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ORACLE CORP
FORM 10-K
(Annual Report)
Filed 06/25/15 for the Period Ending 05/31/15
Address 500 ORACLE PARKWAY
MAIL STOP 5 OP 7
REDWOOD CITY, CA 94065
Telephone 6505067000
CIK 0001341439
Symbol ORCL
SIC Code 7372 - Prepackaged Software
Industry Software & Programming
Sector Technology
Fiscal Year 05/31
http://www.edgar-online.com
© Copyright 2015, EDGAR Online, Inc. All Rights Reserved.
Distribution and use of this document restricted under EDGAR Online, Inc. Terms of Use.

Table of contents

  • Page 1
    ... CORP FORM 10-K (Annual Report) Filed 06/25/15 for the Period Ending 05/31/15 Address 500 ORACLE PARKWAY MAIL STOP 5 OP 7 REDWOOD CITY, CA 94065 6505067000 0001341439 ORCL 7372 - Prepackaged Software Software & Programming Technology 05/31 Telephone CIK Symbol SIC Code Industry Sector Fiscal Year...

  • Page 2
    ... Redwood City, California (Address of principal executive offices) 94065 (Zip Code) (650) 506-7000 (Registrant's telephone number, including area code) Securities registered pursuant to Section 12(b) of the Act: Title of each class Name of each exchange on which registered Common Stock, par value...

  • Page 3
    of this Annual Report on Form 10-K where indicated.

  • Page 4
    ..., and Director Independence Principal Accountant Fees and Services 82 82 82 82 82 Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Selected Financial Data Management's Discussion and Analysis of Financial Condition and Results of Operations...

  • Page 5
    Table of Contents Cautionary Note on Forward-Looking Statements For purposes of this Annual Report, the terms "Oracle," "we," "us" and "our" refer to Oracle Corporation and its consolidated subsidiaries. This Annual Report on Form 10-K contains statements that are not historical in nature, are ...

  • Page 6
    ...Reports on Form 10-Q to be filed by us in our fiscal year 2016, which runs from June 1, 2015 to May 31, 2016. We have no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or risks, except to the extent required by applicable...

  • Page 7
    ...Our products include database and middleware software, application software, cloud infrastructure software and hardware systems (Oracle Engineered Systems, servers, storage, networking and industry specific products), along with support and related services. We offer over 400,000 worldwide customers...

  • Page 8
    ... our total revenues in fiscal 2015, 2014 and 2013, respectively. Application Technologies Our application technologies are available through the purchase of an on-premises software license or via subscription to our Oracle SaaS offerings. Regardless of the deployment model selected, our application...

  • Page 9
    ... cloud services. Oracle Enterprise Resource Planning Cloud Our ERP cloud applications are designed to be complete and integrated to help organizations achieve business insight, improve workforce productivity and operate globally. Oracle ERP Cloud delivers financial management, financial reporting...

  • Page 10
    ... Cloud Industry Solutions are industry specific SaaS applications that are designed to address the distinct requirements of the communications, financial services, healthcare, hospitality and retail, manufacturing and utilities sectors, among others. Oracle Data as a Service Oracle Data as a Service...

  • Page 11
    ... middleware and database servers and storage. These clusters are designed to scale incrementally as required to address our customers' IT capacity requirements, satisfy their planning and procurement needs, support their business applications with a standardized platform architecture, reduce their...

  • Page 12
    ... and Oracle Partitioning software options. Deploying Oracle Database In-Memory option with virtually any existing Oracle Database compatible application requires no application changes as it is fully integrated with Oracle Database's scale-up, scale-out, storage tiering, availability and security...

  • Page 13
    ...and services to help enterprises capture, manage, and analyze big data alongside an enterprise's existing enterprise and streaming data. Our big data solutions for capturing unstructured, streaming and structured data complement existing Oracle Database environments and include Oracle NoSQL Database...

  • Page 14
    ... to manage internal and external users, to secure corporate information from potential software threats and to streamline compliance initiatives while lowering the total cost of their security and compliance initiatives; and • Development Tools for application development, database development...

  • Page 15
    ... consist of our hardware systems products including Oracle Engineered Systems, servers, storage, networking, industry specific hardware, virtualization software, operating systems, management software and related hardware services including support. We also offer Oracle IaaS, which provides...

  • Page 16
    ... and virtualization software, servers, storage and networking hardware in a single box that is designed to deliver high availability database services for a wide range of homegrown and packaged online transaction processing (OLTP) and data warehousing applications; • Oracle Big Data Appliance...

  • Page 17
    ..., Oracle Exalytics In-Memory Machine and the Oracle Big Data Appliance. Storage Our storage products are designed to securely manage, protect, archive and restore customers' mission critical data assets and consist of tape, disk, flash and hardware-related software including file systems software...

  • Page 18
    ... servers, networking and storage resources. In addition to Oracle Solaris and Oracle Linux operating systems and Oracle's virtualization software, we also develop a range of other hardware-related software, including development tools, compilers, management tools for servers and storage, diagnostic...

  • Page 19
    ...software licenses and cloud software subscriptions segment) as certain expenses within our cost structure are relatively fixed in the short term. See "Selected Quarterly Financial Data" in Item 7 of this Annual Report for a more complete description of the seasonality and cyclicality of our revenues...

  • Page 20
    ...well as third party manufacturing partners. Our internal manufacturing operations consist primarily of materials procurement, assembly, testing and quality control of our Oracle Engineered Systems and certain of our enterprise and data center servers, storage systems and networking products. For all...

