ORACLE CORP, 10-Q filed on 3/11/2021
Quarterly Report
v3.20.4
DOCUMENT AND ENTITY INFORMATION - shares
9 Months Ended
Feb. 28, 2021
Mar. 05, 2021
Document Information [Line Items]    
Document Type 10-Q  
Amendment Flag false  
Document Period End Date Feb. 28, 2021  
Document Fiscal Period Focus Q3  
Document Fiscal Year Focus 2021  
Entity Registrant Name Oracle Corporation  
Entity Central Index Key 0001341439  
Current Fiscal Year End Date --05-31  
Entity Filer Category Large Accelerated Filer  
Entity Small Business false  
Entity Emerging Growth Company false  
Entity Shell Company false  
Entity Common Stock, Shares Outstanding (in shares)   2,883,535,000
Entity File Number 001-35992  
Entity Tax Identification Number 54-2185193  
Entity Current Reporting Status Yes  
Entity Interactive Data Current Yes  
Entity Address, Address Line One 2300 Oracle Way  
Entity Address, City or Town Austin  
Entity Address State Or Province TX  
Entity Address, Postal Zip Code 78741  
City Area Code 737  
Local Phone Number 867-1000  
Entity Incorporation, State or Country Code DE  
Document Quarterly Report true  
Document Transition Report false  
Common Stock [Member]    
Document Information [Line Items]    
Title of 12(b) Security Common Stock, par value $0.01 per share  
Trading Symbol ORCL  
Security Exchange Name NYSE  
3.125% senior notes due July 2025 [Member]    
Document Information [Line Items]    
Title of 12(b) Security 3.125% senior notes due July 2025  
Security Exchange Name NYSE  
No Trading Symbol Flag true  
v3.20.4
CONDENSED CONSOLIDATED BALANCE SHEETS - USD ($)
$ in Millions
Feb. 28, 2021
May 31, 2020
Current assets:    
Cash and cash equivalents $ 22,321 $ 37,239
Marketable securities 13,543 5,818
Trade receivables, net of allowances for doubtful accounts of $485 and $409 as of February 28, 2021 and May 31, 2020, respectively 4,637 5,551
Prepaid expenses and other current assets 3,243 3,532
Total current assets 43,744 52,140
Non-current assets:    
Property, plant and equipment, net 6,816 6,244
Intangible assets, net 2,754 3,738
Goodwill, net 43,954 43,769
Deferred tax assets 13,725 3,252
Other non-current assets 7,116 6,295
Total non-current assets 74,365 63,298
Total assets 118,109 115,438
Current liabilities:    
Notes payable, current 5,758 2,371
Accounts payable 812 637
Accrued compensation and related benefits 1,684 1,453
Deferred revenues 8,088 8,002
Other current liabilities 3,908 4,737
Total current liabilities 20,250 17,200
Non-current liabilities:    
Notes payable and other borrowings, non-current 63,541 69,226
Income taxes payable 12,316 12,463
Deferred tax liabilities 7,892 41
Other non-current liabilities 4,473 3,791
Total non-current liabilities 88,222 85,521
Commitments and contingencies 0 0
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: 2,895 shares and 3,067 shares as of February 28, 2021 and May 31, 2020, respectively 26,261 26,486
Accumulated deficit (16,206) (12,696)
Accumulated other comprehensive loss (1,155) (1,716)
Total Oracle Corporation stockholders’ equity 8,900 12,074
Noncontrolling interests 737 643
Total equity 9,637 12,717
Total liabilities and equity $ 118,109 $ 115,438
v3.20.4
CONDENSED CONSOLIDATED BALANCE SHEETS PARENTHETICAL - USD ($)
$ in Millions
Feb. 28, 2021
May 31, 2020
Statement Of Financial Position [Abstract]    
Allowance for doubtful accounts receivable $ 485 $ 409
Preferred stock par value per share $ 0.01 $ 0.01
Preferred stock shares authorized 1,000,000.0 1,000,000.0
Preferred stock shares outstanding 0 0
Common stock par value per share $ 0.01 $ 0.01
Common stock shares authorized 11,000,000,000 11,000,000,000
Common stock shares outstanding 2,895,000,000 3,067,000,000
v3.20.4
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS - USD ($)
shares in Millions, $ in Millions
3 Months Ended 9 Months Ended
Feb. 28, 2021
Feb. 29, 2020
Feb. 28, 2021
Feb. 29, 2020
Revenues:        
Cloud services and license support $ 7,252 $ 6,930 $ 21,311 $ 20,546
Cloud license and on-premise license 1,276 1,231 3,254 3,169
Hardware 820 857 2,478 2,542
Services 737 778 2,209 2,372
Total revenues 10,085 9,796 29,252 28,629
Operating expenses:        
Cloud services and license support [1] 1,064 991 3,139 2,994
Hardware [1] 230 271 719 828
Services 621 702 1,875 2,147
Sales and marketing [1] 1,915 2,049 5,605 6,135
Research and development 1,621 1,500 4,812 4,588
General and administrative 330 288 949 903
Amortization of intangible assets 347 400 1,037 1,221
Acquisition related and other 13 7 107 44
Restructuring 66 60 337 181
Total operating expenses 6,207 6,268 18,580 19,041
Operating income 3,878 3,528 10,672 9,588
Interest expense (585) (456) (1,799) (1,416)
Non-operating (expenses) income, net (17) 4 (30) 195
Income before benefit from (provision for) income taxes 3,276 3,076 8,843 8,367
Benefit from (provision for) income taxes 1,745 (505) 871 (1,348)
Net income $ 5,021 $ 2,571 $ 9,714 $ 7,019
Earnings per share:        
Basic $ 1.72 $ 0.81 $ 3.26 $ 2.16
Diluted $ 1.68 $ 0.79 $ 3.19 $ 2.10
Weighted average common shares outstanding:        
