Cisco Systems (CSCO)

Cash and Cash Equivalents and Investments

The following table summarizes our cash and cash equivalents and investments (in millions):

The increase in cash and cash equivalents and investments was primarily a result of cash provided by operating activities of $7.9 billion, the issuance of $4.0 billion of senior notes in February 2009 ($500 million of which was used to repay senior notes in February 2009), and the issuance of common stock of $486 million related to employee stock option exercises and employee stock purchases. These factors were partially offset by the repurchase of common stock of $2.8 billion, capital expenditures of $794 million, approximately $340 million related to the change in unrealized gains and losses on publicly traded equity and fixed income securities as well as realized gains and losses from these investments, and acquisitions of businesses of $338 million.

Our total cash and cash equivalents and investments held outside of the United States in various foreign subsidiaries was $27.2 billion as of April 25, 2009, and the remaining $6.4 billion was held in the United States. Under current tax law, if cash and cash equivalents and investments held outside the United States are distributed to the United States in the form of dividends or otherwise, we may be subject to additional U.S. income taxes (subject to an adjustment for foreign tax credits) and foreign withholding taxes. For internal management purposes, we target specific ranges of net realizable cash, representing cash and cash equivalents and investments, net of (i) long-term debt and the present value of operating lease commitments, and (ii) U.S. income taxes that we estimate would be payable upon the distribution to the United States of cash and cash equivalents and investments held outside the United States. We believe that our strong total cash and cash equivalents and investments position allows us to use our cash resources for strategic investments to gain access to new technologies, acquisitions, customer financing activities, working capital, and the repurchase of shares. We also believe the overall credit quality of our portfolio is strong, with our cash equivalents and fixed income portfolio invested in securities with a weighted-average credit rating exceeding AA.

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We expect that cash provided by operating activities may fluctuate in future periods as a result of a number of factors, including fluctuations in our operating results, the rate at which products are shipped during the quarter (which we refer to as shipment linearity), accounts receivable collections, inventory and supply chain management, deferred revenue, excess tax benefits from share-based compensation, and the timing and amount of tax and other payments. For additional discussion, see “Part II, Item 1A. Risk Factors.”

Cash and Cash Equivalents and Investments

The following table summarizes our cash and cash equivalents and investments (in millions):

The increase in cash and cash equivalents and investments was primarily a result of cash provided by operating activities of $5.9 billion and issuance of common stock of $441 million related to employee stock option exercises and employee stock purchases. These factors were partially offset by the repurchase of common stock of $1.6 billion, capital expenditures of $585 million, approximately $340 million related to the change in unrealized gains and losses on publicly traded equity and fixed income securities as well as realized gains and losses from these investments, and acquisitions of businesses of $327 million.

Our total cash and cash equivalents and investments held outside of the United States in various foreign subsidiaries was $26.3 billion as of January 24, 2009, and the remaining $3.2 billion was held in the United States. If cash and cash equivalents and investments held outside the United States are distributed to the United States in the form of dividends or otherwise, we may be subject to additional U.S. income taxes (subject to an adjustment for foreign tax credits) and foreign withholding taxes. For internal management purposes, we target specific ranges of net realizable cash, representing cash and cash equivalents and investments, net of (i) long-term debt and the present value of operating lease commitments, and (ii) U.S. income taxes that we estimate would be payable upon the distribution to the United States of cash and cash equivalents and investments held outside the United States. We believe that our strong total cash and cash equivalents and investments position allows us to use our cash resources for strategic investments to gain access to new technologies, acquisitions, customer financing activities, working capital, and the repurchase of shares. We also believe the overall credit quality of our portfolio is strong, with our cash equivalents and fixed income portfolio invested in securities with a weighted-average credit rating exceeding AA.

We expect that cash provided by operating activities may fluctuate in future periods as a result of a number of factors, including fluctuations in our operating results, the rate at which products are shipped during the quarter (which we refer to as shipment linearity), accounts receivable collections, inventory and supply chain management, excess tax benefits from share-based compensation, and the timing and amount of tax and other payments. For additional discussion, see “Part II, Item 1A. Risk Factors.”

Cash and Cash Equivalents and Investments

The following table summarizes our cash and cash equivalents and investments (in millions):

The increase in cash and cash equivalents and investments was primarily a result of cash provided by operating activities of $2.7 billion and issuance of common stock of $224 million related to employee stock option exercises. These factors were partially offset by the repurchase of common stock of $1.0 billion; approximately $600 million related to the change in unrealized gains and losses on publicly traded equity and fixed income securities as well as realized gains and losses from these investments; capital expenditures of $361 million and acquisitions of businesses of $288 million.

