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): August 12, 2015

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 August 12, 2015, Cisco Systems, Inc. (the “Registrant”) reported its results of operations for its fiscal fourth quarter and fiscal year 2015 ended July 25, 2015. 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 gross margins, non-GAAP operating expenses, non-GAAP operating income and margin, non-GAAP effective tax rates, non-GAAP net income per share data, non-GAAP inventory turns and free cash flow for the periods presented. It also includes future estimated ranges for gross margin, operating margin, tax provision rate and EPS on a non-GAAP basis.
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 measures 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 its historical and projected 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, 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 and 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: August 12, 2015	 	By:	 	/s/ Kelly A. Kramer	
	 	Name:  	 	Kelly A. Kramer	
	 	Title:	 	Executive Vice President and Chief Financial Officer	

EXHIBIT INDEX

Exhibit Number	  	Description of Document	
		
99.1	  	Press Release of Registrant, dated August 12, 2015, reporting the results of operations for the Registrant’s fiscal fourth quarter and fiscal year ended July 25, 2015.	

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 REPORTS FOURTH QUARTER AND FISCAL YEAR 2015 EARNINGS
Record Revenues and Non-GAAP EPS Reflect Strong Execution and Momentum
 
 	•	 	Q4 Revenue: $12.8 billion (increase of 4% year over year)	
 
 	•	 	Q4 Earnings per Share: $0.45 GAAP; $0.59 non-GAAP	
 
 	•	 	FY 2015 Revenue: $49.2 billion (increase of 4% year over year)	
 
 	•	 	FY 2015 Earnings per Share: $1.75 GAAP; $2.21 non-GAAP	
 
 	•	 	Q1 FY 2016 Revenue Guidance: 2% - 4% growth year over year	
 
 	•	 	Q1 FY 2016 non-GAAP Earnings per Share Guidance: $0.55 - $0.57	
SAN JOSE, Calif. — August 12, 2015 — Cisco, the worldwide leader in networking that transforms how people connect, communicate and collaborate, today reported its fourth quarter and fiscal year results for the period ended July 25, 2015. Cisco reported fourth quarter revenue of $12.8 billion, net income on a generally accepted accounting principles (GAAP) basis of $2.3 billion or $0.45 per share, and non-GAAP net income of $3.0 billion or $0.59 per share.
“I’m stepping into the CEO role at an incredibly exciting time for Cisco. We closed out our fiscal year with record revenues and record non-GAAP EPS, for both Q4 and FY15. I’m particularly pleased with the strong growth of deferred revenue which shows we are very effectively driving our business to a more predictable software-based business model, at the same time as growing revenues and earnings,” said Chuck Robbins, Cisco chief executive officer.
“These strong results show what we are capable of when we’re focused, and you can expect us to continue to drive the evolution of our portfolio to maximize the value we bring to customers in today’s rapidly changing market. The network’s strategic role at the center of everything becoming digital – today and in the future – is why I strongly believe Cisco’s best years are ahead of us.”
Q4 GAAP Results

 	  	Q4 2015	 	  	Q4 2014	 	  	    Vs. Q4 2014    	 	
Revenue	  	$	12.8 billion	  	  	$	12.4 billion	  	  	 	3.9%	  	
Net Income	  	$	2.3 billion	  	  	$	2.2 billion	  	  	 	3.2%	  	
Diluted Earnings per Share (EPS)	  	$	0.45	  	  	$	0.43	  	  	 	4.7%	  	
Q4 Non-GAAP Results

 	  	Q4 2015	 	  	Q4 2014	 	  	    Vs. Q4 2014    	 	
Net Income	  	$	3.0 billion	  	  	$	  2.8 billion	  	  	 	6.2%	  	
EPS	  	$	0.59	  	  	$	0.55	  	  	 	7.3%	  	
Fiscal Year GAAP Results

 	  	FY 2015	 	  	FY 2014	 	  	    Vs. FY 2014    	 	
Revenue	  	$	49.2 billion	  	  	$	47.1 billion	  	  	 	4.3%	  	
Net Income	  	$	9.0 billion	  	  	$	7.9 billion	  	  	 	14.4%	  	
EPS	  	$	1.75	  	  	$	1.49	  	  	 	17.4%	  	
Fiscal Year Non-GAAP Results

 	  	FY 2015	 	  	FY 2014	 	  	    Vs. FY 2014    	 	
Net Income	  	$	11.4 billion	  	  	$	10.9 billion	  	  	 	4.5%	  	
EPS	  	$	2.21	  	  	$	2.06	  	  	 	7.3%	  	
A reconciliation between net income and EPS on a GAAP and non-GAAP basis is provided in the table following the Consolidated Statements of Operations. Supplementary information related to other GAAP and non-GAAP measures is also provided in the tables below.
 
