, 2015 | |
Deferred Revenues [Abstract] | |
Deferred Revenues | (in millions) August 31, May 31, 2015 2015 Software license updates and product support $ 7,287 $ 5,635 Hardware support and other 764 703 Services 380 379 Cloud SaaS, PaaS and IaaS 512 404 New software licenses 135 124 Deferred revenues, current 9,078 7,245 Deferred revenues, non-current (in other non-current liabilities) 525 393 Total deferred revenues $ 9,603 $ 7,638 |
DERIVATIVE FINANCIAL INSTRUME28
DERIVATIVE FINANCIAL INSTRUMENTS (Tables) | 3 Months Ended |
Aug. 31, 2015 | |
Derivative Instrument Detail [Abstract] | |
Fair Values of Derivative and Non-Derivative Instruments Designated as Hedges in Condensed Consolidated Balance Sheets | Fair Value (in millions) Balance Sheet Location August 31, 2015 May 31, 2015 Interest rate swap agreements designated as fair value hedges Other assets $ 75 $ 74 Cross-currency swap agreements designated as cash flow hedges Other non-current liabilities $ (222) $ (244) Foreign currency borrowings designated as net investment hedge Notes payable, non-current $ (942) $ (981) |
Effects of Derivative and Non-Derivative Instruments Designated as Hedges on Income and Other Comprehensive Income (OCI) or Loss (OCL) | Amount of Gain (Loss) Recognized in Accumulated OCI or OCL (Effective Portion) Location and Amount of Gain (Loss) Reclassified from Accumulated OCI or OCL into Income (Effective Portion) Three Months Ended Three Months Ended (in millions) 2015 2014 2015 2014 Cross-currency swap agreements designated as cash flow hedges $ 22 $ (17) Non-operating income, net 51 $ (52) Foreign currency borrowings designated as net investment hedge $ (31) $ 32 Not applicable $ — $ — Location and Amount of Gain (Loss) Location and Amount of (Loss) Gain on Hedged Item Recognized in Income Attributable to Risk Being Hedged Three Months Ended August 31, Three Months Ended August 31, (in millions) 2015 2014 2015 2014 Interest rate swap agreements designated as fair value hedges Interest expense $ 1 $ (16) Interest expense $ (1) $ 16 |
STOCKHOLDERS' EQUITY (Tables)
STOCKHOLDERS' EQUITY (Tables) | 3 Months Ended |
Aug. 31, 2015 | |
Stockholders' Equity [Abstract] | |
Stock-Based Compensation Expense | Three Months Ended August 31, (in millions) 2015 2014 Sales and marketing $ 51 $ 43 Cloud software as a service and platform as a service 4 2 Cloud infrastructure as a service 1 1 Software license updates and product support 6 5 Hardware products 2 1 Hardware support 1 1 Services 8 6 Research and development 148 108 General and administrative 29 45 Acquisition related and other 3 3 Total stock-based compensation $ 253 $ 215 |
SEGMENT INFORMATION (Tables)
SEGMENT INFORMATION (Tables) | 3 Months Ended |
Aug. 31, 2015 | |
Segment Information [Abstract] | |
Summary of Businesses and Operating Segments Results | Three Months Ended August 31, (in millions) 2015 2014 Cloud software and on-premise software: Revenues (1) $ 1,603 $ 1,707 Cloud software as a service and platform as a service expenses 268 143 Sales and distribution expenses 1,286 1,279 Margin (2) $ 49 $ 285 Cloud infrastructure as a service: Revenues $ 160 $ 138 Cloud infrastructure as a service expenses 85 76 Sales and distribution expenses 22 18 Margin (2) $ 53 $ 44 Software license updates and product support: Revenues (1) $ 4,697 $ 4,731 Software license updates and product support expenses 271 257 Margin (2) $ 4,426 $ 4,474 Total cloud and on-premise software business: Revenues (1) $ 6,460 $ 6,576 Expenses 1,932 1,773 Margin (2) $ 4,528 $ 4,803 Hardware products: Revenues $ 570 $ 578 Hardware products expenses 301 297 Sales and distribution expenses 204 201 Margin (2) $ 65 $ 80 Hardware support: Revenues (1) $ 559 $ 588 Hardware support expenses 172 184 Margin (2) $ 387 $ 404 Total hardware business: Revenues (1) $ 1,129 $ 1,166 Expenses 677 682 Margin (2) $ 452 $ 484 Total services business: Revenues (1) $ 862 $ 857 Services expenses 678 665 Margin (2) $ 184 $ 192 Totals: Revenues (1) $ 8,451 $ 8,599 Expenses 3,287 3,120 Margin (2) $ 5,164 $ 5,479 __________ (1) Cloud software and on-premise software revenues for management reporting included revenues related to cloud SaaS and PaaS contracts that would have otherwise been recorded by the acquired businesses as independent entities but were not recognized in the accompanying condensed consolidated statements of operations in the amounts of $1 million and $2 million for the three months ended August 31, 2015 and 2014, respectively. Software license updates and product support revenues for management reporting included revenues related to s oftware support contracts that would have otherwise been recorded by the acquired businesses as independent entities but were not recognized in the accompanying condensed consolidated statements of operations in the amount of $1 million for the three months ended August 31, 2015. In addition, we did not recognize hardware support revenues related to hardware support contracts that would have otherwise been recorded by the acquired businesses as independent entities in the amount of $ 1 million for each of the three months ended August 31, 2015 and 2014, respectively. See Note 7 for an explanation of these adjustments and the table below for a reconciliation of our total operating segment revenues to our total revenues. Our new software license and services revenues for management reporting also differ from amounts reported per our consolidated statements of operations for the periods presented due to certain insignificant reclassifications between these lines for management reporting purposes. (2) The margins reported reflect only the direct controllable costs of each line of business and do not include allocations of product development, marketing and partner programs, and corporate, general and administrative and information technology expenses. Additionally, the margins reported do not reflect amortization of intangible assets, acquisition related and other expenses, restructuring expenses, stock-based compensation, interest expense or certain other income (expense), net. |