Our total cash and cash equivalents and investments held outside of the United States in various foreign subsidiaries was $24.3 billion as of October 25, 2008, and the remaining $2.5 billion was held in the United States. If cash and cash equivalents and investments held outside the United States are distributed to the United States in the form of dividends or otherwise, we may be subject to additional U.S. income taxes (subject to an adjustment for foreign tax credits) and foreign withholding taxes. For internal management purposes, we target specific ranges of net realizable cash, representing cash and cash equivalents and investments, net of (i) long-term debt and the present value of operating lease commitments, and (ii) U.S. income taxes that we estimate would be payable upon the distribution to the United States of cash and cash equivalents and investments held outside the United States. We believe that our strong total cash and cash equivalents and investments position allows us to use our cash resources for strategic investments to gain access to new technologies, acquisitions, customer financing activities, working capital, and the repurchase of shares.

In light of the challenging conditions in the financial markets over the last several months, we have been more proactively managing our cash equivalents and fixed income portfolio. We believe the overall credit quality of our portfolio is strong, with our cash equivalents and fixed income portfolio invested in securities with a weighted-average credit rating exceeding AA. A majority of our investments are priced by pricing vendors and over 95% of our fixed income and publicly traded equity securities are classified as Level 1 or Level 2 investments, as measured under SFAS 157, as these vendors either provide a quoted market price in an active market or use observable inputs. See Note 8 to the Consolidated Financial Statements.

We expect that cash provided by operating activities may fluctuate in future periods as a result of a number of factors, including fluctuations in our operating results, the rate at which products are shipped during the quarter (which we refer to as shipment linearity), accounts receivable collections, inventory and supply chain management, excess tax benefits from share-based compensation, and the timing and amount of tax and other payments. For additional discussion, see “Part II, Item 1A. Risk Factors.”

Cash and Cash Equivalents and Investments

The following table summarizes our cash and cash equivalents and investments (in millions):

The increase in cash and cash equivalents and investments was primarily a result of cash provided by operating activities of $8.6 billion; issuance of common stock of $2.5 billion related to employee stock option exercises and employee stock purchases; approximately $425 million related to the net increase in unrealized gains from investments; proceeds from the termination of interest rate swaps of $432 million; and excess tax benefits from share-based compensation of $375 million; partially offset by the repurchase of common stock of $9.0 billion, capital expenditures of $908 million, and acquisitions of businesses of $385 million. We believe that our strong cash and cash equivalents and investments position allows us to use our cash resources for strategic investments to gain access to new technologies, acquisitions, customer financing activities, working capital, and the repurchase of shares.

As of April 26, 2008, approximately $2.4 billion of our cash and cash equivalents and investments was held in the United States. The remainder of our cash and cash equivalents and investments was held outside of the United States in various foreign subsidiaries. If these cash and cash equivalents and investments are distributed to the United States in the form of dividends or otherwise, we may be subject to additional U.S. income taxes (subject to an adjustment for foreign tax credits) and foreign withholding taxes.

On August 17, 2007, we entered into a credit agreement with certain institutional lenders that provides for a $3.0 billion unsecured revolving credit facility that is scheduled to expire on August 17, 2012. Any advances under the credit agreement will accrue interest at rates that are equal to, based on certain conditions, either (i) the higher of the Federal Funds rate plus 0.50% or Bank of America’s “prime rate” as announced from time to time, or (ii) LIBOR plus a margin that is based on the our senior debt credit ratings as published by Standard & Poor’s Ratings Services and Moody’s Investors Service, Inc. The credit agreement requires that we maintain an interest coverage ratio as defined in the agreement. As of April 26, 2008, we were in compliance with the required interest coverage ratio and we had not borrowed any funds under the credit facility. We may also, upon the agreement of either the then existing lenders or of additional lenders not currently parties to the agreement, increase the commitments under the credit facility up to a total of $5.0 billion, and/or extend the expiration date of the credit facility up to August 15, 2014.

We expect that cash provided by operating activities may fluctuate in future periods as a result of a number of factors, including fluctuations in our operating results, the rate at which products are shipped during the quarter (which we refer to as shipment linearity), accounts receivable collections, inventory and supply chain management, excess tax benefits from share-based compensation, and the timing and amount of tax and other payments. For additional discussion, see “Part II, Item 1A. Risk Factors.”

