EX-99.1 2 d870540dex991.htm EX-99.1 EX-99.1

Exhibit 99.1

 

LOGO

 

Press Contact:        Investor Relations Contact:
Robyn Jenkins-Blum        Marilyn Mora
Cisco        Cisco
1 (408) 853-9848        1 (408) 527-7452
rojenkin@cisco.com        marilmor@cisco.com

CISCO REPORTS SECOND QUARTER EARNINGS

Strong Momentum and Results; Dividend Increase to $0.21

 

    Q2 Revenue: $11.9 billion (increase of 7% year over year)

 

    Q2 Earnings per Share: $0.46 GAAP; $0.53 non-GAAP

SAN JOSE, Calif. — February 11, 2015 — Cisco, the worldwide leader in networking that transforms how people connect, communicate and collaborate, today reported its second quarter results for the period ended January 24, 2015. Cisco reported second quarter revenue of $11.9 billion, net income on a generally accepted accounting principles (GAAP) basis of $2.4 billion or $0.46 per share, and non-GAAP net income of $2.7 billion or $0.53 per share.

“Our Q2 results reflect continued progress as we transform Cisco to become the #1 IT company. In the quarter we grew revenues by 7%, with strong EPS growth, and saw the best balance of growth across all our geographies, products, and segments. We delivered this strong performance despite a volatile economic environment,” stated Cisco chairman and CEO John Chambers.

“Our strong momentum is the direct result of how well we have managed our company transformation over the last three plus years and our leadership position in the key technology transitions of cloud, mobility, big data, security, collaboration, and the Internet of Everything. Every nation, every company, everything is becoming digitized and the network is at the center of this transformation.”

GAAP Results

 

     Q2 2015      Q2 2014      Vs. Q2 2014  

Revenue

   $ 11.9 billion       $ 11.2 billion         7.0

Net Income

   $ 2.4 billion       $ 1.4 billion         67.7

Earnings per Share

   $ 0.46       $ 0.27         70.4

Non-GAAP Results

 

     Q2 2015      Q2 2014      Vs. Q2 2014  

Net Income

   $   2.7 billion       $   2.5 billion         8.9

Earnings per Share

   $ 0.53       $ 0.47         12.8

Revenue for the first six months of fiscal 2015 was $24.2 billion, compared with $23.2 billion for the first six months of fiscal 2014. Net income for the first six months of fiscal 2015, on a GAAP basis, was $4.2 billion or $0.82 per share, compared with $3.4 billion or $0.64 per share for the first six months of fiscal 2014. Non-GAAP net income for the first six months of fiscal 2015 was $5.5 billion or $1.08 per share, compared with $5.4 billion or $1.00 per share for the first six months of fiscal 2014.

A reconciliation between net income on a GAAP basis and non-GAAP net income is provided in the table following the Consolidated Statements of Operations.

Cisco will discuss second quarter results and business outlook on a conference call and webcast at 1:30 p.m. Pacific Time today. Call information and related charts are available at http://investor.cisco.com.

Cisco Increases Quarterly Cash Dividend

Cisco is also announcing that earlier today its Board of Directors declared a quarterly dividend of $0.21 per common share, a two-cent increase over the previous quarter’s dividend, to be paid on April 22, 2015 to all shareholders of record as of the close of business on April 2, 2015. Future dividends will be subject to Board approval.

“This was a good quarter to start as CFO,” stated Kelly Kramer, EVP and CFO. “The momentum in the business feels good and we are excited about the opportunities ahead. Our revenue growth and increased EPS allows us to continue to give back to shareholders as we returned $2.2 billion to shareholders in Q2 and remain committed to returning at least 50% of our free cash flow annually. We are also pleased to increase our dividend to $0.21 this quarter, an 11% increase.”

 

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Other Financial Highlights

 

    Cash flows from operations were $2.9 billion for the second quarter of fiscal 2015, compared with $2.5 billion for the first quarter of fiscal 2015, and compared with $2.9 billion for the second quarter of fiscal 2014.

