SAN JOSE, CA -- 08/07/07 --
Cisco (NASDAQ: CSCO)
-- 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)
Cisco® (NASDAQ: CSCO), 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 at
http://investor.cisco.com.
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.
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 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, 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 at http://www.cisco.com/go/investors.
-- A Q&A with Cisco's CEO and CFO about Q4 and FY 2007 results will be
available at http://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 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 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 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.
CONSOLIDATED STATEMENTS OF OPERATIONS
(In millions, except per-share amounts)
(Unaudited)
Three Months Ended Twelve Months Ended
--------------------- ---------------------
July 28, July 29, July 28, July 29,
2007 2006 2007 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
---------- ---------- ---------- ----------
RECONCILIATION OF GAAP TO NON-GAAP NET INCOME
(In millions, except per-share amounts)
Three Months Ended Twelve Months Ended
--------------------- ---------------------
July 28, July 29, July 28, July 29,
2007 2006 2007 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.
CONSOLIDATED BALANCE SHEETS
(In millions)
(Unaudited)
July 28, July 29,
2007 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 July 29, 2006 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
------------ ------------
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In millions)
(Unaudited)
Twelve Months Ended
----------------------------
July 28, July 29,
2007 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.
ADDITIONAL FINANCIAL INFORMATION
(In millions)
(Unaudited)
July 28, July 29,
2007 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.
SUMMARY OF EMPLOYEE SHARE-BASED COMPENSATION EXPENSE
(In millions)
Three Months Ended Twelve Months Ended
------------------ ------------------
July 28, July 29, July 28, July 29,
2007 2006 2007 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, July 29, July 28, July 29,
2007 2006 2007 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, April 28, July 29,
2007 2007 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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