Cash and Cash Equivalents and Investments

The following table summarizes our cash and cash equivalents and investments (in millions):

The increase in cash and cash equivalents and investments was primarily a result of cash provided by operating activities of $5.5 billion; issuance of common stock of $2.2 billion related to employee stock option exercises and employee stock purchases; approximately $750 million related to the net increase in unrealized gains from investments; and excess tax benefits from share-based compensation of $338 million; partially offset by the repurchase of common stock of $7.1 billion, capital expenditures of $591 million, and acquisitions of businesses of $385 million. We believe that our strong cash and cash equivalents and investments position allows us to use our cash resources for strategic investments to gain access to new technologies, acquisitions, customer financing activities, working capital, and the repurchase of shares.

As of January 26, 2008, approximately $2.5 billion of our cash and cash equivalents and investments was held in the United States. The remainder of our cash and cash equivalents and investments was held outside of the United States in various foreign subsidiaries. If these cash and cash equivalents and investments are distributed to the United States in the form of dividends or otherwise, we may be subject to additional U.S. income taxes (subject to an adjustment for foreign tax credits) and foreign withholding taxes.

On August 17, 2007, we entered into a credit agreement with certain institutional lenders that provides for a $3.0 billion unsecured revolving credit facility that is scheduled to expire on August 17, 2012. Any advances under the credit agreement will accrue interest at rates that are equal to, based on certain conditions, either (i) the higher of the Federal Funds rate plus 0.50% or Bank of America’s “prime rate” as announced from time to time, or (ii) LIBOR plus a margin that is based on the our senior debt credit ratings as published by Standard & Poor’s Ratings Services and Moody’s Investors Service, Inc. The credit agreement requires that we maintain an interest coverage ratio as defined in the agreement. As of January 26, 2008, we were in compliance with the required interest coverage ratio and we had not borrowed any funds under the credit facility. We may also, upon the agreement of either the then existing lenders or of additional lenders not currently parties to the agreement, increase the commitments under the credit facility up to a total of $5.0 billion, and/or extend the expiration date of the credit facility up to August 15, 2014.

We expect that cash provided by operating activities may fluctuate in future periods as a result of a number of factors, including fluctuations in our operating results, the rate at which products are shipped during the quarter (which we refer to as shipment linearity), accounts receivable collections, inventory and supply chain management, excess tax benefits from share-based compensation, and the timing and amount of tax and other payments. For additional discussion, see “Part II, Item 1A. Risk Factors.”

Cash and Cash Equivalents and Investments

The following table summarizes our cash and cash equivalents and investments (in millions):

The increase in cash and cash equivalents and investments was primarily a result of cash provided by operating activities of $3.1 billion; issuance of common stock of $1.5 billion related to employee stock option exercises; approximately $900 million related to the change in unrealized gains from public equities; and excess tax benefits from share-based compensation of $252 million; partially offset by the repurchase of common stock of $3.0 billion and capital expenditures of $296 million.

As of October 27, 2007, approximately $4.8 billion of our cash and cash equivalents and investments was held in the United States. The remainder of our cash and cash equivalents and investments was held outside of the United States in various foreign subsidiaries. If these cash and cash equivalents and investments are distributed to the United States in the form of dividends or otherwise, we may be subject to additional U.S. income taxes (subject to an adjustment for foreign tax credits) and foreign withholding taxes.

On August 17, 2007, we entered into a credit agreement with certain institutional lenders which provides for a $3.0 billion unsecured revolving credit facility that is scheduled to expire on August 17, 2012. Any advances under the credit agreement will accrue interest

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at rates that are equal to, based on certain conditions, either (i) the higher of the Federal Funds rate plus 0.50% or Bank of America’s “prime rate” as announced from time to time, or (ii) LIBOR plus a margin that is based on the our senior debt credit ratings as published by Standard & Poor’s Ratings Services and Moody’s Investors Service, Inc. The credit agreement requires that we maintain an interest coverage ratio as defined in the agreement. As of October 27, 2007, we were in compliance with the required interest coverage ratio and we had not borrowed any funds under the credit facility. We may also, upon the agreement of either the then existing lenders or of additional lenders not currently parties to the agreement, increase the commitments under the credit facility up to a total of $5.0 billion, and/or extend the expiration date of the credit facility up to August 15, 2014.

