Exhibit 99.1
PRESS RELEASE
| Press Contact: | Investor Relations Contact: | |||
| John Noh | Laura Graves | |||
| Cisco | Cisco | |||
| (408) 853-8445 | (408) 526-6521 | |||
| jnoh@cisco.com | lagraves@cisco.com |
CISCO REPORTS FOURTH QUARTER AND FISCAL YEAR 2007 EARNINGS
| • | Q4 Net Sales: $9.4 billion (increase of 18% year over year) |
| • | Q4 Net Income: $1.9 billion GAAP; $2.3 billion non-GAAP |
| • | Q4 Earnings per Share: $0.31 GAAP (increase of 24% year over year); $0.36 non-GAAP (increase of 20% year over year) |
| • | FY 2007 Net Sales: $34.9 billion (increase of 23% year over year) |
| • | FY 2007 Net Income:$7.3 billion GAAP; $8.4 billion non-GAAP |
| • | FY 2007 Earnings per Share: $1.17 GAAP (increase of 31% year over year); $1.34 non-GAAP (increase of 22% year over year) |
SAN JOSE, Calif. – Aug. 7, 2007 – Cisco®, the worldwide leader in networking that transforms how people connect, communicate and collaborate, today reported its fourth quarter and fiscal year results for the period ended July 28, 2007. Cisco reported fourth quarter net sales of $9.4 billion, net income on a generally accepted accounting principles (GAAP) basis of $1.9 billion or $0.31 per share, and non-GAAP net income of $2.3 billion or $0.36 per share.
“Cisco delivered another record quarter with great execution across the company,” said John Chambers, Chairman and CEO, Cisco. “Again, the performance was based on our balanced approach across products, services, geographies and customer segments and our ability to catch and execute on key market transitions.
“As we turn our attention to the next fiscal year, we believe that we are headed into a new era in networking that we define as the second phase of the Internet. We expect that this phase will be driven by collaboration and Web 2.0 technologies and will become an increasingly influential market trend for businesses. Collaboration has already transformed almost every area of our business internally, resulting in the potential for dramatic gains in productivity and efficiency. We believe this new model will help enable Cisco to identify, target and capture market opportunities more effectively than at any other time in our history.”
| Q4 GAAP Results | ||||||
Q4 2007 | Q4 2006 | vs. Q4 2006 | ||||
| Net Sales | $9.4 billion | $8.0 billion | +18.1% | |||
| Net Income | $1.9 billion | $1.5 billion | +25.0% | |||
| Earnings per Share | $0.31 | $0.25 | +24.0% | |||
| Q4 Non-GAAP Results | ||||||
Q4 2007 | Q4 2006 | vs. Q4 2006 | ||||
Net Income | $2.3 billion | $1.9 billion | +21.2% | |||
Earnings per Share | $0.36 | $0.30 | +20.0% | |||
| Fiscal Year GAAP Results | ||||||
FY 2007 | FY 2006 | vs. FY 2006 | ||||
Net Sales | $34.9 billion | $28.5 billion | +22.6% | |||
Net Income | $7.3 billion | $5.6 billion | +31.4% | |||
Earnings per Share | $1.17 | $0.89 | +31.5% | |||
| Fiscal Year Non-GAAP Results | ||||||
FY 2007 | FY 2006 | vs. FY 2006 | ||||
Net Income | $8.4 billion | $6.9 billion | +21.6% | |||
Earnings per Share | $1.34 | $1.10 | +21.8% | |||
Scientific-Atlanta, Inc., acquired on February 24, 2006, contributed $2.8 billion to net sales for fiscal 2007, compared with $989 million for fiscal 2006.
A reconciliation between GAAP net income and non-GAAP net income is provided in the table on page 6.
Cisco will discuss fourth quarter and fiscal year 2007 results and business outlook on a conference call and Webcast at 1:30 p.m. Pacific Time today. Call information and related charts are available athttp://investor.cisco.com.
