Document and Entity Information
Document and Entity Information | ||
9 Months Ended
May. 01, 2010 | May. 20, 2010
| |
Document Type | 10-Q | |
Amendment Flag | false | |
Document Period End Date | 2010-05-01 | |
Trading Symbol | CSCO | |
Document Fiscal Year Focus | 2,010 | |
Document Fiscal Period Focus | Q3 | |
Entity Registrant Name | CISCO SYSTEMS INC | |
Entity Central Index Key | 0000858877 | |
Current Fiscal Year End Date | --07-28 | |
Entity Filer Category | Large Accelerated Filer | |
Entity Common Stock, Shares Outstanding | 5,711,151,107 |
CONSOLIDATED BALANCE SHEETS
CONSOLIDATED BALANCE SHEETS (USD $) | ||
In Millions | 9 Months Ended
May. 01, 2010 | 12 Months Ended
Jul. 25, 2009 |
Current assets: | ||
Cash and cash equivalents | $3,961 | $5,718 |
Investments | 35,145 | 29,283 |
Accounts receivable, net of allowance for doubtful accounts of $216 at May 1, 2010 and July 25, 2009 | 4,078 | 3,177 |
Inventories | 1,250 | 1,074 |
Deferred tax assets | 2,277 | 2,320 |
Other current assets | 3,047 | 2,605 |
Total current assets | 49,758 | 44,177 |
Property and equipment, net | 3,994 | 4,043 |
Goodwill | 16,668 | 12,925 |
Purchased intangible assets, net | 3,448 | 1,702 |
Other assets | 5,424 | 5,281 |
TOTAL ASSETS | 79,292 | 68,128 |
Current liabilities: | ||
Short-term debt | 3,127 | 0 |
Accounts payable | 902 | 675 |
Income taxes payable | 167 | 166 |
Accrued compensation | 2,709 | 2,535 |
Deferred revenue | 7,154 | 6,438 |
Other current liabilities | 4,380 | 3,841 |
Total current liabilities | 18,439 | 13,655 |
Long-term debt | 12,119 | 10,295 |
Income taxes payable | 1,054 | 2,007 |
Deferred revenue | 3,149 | 2,955 |
Other long-term liabilities | 679 | 539 |
Total liabilities | 35,440 | 29,451 |
Commitments and contingencies (Note 11) | ||
Cisco shareholders' equity: | ||
Preferred stock, no par value: 5 shares authorized; none issued and outstanding | 0 | 0 |
Common stock and additional paid-in capital, $0.001 par value: 20,000 shares authorized; 5,722 and 5,785 shares issued and outstanding at May 1, 2010 and July 25, 2009, respectively | 37,584 | 34,344 |
Retained earnings | 5,570 | 3,868 |
Accumulated other comprehensive income | 676 | 435 |
Total Cisco shareholders' equity | 43,830 | 38,647 |
Noncontrolling interests | 22 | 30 |
Total equity | 43,852 | 38,677 |
TOTAL LIABILITIES AND EQUITY | $79,292 | $68,128 |
CONSOLIDATED BALANCE SHEETS (Pa
CONSOLIDATED BALANCE SHEETS (Parenthetical) (USD $) | ||
In Millions, except Per Share data | May. 01, 2010
| Jul. 25, 2009
|
Accounts receivable, allowance for doubtful accounts | $216 | $216 |
Preferred stock, par value | $0 | $0 |
Preferred stock, shares authorized | 5 | 5 |
Preferred stock, issued | 0 | 0 |
Preferred stock, outstanding | 0 | 0 |
Common stock, par value | 0.001 | 0.001 |
Common stock, shares authorized | 20,000 | 20,000 |
Common stock, shares issued | 5,722 | 5,785 |
Common stock, shares outstanding | 5,722 | 5,785 |
CONSOLIDATED STATEMENTS OF OPER
CONSOLIDATED STATEMENTS OF OPERATIONS (USD $) | ||||
In Millions, except Per Share data | 3 Months Ended
May. 01, 2010 | 3 Months Ended
Apr. 25, 2009 | 9 Months Ended
May. 01, 2010 | 9 Months Ended
Apr. 25, 2009 |
NET SALES: | ||||
Product | $8,436 | $6,420 | $23,612 | $22,402 |
Service | 1,932 | 1,742 | 5,592 | 5,180 |
Total net sales | 10,368 | 8,162 | 29,204 | 27,582 |
COST OF SALES: | ||||
Product | 3,010 | 2,327 | 8,311 | 8,045 |
Service | 728 | 606 | 2,043 | 1,904 |
Total cost of sales | 3,738 | 2,933 | 10,354 | 9,949 |
GROSS MARGIN | 6,630 | 5,229 | 18,850 | 17,633 |
OPERATING EXPENSES: | ||||
Research and development | 1,411 | 1,243 | 3,882 | 3,928 |
Sales and marketing | 2,260 | 1,956 | 6,365 | 6,394 |
General and administrative | 497 | 302 | 1,404 | 1,077 |
Amortization of purchased intangible assets | 117 | 121 | 360 | 369 |
In-process research and development | 0 | 0 | 0 | 3 |
Total operating expenses | 4,285 | 3,622 | 12,011 | 11,771 |
OPERATING INCOME | 2,345 | 1,607 | 6,839 | 5,862 |
Interest income | 158 | 194 | 481 | 675 |
Interest expense | (182) | (105) | (454) | (232) |
Other income (loss), net | 82 | (9) | 131 | (145) |
Interest and other income, net | 58 | 80 | 158 | 298 |
INCOME BEFORE PROVISION FOR INCOME TAXES | 2,403 | 1,687 | 6,997 | 6,160 |
Provision for income taxes | 211 | 339 | 1,165 | 1,107 |
NET INCOME | $2,192 | $1,348 | $5,832 | $5,053 |
Net income per share: | ||||
Basic | 0.38 | 0.23 | 1.01 | 0.86 |
Diluted | 0.37 | 0.23 | 0.99 | 0.86 |
Shares used in per-share calculation: | ||||
Basic | 5,731 | 5,805 | 5,746 | 5,844 |
Diluted | 5,869 | 5,818 | 5,869 | 5,871 |
CONSOLIDATED STATEMENTS OF CASH
CONSOLIDATED STATEMENTS OF CASH FLOWS (USD $) | ||
In Millions | 9 Months Ended
May. 01, 2010 | 9 Months Ended
Apr. 25, 2009 |
Cash flows from operating activities: | ||
Net income | $5,832 | $5,053 |
Adjustments to reconcile net income to net cash provided by operating activities: | ||
Depreciation, amortization and other noncash items | 1,415 | 1,244 |
Share-based compensation expense | 1,126 | 901 |
Provision for doubtful accounts | 18 | 36 |
Deferred income taxes | (256) | (166) |
Excess tax benefits from share-based compensation | (177) | (25) |
In-process research and development | 0 | 3 |
Net (gains) losses on investments | (147) | 113 |
Change in operating assets and liabilities, net of effects of acquisitions: | ||
Accounts receivable | (662) | 1,337 |
Inventories | (86) | 199 |
Lease receivables, net | (263) | (127) |
Accounts payable | 160 | (198) |
Income taxes payable | (204) | 274 |
Accrued compensation | 138 | 120 |
Deferred revenue | 740 | 9 |
Other assets | (544) | (618) |
Other liabilities | (149) | (243) |
Net cash provided by operating activities | 6,941 | 7,912 |
Cash flows from investing activities: | ||
Purchases of investments | (35,263) | (31,865) |
Proceeds from sales of investments | 12,193 | 17,291 |
Proceeds from maturities of investments | 17,474 | 9,088 |
Acquisition of property and equipment | (699) | (794) |
Acquisition of businesses, net of cash and cash equivalents acquired | (4,950) | (338) |
Change in investments in privately held companies | (68) | (78) |
Other | 80 | (54) |
Net cash used in investing activities | (11,233) | (6,750) |
Cash flows from financing activities: | ||
Issuance of common stock | 2,780 | 486 |
Repurchase of common stock | (5,440) | (2,807) |
Issuance of long-term debt | 4,944 | 3,991 |
Short-term borrowings, net | 62 | 0 |
Repayment of long-term debt | 0 | (500) |
Settlements of interest rate derivatives related to long-term debt | 23 | (42) |
