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Cisco Reports Third Quarter Earnings SAN JOSE, CA--(MARKET WIRE)--May 6, 2008 -- Cisco (NasdaqGS:CSCO - News)
-- Q3 Net Sales: $9.8 billion (increase of 10% year over year)
-- Q3 Net Income: $1.8 billion GAAP*; $2.3 billion non-GAAP
-- Q3 Earnings per Share: $0.29 GAAP* (decrease of 3% year over year);
$0.38 non-GAAP (increase of 12% year over year)
Cisco® (NasdaqGS:CSCO - News), the worldwide leader in networking that transforms how people connect, communicate and collaborate, today reported its third quarter results for the period ended April 26, 2008. Cisco reported third quarter net sales of $9.8 billion, net income on a generally accepted accounting principles (GAAP) basis of $1.8 billion or $0.29 per share, and non-GAAP net income of $2.3 billion or $0.38 per share. "In the quarter, Cisco delivered solid financial results driven by our focus on innovation, our broad and growing global footprint, and our teams' focus on delivering results," said John Chambers, chairman and CEO, Cisco. "We believe that our steady performance is based on Cisco's unique balance across business and technology architectures and our continued focus on execution against our long-term strategy." Chambers continued, "Our optimism lies in our vision that the network is a strategic asset to optimize productivity and to enable collaboration in the second phase of the Internet, both of which are priorities for our success. The network is also a focal point for innovation, helping Cisco enter new and adjacent markets as well as strengthen or expand our positions in large, established markets."
GAAP Results
-------------------------------------------
Q3 2008 Q3 2007 vs. Q3 2007
-------------- -------------- -------------
Net Sales $ 9.8 billion $ 8.9 billion + 10.4%
-------------- -------------- -------------
Net Income $ 1.8 billion* $ 1.9 billion - 5.4%
-------------- -------------- -------------
Earnings per Share $ 0.29* $ 0.30 - 3.3%
-------------- -------------- -------------
Non-GAAP Results
-------------------------------------------
Q3 2008 Q3 2007 vs. Q3 2007
-------------- -------------- -------------
Net Income $ 2.3 billion $ 2.1 billion + 9.4%
-------------- -------------- -------------
Earnings per Share $ 0.38 $ 0.34 + 11.8%
-------------- -------------- -------------* GAAP net income and GAAP earnings per share for the third quarter of fiscal 2008 included an acquisition-related charge of $246 million or $0.04 per share. Net sales for the first nine months of fiscal 2008 were $29.2 billion, compared with $25.5 billion for the first nine months of fiscal 2007. Net income for the first nine months of fiscal 2008, on a GAAP basis, was $6.0 billion or $0.97 per share, compared with $5.4 billion or $0.86 per share for the first nine months of fiscal 2007. Non-GAAP net income for the first nine months of fiscal 2008 was $7.2 billion or $1.16 per share, compared with $6.1 billion or $0.98 per share for the first nine months of fiscal 2007. A reconciliation between GAAP net income and non-GAAP net income is provided in the table on page 7. Cisco will discuss third quarter 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 at http://investor.cisco.com. Other Financial Highlights
-- Cash flows from operations were $3.0 billion for the third quarter of
fiscal 2008, compared with $2.4 billion for the third quarter of fiscal
2007, and compared with $2.4 billion for the second quarter of fiscal 2008.
-- Cash and cash equivalents and investments were $24.4 billion at the
end of the third quarter of fiscal 2008, compared with $22.3 billion at the
end of the fourth quarter of fiscal 2007, and compared with $22.7 billion
at the end of the second quarter of fiscal 2008.
-- During the third quarter of fiscal 2008, Cisco repurchased 83 million
shares of common stock at an average price of $24.04 per share for an
aggregate purchase price of $2.0 billion. As of April 26, 2008, Cisco had
repurchased and retired 2.5 billion shares of Cisco common stock at an
average price of $20.51 per share for an aggregate purchase price of
approximately $52.2 billion since the inception of the stock repurchase
program. The remaining authorized repurchase amount as of April 26, 2008
was $9.8 billion with no termination date.
-- Days sales outstanding in accounts receivable (DSO) at the end of the
third quarter of fiscal 2008 was 39 days, compared with 38 days at the end
of the fourth quarter of fiscal 2007, and compared with 39 days at the end
of the second quarter of fiscal 2008.
