- Q4 Revenues: $4.7 Billion
- Q4 Operating Cash Flow: $1.55 Billion
- Q4 Earnings Per Share: $0.14 GAAP (40% increase year over year); $0.15 Pro Forma
SAN JOSE, Calif., August 5, 2003 - 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 26, 2003.
Net sales for the fourth quarter of fiscal 2003 were $4.7 billion, compared with $4.8 billion for the fourth quarter of fiscal 2002, a decrease of 2.6 percent, and compared with $4.6 billion for the third quarter of fiscal 2003.
Net income for the fourth quarter of fiscal 2003, on a generally accepted accounting principles (GAAP) basis, was $982 million or $0.14 per share, compared with $772 million or $0.10 per share for the fourth quarter of fiscal 2002, and compared with $987 million or $0.14 per share for the third quarter of fiscal 2003. Pro forma net income for the fourth quarter of fiscal 2003 was $1.1 billion or $0.15 per share, compared with pro forma net income of $1.0 billion or $0.14 per share for the fourth quarter of fiscal 2002, and compared with $1.1 billion or $0.15 per share for the third quarter of fiscal 2003. A reconciliation between net income on a GAAP basis and pro forma net income is provided in a table immediately following the Pro Forma Consolidated Statements of Operations.
Net sales for fiscal 2003 were $18.9 billion, compared with $18.9 billion for fiscal 2002.
Net income for fiscal 2003, on a GAAP basis, was $3.6 billion or $0.50 per share, compared with $1.9 billion or $0.25 per share for fiscal 2002. Pro forma net income for fiscal 2003 was $4.3 billion or $0.59 per share, compared with pro forma net income of $2.9 billion or $0.39 per share for fiscal 2002.
During the fourth quarter of fiscal 2003, Cisco® completed the acquisition of SignalWorks, Inc. for a purchase price of approximately $16 million and completed the acquisition of the business of The Linksys Group, Inc. for a purchase price of approximately $480 million.
"We are pleased to report another solid quarter in a challenging market," said John Chambers, President and CEO, Cisco Systems. "We continue to achieve some of the best financial measurements in our company's history, with solid momentum spanning net income, gross margins, profitable market share gains, focus on profit contribution, geographic balance and advanced technology results."
Chambers continued, "The investments and strategies of the past three years are paying off. This is particularly true in high-end routing and switching, where we saw solid sequential growth. Advanced technologies in total exceeded 20 percent sequential growth, with IP telephony, storage and optical growing the fastest in terms of orders."
Cisco will discuss fourth quarter and fiscal year 2003 results and business outlook on a conference call and Webcast at 1:30 p.m. PT today. Call information and related charts are available at http://investor.cisco.com.
Financial Highlights- Cash flows from operations were $1.55 billion for the fourth quarter of fiscal 2003, compared with $1.61 billion for the fourth quarter of fiscal 2002, and compared with $1.26 billion for the third quarter of fiscal 2003. Cash flows from operations were $5.24 billion for fiscal 2003, compared with $6.59 billion for fiscal 2002.
- Cash and cash equivalents and total investments were $20.7 billion at the end of fiscal 2003, compared with $21.5 billion at the end of fiscal year 2002, and compared with $20.3 billion at the end of the third quarter of fiscal 2003.
- During the fourth quarter of fiscal 2003, Cisco repurchased 83 million shares of common stock for an aggregate purchase price of $1.4 billion. For fiscal 2003, Cisco repurchased 424 million shares of common stock for an aggregate purchase price of $6.0 billion.
- Days sales outstanding (DSO) in accounts receivable at the end of the fourth quarter of fiscal 2003 were 26 days, compared with 21 days at the end of the fourth quarter of fiscal 2002, and compared with 23 days at the end of the third quarter of fiscal 2003.
- Inventory turns were 6.8 for the fourth quarter of fiscal 2003, compared with 7.1 for the fourth quarter of fiscal 2002, and compared with 7.0 for the third quarter of fiscal 2003.
"Cisco's solid financial performance reflects our ongoing focus on operational excellence," said Dennis Powell, Chief Financial Officer, Cisco Systems. "For over a year, our quarterly pro forma net income has consistently exceeded $1 billion and profit has exceeded 20 percent of revenue. Cash flows from operations were also particularly strong and we continued to actively engage in our stock repurchase program while maintaining over $20 billion in cash and investments."
Business Highlights- Cisco and service provider BellSouth® expanded their relationship with an agreement to team to implement the infrastructure for BellSouth to deliver advanced voice- and data-managed services to businesses throughout BellSouth's nine-state region. BellSouth also selected the Cisco ONS 15454 SONET Multiservice Provisioning Platform (MSPP) as part of BellSouth's plans to upgrade its traditional Synchronous Optical Network (SONET) network to an advanced optical network infrastructure.
