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 9, 2005
 
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:
 
¨	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 9, 2005, Cisco Systems, Inc. (the “Registrant”) reported its results of operations for its fiscal fourth quarter and fiscal year ended July 30, 2005. 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 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 to help investors better understand 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 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. The Registrant believes when GAAP net income and GAAP net income per share are viewed in conjunction with pro forma net income and pro forma net income per share, investors are provided with a more meaningful understanding of the Registrant’s ongoing operating performance. In addition, the Registrant’s management uses these measures for reviewing the financial results of the Registrant. 

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 9, 2005	 	By:	 	/s/ Dennis D. Powell
	
 	 	Name:	 	Dennis D. Powell	
 	 	Title:	 	Senior Vice President and	
 	 	 	 	Chief Financial Officer	

EXHIBIT INDEX

Exhibit
Number
	 	Description of Document
	
99.1	 	Press Release of Registrant, dated August 9, 2005, reporting the results of operations for the Registrant’s fiscal fourth quarter and fiscal year ended July 30, 2005.	
 
EXHIBIT 99.1

Press Contact:	 	 	 	Investor Relations Contact:	
Heather Dickinson	 	 	 	Liz Lemon	
Cisco Systems, Inc.	 	 	 	Cisco Systems, Inc.	
(408) 526-6117	 	 	 	(408) 527-8452	
hdickins@cisco.com	 	 	 	lemon@cisco.com	
 
CISCO SYSTEMS REPORTS FOURTH QUARTER AND FISCAL YEAR 2005 EARNINGS
 
 	•	 	Q4 Net Sales: $6.6 billion (11.1% increase year over year; 6.4% increase quarter over quarter)	
 
 	•	 	Q4 Net Income: $1.5 billion GAAP; $1.6 billion pro forma	
 
 	•	 	Q4 EPS: $0.24 GAAP; $0.25 pro forma	
 
 	•	 	FY’05 Net Sales: $24.8 billion (12.5% increase year over year)	
 
 	•	 	FY’05 EPS: 40.3% increase year over year (GAAP); 21.1% increase year over year (pro forma)	
 
SAN JOSE, Calif. — August 9, 2005 — Cisco Systems, Inc., the worldwide leader in networking for the Internet, today reported its fourth quarter and fiscal year results for the periods ended July 30, 2005.
 
Net sales for the fourth quarter of fiscal 2005 were $6.6 billion, compared with $5.9 billion for the fourth quarter of fiscal 2004, an increase of 11.1 percent, and compared with $6.2 billion for the third quarter of fiscal 2005, an increase of 6.4 percent.
 
Net income for the fourth quarter of fiscal 2005 , on a generally accepted accounting principles (GAAP) basis, was $1.5 billion or $0.24 per share, compared with $1.4 billion or $0.20 per share for the fourth quarter of fiscal 2004, and compared with $1.4 billion or $0.21 per share for the third quarter of fiscal 2005. Pro forma net income for the fourth quarter of fiscal 2005 was $1.6 billion or $0.25 per share, compared with $1.5 billion or $0.21 per share for the fourth quarter of fiscal 2004, and compared with $1.5 billion or $0.23 per share for the third quarter of fiscal 2005. 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 fiscal 2005 were $24.8 billion, compared with $22.0 billion for fiscal 2004, an increase of 12.5 percent.
 
Net income for fiscal 2005 , on a GAAP basis, was $5.7 billion or $0.87 per share, compared with $4.4 billion or $0.62 per share for fiscal 2004. Net income on a GAAP basis for fiscal 2004 included a non-cash cumulative stock compensation charge of $567 million or $0.08 per share relating to the implementation of Financial Accounting Standards Board Interpretation No. 46(R), as a consequence of the acquisition of Andiamo Systems, Inc. Pro forma net income for fiscal 2005 was $6.1 billion or $0.92 per share, compared with $5.3 billion or $0.76 per share for fiscal 2004.
 
During the fourth quarter of fiscal 2005, Cisco completed the acquisitions of FineGround Networks, Inc., M.I. Secure Corporation, NetSift, Inc., Sipura Technology, Inc., Topspin Communications, Inc. and Vihana, Inc.
 