Reconciliation of Total Operating Segment Revenues to Total Revenues | Three Months Ended August 31, (in millions) 2015 2014 Total revenues for operating segments $ 8,451 $ 8,599 Cloud software as a service and platform as a service revenues (1) (1) (2) Software license updates and product support revenues (1) (1) — Hardware support revenues (1) (1) (1) Total revenues $ 8,448 $ 8,596 |
Reconciliation of Total Operating Segment Margin to Income before Provision for Income Taxes | Total margin for operating segments $ 5,164 $ 5,479 Cloud software as a service and platform as a service revenues (1) (1) (2) Software license updates and product support revenues (1) (1) — Hardware support revenues (1) (1) (1) Product development (1,188) (1,174) Marketing and partner program expenses (109) (119) Corporate, general and administrative and information technology expenses (394) (367) Amortization of intangible assets (452) (547) Acquisition related and other (31) (25) Restructuring (83) (69) Stock-based compensation (250) (212) Interest expense (374) (261) Non-operating income, net 30 16 Income before provision for income taxes $ 2,310 $ 2,718 __________ (1) Cloud software as a service and platform as a service revenues, software license updates and product support revenues and hardware support revenues for management reporting included revenues that would have otherwise been recorded by our acquired businesses as independent entities but were not recognized in the accompanying condensed consolidated statements of operations for the periods presented due to business combination accounting requirements. Refer to footnote one to our business and operating segments summary results table above in this Note 11 for additional information. |
EARNINGS PER SHARE (Tables)
EARNINGS PER SHARE (Tables) | 3 Months Ended |
Aug. 31, 2015 | |
Earnings Per Share [Abstract] | |
Earnings Per Share | Three Months Ended August 31, (in millions, except per share data) 2015 2014 Net income $ 1,747 $ 2,184 Weighted average common shares outstanding 4,317 4,451 Dilutive effect of employee stock plans 95 97 Dilutive weighted average common shares outstanding 4,412 4,548 Basic earnings per share $ 0.40 $ 0.49 Diluted earnings per share $ 0.40 $ 0.48 Shares subject to anti-dilutive stock options and restricted stock-based awards excluded from calculation (1) 57 26 __________ (1) These weighted shares relate to anti-dilutive stock options and restricted stock-based awards as calculated using the treasury stock method and could be dilutive in the future. |
BASIS OF PRESENTATION AND REC32
BASIS OF PRESENTATION AND RECENT ACCOUNTING PRONOUNCEMENTS (Details) - USD ($) $ in Millions | 3 Months Ended | |
Aug. 31, 2015 | Aug. 31, 2014 | |
Acquisition Related and Other Expenses [Abstract] | ||
Transitional and other employee related costs | $ 24 | $ 9 |
Stock-based compensation | 3 | 3 |
Professional fees and other, net | 4 | 13 |
Total acquisition related and other expenses | 31 | 25 |
Non-Operating Income, net [Abstract] | ||
Interest income | 117 | 89 |
Foreign currency losses, net | (25) | (41) |
Noncontrolling interests in income | (30) | (46) |
Other (loss) income, net | (32) | 14 |
Total non-operating income, net | 30 | 16 |
Sales of Financing Receivables [Narrative] [Abstract] | ||
Sales of financing receivables | $ 972 | $ 724 |
ACQUISITIONS (Details)
ACQUISITIONS (Details) - USD ($) $ / shares in Units, $ in Millions | 1 Months Ended | 3 Months Ended | 12 Months Ended | |||
Sep. 30, 2014 | Aug. 31, 2015 | Aug. 31, 2014 | May. 31, 2015 | Sep. 08, 2014 | Jul. 03, 2014 | |
Acquisitions [Line Items] | ||||||
Goodwill | $ 34,133 | $ 34,087 | ||||
Acquisitions Proforma [Abstract] | ||||||
Total revenues | 8,448 | $ 9,029 | ||||
Net income | $ 1,747 | $ 2,175 | ||||
Basic earnings per share (in dollars per share) | $ 0.4 | $ 0.49 | ||||
Diluted earnings per share (in dollars per share) | $ 0.4 | $ 0.48 | ||||
MICROS Systems, Inc. [Member] | ||||||
Acquisitions [Line Items] | ||||||
Merger agreement date | Jun. 22, 2014 | |||||
Total purchase price | $ 5,247 | |||||
Cash and cash equivalents | $ 680 | |||||
Trade receivables, net | 182 | |||||
Inventories | 22 | |||||
Goodwill | 3,322 | |||||
Intangible assets | 2,030 | |||||
Other assets | 157 | |||||
Accounts payable and other liabilities | (360) | |||||
Deferred tax liabilities, net | (609) | |||||
Deferred revenues | $ (177) | |||||
Business acquisition per share price | $ 68 | $ 68 | ||||
Business combination reason | We acquired MICROS to, among other things, expand our cloud and on-premise software, hardware and related services offerings for hotels, food and beverage industries, facilities, and retailers. | |||||
Other Fiscal 2015 Acquisitions [Member] | ||||||
Acquisitions [Line Items] | ||||||
Total purchase price | 1,700 | |||||