  • Page 21
    ... on Form 8-K and amendments to those reports filed pursuant to Sections 13(a) and 15(d) of the Securities Exchange Act of 1934, as amended, are available, free of charge, on our Investor Relations website at www.oracle.com/investor as soon as reasonably practicable after we electronically file such...

  • Page 22
    ... President, Corporate Controller and Chief Accounting Officer Ms. Catz, 53, has been our Chief Executive Officer since September 2014. She served as our President from January 2004 to September 2014, our Chief Financial Officer most recently from April 2011 until September 2014 and a Director since...

  • Page 23
    ... renewal rates for software license updates and product support and our subscription-based cloud offerings. We may experience foreign currency gains and losses. Changes in currency exchange rates can adversely affect customer demand and our revenue and profitability. We conduct a significant number...

  • Page 24
    ... rates. Differences in conversion rates can also be affected by changes in business practices that we implement in our newly acquired companies. These changes may negatively affect customer behavior. A substantial portion of our new software licenses and hardware systems contracts is completed...

  • Page 25
    ... reported revenues and operating results due to the differences in timing of revenue recognition between our new software licenses arrangements and cloud offering arrangements. We have also acquired a number of cloud computing companies, and the integration of these companies into our Oracle Cloud...

  • Page 26
    ... data, and host or manage parts of our customers' businesses in cloud-based IT environments, especially in customer sectors involving particularly sensitive data such as health sciences, financial services and the government. We also have an active acquisition program and have acquired a number...

  • Page 27
    ... errors in our software, hardware and cloud offerings. Despite testing prior to their release and throughout the lifecycle of a product or service, software, hardware and cloud offerings sometimes contain coding or manufacturing errors that can impact their function, performance and security...

  • Page 28
    ... of our revenues from, and have significant operations, outside of the United States. Our international operations include software and hardware systems development, manufacturing, assembly, sales, customer support, consulting and other services and shared administrative service centers. Compliance...

  • Page 29
    ..., architecture, controls, procedures and policies; • we may have multiple product lines or services offerings as a result of our acquisitions that are offered, priced and supported differently, which could cause customer confusion and delays; • we may have higher than anticipated costs in...

  • Page 30
    Table of Contents • our use of cash to pay for acquisitions may limit other potential uses of our cash, including stock repurchases, dividend payments and retirement of outstanding indebtedness; • we may significantly increase our interest expense, leverage and debt service requirements if we ...

  • Page 31
    ...have previously committed to pay or need to fulfill orders from customers and could also prevent the production of our hardware products or cause our hardware products to be returned, recalled or rejected resulting in lost revenues, increases in warranty costs or costs related to remediation efforts...

  • Page 32
    ... or cost effective manner, if at all. If we are required to change third party manufacturers, our ability to meet our scheduled hardware systems products deliveries to our customers could be adversely affected, which could cause the loss of sales and existing or potential customers, delayed revenue...

  • Page 33
    ... in the number of employees granted equity awards, a reduction in the number of stock options or RSUs granted per employee and alternative forms of stock-based compensation, all of which may have an impact on our ability to retain employees and also impact the amount of stock-based compensation...

  • Page 34
    ... and our competitors may unfavorably impact the pricing of our on-premises enterprise software offerings and our cloud offerings, as well as overall demand for our on-premises software product and service offerings, which could reduce our revenues and profitability. Our software license updates and...

  • Page 35
    ... business combination accounting standards pursuant to ASC 805, Business Combinations , we recognize the identifiable assets acquired, the liabilities assumed and any noncontrolling interests in acquired companies generally at their acquisition date fair values and, in each case, separately from...

  • Page 36
    ... 2015 relating to our hardware systems reporting unit. Charges to our operating results in any given period could differ substantially from other periods based on the timing and size of our future acquisitions and the extent of integration activities. A more detailed discussion of our accounting...

  • Page 37
    ...' valuation measures for our stock, our credit ratings and market trends unrelated to our performance. A significant drop in our stock price could also expose us to the risk of securities class actions lawsuits, which could result in substantial costs and divert management's attention and resources...

  • Page 38
    ... of future record and payment dates are subject to the final determination of our Board of Directors. For equity compensation plan information, please refer to Item 12 in Part III of this Annual Report. Stock Repurchase Programs Our Board of Directors has approved a program for us to repurchase...

  • Page 39
    Table of Contents Stock Performance Graph and Cumulative Total Return The graph below compares the cumulative total stockholder return on our common stock with the cumulative total return of the S&P 500 Index and the S&P Information Technology Index for each of the last five fiscal years ended May ...

  • Page 40
    ... financial statements since their respective dates of acquisition and have contributed to our revenues, income, earnings per share and total assets. (in millions, except per share amounts) 2015 (1) As of and for the Year Ended May 31, 2014 2013 2012 2011 Consolidated Statements of Operations Data...

  • Page 41
    ... products include database and middleware software, application software, cloud infrastructure software, and hardware systems (Oracle Engineered Systems, servers, storage, networking and industry specific products), along with support and related services. We offer over 400,000 worldwide customers...

  • Page 42
    ... related operating segments follows. Software and Cloud Business Our software and cloud business, which represented 77%, 76% and 75% of our total revenues in fiscal 2015, 2014 and 2013, respectively, is comprised of three operating segments: (1) new software licenses and cloud software subscriptions...

