Cisco Reports First Quarter Earnings
Announces $10 Billion Increase in Stock Repurchase Program
- Press Release
- Source: Cisco
- On 4:05 pm EST, Wednesday November 4, 2009
SAN JOSE, CA--(Marketwire - 11/04/09) - Cisco (NASDAQ:CSCO - News)
- Q1 Net Sales: $9.0 billion (decrease of 13% year over
year)
- Q1 Net Income: $1.8 billion GAAP; $2.1 billion
non-GAAP
- Q1 Earnings per Share: $0.30 GAAP (decrease of 19% year over
year); $0.36 non-GAAP (decrease of 14% year over year)
- Total Cash, Cash Equivalents and Investments: $35.4 billion
Cisco (NASDAQ:CSCO - News), the worldwide leader in networking that transforms how people connect, communicate and collaborate, today reported its first quarter results for the period ended October 24, 2009. Cisco reported first quarter net sales of $9.0 billion, net income on a generally accepted accounting principles (GAAP) basis of $1.8 billion or $0.30 per share, and non-GAAP net income of $2.1 billion or $0.36 per share.
Commenting on the quarter, Chairman and Chief Executive Officer John Chambers noted, "Building off what we saw as a clear tipping point in Q4, our Q1 results continued to reflect strong sequential growth trends that meet or exceed expectations during normal economic times. We view the improving economic outlook, combined with solid execution on our growth strategy, as creating unparalleled opportunity to drive more value into the core of the network. Simply said, we believe that key market transitions across collaboration, virtualization and video will drive productivity and growth in network loads for the next decade, and are evolving even faster than expected."
Chambers continued, "Our ability to launch four proposed acquisitions, the ecosystem-shifting coalition with EMC/VMware, and five new products and industry solutions into the Cisco pipeline in the past few months alone underscore this momentum. Our build -- buy -- partner innovation engine is clearly running on all cylinders, while our operational machine is pulling costs out of the business even as we scale new models for growth. Execution and results over time will demonstrate the long-term impact of this vision and strategy -- but a new model of productivity based on collaboration is clearly emerging and we believe this may be the most profound opportunity for businesses in our 25 years as a company."
�
GAAP Results
------------
Q1 2010 Q1 2009 Vs. Q1 2009
-------------- -------------- -------------
Net Sales $ 9.0 billion $ 10.3 billion -12.7%
-------------- -------------- -------------
Net Income $ 1.8 billion $ 2.2 billion -18.8%
-------------- -------------- -------------
Earnings per Share $ 0.30 $ 0.37 -18.9%
-------------- -------------- -------------
Non-GAAP Results
----------------
Q1 2010 Q1 2009 Vs. Q1 2009
-------------- -------------- -------------
Net Income $ 2.1 billion $ 2.5 billion -15.3%
-------------- -------------- -------------
Earnings per Share $ 0.36 $ 0.42 -14.3%
-------------- -------------- -------------
In October 2009, the Financial Accounting Standards Board issued new accounting guidance related to revenue recognition. Cisco elected to adopt this accounting guidance early on a prospective basis for transactions originating or materially modified in the first quarter of fiscal 2010. Net sales for the first quarter of fiscal 2010 were approximately $50 million higher than the net sales that would have been recorded under the previous accounting guidance.
A reconciliation between net income on a GAAP basis and non-GAAP net income is provided in the table on page 6.
Cisco will discuss first 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://www.cisco.com/go/investors. A Q&A session with Cisco's Chairman and CEO John Chambers and CFO Frank Calderoni will also be available at http://newsroom.cisco.com. To view a video of Cisco's CFO discussing first quarter results, visit http://blogs.cisco.com.
Stock Repurchase Program Expanded
Cisco also announced that on November 4, 2009 its board of directors authorized up to $10 billion in additional repurchases of its common stock. Cisco's board had previously authorized up to $62 billion in stock repurchases. There is no fixed termination date for the repurchase program. The remaining authorized amount for stock repurchases under this program, including the additional authorization, is approximately $13.1 billion.
