Exhibit 99.2
CONSOLIDATED STATEMENTS OF OPERATIONS
(In millions, except per-share amounts)
(Unaudited)
Three Months Ended | Six Months Ended | |||||||||||
January 28, 2006 | January 29, 2005 | January 28, 2006 | January 29, 2005 | |||||||||
NET SALES: | ||||||||||||
Product | $ | 5,537 | $ | 5,106 | $ | 11,028 | $ | 10,139 | ||||
Service | 1,091 | 956 | 2,150 | 1,894 | ||||||||
Total net sales | 6,628 | 6,062 | 13,178 | 12,033 | ||||||||
COST OF SALES: | ||||||||||||
Product | 1,774 | 1,669 | 3,525 | 3,315 | ||||||||
Service | 388 | 340 | 777 | 650 | ||||||||
Total cost of sales | 2,162 | 2,009 | 4,302 | 3,965 | ||||||||
GROSS MARGIN | 4,466 | 4,053 | 8,876 | 8,068 | ||||||||
OPERATING EXPENSES: | ||||||||||||
Research and development | 966 | 811 | 1,962 | 1,616 | ||||||||
Sales and marketing | 1,431 | 1,142 | 2,884 | 2,262 | ||||||||
General and administrative | 282 | 228 | 560 | 458 | ||||||||
Amortization of purchased intangible assets | 56 | 57 | 115 | 117 | ||||||||
In-process research and development | — | 2 | 2 | 14 | ||||||||
Total operating expenses | 2,735 | 2,240 | 5,523 | 4,467 | ||||||||
OPERATING INCOME | 1,731 | 1,813 | 3,353 | 3,601 | ||||||||
Interest income | 168 | 127 | 322 | 257 | ||||||||
Other income, net | 17 | 17 | — | 57 | ||||||||
Interest and other income, net | 185 | 144 | 322 | 314 | ||||||||
INCOME BEFORE PROVISION FOR INCOME TAXES | 1,916 | 1,957 | 3,675 | 3,915 | ||||||||
Provision for income taxes | 541 | 557 | 1,039 | 1,119 | ||||||||
NET INCOME | $ | 1,375 | $ | 1,400 | $ | 2,636 | $ | 2,796 | ||||
Net income per share: | ||||||||||||
Basic | $ | 0.22 | $ | 0.21 | $ | 0.43 | $ | 0.43 | ||||
Diluted | $ | 0.22 | $ | 0.21 | $ | 0.42 | $ | 0.42 | ||||
Shares used in per-share calculation: | ||||||||||||
Basic | 6,146 | 6,521 | 6,195 | 6,577 | ||||||||
Diluted | 6,248 | 6,652 | 6,301 | 6,713 | ||||||||
Net income for the second quarter and the first six months of fiscal 2006 included stock-based compensation expense related to employee stock options and employee stock purchases, net of tax, of $188 and $416, respectively, under SFAS 123(R). There was no stock-based compensation expense related to employee stock options and employee stock purchases under SFAS 123 in fiscal 2005 because the Company did not adopt the recognition provisions of SFAS 123. Net income including pro forma stock-based compensation expense as previously disclosed in Cisco’s financial statements footnotes for the second quarter and the first six months of fiscal 2005 was $1.1 billion or $0.17 per diluted share and $2.3 billion or $0.34 per diluted share, respectively.