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Financial Summary
(All comparative percentages are on a year-over-year basis unless otherwise noted)
Q4 2015 Highlights
Revenue — Total revenue was $12.8 billion, up 4%. Product revenue and service revenue each increased 4%. In terms of total revenue by geographic segment, Americas was up 7%, while both EMEA and APJC were flat. Product revenue growth was led by Collaboration and Data Center at 14% each. Switching and NGN Routing grew by 2% and 3%, respectively.
Gross Margin — On a non-GAAP basis, total gross margin and product gross margin were 62.1% and 61.0% respectively. The decrease in non-GAAP product gross margin as compared to the third quarter of fiscal 2015 was driven by pricing and product mix partially offset by productivity. Non-GAAP service gross margin was 65.9%. Total gross margins by geographic segment were: 62.7% for the Americas, 62.1% for EMEA, and 59.5% for APJC. On a GAAP basis, total gross margin, product gross margin, and service gross margin were at 60.2%, 59.0% and 64.5%, respectively.
Operating Expenses — Non-GAAP operating expenses were $4.2 billion, up 1%. Headcount increased from the third quarter of fiscal 2015 by approximately 900 to 71,833 reflecting investments in key growth areas such as security, cloud and software. On a GAAP basis, operating expenses were $4.9 billion, up 3%.
Operating Income — Non-GAAP operating income was $3.8 billion, up 9%, with non-GAAP operating margin at 29.3%. GAAP operating income was $2.9 billion, up 7%, with GAAP operating margin of 22.4%.
Provision for Income Taxes — The non-GAAP tax provision rate was 21.0% for the fourth quarter of fiscal 2015 reflecting fiscal year end true-ups. The GAAP tax provision rate was 20.9%.
Net Income and EPS — On a non-GAAP basis, net income was $3.0 billion, an increase of 6%, and EPS was $0.59, an increase of 7%. On a GAAP basis, net income was $2.3 billion and EPS was $0.45.
Cash Flow from Operating Activities — was $4.1 billion for the fourth quarter of fiscal 2015, compared with $3.0 billion for the third quarter of fiscal 2015, and compared with $3.6 billion for the fourth quarter of fiscal 2014.
Fiscal 2015 Highlights
Revenue — Total revenue was $49.2 billion, an increase of 4%.
Net Income and EPS — On a non-GAAP basis, net income was $11.4 billion, an increase of 5%, and EPS was $2.21, an increase of 7%. On a GAAP basis, net income was $9.0 billion and EPS was $1.75.
Cash Flow from Operating Activities — was $12.6 billion for fiscal 2015, compared with $12.3 billion for fiscal 2014.
Cash and Cash Equivalents and Investments — were $60.4 billion at the end of the fourth quarter of fiscal 2015, compared with $54.4 billion at the end of the third quarter of fiscal 2015, and compared with $52.1 billion at the end of the fourth quarter of fiscal 2014. $7.0 billion of cash and cash equivalents and investments was available in the United States at the end of the fourth quarter of fiscal 2015.
Deferred Revenue — was $15.2 billion, up 7% in total. Product deferred revenue grew in double-digits again in the fourth quarter of fiscal 2015 at 21%, driven largely by subscription based and software offerings, while services deferred revenue grew 1%. Cisco continued to build a greater mix of recurring revenue as reflected in deferred revenue.
Product Backlog — was approximately $5.1 billion at the end of fiscal 2015 as compared to approximately $5.4 billion at the end of fiscal 2014.
Days Sales Outstanding in Accounts Receivable (DSO) — was 38 days at the end of the fourth quarter of fiscal 2015 consistent with the fourth quarter of fiscal 2014.
Capital Allocation
In the fourth quarter of fiscal 2015, Cisco declared and paid a cash dividend of $0.21 per common share, or $1.1 billion. For the full fiscal year, Cisco declared and paid cash dividends of $0.80 per common share, or $4.1 billion.
For the fourth quarter of fiscal 2015, Cisco repurchased approximately 35 million shares of common stock under its stock repurchase program at an average price of $28.62 per share for an aggregate purchase price of $1.0 billion. For the full fiscal year, Cisco repurchased approximately 155 million shares of common stock under its stock repurchase program at an average price of $27.22 per share for an aggregate purchase price of $4.2 billion. As of July 25, 2015, Cisco had repurchased and retired 4.4 billion shares of Cisco common stock at an average price of $20.86 per share for an aggregate purchase price of approximately $92.7 billion since the inception of the stock repurchase program. The remaining authorized amount for stock repurchases under this program is approximately $4.3 billion with no termination date.
 
2

For the full fiscal year, Cisco returned $8.3 billion to shareholders through share buybacks and dividends, which represented 73% of free cash flow.
“We ended this year with another strong quarter. We saw good top line growth in Q4 with record revenue of $12.8 billion, a 4% increase for the quarter bringing our full year 2015 revenue to $49.2 billion – also growth of 4%,” said Kelly Kramer, Cisco executive vice president and chief financial officer. “I am pleased with our execution on our financial strategy of delivering profitable growth, managing our portfolio and strategic investments, and delivering shareholder value.”
Acquisitions and Divestitures
In the fourth quarter of fiscal 2015, we announced an agreement to sell the client premises equipment portion of our Service Provider Video connected devices unit to French-based Technicolor for approximately $600 million in cash and stock, subject to certain adjustments. We will continue to refocus our investments in service provider video towards cloud and software-based services. We expect the transaction to close at the end of the second quarter of fiscal 2016 subject to regulatory approvals.
During the quarter, Cisco also announced its intent to acquire the cloud-based security company OpenDNS to enhance the security portfolio and, along with this, Cisco announced one additional acquisition and closed two acquisitions to further complement the software, collaboration and cloud offerings.
Business Outlook for the First Quarter of Fiscal Year 2016
Cisco expects to achieve the following results for the first quarter of fiscal year 2016:

