10-Q 1 a10qq217.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 January 28, 2017

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 
_____________________________________
image-logoa10.jpg
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 February 16, 2017: 5,007,856,247
____________________________________ 


1


Cisco Systems, Inc.
Form 10-Q for the Quarter Ended January 28, 2017
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)
 
January 28, 2017
 
July 30, 2016
ASSETS
 
 
 
Current assets:
 
 
 
Cash and cash equivalents
$
10,898

 
$
7,631

Investments
60,947

 
58,125

Accounts receivable, net of allowance for doubtful accounts of $225 at January 28, 2017 and $249 at July 30, 2016
4,458

 
5,847

Inventories
1,264

 
1,217

Financing receivables, net
4,496

 
4,272

Other current assets
1,329

 
1,627

Total current assets
83,392

 
78,719

Property and equipment, net
3,422

 
3,506

Financing receivables, net
4,664

 
4,158

Goodwill
26,822

 
26,625

Purchased intangible assets, net
2,117

 
2,501

Deferred tax assets
4,293

 
4,299

Other assets
1,538

 
1,844

TOTAL ASSETS
$
126,248

 
$
121,652

LIABILITIES AND EQUITY

 

Current liabilities:

 

Short-term debt
$
4,451

 
$
4,160

Accounts payable
957

 
1,056

Income taxes payable
57

 
517

Accrued compensation
2,522

 
2,951

Deferred revenue
10,243

 
10,155

Other current liabilities
4,478

 
6,072

Total current liabilities
22,708

 
24,911

Long-term debt
30,471

 
24,483

Income taxes payable
1,025

 
925

Deferred revenue
6,843

 
6,317

Other long-term liabilities
1,383

 
1,431

Total liabilities
62,430

 
58,067

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; 5,007 and 5,029 shares issued and outstanding at January 28, 2017 and July 30, 2016, respectively
44,585

 
44,516

Retained earnings
20,027

 
19,396

Accumulated other comprehensive income (loss)
(801
)
 
(326
)
Total Cisco shareholders’ equity
63,811

 
63,586

Noncontrolling interests
7

 
(1
)
Total equity
63,818

 
63,585

TOTAL LIABILITIES AND EQUITY
$
126,248

 
$
121,652

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 28, 2017
 
January 23, 2016
 
January 28, 2017
 
January 23, 2016
REVENUE:
 
 
 
 
 
 
 
Product
$
8,491

 
$
8,983

 
$
17,793

 
$
18,827

Service
3,089

 
2,944

 
6,139

 
5,782

Total revenue
11,580


11,927

 
23,932

 
24,609

COST OF SALES:



 
 
 
 
Product
3,305

 
3,480

 
6,708

 
7,333

Service
999

 
1,015

 
2,064

 
2,012

Total cost of sales
4,304


4,495

 
8,772

 
9,345

GROSS MARGIN
7,276

 
7,432

 
15,160

 
15,264

OPERATING EXPENSES:



 
 
 
 
Research and development
1,508

 
1,509

 
3,053

 
3,069

Sales and marketing
2,222

 
2,286

 
4,640

 
4,729

General and administrative
456

 
176

 
1,011

 
715

Amortization of purchased intangible assets
64

 
71

 
142

 
140

Restructuring and other charges
133

 
96

 
544

 
238

Total operating expenses
4,383


4,138

 
9,390

 
8,891

OPERATING INCOME
2,893


3,294

 
5,770

 
6,373

Interest income
329

 
237

 
624

 
462

Interest expense
(222
)
 
(162
)
 
(420
)
 
(321
)
Other income (loss), net
(37
)
 
(63
)
 
(58
)
 
(71
)
Interest and other income (loss), net
70


12

 
146

 
70

INCOME BEFORE PROVISION FOR INCOME TAXES
2,963


3,306

 
5,916

 
6,443

Provision for income taxes
615

 
159

 
1,246

 
866

NET INCOME
$
2,348


$
3,147

 
$
4,670

 
$
5,577




 


 
 
 
 
Net income per share:


 


 
 
 
 
Basic
$
0.47


$
0.62

 
$
0.93

 
$
1.10

Diluted
$
0.47


$
0.62

 
$
0.92

 
$
1.09

Shares used in per-share calculation:





 
 
 
 
Basic
5,015

 
5,070

 
5,021

 
5,075

Diluted
5,040

 
5,097

 
5,054

 
5,106







 
 
 
 
Cash dividends declared per common share
$
0.26

 
$
0.21

 
$
0.52

 
$
0.42

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 28, 2017
 
January 23, 2016
 
January 28, 2017
 
January 23, 2016
Net income
$
2,348

 
$
3,147

 
$
4,670

 
$
5,577

Available-for-sale investments:
 
 
 
 
 
 
 
Change in net unrealized gains, net of tax benefit (expense) of $73 and $154 for the three and six months ended January 28, 2017, respectively, and $149 and $205 for the corresponding periods of fiscal 2016, respectively
(276
)
 
(212
)
 
(397
)
 
(312
)
Net (gains) losses reclassified into earnings, net of tax (benefit) expense of $(11) and $(6) for the three and six months ended January 28, 2017, respectively, and $(7) for each of the three and six months ended January 23, 2016
19

 
12

 
9

 
13


(257
)
 
(200
)
 
(388
)
 
(299
)
Cash flow hedging instruments:
 
 
 
 
 
 
 
Change in unrealized gains and losses, net of tax benefit (expense) of $1 and $4 for the three and six months ended January 28, 2017, respectively, and $1 and $4 for the corresponding periods of fiscal 2016, respectively
(1
)
 
(19
)
 
(44
)
 
(20
)
Net (gains) losses reclassified into earnings, net of tax (benefit) expense of $(2) and $(3) for the three and six months ended January 28, 2017, respectively, and $(1) and $(2) for the corresponding periods of fiscal 2016, respectively
25

 
4

 
36

 
6


24

 
(15
)
 
(8
)
 
(14
)
Net change in cumulative translation adjustment and actuarial gains and losses net of tax benefit (expense) of $0 and $(1) for the three and six months ended January 28, 2017, respectively, and $5 and $(34) for the corresponding periods of fiscal 2016, respectively
(44
)
 
(341
)
 
(71
)
 
(557
)
Other comprehensive income (loss)
(277
)
 
(556
)
 
(467
)
 
(870
)
Comprehensive income
2,071

 
2,591

 
4,203

 
4,707

Comprehensive (income) loss attributable to noncontrolling interests

 
1

 
(8
)
 
2

Comprehensive income attributable to Cisco Systems, Inc.
$
2,071

 
$
2,592

 
$
4,195

 
$
4,709

See Notes to Consolidated Financial Statements.


5


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

January 28, 2017
 
January 23, 2016
Cash flows from operating activities:
 
 
 
Net income
$
4,670

 
$
5,577

Adjustments to reconcile net income to net cash provided by operating activities:
 
 
 
Depreciation, amortization, and other
1,148

 
1,005

Share-based compensation expense
724

 
706

Provision for receivables
4

 
31

Deferred income taxes
(26
)
 
274

Excess tax benefits from share-based compensation
(101
)
 
(82
)
(Gains) losses on divestitures, investments and other, net
79

 
(260
)
Change in operating assets and liabilities, net of effects of acquisitions and divestitures:

 

Accounts receivable
1,396

 
988

Inventories
(51
)
 
153

Financing receivables
(764
)
 
(171
)
Other assets
155

 
(181
)
Accounts payable
(98
)
 
(147
)
Income taxes, net
(257
)
 
(764
)
Accrued compensation
(417
)
 
(348
)
Deferred revenue
611

 
69

Other liabilities
(571
)
 
(162
)
Net cash provided by operating activities
6,502

 
6,688

Cash flows from investing activities:
 
 
 
Purchases of investments
(27,847
)
 
(19,089
)
Proceeds from sales of investments
18,420

 
10,247

Proceeds from maturities of investments
5,245

 
7,955

Acquisition of businesses, net of cash and cash equivalents acquired
(251
)
 
(1,089
)
Proceeds from business divestiture

 
372

Purchases of investments in privately held companies
(142
)
 
(166
)
Return of investments in privately held companies
108

 
35

Acquisition of property and equipment
(526
)
 