Other Financial Highlights
- Cash flows from operations were $1.5 billion for the first quarter of
fiscal 2010, compared with $2.7 billion for the first quarter of fiscal
2009, and compared with $2.0 billion for the fourth quarter of fiscal 2009.
- Cash and cash equivalents and investments were $35.4 billion at the end
of the first quarter of fiscal 2010, compared with $35.0 billion at the end
of fiscal 2009.
- During the first quarter of fiscal 2010, Cisco repurchased 76 million
shares of common stock under the stock repurchase program at an average
price of $22.99 per share for an aggregate purchase price of $1.8 billion.
As of October 24, 2009, Cisco had repurchased and retired 2.9 billion
shares of Cisco common stock at an average price of $20.47 per share for an
aggregate purchase price of approximately $58.9 billion since the inception
of the stock repurchase program.
- Days sales outstanding in accounts receivable (DSO) at the end of the
first quarter of fiscal 2010 were 32 days, compared with 34 days at the end
of the fourth quarter of fiscal 2009, and compared with 29 days at the end
of the first quarter of fiscal 2009.
- Inventory turns on a GAAP basis were 11.6 in the first quarter of
fiscal 2010, compared with 11.7 in the fourth quarter of fiscal 2009, and
compared with 11.9 in the first quarter of fiscal 2009. Non-GAAP inventory
turns were 11.3 in the first quarter of fiscal 2010, compared with 11.3 in
the fourth quarter of fiscal 2009, and compared with 11.6 in the first
quarter of fiscal 2009.
"Cisco's strong first quarter results represent two quarters of sequentially positive revenue growth and demonstrate our ability to execute on our innovation and operational excellence priorities," said Frank Calderoni, Cisco chief financial officer. "We delivered earnings per share on a GAAP basis of $0.30 and non-GAAP of $0.36, which were above our expectations, driven by balance across a broad portfolio and intense focus on execution. Our results validate our strategy and portfolio approach of balancing disciplined expense management with strategic investment, to drive continued profitability through varying economic environments."
Cisco Innovation
- Cisco expanded its Cisco TelePresence(TM) portfolio with the
single-screen, single-camera Cisco TelePresence System 1100 for
multipurpose rooms. Service providers AT&T, BT, Orange, NTT, Tata
Communications, Telefonica, Telstra and Telmex have announced commercial
intercompany Cisco TelePresence service offerings.
- Cisco announced its Borderless Networks Architecture strategy, together
with announcing its new Integrated Services Router Generation 2 (ISR G2),
which helps businesses and service providers simplify and scale delivery of
on-demand, networked business services such as video and collaborative
applications.
- Cisco launched Cisco IronPort(TM) Web Usage Controls, a product
designed to provide real-time content categorization to accurately identify
up to 90 percent of "dark web" sites in the most egregious content
categories.
- Cisco and salesforce.com announced the Customer Interaction Cloud, a
combined solution that uses a connector to integrate salesforce.com's
Service Cloud 2 with Cisco� Unified Contact Center's functionality,
empowering small and medium-sized companies to run their customer service
function completely in the cloud.
- Cisco announced the creation of a Smart Grid Ecosystem, with more than 25 initial partners, to facilitate the adoption of Internet Protocol (IP)-based communications standards for smart grids designed to benefit the energy industry as well as business and residential customers. Cisco also created a Smart Grid Technical Advisory Board made up of leading innovative utility and energy companies from around the world.
Select Customer Announcements
- Tutor Perini Corporation, a leading civil and building construction
company, is consolidating five data centers into one new facility which
utilizes the Cisco Unified Computing System(TM) as its computing platform.
- The Miami Dolphins National Football League franchise announced the
deployment of Cisco TelePresence and Cisco StadiumVision(TM) systems to
help fans "Live the Game" at Miami's Land Shark Stadium.