Q1 2016	  	 	
Revenue	  	2% - 4% growth Y/Y	
Non-GAAP gross margin rate	  	61% - 62%	
Non-GAAP operating margin rate	  	28% - 29%	
Non-GAAP tax provision rate	  	23%	
Non-GAAP EPS	  	$0.55 - $0.57	
Cisco estimates that GAAP EPS will be lower than non-GAAP EPS by $0.11 to $0.15 cents per share in the first quarter of fiscal 2016 as follows:

Q1 2016	  	 	 	
Share-based compensation expense	  	$	0.05 - $0.06	  	
Amortization of purchased intangible assets and other acquisition-related/divestiture costs	  	 	0.04   - 0.06	  	
	  	 	 	 	
Subtotal	  	 	0.09   - 0.12	  	
Restructuring and other charges	  	 	0.02   - 0.03	  	
	  	 	 	 	
Total	  	$	0.11 - $0.15	  	
	  	 	 	 	
Share-based compensation expense is expected to impact Cisco’s results of operations in similar proportions as the fourth quarter of fiscal 2015. Amortization of purchased intangible assets, and other acquisition-related/divestiture costs will be reported as GAAP operating expenses, cost of sales, or other income/(loss) as applicable.
The range for restructuring and other charges includes a pretax charge of up to $200 million as a result of the restructuring that Cisco announced in August 2014. During the fourth quarter of fiscal 2015, Cisco recognized pretax restructuring charges of $78 million to the GAAP financial statements related to these actions and expects that the total charges related to these actions will be approximately $700 million for the total restructuring plan.
This guidance does not include the effects of any future acquisitions/divestitures, asset impairments, restructurings, and tax or other events, which may or may not be significant.
Editor’s Notes:
 
 	•	 	The Q4 and fiscal year 2015 conference call to discuss Cisco’s results along with its business outlook will be held on Wednesday, August 12, 2015 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, August 12, 2015 to 4:00 p.m. Pacific Time, on August 19, 2015 at 1-866-465-1308 (United States) or 1-203-369-1425 (international). The replay will also be available via webcast from August 12, 2015 through October 16, 2015 on the Cisco Investor Relations website at http://investor.cisco.com.	
 
3

 	•	 	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, August 12, 2015. 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 the GAAP to non-GAAP reconciliation information, will be available on the Cisco Investor Relations website at http://investor.cisco.com.	
 
4

CISCO SYSTEMS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(In millions, except per-share amounts)
(Unaudited)

 	  	Three Months Ended	 	 	Fiscal Year Ended	 	
 	  	July 25,
2015	 	 	July 26,
2014	 	 	July 25,
2015	 	 	July 26,
2014	 	
REVENUE:	  				 				 				 				
Product	  	$	9,911	  	 	$	9,532	  	 	$	37,750	  	 	$	36,172	  	
Service	  	 	2,932	  	 	 	2,825	  	 	 	11,411	  	 	 	10,970	  	
	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Total revenue	  	 	12,843	  	 	 	12,357	  	 	 	49,161	  	 	 	47,142	  	
	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
COST OF SALES:	  				 				 				 				
Product	  	 	4,068	  	 	 	3,976	  	 	 	15,377	  	 	 	15,641	  	
Service	  	 	1,042	  	 	 	976	  	 	 	4,103	  	 	 	3,732	  	
	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Total cost of sales	  	 	5,110	  	 	 	4,952	  	 	 	19,480	  	 	 	19,373	  	
	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
GROSS MARGIN	  	 	7,733	  	 	 	7,405	  	 	 	29,681	  	 	 	27,769	  	
OPERATING EXPENSES:	  				 				 				 				
Research and development	  	 	1,548	  	 	 	1,593	  	 	 	6,207	  	 	 	6,294	  	
Sales and marketing	  	 	2,549	  	 	 	2,473	  	 	 	9,821	  	 	 	9,503	  	
General and administrative	  	 	536	  	 	 	508	  	 	 	2,040	  	 	 	1,934	  	
Amortization of purchased intangible assets	  	 	146	  	 	 	68	  	 	 	359	  	 	 	275	  	
Restructuring and other charges	  	 	73	  	 	 	82	  	 	 	484	  	 	 	418	  	
	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Total operating expenses	  	 	4,852	  	 	 	4,724	  	 	 	18,911	  	 	 	18,424	  	
	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
OPERATING INCOME	  	 	2,881	  	 	 	2,681	  	 	 	10,770	  	 	 	9,345	  	
Interest income	  	 	211	  	 	 	183	  	 	 	769	  	 	 	691	  	
Interest expense	  	 	(149	) 	 	 	(142	) 	 	 	(566	) 	 	 	(564	) 	
Other income (loss), net	  	 	(10	) 	 	 	56	  	 	 	228	  	 	 	243	  	
	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Interest and other income (loss), net	  	 	52	  	 	 	97	  	 	 	431	  	 	 	370	  	
	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
INCOME BEFORE PROVISION FOR INCOME TAXES	  	 	2,933	  	 	 	2,778	  	 	 	11,201	  	 	 	9,715	  	
Provision for income taxes	  	 	614	  	 	 	531	  	 	 	2,220	  	 	 	1,862	  	
	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
NET INCOME	  	$	2,319	  	 	$	2,247	  	 	$	8,981	  	 	$	7,853	  	
	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Net income per share:	  				 				 				 				
Basic	  	$	0.46	  	 	$	0.44	  	 	$	1.76	  	 	$	1.50	  	
	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Diluted	  	$	0.45	  	 	$	0.43	  	 	$	1.75	  	 	$	1.49	  	
	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Shares used in per-share calculation:	  				 				 				 				
Basic	  	 	5,086	  	 	 	5,121	  	 	 	5,104	  	 	 	5,234	  	
	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Diluted	  	 	5,131	  	 	 	5,172	  	 	 	5,146	  	 	 	5,281	  	
	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Cash dividends declared per common share	  	$	0.21	  	 	$	0.19	  	 	$	0.80	  	 	$	0.72	  	

