SOURCE: Cisco

Cisco

August 10, 2011 16:05 ET

Cisco Reports Fourth Quarter and Fiscal Year 2011 Earnings

SAN JOSE, CA--(Marketwire - Aug 10, 2011) - Cisco (NASDAQ: CSCO)

  • Q4 Net Sales: $11.2 billion
  • Q4 Net Income: $1.2 billion GAAP; $2.2 billion non-GAAP
  • Q4 Earnings per Share: $0.22 GAAP; $0.40 non-GAAP
  • FY 2011 Net Sales: $43.2 billion
  • FY 2011 Net Income: $6.5 billion GAAP; $9.0 billion non-GAAP
  • FY 2011 Earnings per Share: $1.17 GAAP; $1.62 non-GAAP

Cisco (NASDAQ: CSCO), the worldwide leader in networking that transforms how people connect, communicate and collaborate, today reported its fourth quarter and fiscal year results for the period ended July 30, 2011. Cisco reported fourth quarter net sales of $11.2 billion, net income on a generally accepted accounting principles (GAAP) basis of $1.2 billion or $0.22 per share, and non-GAAP net income of $2.2 billion or $0.40 per share.

"We've made significant progress on our comprehensive action plan to position ourselves for our next stage of growth and profitability, while delivering solid financial results in Q4," said John Chambers, chairman and CEO, Cisco. "As we start our next fiscal year, you will see a very focused, agile, lean and aggressive company, that is laser focused on helping our customers use intelligent networks to transform their businesses."

Q4 GAAP Results

Q4 2011 Q4 2010 Vs. Q4 2010
Net Sales $ 11.2 billion $ 10.8 billion 3.3 %
Net Income $ 1.2 billion $ 1.9 billion (36.3 ) %
Earnings per Share $ 0.22 $ 0.33 (33.3 ) %

Q4 Non-GAAP Results

Q4 2011 Q4 2010 Vs. Q4 2010
Net Income $ 2.2 billion $ 2.5 billion (12.4 ) %
Earnings per Share $ 0.40 $ 0.43 (7.0 ) %

Fiscal Year GAAP Results

FY 2011 FY 2010 Vs. FY 2010
Net Sales $ 43.2 billion $ 40.0 billion 7.9 %
Net Income $ 6.5 billion $ 7.8 billion (16.4 ) %
Earnings per Share $ 1.17 $ 1.33 (12.0 ) %

Fiscal Year Non-GAAP Results

FY 2011 FY 2010 Vs. FY 2010
Net Income $ 9.0 billion $ 9.4 billion (4.3 ) %
Earnings per Share $ 1.62 $ 1.61 0.6 %

GAAP net income for the fourth quarter and fiscal year 2011 included pretax charges of $772 million and $923 million, respectively, related to restructuring and other charges. A reconciliation between net income on a GAAP basis and non-GAAP net income is provided in the table on page 7.

Cisco will discuss fourth quarter and fiscal year 2011 results and business outlook on a conference call and webcast at 1:30 p.m. Pacific Time today. Call information and related charts are available at http://investor.cisco.com.

Other Financial Highlights

  • Cash flows from operations were $2.8 billion for the fourth quarter of fiscal 2011, compared with $3.0 billion for the third quarter of fiscal 2011, and compared with $3.2 billion for the fourth quarter of fiscal 2010. Cash flows from operations were $10.1 billion for fiscal 2011, compared with $10.2 billion for fiscal 2010.

  • Cash and cash equivalents and investments were $44.6 billion at the end of fiscal 2011, compared with $43.4 billion at the end of the third quarter of fiscal 2011, and compared with $39.9 billion at the end of fiscal 2010.

  • During the fourth quarter of fiscal 2011, Cisco repurchased 95 million shares of common stock under the stock repurchase program at an average price of $15.85 per share for an aggregate purchase price of $1.5 billion. During fiscal 2011, Cisco repurchased 351 million shares of common stock at an average price of $19.36 per share for an aggregate purchase price of $6.8 billion. As of July 30, 2011, Cisco had repurchased and retired 3.5 billion shares of Cisco common stock at an average price of $20.64 per share for an aggregate purchase price of approximately $71.8 billion since the inception of the stock repurchase program. The remaining authorized amount for stock repurchases under this program as of July 30, 2011 was approximately $10.2 billion with no termination date.

