DOCUMENT AND ENTITY INFORMATION
DOCUMENT AND ENTITY INFORMATION - shares | 3 Months Ended | |
Aug. 31, 2017 | Sep. 11, 2017 | |
Document And Entity Information [Abstract] | ||
Document Type | 10-Q | |
Amendment Flag | false | |
Document Period End Date | Aug. 31, 2017 | |
Document Fiscal Period Focus | Q1 | |
Document Fiscal Year Focus | 2,018 | |
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) | 4,173,053,000 |
CONDENSED CONSOLIDATED BALANCE
CONDENSED CONSOLIDATED BALANCE SHEETS - USD ($) $ in Millions | Aug. 31, 2017 | May 31, 2017 |
Current assets: | ||
Cash and cash equivalents | $ 21,321 | $ 21,784 |
Marketable securities | 45,576 | 44,294 |
Trade receivables, net of allowances for doubtful accounts of $336 and $319 as of August 31, 2017 and May 31, 2017, respectively | 3,591 | 5,300 |
Inventories | 312 | 300 |
Prepaid expenses and other current assets | 2,535 | 2,837 |
Total current assets | 73,335 | 74,515 |
Non-current assets: | ||
Property, plant and equipment, net | 5,586 | 5,315 |
Intangible assets, net | 7,186 | 7,679 |
Goodwill, net | 43,020 | 43,045 |
Deferred tax assets | 1,181 | 1,143 |
Other assets | 3,289 | 3,294 |
Total non-current assets | 60,262 | 60,476 |
Total assets | 133,597 | 134,991 |
Current liabilities: | ||
Notes payable and other borrowings, current | 4,998 | 9,797 |
Accounts payable | 593 | 599 |
Accrued compensation and related benefits | 1,517 | 1,966 |
Deferred revenues | 10,269 | 8,233 |
Other current liabilities | 2,849 | 3,583 |
Total current liabilities | 20,226 | 24,178 |
Non-current liabilities: | ||
Notes payable and other borrowings, non-current | 48,293 | 48,112 |
Income taxes payable | 5,891 | 5,681 |
Other non-current liabilities | 2,821 | 2,774 |
Total non-current liabilities | 57,005 | 56,567 |
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: 4,171 shares and 4,137 shares as of August 31, 2017 and May 31, 2017, respectively | 28,089 | 27,065 |
Retained earnings | 28,586 | 27,598 |
Accumulated other comprehensive loss | (716) | (803) |
Total Oracle Corporation stockholders’ equity | 55,959 | 53,860 |
Noncontrolling interests | 407 | 386 |
Total equity | 56,366 | 54,246 |
Total liabilities and equity | $ 133,597 | $ 134,991 |
CONDENSED CONSOLIDATED BALANCE3
CONDENSED CONSOLIDATED BALANCE SHEETS PARENTHETICAL - USD ($) shares in Millions, $ in Millions | Aug. 31, 2017 | May 31, 2017 |
Statement Of Financial Position [Abstract] | ||
Allowance for doubtful accounts receivable | $ 336 | $ 319 |
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 | 4,171 | 4,137 |
CONDENSED CONSOLIDATED STATEMEN
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS - USD ($) shares in Millions, $ in Millions | 3 Months Ended | ||
Aug. 31, 2017 | Aug. 31, 2016 | ||
Revenues: | |||
Cloud software as a service | $ 1,067 | $ 657 | |
Cloud platform as a service and infrastructure as a service | 400 | 312 | |
Total cloud revenues | 1,467 | 969 | |
New software licenses | 966 | 1,030 | |
Software license updates and product support | 4,951 | 4,792 | |
Total on-premise software revenues | 5,917 | 5,822 | |
Total cloud and on-premise software revenues | 7,384 | 6,791 | |
Hardware revenues | 943 | 996 | |
Services revenues | 860 | 808 | |
Total revenues | 9,187 | 8,595 | |
Operating expenses: | |||
Cloud software as a service | [1] | 374 | 283 |
Cloud platform as a service and infrastructure as a service | [1] | 227 | 132 |
Software license updates and product support | [1] | 257 | 275 |
Hardware | [1] | 373 | 391 |
Services | [1] | 702 | 695 |
Sales and marketing | [1] | 1,992 | 1,919 |
Research and development | 1,574 | 1,520 | |
General and administrative | 320 | 315 | |
Amortization of intangible assets | 411 | 311 | |
Acquisition related and other | 12 | 14 | |
Restructuring | 124 | 99 | |
Total operating expenses | 6,366 | 5,954 | |
Operating income | 2,821 | 2,641 | |
Interest expense | (469) | (416) | |
Non-operating income, net | 233 | 148 | |
Income before provision for income taxes | 2,585 | 2,373 | |
Provision for income taxes | 375 | 541 | |
Net income | $ 2,210 | $ 1,832 | |
Earnings per share: | |||
Basic (in dollars per share) | $ 0.53 | $ 0.44 | |
Diluted (in dollars per share) | $ 0.52 | $ 0.43 | |
Weighted average common shares outstanding: | |||
Basic (in shares) | 4,156 | 4,119 | |
Diluted (in shares) | 4,284 | 4,221 | |
Dividends declared per common share (in dollars per share) | $ 0.19 | $ 0.15 | |
[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, 2017 | Aug. 31, 2016 | |
Net income | $ 2,210 | $ 1,832 |
Portion Attributable to Parent [Member] | ||
Net income | 2,210 | 1,832 |
Other comprehensive income (loss), net of tax: | ||
Net foreign currency translation gains | 38 | 133 |
Net unrealized gains on defined benefit plans | 7 | 5 |
Net unrealized gains on marketable securities | 64 | 143 |
Net unrealized (losses) gains on cash flow hedges | (22) | 2 |
Total other comprehensive income, net | 87 | 283 |
Comprehensive income | $ 2,297 | $ 2,115 |
CONDENSED CONSOLIDATED STATEME6
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($) $ in Millions | 3 Months Ended | |
Aug. 31, 2017 | Aug. 31, 2016 | |
Cash flows from operating activities: | ||
Net income | $ 2,210 | $ 1,832 |
Adjustments to reconcile net income to net cash provided by operating activities: | ||
Depreciation | 285 | 222 |
Amortization of intangible assets | 411 | 311 |
Deferred income taxes | 159 | 145 |
Stock-based compensation | 403 | 319 |
Other, net | 47 | 39 |
Changes in operating assets and liabilities, net of effects from acquisitions: | ||
Decrease in trade receivables, net | 1,752 | 1,993 |
Increase in inventories | (11) | (75) |
Decrease in prepaid expenses and other assets | 555 | 435 |
Decrease in accounts payable and other liabilities | (1,062) | (1,013) |
Increase (decrease) in income taxes payable | 32 | (94) |
Increase in deferred revenues | 1,785 | 1,761 |
Net cash provided by operating activities | 6,566 | 5,875 |
Cash flows from investing activities: | ||
Purchases of marketable securities and other investments | (7,671) | (5,513) |
Proceeds from maturities and sales of marketable securities and other investments | 6,326 | 1,752 |
Acquisitions, net of cash acquired | 0 | (1,143) |
Capital expenditures | (473) | (299) |
Net cash used for investing activities | (1,818) | (5,203) |
Cash flows from financing activities: | ||
Payments for repurchases of common stock | (502) | (2,002) |
Proceeds from issuances of common stock | 1,014 | 487 |
Shares repurchased for tax withholdings upon vesting of restricted stock-based awards | (331) | (170) |
Payments of dividends to stockholders | (788) | (618) |
Proceeds from borrowings, net of issuance costs | 0 | 13,932 |
Repayments of borrowings | (4,800) | (3,750) |
Distributions to noncontrolling interests | (34) | (167) |
Net cash (used for) provided by financing activities | (5,441) | 7,712 |
Effect of exchange rate changes on cash and cash equivalents | 230 | 78 |
Net (decrease) increase in cash and cash equivalents | (463) | 8,462 |
Cash and cash equivalents at beginning of period | 21,784 | 20,152 |
Cash and cash equivalents at end of period | 21,321 | 28,614 |
Non-cash investing and financing transactions: | ||
Fair values of restricted stock-based awards and stock options assumed in connection with acquisitions | 0 | 6 |
Decrease in unsettled repurchases of common stock | (2) | (3) |
Decrease in unsettled investment purchases | $ (138) | $ (95) |
BASIS OF PRESENTATION AND RECEN
BASIS OF PRESENTATION AND RECENT ACCOUNTING PRONOUNCEMENTS | 3 Months Ended |
Aug. 31, 2017 | |
Organization Consolidation And Presentation Of Financial Statements [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 (SEC). Certain information and footnote disclosures normally included in financial statements prepared in accordance with U.S. generally accepted accounting principles (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, 2017. 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, 2018. 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 three months of fiscal 2017, we adopted Accounting Standards Update (ASU) 2017-04, Intangibles—Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment Cash, Cash Equivalents and Restricted Cash Restricted cash that was included within cash and cash equivalents as presented within our condensed consolidated balance sheets as of August 31, 2017 and May 31, 2017 and our condensed consolidated statements of cash flows for the three months ended August 31, 2017 and 2016 was nominal. Acquisition Related and Other Expenses Acquisition related and other expenses consist of personnel related costs and stock-based compensation for transitional and certain other employees, integration related professional services, certain business combination adjustments including certain adjustments after the measurement period has ended and certain other operating items, net. Three Months Ended August 31, (in millions) 2017 2016 Transitional and other employee related costs $ 9 $ 8 Stock-based compensation 1 — Professional fees and other, net 3 5 Business combination adjustments, net (1 ) 1 Total acquisition related and other expenses $ 12 $ 14 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) 2017 2016 Interest income $ 257 $ 177 Foreign currency losses, net (4 ) (13 ) Noncontrolling interests in income (47 ) (35 ) Other income (loss), net 27 19 Total non-operating income, net $ 233 $ 148 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, 2017 and 2016, $818 million and $898 million of financing receivables were sold to financial institutions, respectively. Recent Accounting Pronouncements Derivatives and Hedging: In August 2017, the Financial Accounting Standards Board (FASB) issued ASU 2017-12, Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities (ASU 2017-12), which amends and simplifies existing guidance in order to allow companies to more accurately present the economic effects of risk management activities in the financial statements. ASU 2017-12 is effective for us in the first quarter of fiscal 2020, and earlier adoption is permitted. We are currently evaluating the impact of our pending adoption of ASU 2017-12 on our consolidated financial statements. Retirement Benefits: In March 2017, the FASB issued ASU 2017-07, Compensation—Retirement Benefits (Topic 715): Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost (ASU 2017-07), which provides guidance on the capitalization, presentation and disclosure of net benefit costs. ASU 2017-07 is effective for us in the first quarter of fiscal 2019. We are currently evaluating the impact of our pending adoption of ASU 2017-07 on our consolidated financial statements. Income Taxes: In October 2016, the FASB issued ASU 2016-16, Income Taxes (Topic 740): Intra-Entity Transfers of Assets Other Than Inventory (ASU 2016-16), which changes the timing of when certain intercompany transactions are recognized within the provision for income taxes. ASU 2016-16 is effective for us in our first quarter of fiscal 2019 on a modified retrospective basis, and earlier adoption is permitted. We are currently evaluating the impact of our pending adoption of ASU 2016-16 on our consolidated financial statements. Financial Instruments: In June 2016, the FASB issued ASU 2016-13, Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments (ASU 2016-13), which requires measurement and recognition of expected credit losses for financial assets held. ASU 2016-13 is effective for us in our first quarter of fiscal 2021, and earlier adoption is permitted beginning in the first quarter of fiscal 2020. We are currently evaluating the impact of our pending adoption of ASU 2016-13 on our consolidated financial statements. In January 2016, the FASB issued ASU 2016-01, Financial Instruments—Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities Leases: In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842) (ASU 2016-02). ASU 2016-02 requires companies to generally recognize on the balance sheet operating and financing lease liabilities and corresponding right-of-use assets. ASU 2016-02 is effective for us in our first quarter of fiscal 2020 on a modified retrospective basis, and earlier adoption is permitted. We are currently evaluating the impact of our pending adoption of ASU 2016-02 on our consolidated financial statements. We currently expect that