Table of Contents

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

_____________________________________

FORM 10-Q

(Mark One)

  • QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended April 27, 2019

or

  • TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from

to

Commission file number 0-18225

_____________________________________

CISCO SYSTEMS, INC.

(Exact name of registrant as specified in its charter)

California

77-0059951

(State or other jurisdiction of

(I.R.S. Employer

incorporation or organization)

170 West Tasman Drive

Identification Number)

San Jose, California 95134

(Address of principal executive office and zip code)

(408) 526-4000

(Registrant's telephone number, including area code)

Not Applicable

(Former name, former address and formal fiscal year, if changed since last report.)

_____________________________________

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Common Stock, par value $0.001 per share

CSCO

The Nasdaq Stock Market LLC

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No o

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes x No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act.

Large accelerated filer

x

Accelerated filer

o

Non-accelerated filer

o

Smaller reporting company

o

Emerging growth company

o

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨ No x Number of shares of the registrant's common stock outstanding as of May 16, 2019 : 4,280,733,008

____________________________________

1

Table of Contents

Cisco Systems, Inc.

Form 10-Q for the Quarter Ended April 27, 2019

INDEX

Page

Part I

Financial Information

3

Item 1.

Financial Statements (Unaudited)

3

Consolidated Balance Sheets at April 27, 2019 and July 28, 2018

3

Consolidated Statements of Operations for the Three and Nine Months Ended April 27, 2019 and April 28, 2018

4

Consolidated Statements of Comprehensive Income (Loss) for the Three and Nine Months Ended April 27, 2019 and April 28,

2018

5

Consolidated Statements of Cash Flows for the Nine Months Ended April 27, 2019 and April 28, 2018

6

Consolidated Statements of Equity for the Three and Nine Months Ended April 27, 2019 and April 28, 2018

7

Notes to Consolidated Financial Statements

9

Item 2.

Management's Discussion and Analysis of Financial Condition and Results of Operations

49

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

72

Item 4.

Controls and Procedures

74

Part II.

Other Information

74

Item 1.

Legal Proceedings

74

Item 1A.

Risk Factors

75

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

92

Item 3.

Defaults Upon Senior Securities

92

Item 4.

Mine Safety Disclosures

92

Item 5.

Other Information

92

Item 6.

Exhibits

93

Signature

94

2

Table of Contents

PART I. FINANCIAL INFORMATION

Item 1.

Financial Statements (Unaudited)

CISCO SYSTEMS, INC.

CONSOLIDATED BALANCE SHEETS

(in millions, except par value)

(Unaudited)

April 27, 2019

July 28, 2018

ASSETS

Current assets:

Cash and cash equivalents

$

10,251

$

8,934

Investments

24,392

37,614

Accounts receivable, net of allowance for doubtful accounts of $124 at April 27, 2019 and $129 at July 28,

2018

3,795

5,554

Inventories

1,513

1,846

Financing receivables, net

5,029

4,949

Other current assets

2,331

2,940

Total current assets

47,311

61,837

Property and equipment, net

2,834

3,006

Financing receivables, net

4,862

4,882

Goodwill

33,544

31,706

Purchased intangible assets, net

2,398

2,552

Deferred tax assets

4,023

3,219

Other assets

2,315

1,582

TOTAL ASSETS

$

97,287

$

108,784

LIABILITIES AND EQUITY

Current liabilities:

Short-term debt

$

7,777

$

5,238

Accounts payable

2,022

1,904

Income taxes payable

953

1,004

Accrued compensation

2,872

2,986

Deferred revenue

10,117

11,490

Other current liabilities

4,172

4,413

Total current liabilities

27,913

27,035

Long-term debt

15,921

20,331

Income taxes payable

8,038

8,585

Deferred revenue

7,339

8,195

Other long-term liabilities

1,272

1,434

Total liabilities

60,483

65,580

Commitments and contingencies (Note 13)

Equity:

Cisco shareholders' equity:

Preferred stock, no par value: 5 shares authorized; none issued and outstanding

-

-

Common stock and additional paid-in capital, $0.001 par value: 20,000 shares authorized; 4,313 and 4,614

shares issued and outstanding at April 27, 2019 and July 28, 2018, respectively

40,577

42,820

(Accumulated deficit) Retained earnings

(2,877)

1,233

Accumulated other comprehensive income (loss)

(896)

(849)

Total equity

36,804

43,204

TOTAL LIABILITIES AND EQUITY

$

97,287

$

108,784

See Notes to Consolidated Financial Statements.