 

    Cash and cash equivalents and investments were $53.0 billion at the end of the second quarter of fiscal 2015, compared with $52.1 billion at the end of the first quarter of fiscal 2015, and compared with $52.1 billion at the end of the fourth quarter of fiscal 2014.

 

    During the second quarter of fiscal 2015, Cisco paid a cash dividend of $0.19 per common share, or $974 million.

 

    Cisco repurchased approximately 44 million shares of common stock under the stock repurchase program at an average price of $27.63 per share for an aggregate purchase price of $1.2 billion during the second quarter of fiscal 2015. As of January 24, 2015, Cisco had repurchased and retired 4.4 billion shares of Cisco common stock at an average price of $20.73 per share for an aggregate purchase price of approximately $90.7 billion since the inception of the stock repurchase program. The remaining authorized amount for stock repurchases under this program is approximately $6.3 billion with no termination date.

Internet of Everything

 

    The Metropolitan Regional Government of Santiago signed a collaboration agreement with Cisco Chile with the aim to turn Santiago into a “Smart City.”

 

    Cisco announced the opening of a new Internet of Everything (IoE) Innovation Center in Tokyo.

Fast IT

 

    Cisco released the Cisco 2015 Annual Security Report that revealed a widening gap between perception and reality of cybersecurity readiness.

 

    The Cisco® Connected Analytics for the IoE was unveiled to help customers access, analyze and act on data — from the cloud to the data center to the network’s edge.

 

    Cisco and IBM announced the VersaStack solution that combines the innovation of the Cisco UCS® Integrated Infrastructure with the efficiency of the IBM Storwize storage system.

 

    The fourth annual Cisco Global Cloud Index (2013-2018) projected that over the next five years data center traffic will nearly triple, with cloud representing 76 percent of total data center traffic.

 

    Cisco Meraki® solutions will be used to offer Internet connectivity under Mexico Conectado, a program developed by the Mexican federal government that offers broadband connectivity to the population in public areas.

 

    Cisco announced that four new cloud providers from across Latin America have joined the Intercloud partner ecosystem.

 

    Cisco announced that beIN SPORTS selected the Cisco VideoscapeTM TV platform to deliver advanced sports video experiences across more than 20 countries in the Middle East and North Africa.

Innovation

 

    Cisco completed the acquisition of Neohapsis to help deliver comprehensive services to help customers build the security capabilities required to remain secure and competitive in today’s markets.

 

    Cisco and Charter Communications entered a strategic agreement to supply key Cisco products in support of Charter’s next-generation video solution.

 

    In December 2014, Cisco celebrated 30 years of innovation.

 

    Cisco unveiled Project Squared, a business collaboration app that combines chat, audio, video, multi-party meetings and content sharing in a single experience that supports the demanding collaboration needs of modern teams.

 

    Cisco introduced the TelePresenceTM IX5000 series, a world-class quality video collaboration experience for 6-to-18 people.

 

    Cisco was named one of the 50 most innovative companies by Boston Consulting Group and jumped to 14th from 46th last year.

Editor’s Notes:

 

    Q2 fiscal year 2015 conference call to discuss Cisco’s results along with its business outlook will be held on Wednesday, February 11, 2015 at 1:30 p.m. Pacific Time. Conference call number is 1-888-848-6507 (United States) or 1-212-519-0847 (international).

 

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    Conference call replay will be available from 4:00 p.m. Pacific Time, February 11, 2015 to 4:00 p.m. Pacific Time, on February 18, 2015 at 1-866-410-5841 (United States) or 1-203-369-0643 (international). The replay will also be available via webcast from February 11, 2015 through April 17, 2015 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, February 11, 2015. 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 the GAAP to non-GAAP reconciliation information, will be available on the Cisco Investor Relations website at http://investor.cisco.com.

About Cisco

Cisco (NASDAQ: CSCO) is the worldwide leader in IT that helps companies seize the opportunities of tomorrow by proving that amazing things can happen when you connect the previously unconnected. For ongoing news, please go to http://thenetwork.cisco.com.