-- Inventory turns on a GAAP basis were 11.0 in the third quarter of
fiscal 2008, compared with 10.3 in the fourth quarter of fiscal 2007, and
compared with 10.8 in the second quarter of fiscal 2008. Non-GAAP inventory
turns were 10.7 in the third quarter of fiscal 2008, compared with 10.1 in
the fourth quarter of fiscal 2007, and compared with 10.5 in the second
quarter of fiscal 2008."We are very pleased with our performance for the third quarter in which we delivered 10 percent year-over-year top-line growth," said Frank Calderoni, chief financial officer, Cisco. "Our ability to deliver solid financial results, excellent cash flow, and a strong balance sheet during a quarter of somewhat uncertain macro-economic conditions, illustrates the power of our business model." Business Highlights Acquisitions and Investments
-- Cisco announced its intent to purchase the remaining 20 percent
interest in San Jose-based Nuova Systems, a startup focused on the
development of next-generation products for the data center market. Cisco
also introduced the Cisco Nexus(TM) 5000 Series, the first product
developed by Nuova.
-- Cisco announced the next phase of its corporate strategy for China,
marked by new public-private collaborative programs within the country that
deliver upon Cisco's $16 billion multi-year innovation and sustainability
initiative first announced in November 2007, while expanding its
organizational and leadership focus for the country.New Products
-- Cisco introduced the Cisco ASR 1000 Series Aggregation Services
Routers, which help service provider and enterprise edge networks
simultaneously host an ever-increasing array of resource-intensive
integrated data, voice and video business and consumer services.
-- Cisco evolved its Self-Defending Network portfolio from network
security offerings into a broader systems approach designed to strengthen
the overall protection of networks as well as the increasingly diverse
number of endpoints, applications and content utilized on networks.
-- Cisco announced additions to its physical security product portfolio,
delivering new capabilities in Internet Protocol (IP)-based video
surveillance and electronic access control designed to help customers
integrate existing physical security systems and IT infrastructures.
-- Cisco announced new solutions for its Empowered Branch portfolio,
including the opening of its industry-leading Cisco Integrated Services
Router and Cisco Wide Area Application Services (WAAS) platforms to
customers and third-party application developers. The intent of these new
solutions is to allow companies to customize and optimize branch networks
to meet their unique business needs.
-- Cisco announced that it enhanced its Mobility Healthcare portfolio
with a set of integrated solutions designed to rapidly improve staff
productivity and patient care efficacy for healthcare organizations around
the globe. These integrated solutions combine Cisco's Unified Wireless
Network with new Cisco Compatible Extensions and technology partner
offerings in the areas of Mobile Care and Location-Aware services, as well
as with Cisco's Secure Wireless foundation, to address the concerns of
healthcare professionals.
-- Cisco announced the development of the Cisco Academy of Digital
Signage, a new qualification program for media professionals looking to
create trusted, optimized content for digital signage.
-- Cisco announced Apple Mac support across its WebEx® suite of
business process collaboration applications, specifically WebEx Meeting
Center, WebEx WebOffice, WebEx Event Center, WebEx Training Center, WebEx
Sales Center and WebEx Support Center, which now offer cross-platform
support for Mac OS X Leopard and Safari 3.
-- Linksys® introduced the Linksys by Cisco Wireless-G IP iPhone
(WIP310), the latest product in the Linksys IP phone family offering voice
over IP (VoIP) connectivity via Wi-Fi Internet access.Major Customer Announcements
-- Videotron became the first cable operator in North America to roll out
services based on Cisco Wideband, which uses channel bonding as defined by
the CableLabs® DOCSIS® 3.0 specification.
-- AT&T announced plans to become the first service provider to deliver a
global, fully managed Cisco TelePresence solution, called AT&T Telepresence
Solution, that allows companies to connect to their customers, suppliers
and partners worldwide.
-- Tata Communications, a leading Asia-based service provider, launched
its global TelePresence network service, as the first Asian service
provider to achieve Cisco Certified TelePresence Connection status enabling
delivery of the Cisco TelePresence solution.
-- Xanadoo Company, a U.S. wireless broadband service provider, is using
Cisco's IP Next-Generation Network (IP NGN) infrastructure to launch one of
the first commercial North American mobile WiMAX (Worldwide
Interoperability for Microwave Access) broadband wireless networks.