Excess tax benefits from share-based compensation | 177 | 25 |
Other | (11) | (147) |
Net cash provided by financing activities | 2,535 | 1,006 |
Net (decrease) increase in cash and cash equivalents | (1,757) | 2,168 |
Cash and cash equivalents, beginning of period | 5,718 | 5,191 |
Cash and cash equivalents, end of period | $3,961 | $7,359 |
CONSOLIDATED STATEMENTS OF EQUI
CONSOLIDATED STATEMENTS OF EQUITY (USD $) | |||||||
In Millions | Shares of Common Stock
| Common Stock and Additional Paid-In Capital
| Retained Earnings
| Accumulated Other Comprehensive Income (Loss)
| Total Cisco Shareholders' Equity
| Noncontrolling Interests
| Total
|
Balance at Jul. 26, 2008 | $33,505 | $120 | $728 | $34,353 | $49 | $34,402 | |
Balance (in shares) at Jul. 26, 2008 | 5,893 | ||||||
Net income | 5,053 | 5,053 | 5,053 | ||||
Change in unrealized gains and losses on investments | (173) | (173) | (22) | (195) | |||
Change in derivative instruments | (136) | (136) | (136) | ||||
Change in cumulative translation adjustment and other | (429) | (429) | (429) | ||||
Comprehensive income (loss) | 4,315 | (22) | 4,293 | ||||
Issuance of common stock (in shares) | 39 | ||||||
Issuance of common stock | 486 | 486 | 486 | ||||
Repurchase of common stock (in shares) | (160) | ||||||
Repurchase of common stock | (936) | (1,881) | (2,817) | (2,817) | |||
Tax benefits from employee stock incentive plans | 5 | 5 | 5 | ||||
Purchase acquisitions | 13 | 13 | 13 | ||||
Share-based compensation expense | 901 | 901 | 901 | ||||
Balance (in shares) at Apr. 25, 2009 | 5,772 | ||||||
Balance at Apr. 25, 2009 | 33,974 | 3,292 | (10) | 37,256 | 27 | 37,283 | |
Balance at Jul. 25, 2009 | 34,344 | 3,868 | 435 | 38,647 | 30 | 38,677 | |
Balance (in shares) at Jul. 25, 2009 | 5,785 | ||||||
Net income | 5,832 | 5,832 | 5,832 | ||||
Change in unrealized gains and losses on investments | 233 | 233 | (8) | 225 | |||
Change in derivative instruments | (4) | (4) | (4) | ||||
Change in cumulative translation adjustment and other | 12 | 12 | 12 | ||||
Comprehensive income (loss) | 6,073 | (8) | 6,065 | ||||
Issuance of common stock (in shares) | 167 | ||||||
Issuance of common stock | 2,780 | 2,780 | 2,780 | ||||
Repurchase of common stock (in shares) | (230) | ||||||
Repurchase of common stock | (1,458) | (4,130) | (5,588) | (5,588) | |||
Tax benefits from employee stock incentive plans | 710 | 710 | 710 | ||||
Purchase acquisitions | 82 | 82 | 82 | ||||
Share-based compensation expense | 1,126 | 1,126 | 1,126 | ||||
Balance (in shares) at May. 01, 2010 | 5,722 | ||||||
Balance at May. 01, 2010 | $37,584 | $5,570 | $676 | $43,830 | $22 | $43,852 |
Supplemental Information
Supplemental Information | |
9 Months Ended
May. 01, 2010 | |
Supplemental Information | Supplemental Information In September 2001, the Company's Board of Directors authorized a stock repurchase program. As of May 1, 2010, the Company's Board of Directors had authorized an aggregate repurchase of up to $72 billion of common stock under this program with no termination date. For additional information regarding stock repurchases, see Note 12 to the Consolidated Financial Statements. The stock repurchases since the inception of this program and the related impact on Cisco shareholders' equity are summarized in the table below (in millions): SharesofCommon Stock CommonStockandAdditionalPaid-InCapital RetainedEarnings Total CiscoShareholders'Equity Repurchases of common stock under the repurchase program 3,028 $ 12,113 $ 50,569 $ 62,682 |
Basis of Presentation
Basis of Presentation | |
9 Months Ended
May. 01, 2010 | |
Basis of Presentation | 1. Basis of Presentation The fiscal year for Cisco Systems, Inc. (the "Company" or "Cisco") is the 52 or 53 weeks ending on the last Saturday in July. Fiscal 2010 is a 53-week fiscal year and fiscal 2009 was a 52-week fiscal year. The third quarter of fiscal 2010 consisted of 14 weeks, one week more than a typical quarter. The Consolidated Financial Statements include the accounts of Cisco and its subsidiaries. All significant intercompany accounts and transactions have been eliminated. The Company conducts business globally and is primarily managed on a geographic basis in the following theaters: United States and Canada, European Markets, Emerging Markets, Asia Pacific, and Japan. The Emerging Markets theater consists of Eastern Europe, Latin America, the Middle East and Africa, and Russia and the Commonwealth of Independent States. The accompanying financial data as of May 1, 2010 and for the three and nine months ended May 1, 2010 and April 25, 2009 has been prepared by the Company, without audit, pursuant to the rules and regulations of the Securities and Exchange Commission (SEC). Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles in the United States ("GAAP") have been condensed or omitted pursuant to such rules and regulations. The July 25, 2009 Consolidated Balance Sheet was derived from audited financial statements, but does not include all disclosures required by accounting principles generally accepted in the United States. However, the Company believes that the disclosures are adequate to make the information presented not misleading. These Consolidated Financial Statements should be read in conjunction with the Consolidated Financial Statements and the notes thereto, included in the Company's Annual Report on Form 10-K for the fiscal year ended July 25, 2009. In the opinion of management, all adjustments (which include normal recurring adjustments, except as disclosed herein) necessary to present fairly the statement of financial position as of May 1, 2010, and results of operations for the three and nine months ended May 1, 2010 and April 25, 2009, cash flows, and equity for the nine months ended May 1, 2010 and April 25, 2009, as applicable, have been made. The results of operations for the three and nine months ended May 1, 2010 are not necessarily indicative of the operating results for the full fiscal year or any future periods. The Company has made certain reclassifications to prior period amounts relating to net sales for similar groups of products, and gross margin by theater, due to refinement of the respective categories. The Company has made certain other reclassifications to prior period amounts in order to conform to the current period's presentation. The Company has evaluated subsequent events through the date that the financial statements were issued based on the accounting guidance for subsequent events. |
Summary of Significant Accounti