(576
)
Proceeds from sales of property and equipment
5

 
11

Other
10

 
(87
)
Net cash used in investing activities
(4,978
)
 
(2,387
)
Cash flows from financing activities:
 
 
 
Issuances of common stock
386

 
701

Repurchases of common stockrepurchase program
(1,991
)
 
(2,344
)
Shares repurchased for tax withholdings on vesting of restricted stock units
(432
)
 
(412
)
Short-term borrowings, original maturities less than 90 days, net
300

 
(4
)
Issuances of debt
6,232

 

Repayments of debt
(1
)
 
(862
)
Excess tax benefits from share-based compensation
101

 
82

Dividends paid
(2,612
)
 
(2,133
)
Other
(240
)
 
108

Net cash provided by (used in) financing activities
1,743

 
(4,864
)
Net increase (decrease) in cash and cash equivalents
3,267

 
(563
)
Cash and cash equivalents, beginning of period
7,631

 
6,877

Cash and cash equivalents, end of period
$
10,898

 
$
6,314

 
 
 
 
Supplemental cash flow information:
 
 
 
Cash paid for interest
$
419

 
$
426

Cash paid for income taxes, net
$
1,529

 
$
1,355

See Notes to Consolidated Financial Statements.

6


CISCO SYSTEMS, INC.
CONSOLIDATED STATEMENTS OF EQUITY
(in millions, except per-share amounts)
(Unaudited)
 
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 30, 2016
5,029

 
$
44,516

 
$
19,396

 
$
(326
)
 
$
63,586

 
$
(1
)
 
$
63,585

Net income
 
 
 
 
4,670

 
 
 
4,670

 
 
 
4,670

Other comprehensive income (loss)
 
 
 
 
 
 
(475
)
 
(475
)
 
8

 
(467
)
Issuance of common stock
57

 
386

 
 
 
 
 
386

 
 
 
386

Repurchase of common stock
(65
)
 
(575
)
 
(1,427
)
 
 
 
(2,002
)
 
 
 
(2,002
)
Shares repurchased for tax withholdings on vesting of restricted stock units
(14
)
 
(432
)
 
 
 
 
 
(432
)
 
 
 
(432
)
Cash dividends declared ($0.52 per common share)
 
 
 
 
(2,612
)
 
 
 
(2,612
)
 
 
 
(2,612
)
Tax effects from employee stock incentive plans
 
 
(54
)
 
 
 
 
 
(54
)
 
 
 
(54
)
Share-based compensation
 
 
738

 
 
 
 
 
738

 
 
 
738

Purchase acquisitions and other
 
 
6

 
 
 
 
 
6

 
 
 
6

BALANCE AT JANUARY 28, 2017
5,007

 
$
44,585

 
$
20,027

 
$
(801
)
 
$
63,811

 
$
7

 
$
63,818


 
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
 
 
 
 
5,577

 
 
 
5,577

 
 
 
5,577

Other comprehensive income (loss)
 
 
 
 
 
 
(868
)
 
(868
)
 
(2
)
 
(870
)
Issuance of common stock
76

 
701

 
 
 
 
 
701

 
 
 
701

Repurchase of common stock
(93
)
 
(801
)
 
(1,668
)
 
 
 
(2,469
)
 
 
 
(2,469
)
Shares repurchased for tax withholdings on vesting of restricted stock units
(16
)
 
(412
)
 
 
 
 
 
(412
)
 
 
 
(412
)
Cash dividends declared ($0.42 per common share)
 
 
 
 
(2,133
)
 
 
 
(2,133
)
 
 
 
(2,133
)
Tax effects from employee stock incentive plans
 
 
28

 
 
 
 
 
28

 
 
 
28

Share-based compensation
 
 
706

 
 
 
 
 
706

 
 
 
706

Purchase acquisitions and other
 
 
43

 
 
 
 
 
43

 
 
 
43

BALANCE AT JANUARY 23, 2016
5,052

 
$
43,857

 
$
17,821

 
$
(807
)
 
$
60,871

 
$
7

 
$
60,878


Supplemental Information
In September 2001, the Company’s Board of Directors authorized a stock repurchase program. As of January 28, 2017, 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
4,656