Cash portion of purchase price | 1,700 | |||||
Fair value of stock options and restricted stock-based awards assumed | 7 | |||||
Goodwill | 1,300 | |||||
Intangible assets | 388 | |||||
Net tangible assets assumed | $ 14 | |||||
Materiality of acquisitions | These acquisitions were not individually significant. |
FAIR VALUE MEASUREMENTS (Detail
FAIR VALUE MEASUREMENTS (Details) - USD ($) $ in Millions | 3 Months Ended | |
Aug. 31, 2015 | May. 31, 2015 | |
Assets [Abstract] | ||
U.S. Treasury securities | $ 615 | $ 668 |
Commercial paper debt securities | 10,170 | 9,203 |
Corporate debt securities and other | 31,349 | 28,844 |
Derivative financial instruments | 75 | 74 |
Total assets | 42,209 | 38,789 |
Liabilities [Abstract] | ||
Derivative financial instruments | $ 222 | 244 |
Marketable security investments maturity information [Abstract] | ||
Maturity of marketable security investments | As of August 31, 2015 and May 31, 2015, approximately 35% and 28%, respectively, of our marketable securities investments mature within one year and 65% and 72%, respectively, mature within one to six years. | |
Long Term Debt [Abstract] | ||
Total debt | $ 42,000 | 42,000 |
Fair Value Measurements Using Input Types Level 1 [Member] | ||
Assets [Abstract] | ||
U.S. Treasury securities | 615 | 668 |
Corporate debt securities and other | 153 | 190 |
Total assets | 768 | 858 |
Fair Value Measurements Using Input Types Level 2 [Member] | ||
Assets [Abstract] | ||
Commercial paper debt securities | 10,170 | 9,203 |
Corporate debt securities and other | 31,196 | 28,654 |
Derivative financial instruments | 75 | 74 |
Total assets | 41,441 | 37,931 |
Liabilities [Abstract] | ||
Derivative financial instruments | 222 | 244 |
Total debt fair value | $ 43,300 | $ 44,100 |
INVENTORIES (Details)
INVENTORIES (Details) - USD ($) $ in Millions | Aug. 31, 2015 | May. 31, 2015 |
Inventories [Abstract] | ||
Raw materials | $ 113 | $ 112 |
Work-in-process | 47 | 38 |
Finished goods | 91 | 164 |
Total | $ 251 | $ 314 |
INTANGIBLE ASSETS (Details)
INTANGIBLE ASSETS (Details) - USD ($) $ in Millions | 3 Months Ended | ||
Aug. 31, 2015 | Aug. 31, 2014 | May. 31, 2015 | |
Total intangible assets [Line Items] | |||
Intangible Assets, Gross | $ 15,048 | $ 15,047 | |
Additions | 1 | ||
Accumulated Amortization | (9,093) | (8,641) | |
Expense | (452) | $ (547) | |
Total intangible assets, net | 5,955 | 6,406 | |
Intangible assets subject to amortization [Member] | Software support agreements and related relationships [Member] | |||
Total intangible assets [Line Items] | |||
Intangible Assets, Gross | 4,190 | 4,190 | |
Accumulated Amortization | (2,803) | (2,700) | |
Expense | (103) | ||
Intangible assets subject to amortization | 1,387 | 1,490 | |
Intangible assets subject to amortization [Member] | Hardware support agreements and related relationships [Member] | |||
Total intangible assets [Line Items] | |||
Intangible Assets, Gross | 1,012 | 1,012 | |
Accumulated Amortization | (690) | (654) | |
Expense | (36) | ||
Intangible assets subject to amortization | 322 | 358 | |
Intangible assets subject to amortization [Member] | Developed technology [Member] | |||
Total intangible assets [Line Items] | |||
Intangible Assets, Gross | 4,603 | 4,602 | |
Additions | 1 | ||
Accumulated Amortization | (2,512) | (2,355) | |
Expense | (157) | ||
Intangible assets subject to amortization | 2,091 | 2,247 | |
Intangible assets subject to amortization [Member] | Core technology [Member] | |||
Total intangible assets [Line Items] | |||
Intangible Assets, Gross | 552 | 552 | |
Accumulated Amortization | (435) | (411) | |
Expense | (24) | ||
Intangible assets subject to amortization | 117 | 141 | |
Intangible assets subject to amortization [Member] | Customer relationships and contract backlog [Member] | |||
Total intangible assets [Line Items] | |||
Intangible Assets, Gross | 2,197 | 2,197 | |
Accumulated Amortization | (1,775) | (1,710) | |
Expense | (65) | ||
Intangible assets subject to amortization | 422 | 487 | |
Intangible assets subject to amortization [Member] | SaaS, PaaS and IaaS agreements and related relationships and other [Member] | |||
Total intangible assets [Line Items] | |||
Intangible Assets, Gross | 1,993 | 1,993 | |
Accumulated Amortization | (561) | (508) | |
Expense | (53) | ||
Intangible assets subject to amortization | 1,432 | 1,485 | |
Intangible assets subject to amortization [Member] | Trademarks [Member] | |||
Total intangible assets [Line Items] | |||
Intangible Assets, Gross | 501 | 501 | |
Accumulated Amortization | (317) | (303) | |
Expense | (14) | ||
Intangible assets subject to amortization | $ 184 | $ 198 |
INTANGIBLE ASSETS AMORTIZATION
INTANGIBLE ASSETS AMORTIZATION (Details) - USD ($) $ in Millions | Aug. 31, 2015 | May. 31, 2015 |
Finite lived intangible assets future amortization expense [Abstract] | ||
Remainder of Fiscal 2016 | $ 1,173 | |
Fiscal 2,017 | 995 | |
Fiscal 2,018 | 848 | |
Fiscal 2,019 | 742 | |
Fiscal 2,020 | 598 | |
Fiscal 2,021 | 457 | |
Thereafter | 1,142 | |
Total intangible assets, net | $ 5,955 | $ 6,406 |
GOODWILL (Details)
GOODWILL (Details) $ in Millions | 3 Months Ended | |
Aug. 31, 2015USD ($) | ||
Goodwill [Line Items] | ||
Balances at period start | $ 34,087 | |
Goodwill adjustments | [1] | 46 |
Balances at period end | 34,133 | |
Cloud software and on-premise software [Member] | ||
Goodwill [Line Items] | ||
Balances at period start | 15,217 | |