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This release may be deemed to contain forward-looking statements, which are subject to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. These forward-looking statements include, among other things, statements regarding future events (such as our goal to become the #1 IT company; our leadership position in and ability to continue to grow in key technology transitions of cloud, mobility, big data, security, collaboration, and the Internet of Everything; the ability of our architectures and solutions to drive positive outcomes and enable productivity in our customers’ businesses; continued success of our transformation strategy and our focus on growing market share; and our ability to deliver value to shareholders through our capital allocation strategy and our continued investment in long-term growth opportunities) 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; our ability to achieve expected benefits of our partnerships; 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 Forms 10-Q and 10-K filed on November 20, 2014 and September 9, 2014, 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 Forms 10-Q and 10-K as each may be amended from time to time. Cisco’s results of operations for the three and six months ended January 24, 2015 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 effective tax rates, non-GAAP net income per share data, non-GAAP inventory turns and free cash flow.

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 effective tax rates, 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 periods presented. Cisco believes that the presentation of free cash flow, which it defines as the net cash provided by operating activities less cash used to

 

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acquire property and equipment, to be a liquidity measure that provides useful information to management and investors because of its intent to return a stated percentage of free cash flow to shareholders in the form of dividends and stock repurchases. Cisco further regards free cash flow as a useful measure because it reflects cash that can be used to, among other things, invest in its business, make strategic acquisitions, repurchase common stock, and pay dividends on its common stock, after deducting capital investments.

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, impact to cost of sales from purchase accounting adjustments to inventory, acquisition-related/divestiture costs (which includes a gain recognized in the second quarter of fiscal 2015 with respect to the reorganization and divestiture of a portion of Cisco’s investment in VCE), significant asset impairments and restructurings, significant litigation and other contingencies, 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 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 © 2015 Cisco and/or its affiliates. All rights reserved. Cisco, the Cisco logo, Cisco UCS, Meraki, TelePresence, and Videoscape are trademarks or registered trademarks of Cisco and/or its affiliates in the U.S. and other countries. To view a list of Cisco trademarks, go to: 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.

 

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CONSOLIDATED STATEMENTS OF OPERATIONS

(In millions, except per-share amounts)

(Unaudited)

 

     Three Months Ended     Six Months Ended  
     January 24,
2015
    January 25,
2014
    January 24,
2015
    January 25,
2014
 

REVENUE:

        

Product

   $ 9,078      $ 8,423      $ 18,513      $ 17,820   

Service

     2,858        2,732        5,668        5,420   
  

 

 

   

 

 

   

 

 

   

 

 

 

Total revenue

  11,936      11,155      24,181      23,240   
  

 

 

   

 

 

   

 

 

   

 

 

 

COST OF SALES:

Product

  3,806      4,323      7,725      8,070   

Service

  1,040      881      2,033      1,812   
  

 

 

   

 

 

   

 

 

   

 

 

 

Total cost of sales

  4,846      5,204      9,758      9,882   
  

 

 

   

 

 

   

 

 

   

 

 

 

GROSS MARGIN

  7,090      5,951      14,423      13,358   

OPERATING EXPENSES:

Research and development

  1,529      1,412      3,112      3,136   

Sales and marketing

  2,308      2,277      4,823      4,688   

General and administrative

  490      451      994      966   

Amortization of purchased intangible assets

  72      71      143      136   

Restructuring and other charges

  69      73      387      310   
  

 

 

   

 

 

   

 

 

   

 

 

 

Total operating expenses

  4,468      4,284      9,459      9,236   
  

 

 

   

 

 

   

 

 

   

 

 

 

OPERATING INCOME

  2,622      1,667      4,964      4,122   

Interest income

  189      169      368      338   

Interest expense

  (139   (136   (278   (276

Other income (loss), net

  201      55      179      111   
  

 

 

   

 

 

   

 

 

   

 

 

 

Interest and other income (loss), net

  251      88      269      173   
  

 

 

   

 

 

   

 

 

   

 

 

 

