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. | ||||||
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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.
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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