-- The Colin Powell Youth Leadership Center has deployed Cisco Unified
Communications to help staff become increasingly mobile so that they can
collaborate from any workspace, and to help students gain exposure to
technology to help them gain a competitive advantage as they graduate and
move into the workforce.
-- Esurance, a direct-to-consumer personal auto insurance company, has
deployed security technology as part of a comprehensive Cisco network that
is helping secure and support a number of corporate initiatives, such as
data protection, compliance, and innovative online services.
-- Bell Canada and Cisco announced they are working together to
accelerate a number of strategic initiatives designed to develop and
deliver a range of IP-based managed services to Canadian businesses,
including unified communications, voice, wireless, IP contact center and
security.
-- St. Helens & Knowsley Hospitals NHS Trust of the United Kingdom has
been able to offer faster treatment, reduced waiting times and better use
of NHS resources to their patients in parts of Liverpool and Merseyside
after the deployment of a Community of Interest Network (COIN) based on
Cisco technology.
-- SWIPE (Hong Kong) Ltd. has deployed a Cisco Unified Communications
system to replace its traditional private automatic branch exchange
telecommunications systems, providing a transparent connection between its
employees, offices and customers.
-- Westcon Group, Inc., the leading specialty distributor in networking,
convergence, security and mobility, extended its distribution agreement
with Cisco into the Brazilian market. Westcon Brazil is now offering
channel partners a full line of Cisco enterprise and small and medium-sized
business (SMB) solutions.Key Milestones
-- Cisco announced that it achieved a major milestone in the adoption of
Cisco TelePresence with more than 500 units ordered since the solution's
introduction in October 2006.
-- Cisco announced that it has shipped its 4-millionth Cisco Integrated
Services Router, an achievement that was celebrated at the Cisco Partner
Summit when John Chambers presented Coca-Cola Enterprises Chief Information
Officer Esat Sezer with an award for deploying this milestone router.Editor's Note:
-- Q3 FY 2008 conference call to discuss Cisco's results along with its
business outlook to be held at 1:30 p.m. Pacific Time, Tuesday, May 6,
2008. 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,
May 6, 2008 to 4:30 p.m. Pacific Time, May 13, 2008 at 866-357-4205 (United
States) or 203-369-0122 (international). The replay is also available from
May 6, 2008 through July 18, 2008 on the Cisco Investor Relations Website
at http://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, May 6, 2008.
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 at http://www.cisco.com/go/investors.
-- A Q&A with Cisco's CEO and CFO about Q3 FY 2008 results will be
available at http://newsroom.cisco.com.About Cisco Cisco (NasdaqGS:CSCO - News) is the worldwide leader in networking that transforms how people connect, communicate and collaborate. Information about Cisco can be found at http://www.cisco.com. For ongoing news, visit http://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 our vision of the network, our entry into new and adjacent markets, strengthening or expanding our positions in large, established markets, and the power of our business model) 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, our customer markets and various geographic regions; global economic conditions and uncertainties in the geopolitical environment; overall information technology spending; the growth 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 our product and service markets; 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 lean manufacturing model; product defects and returns; litigation involving patents, intellectual property, antitrust, shareholder and other matters, and governmental investigations; natural catastrophic events; a pandemic or epidemic; our ability to achieve 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; risks related to the global nature of our operations, including our operations in emerging markets; 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, as each may be amended from time to time. Cisco's results of operations for the three and nine months ended April 26, 2008 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. 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 to the Securities and Exchange Commission. Copyright ©2008 Cisco Systems, Inc. All rights reserved. Cisco, the Cisco logo, Cisco Nexus, Cisco TelePresence, Cisco Systems, Linksys and WebEx are registered trademarks or trademarks of Cisco Systems, Inc. and/or its affiliates in the United States and certain other countries. CableLabs and DOCSIS are registered trademarks of Cable Television Laboratories, Inc. 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.
