10-Q 1 a10q-q316.htm 10-Q Document

 
 
 
 
 
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 April 30, 2016

OR
o
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  o  
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  o  
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
(Do not check if a smaller reporting company)
  
Smaller reporting company
 
o
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 May 19, 2016: 5,029,711,978
____________________________________ 


1


Cisco Systems, Inc.
Form 10-Q for the Quarter Ended April 30, 2016
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 I. FINANCIAL INFORMATION 
Item 1.
Financial Statements (Unaudited)
CISCO SYSTEMS, INC.
CONSOLIDATED BALANCE SHEETS
(in millions, except par value)
(Unaudited)
 
April 30, 2016
 
July 25, 2015
ASSETS
 
 
 
Current assets:
 
 
 
Cash and cash equivalents
$
8,895

 
$
6,877

Investments
54,617

 
53,539

Accounts receivable, net of allowance for doubtful accounts of $244 at April 30, 2016 and $302 at July 25, 2015
4,047

 
5,344

Inventories
1,343

 
1,627

Financing receivables, net
4,716

 
4,491

Deferred tax assets
2,723

 
2,915

Other current assets
2,230

 
1,490

Total current assets
78,571

 
76,283

Property and equipment, net
3,529

 
3,332

Financing receivables, net
3,900

 
3,858

Goodwill
26,762

 
24,469

Purchased intangible assets, net
2,744

 
2,376

Other assets
3,148

 
3,163

TOTAL ASSETS
$
118,654

 
$
113,481

LIABILITIES AND EQUITY

 

Current liabilities:

 

Short-term debt
$
4,164

 
$
3,897

Accounts payable
1,007

 
1,104

Income taxes payable
152

 
62

Accrued compensation
2,745

 
3,049

Deferred revenue
9,662

 
9,824

Other current liabilities
6,273

 
5,687

Total current liabilities
24,003

 
23,623

Long-term debt
24,431

 
21,457

Income taxes payable
891

 
1,876

Deferred revenue
5,610

 
5,359

Other long-term liabilities
1,361

 
1,459

Total liabilities
56,296

 
53,774

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; 5,034 and 5,085 shares issued and outstanding at April 30, 2016 and July 25, 2015, respectively
44,137

 
43,592

Retained earnings
18,448

 
16,045

Accumulated other comprehensive income (loss)
(227
)
 
61

Total Cisco shareholders’ equity
62,358

 
59,698

Noncontrolling interests

 
9

Total equity
62,358

 
59,707

TOTAL LIABILITIES AND EQUITY
$
118,654

 
$
113,481

See Notes to Consolidated Financial Statements.

3


CISCO SYSTEMS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(in millions, except per-share amounts)
(Unaudited) 
 
Three Months Ended
 
Nine Months Ended
 
April 30, 2016
 
April 25, 2015
 
April 30, 2016
 
April 25, 2015
REVENUE:
 
 
 
 
 
 
 
Product
$
8,875

 
$
9,326

 
$
27,702

 
$
27,839

Service
3,125

 
2,811

 
8,907

 
8,479

Total revenue
12,000


12,137

 
36,609

 
36,318

COST OF SALES:



 
 
 
 
Product
3,214

 
3,584

 
10,547

 
11,309

Service
1,065

 
1,028

 
3,077

 
3,061

Total cost of sales
4,279


4,612

 
13,624

 
14,370

GROSS MARGIN
7,721

 
7,525

 
22,985

 
21,948

OPERATING EXPENSES:



 
 
 
 
Research and development
1,626

 
1,547

 
4,695

 
4,659

Sales and marketing
2,447

 
2,449

 
7,176

 
7,272

General and administrative
566

 
510

 
1,281

 
1,504

Amortization of purchased intangible assets
81

 
70

 
221

 
213

Restructuring and other charges
17

 
24

 
255

 
411

Total operating expenses
4,737


4,600

 
13,628

 
14,059

OPERATING INCOME
2,984


2,925

 
9,357

 
7,889

Interest income
270

 
190

 
732

 
558

Interest expense
(175
)
 
(139
)
 
(496
)
 
(417
)
Other income (loss), net
4

 
59

 
(67
)
 
238

Interest and other income (loss), net
99


110

 
169

 
379

INCOME BEFORE PROVISION FOR INCOME TAXES
3,083


3,035

 
9,526

 
8,268

Provision for income taxes
734

 
598

 
1,600

 
1,606

NET INCOME
$
2,349


$
2,437

 
$
7,926

 
$
6,662




 


 
 
 
 
Net income per share:


 


 
 
 
 
Basic
$
0.47


$
0.48

 
$
1.57

 
$
1.30

Diluted
$
0.46


$
0.47

 
$
1.56

 
$
1.29

Shares used in per-share calculation:





 
 
 
 
Basic
5,032

 
5,102

 
5,060

 
5,110

Diluted
5,065

 
5,148

 
5,095

 
5,154







 
 
 
 
Cash dividends declared per common share
$
0.26

 
$
0.21

 
$
0.68

 
$
0.59

See Notes to Consolidated Financial Statements.