Summary of Significant Accounting Policies | |
9 Months Ended
May. 01, 2010 | |
Summary of Significant Accounting Policies | 2. Summary of Significant Accounting Policies (a) New Accounting Standards Recently Adopted Revenue Recognition for Arrangements with Multiple Deliverables In October 2009, the Financial Accounting Standards Board (FASB) amended the accounting standards for revenue recognition to remove from the scope of industry-specific software revenue recognition guidance, tangible products containing software components and nonsoftware components that function together to deliver the product's essential functionality. In October 2009, the FASB also amended the accounting standards for multiple-deliverable revenue arrangements to: (i) provide updated guidance on whether multiple deliverables exist, how the deliverables in an arrangement should be separated, and how the consideration should be allocated; (ii) require an entity to allocate revenue in an arrangement using estimated selling prices (ESP) of deliverables if a vendor does not have vendor-specific objective evidence of selling price (VSOE) or third-party evidence of selling price (TPE); and (iii) eliminate the use of the residual method and require an entity to allocate revenue using the relative selling price method. The Company elected to early adopt this accounting guidance at the beginning of its first quarter of fiscal 2010 on a prospective basis for applicable transactions originating or materially modified after July 25, 2009. This guidance does not generally change the units of accounting for the Company's revenue transactions. Most products and services qualify as separate units of accounting. Products are typically considered delivered upon shipment. In instances where final acceptance of the product, system, or solution is specified by the customer, revenue is deferred until all acceptance criteria have been met. Technical support services revenue is deferred and recognized ratably over the period during which the services are to be performed, which is typically from one to three years. Consulting services for specific customer networking needs, which the Company refers to as advanced services, are recognized upon delivery or completion of performance. Advanced service arrangements are typically short term in nature and are largely completed within 90 days from the start of service. The Company's arrangements generally do not include any provisions for cancellation, termination, or refunds that would significantly impact recognized revenue. Many of the Company's products have both software and nonsoftware components that function together to deliver the products' essential functionality. The Company's product offerings fall into the following categories: routing, switching, advanced technologies, and other products, which include emerging technologies. In addition to its product offerings, the Company provides a broad range of technical support and advanced services, as discussed above. The Company has a broad customer base that encompasses virtually all types of public and private entities, including enterprise businesses, service providers, commercial customers, and consumers. The Company and its sales force are not organized by product divisio |
Business Combinations
Business Combinations | |
9 Months Ended
May. 01, 2010 | |
Business Combinations | 3. Business Combinations (a) Business Combinations Completed During the Period A summary of the business combinations completed during the nine months ended May 1, 2010 is as follows (in millions): PurchaseConsideration NetTangibleAssetsAcquired/(LiabilitiesAssumed) (1) PurchasedIntangibleAssets Goodwill ScanSafe, Inc. $ 154 $ 2 $ 31 $ 121 Starent Networks, Corp. 2,636 (17 ) 1,274 1,379 Tandberg ASA 3,268 17 980 2,271 Other 3 (5 ) 6 2 Total $ 6,061 $ (3 ) $ 2,291 $ 3,773 (1) Net liabilities assumed for business combinations completed during the nine months ended May1, 2010 primarily consist of net deferred tax liabilities, partially offset by $748 million of cash and cash equivalents acquired. The Company continues to evaluate certain assets and liabilities related to business combinations completed during the period. Additional information, which existed as of the acquisition date but was at that time unknown to the Company, may become known to the Company during the remainder of the measurement period, a period not to exceed 12 months from the acquisition date. Changes to amounts recorded as assets or liabilities may result in a corresponding adjustment to goodwill. * In December 2009, the Company acquired ScanSafe, Inc., a provider of hosted web security to help build a borderless network security architecture that combines network and cloud-based services for advanced security enforcement. * In December 2009, the Company acquired Starent Networks, Corp. ("Starent"), a provider of IP-based mobile infrastructure for mobile and converged carriers, to enhance the Company's portfolio of products to provide an integrated architecture to offer rich, quality multimedia experiences to mobile subscribers. * In April 2010, the Company acquired Tandberg ASA ("Tandberg"), a leader in video communications. With this acquisition, the Company expects that it will be able to combine innovations with multivendor interoperability capabilities to provide a platform significantly more attractive to its customers and partners. The total purchase consideration related to the Company's business combinations completed during the nine months ended May 1, 2010, consisted of approximately $6.0 billion in cash and $82 million in vested share-based awards assumed. For the April 2010 acquisition of Tandberg, of the total consideration of $3.3 billion, approximately $281 million (based on exchange rates in effect as of May 1, 2010) relating to the compulsory acquisition of non-tendered shares is expected to be paid during the fourth quarter of fiscal 2010. The Consolidated Financial Statements include the operating results of each business from the date of acquisition. Pro forma results of operations for the acquisitions completed during the nine months ended May 1, 2010 have not been presented because the effects of the acquisitions, individually and in the aggregate, were not material to the Company's financial results. For the three |
Goodwill and Purchased Intangib
Goodwill and Purchased Intangible Assets | |
9 Months Ended
May. 01, 2010 | |
