cisco-annual-report-2021
15. Stockholders’ Equity(a) Cash Dividends on Shares of Common StockWe declared and paid cash dividends of $1.46, $1.42 and $1.36 per common share, or $6.2 billion during fiscal 2021 and$6.0 billion, on our outstanding common stock during each of fiscal 2020 and 2019.Any future dividends will be subject to the approval of our Board of Directors.(b) Stock Repurchase ProgramIn September 2001, our Board of Directors authorized a stock repurchase program. As of July 31, 2021, the remaining authorizedamount for stock repurchases under this program was approximately $7.9 billion with no termination date.A summary of the stock repurchase activity under the stock repurchase program, reported based on the trade date, is summarizedas follows (in millions, except per-share amounts):Years Ended90SharesWeighted-Average Priceper ShareAmountJuly 31, 2021 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64 $ 45.48 $ 2,902July 25, 2020 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59 $ 44.36 $ 2,619July 27, 2019 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 418 $ 49.22 $ 20,577There was $25 million in stock repurchases that were pending settlement as of July 31, 2021. There was no stock repurchasespending settlement as of July 25, 2020. There was $40 million in stock repurchases that were pending settlement as of July 27,2019.The purchase price for the shares of our stock repurchased is reflected as a reduction to stockholders’ equity.We are required to allocate the purchase price of the repurchased shares as (i) a reduction to retained earnings or an increase toaccumulated deficit and (ii) a reduction of common stock and additional paid-in capital.(c) Preferred StockUnder the terms of our Amended and Restated Certificate of Incorporation, the Board of Directors is authorized to issuepreferred stock of one or more series and, in connection with the creation of such series, to fix by resolution the designation,powers (including voting powers (if any)), preferences and relative, participating, optional or other special rights of such series,and any qualification, limitations or restrictions thereof, of the shares of such series. As of July 31, 2021, we had not issued anyshares of preferred stock.16. Employee Benefit Plans(a) Employee Stock Incentive PlansStock Incentive Plan Program Description We have one stock incentive plan: the 2005 Stock Incentive Plan (the “2005 Plan”).In addition, we have, in connection with our acquisitions of various companies, assumed the share-based awards granted understock incentive plans of the acquired companies or issued share-based awards in replacement thereof. Share-based awards aredesigned to reward employees for their long-term contributions to us and provide incentives for them to remain with us. Thenumber and frequency of share-based awards are based on competitive practices, our operating results, government regulations,and other factors. Our primary stock incentive plan is summarized as follows:2005 Plan The 2005 Plan provides for the granting of stock options, stock grants, stock units and stock appreciation rights (SARs), thevesting of which may be time-based or upon satisfaction of performance goals, or both, and/or other conditions. Employees (includingemployee directors and executive officers) and consultants of Cisco and its subsidiaries and affiliates and non-employee directors ofCisco are eligible to participate in the 2005 Plan. As of July 31, 2021, the maximum number of shares issuable under the 2005 Planover its term was 790 million shares. The 2005 Plan may be terminated by our Board of Directors at any time and for any reason, andis currently set to terminate at the 2030 Annual Meeting unless re-adopted or extended by our stockholders prior to or on such date.Under the 2005 Plan’s share reserve feature, a distinction is made between the number of shares in the reserve attributable to (i) stockoptions and SARs and (ii) “full value” awards (i.e., stock grants and stock units). Shares issued as stock grants, pursuant to stockunits or pursuant to the settlement of dividend equivalents are counted against shares available for issuance under the 2005 Plan on a1.5-to-1 ratio. For each share awarded as restricted stock or a restricted stock unit award under the 2005 Plan, 1.5 shares was deductedfrom the available share-based award balance. If awards issued under the 2005 Plan are forfeited or terminated for any reason before
being exercised or settled, then the shares underlying such awards, plus the number of additional shares, if any, that counted againstshares available for issuance under the 2005 Plan at the time of grant as a result of the application of the share ratio described above,will become available again for issuance under the 2005 Plan. As of July 31, 2021, 245 million shares were authorized for future grantunder the 2005 Plan.(b) Employee Stock Purchase PlanWe have an Employee Stock Purchase Plan under which 721 million shares of our common stock have been reserved for issuanceas of July 31, 2021. Eligible employees are offered shares through a 24-month offering period, which consists of four consecutive6-month purchase periods. Employees may purchase a limited amount of shares of our stock at a discount of up to 15% of thelesser of the fair market value at the beginning of the offering period or the end of each 6-month purchase period. The EmployeeStock Purchase Plan is scheduled to terminate on the earlier of (i) January 3, 2030 and (ii) the date on which all shares availablefor issuance under the Employee Stock Purchase Plan are sold pursuant to exercised purchase rights. We issued 17 million,18 million, and 19 million shares under the Employee Stock Purchase Plan in fiscal 2021, 2020, and 2019, respectively. As ofJuly 31, 2021, 125 million shares were available for issuance under the Employee Stock Purchase Plan.(c) Summary of Share-Based Compensation ExpenseShare-based compensation expense consists primarily of expenses for RSUs, stock purchase rights, and stock options, grantedto employees or assumed from acquisitions. The following table summarizes share-based compensation expense (in millions):Years Ended July 31, 2021 July 25, 2020 July 27, 2019Cost of sales—product . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 99 $ 93 $ 90Cost of sales—service . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 176 144 130Share-based compensation expense in cost of sales . . . . . . . . . . . . . . . . . . . . . . . . . . . 275 237 220Research and development . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 694 592 540Sales and marketing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 540 500 519General and administrative . