8-K

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 8-K

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934

Date of report (Date of earliest event reported): May 6, 2003

CISCO SYSTEMS, INC.

(Exact Name of Registrant as Specified in Charter)

California	0-18225	77-0059951
(State or Other Jurisdiction of Incorporation)	(Commission File Number)	(IRS Employer Identification No.)
170 West Tasman Drive, San Jose, California		95134-1706
(Address of Principal Executive Offices)		(Zip Code)

Registrant’s telephone number, including area code: (408) 526-4000

Not applicable
(Former name or former addressed, if changed since last report)

TABLE OF CONTENTS

	Item 7. Financial Statements, Pro Forma Financial Information and Exhibits.
	Item 9. Regulation FD Disclosure. (Information furnished pursuant to Item 12. Results of Operations and Financial Condition)
SIGNATURES
EXHIBIT INDEX
EXHIBIT 99.1

Item 7. Financial Statements, Pro Forma Financial Information and Exhibits.

     (c)  Exhibits.

99.1 Press Release, dated May 6, 2003, reporting the results of operations of Cisco Systems, Inc. (the “Registrant”) for its fiscal third quarter ended April 26, 2003 (furnished and not filed herewith solely pursuant to Item 12).

Item 9. Regulation FD Disclosure. (Information furnished pursuant to Item 12. Results of Operations and Financial Condition)

          On May 6, 2003, the Registrant reported its results of operations for its fiscal third quarter ended April 26, 2003. A copy of the press release issued by the Registrant concerning the foregoing results is furnished herewith as Exhibit 99.1 and is incorporated herein by reference.

          The information contained herein and in the accompanying exhibit is being furnished pursuant to “Item 12. Results of Operations and Financial Condition” in accordance with interim guidance issued by the Securities and Exchange Commission in Release No. 33-8216. The information contained herein and in the accompanying exhibit shall not be incorporated by reference into any filing of the Registrant, whether made before or after the date hereof, regardless of any general incorporation language in such filing, unless expressly incorporated by specific reference to such filing. The information in this report, including the exhibit hereto, shall not be deemed to be “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liabilities of that section or Sections 11 and 12(a)(2) of the Securities Act of 1933, as amended.

          In addition to reporting financial results in accordance with generally accepted accounting principles, or GAAP, the Registrant provides pro forma net income and pro forma net income per share in the press release as additional information for its operating results. These measures are not in accordance with, or an alternative for, GAAP and may be different from pro forma measures used by other companies. The Registrant’s management believes that this presentation of pro forma net income and pro forma net income per share provides useful information to management and investors regarding certain additional financial and business trends relating to its financial condition and results of operations. In addition, management uses these measures for reviewing the financial results of the Registrant and for budget planning purposes.

SIGNATURES

          Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

	CISCO SYSTEMS, INC.
Dated: May 6, 2003	By:	/s/ Larry R. Carter
	Name:	Larry R. Carter
	Title:	Senior Vice President, Finance and Administration, Chief Financial Officer, Secretary and Director

EXHIBIT INDEX

Exhibit
Number	Description of Document
99.1	Press Release of Registrant, dated May 6, 2003, reporting the results of operations for the Registrant’s third fiscal quarter ended April 26, 2003.

EX-99.1 3 f89872exv99w1.htm EXHIBIT 99.1

Exhibit 99.1

Press Contact:	Investor Relations Contact:
Robyn Jenkins-Blum	Blair Christie
Cisco Systems, Inc.	Cisco Systems, Inc.
(408) 853-9848	(408) 525-4856
rojenkin@cisco.com	blchrist@cisco.com

CISCO SYSTEMS REPORTS THIRD QUARTER EARNINGS

• Q3 Revenues: $4.6 Billion

• Q3 Operating Cash Flow: $1.26 Billion

• Q3 Earnings Per Share: $0.14 GAAP; $0.15 Pro Forma

          SAN JOSE, Calif. — May 6, 2003 — Cisco Systems, Inc., the worldwide leader in networking for the Internet, today reported its third quarter results for the period ended April 26, 2003.

          Net sales for the third quarter of fiscal 2003 were $4.6 billion, compared with $4.8 billion for the third quarter of fiscal 2002, a decrease of 4.2 percent, and compared with $4.7 billion for the second quarter of fiscal 2003.