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Other Financial Highlights
| • | Cash flows from operations were $2.7 billion for the fourth quarter of fiscal 2007, compared with $2.3 billion for the fourth quarter of fiscal 2006, and compared with $2.4 billion for the third quarter of fiscal 2007. Cash flows from operations were $10.1 billion for fiscal 2007, compared with $7.9 billion for fiscal 2006. |
| • | Cash and cash equivalents, and investments were $22.3 billion at the end of fiscal 2007, compared with $17.8 billion at the end of fiscal 2006, and compared with $22.3 billion at the end of the third quarter of fiscal 2007. |
| • | During the fourth quarter of fiscal 2007, Cisco repurchased 54 million shares of common stock at an average price of $27.33 per share for an aggregate purchase price of $1.5 billion. During fiscal 2007, Cisco repurchased 297 million shares of common stock at an average price of $26.12 per share for an aggregate purchase price of $7.8 billion. As of July 28, 2007, Cisco had repurchased and retired 2.2 billion shares of Cisco common stock at an average price of $19.40 per share for an aggregate purchase price of approximately $43.2 billion since the inception of the stock repurchase program. On July 26, 2007, our Board of Directors had authorized the repurchase of up to an additional $5 billion of common stock under this program. The remaining authorized repurchase amount as of July 28, 2007 was $8.8 billion with no termination date. |
| • | Days sales outstanding in accounts receivable (DSO) at the end of the fourth quarter of fiscal 2007 were 38 days, compared with 38 days at the end of the fourth quarter of fiscal 2006, and compared with 33 days at the end of the third quarter of fiscal 2007. |
| • | Inventory turns on a GAAP basis were 10.3 in the fourth quarter of fiscal 2007, compared with 8.5 in the fourth quarter of fiscal 2006, and compared with 8.8 in the third quarter of fiscal 2007. Non-GAAP inventory turns were 10.1 in the fourth quarter of fiscal 2007, compared with 8.3 in the fourth quarter of fiscal 2006, and compared with 8.6 in the third quarter of fiscal 2007. |
“We are very pleased with Cisco’s financial results reflecting another record quarter of revenue and non-GAAP net income as well as a record quarter for cash flow from operations,” said Dennis Powell, chief financial officer, Cisco. “Our strategy is clearly working as we have consistently met or exceeded expectations for many years. This has resulted in Cisco’s ability to increase shareholder value on an average of over 22 percent earnings per share growth, year-over-year, for the past 16 quarters.”
Business Highlights
Acquisitions and Investments
| • | Cisco announced that it will invest $150 million to purchase an equity stake in VMware, Inc., subject to regulatory and other closing conditions. Cisco’s investment is intended to strengthen intercompany collaboration toward accelerating customer adoption of VMware virtualization products for use with Cisco networking infrastructure. |
| • | Cisco completed the acquisitions of WebEx Communications, Inc., IronPort Systems, Inc. and BroadWare Technologies, Inc. |
New Products
| • | Cisco announced a major extension to the Cisco Unified Wireless Network, including a new wireless location solution and a new unified wireless network software release designed to mobilize assets across an enterprise environment. |
| • | Cisco unveiled a broad array of innovative new data center products and solutions designed to help customers better utilize their data center resources, deploy more robust business continuance, build cost-effective storage area networks, and enhance data security. Cisco also outlined Data Center 3.0, its vision for the next-generation data center. |
| • | Cisco launched the Self-Defending Network v. 3.0, an extension of Cisco’s existing network security strategy that now includes wide traffic-inspection capabilities, combining the depth of network-level security with the breadth of capabilities for inspecting e-mail, Web and instant messaging traffic acquired through IronPort. |
| • | Cisco introduced Cisco In-Store Mobility Solutions designed to help transform retail store environments by delivering highly secure, manageable and extensible mobile solutions designed to improve operations and enhance the consumer shopping experience. |
| • | Cisco added Internet streaming media capabilities to its Content Delivery System, helping enable service providers to deploy next-generation video entertainment systems. |
