10-Q 1 csco-2013126x10qq2.htm FORM 10-Q CSCO - 2013.1.26 - 10Q Q2


UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549 

FORM 10-Q
(Mark one)
x
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended January 26, 2013
OR
¨
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from              to             
Commission file number 0-18225 

CISCO SYSTEMS, INC.
(Exact name of Registrant as specified in its charter)
 
 
 
 
California
 
77-0059951
(State or other jurisdiction of
incorporation or organization)
 
(I.R.S. Employer
Identification Number)
170 West Tasman Drive
San Jose, California 95134
(Address of principal executive office and zip code)
(408) 526-4000
(Registrant’s telephone number, including area code)
 
 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    YES   x     NO   ¨
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).     YES   x     NO   ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer  x
 
Accelerated filer
o
 
Non-accelerated filer
o
 
Smaller reporting company 
o
 
 
 
 
 
(Do not check if a smaller
reporting company)
 
 
 
 
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    YES   ¨     NO   x
Number of shares of the registrant’s common stock outstanding as of February 14, 2013: 5,331,973,900




Cisco Systems, Inc.
FORM 10-Q for the Quarter Ended January 26, 2013
INDEX
 
 
  
 
 
Page
Part I.
  
 
Item 1.
  
 
 
  
 
 
  
 
 
 
 
 
  
 
 
  
 
 
  
 
Item 2.
  
 
Item 3.
  
 
Item 4.
  
 
Part II.
  
 
Item 1.
  
 
Item 1A.
  
 
Item 2.
  
 
Item 3.
  
 
Item 4.
  
 
Item 5.
  
 
Item 6.
  
 
 
  
 
 
2




PART 1. FINANCIAL INFORMATION
Item 1.
Financial Statements (Unaudited)
CISCO SYSTEMS, INC.
CONSOLIDATED BALANCE SHEETS
(in millions, except par value)
(Unaudited)
 
January 26,
2013
 
July 28,
2012
ASSETS
 
 
 
Current assets:
 
 
 
Cash and cash equivalents
$
6,847

 
$
9,799

Investments
39,529

 
38,917

Accounts receivable, net of allowance for doubtful accounts of $218 at January 26, 2013 and $207 at July 28, 2012
4,462

 
4,369

Inventories
1,574

 
1,663

Financing receivables, net
3,894

 
3,661

Deferred tax assets
2,297

 
2,294

Other current assets
2,122

 
1,230

Total current assets
60,725

 
61,933

Property and equipment, net
3,403

 
3,402

Financing receivables, net
3,837

 
3,585

Goodwill
21,361

 
16,998

Purchased intangible assets, net
3,542

 
1,959

Other assets
3,510

 
3,882

TOTAL ASSETS
$
96,378

 
$
91,759

LIABILITIES AND EQUITY
 
 
 
Current liabilities:
 
 
 
Short-term debt
$
37

 
$
31

Accounts payable
890

 
859

Income taxes payable
87

 
276

Accrued compensation
2,921

 
2,928

Deferred revenue
9,108

 
8,852

Other current liabilities
4,907

 
4,785

Total current liabilities
17,950

 
17,731

Long-term debt
16,254

 
16,297

Income taxes payable
1,340

 
1,844

Deferred revenue
4,213

 
4,028

Other long-term liabilities
1,096

 
558

Total liabilities
40,853

 
40,458

Commitments and contingencies (Note 12)

 

Equity:
 
 
 
Cisco shareholders’ equity:
 
 
 
Preferred stock, no par value: 5 shares authorized; none issued and outstanding

 

Common stock and additional paid-in capital, $0.001 par value: 20,000 shares authorized; 5,323 and 5,298 shares issued and outstanding at January 26, 2013 and July 28, 2012, respectively
39,970

 
39,271

Retained earnings
14,647

 
11,354

Accumulated other comprehensive income
898

 
661

Total Cisco shareholders’ equity
55,515

 
51,286

Noncontrolling interests
10

 
15

Total equity
55,525

 
51,301

TOTAL LIABILITIES AND EQUITY
$
96,378

 
$
91,759

See Notes to Consolidated Financial Statements.

3


CISCO SYSTEMS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(in millions, except per-share amounts)
(Unaudited) 
 
Three Months Ended
 
Six Months Ended
 
January 26,
2013
 
January 28,
2012
 
January 26,
2013
 
January 28,
2012
NET SALES:
 
 
 
 
 
 
 
Product
$
9,437

 
$
9,118

 
$
18,734

 
$
18,070

Service
2,661

 
2,409

 
5,240

 
4,713

Total net sales
12,098

 
11,527

 
23,974

 
22,783

COST OF SALES:
 
 
 
 
 
 
 
Product
3,857

 
3,650

 
7,605

 
7,213

Service
898

 
812

 
1,787

 
1,615

Total cost of sales
4,755

 
4,462

 
9,392

 
8,828

GROSS MARGIN
7,343

 
7,065

 
14,582

 
13,955

OPERATING EXPENSES:
 
 
 
 
 
 
 
Research and development
1,452

 
1,339

 
2,883

 
2,714

Sales and marketing
2,387

 
2,395

 
4,803

 
4,847

General and administrative
584

 
497

 
1,144

 
1,049

Amortization of purchased intangible assets
118

 
97

 
240

 
196

Restructuring and other charges
13

 
3

 
72

 
205

Total operating expenses
4,554

 
4,331

 
9,142

 
9,011

OPERATING INCOME
2,789

 
2,734

 
5,440

 
4,944

Interest income
160

 
158

 
321

 
322

Interest expense
(147
)
 
(150
)
 
(295
)
 
(298
)
Other income (loss), net
(22
)
 
7

 
(55
)
 
26

Interest and other income (loss), net
(9
)
 
15

 
(29
)
 
50

INCOME BEFORE PROVISION FOR (BENEFIT FROM) INCOME TAXES
2,780

 
2,749

 
5,411

 
4,994

Provision for (benefit from) income taxes
(363
)
 
567

 
176

 
1,035

NET INCOME
$
3,143

 
$
2,182

 
$
5,235

 
$
3,959

 
 
 
 
 
 
 
 
Net income per share:
 
 
 
 
 
 
 
Basic
$
0.59

 
$
0.41

 
$
0.99

 
$
0.74

Diluted
$
0.59

 
$
0.40

 
$
0.98

 
$
0.73

Shares used in per-share calculation:
 
 
 
 
 
 
 
Basic
5,318

 
5,368

 
5,310

 
5,381

Diluted
5,357

 
5,401

 
5,344

 
5,404

 
 
 
 
 
 
 
 
Cash dividends declared per common share
$
0.14

 
$
0.06

 
$
0.28

 
$
0.12

See Notes to Consolidated Financial Statements.

