Cisco Reports Third Quarter Earnings

Marketwired

SAN JOSE, CA--(Marketwire -05/09/12)- Cisco (CSCO)

  • Q3 Net Sales: $11.6 billion (increase of 7% year over year)

  • Q3 Net Income: $2.2 billion GAAP (increase of 20% year over year); $2.6 billion non-GAAP (increase of 11% year over year)

  • Q3 Earnings per Share: $0.40 GAAP (increase of 21% year over year); $0.48 non-GAAP (increase of 14% year over year)

Cisco, the worldwide leader in networking that transforms how people connect, communicate and collaborate, today reported its third quarter results for the period ended April 28, 2012. Cisco reported third quarter net sales of $11.6 billion, net income on a generally accepted accounting principles (GAAP) basis of $2.2 billion, or $0.40 per share, and non-GAAP net income of $2.6 billion, or $0.48 per share.

"We delivered solid results this quarter with record revenue and non-GAAP earnings per share," said John Chambers, Cisco chairman and CEO. "We are successfully executing against our long-term strategic plan of growing profit faster than revenue, and in a cautious IT spending environment, we continue to outperform our competitors."

Chambers continued, "In a world of clouds, video and mobile device proliferations, the role of the intelligent network has never been greater and our value proposition with our customers is the strongest it has ever been. Our vision and strategy is focused on the right market transitions, and I want to thank our shareholders, employees, customers and partners for their ongoing commitment to Cisco."

 



GAAP Results


Q3 2012 Q3 2011 Vs. Q3 2011
---------------- ---------------- ---------------
Net Sales $ 11.6 billion $ 10.9 billion 6.6%
Net Income $ 2.2 billion $ 1.8 billion 19.8%
Earnings per Share $ 0.40 $ 0.33 21.2%

Non-GAAP Results


Q3 2012 Q3 2011 Vs. Q3 2011
--------------- --------------- ---------------
Net Income $ 2.6 billion $ 2.3 billion 10.9%
Earnings per Share $ 0.48 $ 0.42 14.3%



Net sales for the first nine months of fiscal 2012 were $34.4 billion, compared with $32.0 billion for the first nine months of fiscal 2011. Net income for the first nine months of fiscal 2012, on a GAAP basis, was $6.1 billion, or $1.13 per share, compared with $5.3 billion, or $0.94 per share, for the first nine months of fiscal 2011. Non-GAAP net income for the first nine months of fiscal 2012 was $7.5 billion, or $1.38 per share, compared with $6.8 billion, or $1.22 per share, for the first nine months of fiscal 2011.

A reconciliation between net income on a GAAP basis and non-GAAP net income is provided in the table on page 5.

Cisco will discuss third quarter results and business outlook in 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 2012, compared with $3.1 billion for the second quarter of fiscal 2012, and compared with $3.0 billion for the third quarter of fiscal 2011.

  • Cash and cash equivalents and investments totaled $48.4 billion at the end of the third quarter of fiscal 2012, compared with $46.7 billion at the end of the second quarter of fiscal 2012, and compared with $44.6 billion at the end of fiscal 2011.

  • During the third quarter of fiscal 2012, Cisco repurchased 27 million shares of common stock under its stock repurchase program at an average price of $20.28 per share for an aggregate purchase price of $550 million. As of April 28, 2012, Cisco had repurchased and retired 3.6 billion shares of Cisco common stock at an average price of $20.47 per share for an aggregate purchase price of approximately $74.3 billion since the inception of the stock repurchase program. The remaining authorized amount for stock repurchases under this program is approximately $7.7 billion with no termination date. During the third quarter of fiscal 2012, Cisco also paid a cash dividend of $0.08, or $432 million.

  • Days sales outstanding in accounts receivable (DSO) at the end of the third quarter of fiscal 2012 were 31 days, compared with 31 days at the end of the second quarter of fiscal 2012, and compared with 37 days at the end of the third quarter of fiscal 2011.

  • Inventory turns on a GAAP basis were 11.5 in the third quarter of fiscal 2012, compared with 11.1 in each of the second quarter of fiscal 2012 and the third quarter of fiscal 2011. Non-GAAP inventory turns were 11.1 in the third quarter of fiscal 2012, compared with 10.8 in the second quarter of fiscal 2012, and compared with 10.3 in the third quarter of fiscal 2011.