• | Linksys® introduced enhanced entry-level Gigabit Smart Switches for small businesses and an easy-to-use, Web-based interface that helps small businesses to manage and configure their networks without a dedicated IT staff. |
| • | Cisco and Scientific Atlanta announced the first of a new RF Gateway series of Universal Edge QAM products, providing cable operators a high level of performance, functionality, reliability and choice as they deploy expanded video on demand, switched digital video and high-speed data services. |
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Major Customer Announcements
• | Scottrade announced implementation of a new, state-of-the-art data center that is expected to allow the company to continue to grow its business and meet the needs of its customers by being capable of processing up to one million transactions per day. A wide range of Cisco networking products powers this mission-critical data center including 50 Cisco Catalyst® 6500 Series Switches. |
| • | NTELOS announced its deployment of the Cisco CRS-1 Carrier Routing System to support converged business and residential services including Layer 2 and Layer 3 VPNs and IPTV. |
| • | The Government of Saskatchewan is deploying a Cisco Outdoor Wireless Network Solution to provide free Internet access to businesses, residents and visitors across the province’s largest four cities. This will be Canada’s largest outdoor wireless network and the first of its kind to be supported on a provincial or state level in North America. |
| • | Airbus has completed deployment of a Cisco Unified Communications System to help improve collaboration, increase productivity and simplify its communications infrastructure, which will support 45,000 employees. The completion of the deployment marks the shipping of 12 million Cisco Unified IP Phones. |
| • | Kabul, Afghanistan-based Aga Khan University Hospital launched telemedicine, a first-of-its-kind solution in that country to expand healthcare access and delivery across the country utilizing broadband, wireless video consultation and digital image-transfer technologies. The project is expected to provide hospitals in Afghanistan with real-time access to specialist diagnosis, treatment and training expertise from abroad. |
| • | Bapatla Engineering College in India plans to deploy the Cisco Digital Media System to extend the classroom environment and create anywhere, anytime learning experiences through remote broadcast and viewing of lectures and on-demand video and other materials. |
Key Milestones
| • | Combined Endeavor 2007, the world’s largest multinational communications interoperability exercise, used an all-IP infrastructure powered by Cisco equipment to test and document the interoperability of vital communication systems of 42 nations for multinational forces deployed in humanitarian, peacekeeping and disaster-relief efforts. |
Editor’s Note:
| • | Q4 and FY 2007 conference call to discuss Cisco’s results along with its business outlook to be held at 1:30 p.m. Pacific Time, Tuesday, August 7, 2007. Conference call number is 888-848-6507 (United States) or 212-519-0847 (international). |
| • | Conference call replay will be available from 4:30 p.m. Pacific Time, August 7, 2007 to 4:30 p.m. Pacific Time, August 14, 2007 at 866-357-4205 (United States) or 203-369-0122 (international). The replay is also available from August 7, 2007 through October 19, 2007 on the Cisco Investor Relations Website athttp://www.cisco.com/go/investors. |
| • | Additional information regarding Cisco’s financials, as well as a Webcast of the conference call with visuals designed to guide participants through the call, will be available at 1:30 p.m. Pacific Time, August 7, 2007. Text of the conference call’s prepared remarks will be available within 24 hours of completion of the call. The Webcast will include both the prepared remarks and the question-and-answer session. This information, along with GAAP reconciliation information, will be available on the Cisco Investor Relations Website athttp://www.cisco.com/go/investors. |
| • | A Q&A with Cisco’s CEO and CFO about Q4 and FY 2007 results will be available athttp://newsroom.cisco.com. |
About Cisco
Cisco (NASDAQ: CSCO) is the worldwide leader in networking that transforms how people connect, communicate and collaborate. Information about Cisco can be found athttp://www.cisco.com. For ongoing news, visithttp://newsroom.cisco.com.