4


CISCO SYSTEMS, INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(in millions)
(Unaudited)
 
Three Months Ended
 
Nine Months Ended
 
April 30, 2016
 
April 25, 2015
 
April 30, 2016
 
April 25, 2015
Net income
$
2,349

 
$
2,437

 
$
7,926

 
$
6,662

Available-for-sale investments:
 
 
 
 
 
 
 
Change in net unrealized gains, net of tax benefit (expense) of $(146) and $59 for the three and nine months ended April 30, 2016, respectively, and $(57) and $(34) for the corresponding periods of fiscal 2015, respectively
217

 
72

 
(95
)
 
80

Net (gains) losses reclassified into earnings, net of tax (benefit) expense of $(2) and $(9) for the three and nine months ended April 30, 2016, and $16 and $42 for the corresponding periods of fiscal 2015, respectively
4

 
(28
)
 
17

 
(78
)

221

 
44

 
(78
)
 
2

Cash flow hedging instruments:
 
 
 
 
 
 
 
Change in unrealized gains and losses, net of tax benefit (expense) of $(2) and $2 for the three and nine months ended April 30, 2016, respectively, and $2 and $8 for the corresponding periods of fiscal 2015, respectively
19

 
(30
)
 
(1
)
 
(155
)
Net (gains) losses reclassified into earnings, net of tax (benefit) expense of $(2) and $(4) for the three and nine months ended April 30, 2016, and $(2) and $(5) for the corresponding periods of fiscal 2015, respectively
7

 
62

 
13

 
89


26

 
32

 
12

 
(66
)
Net change in cumulative translation adjustment and actuarial gains and losses net of tax benefit (expense) of $(9) and $(43) for the three and nine months ended April 30, 2016, respectively, and $14 and $50 for the corresponding periods of fiscal 2015, respectively
326

 
(80
)
 
(231
)
 
(423
)
Other comprehensive income (loss)
573

 
(4
)
 
(297
)
 
(487
)
Comprehensive income
2,922

 
2,433

 
7,629

 
6,175

Comprehensive (income) loss attributable to noncontrolling interests
7

 
5

 
9

 
(3
)
Comprehensive income attributable to Cisco Systems, Inc.
$
2,929

 
$
2,438

 
$
7,638

 
$
6,172

See Notes to Consolidated Financial Statements.


5


CISCO SYSTEMS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in millions)
(Unaudited)
 
Nine Months Ended

April 30, 2016
 
April 25, 2015
Cash flows from operating activities:
 
 
 
Net income
$
7,926

 
$
6,662

Adjustments to reconcile net income to net cash provided by operating activities:

 

Depreciation, amortization, and other
1,546

 
1,799

Share-based compensation expense
1,101

 
1,044

Provision for receivables
(27
)
 
82

Deferred income taxes
229

 
438

Excess tax benefits from share-based compensation
(103
)
 
(102
)
(Gains) losses on divestitures, investments and other, net
(279
)
 
(231
)
Change in operating assets and liabilities, net of effects of acquisitions and divestitures:

 

Accounts receivable
1,412

 
97

Inventories
189

 
(235
)
Financing receivables
(296
)
 
36

Other assets
(94
)
 
(349
)
Accounts payable
(114
)
 
101

Income taxes, net
(723
)
 
(511
)
Accrued compensation
(318
)
 
(324
)
Deferred revenue
7

 
217

Other liabilities
(704
)
 
(310
)
Net cash provided by operating activities
9,752

 
8,414

Cash flows from investing activities:
 
 
 
Purchases of investments
(36,366
)
 
(30,617
)
Proceeds from sales of investments
23,806

 
13,890

Proceeds from maturities of investments
11,790

 
11,632

Acquisition of businesses, net of cash and cash equivalents acquired
(3,161
)
 
(238
)
Proceeds from business divestiture
372

 

Purchases of investments in privately held companies
(202
)
 
(155
)
Return of investments in privately held companies
74

 
274

Acquisition of property and equipment
(880
)
 
(907
)
Proceeds from sales of property and equipment
11

 
8

Other
(195
)
 
(115
)
Net cash used in investing activities
(4,751
)
 
(6,228
)
Cash flows from financing activities:
 
 
 
Issuances of common stock
771

 
1,584

Repurchases of common stockrepurchase program
(3,154
)
 
(3,325
)
Shares repurchased for tax withholdings on vesting of restricted stock units
(469
)
 
(415
)
Short-term borrowings, original maturities less than 90 days, net
(4
)
 
496

Issuances of debt
6,978

 

Repayments of debt
(3,863
)
 
(507
)
Excess tax benefits from share-based compensation
103

 
102

Dividends paid
(3,441
)
 
(3,017
)
Other
96

 
40

Net cash used in financing activities
(2,983
)
 
(5,042
)
Net increase (decrease) in cash and cash equivalents
2,018

 
(2,856
)
Cash and cash equivalents, beginning of period
6,877

 
6,726

Cash and cash equivalents, end of period
$
8,895

 
$
3,870

 
 
 
 
Supplemental cash flow information:
 
 
 
Cash paid for interest
$
691


$
646

Cash paid for income taxes, net
$
2,093


$
1,680

See Notes to Consolidated Financial Statements.