INCOME BEFORE PROVISION FOR INCOME TAXES

  2,873      1,755      5,233      4,295   

Provision for income taxes

  476      326      1,008      870   
  

 

 

   

 

 

   

 

 

   

 

 

 

NET INCOME

$ 2,397    $ 1,429    $ 4,225    $ 3,425   
  

 

 

   

 

 

   

 

 

   

 

 

 

Net income per share:

Basic

$ 0.47    $ 0.27    $ 0.83    $ 0.64   
  

 

 

   

 

 

   

 

 

   

 

 

 

Diluted

$ 0.46    $ 0.27    $ 0.82    $ 0.64   
  

 

 

   

 

 

   

 

 

   

 

 

 

Shares used in per-share calculation:

Basic

  5,117      5,294      5,115      5,336   
  

 

 

   

 

 

   

 

 

   

 

 

 

Diluted

  5,160      5,327      5,159      5,383   
  

 

 

   

 

 

   

 

 

   

 

 

 

Cash dividends declared per common share

$ 0.19    $ 0.17    $ 0.38    $ 0.34   
  

 

 

   

 

 

   

 

 

   

 

 

 

 

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RECONCILIATION OF GAAP TO NON-GAAP NET INCOME

(In millions, except per-share amounts)

 

     Three Months Ended     Six Months Ended  
     January 24,
2015
    January 25,
2014
    January 24,
2015
    January 25,
2014
 

GAAP net income

   $ 2,397      $ 1,429      $ 4,225      $ 3,425   

Adjustments to cost of sales:

        

Share-based compensation expense

     45        52        93        95   

Amortization of acquisition-related intangible assets

     233        182        414        349   

Supplier component remediation charge

     —          655        —          655   

Patent portfolio charge

     —          —          188        —     
  

 

 

   

 

 

   

 

 

   

 

 

 

Total adjustments to GAAP cost of sales

  278      889      695      1,099   
  

 

 

   

 

 

   

 

 

   

 

 

 

Adjustments to operating expenses:

Share-based compensation expense

  261      296      586      565   

Amortization of acquisition-related intangible assets

  72      71      143      136   

Acquisition-related/divestiture costs

  92      107      193      415   

Significant asset impairments and restructurings

  69      73      387      310   
  

 

 

   

 

 

   

 

 

   

 

 

 

Total adjustments to GAAP operating expenses

  494      547      1,309      1,426   
  

 

 

   

 

 

   

 

 

   

 

 

 

Adjustments to other income (loss), net:

Gain on VCE reorganization

  (126   —        (126   —     
  

 

 

   

 

 

   

 

 

   

 

 

 

Total adjustments to GAAP income before provision for income taxes

  646      1,436      1,878      2,525   
  

 

 

   

 

 

   

 

 

   

 

 

 

Income tax effect of non-GAAP adjustments

  (164   (275   (422   (493

Significant tax matters (1)

  (134   (69   (134   (69
  

 

 

   

 

 

   

 

 

   

 

 

 

Total adjustments to GAAP provision for income taxes

  (298   (344   (556   (562
  

 

 

   

 

 

   

 

 

   

 

 

 

Non-GAAP net income

$ 2,745    $ 2,521    $ 5,547    $ 5,388   
  

 

 

   

 

 

   

 

 

   

 

 

 

Diluted net income per share:

GAAP

$ 0.46    $ 0.27    $ 0.82    $ 0.64   
  

 

 

   

 

 

   

 

 

   

 

 

 

Non-GAAP

$ 0.53    $ 0.47    $ 1.08    $ 1.00   
  

 

 

   

 

 

   

 

 

   

 

 

 

 

(1) During the second quarter of fiscal 2015, Cisco recorded certain net tax benefits totaling $134 million related to prior year periods that were excluded from non-GAAP net income for the second quarter and first six months of fiscal 2015. These net tax benefits are comprised of the retroactive reinstatement of the U.S. federal R&D tax credit of $91 million related to fiscal 2014 and a net tax benefit of $43 million related to prior fiscal years.