# # #
This release may be deemed to contain forward-looking statements, which are subject to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. These forward-looking statements include, among other things, statements regarding future events (such as the development of our markets, the future of networking, Cisco’s strategy and positioning, and our ability to foresee market transitions) and the future financial performance of Cisco that involve risks and uncertainties. Readers are cautioned that these forward-looking statements are only predictions and may differ materially from actual future events or results due to a variety of factors, including: business and economic conditions and growth trends in the networking industry and in various geographic regions; global economic conditions and uncertainties in the geopolitical environment; overall information technology spending; the growth
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and evolution of the Internet and levels of capital spending on Internet-based systems; variations in customer demand for products and services, including sales to the service provider market and other customer markets; the timing of orders and manufacturing and customer lead times; changes in customer order patterns or customer mix; insufficient, excess or obsolete inventory; variability of component costs; variations in sales channels, product costs or mix of products sold; our ability to successfully acquire businesses and technologies and to successfully integrate and operate these acquired businesses and technologies; increased competition in the networking industry; dependence on the introduction and market acceptance of new product offerings and standards; rapid technological and market change; manufacturing and sourcing risks; including risks related to our transition to a new manufacturing model; product defects and returns; litigation involving patents, intellectual property, antitrust, shareholder and other matters; natural catastrophic events; a pandemic or epidemic; achievement of the benefits anticipated from our investments in sales and engineering activities; our ability to recruit and retain key personnel; our ability to manage financial risk; currency fluctuations and other international factors; potential volatility in operating results; and other factors listed in Cisco’s most recent reports on Form 10-K and Form 10-Q. The financial information contained in this release should be read in conjunction with the consolidated financial statements and notes thereto included in Cisco’s most recent reports on Form 10-K and Form 10-Q, each as it may be amended from time to time. Cisco’s results of operations for the three and twelve months ended July 28, 2007 are not necessarily indicative of Cisco’s operating results for any future periods. Any projections in this release are based on limited information currently available to Cisco, which is subject to change. Although any such projections and the factors influencing them will likely change, Cisco will not necessarily update the information, since Cisco will only provide guidance at certain points during the year. Such information speaks only as of the date of this release.
This release includes non-GAAP net income, non-GAAP net income per share data, shares used in non-GAAP net income per share calculation and non-GAAP inventory turns.
These non-GAAP measures are not in accordance with, or an alternative for measures prepared in accordance with, generally accepted accounting principles and may be different from non-GAAP measures used by other companies. In addition, these non-GAAP measures are not based on any comprehensive set of accounting rules or principles. Cisco believes that non-GAAP measures have limitations in that they do not reflect all of the amounts associated with Cisco’s results of operations as determined in accordance with GAAP and that these measures should only be used to evaluate Cisco’s results of operations in conjunction with the corresponding GAAP measures.
Cisco believes that the presentation of non-GAAP net income, non-GAAP net income per share data and shares used in non-GAAP net income per share calculation, when shown in conjunction with the corresponding GAAP measures, provides useful information to investors and management regarding financial and business trends relating to its financial condition and results of operations. In addition, Cisco believes that the presentation of non-GAAP inventory turns provides useful information to investors and management regarding financial and business trends relating to inventory management based on the operating activities of the period presented.
For its internal budgeting process, Cisco’s management uses financial statements that do not include employee share-based compensation expense, impact to cost of sales from purchase accounting adjustments to inventory, payroll tax on stock option exercises, compensation expense related to acquisitions and investments, in-process research and development, amortization of purchased intangible assets, significant gains and losses on publicly traded equity securities, the income tax effects of the foregoing, tax effects of post-acquisition integration of purchased intangible assets from significant acquisitions, and significant effects of retroactive tax legislation (such as Cisco’s U.S. federal research and development (R&D) tax credit relating to fiscal year 2006 R&D expenses). Cisco’s management also uses the foregoing non-GAAP measures, in addition to the corresponding GAAP measures, in reviewing the financial results of Cisco.
For additional information on the items excluded by Cisco from one or more of its non-GAAP financial measures, refer to the Form 8-K regarding this release furnished today with the Securities and Exchange Commission.
Copyright© 2007 Cisco Systems, Inc. All rights reserved. Cisco, the Cisco logo, Cisco Systems, Catalyst, Linksys and WebEx are registered trademarks or trademarks of Cisco Systems, Inc. and/or its affiliates in the United States and certain other countries. All other trademarks mentioned in this document are the property of their respective owners. The use of the word partner does not imply a partnership relationship between Cisco and any other company. This document is Cisco Public Information.