6


CISCO SYSTEMS, INC.
CONSOLIDATED STATEMENTS OF EQUITY
(in millions, except per-share amounts)
(Unaudited)
Nine Months Ended April 30, 2016
Shares of
Common
Stock
 
Common Stock
and
Additional
Paid-In Capital
 
Retained
Earnings
 
Accumulated
Other
Comprehensive
Income (Loss)
 
Total Cisco
Shareholders’
Equity
 
Non-controlling
Interests
 
Total  Equity
BALANCE AT JULY 25, 2015
5,085

 
$
43,592

 
$
16,045

 
$
61

 
$
59,698

 
$
9

 
$
59,707

Net income
 
 
 
 
7,926

 
 
 
7,926

 
 
 
7,926

Other comprehensive income (loss)
 
 
 
 
 
 
(288
)
 
(288
)
 
(9
)
 
(297
)
Issuance of common stock
87

 
771

 
 
 
 
 
771

 
 
 
771

Repurchase of common stock
(120
)
 
(1,036
)
 
(2,082
)
 
 
 
(3,118
)
 
 
 
(3,118
)
Shares repurchased for tax withholdings on vesting of restricted stock units
(18
)
 
(469
)
 
 
 
 
 
(469
)
 
 
 
(469
)
Cash dividends declared ($0.68 per common share)
 
 
 
 
(3,441
)
 
 
 
(3,441
)
 
 
 
(3,441
)
Tax effects from employee stock incentive plans
 
 
32

 
 
 
 
 
32

 
 
 
32

Share-based compensation expense
 
 
1,101

 
 
 
 
 
1,101

 
 
 
1,101

Purchase acquisitions
 
 
146

 
 
 
 
 
146

 
 
 
146

BALANCE AT APRIL 30, 2016
5,034

 
$
44,137

 
$
18,448

 
$
(227
)
 
$
62,358

 
$

 
$
62,358


Nine Months Ended April 25, 2015
Shares of
Common
Stock
 
Common Stock
and
Additional
Paid-In Capital
 
Retained
Earnings
 
Accumulated
Other
Comprehensive
Income (Loss)
 
Total Cisco
Shareholders’
Equity
 
Non-controlling
Interests
 
Total  Equity
BALANCE AT JULY 26, 2014
5,107

 
$
41,884

 
$
14,093

 
$
677

 
$
56,654

 
$
7

 
$
56,661

Net income
 
 
 
 
6,662

 
 
 
6,662

 
 
 
6,662

Other comprehensive income (loss)
 
 
 
 
 
 
(490
)
 
(490
)
 
3

 
(487
)
Issuance of common stock
123

 
1,584

 
 
 
 
 
1,584

 
 
 
1,584

Repurchase of common stock
(120
)
 
(994
)
 
(2,235
)
 
 
 
(3,229
)
 
 
 
(3,229
)
Shares repurchased for tax withholdings on vesting of restricted stock units
(17
)
 
(415
)
 
 
 
 
 
(415
)
 
 
 
(415
)
Cash dividends declared ($0.59 per common share)
 
 
 
 
(3,017
)
 
 
 
(3,017
)
 
 
 
(3,017
)
Tax effects from employee stock incentive plans
 
 
27

 
 
 
 
 
27

 
 
 
27

Share-based compensation expense
 
 
1,044

 
 
 
 
 
1,044

 
 
 
1,044

Purchase acquisitions
 
 
3

 
 
 
 
 
3

 
 
 
3

BALANCE AT APRIL 25, 2015
5,093

 
$
43,133

 
$
15,503

 
$
187

 
$
58,823

 
$
10

 
$
58,833


Supplemental Information
In September 2001, the Company’s Board of Directors authorized a stock repurchase program. As of April 30, 2016, the Company’s Board of Directors had authorized an aggregate repurchase of up to $112 billion of common stock under this program with no termination date. For additional information regarding stock repurchase, 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
4,563