4



CISCO SYSTEMS, INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(in millions)
(Unaudited)
 
Three Months Ended
 
Six Months Ended
 
January 26,
2013
 
January 28,
2012
 
January 26,
2013
 
January 28,
2012
Net income
$
3,143

 
$
2,182

 
$
5,235

 
$
3,959

Available-for-sale investments:
 
 
 
 
 
 
 
Change in net unrealized gains, net of tax benefit (expense) of $(47) and $(46) for the three and six months ended January 26, 2013, respectively, and $2 and $28 for the corresponding periods of fiscal 2012, respectively
69

 
10

 
73

 
(43
)
Net gains reclassified into earnings, net of tax effects of $5 and $14 for the three and six months ended January 26, 2013, respectively, and $14 and $16 for the corresponding periods of fiscal 2012, respectively
(9
)
 
(24
)
 
(26
)
 
(30
)
 
60

 
(14
)
 
47

 
(73
)
Cash flow hedging instruments:
 
 
 
 
 
 
 
Change in unrealized gains and losses, net of tax expense of $(1) for each of the three and six months ended January 26, 2013
2

 
(44
)
 
68

 
(94
)
Net (gains) losses reclassified into earnings
(8
)
 
26

 
(3
)
 
26

 
(6
)
 
(18
)
 
65

 
(68
)
Net change in cumulative translation adjustment and other, net of tax (expense) benefit of $(5) and $(15) for the three and six months ended January 26, 2013, respectively, and $10 and $31 for the corresponding periods of fiscal 2012, respectively
6

 
(106
)
 
120

 
(317
)
Other comprehensive income (loss)
60

 
(138
)
 
232

 
(458
)
Comprehensive income
3,203

 
2,044

 
5,467

 
3,501

Comprehensive loss attributable to noncontrolling interests
5

 
7

 
5

 
14

Comprehensive income attributable to Cisco Systems, Inc.
$
3,208

 
$
2,051

 
$
5,472

 
$
3,515

See Notes to Consolidated Financial Statements.

5


CISCO SYSTEMS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in millions)
(Unaudited) 
 
Six Months Ended
 
January 26,
2013
 
January 28,
2012
Cash flows from operating activities:
 
 
 
Net income
$
5,235

 
$
3,959

Adjustments to reconcile net income to net cash provided by operating activities:
 
 
 
Depreciation, amortization, and other
1,223

 
1,185

Share-based compensation expense
608

 
695

Provision for receivables
12

 
43

Deferred income taxes
148

 
29

Excess tax benefits from share-based compensation
(32
)
 
(32
)
Net losses (gains) on investments
14

 
(11
)
Change in operating assets and liabilities, net of effects of acquisitions and divestitures:
 
 
 
Accounts receivable
100

 
761

Inventories
194

 
(194
)
Financing receivables
(403
)
 
(551
)
Other assets
(63
)
 
(505
)
Accounts payable
(17
)
 
(78
)
Income taxes, net
(1,444
)
 
146

Accrued compensation
(161
)
 
(508
)
Deferred revenue
407

 
304

Other liabilities
(7
)
 
191

Net cash provided by operating activities
5,814

 
5,434

 
 
 
 
Cash flows from investing activities:
 
 
 
Purchases of investments
(14,234
)
 
(17,810
)
Proceeds from sales of investments
4,991

 
12,291

Proceeds from maturities of investments
8,652

 
4,039

Acquisition of property and equipment
(552
)
 
(549
)
Acquisition of businesses, net of cash and cash equivalents acquired
(6,035
)
 
(109
)
Purchases of investments in privately held companies
(116
)
 
(231
)
Return of investments in privately held companies
68

 
124

Other
30

 
160

Net cash used in investing activities
(7,196
)
 
(2,085
)
 
 
 
 
Cash flows from financing activities:
 
 
 
Issuances of common stock
652

 
653

Repurchases of common stock - repurchase program
(645
)
 
(2,210
)
Shares repurchased for tax withholdings on vesting of restricted stock units
(212
)
 
(145
)
Short-term borrowings, maturities less than 90 days, net
4

 
17

Excess tax benefits from share-based compensation
32

 
32

Dividends paid
(1,487
)
 
(644
)
Other
86

 
(153
)
Net cash used in financing activities
(1,570
)
 
(2,450
)
Net (decrease) increase in cash and cash equivalents
(2,952
)
 
899

Cash and cash equivalents, beginning of period
9,799

 
7,662

Cash and cash equivalents, end of period
$
6,847

 
$
8,561

 
 
 
 
Cash paid for:
 
 
 
Interest
$
341

 
$
340

Income taxes
$
1,472

 
$
860

See Notes to Consolidated Financial Statements.