“The close of Cisco’s fourth quarter and 2005 fiscal year marks not only a period of strong operating performance for the company, including record net income and earnings per share, but also further demonstrates that
 
1

our architectural strategy is working,” said John Chambers, president and CEO, Cisco Systems, Inc. “The home run again this quarter was the continued balance we’ve achieved across geographies, architectural evolutions, product families and market segments, with the commercial and enterprise segments bringing in top results.”
 
“Going forward, we will continue to make investments in our growth areas that we believe will provide customers with an intelligent network, one that is designed to allow them to evolve from a transaction-oriented network into an architecture that delivers a robust, interactive experience.”
 
Cisco will discuss fourth quarter and fiscal year 2005 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.
 
Financial Highlights
 
•	 	Cash flows from operations were $2.4 billion for the fourth quarter of fiscal 2005, compared with $2.0 billion for the fourth quarter of fiscal 2004, and compared with $1.9 billion for the third quarter of fiscal 2005. Cash flows from operations were $7.6 billion for fiscal 2005, compared with $7.0 billion for fiscal 2004. 	
 
•	 	Cash and cash equivalents and total investments were $16.1 billion at the end of fiscal 2005, compared with $19.3 billion at the end of fiscal 2004, and compared with $16.1 billion at the end of the third quarter of fiscal 2005.	
 
•	 	During the fourth quarter of fiscal 2005, Cisco repurchased 130 million shares of common stock at an average price of $19.14 per share for an aggregate purchase price of $2.5 billion. As of July 30, 2005, Cisco had repurchased and retired 1.5 billion shares of Cisco common stock at an average price of $18.15 per share for an aggregate purchase price of approximately $27.2 billion since the inception of the stock repurchase program.	
 
•	 	Days sales outstanding (DSO) in accounts receivable at the end of the fourth quarter of fiscal 2005 were 31 days, compared with 28 days at the end of the fourth quarter of fiscal 2004, and compared with 33 days at the end of the third quarter of fiscal 2005.	
 
•	 	Inventory turns were 6.6 in the fourth quarter of fiscal 2005, compared with 6.4 in the fourth quarter of fiscal 2004, and compared with 6.5 in the third quarter of fiscal 2005.	
 
“I am pleased with the continued focus and execution on our three long-term key financial priorities—growth, profitability and increasing shareholder value,” said Dennis Powell, chief financial officer, Cisco Systems. “This quarter, we delivered record net income and earnings per share both on a GAAP and pro forma basis. With steady customer demand for our products across key segments, Cisco is clearly delivering solid performance with Q4 revenue of $6.6 billion, an increase of approximately 11% year over year. On an annual basis, we are delighted to end fiscal year 2005 with pro forma net income increasing 13.5% from fiscal year 2004, pro forma operating income increasing 15.4% and pro forma earnings per share increasing 21.1%.”
 
2

Business Highlights
 
 	•	 	Cisco unveiled Cisco Application-Oriented Networking (AON) technology, an approach to networking that adds intelligence to the network and enables it to better understand business-application communications as well as help businesses make more effective business decisions.	
 
 	•	 	Sprint is deploying a Cisco technology-based IP Next-Generation Network that will enable “triple play” (data, voice and video) offerings to enterprise customers worldwide.	
 
 	•	 	T-Com, the fixed-network unit of Deutsche Telekom, is extending one of Europe’s largest Cisco IP next- generation networks based on IP/Multiprotocol Label Switching (IP/MPLS) by an upgrade of its existing Cisco 12000 Series routers.	
 
 	•	 	Australia-based WiZZ Communications deployed Cisco wireless and other networking technology to create a leading wireless network for business.	
 
 	•	 	Red Bull Cheever Racing used Cisco wireless and voice-over-IP (VoIP) technology at the 89th annual Indianapolis 500, allowing engineers, pit crews and race car drivers immediate access to real-time information and statistics during the race.	
 
 	•	 	British Airways selected Cisco and Prime Business Solutions to implement an IP telephony-based system designed to improve communication for 14,000 British Airways staff at UK offices and airports.	
 
 	•	 	As part of a multimillion dollar contract, Swisscom selected the Cisco CRS-1 Carrier Routing System to transform Swisscom’s entire core network to support Ethernet services for business customers and next-generation “triple play” over broadband services for residential and wholesale customers.	
 