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CONSOLIDATED STATEMENTS OF OPERATIONS
(In millions, except per-share amounts)
(Unaudited)
| Three Months Ended | Twelve Months Ended | |||||||||||
| July 28, 2007 | July 29, 2006 | July 28, 2007 | July 29, 2006 | |||||||||
NET SALES: | ||||||||||||
Product | $ | 7,942 | $ | 6,734 | $ | 29,462 | $ | 23,917 | ||||
Service | 1,491 | 1,250 | 5,460 | 4,567 | ||||||||
Total net sales | 9,433 | 7,984 | 34,922 | 28,484 | ||||||||
COST OF SALES: | ||||||||||||
Product | 2,820 | 2,396 | 10,548 | 8,114 | ||||||||
Service | 545 | 443 | 2,038 | 1,623 | ||||||||
Total cost of sales | 3,365 | 2,839 | 12,586 | 9,737 | ||||||||
GROSS MARGIN | 6,068 | 5,145 | 22,336 | 18,747 | ||||||||
OPERATING EXPENSES: | ||||||||||||
Research and development | 1,178 | 1,064 | 4,499 | 4,067 | ||||||||
Sales and marketing | 1,973 | 1,600 | 7,215 | 6,031 | ||||||||
General and administrative | 431 | 311 | 1,513 | 1,169 | ||||||||
Amortization of purchased intangible assets | 109 | 179 | 407 | 393 | ||||||||
In-process research and development | 74 | 1 | 81 | 91 | ||||||||
Total operating expenses | 3,765 | 3,155 | 13,715 | 11,751 | ||||||||
OPERATING INCOME | 2,303 | 1,990 | 8,621 | 6,996 | ||||||||
Interest income, net | 197 | 143 | 715 | 607 | ||||||||
Other income, net | 31 | 13 | 125 | 30 | ||||||||
Interest and other income, net | 228 | 156 | 840 | 637 | ||||||||
INCOME BEFORE PROVISION FOR INCOME TAXES | 2,531 | 2,146 | 9,461 | 7,633 | ||||||||
Provision for income taxes | 601 | 602 | 2,128 | 2,053 | ||||||||
NET INCOME | $ | 1,930 | $ | 1,544 | $ | 7,333 | $ | 5,580 | ||||
Net income per share: | ||||||||||||
Basic | $ | 0.32 | $ | 0.25 | $ | 1.21 | $ | 0.91 | ||||
Diluted | $ | 0.31 | $ | 0.25 | $ | 1.17 | $ | 0.89 | ||||
Shares used in per-share calculation: | ||||||||||||
Basic | 6,062 | 6,081 | 6,055 | 6,158 | ||||||||
Diluted | 6,275 | 6,187 | 6,265 | 6,272 | ||||||||
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RECONCILIATION OF GAAP TO NON-GAAP NET INCOME
(In millions, except per-share amounts)
| Three Months Ended | Twelve Months Ended | |||||||||||||||
| July 28, 2007 | July 29, 2006 | July 28, 2007 | July 29, 2006 | |||||||||||||
GAAP net income | $ | 1,930 | $ | 1,544 | $ | 7,333 | $ | 5,580 | ||||||||
Employee share-based compensation expense | 222 | 211 | 931 | 1,050 | ||||||||||||
Impact to cost of sales from purchase accounting adjustments to inventory | — | 4 | — | 26 | ||||||||||||
Payroll tax on stock option exercises | 10 | 2 | 36 | 15 | ||||||||||||
Compensation expense related to acquisitions and investments | 29 | 21 | 93 | 123 | ||||||||||||
In-process research and development | 74 | 1 | 81 | 91 | ||||||||||||
Amortization of purchased intangible assets | 157 | 215 | 563 | 453 | ||||||||||||
Total adjustments to GAAP income before provision for income taxes | 492 | 454 | 1,704 | 1,758 | ||||||||||||
Income tax effect (1) | (154 | ) | (126 | ) | (603 | ) | (452 | ) | ||||||||
Effect of retroactive tax legislation (2) | — | — | (60 | ) | — | |||||||||||
Total adjustments to GAAP provision for income taxes | (154 | ) | (126 | ) | (663 | ) | (452 | ) | ||||||||
Non-GAAP net income | $ | 2,268 | $ | 1,872 | $ | 8,374 | $ | 6,886 | ||||||||
Diluted net income per share: | ||||||||||||||||
