8-K

UNITED STATES

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 14, 2014

CISCO SYSTEMS, INC.

(Exact name of registrant as specified in its charter)

California

(State or other jurisdiction of incorporation)

0-18225	77-0059951
(Commission File Number)	(IRS Employer Identification No.)
170 West Tasman Drive, San Jose, California	95134-1706
(Address of principal executive offices)	(Zip Code)

(408) 526-4000

(Registrant’s telephone number, including area code)

Not Applicable

(Former name or former address, if changed since last report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

¨ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

¨ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

¨ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

¨ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Item 2.02.         Results of Operations and Financial Condition.

On May 14, 2014, Cisco Systems, Inc. (the “Registrant”) reported its results of operations for its fiscal third quarter 2014 ended April 26, 2014. A copy of the press release issued by the Registrant concerning the foregoing results is furnished herewith as Exhibit 99.1.

The information contained herein and in the accompanying exhibits 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 exhibits 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.

The attached exhibits include non-GAAP net income, non-GAAP effective tax rates, non-GAAP net income per share data, non-GAAP inventory turns and free cash flow.

These non-GAAP measures are not in accordance with, or an alternative for, measures prepared in accordance with generally accepted accounting principles, and may be different from non-GAAP measures used by other companies. In addition, these non-GAAP measures are not based on any comprehensive set of accounting rules or principles. The Registrant believes that non-GAAP measures have limitations in that they do not reflect all of the amounts associated with the Registrant’s results of operations as determined in accordance with GAAP and that these measures should only be used to evaluate the Registrant’s results of operations in conjunction with the corresponding GAAP measures.

The Registrant believes that the presentation of non-GAAP net income, non-GAAP effective tax rates, and non-GAAP net income per share data when shown in conjunction with the corresponding GAAP measures, provides useful information to investors and management regarding financial and business trends relating to its financial condition and results of operations. In addition, the Registrant believes that the presentation of non-GAAP inventory turns provides useful information to investors and management regarding financial and business trends relating to inventory management based on the operating activities of the periods presented. The Registrant believes that the presentation of free cash flow, which it defines as the net cash provided by operating activities less cash used to acquire property and equipment, to be a liquidity measure that provides useful information to management and investors because of the Registrant’s intent to return a stated percentage of free cash flow to shareholders in the form of dividends and stock repurchases. The Registrant further regards free cash flow as a useful measure because it reflects cash that can be used to, among other things, invest in its business, make strategic acquisitions, repurchase common stock, and pay dividends on its common stock, after deducting capital investments.

For its internal budgeting process, the Registrant’s management uses financial statements that do not include, when applicable, share-based compensation expense, amortization of acquisition-related intangible assets, impact to cost of sales from purchase accounting adjustments to inventory, acquisition-related/divestiture costs, significant asset impairments and restructurings, significant litigation and other contingencies (such as the supplier component remediation charge in the second quarter of fiscal 2014 and the patent litigation settlement with TiVo, Inc. in the fourth quarter of fiscal 2013), the income tax effects of the foregoing, and significant tax matters. The Registrant’s management also uses the foregoing non-GAAP measures, in addition to the corresponding GAAP measures, in reviewing the financial results of the Registrant. In prior periods, the Registrant has excluded other items that it no longer excludes for purposes of its non-GAAP financial measures. From time to time in the future, there may be other items that the Registrant may exclude for purposes of its internal budgeting process and in reviewing its financial results.

As described above, the Registrant excludes the following items from one or more of its non-GAAP measures when applicable:

Share-based compensation expense. These expenses consist primarily of expenses for employee restricted stock and restricted stock units, employee stock options, and employee stock purchase rights, including such expenses associated with acquisitions. The Registrant excludes share-based compensation expense from its non-GAAP measures primarily because they are non-cash expenses that the Registrant does not believe are reflective of ongoing operating results. Further, the Registrant believes that it is useful to investors to understand the impact of share-based compensation to its results of operations.