We expect that cash provided by operating activities may fluctuate in future periods as a result of a number of factors, including fluctuations in our operating results, the rate at which products are shipped during the quarter (which we refer to as shipment linearity), accounts receivable collections, inventory and supply chain management, excess tax benefits from share-based compensation, and the timing and amount of tax and other payments. For additional discussion, see “Part II, Item 1A. Risk Factors.”

Cash and Cash Equivalents and Investments

The following table summarizes our cash and cash equivalents and investments (in millions):

The increase in cash and cash equivalents and investments was primarily a result of cash provided by operating activities of $7.4 billion, cash provided by the issuance of common stock of $3.7 billion related to employee stock option exercises and employee stock purchases, and excess tax benefits from share-based compensation of $648 million, partially offset by cash used for the repurchase of common stock of $6.3 billion and capital expenditures of $912 million. The increase in cash and cash equivalents and investments is in anticipation of the completion of our previously announced acquisitions of WebEx and IronPort.

As of April 28, 2007, approximately $5.6 billion of our cash and cash equivalents and investments was held in the United States. The remainder of our cash and cash equivalents and investments was held outside of the United States in various foreign subsidiaries. If these cash and cash equivalents and investments were distributed to the United States in the form of dividends or otherwise, we would be subject to additional U.S. income taxes (subject to an adjustment for foreign tax credits) and foreign withholding taxes.

We expect that cash provided by operating activities may fluctuate in future periods as a result of a number of factors, including fluctuations in our operating results, shipment linearity, accounts receivable collections, inventory and supply chain management, excess tax benefits from share-based compensation, and the timing and amount of tax and other payments. For additional discussion, see “Part II, Item 1A. Risk Factors” below.

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Cash and Cash Equivalents and Investments

The following table summarizes our cash and cash equivalents and investments (in millions):

The increase in cash and cash equivalents and investments was primarily a result of cash provided by operating activities of $4.9 billion, cash provided by the issuance of common stock of $2.8 billion related to employee stock option exercises and employee stock purchases, and excess tax benefits from share-based compensation of $428 million, partially offset by cash used for the repurchase of common stock of $4.8 billion and capital expenditures of $548 million.

As of January 27, 2007, approximately $5.5 billion of our cash and cash equivalents and investments was held in the United States. The remainder of our cash and cash equivalents and investments was held outside of the United States in various foreign subsidiaries. If these cash and cash equivalents and investments were distributed to the United States in the form of dividends or otherwise, we would be subject to additional U.S. income taxes (subject to an adjustment for foreign tax credits) and foreign withholding taxes.

We expect that cash provided by operating activities may fluctuate in future periods as a result of a number of factors, including fluctuations in our operating results, shipment linearity, accounts receivable collections, inventory management, excess tax benefits from share-based compensation, and the timing and amount of tax and other payments. For additional discussion, see “Part II, Item 1A. Risk Factors” below.

Cash and Cash Equivalents and Investments

The following table summarizes our cash and cash equivalents and investments (in millions):

The increase in cash and cash equivalents and investments was primarily a result of cash provided by operating activities of $2.3 billion and cash provided by the issuance of common stock of $1.0 billion related to employee stock option exercises partially offset by cash used for the repurchase of common stock of $1.5 billion and capital expenditures of $214 million.

As of October 28, 2006, approximately $6.2 billion of our cash and cash equivalents and investments was held in the United States. The remainder of our cash and cash equivalents and investments was held outside of the United States in various foreign subsidiaries. If these cash and cash equivalents and investments were distributed to the United States in the form of dividends or otherwise, we would be subject to additional U.S. income taxes (subject to an adjustment for foreign tax credits) and foreign withholding taxes.

We expect that cash provided by operating activities may fluctuate in future periods as a result of a number of factors, including fluctuations in our operating results, shipment linearity, accounts receivable collections, inventory management, excess tax benefits from share-based compensation, and the timing and amount of tax and other payments. Shipment linearity is a measure of the level of shipments throughout a particular quarter. For additional discussion, see Part II, Item 1A. Risk Factors below.