 
$
23,651

 
$
72,146

 
$
95,797

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 2016 is a 53-week fiscal year, and fiscal 2015 was a 52-week fiscal year. The Consolidated Financial Statements include the accounts of Cisco and its subsidiaries. All 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 April 30, 2016 and for the three and nine months ended April 30, 2016 and April 25, 2015 has been prepared by the Company, without audit, pursuant to the rules and regulations of the U.S. 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 25, 2015 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 25, 2015.
The Company consolidates its investments in a venture fund managed by SOFTBANK Corp. and its affiliates (“SOFTBANK”) as this is a variable interest entity 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 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 normal recurring adjustments necessary to present fairly the consolidated balance sheet as of April 30, 2016; the results of operations and the statements of comprehensive income for the three and nine months ended April 30, 2016 and April 25, 2015; and the statements of cash flows and equity for the nine months ended April 30, 2016 and April 25, 2015, as applicable, have been made. The results of operations for the three and nine months ended April 30, 2016 are not necessarily indicative of the operating results for the full fiscal year or any future periods.
Certain reclassifications have been made to the amounts in prior periods 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
Recent Accounting Standards or Updates Not Yet Effective
Revenue Recognition In May 2014, the Financial Accounting Standards Board (FASB) issued an accounting standard update related to revenue from contracts with customers, which will supersede nearly all current U.S. GAAP guidance on this topic and eliminate industry-specific guidance. The underlying principle is to recognize revenue when promised goods or services are transferred to customers in an amount that reflects the consideration that is expected to be received for those goods or services. This accounting standard update, as amended, will be effective for the Company beginning in the first quarter of fiscal 2019. The new revenue standard may be applied retrospectively to each prior period presented or retrospectively with the cumulative effect recognized as of the date of adoption. Early adoption is permitted, but no earlier than fiscal 2018. The Company expects to adopt this accounting standard update in the first quarter of fiscal 2019, and it is currently evaluating the impact of this accounting standard update on its Consolidated Financial Statements.
Consolidation of Certain Types of Legal Entities In February 2015, the FASB issued an accounting standard update that changes the analysis that a reporting entity must perform to determine whether it should consolidate certain types of legal entities. The accounting standard update will be effective for the Company beginning in the first quarter of fiscal 2017, and early adoption is permitted. The application of this accounting standard update is not expected to have a material impact on the Company's Consolidated Financial Statements.
Classification of Deferred Taxes In November 2015, the FASB issued an accounting standard update that requires that all deferred tax assets and liabilities, along with any related valuation allowance, be classified as noncurrent on the balance sheet. The accounting standard update will be effective for the Company beginning in the first quarter of fiscal 2018, and early adoption is permitted. The accounting standard update is a change in balance sheet presentation only.

8

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

Financial Instruments In January 2016, the FASB issued an accounting standard update that changes the accounting for equity investments, financial liabilities under the fair value option, and the presentation and disclosure requirements for financial instruments. The accounting standard update will be effective for the Company beginning in the first quarter of fiscal 2019, and early adoption is permitted. The Company is currently evaluating the impact of this accounting standard update on its Consolidated Financial Statements.

Leases In February 2016, the FASB issued an accounting standard update related to leases requiring lessees to recognize operating and financing lease liabilities on the balance sheet, as well as corresponding right-of-use assets. The new lease standard also makes some changes to lessor accounting and aligns key aspects of the lessor accounting model with the revenue recognition standard. In addition, disclosures will be required to enable users of financial statements to assess the amount, timing, and uncertainty of cash flows arising from leases. The accounting standard update will be effective for the Company beginning in the first quarter of fiscal 2020 on a modified retrospective basis, and early adoption is permitted. The Company is currently evaluating the impact of this accounting standard update on its Consolidated Financial Statements.

Share-Based Compensation In March 2016, the FASB issued an accounting standard update that impacts the accounting for share-based payment transactions, including income tax consequences, classification of awards as either equity or liabilities, and classification on the Consolidated Statements of Cash Flows. The accounting standard will be effective for the Company beginning the first quarter of fiscal 2018, and early adoption is permitted. The Company is currently evaluating the impact of this accounting standard update on its Consolidated Financial Statements.


3.
Acquisitions and Divestitures
The Company completed 12 acquisitions during the nine months ended April 30, 2016. A summary of the allocation of the total purchase consideration is presented as follows (in millions):
 
Purchase Consideration
 
Net Tangible Assets Acquired (Liabilities Assumed)
 
Purchased Intangible Assets
 
Goodwill
MaintenanceNet
$
105

 
$
(21
)
 
$
65

 
$
61

OpenDNS
545

 
(9
)
 
61

 
493

Lancope
410

 
(34
)
 
121

 
323

Acano
528

 
(27
)
 
103

 
452

Leaba
219

 
(18
)
 
96

 
141

Jasper
1,234

 
5

 
361

 
868

CliQr
225

 
(3
)
 
69

 
159

Others (five in total)
112

 
(17
)
 
64

 
65

Total
$
3,378

 
$
(124
)
 
$
940

 
$
2,562

On August 6, 2015, the Company completed its acquisition of privately held MaintenanceNet, Inc. ("MaintenanceNet"), a provider of a cloud-based software platform that uses data analytics and automation to manage renewals of recurring customer contracts. This acquisition is a component of the Company's strategy for its Services organization to simplify and digitize its business processes.
On August 26, 2015, the Company completed its acquisition of privately held OpenDNS, Inc. ("OpenDNS"), a provider of advanced threat protection for endpoint devices. With the OpenDNS acquisition, the Company aims to strengthen its security offerings by adding broad visibility and threat intelligence delivered through a software-as-a-service platform. Revenue from the OpenDNS acquisition has been included in the Company's Security product category.
On December 21, 2015, the Company completed its acquisition of privately held Lancope, Inc. ("Lancope"), a provider of network behavior analytics, threat visibility, and security intelligence. With the Lancope acquisition, the Company aims to advance its "security everywhere" strategy with an additional capability of network behavior analytics that extend protection further into the network. Revenue from the Lancope acquisition has been included in the Company's Security product category.