- Kenya's Ministry of Information and Communications Technology launched
the first network-enabled Pilot Pasha Centre in Kangundo with the aim of
enhancing the livelihoods of local citizens and encouraging new
micro-enterprises.
- Cisco and Gale International expanded their relationship on Smart +
Connected Communities under development in Korea's Songdo International
Business District, with the aim of creating a repeatable model for smart,
sustainable cities of the future.
- German electricity company Yello Strom launched an energy-saving smart grid pilot to create an intelligent energy system that communicates over an IP network.
Select Acquisitions and Investments
- Cisco announced a definitive agreement to acquire Starent Networks,
Corp., a leading supplier of IP-based mobile infrastructure solutions
targeting mobile and converged carriers.
- Cisco announced a definitive agreement for Cisco to launch a recommended voluntary cash offer to acquire TANDBERG ASA, a global leader in video communications.
Editor's Note:
- Q1 FY 2010 conference call to discuss Cisco's results along with its
business outlook will be held at 1:30 p.m. Pacific Time, Wednesday,
November 4, 2009. Conference call number is 888-848-6507 (United States) or
212-519-0847 (international).
- Conference call replay will be available from 4:00 p.m. Pacific Time,
November 4, 2009 to 4:00 p.m. Pacific Time, November 11, 2009 at
866-357-4205 (United States) or 203-369-0122 (international). The replay
also will be available via webcast from November 4, 2009 through January
15, 2010 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, November 4,
2009. 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 session with Cisco's Chairman and CEO John Chambers and CFO Frank
Calderoni about Q1 FY 2010 results will be available at
http://newsroom.cisco.com.
- To view a video of Cisco's CFO discussing Q1 FY 2010 results, visit Cisco's blog site, The Platform, at http://blogs.cisco.com.
About Cisco
Cisco (NASDAQ: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 the improving economic outlook and related opportunity, market transitions across collaboration, virtualization and video driving productivity and growth in network loads for the next decade, and the emergence of a new model of productivity based on collaboration and related business opportunity) 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 return on our investments in certain market adjacencies and geographical locations during the current economic downturn; 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, including the data center; dependence on the introduction and market acceptance of new product offerings and standards; rapid technological and market change; manufacturing and sourcing risks; 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, and to manage expenses during the current economic downturn; risks related to the global nature of our operations, including our operations in emerging markets; currency fluctuations and other international factors, including relating to transactions to hedge foreign currency consideration for acquisitions; changes in provision for income taxes, including changes in tax laws and regulations or adverse outcomes resulting from examinations of our income tax returns; potential volatility in operating results; and other factors listed in Cisco's most recent report on Form 10-K. 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 report on Form 10-K filed on September 11, 2009, as it may be amended from time to time. Cisco's results of operations for the three months ended October 24, 2009 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, when applicable, share-based compensation expense, amortization of acquisition-related intangible assets, other acquisition-related costs, enhanced early retirement benefits, the income tax effects of the foregoing, significant effects of retroactive tax legislation, and significant transfer pricing adjustments related to share-based compensation. Cisco's management also uses the foregoing non-GAAP measures, in addition to the corresponding GAAP measures, in reviewing the financial results of Cisco. In prior periods, Cisco has excluded other items that it no longer excludes for purposes of its non-GAAP financial measures; for example, effective in the third quarter of fiscal 2009, Cisco no longer excludes payroll tax on stock option exercises and effective beginning in fiscal 2010, Cisco no longer excludes in-process research and development as it is no longer expensed as a result of new accounting guidance. From time to time in the future, there may be other items that Cisco may exclude for purposes of its internal budgeting process and in reviewing its financial results.
