Cisco Systems Earnings 2020-04-25

Balance Sheet	Income Statement	Cash Flow
Assets, Equity	Rev, G Profit, Net Income	Ops, Inv, Fin

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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 25, 2020



☐	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 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)

(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 ☒ No ☐

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 ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a 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	☒	Accelerated filer	☐

Non-accelerated filer	☐	Smaller reporting company	☐

		Emerging growth company	☐

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. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

Number of shares of the registrant’s common stock outstanding as of May 14, 2020: 4,222,296,202

____________________________________

Table of Contents

Cisco Systems, Inc.

Form 10-Q for the Quarter Ended April 25, 2020

INDEX



		Page
Part I	Financial Information	3
Item 1.	Financial Statements (Unaudited)	3
	Consolidated Balance Sheets at April 25, 2020 and July 27, 2019	3
	Consolidated Statements of Operations for the Three and Nine Months Ended April 25, 2020 and April 27, 2019	4
	Consolidated Statements of Comprehensive Income for the Three and Nine Months Ended April 25, 2020 and April 27, 2019	5
	Consolidated Statements of Cash Flows for the Nine Months Ended April 25, 2020 and April 27, 2019	6
	Consolidated Statements of Equity for the Three and Nine Months Ended April 25, 2020 and April 27, 2019	7
	Notes to Consolidated Financial Statements	9
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	43
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	65
Item 4.	Controls and Procedures	66
Part II.	Other Information	66
Item 1.	Legal Proceedings	66
Item 1A.	Risk Factors	67
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	85
Item 3.	Defaults Upon Senior Securities	85
Item 4.	Mine Safety Disclosures	85
Item 5.	Other Information	85
Item 6.	Exhibits	87
	Signature	88

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 25, 2020			July 27, 2019
ASSETS
Current assets:
Cash and cash equivalents	$	10,366		$	11,750
Investments	18,208			21,663
Accounts receivable, net of allowance for doubtful accounts of $130 at April 25, 2020 and $136 at July 27, 2019	4,569			5,491
Inventories	1,212			1,383
Financing receivables, net	4,703			5,095
Other current assets	2,249			2,373
Total current assets	41,307			47,755
Property and equipment, net	2,535			2,789
Financing receivables, net	4,770			4,958
Goodwill	33,453			33,529
Purchased intangible assets, net	1,744			2,201
Deferred tax assets	3,909			4,065
Other assets	3,676			2,496
TOTAL ASSETS	$	91,394		$	97,793
LIABILITIES AND EQUITY
Current liabilities:
Short-term debt	$	4,506		$	10,191
Accounts payable	2,393			2,059
Income taxes payable	1,047			1,149
Accrued compensation	2,940			3,221
Deferred revenue	10,710			10,668
Other current liabilities	4,341			4,424
Total current liabilities	25,937			31,712
Long-term debt	11,578			14,475
Income taxes payable	8,285			8,927
Deferred revenue	7,938			7,799
Other long-term liabilities	1,948			1,309
Total liabilities	55,686			64,222
Commitments and contingencies (Note 14)
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; 4,220 and 4,250 shares issued and outstanding at April 25, 2020 and July 27, 2019, respectively	40,691			40,266
Accumulated deficit	(3,874		)	(5,903		)
Accumulated other comprehensive loss	(1,109		)	(792		)
Total equity	35,708			33,571
TOTAL LIABILITIES AND EQUITY	$	91,394		$	97,793

See Notes to Consolidated Financial Statements.

Table of Contents

CISCO SYSTEMS, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(in millions, except per-share amounts)

(Unaudited)



	Three Months Ended						Nine Months Ended
	April 25, 2020			April 27, 2019			April 25, 2020			April 27, 2019
REVENUE:
Product	$	8,597		$	9,722		$	27,146		$	28,885
Service	3,386			3,236			10,001			9,591
Total revenue	11,983			12,958			37,147			38,476
COST OF SALES:
Product	3,120			3,693			9,770			11,106
Service	1,092			1,092			3,378			3,278
Total cost of sales	4,212			4,785			13,148			14,384
GROSS MARGIN	7,771			8,173			23,999			24,092
OPERATING EXPENSES:
Research and development	1,546			1,659			4,782			4,824
Sales and marketing	2,192			2,403			6,951			7,084
General and administrative	457			541			1,431			1,261
Amortization of purchased intangible assets	34			39			108			112
Restructuring and other charges	128			18			354			282
Total operating expenses	4,357			4,660			13,626			13,563
OPERATING INCOME	3,414			3,513			10,373			10,529
Interest income	218			331			733			1,003
Interest expense	(130		)	(211		)	(466		)	(655		)
Other income (loss), net	(58		)	(18		)	24			(10		)
Interest and other income (loss), net	30			102			291			338
INCOME BEFORE PROVISION FOR INCOME TAXES	3,444			3,615			10,664			10,867
Provision for income taxes	670			571			2,086			1,452
NET INCOME	$	2,774		$	3,044		$	8,578		$	9,415

Net income per share:
Basic	$	0.66		$	0.70		$	2.02		$	2.11
Diluted	$	0.65		$	0.69		$	2.01		$	2.09
Shares used in per-share calculation:
Basic	4,230			4,370			4,239			4,468
Diluted	4,243			4,415			4,258			4,509

See Notes to Consolidated Financial Statements.