9

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

On January 29, 2016, the Company completed its acquisition of privately held, London-based Acano (UK) Limited ("Acano"), a collaboration infrastructure and conferencing software provider. With the Acano acquisition, the Company aims to enhance its collaboration strategy to deliver video across both cloud and hybrid environments. Revenue from the Acano acquisition has been included in the Company's Collaboration product category.
On March 3, 2016, the Company completed its acquisition of privately held Leaba Semiconductor, Ltd. ("Leaba"), an Israeli-based fabless semiconductor provider whose semiconductor expertise is expected to be leveraged to accelerate the Company's next-generation product portfolio. This acquisition is a component of the Company's strategy to enhance its product offerings in the networking chipset market.
On March 18, 2016, the Company completed its acquisition of privately held Jasper Technologies, Inc. ("Jasper"), a provider of a cloud-based Internet of Things (IoT) software-as-a-service platform to help enterprises and service providers launch, manage, and monetize IoT services on a global scale. With the Jasper acquisition, the Company aims to offer an IoT solution that is interoperable across devices and works with IoT service providers, application developers, and an ecosystem of partners. Revenue from the Jasper acquisition has been included in the Company's Other product category.
On April 15, 2016, the Company completed its acquisition of privately held CliQr Technologies, Inc. ("CliQr"), an application-defined cloud orchestration platform provider. With the CliQr acquisition, the Company aims to help its customers simplify and accelerate their private, public, and hybrid cloud deployments.
The total purchase consideration related to the Company’s acquisitions completed during the nine months ended April 30, 2016 consisted of cash consideration and the assumption of vested share-based awards. The total cash and cash equivalents acquired from these business combinations was approximately $44 million. Total transaction costs related to the Company’s acquisition activities were $29 million and $5 million for the nine months ended April 30, 2016 and April 25, 2015, respectively. These transaction costs were expensed as incurred in general and administrative expenses ("G&A") in the Consolidated Statements of Operations.
The Company’s purchase price allocation for acquisitions completed during recent periods is preliminary and subject to revision as additional information about fair value of assets and liabilities becomes available. Additional information that 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.
The goodwill generated from the Company’s acquisitions completed during the nine months ended April 30, 2016 is primarily related to expected synergies. The goodwill is generally not deductible for income tax purposes.
The Consolidated Financial Statements include the operating results of each acquisition from the date of acquisition. Pro forma results of operations for the acquisitions completed during the nine months ended April 30, 2016 have not been presented because the effects of the acquisitions, individually and in the aggregate, were not material to the Company’s financial results.
Divestiture of SP Video CPE Business On November 20, 2015, the Company completed the sale of the assets comprising the customer premises equipment portion of its Service Provider Video connected devices business ("SP Video CPE Business") to Technicolor SA. As a result of the transaction, the Company received aggregate consideration of $542 million consisting of $372 million in cash and $170 million in Technicolor stock (as of the divestiture date) and the transaction resulted in a gain of $285 million, net of certain transaction costs incurred to date.

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 nine months ended April 30, 2016 (in millions):
 
Balance at
 
 
 
 
 
 
 
Balance at
 
July 25, 2015
 
Acquisitions
 
Divestiture
 
Other
 
April 30, 2016
Americas
$
15,212

 
$
1,607

 
$
(126
)
 
$
(80
)
 
$
16,613

EMEA
5,791

 
554

 
(12
)
 
(31
)
 
6,302

APJC
3,466

 
401

 
(3
)
 
(17
)
 
3,847

Total
$
24,469

 
$
2,562

 
$
(141
)
 
$
(128
)
 
$
26,762

“Other” in the table above primarily consists of foreign currency translation, as well as immaterial purchase accounting adjustments.

(b)
Purchased Intangible Assets
The following table presents details of the Company’s intangible assets acquired through acquisitions completed during the nine months ended April 30, 2016 (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
MaintenanceNet
5.0
 
$
50

 
5.0
 
$
2

 
2.0
 
$
2

 
$
11

 
$
65

OpenDNS
5.0
 
43

 
7.0
 
15

 
1.0
 
2

 
1

 
61

Lancope
5.0
 
79

 
6.0
 
29

 
3.0
 
3

 
10

 
121

Acano
5.0
 
9

 
5.0
 
12

 
0.0
 

 
82

 
103

Leaba
0.0
 

 
0.0
 

 
0.0
 

 
96

 
96

Jasper
6.0
 
240

 
7.0
 
75

 
2.0
 
23

 
23

 
361

CliQr
6.0
 
65

 
6.0
 
3

 
2.0
 
1

 

 
69

Others (five in total)
4.1
 
58

 
6.3
 
6

 
0.0
 

 

 
64

Total
 
 
$
544

 
 
 
$
142

 
 
 
$
31

 
$
223

 
$
940

The following tables present details of the Company’s purchased intangible assets (in millions): 
April 30, 2016
 
Gross
 
Accumulated Amortization
 
Net
Purchased intangible assets with finite lives:
 
 
 
 
 
 
Technology
 
$
3,103

 
$
(1,297
)
 
$
1,806

Customer relationships
 
1,821

 
(1,156
)
 
665

Other
 
85

 
(36
)
 
49

Total purchased intangible assets with finite lives
 
5,009

 
(2,489
)
 
2,520

In-process research and development, with indefinite lives
 
224

 

 
224

Total
 
$
5,233

 
$
(2,489
)
 
$
2,744

 

11

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

July 25, 2015
 
Gross
 
Accumulated Amortization
 
Net
Purchased intangible assets with finite lives:
 