6


CISCO SYSTEMS, INC.
CONSOLIDATED STATEMENTS OF EQUITY
(in millions, except per-share amounts)
(Unaudited)
Six Months Ended January 26, 2013
 
Shares of Common Stock
 
Common Stock and Additional Paid-In Capital
 
Retained Earnings
 
Accumulated Other Comprehensive Income
 
Total Cisco Shareholders’ Equity
 
Non-controlling Interests
 
Total Equity
BALANCE AT JULY 28, 2012
 
5,298

 
$
39,271

 
$
11,354

 
$
661

 
$
51,286

 
$
15

 
$
51,301

Net income
 
 
 
 
 
5,235

 
 
 
5,235

 
 
 
5,235

Other comprehensive income
 
 
 
 
 
 
 
237

 
237

 
(5
)
 
232

Issuance of common stock
 
76

 
652

 
 
 
 
 
652

 
 
 
652

Repurchase of common stock - repurchase program
 
(40
)
 
(298
)
 
(455
)
 
 
 
(753
)
 
 
 
(753
)
Shares repurchased for tax withholdings on vesting of restricted stock units
 
(11
)
 
(212
)
 
 
 
 
 
(212
)
 
 
 
(212
)
Cash dividends declared ($0.28 per common share)
 
 
 
 
 
(1,487
)
 
 
 
(1,487
)
 
 
 
(1,487
)
Tax effects from employee stock incentive plans
 
 
 
(97
)
 
 
 
 
 
(97
)
 
 
 
(97
)
Share-based compensation expense
 
 
 
608

 
 
 
 
 
608

 
 
 
608

Purchase acquisitions and other
 
 
 
46

 
 
 
 
 
46

 
 
 
46

BALANCE AT JANUARY 26, 2013
 
5,323

 
$
39,970

 
$
14,647

 
$
898

 
$
55,515

 
$
10

 
$
55,525


Six Months Ended January 28, 2012
 
Shares of Common Stock
 
Common Stock and Additional Paid-In Capital
 
Retained Earnings
 
Accumulated Other Comprehensive Income
 
Total Cisco Shareholders’ Equity
 
Non-controlling Interests
 
Total Equity
BALANCE AT JULY 30, 2011
 
5,435

 
$
38,648

 
$
7,284

 
$
1,294

 
$
47,226

 
$
33

 
$
47,259

Net income
 
 
 
 
 
3,959

 
 
 
3,959

 
 
 
3,959

Other comprehensive loss
 
 
 
 
 
 
 
(444
)
 
(444
)
 
(14
)
 
(458
)
Issuance of common stock
 
78

 
653

 
 
 
 
 
653

 
 
 
653

Repurchase of common stock - repurchase program
 
(126
)
 
(901
)
 
(1,109
)
 
 
 
(2,010
)
 
 
 
(2,010
)
Shares repurchased for tax withholdings on vesting of restricted stock units
 
(9
)
 
(145
)
 
 
 
 
 
(145
)
 
 
 
(145
)
Cash dividends declared ($0.12 per common share)
 
 
 
 
 
(644
)
 
 
 
(644
)
 
 
 
(644
)
Tax effects from employee stock incentive plans
 
 
 
(48
)
 
 
 
 
 
(48
)
 
 
 
(48
)
Share-based compensation expense
 
 
 
695

 
 
 
 
 
695

 
 
 
695

Purchase acquisitions and other
 
 
 
4

 
 
 
 
 
4

 
 
 
4

BALANCE AT JANUARY 28, 2012
 
5,378

 
$
38,906

 
$
9,490

 
$
850

 
$
49,246

 
$
19

 
$
49,265

In September 2001, the Company’s Board of Directors authorized a stock repurchase program. As of January 26, 2013, the Company’s Board of Directors had authorized an aggregate repurchase of up to $82 billion of common stock under this program with no termination date. For additional information regarding stock repurchases, see Note 13 to the Consolidated Financial Statements. The stock repurchases since the inception of this program and the related impacts on Cisco shareholders’ equity are summarized in the following table (in millions):
 
 
Shares of Common Stock
 
Common Stock and Additional Paid-In Capital
 
Retained Earnings
 
Total Cisco Shareholders’ Equity
Repurchases of common stock under the repurchase program
3,780

 
$
17,339

 
$
59,547

 
$
76,886

See Notes to Consolidated Financial Statements.

7


CISCO SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1.
Basis of Presentation
The fiscal year for Cisco Systems, Inc. (the "Company" or "Cisco") is the 52 or 53 weeks ending on the last Saturday in July. Fiscal 2013 and fiscal 2012 are each 52-week fiscal years. The Consolidated Financial Statements include the accounts of Cisco and its subsidiaries. All significant intercompany accounts and transactions have been eliminated. The Company conducts business globally and is primarily managed on a geographic basis in the following three geographic segments: the Americas; Europe, Middle East, and Africa ("EMEA"); and Asia Pacific, Japan, and China ("APJC").
The accompanying financial data as of January 26, 2013 and for the three and six months ended January 26, 2013 and January 28, 2012 has been prepared by the Company, without audit, pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”). Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles in the United States (“GAAP”) have been condensed or omitted pursuant to such rules and regulations. The July 28, 2012 Consolidated Balance Sheet was derived from audited financial statements, but does not include all disclosures required by accounting principles generally accepted in the United States. However, the Company believes that the disclosures are adequate to make the information presented not misleading. These Consolidated Financial Statements should be read in conjunction with the Consolidated Financial Statements and the notes thereto included in the Company's Annual Report on Form 10-K for the fiscal year ended July 28, 2012.
The Company consolidates its investment in a venture fund managed by SOFTBANK Corp. and its affiliates ("SOFTBANK") and Insieme Networks, Inc. ("Insieme") as these are variable interest entities and the Company is the primary beneficiary. The noncontrolling interests attributed to SOFTBANK are presented as a separate component from the Company's equity in the equity section of the Consolidated Balance Sheets. SOFTBANK's share of the earnings in the venture fund and the loss attributable to the noncontrolling interests in Insieme are not presented separately in the Consolidated Statements of Operations as these amounts are not material for any of the fiscal periods presented.
In the opinion of management, all adjustments (which include normal recurring adjustments, except as disclosed herein) necessary to present fairly the statement of financial position as of January 26, 2013; the results of operations for the three and six months ended January 26, 2013 and January 28, 2012; and the statements of cash flows and equity for the six months ended January 26, 2013 and January 28, 2012, as applicable, have been made. The results of operations for the three and six months ended January 26, 2013 are not necessarily indicative of the operating results for the full fiscal year or any future periods.
Certain reclassifications have been made to prior period amounts in order to conform to the current period's presentation. The Company has evaluated subsequent events through the date that the financial statements were issued.

