Cisco 2009 Annual Report Download - page 36

Management’s Discussion and Analysis of Financial Condition and Results of Operations
Contractual Obligations
The impact of contractual obligations on our liquidity and capital resources in future periods should be analyzed in conjunction with the
factors that impact our cash flows from operations discussed above. In addition, we plan for and measure our liquidity and capital
resources through an annual budgeting process. The following table summarizes our contractual obligations at July 25, 2009 (in millions):
PAYMENTS DUE BY PERIOD
July 25, 2009 Total
Less than
1 Year
1to3
Years
3to5
Years
More than
5 Years
Operating leases $ 1,426 $ 345 $ 426 $ 235 $ 420
Purchase commitments with contract manufacturers and suppliers 2,157 2,157 — — —
Purchase obligations 1,544 943 301 218 82
Long-term debt 10,002 — 3,002 — 7,000
Other long-term liabilities 482 — 263 28 191
Total by period $ 15,611 $ 3,445 $ 3,992 $ 481 $ 7,693
Other long-term liabilities (uncertainty in the timing of future payments) 2,064
Total $ 17,675
Operating Leases We lease office space in several U.S. locations. Outside the United States, larger leased sites are located in Australia,
Belgium, China, France, Germany, India, Israel, Italy, Japan, and the United Kingdom. We also lease equipment and vehicles. 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. A significant portion of our reported purchase commitments
arising from these agreements are firm, noncancelable, and unconditional commitments. We record a liability for firm, noncancelable, and
unconditional purchase commitments for quantities in excess of our future demand forecasts consistent with the valuation of our excess
and obsolete inventory. As of July 25, 2009, the liability for these purchase commitments was $175 million and is recorded in other current
liabilities and is 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.
Long-Term Debt The amount of long-term debt in the preceding table represents the principal amount of the respective debt instruments.
See Note 9 to the Consolidated Financial Statements.
Other Long-Term Liabilities Other long-term liabilities include noncurrent income taxes payable, accrued liabilities for deferred
compensation, noncurrent deferred tax liabilities, and certain other long-term liabilities. Due to the uncertainty in the timing of future
payments, our noncurrent income taxes payable of approximately $2.0 billion and noncurrent deferred tax liabilities of $57 million were
presented as one aggregated amount in the total column on a separate line in the preceding table. Noncurrent income taxes payable
includes uncertain tax positions (see Note 14 to the Consolidated Financial Statements) partially offset by payments.
Other Commitments
In connection with our purchase acquisitions, asset purchases, and acquisitions of variable interest entities, we have agreed to pay certain
additional amounts contingent upon the achievement of agreed-upon technology, development, product, or other milestones, or continued
employment with us of certain employees of acquired entities. See Note 3 to the Consolidated Financial Statements.
We also have certain funding commitments primarily related to our investments in privately held companies and venture funds, some
of which are based on the achievement of certain agreed-upon milestones, and some of which are required to be funded on demand. The
funding commitments were approximately $313 million as of July 25, 2009, compared with approximately $359 million as of July 26, 2008.
34 Cisco Systems, Inc.