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EMPLOYEE BENEFIT PLANS | 12 Months Ended
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May 31, 2019
Compensation Related Costs [Abstract] |
EMPLOYEE BENEFIT PLANS |
13. | EMPLOYEE BENEFIT PLANS
Stock-Based Compensation Plans Stock Plans In fiscal 2001, we adopted the 2000 Long-Term Equity Incentive Plan, which provides for the issuance of long-term performance awards, including restricted stock-based awards, non-qualified stock options and incentive stock options, as well as stock purchase rights and stock appreciation rights, to our eligible employees, officers and directors who are also employees or consultants, independent consultants and advisers.
| • | In fiscal 2011, our stockholders, upon the recommendation of our Board of Directors (the Board), approved the adoption of the Amended and Restated 2000 Long-Term Equity Incentive Plan (the 2000 Plan), which extended the termination date of the 2000 Plan by 10 years and increased the number of authorized shares of stock that may be issued by 388,313,015 shares.
| • | In fiscal 2014, our stockholders, upon the recommendation of the Board, approved a further increase in the number of authorized shares of stock that may be issued under the 2000 Plan by 305,000,000 shares. Under the terms of the 2000 Plan, long-term full value awards are granted in the form of restricted stock units (RSUs) and performance-based restricted stock awards (PSUs). 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.
| • | In fiscal 2018, our stockholders, upon the recommendation of the Board, approved a further increase in the number of authorized shares of stock that may be issued under the 2000 Plan by 330,000,000 shares, and approved material terms of the performance goals under which PSUs and performance-based stock options (PSOs) could be granted.
As of May 31, 2019, the 2000 Plan had 93 million unvested RSUs outstanding, 1 million unvested PSUs outstanding, 55 million PSOs outstanding and service-based stock options (SOs) to purchase 164 million shares of common stock outstanding of which 143 million shares were vested. As of May 31, 2019, approximately 301 million shares of common stock were available for future awards under the 2000 Plan. To date, we have not issued any stock purchase rights or stock appreciation rights under the 2000 Plan. The vesting schedule for all awards granted under the 2000 Plan is established by the Compensation Committee of the Board of Directors. RSUs generally require service-based vesting of 25% annually over four years. The vesting schedule for PSUs currently requires achieving performance targets and providing service over four fiscal years. SOs are granted at not less than fair market value, become exercisable generally 25% annually over four years of service, and generally expire 10 years from the date of grant. PSOs granted to three of our current executive officers in fiscal 2018 consist of seven numerically equivalent vesting tranches that potentially may vest. One tranche vests solely on the attainment of a market-based metric. The remaining six tranches require the attainment of both a performance metric and a market capitalization metric. In each case, the market-based metric, performance metrics and market capitalization metrics may be achieved at any time during a five year performance period, assuming continued employment and service through the date the Compensation Committee of the Board of Directors certifies that performance has been achieved. The PSOs have contractual lives of eight years in comparison to the typical ten year contractual lives for SOs. For the six tranches of the PSOs with both performance and market conditions, stock-based compensation expense is to be recognized once each vesting tranche becomes probable of achievement over the longer of the estimated implicit service period or derived service. We have preliminarily estimated service periods for those tranches that have been deemed probable of achievement to be up 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. In fiscal 1993, the Board adopted the 1993 Directors’ Stock Plan (the Directors’ Plan), which provides for the issuance of RSUs and other stock-based awards, including non-qualified stock options, to non-employee directors. The Directors’ Plan has from time to time been amended and restated. Under the terms of the Directors’ Plan, 10 million shares of common stock are reserved for issuance (including a fiscal 2013 amendment to increase the number of shares of our common stock reserved for issuance by 2 million shares). In prior years, we granted stock options at not less than fair market value, that vest over four years, and expire no more than 10 years from