 	•	 	Fujitsu Limited and Cisco introduced the first product to be delivered under the strategic alliance announced in December 2004, a Fujitsu and Cisco CRS-1 Carrier Routing System built on the Cisco IOS ® XR next-generation operating system.	
 
 	•	 	Cisco announced definitive agreements to acquire privately held KiSS Technology A/S and Sheer Networks, Inc.	
 
Editor’s Note:
 
 	•	 	Q4 and FY’05 conference call to discuss Cisco’s results along with its outlook for Q1 FY’06 to be held at 1:30 p.m. Pacific Time on Tuesday, August 9, 2005. Conference call number is 888-790-3530 (United States); 517-308-9081 (international).	
 
 	•	 	Conference call replay will be available from 4:30 p.m. Pacific Time on August 9, 2005 to 4:30 p.m. Pacific Time on August 16, 2005 at 800-824-7031 (United States); 203-369-3222 (international). The replay is also available from August 9, 2005 through October 21, 2005 on the Cisco Investor Relations Website at http://www.cisco.com/go/investors.	
 
 	•	 	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 on August 9, 2005. Text of the conference call’s prepared remarks will be available within 24 hours of	
 
3

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://www.cisco.com/go/investors.
 
 	•	 	A Q&A with Cisco’s CEO and CFO on Q4 and FY’05 results will be available at http://newsroom.cisco.com.	
 
About Cisco Systems
 
Cisco Systems, Inc. (NASDAQ: CSCO), the worldwide leader in networking for the Internet, celebrates 20 years of commitment to technology innovation, industry leadership and corporate social responsibility. Information about Cisco can be found at http://www.cisco.com . For ongoing news, go to http://newsroom.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 due to a variety of factors, including: business and economic conditions and growth trends in the networking industry and 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 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; increased competition in the networking industry; 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; our ability to recruit and retain key personnel; our ability to manage financial risk; currency fluctuations and other international factors; potential volatility in operating results and other factors listed in Cisco’s most recent reports on Form 10-K, 10-Q and 8-K. 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 twelve months ended July 30, 2005 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 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.
 
Cisco provides pro forma net income and pro forma net income per share data as additional information to help investors better understand 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. Cisco believes when GAAP net income and GAAP net income per share are viewed in conjunction with pro forma net income and pro forma net income per share, investors are provided with a more meaningful understanding of Cisco’s ongoing operating performance. In addition, Cisco’s management uses these measures for reviewing the financial results of Cisco.
 
Copyright© 2005 Cisco Systems, Inc. All rights reserved. Cisco, 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 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.
 
4

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

 	  	Three Months Ended
	  	Twelve Months Ended
	 	
 	  	July 30,
2005
	  	July 31,
2004
	  	July 30,
2005
	  	July 31,
2004
	 	
NET SALES:	  	 	 	  	 	 	  	 	 	  	 	 	 	
Product	  	$	5,525	  	$	5,007	  	$	20,853	  	$	18,550	 	
Service	  	 	1,056	  	 	919	  	 	3,948	  	 	3,495	 	
 	  			  			  			  				
Total net sales	  	 	6,581	  	 	5,926	  	 	24,801	  	 	22,045	 	
 	  			  			  			  				
COST OF SALES:	  	 	 	  	 	 	  	 	 	  	 	 	 	
Product	  	 	1,746	  	 	1,573	  	 	6,758	  	 	5,766	 	
Service	  	 	367	  	 	298	  	 	1,372	  	 	1,153	 	
 	  			  			  			  				
Total cost of sales	  	 	2,113	  	 	1,871	  	 	8,130	  	 	6,919	 	
 	  			  			  			  				
GROSS MARGIN	  	 	4,468	  	 	4,055	  	 	16,671	  	 	15,126	 	
					
OPERATING EXPENSES:	  	 	 	  	 	 	  	 	 	  	 	 	 	
Research and development	  	 	858	  	 	785	  	 	3,220	  	 	3,080	 	
Sales and marketing	  	 	1,257	  	 	1,150	  	 	4,671	  	 	4,445	 	
General and administrative	  	 	250	  	 	199	  	 	934	  	 	804	 	
Payroll tax on stock option exercises	  	 	5	  	 	4	  	 	12	  	 	16	 	
Stock-based compensation related to acquisitions and investments	  	 	39	  	 	56	  	 	165	  	 	244	 	
Amortization of purchased intangible assets	  	 	56	  	 	60	  	 	227	  	 	242	 	
In-process research and development	  	 	6	  	 	—  	  	 	26	  	 	3	 	
 	  			  			  			  				