  • Page 43
    ... of our total revenues in fiscal 2015 and 1% in each of fiscal 2014 and 2013, provide comprehensive software and hardware management and maintenance services for customer IT infrastructure for a fee for a stated term that is hosted at our Oracle data center facilities, select partner data centers or...

  • Page 44
    ... Cloud, Oracle Exalytics In-Memory Machine and the Oracle Big Data Appliance. Our storage products are designed to securely manage, protect, archive and restore customers' mission critical data assets and consist of tape, disk, flash and hardware-related software including file systems software...

  • Page 45
    ... servers and storage systems. For all other manufacturing, we generally rely on third party manufacturing partners to produce our hardware related components and hardware products and we may involve our internal manufacturing operations in the final assembly, testing and quality control processes...

  • Page 46
    ... our education centers, live virtual training, self-paced online training, private events and custom training. Acquisitions A selective and active acquisition program is another important element of our corporate strategy. In recent years, we have invested billions of dollars to acquire a number of...

  • Page 47
    ...different result. Our senior management has reviewed our critical accounting policies and related disclosures with the Finance and Audit Committee of the Board of Directors. Revenue Recognition Our sources of revenues include: (1) software and cloud revenues, including new software licenses revenues...

  • Page 48
    ... its fair value as determined by our vendor specific objective evidence (VSOE-described further below), with any remaining amount allocated to the software license. Revenue Recognition for Cloud SaaS, PaaS and IaaS Offerings, Hardware Systems Products, Hardware Systems Support and Related Services...

  • Page 49
    ... is hosted at our data center facilities, select partner data centers or physically on-premises at customer facilities generally for a term-based fee; and virtual machine instances that are subscription-based and designed for computing and reliable and secure object storage. Revenues for these cloud...

  • Page 50
    ... revenues and related expenses reported in our consolidated financial statements. A number of internal and external factors can affect our estimates, including labor rates, utilization and efficiency variances and specification and testing requirement changes. Our advanced customer support services...

  • Page 51
    ...was formed, we have established a history of collection, without concessions, on these receivables with payment terms that generally extend up to five years from the contract date. Provided all other revenue recognition criteria have been met, we recognize new software licenses revenues and hardware...

  • Page 52
    ... fair values of our cloud SaaS and PaaS (collectively, cloud software subscriptions), software license updates and product support, and hardware systems support obligations assumed. The estimated fair values of these performance obligations are determined utilizing a cost build-up approach. The cost...

  • Page 53
    ...45 million that would have been otherwise recorded by the acquired businesses as independent entities in fiscal 2015, 2014 and 2013, respectively. We did not recognize software license updates and product support revenues related to support contracts in the amounts of $11 million, $3 million and $14...

  • Page 54
    ...the income approach. Based upon the completion of our annual forecasting process, the fair value of our hardware systems products reporting unit under the income approach was impacted by lower forecasted operating results, primarily caused by lower forecasted revenues and our continued investment in...

  • Page 55
    ...and appropriate, different assumptions and estimates could materially impact our reported financial results. We did not recognize any intangible asset impairment charges in fiscal 2015, 2014 or 2013. Accounting for Income Taxes Significant judgment is required in determining our worldwide income tax...

  • Page 56
    ... impact on our results of operations and financial position. Stock-Based Compensation We account for share-based payments to employees, including grants of service-based employee stock options, service-based restricted stock awards, performance-based restricted stock awards (PSUs) and purchases...

  • Page 57
    ... from fiscal 2015 compared to fiscal 2014 and fiscal 2014 compared to fiscal 2013, we may qualitatively disclose the impact of our acquired products and services (for the one year period subsequent to the acquisition date) to the growth in certain of our operating segments' revenues where such...

  • Page 58
    ... last day of our prior fiscal year) rather than the actual exchange rates in effect during the respective periods. For example, if an entity reporting in Euros had revenues of 1.0 million Euros from products sold on May 31, 2015 and 2014, our financial statements would reflect reported revenues of...

  • Page 59
    ...during fiscal 2015 as our total operating expenses increased at a faster rate than our total revenues. Fiscal 2014 Compared to Fiscal 2013 : On a constant currency basis, our total revenues increased in fiscal 2014 due to increases in our software and cloud business revenues and our hardware systems...

  • Page 60
    ...(in millions) 2015 Year Ended May 31, 2014 2013 Cloud software as a service and platform as a service deferred revenues (1) Software license updates and product support deferred revenues (1) Hardware systems support deferred revenues (1) Amortization of intangible assets (2) Acquisition related and...

  • Page 61
    ... Cloud software as a service and platform as a service Cloud infrastructure as a service Software license updates and product support Hardware systems products Hardware systems support Services Research and development General and administrative Subtotal Acquisition related and other Total stock...

  • Page 62
    ...of 'Amortization of Intangible Assets' in our consolidated statements of operations Fiscal 2015 Compared to Fiscal 2014: Excluding the effects of unfavorable currency rate fluctuations of 5 percentage points, total new software licenses and cloud software subscriptions revenues remained flat during...

  • Page 63
    ...software licenses revenues in fiscal 2015 in comparison to 33% in fiscal 2014. Excluding the effects of favorable currency rate fluctuations of 4 percentage points, total new software licenses and cloud software subscriptions expenses increased in fiscal 2015 primarily due to higher employee related...