5

CISCO SYSTEMS, INC.
RECONCILIATION OF GAAP TO NON-GAAP NET INCOME
(In millions, except per-share amounts)

 	  	Three Months Ended	 	 	Fiscal Year Ended	 	
 	  	July 25,
2015	 	 	July 26,
2014	 	 	July 25,
2015	 	 	July 26,
2014	 	
GAAP net income	  	$	2,319	  	 	$	2,247	  	 	$	8,981	  	 	$	7,853	  	
Adjustments to cost of sales:	  				 				 				 				
Share-based compensation expense	  	 	58	  	 	 	49	  	 	 	207	  	 	 	195	  	
Amortization of acquisition-related intangible assets	  	 	179	  	 	 	180	  	 	 	765	  	 	 	710	  	
Supplier component remediation charge (adjustment)	  	 	—  	  	 	 	—  	  	 	 	(164	) 	 	 	655	  	
Rockstar patent portfolio charge	  	 	—  	  	 	 	—  	  	 	 	188	  	 	 	—  	  	
Acquisition-related/divestiture costs	  	 	—  	  	 	 	1	  	 	 	—  	  	 	 	2	  	
Significant asset impairments and restructurings	  	 	5	  	 	 	—  	  	 	 	5	  	 	 	—  	  	
	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Total adjustments to GAAP cost of sales	  	 	242	  	 	 	230	  	 	 	1,001	  	 	 	1,562	  	
	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Adjustments to operating expenses:	  				
Share-based compensation expense	  	 	338	  	 	 	291	  	 	 	1,235	  	 	 	1,158	  	
Amortization of acquisition-related intangible assets	  	 	146	  	 	 	68	  	 	 	359	  	 	 	275	  	
Acquisition-related/divestiture costs	  	 	79	  	 	 	102	  	 	 	351	  	 	 	585	  	
Significant asset impairments and restructurings	  	 	73	  	 	 	82	  	 	 	484	  	 	 	418	  	
	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Total adjustments to GAAP operating expenses	  	 	636	  	 	 	543	  	 	 	2,429	  	 	 	2,436	  	
Adjustments to other income (loss), net:	  				 				 				 				
Gain on VCE reorganization	  	 	—  	  	 	 	—  	  	 	 	(126	) 	 	 	—  	  	
	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Total adjustments to GAAP income before provision for income taxes	  	 	878	  	 	 	773	  	 	 	3,304	  	 	 	3,998	  	
	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Income tax effect of non-GAAP adjustments	  	 	(185	) 	 	 	(185	) 	 	 	(731	) 	 	 	(834	) 	
Significant tax matters	  	 	—  	  	 	 	—  	  	 	 	(200	) 	 	 	(154	) 	
	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Total adjustments to GAAP provision for income taxes	  	 	(185	) 	 	 	(185	) 	 	 	(931	) 	 	 	(988	) 	
	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Non-GAAP net income	  	$	3,012	  	 	$	2,835	  	 	$	11,354	  	 	$	10,863	  	
	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Diluted net income per share:	  				
GAAP	  	$	0.45	  	 	$	0.43	  	 	$	1.75	  	 	$	1.49	  	
	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Non-GAAP	  	$	0.59	  	 	$	0.55	  	 	$	2.21	  	 	$	2.06	  	

6

CISCO SYSTEMS, INC.
REVENUE BY SEGMENT
(In millions, except percentages)

