FY2010 Income Statement GAAP Reconciliation - As Reclassified

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  • 8/13/2019 FY2010 Income Statement GAAP Reconciliation - As Reclassified

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    Cisco Systems, Inc.

    Historical Financials (As Reclassified)

    Income Statements

    (In millions, except per-share amounts)

    Notes (1) (2) Notes (1) (2) Notes (1) (2) Notes (1) (2) Notes (1) (2) Notes (1) (2) Notes (1) (2) Notes (1) (2)

    GAAP NON-GAAP GAAP NON-GAAP GAAP NON-GAAP GAAP NON-GAAPFY2010 FY2010 FY2010 FY2010 FY2010 FY2010 FY2010 FY2010

    Qtr Ending Qtr Ending Qtr Ending Qtr Ending Qtr Ending Qtr Ending Qtr Ending Qtr Ending

    10/24/2009 10/24/2009 1/23/2010 1/23/2010 5/1/2010 5/1/2010 7/31/2010 7/31/2010

    NET SALES:Product 7,200$ 7,200$ 7,976$ 7,976$ 8,436$ 8,436$ 8,808$ 8,808$ Service 1,821 1,821 1,839 1,839 1,932 1,932 2,028 2,028

    Total net sales 9,021 9,021 9,815 9,815 10,368 10,368 10,836 10,836

    COST OF SALES:

    Product (a) & (b) 2,486 2,430 2,815 2,746 3,010 2,930 3,309 3,202Service (a) 647 614 668 627 728 681 734 691

    Total cost of sales (a) & (b) 3,133 3,044 3,483 3,373 3,738 3,611 4,043 3,893

    GROSS MARGIN (a) & (b) 5,888 5,977 6,332 6,442 6,630 6,757 6,793 6,943

    OPERATING EXPENSES:Research and development (a) & (c) 1,224 1,097 1,247 1,109 1,411 1,266 1,391 1,247Sales and marketing (a) & (c) 2,010 1,879 2,126 1,977 2,278 2,104 2,368 2,205General and administrative (a) & (c)-(d) 425 361 451 380 479 398 578 388

    Amortization of purchased intangible assets (b) 105 - 138 - 117 - 131 -

    Total operating expenses (a)-(d) 3,764 3,337 3,962 3,466 4,285 3,768 4,468 3,840

    OPERATING INCOME (a) - (d) 2,124 2,640 2,370 2,976 2,345 2,989 2,325 3,103

    Interest income 168 168 155 155 158 158 154 154Interest expense (114) (114) (158) (158) (182) (182) (169) (169Other income (loss), net (c) 61 19 (12) 26 82 96 108 106

    Interest and other income (loss), net (c) 115 73 (15) 23 58 72 93 91

    INCOME BEFORE PROVISION FOR INCOME TAXES (a) - (d) 2,239 2,713 2,355 2,999 2,403 3,061 2,418 3,194

    Provision for income taxes (e)-(f) 452 597 502 660 211 585 483 687

    NET INCOME (a) - (f) 1,787$ 2,116$ 1,853$ 2,339$ 2,192$ 2,476$ 1,935$ 2,507$

    Net income per share:Basic (a) - (f) 0.31$ 0.37$ 0.32$ 0.41$ 0.38$ 0.43$ 0.34$ 0.44$

    Diluted (a) - (f) 0.30$ 0.36$ 0.32$ 0.40$ 0.37$ 0.42$ 0.33$ 0.43$

    Shares used in per-share calculation:Basic 5,767 5,767 5,741 5,741 5,731 5,731 5,688 5,688

    Diluted * 5,871 5,880 5,862 5,862 5,869 5,869 5,795 5,795

    Cisco's non-GAAP measures are not in accordance with, or an alternative for, generally accepted accounting principles and may be different from non-GAAP measures used by other companies.In addition, the above non-GAAP Consolidated Statements of Operations are not based on a comprehensive set of accounting rules or principles.* Effective from the second quarter of fiscal 2010, Cisco no longer uses non-GAAP shares in the calculation of non-GAAP net income per share.