Select Global Business Highlights

  • Cisco announced its intent to acquire NDS Group Ltd., a provider of video software and content security solutions. The acquisition is expected to help Cisco's ability to transform how service providers and media companies deliver next-generation video experiences to subscribers.
  • Cisco completed the acquisition of privately held Lightwire, Inc. Lightwire develops advanced optical interconnect technology for high-speed networking applications. The acquisition is expected to allow Cisco to deliver cost-effective, high-speed networks with the next generation of optical connectivity.
  • Cisco acquired privately held ClearAccess, Inc. The acquisition enhances Cisco's network management capabilities and enables service providers to better deliver, manage and monetize their services.
  • Cisco announced strategic investments in Brazil to foster innovation, transformation and socio-economic development.

Cisco Innovation

  • Cisco announced it has updated its cloud-ready switching portfolio to enhance network virtualization with simplicity and scale.
  • Cisco announced a successful demonstration and validation of its coherent 100G dense wavelength division multiplexing solution, exceeding 3,000 km in reach without the need for regeneration. This distance is 50 percent farther than any non-Raman alternative solution on the market today.
  • Cisco introduced the industry's first carrier-grade, end-to-end Wi-Fi infrastructure to deliver next-generation hotspots. The technology is designed to deliver seamless mobile experiences and enables operators to support a continuing expansion of mobile traffic, devices and new services.
  • Cisco announced innovations across the Cisco Unified Computing System® (UCS) that quadruple memory capacity, double switching capacity and simplify management for large-scale Cisco UCS® deployments.
  • Cisco introduced new Linksys Smart Wi-Fi Routers with app-enabled capabilities for new home experiences. The three new routers offer wireless performance and support for Cisco Connect® Cloud.
  • Cisco announced it expanded its small business product portfolio with new wireless access points, routers, switches, unified communications and partner-managed service offerings.
  • Cisco and NetApp announced FlexPod was the first data center infrastructure solution to be validated by Microsoft for the updated Microsoft Private Cloud Fast Track 2.0 program.

Select Customer Announcements

  • TELUS announced it has deployed key components of the Cisco Videoscape™ platform to extend its Optik TV services to mobile devices.
  • Cisco announced it has been chosen by Fastway Transmissions Private Ltd. to facilitate cable digitization deployment across its customer base in India. Fastway is expected to deploy more than two million next-generation digital set-top boxes from Cisco during the next two years.
  • Magyar Telekom rolled out 4G LTE services with Cisco mobile internet solutions. Magyar Telekom is Hungary's largest telecommunications company.
  • IPLAN chose Cisco technology for its newest data center which is expected to be launched in June 2012. IPLAN is a leader in telecommunications and cloud computing services for small and medium-sized businesses in Argentina.
  • Videotron launched its enhanced illico digital TV service with Cisco's HD set-top box platform. Videotron is a leading Canadian telecommunications operator providing communications and broadband entertainment services.
  • Peru Credit Bank implemented the Cisco Unified Communications system to increase business flexibility and reduce costs.
  • Kabel Deutschland (KD) selected Cisco CRS-3 routers for its Internet Protocol Next-Generation Network core to meet demand for video and broadband services. KD is Germany's largest cable operator.
  • Netelligent announced that it will collaborate with Desktone, Inc. to offer cloud-hosted virtual desktops. These cloud-based solutions will include Cisco UCS, the Desktone desktops-as-a-service (DaaS) platform and NetApp storage systems.

Editor's Note:

  • Q3 FY 2012 conference call to discuss Cisco's results along with its business outlook will be held at 1:30 p.m. Pacific Time, Wednesday, May 9, 2012. 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 9, 2012 to 4:30 p.m. Pacific Time, May 16, 2012 at 866-493-8039 (United States) or 203-369-1749 (international). The replay also will be available via webcast from May 9, 2012 through July 20, 2012 on the Cisco Investor Relations website at http://investor.cisco.com.
  • 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 9, 2012. 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://investor.cisco.com.

About Cisco

Cisco (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, please go to 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 statements regarding our ability to execute our long-term strategic plan, our competitive performance, the role of the intelligent network, our value proposition with customers and our strategy regarding 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, 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 priorities, including our foundational priorities, and in certain geographical locations; 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, engineering, service, marketing and manufacturing activities; our ability to recruit and retain key personnel; our ability to manage financial risk, and to manage expenses during economic downturns; risks related to the global nature of our operations, including our operations in emerging markets; currency fluctuations and other international factors; 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 reports on Form 10-K and 10-Q filed on September 14, 2011 and February 21, 2012, respectively. 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 10-Q, as each may be amended from time to time. Cisco's results of operations for the three and nine months ended April 28, 2012 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 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 and non-GAAP net income per share data 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, significant asset impairments and restructurings, the income tax effects of the foregoing, and significant tax matters. 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. From time to time in the future, there may be other items, such as significant gains or losses from contingencies 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 © 2012 Cisco and/or its affiliates. All rights reserved. Cisco, the Cisco logo, Cisco Systems, Cisco Connect, Cisco UCS, Cisco Unified Computing System, and Cisco Videoscape are trademarks or registered trademarks of Cisco and/or its affiliates in the U.S. and other countries. A listing of Cisco's trademarks can be found at www.cisco.com/go/trademarks. Third party 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 28, April 30, April 28, April 30,
2012 2011 2012 2011
--------- --------- --------- ---------
NET SALES:
Product $ 9,106 $ 8,669 $ 27,176 $ 25,605
Service 2,482 2,197 7,195 6,418
--------- --------- --------- ---------