Total operating expenses	  	 	2,471	  	 	2,254	  	 	9,255	  	 	8,834	 	
 	  			  			  			  				
OPERATING INCOME	  	 	1,997	  	 	1,801	  	 	7,416	  	 	6,292	 	
					
Interest income	  	 	153	  	 	124	  	 	552	  	 	512	 	
Other income, net	  	 	3	  	 	11	  	 	68	  	 	188	 	
 	  			  			  			  				
Interest and other income, net	  	 	156	  	 	135	  	 	620	  	 	700	 	
 	  			  			  			  				
INCOME BEFORE PROVISION FOR INCOME TAXES AND CUMULATIVE EFFECT OF ACCOUNTING CHANGE	  	 	2,153	  	 	1,936	  	 	8,036	  	 	6,992	 	
Provision for income taxes	  	 	613	  	 	556	  	 	2,295	  	 	2,024	 	
 	  			  			  			  				
INCOME BEFORE CUMULATIVE EFFECT OF ACCOUNTING CHANGE	  	 	1,540	  	 	1,380	  	 	5,741	  	 	4,968	 	
					
Cumulative effect of accounting change, net of tax	  	 	—  	  	 	—  	  	 	—  	  	 	(567	)	
 	  			  			  			  				
NET INCOME	  	$	1,540	  	$	1,380	  	$	5,741	  	$	4,401	 	
 	  			  			  			  				
Income per share before cumulative effect of accounting change:	  	 	 	  	 	 	  	 	 	  	 	 	 	
Basic	  	$	0.24	  	$	0.20	  	$	0.88	  	$	0.73	 	
 	  			  			  			  				
Diluted	  	$	0.24	  	$	0.20	  	$	0.87	  	$	0.70	 	
 	  			  			  			  				
Net income per share:	  	 	 	  	 	 	  	 	 	  	 	 	 	
Basic	  	$	0.24	  	$	0.20	  	$	0.88	  	$	0.64	 	
 	  			  			  			  				
Diluted	  	$	0.24	  	$	0.20	  	$	0.87	  	$	0.62	 	
 	  			  			  			  				
Shares used in per-share calculation:	  	 	 	  	 	 	  	 	 	  	 	 	 	
Basic	  	 	6,366	  	 	6,736	  	 	6,487	  	 	6,840	 	
 	  			  			  			  				
Diluted	  	 	6,480	  	 	6,935	  	 	6,612	  	 	7,057	 	

5

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

 	  	Three Months Ended
	 	 	Twelve Months Ended
	 	
 	  	July 30,
2005
	 	 	July 31,
2004
	 	 	July 30,
2005
	 	 	July 31,
2004
	 	
NET SALES:	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Product	  	$	5,525	 	 	$	5,007	 	 	$	20,853	 	 	$	18,550	 	
Service	  	 	1,056	 	 	 	919	 	 	 	3,948	 	 	 	3,495	 	
 	  				 				 				 				
Total net sales	  	 	6,581	 	 	 	5,926	 	 	 	24,801	 	 	 	22,045	 	
 	  				 				 				 				
COST OF SALES:	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Product	  	 	1,746	 	 	 	1,573	 	 	 	6,758	 	 	 	5,766	 	
Service	  	 	367	 	 	 	298	 	 	 	1,372	 	 	 	1,153	 	
 	  				 				 				 				
Total cost of sales	  	 	2,113	 	 	 	1,871	 	 	 	8,130	 	 	 	6,919	 	
 	  				 				 				 				
GROSS MARGIN	  	 	4,468	 	 	 	4,055	 	 	 	16,671	 	 	 	15,126	 	
					
OPERATING EXPENSES:	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Research and development	  	 	858	 	 	 	785	 	 	 	3,220	 	 	 	3,080	 	
Sales and marketing	  	 	1,257	 	 	 	1,150	 	 	 	4,671	 	 	 	4,445	 	
General and administrative	  	 	250	 	 	 	199	 	 	 	934	 	 	 	804	 	
 	  				 				 				 				