 
 
 
 
 
Technology
 
$
3,418

 
$
(1,818
)
 
$
1,600

Customer relationships
 
1,699

 
(971
)
 
728

Other
 
55

 
(24
)
 
31

Total purchased intangible assets with finite lives
 
5,172

 
(2,813
)
 
2,359

In-process research and development, with indefinite lives
 
17

 

 
17

Total
 
$
5,189

 
$
(2,813
)
 
$
2,376

Purchased intangible assets include intangible assets acquired through acquisitions as well as through direct purchases or licenses. In fiscal 2015, the Company, along with a number of other companies, entered into an agreement to obtain a license to the patents owned by the Rockstar Consortium, and the Company paid approximately $300 million, of which $188 million was expensed to product cost of sales in the first quarter of fiscal 2015 related to the settlement of patent infringement claims, and the remainder was capitalized as an intangible asset to be amortized over its estimated useful life.
Impairment charges related to purchased intangible assets for the three months ended April 30, 2016 and April 25, 2015 were $7 million and $1 million, respectively. Impairment charges related to purchased intangible assets for the nine months ended April 30, 2016 and April 25, 2015 were $44 million and $57 million, respectively.
The following table presents the amortization of purchased intangible assets (in millions):
 
Three Months Ended
 
Nine Months Ended
 
April 30, 2016
 
April 25, 2015
 
April 30, 2016
 
April 25, 2015
Amortization of purchased intangible assets:
 
 
 
 
 
 
 
Cost of sales
$
134

 
$
187

 
$
419

 
$
618

Operating expenses
81

 
70

 
221

 
213

Total
$
215

 
$
257

 
$
640

 
$
831

The estimated future amortization expense of purchased intangible assets with finite lives as of April 30, 2016 is as follows (in millions):
Fiscal Year
Amount
2016 (remaining three months)
$
211

2017
742

2018
595

2019
502

2020
276

Thereafter
194

Total
$
2,520



12

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

5.
Restructuring and Other Charges
Fiscal 2015 Plan The Company announced a restructuring action in August 2014 (the "Fiscal 2015 Plan"), in order to realign its workforce towards key growth areas of its business such as data center, software, security, and cloud. The Company's aggregate pre-tax estimated charges pursuant to the restructuring plan are expected to be approximately $750 million, consisting of severance and other one-time termination benefits and other associated costs, and the Company has incurred cumulative charges of approximately $743 million in connection with this plan, which is substantially complete. The Company incurred charges of $18 million and $24 million for the three months ended April 30, 2016 and April 25, 2015, respectively, and $254 million, net of a $2 million credit to cost of sales, and $411 million for the nine months ended April 30, 2016 and April 25, 2015, respectively.
Fiscal 2014 Plan In connection with a restructuring action announced in August 2013 (the "Fiscal 2014 Plan"), the Company incurred cumulative charges of approximately $417 million, of which a $1 million credit was recognized during the three and nine months ended April 30, 2016. No charges were incurred in the corresponding periods of fiscal 2015. The Company completed the Fiscal 2014 Plan at the end of fiscal 2014.
The following table summarizes the activities related to the restructuring and other charges as discussed above (in millions):
 
 
FISCAL 2014 PLAN
 
FISCAL 2015 PLAN
 
 
 
 
Employee
Severance
 
Other
 
Employee
Severance
 
Other
 
Total
Liability as of July 25, 2015
 
$
11

 
$
14

 
$
49

 
$
15

 
$
89

Charges
 

 
(1
)
 
224

 
32

 
255

Cash payments
 
(11
)
 
(3
)
 
(227
)
 
(10
)
 
(251
)
Non-cash items
 

 

 

 
(21
)
 
(21
)
Liability as of April 30, 2016
 
$

 
$
10

 
$
46

 
$
16

 
$
72



13

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):
 
 
April 30,
2016
 
July 25,
2015
Inventories:
 
 
 
 
Raw materials
 
$
108

 
$
114

Work in process
 

 
2

Finished goods:
 
 
 

Distributor inventory and deferred cost of sales
 
513

 
610

Manufactured finished goods
 
469

 
593

Total finished goods
 
982

 
1,203

Service-related spares
 
234

 
258

Demonstration systems
 
19

 
50

Total
 
$
1,343

 
$
1,627

Property and equipment, net:
 
 
 
 
Gross property and equipment:
 
 
 
 
Land, buildings, and building and leasehold improvements
 
$
4,706

 
$
4,495

Computer equipment and related software
 
1,384

 
1,310

Production, engineering, and other equipment
 
5,700

 
5,753

Operating lease assets
 
325

 
372

Furniture and fixtures
 
527

 
497

Total gross property and equipment
 
12,642

 
12,427

Less: accumulated depreciation and amortization
 
(9,113
)
 
(9,095
)
Total
 
$
3,529

 
$
3,332

 Other assets:
 
 
 
 
Deferred tax assets
 
$
1,345

 
$
1,648

Investments in privately held companies
 
976

 
897

Other
 
827

 
618

Total
 
$
3,148

 
$
3,163

Deferred revenue:
 
 
 