Goodwill and Purchased Intangible Assets | 4. Goodwill and Purchased Intangible Assets (a) Goodwill The following table presents the goodwill allocated to the Company's reportable segments as of and during the nine months ended May 1, 2010 (in millions): BalanceatJuly25,2009 Acquisitions Other BalanceatMay1, 2010 United States and Canada $ 9,512 $ 1,788 $ (5 ) $ 11,295 European Markets 1,669 1,087 (26 ) 2,730 Emerging Markets 437 322 1 760 Asia Pacific 506 462 968 Japan 801 114 915 Total $ 12,925 $ 3,773 $ (30 ) $ 16,668 In the table above, "Other" primarily includes foreign currency translation. (b) Purchased Intangible Assets The following table presents details of the Company's purchased intangible assets acquired through business combinations during the nine months ended May 1, 2010 (in millions, except years): FINITE LIVES INDEFINITELIVES TECHNOLOGY CUSTOMERRELATIONSHIPS OTHER IPRD TOTAL Weighted-AverageUsefulLife(in Years) Amount Weighted-AverageUsefulLife(inYears) Amount Weighted-AverageUsefulLife(inYears) Amount Amount Amount ScanSafe, Inc. 5.0 $ 14 6.0 $ 11 3.0 $ 6 $ $ 31 Starent Networks, Corp. 6.0 691 7.0 434 0.3 35 114 1,274 Tandberg ASA 5.0 709 7.0 179 3.0 21 71 980 Other 6 6 Total $ 1,414 $ 624 $ 62 $ 191 $ 2,291 The following tables present details of the Company's purchased intangible assets (in millions): May1, 2010 Gross AccumulatedAmortization Net Intangible assets with finite lives: Technology $ 2,361 $ (563 ) $ 1,798 Customer relationships 2,331 (966 ) 1,365 Other 207 (113 ) 94 Total intangible assets with finite lives 4,899 (1,642 ) 3,257 IPRD, with indefinite lives 191 191 Total intangible assets $ 5,090 $ (1,642 ) $ 3,448 July25, 2009 Gross AccumulatedAmortization Net Intangible assets with finite lives: Technology $ 1,469 $ (803 ) $ 666 Customer relationships 1,730 (768 ) 962 Other 184 (110 ) 74 Total intangible assets $ 3,383 $ (1,681 ) $ 1,702 Purchased intangible assets include technology intangible assets acquired through business combinations as well as through technology licenses. Effective the first quarter of fiscal 2010, with the adoption of revised accounting guidance for business combinations, IPRD has been capitalized at fair value as an intangible asset with an indefinite life and will be assessed for impairment thereafter. Upon completion of the development of the underlying m |
Balance Sheet Details
Balance Sheet Details | |
9 Months Ended
May. 01, 2010 | |
Balance Sheet Details | 5. Balance Sheet Details The following tables provide details of selected balance sheet items (in millions): May1,2010 July25,2009 Inventories: Raw materials $ 204 $ 165 Work in process 43 33 Finished goods: Distributor inventory and deferred cost of sales 530 382 Manufactured finished goods 280 310 Total finished goods 810 692 Service-related spares 143 151 Demonstration systems 50 33 Total $ 1,250 $ 1,074 Property and equipment, net: Land, buildings, and building leasehold improvements $ 4,527 $ 4,618 Computer equipment and related software 1,489 1,823 Production, engineering, and other equipment 4,891 5,075 Operating lease assets 256 227 Furniture and fixtures 474 465 11,637 12,208 Less accumulated depreciation and amortization (7,643 ) (8,165 ) Total $ 3,994 $ 4,043 Other assets: Deferred tax assets $ 1,800 $ 2,122 Investments in privately held companies 763 709 Lease receivables, net(1) 1,126 966 Financed service contracts, net(1) 692 676 Loan receivables, net(1) 744 537 Other 299 271 Total $ 5,424 $ 5,281 Deferred revenue: Service $ 6,838 $ 6,496 Product: Unrecognized revenue on product shipments and other deferred revenue 2,737 2,490 Cash receipts related to unrecognized revenue from two-tier distributors 728 407 Total product deferred revenue 3,465 2,897 Total $ 10,303 $ 9,393 Reported as: Current $ 7,154 $ 6,438 Noncurrent 3,149 2,955 Total $ 10,303 $ 9,393 (1) Amounts represent the noncurrent portions of the respective balances. See Note 6 for the current portions of the respective balances. |
Financing Receivables and Guara
Financing Receivables and Guarantees | |
9 Months Ended
May. 01, 2010 | |
Financing Receivables and Guarantees | 6. Financing Receivables and Guarantees (a) Lease Receivables Lease receivables represent sales-type and direct-financing leases resulting from the sale of the Company's and complementary third-party products. These lease arrangements typically have terms of up to three years and are generally collateralized by a security interest in the underlying assets. The net lease receivables are summarized as follows (in millions): May1,2010 July25,2009 Gross lease receivables $ 2,294 $ 1,996 Unearned income (215 ) (191 ) Allowances (199 ) (213 ) Lease receivables, net $ 1,880 $ 1,592 Reported as: Current $ 754 $ 626 Noncurrent 1,126 966 Lease receivables, net $ 1,880 $ 1,592 Contractual maturities of the gross lease receivables at May 1, 2010 are as follows (in millions): Fiscal Year Amount 2010 (remaining three months) $ 280 2011 850 2012 590 2013 366 2014 170 Thereafter 38 Total $ 2,294 Actual cash collections may differ from the contractual maturities due to early customer buyouts, refinancings, or defaults. (b) Financed Service Contracts Financed service contracts are summarized as follows (in millions): May1,2010 July25,2009 Gross financed service contracts $ 1,676 $ 1,642 Allowances (19 ) (26 ) Financed service contracts, net $ 1,657 $ 1,616 Reported as: Current $ 965 $ 940 Noncurrent 692 676 Financed service contracts, net $ 1,657 $ 1,616 The revenue related to financed service contracts, which primarily relates to technical support services, is deferred and included in deferred service revenue. The revenue is recognized ratably over the period during which the related services are to be performed, which is typically from one to three years. (c) Loan Receivables Loan receivables are summarized as follows (in millions): May1,2010 July25,2009 Gross loan receivables $ 1,271 $ 861 Allowances (104 ) (88 ) Loan receivables, net $ 1,167 $ 773 Reported as: Current $ 423 $ 236 Noncurrent 744 537 Loan receivables, net $ 1,167 $ 773 A portion of the revenue related to loan receivables is deferred and included in deferred product revenue based on revenue recognition criteria. (d) Financing Guarantees In the ordinary course of business, the Company provides financing guarantees that are generally for various third-party financing arrangements extended to channel partners and end-user customers. Channel Partner Financing Guarantees The Company facilitates arrangements for third-party financing extended to channel partners, consisting of revolving short-term financing, generally with payment terms ranging from 6 |