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 �2009 Cisco Systems, Inc. All rights reserved. Cisco, the Cisco logo, Cisco Systems, Cisco IronPort, Cisco StadiumVision, Cisco TelePresence, Cisco Unified Computing System, and IronPort 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
--------------------------
October 24, October 25,
2009 2008
------------ ------------
NET SALES:
Product $ 7,200 $ 8,635
Service 1,821 1,696
------------ ------------
Total net sales 9,021 10,331
------------ ------------
COST OF SALES:
Product 2,486 2,981
Service 647 669
------------ ------------
Total cost of sales 3,133 3,650
------------ ------------
GROSS MARGIN 5,888 6,681
OPERATING EXPENSES:
Research and development 1,224 1,406
Sales and marketing 1,995 2,283
General and administrative 440 395
Amortization of purchased intangible assets 105 112
In-process research and development -- 3
------------ ------------
Total operating expenses 3,764 4,199
------------ ------------
OPERATING INCOME 2,124 2,482
Interest income, net 54 195
Other income (loss), net 61 (72)
------------ ------------
Interest and other income, net 115 123
------------ ------------
INCOME BEFORE PROVISION FOR INCOME TAXES 2,239 2,605
Provision for income taxes 452 404
------------ ------------
NET INCOME $ 1,787 $ 2,201
------------ ------------
Net income per share:
Basic $ 0.31 $ 0.37
------------ ------------
Diluted $ 0.30 $ 0.37
------------ ------------
Shares used in per-share calculation:
Basic 5,767 5,881
------------ ------------
Diluted 5,871 5,972
------------ ------------
RECONCILIATION OF GAAP TO NON-GAAP NET INCOME
(In millions, except per-share amounts)
Three Months Ended
--------------------------
October 24, October 25,
2009 2008
------------ ------------
GAAP net income $ 1,787 $ 2,201
Share-based compensation expense(1) 321 304
Payroll tax on stock option exercises(2) -- 1
In-process research and development(3) -- 3
Amortization of acquisition-related
intangible assets 149 166
Other acquisition-related costs(4) 4 122
------------ ------------
Total adjustments to GAAP income before
provision for income taxes 474 596
------------ ------------
Income tax effect (145) (194)
Effect of retroactive tax legislation(5) -- (106)
------------ ------------
Total adjustments to GAAP provision
for income taxes (145) (300)
Non-GAAP net income $ 2,116 $ 2,497
------------ ------------
Diluted net income per share:
GAAP $ 0.30 $ 0.37
------------ ------------
Non-GAAP $ 0.36 $ 0.42
------------ ------------
Shares used in diluted net income
per share calculation:
GAAP 5,871 5,972
------------ ------------
Non-GAAP 5,880 5,979
------------ ------------
(1) Share-based compensation expense for the first quarter of fiscal 2010
and fiscal 2009 includes $28 million and $22 million, respectively, of
share-based compensation related to acquisitions.
(2) Effective in the third quarter of fiscal 2009, Cisco no longer excludes
payroll tax on stock option exercises for purposes of its non-GAAP
financial measures.
(3) Effective beginning in fiscal 2010, Cisco no longer excludes in-process
research and development for purposes of its non-GAAP financial
measures as it is no longer expensed as a result of new accounting
guidance.
(4) Other acquisition-related costs for the first quarter of fiscal 2010
includes a $42 million mark-to-market impact related to transactions to
hedge a portion of the foreign currency consideration of an announced,
pending business combination.
(5) In the first quarter of fiscal 2009, the Tax Extenders and Alternative
Minimum Tax Relief Act of 2008 reinstated the U.S. federal R&D tax
credit, retroactive to January 1, 2008. GAAP net income for the first
quarter 2009 included a $106 million tax benefit related to fiscal 2008
R&D expenses. Non-GAAP net income for the first quarter of fiscal 2009
excluded the $106 million tax benefit related to fiscal 2008 R&D
expenses.
Certain reclassifications have been made to prior period amounts to conform to the current period's presentation.