 
$
24,470

 
$
74,129

 
$
98,599

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 2017 is a 52-week fiscal year, and fiscal 2016 was a 53-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 January 28, 2017 and for the three and six months ended January 28, 2017 and January 23, 2016 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 30, 2016 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 30, 2016.
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 January 28, 2017; the results of operations and the statements of comprehensive income for the three and six months ended January 28, 2017 and January 23, 2016; and the statements of cash flows and equity for the six months ended January 28, 2017 and January 23, 2016, as applicable, have been made. The results of operations for the three and six months ended January 28, 2017 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
(a) New Accounting Updates Recently Adopted
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 became effective for the Company beginning in the first quarter of fiscal 2017. The application of this accounting standard update did not have any impact on the Company's Consolidated Balance Sheet or Statement of Operations upon adoption, but the Company has provided additional disclosures in Note 8 pursuant to this accounting standard update.
(b) 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, along with amendments issued in 2015 and 2016, 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 in retained earnings as of the date of adoption ("modified retrospective basis"). Early adoption is permitted, but no earlier than fiscal 2018. The Company expects to adopt this accounting standard update on a modified retrospective basis in the first quarter of fiscal 2019, and it is currently evaluating the impact of this accounting standard update on its Consolidated Financial Statements.


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.
Credit Losses of Financial Instruments In June 2016, the FASB issued an accounting standard update that requires measurement and recognition of expected credit losses for financial assets held based on historical experience, current conditions, and reasonable and supportable forecasts that affect the collectibility of the reported amount. The accounting standard update will be effective for the Company beginning in the first quarter of fiscal 2021 on a modified retrospective basis, and early adoption in fiscal 2020 is permitted. The Company is currently evaluating the impact of this accounting standard update on its Consolidated Financial Statements.
Classification of Cash Flow Elements In August 2016, the FASB issued an accounting standard update related to the classification of certain cash receipts and cash payments on the statement of cash flows. The accounting standard update will be effective for the Company beginning in the first quarter of fiscal 2019 on a retrospective basis, and early adoption is permitted. The Company is currently evaluating the impact of this accounting standard update on its Consolidated Statements of Cash Flows.
Income Taxes on Intra-Entity Transfers of Assets In October 2016, the FASB issued an accounting standard update that requires recognition of the income tax consequences of intra-entity transfers of assets (other than inventory) at the transaction date. The accounting standard update will be effective for the Company beginning in the first quarter of fiscal 2019 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.
Restricted Cash in Statement of Cash Flow In November 2016, the FASB issued an accounting standard update that provides guidance on the classification and presentation of changes in restricted cash and cash equivalents in the statement of cash flows. The accounting standard update will be effective for the Company beginning in the first quarter of fiscal 2019 using a retrospective transition method to each period presented, and early adoption is permitted. The Company does not expect that this accounting standard update will have a material impact on its Consolidated Statements of Cash Flows.
Definition of a Business In January 2017, the FASB issued an accounting standard update that clarifies the definition of a business to help companies evaluate whether acquisition or disposal transactions should be accounted for as asset groups or as businesses. The accounting standard update will be effective for the Company beginning in the first quarter of fiscal 2019 on a prospective basis. The impact of this accounting standard update will be facts and circumstances dependent, but the Company expects that in some situations transactions that were previously accounted for as business combinations or disposal transactions will be accounted for as asset purchases or asset sales under the accounting standard update.
Simplifying the Test for Goodwill Impairment In January 2017, the FASB issued an accounting standard update that removes Step 2 of the goodwill impairment test, which requires the assessment of fair value of individual assets and liabilities of a reporting unit to measure goodwill impairments. Goodwill impairment will now be the amount by which a reporting unit's carrying value exceeds its fair value. The accounting standard update will be effective for the Company beginning in the first quarter of fiscal 2021 on a prospective basis, and early adoption is permitted. The Company does not expect that this accounting standard update will impact its Consolidated Financial Statements.