Goodwill adjustments | [1] | 12 |
Balances at period end | 15,229 | |
Software License Updates and Product Support [Member] | ||
Goodwill [Line Items] | ||
Balances at period start | 14,461 | |
Goodwill adjustments | [1] | 28 |
Balances at period end | 14,489 | |
Hardware Support [Member] | ||
Goodwill [Line Items] | ||
Balances at period start | 2,370 | |
Goodwill adjustments | [1] | 4 |
Balances at period end | 2,374 | |
Consulting Member | ||
Goodwill [Line Items] | ||
Balances at period start | 1,759 | |
Balances at period end | 1,759 | |
Other [Member] | ||
Goodwill [Line Items] | ||
Balances at period start | [2] | 280 |
Goodwill adjustments | [1],[2] | 2 |
Balances at period end | [2] | $ 282 |
[1] | Pursuant to our business combinations accounting policy, we recorded goodwill adjustments for the effect on goodwill of changes to net assets acquired during the measurement period (up to one year from the date of an acquisition). Goodwill adjustments were not significant to our previously reported operating results or financial position. | |
[2] | Represents goodwill allocated to our other operating segments. |
RESTRUCTURING ACTIVITIES (Detai
RESTRUCTURING ACTIVITIES (Details) - USD ($) $ in Millions | 3 Months Ended | ||
Aug. 31, 2015 | Aug. 31, 2014 | ||
Restructuring Reserve [Line Items] | |||
Accrued at Period Start | [1] | $ 120 | |
Initial Costs | [2] | 85 | |
Adjustments to Costs | [3] | (2) | |
Cash Payments | (64) | ||
Others | [4] | 2 | |
Accrued at Period End | [1] | 141 | |
Restructuring Expenses | 83 | $ 69 | |
Fiscal 2015 Oracle Restructuring [Member] | |||
Restructuring Reserve [Line Items] | |||
Accrued at Period Start | [5] | 36 | |
Initial Costs | [2],[5] | 85 | |
Adjustments to Costs | [3],[5] | (2) | |
Cash Payments | [5] | (55) | |
Others | [4],[5] | 2 | |
Accrued at Period End | [5] | 66 | |
Total Costs Accrued to Date | [5] | 183 | |
Total Expected Program Costs | [5] | 626 | |
Restructuring Expenses | 83 | ||
Remaining Expenses to Incur | $ 443 | ||
Expected Completion Date or Completion Date | May 31, 2016 | ||
Fiscal 2015 Oracle Restructuring [Member] | Cloud software and on-premise software [Member] | |||
Restructuring Reserve [Line Items] | |||
Accrued at Period Start | [5] | $ 11 | |
Initial Costs | [2],[5] | 31 | |
Adjustments to Costs | [3],[5] | (1) | |
Cash Payments | [5] | (21) | |
Accrued at Period End | [5] | 20 | |
Total Costs Accrued to Date | [5] | 57 | |
Total Expected Program Costs | [5] | 110 | |
Fiscal 2015 Oracle Restructuring [Member] | Software license updates and product support [Member] | |||
Restructuring Reserve [Line Items] | |||
Accrued at Period Start | [5] | 5 | |
Initial Costs | [2],[5] | 13 | |
Cash Payments | [5] | (8) | |
Others | [4],[5] | 1 | |
Accrued at Period End | [5] | 11 | |
Total Costs Accrued to Date | [5] | 20 | |
Total Expected Program Costs | [5] | 209 | |
Fiscal 2015 Oracle Restructuring [Member] | Hardware business [Member] | |||
Restructuring Reserve [Line Items] | |||
Accrued at Period Start | [5] | 6 | |
Initial Costs | [2],[5] | 16 | |
Cash Payments | [5] | (10) | |
Others | [4],[5] | 1 | |
Accrued at Period End | [5] | 13 | |
Total Costs Accrued to Date | [5] | 36 | |
Total Expected Program Costs | [5] | 65 | |
Fiscal 2015 Oracle Restructuring [Member] | Services business [Member] | |||
Restructuring Reserve [Line Items] | |||
Accrued at Period Start | [5] | 9 | |
Initial Costs | [2],[5] | 10 | |
Adjustments to Costs | [3],[5] | (1) | |
Cash Payments | [5] | (9) | |
Accrued at Period End | [5] | 9 | |
Total Costs Accrued to Date | [5] | 30 | |
Total Expected Program Costs | [5] | 101 | |
Fiscal 2015 Oracle Restructuring [Member] | General and administrative and other [Member] | |||
Restructuring Reserve [Line Items] | |||
Accrued at Period Start | [5] | 5 | |
Initial Costs | [2],[5] | 15 | |
Cash Payments | [5] | (7) | |
Accrued at Period End | [5] | 13 | |
Total Costs Accrued to Date | [5] | 40 | |
Total Expected Program Costs | [5] | 141 | |
Other Restructuring Plans [Member] | |||
Restructuring Reserve [Line Items] | |||
Accrued at Period Start | [6] | 84 | |
Cash Payments | [6] | (9) | |
Accrued at Period End | [6] | $ 75 | |
[1] | The balances at August 31, 2015 and May 31, 2015 included $109 million and $86 million, respectively, recorded in other current liabilities, and $32 million and $34 million, respectively, recorded in other non-current liabilities. | ||
[2] | Costs recorded for the respective restructuring plans during the current period presented. | ||
[3] | All plan adjustments were changes in estimates whereby increases and decreases in costs were generally recorded to operating expenses in the period of adjustments. | ||
[4] | Represents foreign currency translation and certain other adjustments. | ||
[5] | Restructuring costs recorded for individual line items primarily related to employee severance costs. | ||
[6] | Other restructuring plans presented in the table above included condensed information for other Oracle-based plans and other plans associated with certain of our acquisitions whereby we continued to make cash outlays to settle obligations under these plans during the period presented but for which the current impact to our consolidated statements of operations was not significant. |
RESTRUCTURING ACTIVITIES Narrat
RESTRUCTURING ACTIVITIES Narrative (Details) - USD ($) $ in Millions | Aug. 31, 2015 | May. 31, 2015 |
Total Restructuring Liabilities [Abstract] | ||
