Beat by .01...
SAN JOSE, Calif.--(BUSINESS WIRE)--Nov. 6, 2002--Cisco Systems
(Nasdaq:CSCO.Q)
-- Q1 Revenues: $4.8 Billion
-- Q1 Operating Cash Flow: $1.1 Billion
-- Q1 Earnings Per Share: $0.08 GAAP; $0.14 Pro Forma
Cisco Systems, Inc., the worldwide leader in networking for the
Internet, today reported its first quarter results for the period
ended October 26, 2002.
Net sales for the first quarter of fiscal 2003 were $4.8 billion,
compared with $4.4 billion for the first quarter of fiscal 2002, an
increase of 9%, and compared with $4.8 billion for the fourth quarter
of fiscal 2002.
Net income for the first quarter of fiscal 2003 on a generally
accepted accounting principle (GAAP) basis, was $618 million or $0.08
per share, compared with net loss of $268 million or $0.04 per share
for the first quarter of fiscal 2002, and $772 million or $0.10 per
share for the fourth quarter of fiscal 2002. Pro forma net income for
the first quarter of fiscal 2003, which excludes the effects of
acquisition charges, payroll tax on employee stock option exercises,
loss on public equity investments and certain nonrecurring items, was
$1.0 billion or $0.14 per share, compared with pro forma net income of
$332 million or $0.04 per share for the first quarter of fiscal 2002,
and compared with $1.0 billion or $0.14 per share for the fourth
quarter of fiscal 2002.
During the first quarter of fiscal 2003, Cisco recorded a non-cash
$412 million impairment charge on certain publicly held equity
securities in its investments portfolio. Cisco has excluded the
impairment charge, and the related tax benefit, from pro forma
earnings. This treatment is similar to the reporting of a non-cash
$858 million impairment charge on certain publicly held equity
securities recorded during the first quarter of fiscal 2002. Cisco
reflects publicly held equity securities at current market value on
its balance sheet and the accounting rules require that once a decline
in value is judged tobe other than temporary, the company must record
a charge to earnings.
During the first quarter of fiscal 2003, Cisco completed the
acquisition of AYR Networks, Inc. The purchase price recorded during
the quarter, including assumed liabilities, was approximately $97
million.
Cash flows from operations were $1.1 billion for the first quarter
of fiscal 2003 compared with $1.6 billion for the fourth quarter of
fiscal 2002. Cash and cash equivalents and total investments were
$21.2 billion at the end of the first quarter of fiscal 2003 compared
with $21.5 billion at fiscal year-end 2002.
"Despite the challenging market, we continued to execute ahead of
our competitors, resulting in another solid quarter for Cisco," said
John Chambers, CEO of Cisco Systems. "By focusing on what we can
control and influence, we saw dramatic year-over-year improvements in
net income, gross margins and profitable market share gains as well as
solid revenue growth, which is reflected in another quarter of cash
flow from operations in excess of a billion dollars. We are well
positioned for an upturn, regardless of when it occurs."
Chambers continued, "I spent the last month traveling to eight
countries and 17 cities and I visited with thousands of customers and
government leaders, whose message is clear -- the network is a
long-term strategic investment for driving productivity. As business
turns around, spending will return. Cisco is well positioned in both
traditional and new growth markets such as network storage, security,
wireless LAN and IP telephony."
Market Segment Update:
Enterprise
Global enterprise customers continue to cautiously deploy
solutions that provide ways to boost productivity and enhance business
resilience. In switching, Cisco introduced additions to the
Catalyst(R) series of switches, including the Catalyst 4500 Series and
new options for the Catalyst 6500 Series. These included new
price/performance points, a new three-slot chassis, integrated
security, VPN and content networking services modules.
In potential growth areas such as security, voice and storage,
Cisco made several product announcements. In addition to new security
hardware modules, Cisco announced new integrated software security
functionality. Cisco also announced its intent to acquire Psionic
Software Inc., a security company with technology that is designed to
reduce the number of false alarms in intrusion detection systems. In
the voice market, Cisco announced Ernst & Young LLP's decision to
deploy a 4,300 IP phone installation at its headquarter site in New
York City. In the storage networking market, Cisco announced its
intent to acquire Andiamo Systems and launched the Cisco MDS 9000
family of multilayer directors and fabric switches.
Commercial
During the quarter, Cisco launched an initiative with the
objective of providing SMB customers with technology, solutions and
expertise to assist them to better utilize their networks. Included in
the SMB outreach effort are networking solutions in the areas of
security, mobility and IP telephony, along with the addition of 11 new
industry components to Cisco's Web-based, reseller resource program
and the Cisco Internet Business Roadmap. This commitment will better
enable Cisco and its partners to meet the business needs of SMBs, who,
on a global basis, will spend an estimated $14 billion on networking
hardware in 2002 according to AMI-Partners. Competitive intelligence
firm Current Analysis rated the initiative as positive and of high
importance to SMBs and the industry.