9

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



3.
Acquisitions and Divestitures
The Company completed three acquisitions during the six months ended January 28, 2017. A summary of the allocation of the total purchase consideration is presented as follows (in millions):
 
Purchase Consideration
 
Purchased Intangible Assets
 
Goodwill
CloudLock
$
249

 
$
36

 
$
213

Others (two in total)
9

 
5

 
4

Total
$
258

 
$
41

 
$
217

On August 1, 2016, the Company completed its acquisition of privately held CloudLock Inc. ("CloudLock"), a provider of cloud security that specializes in cloud access security broker technology that provides enterprises with visibility and analytics around user behavior and sensitive data in cloud services. Revenue from the CloudLock acquisition has been included in the Company's Security product category.
The total purchase consideration related to the Company’s acquisitions completed during the six months ended January 28, 2017 consisted of cash consideration and vested share-based awards assumed. The total cash and cash equivalents acquired from these acquisitions was approximately $1 million. Total transaction costs related to the Company’s acquisition activities were $3 million and $14 million for the six months ended January 28, 2017 and January 23, 2016, 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 six months ended January 28, 2017 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 six months ended January 28, 2017 have not been presented because the effects of the acquisitions, individually and in the aggregate, were not material to the Company’s financial results.
Pending Acquisition of AppDynamics On January 24, 2017, the Company announced its intent to acquire privately held AppDynamics, Inc. ("AppDynamics"), an application intelligence software company. AppDynamics's cloud application and business monitoring platform is designed to enable companies to improve application and business performance. Under the terms of the agreement, the Company will pay approximately $3.7 billion in cash and assumed equity awards to acquire AppDynamics. With the AppDynamics acquisition, the Company seeks to provide end-to-end visibility and intelligence from the customers' network through to the application. The acquisition is expected to close in the third quarter of fiscal 2017.

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 28, 2017 (in millions):
 
Balance at
 
 
 
 
 
Balance at
 
July 30, 2016
 
Acquisitions
 
Other
 
January 28, 2017
Americas
$
16,529

 
$
132

 
$
(16
)
 
$
16,645

EMEA
6,269

 
62

 
(3
)
 
6,328

APJC
3,827

 
23

 
(1
)
 
3,849

Total
$
26,625

 
$
217

 
$
(20
)
 
$
26,822

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

10

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


(b)
Purchased Intangible Assets
The following table presents details of the Company’s intangible assets acquired through acquisitions completed during the six months ended January 28, 2017 (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
CloudLock
6.0
 
$
32

 
4.0
 
$
3

 
1.5
 
$
1

 
$

 
$
36

Others (two in total)
3.0
 
5

 
0.0
 

 
0.0
 

 

 
5

Total
 
 
$
37

 
 
 
$
3

 
 
 
$
1

 
$

 
$
41

The following tables present details of the Company’s purchased intangible assets (in millions): 
January 28, 2017
 
Gross
 
Accumulated Amortization
 
Net
Purchased intangible assets with finite lives:
 
 
 
 
 
 
Technology
 
$
2,900

 
$
(1,440
)
 
$
1,460

Customer relationships
 
1,303

 
(846
)
 
457

Other
 
57

 
(25
)
 
32

Total purchased intangible assets with finite lives
 
4,260

 
(2,311
)
 
1,949

In-process research and development, with indefinite lives
 
168

 

 
168

       Total
 
$
4,428

 
$
(2,311
)
 
$
2,117

 
July 30, 2016
 
Gross
 
Accumulated Amortization
 
Net
Purchased intangible assets with finite lives:
 
 
 
 
 
 
Technology
 
$
3,038

 
$
(1,391
)
 
$
1,647

Customer relationships
 
1,793

 
(1,203
)
 
590

Other
 
85

 
(43
)
 
42

Total purchased intangible assets with finite lives
 
4,916

 
(2,637
)
 
2,279

In-process research and development, with indefinite lives
 
222

 

 
222

       Total
 
$
5,138

 
$
(2,637
)
 
$
2,501

Purchased intangible assets include intangible assets acquired through acquisitions as well as through direct purchases or licenses.
Impairment charges related to purchased intangible assets for the three and six months ended January 28, 2017 were zero and $42 million, respectively. Impairment charges were primarily as a result of declines in estimated fair values of certain purchased intangible assets resulting from the reduction or elimination of expected future cash flows associated with certain of the Company’s technology and IPR&D intangible assets. Of these impairment charges, $38 million was recorded to restructuring and other charges in connection with the Company's decision to exit certain product lines, and the corresponding elimination of future associated cash flows. Impairment charges related to purchased intangible assets for the three and six months ended January 23, 2016 were $37 million.