Accrued restructuring liabilities, current (in other current liabilities) | $ 109 | $ 86 |
Accrued restructuring liabilities, non-current (in other non-current liabilities) | $ 32 | $ 34 |
DEFERRED REVENUES (Details)
DEFERRED REVENUES (Details) - USD ($) $ in Millions | Aug. 31, 2015 | May. 31, 2015 |
Deferred Revenues [Line Items] | ||
Deferred revenues, current | $ 9,078 | $ 7,245 |
Deferred revenues, non-current (in other non-current liabilities) | 525 | 393 |
Total deferred revenues | 9,603 | 7,638 |
Software license updates and product support [Member] | ||
Deferred Revenues [Line Items] | ||
Deferred revenues, current | 7,287 | 5,635 |
Hardware support and other [Member] | ||
Deferred Revenues [Line Items] | ||
Deferred revenues, current | 764 | 703 |
Services [Member] | ||
Deferred Revenues [Line Items] | ||
Deferred revenues, current | 380 | 379 |
Cloud SaaS, PaaS and IaaS [Member] | ||
Deferred Revenues [Line Items] | ||
Deferred revenues, current | 512 | 404 |
New software licenses [Member] | ||
Deferred Revenues [Line Items] | ||
Deferred revenues, current | $ 135 | $ 124 |
DERIVATIVE FINANCIAL INSTRUME42
DERIVATIVE FINANCIAL INSTRUMENTS (Details) - USD ($) $ in Millions | 3 Months Ended | ||
Aug. 31, 2015 | Aug. 31, 2014 | May. 31, 2015 | |
Foreign Currency Forward Contracts Not Designated as Hedges (Narrative) [Abstract] | |||
Net gains (losses) related to forward contracts | $ 97 | $ (31) | |
Foreign Currency Forward Contracts Not Designated as Hedges [Member] | Forward contracts held to purchase U.S. Dollars [Member] | |||
Foreign Currency Forward Contracts Not Designated as Hedges (Narrative) [Abstract] | |||
Notional amounts of forward contracts | 2,000 | $ 2,200 | |
Foreign Currency Forward Contracts Not Designated as Hedges [Member] | Forward contracts held to sell U.S. Dollars [Member] | |||
Foreign Currency Forward Contracts Not Designated as Hedges (Narrative) [Abstract] | |||
Notional amounts of forward contracts | $ 956 | $ 1,200 |
DERIVATIVES FINANCIAL INSTRUMEN
DERIVATIVES FINANCIAL INSTRUMENTS (Details) € in Millions, $ in Millions | 3 Months Ended | |||||
Aug. 31, 2015USD ($) | Aug. 31, 2014USD ($) | May. 31, 2015USD ($) | Jul. 08, 2014USD ($) | Jul. 16, 2013USD ($) | Jul. 10, 2013EUR (€) | |
Fair Values of Derivative and Non-Derivative Instruments Designated as Hedges in Condensed Consolidated Balance Sheets [Abstract] | ||||||
Fair value, assets | $ 75 | $ 74 | ||||
Fair value, liabilities | (222) | (244) | ||||
Interest rate swap agreements [Member] | Interest expense [Member] | ||||||
Effects of Derivative and Non-Derivative Instruments Designated as Hedges on Income and Other Comprehensive Income (OCI) or Loss (OCL) [Abstract] | ||||||
Amount of Gain (Loss) Recognized in Income on Derivative | 1 | $ (16) | ||||
Amount of (Loss) Gain on Hedged Item Recognized in Income Attributable to Risk Being Hedged | (1) | 16 | ||||
Cash flow hedges [Member] | Cross-currency swap agreements [Member] | ||||||
Effects of Derivative and Non-Derivative Instruments Designated as Hedges on Income and Other Comprehensive Income (OCI) or Loss (OCL) [Abstract] | ||||||
Amount of Gain (Loss) Recognized in Accumulated OCI or OCL (Effective Portion) | 22 | (17) | ||||
Derivative Instrument Detail [Abstract] | ||||||
Amount of ineffectiveness measured | 0 | 0 | ||||
Cash flow hedges [Member] | Cross-currency swap agreements [Member] | 2.25% senior notes due January 2021 [Member] | ||||||
Debt Instruments [Abstract] | ||||||
Total debt issued | € | € 1,250 | |||||
Senior notes fixed principal amount | $ 1,600 | |||||
Annual interest rate for the 2.25% notes due January 2021 after the economic effect of the cross-currency swaps | 3.53% | |||||
Stated interest rate percentage | 2.25% | |||||
Maturity date | Jan. 10, 2021 | |||||
Cash flow hedges [Member] | Cross-currency swap agreements [Member] | Non-operating income, net [Member] | ||||||
Effects of Derivative and Non-Derivative Instruments Designated as Hedges on Income and Other Comprehensive Income (OCI) or Loss (OCL) [Abstract] | ||||||
Amount of Gain (Loss) Reclassified from Accumulated OCI or OCL into Income (Effective Portion) | $ 51 | (52) | ||||
Cash flow hedges [Member] | Cross-currency swap agreements [Member] | Other non-current liabilities [Member] | ||||||
Fair Values of Derivative and Non-Derivative Instruments Designated as Hedges in Condensed Consolidated Balance Sheets [Abstract] | ||||||
Fair value, liabilities | (222) | (244) | ||||
Net investment hedge [Member] | Foreign currency borrowings [Member] | ||||||
Effects of Derivative and Non-Derivative Instruments Designated as Hedges on Income and Other Comprehensive Income (OCI) or Loss (OCL) [Abstract] | ||||||
Amount of Gain (Loss) Recognized in Accumulated OCI or OCL (Effective Portion) | (31) | 32 | ||||
Derivative Instrument Detail [Abstract] | ||||||
Amount of ineffectiveness measured | $ 0 | $ 0 | ||||
Net investment hedge [Member] | Foreign currency borrowings [Member] | 3.125% senior notes due July 2025 [Member] | ||||||
Debt Instruments [Abstract] | ||||||
Total debt issued | € | € 750 | |||||
Stated interest rate percentage | 3.125% | |||||
Maturity date | Jul. 10, 2025 | |||||
Net investment hedge [Member] | Foreign currency borrowings [Member] | Notes payable, non-current [Member] | ||||||
Fair Values of Derivative and Non-Derivative Instruments Designated as Hedges in Condensed Consolidated Balance Sheets [Abstract] | ||||||