the date of grant. We currently grant RSUs only that vest fully on the one-year anniversary of the date of grant. The Directors’ Plan was most recently amended on April 29, 2016 and permits the Compensation Committee of the Board to determine the amount and form of automatic grants of stock awards to each non-employee director upon first becoming a director and thereafter on an annual basis, as well as automatic grants for chairing certain Board committees, subject to certain stockholder approved limitations set forth in the Directors’ Plan. As of May 31, 2019, approximately 90,000 unvested RSUs and stock options to purchase approximately 1 million shares of common stock (all of which were vested) were outstanding under the Directors’ Plan. As of May 31, 2019, approximately 1 million shares were available for future stock awards under this plan. In connection with certain of our acquisitions, we assumed certain outstanding restricted stock-based awards and stock options under each acquired company’s respective stock plans, or we substituted substantially similar awards under the 2000 Plan. These restricted stock-based awards and stock options assumed or substituted generally retain all of the rights, terms and conditions of the respective plans under which they were originally granted. As of May 31, 2019, approximately 1 million shares of restricted stock-based awards and stock options to purchase 2 million shares of common stock were outstanding under acquired company stock plans that Oracle assumed. The following table summarizes restricted stock-based award activity, including service-based awards and performance-based awards, granted pursuant to Oracle-based stock plans and stock plans assumed from our acquisitions for our last three fiscal years ended May 31, 2019:
|  | Restricted Stock-Based Awards Outstanding |
(in millions, except fair value) |  | Number of Shares |  |  | Weighted-Average Grant Date Fair Value |
Balance, May 31, 2016 |  |  | 52 |  |  | $ | 39.29 |
Granted |  |  | 42 |  |  | $ | 39.40 |
Assumed |  |  | 14 |  |  | $ | 37.83 |
Vested and Issued |  |  | (18 | ) |  | $ | 40.39 |
Canceled |  |  | (7 | ) |  | $ | 39.73 |
Balance, May 31, 2017 |  |  | 83 |  |  | $ | 39.18 |
Granted |  |  | 44 |  |  | $ | 47.42 |
Vested and Issued |  |  | (27 | ) |  | $ | 39.10 |
Canceled |  |  | (11 | ) |  | $ | 41.97 |
Balance, May 31, 2018 |  |  | 89 |  |  | $ | 42.93 |
Granted |  |  | 53 |  |  | $ | 42.47 |
Vested and Issued |  |  | (31 | ) |  | $ | 41.85 |
Canceled |  |  | (12 | ) |  | $ | 42.97 |
Balance, May 31, 2019 |  |  | 99 |  |  | $ | 43.01 |
The total grant date fair value of restricted stock-based awards that were vested and issued in fiscal 2019, 2018 and 2017 was $1.3 billion, $1.0 billion and $715 million, respectively. As of May 31, 2019, total unrecognized stock-based compensation expense related to non-vested restricted stock-based awards was $2.8 billion and is expected to be recognized over the remaining weighted-average vesting period of 2.68 years. No PSUs were granted in each of fiscal 2019 and 2018. In fiscal 2017, 1.7 million PSUs were granted which vest upon the attainment of certain performance metrics and service-based vesting. Based upon actual attainment relative to the “target” performance metric, certain participants have the ability to be issued up to 150% of the target number of PSUs originally granted, or to be issued no PSUs at all. In fiscal 2019, 2.4 million PSUs vested and 1.3 million PSUs remained outstanding as of May 31, 2019. The following table summarizes stock option activity, including SOs and PSOs, and includes awards granted pursuant to the 2000 Plan and stock plans assumed from our acquisitions for our last three fiscal years ended May 31, 2019:
|  | Options Outstanding |
(in millions, except exercise price) |  | Shares Under Stock Option |  |  | Weighted-Average Exercise Price |
Balance, May 31, 2016 |  |  | 375 |  |  | $ | 29.66 |
Granted(1) |  |  | 18 |  |  | $ | 40.90 |
Assumed |  |  | 2 |  |  | $ | 13.06 |
Exercised |  |  | (77 | ) |  | $ | 26.65 |
Canceled |  |  | (6 | ) |  | $ | 36.28 |
Balance, May 31, 2017 |  |  | 312 |  |  | $ | 29.02 |
Granted(2) |  |  | 77 |  |  | $ | 50.95 |
Exercised |  |  | (78 | ) |  | $ | 28.78 |
Canceled |  |  | (7 | ) |  | $ | 45.70 |
Balance, May 31, 2018 |  |  | 304 |  |  | $ | 36.11 |
Granted |  |  | 7 |  |  | $ | 43.47 |
Exercised |  |  | (72 | ) |  | $ | 28.32 |
Canceled |  |  | (17 | ) |  | $ | 49.28 |
Balance, May 31, 2019 |  |  | 222 |  |  | $ | 37.78 |
(1) | 6.75 million SOs were granted in total during fiscal 2017 to our Chief Executive Officers and Chief Technology Officer and have contractual lives of five years versus the ten-year contractual lives for most of the other SOs granted.