Basic 2,913 3,190 2,977 3,251
Diluted 2,994 3,271 3,049 3,337
[1] Exclusive of amortization of intangible assets, which is shown separately.
v3.20.4
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME - USD ($)
$ in Millions
3 Months Ended 9 Months Ended
Feb. 28, 2021
Feb. 29, 2020
Feb. 28, 2021
Feb. 29, 2020
Statement Of Income And Comprehensive Income [Abstract]        
Net income $ 5,021 $ 2,571 $ 9,714 $ 7,019
Other comprehensive income (loss), net of tax:        
Net foreign currency translation gains (losses) 132 (86) 504 (178)
Net unrealized gains on defined benefit plans 10 34 66 45
Net unrealized (losses) gains on marketable securities (4) 3 (1) 91
Net unrealized (losses) gains on cash flow hedges (7) 7 (8) (9)
Total other comprehensive income (loss), net 131 (42) 561 (51)
Comprehensive income $ 5,152 $ 2,529 $ 10,275 $ 6,968
v3.20.4
CONDENSED CONSOLIDATED STATEMENTS OF EQUITY - USD ($)
$ in Millions
Total
Common Stock and Additional Paid in Capital
Accumulated deficit
Other Equity, Net
Balance, beginning of period at May. 31, 2019   $ 26,909 $ (3,496) $ (1,050)
Other comprehensive income (loss), net $ (51)     (51)
Common stock issued   1,232    
Stock-based compensation   1,204    
Repurchases of common stock (14,000) (2,033) (11,967)  
Cash dividends declared     (2,330)  
Net income     7,019  
Other, net   (627) 3 68
Balance, end of period at Feb. 29, 2020 $ 14,881 26,685 (10,771) (1,033)
Cash dividends declared per common share $ 0.72      
Balance, beginning of period at Nov. 30, 2019   26,374 (9,174) (1,015)
Other comprehensive income (loss), net $ (42)     (42)
Common stock issued   615    
Stock-based compensation   361    
Repurchases of common stock   (599) (3,401)  
Cash dividends declared     (768)  
Net income     2,571  
Other, net   (66) 1 24
Balance, end of period at Feb. 29, 2020 $ 14,881 26,685 (10,771) (1,033)
Cash dividends declared per common share $ 0.24      
Balance, beginning of period at May. 31, 2020 $ 12,717 26,486 (12,696) (1,073)
Other comprehensive income (loss), net 561     561
Common stock issued   915    
Stock-based compensation   1,395    
Repurchases of common stock (13,000) (1,922) (11,078)  
Cash dividends declared     (2,146)  
Net income     9,714  
Other, net   (613) 0 94
Balance, end of period at Feb. 28, 2021 $ 9,637 26,261 (16,206) (418)
Cash dividends declared per common share $ 0.72      
Balance, beginning of period at Nov. 30, 2020   26,298 (17,095) (587)
Other comprehensive income (loss), net $ 131     131
Common stock issued   143    
Stock-based compensation   479    
Repurchases of common stock   (567) (3,433)  
Cash dividends declared     (699)  
Net income     5,021  
Other, net   (92) 0 38
Balance, end of period at Feb. 28, 2021 $ 9,637 $ 26,261 $ (16,206) $ (418)
Cash dividends declared per common share $ 0.24      
v3.20.4
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($)
$ in Millions
9 Months Ended
Feb. 28, 2021
Feb. 29, 2020
Cash flows from operating activities:    
Net income $ 9,714 $ 7,019
Adjustments to reconcile net income to net cash provided by operating activities:    
Depreciation 1,127 1,025
Amortization of intangible assets 1,037 1,221
Deferred income taxes (2,475) (398)
Stock-based compensation 1,395 1,204
Other, net 227 167
Changes in operating assets and liabilities, net of effects from acquisitions:    
Decrease in trade receivables, net 1,089 946
Decrease in prepaid expenses and other assets 609 718
Decrease in accounts payable and other liabilities (247) (1,035)
Decrease in income taxes payable (1,181) (789)
Decrease in deferred revenues (250) (553)
Net cash provided by operating activities 11,045 9,525
Cash flows from investing activities:    
Purchases of marketable securities and other investments (26,775) (399)
Proceeds from maturities of marketable securities and other investments 18,182 3,165
Proceeds from sales of marketable securities 853 12,575
Acquisitions, net of cash acquired (29) (111)
Capital expenditures (1,418) (1,131)
Net cash (used for) provided by investing activities (9,187) 14,099
Cash flows from financing activities:    
Payments for repurchases of common stock (12,958) (13,935)
Proceeds from issuances of common stock 915 1,232
Shares repurchased for tax withholdings upon vesting of restricted stock-based awards (597) (624)
Payments of dividends to stockholders (2,146) (2,330)
Repayments of borrowings (2,631) (4,500)
Other, net 241 (108)
Net cash used for financing activities (17,176) (20,265)
Effect of exchange rate changes on cash and cash equivalents 400 (44)
Net (decrease) increase in cash and cash equivalents (14,918) 3,315
Cash and cash equivalents at beginning of period 37,239 20,514
Cash and cash equivalents at end of period 22,321 23,829
Non-cash financing activities:    
Change in unsettled repurchases of common stock $ 42 $ 65
v3.20.4
BASIS OF PRESENTATION, RECENT ACCOUNTING PRONOUNCEMENTS AND OTHER
9 Months Ended
Feb. 28, 2021
Organization Consolidation And Presentation Of Financial Statements [Abstract]  
BASIS OF PRESENTATION, RECENT ACCOUNTING PRONOUNCEMENTS AND OTHER