Amortization of acquisition-related intangible assets. The Registrant incurs amortization of intangible assets (which may include impairment charges from the write-downs of purchased intangible assets) in connection with acquisitions. The Registrant excludes these items because the Registrant does not believe these expenses are reflective of ongoing operating results in the period incurred. These amounts arise from the Registrant’s prior acquisitions and have no direct correlation to the operation of the Registrant’s business.

Impact to cost of sales from purchase accounting adjustments to inventory. This represents the amount of increase in inventory valuation resulting from the fair value adjustments required under purchase accounting for business combinations. These amounts arise from the Registrant’s prior acquisitions and have no direct correlation to the operation of the Registrant’s business.

Acquisition-related/divestiture costs. In connection with its business combinations, the Registrant incurs compensation expense, changes to the fair value of contingent consideration, as well as professional fees and other direct expenses such as restructuring activities related to the acquired company. In addition, from time to time the Registrant enters into foreign currency transactions related to pending acquisitions, and may incur gains or losses on such transactions. The Registrant may also from time to time incur gains or losses from divestitures of a business area as well as professional fees and other direct expenses associated with such transactions. The Registrant excludes such compensation expense, changes to the fair value of contingent consideration, fees, other direct expenses, and gains and losses, as they are related to acquisitions and divestitures and have no direct correlation to the operation of the Registrant’s business.

Significant asset impairments and restructurings. The Registrant from time to time incurs significant asset impairments, restructuring charges, and gains or losses on asset disposals. The Registrant excludes these items, when significant, because it does not believe they are reflective of ongoing business and operating results.

Significant litigation and other contingencies. The Registrant from time to time may incur charges or benefits related to significant litigation and other contingencies. The Registrant excludes these charges or benefits, when significant, because it does not believe they are reflective of ongoing business and operating results.

Income tax effects of the foregoing. This amount is used to present each of the amounts described above on an after-tax basis consistent with the presentation of non-GAAP net income.

Significant tax matters. The Registrant may incur tax charges or benefits in the current period that relate to one or more prior fiscal years as a result of events such as changes in tax legislation, court decisions, and/or tax settlements. The Registrant excludes these charges or benefits, when significant, because it does not believe they are reflective of ongoing business and operating results.

From time to time in the future, there may be other items that the Registrant may exclude if it believes that doing so is consistent with the goal of providing useful information to investors and management.

The Registrant will incur share-based compensation expense, amortization of acquisition-related intangible assets, impacts to cost of sales from purchase accounting adjustments to inventory, and acquisition-related costs, in future periods. Significant asset impairments, restructurings, significant litigation and other contingencies, and divestiture costs could occur in future periods. The Registrant could also be impacted by significant tax matters in future periods.

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 14, 2014	By:	/s/ Frank A. Calderoni
	Name:	Frank A. Calderoni
	Title:	Executive Vice President and Chief Financial Officer

EXHIBIT INDEX

Exhibit Number	Description of Document
99.1	Press Release of Registrant, dated May 14, 2014, reporting the results of operations for the Registrant’s fiscal third quarter ended April 26, 2014.

EX-99.1

Exhibit 99.1

Press Contact:	Investor Relations Contact:
Robyn Jenkins-Blum	Marilyn Mora
Cisco	Cisco
1 (408) 853-9848	1 (408) 527-7452
rojenkin@cisco.com	marilmor@cisco.com

Cisco Demonstrates Solid Execution in Q3FY14

New Markets and Technologies Drive Plan to Return to Growth

• Q3 Revenue: $11.5 billion

• Q3 Earnings per Share: $0.42 GAAP; $0.51 non-GAAP

SAN JOSE, Calif. -- May 14, 2014 -- Cisco, the worldwide leader in networking that transforms how people connect, communicate and collaborate, today reported its third quarter results for the period ended April 26, 2014. Cisco reported third quarter revenue of $11.5 billion, net income on a generally accepted accounting principles (GAAP) basis of $2.2 billion or $0.42 per share, and non-GAAP net income of $2.6 billion or $0.51 per share.