 
Service
 
$
9,866

 
$
9,757

Product:
 

 
 
Unrecognized revenue on product shipments and other deferred revenue
 
4,987

 
4,766

Cash receipts related to unrecognized revenue from two-tier distributors
 
419

 
660

Total product deferred revenue
 
5,406

 
5,426

Total
 
$
15,272

 
$
15,183

Reported as:
 

 
 
Current
 
$
9,662

 
$
9,824

Noncurrent
 
5,610

 
5,359

Total
 
$
15,272

 
$
15,183




14

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

7.
Financing Receivables and Operating Leases
(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):
April 30, 2016
Lease
Receivables
 
Loan
Receivables
 
Financed Service
Contracts and Other
 
Total
Gross
$
3,245

 
$
2,223

 
$
3,504

 
$
8,972

Residual value
205

 

 

 
205

Unearned income
(178
)
 

 

 
(178
)
Allowance for credit loss
(250
)
 
(93
)
 
(40
)
 
(383
)
Total, net
$
3,022

 
$
2,130

 
$
3,464

 
$
8,616

Reported as:
 
 
 
 
 
 
 
Current
$
1,495

 
$
1,052

 
$
2,169

 
$
4,716

Noncurrent
1,527

 
1,078

 
1,295

 
3,900

Total, net
$
3,022

 
$
2,130

 
$
3,464

 
$
8,616

July 25, 2015
Lease
Receivables
 
Loan
Receivables
 
Financed Service
Contracts and Other
 
Total
Gross
$
3,361

 
$
1,763

 
$
3,573

 
$
8,697

Residual value
224

 

 

 
224

Unearned income
(190
)
 

 

 
(190
)
Allowance for credit loss
(259
)
 
(87
)
 
(36
)
 
(382
)
Total, net
$
3,136

 
$
1,676

 
$
3,537

 
$
8,349

Reported as:
 
 
 
 
 
 
 
Current
$
1,468

 
$
856

 
$
2,167

 
$
4,491

Noncurrent
1,668

 
820

 
1,370

 
3,858

Total, net
$
3,136

 
$
1,676

 
$
3,537

 
$
8,349

As of April 30, 2016 and July 25, 2015, the deferred service revenue related to "Financed Service Contracts and Other" was $1,822 million and $1,853 million, respectively.
Future minimum lease payments to the Company on lease receivables as of April 30, 2016 are summarized as follows (in millions):
Fiscal Year
Amount
2016 (remaining three months)
$
408

2017
1,430

2018
833

2019
402

2020
152

Thereafter
20

Total
$
3,245

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

15

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

(b)
Credit Quality of Financing Receivables
Gross receivables, excluding residual value, less unearned income categorized by the Company’s internal credit risk rating as of April 30, 2016 and July 25, 2015 are summarized as follows (in millions):
 
INTERNAL CREDIT RISK RATING
April 30, 2016
1 to 4
 
5 to 6
 
7 and Higher
 
Total
Lease receivables
$
1,677

 
$
1,276

 
$
114

 
$
3,067

Loan receivables
991

 
1,079

 
153

 
2,223

Financed service contracts and other
2,216

 
1,242

 
46

 
3,504

Total
$
4,884

 
$
3,597

 
$
313

 
$
8,794

 
INTERNAL CREDIT RISK RATING
July 25, 2015
1 to 4
 
5 to 6
 
7 and Higher
 
Total
Lease receivables
$
1,688

 
$
1,342

 
$
141

 
$
3,171

Loan receivables
788

 
823

 
152

 
1,763

Financed service contracts and other
2,133

 
1,389

 
51

 
3,573

Total
$
4,609

 
$
3,554

 
$
344

 
$
8,507

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, which consist of the following: 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.
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 April 30, 2016 and July 25, 2015 were $2,225 million and $2,253 million, respectively, and they were associated with total financing receivables before allowance for credit loss of $8,999 million and $8,731 million as of their respective period ends.
The following tables present the aging analysis of gross receivables, excluding residual value and less unearned income as of April 30, 2016 and July 25, 2015 (in millions):
 
DAYS PAST DUE
(INCLUDES BILLED AND UNBILLED)
 
 
 
 
 
 
 
 
April 30, 2016
31-60
 
61-90 
 
91+
 
Total
Past Due
 
Current
 
Total
 
Nonaccrual
Financing
Receivables
 
Impaired
Financing
Receivables
Lease receivables
$
41

 
$
44

 
$
181

 
$
266

 
$
2,801

 
$
3,067

 
$
67

 
$
65

Loan receivables
51

 
11

 
78

 
140

 
2,083

 
2,223

 
47

 
47

Financed service contracts and other
79

 
115

 
237

 
431

 
3,073

 
3,504

 
36

 
16

Total
$
171

 
$
170

 
$
496

 
$
837

 
$
7,957

 
$
8,794

 
$
150

 
$
128

 
DAYS PAST DUE
(INCLUDES BILLED AND UNBILLED)
 
 
 
 
 
 
 