1.

BASIS OF PRESENTATION, RECENT ACCOUNTING PRONOUNCEMENTS AND OTHER

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 consolidated financial statements and the notes thereto included in our Annual Report on Form 10-K for the fiscal year ended May 31, 2020.

We believe that all necessary adjustments 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, 2021.

The comparability of our operating results during the third quarter and first nine months of fiscal 2021 compared to the corresponding prior year periods, and of our condensed consolidated balance sheets as of February 28, 2021 relative to May 31, 2020, was impacted by the income tax related effects of a partial realignment of our legal entity structure that resulted in the intra-group transfer of certain intellectual property rights. During the third quarter and first nine months of fiscal 2021, we recognized a benefit from income taxes primarily due to the result of a net discrete tax benefit of $2.3 billion that was recorded as a deferred tax asset of $11.3 billion and a non-current deferred tax liability of $9.1 billion. The deferred tax asset was recognized as a result of the book and tax basis difference on the intra-group transfer of certain intellectual property and the realignment of certain legal entities, partially offset by a Global Intangible Low-Taxed Income (GILTI) non-current deferred tax liability. The tax amortization related to the intellectual property deferred tax asset will be recognized in future periods and any unused amortization in a particular year will carry forward indefinitely. The $11.3 billion deferred tax asset was measured based on the tax rate at which it is expected to reverse in the future. We expect to realize the net deferred tax asset recorded as a result of the intangible property transfer and will periodically assess the realizability of the net deferred tax asset. Refer to Note 9 below for additional information.