  • Days sales outstanding in accounts receivable (DSO) at the end of the fourth quarter of fiscal 2011 were 38 days, compared with 37 days at the end of the third quarter of fiscal 2011, and compared with 41 days at the end of the fourth quarter of fiscal 2010.

  • Inventory turns on a GAAP basis were 11.8 in the fourth quarter of fiscal 2011, compared with 11.1 in the third quarter of fiscal 2011, and compared with 12.6 in the fourth quarter of fiscal 2010. Non-GAAP inventory turns were 11.4 in the fourth quarter of fiscal 2011, compared with 10.3 in the third quarter of fiscal 2011, and compared with 12.1 in the fourth quarter of fiscal 2010.

Select Global Business Highlights

  • Xerox and Cisco announced that they intend to form an alliance to simplify IT management by delivering cloud-based services and technology solutions that combine network intelligence and print.

Cisco Innovation

  • Cisco introduced multiple innovations for its flagship Catalyst® 6500 Series Switches, providing customers with the capability to evolve their network infrastructure for the coming decade's proliferation of connected devices, growth of video traffic, cloud computing business models and increasingly mobile workforces.
  • Cisco introduced AppHQ™, an application ecosystem built specifically for Cisco Cius™ that provides new ways to create, manage and rapidly deploy tablet applications in the enterprise.
  • Cisco announced the industry's first 60-watt Power over Ethernet capability for one of the most widely deployed enterprise-class switches in the industry, the Catalyst 4500E Switch.
  • Cisco introduced new technology to increase the efficiency and security of cloud-based networks so that information can be delivered instantly, with industry-leading security to more people, on more devices, in more locations.
  • Cisco introduced a number of new telepresence products and enhancements designed to give customers new ways to simply, quickly and cost effectively scale telepresence throughout their organizations.
  • Cisco introduced new solutions to help sports and entertainment venues and service providers enhance wireless bandwidth and performance in high-density areas while monetizing the delivery of personalized mobile experiences.

Select Customer Announcements

  • NASDAQ OMX PHLX, the Philadelphia-based, high-performance options trading exchange, deployed Cisco Nexus® 5000 Series Switches and the Cisco Nexus 2000 Series Fabric Extender (FEX), which provides scalability and a simplified, single point of management capability.
  • Comcast, Tata Communications, and China Telecom selected the Cisco ASR 9000 Series Aggregation Services Routers to support the delivery of advanced services to their respective customers.
  • Travelport selected Cisco Unified Computing System™ and Cisco Nexus Switches to increase business efficiency and scalability.
  • Cisco and New Songdo International City Development in Korea joined forces to create what is anticipated to become one of the most technologically advanced Cisco Smart+Connected Communities™ in the world.
  • Cisco Cius and Nervecentre Software are helping Nottingham University Hospitals NHS Trust redirect 8,000 hours of annual nursing time into hands-on patient care.
  • Polish Telecom boosted its network with Cisco CRS-3 Carrier Routing System and Cisco ASR 9000 Series Aggregation Services Routers to help build out video, mobile and cloud computing services.
  • Law firm Minter Ellison selected Cisco technology to connect industry and government clients in Australia, Hong Kong, the People's Republic of China, New Zealand and the United Kingdom.
  • Russian mobile operator SkyLink completed the modernization of its Packet Data Serving Node (PDSN) and migrated data traffic to an intelligent platform based on the Cisco ASR 5000 Series Aggregation Services Router.
  • Argentinean bank Banco Supervielle adopted Cisco Borderless Network Architecture to accelerate processes, improve productivity and reduce operational costs.

Editor's Note:

  • Q4 and fiscal year 2011 conference call to discuss Cisco's results along with its business outlook will be held at 1:30 p.m. Pacific Time, Wednesday, August 10, 2011. Conference call number is 888-848-6507 (United States) or 212-519-0847 (international).

  • Conference call replay will be available from 4:30 p.m. Pacific Time, August 10, 2011 to 4:30 p.m. Pacific Time, August 17, 2011 at 866-357-4205 (United States) or 203-369-0122 (international). The replay also will be available via webcast from August 10, 2011 through October 21, 2011 on the Cisco Investor Relations website at http://investor.cisco.com.

  • Additional information regarding Cisco's financials, as well as a webcast of the conference call with visuals designed to guide participants through the call, will be available at 1:30 p.m. Pacific Time, August 10, 2011. Text of the conference call's prepared remarks will be available within 24 hours of completion of the call. The webcast will include both the prepared remarks and the question-and-answer session. This information, along with GAAP reconciliation information, will be available on the Cisco Investor Relations website at http://investor.cisco.com.