most of our operating lease commitments will be subject to the new standard and recognized as operating lease liabilities and right-of-use assets upon our adoption of ASU 2016-02, which will increase our total assets and total liabilities that we report relative to such amounts prior to adoption. Revenue Recognition: In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers: Topic 606 and issued subsequent amendments to the initial guidance in August 2015, March 2016, April 2016, May 2016, December 2016 and May 2017 within ASU 2015-14, ASU 2016-08, ASU 2016-10, ASU 2016-12, ASU 2016-20 and ASU 2017-10, respectively, and collectively Topic 606. Topic 606 supersedes nearly all existing revenue recognition guidance under GAAP. The core principle of Topic 606 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. Topic 606 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 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. Topic 606 also provides guidance on the recognition of costs related to obtaining customer contracts. Topic 606 is effective for us as of our first quarter of fiscal 2019 using either of two methods: (1) retrospective application of Topic 606 to each prior reporting period presented with the option to elect certain practical expedients as defined within Topic 606 or (2) retrospective application of Topic 606 with the cumulative effect of initially applying Topic 606 recognized at the date of initial application and providing certain additional disclosures as defined per Topic 606. The accounting for the recognition of costs related to obtaining customer contracts under Topic 606 is significantly different than our current capitalization policy. The adoption of Topic 606 will result in additional types of costs that will be capitalized. Additionally, all amounts capitalized will be amortized over a period longer than our current policy. We plan to adopt Topic 606 in the first quarter of fiscal 2019 pursuant to the aforementioned adoption method (1) and we do not believe there will be a material impact to our revenues upon adoption. We are continuing to evaluate the impact to our revenues and costs related to our pending adoption of Topic 606 and our preliminary assessments are subject to change. |
ACQUISITIONS
ACQUISITIONS | 3 Months Ended |
Aug. 31, 2017 | |
Business Combinations [Abstract] | |
ACQUISITIONS | 2. ACQUISITIONS Fiscal 2017 Acquisition of NetSuite Inc., a Related Party On November 7, 2016, we completed our acquisition of NetSuite Inc. (NetSuite), a provider of cloud-based enterprise resource planning (ERP) software and related applications and a related party to Oracle. We acquired NetSuite to, among other things, expand our cloud software as a service offerings with a complementary set of cloud ERP and related cloud software applications for customers. Lawrence J. Ellison, Oracle’s Chairman of the Board and Chief Technology Officer and Oracle’s largest stockholder, is an affiliate of NetSuite’s largest stockholder, NetSuite Restricted Holdings LLC (a single member LLC investment entity whose interests are beneficially owned by a trust controlled by Mr. Ellison), which owned approximately 40% of the issued and outstanding NetSuite Shares immediately prior to the conclusion of the merger. The total preliminary purchase price for NetSuite was approximately $9.1 billion, which consisted of approximately $9.0 billion in cash and $78 million for the fair values of restricted stock-based awards and stock options assumed. In allocating the purchase price based on estimated fair values, we recorded approximately $6.7 billion of goodwill, $3.2 billion of identifiable intangible assets and $816 million of net tangible liabilities. 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. See Note 2 of Notes to Consolidated Financial Statements included in our Annual Report on Form 10-K for the fiscal year ended May 31, 2017 for additional information regarding our acquisition of NetSuite. Other Fiscal 2017 Acquisitions During fiscal 2017, we acquired certain companies and purchased certain technology and development assets primarily to expand our products and services offerings. These acquisitions were not significant individually or in the aggregate. We have included the financial results of the acquired companies in our condensed consolidated financial statements from their respective acquisition dates, and the results from each of these companies were not individually material to our condensed consolidated financial statements. In the aggregate, the total preliminary purchase price for these acquisitions was approximately $3.0 billion, which consisted of approximately $3.0 billion in cash and $13 million for the fair values of restricted stock-based awards and stock options assumed. We preliminarily recorded $241 million of net tangible assets and $948 million of identifiable intangible assets, based on their estimated fair values, and $1.8 billion of residual goodwill. The preliminary fair value estimates for the assets acquired and liabilities assumed for our completed acquisitions were based upon preliminary calculations and valuations, and our estimates and assumptions for 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, income and non-income based taxes and residual goodwill. Unaudited Pro Forma Financial Information The unaudited pro forma financial information in the table below summarizes the combined results of operations for Oracle, NetSuite and certain other companies that we acquired since the beginning of fiscal 2017 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 2017. The unaudited pro forma financial information for all periods presented included the business combination accounting effects resulting from these acquisitions, including amortization charges from acquired intangible assets (certain of which are preliminary), stock-based compensation charges for unvested restricted stock-based awards and stock options assumed, if any, and the related tax effects as though the aforementioned companies were combined as of the beginning of fiscal 2017. 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 2017. The unaudited pro forma financial information for the three months ended August 31, 2017 includes only the historical results of Oracle and is included below for comparative purposes only. The unaudited pro forma financial information for the three months ended August 31, 2016 combined the historical results of Oracle for the three months ended August 31, 2016, the historical results of NetSuite for the three months ended September 30, 2016 (due to differences in reporting periods) and the historical results of certain other companies that we acquired since the beginning of fiscal 2017 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) 2017 2016 Total revenues $ 9,187 $ 8,856 Net income $ 2,210 $ 1,666 Basic earnings per share $ 0.53 $ 0.40 Diluted earnings per share $ 0.52 $ 0.39 |
FAIR VALUE MEASUREMENTS
FAIR VALUE MEASUREMENTS | 3 Months Ended |
Aug. 31, 2017 | |
Fair Value Disclosures [Abstract] | |
FAIR VALUE MEASUREMENTS | 3. FAIR VALUE MEASUREMENTS We perform fair value measurements in accordance with FASB Accounting Standards Codification (ASC) 820, Fair Value Measurement 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 Level 2 inputs are defined above): August 31, 2017 May 31, 2017 Fair Value Measurements Using Input Types Fair Value Measurements Using Input Types (in millions) Level 1 Level 2 Total Level 1 Level 2 Total Assets: Corporate debt securities and other $ 427 $ 43,153 $ 43,580 $ 580 $ 41,038 $ 41,618 Commercial paper debt securities — 4,210 4,210 — 5,053 5,053 Money market funds 1,502 — 1,502 3,302 — 3,302 Derivative financial instruments — 40 40 — 40 40 Total assets $ 1,929 $ 47,403 $ 49,332 $ 3,882 $ 46,131 $ 50,013 Liabilities: Derivative financial instruments $ — $ 106 $ 106 $ — $ 191 $ 191 Our marketable securities investments consist of Tier 1 commercial paper debt securities, corporate debt securities and certain other securities. As of August 31, 2017 and May 31, 2017, approximately 28% and 32%, respectively, of our marketable securities investments mature within one year and 72% and 68%, 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 that 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 the $53.1 billion and $54.0 billion of senior notes and the related fair value hedges that were outstanding as of August 31, 2017 and May 31, 2017, respectively, the estimated fair values of the senior notes and the related fair value hedges using Level 2 inputs at August 31, 2017 and May 31, 2017 were $55.9 billion and $56.5 billion, respectively. |
INVENTORIES
INVENTORIES | 3 Months Ended |
Aug. 31, 2017 | |
Inventory Net [Abstract] | |
INVENTORIES | 4. INVENTORIES Inventories consisted of the following: (in millions) August 31, 2017 May 31, 2017 Raw materials $ 158 $ 186 Work-in-process 34 42 Finished goods 120 72 Total inventories $ 312 $ 300 |
INTANGIBLE ASSETS AND GOODWILL
INTANGIBLE ASSETS AND GOODWILL | 3 Months Ended |
Aug. 31, 2017 | |
Goodwill And Intangible Assets Disclosure [Abstract] | |
INTANGIBLE ASSETS AND GOODWILL | 5. INTANGIBLE ASSETS AND GOODWILL The changes in intangible assets for fiscal 2018 and the net book value of intangible assets as of August 31, 2017 and May 31, 2017 were as follows: Intangible Assets, Gross Accumulated Amortization Intangible Assets, Net (Dollars in millions) May 31, 2017 Additions & Adjustments, net August 31, 2017 May 31, 2017 Expense August 31, 2017 May 31, 2017 August 31, 2017 Developed technology $ 5,397 $ (214 ) $ 5,183 $ (2,295 ) $ (190 ) $ (2,485 ) $ 3,102 $ 2,698 SaaS, PaaS and IaaS agreements and related relationships 4,105 114 4,219 (1,089 ) (151 ) (1,240 ) 3,016 2,979 Software support agreements and related relationships 1,565 — 1,565 (559 ) (31 ) (590 ) 1,006 975 Other 1,998 18 2,016 (1,443 ) (39 ) (1,482 ) 555 534 Total intangible assets, net $ 13,065 $ (82 ) $ 12,983 $ (5,386 ) $ (411 ) $ (5,797 ) $ 7,679 $ 7,186 Total amortization expense related to our intangible assets was $411 million and $311 million for the three months ended August 31, 2017 and 2016, respectively. As of August 31, 2017, estimated future amortization expenses related to intangible assets were as follows (in millions): Remainder of fiscal 2018 $ 1,179 Fiscal 2019 1,408 Fiscal 2020 1,207 Fiscal 2021 1,021 Fiscal 2022 918 Fiscal 2023 567 Thereafter 886 Total intangible assets, net $ 7,186 The changes in the carrying amounts of goodwill, net, which is generally not deductible for tax purposes, for our operating segments for the three months ended August 31, 2017 were as follows: (in millions) Cloud and On-Premise Software Hardware Services Total Goodwill, net Balances as of May 31, 2017 $ 38,791 $ 2,367 $ 1,887 $ 43,045 Goodwill adjustments, net (1) (25 ) — — (25 ) Balances as of August 31, 2017 $ 38,766 $ 2,367 $ 1,887 $ 43,020 (1) Pursuant to our business combinations accounting policy, we recorded goodwill adjustments for the effects on goodwill of changes to net assets acquired during the period that such a change is identified, provided that any such change is within the measurement period (up to one year from the date of the acquisition). |
RESTRUCTURING ACTIVITIES
RESTRUCTURING ACTIVITIES | 3 Months Ended |
Aug. 31, 2017 | |
Restructuring And Related Activities [Abstract] | |