Total operating expenses (a) (b) (c) (d)	  	 	2,365	 	 	 	2,134	 	 	 	8,825	 	 	 	8,329	 	
 	  				 				 				 				
OPERATING INCOME (a) (b) (c) (d)	  	 	2,103	 	 	 	1,921	 	 	 	7,846	 	 	 	6,797	 	
					
Interest income	  	 	153	 	 	 	124	 	 	 	552	 	 	 	512	 	
Other income, net (e)	  	 	3	 	 	 	11	 	 	 	15	 	 	 	103	 	
 	  				 				 				 				
Interest and other income, net (e)	  	 	156	 	 	 	135	 	 	 	567	 	 	 	615	 	
 	  				 				 				 				
INCOME BEFORE PROVISION FOR INCOME TAXES (a) (b) (c) (d) (e)	  	 	2,259	 	 	 	2,056	 	 	 	8,413	 	 	 	7,412	 	
Provision for income taxes (f)	  	 	633	 	 	 	576	 	 	 	2,356	 	 	 	2,075	 	
 	  				 				 				 				
NET INCOME	  	$	1,626	 	 	$	1,480	 	 	$	6,057	 	 	$	5,337	 	
 	  				 				 				 				
Net income per share:	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Basic	  	$	0.26	 	 	$	0.22	 	 	$	0.93	 	 	$	0.78	 	
 	  				 				 				 				
Diluted	  	$	0.25	 	 	$	0.21	 	 	$	0.92	 	 	$	0.76	 	
 	  				 				 				 				
Shares used in per-share calculation:	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Basic	  	 	6,366	 	 	 	6,736	 	 	 	6,487	 	 	 	6,840	 	
 	  				 				 				 				
Diluted	  	 	6,480	 	 	 	6,935	 	 	 	6,612	 	 	 	7,057	 	
 	  				 				 				 				
A reconciliation between net income on a GAAP basis and pro forma net income is as follows:	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
GAAP net income	  	$	1,540	 	 	$	1,380	 	 	$	5,741	 	 	$	4,401	 	
(a) In-process research and development	  	 	6	 	 	 	—  	 	 	 	26	 	 	 	3	 	
(b) Payroll tax on stock option exercises	  	 	5	 	 	 	4	 	 	 	12	 	 	 	16	 	
(c) Stock-based compensation related to acquisitions and investments	  	 	39	 	 	 	56	 	 	 	165	 	 	 	244	 	
(d) Amortization of purchased intangible assets	  	 	56	 	 	 	60	 	 	 	227	 	 	 	242	 	
(e) (Gain) loss on publicly traded equity securities	  	 	—  	 	 	 	—  	 	 	 	(53	)	 	 	(85	)	
(f) Income tax effect	  	 	(20	)	 	 	(20	)	 	 	(61	)	 	 	(51	)	
(g) Cumulative effect of accounting change, net of tax	  	 	—  	 	 	 	—  	 	 	 	—  	 	 	 	567	 	
 	  				 				 				 				
Pro forma net income	  	$	1,626	 	 	$	1,480	 	 	$	6,057	 	 	$	5,337	 	

For the three month period ended April 30, 2005, pro forma net income and pro forma net income per share excluded the following items: in-process research and development of $6 million; payroll tax on stock option exercises of $3 million; stock-based compensation related to acquisitions and investments of $47 million; amortization of purchased intangible assets of $54 million and income tax effect of ($19) million.
 
6

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

 	  	July 30,
2005
	  	July 31,
2004
	
ASSETS	  	 	 	  	 	 	
Current assets:	  	 	 	  	 	 	
Cash and cash equivalents	  	$	4,742	  	$	3,722	
Short-term investments	  	 	2,227	  	 	4,947	
Accounts receivable, net of allowance for doubtful accounts of $162 at July 30, 2005 and $179 at July 31, 2004	  	 	2,216	  	 	1,825	
Inventories	  	 	1,297	  	 	1,207	
Deferred tax assets	  	 	1,582	  	 	1,827	
Prepaid expenses and other current assets	  	 	967	  	 	815	
 	  			  			