RECONCILIATION OF GAAP TO NON-GAAP EFFECTIVE TAX RATE

 

     Three Months Ended     Six Months Ended  
     January 24,
2015
    January 25,
2014
    January 24,
2015
    January 25,
2014
 

GAAP effective tax rate

     16.6     18.6     19.3     20.3

Tax effect of non-GAAP adjustments to net income

     5.4     2.4     2.7     0.7
  

 

 

   

 

 

   

 

 

   

 

 

 

Non-GAAP effective tax rate

  22.0   21.0   22.0   21.0
  

 

 

   

 

 

   

 

 

   

 

 

 

 

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CONDENSED CONSOLIDATED BALANCE SHEETS

(In millions)

(Unaudited)

 

     January 24,
2015
     July 26,
2014
 

ASSETS

     

Current assets:

     

Cash and cash equivalents

   $ 4,797       $ 6,726   

Investments

     48,225         45,348   

Accounts receivable, net of allowance for doubtful accounts of $270 at January 24, 2015 and $265 at July 26, 2014

     4,541         5,157   

Inventories

     1,890         1,591   

Financing receivables, net

     4,210         4,153   

Deferred tax assets

     2,654         2,808   

Other current assets

     1,565         1,331   
  

 

 

    

 

 

 

Total current assets

  67,882      67,114   

Property and equipment, net

  3,212      3,252   

Financing receivables, net

  3,549      3,918   

Goodwill

  24,382      24,239   

Purchased intangible assets, net

  2,755      3,280   

Other assets

  3,142      3,331   
  

 

 

    

 

 

 

TOTAL ASSETS

$ 104,922    $ 105,134   
  

 

 

    

 

 

 

LIABILITIES AND EQUITY

Current liabilities:

Short-term debt

$ 855    $ 508   

Accounts payable

  988      1,032   

Income taxes payable

  —        159   

Accrued compensation

  2,694      3,181   

Deferred revenue

  9,369      9,478   

Other current liabilities

  6,128      5,451   
  

 

 

    

 

 

 

Total current liabilities

  20,034      19,809   

Long-term debt

  19,667      20,401   

Income taxes payable

  1,433      1,851   

Deferred revenue

  4,652      4,664   

Other long-term liabilities

  1,403      1,748   
  

 

 

    

 

 

 

Total liabilities

  47,189      48,473   

Total equity

  57,733      56,661   
  

 

 

    

 

 

 

TOTAL LIABILITIES AND EQUITY

$ 104,922    $ 105,134   
  

 

 

    

 

 

 

 

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CONSOLIDATED STATEMENTS OF CASH FLOWS

(In millions)

(Unaudited) 

 

     Six Months Ended  
     January 24,
2015
    January 25,
2014
 

Cash flows from operating activities:

    

Net income

   $ 4,225      $ 3,425   

Adjustments to reconcile net income to net cash provided by operating activities:

    

Depreciation, amortization, and other

     1,224        1,203   

Share-based compensation expense

     677        656   

Provision for receivables

     62        56   

Deferred income taxes

     385        (26

Excess tax benefits from share-based compensation

     (83     (73

(Gains) losses on investments and other, net

     (182     (163

Change in operating assets and liabilities, net of effects of acquisitions and divestitures:

    

Accounts receivable

     501        1,134   

Inventories

     (340     (77

Financing receivables

     74        245   

Other assets

     (218     179   

Accounts payable

     (32     (161

Income taxes, net

     (528     (444

Accrued compensation

     (390     (804

Deferred revenue

     26        (205

Other liabilities

     (27     577   
  

 

 

   

 

 

 

Net cash provided by operating activities

  5,374      5,522   
  

 

 

   

 

 

 

Cash flows from investing activities:

Purchases of investments

  (20,061   (15,874

Proceeds from sales of investments

  9,948      9,081   

Proceeds from maturities of investments

  7,212      7,988   

Acquisition of businesses, net of cash and cash equivalents acquired

  (217   (2,784

Purchases of investments in privately held companies

  (91   (263

Return of investments in privately held companies

  227      81   

Acquisition of property and equipment

  (550   (577

Proceeds from sales of property and equipment

  5      164   

Other

  (109   (6
  

 