  • Page 64
    ... Assets' in our consolidated statements of operations Not meaningful Fiscal 2015 Compared to Fiscal 2014: On a constant currency basis, total cloud IaaS revenues increased during fiscal 2015 primarily due to growth in our comprehensive software and hardware management, maintenance and hosting...

  • Page 65
    ... recorded adjustments to reduce assumed software support obligations to their estimated fair values at the acquisition dates. Due to our application of business combination accounting rules, software license updates and product support revenues related to software support contracts in the amounts of...

  • Page 66
    Table of Contents Excluding the effects of favorable foreign currency rate fluctuations, total software license updates and product support expenses increased during fiscal 2015 due to higher employee related expenses and facilities costs associated with increased headcount that was primarily ...

  • Page 67
    ...consolidated statements of operations Fiscal 2015 Compared to Fiscal 2014: Excluding the effects of unfavorable currency rate fluctuations of 5 percentage points, total hardware systems products revenues were flat in fiscal 2015 in comparison to the prior year as revenues from our recently acquired...

  • Page 68
    ... estimated fair values at the acquisition dates. Due to our application of business combination accounting rules, hardware systems support revenues related to hardware systems support contracts in the amounts of $4 million, $11 million and $14 million were not recognized in fiscal 2015, 2014 and...

  • Page 69
    ...Oracle products and services. Education revenues are earned by providing instructor-led, live virtual training, self-paced online training, private events and custom training in the use of our software and hardware offerings. The cost of providing our services consists primarily of personnel related...

  • Page 70
    Table of Contents Fiscal 2015 Compared to Fiscal 2014: Excluding the effects of unfavorable currency rate fluctuations of 4 percentage points, our total services revenues were flat in fiscal 2015 as incremental revenues from our recently acquired companies, including MICROS, and an increase in ...

  • Page 71
    ... Financial Statements included elsewhere in this Annual Report for additional information) and an increase in certain transitional employee related costs, primarily related to our acquisition of MICROS. These fiscal 2015 expense increases were partially offset by a $53 million benefit recorded...

  • Page 72
    .... We recorded a net benefit of $387 million during fiscal 2013 related to the change in fair value of contingent consideration payable in connection with an acquisition (refer to Note 2 of Notes to Consolidated Financial Statements included elsewhere in this Annual Report for additional information...

  • Page 73
    .... Note 1 of Notes to Consolidated Financial Statements included elsewhere in this Annual Report contains additional information regarding the foreign currency remeasurement losses we incurred in fiscal 2015, 2014 and 2013 related to our Venezuelan subsidiary. Fiscal 2014 Compared to Fiscal 2013: We...

  • Page 74
    ... what we would have reported using constant currency rates from our May 31, 2014 balance sheet date. The increase in cash, cash equivalents and marketable securities at May 31, 2014 in comparison to May 31, 2013 was due to an increase in cash generated from our operating activities, our issuance of...

  • Page 75
    ...excludes the impact of revenue adjustments resulting from business combinations that reduced our acquired cloud SaaS and PaaS obligations, software license updates and product support obligations and hardware systems support obligations to fair value. (Dollars in millions) 2015 Change Year Ended May...

  • Page 76
    ... option to acquire our software products, hardware systems 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...

  • Page 77
    ...Senior Notes and related interest rate swap agreements are included in Notes 8 and 11 of Notes to Consolidated Financial Statements included elsewhere in this Annual Report. Cash Dividends : In fiscal 2015, we declared and paid cash dividends of $0.51 per share that totaled $2.3 billion, an increase...

  • Page 78
    ...fiscal year. Similarly, the operating income of our business is affected by seasonal factors in a consistent manner as our revenues (in particular, our new software licenses and cloud software subscriptions segment) as certain expenses within our cost structure are relatively fixed in the short-term...

  • Page 79
    ... to control the number of stock options and restricted stock-based awards granted while providing competitive compensation packages. Consistent with these dual goals, our cumulative potential dilution since June 1, 2012 has been a weighted average annualized rate of 1.9% per year. The potential...

  • Page 80
    Table of Contents The Compensation Committee of the Board of Directors reviews and approves the organization-wide stock-based award grants to selected employees, all stock-based award grants to executive officers and any individual grant of stock-based awards in excess of 100,000 stock option ...

  • Page 81
    ... on a worldwide basis. The table below presents the approximate fair values of our cash, cash equivalents and marketable securities and the related weighted average interest rates for our investment portfolio at May 31, 2015 and 2014. May 31, 2015 Weighted Average Interest Rate 2014 Weighted Average...

  • Page 82
    ...foreign currency exchange rates on the effective portion is recorded in accumulated other comprehensive loss on our consolidated balance sheet and is also presented as a line item in our consolidated statements of comprehensive income included elsewhere in this Annual Report and totaled $208 million...

  • Page 83
    Table of Contents not significant. The balance sheet classification for the fair values of these forward contracts is prepaid expenses and other current assets for a net unrealized gain position and other current liabilities for a net unrealized loss position. The statement of operations ...

  • Page 84
    ...securities balances. Item 8. Financial Statements and Supplementary Data The response to this item is submitted as a separate section of this Annual Report. See Part IV, Item 15. Item 9. None. Item 9A. Controls and Procedures Changes In and Disagreements with Accountants on Accounting and Financial...

  • Page 85
    .... However, our management does not expect that our disclosure controls and procedures or our internal control over financial reporting will prevent all errors and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the...