Cisco announced two enhancements to its mobility offerings, the
Cisco Mobile Access Router (Cisco 3200) and Cisco Aironet(R) 1100
Series. SMB customers continue to adopt VPN technology through Cisco
access router platforms, which include Cisco 1700, 2600, 3600 and 3700
series routers. This demonstrates the growing importance of VPN for
connectivity, and customer desire for simplified, branch-office
installations that include integrated, multi-function router
offerings.
Service Provider
Sales in the service provider marketplace continue to be
challenging due to capital expenditure reductions. In response to the
capital spending challenges, Cisco is seeking to help its service
provider customers drive toward profitability by:
-- Creating, testing and assisting new service development,
utilizing their installed equipment to provide new revenue
streams
-- Helping them improve internal and operational productivity
-- Generating demand for their services from Cisco's enterprise
and SMB contacts through its established service acceleration
worldwide programs
-- Continuing Cisco's technology innovation to help drive down
operational costs by providing new means of maximizing their
current infrastructures through incremental investments and/or
taking advantage of new architectural efficiencies. As an
example, Cisco announced the Cisco ONS 15600 Multiservice
Switching Platform, aiming to reduce first costs and
provisioning time.
During the quarter, Cisco announced several new customer
agreements, including Telecom Italia's deployment of Cisco's voice
solution to enable voice calls over a converged "voice over IP/MPLS"
network, China Telecom's purchase of Cisco 12000 Series routers and
Cisco 7000 routers for its northern ChinaNet IP backbone network
expansion, and Charter Communications' decision to deploy a Cisco
end-to-end cable network. Additionally, during the quarter, Cisco
introduced a new Multiprotocol Label Switching (MPLS) bandwidth
protection solution that provides a cost-effective alternative to
SONET/SDH protection. This solution is designed to help service
providers maximize bandwidth protection at a network-wide level for
increased network resiliency, and offer cost-effective global
bandwidth protection services for "carrier-class" service-level
agreements (SLAs) for increased revenue opportunities.
Editors Note:
-- Q1 FY03 conference call to be held at 1:30 p.m. PT on
Wednesday, November 6, 2002. Conference call number is
800-369-1742 (United States); 312-470-7224 (international)
-- Conference call replay available from 4:30 p.m. PT on November
6, 2002 to November 13, 2002 at 888-568-0124 (United States);
402-530-7791 (international)
-- Additional information regarding Cisco's financials, as well
as corresponding Webcast with visuals designed to guide
participants through the call are also available at 1:30 p.m.
PT. Please visit our investor relations site at
cisco.com
-- Additional information regarding Cisco's Q1 FY03 available on
Cisco's news site, including:
-- Customer Highlights and Technology Innovation Fact Sheet:
First Quarter, Fiscal Year 2003 will be available at
newsroom.cisco.com
-- A Q&A with CEO John Chambers and CFO Larry Carter will be
available after the earnings conference call at
newsroom.cisco.com
About Cisco Systems
Cisco Systems, Inc., (Nasdaq:CSCO.Q) is the worldwide leader in
networking for the Internet. News and information are available at
www.cisco.com.
This release contains projections and other forward-looking
statements regarding future events and the future financial
performance of Cisco that involve risks and uncertainties. Readers are
cautioned that these forward-looking statements are only predictions
and may differ materially from actual future events or results.
Readers are referred to the documents filed by Cisco with the SEC,
specifically the most recent reports on Form 10-K, 10-Q and 8-K, each
as it may be amended from time to time, which identify important risk
factors that could cause actual results to differ from those contained
in the forward-looking statements. In addition to these risk factors,
other factors that could cause actual results to differ materially
include the following: business and economic conditions and growth
trends in the networking industry in various geographic regions;
global economic conditions; 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 ability
to successfully restructure existing businesses; the timing of orders
and manufacturing lead times; changes in customer order patterns;
insufficient, excess or obsolete inventory; variations in sales
channels, product costs, or mix of products sold; the ability to
successfully reduce overhead and manage expenses; the ability to
successfully acquire businesses and technologies and to successfully
integrate and operate these acquired businesses and technologies;
increased competition in the networking industry; dependence on the
introduction and market acceptance of new product offerings and
standards; rapid technological and market change; the trend towards
sales of integrated network solutions; manufacturing and sourcing
risks; Internet infrastructure problems and government regulation of
the Internet; international operations; the timing and amount of
employer payroll tax to be paid on employees' gains on stock options
exercised; litigation involving patents, intellectual prder and other matters; possible disruption in
commercial activities occasioned by terrorist activity and armed
conflict, such as changes in logistics and security arrangements, and
reduced end-user purchases relative to expectations; exposure to
credit risks relating to certain customers and credit exposures in
weakened markets; the ability to recruit and retain key personnel;
stock price volatility; financial risk management; and potential
volatility in operating results, among others. The financial
information contained in this release should be read in conjunction
with the consolidated financial statements and notes thereto included
in Cisco's most recent reports on Form 10-K and Form 10-Q, each as it
may be amended from time to time. Cisco's results of operations for
the three months ended October 26, 2002 are not necessarily indicative
of Cisco's operating results for any future periods.
