Cisco 2013 Annual Report Download - page 70

LIQUIDITY AND CAPITAL RESOURCES
The following sections discuss the effects of changes in our balance sheet, our capital allocation strategy including stock
repurchase program and dividends, our contractual obligations, and certain other commitments and activities on our liquidity
and capital resources.
Balance Sheet and Cash Flows
Cash and Cash Equivalents and Investments The following table summarizes our cash and cash equivalents and investments
(in millions):
July 27, 2013 July 28, 2012
Increase
(Decrease)
Cash and cash equivalents ................................................ $ 7,925 $ 9,799 $(1,874)
Fixed income securities .................................................. 39,888 37,297 2,591
Publicly traded equity securities ........................................... 2,797 1,620 1,177
Total ............................................................. $50,610 $48,716 $ 1,894
The increase in cash and cash equivalents and investments was primarily the result of cash provided by operating activities of
$12.9 billion, an increase from $11.5 billion provided for fiscal 2012, and issuance of common stock of $3.3 billion pursuant
to employee stock incentive plans. These sources of cash were partially offset by cash paid for acquisitions of $6.8 billion,
cash dividends paid of $3.3 billion, the repurchase of common stock of $2.8 billion under the stock repurchase program, and
capital expenditures of $1.2 billion. The increase in cash provided by operating activities in fiscal 2013 as compared with
fiscal 2012 was primarily the result of an increase in net income.
Our total in cash and cash equivalents and investments held by various foreign subsidiaries was $40.4 billion and $42.5 billion
as of July 27, 2013 and July 28, 2012, respectively. Under current tax laws and regulations, if cash and cash equivalents and
investments held outside the United States were to be distributed to the United States in the form of dividends or otherwise, we
would be subject to additional U.S. income taxes (subject to an adjustment for foreign tax credits) and foreign withholding
taxes. The balance available in the United States as of July 27, 2013 and July 28, 2012 was $10.2 billion and $6.2 billion,
respectively. In the fourth quarter of fiscal 2013, we announced that we entered into a definitive agreement to acquire
Sourcefire, which will reduce our current balance of cash and cash equivalents and investments available in the United States
by approximately $2.7 billion upon completion of the acquisition. See Note 3 to the Consolidated Financial Statements.
We maintain an investment portfolio of various holdings, types, and maturities. We classify our investments as short-term
investments based on their nature and their availability for use in current operations. We believe the overall credit quality of
our portfolio is strong, with our cash equivalents and our fixed income investment portfolio consisting primarily of high
quality investment-grade securities. We believe that our strong cash and cash equivalents and investments position allows us to
use our cash resources for strategic investments to gain access to new technologies, for acquisitions, for customer financing
activities, for working capital needs, and for the repurchase of shares of common stock and payment of dividends as discussed
below.
Free Cash Flow and Capital Allocation In August 2012, as part of our capital allocation strategy, we announced our intent to
return a minimum of 50% of our free cash flow annually to our shareholders through cash dividends and repurchases of
common stock, which objective we accomplished in fiscal 2013.
We define free cash flow as net cash provided by operating activities less cash used to acquire property and equipment. The
following table reconciles our net cash provided by operating activities to free cash flow (in millions):
Years Ended July 27, 2013 July 28, 2012 July 30, 2011
Net cash provided by operating activities .................................... $12,894 $11,491 $10,079
Acquisition of property and equipment ...................................... (1,160) (1,126) (1,174)
Free cash flow ......................................................... $11,734 $10,365 $ 8,905
We expect that cash provided by operating activities may fluctuate in future periods as a result of a number of factors,
including fluctuations in our operating results, the rate at which products are shipped during the quarter (which we refer to as
shipment linearity), the timing and collection of accounts receivable and financing receivables, inventory and supply chain
management, deferred revenue, excess tax benefits resulting from share-based compensation, and the timing and amount of tax
and other payments. For additional discussion, see “Part I, Item 1A. Risk Factors” in this report.
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