GAAP | $ | 0.31 | $ | 0.25 | $ | 1.17 | $ | 0.89 | ||||||||
Non-GAAP | $ | 0.36 | $ | 0.30 | $ | 1.34 | $ | 1.10 | ||||||||
Shares used in diluted net income per share calculation: | ||||||||||||||||
GAAP | 6,275 | 6,187 | 6,265 | 6,272 | ||||||||||||
Non-GAAP | 6,263 | 6,181 | 6,249 | 6,259 | ||||||||||||
| (1) | The income tax effect for the adjustments relating to GAAP income before provision for income taxes was 35.4% for fiscal 2007 and has been determined using the applicable tax rates in jurisdictions to which these adjustments relate. |
| (2) | In the second quarter of fiscal 2007, the Tax Relief and Health Care Act of 2006 reinstated the U.S. federal R&D tax credit, retroactive to January 1, 2006. GAAP net income for fiscal 2007 included a benefit of $60 million related to fiscal 2006 R&D expenses, while non-GAAP net income for fiscal 2007 excluded this benefit. |
Additional reconciliations between GAAP and non-GAAP financial measures are provided in the tables that follow on page 10.
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CONSOLIDATED BALANCE SHEETS
(In millions)
(Unaudited)
| July 28, 2007 | July 29, 2006 | |||||
ASSETS | ||||||
Current assets: | ||||||
Cash and cash equivalents | $ | 3,728 | $ | 3,297 | ||
Investments | 18,538 | 14,517 | ||||
Accounts receivable, net of allowance for doubtful accounts of $166 at July 28, 2007 and $175 at | 3,989 | 3,303 | ||||
Inventories | 1,322 | 1,371 | ||||
Deferred tax assets | 1,953 | 1,604 | ||||
Prepaid expenses and other current assets | 2,044 | 1,584 | ||||
Total current assets | 31,574 | 25,676 | ||||
Property and equipment, net | 3,893 | 3,440 | ||||
Goodwill | 12,121 | 9,227 | ||||
Purchased intangible assets, net | 2,540 | 2,161 | ||||
Other assets | 3,212 | 2,811 | ||||
TOTAL ASSETS | $ | 53,340 | $ | 43,315 | ||
LIABILITIES AND SHAREHOLDERS’ EQUITY | ||||||
Current liabilities: | ||||||
Accounts payable | $ | 786 | $ | 880 | ||
Income taxes payable | 1,740 | 1,744 | ||||
Accrued compensation | 2,019 | 1,516 | ||||
Deferred revenue | 5,391 | 4,408 | ||||
Other accrued liabilities | 3,422 | 2,765 | ||||
Total current liabilities | 13,358 | 11,313 | ||||
Long-term debt | 6,408 | 6,332 | ||||
Deferred revenue | 1,646 | 1,241 | ||||
Other long-term liabilities | 438 | 511 | ||||
Total liabilities | 21,850 | 19,397 | ||||
Minority interest | 10 | 6 | ||||
Shareholders’ equity | 31,480 | 23,912 | ||||
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY | $ | 53,340 | $ | 43,315 | ||
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CONSOLIDATED STATEMENTS OF CASH FLOWS
(In millions)
(Unaudited)
| Twelve Months Ended | ||||||||
| July 28, 2007 | July 29, 2006 | |||||||
Cash flows from operating activities: | ||||||||
Net income | $ | 7,333 | $ | 5,580 | ||||
Adjustments to reconcile net income to net cash provided by operating activities: | ||||||||
Depreciation and amortization | 1,413 | 1,293 | ||||||
Employee share-based compensation expense | 931 | 1,050 | ||||||
Share-based compensation expense related to acquisitions and investments | 34 | 87 | ||||||
Provision for doubtful accounts | 6 | 24 | ||||||
Deferred income taxes | (622 | ) | (343 | ) | ||||
Excess tax benefits from share-based compensation | (918 | ) | (432 | ) | ||||
In-process research and development | 81 | 91 | ||||||