“I’m pleased with our performance in Q3. Our financial results exceeded the guidance we provided last quarter as we demonstrated clear progress on returning to growth. The entire team is focused on moving Cisco forward aggressively and we remain confident in our long-term goal to be the #1 IT company,” stated John Chambers, Cisco chairman and chief executive officer.

GAAP Results

	Q3 2014	Q3 2013	Vs. Q3 2013
Revenue	$11.5 billion	$12.2 billion	(5.5)%
Net Income	$2.2 billion	$2.5 billion	(12.0)%
Earnings per Share	$      0.42	$      0.46	(8.7)%
Non-GAAP Results
	Q3 2014	Q3 2013	Vs. Q3 2013
Net Income	$2.6 billion	$2.7 billion	(3.2)%
Earnings per Share	$      0.51	$      0.51	—%

Revenue for the first nine months of fiscal 2014 was $34.8 billion, compared with $36.2 billion for the first nine months of fiscal 2013. Net income for the first nine months of fiscal 2014, on a GAAP basis, was $5.6 billion or $1.06 per share, compared with $7.7 billion or $1.44 per share for the first nine months of fiscal 2013. Non-GAAP net income for the first nine months of fiscal 2014 was $8.0 billion or $1.51 per share, compared with $8.0 billion or $1.50 per share for the first nine months of fiscal 2013.

A reconciliation between net income on a GAAP basis and non-GAAP net income is provided in the table following the Consolidated Statements of Operations.

Cisco will discuss third quarter results and business outlook on a conference call and webcast at 1:30 p.m. Pacific Time today. Call information and related charts are available at http://investor.cisco.com.

Cash and Cash Equivalents and Investments

• Cash flows from operations were $3.2 billion for the third quarter of fiscal 2014, compared with $2.9 billion for the second quarter of fiscal 2014, and compared with $3.1 billion for the third quarter of fiscal 2013.

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• Cash and cash equivalents and investments were $50.5 billion at the end of the third quarter of fiscal 2014, compared with $47.1 billion at the end of the second quarter of fiscal 2014, and compared with $50.6 billion at the end of the fourth quarter of fiscal 2013.

Dividends and Stock Repurchase Program

• Cisco repurchased approximately 90 million shares of common stock under the stock repurchase program at an average price of $22.24 per share for an aggregate purchase price of $2.0 billion during the third quarter of fiscal 2014. As of April 26, 2014, Cisco had repurchased and retired 4.2 billion shares of Cisco common stock at an average price of $20.56 per share for an aggregate purchase price of approximately $86.9 billion since the inception of the stock repurchase program. The remaining authorized amount for stock repurchases under this program as of April 26, 2014 was approximately $10.1 billion with no termination date.

• During the third quarter of fiscal 2014, Cisco paid a cash dividend of $0.19 per common share, or $974 million.

“We executed well this quarter with a focus on operational excellence,” stated Frank Calderoni, Cisco executive vice president and chief financial officer. “Our strong and consistent cash generation demonstrates the value of our business model.”

Internet of Everything

• Cisco announced plans to build the world’s largest global Intercloud for the Internet of Everything (IoE) together with a set of partners, a distributed network and security architecture designed for high-value application workloads, real-time analytics, “near infinite” scalability and full compliance with local data sovereignty laws.

• Cisco and AGT International announced a Smart City Global Strategic Alliance that plans to deliver the promise of the IoE through edge analytics and cloud technologies that dramatically change the way cities are managed and safeguarded.

• Cisco selected Toronto as the location for one of four global Cisco® Internet of Everything Innovation Centers, representing a planned investment of up to $100 million over 10 years.

Next Generation of IT

• Cisco’s Visual Networking Index™ Global Mobile Data Traffic Forecast Update for 2013 to 2018 projects that worldwide mobile data traffic is expected to increase nearly 11-fold over the next four years and reach an annual run rate of 190 exabytes by 2018.