During the first nine months of fiscal 2021, we adopted Accounting Standards Update (ASU) 2016-13, Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments and subsequent amendments to the initial guidance; and ASU 2020-01, Investments—Equity Securities (Topic 321), Investments—Equity Method and Joint Ventures (Topic 323), and Derivatives and Hedging (Topic 815), neither of which had a material impact to our current or historical condensed consolidated financial statements. There have been no changes to our significant accounting policies as disclosed in our Annual Report on Form 10-K for the fiscal year ended May 31, 2020 that had a significant impact on our condensed consolidated financial statements or notes thereto as of and for the nine months ended February 28, 2021.

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 February 28, 2021 and May 31, 2020 and our condensed consolidated statements of cash flows for the nine months ended February 28, 2021 and February 29, 2020 was nominal.

Remaining Performance Obligations from Contracts with Customers

Trade receivables, net of allowance for doubtful accounts, and deferred revenues are reported net of related uncollected deferred revenues in our condensed consolidated balance sheets as of February 28, 2021 and May 31, 2020. The revenues recognized during the nine months ended February 28, 2021 and February 29, 2020, respectively, that were included in the opening deferred revenues balances as of May 31, 2020 and 2019, respectively, were approximately $7.4 billion and $7.7 billion, respectively. Revenues recognized from performance obligations satisfied in prior periods and impairment losses recognized on our receivables were immaterial in each of the three and nine months ended February 28, 2021 and February 29, 2020.  

Remaining performance obligations, as defined in Note 1 of Notes to Consolidated Financial Statements included in our Annual Report on Form 10-K for the fiscal year ended May 31, 2020, were $35.3 billion as of February 28, 2021, approximately 61% of which we expect to recognize as revenues over the next twelve months and the remainder thereafter.

Sales of Financing Receivables

We offer certain of our customers the option to acquire certain of our cloud and license, hardware 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. Financing receivables sold to financial institutions were $338 million and $1.3 billion for the three and nine months ended February 28, 2021, respectively, and $284 million and $1.2 billion for the three and nine months ended February 29, 2020, respectively.

Acquisition Related and Other Expenses

Acquisition related and other expenses primarily consist of personnel related costs for transitional and certain other employees, certain business combination adjustments including adjustments after the measurement period has ended, and certain other operating items, net.

 

 

 

Three Months Ended

 

 

Nine Months Ended

 

(in millions)

 

February 28,

2021

 

 

February 29,

2020

 

 

February 28,

2021

 

 

February 29,

2020

 

Transitional and other employee related costs

 

$

1

 

 

$

2

 

 

$

4

 

 

$

9

 

Business combination adjustments, net

 

 

2

 

 

 

2

 

 

 

3

 

 

 

4

 

Other, net

 

 

10

 

 

 

3

 

 

 

100

 

 

 

31

 

Total acquisition related and other expenses

 

$

13

 

 

$

7

 

 

$

107

 

 

$

44

 

Non-Operating (Expenses) Income, net

Non-operating (expenses) income, net consists primarily of interest income, net foreign currency exchange losses, the noncontrolling interests in the net profits of our majority-owned subsidiaries (primarily Oracle Financial Services Software Limited and Oracle Corporation Japan) and net other income and expenses, including net realized gains and losses related to all of our investments, net unrealized gains and losses related to the small portion of our investment portfolio related to our deferred compensation plan, net unrealized gains and losses related to equity securities and non-service net periodic pension income and losses.