Total current assets	  	 	13,031	  	 	14,343	
			
Investments	  	 	9,086	  	 	10,598	
Property and equipment, net	  	 	3,320	  	 	3,290	
Goodwill	  	 	5,295	  	 	4,198	
Purchased intangible assets, net	  	 	549	  	 	325	
Other assets	  	 	2,602	  	 	2,840	
 	  			  			
TOTAL ASSETS	  	$	33,883	  	$	35,594	
 	  			  			
LIABILITIES AND SHAREHOLDERS’ EQUITY	  	 	 	  	 	 	
Current liabilities:	  	 	 	  	 	 	
Accounts payable	  	$	735	  	$	657	
Income taxes payable	  	 	1,511	  	 	963	
Accrued compensation	  	 	1,317	  	 	1,466	
Deferred revenue	  	 	3,854	  	 	3,527	
Other accrued liabilities	  	 	2,094	  	 	2,090	
 	  			  			
Total current liabilities	  	 	9,511	  	 	8,703	
Deferred revenue	  	 	1,188	  	 	975	
 	  			  			
Total liabilities	  	 	10,699	  	 	9,678	
 	  			  			
Minority interest	  	 	10	  	 	90	
			
Shareholders’ equity	  	 	23,174	  	 	25,826	
 	  			  			
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY	  	$	33,883	  	$	35,594	

7

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

 	  	Twelve Months Ended
	 	
 	  	July 30,
2005
	 	 	July 31,
2004
	 	
Cash flows from operating activities:	  	 	 	 	 	 	 	 	
Net income	  	$	5,741	 	 	$	4,401	 	
Adjustments to reconcile net income to net cash provided by operating activities:	  	 	 	 	 	 	 	 	
Cumulative effect of accounting change, net of tax	  	 	—  	 	 	 	567	 	
Depreciation and amortization	  	 	1,009	 	 	 	1,199	 	
Stock-based compensation related to acquisitions and investments	  	 	165	 	 	 	244	 	
Provision for doubtful accounts	  	 	—  	 	 	 	19	 	
Provision for inventory	  	 	221	 	 	 	205	 	
Deferred income taxes	  	 	55	 	 	 	552	 	
Tax benefits from employee stock option plans	  	 	35	 	 	 	537	 	
In-process research and development	  	 	26	 	 	 	3	 	
Net (gains) losses and impairment charges on investments	  	 	(95	)	 	 	(155	)	
Change in operating assets and liabilities:	  	 	 	 	 	 	 	 	
Accounts receivable	  	 	(373	)	 	 	(488	)	
Inventories	  	 	(305	)	 	 	(538	)	
Prepaid expenses and other current assets	  	 	(58	)	 	 	(42	)	
Lease receivables, net	  	 	(163	)	 	 	(159	)	
Accounts payable	  	 	62	 	 	 	54	 	
Income taxes payable	  	 	947	 	 	 	260	 	
Accrued compensation	  	 	(154	)	 	 	(7	)	
Deferred revenue	  	 	541	 	 	 	688	 	
Other accrued liabilities	  	 	(86	)	 	 	(378	)	
 	  				 				
Net cash provided by operating activities	  	 	7,568	 	 	 	6,962	 	
 	  				 				
Cash flows from investing activities:	  	 	 	 	 	 	 	 	
Purchases of short-term investments	  	 	(5,483	)	 	 	(12,206	)	
Proceeds from sales and maturities of short-term investments	  	 	10,465	 	 	 	13,570	 	
Purchases of investments	  	 	(14,831	)	 	 	(20,848	)	
Proceeds from sales and maturities of investments	  	 	14,165	 	 	 	20,757	 	
Acquisition of property and equipment	  	 	(692	)	 	 	(613	)	
Acquisition of businesses, net of cash and cash equivalents	  	 	(911	)	 	 	(104	)	
Change in investments in privately held companies	  	 	(171	)	 	 	(13	)	
Purchase of minority interest of Cisco Systems, K.K. (Japan)	  	 	(34	)	 	 	(71	)	
Other	  	 	106	 	 	 	153	 	
 	  				 				
Net cash provided by investing activities	  	 	2,614	 	 	 	625	 	
 	  				 				
Cash flows from financing activities:	  	 	 	 	 	 	 	 	
Issuance of common stock	  	 	1,087	 	 	 	1,257	 	
Repurchase of common stock	  	 	(10,235	)	 	 	(9,080	)	
Other	  	 	(14	)	 	 	33	 	
 	  				 				
Net cash used in financing activities	  	 	(9,162	)	 	 	(7,790	)	
 	  				 				
Net increase (decrease) in cash and cash equivalents	  	 	1,020	 	 	 	(203	)	
Cash and cash equivalents, beginning of fiscal year	  	 	3,722	 	 	 	3,925	 	
 	  				 				
Cash and cash equivalents, end of fiscal year	  	$	4,742	 	 	$	3,722	 	

Note: Certain reclassifications have been made to prior period balances in order to conform to the current period’s presentation.
 