Fair value, debt | $ (942) | (981) | ||||
Fair value hedges [Member] | Interest rate swap agreements [Member] | 2.375% senior notes due January 2019 [Member] | ||||||
Debt Instruments [Abstract] | ||||||
Total debt issued | $ 1,500 | |||||
Stated interest rate percentage | 2.375% | |||||
Maturity date | Jan. 15, 2019 | |||||
Fair value hedges [Member] | Interest rate swap agreements [Member] | 2.25% senior notes due October 2019 [Member] | ||||||
Debt Instruments [Abstract] | ||||||
Total debt issued | $ 2,000 | |||||
Stated interest rate percentage | 2.25% | |||||
Maturity date | Oct. 8, 2019 | |||||
Fair value hedges [Member] | Interest rate swap agreements [Member] | 2.80% senior notes due July 2021 [Member] | ||||||
Debt Instruments [Abstract] | ||||||
Total debt issued | $ 1,500 | |||||
Stated interest rate percentage | 2.80% | |||||
Maturity date | Jul. 8, 2021 | |||||
Fair value hedges [Member] | Interest rate swap agreements [Member] | Other assets [Member] | ||||||
Fair Values of Derivative and Non-Derivative Instruments Designated as Hedges in Condensed Consolidated Balance Sheets [Abstract] | ||||||
Fair value, assets | $ 75 | $ 74 |
STOCKHOLDERS' EQUITY (Details)
STOCKHOLDERS' EQUITY (Details) - USD ($) $ / shares in Units, shares in Millions, $ in Millions | 3 Months Ended | ||
Aug. 31, 2015 | Aug. 31, 2014 | Sep. 16, 2015 | |
Dividends on Common Stock [Abstract] | |||
Dividends per share, declared and paid (in dollars per share) | $ 0.15 | $ 0.12 | |
Dividends declared per share of outstanding common stock (in dollars per share) | $ 0.15 | ||
Dividend payable date | Oct. 28, 2015 | ||
Dividend record date | Oct. 14, 2015 | ||
Stock Repurchases (Narrative) [Abstract] | |||
Amount available for future repurchases | $ 6,200 | ||
Repurchases of common stock (in shares) | 75.7 | 48.8 | |
Repurchased amount | $ 3,000 | $ 2,000 | |
Repurchased shares that were not settled (in shares) | 5 | ||
Repurchased amount that was not settled | $ 185 | ||
Stock-based Compensation Expense [Line Items] | |||
Total stock-based compensation | $ 253 | 215 | |
Stock options granted (in shares) | 24 | ||
Restricted stock-based awards granted (in shares) | 28 | ||
Forfeitures and cancellations (in shares) | 4 | ||
Service-based restricted stock units [Member] | |||
Stock-based Compensation Expense [Line Items] | |||
Restricted stock-based awards granted (in shares) | 26 | ||
Performance-based restricted stock units [Member] | |||
Stock-based Compensation Expense [Line Items] | |||
Restricted stock-based awards granted (in shares) | 2 | ||
Chief Technology Officer and Chief Executive Officers [Member] | |||
Stock-based Compensation Expense [Line Items] | |||
Stock options granted (in shares) | 7 | ||
Expiration date | 5 years | ||
Other stock options [Member] | |||
Stock-based Compensation Expense [Line Items] | |||
Expiration date | 10 years | ||
Sales and marketing [Member] | |||
Stock-based Compensation Expense [Line Items] | |||
Total stock-based compensation | $ 51 | 43 | |
Cloud software as a service and platform as a service [Member] | |||
Stock-based Compensation Expense [Line Items] | |||
Total stock-based compensation | 4 | 2 | |
Cloud infrastructure as a service [Member] | |||
Stock-based Compensation Expense [Line Items] | |||
Total stock-based compensation | 1 | 1 | |
Software license updates and product support [Member] | |||
Stock-based Compensation Expense [Line Items] | |||
Total stock-based compensation | 6 | 5 | |
Hardware products [Member] | |||
Stock-based Compensation Expense [Line Items] | |||
Total stock-based compensation | 2 | 1 | |
Hardware support [Member] | |||
Stock-based Compensation Expense [Line Items] | |||
Total stock-based compensation | 1 | 1 | |
Services [Member] | |||
Stock-based Compensation Expense [Line Items] | |||
Total stock-based compensation | 8 | 6 | |
Research and development [Member] | |||
Stock-based Compensation Expense [Line Items] | |||
Total stock-based compensation | 148 | 108 | |
General and administrative [Member] | |||
Stock-based Compensation Expense [Line Items] | |||
Total stock-based compensation | 29 | 45 | |
Acquisition related and other [Member] | |||
Stock-based Compensation Expense [Line Items] | |||
Total stock-based compensation | $ 3 | $ 3 |
INCOME TAXES (Details)
INCOME TAXES (Details) - USD ($) $ in Millions | 3 Months Ended | ||
Aug. 31, 2015 | Aug. 31, 2014 | May. 31, 2015 | |
Income Taxes [Abstract] | |||
Effective income tax rate | 24.40% | 19.70% | |
Net deferred tax assets | $ 1,000 | $ 993 | |
Income tax examinations | Our U.S. federal and, with some exceptions, our state income tax returns have been examined for all years prior to fiscal 2003 and we are no longer subject to audit for those periods. With some exceptions, we are generally no longer subject to tax examinations in non-U.S. jurisdictions for years prior to fiscal 1997. |
SEGMENT INFORMATION (Details)
SEGMENT INFORMATION (Details) - USD ($) $ in Millions | 3 Months Ended | ||
Aug. 31, 2015 | Aug. 31, 2014 | ||
Revenues Included for Management Reporting Not Recognized in Consolidated Statements of Operations (Narrative) [Abstract] | |||
Cloud software as a service and platform as a service revenues | [1] | $ 1 | $ 2 |
Software license updates and product support revenues | [1] | 1 | |
Hardware support revenues | [1] | 1 | 1 |
Segment reporting information [Line Items] | |||
Revenues | 8,448 | 8,596 | |
Margin | 5,164 | 5,479 | |