RESTRUCTURING ACTIVITIES | 6. RESTRUCTURING ACTIVITIES Fiscal 2017 Oracle Restructuring Plan During fiscal 2017, our management approved, committed to and initiated plans to restructure and further improve efficiencies in our operations due to our recent acquisitions and certain other operational activities (2017 Restructuring Plan). In the first quarter of fiscal 2018, our management supplemented the 2017 Restructuring Plan to reflect additional actions that we expect to take. The total estimated restructuring costs associated with the 2017 Restructuring Plan are up to $1.1 billion and will be recorded to the restructuring expense line item within our condensed consolidated statements of operations as they are incurred. We recorded $124 million of restructuring expenses in connection with the 2017 Restructuring Plan in the first three months of fiscal 2018 and we expect to incur the majority of the estimated remaining $475 million through the end of fiscal 2018. Any changes to the estimates of executing the 2017 Restructuring Plan will be reflected in our future results of operations. Summary of All Plans Accrued Three Months Ended August 31, 2017 Accrued Total Costs Total Expected (in millions) May 31, 2017 (2) Initial Costs (3) Adj. Cost (4) Cash Payments Others (5) August 31, 2017 (2) Accrued to Date Program Costs Fiscal 2017 Oracle Restructuring Plan (1) Cloud and on-premise software $ 85 $ 54 $ (2 ) $ (70 ) $ 5 $ 72 $ 230 $ 300 Hardware 31 28 (3 ) (26 ) 2 32 113 241 Services 25 12 (1 ) (22 ) 1 15 69 130 Other 44 41 (6 ) (23 ) — 56 197 413 Total Fiscal 2017 Oracle Restructuring Plan $ 185 $ 135 $ (12 ) $ (141 ) $ 8 $ 175 $ 609 $ 1,084 Total other restructuring plans (6) $ 79 $ 1 $ — $ (15 ) $ 3 $ 68 Total restructuring plans $ 264 $ 136 $ (12 ) $ (156 ) $ 11 $ 243 (1) Restructuring costs recorded for individual line items primarily related to employee severance costs. (2) The balances at August 31, 2017 and May 31, 2017 included $217 million and $242 million, respectively, recorded in other current liabilities, and $26 million and $22 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 periodic impact to our condensed consolidated statements of operations was not significant. |
DEFERRED REVENUES
DEFERRED REVENUES | 3 Months Ended |
Aug. 31, 2017 | |
Deferred Revenue Disclosure [Abstract] | |
DEFERRED REVENUES | 7. DEFERRED REVENUES Deferred revenues consisted of the following: (in millions) August 31, 2017 May 31, 2017 Software license updates and product support $ 7,690 $ 5,952 Cloud SaaS, PaaS and IaaS 1,397 1,192 Hardware 716 640 Services 407 382 New software licenses 59 67 Deferred revenues, current 10,269 8,233 Deferred revenues, non-current (in other non-current liabilities) 653 602 Total deferred revenues $ 10,922 $ 8,835 Deferred software license updates and product support revenues and deferred hardware revenues substantially 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 cloud software as a service (SaaS) and deferred cloud platform as a service (PaaS) and infrastructure as a service (IaaS) revenues generally resulted from customer payments made in advance for our cloud-based offerings that are recognized over the corresponding contractual term. Deferred services revenues include prepayments for our services business and revenues for these services are generally recognized as the services are performed. Deferred new software licenses revenues typically resulted from customer payments that relate to undelivered products or specified enhancements, customer specific acceptance provisions, 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, cloud PaaS and IaaS and software license updates and product 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, cloud PaaS and IaaS and software license updates and product 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, 2017 | |
Derivative Instruments And Hedging Activities Disclosure [Abstract] | |
DERIVATIVE FINANCIAL INSTRUMENTS | 8. DERIVATIVE FINANCIAL INSTRUMENTS We held certain derivative and non-derivative instruments that were accounted for pursuant to ASC 815, Derivatives and Hedging • interest rate swap agreements, which are used to protect us against changes in the fair values of certain of our fixed-rate borrowings due to benchmark interest rate movements and are accounted for as fair value hedges; • cross-currency swap agreements, which are used to manage foreign currency exchange risk by converting certain of our fixed-rate Euro-denominated borrowings to fixed-rate U.S. Dollar denominated debt and are accounted for as cash flow hedges; and • foreign currency borrowings, which are used to reduce the volatility in stockholders’ equity caused by the changes in the foreign currency exchange rates of the Euro with respect to the U.S. Dollar and are accounted for as net investment hedges. We also held certain foreign currency contracts that were not designated as hedges pursuant to ASC 815. As of August 31, 2017 and May 31, 2017, the notional amounts of such forward contracts we held to purchase U.S. Dollars in exchange for other major international currencies were $3.3 billion and $3.4 billion, respectively, and the notional amount of forward contracts we held to sell U.S. Dollars in exchange for other major international currencies were $1.2 billion and $1.4 billion, respectively. The fair values of our outstanding foreign currency forward contracts were nominal as of August 31, 2017 and May 31, 2017. The cash flows related to these foreign currency contracts are classified as operating activities. Net gains or losses related to these forward contracts are included in non-operating income, net. See Note 11 of Notes to Consolidated Financial Statements included in our Annual Report on Form 10-K for the fiscal year ended May 31, 2017 for additional information regarding the purpose, accounting and classification of our derivative and non-derivative instruments. None of our derivative instruments are used for trading purposes. The effects of derivative and non-derivative instruments designated as hedges on certain of our condensed 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 as of (in millions) Balance Sheet Location August 31, 2017 May 31, 2017 Interest rate swap agreements designated as fair value hedges Other assets $ 40 $ 40 Cross-currency swap agreements designated as cash flow hedges Other non-current $ (106 ) $ (191 ) Foreign currency borrowings designated as net investment hedge Notes payable, non-current $ (938 ) $ (980 ) 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 Location Three Months Ended August 31, Three Months Ended August 31, (in millions) 2017 2016 2017 2016 Cross-currency swap agreements designated as cash flow hedges $ 85 $ 3 Non-operating income (expense), net $ 107 $ 1 Foreign currency borrowings designated as net investment hedge $ (64 ) $ (1 ) Not applicable $ — $ — Location and Amount of Gain (Loss) Recognized in Income on Derivative Location and Amount of Gain (Loss) on Hedged Item Recognized in Income Attributable to Risk Being Three Months Ended August 31, Three Months Ended August 31, (in millions) 2017 2016 2017 2016 Interest rate swap agreements designated as fair value hedges Interest expense $ — $ 9 Interest $ — $ (9 ) |
STOCKHOLDERS' EQUITY
STOCKHOLDERS' EQUITY | 3 Months Ended |
Aug. 31, 2017 | |
Stockholders Equity Note [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. As of August 31, 2017, approximately $4.8 billion remained available for stock repurchases pursuant to our stock repurchase program. We repurchased 10.2 million shares for $500 million during the three months ended August 31, 2017 (including 0.5 million shares for $23 million that were repurchased but not settled) and 49.3 million shares for $2.0 billion during the three months ended August 31, 2016 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 repurchases 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 three months ended August 31, 2017, our Board of Directors declared cash dividends of $0.19 per share of our outstanding common stock, which we paid during the same period. In September 2017, our Board of Directors declared a quarterly cash dividend of $0.19 per share of our outstanding common stock. The dividend is payable on October 25, 2017 to stockholders of record as of the close of business on October 11, 2017. Future declarations of dividends and the establishment of future record and payment dates are subject to the final determination of our Board of Directors. Fiscal 2018 Stock-Based Awards Activity, Valuation and Compensation Expense During the first quarter of fiscal 2018, we issued 34 million restricted stock-based awards and 77 million stock options (consisting of 8 million service-based stock options (SOs) and 69 million performance-based and market-based stock options (PSOs)). 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 PSOs primarily having performance-based and market-based vesting restrictions. Our fiscal 2018 stock-based awards issuances were partially offset by forfeitures and cancellations of 7 million shares during the first quarter of fiscal 2018. The RSUs and SOs that were granted during the three months ended August 31, 2017 have vesting restrictions, valuations and contractual lives 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, 2017. The fiscal 2018 PSOs granted consist of seven numerically equivalent vesting tranches that potentially may vest. Each of six of the individual vesting tranches are governed by an “all or nothing” vesting schedule requiring the attainment of both a performance metric and a market capitalization metric, which may be achieved at any time, in order for each individual tranche to fully vest during a five year performance period, assuming continued employment and service through the date the Compensation Committee of the Board of Directors certifies that the last of the two metrics for a particular tranche is attained. The seventh vesting tranche requires attainment of a market-based metric to be achieved at any time during a five year performance period and continued employment and service through the vesting date. The PSOs have contractual lives of eight years in comparison to the ten year contractual lives for the fiscal 2018 SOs issued. We estimated the fair values of the PSOs using a Monte Carlo simulation approach with the following assumptions: risk-free interest rate of 2.14%, expected term of 7 years, expected volatility of 22.44% and dividend yield of 1.49%. Stock-based compensation expense is to be recognized for each of the six performance-based and market-based tranches once each vesting tranche becomes probable of achievement over the longer of the estimated implicit service period for performance-metric achievement or derived service period for market-based metric achievement. We have preliminarily estimated service periods for those tranches that have been deemed probable of achievement to be approximately three to five years. Stock-based compensation for the market-based tranche will be recognized using the derived service period for the market-based metric achievement, which we have initially estimated to be approximately three years. 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) 2017 2016 Cloud SaaS $ 9 $ 5 Cloud PaaS and IaaS 2 1 Software license updates and product support 7 6 Hardware 3 3 Services 14 8 Sales and marketing 89 63 Research and development 234 195 General and administrative 44 38 Acquisition related and other 1 — Total stock-based compensation $ 403 $ 319 |
INCOME TAXES
INCOME TAXES | 3 Months Ended |
Aug. 31, 2017 | |
Income Tax Disclosure [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, changes in unrecognized tax benefits due to settlements with tax authorities and other events, the tax effects of stock-based compensation and the U.S. domestic production activity deduction. Our effective tax rate was 14.5% and 22.8% for the three months ended August 31, 2017 and 2016, respectively. Our net deferred tax assets were $693 million and $683 million as of August 31, 2017 and May 31, 2017, respectively. We believe that 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 2016. Our U.S. federal income tax returns have been examined for all years prior to fiscal 2007, and we are no longer subject to audit for those periods. Our U.S. state income tax returns, with some exceptions, have been examined for all years prior to fiscal 2004, 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. On July 27, 2015, in Altera Corp. v. Commissioner We are under audit by the IRS and various other domestic and foreign tax authorities with regards to income tax and indirect tax matters and are involved in various challenges and litigation in a number of countries, including, in particular, Australia, Brazil, India, Korea, Spain and the United Kingdom, where the amounts under controversy are significant. In some, although not all, cases, we have reserved for potential adjustments to our provision for income taxes and accrual of indirect taxes that may result from examinations by, or any negotiated agreements with, these tax authorities or final outcomes in judicial proceedings, and we believe that the final outcome of these examinations, agreements or judicial proceedings will not have a material effect on our results of operations. If events occur which indicate payment of these amounts is unnecessary, the reversal of the liabilities would result in the recognition of benefits in the period we determine the liabilities are no longer necessary. If our estimates of the federal, state, and foreign income tax liabilities and indirect tax liabilities are less than the ultimate assessment, it could result in a further charge to expense. We believe that we have adequately provided under 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. |