- Cisco introduced the Structured Wireless-Aware Network, an integrated secure wired and wireless framework that extends local area networking (LAN) infrastructure capabilities to the wireless LAN.
- IdleAire Technologies Corporation announced it is offering wireless Internet connectivity, based on Cisco Aironet® 1200 Series access points, to long-haul truck drivers and other business professionals along the nation's highways.
- Cisco shipped its 2 millionth Internet Protocol (IP) telephone.
- Time Warner Cable announced plans to deliver the industry's first voice-over-IP (VoIP) cable primary-line residential telephone service, based on the Cisco IP voice solution, across its existing multiservice network to customers in Portland, Maine.
- In the storage and data-center networking arena, IBM will be the first vendor to offer the Cisco MDS 9000 IP Storage Services Module. Cisco also announced new storage area networking customers AXA Technology and the IT division of Euronext.liffe.
- DACOM, one of the leading communications providers in Korea, is deploying 10-gigabits-per-second (Gbps) Cisco 12406, 12410 and 12416 routers for the expansion of its BORANet backbone network.
- Cisco introduced 14 new integrated security solutions and services, providing security management, virtual private network (VPN) technology and advanced threat protection.
- The government of Jordan, together with Cisco and other World Economic Forum member organizations, announced The Jordan Education Initiative to improve education through the use of technology and the delivery of effective e-learning to Jordan citizens.
- Q4 and FY'03 conference call to discuss Cisco results along with its outlook for Q1 FY'04 to be held at 1:30 p.m. PT on Tuesday, August 5, 2003. Conference call number is 800-779-9573 (United States); 210-234-8039 (international).
- Conference call replay available from 4:30 p.m. PT on August 5, 2003 to 4:30 p.m. PT on August 12, 2003 at 888-568-0916 (United States); 402-998-1588 (international).
- Additional information regarding Cisco's financials and corresponding Webcast with visuals designed to guide participants through the call is also available at 1:30 p.m. PT. Prepared remarks will be available approximately 24 hours after completion of the call. The Webcast will include both the prepared remarks, as well as the question-and-answer session. This information, along with GAAP reconciliation information, will be available at http://www.cisco.com under "About Cisco" in the Investor Relations section.
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Additional information regarding Cisco's Q4 and FY'03 results will be available at http://newsroom.cisco.com
About Cisco Systems
Cisco Systems, Inc., (NASDAQ: CSCO) is the worldwide leader in networking for the Internet. News and information are available at www.cisco.com.
Cisco Systems, Inc.
CONSOLIDATED STATEMENTS OF OPERATIONS
|
(Unaudited)
Three Months Ended | Twelve Months Ended | |||
July 26, 2003 |
July 27, 2002 |
July 26, 2003 |
July 27, 2002 |
|
NET SALES: | ||||
Product | $ 3,862 | $ 3,998 | $ 15,565 | $ 15,669 |
Services | 840 | 831 | 3,313 | 3,246 |
Total net sales | 4,702 | 4,829 | 18,878 | 18,915 |
COST OF SALES: | ||||
Product | 1,127 | 1,306 | 4,594 | 5,914 |
Services | 286 | 240 | 1,051 | 988 |
Total cost of sales | 1,413 | 1,546 | 5,645 | 6,902 |
GROSS MARGIN | 3,289 | 3,283 | 13,233 | 12,013 |
OPERATING EXPENSES: | ||||
Research and development | 736 | 797 | 3,026 | 3,301 |
Sales and marketing | 1,022 | 1,028 | 4,106 | 4,235 |
General and administrative | 187 | 152 | 691 | 611 |
Payroll tax on stock option exercises | 2 | - | 2 | 7 |
Amortization of deferred stock-based compensation |
27 | 43 | 128 | 176 |
Amortization of purchased intangible assets | 110 | 288 | 394 | 699 |
In-process research and development | 1 | 28 | 4 | 65 |
Total operating expenses | 2,085 | 2,336 | 8,351 | 9,094 |
OPERATING INCOME | 1,204 | 947 | 4,882 | 2,919 |