 

 

 

 

Three Months Ended

 

 

Nine Months Ended

 

(in millions)

 

February 28,

2021

 

 

February 29,

2020

 

 

February 28,

2021

 

 

February 29,

2020

 

Interest income

 

$

23

 

 

$

122

 

 

$

80

 

 

$

457

 

Foreign currency losses, net

 

 

(18

)

 

 

(47

)

 

 

(84

)

 

 

(127

)

Noncontrolling interests in income

 

 

(46

)

 

 

(28

)

 

 

(127

)

 

 

(115

)

Other, net

 

 

24

 

 

 

(43

)

 

 

101

 

 

 

(20

)

Total non-operating (expenses) income, net

 

$

(17

)

 

$

4

 

 

$

(30

)

 

$

195

 

 

Recent Accounting Pronouncements

Financial Instruments:  In March 2020, the Financial Accounting Standards Board (FASB) issued ASU 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting (ASU 2020-04) and also issued subsequent amendments to the initial guidance (collectively, Topic 848). Topic 848 provides optional guidance for contract modifications and certain hedging relationships associated with the transition from reference rates that are expected to be discontinued. We will adopt Topic 848 when our relevant contracts are modified upon transition to alternative reference rates. We do not expect our adoption of Topic 848 to have a material impact on our consolidated financial statements.

Income Taxes:  In December 2019, the FASB issued ASU 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes (ASU 2019-12), which is intended to simplify various areas related to the accounting for income taxes and improve consistent application of Topic 740. ASU 2019-12 is effective for us beginning in fiscal 2022, and earlier adoption is permitted. We are currently evaluating the impact of our pending adoption of ASU 2019-12 on our consolidated financial statements.

v3.20.4
ACQUISITIONS
9 Months Ended
Feb. 28, 2021
Business Combinations [Abstract]  
ACQUISITIONS

2.

ACQUISITIONS

Fiscal 2021 and 2020 Acquisitions

During the first nine months of fiscal 2021 and full year of fiscal 2020, 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 to our condensed consolidated financial statements.

 

v3.20.4
FAIR VALUE MEASUREMENTS
9 Months Ended
Feb. 28, 2021
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 defines fair value as the price that would be received from selling an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. When determining the fair value measurements for assets and liabilities required to be recorded at their fair values, we consider the principal or most advantageous market in which we would transact and consider assumptions that market participants would use when pricing the assets or liabilities, such as inherent risk, transfer restrictions and risk of nonperformance.

ASC 820 establishes a fair value hierarchy that requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. An asset’s or a liability’s categorization within the fair value hierarchy is based upon the lowest level of input that is significant to the fair value measurement. ASC 820 establishes three levels of inputs that may be used to measure fair value:

 

Level 1:  quoted prices in active markets for identical assets or liabilities;

 

Level 2:  inputs other than Level 1 that are observable, either directly or indirectly, such as quoted prices in active markets for similar assets or liabilities, quoted prices for identical or similar assets or liabilities in markets that are not active, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities; or

 

Level 3:  unobservable inputs that are supported by little or no market activity and that are significant to the fair values of the assets or liabilities.

Assets and Liabilities Measured at Fair Value on a Recurring Basis

Our assets and liabilities measured at fair value on a recurring basis consisted of the following (Level 1 and Level 2 inputs are defined above):

 

 

 

February 28, 2021

 

 

May 31, 2020

 

 

 

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:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Money market funds

 

$

4,702

 

 

$

 

 

$

4,702

 

 

$

18,587

 

 

$

 

 

$

18,587

 

Corporate debt securities and other

 

 

2,836

 

 

 

7,933

 

 

 

10,769

 

 

 

4,036

 

 

 

2,589

 

 

 

6,625

 

Commercial paper debt securities

 

 

 

 

 

7,604

 

 

 

7,604

 

 

 

 

 

 

5,640

 

 

 

5,640

 

Derivative financial instruments

 

 

 

 

 

71

 

 

 

71

 

 

 

 

 

 

29

 

 

 

29

 

Total assets

 

$

7,538

 

 

$

15,608

 

 

$

23,146

 

 

$

22,623

 

 

$

8,258

 

 

$

30,881

 

Liabilities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Derivative financial instruments

 

$

 

 

$

 

 

$

 

 

$

 

 

$

268

 

 

$

268

 

 