• Cisco announced it worked with Fira de Barcelona and the GSMA to successfully provide one of the world’s largest carrier-grade Wi-Fi networks at the GSMA’s Mobile World Congress 2014 at Fira Gran Via in Barcelona, underscoring the growing importance of Wi-Fi to cellular.

• Cisco, AT&T, GE, IBM and Intel announced the formation of the Industrial Internet Consortium™, an open membership group focused on breaking down the barriers of technology silos to support better access to big data with improved integration of the physical and digital worlds.

• Cisco announced Managed Threat Defense, a managed security solution that applies real-time, predictive analytics designed to detect attacks and protect against advanced malware across customers’ extended networks.

Innovation

• Cisco extended Application Centric Infrastructure (ACI) by introducing the Cisco Application Policy Infrastructure Controller (APIC) Enterprise Module, which extends to the WAN and access networks.

• Cisco continued delivering on its vision for fog computing with the announcement of Cisco IOx, transforming the network edge into a distributed computing infrastructure for applications that take advantage of the billions of devices already connected in the Internet of Things (IoT).

• Cisco announced OpenAppID, allowing for the ability to create and integrate new open source application identification capabilities into its Snort engine.

• Cisco announced an agreement with CableLabs to provide them with core infrastructure and Videoscape components for a new IPTV Innovations Lab in Louisville, Colorado designed to provide cable system operator members with a state-of-the-art location for Internet Protocol (IP) video testing.

• Cisco and Sony became the first companies to publicly demonstrate the live delivery of full-frame rate 4K 60P content at NAB 2014.

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Editor’s Notes:

• Q3 fiscal year 2014 conference call to discuss Cisco’s results along with its business outlook will be held on Wednesday, May 14, 2014 at 1:30 p.m. Pacific Time. Conference call number is 1-888-848-6507 (United States) or 1-212-519-0847 (international).

• Conference call replay will be available from 4:00 p.m. Pacific Time on May 14, 2014 to 11:59 p.m. Pacific Time on June 1, 2014 at 1-800-945-7422 (United States) or 1-203-369-3952 (international). The replay will also be available via webcast from May 14, 2014 through July 19, 2014 on the Cisco Investor Relations website at http://investor.cisco.com.

• Additional information regarding Cisco’s financials as well as a webcast of the conference call with visuals designed to guide participants through the call, will be available at 1:30 p.m. Pacific Time, May 14, 2014. Text of the conference call’s prepared remarks will be available within 24 hours of completion of the call. The webcast will include both the prepared remarks and the question-and-answer session. This information, along with GAAP reconciliation information, will be available on the Cisco Investor Relations website at http://investor.cisco.com.

About Cisco

Cisco (NASDAQ: CSCO) is the worldwide leader in IT that helps companies seize the opportunities of tomorrow by proving that amazing things can happen when you connect the previously unconnected. For ongoing news, please go to http://thenetwork.cisco.com.

