Cisco : Quarterly Report

Table of Contents

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

_____________________________________

FORM 10-Q

(Mark One)

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

  For the quarterly period ended October 27, 2018

  OR

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

For the transition period fromtoCommission file number 0-18225

_____________________________________

CISCO SYSTEMS, INC.

(Exact name of registrant as specified in its charter)

California

77-0059951

(State or other jurisdiction of incorporation or organization)

(I.R.S. Employer Identification Number)

170 West Tasman Drive

San Jose, California 95134

(Address of principal executive office and zip code)

[phone]

(Registrant's telephone number, including area code)

_____________________________________

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 November 15, 2018 : 4,495,961,730 ____________________________________

1

Cisco Systems, Inc.

Form 10-Q for the Quarter Ended October 27, 2018

INDEX

Page
Part I	Financial Information	3
Item 1.	Financial Statements (Unaudited)	3
Consolidated Balance Sheets at October 27, 2018 and July 28, 2018	3
Consolidated Statements of Operations for the Three Months Ended October 27, 2018 and October 28, 2017	4
Consolidated Statements of Comprehensive Income (Loss) for the Three Months Ended October 27, 2018 and October 28, 2017	5
Consolidated Statements of Cash Flows for the Three Months Ended October 27, 2018 and October 28, 2017	6
Consolidated Statements of Equity for the Three Months Ended October 27, 2018 and October 28, 2017	7
Notes to Consolidated Financial Statements	8
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	48
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	70
Item 4.	Controls and Procedures	72
Part II.	Other Information	72
Item 1.	Legal Proceedings	72
Item 1A.	Risk Factors	73
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	90
Item 3.	Defaults Upon Senior Securities	90
Item 4.	Mine Safety Disclosures	90
Item 5.	Other Information	90
Item 6.	Exhibits	91
Signature	92

2

Item 1.

ASSETS Current assets:

Financial Statements (Unaudited)

Cash and cash equivalents Investments

PART I. FINANCIAL INFORMATIONCISCO SYSTEMS, INC. CONSOLIDATED BALANCE SHEETS

(in millions, except par value)

(Unaudited)

Accounts receivable, net of allowance for doubtful accounts of $130 at October 27, 2018 and $129 at July 28, 2018

Inventories

Financing receivables, net Other current assets

Total current assets Property and equipment, net Financing receivables, net Goodwill

Purchased intangible assets, net Deferred tax assets

Other assets

TOTAL ASSETS LIABILITIES AND EQUITY Current liabilities:

Short-term debt Accounts payable Income taxes payable Accrued compensation Deferred revenue Other current liabilities

Total current liabilities Long-term debt

Income taxes payable Deferred revenue

Other long-term liabilities

Total liabilities

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; 4,517 and 4,614 shares issued and outstanding at October 27, 2018 and July 28, 2018, respectively

Retained earnings

Accumulated other comprehensive income (loss)

Total equity

TOTAL LIABILITIES AND EQUITY

October 27, 2018

July 28, 2018

$

8,410$ 8,934

34,183 37,614

4,5365,554

1,572 1,846

4,8514,949

2,134 2,940

55,68661,837

2,956 3,006

4,6444,882

33,386 31,706

2,7162,552

3,960 3,219

2,0811,582

$

105,429

$

108,784

$

7,241$ 5,238

1,805 1,904

1,0841,004

2,622 2,986

9,63711,490

4,025 4,413

26,41427,035

18,323 20,331

8,2168,585

7,177 8,195

1,4511,434

61,581

65,580

-

-

41,89742,820

3,169 1,233

(1,218)(849)

43,848

$

43,204

105,429$

108,784

See Notes to Consolidated Financial Statements.

3

REVENUE:

Product

Service

Total revenue

COST OF SALES:

Product

Service

Total cost of sales

GROSS MARGIN OPERATING EXPENSES:

Research and development

Sales and marketing

General and administrative

Amortization of purchased intangible assets

Restructuring and other charges

Total operating expenses

OPERATING INCOME

Interest income

Interest expense

Other income (loss), net

Interest and other income (loss), net

CONSOLIDATED STATEMENTS OF OPERATIONS

(in millions, except per-share amounts)

(Unaudited)

October 27, 2018

$

3,799 3,615

1,1271,094

8,1467,427

1,6081,567

2,410 2,334

211557

34 61

78152

3,8052,756

344 379

(221)(235)

(19) 62

104206

INCOME BEFORE PROVISION FOR INCOME TAXES Provision for income taxes

NET INCOME

Three Months EndedOctober 28, 2017

9,890 $ 9,054

3,1823,082

13,072

4,926

4,341

3,909 360

$

3,549

Net income per share:

Basic

Diluted

Shares used in per-share calculation:

Basic

$ $

0.78$

0.77

Diluted

4,565 4,614

12,136

4,709

4,671

2,962 568

$

2,394

0.48

$

0.48

4,959 4,994

See Notes to Consolidated Financial Statements.

4

Net income

Available-for-sale investments:

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(in millions)

(Unaudited)

Change in net unrealized gains and losses, net of tax benefit (expense) of $13 and $(23) for the three months ended October 27, 2018 and October 28, 2017, respectively

Net (gains) losses reclassified into earnings, net of tax (benefit) expense of $0 and $10 for the three months ended October 27, 2018 and October 28, 2017, respectively

October 27, 2018

6 (23)

Three Months EndedOctober 28, 2017

$

3,549$ 2,394

11(28)Cash flow hedging instruments:

Change in unrealized gains and losses, net of tax benefit (expense) of $1 and $(1) for the three months ended October 27, 2018 and October 28, 2017, respectively

Net (gains) losses reclassified into earnings, net of tax (benefit) expense of $0 and $2 for the three months ended October 27, 2018 and October 28, 2017, respectively

- (11)

(3)(4)Net change in cumulative translation adjustment and actuarial gains and losses net of tax benefit (expense) of $(1) and $(2) for the three months ended October 27, 2018 and October 28, 2017, respectively

Other comprehensive income (loss)

Comprehensive income (loss)

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

See Notes to Consolidated Financial Statements.

5

(209) 17

(201)(15)

3,348 -

$

2,379 -

3,348

$

2,379