CONSOLIDATED STATEMENTS OF OPERATIONS
(In millions, except per-share amounts)
(Unaudited)
Three Months Ended Nine Months Ended
----------------------- -----------------------
April 26, April 28, April 26, April 28,
2008 2007 2008 2007
----------- ----------- ----------- -----------
NET SALES:
Product $ 8,199 $ 7,481 $ 24,459 $ 21,520
Service 1,592 1,385 4,717 3,969
----------- ----------- ----------- -----------
Total net sales 9,791 8,866 29,176 25,489
----------- ----------- ----------- -----------
COST OF SALES:
Product 2,865 2,685 8,570 7,728
Service 621 534 1,788 1,493
----------- ----------- ----------- -----------
Total cost of sales 3,486 3,219 10,358 9,221
----------- ----------- ----------- -----------
GROSS MARGIN 6,305 5,647 18,818 16,268
OPERATING EXPENSES:
Research and development 1,439 1,144 3,847 3,321
Sales and marketing 2,129 1,830 6,216 5,242
General and administrative 479 378 1,489 1,082
Amortization of purchased
intangible assets 117 97 350 298
In-process research and
development -- 1 3 7
----------- ----------- ----------- -----------
Total operating expenses 4,164 3,450 11,905 9,950
----------- ----------- ----------- -----------
OPERATING INCOME 2,141 2,197 6,913 6,318
Interest income, net 201 189 636 518
Other income (loss), net (33) 33 20 94
----------- ----------- ----------- -----------
Interest and other income
(loss), net 168 222 656 612
----------- ----------- ----------- -----------
INCOME BEFORE PROVISION FOR
INCOME TAXES 2,309 2,419 7,569 6,930
Provision for income taxes 536 545 1,531 1,527
----------- ----------- ----------- -----------
NET INCOME $ 1,773 $ 1,874 $ 6,038 $ 5,403
----------- ----------- ----------- -----------
Net income per share:
Basic $ 0.30 $ 0.31 $ 1.00 $ 0.89
----------- ----------- ----------- -----------
Diluted $ 0.29 $ 0.30 $ 0.97 $ 0.86
----------- ----------- ----------- -----------
Shares used in per-share
calculation:
Basic 5,942 6,034 6,014 6,052
----------- ----------- ----------- -----------
Diluted 6,069 6,244 6,202 6,255
----------- ----------- ----------- -----------
RECONCILIATION OF GAAP TO NON-GAAP NET INCOME
(In millions, except per-share amounts)
Three Months Ended Nine Months Ended
----------------------- -----------------------
April 26, April 28, April 26, April 28,
2008 2007 2008 2007
---------- ---------- ---------- ----------
GAAP net income $ 1,773 $ 1,874 $ 6,038 $ 5,403
Employee share-based
compensation expense 268 237 767 709
Payroll tax on stock
option exercises 1 9 20 26
Compensation expense
related to acquisitions
and investments (1) 286 16 359 64
In-process research and
development -- 1 3 7
Amortization of
purchased intangible
assets 174 133 529 406
---------- ---------- ---------- ----------
Total adjustments to
GAAP income before
provision for income
taxes 729 396 1,678 1,212
---------- ---------- ---------- ----------
Income tax effect (193) (159) (526) (449)
Effect of retroactive
tax legislation (2) -- -- -- (60)
---------- ---------- ---------- ----------
Total adjustments to
GAAP provision for
income taxes (193) (159) (526) (509)
---------- ---------- ---------- ----------
Non-GAAP net income $ 2,309 $ 2,111 $ 7,190 $ 6,106
---------- ---------- ---------- ----------
Diluted net income per
share:
GAAP $ 0.29 $ 0.30 $ 0.97 $ 0.86
---------- ---------- ---------- ----------
Non-GAAP $ 0.38 $ 0.34 $ 1.16 $ 0.98
---------- ---------- ---------- ----------
Shares used in diluted net
income per share
calculation:
GAAP 6,069 6,244 6,202 6,255
---------- ---------- ---------- ----------
Non-GAAP 6,052 6,233 6,192 6,241
---------- ---------- ---------- ----------
(1) Compensation expense related to acquisitions and investments for the
third quarter and first nine months of fiscal 2008 included an
acquisition-related charge of $246 million related to the purchase of
the remaining minority interest in Nuova Systems, Inc.
(2) In the second quarter of fiscal 2007, the Tax Relief and Health Care
Act of 2006 reinstated the U.S. federal research and development
(R&D) tax credit, retroactive to January 1, 2006. GAAP net income for
the first nine months of fiscal 2007 included a $120 million tax
benefit relating to the reinstatement of the U.S. federal R&D tax
credit, including $60 million related to fiscal 2006 R&D expenses.
Non-GAAP net income for the first nine months of fiscal 2007 excluded
the $60 million tax benefit related to fiscal 2006 R&D expenses.
Additional reconciliations between GAAP and non-GAAP financial measures
are provided in the tables that follow on page 11.