Net gains and impairment charges on investments | (210 | ) | (124 | ) | ||||
Other | — | 31 | ||||||
Change in operating assets and liabilities, net of effects of acquisitions: | ||||||||
Accounts receivable | (597 | ) | (913 | ) | ||||
Inventories | 61 | 121 | ||||||
Prepaid expenses and other current assets | (452 | ) | (300 | ) | ||||
Lease receivables, net | (156 | ) | (171 | ) | ||||
Accounts payable | (107 | ) | (43 | ) | ||||
Income taxes payable | 1,104 | 743 | ||||||
Accrued compensation | 479 | 150 | ||||||
Deferred revenue | 1,293 | 575 | ||||||
Other liabilities | 431 | 480 | ||||||
Net cash provided by operating activities | 10,104 | 7,899 | ||||||
Cash flows from investing activities: | ||||||||
Purchases of investments | (20,532 | ) | (21,732 | ) | ||||
Proceeds from sales and maturities of investments | 17,368 | 18,480 | ||||||
Acquisition of property and equipment | (1,251 | ) | (772 | ) | ||||
Acquisition of businesses, net of cash and cash equivalents acquired | (3,684 | ) | (5,399 | ) | ||||
Change in investments in privately held companies | (92 | ) | (186 | ) | ||||
Purchase of minority interest of Cisco Systems, K.K. (Japan) | — | (25 | ) | |||||
Other | (151 | ) | (10 | ) | ||||
Net cash used in investing activities | (8,342 | ) | (9,644 | ) | ||||
Cash flows from financing activities: | ||||||||
Issuance of common stock | 5,306 | 1,682 | ||||||
Repurchase of common stock | (7,681 | ) | (8,295 | ) | ||||
Issuance of debt | — | 6,481 | ||||||
Excess tax benefits from share-based compensation | 918 | 432 | ||||||
Other | 126 | — | ||||||
Net cash (used in) provided by financing activities | (1,331 | ) | 300 | |||||
Net increase (decrease) in cash and cash equivalents | 431 | (1,445 | ) | |||||
Cash and cash equivalents, beginning of fiscal year | 3,297 | 4,742 | ||||||
Cash and cash equivalents, end of fiscal year | $ | 3,728 | $ | 3,297 | ||||
Certain reclassifications have been made to prior year amounts to conform to the current year’s presentation.
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ADDITIONAL FINANCIAL INFORMATION
(In millions)
(Unaudited)
| July 28, 2007 | July 29, 2006 | |||||||
CASH AND CASH EQUIVALENTS AND INVESTMENTS | ||||||||
Cash and cash equivalents | $ | 3,728 | $ | 3,297 | ||||
Fixed income securities | 17,297 | 13,805 | ||||||
Publicly traded equity securities | 1,241 | 712 | ||||||
Total | $ | 22,266 | $ | 17,814 | ||||
INVENTORIES | ||||||||
Raw materials | $ | 173 | $ | 131 | ||||
Work in process | 45 | 377 | ||||||
Finished goods: | ||||||||
Distributor inventory and deferred cost of sales | 544 | 423 | ||||||
Manufacturing finished goods | 314 | 236 | ||||||
Total finished goods | 858 | 659 | ||||||
Service-related spares | 211 | 170 | ||||||
Demonstration systems | 35 | 34 | ||||||
Total | $ | 1,322 | $ | 1,371 | ||||
PROPERTY AND EQUIPMENT, NET | ||||||||
Land, buildings, and leasehold improvements | $ | 4,022 | $ | 3,647 | ||||
Computer equipment and related software | 1,605 | 1,352 | ||||||
Production, engineering, and other equipment | 4,264 | 3,678 | ||||||
Operating lease assets | 181 | 153 | ||||||
Furniture and fixtures | 394 | 363 | ||||||
| 10,466 | 9,193 | |||||||
Less accumulated depreciation and amortization | (6,573 | ) | (5,753 | ) | ||||
Total | $ | 3,893 | $ | 3,440 | ||||
LEASE RECEIVABLES, NET(1) | ||||||||