Investments
Investments | |
9 Months Ended
May. 01, 2010 | |
Investments | 7. Investments (a) Summary of Available-for-Sale Investments The following tables summarize the Company's available-for-sale investments (in millions): May1, 2010 AmortizedCost GrossUnrealizedGains GrossUnrealizedLosses FairValue Fixed income securities: Government securities $ 19,402 $ 26 $ (3 ) $ 19,425 Government agency securities (1) 12,153 70 (2 ) 12,221 Corporate debt securities 2,061 65 (18 ) 2,108 Asset-backed securities 151 9 (6 ) 154 Total fixed income securities 33,767 170 (29 ) 33,908 Publicly traded equity securities 887 353 (3 ) 1,237 Total $ 34,654 $ 523 $ (32 ) $ 35,145 July25, 2009 AmortizedCost GrossUnrealizedGains GrossUnrealizedLosses FairValue Fixed income securities: Government securities $ 10,266 $ 23 $ (5 ) $ 10,284 Government agency securities (1) 16,029 116 (2 ) 16,143 Corporate debt securities 1,740 51 (86 ) 1,705 Asset-backed securities 252 5 (34 ) 223 Total fixed income securities 28,287 195 (127 ) 28,355 Publicly traded equity securities 824 193 (89 ) 928 Total $ 29,111 $ 388 $ (216 ) $ 29,283 (1) In Note 7 and Note 8, government agency securities as of May1, 2010 and July25, 2009 include bank-issued securities that are guaranteed by the Federal Deposit Insurance Corporation (FDIC). (b) Gains and Losses on Available-for-Sale Investments The following table summarizes the realized net gains (losses) associated with the Company's available-for-sale investments (in millions): ThreeMonthsEnded NineMonthsEnded May 1,2010 April 25,2009 May1,2010 April25,2009 Net gains (losses) on investments in publicly traded equity securities $ 36 $ (10 ) $ 64 $ 58 Net gains (losses) on investments in fixed income securities 35 36 55 (123 ) Net gains (losses) on available-for-sale investments $ 71 $ 26 $ 119 $ (65 ) There were no impairment charges on investments in fixed income securities and publicly traded equity securities during the third quarter and first nine months of fiscal 2010. For the third quarter and first nine months of fiscal 2009, net gains (losses) on investments in fixed income securities included impairment charges of $17 million and $219 million, respectively, and net gains (losses) on investments in publicly traded equity securities included impairment charges of $4 million and $39 million, respectively. All such impairment charges were due to a decline in the fair value of the investments below their cost basis that were judged to be other than temporary and were recorded as a reduction to the amortized cost of the respecti |
Fair Value
Fair Value | |
9 Months Ended
May. 01, 2010 | |
Fair Value | 8. Fair Value Pursuant to the accounting guidance for fair value measurements and its subsequent updates, fair value is defined as the price that would be received from selling an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. When determining the fair value measurements for assets and liabilities required or permitted to be recorded at fair value, the Company considers the principal or most advantageous market in which it would transact, and it considers assumptions that market participants would use when pricing the asset or liability. (a) Fair Value Hierarchy The accounting guidance for fair value measurement also requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. The standard establishes a fair value hierarchy based on the level of independent, objective evidence surrounding the inputs used to measure fair value. A financial instrument's categorization within the fair value hierarchy is based upon the lowest level of input that is significant to the fair value measurement. The fair value hierarchy is as follows: Level 1 Level 1 applies to assets or liabilities for which there are quoted prices in active markets for identical assets or liabilities. Level 2 Level 2 applies to assets or liabilities for which there are inputs other than quoted prices that are observable for the asset or liability such as quoted prices for similar assets or liabilities in active markets; quoted prices for identical assets or liabilities in markets with insufficient volume or infrequent transactions (less active markets); or model-derived valuations in which significant inputs are observable or can be derived principally from, or corroborated by, observable market data. Level 3 Level 3 applies to assets or liabilities for which there are unobservable inputs to the valuation methodology that are significant to the measurement of the fair value of the assets or liabilities. (b) Assets and Liabilities Measured at Fair Value on a Recurring Basis Assets and liabilities measured at fair value on a recurring basis as of May 1, 2010 and July 25, 2009 were as follows (in millions): May1, 2010 July25, 2009 Fair Value Measurements Fair Value Measurements Level 1 Level 2 Level3 TotalBalance Level 1 Level 2 Level3 TotalBalance Assets: Money market funds $ 2,058 $ $ $ 2,058 $ 4,514 $ $ $ 4,514 Government securities 19,524 19,524 10,345 10,345 Government agency securities(1) 12,423 12,423 16,455 16,455 Corporate debt securities 2,135 2,135 1,741 1,741 Asset-backed securities 154 154 223 223 Publicly traded equity securities 1,237 1,237 928 928 Derivative instruments and other assets (2) 27 14 41 109 4 113 |
Borrowings
Borrowings | |
9 Months Ended
May. 01, 2010 | |
Borrowings | 9. Borrowings (a) Debt The following table summarizes the Company's debt (in millions, except percentages): May1, 2010 July25, 2009 Amount EffectiveRate Amount EffectiveRate Senior notes: 5.25% fixed-rate notes, due 2011 ("2011 Notes") $ 3,000 3.12 % $ 3,000 3.12 % 2.90% fixed-rate notes, due 2014 ("2014 Notes") 500 3.11 % 5.50% fixed-rate notes, due 2016 ("2016 Notes") 3,000 3.71 % 3,000 4.34 % 4.95% fixed-rate notes, due 2019 ("2019 Notes") 2,000 5.08 % 2,000 5.08 % 4.45% fixed-rate notes, due 2020 ("2020 Notes") 2,500 4.50 % 5.90% fixed-rate notes, due 2039 ("2039 Notes") 2,000 6.11 % 2,000 6.11 % 5.50% fixed-rate notes, due 2040 ("2040 Notes") 2,000 5.67 % Total senior notes 15,000 10,000 Other notes and borrowings 73 2 Unaccreted discount (74 ) (21 ) Hedge accounting adjustment 247 314 Total $ 15,246 $ 10,295 Reported as: Short-term debt $ 3,127 $ Long-term debt 12,119 10,295 Total $ 15,246 $ 10,295 In November 2009, the Company issued senior unsecured notes in an aggregate principal amount of $5.0 billion. Of these notes, $500 million will mature in 2014 and bear interest at a fixed rate of 2.90% per annum (the "2014 Notes"), $2.5 billion will mature in 2020 and bear interest at a fixed rate