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)
October 24, July 25,
2009 2009
------------ ------------
ASSETS
Current assets:
Cash and cash equivalents $ 4,774 $ 5,718
Investments 30,591 29,283
Accounts receivable, net of allowance
for doubtful accounts of $216 at
October 24, 2009 and July 25, 2009 3,159 3,177
Inventories 1,089 1,074
Deferred tax assets 2,205 2,320
Other current assets 2,879 2,605
------------ ------------
Total current assets 44,697 44,177
Property and equipment, net 3,976 4,043
Goodwill 12,942 12,925
Purchased intangible assets, net 1,552 1,702
Other assets 5,513 5,281
------------ ------------
TOTAL ASSETS $ 68,680 $ 68,128
------------ ------------
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 729 $ 675
Income taxes payable 97 166
Accrued compensation 2,263 2,535
Deferred revenue 6,397 6,438
Other current liabilities 3,676 3,841
------------ ------------
Total current liabilities 13,162 13,655
Long-term debt 10,273 10,295
Income taxes payable 1,755 2,007
Deferred revenue 2,874 2,955
Other long-term liabilities 590 539
------------ ------------
Total liabilities 28,654 29,451
Shareholders' equity 40,026 38,677
------------ ------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 68,680 $ 68,128
------------ ------------
Certain reclassifications have been made to prior period amounts to conform to the current period's presentation.
�
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In millions)
(Unaudited)
Three Months Ended
--------------------------
October 24, October 25,
2009 2008
------------ ------------
Cash flows from operating activities:
Net income $ 1,787 $ 2,201
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation, amortization, and other
noncash items 429 393
Share-based compensation expense 321 304
Provision for doubtful accounts 4 17
Deferred income taxes 93 26
Excess tax benefits from share-based
compensation (21) (17)
In-process research and development -- 3
Net (gains) losses on investments (47) 70
Change in operating assets and liabilities,
net of effects of acquisitions:
Accounts receivable 38 453
Inventories (8) 8
Lease receivables, net (100) (65)
Accounts payable 52 (35)
Income taxes payable (291) (83)
Accrued compensation (313) (197)
Deferred revenue (160) (2)
Other assets (186) (405)
Other liabilities (110) 47
------------ ------------
Net cash provided by operating activities 1,488 2,718
------------ ------------
Cash flows from investing activities:
Purchases of investments (9,537) (12,461)
Proceeds from sales of investments 2,769 6,833
Proceeds from maturities of investments 5,664 3,509
Acquisition of property and equipment (160) (361)
Acquisition of businesses, net of cash
and cash equivalents acquired -- (288)
Change in investments in privately held
companies (32) (11)
Other 43 (60)
------------ ------------
Net cash used in investing activities (1,253) (2,839)
------------ ------------
Cash flows from financing activities:
Issuance of common stock 634 224
Repurchase of common stock (1,869) (1,002)
Excess tax benefits from share-based
compensation 21 17
Other 35 (112)
------------ ------------
Net cash used in financing activities (1,179) (873)
------------ ------------
Net decrease in cash and cash equivalents (944) (994)
Cash and cash equivalents, beginning of period 5,718 5,191
------------ ------------
Cash and cash equivalents, end of period $ 4,774 $ 4,197
------------ ------------
Certain reclassifications have been made to prior period amounts to conform to the current period's presentation.