Total net sales 11,588 10,866 34,371 32,023
--------- --------- --------- ---------

COST OF SALES:
Product 3,563 3,437 10,776 10,068
Service 856 770 2,471 2,280
--------- --------- --------- ---------

Total cost of sales 4,419 4,207 13,247 12,348
--------- --------- --------- ---------

GROSS MARGIN 7,169 6,659 21,124 19,675

OPERATING EXPENSES:
Research and development 1,358 1,430 4,072 4,339
Sales and marketing 2,383 2,446 7,230 7,292
General and administrative 562 466 1,611 1,376
Amortization of purchased
intangible assets 96 103 292 419
Restructuring and other
charges 20 31 225 31
--------- --------- --------- ---------

Total operating expenses 4,419 4,476 13,430 13,457
--------- --------- --------- ---------


OPERATING INCOME 2,750 2,183 7,694 6,218
Interest income 161 161 483 477
Interest expense (151) (153) (449) (480)
Other income, net 19 12 45 143
--------- --------- --------- ---------

Interest and other income,
net 29 20 79 140
--------- --------- --------- ---------

INCOME BEFORE PROVISION FOR
INCOME TAXES 2,779 2,203 7,773 6,358
Provision for income taxes 614 396 1,649 1,100
--------- --------- --------- ---------

NET INCOME $ 2,165 $ 1,807 $ 6,124 $ 5,258
--------- --------- --------- ---------


Net income per share:
Basic $ 0.40 $ 0.33 $ 1.14 $ 0.95
--------- --------- --------- ---------

Diluted $ 0.40 $ 0.33 $ 1.13 $ 0.94
--------- --------- --------- ---------


Shares used in per-share
calculation:
Basic 5,388 5,508 5,383 5,545
--------- --------- --------- ---------

Diluted 5,456 5,537 5,418 5,596
--------- --------- --------- ---------

Cash dividends declared per
common share $ 0.08 $ 0.06 $ 0.20 $ 0.06
--------- --------- --------- ---------



RECONCILIATION OF GAAP TO NON-GAAP NET INCOME
(In millions, except per-share amounts)


Three Months Ended Nine Months Ended
-------------------- --------------------
April 28, April 30, April 28, April 30,
2012 2011 2012 2011
--------- --------- --------- ---------

GAAP net income $ 2,165 $ 1,807 $ 6,124 $ 5,258

Adjustments to cost of sales:
Share-based compensation
expense 51 60 155 182
Amortization of acquisition-
related intangible
assets(1) 99 102 276 367
Significant asset
impairments and
restructurings (5) 120 (26) 120
--------- --------- --------- ---------

Total adjustments to GAAP cost
of sales 145 282 405 669
--------- --------- --------- ---------

Adjustments to operating
expenses:
Share-based compensation
expense 286 340 879 1,055
Amortization of acquisition-
related intangible
assets(1) 96 103 292 419
Other acquisition-related
costs 14 14 29 123
Significant asset
impairments and
restructurings(3) 20 31 225 31
--------- --------- --------- ---------

Total adjustments to GAAP
operating expenses 416 488 1,425 1,628


Total adjustments to GAAP
income before provision for
income taxes 561 770 1,830 2,297
--------- --------- --------- ---------

Income tax effect (121) (228) (464) (652)

Significant tax matters(2) -- -- -- (65)
--------- --------- --------- ---------

Total adjustments to GAAP
provision for income taxes (121) (228) (464) (717)
--------- --------- --------- ---------

Non-GAAP net income $ 2,605 $ 2,349 $ 7,490 $ 6,838
--------- --------- --------- ---------

Diluted net income per share:
GAAP $ 0.40 $ 0.33 $ 1.13 $ 0.94
--------- --------- --------- ---------

Non-GAAP $ 0.48 $ 0.42 $ 1.38 $ 1.22
--------- --------- --------- ---------

(1) Amortization of acquisition-related intangible assets for the first nine
months of fiscal 2011 includes impairment charges of approximately $155
million, with $63 million recorded in product cost of sales and $92
million in operating expenses.

