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38 Cisco Systems, Inc.
The following tables summarize our contractual obligations at July 29, 2006 and July 30, 2005 (in millions):
PAYMENTS DUE BY PERIOD
Total
Less than
1 Year
1–3
Years
3–5
Years
More than
5 YearsJuly 29, 2006
Operating leases $ 1,215 $ 233 $ 280 $ 196 $ 506
Purchase commitments with contract manufacturers and suppliers 1,979 1,979 — — —
Purchase obligations 1,418 994 314 66 44
Long-term debt 6,505 — 502 3,003 3,000
Other long-term liabilities 161 10 80 28 43
Total $ 11,278 $ 3,216 $ 1,176 $ 3,293 $ 3,593
PAYMENTS DUE BY PERIOD
July 30, 2005 Total
Less than
1 Year
1–3
Years
3–5
Years
More than
5 Years
Operating leases $ 1,260 $ 215 $ 281 $ 184 $ 580
Purchase commitments with contract manufacturers and suppliers 954 954 — — —
Purchase obligations 1,398 1,014 338 46 —
Total $ 3,612 $ 2,183 $ 619 $ 230 $ 580
Operating Leases We lease ofce space in several U.S. locations. Outside the United States, larger sites include Australia, Belgium, Canada,
China, France, Germany, India, Italy, Japan, and the United Kingdom. Operating lease amounts include future minimum lease payments
under all our noncancelable operating leases with an initial term in excess of one year.
Purchase Commitments with Contract Manufacturers and Suppliers We purchase components from a variety of suppliers and use several
contract manufacturers to provide manufacturing services for our products. During the normal course of business, in order to manage
manufacturing lead times and help ensure adequate component supply, we enter into agreements with contract manufacturers and
suppliers that either allow them to procure inventory based upon criteria as dened by us or that establish the parameters dening our
requirements. In certain instances, these agreements allow us the option to cancel, reschedule, and adjust our requirements based on our
business needs prior to rm orders being placed. Consequently, only a portion of our reported purchase commitments arising from these
agreements are rm, noncancelable, and unconditional commitments. The purchase commitments for inventory are expected to be fullled
within one year. The increase in purchase commitments for inventory is related to the inclusion of approximately $295 million of purchase
commitments for Scientic-Atlanta, the implementation of the lean manufacturing model, higher backlog, and longer lead times in the
broader supply chain.
In addition to the above, we record a liability for rm, noncancelable, and unconditional purchase commitments for quantities in excess
of our future demand forecasts consistent with our allowance for inventory. As of July 29, 2006, the liability for these purchase commitments
was $148 million, compared with $87 million as of July 30, 2005. These amounts are included in other accrued liabilities in our Consolidated
Balance Sheets at July 29, 2006 and July 30, 2005, and are not included in the preceding table.
Purchase Obligations Purchase obligations represent an estimate of all open purchase orders and contractual obligations in the ordinary
course of business, other than commitments with contract manufacturers and suppliers, for which we have not received the goods or
services. Although open purchase orders are considered enforceable and legally binding, the terms generally allow us the option to cancel,
reschedule, and adjust our requirements based on our business needs prior to the delivery of goods or performance of services.
Other Long-Term Liabilities Our long-term liabilities consist of the fair value of interest rate swaps, accrued liability for dened benet and
deferred compensation plans, deferred tax liabilities, and other long-term liabilities. The future payments related to the fair value of interest
rate swaps, deferred tax liabilities, and certain other long-term liabilities have not been presented in the table above due to the uncertainty
regarding the timing of future payments with respect to these liabilities.
Management’s Discussion and Analysis of Financial Condition and Results of Operations