2.
Recent Accounting Pronouncements
(a)
New Accounting Updates Recently Adopted
In June 2011, the Financial Accounting Standards Board ("FASB") issued an accounting standard update to provide guidance on increasing the prominence of items reported in other comprehensive income, which eliminated the option to present components of other comprehensive income as part of the statement of equity. The Company adopted this accounting standard in the first quarter of fiscal 2013.
In August 2011, the FASB approved a revised accounting standard update intended to simplify how an entity tests goodwill for impairment. The amendment will allow an entity to first assess qualitative factors to determine whether it is necessary to perform the two-step quantitative goodwill impairment test. An entity no longer will be required to calculate the fair value of a reporting unit unless the entity determines, based on a qualitative assessment, that it is more likely than not that its fair value is less than its carrying amount. This accounting standard update became effective for the Company beginning in the first quarter of fiscal 2013, and its adoption did not have any impact on the Company's Consolidated Financial Statements.
(b)
Recent Accounting Standards or Updates Not Yet Effective
In December 2011, the FASB issued an accounting standard update requiring enhanced disclosures about certain financial instruments and derivative instruments that are offset in the statement of financial position or that are subject to enforceable master netting arrangements or similar agreements. This accounting standard update will be effective for the Company beginning in the first quarter of fiscal 2014, at which time the Company will include the required disclosures.

8


CISCO SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)

In July 2012, the FASB issued an accounting standard update intended to simplify how an entity tests indefinite-lived intangible assets other than goodwill for impairment by providing entities with an option to perform a qualitative assessment to determine whether further impairment testing is necessary. This accounting standard update will be effective for the Company beginning in the first quarter of fiscal 2014, and early adoption is permitted. The adoption of this accounting standard update is not expected to have a material impact on the Company's Consolidated Financial Statements.
In February 2013, the FASB issued an accounting standard update to require reclassification adjustments from other comprehensive income to be presented either in the financial statements or in the notes to the financial statements. This accounting standard update will be effective for the Company beginning in the first quarter of fiscal 2014, at which time the Company will include the required disclosures.

3.
Business Combinations
(a)
Acquisition Summary
On July 30, 2012, the Company completed its acquisition of NDS Group Limited (“NDS”), a leading provider of video software and content security solutions that enable service providers and media companies to securely deliver and monetize new video entertainment experiences. The acquisition of NDS is expected to complement and accelerate the delivery of Cisco Videoscape, the Company's comprehensive content delivery platform that enables service providers and media companies to deliver next-generation entertainment experiences. With the NDS acquisition, the Company aims to broaden its opportunities in the service provider market and to expand its reach into emerging markets such as China and India, where NDS has an established customer presence.
Under the terms of the acquisition agreement, the Company paid total cash consideration of approximately $5.0 billion, which included the repayment of $993 million of pre-existing NDS debt to third party creditors at the closing of the acquisition. The following table summarizes the purchase consideration for the NDS acquisition (in millions):
 
 
Fair Value
Cash consideration to seller
 
$
4,012

Repayment of NDS debt to third party creditors
 
993

Total purchase consideration
 
$
5,005

The payment of the total purchase consideration of approximately $5.0 billion shown above, net of cash and cash equivalents acquired, is classified as a use of cash under investing activities in the Consolidated Statements of Cash Flows.
The Company's purchase price allocation for NDS is preliminary and subject to revision as additional information about fair value of assets and liabilities becomes available. Additional information, which existed as of the acquisition date but at that time was unknown to the Company, may become known to the Company during the remainder of the measurement period, a period not to exceed 12 months from the acquisition date. Adjustments in the purchase price allocation may require a recasting of the amounts allocated to goodwill retroactive to the period in which the acquisition occurred.
A summary of the preliminary allocation of the total purchase consideration for NDS is presented as follows (in millions):
 
 
Fair Value
Cash and cash equivalents
 
$
98

Accounts receivable, net
 
199

Other tangible assets
 
268

Goodwill
 
3,444

Purchased intangible assets
 
1,746

Deferred tax liabilities, net
 
(378
)
Liabilities assumed
 
(372
)
Total purchase consideration
 
$
5,005


9


CISCO SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)

The Company completed seven additional business combinations during the six months ended January 26, 2013. A summary of the allocation of the total purchase consideration is presented as follows (in millions):
 
Purchase Consideration
 
Net Liabilities Assumed
 
Purchased Intangible Assets
 
Goodwill
Meraki Inc.
$
974

 
$
(59
)
 
$
289

 
$
744

All others (six in total)
233

 
(15
)
 
72

 
176

Total other acquisitions
$
1,207

 
$
(74
)
 
$
361

 
$
920

The Company acquired privately held Meraki Inc. (“Meraki”) in the second quarter of fiscal 2013. Meraki offers mid-market customers on-premise networking solutions centrally managed from the cloud. With its acquisition of Meraki, the Company intends to address the shift to cloud networking as a key part of the Company's overall strategy to accelerate the adoption of software-based business models that provide new consumption options for customers and revenue opportunities for partners. The Company has included sales from the Meraki acquisition, subsequent to the acquisition date, in its Wireless product category.
The total purchase consideration related to the Company's business combinations completed during the six months ended January 26, 2013 consisted of cash consideration, repayment of debt, and vested share-based awards assumed. The total cash and cash equivalents acquired from these business combinations were approximately $131 million.
(b)
Other Acquisition/Divestiture Information
Total transaction costs related to the Company's business combination activities were $17 million and $2 million for the six months ended January 26, 2013 and January 28, 2012, respectively. These transaction costs were expensed as incurred as general and administrative ("G&A") expenses in the Consolidated Statements of Operations.
The goodwill generated from the Company's business combinations completed during the six months ended January 26, 2013 is primarily related to expected synergies. The goodwill is generally not deductible for U.S. federal income tax purposes.
The Consolidated Financial Statements include the operating results of each business combination from the date of acquisition. Pro forma results of operations for the acquisitions completed during the six months ended January 26, 2013 have not been presented because the effects of the acquisitions, individually and in the aggregate, were not material to the Company's financial results.
During the second quarter of fiscal 2013, the Company agreed to sell its Linksys product line to a third party. The financial statement impact of the Company's Linksys product line was not material for any of the periods presented. This transaction is expected to close during the third quarter of fiscal 2013, subject to customary closing conditions.
(c)
Pending Acquisition of Intucell
On January 23, 2013, the Company announced that it had entered into a definitive agreement to acquire privately held Intucell Ltd. ("Intucell"). Intucell provides advanced self-optimizing network software for mobile carriers. The acquisition of Intucell enhances the Company's commitment to global service providers by adding a critical network intelligence layer to manage and optimize spectrum, coverage and capacity, and ultimately the quality of the mobile experience.
Under the agreement, the Company has agreed to pay approximately $475 million in cash and retention-based incentives to acquire Intucell. The acquisition is expected to close in the third quarter of fiscal 2013 and is subject to customary closing conditions, including regulatory review.