3

Table of Contents

CISCO SYSTEMS, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(in millions, except per-share amounts)

(Unaudited)

Three Months Ended

Nine Months Ended

April 27, 2019

April 28, 2018

April 27, 2019

April 28, 2018

REVENUE:

Product

$

9,722

$

9,304

$

28,885

$

27,067

Service

3,236

3,159

9,591

9,419

Total revenue

12,958

12,463

38,476

36,486

COST OF SALES:

Product

3,693

3,625

11,106

10,594

Service

1,092

1,079

3,278

3,208

Total cost of sales

4,785

4,704

14,384

13,802

GROSS MARGIN

8,173

7,759

24,092

22,684

OPERATING EXPENSES:

Research and development

1,659

1,590

4,824

4,706

Sales and marketing

2,403

2,325

7,084

6,894

General and administrative

541

561

1,261

1,601

Amortization of purchased intangible assets

39

67

112

188

Restructuring and other charges

18

82

282

332

Total operating expenses

4,660

4,625

13,563

13,721

OPERATING INCOME

3,513

3,134

10,529

8,963

Interest income

331

380

1,003

1,155

Interest expense

(211)

(237)

(655)

(719)

Other income (loss), net

(18)

(24)

(10)

48

Interest and other income (loss), net

102

119

338

484

INCOME BEFORE PROVISION FOR INCOME TAXES

3,615

3,253

10,867

9,447

Provision for income taxes

571

562

1,452

13,140

NET INCOME (LOSS)

$

3,044

$

2,691

$

9,415

$

(3,693)

Net income (loss) per share:

Basic

$

0.70

$

0.56

$

2.11

$

(0.76)

Diluted

$

0.69

$

0.56

$

2.09

$

(0.76)

Shares used in per-share calculation:

Basic

4,370

4,791

4,468

4,892

Diluted

4,415

4,844

4,509

4,892

See Notes to Consolidated Financial Statements.

4

Table of Contents

CISCO SYSTEMS, INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(in millions) (Unaudited)

Three Months Ended

Nine Months Ended

April 27, 2019

April 28, 2018

April 27, 2019

April 28, 2018

Net income (loss)

$

3,044

$

2,691

$

9,415

$

(3,693)

Available-for-sale investments:

Change in net unrealized gains and losses, net of tax benefit (expense) of

$(64) and $(63) for the third quarter and first nine months of fiscal 2019,

respectively, and $18 and $(4) for the corresponding periods of fiscal

2018, respectively

232

(428)

319

(624)

Net (gains) losses reclassified into earnings, net of tax (benefit) expense

of $5 and $4 for the third quarter and first nine months of fiscal 2019,

respectively, and $3 and $28 for the corresponding periods of fiscal 2018,

respectively

12

(14)

22

(80)

244

(442)

341

(704)

Cash flow hedging instruments:

Change in unrealized gains and losses, net of tax benefit (expense) of $(2)

and $0 for the third quarter and first nine months of fiscal 2019,

respectively, and $0 and $(3) for the corresponding periods of fiscal 2018,

respectively

10

(10)

3

25

Net (gains) losses reclassified into earnings, net of tax (benefit) expense

of $0 for each of the third quarter and first nine months of fiscal 2019, and

$3 and $7 for the corresponding periods of fiscal 2018, respectively

-

(25)

(1)

(52)

10

(35)

2

(27)

Net change in cumulative translation adjustment and actuarial gains and

losses net of tax benefit (expense) of $(1) and $(2) for the third quarter and

first nine months of fiscal 2019, respectively, and $3 and $(3) for the

corresponding periods of fiscal 2018, respectively

(40)

(255)

(222)

36

Other comprehensive income (loss)

214

(732)

121

(695)

Comprehensive income (loss)

3,258

1,959

9,536

(4,388)

Comprehensive (income) loss attributable to noncontrolling interests

-

-

-

-

Comprehensive income (loss) attributable to Cisco Systems, Inc.

$

3,258

$

1,959

$

9,536

$

(4,388)

See Notes to Consolidated Financial Statements.

5

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Cisco Systems Inc. published this content on 21 May 2019 and is solely responsible for the information contained herein. Distributed by Public, unedited and unaltered, on 21 May 2019 21:22:07 UTC