Cisco provides pro forma net income and pro forma net income per
share data as additional information for its operating results. These
measures are not in accordance with, or an alternative for, generally
accepted accounting principles and may be different from pro forma
measures used by other companies.
Note to Editors: Catalyst, Cisco, Cisco IOS, Cisco Systems, the
Cisco Systems logo, and Aironet are registered trademarks or
trademarks of Cisco Systems, Inc. and/or its affiliates in the U.S.
and certain other countries. All other trademarks mentioned in this
document or Web site are the property of their respective owners. The
use of the word partner does not imply a partnership relationship
between Cisco and any other company.
-0-
*T
Cisco Systems, Inc.
CONSOLIDATED STATEMENTS OF OPERATIONS
(In millions, except per-share amounts)
(Unaudited)
Three Months Ended
------------------
October October
26, 27,
2002 2001
-------- ---------
NET SALES:
Product $4,013 $3,656
Services832 792
------- -------
Total net sales 4,845 4,448
------- -------
COST OF SALES:
Product 1,237 1,500
Services 250 256
------- -------
Total cost of sales 1,487 1,756
------- -------
GROSS MARGIN 3,358 2,692
OPERATING EXPENSES:
Research and development 789 875
Sales and marketing 1,093 1,086
General and administrative 151 150
Payroll tax on stock option exercises -- 3
Amortization of deferred stock-based compensation 43 50
Amortization of purchased intangible assets 114 146
In-process research and development -- 37
------- -------
Total operating expenses 2,190 2,347
------- -------
OPERATING INCOME 1,168 345
Net gains (losses) on investments (412) (858)
Interest income 179 234
Other income/(loss), net (63) (64)
------- -------
INCOME (LOSS) BEFORE PROVISION FOR (BENEFIT FROM)
INCOME TAXES872 (343)
Provision for (benefit from) income taxes 254 (75)
------- -------
NET INCOME (LOSS) $618 $(268)
======= =======
Net income (loss) per share--basic $0.09 $(0.04)
======= =======
Net income (loss) per share--diluted (1) $0.08 $(0.04)
======= =======
Shares used in per-share calculation--basic 7,249 7,307
======= =======
Shares used in per-share calculation--diluted (1) 7,327 7,307
======= =======
Note 1: Diluted net income per share is computed using the
weighted-average number of common shares and dilutive potential common
shares outstanding during the period. Diluted net loss per share is
computed using the weighted-average number of common shares and
excludes dilutive potential common shares, as their effect is
antidilutive. The weighted-average dilutive potential common shares
which were antidilutive for the three months ended October 27, 2001
amounted to 159 million shares.
Cisco Systems, Inc.
PRO FORMA CONSOLIDATED STATEMENTS OF OPERATIONS
(See pro forma adjustments listed in table below)
(In millions, except per-share amounts)
(Unaudited)
Three Months Ended
-----------------
October October
26, 27,
2002 2001
-------- -------
NET SALES:
Product $4,013 $3,656
Services 832 792
------- -------
Total net sales 4,845 4,448
------- -------
COST OF SALES:
Product 1,237 1,790
Services 250 256
------- -------
Total cost of sales 1,487 2,046
------- -------
GROSS MARGIN 3,358 2,402
OPERATING EXPENSES:
Research and development 789 875
Sales and marketing 1,093 1,086
General and administrative 151 150
------- -------
Total operating expenses 2,033 2,111
------- -------
OPERATING INCOME 1,325 291
Interest income 179 234
Other income/(loss), net (63) (64)
------- -------
INCOME BEFORE PROVISION FOR INCOME TAXES 1,441 461
Provision for income taxes 403 129
------- -------
NET INCOME $1,038 $332
======= =======
Net income per share--basic $0.14 $0.05
======= =======
Net income per share--diluted $0.14 $0.04
======= =======
Shares used in per-share calculation--basic 7,249 7,307
======= =======
Shares used in per-share calculation--diluted 7,327 7,466
======= =======
The above pro forma amounts have been adjusted to
exclude the following items:
In-process research and development $-- $37
Payroll tax on stock option exercises -- 3
Amortization of deferred stock-based compensation 43 50
Amortization of purchased intangible assets 114 146
Net (gains) losses on investments 412 858
Excess inventory benefit -- (290)
Income tax effect (149) (204)
------- -------
$420 $600
======= =======
Cisco Systems, Inc.
