cisco-annual-report-2021

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 31, 2021 July 25, 2020
Increase
(Decrease)
Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 9,175 $ 11,809 $ (2,634)
Available-for-sale debt investments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15,206 17,610 (2,404)
Marketable equity securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 137 — 137
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 24,518 $ 29,419 $ (4,901)
The net decrease in cash and cash equivalents and investments from fiscal 2020 to fiscal 2021 was primarily driven by net cash
paid for acquisitions and divestitures of $7.0 billion, cash returned to stockholders in the form of repurchases of common stock
of $2.9 billion under the stock repurchase program and cash dividends of $6.2 billion, net decrease in debt of $3.0 billion, net
increase in restricted cash of $0.8 billion, and capital expenditures of $0.7 billion. These uses of cash were partially offset by
cash provided by operating activities of $15.5 billion.
In addition to cash requirements in the normal course of business, we have approximately $0.7 billion of the U.S. transition
tax on accumulated earnings for foreign subsidiaries and $2.5 billion of long-term debt outstanding at July 31, 2021 that will
mature within the next 12 months from the balance sheet date. See further discussion of liquidity and future payments under
“Contractual Obligations” and “Liquidity and Capital Resource Requirements” below.
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 available-for-sale debt investment portfolio consisting primarily of high
quality investment-grade securities. We believe that our strong cash and cash equivalents and investments position is critical at
this time of uncertainty due to the COVID-19 pandemic and 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.
Securities Lending We periodically engage in securities lending activities with certain of our available-for-sale debt investments.
These transactions are accounted for as a secured lending of the securities, and the securities are typically loaned only on
an overnight basis. We require collateral equal to at least 102% of the fair market value of the loaned security and that the
collateral be in the form of cash or liquid, high-quality assets. We engage in these secured lending transactions only with highly
creditworthy counterparties, and the associated portfolio custodian has agreed to indemnify us against collateral losses. We did
not experience any losses in connection with the secured lending of securities during the periods presented.
Free Cash Flow and Capital Allocation As part of our capital allocation strategy, we intend to return a minimum of 50% of our
free cash flow annually to our stockholders through cash dividends and repurchases of common stock.
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 31, 2021 July 25, 2020 July 27, 2019
Net cash provided by operating activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 15,454 $ 15,426 $ 15,831
Acquisition of property and equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (692) (770) (909)
Free cash flow . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 14,762 $ 14,656 $ 14,922
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 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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