Loss on public equity investments | - | - | (412) | (858) |
Interest income | 146 | 208 | 660 | 895 |
Other income (loss), net | 23 | (58) | (117) | (246) |
INCOME BEFORE PROVISION FOR INCOME TAXES | 1,373 | 1,097 | 5,013 | 2,710 |
Provision for income taxes | 391 | 325 | 1,435 | 817 |
NET INCOME | $ 982 | $ 772 | $ 3,578 | $ 1,893 |
Net income per share-- basic |
$ 0.14 | $ 0.11 | $ 0.50 | $ 0.26 |
Net income per share--diluted |
$ 0.14 | $ 0.10 | $ 0.50 | $ 0.25 |
Shares used in per-share calculation--basic | 7,001 | 7,292 | 7,124 | 7,301 |
Shares used in per-share calculation--diluted | 7,136 | 7,410 | 7,223 | 7,447 |
PRO FORMA CONSOLIDATED STATEMENTS OF OPERATIONS
|
(Unaudited)
Three Months Ended | Twelve Months Ended | |||
July 26, 2003 |
July 27, 2002 |
July 26, 2003 |
July 27, 2002 |
|
NET SALES: | ||||
Product | $ 3,862 | $ 3,998 | $ 15,565 | $ 15,669 |
Services | 840 | 831 | 3,313 | 3,246 |
Total net sales | 4,702 | 4,829 | 18,878 | 18,915 |
COST OF SALES: | ||||
Product (f) | 1,127 | 1,319 | 4,594 | 6,439 |
Services | 286 | 240 | 1,051 | 988 |
Total cost of sales (f) | 1,413 | 1,559 | 5,645 | 7,427 |
GROSS MARGIN (f) | 3,289 | 3,270 | 13,233 | 11,488 |
OPERATING EXPENSES: | ||||
Research and development | 736 | 797 | 3,026 | 3,301 |
Sales and marketing | 1,022 | 1,028 | 4,106 | 4,235 |
General and administrative | 187 | 152 | 691 | 611 |
Total operating expenses (a) (b) (c) (d) | 1,945 | 1,977 | 7,823 | 8,147 |
OPERATING INCOME (a) (b) (c) (d) (f) | 1,344 | 1,293 | 5,410 | 3,341 |
Interest income | 146 | 208 | 660 | 895 |
Other income (loss), net | 23 | (58) | (117) | (246) |
INCOME BEFORE PROVISION FOR INCOME TAXES (a) (b) (c) (d) (e) (f) | 1,513 | 1,443 | 5,953 | 3,990 |
Provision for income taxes (g) | 424 | 404 | 1,666 | 1,117 |
NET INCOME | $ 1,089 | $ 1,039 | $ 4,287 | $ 2,873 |
Net income per share-- basic |
$ 0.16 | $ 0.14 | $ 0.60 | $ 0.39 |
Net income per share--diluted |
$ 0.15 | $ 0.14 | $ 0.59 | $ 0.39 |
Shares used in per-share calculation--basic | 7,001 | 7,292 | 7,124 | 7,301 |
Shares used in per-share calculation--diluted | 7,136 | 7,410 | 7,223 | 7,447 |
A reconciliation between net income on a GAAP basis and pro forma net income is as follows: | ||||
GAAP net income | $ 982 | $ 772 | $ 3,578 | $ 1,893 |
(a) In-process research and development | 1 | 28 | 4 | 65 |
(b) Payroll tax on stock option exercises | 2 | - | 2 | 7 |
(c) Amortization of deferred stock-based compensation |
27 | 43 | 128 | 176 |
(d) Amortization of purchased intangible assets | 110 | 288 | 394 | 699 |
(e) Loss on public equity investments | - | - | 412 | 858 |
(f) Excess inventory benefit | - | (13) | - | (525) |
(g) Income tax effect | (33) | (79) | (231) | (300) |
Pro forma net income | $ 1,089 | $ 1,039 | $ 4,287 | $ 2,873 |
CONSOLIDATED BALANCE SHEETS |
(Unaudited)
July 26, 2003 |
July 27, 2002 | |
ASSETS | ||
Current assets: | ||
Cash and cash equivalents | $ 3,925 | $ 9,484 |
Short-term investments | 4,560 | 3,172 |
Accounts receivable, net of allowance for doubtful accounts of $183 at July 26, 2003 and $335 at July 27, 2002 | 1,351 | 1,105 |
Inventories, net | 873 | 880 |
Deferred tax assets | 1,975 | 2,030 |
Lease receivables, net | 163 | 239 |
Prepaid expenses and other current assets | 568 | 523 |
Total current assets | 13,415 | 17,433 |
Investments | 12,167 | 8,800 |
Property and equipment, net | 3,721 | 4,102 |
Goodwill | 4,043 | 3,565 |
Purchased intangible assets, net | 556 | 797 |
Lease receivables, net | 60 | 39 |
Other assets | 3,145 | 3,059 |
TOTAL ASSETS | $ 37,107 | |
LIABILITIES AND SHAREHOLDERS' EQUITY |
||
Current liabilities: | ||
Accounts payable | $ 594 | $ 470 |
Income taxes payable | 739 | 579 |
Accrued compensation | 1,470 | 1,365 |
Deferred revenue | 3,034 | 3,143 |
Other accrued liabilities | 2,162 | 2,496 |
Restructuring liabilities | 295 | 322 |
Total current liabilities | 8,294 | 8,375 |
Deferred revenue | 774 | 749 |
Total liabilities | 9,068 | 9,124 |