SEGMENT INFORMATION
SEGMENT INFORMATION | 3 Months Ended |
Aug. 31, 2017 | |
Segment Reporting [Abstract] | |
SEGMENT INFORMATION | 11. SEGMENT INFORMATION ASC 280, Segment Reporting We have three businesses—cloud and on-premise software, hardware and services—each of which is comprised of a single operating segment. Our cloud and on-premise software line of business markets, sells and delivers a broad spectrum of applications, platform and infrastructure technologies through our cloud offerings and on-premise software offerings. Our Oracle Cloud SaaS and Cloud PaaS and IaaS offerings deliver certain of our applications, platform and infrastructure technologies on a subscription basis via cloud-based deployment models that we host, manage and support. Our IaaS offerings also include Oracle Managed Cloud Services, which are designed to provide comprehensive software and hardware management, maintenance and security services for on-premise, cloud-based or hybrid IT infrastructures. Our cloud and on-premise software business also licenses our software products, generally on a perpetual basis, including Oracle Applications, Oracle Database, Oracle Fusion Middleware and Java, among others, for on-premise and other IT environments. Customers that license our software have the option to purchase software license updates and product support contracts, which provide customers with rights to unspecified software product upgrades and maintenance releases, patch releases, internet access to technical content, as well as internet and telephone access to technical support personnel during the support period. Our hardware business provides Oracle Engineered Systems, servers, storage, industry-specific hardware, virtualization software, operating systems including the Oracle Solaris Operating System and management software to support diverse IT environments. Our hardware business also includes hardware support, which provides customers with software updates for the software components that are essential to the functionality of the hardware products, such as Oracle Solaris and certain other software, and can include product repairs, maintenance services and technical support services. Our services business provides services to customers and partners to help maximize the performance of their investments in Oracle applications, platform and infrastructure technologies. We do not track our assets for each business. Consequently, it is not practical to show assets by operating segment. The following table presents summary results for each of our three businesses (fiscal 2017 results have been recast to conform to the current year’s presentation): Three Months Ended August 31, (in millions) 2017 2016 Cloud and on-premise software: Revenues (1) $ 7,409 $ 6,809 Cloud SaaS, PaaS and IaaS expenses 580 401 Software license updates and product support expenses 240 257 Sales and marketing expenses 1,684 1,596 Margin (2) $ 4,905 $ 4,555 Hardware: Revenues $ 943 $ 996 Hardware products and support expenses 366 381 Sales and marketing expenses 170 203 Margin (2) $ 407 $ 412 Services: Revenues $ 860 $ 808 Services expenses 665 665 Margin (2) $ 195 $ 143 Totals: Revenues (1) $ 9,212 $ 8,613 Expenses 3,705 3,503 Margin (2) $ 5,507 $ 5,110 (1) Cloud and on-premise software revenues for management reporting included revenues related to cloud and on-premise software obligations that would have otherwise been recorded by the acquired businesses as independent entities but were not recognized in our consolidated statements of operations for the periods presented due to business combination accounting requirements. 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 consolidated revenues as reported in our consolidated statements of operations. (2) The margins reported reflect only the direct controllable costs of each line of business and do not include allocations of product development, general and administrative and certain other allocable expenses. Additionally, the margins reported above do not reflect amortization of intangible assets, acquisition related and other expenses, restructuring expenses, stock-based compensation, interest expense or certain other non-operating income, 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) 2017 2016 Total revenues for operating segments $ 9,212 $ 8,613 Cloud and on-premise software revenues (1) (25 ) (18 ) Total revenues $ 9,187 $ 8,595 Total margin for operating segments $ 5,507 $ 5,110 Cloud and on-premise software revenues (1) (25 ) (18 ) Research and development (1,574 ) (1,520 ) General and administrative (320 ) (315 ) Amortization of intangible assets (411 ) (311 ) Acquisition related and other (12 ) (14 ) Restructuring (124 ) (99 ) Stock-based compensation for operating segments (124 ) (86 ) Expense allocations and other, net (96 ) (106 ) Interest expense (469 ) (416 ) Non-operating income, net 233 148 Income before provision for income taxes $ 2,585 $ 2,373 (1) Cloud and on-premise software revenues for management reporting included revenues related to cloud and on-premise software obligations that would have otherwise been recorded by the acquired businesses as independent entities but were not recognized in our consolidated statements of operations for the periods presented due to business combination accounting requirements. See Note 7 for an explanation of these adjustments and this table for a reconciliation of our total operating segment revenues to our total consolidated revenues as reported in our consolidated statements of operations. |
EARNINGS PER SHARE
EARNINGS PER SHARE | 3 Months Ended |
Aug. 31, 2017 | |
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 restricted stock-based awards, stock options, 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) 2017 2016 Net income $ 2,210 $ 1,832 Weighted average common shares outstanding 4,156 4,119 Dilutive effect of employee stock plans 128 102 Dilutive weighted average common shares outstanding 4,284 4,221 Basic earnings per share $ 0.53 $ 0.44 Diluted earnings per share $ 0.52 $ 0.43 Shares subject to anti-dilutive restricted stock-based awards and stock options excluded from calculation (1) 31 72 (1) These weighted shares relate to anti-dilutive restricted service based stock-based awards and stock options (as calculated using the treasury stock method) and contingently issuable shares under PSO and PSU arrangements. Such shares could be dilutive in the future. |
LEGAL PROCEEDINGS
LEGAL PROCEEDINGS | 3 Months Ended |
Aug. 31, 2017 | |
Legal Proceedings [Abstract] | |
LEGAL PROCEEDINGS | 13. LEGAL PROCEEDINGS Hewlett-Packard Company Litigation On June 15, 2011, Hewlett-Packard Company, now Hewlett Packard Enterprise 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 is our Chief Executive Officer and 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 (the Phase One Ruling). A jury trial began on May 23, 2016. On June 30, 2016, the jury returned a verdict in favor of HP on its claims for breach of contract and breach of the implied covenant of good faith and fair dealing and against Oracle on its claim for violation of the Lanham Act (the Phase Two Jury Verdict). The jury awarded HP damages in the amount of $3.0 billion, and HP is entitled to post-judgment interest on this award. On August 30, 2016, the court denied HP’s motion for pre-judgment interest. Judgment was entered on October 20, 2016. Oracle posted certain court-mandated surety bonds with the court in order to proceed with its motion for a new trial and entered into related indemnification agreements with each of the surety bond issuing companies. Oracle filed a motion for a new trial on November 14, 2016, which was denied. Oracle filed its notice of appeal on January 17, 2017, specifying that it was appealing the trial court’s Phase One Ruling and Phase Two Jury Verdict. On February 2, 2017, HP filed a notice of appeal of the trial court’s denial of pre-judgment interest. No amounts have been paid or recorded to our results of operations either prior to or subsequent to the Phase One Ruling or Phase Two Jury Verdict. We continue to believe that we have meritorious defenses against HP’s claims, and we intend to present these defenses to the appellate court. Among the arguments we expect to make on appeal are the following: the trial court misapplied fundamental principles of contract law and misinterpreted the Hurd Settlement Agreement, including by disregarding the context of the Hurd Settlement Agreement and the evidence of the parties’ mutual intentions; that HP’s breach of contract claim should fail as a matter of law because HP does not claim and did not prove that Oracle failed to deliver any software under the trial court’s interpretation of the contract; that awarding HP both damages for breach of the Hurd Settlement Agreement and specific performance of that agreement constitutes an improper double recovery; and that the damages award is excessive, unsupported by the evidence, and contrary to law. We cannot currently estimate a reasonably possible range of loss for this action due to the complexities and uncertainty surrounding the appeal process and the nature of the claims. Litigation is inherently unpredictable, and the outcome of the appeal process related to this action is uncertain. It is possible that the resolution of this action could have a material impact to our future cash flows and results of operations. Derivative Litigation On May 3, 2017, a stockholder derivative lawsuit was filed in the Court of Chancery of the State of Delaware. The derivative suit is brought by an alleged stockholder of Oracle, purportedly on Oracle’s behalf, against Oracle, our Chairman of the Board of Directors and Chief Technology Officer in his capacities as a director, officer and an alleged controlling stockholder, one of our Chief Executive Officers (who is also a director), three other directors, and Oracle as a nominal defendant. Plaintiff alleges that the defendants breached their fiduciary duties by causing Oracle to agree to purchase NetSuite Inc. (NetSuite) at an excessive price. Plaintiff seeks declaratory relief, an order rescinding or reforming the NetSuite transaction, unspecified monetary damages (including interest), attorneys’ fees and costs, and disgorgement of various unspecified profits, fees, compensation, and benefits. On July 19, 2017, defendants moved to dismiss this complaint. On July 18, 2017, a second stockholder derivative lawsuit was filed in the Court of Chancery of the State of Delaware, brought by another alleged stockholder of Oracle, purportedly on Oracle’s behalf. The suit is brought against all current members and one former member of our Board of Directors, and Oracle as a nominal defendant. Plaintiff alleges that the defendants breached their fiduciary duties by causing Oracle to agree to purchase NetSuite at an excessive price. Plaintiff seeks declaratory relief, unspecified monetary damages (including interest), and attorneys’ fees and costs. On August 9, 2017, the court consolidated the two derivative cases, and vacated the scheduling order relating to defendants’ motion to dismiss the first case. In a September 7, 2017, order, the court appointed plaintiff’s counsel in the second case as lead plaintiffs’ counsel and designated the July 18, 2017 complaint as the operative complaint. The parties will confer regarding the timing of defendants’ response to this complaint. While Oracle continues to evaluate these claims, we do not believe this litigation will have a material impact on our financial position or results of operations. 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. |
BASIS OF PRESENTATION AND REC20
BASIS OF PRESENTATION AND RECENT ACCOUNTING PRONOUNCEMENTS (Policies) | 3 Months Ended |
Aug. 31, 2017 | |
Accounting Policies [Abstract] | |