of 4.45% per annum (the "2020 Notes"), and $2.0 billion will mature in 2040 and bear interest at a fixed rate of 5.50% per annum (the "2040 Notes"). To achieve its interest rate risk management objectives, during the three months ended May 1, 2010, the Company entered into a $750 million notional amount interest rate swap designated as a fair value hedge of a portion of the 2016 Notes. Subsequent to May 1, 2010, the Company entered into an additional $750 million notional amount interest rate swap, designated as a fair value hedge of an additional portion of the 2016 Notes. In effect, these swaps convert the fixed interest rates of a portion of the 2016 Notes to floating interest rates based on the London InterBank Offered Rate ("LIBOR") plus a fixed number of basis points. Gains and losses in the value of the interest rate swaps substantially offset changes in the fair value of the hedged portion of the underlying debt. The effective rates for the fixed-rate debt include the interest on the notes, the accretion of the discount, and adjustments related to hedging, if applicable. Based on market prices, the fair value of the Company's senior notes was $15.8 billion and $10.5 billion as of May 1, 2010 and July 25, 2009, respectively. Interest is payable semiannually on each class of the senior fixed-rate notes. The notes are redeemable by the Company at any time, subject |
Derivative Instruments
Derivative Instruments | |
9 Months Ended
May. 01, 2010 | |
Derivative Instruments | 10. Derivative Instruments (a) Summary of Derivative Instruments The Company uses derivative instruments primarily to manage exposures to foreign currency exchange rate, interest rate, and equity price risks. The Company's primary objective in holding derivatives is to reduce the volatility of earnings and cash flows associated with changes in foreign currency exchange rates, interest rates, and equity prices. The Company's derivatives expose it to credit risk to the extent that the counterparties may be unable to meet the terms of the agreement. The Company does, however, seek to mitigate such risks by limiting its counterparties to major financial institutions. In addition, the potential risk of loss with any one counterparty resulting from this type of credit risk is monitored. Management does not expect material losses as a result of defaults by counterparties. The fair values of the Company's derivative instruments and the line items on the Consolidated Balance Sheets to which they were recorded are summarized as follows (in millions): DERIVATIVE ASSETS DERIVATIVE LIABILITIES BalanceSheetLineItem May1,2010 July25,2009 BalanceSheetLineItem May1,2010 July25,2009 Derivatives designated as hedging instruments: Foreign currency derivatives Othercurrentassets $ 18 $ 87 Other current liabilities $ 6 $ 36 Interest rate derivatives Other assets 1 Other long-term liabilities Total 19 87 6 36 Derivatives not designated as hedging instruments: Foreign currency derivatives Other current assets 8 22 Other current liabilities 2 30 Equity derivatives Other current assets 2 Other current liabilities Equity derivatives Other assets 2 2 Other long-term liabilities Total 10 26 2 30 Total $ 29 $ 113 $ 8 $ 66 The effect of the Company's cash flow hedging instruments on other comprehensive income (OCI) and the Consolidated Statement of Operations is summarized as follows (in millions): GAINS (LOSSES) RECOGNIZED IN OCION DERIVATIVES(EFFECTIVE PORTION) GAINS (LOSSES) RECLASSIFIED FROM AOCI INTO INCOME (EFFECTIVE PORTION) Three Months Ended May1,2010 April25,2009 May1,2010 April25,2009 Derivatives Designated as Cash Flow Hedging Instruments Line Item in Statements of Operations Foreign currency derivatives $ (21 ) $ 16 Operating expenses $ (2 ) $ (38 ) Cost of sales-service (5 ) Interest rate derivatives (42 ) Interest expense Other derivatives (2 ) Operating expenses (1 ) Total $ (21 ) $ (28 ) $ (2 ) $ (44 ) |
Commitments and Contingencies
Commitments and Contingencies | |
9 Months Ended
May. 01, 2010 | |
Commitments and Contingencies | 11. Commitments and Contingencies (a) Operating Leases The Company leases office space in several U.S. locations. Outside the United States, larger leased sites include sites in Australia, Belgium, China, France, Germany, India, Israel, Italy, Japan, and the United Kingdom. The Company also leases equipment and vehicles. Future minimum lease payments under all noncancelable operating leases with an initial term in excess of one year as of May 1, 2010 are as follows (in millions): Fiscal Year Amount 2010 (remaining three months) $ 81 2011 324 2012 216 2013 150 2014 111 Thereafter 399 Total $ 1,281 (b) Purchase Commitments with Contract Manufacturers and Suppliers The Company purchases components from a variety of suppliers and uses several contract manufacturers to provide manufacturing services for its products. During the normal course of business, in order to manage manufacturing lead times and help ensure adequate component supply, the Company enters into agreements with contract manufacturers and suppliers that either allow them to procure inventory based upon criteria as defined by the Company or that establish the parameters defining the Company's requirements. A significant portion of the Company's reported purchase commitments arising from these agreements consists of firm, noncancelable, and unconditional commitments. In certain instances, these agreements allow the Company the option to cancel, reschedule, and adjust the Company's requirements based on its business needs prior to firm orders being placed. As of May 1, 2010 and July 25, 2009, the Company had total purchase commitments for inventory of $4.3 billion and $2.2 billion, respectively. The Company records a liability for firm, noncancelable, and unconditional purchase commitments for quantities in excess of its future demand forecasts consistent with the valuation of the Company's excess and obsolete inventory. As of May 1, 2010 and July 25, 2009, the liability for these purchase commitments was $148 million and $175 million, respectively, and was included in other current liabilities. (c) Other Commitments In connection with the Company's business combinations and asset purchases, the Company has agreed to pay certain additional amounts contingent upon the achievement of certain agreed-upon technology, development, product, or other milestones or the continued employment with the Company of certain employees of acquired entities. See Note 3. The Company also has certain funding commitments primarily related to its investments in privately held companies and venture funds, some of which are based on the achievement of certain agreed-upon milestones, and some of which are required to be funded on demand. The funding commitments were approximately $299 million and $313 million as of May 1, 2010 and July 25, 2009, respectively. (d) Variable Interest Entities In the ordinary course of business, the Company has investments in privately held companies and provides financing to certain customers. These privately held companies and customers may be considered to be variable in |