10


CISCO SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)

4.
Goodwill and Purchased Intangible Assets
(a)
Goodwill
The following table presents the goodwill allocated to the Company's reportable segments as of and during the six months ended January 26, 2013 (in millions):
 
 
Balance at
July 28, 2012
 
NDS Acquisition
 
Other Acquisitions
 
Other
 
Balance at
January 26, 2013
Americas
 
$
11,755

 
$
1,230

 
$
520

 
$
(1
)
 
$
13,504

EMEA
 
3,287

 
1,327

 
266

 

 
4,880

APJC
 
1,956

 
887

 
134

 

 
2,977

Total
 
$
16,998

 
$
3,444

 
$
920

 
$
(1
)
 
$
21,361

In the preceding table, the column entitled "Other" primarily relates to purchase accounting adjustments.
(b)
Purchased Intangible Assets
The following table presents details of the Company's intangible assets acquired through business combinations completed during the six months ended January 26, 2013 (in millions, except years):
 
FINITE LIVES
 
INDEFINITE LIVES
 
TOTAL
 
TECHNOLOGY
 
CUSTOMER RELATIONSHIPS
 
OTHER
 
IPR&D
 
 
Weighted-Average Useful Life (in Years)
 
Amount
 
Weighted-Average Useful Life (in Years)
 
Amount
 
Weighted-Average Useful Life (in Years)
 
Amount
 
Amount
 
Amount
NDS Group Limited
6.4
 
$
807

 
6.7
 
$
818

 
7.4

 
$
27

 
$
94

 
$
1,746

Meraki Inc.
8.0
 
259

 
6.0
 
30

 

 

 

 
289

All other acquisitions
4.7
 
45

 
5.6
 
12

 
7.0

 
1

 
14

 
72

Total
 
 
$
1,111

 
 
 
$
860

 
 
 
$
28

 
$
108

 
$
2,107

The following tables present details of the Company’s purchased intangible assets (in millions): 
January 26, 2013
 
Gross
 
Accumulated Amortization
 
Net
Purchased intangible assets with finite lives:
 
 
 
 
 
 
Technology
 
$
3,400

 
$
(1,154
)
 
$
2,246

Customer relationships
 
3,118

 
(1,890
)
 
1,228

Other
 
67

 
(41
)
 
26

Total purchased intangible assets with finite lives
 
6,585

 
(3,085
)
 
3,500

In-process research and development, with indefinite lives
 
42

 

 
42

Total
 
$
6,627

 
$
(3,085
)
 
$
3,542

July 28, 2012
 
Gross
 
Accumulated Amortization
 
Net
Purchased intangible assets with finite lives:
 
 
 
 
 
 
Technology
 
$
2,267

 
$
(908
)
 
$
1,359

Customer relationships
 
2,261

 
(1,669
)
 
592

Other
 
49

 
(41
)
 
8

Total
 
$
4,577

 
$
(2,618
)
 
$
1,959

 
Purchased intangible assets include intangible assets acquired through business combinations as well as through direct purchases or licenses.

11


CISCO SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)

The following table presents the amortization of purchased intangible assets (in millions):
 
Three Months Ended
 
Six Months Ended
 
January 26,
2013
 
January 28,
2012
 
January 26,
2013
 
January 28,
2012
Amortization of purchased intangible assets:
 
 
 
 
 
 
 
Cost of sales
$
145

 
$
99

 
$
288

 
$
195

Operating expenses
118

 
97

 
240

 
196

Total
$
263

 
$
196

 
$
528

 
$
391

There were no impairment charges related to purchased intangible assets during the periods presented.
The estimated future amortization expense of purchased intangible assets with finite lives as of January 26, 2013 is as follows (in millions):
Fiscal Year
 
Amount
2013 (remaining six months)
 
$
467

2014
 
840

2015
 
760

2016
 
533

2017
 
380

Thereafter
 
520

Total
 
$
3,500


5.
Restructuring and Other Charges
In fiscal 2011, the Company initiated a number of key targeted actions to address several areas in its business model. These actions were intended to simplify and focus the Company's organization and operating model, align the Company's cost structure given transitions in the marketplace, divest or exit underperforming operations, and deliver value to the Company's shareholders. The Company initiated these actions to align its business based on its five foundational priorities: leadership in its core business (routing, switching, and associated services), which includes comprehensive security and mobility solutions; collaboration; data center virtualization and cloud; video; and architectures for business transformation.
Pursuant to the restructuring that the Company announced in July 2011, the Company has incurred cumulative charges of approximately $1.1 billion (included as part of the charges discussed below). The Company has substantially completed the July 2011 restructuring and does not expect significant remaining charges related to these actions. The following table summarizes the activities related to the restructuring and other charges pursuant to the Company's July 2011 announcement related to the realignment and restructuring of the Company's business as well as certain consumer product lines as announced during April 2011 (in millions):
 
 
Voluntary Early Retirement Program
 
Employee Severance
 
Goodwill and Intangible Assets
 
Other
 
Total
Gross charges in fiscal 2011
 
$
453

 
$
247

 
$
71

 
$
28

 
$
799

Cash payments
 
(436
)
 