Basis of Presentation | 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 (SEC). Certain information and footnote disclosures normally included in financial statements prepared in accordance with U.S. generally accepted accounting principles (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, 2017. 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, 2018. 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 three months of fiscal 2017, we adopted Accounting Standards Update (ASU) 2017-04, Intangibles—Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment |
Cash, Cash Equivalents and Restricted Cash | Cash, Cash Equivalents and Restricted Cash Restricted cash that was included within cash and cash equivalents as presented within our condensed consolidated balance sheets as of August 31, 2017 and May 31, 2017 and our condensed consolidated statements of cash flows for the three months ended August 31, 2017 and 2016 was nominal. |
Acquisition Related and Other Expenses | Acquisition Related and Other Expenses Acquisition related and other expenses consist of personnel related costs and stock-based compensation for transitional and certain other employees, integration related professional services, certain business combination adjustments including certain adjustments after the measurement period has ended and certain other operating items, net. Three Months Ended August 31, (in millions) 2017 2016 Transitional and other employee related costs $ 9 $ 8 Stock-based compensation 1 — Professional fees and other, net 3 5 Business combination adjustments, net (1 ) 1 Total acquisition related and other expenses $ 12 $ 14 |
Non-Operating Income, net | 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) 2017 2016 Interest income $ 257 $ 177 Foreign currency losses, net (4 ) (13 ) Noncontrolling interests in income (47 ) (35 ) Other income (loss), net 27 19 Total non-operating income, net $ 233 $ 148 |
Sales of Financing Receivables | 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, 2017 and 2016, $818 million and $898 million of financing receivables were sold to financial institutions, respectively. |
Recent Accounting Pronouncements | Recent Accounting Pronouncements Derivatives and Hedging: In August 2017, the Financial Accounting Standards Board (FASB) issued ASU 2017-12, Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities (ASU 2017-12), which amends and simplifies existing guidance in order to allow companies to more accurately present the economic effects of risk management activities in the financial statements. ASU 2017-12 is effective for us in the first quarter of fiscal 2020, and earlier adoption is permitted. We are currently evaluating the impact of our pending adoption of ASU 2017-12 on our consolidated financial statements. Retirement Benefits: In March 2017, the FASB issued ASU 2017-07, Compensation—Retirement Benefits (Topic 715): Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost (ASU 2017-07), which provides guidance on the capitalization, presentation and disclosure of net benefit costs. ASU 2017-07 is effective for us in the first quarter of fiscal 2019. We are currently evaluating the impact of our pending adoption of ASU 2017-07 on our consolidated financial statements. Income Taxes: In October 2016, the FASB issued ASU 2016-16, Income Taxes (Topic 740): Intra-Entity Transfers of Assets Other Than Inventory (ASU 2016-16), which changes the timing of when certain intercompany transactions are recognized within the provision for income taxes. ASU 2016-16 is effective for us in our first quarter of fiscal 2019 on a modified retrospective basis, and earlier adoption is permitted. We are currently evaluating the impact of our pending adoption of ASU 2016-16 on our consolidated financial statements. Financial Instruments: In June 2016, the FASB issued ASU 2016-13, Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments (ASU 2016-13), which requires measurement and recognition of expected credit losses for financial assets held. ASU 2016-13 is effective for us in our first quarter of fiscal 2021, and earlier adoption is permitted beginning in the first quarter of fiscal 2020. We are currently evaluating the impact of our pending adoption of ASU 2016-13 on our consolidated financial statements. In January 2016, the FASB issued ASU 2016-01, Financial Instruments—Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities Leases: In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842) (ASU 2016-02). ASU 2016-02 requires companies to generally recognize on the balance sheet operating and financing lease liabilities and corresponding right-of-use assets. ASU 2016-02 is effective for us in our first quarter of fiscal 2020 on a modified retrospective basis, and earlier adoption is permitted. We are currently evaluating the impact of our pending adoption of ASU 2016-02 on our consolidated financial statements. We currently expect that most of our operating lease commitments will be subject to the new standard and recognized as operating lease liabilities and right-of-use assets upon our adoption of ASU 2016-02, which will increase our total assets and total liabilities that we report relative to such amounts prior to adoption. Revenue Recognition: In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers: Topic 606 and issued subsequent amendments to the initial guidance in August 2015, March 2016, April 2016, May 2016, December 2016 and May 2017 within ASU 2015-14, ASU 2016-08, ASU 2016-10, ASU 2016-12, ASU 2016-20 and ASU 2017-10, respectively, and collectively Topic 606. Topic 606 supersedes nearly all existing revenue recognition guidance under GAAP. The core principle of Topic 606 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. Topic 606 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 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. Topic 606 also provides guidance on the recognition of costs related to obtaining customer contracts. Topic 606 is effective for us as of our first quarter of fiscal 2019 using either of two methods: (1) retrospective application of Topic 606 to each prior reporting period presented with the option to elect certain practical expedients as defined within Topic 606 or (2) retrospective application of Topic 606 with the cumulative effect of initially applying Topic 606 recognized at the date of initial application and providing certain additional disclosures as defined per Topic 606. The accounting for the recognition of costs related to obtaining customer contracts under Topic 606 is significantly different than our current capitalization policy. The adoption of Topic 606 will result in additional types of costs that will be capitalized. Additionally, all amounts capitalized will be amortized over a period longer than our current policy. We plan to adopt Topic 606 in the first quarter of fiscal 2019 pursuant to the aforementioned adoption method (1) and we do not believe there will be a material impact to our revenues upon adoption. We are continuing to evaluate the impact to our revenues and costs related to our pending adoption of Topic 606 and our preliminary assessments are subject to change. |
BASIS OF PRESENTATION AND REC21
BASIS OF PRESENTATION AND RECENT ACCOUNTING PRONOUNCEMENTS (Tables) | 3 Months Ended |
Aug. 31, 2017 | |
Organization Consolidation And Presentation Of Financial Statements [Abstract] | |
Acquisition Related and Other Expenses | Three Months Ended August 31, (in millions) 2017 2016 Transitional and other employee related costs $ 9 $ 8 Stock-based compensation 1 — Professional fees and other, net 3 5 Business combination adjustments, net (1 ) 1 Total acquisition related and other expenses $ 12 $ 14 |
Non-Operating Income, net | Three Months Ended August 31, (in millions) 2017 2016 Interest income $ 257 $ 177 Foreign currency losses, net (4 ) (13 ) Noncontrolling interests in income (47 ) (35 ) Other income (loss), net 27 19 Total non-operating income, net $ 233 $ 148 |
ACQUISITIONS (Tables)
ACQUISITIONS (Tables) | 3 Months Ended |
Aug. 31, 2017 | |
Business Combinations [Abstract] | |
Unaudited Pro Forma Financial Information | Three Months Ended August 31, (in millions, except per share data) 2017 2016 Total revenues $ 9,187 $ 8,856 Net income $ 2,210 $ 1,666 Basic earnings per share $ 0.53 $ 0.40 Diluted earnings per share $ 0.52 $ 0.39 |
FAIR VALUE MEASUREMENTS (Tables
FAIR VALUE MEASUREMENTS (Tables) | 3 Months Ended |
Aug. 31, 2017 | |
Fair Value Disclosures [Abstract] | |
Assets and Liabilities Measured at Fair Value on a Recurring Basis | August 31, 2017 May 31, 2017 Fair Value Measurements Using Input Types Fair Value Measurements Using Input Types (in millions) Level 1 Level 2 Total Level 1 Level 2 Total Assets: Corporate debt securities and other $ 427 $ 43,153 $ 43,580 $ 580 $ 41,038 $ 41,618 Commercial paper debt securities — 4,210 4,210 — 5,053 5,053 Money market funds 1,502 — 1,502 3,302 — 3,302 Derivative financial instruments — 40 40 — 40 40 Total assets $ 1,929 $ 47,403 $ 49,332 $ 3,882 $ 46,131 $ 50,013 Liabilities: Derivative financial instruments $ — $ 106 $ 106 $ — $ 191 $ 191 |
INVENTORIES (Tables)
INVENTORIES (Tables) | 3 Months Ended |
Aug. 31, 2017 | |
Inventory Net [Abstract] | |
Inventories | (in millions) August 31, 2017 May 31, 2017 Raw materials $ 158 $ 186 Work-in-process 34 42 Finished goods 120 72 Total inventories $ 312 $ 300 |
INTANGIBLE ASSETS AND GOODWILL
INTANGIBLE ASSETS AND GOODWILL (Tables) | 3 Months Ended |
Aug. 31, 2017 | |
Goodwill And Intangible Assets Disclosure [Abstract] | |
Intangible Assets | Intangible Assets, Gross Accumulated Amortization Intangible Assets, Net (Dollars in millions) May 31, 2017 Additions & Adjustments, net August 31, 2017 May 31, 2017 Expense August 31, 2017 May 31, 2017 August 31, 2017 Developed technology $ 5,397 $ (214 ) $ 5,183 $ (2,295 ) $ (190 ) $ (2,485 ) $ 3,102 $ 2,698 SaaS, PaaS and IaaS agreements and related relationships 4,105 114 4,219 (1,089 ) (151 ) (1,240 ) 3,016 2,979 Software support agreements and related relationships 1,565 — 1,565 (559 ) (31 ) (590 ) 1,006 975 Other 1,998 18 2,016 (1,443 ) (39 ) (1,482 ) 555 534 Total intangible assets, net $ 13,065 $ (82 ) $ 12,983 $ (5,386 ) $ (411 ) $ (5,797 ) $ 7,679 $ 7,186 |
Estimated Future Amortization Expenses Related to Intangible Assets | Remainder of fiscal 2018 $ 1,179 Fiscal 2019 1,408 Fiscal 2020 1,207 Fiscal 2021 1,021 Fiscal 2022 918 Fiscal 2023 567 Thereafter 886 Total intangible assets, net $ 7,186 |
Goodwill | (in millions) Cloud and On-Premise Software Hardware Services Total Goodwill, net Balances as of May 31, 2017 $ 38,791 $ 2,367 $ 1,887 $ 43,045 Goodwill adjustments, net (1) (25 ) — — (25 ) Balances as of August 31, 2017 $ 38,766 $ 2,367 $ 1,887 $ 43,020 (1) Pursuant to our business combinations accounting policy, we recorded goodwill adjustments for the effects on goodwill of changes to net assets acquired during the period that such a change is identified, provided that any such change is within the measurement period (up to one year from the date of the acquisition). |
RESTRUCTURING ACTIVITIES (Table
RESTRUCTURING ACTIVITIES (Tables) | 3 Months Ended |
Aug. 31, 2017 | |
Restructuring And Related Activities [Abstract] | |
Summary of All Plans | Accrued Three Months Ended August 31, 2017 Accrued Total Costs Total Expected (in millions) May 31, 2017 (2) Initial Costs (3) Adj. Cost (4) Cash Payments Others (5) August 31, 2017 (2) Accrued to Date Program Costs Fiscal 2017 Oracle Restructuring Plan (1) Cloud and on-premise software $ 85 $ 54 $ (2 ) $ (70 ) $ 5 $ 72 $ 230 $ 300 Hardware 31 28 (3 ) (26 ) 2 32 113 241 Services 25 12 (1 ) (22 ) 1 15 69 130 Other 44 41 (6 ) (23 ) — 56 197 413 Total Fiscal 2017 Oracle Restructuring Plan $ 185 $ 135 $ (12 ) $ (141 ) $ 8 $ 175 $ 609 $ 1,084 Total other restructuring plans (6) $ 79 $ 1 $ — $ (15 ) $ 3 $ 68 Total restructuring plans $ 264 $ 136 $ (12 ) $ (156 ) $ 11 $ 243 (1) Restructuring costs recorded for individual line items primarily related to employee severance costs. (2) The balances at August 31, 2017 and May 31, 2017 included $217 million and $242 million, respectively, recorded in other current liabilities, and $26 million and $22 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 periodic impact to our condensed consolidated statements of operations was not significant. |
DEFERRED REVENUES (Tables)