11

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


The following table presents the amortization of purchased intangible assets, including impairment charges (in millions):
 
Three Months Ended
 
Six Months Ended
 
January 28, 2017
 
January 23, 2016
 
January 28, 2017
 
January 23, 2016
Amortization of purchased intangible assets:
 
 
 
 
 
 
 
Cost of sales
$
124

 
$
139

 
$
253

 
$
285

Operating expenses
 
 


 
 
 
 
Amortization of purchased intangible assets
64

 
71

 
142

 
140

Restructuring and other charges

 

 
38

 

Total
$
188

 
$
210

 
$
433

 
$
425

The estimated future amortization expense of purchased intangible assets with finite lives as of January 28, 2017 is as follows (in millions):
Fiscal Year
Amount
2017 (remaining six months)
$
343

2018
591

2019
505

2020
292

2021
148

Thereafter
70

   Total
$
1,949



12

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


5.
Restructuring and Other Charges
In August 2016, the Company announced a restructuring plan (the "Fiscal 2017 Plan") in order to reinvest in its key priority areas such as security, the Internet of Things (IoT), collaboration, next generation data center and cloud. In connection with this plan, the Company expects that up to 5,500 employees will be impacted, representing approximately 7% of its global workforce. The Company's aggregate pretax estimated charges pursuant to the restructuring plan are expected to be approximately $700 million, consisting primarily of severance and other one-time termination benefits, and other associated costs. These charges are primarily cash-based, and the Company expects the Fiscal 2017 Plan to be substantially completed by the end of fiscal 2017. The Company incurred charges of $133 million, and $95 million, net of a $1 million credit to cost of sales for the three months ended January 28, 2017 and January 23, 2016, respectively, and $544 million and $236 million, net of a $2 million credit to cost of sales for the six months ended January 28, 2017 and January 23, 2016, respectively.
In connection with a restructuring action announced in August 2014 (the “Fiscal 2015 Plan”), the Company incurred cumulative charges of approximately $756 million. The Company completed the Fiscal 2015 Plan in fiscal 2016.
The following tables summarize the activities related to the restructuring and other charges (in millions):
 
 
FISCAL 2015 AND PRIOR PLANS
 
FISCAL 2017 PLAN
 
 
 
 
Employee
Severance
 
Other
 
Employee
Severance
 
Other
 
Total
Liability as of July 30, 2016
 
$
21

 
$
24

 
$

 
$

 
$
45

Charges
 

 

 
452

 
92

 
544

Cash payments
 
(13
)
 
(4
)
 
(368
)
 
(3
)
 
(388
)
Non-cash items
 
(4
)
 
(9
)
 
(2
)
 
(58
)
 
(73
)
Liability as of January 28, 2017
 
$
4

 
$
11

 
$
82

 
$
31

 
$
128

 
 
FISCAL 2015 AND PRIOR PLANS
 
 
 
 
Employee
Severance
 
Other
 
Total
Liability as of July 25, 2015
 
$
60

 
$
29

 
$
89

Charges
 
206

 
32

 
238

Cash payments
 
(187
)
 
(10
)
 
(197
)
Non-cash items
 

 
(21
)
 
(21
)
Liability as of January 23, 2016
 
$
79

 
$
30

 
$
109



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):
 
 
January 28,
2017
 
July 30,
2016
Inventories:
 
 
 
 
Raw materials
 
$
149

 
$
91

Work in process
 
1

 

Finished goods:
 
 
 

Distributor inventory and deferred cost of sales
 
422

 
457

Manufactured finished goods
 
413

 
415

Total finished goods
 
835

 
872

Service-related spares
 
260

 
236

Demonstration systems
 
19

 
18

Total
 
$
1,264

 
$
1,217

Property and equipment, net:
 
 
 
 
Gross property and equipment:
 