 

   

 

 

 

Net cash used in investing activities

  (3,636   (2,190
  

 

 

   

 

 

 

Cash flows from financing activities:

Issuances of common stock

  1,162      837   

Repurchases of common stock - repurchase program

  (2,196   (5,680

Shares repurchased for tax withholdings on vesting of restricted stock units

  (369   (309

Short-term borrowings, original maturities less than 90 days, net

  (4   998   

Issuances of debt

  —        4   

Repayments of debt

  (506   (22

Excess tax benefits from share-based compensation

  83      73   

Dividends paid

  (1,947   (1,810

Other

  110      (9
  

 

 

   

 

 

 

Net cash used in financing activities

  (3,667   (5,918
  

 

 

   

 

 

 

Net decrease in cash and cash equivalents

  (1,929   (2,586

Cash and cash equivalents, beginning of period

  6,726      7,925   
  

 

 

   

 

 

 

Cash and cash equivalents, end of period

$ 4,797    $ 5,339   
  

 

 

   

 

 

 

Supplemental cash flow information:

Cash paid for interest

$ 383    $ 340   

Cash paid for income taxes, net

$ 1,152    $ 1,340   

 

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CASH AND CASH EQUIVALENTS AND INVESTMENTS

(In millions)

 

     January 24,
2015
     July 26,
2014
 

Cash and cash equivalents and investments:

     

Cash and cash equivalents

   $ 4,797       $ 6,726   

Fixed income securities

     46,377         43,396   

Publicly traded equity securities

     1,848         1,952   
  

 

 

    

 

 

 

Total

$ 53,022    $ 52,074   
  

 

 

    

 

 

 

RECONCILIATION OF NET CASH PROVIDED BY OPERATING ACTIVITIES

TO FREE CASH FLOW (NON-GAAP)

(In millions)

 

     Three Months Ended  
     January 24,
2015
    October 25,
2014
    January 25,
2014
 

Net cash provided by operating activities

   $ 2,883      $ 2,491      $ 2,873   

Acquisition of property and equipment

     (265     (285     (262
  

 

 

   

 

 

   

 

 

 

Free cash flow

$ 2,618    $ 2,206    $ 2,611   
  

 

 

   

 

 

   

 

 

 

DIVIDENDS PAID AND REPURCHASES OF COMMON STOCK

(In millions, except per-share amounts)

 

     DIVIDENDS      STOCK REPURCHASE PROGRAM      TOTAL  

Quarter Ended

   Per Share      Amount      Shares      Weighted-
Average Price
per Share
     Amount      Amount  

Fiscal 2015

                 

January 24, 2015

   $ 0.19       $ 974         44       $ 27.63       $ 1,208       $ 2,182   

October 25, 2014

   $ 0.19       $ 973         41       $ 24.58       $ 1,013       $ 1,986   

Fiscal 2014

                 

July 26, 2014

   $ 0.19       $ 974         61       $ 25.11       $ 1,514       $ 2,488   

April 26, 2014

     0.19         974         90       $ 22.24         2,005         2,979   

January 25, 2014

     0.17         896         185       $ 21.73         4,020         4,916   

October 26, 2013

     0.17         914         84       $ 23.65         2,000         2,914   
  

 

 

    

 

 

    

 

 

       

 

 

    

 

 

 

Total

$ 0.72    $ 3,758      420    $ 22.71    $ 9,539    $ 13,297   
  

 

 

    

 

 

    

 

 

       

 

 

    

 

 

 

ACCOUNTS RECEIVABLE AND DSO

(In millions, except DSO)

 

     January 24,
2015
     October 25,
2014
     January 25,
2014
 

Accounts receivable, net

   $ 4,541       $ 4,375       $ 4,378   

Days sales outstanding in accounts receivable (DSO)

     35         33         36   

 