DEFERRED REVENUES (Tables) | 3 Months Ended |
Aug. 31, 2017 | |
Deferred Revenue Disclosure [Abstract] | |
Deferred Revenues | (in millions) August 31, 2017 May 31, 2017 Software license updates and product support $ 7,690 $ 5,952 Cloud SaaS, PaaS and IaaS 1,397 1,192 Hardware 716 640 Services 407 382 New software licenses 59 67 Deferred revenues, current 10,269 8,233 Deferred revenues, non-current (in other non-current liabilities) 653 602 Total deferred revenues $ 10,922 $ 8,835 |
DERIVATIVE FINANCIAL INSTRUME28
DERIVATIVE FINANCIAL INSTRUMENTS (Tables) | 3 Months Ended |
Aug. 31, 2017 | |
Derivative Instrument Detail [Abstract] | |
Fair Values of Derivative and Non-Derivative Instruments Designated as Hedges in Consolidated Balance Sheets | Fair Value as of (in millions) Balance Sheet Location August 31, 2017 May 31, 2017 Interest rate swap agreements designated as fair value hedges Other assets $ 40 $ 40 Cross-currency swap agreements designated as cash flow hedges Other non-current $ (106 ) $ (191 ) Foreign currency borrowings designated as net investment hedge Notes payable, non-current $ (938 ) $ (980 ) |
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 Location Three Months Ended August 31, Three Months Ended August 31, (in millions) 2017 2016 2017 2016 Cross-currency swap agreements designated as cash flow hedges $ 85 $ 3 Non-operating income (expense), net $ 107 $ 1 Foreign currency borrowings designated as net investment hedge $ (64 ) $ (1 ) Not applicable $ — $ — Location and Amount of Gain (Loss) Recognized in Income on Derivative Location and Amount of Gain (Loss) on Hedged Item Recognized in Income Attributable to Risk Being Three Months Ended August 31, Three Months Ended August 31, (in millions) 2017 2016 2017 2016 Interest rate swap agreements designated as fair value hedges Interest expense $ — $ 9 Interest $ — $ (9 ) |
STOCKHOLDERS' EQUITY (Tables)
STOCKHOLDERS' EQUITY (Tables) | 3 Months Ended |
Aug. 31, 2017 | |
Stockholders Equity Note [Abstract] | |
Stock-Based Compensation Expense | Three Months Ended August 31, (in millions) 2017 2016 Cloud SaaS $ 9 $ 5 Cloud PaaS and IaaS 2 1 Software license updates and product support 7 6 Hardware 3 3 Services 14 8 Sales and marketing 89 63 Research and development 234 195 General and administrative 44 38 Acquisition related and other 1 — Total stock-based compensation $ 403 $ 319 |
SEGMENT INFORMATION (Tables)
SEGMENT INFORMATION (Tables) | 3 Months Ended |
Aug. 31, 2017 | |
Segment Reporting [Abstract] | |
Summary of Businesses Results | Three Months Ended August 31, (in millions) 2017 2016 Cloud and on-premise software: Revenues (1) $ 7,409 $ 6,809 Cloud SaaS, PaaS and IaaS expenses 580 401 Software license updates and product support expenses 240 257 Sales and marketing expenses 1,684 1,596 Margin (2) $ 4,905 $ 4,555 Hardware: Revenues $ 943 $ 996 Hardware products and support expenses 366 381 Sales and marketing expenses 170 203 Margin (2) $ 407 $ 412 Services: Revenues $ 860 $ 808 Services expenses 665 665 Margin (2) $ 195 $ 143 Totals: Revenues (1) $ 9,212 $ 8,613 Expenses 3,705 3,503 Margin (2) $ 5,507 $ 5,110 (1) Cloud and on-premise software revenues for management reporting included revenues related to cloud and on-premise software obligations that would have otherwise been recorded by the acquired businesses as independent entities but were not recognized in our consolidated statements of operations for the periods presented due to business combination accounting requirements. 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 consolidated revenues as reported in our consolidated statements of operations. (2) The margins reported reflect only the direct controllable costs of each line of business and do not include allocations of product development, general and administrative and certain other allocable expenses. Additionally, the margins reported above do not reflect amortization of intangible assets, acquisition related and other expenses, restructuring expenses, stock-based compensation, interest expense or certain other non-operating income, net. |
Reconciliation of Total Operating Segment Revenues to Total Revenues | Three Months Ended August 31, (in millions) 2017 2016 Total revenues for operating segments $ 9,212 $ 8,613 Cloud and on-premise software revenues (1) (25 ) (18 ) Total revenues $ 9,187 $ 8,595 |
Reconciliation of Total Operating Segment Margin to Income before Provision for Income Taxes | Total margin for operating segments $ 5,507 $ 5,110 Cloud and on-premise software revenues (1) (25 ) (18 ) Research and development (1,574 ) (1,520 ) General and administrative (320 ) (315 ) Amortization of intangible assets (411 ) (311 ) Acquisition related and other (12 ) (14 ) Restructuring (124 ) (99 ) Stock-based compensation for operating segments (124 ) (86 ) Expense allocations and other, net (96 ) (106 ) Interest expense (469 ) (416 ) Non-operating income, net 233 148 Income before provision for income taxes $ 2,585 $ 2,373 (1) Cloud and on-premise software revenues for management reporting included revenues related to cloud and on-premise software obligations that would have otherwise been recorded by the acquired businesses as independent entities but were not recognized in our consolidated statements of operations for the periods presented due to business combination accounting requirements. See Note 7 for an explanation of these adjustments and this table for a reconciliation of our total operating segment revenues to our total consolidated revenues as reported in our consolidated statements of operations. |
EARNINGS PER SHARE (Tables)
EARNINGS PER SHARE (Tables) | 3 Months Ended |
Aug. 31, 2017 | |
Earnings Per Share [Abstract] | |
Earnings Per Share | Three Months Ended August 31, (in millions, except per share data) 2017 2016 Net income $ 2,210 $ 1,832 Weighted average common shares outstanding 4,156 4,119 Dilutive effect of employee stock plans 128 102 Dilutive weighted average common shares outstanding 4,284 4,221 Basic earnings per share $ 0.53 $ 0.44 Diluted earnings per share $ 0.52 $ 0.43 Shares subject to anti-dilutive restricted stock-based awards and stock options excluded from calculation (1) 31 72 (1) These weighted shares relate to anti-dilutive restricted service based stock-based awards and stock options (as calculated using the treasury stock method) and contingently issuable shares under PSO and PSU arrangements. Such shares could be dilutive in the future. |
BASIS OF PRESENTATION AND REC32
BASIS OF PRESENTATION AND RECENT ACCOUNTING PRONOUNCEMENTS Narrative (Details) - USD ($) $ in Millions | 3 Months Ended | |
Aug. 31, 2017 | Aug. 31, 2016 | |
Restricted Cash And Cash Equivalents [Abstract] | ||
Restricted cash and cash equivalent description | Restricted cash that was included within cash and cash equivalents as presented within our condensed consolidated balance sheets as of August 31, 2017 and May 31, 2017 and our condensed consolidated statements of cash flows for the three months ended August 31, 2017 and 2016 was nominal. | |
Sales of Financing Receivables [Narrative] [Abstract] | ||
Sales of financing receivables | $ 818 | $ 898 |
BASIS OF PRESENTATION AND REC33
BASIS OF PRESENTATION AND RECENT ACCOUNTING PRONOUNCEMENTS (Details) - USD ($) $ in Millions | 3 Months Ended | |
Aug. 31, 2017 | Aug. 31, 2016 | |
Acquisition Related and Other Expenses [Abstract] | ||
Transitional and other employee related costs | $ 9 | $ 8 |
Stock-based compensation | 1 | 0 |
Professional fees and other, net | 3 | 5 |
Business combination adjustments, net | (1) | 1 |
Total acquisition related and other expenses | 12 | 14 |
Non-Operating Income, net [Abstract] | ||
Interest income | 257 | 177 |
Foreign currency losses, net | (4) | (13) |
Noncontrolling interests in income | (47) | (35) |
Other income (loss), net | 27 | 19 |
Total non-operating income, net | $ 233 | $ 148 |
ACQUISITIONS Narrative (Details
ACQUISITIONS Narrative (Details) - USD ($) $ in Millions | 3 Months Ended | ||
Aug. 31, 2017 | Aug. 31, 2016 | May 31, 2017 | |
Acquisition [Line Items] | |||
Fair values of restricted stock-based awards and stock options assumed in connection with acquisitions | $ 0 | $ 6 | |
Goodwill, net | $ 43,020 | $ 43,045 | |
NetSuite Inc. [Member] | Related Party [Member] | |||
Acquisition [Line Items] | |||
Acquisition completion date | Nov. 7, 2016 | ||
Business Combination Reason For Business Combination | We acquired NetSuite to, among other things, expand our cloud software as a service offerings with a complementary set of cloud ERP and related cloud software applications for customers. | ||
Percentage of shares owned | 40.00% | ||
Total purchase price | $ 9,100 | ||
Cash portion of purchase price | 9,000 | ||
Fair values of restricted stock-based awards and stock options assumed in connection with acquisitions | 78 | ||
Goodwill, net | 6,700 | ||
Intangible assets | 3,200 | ||
Net tangible assets (liabilities) | (816) | ||
Other Fiscal 2017 Acquisitions [Member] | |||
Acquisition [Line Items] | |||
Total purchase price | 3,000 | ||
Cash portion of purchase price | 3,000 | ||
Fair values of restricted stock-based awards and stock options assumed in connection with acquisitions | 13 | ||
Goodwill, net | 1,800 | ||
Intangible assets | 948 | ||
Net tangible assets (liabilities) | $ 241 | ||
Materiality of acquisitions individually or in the aggregate | These acquisitions were not significant individually or in the aggregate. |
ACQUISITIONS - UNAUDITED PRO FO
ACQUISITIONS - UNAUDITED PRO FORMA FINANCIAL INFORMATION (Details) - USD ($) $ / shares in Units, $ in Millions | 3 Months Ended | |
Aug. 31, 2017 | Aug. 31, 2016 | |
Acquisitions Proforma [Abstract] | ||
Total revenues | $ 9,187 | $ 8,856 |
Net income | $ 2,210 | $ 1,666 |
Basic earnings per share (in dollars per share) | $ 0.53 | $ 0.40 |
Diluted earnings per share (in dollars per share) | $ 0.52 | $ 0.39 |
FAIR VALUE MEASUREMENTS (Detail
FAIR VALUE MEASUREMENTS (Details) - USD ($) $ in Millions | Aug. 31, 2017 | May 31, 2017 |
Assets [Abstract] | ||
Corporate debt securities and other | $ 43,580 | $ 41,618 |
Commercial paper debt securities | 4,210 | 5,053 |
Money market funds | 1,502 | 3,302 |
Derivative financial instruments | 40 | 40 |
Total assets | 49,332 | 50,013 |
Liabilities [Abstract] | ||
Derivative financial instruments | 106 | 191 |
Fair Value Measurements Using Input Types Level 1 [Member] | ||
Assets [Abstract] | ||
Corporate debt securities and other | 427 | 580 |
Commercial paper debt securities | 0 | 0 |
Money market funds | 1,502 | 3,302 |
Derivative financial instruments | 0 | 0 |
Total assets | 1,929 | 3,882 |
Liabilities [Abstract] | ||
Derivative financial instruments | 0 | 0 |
Fair Value Measurements Using Input Types Level 2 [Member] | ||
Assets [Abstract] | ||
Corporate debt securities and other | 43,153 | 41,038 |
Commercial paper debt securities | 4,210 | 5,053 |
Money market funds | 0 | 0 |
Derivative financial instruments | 40 | 40 |
Total assets | 47,403 | 46,131 |
Liabilities [Abstract] | ||
Derivative financial instruments | $ 106 | $ 191 |
FAIR VALUE MEASUREMENTS Narrati
FAIR VALUE MEASUREMENTS Narrative (Details) - USD ($) $ in Billions | 3 Months Ended | |
Aug. 31, 2017 | May 31, 2017 | |
Marketable security investments maturity information [Abstract] | ||
Maturity of marketable security investments | As of August 31, 2017 and May 31, 2017, approximately 28% and 32%, respectively, of our marketable securities investments mature within one year and 72% and 68%, respectively, mature within one to six years. | |
Percentage of marketable securities investments mature within one year | 28.00% | 32.00% |
Percentage of marketable securities investments mature within one to six years | 72.00% | 68.00% |
Short and Long Term Debt [Abstract] | ||
Senior notes | $ 53.1 | $ 54 |
Fair Value Measurements Using Input Types Level 2 [Member] | ||
Liabilities [Abstract] | ||
Total debt fair value | $ 55.9 | $ 56.5 |
INVENTORIES (Details)
INVENTORIES (Details) - USD ($) $ in Millions | Aug. 31, 2017 | May 31, 2017 |
Inventory Net [Abstract] | ||
Raw materials | $ 158 | $ 186 |
Work-in-process | 34 | 42 |
Finished goods | 120 | 72 |
Total inventories | $ 312 | $ 300 |
INTANGIBLE ASSETS (Details)
INTANGIBLE ASSETS (Details) - USD ($) $ in Millions | 3 Months Ended | ||
Aug. 31, 2017 | Aug. 31, 2016 | May 31, 2017 | |