Table of Contents

CISCO SYSTEMS, INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(in millions)

(Unaudited)



	Three Months Ended						Nine Months Ended
	April 25, 2020			April 27, 2019			April 25, 2020			April 27, 2019
Net income	$	2,774		$	3,044		$	8,578		$	9,415
Available-for-sale investments:
Change in net unrealized gains and losses, net of tax benefit (expense) of $3 and $(26) for the third quarter and first nine months of fiscal 2020, respectively, and $(64) and $(63) for the corresponding periods of fiscal 2019, respectively	4			232			143			319
Net (gains) losses reclassified into earnings, net of tax (benefit) expense of $2 and $14 for the third quarter and first nine months of fiscal 2020, respectively, and $5 and $4 for the corresponding periods of fiscal 2019, respectively	3			12			(6		)	22
	7			244			137			341
Cash flow hedging instruments:
Change in unrealized gains and losses, net of tax benefit (expense) of $(2) and $(1) for the third quarter and first nine months of fiscal 2020, respectively, and $(2) and $0 for the corresponding periods of fiscal 2019, respectively	12			10			13			3
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 2020, respectively, and $0 for each of the corresponding periods of fiscal 2019	(1		)	—			1			(1		)
	11			10			14			2
Net change in cumulative translation adjustment and actuarial gains and losses net of tax benefit (expense) of $3 and $2 for the third quarter and first nine months of fiscal 2020, respectively, and $(1) and $(2) for the corresponding periods of fiscal 2019, respectively	(427		)	(40		)	(468		)	(222		)
Other comprehensive income (loss)	(409		)	214			(317		)	121
Comprehensive income	$	2,365		$	3,258		$	8,261		$	9,536

See Notes to Consolidated Financial Statements.

Table of Contents

CISCO SYSTEMS, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(in millions)

(Unaudited)



	Nine Months Ended
	April 25, 2020			April 27, 2019
Cash flows from operating activities:
Net income	$	8,578		$	9,415
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation, amortization, and other	1,364			1,433
Share-based compensation expense	1,170			1,166
Provision for receivables	60			32
Deferred income taxes	103			(281		)
(Gains) losses on divestitures, investments and other, net	(185		)	(79		)
Change in operating assets and liabilities, net of effects of acquisitions and divestitures:
Accounts receivable	774			1,560
Inventories	143			(1		)
Financing receivables	380			(112		)
Other assets	145			(736		)
Accounts payable	324			52
Income taxes, net	(700		)	(759		)
Accrued compensation	(220		)	(68		)
Deferred revenue	333			421
Other liabilities	(645		)	(154		)
Net cash provided by operating activities	11,624			11,889
Cash flows from investing activities:
Purchases of investments	(6,880		)	(1,176		)
Proceeds from sales of investments	4,737			5,391
Proceeds from maturities of investments	5,708			10,797
Acquisitions and divestitures	(237		)	(2,175		)
Purchases of investments in privately held companies	(143		)	(118		)
Return of investments in privately held companies	213			127
Acquisition of property and equipment	(562		)	(701		)
Proceeds from sales of property and equipment	175			15
Other	(10		)	(12		)
Net cash provided by investing activities	3,001			12,148
Cash flows from financing activities:
Issuances of common stock	335			321
Repurchases of common stock—repurchase program	(2,659		)	(16,042		)
Shares repurchased for tax withholdings on vesting of restricted stock units	(519		)	(601		)
Short-term borrowings, original maturities of 90 days or less, net	(3,470		)	1,723
Issuances of debt	—			1,530
Repayments of debt	(5,220		)	(5,250		)
Dividends paid	(4,491		)	(4,489		)
Other	(3		)	51
Net cash used in financing activities	(16,027		)	(22,757		)
Net (decrease) increase in cash, cash equivalents, and restricted cash	(1,402		)	1,280
Cash, cash equivalents, and restricted cash, beginning of period	11,772			8,993
Cash, cash equivalents, and restricted cash, end of period	$	10,370		$	10,273

Supplemental cash flow information:
Cash paid for interest	$	519		$	707
Cash paid for income taxes, net	$	2,683		$	2,491

See Notes to Consolidated Financial Statements.

Table of Contents

CISCO SYSTEMS, INC.