(13
)
 

 

 
(449
)
Non-cash items
 

 

 
(71
)
 
(17
)
 
(88
)
BALANCE AT JULY 30, 2011
 
$
17

 
$
234

 
$

 
$
11

 
$
262

Gross charges in fiscal 2012
 

 
299

 

 
54

 
353

Change in estimate related to fiscal 2011 charges
 

 
(49
)
 

 

 
(49
)
Cash payments
 
(17
)
 
(401
)
 

 
(18
)
 
(436
)
Non-cash items
 

 

 

 
(20
)
 
(20
)
BALANCE AT JULY 28, 2012
 
$

 
$
83


$


$
27


$
110

Charges in fiscal 2013
 

 
77

 

 
(5
)
 
72

Cash payments
 

 
(139
)
 

 
(10
)
 
(149
)
Non-cash items
 

 

 

 
(3
)
 
(3
)
BALANCE AT JANUARY 26, 2013
 
$

 
$
21

 
$

 
$
9

 
$
30


12


CISCO SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)


6.
Balance Sheet Details
The following tables provide details of selected balance sheet items (in millions):
 
 
January 26,
2013
 
July 28,
2012
Inventories:
 
 
 
 
Raw materials
 
$
113

 
$
127

Work in process
 
24

 
35

Finished goods:
 
 
 
 
Distributor inventory and deferred cost of sales
 
648

 
630

Manufactured finished goods
 
498

 
597

Total finished goods
 
1,146

 
1,227

Service-related spares
 
248

 
213

Demonstration systems
 
43

 
61

 
 
 
 
 
Total
 
$
1,574

 
$
1,663

 
 
 
 
 
Property and equipment, net:
 
 
 
 
Land, buildings, and building and leasehold improvements
 
$
4,491

 
$
4,363

Computer equipment and related software
 
1,455

 
1,469

Production, engineering, and other equipment
 
5,642

 
5,364

Operating lease assets (1)
 
304

 
300

Furniture and fixtures
 
493

 
487

 
 
12,385

 
11,983

Less accumulated depreciation and amortization (1)
 
(8,982
)
 
(8,581
)
Total
 
$
3,403

 
$
3,402

 
 
 
 
 
(1)      Accumulated depreciation related to operating lease assets was $186 and $181 as of January 26, 2013 and July 28, 2012, respectively.
 
 
 
 
 
 Other assets:
 
 
 
 
Deferred tax assets
 
$
1,807

 
$
2,270

Investments in privately held companies
 
869

 
858

Other
 
834

 
754

Total
 
$
3,510

 
$
3,882

 
 
 
 
 
Deferred revenue:
 
 
 
 
Service
 
$
9,055

 
$
9,173

Product:
 
 
 
 
Unrecognized revenue on product shipments and other deferred revenue
 
3,309

 
2,975

Cash receipts related to unrecognized revenue from two-tier distributors
 
957

 
732

Total product deferred revenue
 
4,266

 
3,707

Total
 
$
13,321

 
$
12,880

Reported as:
 
 
 
 
Current
 
$
9,108

 
$
8,852

Noncurrent
 
4,213

 
4,028

Total
 
$
13,321

 
$
12,880


13


CISCO SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)


7.
Financing Receivables and Guarantees
(a)
Financing Receivables
Financing receivables primarily consist of lease receivables, loan receivables, and financed service contracts and other. Lease receivables represent sales-type and direct-financing leases resulting from the sale of the Company's and complementary third-party products and are typically collateralized by a security interest in the underlying assets. Loan receivables represent financing arrangements related to the sale of the Company's products and services, which may include additional funding for other costs associated with network installation and integration of the Company's products and services. Lease receivables consist of arrangements with terms of four years on average, while loan receivables generally have terms of up to three years. The financed service contracts and other category includes financing receivables related to technical support and advanced services, as well as receivables related to financing of certain indirect costs associated with leases. Revenue related to the technical support services is typically deferred and included in deferred service revenue and is recognized ratably over the period during which the related services are to be performed, which typically ranges from one to three years.
A summary of the Company’s financing receivables is presented as follows (in millions):
January 26, 2013
Lease Receivables
 
Loan Receivables
 
Financed Service Contracts and Other
 
Total Financing Receivables
Gross
$
3,717

 
$
1,785

 
$
2,863

 
$
8,365

Unearned income
(273
)
 

 

 
(273
)
Allowance for credit loss
(247
)
 
(101
)
 
(13
)
 
(361
)
Total, net
$
3,197

 
$
1,684

 
$
2,850

 
$
7,731

Reported as:
 
 
 
 
 
 
 
Current
$
1,349

 
$
960

 
$
1,585

 
$
3,894

Noncurrent
1,848

 
724

 
1,265

 
3,837

Total, net
$
3,197

 
$
1,684

 
$
2,850

 
$
7,731

July 28, 2012
Lease Receivables
 
Loan Receivables
 
Financed Service Contracts and Other
 
Total Financing Receivables
Gross
$
3,429

 
$
1,796

 
$
2,651

 
$
7,876

Unearned income
(250
)
 

 

 
(250
)
Allowance for credit loss
(247
)
 
(122
)
 
(11
)
 
(380
)
Total, net
$
2,932

 
$
1,674

 
$
2,640

 
$
7,246

Reported as:
 
 
 
 
 
 
 
Current
$
1,200

 
$
968

 
$
1,493

 
$
3,661

Noncurrent
1,732

 
706

 
1,147

 
3,585

Total, net
$
2,932

 
$
1,674

 
$
2,640

 
$
7,246

As of January 26, 2013 and July 28, 2012, the deferred service revenue related to the financed service contracts and other was $1,943 million and $1,838 million, respectively.
Contractual maturities of the gross lease receivables at January 26, 2013 are summarized as follows (in millions):
Fiscal Year
 
Amount
2013 (remaining six months)
 
$
878

2014
 
1,345

2015
 
863

2016
 
437

2017
 
194

Total
 
$
3,717


Actual cash collections may differ from the contractual maturities due to early customer buyouts, refinancings, or defaults.