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 226 215 250Restructuring and other charges . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26 25 62Share-based compensation expense in operating expenses . . . . . . . . . . . . . . . . . . . . . . 1,486 1,332 1,371Total share-based compensation expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,761 $ 1,569 $ 1,591Income tax benefit for share-based compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 387 $ 452 $ 542As of July 31, 2021, the total compensation cost related to unvested share-based awards not yet recognized was $3.8 billion,which is expected to be recognized over approximately 2.7 years on a weighted-average basis.(d) Restricted Stock Unit AwardsA summary of the restricted stock and stock unit activity, which includes time-based and performance-based or market-basedRSUs, is as follows (in millions, except per-share amounts):Restricted Stock/Stock UnitsWeighted-AverageGrant Date FairValue per ShareAggregateFair ValueUNVESTED BALANCE AT JULY 28, 2018 . . . . . . . . . . . . . . . . . . . . . . . . . . . . 119 $ 30.56Granted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45 47.71Vested . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (50) 29.25 $ 2,446Canceled/forfeited/other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (14) 32.01UNVESTED BALANCE AT JULY 27, 2019 . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100 38.66Granted and assumed . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49 42.61Vested . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (44) 35.20 $ 2,045Canceled/forfeited/other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (9) 40.45UNVESTED BALANCE AT JULY 25, 2020 . . . . . . . . . . . . . . . . . . . . . . . . . . . 96 42.03Granted and assumed . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51 41.89Vested. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (39) 39.63 $ 1,813Canceled/forfeited/other. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (14) 42.13UNVESTED BALANCE AT JULY 31, 2021 . . . . . . . . . . . . . . . . . . . . . . . . . . . 94 $ 42.9391
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15. Stockholders’ Equity
(a) Cash Dividends on Shares of Common Stock
We declared and paid cash dividends of $1.46, $1.42 and $1.36 per common share, or $6.2 billion during fiscal 2021 and
$6.0 billion, on our outstanding common stock during each of fiscal 2020 and 2019.
Any future dividends will be subject to the approval of our Board of Directors.
(b) Stock Repurchase Program
In September 2001, our Board of Directors authorized a stock repurchase program. As of July 31, 2021, the remaining authorized
amount for stock repurchases under this program was approximately $7.9 billion with no termination date.
A summary of the stock repurchase activity under the stock repurchase program, reported based on the trade date, is summarized
as follows (in millions, except per-share amounts):
Years Ended
90
Shares
Weighted-
Average Price
per Share
Amount
July 31, 2021 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64 $ 45.48 $ 2,902
July 25, 2020 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59 $ 44.36 $ 2,619
July 27, 2019 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 418 $ 49.22 $ 20,577
There was $25 million in stock repurchases that were pending settlement as of July 31, 2021. There was no stock repurchases
pending settlement as of July 25, 2020. There was $40 million in stock repurchases that were pending settlement as of July 27,
2019.
The purchase price for the shares of our stock repurchased is reflected as a reduction to stockholders’ equity.
We are required to allocate the purchase price of the repurchased shares as (i) a reduction to retained earnings or an increase to
accumulated deficit and (ii) a reduction of common stock and additional paid-in capital.
(c) Preferred Stock
Under the terms of our Amended and Restated Certificate of Incorporation, the Board of Directors is authorized to issue
preferred stock of one or more series and, in connection with the creation of such series, to fix by resolution the designation,
powers (including voting powers (if any)), preferences and relative, participating, optional or other special rights of such series,
and any qualification, limitations or restrictions thereof, of the shares of such series. As of July 31, 2021, we had not issued any
shares of preferred stock.
16. Employee Benefit Plans
(a) Employee Stock Incentive Plans
Stock Incentive Plan Program Description We have one stock incentive plan: the 2005 Stock Incentive Plan (the “2005 Plan”).
In addition, we have, in connection with our acquisitions of various companies, assumed the share-based awards granted under
stock incentive plans of the acquired companies or issued share-based awards in replacement thereof. Share-based awards are
designed to reward employees for their long-term contributions to us and provide incentives for them to remain with us. The
number and frequency of share-based awards are based on competitive practices, our operating results, government regulations,
and other factors. Our primary stock incentive plan is summarized as follows:
2005 Plan The 2005 Plan provides for the granting of stock options, stock grants, stock units and stock appreciation rights (SARs), the
vesting of which may be time-based or upon satisfaction of performance goals, or both, and/or other conditions. Employees (including
employee directors and executive officers) and consultants of Cisco and its subsidiaries and affiliates and non-employee directors of
Cisco are eligible to participate in the 2005 Plan. As of July 31, 2021, the maximum number of shares issuable under the 2005 Plan
over its term was 790 million shares. The 2005 Plan may be terminated by our Board of Directors at any time and for any reason, and
is currently set to terminate at the 2030 Annual Meeting unless re-adopted or extended by our stockholders prior to or on such date.
Under the 2005 Plan’s share reserve feature, a distinction is made between the number of shares in the reserve attributable to (i) stock
options and SARs and (ii) “full value” awards (i.e., stock grants and stock units). Shares issued as stock grants, pursuant to stock
units or pursuant to the settlement of dividend equivalents are counted against shares available for issuance under the 2005 Plan on a
1.5-to-1 ratio. For each share awarded as restricted stock or a restricted stock unit award under the 2005 Plan, 1.5 shares was deducted
from the available share-based award balance. If awards issued under the 2005 Plan are forfeited or terminated for any reason before
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