9


INVENTORIES

(In millions)

 

     January 24,
2015
     October 25,
2014
     January 25,
2014
 

Inventories:

        

Raw materials

   $ 265       $ 173       $ 81   

Work in process

     2         3         6   

Finished goods:

        

Distributor inventory and deferred cost of sales

     733         654         598   

Manufactured finished goods

     577         535         579   
  

 

 

    

 

 

    

 

 

 

Total finished goods

  1,310      1,189      1,177   

Service-related spares

  274      275      244   

Demonstration systems

  39      36      40   
  

 

 

    

 

 

    

 

 

 

Total

$ 1,890    $ 1,676    $ 1,548   
  

 

 

    

 

 

    

 

 

 

INVENTORY TURNS AND RECONCILIATION OF GAAP TO NON-GAAP

COST OF SALES USED IN INVENTORY TURNS

(In millions, except annualized inventory turns)

 

     Three Months Ended  
     January 24,
2015
    October 25,
2014
    January 25,
2014
 

Annualized inventory turns - GAAP

     10.9        12.0        13.8   

Cost of sales adjustments

     (0.7     (1.0     (2.3
  

 

 

   

 

 

   

 

 

 

Annualized inventory turns - non-GAAP

  10.2      11.0      11.5   

GAAP cost of sales

$ 4,846    $ 4,912    $ 5,204   

Cost of sales adjustments:

Share-based compensation expense

  (45   (48   (52

Amortization of acquisition-related intangible assets

  (233   (181   (182

Supplier component remediation charge

  —        —        (655

Patent portfolio charge

  —        (188   —     
  

 

 

   

 

 

   

 

 

 

Non-GAAP cost of sales

$ 4,568    $ 4,495    $ 4,315   
  

 

 

   

 

 

   

 

 

 

DEFERRED REVENUE

(In millions)

 

     January 24,
2015
     October 25,
2014
     January 25,
2014
 

Deferred revenue:

        

Service

   $ 9,020       $ 9,029       $ 8,843   

Product:

        

Unrecognized revenue on product shipments and other deferred revenue

     4,276         4,056         3,549   

Cash receipts related to unrecognized revenue from two-tier distributors

     725         659         852   
  

 

 

    

 

 

    

 

 

 

Total product deferred revenue

  5,001      4,715      4,401   
  

 

 

    

 

 

    

 

 

 

Total

$ 14,021    $ 13,744    $ 13,244   
  

 

 

    

 

 

    

 

 

 

Reported as:

Current

$ 9,369    $ 9,449    $ 9,350   

Noncurrent

  4,652      4,295      3,894   
  

 

 

    

 

 

    

 

 

 

Total

$ 14,021    $ 13,744    $ 13,244   
  

 

 

    

 

 

    

 

 

 

 

10


SUMMARY OF SHARE-BASED COMPENSATION EXPENSE

(In millions)

 

     Three Months Ended     Six Months Ended  
     January 24,
2015
     January 25,
2014
    January 24,
2015
    January 25,
2014
 

Cost of sales - product

   $ 11       $ 12      $ 22      $ 22   

Cost of sales - service

     34         40        71        73   
  

 

 

    

 

 

   

 

 

   

 

 

 

Share-based compensation expense in cost of sales

  45      52      93      95   
  

 

 

    

 

 

   

 

 

   

 

 

 

Research and development

  105      108      224      200   

Sales and marketing

  114      141      261      264   

General and administrative

  42      47      101      101   

Restructuring and other charges

  2      (1   (2   (4
  

 

 

    

 

 

   

 

 

   

 

 

 

Share-based compensation expense in operating expenses

  263      295      584      561   
  

 

 

    

 

 

   

 

 

   

 

 

 

Total share-based compensation expense

$ 308    $ 347    $ 677    $ 656   
  

 

 

    

 

 

   

 

 

   

 

 

 

Income tax benefit for share-based compensation

$ 85    $ 82    $ 179    $ 160   
  

 

 

    

 

 

   

 

 

   

 

 

 

 

11