  • Page 86
    ... information to be contained in our 2015 Proxy Statement under the sections entitled "Corporate Governance-Board of Directors and Director Independence" and "Transactions with Related Persons". Item 14. Principal Accountant Fees and Services The information required by this Item 14 is incorporated...

  • Page 87
    ... and Financial Statement Schedules (a) 1. Financial Statements The following financial statements are filed as a part of this report: Page Reports of Independent Registered Public Accounting Firm Consolidated Financial Statements: Balance Sheets as of May 31, 2015 and 2014 Statements of Operations...

  • Page 88
    ... balance sheets of Oracle Corporation as of May 31, 2015 and 2014, and the related consolidated statements of operations, comprehensive income, equity, and cash flows for each of the three years in the period ended May 31, 2015. Our audits also included the financial statement schedule listed...

  • Page 89
    ...accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheets of Oracle Corporation as of May 31, 2015 and 2014, and the related consolidated statements of operations, comprehensive income, equity, and cash flows for each of the three...

  • Page 90
    Table of Contents ORACLE CORPORATION CONSOLIDATED BALANCE SHEETS As of May 31, 2015 and 2014 May 31, (in millions, except per share data) 2015 2014 ASSETS Current assets: Cash and cash equivalents Marketable securities Trade receivables, net of allowances for doubtful accounts of $285 and $306 as ...

  • Page 91
    Table of Contents ORACLE CORPORATION CONSOLIDATED STATEMENTS OF OPERATIONS For the Years Ended May 31, 2015, 2014 and 2013 (in millions, except per share data) 2015 Year Ended May 31, 2014 2013 Revenues: New software licenses Cloud software as a service and platform as a service Cloud ...

  • Page 92
    Table of Contents ORACLE CORPORATION CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME For the Years Ended May 31, 2015, 2014 and 2013 (in millions) 2015 Year Ended May 31, 2014 2013 Net income Other comprehensive loss, net of tax: Net foreign currency translation losses Net unrealized (losses) gains...

  • Page 93
    Table of Contents ORACLE CORPORATION CONSOLIDATED STATEMENTS OF EQUITY For the Years Ended May 31, 2015, 2014 and 2013 Common Stock and Additional Paid in Capital Number of (in millions) Balances as of May 31, 2012 Common stock issued under stock-based compensation plans Common stock issued under ...

  • Page 94
    Table of Contents ORACLE CORPORATION CONSOLIDATED STATEMENTS OF CASH FLOWS For the Years Ended May 31, 2015, 2014 and 2013 (in millions) Cash flows from operating activities: Net income Adjustments to reconcile net income to net cash provided by operating activities: Depreciation Amortization of ...

  • Page 95
    ... ACCOUNTING POLICIES Oracle Corporation develops, manufactures, markets, sells, hosts and supports database and middleware software, application software, cloud infrastructure, hardware systems-including Oracle Engineered Systems, computer server, storage, networking and industry specific hardware...

  • Page 96
    ... and Software Related Services (Software Elements) New software licenses revenues primarily represent fees earned from granting customers licenses to use our database, middleware and application software and exclude cloud SaaS and PaaS revenues and revenues derived from software license updates...

  • Page 97
    Table of Contents ORACLE CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued) May 31, 2015 acceptance terms are perfunctory and all other revenue recognition criteria have been met. If acceptance provisions are not perfunctory (for example, acceptance provisions that are long-term in ...

  • Page 98
    Table of Contents ORACLE CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued) May 31, 2015 Our cloud IaaS offerings provide deployment and management offerings for our software and hardware and related IT infrastructure including comprehensive software and hardware management and ...

  • Page 99
    Table of Contents ORACLE CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued) May 31, 2015 When possible, we establish VSOE of selling price for deliverables in software and nonsoftware multiple-element arrangements using the price charged for a deliverable when sold separately and for...

  • Page 100
    ... revenues and related expenses reported in our consolidated financial statements. A number of internal and external factors can affect our estimates, including labor rates, utilization and efficiency variances and specification and testing requirement changes. Our advanced customer support services...

  • Page 101
    ... of Contents ORACLE CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued) May 31, 2015 contract date. Provided all other revenue recognition criteria have been met, we recognize new software licenses revenues and hardware systems products revenues for these arrangements upon delivery...

  • Page 102
    Table of Contents ORACLE CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued) May 31, 2015 If we cannot reasonably determine the fair value of a pre-acquisition contingency (non-income tax related) by the end of the measurement period, which is generally the case given the nature of ...

  • Page 103
    ... of our payment terms for the significant majority of our customer contracts and by the diversification of our customer base. No single customer accounted for 10% or more of our total revenues in fiscal 2015, 2014 or 2013. We outsource the design, manufacturing, assembly and delivery of certain...

  • Page 104
    Table of Contents ORACLE CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued) May 31, 2015 Goodwill, Intangible Assets and Impairment Assessments Goodwill represents the excess of the purchase price in a business combination over the fair value of net tangible and intangible assets ...

  • Page 105
    ... statements of operations were $157 million, $375 million and $162 million in fiscal 2015, 2014 and 2013, respectively. Stock-Based Compensation We account for share-based payments to employees, including grants of service-based employee stock options, service-based restricted stock awards...

  • Page 106
    Table of Contents ORACLE CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued) May 31, 2015 We record deferred tax assets for stock-based compensation awards that result in deductions on our income tax returns based on the amount of stock-based compensation recognized and the fair value...