About Cisco

Cisco (NASDAQ: CSCO) is the worldwide leader in networking that transforms how people connect, communicate and collaborate. Information about Cisco can be found at http://www.cisco.com. For ongoing news, please go to http://newsroom.cisco.com.

This release may be deemed to contain forward-looking statements, which are subject to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. These forward-looking statements include, among other things, statements regarding future events (such as statements regarding Cisco's next stage of growth and profitability and its future strategy and plans) and the future financial performance of Cisco that involve risks and uncertainties. Readers are cautioned that these forward-looking statements are only predictions and may differ materially from actual future events or results due to a variety of factors, including: business and economic conditions and growth trends in the networking industry, our customer markets and various geographic regions; global economic conditions and uncertainties in the geopolitical environment; overall information technology spending; the growth and evolution of the Internet and levels of capital spending on Internet-based systems; variations in customer demand for products and services, including sales to the service provider market and other customer markets; the return on our investments in certain market adjacencies and geographical locations; the timing of orders and manufacturing and customer lead times; changes in customer order patterns or customer mix; insufficient, excess or obsolete inventory; variability of component costs; variations in sales channels, product costs or mix of products sold; our ability to successfully acquire businesses and technologies and to successfully integrate and operate these acquired businesses and technologies; increased competition in our product and service markets, including the data center; dependence on the introduction and market acceptance of new product offerings and standards; rapid technological and market change; manufacturing and sourcing risks; product defects and returns; litigation involving patents, intellectual property, antitrust, shareholder and other matters, and governmental investigations; natural catastrophic events; a pandemic or epidemic; our ability to achieve the benefits anticipated from our investments in sales and engineering activities; our ability to recruit and retain key personnel; our ability to manage financial risk, and to manage expenses during economic downturns; risks related to the global nature of our operations, including our operations in emerging markets; currency fluctuations and other international factors; changes in provision for income taxes, including changes in tax laws and regulations or adverse outcomes resulting from examinations of our income tax returns; potential volatility in operating results; and other factors listed in Cisco's most recent reports on Forms 10-K and 10-Q, filed on September 21, 2010 and May 25, 2011, respectively. The financial information contained in this release should be read in conjunction with the consolidated financial statements and notes thereto included in Cisco's most recent report on Form 10-Q and report on Form 8-K filed on March 9, 2011, as each may be amended from time to time. Cisco's results of operations for the three and twelve months ended July 30, 2011 are not necessarily indicative of Cisco's operating results for any future periods. Any projections in this release are based on limited information currently available to Cisco, which is subject to change. Although any such projections and the factors influencing them will likely change, Cisco will not necessarily update the information, since Cisco will only provide guidance at certain points during the year. Such information speaks only as of the date of this release.

This release includes non-GAAP net income, non-GAAP net income per share data and non-GAAP inventory turns.

These non-GAAP measures are not in accordance with, or an alternative for, measures prepared in accordance with generally accepted accounting principles and may be different from non-GAAP measures used by other companies. In addition, these non-GAAP measures are not based on any comprehensive set of accounting rules or principles. Cisco believes that non-GAAP measures have limitations in that they do not reflect all of the amounts associated with Cisco's results of operations as determined in accordance with GAAP and that these measures should only be used to evaluate Cisco's results of operations in conjunction with the corresponding GAAP measures.

Cisco believes that the presentation of non-GAAP net income and non-GAAP net income per share data when shown in conjunction with the corresponding GAAP measures, provides useful information to investors and management regarding financial and business trends relating to its financial condition and results of operations. In addition, Cisco believes that the presentation of non-GAAP inventory turns provides useful information to investors and management regarding financial and business trends relating to inventory management based on the operating activities of the period presented.

For its internal budgeting process, Cisco's management uses financial statements that do not include, when applicable, share-based compensation expense, amortization of acquisition-related intangible assets, other acquisition-related costs, significant asset impairments and restructurings, the income tax effects of the foregoing, and significant tax matters. Cisco's management also uses the foregoing non-GAAP measures, in addition to the corresponding GAAP measures, in reviewing the financial results of Cisco. In prior periods, Cisco has excluded other items that it no longer excludes for purposes of its non-GAAP financial measures. From time to time in the future, there may be other items, such as significant gains or losses from contingencies, that Cisco may exclude for purposes of its internal budgeting process and in reviewing its financial results.