Cloud software and on-premise software [Member] | |||
Segment reporting information [Line Items] | |||
Revenues | [2] | 1,603 | 1,707 |
Cloud software as a service and platform as a service expenses | 268 | 143 | |
Sales and distribution expenses | 1,286 | 1,279 | |
Margin | [3] | 49 | 285 |
Cloud infrastructure as a service [Member] | |||
Segment reporting information [Line Items] | |||
Revenues | 160 | 138 | |
Cloud infrastructure as a service expenses | 85 | 76 | |
Sales and distribution expenses | 22 | 18 | |
Margin | [3] | 53 | 44 |
Software license updates and product support [Member] | |||
Segment reporting information [Line Items] | |||
Revenues | [2] | 4,697 | 4,731 |
Software license updates and product support expenses | 271 | 257 | |
Margin | [3] | 4,426 | 4,474 |
Total cloud and on-premise software business [Member] | |||
Segment reporting information [Line Items] | |||
Revenues | [2] | 6,460 | 6,576 |
Expenses | 1,932 | 1,773 | |
Margin | [3] | 4,528 | 4,803 |
Hardware products [Member] | |||
Segment reporting information [Line Items] | |||
Revenues | 570 | 578 | |
Hardware products expenses | 301 | 297 | |
Sales and distribution expenses | 204 | 201 | |
Margin | [3] | 65 | 80 |
Hardware support [Member] | |||
Segment reporting information [Line Items] | |||
Revenues | [2] | 559 | 588 |
Hardware support expenses | 172 | 184 | |
Margin | [3] | 387 | 404 |
Total hardware business [Member] | |||
Segment reporting information [Line Items] | |||
Revenues | [2] | 1,129 | 1,166 |
Expenses | 677 | 682 | |
Margin | [3] | 452 | 484 |
Total services business [Member] | |||
Segment reporting information [Line Items] | |||
Revenues | [2] | 862 | 857 |
Services expenses | 678 | 665 | |
Margin | [3] | 184 | 192 |
Total for operating segments [Member] | |||
Segment reporting information [Line Items] | |||
Revenues | [2] | 8,451 | 8,599 |
Expenses | 3,287 | 3,120 | |
Margin | [3] | $ 5,164 | $ 5,479 |
[1] | Cloud software as a service and platform as a service revenues, software license updates and product support revenues and hardware support revenues for management reporting included revenues that would have otherwise been recorded by our acquired businesses as independent entities but were not recognized in the accompanying condensed consolidated statements of operations for the periods presented due to business combination accounting requirements. Refer to footnote one to our business and operating segments summary results table above in this Note 11 for additional information. | ||
[2] | Cloud software and on-premise software revenues for management reporting included revenues related to cloud SaaS and PaaS contracts that would have otherwise been recorded by the acquired businesses as independent entities but were not recognized in the accompanying condensed consolidated statements of operations in the amounts of $1 million and $2 million for the three months ended August 31, 2015 and 2014, respectively. Software license updates and product support revenues for management reporting included revenues related to software support contracts that would have otherwise been recorded by the acquired businesses as independent entities but were not recognized in the accompanying condensed consolidated statements of operations in the amount of $1 million for the three months ended August 31, 2015. In addition, we did not recognize hardware support revenues related to hardware support contracts that would have otherwise been recorded by the acquired businesses as independent entities in the amount of $1 million for each of the three months ended August 31, 2015 and 2014, respectively. See Note 7 for an explanation of these adjustments and the table below for a reconciliation of our total operating segment revenues to our total revenues. Our new software license and services revenues for management reporting also differ from amounts reported per our consolidated statements of operations for the periods presented due to certain insignificant reclassifications between these lines for management reporting purposes. | ||
[3] | The margins reported reflect only the direct controllable costs of each line of business and do not include allocations of product development, marketing and partner programs, and corporate, general and administrative and information technology expenses. Additionally, the margins reported do not reflect amortization of intangible assets, acquisition related and other expenses, restructuring expenses, stock-based compensation, interest expense or certain other income (expense), net. |
SEGMENT INFORMATION RECONCILIAT
SEGMENT INFORMATION RECONCILIATION (Details) - USD ($) $ in Millions | 3 Months Ended | ||
Aug. 31, 2015 | Aug. 31, 2014 | ||
Reconciliation of Total Operating Segment Margin to Income Before Provision for Income Taxes [Abstract] | |||
Total margin for operating segments | $ 5,164 | $ 5,479 | |
Cloud software as a service and platform as a service revenues | [1] | (1) | (2) |
Software license updates and product support revenues | [1] | (1) | |
Hardware support revenues | [1] | (1) | (1) |
Product development | (1,188) | (1,174) | |
Marketing and partner program expenses | (109) | (119) | |
Corporate, general and administrative and information technology expenses | (394) | (367) | |
Amortization of intangible assets | (452) | (547) | |
Acquisition related and other | (31) | (25) | |
Restructuring | (83) | (69) | |
Stock-based compensation | (250) | (212) | |