          Net income for the third quarter of fiscal 2003, on a generally accepted accounting principles (GAAP) basis, was $987 million or $0.14 per share, compared with $729 million or $0.10 per share for the third quarter of fiscal 2002, and compared with $991 million or $0.14 per share for the second quarter of fiscal 2003. Pro forma net income for the third quarter of fiscal 2003 was $1.1 billion or $0.15 per share, compared with pro forma net income of $838 million or $0.11 per share for the third quarter of fiscal 2002, and compared with $1.1 billion or $0.15 per share for the second quarter of fiscal 2003. A reconciliation between net income on a GAAP basis and pro forma net income is provided in a table immediately following the Pro Forma Consolidated Statements of Operations.

          Net sales for the first nine months of fiscal 2003 were $14.2 billion, compared with $14.1 billion for the first nine months of fiscal 2002, an increase of 0.6 percent.

          Net income for the first nine months of fiscal 2003, on a GAAP basis, was $2.6 billion or $0.36 per share, compared with $1.1 billion or $0.15 per share for the first nine months of fiscal 2002. Pro forma net income for the first nine months of fiscal 2003 was $3.2 billion or $0.44 per share, compared with pro forma net income of $1.8 billion or $0.25 per share for the first nine months of fiscal 2002.

          During the third quarter of fiscal 2003, Cisco completed the acquisition of Okena, Inc. The purchase price, including assumed liabilities, was approximately $160 million.

          “As we navigate through these challenging market transitions, we are particularly pleased with our solid financial and operational performance during the quarter,” said John Chambers, president and CEO of Cisco Systems. “By focusing on managing our business and making strategic investments in R&D and advanced technology markets, we are positioning ourselves for growth as the economy recovers, whenever that may be.”

          Chambers continued, “What’s becoming increasingly clear is that productivity growth fueled by information technology will continue to contribute to the broader economic recovery. This quarter, we continued to meet with CEOs and CIOs from the world’s leading companies who view information technology as the enabler of their business strategies, allowing for greater productivity and competitive advantage. Cisco is well positioned to help customers integrate the applications, business processes and technologies that will continue to drive these productivity gains.”

Financial Highlights

• Cash flows from operations were $1.26 billion for the third quarter of fiscal 2003, compared with $1.59 billion for the third quarter of fiscal 2002, and compared with $1.36 billion for the second quarter of fiscal 2003.

• Cash and cash equivalents and total investments were $20.3 billion at the end of the third quarter of fiscal 2003, compared with $21.5 billion at the end of fiscal year 2002, and compared with $21.2 billion at the end of the second quarter of fiscal 2003.

• During the third quarter of fiscal 2003, Cisco repurchased $2.0 billion of common stock. The total amount of stock repurchases for the first nine months of fiscal 2003 was $4.5 billion.

• Days sales outstanding (DSO) in accounts receivable at the end of the third quarter of fiscal 2003 were 23 days, compared with 21 days at the end of the fourth quarter of fiscal 2002 and the second quarter of fiscal 2003.

• Inventory turns were 7.0 in the third quarter of fiscal 2003, consistent with the fourth quarter of fiscal 2002 and the second quarter of fiscal 2003.

Business Highlights

• Cisco and EMC signed a letter of intent to enter into an agreement that will allow EMC to resell the Cisco MDS 9000 Series of storage area network (SAN) switches.

• Cisco announced definitive agreements to acquire the business of The Linksys Group, Inc., a provider of home networking products for consumers and small office/home office (SOHO) users, and SignalWorks, Inc., a developer of advanced software that delivers high-performance audio capabilities for IP telephony. Cisco also completed the acquisition of Okena, Inc., a developer of network security software.

• Cisco announced the wireless Cisco IP Phone 7920, which operates over an IP network infrastructure with Cisco Aironet® Series IEEE 802.11b compliant wireless access points.

• Cisco announced several new IP telephony customers, including Cap Gemini Ernst & Young, the Cancer Therapy and Research Center, and the Memphis Grizzlies.

• Cisco announced the Cisco Compatible Extensions program, a no-cost licensing agreement to enable interoperability of third-party client adapters and mobile devices with Cisco Aironet wireless local area network (LAN) infrastructure.

• Cisco introduced the Cisco Catalyst® 3750 Series next-generation stackable switch platform with Gigabit Ethernet performance for midsized organizations and enterprise branch offices.

• Cisco introduced next-generation interfaces for the Catalyst 6500 Series Multilayer Switch, consisting of the Catalyst 6500 Series Supervisor Engine 720, high-performance two-port and four-port 10 Gigabit Ethernet modules, and two 48-port 10/100/1000 Ethernet modules.