Shareholders' Equity
Shareholders' Equity | |
9 Months Ended
May. 01, 2010 | |
Shareholders' Equity | 12. Shareholders' Equity (a) Stock Repurchase Program In September 2001, the Company's Board of Directors authorized a stock repurchase program. As of May 1, 2010, the Company's Board of Directors had authorized an aggregate repurchase of up to $72 billion of common stock under this program and the remaining authorized repurchase amount was $9.3 billion with no termination date. The stock repurchase activity under the stock repurchase program during the nine months ended May 1, 2010 is summarized as follows (in millions, except per-share amounts): Nine Months Ended May1, 2010 SharesRepurchased Weighted-AveragePriceper Share AmountRepurchased Cumulative balance at July25, 2009 2,802 $ 20.41 $ 57,179 Repurchase of common stock under the stock repurchase program 226 24.33 5,503 Cumulative balance at May1, 2010 3,028 $ 20.70 $ 62,682 The purchase price for the shares of the Company's stock repurchased is reflected as a reduction to shareholders' equity. The Company is required to allocate the purchase price of the repurchased shares as (i) a reduction to retained earnings until retained earnings are zero and then as an increase to accumulated deficit and (ii) a reduction of common stock and additional paid-in capital. Issuance of common stock and the tax benefit related to employee stock incentive plans are recorded as an increase to common stock and additional paid-in capital. (b) Other Repurchases of Common Stock For the nine months ended May 1, 2010 and April 25, 2009, the Company repurchased approximately 3.7 million and 0.8 million shares, respectively, in settlement of employee tax withholding obligations due upon the vesting of restricted stock or stock units. (c) Comprehensive Income The components of comprehensive income, net of tax, are as follows (in millions): ThreeMonthsEnded NineMonthsEnded May1,2010 April25,2009 May1,2010 April25,2009 Net income $ 2,192 $ 1,348 $ 5,832 $ 5,053 Other comprehensive income: Change in unrealized gains and losses on investments, net of tax benefit (expense) of $(67) and $(93), for the three and nine months ended May1, 2010, respectively, and $(8) and $86 for the corresponding periods of fiscal 2009 30 (19 ) 225 (195 ) Change in derivative instruments (19 ) 17 (4 ) (136 ) Change in cumulative translation adjustment and other (72 ) 5 12 (429 ) Comprehensive income 2,131 1,351 6,065 4,293 Comprehensive (income) loss attributable to noncontrolling interests (2 ) (9 ) 8 22 Comprehensive income attributable to Cisco Systems, Inc. $ 2,129 $ 1,342 $ 6,073 $ 4,315 The Company consolidates its investment in a venture fund managed by SOFTBANK Corp. and its affiliates ("SOFTBANK") as the Company is the primary beneficiary. As a result, SOFTBANK's interest in the change |
Employee Benefit Plans
Employee Benefit Plans | |
9 Months Ended
May. 01, 2010 | |
Employee Benefit Plans | 13. Employee Benefit Plans (a) Employee Stock Purchase Plan The Company has an Employee Stock Purchase Plan, which includes its subplan, the International Employee Stock Purchase Plan (together, the "Purchase Plan"), under which 471.4 million shares of the Company's common stock had been reserved for issuance as of May 1, 2010. Effective July 1, 2009, eligible employees are offered shares through a 24-month offering period, which consists of four consecutive 6-month purchase periods. Employees may purchase a limited number of shares of the Company's stock at a discount of up to 15% of the lesser of the market value at the beginning of the offering period or the end of each 6-month purchase period. Prior to July 1, 2009 the offering period was six months. The purchase plan is scheduled to terminate on January 3, 2020. For the nine months ended both May 1, 2010 and April 25, 2009, the Company issued 14 million shares under the Purchase Plan. As of May 1, 2010, 169 million shares were available for issuance under the Purchase Plan. (b) Employee Stock Incentive Plans Stock Incentive Plan Program Description As of May 1, 2010, the Company had five stock incentive plans: the 2005 Stock Incentive Plan (the "2005 Plan"); the 1996 Stock Incentive Plan (the "1996 Plan"); the 1997 Supplemental Stock Incentive Plan (the "Supplemental Plan"); the Cisco Systems, Inc. SA Acquisition Long-Term Incentive Plan (the "SA Acquisition Plan"); and the Cisco Systems, Inc. WebEx Acquisition Long-Term Incentive Plan (the "WebEx Acquisition Plan"). In addition, the Company has, in connection with the acquisitions of various companies, assumed the share-based awards granted under stock incentive plans of the acquired companies or issued share-based awards in replacement thereof. Share-based awards are designed to reward employees for their long-term contributions to the Company and provide incentives for them to remain with the Company. The number and frequency of share-based awards are based on competitive practices, operating results of the Company, government regulations, and other factors. Since the inception of the stock incentive plans, the Company has granted share-based awards to a significant percentage of its employees, and the majority has been granted to employees below the vice president level. The Company's primary stock incentive plans are summarized as follows: 2005 Plan As amended on November 15, 2007, the maximum number of shares issuable under the 2005 Plan over its term is 559 million shares plus the amount of any shares underlying awards outstanding on November 15, 2007 under the 1996 Plan, the SA Acquisition Plan, and the WebEx Acquisition Plan that are forfeited or are terminated for any other reason before being exercised or settled. If any awards granted under the 2005 Plan are forfeited or are terminated for any other reason before being exercised or settled, then the shares underlying the awards will again be available under the 2005 Plan. Prior to November 12, 2009, the number of shares available for issuance under the 2005 Plan was reduced by 2.5 shares for each share awarded as a stock grant or stock unit. Pursua |