For additional information on the items excluded by Cisco from one or more of its non-GAAP financial measures, refer to the Form 8-K regarding this release furnished today to the Securities and Exchange Commission.

Copyright © 2011 Cisco Systems, Inc. and or its affiliates. All rights reserved. Cisco, the Cisco logo, Cisco Systems, AppHQ, Catalyst, Cisco Cius, Cisco Nexus, Cisco Smart+Connected Communities, and Cisco Unified Computing System are registered trademarks or trademarks of Cisco and/or its affiliates in the United States and other countries. Third party trademarks mentioned in this document are the property of their respective owners. The use of the word partner does not imply a partnership relationship between Cisco and any other company. This document is Cisco Public Information.

CONSOLIDATED STATEMENTS OF OPERATIONS
(In millions, except per-share amounts)
(Unaudited)
Three Months Ended Twelve Months Ended
July 30,
2011
July 31,
2010
July 30,
2011
July 31,
2010
NET SALES:
Product $ 8,921 $ 8,808 $ 34,526 $ 32,420
Service 2,274 2,028 8,692 7,620
Total net sales 11,195 10,836 43,218 40,040
COST OF SALES:
Product 3,579 3,309 13,647 11,620
Service 755 734 3,035 2,777
Total cost of sales 4,334 4,043 16,682 14,397
GROSS MARGIN 6,861 6,793 26,536 25,643
OPERATING EXPENSES:
Research and development 1,484 1,391 5,823 5,273
Sales and marketing 2,520 2,368 9,812 8,782
General and administrative 532 578 1,908 1,933
Amortization of purchased intangible assets 101 131 520 491
Restructuring and other charges 768 -- 799 --
Total operating expenses 5,405 4,468 18,862 16,479
OPERATING INCOME 1,456 2,325 7,674 9,164
Interest income 164 154 641 635
Interest expense (148 ) (169 ) (628 ) (623 )
Other income (loss), net (5 ) 108 138 239
Interest and other income, net 11 93 151 251
INCOME BEFORE PROVISION FOR INCOME TAXES 1,467 2,418 7,825 9,415
Provision for income taxes 235 483 1,335 1,648
NET INCOME $ 1,232 $ 1,935 $ 6,490 $ 7,767
Net income per share:
Basic $ 0.22 $ 0.34 $ 1.17 $ 1.36
Diluted $ 0.22 $ 0.33 $ 1.17 $ 1.33
Shares used in per-share calculation:
Basic 5,478 5,688 5,529 5,732
Diluted 5,496 5,795 5,563 5,848
Cash dividends declared per common share $ 0.06 $ -- $ 0.12 $ --

Certain reclassifications have been made to prior period amounts to conform to the current period's presentation.

RECONCILIATION OF GAAP TO NON-GAAP NET INCOME
(In millions, except per-share amounts)
Three Months Ended Twelve Months Ended
July 30,
2011
July 31,
2010
July 30,
2011
July 31,
2010
GAAP net income $ 1,232 $ 1,935 $ 6,490 $ 7,767
Adjustments to cost of sales:
Share-based compensation expense 56 57 238 221
Amortization of acquisition-related intangible assets(1) 96 93 463 255
Significant asset impairments and restructurings(2) 4 -- 124 --
Total adjustments to GAAP cost of sales 156 150 825 476
Adjustments to operating expenses:
Share-based compensation expense 327 334 1,382 1,296
Amortization of acquisition-related intangible assets(1) 101 131 520 491
Other acquisition-related costs 8 43 131 161
Significant asset impairments and restructurings(2) 768 120 799 120
Total adjustments to GAAP operating expenses 1,204 628 2,832 2,068
Adjustments to other income, net:
Other acquisition-related costs -- (2) -- 8
Total adjustments to GAAP income before provision for income taxes 1,360 776 3,657 2,552
Income tax effect (397 ) (204 ) (1,049 ) (723 )
Significant tax matters(3) (4) -- -- (65 ) (158 )
Total adjustments to GAAP provision for income taxes (397 ) (204 ) (1,114 ) (881 )
Non-GAAP net income $ 2,195 $ 2,507 $ 9,033 $ 9,438
Diluted net income per share:
GAAP $ 0.22 $ 0.33 $ 1.17 $ 1.33
Non-GAAP $ 0.40 $ 0.43 $ 1.62 $ 1.61
(1) Amortization of acquisition-related intangible assets for fiscal 2011 includes impairment charges of approximately $155 million, with $63 million recorded in product cost of sales and $92 million in operating expenses.
(2) Significant asset impairments and restructurings for the three months ended July 30, 2011 consist of $453 million in charges for a voluntary early retirement program, $214 million for employee severance, $61 million related to the planned sale of our Juarez, Mexico manufacturing facility, and $44 million of residual costs related to exiting, realigning and restructuring certain aspects of our consumer business announced in the third quarter of fiscal 2011 ($4 million of which is included in cost of sales). For fiscal 2011 significant asset impairments and restructurings totaled $923 million ($124 million of which is included in cost of sales) which includes $151 million of charges taken in the third quarter of fiscal 2011 primarily related to exiting, realigning and restructuring certain aspects of our consumer business.
(3) In the second quarter of fiscal 2011, the Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010 reinstated the U.S. federal R&D tax credit, retroactive to January 1, 2010. GAAP net income for fiscal 2011 included a $65 million tax benefit related to fiscal 2010 R&D expenses. Non-GAAP net income for fiscal 2011 excluded the $65 million tax benefit related to fiscal 2010 R&D expenses.
(4) In the third quarter of fiscal 2010, the U.S. Court of Appeals for the Ninth Circuit affirmed a 2005 U.S. Tax Court ruling in Xilinx, Inc. v. Commissioner. The decision affirmed the tax treatment of share-based compensation expenses for the purpose of determining intangible development costs under a company's research and development cost sharing arrangement. While Cisco was not a party to the case, as a result of this ruling, the Company recorded a tax benefit of $158 million as a reduction to the provision for income taxes during fiscal 2010.