We classify our marketable securities as available-for-sale debt securities at the time of purchase and reevaluate such classification as of each balance sheet date. Our marketable securities investments consist of money market funds, Tier 1 commercial paper debt securities, corporate debt securities and certain other securities. Marketable securities as presented per our condensed consolidated balance sheets included securities with original maturities at the time of purchase greater than three months and the remainder of the securities were included in cash and cash equivalents. As of February 28, 2021 and May 31, 2020, substantially all of our marketable securities investments mature within one year. Our valuation techniques used to measure the fair values of our instruments 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 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 $69.3 billion and $71.6 billion of senior notes and the related fair value hedges that we had outstanding as of February 28, 2021 and May 31, 2020, respectively, the estimated fair values of the senior notes and the related fair value hedges using Level 2 inputs at February 28, 2021 and May 31, 2020 were $76.3 billion and $80.9 billion, respectively.

v3.20.4
INTANGIBLE ASSETS AND GOODWILL
9 Months Ended
Feb. 28, 2021
Goodwill And Intangible Assets Disclosure [Abstract]  
INTANGIBLE ASSETS AND GOODWILL

4.

INTANGIBLE ASSETS AND GOODWILL

The changes in intangible assets for fiscal 2021 and the net book value of intangible assets as of February 28, 2021 and May 31, 2020 were as follows:

 

 

 

Intangible Assets, Gross

 

 

Accumulated Amortization

 

 

Intangible Assets, Net

 

 

Weighted

Average

Useful

Life(2)

 

(Dollars in millions)

 

May 31,

2020

 

 

Additions &

Adjustments, net(1)

 

 

February 28,

2021

 

 

May 31,

2020

 

 

Expense

 

 

February 28,

2021

 

 

May 31,

2020

 

 

February 28,

2021

 

 

 

Developed technology

 

$

4,471

 

 

$

36

 

 

$

4,507

 

 

$

(3,290

)

 

$

(477

)

 

$

(3,767

)

 

$

1,181

 

 

$

740

 

 

 

3

 

Cloud services and license support agreements and related relationships

 

 

5,589

 

 

 

16

 

 

 

5,605

 

 

 

(3,271

)

 

 

(493

)

 

 

(3,764

)

 

 

2,318

 

 

 

1,841

 

 

 

 

Other

 

 

1,341

 

 

 

1

 

 

 

1,342

 

 

 

(1,102

)

 

 

(67

)

 

 

(1,169

)

 

 

239

 

 

 

173

 

 

 

 

Total intangible assets, net

 

$

11,401

 

 

$

53

 

 

$

11,454

 

 

$

(7,663

)

 

$

(1,037

)

 

$

(8,700

)

 

$

3,738

 

 

$

2,754

 

 

 

 

 

 

(1)

Amounts also include any changes in intangible asset balances for the periods presented that resulted from foreign currency translations.

(2)

Represents weighted-average useful lives (in years) of intangible assets acquired during fiscal 2021.

As of February 28, 2021, estimated future amortization expenses related to intangible assets were as follows (in millions):

 

Remainder of fiscal 2021

 

$

328

 

Fiscal 2022

 

 

1,120

 

Fiscal 2023

 

 

696

 

Fiscal 2024

 

 

450

 

Fiscal 2025

 

 

126

 

Fiscal 2026

 

 

24

 

Thereafter

 

 

10

 

Total intangible assets, net

 

$

2,754

 

 

The changes in the carrying amounts of goodwill, net, which is generally not deductible for tax purposes, for our operating segments for the nine months ended February 28, 2021 were as follows:

 

(in millions)

 

Cloud and License

 

 

Hardware

 

 

Services

 

 

Total Goodwill, net

 

Balances as of May 31, 2020

 

$

39,637

 

 

$

2,367

 

 

$

1,765

 

 

$

43,769

 

Goodwill adjustments, net(1)

 

 

168

 

 

 

 

 

 

17

 

 

 

185

 

Balances as of February 28, 2021

 

$

39,805

 

 

$

2,367

 

 

$

1,782

 

 

$

43,954

 

 

(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). Amounts also include any changes in goodwill balances for the period presented that resulted from foreign currency translations.

v3.20.4
RESTRUCTURING ACTIVITIES
9 Months Ended
Feb. 28, 2021
Restructuring And Related Activities [Abstract]  
RESTRUCTURING ACTIVITIES

5.