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This release may be deemed to contain forward-looking statements, which are subject to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. These forward-looking statements include, among other things, statements regarding future events (such as our strategy and execution, our ability and plan to return to growth, our goal to be the #1 IT company, financial strength, strong cash generation and value of our business model) 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 due to a variety of factors, including: business and economic conditions and growth trends in the networking industry, our customer markets and various geographic regions; global economic conditions and uncertainties in the geopolitical environment; overall information technology spending; the growth and evolution 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 and other customer markets; the return on our investments in certain priorities, including our foundational priorities, and in certain geographical locations; the timing of orders and manufacturing and customer lead times; changes in customer order patterns or customer mix; insufficient, excess or obsolete inventory; variability of component costs; variations in sales channels, product costs or mix of products sold; our ability to successfully acquire businesses and technologies and to successfully integrate and operate these acquired businesses and technologies; our ability to achieve expected benefits of our partnerships; increased competition in our product and service markets, including the data center; dependence on the introduction and market acceptance of new product offerings and standards; rapid technological and market change; manufacturing and sourcing risks; product defects and returns; litigation involving patents, intellectual property, antitrust, shareholder and other matters, and governmental investigations; natural catastrophic events; a pandemic or epidemic; our ability to achieve the benefits anticipated from our investments in sales, engineering, service, marketing and manufacturing activities; our ability to recruit and retain key personnel; our ability to manage financial risk, and to manage expenses during economic downturns; risks related to the global nature of our operations, including our operations in emerging markets; currency fluctuations and other international factors; changes in provision for income taxes, including changes in tax laws and regulations or adverse outcomes resulting from examinations of our income tax returns; potential volatility in operating results; and other factors listed in Cisco’s most recent reports on Forms 10-Q and 10-K filed on February 20, 2014 and September 10, 2013, respectively. 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 Forms 10-Q and 10-K as each may be amended from time to time. Cisco’s results of operations for the three and nine months ended April 26, 2014 are not necessarily indicative of Cisco’s operating results for 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 will only provide guidance at certain points during the year. Such information speaks only as of the date of this release.

This release includes non-GAAP net income, non-GAAP effective tax rates, non-GAAP net income per share data, non-GAAP inventory turns and free cash flow.

These non-GAAP measures are not in accordance with, or an alternative for, measures prepared in accordance with generally accepted accounting principles and may be different from non-GAAP measures used by other companies. In addition, these non-GAAP measures are not based on any comprehensive set of accounting rules or principles. Cisco believes that non-GAAP measures have limitations in that they do not reflect all of the amounts associated with Cisco’s results of operations as determined in accordance with GAAP and that these measures should only be used to evaluate Cisco’s results of operations in conjunction with the corresponding GAAP measures.

Cisco believes that the presentation of non-GAAP net income, non-GAAP effective tax rates, and non-GAAP net income per share data, when shown in conjunction with the corresponding GAAP measures, provides useful information to investors and management regarding financial and business trends relating to its financial condition and results of operations. In addition, Cisco believes that the presentation of non-GAAP inventory turns provides useful information to investors and management regarding financial and business trends relating to inventory management based on the operating activities of the periods presented. Cisco believes that the presentation of free cash flow, which it defines as the net cash provided by operating activities less cash used to acquire property and equipment, to be a liquidity measure that provides useful information to management and investors because of its intent to return a stated percentage of free cash flow to shareholders in the form of dividends and stock repurchases. Cisco further regards free cash flow as a useful measure because it reflects cash that can be used to, among other things, invest in its business, make strategic acquisitions, repurchase common stock, and pay dividends on its common stock, after deducting capital investments.

For its internal budgeting process, Cisco’s management uses financial statements that do not include, when applicable, share-based compensation expense, amortization of acquisition-related intangible assets, impact to cost of sales from purchase accounting adjustments to inventory, acquisition-related/divestiture costs, significant asset impairments and restructurings, significant litigation and other contingencies (such as the supplier component remediation charge in the second quarter of fiscal 2014 and the patent litigation settlement with TiVo, Inc. incurred in the fourth quarter of fiscal 2013), the income tax effects of the foregoing, and significant tax matters. Cisco’s management also uses the foregoing non-GAAP

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measures, in addition to the corresponding GAAP measures, in reviewing the financial results of Cisco. In prior periods, Cisco has excluded other items that it no longer excludes for purposes of its non-GAAP financial measures. From time to time in the future, there may be other items that Cisco may exclude for purposes of its internal budgeting process and in reviewing its financial results.

For additional information on the items excluded by Cisco from one or more of its non-GAAP financial measures, refer to the Form 8-K regarding this release furnished today to the Securities and Exchange Commission.