• Cisco announced the Catalyst 2955 Series industrial Ethernet switch designed for deployment in manufacturing environments.

• AT&T and Cisco expanded their relationship to enhance the delivery of AT&T’s portfolio of global managed services that use Cisco technology.

• France Telecom, China Telecom, Telstra and Japan’s “Super SINET” ultra-high-speed research network announced plans to deploy Cisco 12000 Series routers.

• Cisco introduced the Cisco 7301 Router for customer-edge applications such as Internet/campus gateway and service provider managed services.

Editors Note:

• Q3 FY’03 conference call to discuss Cisco results along with its outlook for Q4 FY’03 to be held at 1:30 p.m. PT on Tuesday, May 6, 2003. Conference call number is 888-603-8938 (United States); 712-271-0944 (international).

• Conference call replay available from 4:30 p.m. PT on May 6, 2003 to 4:30 p.m. PT on May 13, 2003 at 800-454-0218 (United States); 402-220-2147 (international).

• Additional information regarding Cisco’s financials and corresponding Webcast with visuals designed to guide participants through the call are also available at 1:30 p.m. PT. Prepared remarks will be available approximately 24 hours after completion of the call. The Webcast will include both the prepared remarks, as well as the question-and-answer session. This information, along with GAAP reconciliation information, will be available at http://www.cisco.com under “About Cisco” in the Investor Relations section.

• Additional information regarding Cisco’s Q3 FY’03 results will be available at http://newsroom.cisco.com, including:

o Customer Highlights and Technology Innovation Fact Sheet

o Summary Q&A with Cisco’s CEO and CFO

About Cisco Systems

          Cisco Systems, Inc., (NASDAQ: CSCO) is the worldwide leader in networking for the Internet. News and information are available at www.cisco.com.

###

This release may be deemed to contain forward-looking statements which are subject to the safe harbor provisions of the Private Litigation Reform Act of 1995. These forward-looking statements include, among other things, statements regarding future events and the future financial performance of Cisco that involve risks and uncertainties. Readers are cautioned that these forward-looking statements are only predictions and may differ materially from actual future events or results. Readers are referred to the documents filed by Cisco with the SEC, specifically the most recent reports on Form 10-K and 10-Q, each as it may be amended from time to time, which identify important risk factors that could cause actual results to differ from those contained in the forward-looking statements. Among the important factors or risks that could cause actual results or events to differ materially from those in the forward-looking statements in this release are: business and economic conditions and growth trends in the networking industry in various geographic regions; global economic conditions and uncertainties in the geopolitical environment; overall information technology spending; the growth of the Internet and levels of capital spending on Internet-based systems; variations in customer demand for products and services, including sales to the service provider market; the timing of orders and manufacturing lead times; changes in customer order patterns; insufficient, excess or obsolete inventory; variations in sales channels, product costs, or mix of products sold; the ability to successfully reduce overhead and manage expenses; the ability to successfully acquire businesses and technologies and to successfully integrate and operate these acquired businesses and technologies; increased competition in the networking industry; dependence on the introduction and market acceptance of new product offerings and standards; rapid technological and market change; the trend toward sales of integrated network solutions; manufacturing and sourcing risks; Internet infrastructure problems and government regulation of the Internet; international operations; litigation involving patents, intellectual property, antitrust, stockholder and other matters; possible disruption in commercial activities occasioned by terrorist activity and armed conflict, such as changes in logistics and security arrangements, and reduced end-user purchases relative to expectations; the ability to recruit and retain key personnel; stock price volatility; financial risk management; and potential volatility in operating results, among others. The financial information contained in this release should be read in conjunction with the consolidated financial statements and notes thereto included in Cisco’s most recent reports on Form 10-K and Form 10-Q, each as it may be amended from time to time. Cisco’s results of operations for the three and nine months ended April 26, 2003 are not necessarily indicative of Cisco’s operating results for the full fiscal year or any future periods. Any projections in this release are based on limited information currently available to Cisco, which is subject to change. Although any such projections and the factors influencing them will likely change, Cisco will not necessarily update the information, since Cisco is only to provide guidance at certain points during the year. Actual events or results could differ materially and no reader of this release should assume later that the information provided today is still valid. Such information speaks only as of the date of this release.