 
July 25, 2015
31-60
 
61-90 
 
91+
 
Total
Past Due
 
Current
 
Total
 
Nonaccrual
Financing
Receivables
 
Impaired
Financing
Receivables
Lease receivables
$
90

 
$
27

 
$
185

 
$
302

 
$
2,869

 
$
3,171

 
$
73

 
$
73

Loan receivables
21

 
3

 
25

 
49

 
1,714

 
1,763

 
32

 
32

Financed service contracts and other
396

 
152

 
414

 
962

 
2,611

 
3,573

 
29

 
9

Total
$
507

 
$
182

 
$
624

 
$
1,313

 
$
7,194

 
$
8,507

 
$
134

 
$
114

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

16

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

of either unbilled or current financing receivables included in the category of 91 days plus past due for financing receivables were $298 million and $496 million as of April 30, 2016 and July 25, 2015, respectively.
As of April 30, 2016, the Company had financing receivables of $165 million, net of unbilled or current receivables from the same contract, that were in the category of 91 days plus past due but remained on accrual status as they are well-secured and in the process of collection. Such balance was $70 million as of July 25, 2015.
(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
Three months ended April 30, 2016
Lease
Receivables
 
Loan
Receivables
 
Financed Service
Contracts and Other
 
Total
Allowance for credit loss as of January 23, 2016
$
248

 
$
80

 
$
37

 
$
365

Provisions
7

 
8

 
2

 
17

Recoveries (write-offs), net
(6
)
 

 

 
(6
)
Foreign exchange and other
1

 
5

 
1

 
7

Allowance for credit loss as of April 30, 2016
$
250

 
$
93

 
$
40

 
$
383

 
CREDIT LOSS ALLOWANCES
Nine months ended April 30, 2016
Lease
Receivables
 
Loan
Receivables
 
Financed Service
Contracts and Other
 
Total
Allowance for credit loss as of July 25, 2015
$
259

 
$
87

 
$
36

 
$
382

Provisions
3

 
2

 
7

 
12

Recoveries (write-offs), net
(10
)
 

 
(4
)
 
(14
)
Foreign exchange and other
(2
)
 
4

 
1

 
3

Allowance for credit loss as of April 30, 2016
$
250

 
$
93

 
$
40

 
$
383

 
CREDIT LOSS ALLOWANCES
Three months ended April 25, 2015
Lease
Receivables
 
Loan
Receivables
 
Financed Service
Contracts and Other
 
Total
Allowance for credit loss as of January 24, 2015
$
250

 
$
85

 
$
40

 
$
375

Provisions
(4
)
 
(5
)
 
(2
)
 
(11
)
Recoveries (write-offs), net
(1
)
 

 

 
(1
)
Foreign exchange and other
(3
)
 

 
(1
)
 
(4
)
Allowance for credit loss as of April 25, 2015
$
242

 
$
80

 
$
37

 
$
359

 
CREDIT LOSS ALLOWANCES
Nine months ended April 25, 2015
Lease
Receivables
 
Loan
Receivables
 
Financed Service
Contracts and Other
 
Total
Allowance for credit loss as of July 26, 2014
$
233

 
$
98

 
$
18

 
$
349

Provisions
25

 
(15
)
 
21

 
31

Recoveries (write-offs), net
(6
)
 
1

 

 
(5
)
Foreign exchange and other
(10
)
 
(4
)
 
(2
)
 
(16
)
Allowance for credit loss as of April 25, 2015
$
242

 
$
80

 
$
37

 
$
359

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

17

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

any accrued interest, will be assessed and fully reserved at the customer level. The Company’s internal credit risk ratings are categorized as 1 through 10, with the lowest credit risk rating representing the highest quality financing receivables.
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. These balances, as of April 30, 2016 and July 25, 2015, are presented under “(b) Credit Quality of Financing Receivables” above.
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)
Operating Leases
The Company provides financing of certain equipment through operating leases, and the amounts are included in property and equipment in the Consolidated Balance Sheets. Amounts relating to equipment on operating lease assets and the associated accumulated depreciation are summarized as follows (in millions):
 
April 30, 2016
 
July 25, 2015
Operating lease assets
$
325

 
$
372

Accumulated depreciation
(184
)
 
(205
)
Operating lease assets, net
$
141

 
$
167

Minimum future rentals on noncancelable operating leases as of April 30, 2016 are summarized as follows (in millions):
Fiscal Year
Amount
2016 (remaining three months)
$
54

2017
189

2018
129

2019
39

2020
8

Thereafter
5

Total
$
424


8.
Investments
(a)
Summary of Available-for-Sale Investments
The following tables summarize the Company’s available-for-sale investments (in millions):
April 30, 2016
Amortized
Cost
 
Gross
Unrealized
Gains
 
Gross
Unrealized
Losses
 
Fair
Value
Fixed income securities:
 
 
 
 
 
 
 
U.S. government securities
$
24,003

 
$
44

 
$
(3
)
 
$
24,044

U.S. government agency securities
2,883

 
5

 

 
2,888

Non-U.S. government and agency securities
1,063

 
2

 

 
1,065

Corporate debt securities
23,193

 
160

 
(37
)
 
23,316

U.S. agency mortgage-backed securities
1,746

 
16

 

 
1,762

Total fixed income securities
52,888

 
227

 
(40
)
 
53,075

Publicly traded equity securities
1,354

 
218