Interest expense | (374) | (261) | |
Non-operating income, net | 30 | 16 | |
Income before provision for income taxes | 2,310 | 2,718 | |
Reconciliation of Total Operating Segment Revenues to Total Revenues [Line Items] | |||
Cloud software as a service and platform as a service revenues | [1] | (1) | (2) |
Software license updates and product support revenues | [1] | (1) | |
Hardware support revenues | [1] | (1) | (1) |
Total revenues | 8,448 | 8,596 | |
Total for operating segments [Member] | |||
Reconciliation of Total Operating Segment Margin to Income Before Provision for Income Taxes [Abstract] | |||
Total margin for operating segments | [2] | 5,164 | 5,479 |
Reconciliation of Total Operating Segment Revenues to Total Revenues [Line Items] | |||
Total revenues | [3] | $ 8,451 | $ 8,599 |
[1] | Cloud software as a service and platform as a service revenues, software license updates and product support revenues and hardware support revenues for management reporting included revenues that would have otherwise been recorded by our acquired businesses as independent entities but were not recognized in the accompanying condensed consolidated statements of operations for the periods presented due to business combination accounting requirements. Refer to footnote one to our business and operating segments summary results table above in this Note 11 for additional information. | ||
[2] | The margins reported reflect only the direct controllable costs of each line of business and do not include allocations of product development, marketing and partner programs, and corporate, general and administrative and information technology expenses. Additionally, the margins reported do not reflect amortization of intangible assets, acquisition related and other expenses, restructuring expenses, stock-based compensation, interest expense or certain other income (expense), net. | ||
[3] | Cloud software and on-premise software revenues for management reporting included revenues related to cloud SaaS and PaaS contracts that would have otherwise been recorded by the acquired businesses as independent entities but were not recognized in the accompanying condensed consolidated statements of operations in the amounts of $1 million and $2 million for the three months ended August 31, 2015 and 2014, respectively. Software license updates and product support revenues for management reporting included revenues related to software support contracts that would have otherwise been recorded by the acquired businesses as independent entities but were not recognized in the accompanying condensed consolidated statements of operations in the amount of $1 million for the three months ended August 31, 2015. In addition, we did not recognize hardware support revenues related to hardware support contracts that would have otherwise been recorded by the acquired businesses as independent entities in the amount of $1 million for each of the three months ended August 31, 2015 and 2014, respectively. See Note 7 for an explanation of these adjustments and the table below for a reconciliation of our total operating segment revenues to our total revenues. Our new software license and services revenues for management reporting also differ from amounts reported per our consolidated statements of operations for the periods presented due to certain insignificant reclassifications between these lines for management reporting purposes. |
EARNINGS PER SHARE (Details)
EARNINGS PER SHARE (Details) - USD ($) $ / shares in Units, shares in Millions, $ in Millions | 3 Months Ended | ||
Aug. 31, 2015 | Aug. 31, 2014 | ||
Computation of Basic and Diluted Earnings Per Share [Abstract] | |||
Net income | $ 1,747 | $ 2,184 | |
Weighted average common shares outstanding | 4,317 | 4,451 | |
Dilutive effect of employee stock plans | 95 | 97 | |
Dilutive weighted average common shares outstanding | 4,412 | 4,548 | |
Basic earnings per share | $ 0.40 | $ 0.49 | |
Diluted earnings per share | $ 0.40 | $ 0.48 | |
Shares subject to anti-dilutive stock options and restricted stock-based awards excluded from calculation | [1] | 57 | 26 |
[1] | These weighted shares relate to anti-dilutive stock options and restricted stock-based awards as calculated using the treasury stock method and could be dilutive in the future. |
LEGAL PROCEEDINGS (Details)
LEGAL PROCEEDINGS (Details) | 3 Months Ended |
Aug. 31, 2015 | |
Hewlett-Packard Litigation [Member] | |
Legal Proceedings [Line Items] | |
Inestimable loss related to litigation | We cannot currently estimate a reasonably possible range of loss for this action. |
State Of Oregon Litigation [Member] | |
Legal Proceedings [Line Items] | |
Inestimable loss related to litigation | We cannot currently estimate a reasonably possible range of loss for this action. |
Other Litigation [Member] | |
Legal Proceedings [Line Items] | |
Other litigation | We are party to various other legal proceedings and claims, either asserted or unasserted, which arise in the ordinary course of business, including proceedings and claims that relate to acquisitions we have completed or to companies we have acquired or are attempting to acquire. While the outcome of these matters cannot be predicted with certainty, we do not believe that the outcome of any of these matters, individually or in the aggregate, will result in losses that are materially in excess of amounts already recognized, if any. |