CONSOLIDATED STATEMENTS OF EQUITY

(in millions, except per-share amounts)

(Unaudited)



Three Months Ended April 25, 2020	Shares of Common Stock		Common Stock and Additional Paid-In Capital			Accumulated Deficit			Accumulated Other Comprehensive Loss			Total Equity
BALANCE AT JANUARY 25, 2020	4,241		$	40,617		$	(4,384	)	$	(700	)	$	35,533
Net income						2,774						2,774
Other comprehensive loss									(409		)	(409		)
Issuance of common stock	6		1									1
Repurchase of common stock	(25	)	(236		)	(745		)				(981		)
Shares repurchased for tax withholdings on vesting of restricted stock units	(2	)	(82		)							(82		)
Cash dividends declared ($0.36 per common share)						(1,519		)				(1,519		)
Share-based compensation			391									391
BALANCE AT APRIL 25, 2020	4,220		$	40,691		$	(3,874	)	$	(1,109	)	$	35,708



Nine Months Ended April 25, 2020	Shares of Common Stock		Common Stock and Additional Paid-In Capital			Accumulated Deficit			Accumulated Other Comprehensive Loss			Total Equity
BALANCE AT JULY 27, 2019	4,250		$	40,266		$	(5,903	)	$	(792	)	$	33,571
Net income						8,578						8,578
Other comprehensive loss									(317		)	(317		)
Issuance of common stock	40		335									335
Repurchase of common stock	(59	)	(561		)	(2,058		)				(2,619		)
Shares repurchased for tax withholdings on vesting of restricted stock units	(11	)	(519		)							(519		)
Cash dividends declared ($1.06 per common share)						(4,491		)				(4,491		)
Share-based compensation

Price	49.42	EPS	3
Shares	4,273	P/E	19
MCap	211,172	P/FCF	18
Net Debt	9,887	EBIT	15,413
TEV	221,059	TEV/EBIT	14
TTM 2019-10-26, in MM, except price, ratios

10-Q	2020-04-25	Filed 2020-05-18
10-Q	2020-01-25	Filed 2020-02-18
10-Q	2019-10-26	Filed 2019-11-19
10-K	2019-07-27	Filed 2019-09-05
10-Q	2019-04-27	Filed 2019-05-21
10-Q	2019-01-26	Filed 2019-02-19
10-Q	2018-10-27	Filed 2018-11-20
10-K	2018-07-28	Filed 2018-09-06
10-Q	2018-04-28	Filed 2018-05-22
10-Q	2018-01-27	Filed 2018-02-20
10-Q	2017-10-28	Filed 2017-11-21
10-K	2017-07-29	Filed 2017-09-07
10-Q	2017-04-29	Filed 2017-05-23
10-Q	2017-01-28	Filed 2017-02-21
10-Q	2016-10-29	Filed 2016-11-22
10-K	2016-07-30	Filed 2016-09-08
10-Q	2016-04-30	Filed 2016-05-24
10-Q	2016-01-23	Filed 2016-02-18
10-Q	2015-10-24	Filed 2015-11-19
10-K	2015-07-25	Filed 2015-09-08
10-Q	2015-04-25	Filed 2015-05-20
10-Q	2015-01-24	Filed 2015-02-18
10-Q	2014-10-25	Filed 2014-11-20
10-K	2014-07-26	Filed 2014-09-09
10-Q	2014-04-26	Filed 2014-05-22
10-Q	2014-01-25	Filed 2014-02-20
10-Q	2013-10-26	Filed 2013-11-22
10-K	2013-07-27	Filed 2013-09-10
10-Q	2013-04-27	Filed 2013-05-21
10-Q	2013-01-26	Filed 2013-02-19
10-Q	2012-10-27	Filed 2012-11-20
10-K	2012-07-28	Filed 2012-09-12
10-Q	2012-04-28	Filed 2012-05-23
10-Q	2012-01-28	Filed 2012-02-21
10-Q	2011-10-29	Filed 2011-11-22
10-K	2011-07-30	Filed 2011-09-14
10-Q	2011-04-30	Filed 2011-05-25
10-Q	2011-01-29	Filed 2011-02-23
10-Q	2010-10-30	Filed 2010-11-23
10-K	2010-07-31	Filed 2010-09-21
10-Q	2010-05-01	Filed 2010-05-26
10-Q	2010-01-23	Filed 2010-02-17

8-K	2020-06-17
8-K	2020-05-13
8-K	2020-03-11
8-K	2020-03-04
8-K	2020-02-12
8-K	2020-01-24
8-K	2019-12-20
8-K	2019-12-10
8-K	2019-12-06
8-K	2019-11-28
8-K	2019-11-13
8-K	2019-08-19
8-K	2019-08-14
8-K	2019-07-08
8-K	2019-06-13
8-K	2019-05-30
8-K	2019-05-21
8-K	2019-05-15
8-K	2019-03-04
8-K	2019-02-13
8-K	2018-12-12
8-K	2018-11-14
8-K	2018-10-15
8-K	2018-09-07
8-K	2018-08-15
8-K	2018-08-06
8-K	2018-06-19
8-K	2018-06-01
8-K	2018-05-16
8-K	2018-05-01
8-K	2018-04-12
8-K	2018-02-14

EX-10.1	exh101-cscocreditagree.htm
EX-31.1	exh311-q3fy20.htm
EX-31.2	exh312-q3fy20.htm
EX-32.1	exh321-q3fy20.htm
EX-32.2	exh322-q3fy20.htm

CSCO 10Q Quarterly Report

Cisco Systems Earnings 2020-04-25