Copyright © 2014 Cisco and/or its affiliates. All rights reserved. Cisco, the Cisco logo, Videoscape and the Visual Networking Index are trademarks or registered trademarks of Cisco and/or its affiliates in the U.S. and other countries. To view a list of Cisco trademarks, go to: www.cisco.com/go/trademarks. Third-party trademarks mentioned in this document 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. This document is Cisco Public Information.

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CISCO SYSTEMS, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(In millions, except per-share amounts)

(Unaudited)

	Three Months Ended				Nine Months Ended
	April 26, 2014		April 27, 2013		April 26, 2014		April 27, 2013
REVENUE:
Product	$	8,820	$	9,559	$	26,640	$	28,293
Service		2,725		2,657		8,145		7,897
Total revenue		11,545		12,216		34,785		36,190
COST OF SALES:
Product		3,595		3,782		11,665		11,387
Service		944		923		2,756		2,710
Total cost of sales		4,539		4,705		14,421		14,097
GROSS MARGIN		7,006		7,511		20,364		22,093
OPERATING EXPENSES:
Research and development		1,565		1,542		4,701		4,425
Sales and marketing		2,342		2,375		7,030		7,178
General and administrative		460		530		1,426		1,674
Amortization of purchased intangible assets		71		89		207		329
Restructuring and other charges		26		33		336		105
Total operating expenses		4,464		4,569		13,700		13,711
OPERATING INCOME		2,542		2,942		6,664		8,382
Interest income		170		162		508		483
Interest expense		(146)		(145)		(422)		(440)
Other income (loss), net		76		(14)		187		(69)
Interest and other income (loss), net		100		3		273		(26)
INCOME BEFORE PROVISION FOR INCOME TAXES		2,642		2,945		6,937		8,356
Provision for income taxes		461		467		1,331		643
NET INCOME	$	2,181	$	2,478	$	5,606	$	7,713
Net income per share:
Basic	$	0.42	$	0.47	$	1.06	$	1.45
Diluted	$	0.42	$	0.46	$	1.06	$	1.44
Shares used in per-share calculation:
Basic		5,143		5,329		5,271		5,316
Diluted		5,180		5,387		5,311		5,361
Cash dividends declared per common share	$	0.19	$	0.17	$	0.53	$	0.45

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RECONCILIATION OF GAAP TO NON-GAAP NET INCOME

(In millions, except per-share amounts)

	Three Months Ended				Nine Months Ended
	April 26, 2014		April 27, 2013		April 26, 2014		April 27, 2013
GAAP net income	$	2,181	$	2,478	$	5,606	$	7,713
Adjustments to cost of sales:
Share-based compensation expense		51		44		146		136
Amortization of acquisition-related intangible assets		181		146		530		416
Supplier component remediation charge		—		—		655		—
Impact to cost of sales from purchase accounting adjustments to inventory		—		—		—		40
Acquisition-related/divestiture costs		1		—		1		—
Total adjustments to GAAP cost of sales		233		190		1,332		592
Adjustments to operating expenses:
Share-based compensation expense		302		230		867		749
Amortization of acquisition-related intangible assets		71		89		207		329
Acquisition-related/divestiture costs		68		16		483		70
Significant asset impairments and restructurings		26		(17)		336		55
Total adjustments to GAAP operating expenses		467		318		1,893		1,203
Total adjustments to GAAP income before provision for income taxes		700		508		3,225		1,795
Income tax effect of non-GAAP adjustments		(156)		(141)		(649)		(506)
Significant tax matters		(85)		(117)		(154)		(983)
Total adjustments to GAAP provision for income taxes		(241)		(258)		(803)		(1,489)
Non-GAAP net income	$	2,640	$	2,728	$	8,028	$	8,019
Diluted net income per share:
GAAP	$	0.42	$	0.46	$	1.06	$	1.44
Non-GAAP	$	0.51	$	0.51	$	1.51	$	1.50
RECONCILIATION OF GAAP TO NON-GAAP EFFECTIVE TAX RATE
	Three Months Ended				Nine Months Ended
	April 26, 2014		April 27, 2013		April 26, 2014		April 27, 2013
GAAP effective tax rate		17.4%		15.9%		19.2%		7.7%
Tax effect of non-GAAP adjustments to net income		3.6%		5.1%		1.8%		13.3%
Non-GAAP effective tax rate		21.0%		21.0%		21.0%		21.0%

