Cisco 2006 Annual Report Download - page 36

2006 Annual Report 39
Other Commitments
We have entered into an agreement to invest approximately $800 million in venture funds managed by SOFTBANK Corp. and its afliates
(“SOFTBANK”) that are required to be funded on demand. The total commitment is to be invested in venture funds and as senior debt with
entities as directed by SOFTBANK. Our commitment to fund the senior debt is contingent upon the achievement of certain agreed-upon
milestones. As of July 29, 2006, we had invested $523 million in the venture funds pursuant to the commitment, compared with $414 million
as of July 30, 2005. In addition, as of July 29, 2006, we had invested $49 million in the senior debt pursuant to the commitment, all of which
has been repaid. As of July 30, 2005, we had invested $49 million in the senior debt pursuant to the commitment, of which $47 million had
been repaid.
We also have certain other funding commitments related to our privately held investments that are based on the achievement of
certain agreed-upon milestones. The funding commitments were approximately $34 million as of July 29, 2006, compared with approximately
$56 million as of July 30, 2005.
Off-Balance Sheet Arrangements
We consider our investments in unconsolidated variable interest entities to be off-balance sheet arrangements. In the ordinary course of
business, we have investments in privately held companies and provide nancing to certain customers through our wholly owned subsidiaries,
which may be considered to be variable interest entities. We have evaluated our investments in these privately held companies and customer
nancings and have determined that there were no signicant unconsolidated variable interest entities as of July 29, 2006.
Certain events can require a reassessment of our investments in privately held companies or customer nancings to determine if they
are variable interest entities and if we would be regarded as the primary beneciary. As a result of such events, we may be required to make
additional disclosures or consolidate these entities. Because we may not control these entities, we may not have the ability to inuence
these events.
Stock Repurchase Program
In September 2001, our Board of Directors authorized a stock repurchase program. As of July 29, 2006, our Board of Directors had authorized
an aggregate repurchase of up to $40 billion of common stock under this program. During scal 2006, we repurchased and retired 435 million
shares of our common stock at an average price of $19.07 per share for an aggregate purchase price of $8.3 billion. As of July 29, 2006, we
have repurchased and retired 1.9 billion shares of our common stock at an average price of $18.36 per share for an aggregate purchase price
of $35.4 billion since inception of the stock repurchase program, and the remaining authorized amount under the stock repurchase
program was $4.6 billion with no termination date.
The purchase price for the shares of our common stock repurchased was reected as a reduction to shareholders’ equity. In accordance
with Accounting Principles Board Opinion No. 6, “Status of Accounting Research Bulletins,” we are required to allocate the purchase price
of the repurchased shares as (i) a reduction to retained earnings until retained earnings are zero and then as an increase to accumulated
decit and (ii) a reduction of common stock and additional paid-in capital. Issuance of common stock and the tax benet related to employee
stock option plans are recorded as an increase to common stock and additional paid-in capital. As a result of future repurchases, we may
continue to report an accumulated decit included in shareholders’ equity in our Consolidated Balance Sheets. Our accumulated decit as
of July 29, 2006 is a result of the accounting effect of stock repurchases and is not reective of our nancial performance or our liquidity.
Liquidity and Capital Resource Requirements
Based on past performance and current expectations, we believe our cash and cash equivalents, investments, and cash generated from
operations will satisfy our working capital needs, capital expenditures, investment requirements, stock repurchases, contractual obligations,
commitments (see Note 8 to the Consolidated Financial Statements), future customer nancings, and other liquidity requirements associated
with our operations through at least the next 12 months. We believe that the most strategic uses of our cash resources include repurchase
of shares, strategic investments to gain access to new technologies, acquisitions, nancing activities, and working capital. There are no
other transactions, arrangements, or other relationships with unconsolidated entities or other persons that are reasonably likely to materially
affect liquidity or the availability of our requirements for capital resources.
Management’s Discussion and Analysis of Financial Condition and Results of Operations