Cisco 2007 Annual Report Download - page 38

2007 Annual Report 41
Management’s Discussion and Analysis of Financial Condition and Results of Operations
Other Commitments
As of July 28, 2007, we were party to an agreement to invest approximately $700 million in venture funds and $49 million in senior debt
managed by SOFTBANK Corp. and its affiliates (“SOFTBANK”) that are required to be funded on demand. As of July 28, 2007, we had
invested $616 million in the venture funds pursuant to the commitment, compared with $523 million as of July 29, 2006. In addition, as of
July 28, 2007 and July 29, 2006, we had invested $49 million in the senior debt pursuant to the commitment, all of which has 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 remaining funding commitments were approximately $56 million as of July 28, 2007, compared with
approximately $34 million as of July 29, 2006. In addition, as of July 28, 2007, we had a commitment to invest $150 million for an equity
interest in VMware, Inc., which was completed subsequent to fiscal year-end.
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 financing 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 financings and have determined that there were no significant unconsolidated variable interest entities as of July 28, 2007.
Certain events can require a reassessment of our investments in privately held companies or customer financings to determine if they
are variable interest entities and if we would be regarded as the primary beneficiary. 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 influence
these events.
Stock Repurchase Program
In September 2001, our Board of Directors authorized a stock repurchase program. As of July 28, 2007, our Board of Directors had
authorized an aggregate repurchase of up to $52 billion of common stock under this program and the remaining authorized repurchase
amount was $8.8 billion with no termination date. The stock repurchase activity under the stock repurchase program during fiscal 2006
and 2007 is summarized as follows (in millions, except per-share amounts):
Shares
Repurchased
Weighted-
Average Price
per Share
Amount
Repurchased
Remaining
Amount
Authorized
Cumulative balance at July 30, 2005 1,496 $ 18.15 $ 27,153 $ 7,847
Additional authorization — — — 5,000
Repurchase of common stock 435 19.07 8,295 (8,295)
Cumulative balance at July 29, 2006 1,931 $ 18.36 $ 35,448 $ 4,552
Additional authorization — — — 12,000
Repurchase of common stock(1) 297 26.12 7,781 (7,781)
Cumulative balance at July 28, 2007 2,228 $ 19.40 $ 43,229 $ 8,771
(1) Includes stock repurchases of $100 million which were settled subsequent to July 28, 2007.
The purchase price for the shares of our common stock repurchased is reflected 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 deficit
and (ii) a reduction of common stock and additional paid-in capital. Issuance of common stock and the tax benefit related to employee stock
incentive plans are recorded as an increase to common stock and additional paid-in capital. As a result of future repurchases, we may
report an accumulated deficit as a component in shareholders’ equity.
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, and our ability to access capital markets, including committed credit lines, will satisfy our working capital needs, capital
expenditures, investment requirements, stock repurchases, contractual obligations, commitments, future customer financings, 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, customer financing
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, the availability, and our requirements for capital resources.