Additional reconciliations between GAAP and non-GAAP financial measures are provided in the tables that follow on page 11.

CONSOLIDATED BALANCE SHEETS
(In millions)
(Unaudited)
July 30, 2011 July 31, 2010
ASSETS
Current assets:
Cash and cash equivalents $ 7,662 $ 4,581
Investments 36,923 35,280
Accounts receivable, net of allowance for doubtful accounts of $204 at July 30, 2011 and $235 at July 31, 2010 4,698 4,929
Inventories 1,486 1,327
Financing receivables, net 3,111 2,303
Deferred tax assets 2,410 2,126
Other current assets 941 875
Total current assets 57,231 51,421
Property and equipment, net 3,916 3,941
Financing receivables, net 3,488 2,614
Goodwill 16,818 16,674
Purchased intangible assets, net 2,541 3,274
Other assets 3,101 3,206
TOTAL ASSETS $ 87,095 $ 81,130
LIABILITIES AND EQUITY
Current liabilities:
Short-term debt $ 588 $ 3,096
Accounts payable 876 895
Income taxes payable 120 90
Accrued compensation 3,163 3,129
Deferred revenue 8,025 7,664
Other current liabilities 4,734 4,359
Total current liabilities 17,506 19,233
Long-term debt 16,234 12,188
Income taxes payable 1,191 1,353
Deferred revenue 4,182 3,419
Other long-term liabilities 723 652
Total liabilities 39,836 36,845
Total equity 47,259 44,285
TOTAL LIABILITIES AND EQUITY $ 87,095 $ 81,130

Certain reclassifications have been made to prior period amounts to conform to the current period's presentation.

CONSOLIDATED STATEMENTS OF CASH FLOWS
(In millions)
(Unaudited)
Twelve Months Ended
July 30,
2011
July 31,
2010
Cash flows from operating activities:
Net income $ 6,490 $ 7,767
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation, amortization, and other 2,486 2,030
Share-based compensation expense 1,620 1,517
Provision for doubtful accounts 7 44
Deferred income taxes (157 ) (477 )
Excess tax benefits from share-based compensation (71 ) (211 )
Net gains on investments (213 ) (223 )
Change in operating assets and liabilities, net of effects of acquisitions and divestitures:
Accounts receivable 298 (1,528 )
Inventories (147 ) (158 )
Financing receivables, net (1,534 ) (928 )
Other assets 275 (98 )
Accounts payable (28 ) 139
Income taxes payable (156 ) 55
Accrued compensation (64 ) 565
Deferred revenue 1,028 1,531
Other liabilities 245 148
Net cash provided by operating activities 10,079 10,173
Cash flows from investing activities:
Purchases of investments (37,130 ) (48,690 )
Proceeds from sales of investments 17,538 19,300
Proceeds from maturities of investments 18,117 23,697
Acquisition of property and equipment (1,174 ) (1,008 )
Acquisition of businesses, net of cash and cash equivalents acquired (266 ) (5,279 )
Change in investments in privately held companies (41 ) (79 )
Other 22 128
Net cash used in investing activities (2,934 ) (11,931 )
Cash flows from financing activities:
Issuances of common stock 1,831 3,278
Repurchases of common stock (6,896 ) (7,864 )
Short-term borrowings, maturities less than 90 days, net 512 41
Issuances of debt, maturities greater than 90 days 4,109 4,944
Repayments of debt, maturities greater than 90 days (3,113 ) --
Excess tax benefits from share-based compensation 71 211
Dividends paid (658 ) --
Other 80 11
Net cash (used in) provided by financing activities (4,064 ) 621
Net increase (decrease) in cash and cash equivalents 3,081 (1,137 )
Cash and cash equivalents, beginning of fiscal year 4,581 5,718
Cash and cash equivalents, end of fiscal year $ 7,662 $ 4,581