 	  	July 25, 2015	 	
 	  	Three Months Ended	 	 	Fiscal Year Ended	 	
 	  	Amount	 	  	Y/Y %	 	 	Amount	 	  	Y/Y %	 	
Revenue	  				  				 				  				
Americas	  	$	7,801	  	  	 	7	% 	 	$	29,655	  	  	 	7	% 	
EMEA	  	 	3,110	  	  	 	—  	% 	 	 	12,322	  	  	 	3	% 	
APJC	  	 	1,932	  	  	 	—  	% 	 	 	7,184	  	  	 	(2	)% 	
	  	 	 	 	  				 	 	 	 	  				
Total	  	$	12,843	  	  	 	4	% 	 	$	49,161	  	  	 	4	% 	
	  	 	 	 	  				 	 	 	 	  				
CISCO SYSTEMS, INC.
GROSS MARGIN PERCENTAGE BY SEGMENT
(In percentages)

 	  	July 25, 2015	 	
 	  	Three Months Ended	 	 	Fiscal Year Ended	 	
Gross Margin Percentage	  				 				
Americas	  	 	62.7	% 	 	 	63.0	% 	
EMEA	  	 	62.1	% 	 	 	62.5	% 	
APJC	  	 	59.5	% 	 	 	60.0	% 	
CISCO SYSTEMS, INC.
REVENUE FOR GROUPS OF SIMILAR PRODUCTS AND SERVICES
(In millions, except percentages)

 	  	July 25, 2015	 	
 	  	Three Months Ended	 	 	Fiscal Year Ended	 	
 	  	Amount	 	  	Y/Y %	 	 	Amount	 	  	Y/Y %	 	
Revenue:	  				  				 				  				
Switching	  	$	3,719	  	  	 	2	% 	 	$	14,741	  	  	 	5	% 	
NGN Routing	  	 	1,992	  	  	 	3	% 	 	 	7,704	  	  	 	1	% 	
Collaboration	  	 	1,088	  	  	 	14	% 	 	 	4,000	  	  	 	5	% 	
Service Provider Video	  	 	994	  	  	 	(7	)% 	 	 	3,555	  	  	 	(10	)% 	
Data Center	  	 	880	  	  	 	14	% 	 	 	3,220	  	  	 	22	% 	
Wireless	  	 	715	  	  	 	7	% 	 	 	2,542	  	  	 	11	% 	
Security	  	 	464	  	  	 	4	% 	 	 	1,747	  	  	 	12	% 	
Other	  	 	59	  	  	 	(3	)% 	 	 	241	  	  	 	(14	)% 	
	  	 	 	 	  				 	 	 	 	  				
Product	  	 	9,911	  	  	 	4	% 	 	 	37,750	  	  	 	4	% 	
Service	  	 	2,932	  	  	 	4	% 	 	 	11,411	  	  	 	4	% 	
	  	 	 	 	  				 	 	 	 	  				
Total	  	$	12,843	  	  	 	4	% 	 	$	49,161	  	  	 	4	% 	

7

CISCO SYSTEMS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In millions)
(Unaudited)

 	  	July 25,
2015	 	  	July 26,
2014	 	
ASSETS	  				
Current assets:	  				
Cash and cash equivalents	  	$	6,877	  	  	$	6,726	  	
Investments	  	 	53,539	  	  	 	45,348	  	
Accounts receivable, net of allowance for doubtful accounts of $302 at July 25, 2015 and $265 at July 26, 2014	  	 	5,344	  	  	 	5,157	  	
Inventories	  	 	1,627	  	  	 	1,591	  	
Financing receivables, net	  	 	4,491	  	  	 	4,153	  	
Deferred tax assets	  	 	2,915	  	  	 	2,808	  	
Other current assets	  	 	1,490	  	  	 	1,331	  	
	  	 	 	 	  	 	 	 	
Total current assets	  	 	76,283	  	  	 	67,114	  	
Property and equipment, net	  	 	3,332	  	  	 	3,252	  	
Financing receivables, net	  	 	3,858	  	  	 	3,918	  	
Goodwill	  	 	24,469	  	  	 	24,239	  	
Purchased intangible assets, net	  	 	2,376	  	  	 	3,280	  	
Other assets	  	 	3,163	  	  	 	3,267	  	
	  	 	 	 	  	 	 	 	
TOTAL ASSETS	  	$	113,481	  	  	$	105,070	  	
	  	 	 	 	  	 	 	 	
LIABILITIES AND EQUITY	  				
Current liabilities:	  				
Short-term debt	  	$	3,897	  	  	$	508	  	
Accounts payable	  	 	1,104	  	  	 	1,032	  	
Income taxes payable	  	 	62	  	  	 	159	  	
Accrued compensation	  	 	3,049	  	  	 	3,181	  	
Deferred revenue	  	 	9,824	  	  	 	9,478	  	
Other current liabilities	  	 	5,687	  	  	 	5,451	  	
	  	 	 	 	  	 	 	 	
Total current liabilities	  	 	23,623	  	  	 	19,809	  	
Long-term debt	  	 	21,457	  	  	 	20,337	  	
Income taxes payable	  	 	1,876	  	  	 	1,851	  	
Deferred revenue	  	 	5,359	  	  	 	4,664	  	
Other long-term liabilities	  	 	1,459	  	  	 	1,748	  	
	  	 	 	 	  	 	 	 	
Total liabilities	  	 	53,774	  	  	 	48,409	  	
Total equity	  	 	59,707	  	  	 	56,661	  	
	  	 	 	 	  	 	 	 	
TOTAL LIABILITIES AND EQUITY	  	$	113,481	  	  	$	105,070	  	
	  	 	 	 	  	 	 	 	
Certain reclassifications have been made to prior year amounts to conform to the current year’s presentation.
 