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CISCO SYSTEMS, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(In millions)

(Unaudited)

	April 26, 2014		July 27, 2013
ASSETS
Current assets:
Cash and cash equivalents	$	6,241	$	7,925
Investments		44,228		42,685
Accounts receivable, net of allowance for doubtful accounts of $247 at April 26, 2014 and $228 at July 27, 2013		4,443		5,470
Inventories		1,528		1,476
Financing receivables, net		4,071		4,037
Deferred tax assets		2,504		2,616
Other current assets		1,273		1,312
Total current assets		64,288		65,521
Property and equipment, net		3,310		3,322
Financing receivables, net		3,537		3,911
Goodwill		24,076		21,919
Purchased intangible assets, net		3,461		3,403
Other assets		3,184		3,115
TOTAL ASSETS	$	101,856	$	101,191
LIABILITIES AND EQUITY
Current liabilities:
Short-term debt	$	508	$	3,283
Accounts payable		1,051		1,029
Income taxes payable		—		192
Accrued compensation		2,813		3,182
Deferred revenue		9,198		9,262
Other current liabilities		4,945		5,048
Total current liabilities		18,515		21,996
Long-term debt		20,384		12,928
Income taxes payable		1,530		1,748
Deferred revenue		3,953		4,161
Other long-term liabilities		1,678		1,230
Total liabilities		46,060		42,063
Total equity		55,796		59,128
TOTAL LIABILITIES AND EQUITY	$	101,856	$	101,191

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CISCO SYSTEMS, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In millions)

(Unaudited)

	Nine Months Ended
	April 26, 2014		April 27, 2013
Cash flows from operating activities:
Net income	$	5,606	$	7,713
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation, amortization, and other		1,811		1,851
Share-based compensation expense		1,009		880
Provision for receivables		48		46
Deferred income taxes		(181)		48
Excess tax benefits from share-based compensation		(84)		(48)
(Gains) losses on investments and other, net		(228)		(68)
Change in operating assets and liabilities, net of effects of acquisitions and divestitures:
Accounts receivable		1,064		(439)
Inventories		(50)		238
Financing receivables		332		(448)
Other assets		180		(41)
Accounts payable		(2)		91
Income taxes, net		(356)		(642)
Accrued compensation		(411)		(48)
Deferred revenue		(309)		(169)
Other liabilities		291		(56)
Net cash provided by operating activities		8,720		8,908
Cash flows from investing activities:
Purchases of investments		(27,884)		(23,969)
Proceeds from sales of investments		14,490		7,279
Proceeds from maturities of investments		12,048		13,234
Acquisition of property and equipment		(950)		(843)
Acquisition of businesses, net of cash and cash equivalents acquired		(2,784)		(6,371)
Purchases of investments in privately held companies		(315)		(140)
Return of investments in privately held companies		119		110
Proceeds from sales of property and equipment		168		57
Other		(30)		(10)
Net cash used in investing activities		(5,138)		(10,653)
Cash flows from financing activities:
Issuances of common stock		1,053		1,193
Repurchases of common stock - repurchase program		(7,965)		(1,554)
Shares repurchased for tax withholdings on vesting of restricted stock units		(345)		(249)
Short-term borrowings, original maturities less than 90 days, net		(2)		(20)
Issuances of debt		8,001		—
Repayments of debt		(3,274)		—
Excess tax benefits from share-based compensation		84		48
Dividends paid		(2,784)		(2,392)
Other		(34)		42
Net cash used in financing activities		(5,266)		(2,932)
Net decrease in cash and cash equivalents		(1,684)		(4,677)
Cash and cash equivalents, beginning of period		7,925		9,799
Cash and cash equivalents, end of period	$	6,241	$	5,122
Supplemental cash flow information:
Cash paid for interest	$	561	$	562
Cash paid for income taxes, net	$	1,868	$	1,236

Certain reclassifications have been made to prior period amounts to conform to the current period’s presentation.