  • Page 107
    Table of Contents ORACLE CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued) May 31, 2015 Non-Operating Income (Expense), net Non-operating income (expense), net consists primarily of interest income, net foreign currency exchange gains (losses), the noncontrolling interests in the ...

  • Page 108
    ... of Contents ORACLE CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued) May 31, 2015 consistent with the acquisition of other software licenses. If a cloud computing arrangement does not include a software license, the customer should account for the arrangement as a service contract...

  • Page 109
    ...6, 2014, we completed our acquisition of Responsys, Inc. (Responsys), a provider of enterprise-scale cloud-based business-toconsumer marketing software. We have included the financial results of Responsys in our consolidated financial statements from the date of acquisition. The total purchase price...

  • Page 110
    ... completed our acquisition of Eloqua, Inc. (Eloqua), a provider of cloud-based marketing automation and revenue performance management software. We have included the financial results of Eloqua in our consolidated financial statements from the date of acquisition. The total purchase price for Eloqua...

  • Page 111
    ... 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 for fiscal 2015 and 2014: (in millions, except per share data) Year Ended May 31, 2015 2014 Total revenues...

  • Page 112
    Table of Contents ORACLE CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued) May 31, 2015 The amortized principal amounts of our cash, cash equivalents and marketable securities approximated their fair values at May 31, 2015 and 2014. We use the specific identification method to ...

  • Page 113
    ..., 2015 Fair Value Measurements Using Input Types Level 1 Level 2 May 31, 2014 Fair Value Measurements Using Input Types Level 1 Level 2 (in millions) Total Total Assets: U.S. Treasury securities Commercial paper debt securities Corporate debt securities and other Derivative financial instruments...

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    Table of Contents ORACLE CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued) May 31, 2015 6. PROPERTY, PLANT AND EQUIPMENT Property, plant and equipment, net consisted of the following: (Dollars in millions) Estimated Useful Life May 31, 2015 2014 Computer, network, machinery and ...

  • Page 115
    ... of Contents ORACLE CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued) May 31, 2015 The changes in the carrying amounts of goodwill, net, which is generally not deductible for tax purposes, for our operating segments for fiscal 2015 and 2014 were as follows: New Software Licenses and...

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    Table of Contents ORACLE CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued) May 31, 2015 8. NOTES PAYABLE AND OTHER BORROWINGS Notes payable consisted of the following: May 31, (Dollars in millions) 3.75% senior notes due July 2014, net of fair value adjustment of $8 as of May 31, ...

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    Table of Contents ORACLE CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued) May 31, 2015 and 2045 Notes, the May 2015 Senior Notes). We issued the May 2015 Senior Notes for general corporate purposes, which may include stock repurchases, payment of cash dividends on our common stock ...

  • Page 118
    Table of Contents ORACLE CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued) May 31, 2015 The effective interest yields of the 2016 Notes, 2017 Notes, 2018 Notes, January 2019 Notes, July 2019 Notes, 2019 Notes, 2020 Notes, 2021 Notes, 2022 Notes, October 2022 Notes, 2023 Notes, 2024 ...

  • Page 119
    Table of Contents ORACLE CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued) May 31, 2015 2013 Credit Agreement at any time during the term of the 2013 Credit Agreement. Interest under the 2013 Credit Agreement is based on either (a) a LIBOR-based formula or (b) the Base Rate formula,...

  • Page 120
    ... 5 36 31 53 120 Total Costs Accrued to Date $ 27 7 20 21 25 100 Total Expected Program Costs $ 110 209 65 101 141 626 (in millions) Fiscal 2015 Oracle Restructuring Plan (1) New software licenses and cloud software subscriptions Software license updates and product support Hardware systems business...

  • Page 121
    ... STATEMENTS-(Continued) May 31, 2015 Fiscal 2013 Activity Accrued May 31, 2012 Initial Costs (3) Year Ended May 31, 2013 Adj. to Cash Cost (4) Payments Others (5) Accrued May 31, 2013 (in millions) Fiscal 2013 Oracle Restructuring Plan (1) New software licenses and cloud software subscriptions...

  • Page 122
    ...required to pay a third party to assume these acquired obligations. These aforementioned fair value adjustments recorded for obligations assumed from our acquisitions reduced the cloud SaaS and PaaS, software license updates and product support and hardware systems support deferred revenues balances...

  • Page 123
    Table of Contents ORACLE CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued) May 31, 2015 principal amount of the January 2021 Notes at $1.6 billion with a fixed annual interest rate of 3.53%. We have designated these cross-currency swap agreements as qualifying hedging instruments ...

  • Page 124
    ... borrowings designated as net investment hedge May 31, 2015 Balance Sheet Location Fair Value Other assets $ 74 Not applicable Other non-current liabilities Notes payable, noncurrent $ $ $ - May 31, 2014 Balance Sheet Location Other assets Fair Value $ 15 8 74 (1,116) Prepaid expenses and other...

  • Page 125
    Table of Contents ORACLE CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued) May 31, 2015 Location and Amount of Gain (Loss) Recognized in Income on Derivative Year Ended May 31, 2015 2014 Interest expense $ 51 $ (18) Location and Amount of (Loss) Gain on Hedged Item Recognized in ...

  • Page 126
    Table of Contents ORACLE CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued) May 31, 2015 As of May 31, 2015, our unconditional purchase and certain other obligations were as follows (in millions): Fiscal 2016 Fiscal 2017 Fiscal 2018 Fiscal 2019 Fiscal 2020 Thereafter Total $ 713 195 ...

