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2007 Annual Report 39
Management’s Discussion and Analysis of Financial Condition and Results of Operations
Long-Term Debt The following table summarizes our long-term debt (in millions):
July 29, 2006
Increase
(Decrease)July 28, 2007
Senior notes:
Floating-rate notes, due 2009 $ 500 $ 500 $ —
5.25% fixed-rate notes, due 2011 3,000 3,000 —
5.50% fixed-rate notes, due 2016 3,000 3,000 —
Total senior notes 6,500 6,500 —
Other notes 5 5 —
Unamortized discount (16) (18) 2
Fair value adjustment (81) (155) 74
Total $ 6,408 $ 6,332 $ 76
In February 2006, we issued $500 million of senior floating interest rate notes due 2009 (the “2009 Notes”), $3.0 billion of 5.25% senior
notes due 2011 (the “2011 Notes”), and $3.0 billion of 5.50% senior notes due 2016 (the “2016 Notes”), for an aggregate principal amount of
$6.5 billion. The debt issuance was used to fund the acquisition of Scientific-Atlanta and for general corporate purposes. The 2011 Notes
and the 2016 Notes are redeemable by us at any time, subject to a make-whole premium. To achieve our interest rate objectives, we
entered into $6.0 billion notional amount of interest rate swaps. In effect, these swaps convert the fixed interest rates of the 2011 Notes and
the 2016 Notes to floating interest rates based on LIBOR. Gains and losses in the fair value of the interest rate swaps offset changes in the
fair value of the underlying debt. See Note 8 to the Consolidated Financial Statements. We were in compliance with all debt covenants as
of July 28, 2007.
Deferred Revenue The following table presents the breakdown of deferred revenue (in millions):
July 29, 2006
Increase
(Decrease)July 28, 2007
Service $ 4,840 $ 4,088 $ 752
Product 2,197 1,561 636
Total $ 7,037 $ 5,649 $ 1,388
Reported as:
Current $ 5,391 $ 4,408 $ 983
Noncurrent 1,646 1,241 405
Total $ 7,037 $ 5,649 $ 1,388
The increase in deferred service revenue reflects an increase in the volume of technical support contract initiations and renewals partially
offset by ongoing amortization of deferred service revenue. The increase in deferred product revenue was primarily related to shipments
not having met revenue recognition criteria and other revenue deferrals.
Contractual Obligations
Our cash flows from operations are dependent on a number of factors, including fluctuations in our operating results, shipment linearity,
accounts receivable collections, inventory management, excess tax benefits from share-based compensation, and the timing and amount
of tax and other payments. As a result, the impact of contractual obligations on our liquidity and capital resources in future periods should
be analyzed in conjunction with such factors. In addition, we plan for and measure our liquidity and capital resources through an annual
budgeting process.