Cisco 2011 Annual Report Download - page 118

(c) Credit Facility
The Company has a credit agreement with certain institutional lenders providing for a $3.0 billion unsecured revolving credit
facility that is scheduled to expire on August 17, 2012. Any advances under the credit agreement will accrue interest at rates that
are equal to, based on certain conditions, either (i) the higher of the Federal Funds rate plus 0.50% or Bank of America’s “prime
rate” as announced from time to time or (ii) LIBOR plus a margin that is based on the Company’s senior debt credit ratings as
published by Standard & Poor’s Ratings Services and Moody’s Investors Service, Inc. The credit agreement requires the Company
to comply with certain covenants, including that it maintain an interest coverage ratio as defined in the agreement. The Company
was in compliance with the required interest coverage ratio and the other covenants as of July 30, 2011.
The Company may also, upon the agreement of either the then-existing lenders or additional lenders not currently parties to the
agreement, increase the commitments under the credit facility by up to an additional $1.9 billion and/or extend the expiration date
of the credit facility up to August 15, 2014. As of July 30, 2011, the Company had not borrowed any funds under the credit facility.
11. Derivative Instruments
(a) Summary of Derivative Instruments
The Company uses derivative instruments primarily to manage exposures to foreign currency exchange rate, interest rate, and
equity price risks. The Company’s primary objective in holding derivatives is to reduce the volatility of earnings and cash flows
associated with changes in foreign currency exchange rates, interest rates, and equity prices. The Company’s derivatives expose it
to credit risk to the extent that the counterparties may be unable to meet the terms of the agreement. The Company does, however,
seek to mitigate such risks by limiting its counterparties to major financial institutions. In addition, the potential risk of loss with
any one counterparty resulting from this type of credit risk is monitored. Management does not expect material losses as a result of
defaults by counterparties.
The fair values of the Company’s derivative instruments and the line items on the Consolidated Balance Sheets to which they were
recorded are summarized as follows (in millions):
DERIVATIVE ASSETS DERIVATIVE LIABILITIES
Balance Sheet Line Item
July 30,
2011
July 31,
2010 Balance Sheet Line Item
July 30,
2011
July 31,
2010
Derivatives designated as hedging instruments:
Foreign currency derivatives .............. Other current assets $67 $ 82 Other current liabilities $12 $7
Interest rate derivatives ................... Other assets 146 72 Other long-term liabilities ——
Total ................................. 213 154 12 7
Derivatives not designated as hedging instruments:
Foreign currency derivatives .............. Other current assets 76 Other current liabilities 12 12
Total return swaps-deferred compensation .... Other current assets —1 Other current liabilities ——
Equity derivatives ....................... Other assets 22 Other long-term liabilities ——
Total ................................. 9912 12
Total ............................. $222 $163 $24 $19
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