CONSOLIDATED BALANCE SHEETS
(In millions)
(Unaudited)
April 26, July 28,
2008 2007
---------- ----------
ASSETS
Current assets:
Cash and cash equivalents $ 6,154 $ 3,728
Investments 18,279 18,538
Accounts receivable, net of allowance for doubtful
accounts of $183 at April 26, 2008 and $166 at
July 28, 2007 4,183 3,989
Inventories 1,279 1,322
Deferred tax assets 2,078 1,953
Prepaid expenses and other current assets 2,172 2,044
---------- ----------
Total current assets 34,145 31,574
Property and equipment, net 4,045 3,893
Goodwill 12,419 12,121
Purchased intangible assets, net 2,181 2,540
Other assets 4,333 3,212
---------- ----------
TOTAL ASSETS $ 57,123 $ 53,340
---------- ----------
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Current portion of long-term debt $ 500 $ --
Accounts payable 808 786
Income taxes payable 83 1,740
Accrued compensation 2,320 2,019
Deferred revenue 6,103 5,391
Other current liabilities 3,545 3,422
---------- ----------
Total current liabilities 13,359 13,358
Long-term debt 6,415 6,408
Income taxes payable 1,015 --
Deferred revenue 2,487 1,646
Other long-term liabilities 646 438
---------- ----------
Total liabilities 23,922 21,850
---------- ----------
Minority interest 63 10
Shareholders’ equity 33,138 31,480
---------- ----------
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY $ 57,123 $ 53,340
---------- ----------
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In millions)
(Unaudited)
Nine Months Ended
--------------------
April 26, April 28,
2008 2007
--------- ---------
Cash flows from operating activities:
Net income $ 6,038 $ 5,403
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 1,314 1,039
Employee share-based compensation expense 767 709
Share-based compensation expense related to
acquisitions and investments 67 27
Provision for doubtful accounts 34 6
Deferred income taxes (876) (302)
Excess tax benefits from share-based compensation (375) (648)
In-process research and development 3 7
Net gains and impairment charges on investments (109) (154)
Change in operating assets and liabilities, net of
effects of acquisitions:
Accounts receivable (219) 60
Inventories 54 82
Lease receivables, net (320) (131)
Accounts payable 12 (17)
Income taxes payable and receivable 405 535
Accrued compensation 301 275
Deferred revenue 1,553 690
Other assets (357) (355)
Other liabilities 268 140
--------- ---------
Net cash provided by operating activities 8,560 7,366
--------- ---------
Cash flows from investing activities:
Purchases of investments (14,093) (15,342)
Proceeds from sales and maturities of investments 14,761 13,438
Acquisition of property and equipment (908) (912)
Acquisition of businesses, net of cash and cash
equivalents acquired (385) (387)
Change in investments in privately held companies (63) (81)
Other 6 (87)
--------- ---------
Net cash used in investing activities (682) (3,371)
--------- ---------
Cash flows from financing activities:
Issuance of common stock 2,501 3,719
Repurchase of common stock (8,982) (6,281)
Proceeds from the termination of interest rate
swaps 432 --
Excess tax benefits from share-based compensation 375 648
Other 222 79
--------- ---------
Net cash used in financing activities (5,452) (1,835)
--------- ---------
Net increase in cash and cash equivalents 2,426 2,160
Cash and cash equivalents, beginning of period 3,728 3,297
--------- ---------
Cash and cash equivalents, end of period $ 6,154 $ 5,457
--------- ---------
ADDITIONAL FINANCIAL INFORMATION
(In millions)
(Unaudited)
April 26, July 28,
2008 2007
--------- ---------
CASH AND CASH EQUIVALENTS AND INVESTMENTS
Cash and cash equivalents $ 6,154 $ 3,728
Fixed income securities 16,841 17,297
Publicly traded equity securities 1,438 1,241
--------- ---------
Total $ 24,433 $ 22,266
--------- ---------
INVENTORIES
Raw materials $ 122 $ 173
Work in process 48 45
Finished goods:
Distributor inventory and deferred cost of sales 486 544
Manufactured finished goods 384 314
--------- ---------
Total finished goods 870 858
Service-related spares 198 211
Demonstration systems 41 35
--------- ---------
Total $ 1,279 $ 1,322
--------- ---------
PROPERTY AND EQUIPMENT, NET
