Cisco 2008 Annual Report Download - page 76

2008 Annual Report 81
Notes to Consolidated Financial Statements
As of July 26, 2008, the Company’s federal, state, and foreign net operating loss carryforwards for income tax purposes were $344 million,
$1.7 billion, and $97 million, respectively. If not utilized, the federal net operating loss carryforwards will begin to expire in fiscal 2016, the
state net operating loss carryforwards will begin to expire in fiscal 2009, and the foreign net operating loss carryforwards will begin to expire
in fiscal 2011. As of July 26, 2008, the Company’s federal and state tax credit carryforwards for income tax purposes were approximately
$10 million and $600 million, respectively. If not utilized, the federal and state tax credit carryforwards will begin to expire in fiscal 2009.
14. Segment Information and Major Customers
The Company’s operations involve the design, development, manufacturing, marketing, and technical support of networking and other
products and services related to the communications and information technology industry. Cisco products include routers, switches,
advanced technologies, and other products. These products, primarily integrated by Cisco IOS Software, link geographically dispersed
local-area networks (LANs), metropolitan-area networks (MANs) and wide-area networks (WANs).
(a) Net Sales and Gross Margin by Theater
The Company conducts business globally and is primarily managed on a geographic basis. The Company’s management makes financial
decisions and allocates resources based on the information it receives from its internal management system. Sales are attributed to a
geographic theater based on the ordering location of the customer. During the first quarter of fiscal 2008, the Company enhanced its
methodology for attributing certain revenue transactions, including revenue deferrals, and the associated cost of sales for each to the
respective geographic theater and revised the information utilized by the Company’s chief operating decision maker (CODM). As a result,
the Company has reclassified prior year net sales and gross margin amounts by theater to conform to the current year’s presentation.
The Company does not allocate research and development, sales and marketing, or general and administrative expenses to its
geographic theaters in this internal management system because management does not include the information in its measurement of the
performance of the operating segments. In addition, the Company does not allocate amortization of acquisition-related intangible assets,
share-based compensation expense, and the effects of purchase accounting adjustments to inventory to the gross margin for each theater
because management also does not include this information in its measurement of the performance of the operating segments.
Summarized financial information by theater for fiscal 2008, 2007, and 2006, based on the Company’s internal management system
and as utilized by the Company’s CODM, is as follows (in millions):
Years Ended July 26, 2008 July 28, 2007 July 29, 2006
Net sales:
United States and Canada(1) $ 21,314 $ 19,380 $ 15,623
European Markets 8,103 7,371 6,145
Emerging Markets 4,510 3,221 2,460
Asia Pacific 4,254 3,632 2,935
Japan 1,359 1,318 1,321
Total $ 39,540 $ 34,922 $ 28,484
Gross margin:
United States and Canada $ 14,012 $ 12,524 $ 10,385
European Markets 5,340 4,826 4,116
Emerging Markets 2,785 2,022 1,648
Asia Pacific 2,767 2,346 1,912
Japan 961 917 934
Theater total 25,865 22,635 18,995
Unallocated corporate items(2) (381) (299) (248)
Total $ 25,484 $ 22,336 $ 18,747
(1) Net sales in the United States were $20.2 billion, $18.3 billion, and $14.8 billion for fiscal 2008, 2007, and 2006, respectively.
(2) The unallocated corporate items primarily include the effects of amortization of acquisition-related intangible assets and share-based compensation expense.