Cisco provides pro forma net income and pro forma net income per share data as additional information for its operating results. These measures are not in accordance with, or an alternative for, generally accepted accounting principles and may be different from pro forma measures used by other companies. Cisco believes that this presentation of pro forma net income and pro forma net income per share provides useful information to management and investors regarding certain additional financial and business trends relating to its financial condition and results of operations. In addition, Cisco’s management uses these measures for reviewing the financial results of Cisco and for budget planning purposes.

Copyright © 2003 Cisco Systems, Inc. All rights reserved. Aironet, Catalyst, Cisco, Cisco IOS, Cisco Systems and the Cisco Systems logo are registered trademarks or trademarks of Cisco Systems, Inc. and/or its affiliates in the U.S. and certain other countries. All other trademarks mentioned in this document or Web site are the property of their respective owners. The use of the word partner does not imply a partnership relationship between Cisco and any other company.

Cisco Systems, Inc.
CONSOLIDATED STATEMENTS OF OPERATIONS
(In millions, except per-share amounts)
(Unaudited)

				Three Months Ended						Nine Months Ended
				April 26,			April 27,			April 26,			April 27,
				2003			2002			2003			2002
NET SALES:
	Product			$	3,799		$	3,993		$	11,703		$	11,671
	Services				819			829			2,473			2,415
		Total net sales			4,618			4,822			14,176			14,086
COST OF SALES:
	Product				1,086			1,515			3,467			4,608
	Services				263			239			765			748
		Total cost of sales			1,349			1,754			4,232			5,356
	GROSS MARGIN				3,269			3,068			9,944			8,730
OPERATING EXPENSES:
	Research and development				703			807			2,290			2,504
	Sales and marketing				1,019			1,057			3,084			3,207
	General and administrative				181			163			504			459
	Payroll tax on stock option exercises				—			1			—			7
	Amortization of deferred stock-based compensation				25			37			101			133
	Amortization of purchased intangible assets				92			129			284			411
	In-process research and development				3			—			3			37
			Total operating expenses		2,023			2,194			6,266			6,758
OPERATING INCOME					1,246			874			3,678			1,972
Loss on public equity investments					—			—			(412	)		(858	)
Interest income					161			220			514			687
Other loss, net					(26	)		(70	)		(140	)		(188	)
INCOME BEFORE PROVISION FOR INCOME TAXES					1,381			1,024			3,640			1,613
Provision for income taxes					394			295			1,044			492
	NET INCOME			$	987		$	729		$	2,596		$	1,121
Net income per share—basic				$	0.14		$	0.10		$	0.36		$	0.15
Net income per share—diluted				$	0.14		$	0.10		$	0.36		$	0.15
Shares used in per-share calculation—basic					7,062			7,306			7,165			7,310
Shares used in per-share calculation—diluted					7,158			7,454			7,257			7,473

Cisco Systems, Inc.
PRO FORMA CONSOLIDATED STATEMENTS OF OPERATIONS
(In millions, except per-share amounts)
(Unaudited)

			Three Months Ended						Nine Months Ended
			April 26,			April 27,			April 26,			April 27,
			2003			2002			2003			2002
NET SALES:
	Product		$	3,799		$	3,993		$	11,703		$	11,671
	Services			819			829			2,473			2,415
		Total net sales		4,618			4,822			14,176			14,086
COST OF SALES:
	Product			1,086			1,542			3,467			5,120
	Services			263			239			765			748
		Total cost of sales		1,349			1,781			4,232			5,868
	GROSS MARGIN			3,269			3,041			9,944			8,218
OPERATING EXPENSES:
	Research and development			703			807			2,290			2,504
	Sales and marketing			1,019			1,057			3,084			3,207
	General and administrative			181			163			504			459
		Total operating expenses		1,903			2,027			5,878			6,170
OPERATING INCOME				1,366			1,014			4,066			2,048
Interest income				161			220			514			687
Other loss, net				(26	)		(70	)		(140	)		(188	)
INCOME BEFORE PROVISION FOR INCOME TAXES				1,501			1,164			4,440			2,547
Provision for income taxes				420			326			1,242			713
	NET INCOME		$	1,081		$	838		$	3,198		$	1,834
Net income per share—basic			$	0.15		$	0.11		$	0.45		$	0.25
Net income per share—diluted			$	0.15		$	0.11		$	0.44		$	0.25
Shares used in per-share calculation—basic				7,062			7,306			7,165			7,310
Shares used in per-share calculation—diluted				7,158			7,454			7,257			7,473
A reconciliation between net income on a GAAP basis and pro forma net income is as follows:
GAAP net income			$	987		$	729		$	2,596		$	1,121
	In-process research and development			3			—			3			37
	Payroll tax on stock option exercises			—			1			—			7
	Amortization of deferred stock-based compensation			25			37			101			133
	Amortization of purchased intangible assets			92			129			284			411
	Loss on public equity investments			—			—			412			858
	Excess inventory benefit			—			(27	)		—			(512	)
	Income tax effect			(26	)		(31	)		(198	)		(221	)
Pro forma net income			$	1,081		$	838		$	3,198		$	1,834