14


CISCO SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)

(b)
Credit Quality of Financing Receivables
Financing receivables categorized by the Company's internal credit risk rating as of January 26, 2013 and July 28, 2012 are summarized as follows (in millions):
 
INTERNAL CREDIT RISK RATING
 
 
 
 
 
 
January 26, 2013
1 to 4
 
5 to 6
 
7 and Higher
 
Total
 
Residual Value
 
Gross Receivables,
Net of Unearned Income
Lease receivables
$
1,607

 
$
1,505

 
$
58

 
$
3,170

 
$
274

 
$
3,444

Loan receivables
882

 
857

 
46

 
1,785

 

 
1,785

Financed service contracts and other
1,579

 
1,179

 
105

 
2,863

 

 
2,863

Total
$
4,068

 
$
3,541

 
$
209

 
$
7,818

 
$
274

 
$
8,092

 
INTERNAL CREDIT RISK RATING
 
 
 
 
 
 
July 28, 2012
1 to 4
 
5 to 6
 
7 and Higher
 
Total
 
Residual Value
 
Gross Receivables,
Net of Unearned Income
Lease receivables
$
1,532

 
$
1,342

 
$
31

 
$
2,905

 
$
274

 
$
3,179

Loan receivables
831

 
921

 
44

 
1,796

 

 
1,796

Financed service contracts and other
1,552

 
1,030

 
69

 
2,651

 

 
2,651

Total
$
3,915

 
$
3,293

 
$
144

 
$
7,352

 
$
274

 
$
7,626

The Company determines the adequacy of its allowance for credit loss by assessing the risks and losses inherent in its financing receivables by portfolio segment. The portfolio segment is based on the types of financing offered by the Company to its customers: lease receivables, loan receivables, and financed service contracts and other.
The Company's internal credit risk ratings of 1 through 4 correspond to investment-grade ratings, while credit risk ratings of 5 and 6 correspond to non-investment grade ratings. Credit risk ratings of 7 and higher correspond to substandard ratings and constitute a relatively small portion of the Company's financing receivables.
In circumstances when collectibility is not deemed reasonably assured, the associated revenue is deferred in accordance with the Company's revenue recognition policies, and the related allowance for credit loss, if any, is included in deferred revenue. The Company also records deferred revenue associated with financing receivables when there are remaining performance obligations, as it does for financed service contracts. Total allowances for credit loss and deferred revenue as of January 26, 2013 and July 28, 2012 were $2,429 million and $2,387 million, respectively, and they were associated with financing receivables (net of unearned income) of $8,092 million and $7,626 million as of their respective period ends. The losses that the Company has incurred historically, including in the periods presented with respect to its financing receivables, have been immaterial and consistent with the performance of an investment-grade portfolio. The Company did not modify any financing receivables during the periods presented.
The following tables present the aging analysis of financing receivables as of January 26, 2013 and July 28, 2012 (in millions):
 
DAYS PAST DUE (INCLUDES BILLED AND UNBILLED)
 
 
 
 
 
 
 
 
January 26, 2013
31-60
 
61-90 
 
91+
 
Total Past Due
 
Current
 
Gross Receivables,
Net of Unearned Income
 
Non-Accrual Financing Receivables
 
Impaired Financing Receivables
Lease receivables
$
182

 
$
34

 
$
230

 
$
446

 
$
2,998

 
$
3,444

 
$
49

 
$
33

Loan receivables
12

 
3

 
11

 
26

 
1,759

 
1,785

 
32

 
32

Financed service contracts and other
305

 
37

 
251

 
593

 
2,270

 
2,863

 
21

 
13

Total
$
499

 
$
74

 
$
492

 
$
1,065

 
$
7,027

 
$
8,092

 
$
102

 
$
78


15


CISCO SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)

 
DAYS PAST DUE (INCLUDES BILLED AND UNBILLED)
 
 
 
 
 
 
 
 
July 28, 2012
31-60
 
61-90 
 
91+
 
Total Past Due
 
Current
 
Gross Receivables,
Net of Unearned Income
 
Non-Accrual Financing Receivables
 
Impaired Financing Receivables
Lease receivables
$
151

 
$
69

 
$
173

 
$
393

 
$
2,786

 
$
3,179

 
$
23

 
$
14

Loan receivables
10

 
8

 
11

 
29

 
1,767

 
1,796

 
4

 
4

Financed service contracts and other
89

 
68

 
392

 
549

 
2,102

 
2,651

 
18

 
10

Total
$
250

 
$
145

 
$
576

 
$
971

 
$
6,655

 
$
7,626

 
$
45

 
$
28

Past due financing receivables are those that are 31 days or more past due according to their contractual payment terms. The data in the preceding tables is presented by contract, and the aging classification of each contract is based on the oldest outstanding receivable, and therefore past due amounts also include unbilled and current receivables within the same contract. The balances of either unbilled or current financing receivables included in the category of 91 days plus past due for lease receivables, loan receivables, and financed service contracts and other were, respectively, $179 million, $6 million, and $199 million as of January 26, 2013; and were, respectively, $139 million, $3 million, and $313 million as of July 28, 2012.
As of January 26, 2013, the Company had financing receivables of $82 million, net of unbilled or current receivables from the same contract, that were in the category for 91 days plus past due but remained on accrual status. Such balance was $109 million as of July 28, 2012. A financing receivable may be placed on nonaccrual status earlier if, in management's opinion, a timely collection of the full principal and interest becomes uncertain.
(c)
Allowance for Credit Loss Rollforward
The allowances for credit loss and the related financing receivables are summarized as follows (in millions):
 
CREDIT LOSS ALLOWANCES
 
Lease Receivables
 
Loan Receivables
 
Financed Service Contracts and Other
 
Total
Allowance for credit loss as of July 28, 2012
$
247

 
$
122

 
$
11

 
$
380

Provisions
(2
)
 
(10
)
 
1

 
(11
)
Write-offs net of recoveries

 

 

 

Foreign exchange and other
3

 
2

 