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CASH AND CASH EQUIVALENTS AND INVESTMENTS

(In millions)

	April 26, 2014		July 27, 2013
Cash and cash equivalents and investments:
Cash and cash equivalents	$	6,241	$	7,925
Fixed income securities		42,269		39,888
Publicly traded equity securities		1,959		2,797
Total	$	50,469	$	50,610

RECONCILIATION OF NET CASH PROVIDED BY OPERATING ACTIVITIES

TO FREE CASH FLOW (NON-GAAP)

(In millions)

	Three Months Ended
	April 26, 2014		January 25, 2014		April 27, 2013
Net cash provided by operating activities	$	3,198	$	2,873	$	3,094
Acquisition of property and equipment		(373)		(262)		(291)
Free cash flow	$	2,825	$	2,611	$	2,803

DIVIDENDS PAID AND REPURCHASES OF COMMON STOCK

(In millions, except per-share amounts)

	DIVIDENDS				STOCK REPURCHASE PROGRAM						TOTAL
Quarter Ended	Per Share		Amount		Shares		Weighted-Average  Price per Share		Amount		Amount
Fiscal 2014
April 26, 2014	$	0.19	$	974		90	$	22.24	$	2,005	$	2,979
January 25, 2014	$	0.17	$	896		185	$	21.73	$	4,020	$	4,916
October 26, 2013	$	0.17	$	914		84	$	23.65	$	2,000	$	2,914
Fiscal 2013
July 27, 2013	$	0.17	$	918		47	$	24.80	$	1,160	$	2,078
April 27, 2013	$	0.17	$	905		41	$	20.85	$	860	$	1,765
January 26, 2013	$	0.14	$	743		25	$	20.15	$	500	$	1,243
October 27, 2012	$	0.14	$	744		15	$	16.44	$	253	$	997

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ACCOUNTS RECEIVABLE AND DSO

(In millions, except DSO)

	April 26, 2014		January 25, 2014		April 27, 2013
Accounts receivable, net	$	4,443	$	4,378	$	4,942
Days sales outstanding in accounts receivable (DSO)		35		36		37
INVENTORY TURNS AND RECONCILIATION OF GAAP TO NON-GAAP COST OF SALES USED IN INVENTORY TURNS (In millions, except annualized inventory turns)
	Three Months Ended
	April 26, 2014		January 25, 2014		April 27, 2013
Annualized inventory turns - GAAP		11.8		13.8		12.4
Cost of sales adjustments		(0.6)		(2.3)		(0.5)
Annualized inventory turns - non-GAAP		11.2		11.5		11.9
GAAP cost of sales	$	4,539	$	5,204	$	4,705
Cost of sales adjustments:
Share-based compensation expense		(51)		(52)		(44)
Amortization of acquisition-related intangible assets		(181)		(182)		(146)
Supplier component remediation charge		—		(655)		—
Acquisition-related/divestiture costs		(1)		—		—
Non-GAAP cost of sales	$	4,306	$	4,315	$	4,515
DEFERRED REVENUE (In millions)
	April 26, 2014		January 25, 2014		April 27, 2013
Service	$	8,746	$	8,843	$	8,705
Product:
Unrecognized revenue on product shipments and other deferred revenue		3,669		3,549		3,257
Cash receipts related to unrecognized revenue from two-tier distributors		736		852		723
Total product deferred revenue		4,405		4,401		3,980
Total	$	13,151	$	13,244	$	12,685
Reported as:
Current	$	9,198	$	9,350	$	9,055
Noncurrent		3,953		3,894		3,630
Total	$	13,151	$	13,244	$	12,685

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