 
 
 
Land, buildings, and building and leasehold improvements
 
$
4,800

 
$
4,778

Computer equipment and related software
 
1,301

 
1,288

Production, engineering, and other equipment
 
5,680

 
5,658

Operating lease assets
 
297

 
296

Furniture and fixtures
 
560

 
543

Total gross property and equipment
 
12,638

 
12,563

Less: accumulated depreciation and amortization
 
(9,216
)
 
(9,057
)
Total
 
$
3,422

 
$
3,506

Deferred revenue:
 
 
 
 
Service
 
$
10,525

 
$
10,621

Product:
 

 
 
Deferred revenue related to recurring software and subscription businesses
 
3,997

 
3,308

Deferred revenue related to two-tier distributors
 
401

 
377

Other product deferred revenue
 
2,163

 
2,166

Total product deferred revenue
 
6,561

 
5,851

Total
 
$
17,086

 
$
16,472

Reported as:
 

 
 
Current
 
$
10,243

 
$
10,155

Noncurrent
 
6,843

 
6,317

Total
 
$
17,086

 
$
16,472




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, software, and 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 28, 2017
Lease
Receivables
 
Loan
Receivables
 
Financed Service
Contracts and Other
 
Total
Gross
$
2,967

 
$
2,369

 
$
4,165

 
$
9,501

Residual value
191

 

 

 
191

Unearned income
(154
)
 

 

 
(154
)
Allowance for credit loss
(225
)
 
(106
)
 
(47
)
 
(378
)
Total, net
$
2,779

 
$
2,263

 
$
4,118

 
$
9,160

Reported as:
 
 
 
 
 
 
 
Current
$
1,419

 
$
1,040

 
$
2,037

 
$
4,496

Noncurrent
1,360

 
1,223

 
2,081

 
4,664

Total, net
$
2,779

 
$
2,263

 
$
4,118

 
$
9,160

July 30, 2016
Lease
Receivables
 
Loan
Receivables
 
Financed Service
Contracts and Other
 
Total
Gross
$
3,272

 
$
2,135

 
$
3,370

 
$
8,777

Residual value
202

 

 

 
202

Unearned income
(174
)
 

 

 
(174
)
Allowance for credit loss
(230
)
 
(97
)
 
(48
)
 
(375
)
Total, net
$
3,070

 
$
2,038

 
$
3,322

 
$
8,430

Reported as:
 
 
 
 
 
 
 
Current
$
1,490

 
$
988

 
$
1,794

 
$
4,272

Noncurrent
1,580

 
1,050

 
1,528

 
4,158

Total, net
$
3,070

 
$
2,038

 
$
3,322

 
$
8,430

As of January 28, 2017 and July 30, 2016, the deferred service revenue related to "Financed Service Contracts and Other" was $1,922 million and $1,716 million, respectively.
Future minimum lease payments to the Company on lease receivables as of January 28, 2017 are summarized as follows (in millions):
Fiscal Year
Amount
2017 (remaining six months)
$
768

2018
1,141

2019
656

2020
300

2021
95

Thereafter
7

Total
$
2,967


15

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


Actual cash collections may differ from the contractual maturities due to early customer buyouts, refinancings, or defaults.
(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 January 28, 2017 and July 30, 2016 are summarized as follows (in millions):
 
INTERNAL CREDIT RISK RATING
January 28, 2017
1 to 4
 
5 to 6
 
7 and Higher
 
Total
Lease receivables
$
1,505

 
$
1,209

 
$
99

 
$
2,813

Loan receivables
1,259

 
934

 
176

 
2,369

Financed service contracts and other
2,756

 
1,355

 
54

 
4,165

Total
$
5,520

 
$
3,498

 
$
329

 
$
9,347

 
INTERNAL CREDIT RISK RATING
July 30, 2016
1 to 4
 
5 to 6
 
7 and Higher
 
Total
Lease receivables
$
1,703

 
$
1,294

 
$
101

 
$
3,098

Loan receivables
986

 
967

 
182

 
2,135

Financed service contracts and other
2,077

 
1,271

 
22

 
3,370

Total
$
4,766

 
$
3,532

 
$
305

 
$
8,603

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 January 28, 2017 and July 30, 2016 were $2,327 million and $2,112 million, respectively, and they were associated with total financing receivables before allowances for credit loss of $9,538 million and $8,805 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 January 28, 2017 and July 30, 2016 (in millions):
 