8

CISCO SYSTEMS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In millions)
(Unaudited)  

 	  	Fiscal Year Ended	 	
 	  	July 25,
2015	 	 	July 26,
2014	 	
Cash flows from operating activities:	  				
Net income	  	$	8,981	  	 	$	7,853	  	
Adjustments to reconcile net income to net cash provided by operating activities:	  				
Depreciation, amortization, and other	  	 	2,442	  	 	 	2,439	  	
Share-based compensation expense	  	 	1,440	  	 	 	1,348	  	
Provision for receivables	  	 	134	  	 	 	79	  	
Deferred income taxes	  	 	(23	) 	 	 	(678	) 	
Excess tax benefits from share-based compensation	  	 	(128	) 	 	 	(118	) 	
(Gains) losses on investments and other, net	  	 	(258	) 	 	 	(299	) 	
Change in operating assets and liabilities, net of effects of acquisitions and divestitures:	  				
Accounts receivable	  	 	(413	) 	 	 	340	  	
Inventories	  	 	(116	) 	 	 	(109	) 	
Financing receivables	  	 	(634	) 	 	 	(119	) 	
Other assets	  	 	(370	) 	 	 	26	  	
Accounts payable	  	 	87	  	 	 	(23	) 	
Income taxes, net	  	 	53	  	 	 	191	  	
Accrued compensation	  	 	7	  	 	 	(42	) 	
Deferred revenue	  	 	1,275	  	 	 	659	  	
Other liabilities	  	 	75	  	 	 	785	  	
	  	 	 	 	 	 	 	 	
Net cash provided by operating activities	  	 	12,552	  	 	 	12,332	  	
	  	 	 	 	 	 	 	 	
Cash flows from investing activities:	  				
Purchases of investments	  	 	(43,975	) 	 	 	(36,317	) 	
Proceeds from sales of investments	  	 	20,237	  	 	 	18,193	  	
Proceeds from maturities of investments	  	 	15,293	  	 	 	15,660	  	
Acquisition of businesses, net of cash and cash equivalents acquired	  	 	(326	) 	 	 	(2,989	) 	
Purchases of investments in privately held companies	  	 	(222	) 	 	 	(384	) 	
Return of investments in privately held companies	  	 	288	  	 	 	213	  	
Acquisition of property and equipment	  	 	(1,227	) 	 	 	(1,275	) 	
Proceeds from sales of property and equipment	  	 	22	  	 	 	232	  	
Other	  	 	(178	) 	 	 	24	  	
	  	 	 	 	 	 	 	 	
Net cash used in investing activities	  	 	(10,088	) 	 	 	(6,643	) 	
	  	 	 	 	 	 	 	 	
Cash flows from financing activities:	  				
Issuances of common stock	  	 	2,016	  	 	 	1,907	  	
Repurchases of common stock - repurchase program	  	 	(4,324	) 	 	 	(9,413	) 	
Shares repurchased for tax withholdings on vesting of restricted stock units	  	 	(502	) 	 	 	(430	) 	
Short-term borrowings, original maturities less than 90 days, net	  	 	(4	) 	 	 	(2	) 	
Issuances of debt	  	 	4,981	  	 	 	7,981	  	
Repayments of debt	  	 	(508	) 	 	 	(3,276	) 	
Excess tax benefits from share-based compensation	  	 	128	  	 	 	118	  	
Dividends paid	  	 	(4,086	) 	 	 	(3,758	) 	
Other	  	 	(14	) 	 	 	(15	) 	
	  	 	 	 	 	 	 	 	
Net cash used in financing activities	  	 	(2,313	) 	 	 	(6,888	) 	
	  	 	 	 	 	 	 	 	
Net increase (decrease) in cash and cash equivalents	  	 	151	  	 	 	(1,199	) 	
Cash and cash equivalents, beginning of fiscal year	  	 	6,726	  	 	 	7,925	  	
	  	 	 	 	 	 	 	 	
Cash and cash equivalents, end of fiscal year	  	$	6,877	  	 	$	6,726	  	
	  	 	 	 	 	 	 	 	
Supplemental cash flow information:	  				
Cash paid for interest	  	$	760	  	 	$	682	  	
Cash paid for income taxes, net	  	$	2,190	  	 	$	2,349	  	
Certain reclassifications have been made to prior year amounts to conform to the current year’s presentation.
 