RESTRUCTURING ACTIVITIES

Fiscal 2019 Oracle Restructuring Plan

During fiscal 2019, our management approved, committed to and initiated plans to restructure and further improve efficiencies in our operations due to our acquisitions and certain other operational activities (2019 Restructuring Plan). In the first nine months of fiscal 2021, our management supplemented the 2019 Restructuring Plan to reflect additional actions that we expected to take. Restructuring costs associated with the 2019 Restructuring Plan were recorded to the restructuring expense line item within our condensed consolidated statements of operations as they were incurred. We recorded $335 million and $186 million of restructuring expenses in connection with the 2019 Restructuring Plan in the first nine months of fiscal 2021 and 2020, respectively. Any changes to the estimates or timing of executing the 2019 Restructuring Plan will be reflected in our future results of operations.

Summary of All Plans

 

 

 

Accrued

May 31,

2020(2)

 

 

Nine Months Ended February 28, 2021

 

 

Accrued

February 28,

2021(2)

 

 

Total

Costs

Accrued

to Date

 

 

Total

Expected

Program

Costs

 

(in millions)

 

 

 

Initial

Costs(3)

 

 

Adj. to

Cost(4)

 

 

Cash

Payments

 

 

Others(5)

 

 

 

 

 

 

 

2019 Restructuring Plan(1)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cloud and license

 

$

75

 

 

$

168

 

 

$

(18

)

 

$

(148

)

 

$

11

 

 

$

88

 

 

$

453

 

 

$

470

 

Hardware

 

 

14

 

 

 

32

 

 

 

(2

)

 

 

(26

)

 

 

(1

)

 

 

17

 

 

 

110

 

 

 

115

 

Services

 

 

27

 

 

 

45

 

 

 

(3

)

 

 

(45

)

 

 

3

 

 

 

27

 

 

 

133

 

 

 

156

 

Other(6)

 

 

22

 

 

 

114

 

 

 

(1

)

 

 

(95

)

 

 

4

 

 

 

44

 

 

 

376

 

 

 

376

 

Total 2019 Restructuring Plan

 

$

138

 

 

$

359

 

 

$

(24

)

 

$

(314

)

 

$

17

 

 

$

176

 

 

$

1,072

 

 

$

1,117

 

Total other restructuring plans(7)

 

$

13

 

 

$

2

 

 

$

 

 

$

(4

)

 

$

(1

)

 

$

10

 

 

 

 

 

 

 

 

 

Total restructuring plans

 

$

151

 

 

$

361

 

 

$

(24

)

 

$

(318

)

 

$

16

 

 

$

186

 

 

 

 

 

 

 

 

 

 

(1)

Restructuring costs recorded for individual line items primarily related to employee severance costs.

(2)

As of February 28, 2021 and May 31, 2020, substantially all restructuring liabilities have been recorded in other current liabilities within our condensed consolidated balance sheets.

(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)

Represents employee related severance costs for functions that are not included within our operating segments and certain other restructuring costs.

(7)

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.

 

v3.20.4
DEFERRED REVENUES
9 Months Ended
Feb. 28, 2021
Deferred Revenue Disclosure [Abstract]  
DEFERRED REVENUES

6.

DEFERRED REVENUES

Deferred revenues consisted of the following:

 

(in millions)

 

February 28,

2021

 

 

May 31,

2020

 

Cloud services and license support

 

$

7,075

 

 

$

6,996

 

Hardware

 

 

556

 

 

 

613

 

Services

 

 

425

 

 

 

365

 

Cloud license and on-premise license

 

 

32

 

 

 

28

 

Deferred revenues, current

 

 

8,088

 

 

 

8,002

 

Deferred revenues, non-current (in other non-current liabilities)

 

 

670

 

 

 

597

 

Total deferred revenues

 

$

8,758

 

 

$

8,599

 

 

Deferred cloud services and license support revenues and deferred hardware revenues substantially represent customer payments made in advance for cloud or support contracts that are typically billed in advance with corresponding revenues generally being recognized ratably over the contractual periods. Deferred services revenues include prepayments for our services business and revenues for these services are generally recognized as the services are performed. Deferred cloud license and on-premise license revenues typically resulted from customer payments that related to undelivered products and services or specified enhancements.