Certain reclassifications have been made to prior period amounts to conform to the current period's presentation.

ADDITIONAL FINANCIAL INFORMATION
(In millions)
(Unaudited)
July 30, 2011 July 31, 2010
CASH AND CASH EQUIVALENTS AND INVESTMENTS
Cash and cash equivalents $ 7,662 $ 4,581
Fixed income securities 35,562 34,029
Publicly traded equity securities 1,361 1,251
Total $ 44,585 $ 39,861
INVENTORIES
Raw materials $ 219 $ 217
Work in process 52 50
Finished goods:
Distributor inventory and deferred cost of sales 631 587
Manufactured finished goods 331 260
Total finished goods 962 847
Service-related spares 182 161
Demonstration systems 71 52
Total $ 1,486 $ 1,327
PROPERTY AND EQUIPMENT, NET
Land, buildings, and building & leasehold improvements $ 4,760 $ 4,470
Computer equipment and related software 1,429 1,405
Production, engineering, and other equipment 5,093 4,702
Operating lease assets 293 255
Furniture and fixtures 491 476
12,066 11,308
Less accumulated depreciation and amortization (8,150 ) (7,367 )
Total $ 3,916 $ 3,941
OTHER ASSETS
Deferred tax assets $ 1,864 $ 2,079
Investments in privately held companies 796 756
Other 441 371
Total $ 3,101 $ 3,206
DEFERRED REVENUE
Service $ 8,521 $ 7,428
Product:
Unrecognized revenue on product shipments and other deferred revenue 3,003 2,788
Cash receipts related to unrecognized revenue from two-tier distributors 683 867
Total product deferred revenue 3,686 3,655
Total $ 12,207 $ 11,083
Reported as:
Current $ 8,025 $ 7,664
Noncurrent 4,182 3,419
Total $ 12,207 $ 11,083
SUMMARY OF SHARE-BASED COMPENSATION EXPENSE
(In millions)

The following table summarizes share-based compensation expense (in millions):

Three Months Ended Twelve Months Ended
July 30,
2011
July 31,
2010
July 30,
2011
July 31,
2010
Cost of sales -- product $ 14 $ 14 $ 61 $ 57
Cost of sales -- service 42 43 177 164
Share-based compensation expense in cost of sales 56 57 238 221
Research and development 108 114 481 450
Sales and marketing 160 158 651 602
General and administrative 59 62 250 244
Share-based compensation expense in operating expenses 327 334 1,382 1,296
Total share-based compensation expense $ 383 $ 391 $ 1,620 $ 1,517

Certain reclassifications have been made to prior period amounts to conform to the current period's presentation.

The income tax benefit for share-based compensation expense was $109 million and $444 million for the three and twelve months ended July 30, 2011, respectively, and $111 million and $415 million for the three and twelve months ended July 31, 2010, respectively.

RECONCILIATION OF GAAP TO NON-GAAP
COST OF SALES USED IN INVENTORY TURNS
(In millions)
Three Months Ended
July 30, 2011 April 30, 2011 July 31, 2010
GAAP cost of sales $ 4,334 $ 4,207 $ 4,043
Share-based compensation expense (56 ) (60 ) (57)
Amortization of acquisition-related intangible assets (96 ) (102 ) (93)
Significant asset impairments and restructurings (4 ) (120 ) --
Non-GAAP cost of sales $ 4,178 $ 3,925 $ 3,893

Contact Information

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