9

CISCO SYSTEMS, INC.
DEFERRED REVENUE
(In millions)

 	  	July 25,
2015	 	  	April 25,
2015	 	  	July 26,
2014	 	
Deferred revenue:	  				
Service	  	$	9,757	  	  	$	9,236	  	  	$	9,640	  	
Product:	  				
Unrecognized revenue on product shipments and other deferred revenue	  	 	4,766	  	  	 	4,258	  	  	 	3,924	  	
Cash receipts related to unrecognized revenue from two-tier distributors	  	 	660	  	  	 	687	  	  	 	578	  	
	  	 	 	 	  	 	 	 	  	 	 	 	
Total product deferred revenue	  	 	5,426	  	  	 	4,945	  	  	 	4,502	  	
	  	 	 	 	  	 	 	 	  	 	 	 	
Total	  	$	15,183	  	  	$	14,181	  	  	$	14,142	  	
	  	 	 	 	  	 	 	 	  	 	 	 	
Reported as:	  				
Current	  	$	9,824	  	  	$	9,371	  	  	$	9,478	  	
Noncurrent	  	 	5,359	  	  	 	4,810	  	  	 	4,664	  	
	  	 	 	 	  	 	 	 	  	 	 	 	
Total	  	$	15,183	  	  	$	14,181	  	  	$	14,142	  	
	  	 	 	 	  	 	 	 	  	 	 	 	
CISCO SYSTEMS, INC.
INVENTORIES AND INVENTORY TURNS
(In millions, except annualized inventory turns)

 	  	July 25,
2015	 	 	April 25,
2015	 	 	July 26,
2014	 	
Inventories:	  				
Raw materials	  	$	114	  	 	$	264	  	 	$	77	  	
Work in process	  	 	2	  	 	 	2	  	 	 	5	  	
Finished goods:	  				 				 				
Distributor inventory and deferred cost of sales	  	 	610	  	 	 	635	  	 	 	595	  	
Manufactured finished goods	  	 	593	  	 	 	547	  	 	 	606	  	
	  	 	 	 	 	 	 	 	 	 	 	 	
Total finished goods	  	 	1,203	  	 	 	1,182	  	 	 	1,201	  	
Service-related spares	  	 	258	  	 	 	268	  	 	 	273	  	
Demonstration systems	  	 	50	  	 	 	44	  	 	 	35	  	
	  	 	 	 	 	 	 	 	 	 	 	 	
Total	  	$	1,627	  	 	$	1,760	  	 	$	1,591	  	
	  	 	 	 	 	 	 	 	 	 	 	 	
Annualized inventory turns - GAAP	  	 	12.1	  	 	 	10.1	  	 	 	12.7	  	
Cost of sales adjustments	  	 	(0.6	) 	 	 	(0.1	) 	 	 	(0.6	) 	
	  	 	 	 	 	 	 	 	 	 	 	 	
Annualized inventory turns - non-GAAP	  	 	11.5	  	 	 	10.0	  	 	 	12.1	  	

10

CISCO SYSTEMS, INC.
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 2015	  				  				
July 25, 2015	  	$	0.21	  	  	$	1,069	  	  	 	35	  	  	$	28.62	  	  	$	1,005	  	  	$	2,074	  	
April 25, 2015	  	 	0.21	  	  	 	1,070	  	  	 	35	  	  	 	28.39	  	  	 	1,008	  	  	 	2,078	  	
January 24, 2015	  	 	0.19	  	  	 	974	  	  	 	44	  	  	 	27.63	  	  	 	1,208	  	  	 	2,182	  	
October 25, 2014	  	 	0.19	  	  	 	973	  	  	 	41	  	  	 	24.58	  	  	 	1,013	  	  	 	1,986	  	
	  	 	 	 	  	 	 	 	  	 	 	 	  				  	 	 	 	  	 	 	 	
Total	  	$	0.80	  	  	$	4,086	  	  	 	155	  	  	$	27.22	  	  	$	4,234	  	  	$	8,320	  	
	  	 	 	 	  	 	 	 	  	 	 	 	  				  	 	 	 	  	 	 	 	
Fiscal 2014	  				  				
July 26, 2014	  	$	0.19	  	  	$	974	  	  	 	61	  	  	$	25.11	  	  	$	1,514	  	  	$	2,488	  	
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	  	
	  	 	 	 	  	 	 	 	  	 	 	 	  				  	 	 	 	  	 	 	 	
Total	  	$	0.72	  	  	$	3,758	  	  	 	420	  	  	$	22.71	  	  	$	9,539	  	  	$	13,297	  	
	  	 	 	 	  	 	 	 	  	 	 	 	  				  	 	 	 	  	 	 	 	
CISCO SYSTEMS, INC.
FREE CASH FLOW
(In millions)

 	  	Three Months Ended	 	 	Fiscal Year Ended	 	
 	  	July 25,
2015	 	 	July 26,
2014	 	 	July 25,
2015	 	 	July 26,
2014	 	
Net cash provided by operating activities	  	$	4,138	  	 	$	3,612	  	 	$	12,552	  	 	$	12,332	  	
Acquisition of property and equipment	  	 	(320	) 	 	 	(325	) 	 	 	(1,227	) 	 	 	(1,275	) 	
	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Free cash flow	  	$	3,818	  	 	$	3,287	  	 	$	11,325	  	 	$	11,057	  	