Cash and Cash Equivalents and Investments

The following table summarizes our cash and cash equivalents and investments (in millions):

The increase in cash and cash equivalents and investments was primarily a result of approximately $6.5 billion of cash provided by the issuance of debt, cash provided by operating activities of $5.6 billion, and cash provided by the issuance of common stock of $1.3 billion related to employee stock option exercises and employee stock purchases, offset by acquisitions of businesses of $5.2 billion, net of cash and investments acquired, the repurchase of common stock of $5.5 billion, and capital expenditures of $595 million.

Effective October 29, 2005, we changed the method of classification of our investments previously classified as long-term investments to current assets, and prior period balances have been reclassified to conform to the current period’s presentation. This new method classifies these securities as current or long-term based on the nature of the securities and the availability for use in current operations while the prior classification was based on the maturities of the investments. We believe this method is preferable because it is more reflective of our assessment of the overall liquidity position. In conjunction with this change in classification of investments, we changed the classification of deferred taxes related to the unrealized gains and losses on long-term investments from noncurrent assets to current assets.

As of April 29, 2006, the majority of our cash and cash equivalents and investments were held outside of the United States in certain of our foreign subsidiaries. If these cash and cash equivalents and investments were distributed to the United States in the form of dividends or otherwise, we would be subject to additional U.S. income taxes (subject to an adjustment for foreign tax credits) and foreign withholding taxes.

We expect that cash provided by operating activities may fluctuate in future periods as a result of a number of factors, including fluctuations in our operating results, shipment linearity, accounts receivable collections, inventory management, stock option expensing, and the timing and amount of tax and other payments. Shipment linearity is a measure of the level of shipments throughout a particular quarter. For additional discussion, see the following section entitled “Risk Factors.”

Cash and Cash Equivalents and Investments

The following table summarizes our cash and cash equivalents and investments (in millions):

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The decrease in cash and cash equivalents and investments was primarily a result of cash used for the repurchase of common stock of $4.2 billion, capital expenditures of $394 million and acquisitions of businesses of $150 million, partially offset by cash provided by operating activities of $3.3 billion and cash provided by the issuance of common stock of $563 million related to employee stock option exercises and employee stock purchases.

Effective October 29, 2005 we changed the method of classification of our investments previously classified as long-term investments to current assets and prior period balances have been reclassified to conform to the current period’s presentation. This new method classifies these securities as current or long-term based on the nature of the securities and the availability for use in current operations while the prior classification was based on the maturities of the investments. We believe this method is preferable because it is more reflective of our assessment of the overall liquidity position. In conjunction with this change in classification of investments, we changed the classification of deferred taxes related to the unrealized gains and losses on long-term investments from noncurrent assets to current assets.

As of January 28, 2006, a majority of our cash and cash equivalents and investments are held outside of the United States in certain of our foreign subsidiaries. If these cash and cash equivalents and investments were distributed to the United States in the form of dividends or otherwise, we would be subject to additional U.S. income taxes (subject to an adjustment for foreign tax credits) and foreign withholding taxes.

In November 2005, we signed a definitive agreement for our proposed acquisition of Scientific-Atlanta. Under the terms of the agreement, we have agreed to pay $43 per share in cash in exchange for each share of Scientific-Atlanta and to assume outstanding options, for an aggregate purchase price of approximately $6.9 billion, or approximately $5.3 billion, net of Scientific-Atlanta’s cash resources as of November 18, 2005. The proposed acquisition is expected to close in late February or early March, 2006.

On February 10, 2006 the Company filed a Form S-3 Registration Statement with the Securities and Exchange Commission to offer debt securities, subject to market conditions. On February 14, 2006, the Company entered into an underwriting agreement to issue unsecured notes in aggregate principal amount of $6.5 billion under the Registration Statement.

Of these notes, $500 million will mature in 2009 and bear interest at an adjustable rate equal to the three-month LIBOR plus 0.08%, $3 billion will mature in 2011 and bear interest at an annual coupon rate equal to 5.25% and $3 billion will mature in 2016 and bear interest at an annual coupon rate equal to 5.50%. This offering is expected to be completed in February 2006, subject to customary closing conditions. The Company intends to use the proceeds from the offering to fund the purchase of Scientific-Atlanta and for general corporate purposes.

We expect that cash provided by operating activities may fluctuate in future periods as a result of a number of factors, including fluctuations in our operating results, shipment linearity, accounts receivable collections, inventory management, stock option expensing, and the timing and amount of tax and other payments. Shipment linearity is a measure of the level of shipments throughout a particular quarter. For additional discussion, see the following section entitled “Risk Factors.”