Cisco Systems, Inc.
CONSOLIDATED BALANCE SHEETS
(In millions)
(Unaudited)

			April 26,		July 27,
			2003		2002
ASSETS
Current assets:
	Cash and cash equivalents		$	3,940	$	9,484
	Short-term investments			4,048		3,172
	Accounts receivable, net of allowance for doubtful accounts of $274 at April 26, 2003 and $335 at July 27, 2002			1,157		1,105
	Inventories, net			765		880
	Deferred tax assets			1,935		2,030
	Lease receivables, net			181		239
	Prepaid expenses and other current assets			595		523
		Total current assets		12,621		17,433
Investments				12,328		8,800
Property and equipment, net				3,805		4,102
Goodwill				3,813		3,565
Purchased intangible assets, net				551		797
Lease receivables, net				48		39
Other assets				3,090		3,059
		TOTAL ASSETS	$	36,256	$	37,795
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
	Accounts payable		$	480	$	470
	Income taxes payable			544		579
	Accrued compensation			1,293		1,365
	Deferred revenue			2,954		3,143
	Other accrued liabilities			2,220		2,496
	Restructuring liabilities			304		322
		Total current liabilities		7,795		8,375
Deferred revenue				805		749
		Total liabilities		8,600		9,124
Minority interest				11		15
Shareholders’ equity				27,645		28,656
		TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY	$	36,256	$	37,795

Cisco Systems, Inc.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In millions)
(Unaudited)

					Nine Months Ended
					April 26,			April 27,
					2003			2002
Cash flows from operating activities:
	Net income				$	2,596		$	1,121
	Adjustments to reconcile net income to net cash provided by operating activities:
		Depreciation and amortization				1,166			1,353
		Provision for doubtful accounts				94			91
		Provision for on-hand inventory				26			150
		Deferred income taxes				131			(373	)
		Tax benefits from employee stock option plans				19			51
		In-process research and development				3			25
		Net (gains) losses on investments and provision for losses				523			1,076
		Change in operating assets and liabilities:
			Accounts receivable			(142	)		385
			Inventories			89			665
			Prepaid expenses and other current assets			(79	)		(20	)
			Accounts payable			10			(208	)
			Income taxes payable			(319	)		51
			Accrued compensation			(72	)		208
			Deferred revenue			(133	)		619
			Other accrued liabilities			(203	)		(171	)
			Restructuring liabilities			(18	)		(45	)
				Net cash provided by operating activities		3,691			4,978
Cash flows from investing activities:
	Purchases of short-term investments					(6,759	)		(4,166	)
	Proceeds from sales and maturities of short-term investments					7,346			4,702
	Purchases of investments					(13,024	)		(13,600	)
	Proceeds from sales and maturities of investments					7,975			10,658
	Purchases of restricted investments					—			(291	)
	Proceeds from sales and maturities of restricted investments					—			1,471
	Acquisition of property and equipment					(504	)		(2,243	)
	Acquisition of businesses, net of cash and cash equivalents					3			14
	Change in lease receivables, net					49			344
	Purchases of investments in privately held companies					(141	)		(52	)
	Lease deposits					—			320
	Purchase of minority interest of Cisco Systems, K.K. (Japan)					(59	)		(91	)
	Other					126			98
				Net cash used in investing activities		(4,988	)		(2,836	)
Cash flows from financing activities:
	Issuance of common stock					279			431
	Repurchase of common stock					(4,549	)		(952	)
	Other					23			(1	)
				Net cash used in financing activities		(4,247	)		(522	)
Net (decrease) increase in cash and cash equivalents						(5,544	)		1,620
Cash and cash equivalents, beginning of period						9,484			4,873
Cash and cash equivalents, end of period					$	3,940		$	6,493

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EX-99.1

Exhibit 99.1