Minority interest | 10 | 15 |
Shareholders' equity | 28,029 | 28,656 |
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY | $ 37,107 | $ 37,795 |
CONSOLIDATED STATEMENTS OF CASH FLOWS |
(Unaudited)
Twelve Months Ended | ||
July 26, 2003 |
July 27, 2002 | |
Cash flows from operating activities: | ||
Net income | $ 3,578 | $ 1,893 |
Adjustments to reconcile net income to net cash provided by operating activities: |
||
Depreciation and amortization | 1,591 | 1,957 |
Provision for doubtful accounts | (59) | 91 |
Provision for on-hand inventory | 70 | 131 |
Deferred income taxes | (14) | (573) |
Tax benefits from employee stock option plans | 132 | 61 |
In-process research and development | 4 | 53 |
Net (gains) losses on investments and provision for losses | 520 | 1,127 |
Change in operating assets and liabilities: | ||
Accounts receivable | (125) | 270 |
Inventories | (17) | 673 |
Prepaid expenses and other current assets | (61) | (28) |
Accounts payable | 35 | (174) |
Income taxes payable | (125) | 389 |
Accrued compensation | 104 | 307 |
Deferred revenue | (84) | 678 |
Other accrued liabilities | (282) | (204) |
Restructuring liabilities | (27) | (64) |
Net cash provided by operating activities | 5,240 | 6,587 |
Cash flows from investing activities: | ||
Purchases of short-term investments | (9,396) | (5,473) |
Proceeds from sales and maturities of short-term investments | 10,319 | 5,868 |
Purchases of investments | (18,063) | (15,760) |
Proceeds from sales and maturities of investments | 12,497 | 15,317 |
Purchases of restricted investments | - | (291) |
Proceeds from sales and maturities of restricted investments | - | 1,471 |
Acquisition of property and equipment | (717) | (2,641) |
Acquisition of businesses, net of cash and cash equivalents | 33 | 16 |
Change in lease receivables, net | 79 | 380 |
Purchases of investments in privately held companies | (223) | (58) |
Lease deposits | - | 320 |
Purchase of minority interest of Cisco Systems, K.K. (Japan) | (59) | (115) |
Other | 94 | 159 |
Net cash used in investing activities | (5,436) | (807) |
Cash flows from financing activities: | ||
Issuance of common stock | 578 | 655 |
Repurchase of common stock | (5,984) | (1,854) |
Other | 43 | 30 |
Net cash used in financing activities | (5,363) | (1,169) |
Net (decrease) increase in cash and cash equivalents | (5,559) | 4,611 |
Cash and cash equivalents, beginning of year | 9,484 | 4,873 |
Cash and cash equivalents, end of year | $ 3,925 | $ 9,484 |
Cisco Systems, Inc.
ADDITIONAL FINANCIAL INFORMATION |
(Unaudited)
July 26, 2003 |
July 27, 2002 | |
CASH AND INVESTMENTS | ||
Cash and cash equivalents | $ 3,925 | $ 9,484 |
Fixed income securities (a) | 15,982 | 11,405 |
Public equity securities | 745 | 567 |
Total (a) The fixed income securities consist primarily of government and corporate notes and bonds with an average credit quality rating of AA+ based on the Standard &Poors credit rating system. |
$ 20,652 | $ 21,456 |
INVENTORIES | ||
Raw materials | $ 38 | $ 38 |
Work in process | 291 | 297 |
Finished goods | 515 | 490 |
Demonstration systems | 29 | 55 |
Total | $ 873 | $ 880 |
PROPERTY AND EQUIPMENT, NET | ||
Land, buildings, and leasehold improvements | $ 3,411 | $ 3,352 |
Computer equipment and related software | 1,147 | 1,021 |
Production, engineering, and other equipment | 2,410 | 2,061 |
Operating lease assets | 439 | 505 |
Furniture and fixtures | 350 | 366 |
7,757 | 7,305 | |
Less, accumulated depreciation and amortization | (4,036) | (3,203) |
Total | $ 3,721 | $ 4,102 |
OTHER ASSETS | ||
Deferred tax assets | $1,476 | $ 1,663 |
Investments in privately held companies | 516 | 477 |
Income tax receivable | 727 | 392 |
Structured loans, net | 42 | 61 |
Other | 384 | 466 |
Total | $ 3,145 | $ 3,059 |
DEFERRED REVENUE | ||
Services | $ 2,451 | $ 2,207 |
Product | 1,357 | 1,685 |
Total | 3,808 | 3,892 |
Less, current portion | (3,034) | (3,143) |
Non-current deferred revenue | $ 774 | $ 749 |