Cisco 2012 Annual Report Download - page 119

(c) Credit Facility
On February 17, 2012, the Company entered into a credit agreement with certain institutional lenders that
provides for a $3.0 billion unsecured revolving credit facility that is scheduled to expire on February 17, 2017.
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%, Bank of America’s “prime rate” as
announced from time to time, or one-month LIBOR plus 1.00%, or (ii) LIBOR plus a margin that is based on the
Company’s senior debt credit ratings as published by Standard & Poor’s Financial Services, LLC and Moody’s
Investors Service, Inc. The credit agreement requires the Company to comply with certain covenants, including
that it maintains an interest coverage ratio as defined in the agreement. As of July 28, 2012, the Company was in
compliance with all such required covenants, and the Company had not borrowed any funds under the credit
facility.
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 $2.0 billion
and/or extend the expiration date of the credit facility up to February 17, 2019.
This credit facility replaces the Company’s prior credit facility that was entered into on August 17, 2007, which
was terminated in connection with its entering into the new 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 28,
2012
July 30,
2011 Balance Sheet Line Item
July 28,
2012
July 30,
2011
Derivatives designated as hedging
instruments:
Foreign currency derivatives ...... Other current assets $24 $ 67 Other current liabilities $26 $12
Interest rate derivatives .......... Other assets 223 146 Other long-term liabilities ——
Equity derivatives .............. Other current assets —— Other current liabilities 4—
Total ........................ 247 213 30 12
Derivatives not designated as hedging
instruments:
Foreign currency derivatives ...... Other current assets 16 7 Other current liabilities 12 12
Equity derivatives .............. Other assets 12 Other long-term liabilities ——
Total ........................ 17 912 12
Total .................... $264 $222 $42 $24
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