 
5

Allowance for credit loss as of October 27, 2012
248

 
114

 
12


374

Provisions
(1
)
 
(14
)
 
2

 
(13
)
Write-offs net of recoveries

 

 

 

Foreign exchange and other

 
1

 
(1
)
 

Allowance for credit loss as of January 26, 2013
$
247

 
$
101

 
$
13

 
$
361

Gross receivables as of January 26, 2013, net of unearned income
$
3,444

 
$
1,785

 
$
2,863

 
$
8,092

 
CREDIT LOSS ALLOWANCES
 
Lease Receivables
 
Loan Receivables
 
Financed Service Contracts and Other
 
Total
Allowance for credit loss as of July 30, 2011
$
237

 
$
103

 
$
27

 
$
367

Provisions
2

 
5

 
2

 
9

Write-offs net of recoveries

 

 

 

Foreign exchange and other
(6
)
 
(5
)
 

 
(11
)
Allowance for credit loss as of October 29, 2011
233

 
103

 
29

 
365

Provisions
18

 
4

 
(18
)
 
4

Write-offs net of recoveries

 

 

 

Foreign exchange and other
(1
)
 
3

 
(2
)
 

Allowance for credit loss as of January 28, 2012
$
250

 
$
110

 
$
9

 
$
369

Gross receivables as of January 28, 2012, net of unearned income
$
3,049

 
$
1,673

 
$
2,666

 
$
7,388


16


CISCO SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)

The Company assesses the allowance for credit loss related to financing receivables on either an individual or a collective basis. The Company considers various factors in evaluating lease and loan receivables and the earned portion of financed service contracts for possible impairment on an individual basis. These factors include the Company's historical experience, credit quality and age of the receivable balances, and economic conditions that may affect a customer's ability to pay. When the evaluation indicates that it is probable that all amounts due pursuant to the contractual terms of the financing agreement, including scheduled interest payments, are unable to be collected, the financing receivable is considered impaired. All such outstanding amounts, including any accrued interest, will be assessed and fully reserved at the customer level.
Typically, the Company also considers receivables with a risk rating of 8 or higher to be impaired and will include them in the individual assessment for allowance. Financing receivables that were individually evaluated for impairment during the periods presented were not material and therefore are not presented separately in the preceding tables.
The Company evaluates the remainder of its financing receivables portfolio for impairment on a collective basis and records an allowance for credit loss at the portfolio segment level. When evaluating the financing receivables on a collective basis, the Company uses expected default frequency rates published by a major third-party credit-rating agency as well as its own historical loss rate in the event of default, while also systematically giving effect to economic conditions, concentration of risk, and correlation.
(d)
Financing Guarantees
In the ordinary course of business, the Company provides financing guarantees for various third-party financing arrangements extended to channel partners and end-user customers. Payments under these financing guarantee arrangements were not material for the periods presented.
Channel Partner Financing Guarantees  The Company facilitates arrangements for third-party financing extended to channel partners, consisting of revolving short-term financing, generally with payment terms ranging from 60 to 90 days. These financing arrangements facilitate the working capital requirements of the channel partners, and, in some cases, the Company guarantees a portion of these arrangements. The volume of channel partner financing was $5.8 billion and $5.4 billion for the three months ended January 26, 2013 and January 28, 2012, respectively. The volume of channel partner financing was $11.4 billion and $10.7 billion for the six months ended January 26, 2013 and January 28, 2012, respectively. The balance of the channel partner financing subject to guarantees was $1.4 billion and $1.2 billion as of January 26, 2013 and July 28, 2012, respectively.
End-User Financing Guarantees  The Company also provides financing guarantees for third-party financing arrangements extended to end-user customers related to leases and loans, which typically have terms of up to three years. The volume of financing provided by third parties for leases and loans as to which the Company had provided guarantees was $55 million and $60 million for the three months ended January 26, 2013 and January 28, 2012, respectively, and was $99 million and $95 million for the six months ended January 26, 2013 and January 28, 2012, respectively.
Financing Guarantee Summary  The aggregate amounts of financing guarantees outstanding at January 26, 2013 and July 28, 2012, representing the total maximum potential future payments under financing arrangements with third parties along with the related deferred revenue, are summarized in the following table (in millions):
 
January 26,
2013
 
July 28,
2012
Maximum potential future payments relating to financing guarantees:
 
 
 
Channel partner
$
491

 
$
277

End user
254

 
232

Total
$
745

 
$
509

Deferred revenue associated with financing guarantees:
 
 
 
Channel partner
$
(267
)
 
$
(193
)
End user
(217
)
 
(200
)
Total
$
(484
)
 
$
(393
)
Maximum potential future payments relating to financing guarantees, net of associated deferred revenue
$
261

 
$
116



17


CISCO SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)

8.
Investments
(a)
Summary of Available-for-Sale Investments
The following tables summarize the Company’s available-for-sale investments (in millions):
January 26, 2013
Amortized Cost
 
Gross Unrealized Gains
 
Gross Unrealized Losses
 
Fair Value
Fixed income securities:
 
 
 
 
 
 
 
U.S. government securities
$
25,147

 
$
31

 
$
(1
)
 
$
25,177

U.S. government agency securities
3,776

 
14

 

 
3,790

Non-U.S. government and agency securities
1,329

 
7

 

 
1,336

Corporate debt securities
7,021

 
99

 
(2
)
 
7,118

Total fixed income securities
37,273

 
151

 
(3
)
 
37,421

Publicly traded equity securities
1,484

 
628

 
(4
)
 
2,108

Total
$
38,757

 
$
779

 
$
(7
)
 
$
39,529

July 28, 2012
Amortized Cost
 
Gross Unrealized Gains
 
Gross Unrealized Losses
 
Fair Value
Fixed income securities:
 
 
 
 
 
 
 
U.S. government securities
$
24,201

 
$
41

 
$
(1
)
 
$
24,241

U.S. government agency securities
5,367

 
21

 

 
5,388

Non-U.S. government and agency securities
1,629

 
9

 

 
1,638

Corporate debt securities
5,959

 
74

 
(3
)