(2) | Awards granted in fiscal 2018 included 66.5 million PSOs granted in total to our Chief Executive Officers, Chief Technology Officer, and former President, Product Development, the contractual terms of which are described in greater detail above.
Stock options outstanding that have vested and that are expected to vest as of May 31, 2019 were as follows:
|  | Outstanding Stock Options (in millions) |  |  |  |  | Weighted-Average Exercise Price |  |  |  |  | Weighted-Average Remaining Contract Term (in years) |  |  |  |  | Aggregate Intrinsic Value(1) (in millions) |
Vested |  |  | 146 |  |  |  |  | $ | 32.13 |  |  |  |  |  | 3.32 |  |  |  |  | $ | 2,698 |
Expected to vest(2) |  |  | 42 |  |  |  |  | $ | 46.95 |  |  |  |  |  | 6.47 |  |  |  |  |  | 181 |
Total |  |  | 188 |  |  |  |  | $ | 35.45 |  |  |  |  |  | 4.02 |  |  |  |  | $ | 2,879 |
(1) | The aggregate intrinsic value was calculated based on the gross difference between our closing stock price on the last trading day of fiscal 2019 of $50.60 and the exercise prices for all “in-the-money” options outstanding, excluding tax effects.
(2) | The unrecognized compensation expense calculated under the fair value method for shares expected to vest (unvested shares net of expected forfeitures) as of May 31, 2019 was approximately $254 million and is expected to be recognized over a weighted-average period of 2.74 years. Approximately 34 million shares outstanding as of May 31, 2019 were not expected to vest.
Stock-Based Compensation Expense and Valuations of Stock Awards We estimated the fair values of our restricted stock-based awards that are solely subject to service-based vesting requirements based upon their market values as of the grant dates, discounted for the present values of expected dividends. The fair values of our PSUs were also measured based upon their market values as of their respective grant dates, discounted for the present values of expected dividends. The vesting conditions and related terms of our PSUs were communicated to each participating employee as of their respective grant dates and included attainment metrics that were defined, fixed and based upon consistent U.S. GAAP metrics or internal metrics that are defined, fixed and consistently determined, and that require the employee to render service. Therefore, these awards met the performance-based award classification criteria as defined within ASC 718. We estimated the fair values of our stock options that were solely subject to service-based vesting requirements using the Black-Scholes-Merton option-pricing model, which was developed for use in estimating the fair values of stock options. Option valuation models, including the Black-Scholes-Merton option-pricing model, require the input of assumptions, including stock price volatility. Changes in the input assumptions can affect the fair value estimates and ultimately how much we recognize as stock-based compensation expense. The fair values of our stock options were estimated at the grant dates or at the acquisition dates for options assumed in a business combination. The weighted-average input assumptions used and resulting fair values of our service-based stock options were as follows for fiscal 2019, 2018 and 2017:
|  | Year Ended May 31, |
|  | 2019 |  |  | 2018 |  |  | 2017 |
Expected life (in years) |  |  | 4.6 |  |  |  | 4.7 |  |  |  | 4.8 |
Risk-free interest rate |  | 2.7% |  |  | 2.0% |  |  | 1.0% |
Volatility |  | 24% |  |  | 22% |  |  | 23% |
Dividend yield |  | 1.7% |  |  | 1.5% |  |  | 1.5% |
Weighted-average fair value per share |  | $ | 10.77 |  |  | $ | 9.34 |  |  | $ | 8.18 |
The expected life input is based on historical exercise patterns and post-vesting termination behavior, the risk-free interest rate input is based on U.S. Treasury instruments, the annualized dividend yield input is based on the per share dividend declared by the Board, and the volatility input is calculated based on the implied volatility of our publicly traded options. We estimated the fair values of the PSOs granted during fiscal 2018 at approximately $10 per share using a Monte Carlo simulation approach as of the grant date with the following assumptions: risk-free interest rate of 2.14%, expected term of seven years, expected volatility of 22.44% and dividend yield of 1.49%. Stock-based compensation expense is included in the following operating expense line items in our consolidated statements of operations:
|  | Year Ended May 31, |
(in millions) |  | 2019 |  |  | 2018 |  |  | 2017 |
Cloud services and license support |  | $ | 99 |  |  | $ | 82 |  |  | $ | 54 |
Hardware |  |  | 10 |  |  |  | 10 |  |  |  | 11 |
Services |  |  | 49 |  |  |  | 52 |  |  |  | 44 |
Sales and marketing |  |  | 360 |  |  |  | 361 |  |  |  | 306 |
Research and development |  |  | 963 |  |  |  | 921 |  |  |  | 770 |
General and administrative |  |  | 172 |  |  |  | 180 |  |  |  | 130 |
Acquisition related and other |  |  | — |  |  |  | 1 |  |  |  | 35 |