Acquired Finite-Lived Intangible Assets [Line Items] | |||
Intangible Assets, Gross | $ 12,983 | $ 13,065 | |
Additions & Adjustments, net | (82) | ||
Accumulated Amortization | (5,797) | (5,386) | |
Expense | (411) | $ (311) | |
Intangible Assets, Net | 7,186 | 7,679 | |
Developed technology [Member] | |||
Acquired Finite-Lived Intangible Assets [Line Items] | |||
Intangible Assets, Gross | 5,183 | 5,397 | |
Additions & Adjustments, net | (214) | ||
Accumulated Amortization | (2,485) | (2,295) | |
Expense | (190) | ||
Intangible Assets, Net | 2,698 | 3,102 | |
SaaS, PaaS and IaaS agreements and related relationships [Member] | |||
Acquired Finite-Lived Intangible Assets [Line Items] | |||
Intangible Assets, Gross | 4,219 | 4,105 | |
Additions & Adjustments, net | 114 | ||
Accumulated Amortization | (1,240) | (1,089) | |
Expense | (151) | ||
Intangible Assets, Net | 2,979 | 3,016 | |
Software support agreements and related relationships [Member] | |||
Acquired Finite-Lived Intangible Assets [Line Items] | |||
Intangible Assets, Gross | 1,565 | 1,565 | |
Additions & Adjustments, net | 0 | ||
Accumulated Amortization | (590) | (559) | |
Expense | (31) | ||
Intangible Assets, Net | 975 | 1,006 | |
Other Intangible Assets | |||
Acquired Finite-Lived Intangible Assets [Line Items] | |||
Intangible Assets, Gross | 2,016 | 1,998 | |
Additions & Adjustments, net | 18 | ||
Accumulated Amortization | (1,482) | (1,443) | |
Expense | (39) | ||
Intangible Assets, Net | $ 534 | $ 555 |
INTANGIBLE ASSETS AND GOODWIL40
INTANGIBLE ASSETS AND GOODWILL Narrative (Details) - USD ($) $ in Millions | 3 Months Ended | |
Aug. 31, 2017 | Aug. 31, 2016 | |
Goodwill And Intangible Assets Disclosure [Abstract] | ||
Amortization of intangible assets | $ 411 | $ 311 |
INTANGIBLE ASSETS AMORTIZATION
INTANGIBLE ASSETS AMORTIZATION (Details) - USD ($) $ in Millions | Aug. 31, 2017 | May 31, 2017 |
Finite lived intangible assets future amortization expense [Abstract] | ||
Remainder of fiscal 2018 | $ 1,179 | |
Fiscal 2,019 | 1,408 | |
Fiscal 2,020 | 1,207 | |
Fiscal 2,021 | 1,021 | |
Fiscal 2,022 | 918 | |
Fiscal 2,023 | 567 | |
Thereafter | 886 | |
Intangible Assets, Net | $ 7,186 | $ 7,679 |
GOODWILL (Details)
GOODWILL (Details) $ in Millions | 3 Months Ended | |
Aug. 31, 2017USD ($) | ||
Goodwill [Line Items] | ||
Balances at period start | $ 43,045 | |
Goodwill adjustments, net | (25) | [1] |
Balances at period end | 43,020 | |
Cloud and On-Premise Software [Member] | ||
Goodwill [Line Items] | ||
Balances at period start | 38,791 | |
Goodwill adjustments, net | (25) | [1] |
Balances at period end | 38,766 | |
Hardware [Member] | ||
Goodwill [Line Items] | ||
Balances at period start | 2,367 | |
Goodwill adjustments, net | 0 | [1] |
Balances at period end | 2,367 | |
Services [Member] | ||
Goodwill [Line Items] | ||
Balances at period start | 1,887 | |
Goodwill adjustments, net | 0 | [1] |
Balances at period end | $ 1,887 | |
[1] | Pursuant to our business combinations accounting policy, we recorded goodwill adjustments for the effects on goodwill of changes to net assets acquired during the period that such a change is identified, provided that any such change is within the measurement period (up to one year from the date of the acquisition). |
RESTRUCTURING ACTIVITIES (Detai
RESTRUCTURING ACTIVITIES (Details) - USD ($) $ in Millions | 3 Months Ended | ||
Aug. 31, 2017 | Aug. 31, 2016 | ||
Restructuring reserve [Line Items] | |||
Restructuring expenses | $ 124 | $ 99 | |
Accrued at period start | [1],[2] | 264 | |
Initial Costs | [1],[3] | 136 | |
Adjustments to Cost | [1],[4] | (12) | |
Cash Payments | [1] | (156) | |
Others | [1],[5] | 11 | |
Accrued at period end | [1],[2] | 243 | |
Fiscal 2017 Oracle Restructuring [Member] | |||
Restructuring reserve [Line Items] | |||
Total expected program costs | 1,100 | ||
Restructuring expenses | 124 | ||
Remaining expenses to incur | $ 475 | ||
Expected completion date | May 31, 2018 | ||
Fiscal 2017 Oracle Restructuring [Member] | Fiscal 2017 Activity [Member] | |||
Restructuring reserve [Line Items] | |||
Total expected program costs | [1] | $ 1,084 | |
Accrued at period start | [1],[2] | 185 | |
Initial Costs | [1],[3] | 135 | |
Adjustments to Cost | [1],[4] | (12) | |
Cash Payments | [1] | (141) | |
Others | [1],[5] | 8 | |
Accrued at period end | [1],[2] | 175 | |
Total Costs Accrued to Date | [1] | 609 | |
Fiscal 2017 Oracle Restructuring [Member] | Fiscal 2017 Activity [Member] | Cloud and on-premise software [Member] | |||
Restructuring reserve [Line Items] | |||
Total expected program costs | [1] | 300 | |
Accrued at period start | [1],[2] | 85 | |
Initial Costs | [1],[3] | 54 | |
Adjustments to Cost | [1],[4] | (2) | |
Cash Payments | [1] | (70) | |
Others | [1],[5] | 5 | |
Accrued at period end | [1],[2] | 72 | |
Total Costs Accrued to Date | [1] | 230 | |
Fiscal 2017 Oracle Restructuring [Member] | Fiscal 2017 Activity [Member] | Hardware [Member] | |||
Restructuring reserve [Line Items] | |||
Total expected program costs | [1] | 241 | |
Accrued at period start | [1],[2] | 31 | |
Initial Costs | [1],[3] | 28 | |
Adjustments to Cost | [1],[4] | (3) | |
Cash Payments | [1] | (26) | |
Others | [1],[5] | 2 | |
Accrued at period end | [1],[2] | 32 | |
Total Costs Accrued to Date | [1] | 113 | |
Fiscal 2017 Oracle Restructuring [Member] | Fiscal 2017 Activity [Member] | Services [Member] | |||
Restructuring reserve [Line Items] | |||
Total expected program costs | [1] | 130 | |
Accrued at period start | [1],[2] | 25 | |
Initial Costs | [1],[3] | 12 | |
Adjustments to Cost | [1],[4] | (1) | |
Cash Payments | [1] | (22) | |
Others | [1],[5] | 1 | |
Accrued at period end | [1],[2] | 15 | |
Total Costs Accrued to Date | [1] | 69 | |
Fiscal 2017 Oracle Restructuring [Member] | Fiscal 2017 Activity [Member] | Other [Member] | |||
Restructuring reserve [Line Items] | |||
Total expected program costs | [1] | 413 | |
Accrued at period start | [1],[2] | 44 | |
Initial Costs | [1],[3] | 41 | |
Adjustments to Cost | [1],[4] | (6) | |
Cash Payments | [1] | (23) | |
Others | [1],[5] | 0 | |
Accrued at period end | [1],[2] | 56 | |
Total Costs Accrued to Date | [1] | 197 | |
Other Restructuring Plans [Member] | Fiscal 2017 Activity [Member] | |||
Restructuring reserve [Line Items] | |||
Accrued at period start | [1],[2],[6] | 79 | |
Initial Costs | [1],[3],[6] | 1 | |
Adjustments to Cost | [1],[4],[6] | 0 | |
Cash Payments | [1],[6] | (15) | |
Others | [1],[5],[6] | 3 | |
Accrued at period end | [1],[2],[6] | $ 68 | |
[1] | Restructuring costs recorded for individual line items primarily related to employee severance costs. | ||
[2] | The balances at August 31, 2017 and May 31, 2017 included $217 million and $242 million, respectively, recorded in other current liabilities, and $26 million and $22 million, respectively, recorded in other non-current liabilities. | ||
[3] | Costs recorded for the respective restructuring plans during the current period presented. | ||
[4] | All plan adjustments were changes in estimates whereby increases and decreases in costs were generally recorded to operating expenses in the period of adjustments. | ||
[5] | Represents foreign currency translation and certain other adjustments. | ||
[6] | Other restructuring plans presented in the table above included condensed information for other Oracle based plans and other plans associated with certain of our acquisitions whereby we continued to make cash outlays to settle obligations under these plans during the period presented but for which the periodic impact to our condensed consolidated statements of operations was not significant. |
RESTRUCTURING ACTIVITIES Narrat
RESTRUCTURING ACTIVITIES Narrative (Details) - USD ($) $ in Millions | Aug. 31, 2017 | May 31, 2017 |
Restructuring Reserve [Abstract] | ||
Accrued restructuring liabilities, current (in other current liabilities) | $ 217 | $ 242 |
Accrued restructuring liabilities, non-current (in other non-current liabilities) | $ 26 | $ 22 |
DEFERRED REVENUES (Details)
DEFERRED REVENUES (Details) - USD ($) $ in Millions | Aug. 31, 2017 | May 31, 2017 |
Deferred Revenues [Line Items] | ||
Deferred revenues, current | $ 10,269 | $ 8,233 |
Deferred revenues, non-current (in other non-current liabilities) | 653 | 602 |
Total deferred revenues | 10,922 | 8,835 |
Software license updates and product support [Member] | ||
Deferred Revenues [Line Items] | ||
Deferred revenues, current | 7,690 | 5,952 |
Cloud SaaS, PaaS and IaaS [Member] | ||
Deferred Revenues [Line Items] | ||
Deferred revenues, current | 1,397 | 1,192 |
Hardware [Member] | ||
Deferred Revenues [Line Items] | ||
Deferred revenues, current | 716 | 640 |
Services business [Member] | ||
Deferred Revenues [Line Items] | ||
Deferred revenues, current | 407 | 382 |
New software licenses [Member] | ||
Deferred Revenues [Line Items] | ||
Deferred revenues, current | $ 59 | $ 67 |
DERIVATIVE FINANCIAL INSTRUME46
DERIVATIVE FINANCIAL INSTRUMENTS Narrative (Details) - USD ($) $ in Billions | 3 Months Ended | |
Aug. 31, 2017 | May 31, 2017 | |
Foreign Currency Forward Contracts Not Designated as Hedges [Abstract] | ||
Description of foreign currency forward contracts not designated as hedges | We also held certain foreign currency contracts that were not designated as hedges pursuant to ASC 815. As of August 31, 2017 and May 31, 2017, the notional amounts of such forward contracts we held to purchase U.S. Dollars in exchange for other major international currencies were $3.3 billion and $3.4 billion, respectively, and the notional amount of forward contracts we held to sell U.S. Dollars in exchange for other major international currencies were $1.2 billion and $1.4 billion, respectively. The fair values of our outstanding foreign currency forward contracts were nominal as of August 31, 2017 and May 31, 2017. | |
Forward contracts held to purchase U.S. Dollars [Member] | Foreign Currency Forward Contracts Not Designated as Hedges [Member] | ||
Foreign Currency Forward Contracts Not Designated as Hedges (Narrative) [Abstract] | ||
Notional amounts of forward contracts | $ 3.3 | $ 3.4 |
Forward contracts held to sell U.S. Dollars [Member] | Foreign Currency Forward Contracts Not Designated as Hedges [Member] | ||
Foreign Currency Forward Contracts Not Designated as Hedges (Narrative) [Abstract] | ||
Notional amounts of forward contracts | $ 1.2 | $ 1.4 |
DERIVATIVE FINANCIAL INSTRUME47
DERIVATIVE FINANCIAL INSTRUMENTS (Details) - USD ($) $ in Millions | 3 Months Ended | ||
Aug. 31, 2017 | Aug. 31, 2016 | May 31, 2017 | |
Fair Values of Derivative and Non-Derivative Instruments Designated as Hedges in Consolidated Balance Sheets [Abstract] | |||
Fair value, assets | $ 40 | $ 40 | |
Fair value, liabilities | (106) | (191) | |
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 | 0 | $ 9 | |
Amount of Gain (Loss) on Hedged Item Recognized in Income Attributable to Risk Being Hedged | 0 | (9) | |
Fair value hedges [Member] | Interest rate swap agreements [Member] | Other assets [Member] | |||
Fair Values of Derivative and Non-Derivative Instruments Designated as Hedges in Consolidated Balance Sheets [Abstract] | |||
Fair value, assets | 40 | 40 | |
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) | 85 | 3 | |
Cash flow hedges [Member] | Cross-currency swap agreements [Member] | Non-operating income (expense), 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) | 107 | 1 | |
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 Consolidated Balance Sheets [Abstract] | |||
Fair value, liabilities | (106) | (191) | |
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) | (64) | $ (1) | |
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 Consolidated Balance Sheets [Abstract] | |||
Fair value, debt | $ (938) | $ (980) |
STOCKHOLDERS' EQUITY Narrative
STOCKHOLDERS' EQUITY Narrative (Details) $ / shares in Units, shares in Millions, $ in Millions | Sep. 14, 2017$ / shares | Aug. 31, 2017USD ($)Tranche$ / sharesshares | Aug. 31, 2016USD ($)$ / sharesshares |
Stock Repurchases [Abstract] | |||
Amount available for future repurchases | $ | $ 4,800 | ||
Repurchases of common stock (in shares) | 10.2 | 49.3 | |
Repurchased amount | $ | $ 500 | $ 2,000 | |
Repurchased shares that were not settled (in shares) | 0.5 | ||
Repurchased amount that was not settled | $ | $ 23 | ||
Dividends on Common Stock [Abstract] | |||