Income Taxes
Income Taxes | |
9 Months Ended
May. 01, 2010 | |
Income Taxes | 14. Income Taxes The following table provides details of income taxes (in millions, except percentages): ThreeMonthsEnded NineMonthsEnded May1,2010 April25,2009 May1,2010 April25,2009 Effective tax rate 8.8 % 20.1 % 16.6 % 18.0 % Cash paid for income taxes $ 486 $ 406 $ 1,624 $ 999 In the third quarter of fiscal 2010, the U.S. Court of Appeals for the Ninth Circuit affirmed a 2005 U.S. Tax Court ruling in Xilinx, Inc. v. Commissioner. The decision affirmed the tax treatment of share-based compensation expenses for the purpose of determining intangible development costs under a company's research and development cost sharing arrangement. While the Company was not a party to the case, as a result of this ruling, the Company recognized tax benefits as an increase in additional paid-in capital of $566 million and as a reduction to the provision for income taxes of $158 million during the three months ended May 1, 2010. During the nine months ended April 25, 2009, the Tax Extenders and Alternative Minimum Tax Relief Act of 2008 reinstated the U.S. federal research and development (RD) tax credit, retroactive to January 1, 2008. As a result, the effective tax rate for the nine months ended April 25, 2009 reflected a $106 million tax benefit related to fiscal 2008 RD expenses. The U.S. federal RD tax credit expired on December 31, 2009. In the third quarter of fiscal 2010, as a result of the U.S. Court of Appeals decision in Xilinx Inc. v. Commissioner as discussed above, the Company decreased the amount of unrecognized tax benefits by approximately $220 million. The Company also decreased the amount of accrued interest by approximately $218 million. As of May 1, 2010, the Company had $2.6 billion of unrecognized tax benefits, of which $2.3 billion, if recognized, would favorably impact the effective tax rate. Although timing of the resolution of audits is highly uncertain, the Company does not believe it is reasonably possible that the total amount of unrecognized tax benefits as of May 1, 2010 will materially change in the next 12 months. |
Segment Information and Major C
Segment Information and Major Customers | |
9 Months Ended
May. 01, 2010 | |
Segment Information and Major Customers | 15. Segment Information and Major Customers The Company's operations involve the design, development, manufacturing, marketing, and technical support of networking and other products and services related to the communications and information technology industry. Cisco products include routers, switches, advanced technologies, and other products. These products, primarily integrated by Cisco IOS Software, link geographically dispersed local-area networks (LANs), metropolitan-area networks (MANs), and wide-area networks (WANs). (a) Net Sales and Gross Margin by Theater The Company conducts business globally and is primarily managed on a geographic basis. The Company's management makes financial decisions and allocates resources based on the information it receives from its internal management system. Sales are attributed to a geographic theater based on the ordering location of the customer. The Company does not allocate research and development, sales and marketing, or general and administrative expenses to its geographic theaters in this internal management system because management does not include the information in its measurement of the performance of the operating segments. In addition, the Company does not allocate amortization of acquisition-related intangible assets, share-based compensation expense, and certain other items to the gross margin for each theater because management does not include this information in its measurement of the performance of the operating segments. Summarized financial information by theater for the three and nine months ended May 1, 2010 and April 25, 2009, based on the Company's internal management system and as utilized by the Company's Chief Operating Decision Maker (CODM), is as follows (in millions): ThreeMonthsEnded Nine Months Ended May1,2010 April25,2009 May1,2010 April25,2009 Net sales: United States and Canada (1) $ 5,555 $ 4,308 $ 15,869 $ 14,593 European Markets 2,134 1,848 5,895 6,009 Emerging Markets 1,140 880 3,107 3,198 Asia Pacific 1,141 808 3,175 2,753 Japan 398 318 1,158 1,029 Total $ 10,368 $ 8,162 $ 29,204 $ 27,582 Gross margin (2): United States and Canada $ 3,595 $ 2,832 $ 10,339 $ 9,538 European Markets 1,444 1,233 4,007 3,993 Emerging Markets 717 532 1,986 1,960 Asia Pacific 718 498 2,009 1,718 Japan 283 220 835 702 Theater total 6,757 5,315 19,176 17,911 Unallocated corporate items (3) (127 ) (86 ) (326 ) (278 ) Total $ 6,630 $ 5,229 $ 18,850 $ 17,633 (1) Net sales in the United States were $5.2 billion and $4.1 billion for the three months ended May1, 2010 and April25, 2009, respecti |
Net Income per Share
Net Income per Share | |
9 Months Ended
May. 01, 2010 | |
Net Income per Share | 16. Net Income per Share The following table presents the calculation of basic and diluted net income per share (in millions, except per-share amounts): ThreeMonthsEnded NineMonthsEnded May1,2010 April25,2009 May1,2010 April25,2009 Net income $ 2,192 $ 1,348 $ 5,832 $ 5,053 Weighted-average sharesbasic 5,731 5,805 5,746 5,844 Effect of dilutive potential common shares 138 13 123 27 Weighted-average sharesdiluted 5,869 5,818 5,869 5,871 Net income per sharebasic $ 0.38 $ 0.23 $ 1.01 $ 0.86 Net income per sharediluted $ 0.37 $ 0.23 $ 0.99 $ 0.86 Antidilutive employee share-based awards, excluded 197 977 358 1,008 Employee equity share options, unvested shares, and similar equity instruments granted by the Company are treated as potential common shares outstanding in computing diluted earnings per share. Diluted shares outstanding include the dilutive effect of in-the-money options and nonvested restricted stock and restricted stock units which is calculated based on the average share price for each fiscal period using the treasury stock method. Under the treasury stock method, the amount the employee must pay for exercising stock options, the amount of compensation cost for future service that the Company has not yet recognized, and the amount of tax benefits that would be recorded in additional paid-in capital when the award becomes deductible are assumed to be used to repurchase shares. |