(2) In the second quarter of fiscal 2011, the Tax Relief, Unemployment
Insurance Reauthorization, and Job Creation Act of 2010 reinstated the
U.S. federal R&D tax credit, retroactive to January 1, 2010. GAAP net
income for the first nine months of fiscal 2011 included a $65 million
tax benefit related to fiscal 2010 R&D expenses. Non-GAAP net income for
the first nine months of fiscal 2011 excluded the $65 million tax
benefit related to fiscal 2010 R&D expenses.

(3) Restructuring and other charges for the first nine months of fiscal 2012
includes a $2 million credit for share based compensation related to
forfeitures of unvested awards.    

A reconciliation between GAAP to non-GAAP inventory turns is provided on page 9.

 


CONSOLIDATED BALANCE SHEETS
(In millions)
(Unaudited)

April 28, July 30,
2012 2011
----------- -----------
ASSETS
Current assets:
Cash and cash equivalents $ 6,461 $ 7,662
Investments 41,951 36,923
Accounts receivable, net of allowance for doubtful
accounts of $216 at April 28, 2012 and $204 at
July 30, 2011 3,980 4,698
Inventories 1,497 1,486
Financing receivables, net 3,709 3,111
Deferred tax assets 2,104 2,410
Other current assets 1,510 941
----------- -----------
Total current assets 61,212 57,231
Property and equipment, net 3,634 3,916
Financing receivables, net 3,518 3,488
Goodwill 17,006 16,818
Purchased intangible assets, net 2,134 2,541
Other assets 3,650 3,101
----------- -----------
TOTAL ASSETS $ 91,154 $ 87,095
----------- -----------

LIABILITIES AND EQUITY
Current liabilities:
Short-term debt $ 83 $ 588
Accounts payable 903 876
Income taxes payable 453 120
Accrued compensation 2,626 3,163
Deferred revenue 8,568 8,025
Other current liabilities 4,491 4,734
----------- -----------
Total current liabilities 17,124 17,506
Long-term debt 16,286 16,234
Income taxes payable 1,698 1,191
Deferred revenue 4,080 4,182
Other long-term liabilities 588 723
----------- -----------
Total liabilities 39,776 39,836
Total equity 51,378 47,259
----------- -----------
TOTAL LIABILITIES AND EQUITY $ 91,154 $ 87,095
----------- -----------



CONSOLIDATED STATEMENTS OF CASH FLOWS
(In millions)
(Unaudited)


Nine Months Ended
----------------------
April 28, April 30,
2012 2011
---------- ----------
Cash flows from operating activities:
Net income $ 6,124 $ 5,258
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation, amortization, and other 1,816 1,813
Share-based compensation expense 1,032 1,237
Provision for doubtful accounts 20 (1)
Deferred income taxes 75 (37)
Excess tax benefits from share-based
compensation (57) (65)
Net gains on investments (38) (185)
Change in operating assets and liabilities, net
of effects of acquisitions and divestitures:
Accounts receivable 660 603
Inventories (113) (105)
Financing receivables, net (737) (1,089)
Other assets (495) 190
Accounts payable 34 (103)
Income taxes, net 151 (192)
Accrued compensation (451) (265)
Deferred revenue 482 537
Other liabilities (100) (341)
---------- ----------

Net cash provided by operating activities 8,403 7,255
---------- ----------

Cash flows from investing activities:
Purchases of investments (32,690) (30,303)
Proceeds from sales of investments 19,591 14,942
Proceeds from maturities of investments 7,930 14,134
Acquisition of property and equipment (830) (930)
Acquisition of businesses, net of cash and cash
equivalents acquired (333) (266)
Purchases of investments in privately held
companies (299) (179)
Return of investments in privately held companies 212 93
Other 175 48
---------- ----------

Net cash used in investing activities (6,244) (2,461)
---------- ----------

Cash flows from financing activities:
Issuances of common stock 1,115 1,516
Repurchases of common stock (2,868) (5,564)
Short-term borrowings maturities less than 90
days, net (505) 392
Issuances of debt, maturities greater than 90 days -- 4,109
Repayments of debt, maturities greater than 90
days -- (3,000)
Excess tax benefits from share-based compensation 57 65
Dividends paid (1,076) (329)
Other (83) 71
---------- ----------

Net cash used in financing activities (3,360) (2,740)
---------- ----------

Net (decrease) increase in cash and cash equivalents (1,201) 2,054
Cash and cash equivalents, beginning of period 7,662 4,581
---------- ----------

Cash and cash equivalents, end of period $ 6,461 $ 6,635
---------- ----------


Certain reclassifications have been made to prior period amounts to conform to the current period's presentation.