8

Cisco Systems, Inc.
ADDITIONAL FINANCIAL INFORMATION
(In millions)
(Unaudited)

 	  	July 30,
2005
	 	 	July 31,
2004
	 	
CASH AND CASH EQUIVALENTS AND TOTAL INVESTMENTS	  	 	 	 	 	 	 	 	
Cash and cash equivalents	  	$	4,742	 	 	$	3,722	 	
Fixed income securities	  	 	10,372	 	 	 	14,411	 	
Publicly traded equity securities	  	 	941	 	 	 	1,134	 	
 	  				 				
Total	  	$	16,055	 	 	$	19,267	 	
 	  				 				
INVENTORIES	  	 	 	 	 	 	 	 	
Raw materials	  	$	82	 	 	$	58	 	
Work in process	  	 	431	 	 	 	416	 	
Finished goods:	  	 	 	 	 	 	 	 	
Distributor inventory and deferred cost of sales	  	 	385	 	 	 	316	 	
Manufacturing finished goods	  	 	184	 	 	 	206	 	
 	  				 				
Total finished goods	  	 	569	 	 	 	522	 	
Service-related spares	  	 	180	 	 	 	177	 	
Demonstration systems	  	 	35	 	 	 	34	 	
 	  				 				
Total	  	$	1,297	 	 	$	1,207	 	
 	  				 				
PROPERTY AND EQUIPMENT, NET	  	 	 	 	 	 	 	 	
Land, buildings, and leasehold improvements	  	$	3,492	 	 	$	3,429	 	
Computer equipment and related software	  	 	1,244	 	 	 	1,120	 	
Production, engineering, and other equipment	  	 	3,095	 	 	 	2,643	 	
Operating lease assets	  	 	136	 	 	 	94	 	
Furniture and fixtures	  	 	355	 	 	 	356	 	
 	  				 				
 	  	 	8,322	 	 	 	7,642	 	
Less, accumulated depreciation and amortization	  	 	(5,002	)	 	 	(4,352	)	
 	  				 				
Total	  	$	3,320	 	 	$	3,290	 	
 	  				 				
LEASE RECEIVABLES, NET (a)	  	 	 	 	 	 	 	 	
Current	  	$	248	 	 	$	215	 	
Noncurrent	  	 	353	 	 	 	231	 	
 	  				 				
Total	  	$	601	 	 	$	446	 	
 	  				 				
OTHER ASSETS	  	 	 	 	 	 	 	 	
Deferred tax assets	  	$	1,201	 	 	$	1,130	 	
Investments in privately held companies	  	 	421	 	 	 	354	 	
Income tax receivable	  	 	277	 	 	 	690	 	
Lease receivables, net	  	 	353	 	 	 	231	 	
Other	  	 	350	 	 	 	435	 	
 	  				 				
Total	  	$	2,602	 	 	$	2,840	 	
 	  				 				
DEFERRED REVENUE	  	 	 	 	 	 	 	 	
Service	  	$	3,618	 	 	$	3,047	 	
Product	  	 	1,424	 	 	 	1,455	 	
 	  				 				
Total	  	$	5,042	 	 	$	4,502	 	
 	  				 				
Reported as:	  	 	 	 	 	 	 	 	
Current	  	$	3,854	 	 	$	3,527	 	
Noncurrent	  	 	1,188	 	 	 	975	 	
 	  				 				
Total	  	$	5,042	 	 	$	4,502	 	

Note: Certain reclassifications have been made to prior period balances in order to conform to the current period’s presentation.

(a)	The current portion of lease receivables, net, is recorded in prepaid expenses and other current assets and the noncurrent portion is recorded in other assets in the Consolidated Balance Sheets.	
 
9