  • Page 127
    ... requires vesting over four fiscal years, if at all, based on relative performance. For each share granted as a full value award under the 2000 Plan, an equivalent of 2.5 shares is deducted from our pool of shares available for grant. As of May 31, 2015, the 2000 Plan had stock options to purchase...

  • Page 128
    Table of Contents ORACLE CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued) May 31, 2015 3 million unvested PSUs outstanding. As of May 31, 2015, approximately 409 million shares of common stock were available for future awards under the 2000 Plan. To date, we have not issued any ...

  • Page 129
    ... to Oracle-based stock plans and stock plans assumed from our acquisitions for our fiscal year ended May 31, 2015: Restricted Stock-Based Awards Outstanding Weighted Average Number of Grant Date Fair Value Shares (in millions, except fair value) Balance, May 31, 2014 Granted Canceled Balance, May...

  • Page 130
    Table of Contents ORACLE CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued) May 31, 2015 Stock-Based Compensation Expense and Valuation of Stock Awards We estimated the fair values of our stock options using the Black-Scholes-Merton option-pricing model, which was developed for use ...

  • Page 131
    Table of Contents ORACLE CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued) May 31, 2015 Tax Benefits from Exercise of Stock Options and Vesting of Restricted Stock-Based Awards Total cash received as a result of option exercises was approximately $1.7 billion, $2.0 billion and $1.4 ...

  • Page 132
    Table of Contents ORACLE CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued) May 31, 2015 15. INCOME TAXES Year Ended May 31, 2014 The following is a geographical breakdown of income before the provision for income taxes: (in millions) 2015 2013 Domestic Foreign Income before ...

  • Page 133
    Table of Contents ORACLE CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued) May 31, 2015 The components of our deferred tax liabilities and assets were as follows: May 31, (in millions) 2015 2014 Deferred tax liabilities: Unrealized gain on stock Acquired intangible assets ...

  • Page 134
    Table of Contents ORACLE CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued) May 31, 2015 The valuation allowance was $1.0 billion and $1.1 billion at May 31, 2015 and 2014, respectively. Substantially all of the valuation allowances as of May 31, 2015 and 2014 relate to tax assets ...

  • Page 135
    ... during the support period. The hardware systems products line of business provides Oracle Engineered Systems, servers, storage, networking, industry specific hardware, virtualization software, operating systems including the Oracle Solaris Operating System and management software to support diverse...

  • Page 136
    Table of Contents ORACLE CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued) May 31, 2015 Our services business is comprised of the remainder of our operating segments and offers consulting, advanced customer support services and education services. Our consulting line of business ...

  • Page 137
    Table of Contents ORACLE CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued) May 31, 2015 (1) New software licenses and cloud software subscriptions revenues for management reporting included revenues related to cloud SaaS and PaaS contracts that would have otherwise been recorded by...

  • Page 138
    ... stock options, restricted stock-based awards and shares issuable under the employee stock purchase plan using the treasury stock method. The following table sets forth the computation of basic and diluted earnings per share: (in millions, except per share data) 2015 Year Ended May 31, 2014...

  • Page 139
    Table of Contents ORACLE CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued) May 31, 2015 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...

  • Page 140
    Table of Contents SCHEDULE II ORACLE CORPORATION VALUATION AND QUALIFYING ACCOUNTS Additions Charged to Operations or Other Accounts Translation Adjustments and Other (in millions) Beginnning Balance Write-offs Ending Balance Allowances for Doubtful Trade Receivables Year Ended: May 31, 2013 ...

  • Page 141
    Table of Contents SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. ORACLE CORPORATION Date: June 25, 2015 By: / S / S AFRA A. C ...

  • Page 142
    Table of Contents ORACLE CORPORATION INDEX OF EXHIBITS The following exhibits are filed herewith or are incorporated by reference to exhibits previously filed with the U.S. Securities and Exchange Commission. Exhibit No. Exhibit Description Form File No. Incorporated by Reference Exhibit Filing Date...

  • Page 143
    ... as of October 1, 2009 10.03* Oracle Corporation Amended and Restated 1993 Directors' Stock Plan, as amended and restated on September 4, 2013 10.04* Amended and Restated 2000 Long-Term Equity Incentive Plan, as approved on October 31, 2013 10.05* Form of Stock Option Agreement under the Amended and...

  • Page 144
    Table of Contents Exhibit No. Incorporated by Reference Exhibit Filing Date Filed Herewith Exhibit Description Form File No. Filed By 10.06* Form of Stock Option Agreement under the Oracle Corporation Amended and Restated 1993 Directors' Stock Plan 10.07* Form of Indemnity Agreement for ...

  • Page 145
    ... Equity for the years ended May 31, 2015, 2014 and 2013, (v) Consolidated Statements of Cash Flows for the years ended May 31, 2015, 2014 and 2013, (vi) Notes to Consolidated Financial Statements and (vii) Financial Statement Schedule II X X X * Indicates management contract or compensatory plan...

  • Page 146
    ...Address: Grant Date: Number of Shares: Exercise Price per Share: Expiration Date: $ Oracle Corporation, a Delaware corporation (the "Company"), hereby grants to the optionee named above ("Optionee") a non-qualified stock option (this "Option") to purchase the total number of shares of Common Stock...