Land, buildings, and leasehold improvements $ 4,282 $ 4,022
Computer equipment and related software 1,742 1,605
Production, engineering, and other equipment 4,714 4,264
Operating lease assets 200 181
Furniture and fixtures 425 394
--------- ---------
11,363 10,466
Less accumulated depreciation and amortization (7,318) (6,573)
--------- ---------
Total $ 4,045 $ 3,893
--------- ---------
OTHER ASSETS
Deferred tax assets $ 1,851 $ 1,060
Investments in privately held companies 678 643
Income tax receivable -- 277
Lease receivables, net (1) 754 539
Financed service contracts (2) 563 377
Other 487 316
--------- ---------
Total $ 4,333 $ 3,212
--------- ---------
DEFERRED REVENUE
Service $ 5,698 $ 4,840
Product
Unrecognized revenue on product shipments and other
deferred revenue 2,224 1,769
Cash receipts related to unrecognized revenue from
two-tier distributors 668 428
--------- ---------
Total product deferred revenue 2,892 2,197
--------- ---------
Total $ 8,590 $ 7,037
--------- ---------
Reported as:
Current $ 6,103 $ 5,391
Noncurrent 2,487 1,646
--------- ---------
Total $ 8,590 $ 7,037
--------- ---------
Note:
(1) The current portion of lease receivables, net, which was $494 million
and $389 million as of April 26, 2008 and July 28, 2007, respectively,
is recorded in prepaid expenses and other current assets.
(2) The current portion of financed service contracts, which was $652
million and $476 million as of April 26, 2008 and July 28, 2007,
respectively, is recorded in prepaid expenses and other current assets.
These financed service contracts primarily relate to technical support
services and the 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.
SUMMARY OF EMPLOYEE SHARE-BASED COMPENSATION EXPENSE
(In millions)
Three Months Nine Months
Ended Ended
-------------------------------
April April April April
26, 28, 26, 28,
2008 2007 2008 2007
------- ------- ------- -------
Cost of sales -- product $ 10 $ 10 $ 30 $ 33
Cost of sales -- service 27 25 80 79
------- ------- ------- -------
Employee share-based compensation expense
in cost of sales 37 35 110 112
------- ------- ------- -------
Research and development 78 75 224 223
Sales and marketing 114 101 324 294
General and administrative 39 26 109 80
------- ------- ------- -------
Employee share-based compensation expense
in operating expenses 231 202 657 597
------- ------- ------- -------
Total employee share-based compensation
expense $ 268 $ 237 $ 767 $ 709
------- ------- ------- -------
The income tax benefit for employee share-based compensation expense was
$87 million and $247 million for the third quarter and first nine months of
fiscal 2008, respectively, and $102 million and $265 million for the third
quarter and first nine months of fiscal 2007, respectively.
RECONCILIATION OF SHARES USED IN THE GAAP AND NON-GAAP
DILUTED NET INCOME PER SHARE CALCULATION
(In millions)
Three Months Ended Nine Months Ended
-------------------- --------------------
April 26, April 28, April 26, April 28,
2008 2007 2008 2007
--------- --------- --------- ---------
Shares used in diluted net
income per share
calculation -- GAAP 6,069 6,244 6,202 6,255
Effect of SFAS 123(R) (17) (11) (10) (14)
--------- --------- --------- ---------
Shares used in diluted net
income per share
calculation -- Non-GAAP 6,052 6,233 6,192 6,241
--------- --------- --------- ---------
RECONCILIATION OF GAAP TO NON-GAAP COST OF SALES
USED IN INVENTORY TURNS
(In millions)
Three Months Ended
--------------------------------------------------
April 26, January 26, July 28, April 28,
2008 2008 2007 2007
----------- ----------- ----------- -----------
GAAP cost of sales $ 3,486 $ 3,491 $ 3,365 $ 3,219
Employee share-based
compensation expense (37) (41) (31) (35)
Amortization of
purchased intangible
assets (57) (61) (48) (36)
----------- ----------- ----------- -----------
Non-GAAP cost of sales $ 3,392 $ 3,389 $ 3,286 $ 3,148
----------- ----------- ----------- -----------Contact: Press Contact:
John Noh
Cisco
(408) 853-8445
jnoh@cisco.com
Investor Relations Contact:
Laura Graves
Cisco
(408) 526-6521
lagraves@cisco.com
Source: Cisco
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