In connection with our acquisitions, we have estimated the fair values of the cloud services and license support performance obligations assumed from our acquired companies. Refer to Note 9 of Notes to Consolidated Financial Statements included in our Annual Report on Form 10-K for the fiscal year ended May 31, 2020 for further explanation of these estimates.

v3.20.4
DERIVATIVE FINANCIAL INSTRUMENTS
9 Months Ended
Feb. 28, 2021
Derivative Instruments And Hedging Activities Disclosure [Abstract]  
DERIVATIVE FINANCIAL INSTRUMENTS

7.

DERIVATIVE FINANCIAL INSTRUMENTS

We held the following derivative instruments that were designated and accounted for as hedging instruments pursuant to ASC 815, Derivatives and Hedging (ASC 815):

 

interest rate swap agreements, which are used to protect us against changes in the fair values of certain of our fixed-rate borrowings attributable to the movements in benchmark interest rates. We have designated these swap agreements as qualifying hedging instruments and are accounting for them as fair value hedges pursuant to ASC 815;

 

cross-currency interest rate swap agreements, which are used to protect us against changes in the fair values of certain of our fixed-rate Euro-denominated borrowings attributable to the movements in benchmark interest rates and foreign currency exchange rates by effectively converting the fixed-rate, Euro-denominated borrowings, including the annual interest payments and the payment of principal at maturity, to variable-rate, U.S. Dollar-denominated debt based on LIBOR. We have designated these swap agreements as qualifying hedging instruments and are accounting for them as fair value hedges pursuant to ASC 815; and

 

 

cross-currency swap agreements, which were used to manage foreign currency exchange risk by converting certain of our fixed-rate Euro-denominated borrowings including periodic interest payments and the payment of principal at maturity to fixed-rate U.S. Dollar-denominated debt and were accounted for as cash flow hedges pursuant to ASC 815. In the third quarter of fiscal 2021, these cross-currency swap agreements and the related senior notes were settled in cash upon their maturity.

We also held certain foreign currency contracts that were not designated as hedges pursuant to ASC 815. The notional amounts of such forward contracts we held to purchase U.S. Dollars in exchange for other major

international currencies was $4.2 billion as of both February 28, 2021 and May 31, 2020. The notional amounts of forward contracts we held to sell U.S. Dollars in exchange for other major international currencies were $4.4 billion and $3.9 billion as of February 28, 2021 and May 31, 2020, respectively. The fair values of our outstanding foreign currency forward contracts were nominal as of February 28, 2021 and May 31, 2020. Net gains or losses related to these forward contracts are included in non-operating income, net.

See Note 10 of Notes to Consolidated Financial Statements included in our Annual Report on Form 10-K for the fiscal year ended May 31, 2020 for additional information regarding the purpose, accounting and classification of our derivative instruments. None of our derivative instruments are used for trading purposes. The effects of 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 Instruments Designated as Hedges in Condensed Consolidated Balance Sheets

 

 

 

 

 

Fair Value as of

 

(in millions)

 

Balance Sheet Location

 

February 28,

2021

 

 

May 31,

2020

 

Derivative assets:

 

 

 

 

 

 

 

 

 

 

Interest rate swap agreements designated as fair value hedges

 

Other current assets

 

$

10

 

 

$

 

Cross-currency interest rate swap agreements designated as fair value hedges

 

Other non-current assets

 

 

61

 

 

 

 

Interest rate swap agreements designated as fair value hedges

 

Other non-current assets

 

 

 

 

 

29

 

Total derivative assets

 

 

 

$

71

 

 

$

29

 

Derivative liabilities:

 

 

 

 

 

 

 

 

 

 

Cross-currency swap agreements designated as cash flow hedges

 

Other current liabilities

 

$

 

 

$

251

 

Cross-currency interest rate swap agreements designated as fair value hedges

 

Other non-current liabilities

 

 

 

 

 

17

 

Total derivative liabilities

 

 

 

$

 

 

$

268

 

Effects of Fair Value Hedging Relationships on Hedged Items in Condensed Consolidated Balance Sheets

 

(in millions)

 

February 28,

2021

 

 

May 31,

2020

 

Notes payable, current:

 

 

 

 

 

 

 

 

Carrying amount of hedged item

 

$

1,510

 

 

$

 

Cumulative hedging adjustment included in the carrying amount

 

$

10