Dividends per share, declared and paid (in dollars per share) | $ / shares | $ 0.19 | $ 0.15 | |
Stock-Based Compensation Expense and Valuations of Stock Awards [Abstract] | |||
Restricted stock-based awards granted (in shares) | 34 | ||
Stock options granted (in shares) | 77 | ||
Forfeitures and cancellations (in shares) | 7 | ||
Service-based stock options [Member] | |||
Stock-Based Compensation Expense and Valuations of Stock Awards [Abstract] | |||
Stock options granted (in shares) | 8 | ||
Expiration date | 10 years | ||
Performance-based stock options [Member] | |||
Stock-Based Compensation Expense and Valuations of Stock Awards [Abstract] | |||
Stock options granted (in shares) | 69 | ||
Number of vesting tranches granted that potentially may vest | Tranche | 7 | ||
Number of individual vesting tranches requiring attainment of both a performance and a market condition | Tranche | 6 | ||
Award performance period | 5 years | ||
Expiration date | 8 years | ||
Award service period for performance-based metrics, minimum | 3 years | ||
Award service period for performance-based metrics, maximum | 5 years | ||
Award service period for market-based metric | 3 years | ||
Weighted Average Input Assumptions Used and Resulting Fair Values [Abstract] | |||
Risk-free interest rate | 2.14% | ||
Expected life (in years) | 7 years | ||
Volatility | 22.44% | ||
Dividend yield | 1.49% | ||
Subsequent Event [Member] | |||
Dividends on Common Stock [Abstract] | |||
Dividends declared per share of outstanding common stock (in dollars per share) | $ / shares | $ 0.19 | ||
Dividend payable date | Oct. 25, 2017 | ||
Dividend record date | Oct. 11, 2017 |
STOCKHOLDERS' EQUITY (Details)
STOCKHOLDERS' EQUITY (Details) - USD ($) $ in Millions | 3 Months Ended | |
Aug. 31, 2017 | Aug. 31, 2016 | |
Stock-Based Compensation Expense and Valuations of Stock Awards [Abstract] | ||
Total stock-based compensation | $ 403 | $ 319 |
Cloud SaaS [Member] | ||
Stock-Based Compensation Expense and Valuations of Stock Awards [Abstract] | ||
Total stock-based compensation | 9 | 5 |
Cloud PaaS and IaaS [Member] | ||
Stock-Based Compensation Expense and Valuations of Stock Awards [Abstract] | ||
Total stock-based compensation | 2 | 1 |
Software license updates and product support [Member] | ||
Stock-Based Compensation Expense and Valuations of Stock Awards [Abstract] | ||
Total stock-based compensation | 7 | 6 |
Hardware [Member] | ||
Stock-Based Compensation Expense and Valuations of Stock Awards [Abstract] | ||
Total stock-based compensation | 3 | 3 |
Services business [Member] | ||
Stock-Based Compensation Expense and Valuations of Stock Awards [Abstract] | ||
Total stock-based compensation | 14 | 8 |
Sales and marketing [Member] | ||
Stock-Based Compensation Expense and Valuations of Stock Awards [Abstract] | ||
Total stock-based compensation | 89 | 63 |
Research and development [Member] | ||
Stock-Based Compensation Expense and Valuations of Stock Awards [Abstract] | ||
Total stock-based compensation | 234 | 195 |
General and administrative [Member] | ||
Stock-Based Compensation Expense and Valuations of Stock Awards [Abstract] | ||
Total stock-based compensation | 44 | 38 |
Acquisition related and other [Member] | ||
Stock-Based Compensation Expense and Valuations of Stock Awards [Abstract] | ||
Total stock-based compensation | $ 1 | $ 0 |
INCOME TAXES (Details)
INCOME TAXES (Details) - USD ($) $ in Millions | 3 Months Ended | ||
Aug. 31, 2017 | Aug. 31, 2016 | May 31, 2017 | |
Income Tax Examination [Line Items] | |||
Effective income tax rate | 14.50% | 22.80% | |
Net deferred tax assets | $ 693 | $ 683 | |
Domestic Country [Member] | |||
Income Tax Examination [Line Items] | |||
Income tax examinations | Domestically, U.S. federal and state taxing authorities are currently examining income tax returns of Oracle and various acquired entities for years through fiscal 2016. Our U.S. federal income tax returns have been examined for all years prior to fiscal 2007, and we are no longer subject to audit for those periods. Our U.S. state income tax returns, with some exceptions, have been examined for all years prior to fiscal 2004, and we are no longer subject to audit for those periods. | ||
Foreign Country [Member] | |||
Income Tax Examination [Line Items] | |||
Income tax examinations | 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. |
SEGMENT INFORMATION Narrative (
SEGMENT INFORMATION Narrative (Details) | 3 Months Ended |
Aug. 31, 2017BusinessSegment | |
Segment reporting information [Line Items] | |
Number of businesses | Business | 3 |
Cloud and On-Premise Software [Member] | |
Segment reporting information [Line Items] | |
Number of operating segments | 1 |
Hardware [Member] | |
Segment reporting information [Line Items] | |
Number of operating segments | 1 |
Services [Member] | |
Segment reporting information [Line Items] | |
Number of operating segments | 1 |
SEGMENT INFORMATION (Details)
SEGMENT INFORMATION (Details) - USD ($) $ in Millions | 3 Months Ended | ||
Aug. 31, 2017 | Aug. 31, 2016 | ||
Segment reporting information [Line Items] | |||
Revenues | $ 9,187 | $ 8,595 | |
Sales and marketing expenses | [1] | 1,992 | 1,919 |
Margin | 5,507 | 5,110 | |
Total for operating segments [Member] | |||
Segment reporting information [Line Items] | |||
Revenues | [2] | 9,212 | 8,613 |
Expenses | 3,705 | 3,503 | |
Margin | [3] | 5,507 | 5,110 |
Total for operating segments [Member] | Cloud and on-premise software [Member] | |||
Segment reporting information [Line Items] | |||
Revenues | [2] | 7,409 | 6,809 |
Cloud SaaS, PaaS and IaaS expenses | 580 | 401 | |
Software license updates and product support expenses | 240 | 257 | |
Sales and marketing expenses | 1,684 | 1,596 | |
Margin | [3] | 4,905 | 4,555 |
Total for operating segments [Member] | Hardware [Member] | |||
Segment reporting information [Line Items] | |||
Revenues | 943 | 996 | |
Hardware products and support expenses | 366 | 381 | |
Sales and marketing expenses | 170 | 203 | |
Margin | [3] | 407 | 412 |
Total for operating segments [Member] | Services [Member] | |||
Segment reporting information [Line Items] | |||
Revenues | 860 | 808 | |
Services expenses | 665 | 665 | |
Margin | [3] | $ 195 | $ 143 |
[1] | Exclusive of amortization of intangible assets, which is shown separately. | ||
[2] | Cloud and on-premise software revenues for management reporting included revenues related to cloud and on-premise software obligations that would have otherwise been recorded by the acquired businesses as independent entities but were not recognized in our consolidated statements of operations for the periods presented due to business combination accounting requirements. 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 consolidated revenues as reported in our consolidated statements of operations. | ||
[3] | The margins reported reflect only the direct controllable costs of each line of business and do not include allocations of product development, general and administrative and certain other allocable expenses. Additionally, the margins reported above do not reflect amortization of intangible assets, acquisition related and other expenses, restructuring expenses, stock-based compensation, interest expense or certain other non-operating income, net. |
SEGMENT INFORMATION RECONCILIAT
SEGMENT INFORMATION RECONCILIATION (Details) - USD ($) $ in Millions | 3 Months Ended | ||
Aug. 31, 2017 | Aug. 31, 2016 | ||
Reconciliation of Operating Segment Revenues to Revenues [Abstract] | |||
Total revenues | $ 9,187 | $ 8,595 | |
Cloud and on-premise software revenues | [1] | (25) | (18) |
Reconciliation of Total Operating Segment Margin to Income Before Provision for Income Taxes [Abstract] | |||
Total margin for operating segments | 5,507 | 5,110 | |
Cloud and on-premise software revenues | [1] | (25) | (18) |
Research and development | (1,574) | (1,520) | |
General and administrative | (320) | (315) | |
Amortization of intangible assets | (411) | (311) | |
Acquisition related and other | (12) | (14) | |
Restructuring | (124) | (99) | |
Stock-based compensation for operating segments | (124) | (86) | |
Expense allocations and other, net | (96) | (106) | |
Interest expense | (469) | (416) | |
Non-operating income, net | 233 | 148 | |
Income before provision for income taxes | 2,585 | 2,373 | |
Total for operating segments Member | |||
Reconciliation of Operating Segment Revenues to Revenues [Abstract] | |||
Total revenues | [2] | 9,212 | 8,613 |
Reconciliation of Total Operating Segment Margin to Income Before Provision for Income Taxes [Abstract] | |||
Total margin for operating segments | [3] | $ 5,507 | $ 5,110 |
[1] | Cloud and on-premise software revenues for management reporting included revenues related to cloud and on-premise software obligations that would have otherwise been recorded by the acquired businesses as independent entities but were not recognized in our consolidated statements of operations for the periods presented due to business combination accounting requirements. See Note 7 for an explanation of these adjustments and this table for a reconciliation of our total operating segment revenues to our total consolidated revenues as reported in our consolidated statements of operations. | ||
[2] | Cloud and on-premise software revenues for management reporting included revenues related to cloud and on-premise software obligations that would have otherwise been recorded by the acquired businesses as independent entities but were not recognized in our consolidated statements of operations for the periods presented due to business combination accounting requirements. 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 consolidated revenues as reported in our consolidated statements of operations. | ||
[3] | The margins reported reflect only the direct controllable costs of each line of business and do not include allocations of product development, general and administrative and certain other allocable expenses. Additionally, the margins reported above do not reflect amortization of intangible assets, acquisition related and other expenses, restructuring expenses, stock-based compensation, interest expense or certain other non-operating income, net. |
EARNINGS PER SHARE (Details)
EARNINGS PER SHARE (Details) - USD ($) $ / shares in Units, shares in Millions, $ in Millions | 3 Months Ended | ||
Aug. 31, 2017 | Aug. 31, 2016 | ||
Earnings Per Share [Abstract] | |||
Net income | $ 2,210 | $ 1,832 | |
Weighted average common shares outstanding | 4,156 | 4,119 | |
Dilutive effect of employee stock plans | 128 | 102 | |
Dilutive weighted average common shares outstanding | 4,284 | 4,221 | |
Basic earnings per share | $ 0.53 | $ 0.44 | |
Diluted earnings per share | $ 0.52 | $ 0.43 | |
Shares subject to anti-dilutive restricted stock-based awards and stock options excluded from calculation | [1] | 31 | 72 |
[1] | These weighted shares relate to anti-dilutive restricted service based stock-based awards and stock options (as calculated using the treasury stock method) and contingently issuable shares under PSO and PSU arrangements. Such shares could be dilutive in the future. |
LEGAL PROCEEDINGS (Details)
LEGAL PROCEEDINGS (Details) - USD ($) | Jun. 30, 2016 | Aug. 31, 2017 |
Hewlett-Packard Litigation [Member] | ||
Legal Proceedings [Line Items] | ||
Damages awarded, value | $ 3,000,000,000 | |
Damages paid, value | $ 0 | |
Inestimable loss related to litigation | We cannot currently estimate a reasonably possible range of loss for this action due to the complexities and uncertainty surrounding the appeal process and the nature of the claims. | |
Hewlett-Packard Litigation [Member] | Surety Bond [Member] | ||
Legal Proceedings [Line Items] | ||
Guarantor obligations, origin and purpose | Oracle posted certain court-mandated surety bonds with the court in order to proceed with its motion for a new trial and entered into related indemnification agreements with each of the surety bond issuing companies. | |
Derivative Litigation [Member] | ||
Legal Proceedings [Line Items] | ||
Derivative litigations and related action | While Oracle continues to evaluate these claims, we do not believe this litigation will have a material impact on our financial position or results of operations. | |
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. |