  • 8/13/2019 FY2010 Income Statement GAAP Reconciliation - As Reclassified

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    FY2010 FY2010 FY2010 FY2010 FY2010

    Qtr Ending Qtr Ending Qtr Ending Qtr Ending YTD Ending

    ( In millions ) 10/24/2009 1/23/2010 5/1/2010 7/31/2010 7/31/2010

    Note 1

    A reconciliation between net income on a GAAP basis and non-GAAP net income including items (a) - (f) is as follows:

    GAAP net income 1,787$ 1,853$ 2,192$ 1,935$ 7,767$

    (a) Share-based compensation expense 321 371 434 391 1,517(b) Amortization of acquisition-related intangible assets 149 192 181 224 746(c) Other acquisition-related costs 4 81 43 41 169

    (d) Significant asset impairments and restructurings (1) - - - 120 120Total adjustments to GAAP income before provision for income taxes 474 644 658 776 2,552

    (e) Income tax effect (145) (158) (216) (204) (723)

    (f) Transfer pricing adjustment related to share-based compensation(2) - - (158) - (158)

    Total adjustments to GAAP provision for income taxes (145) (158) (374) (204) (881)

    Non-GAAP net income 2,116$ 2,339$ 2,476$ 2,507$ 9,438$

    Shares used in diluted net income per-share calculation - GAAP 5,871 5,862 5,869 5,795 5,848Effect of share-based compensation expense 9 - - - -Shares used in diluted net income per-share calculation - Non-GAAP

    (3) 5,880 5,862 5,869 5,795 5,848

    (1) In the fourth quarter of fiscal 2010, Cisco excluded expenses related to real estate impairments and charges related to excess facilities.

    (2)

    (3)

    In the third quarter of fiscal 2010, the U.S. Court of Appeals for the Ninth Circuit affirmed a 2005 U.S. Tax Court ruling in Xilinx, Inc. v. Commissioner. The decision affirmed the tax treatment of share-basedcompensation expense for the purpose of determining intangible development costs under a companys research and development cost sharing arrangement. While Cisco was not a party to the case, as a

    result of this ruling, the Company recorded a tax benefit of $158 million as a reduction to the provision for income taxes during the twelve months ended July 31, 2010. This tax benefit effectively reversed thecorresponding charge that the Company incurred during the fourth quarter of fiscal 2009.

    Effective from the second quarter and for the related year-to-date periods of fiscal 2010, Cisco no longer uses non-GAAP shares in the calculation of non-GAAP net income per share.

    GAAP Recon Note 1 Cisco Systems, Inc. Confidential 12/6/201310:10 AM

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    Note 2

    Amortization of

    Cost of Sales Cost of Sales Research and Sales and General and

    Acquisition-relatedIntangible

    Other(Income) Total

    Items( In millions )

    Product Service Development Marketing Administrative Assets (Op. Exp.) loss, netQ1FY'10

    (a) Share-based compensation expense 12$ 33$ 97$ 128$ 51$ -$ -$ 321$

    (b) Amortization of acquisition-related intangible assets 44 - - - - 105 - 149

    (c) Other acquisition-related costs - - 30 3 13 - (42) 4

    Total 56$ 33$ 127$ 131$ 64$ 105$ (42)$ 474$

    Q2FY'10

    (a) Share-based compensation expense 15$ 41$ 110$ 145$ 60$ -$ -$ 371$

    (b) Amortization of acquisition-related intangible assets 54 - - - - 138 - 192

    (c) Other acquisition-related costs - - 28 4 11 - 38 81

    Total 69$ 41$ 138$ 149$ 71$ 138$ 38$ 644$

    Q3FY'10

    (a) Share-based compensation expense 16$ 47$ 129$ 171$ 71$ -$ -$ 434$

    (b) Amortization of acquisition-related intangible assets 64 - - - - 117 - 181

    (c) Other acquisition-related costs - - 16 3 10 - 14 43

    Total 80$ 47$ 145$ 174$ 81$ 117$ 14$ 658$

    Q4FY'10(a) Share-based compensation expense 14$ 43$ 114$ 158$ 62$ -$ -$ 391$

    (b) Amortization of acquisition-related intangible assets 93 - - - - 131 - 224

    (c) Other acquisition-related costs - - 30 5 8 - (2) 41

    (d) Significant asset impairments and restructurings - - - - 120 - - 120

    Total 107$ 43$ 144$ 163$ 190$ 131$ (2)$ 776$

    FY'10

    (a) Share-based compensation expense 57$ 164$ 450$ 602$ 244$ -$ -$ 1,517$

    (b) Amortization of acquisition-related intangible assets 255 - - - - 491 - 746

    (c) Other acquisition-related costs - - 104 15 42 - 8 169

    (d) Significant asset impairments and restructurings - - - - 120 - - 120

    Total 312$ 164$ 554$ 617$ 406$ 491$ 8$ 2,552$

    Items (a) to (d) in note 1 are allocated as follows:

    GAAP Recon Note 2 Cisco Systems, Inc. Confidential 12/6/201310:10 AM