cisco-annual-report-2021

Recommendations

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The components of our lease expenses were as follows (in millions):Years Ended July 31, 2021 July 25, 2020Operating lease expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 399 $ 428Short-term lease expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65 69Variable lease expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 173 157Total lease expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 637 $ 654Supplemental information related to our operating leases is as follows (in millions):Years Ended July 31, 2021 July 25, 2020Cash paid for amounts included in the measurement of lease liabilities — operating cash flows . . . $ 407 $ 413Right-of-use assets obtained in exchange for operating leases liabilities. . . . . . . . . . . . . . . . . . . . . . . $ 536 $ 197The weighted-average lease term was 5.2 years and 4.0 years as of July 31, 2021 and July 25, 2020, respectively. The weightedaveragediscount rate was 1.7% and 1.5% as of July 31, 2021 and July 25, 2020, respectively.The maturities of our operating leases (undiscounted) as of July 31, 2021 are as follows (in millions):Fiscal YearAmount2022 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 3552023 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2792024 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1952025 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1272026 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70Thereafter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 219Total lease payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,245Less interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (77)Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,168(b) Lessor ArrangementsOur leases primarily represent sales-type leases with terms of four years on average. We provide leasing of our equipment andcomplementary third-party products primarily through our channel partners and distributors, for which the income arising fromthese leases is recognized through interest income. Interest income for fiscal 2021 and 2020 was $75 million and $94 million,respectively, and was included in interest income in the Consolidated Statement of Operations. The net investment of our leasereceivables is measured at the commencement date as the gross lease receivable, residual value less unearned income andallowance for credit loss. For additional information, see Note 9.Future minimum lease payments on our lease receivables as of July 31, 2021 are summarized as follows (in millions):Fiscal YearAmount2022 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 6822023 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5562024 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2862025 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1442026 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41Thereafter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,710Less: Present value of lease payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,632Unearned income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 78Actual cash collections may differ from the contractual maturities due to early customer buyouts, refinancings, or defaults.74
We provide financing of certain equipment through operating leases, and the amounts are included in property and equipmentin the Consolidated Balance Sheets. Amounts relating to equipment on operating lease assets held by us and the associatedaccumulated depreciation are summarized as follows (in millions):July 31, 2021 July 25, 2020Operating lease assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 273 $ 337Accumulated depreciation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (165) (198)Operating lease assets, net. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 108 $ 139Our operating lease income for fiscal 2021 and 2020 was $151 million and $190 million, respectively, and was included inproduct revenue in the Consolidated Statement of Operations.Minimum future rentals on noncancelable operating leases as of July 31, 2021 are summarized as follows (in millions):Fiscal YearAmount2022 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 492023 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 242024 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62025 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 809. Financing Receivables(a) Financing ReceivablesFinancing receivables primarily consist of lease receivables, loan receivables, and financed service contracts. Lease receivablesrepresent sales-type leases resulting from the sale of Cisco’s and complementary third-party products and are typicallycollateralized by a security interest in the underlying assets. Lease receivables consist of arrangements with terms of four yearson average. Loan receivables represent