  • Page 147
    ... Stock may be listed at the time of exercise, and (ii) until the Plan, or any required increase in the number of Shares authorized under the Plan, is approved by the Stockholders of the Company. Notwithstanding anything else in this Grant or the Plan, this Option shall expire on the Expiration Date...

  • Page 148
    ... as may be required by the Company to comply with applicable securities laws. Payment . Payment of the exercise price upon exercise of any Option shall be made (i) by cash or check; (ii) provided that a public market for the Company's stock exists, through a "same day sale" commitment from...

  • Page 149
    ... . Optionee hereby acknowledges receipt of a copy of the Plan and the prospectus relating to the Plan, represents that Optionee has read and understands the terms and conditions thereof, and accepts this Option subject to all the terms and provisions of the Plan and this Grant. Optionee acknowledges...

  • Page 150
    ... the aggregate purchase price of the Shares that are specified in the accompanying Oracle Corporation Stock Option Exercise Form, and I have made provision for the payment of any federal and state withholding taxes required to be paid or withheld by the Company. Insider Trading . I acknowledge that...

  • Page 151
    ... of law pertaining to conflict of laws. Optionee agrees to institute any legal action or legal proceeding relating to the Grant, the Plan or this Agreement in state court in San Mateo County, ...courts in any such action or proceeding. Optionee's Name (please print): Optionee's Signature: Date:

  • Page 152
    ...THIS AWARD IS NOT TRANSFERABLE Participant: Address: Grant Date: Number of Shares: Oracle Corporation, a Delaware corporation (the "Company"), hereby grants to the Director named above ("Participant") an award of stock units (this "Award") pursuant to which the Participant may acquire the number of...

  • Page 153
    ... AMENDED AND RESTATED 1993 DIRECTORS' STOCK PLAN DIRECTORS' STOCK UNIT TERMS AND CONDITIONS 1. Grant . Oracle Corporation (the "Company") has granted to the Director (the "Participant") named in the applicable Directors' Stock Unit Award Notice (the "Notice") the number of stock units set forth in...

  • Page 154
    ... this Award, the subsequent sale of Shares acquired pursuant to such settlement and the receipt of any dividends; and (b) does not commit to and is under no obligation to structure the terms of the grant or any aspect of this Award to reduce or eliminate Participant's liability for Tax-Related Items...

  • Page 155
    ... full number of Shares subject to the vested stock units underlying this Award, notwithstanding that a number of the Shares are held back solely for the purpose of paying the Tax-Related Items due as a result of any aspect of Participant's participation in the Plan. Finally, Participant shall pay to...

  • Page 156
    ... have no liability to Participant or any other party if the grant, vesting or settlement of this Award and the issuance of Shares or cash or any other transaction under these RSU Terms and Conditions are not exempt from, or compliant with, Code Section 409A, or for any action taken by the Company...

  • Page 157
    Exhibit 12.01 ORACLE CORPORATION CONOSOLIDATED RATIO OF EARNINGS TO FIXED CHARGES (Unaudited) Year Ended May 31, 2013 2012 (Dollars in millions) 2015 2014 2011 Earnings (1) Income before provision for income taxes Add: Noncontrolling interests Add: Fixed charges Total earnings Fixed Charges (2)...

  • Page 158
    ... ORACLE CORPORATION Subsidiaries of the Registrant Name of Subsidiary Place of Incorporation Oracle International Corporation Oracle Global Holdings, Inc. Oracle America, Inc. Oracle Technology Company OCAPAC Holding Company OCAPAC Research Partner OCAPAC Distributor Partner OCAPAC Hardware Partner...

  • Page 159
    ...2008 Equity Incentive Plan Responsys, Inc. 1999 Stock Plan, as amended, Responsys, Inc. 2011 Equity Incentive Plan Oracle Corporation Amended and Restated 2000 Long-Term Equity Incentive Plan, Bitzer Mobile Inc. 2011 Stock Incentive Plan, as amended Acme Packet, Inc. 2006 Equity Incentive Plan Form...

  • Page 160
    ...Plan, Hyperion Solutions Corporation 1992 Stock Option Plan, Hyperion Software Corporation 1991 Stock Plan, Hyperion Software Corporation 1991 Stock Plan, Decisioneering, Inc. 1997 Stock Option Plan, SQRIBE 1995 Stock Option Plan, Hyperion Software Corporation 1991 Non-Employee Director Stock Option...

  • Page 161
    ..., Inc. 1993 Stock Option Plan, The Vantive Corporation Amended and Restated 1991 Stock Option Plan, The Vantive Corporation 1997 Nonstatutory Stock Option Plan, Oracle Corporation 1993 Deferred Compensation Plan, Oracle Corporation 401(k) Savings and Investment Plan Form S-8 Form S-8 Form S-8 333...

  • Page 162
    of our reports dated June 25, 2015, with respect to the consolidated financial statements and schedule of Oracle Corporation and the effectiveness of internal control over financial reporting of Oracle Corporation included in this Annual Report (Form 10-K) of Oracle Corporation for the year ended ...

  • Page 163
    ...; and any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. By: / S / M ARK V. H URD Mark V. Hurd Chief Executive Officer and Director (Principal Executive Officer) Date: June 25...

  • Page 164
    ..., whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. By: / S / S AFRA A. C ATZ Safra A. Catz Chief Executive Officer and Director (Principal Executive and Financial Officer) Date: June 25...

  • Page 165
    ... fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of Oracle Corporation. By: / S / S AFRA A. C ATZ Safra...