 


ADDITIONAL FINANCIAL INFORMATION
(In millions)
(Unaudited)


April 28, July 30,
2012 2011
----------- -----------
CASH AND CASH EQUIVALENTS AND INVESTMENTS
Cash and cash equivalents $ 6,461 $ 7,662
Fixed income securities 40,437 35,562
Publicly traded equity securities 1,514 1,361
----------- -----------
Total $ 48,412 $ 44,585
----------- -----------

INVENTORIES
Raw materials $ 114 $ 219
Work in process 37 52
Finished goods:
Distributor inventory and deferred cost of sales 629 631
Manufactured finished goods 437 331
----------- -----------
Total finished goods 1,066 962
Service-related spares 202 182
Demonstration systems 78 71
----------- -----------
Total $ 1,497 $ 1,486
----------- -----------

PROPERTY AND EQUIPMENT, NET

Land, buildings, and building & leasehold
improvements $ 4,547 $ 4,760
Computer equipment and related software 1,454 1,429
Production, engineering, and other equipment 5,286 5,093
Operating lease assets 291 293
Furniture and fixtures 489 491
----------- -----------
12,067 12,066
Less accumulated depreciation and amortization (8,433) (8,150)
----------- -----------
Total $ 3,634 $ 3,916
----------- -----------

OTHER ASSETS
Deferred tax assets $ 2,063 $ 1,864
Investments in privately held companies 841 796
Other 746 441
----------- -----------
Total $ 3,650 $ 3,101
----------- -----------

DEFERRED REVENUE
Service $ 8,778 $ 8,521
Product:
Unrecognized revenue on product shipments and
other deferred revenue 2,943 3,003
Cash receipts related to unrecognized revenue
from two-tier distributors 927 683
----------- -----------
Total product deferred revenue 3,870 3,686
----------- -----------
Total $ 12,648 $ 12,207
----------- -----------

Reported as:
Current $ 8,568 $ 8,025
Noncurrent 4,080 4,182
----------- -----------
Total $ 12,648 $ 12,207
----------- -----------



SUMMARY OF SHARE-BASED COMPENSATION EXPENSE
(In millions)

Three Months Ended Nine Months Ended
------------------- --------------------
April 28, April 30, April 28, April 30,
2012 2011 2012 2011
--------- --------- --------- ---------
Cost of sales -- product $ 12 $ 16 $ 39 $ 47
Cost of sales -- service 39 44 116 135
--------- --------- --------- ---------

Share-based compensation expense in
cost of sales 51 60 155 182
--------- --------- --------- ---------

Research and development 97 120 297 373
Sales and marketing 138 160 429 491
General and administrative 51 60 153 191
Restructuring and other charges -- -- (2) --
--------- --------- --------- ---------

Share-based compensation expense in
operating expenses 286 340 877 1,055
--------- --------- --------- ---------

Total share-based compensation
expense $ 337 $ 400 $ 1,032 $ 1,237
--------- --------- --------- ---------


The income tax benefit for share-based compensation expense was $88 million and $271 million for the three and nine months ended April 28, 2012, respectively, and $107 million and $335 million for the three and nine months ended April 30, 2011, respectively.

 


RECONCILIATION OF GAAP TO NON-GAAP
INVENTORY TURNS
(In millions, except annualized inventory turns)

Three Months Ended
---------------------------------
April 28, January 28, April 30,
2012 2012 2011
========= =========== =========

Annualized inventory turns- GAAP 11.5 11.1 11.1
Cost of sales adjustments (0.4) (0.3) (0.8)
--------- ----------- ---------
Annualized inventory turns- non-GAAP 11.1 10.8 10.3

GAAP cost of sales $ 4,419 $ 4,462 $ 4,207
Cost of sales adjustments:
Share-based compensation expense (51) (54) (60)
Amortization of acquisition-related
intangible assets (99) (90) (102)
Significant asset impairments and
restructurings 5 16 (120)

--------- ----------- ---------
Non-GAAP cost of sales $ 4,274 $ 4,334 $ 3,925
--------- ----------- ---------
Contact:
Press
Robyn Jenkins-Blum
Cisco
+1 (408) 853-9848
Email Contact
Investor Relations
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Cisco
+1 (408) 424-1335
Email Contact

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