CONSOLIDATED BALANCE SHEETS
(In millions)
(Unaudited)
October July
26, 27,
2002 2002
--------- ---------
ASSETS
Current assets:
Cash and cash equivalents $6,986 $9,484
Short-term investments 3,325 3,172
Accounts receivable, net of allowance for
doubtful accounts of $346 at October 26,
2002 and $335 at July 27, 2002 1,109 1,105
Inventories, net 828 880
Deferred tax assets 2,106 2,030
Lease receivables, net 194 239
Prepaid expenses and other current assets 548 523
-------- --------
Total current assets 15,096 17,433
Investments 10,877 8,800
Property and equipment, net 3,921 4,102
Goodwill 3,709 3,565
Purchased intangible assets, net 682 797
Lease receivables, net 41 39
Other assets 2,872 3,059
-------- --------
TOTAL ASSETS $37,198 $37,795
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $540 $470
Income taxes payable 508 579
Accrued compensation 1,083 1,365
Deferred revenue2,980 3,143
Other accrued liabilities 2,424 2,496
Restructuring liabilities 336 322
-------- --------
Total current liabilities 7,871 8,375
Deferred revenue 771 749
-------- --------
Total liabilities 8,642 9,124
Minority interest 10 15
Shareholders' equity 28,546 28,656
-------- --------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $37,198 $37,795
======== ========
Cisco Systems, Inc.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In millions)
(Unaudited)
Three Months Ended
-----------------
October October
26, 27,
2002 2001
-------- -------
Cash flows from operating activities:
Net income (loss) $618 $(268)
Adjustments to reconcile net income (loss) to
net cash provided by operating activities:
Depreciation and amortization 410 459
Provision for doubtful accounts 47 26
Provision for (benefit from) inventory 7 (29)
Deferred income taxes (27) (540)
Tax benefits from employee stock option plans 3 43
In-process research and development -- 25
Net (gains) losses on investments and provision
for losses 474 971
Change in operating assets and liabilities:
Accounts receivable (51) 259
Inventories 49 229
Prepaid expenses and other current assets (36) 70
Accounts payable 70 (185)
Income taxes payable (70) 34
Accrued compensation (282) 122
Deferred revenue (141) 321
Other accrued liabilities (18) (83)
Restructuring liabilities 14 (70)
------- -------
Net cash provided by operating activities 1,067 1,384
------- -------
Cash flows from investing activities:
Purchases of short-term investments (1,671) (2,327)
Proceeds from sales and maturities of short-term
investments 1,941 1,724
Purchases of investments (4,981) (2,790)
Proceeds from sales and maturities of investments 2,251 2,040
Purchases of restricted investments -- (19)
Proceeds from sales and maturities of restricted
investments -- 161
Acquisition of property and equipment (122) (292)
Acquisition of businesses, net of cash and cash
equivalents 2 14
Change in lease receivables, net 43 165
Purchases of investments in privately held
companies (12) (19)
Lease deposits -- (73)
Purchase of minority interest of Cisco Systems,
K.K. (Japan) (59) (37)
Other 91 (138)
------- -------
Net cash used in investing activities (2,517) (1,591)
------- -------
Cash flows from financing activities:
Issuance of common stock 41 171
Repurchase of common stock (1,077) (350)
Other (12) --
------- -------
Net cash used in financing activities (1,048) (179)
------- -------
Net decrease in cash and cash equivalents (2,498) (386)
Cash and cash equivalents, beginning of period 9,484 4,873
------- -------
Cash and cash equivalents, end of period $6,986 $4,487
======= =======
*T
--30--EM/sf*
CONTACT: Cisco Systems, Inc.
Abby Smith, 408/525-8548 (Press)
absmith@cisco.com
Blair Christie, 408/525-4856 (IR)
blchrist@cisco.com
KEYWORD: afxal CALIFORNIA TRACK
INDUSTRY KEYWORD: COMPUTERS/ELECTRONICS INTERNET NETWORKING
TELECOMMUNICATIONS CONFERENCE CALLS EARNINGS
SOURCE: Cisco Systems, Inc.
Today's News On The Net - Business Wire's full file on the Internet
with Hyperlinks to your home page.
URL: businesswire.com
Copyright 2002, Business Wire |