�
ADDITIONAL FINANCIAL INFORMATION
(In millions)
(Unaudited)
October 24, July 25,
2009 2009
------------ ------------
CASH AND CASH EQUIVALENTS AND INVESTMENTS
Cash and cash equivalents $ 4,774 $ 5,718
Fixed income securities 29,548 28,355
Publicly traded equity securities 1,043 928
------------ ------------
Total $ 35,365 $ 35,001
------------ ------------
INVENTORIES
Raw materials $ 167 $ 165
Work in process 33 33
Finished goods:
Distributor inventory and deferred
cost of sales 403 382
Manufactured finished goods 307 310
------------ ------------
Total finished goods 710 692
Service-related spares 147 151
Demonstration systems 32 33
------------ ------------
Total $ 1,089 $ 1,074
------------ ------------
PROPERTY AND EQUIPMENT, NET
Land, buildings, building improvements,
and leasehold improvements $ 4,501 $ 4,618
Computer equipment and related software 1,569 1,823
Production, engineering, and other
equipment 5,273 5,075
Operating lease assets 242 227
Furniture and fixtures 471 465
------------ ------------
12,056 12,208
Less accumulated depreciation and
amortization (8,080) (8,165)
------------ ------------
Total $ 3,976 $ 4,043
------------ ------------
OTHER ASSETS
Deferred tax assets $ 2,112 $ 2,122
Investments in privately held companies 728 709
Lease receivables, net(1) 1,043 966
Financed service contracts(2) 648 676
Loan receivables(3) 712 537
Other 270 271
------------ ------------
Total $ 5,513 $ 5,281
------------ ------------
DEFERRED REVENUE
Service $ 6,194 $ 6,496
Product
Unrecognized revenue on product shipments
and other deferred revenue 2,551 2,490
Cash receipts related to unrecognized
revenue from two-tier distributors 526 407
------------ ------------
Total product deferred revenue 3,077 2,897
------------ ------------
Total $ 9,271 $ 9,393
------------ ------------
Reported as:
Current $ 6,397 $ 6,438
Noncurrent 2,874 2,955
------------ ------------
Total $ 9,271 $ 9,393
------------ ------------
Note:
(1) The current portion of lease receivables, net, which was $689 million
and $626 million as of October 24, 2009 and July 25, 2009,
respectively, is recorded in other current assets.
(2) The current portion of financed service contracts, which was
$1.0 billion and $940 million as of October 24, 2009 and July 25, 2009,
respectively, is recorded in other current assets. These financed
service contracts primarily relate to technical support services, and
the associated 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.
(3) The current portion of loan receivables, net, which was $328 million
and $236 million as of October 24, 2009 and July 25, 2009,
respectively, is recorded in other current assets.
SUMMARY OF SHARE-BASED COMPENSATION EXPENSE
(In millions)
Three Months Ended
--------------------------
October 24, October 25,
2009 2008
------------ ------------
Cost of sales -- product $ 12 $ 11
Cost of sales -- service 33 31
------------ ------------
Share-based compensation expense
in cost of sales 45 42
------------ ------------
Research and development 97 94
Sales and marketing 113 113
General and administrative 66 55
------------ ------------
Share-based compensation expense
in operating expenses 276 262
------------ ------------
Total share-based compensation expense $ 321 $ 304
------------ ------------
The income tax benefit for share-based compensation expense was $85 million and $82 million for the first quarter of fiscal 2010 and fiscal 2009, respectively.
�
RECONCILIATION OF SHARES USED IN THE GAAP AND NON-GAAP
DILUTED NET INCOME PER SHARE CALCULATION
(In millions)
Three Months Ended
--------------------------
October 24, October 25,
2009 2008
------------ ------------
Shares used in diluted net income per share
calculation -- GAAP 5,871 5,972
Effect of share-based compensation expense 9 7
------------ ------------
Shares used in diluted net income per share
calculation -- Non-GAAP 5,880 5,979
------------ ------------
RECONCILIATION OF GAAP TO NON-GAAP COST OF SALES
USED IN INVENTORY TURNS
(In millions)
Three Months Ended
----------------------------------
October 24, July 25, October 25,
2009 2009 2008
---------- ---------- ----------
GAAP cost of sales $ 3,133 $ 3,074 $ 3,650
Share-based compensation expense (45) (47) (42)
Amortization of acquisition-related
intangible assets (44) (39) (54)
Enhanced early retirement benefits -- (28) --
---------- ---------- ----------
Non-GAAP cost of sales $ 3,044 $ 2,960 $ 3,554
---------- ---------- ----------
Youtube Video Available: http://www2.marketwire.com/mw/frame_mw?attachid=1106890
Contact:
Press Contact:
Robyn Jenkins-Blum
Cisco
+1 (408) 853-9848
rojenkin@cisco.com
Investor Relations Contact:
Laura Graves
Cisco
+1 (408) 526-6521
lagraves@cisco.com
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