Current | $ | 389 | $ | 308 | ||||
Noncurrent | 539 | 464 | ||||||
Total | $ | 928 | $ | 772 | ||||
OTHER ASSETS | ||||||||
Deferred tax assets | $ | 1,060 | $ | 983 | ||||
Investments in privately held companies | 643 | 574 | ||||||
Income tax receivable | 277 | 279 | ||||||
Lease receivables, net | 539 | 464 | ||||||
Other | 693 | 511 | ||||||
Total | $ | 3,212 | $ | 2,811 | ||||
DEFERRED REVENUE | ||||||||
Service | $ | 4,840 | $ | 4,088 | ||||
Product | ||||||||
Unrecognized revenue on product shipments and other deferred revenue | 1,769 | 1,156 | ||||||
Cash receipts related to unrecognized revenue from two-tier distributors | 428 | 405 | ||||||
Total product deferred revenue | 2,197 | 1,561 | ||||||
Total | $ | 7,037 | $ | 5,649 | ||||
Reported as: | ||||||||
Current | $ | 5,391 | $ | 4,408 | ||||
Noncurrent | 1,646 | 1,241 | ||||||
Total | $ | 7,037 | $ | 5,649 | ||||
Note:
| (1) | The current portion of lease receivables, net, is recorded in prepaid expenses and other current assets, and the noncurrent portion is recorded in other assets in the Consolidated Balance Sheets. |
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SUMMARY OF EMPLOYEE SHARE-BASED COMPENSATION EXPENSE
(In millions)
| Three Months Ended | Twelve Months Ended | |||||||||||
| July 28, 2007 | July 29, 2006 | July 28, 2007 | July 29, 2006 | |||||||||
Cost of sales—product | $ | 6 | $ | 9 | $ | 39 | $ | 50 | ||||
Cost of sales—service | 25 | 22 | 104 | 112 | ||||||||
Employee share-based compensation expense in cost of sales | 31 | 31 | 143 | 162 | ||||||||
Research and development | 66 | 67 | 289 | 346 | ||||||||
Sales and marketing | 98 | 87 | 392 | 427 | ||||||||
General and administrative | 27 | 26 | 107 | 115 | ||||||||
Employee share-based compensation expense in operating expenses | 191 | 180 | 788 | 888 | ||||||||
Total employee share-based compensation expense | $ | 222 | $ | 211 | $ | 931 | $ | 1,050 | ||||
The income tax benefit for employee share-based compensation expense was $77 million and $342 million for the fourth quarter and for fiscal 2007, respectively, and $59 million and $294 million for the fourth quarter and for fiscal 2006, respectively.
RECONCILIATION OF SHARES USED IN THE GAAP AND NON-GAAP
DILUTED NET INCOME PER SHARE CALCULATION
(In millions)
| Three Months Ended | Twelve Months Ended | |||||||||||
| July 28, 2007 | July 29, 2006 | July 28, 2007 | July 29, 2006 | |||||||||
Shares used in diluted net income per share calculation—GAAP | 6,275 | 6,187 | 6,265 | 6,272 | ||||||||
Effect of SFAS 123(R) | (12 | ) | (6 | ) | (16 | ) | (13 | ) | ||||
Shares used in diluted net income per share calculation—Non-GAAP | 6,263 | 6,181 | 6,249 | 6,259 | ||||||||
RECONCILIATION OF GAAP TO NON-GAAP COST OF SALES
USED IN INVENTORY TURNS
(In millions)
| Three Months Ended | ||||||||||||
| July 28, 2007 | April 28, 2007 | July 29, 2006 | ||||||||||
GAAP cost of sales | $ | 3,365 | $ | 3,219 | $ | 2,839 | ||||||
Employee share-based compensation expense | (31 | ) | (35 | ) | (31 | ) | ||||||
Impact to cost of sales from purchase accounting adjustments to inventory | — | — | (4 | ) | ||||||||
Amortization of purchased intangible assets | (48 | ) | (36 | ) | (36 | ) | ||||||
Non-GAAP cost of sales | $ | 3,286 | $ | 3,148 | $ | 2,768 | ||||||
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