1
CONSOLIDATED BALANCE SHEETS
(In millions)
(Unaudited)
January 28, 2006 | July 30, 2005 | |||||
ASSETS | ||||||
Current assets: | ||||||
Cash and cash equivalents | $ | 5,151 | $ | 4,742 | ||
Investments | 9,838 | 11,313 | ||||
Accounts receivable, net of allowance for doubtful accounts of $171 at January 28, 2006 and $162 at July 30, 2005 | 2,537 | 2,216 | ||||
Inventories | 1,345 | 1,297 | ||||
Deferred tax assets | 1,476 | 1,475 | ||||
Prepaid expenses and other current assets | 1,264 | 967 | ||||
Total current assets | 21,611 | 22,010 | ||||
Property and equipment, net | 3,316 | 3,320 | ||||
Goodwill | 5,422 | 5,295 | ||||
Purchased intangible assets, net | 510 | 549 | ||||
Other assets | 2,793 | 2,709 | ||||
TOTAL ASSETS | $ | 33,652 | $ | 33,883 | ||
LIABILITIES AND SHAREHOLDERS’ EQUITY | ||||||
Current liabilities: | ||||||
Accounts payable | $ | 684 | $ | 735 | ||
Income taxes payable | 1,437 | 1,511 | ||||
Accrued compensation | 1,220 | 1,317 | ||||
Deferred revenue | 3,937 | 3,854 | ||||
Other accrued liabilities | 2,243 | 2,094 | ||||
Total current liabilities | 9,521 | 9,511 | ||||
Deferred revenue | 1,163 | 1,188 | ||||
Total liabilities | 10,684 | 10,699 | ||||
Minority interest | 4 | 10 | ||||
Shareholders’ equity | 22,964 | 23,174 | ||||
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY | $ | 33,652 | $ | 33,883 | ||
Long-term investments and the related deferred taxes on unrealized gains and losses on investments as of July 30, 2005 have been reclassified to current assets in order to conform to the current period’s presentation.
2
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In millions)
(Unaudited)
Six Months Ended | ||||||||
January 28, 2006 | January 29, 2005 | |||||||
Cash flows from operating activities: | ||||||||
Net income | $ | 2,636 | $ | 2,796 | ||||
Adjustments to reconcile net income to net cash provided by operating activities: | ||||||||
Depreciation and amortization | 512 | 508 | ||||||
Stock-based compensation expense related to employee stock options and employee stock purchases | 578 | — | ||||||
Stock-based compensation expense related to acquisitions and investments | 52 | 79 | ||||||
Provision for doubtful accounts | 10 | — | ||||||
Provision for inventory | 70 | 111 | ||||||
Deferred income taxes | 1 | (41 | ) | |||||
Tax benefits from employee stock option plans | — | 126 | ||||||
Excess tax benefits from stock-based compensation | (125 | ) | — | |||||
In-process research and development | 2 | 14 | ||||||
Net (gains) losses and impairment charges on investments | (21 | ) | (74 | ) | ||||
Change in operating assets and liabilities, net of effects of acquisitions: | ||||||||
Accounts receivable | (329 | ) | (446 | ) | ||||
Inventories | (115 | ) | (157 | ) | ||||
Prepaid expenses and other current assets | (47 | ) | 73 | |||||
Lease receivables, net | (60 | ) | (60 | ) | ||||
Accounts payable | (51 | ) | 8 | |||||
Income taxes payable | 63 | 424 | ||||||
Accrued compensation | (97 | ) | (252 | ) | ||||
Deferred revenue | 59 | 146 | ||||||
Other accrued liabilities | 129 | (7 | ) | |||||
Net cash provided by operating activities | 3,267 | 3,248 | ||||||
Cash flows from investing activities: | ||||||||
Purchases of investments | (10,467 | ) | (10,366 | ) | ||||
Proceeds from sales and maturities of investments | 11,886 | 11,957 | ||||||
Acquisition of property and equipment | (394 | ) | (290 | ) | ||||
Acquisition of businesses, net of cash and cash equivalents | (150 | ) | (553 | ) | ||||
Change in investments in privately held companies | (90 | ) | (110 | ) | ||||
Purchase of minority interest of Cisco Systems, K.K. (Japan) | (25 | ) | — | |||||
Other | (84 | ) | 93 | |||||
Net cash provided by investing activities | 676 | 731 | ||||||
Cash flows from financing activities: | ||||||||
Issuance of common stock | 563 | 433 | ||||||
Repurchase of common stock | (4,248 | ) | (5,706 | ) | ||||
Excess tax benefits from stock-based compensation | 125 | — | ||||||
Other | 26 | 45 | ||||||
Net cash used in financing activities | (3,534 | ) | (5,228 | ) | ||||
Net increase (decrease) in cash and cash equivalents | 409 | (1,249 | ) | |||||
Cash and cash equivalents, beginning of period | 4,742 | 3,722 | ||||||
Cash and cash equivalents, end of period | $ | 5,151 | $ | 2,473 | ||||
Certain reclassifications have been made to prior period balances in order to conform to the current period’s presentation.
3