financing arrangements related to the sale of our hardware, software, and services, whichmay include additional funding for other costs associated with network installation and integration of our products and services.Loan receivables have terms of three years on average. Financed service contracts include financing receivables related totechnical support and advanced services. Revenue related to the technical support services is typically deferred and included indeferred service revenue and is recognized ratably over the period during which the related services are to be performed, whichtypically ranges from one year to three years.A summary of our financing receivables is presented as follows (in millions):July 31, 2021LeaseReceivablesLoanReceivablesFinanced ServiceContractsGross . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,710 $ 5,203 $ 2,453 $ 9,366Residual value . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 103 — — 103Unearned income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (78) — — (78)Allowance for credit loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (38) (86) (3) (127)Total, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,697 $ 5,117 $ 2,450 $ 9,264Reported as:Current . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 780 $ 2,372 $ 1,228 $ 4,380Noncurrent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 917 2,745 1,222 4,884Total, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,697 $ 5,117 $ 2,450 $ 9,264Total75
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2021ANNUAL REPORTThe Future of Work
Page 3 and 4:
Introduction tosummary reportThis s
Page 5 and 6:
In collaboration, we continue to in
Page 7 and 8:
Capital allocationDividends paid pe
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LeadershipCisco’s executive leade
Page 11 and 12:
ExecutivecompensationOur pay practi
Page 13 and 14:
The role of the Board of Directors
Page 15 and 16:
Cisco’s efforts to deliver on our
Page 17 and 18:
Cisco’s net zero goal will be sup
Page 19 and 20:
(Mark One)orUNITED STATES SECURITIE
Page 21 and 22:
This Annual Report on Form 10-K, in
Page 23 and 24:
We introduced Cisco Silicon One, a
Page 25 and 26:
range of devices and endpoints such
Page 27 and 28:
For information regarding risks rel
Page 29 and 30:
Research and DevelopmentWe regularl
Page 31 and 32:
Inclusion & DiversityInclusion and
Page 33 and 34:
Mr. Herren joined Cisco in December
Page 35 and 36:
As a consequence, operating results
Page 37 and 38:
We believe that we may be faced wit
Page 39 and 40:
new competitors to enter the market
Page 41 and 42:
assessments and decisions. Although
Page 43 and 44: components if a government body wer
Page 45 and 46: There can be no assurance that our
Page 47 and 48: Risks Related to Ownership of Our S
Page 49 and 50: Stock Performance GraphThe informat
Page 51 and 52: Fiscal 2021 Compared with Fiscal 20
Page 53 and 54: CRITICAL ACCOUNTING ESTIMATESThe pr
Page 55 and 56: Significant judgment is required in
Page 57 and 58: Product Revenue by SegmentThe follo
Page 59 and 60: Service Revenue by SegmentThe follo
Page 61 and 62: Research and Development (“R&D”
Page 63 and 64: Other Income (Loss), Net The compon
Page 65 and 66: We consider free cash flow to be a
Page 67 and 68: BorrowingsSenior Notes The followin
Page 69 and 70: commitments arising from these agre
Page 71 and 72: Foreign Currency Exchange RiskOur f
Page 73 and 74: Report of Independent Registered Pu
Page 75 and 76: Reports of ManagementStatement of M
Page 77 and 78: CISCO SYSTEMS, INC.Consolidated Sta
Page 79 and 80: CISCO SYSTEMS, INC.Consolidated Sta
Page 81 and 82: 1. Basis of PresentationCISCO SYSTE
Page 83 and 84: As a lessee, we determine if an arr
Page 85 and 86: We perform ongoing credit evaluatio
Page 87 and 88: (y) New Accounting Updates Recently
Page 89 and 90: 4. Acquisitions and Divestitures(a)
Page 91 and 92: July 25, 2020GrossAccumulatedAmorti
Page 93: Property and Equipment, NetJuly 31,
Page 97 and 98: The following tables present the ag
Page 99 and 100: The following tables present the br
Page 101 and 102: receivables and financed service co
Page 103 and 104: 13. Derivative Instruments(a)Summar
Page 105 and 106: (d)Interest Rate RiskWe hold intere
Page 107 and 108: It is not possible to determine the
Page 109 and 110: running royalty on future sales. Ra
Page 111 and 112: being exercised or settled, then th
Page 113 and 114: (f) Employee 401(k) PlansWe sponsor
Page 115 and 116: 18. Income Taxes(a) Provision for I
Page 117 and 118: The following table presents the co
Page 119 and 120: 20. Net Income per ShareThe followi
Page 121 and 122: Item 9B.Other InformationRequired D
Page 123 and 124: INDEX TO EXHIBITSExhibitNumber Exhi
Page 125 and 126: SIGNATURESPursuant to the requireme
Page 127 and 128: Stockholder information andforward-
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