Total stock-based compensation |  |  | 1,653 |  |  |  | 1,607 |  |  |  | 1,350 |
Estimated income tax benefit included in provision for income taxes |  |  | (358 | ) |  |  | (451 | ) |  |  | (423 | )
Total stock-based compensation, net of estimated income tax benefit |  | $ | 1,295 |  |  | $ | 1,156 |  |  | $ | 927 |
Tax Benefits from Exercises of Stock Options and Vesting of Restricted Stock-Based Awards Total cash received as a result of option exercises was approximately $2.0 billion, $2.3 billion and $2.1 billion for fiscal 2019, 2018 and 2017, respectively. The total aggregate intrinsic value of restricted stock-based awards that vested and were issued and stock options that were exercised was $3.1 billion, $3.0 billion and $2.0 billion for fiscal 2019, 2018 and 2017, respectively. In connection with the vesting and issuance of restricted stock-based awards and stock options that were exercised, the tax benefits realized by us were $692 million, $860 million and $614 million for fiscal 2019, 2018 and 2017, respectively. Employee Stock Purchase Plan We have an Employee Stock Purchase Plan (Purchase Plan) that allows employees to purchase shares of common stock at a price per share that is 95% of the fair market value of Oracle stock as of the end of the semi-annual option period. As of May 31, 2019, 46 million shares were reserved for future issuances under the Purchase Plan. We issued 2 million shares in fiscal 2019 and 3 million shares in each of fiscal 2018 and 2017, respectively, under the Purchase Plan. Defined Contribution and Other Postretirement Plans We offer various defined contribution plans for our U.S. and non-U.S. employees. Total defined contribution plan expense was $380 million, $384 million and $366 million for fiscal 2019, 2018 and 2017, respectively. In the U.S., regular employees can participate in the Oracle Corporation 401(k) Savings and Investment Plan (Oracle 401(k) Plan). Participants can generally contribute up to 40% of their eligible compensation on a per-pay-period basis as defined by the Oracle 401(k) Plan document or by the section 402(g) limit as defined by the U.S. Internal Revenue Service (IRS). We match a portion of employee contributions, currently 50% up to 6% of compensation each pay period, subject to maximum aggregate matching amounts. Our contributions to the Oracle 401(k) Plan, net of forfeitures, were $154 million, $151 million and $157 million in fiscal 2019, 2018 and 2017, respectively. We also offer non-qualified deferred compensation plans to certain employees whereby they may defer a portion of their annual base and/or variable compensation until retirement or a date specified by the employee in accordance with the plans. Deferred compensation plan assets and liabilities were each approximately $566 million and approximately $555 million as of May 31, 2019 and 2018, respectively, and were presented in other non-current assets and other non-current liabilities in the accompanying consolidated balance sheets. We sponsor certain defined benefit pension plans that are offered primarily by certain of our foreign subsidiaries. Many of these plans were assumed through our acquisitions or are required by local regulatory requirements. We may deposit funds for these plans with insurance companies, third-party trustees, or into government-managed accounts consistent with local regulatory requirements, as applicable. Our total defined benefit plan pension expenses were $90 million, $102 million and $85 million for fiscal 2019, 2018 and 2017, respectively. The aggregate projected benefit obligation and aggregate net liability (funded status) of our defined benefit plans as of May 31, 2019 were $1.2 billion and $821 million, respectively, and as of May 31, 2018 were $1.1 billion and $711 million, respectively.

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- Definition The entire disclosure for compensation costs, including compensated absences accruals, compensated absences liability, deferred compensation arrangements and income statement compensation items. Deferred compensation arrangements may include a description of an arrangement with an individual employee, which is generally an employment contract between the entity and a selected officer or key employee containing a promise by the employer to pay certain amounts at designated future dates, usually including a period after retirement, upon compliance with stipulated requirements. This type of arrangement is distinguished from broader based employee benefit plans as it is usually tailored to the employee. Disclosure also typically includes the amount of related compensation expense recognized during the reporting period, the number of shares (units) issued during the period under such arrangements, and the carrying amount as of the balance sheet date of the related liability. + References Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 710 -URI http://asc.fasb.org/topic&trid=2127225 + Details
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