11

CISCO SYSTEMS, INC.
SUPPLEMENTARY INFORMATION - RECONCILIATIONS OF GAAP TO NON-GAAP MEASURES
GROSS MARGINS, OPERATING EXPENSES, AND OPERATING MARGINS
(In millions, except percentages)

 	  	Three Months Ended	 	
 	  	July 25, 2015	 	
 	  	Product
Gross
Margin	 	 	Service
Gross
Margin	 	 	Total
Gross
Margin	 	 	Operating
Expenses	 	 	Y/Y	 	 	Operating
Income	 	 	Y/Y	 	
GAAP amount	  	$	5,843	  	 	$	1,890	  	 	$	7,733	  	 	$	4,852	  	 	 	3	% 	 	$	2,881	  	 	 	7	% 	
GAAP (% of revenue)	  	 	59.0	% 	 	 	64.5	% 	 	 	60.2	% 	 	 	37.8	% 	 				 	 	22.4	% 	 				
Adjustments to GAAP amounts:	  				
Share-based compensation expense	  	 	16	  	 	 	42	  	 	 	58	  	 	 	338	  	 				 	 	396	  	 				
Amortization of acquisition-related intangible assets	  	 	179	  	 	 	—  	  	 	 	179	  	 	 	146	  	 				 	 	325	  	 				
Acquisition-related/divestiture costs	  	 	—  	  	 	 	—  	  	 	 	—  	  	 	 	79	  	 				 	 	79	  	 				
Significant asset impairments and restructurings	  	 	5	  	 	 	—  	  	 	 	5	  	 	 	73	  	 				 	 	78	  	 				
	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 				 	 	 	 	 				
Non-GAAP amount	  	$	6,043	  	 	$	1,932	  	 	$	7,975	  	 	$	4,216	  	 	 	1	% 	 	$	3,759	  	 	 	9	% 	
	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 				 	 	 	 	 				
Non-GAAP (% of revenue)	  	 	61.0	% 	 	 	65.9	% 	 	 	62.1	% 	 	 	32.8	% 	 				 	 	29.3	% 	 				
EFFECTIVE TAX RATE
(In percentages)

 	  	Three Months Ended	 	 	Fiscal Year Ended	 	
 	  	July 25,
2015	 	 	July 26,
2014	 	 	July 25,
2015	 	 	July 26,
2014	 	
GAAP effective tax rate	  	 	20.9	% 	 	 	19.1	% 	 	 	19.8	% 	 	 	19.2	% 	
Tax effect of non-GAAP adjustments to net income	  	 	0.1	% 	 	 	1.1	% 	 	 	1.9	% 	 	 	1.6	% 	
	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Non-GAAP effective tax rate	  	 	21.0	% 	 	 	20.2	% 	 	 	21.7	% 	 	 	20.8	% 	
	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
COST OF SALES USED IN INVENTORY TURNS
(In millions)

 	  	Three Months Ended	 	
 	  	July 25,
2015	 	 	April 25,
2015	 	 	July 26,
2014	 	
GAAP cost of sales	  	$	5,110	  	 	$	4,612	  	 	$	4,952	  	
Cost of sales adjustments:	  				
Share-based compensation expense	  	 	(58	) 	 	 	(56	) 	 	 	(49	) 	
Amortization of acquisition-related intangible assets	  	 	(179	) 	 	 	(172	) 	 	 	(180	) 	
Supplier component remediation adjustment	  	 	—  	  	 	 	164	  	 	 	—  	  	
Acquisition-related/divestiture costs	  	 	—  	  	 	 	—  	  	 	 	(1	) 	
Significant asset impairments and restructurings	  	 	(5	) 	 	 	—  	  	 	 	—  	  	
	  	 	 	 	 	 	 	 	 	 	 	 	
Non-GAAP cost of sales	  	$	4,868	  	 	$	4,548	  	 	$	4,722	  	

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Forward Looking Statements and Non-GAAP Information
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 digitization strategy and execution, financial strength and financial guidance, our strategy to transition our business to a more software-based business model and recurring revenue streams, and our ability to deliver profitable growth, manage our portfolio and strategic investments, and return shareholder value) 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 May 20, 2015 and September 9, 2014, 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 months and the year ended July 25, 2015 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 gross margins, non-GAAP operating expenses, non-GAAP operating income and margin, non-GAAP effective tax rates, non-GAAP net income per share data, non-GAAP inventory turns and free cash flow for the periods presented. It also includes future estimated ranges for gross margin, operating margin, tax provision rate and EPS on a non-GAAP basis.
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 measures 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 its historical and projected 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,
 
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significant litigation and other contingencies, the income tax effects of the foregoing, and significant tax matters. Cisco’s management also uses the foregoing non-GAAP 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.
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.
Copyright © 2015 Cisco and/or its affiliates. All rights reserved. Cisco and the Cisco logo 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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