DAYS PAST DUE
(INCLUDES BILLED AND UNBILLED)
 
 
 
 
 
 
 
 
January 28, 2017
31-60
 
61-90 
 
91+
 
Total
Past Due
 
Current
 
Total
 
Nonaccrual
Financing
Receivables
 
Impaired
Financing
Receivables
Lease receivables
$
106

 
$
55

 
$
237

 
$
398

 
$
2,415

 
$
2,813

 
$
66

 
$
66

Loan receivables
34

 
24

 
67

 
125

 
2,244

 
2,369

 
56

 
56

Financed service contracts and other
111

 
225

 
494

 
830

 
3,335

 
4,165

 
29

 
9

Total
$
251

 
$
304

 
$
798

 
$
1,353

 
$
7,994

 
$
9,347

 
$
151

 
$
131

 
DAYS PAST DUE
(INCLUDES BILLED AND UNBILLED)
 
 
 
 
 
 
 
 
July 30, 2016
31-60
 
61-90 
 
91+
 
Total
Past Due
 
Current
 
Total
 
Nonaccrual
Financing
Receivables
 
Impaired
Financing
Receivables
Lease receivables
$
111

 
$
25

 
$
251

 
$
387

 
$
2,711

 
$
3,098

 
$
60

 
$
60

Loan receivables
30

 
9

 
37

 
76

 
2,059

 
2,135

 
42

 
42

Financed service contracts and other
213

 
152

 
565

 
930

 
2,440

 
3,370

 
30

 
10

Total
$
354

 
$
186

 
$
853

 
$
1,393

 
$
7,210

 
$
8,603

 
$
132

 
$
112


16

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


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 financing receivables were $444 million and $670 million as of January 28, 2017 and July 30, 2016, respectively.
As of January 28, 2017, the Company had financing receivables of $316 million, net of unbilled or current receivables, 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 $144 million as of July 30, 2016.
(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 January 28, 2017
Lease
Receivables
 
Loan
Receivables
 
Financed Service
Contracts and Other
 
Total
Allowance for credit loss as of October 29, 2016
$
227

 
$
111

 
$
48

 
$
386

Provisions
2

 

 
(1
)
 
1

Recoveries (write-offs), net
(2
)
 
(4
)
 

 
(6
)
Foreign exchange and other
(2
)
 
(1
)
 

 
(3
)
Allowance for credit loss as of January 28, 2017
$
225

 
$
106

 
$
47

 
$
378


 
CREDIT LOSS ALLOWANCES
Six months ended January 28, 2017
Lease
Receivables
 
Loan
Receivables
 
Financed Service
Contracts and Other
 
Total
Allowance for credit loss as of July 30, 2016
$
230

 
$
97

 
$
48

 
$
375

Provisions
(2
)
 
12

 
(1
)
 
9

Recoveries (write-offs), net
(2
)
 
(4
)
 

 
(6
)
Foreign exchange and other
(1
)
 
1

 

 

Allowance for credit loss as of January 28, 2017
$
225

 
$
106

 
$
47

 
$
378


 
CREDIT LOSS ALLOWANCES
Three months ended January 23, 2016
Lease
Receivables
 
Loan
Receivables
 
Financed Service
Contracts and Other
 
Total
Allowance for credit loss as of October 24, 2015
$
255

 
$
90

 
$
33

 
$
378

Provisions
(4
)
 
(10
)
 
5

 
(9
)
Recoveries (write-offs), net

 

 
(1
)
 
(1
)
Foreign exchange and other
(3
)
 

 

 
(3
)
Allowance for credit loss as of January 23, 2016
$
248

 
$
80

 
$
37

 
$
365


 
CREDIT LOSS ALLOWANCES
Six months ended January 23, 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
(4
)
 
(6
)
 
5

 
(5
)
Recoveries (write-offs), net
(4
)
 

 
(4
)
 
(8
)
Foreign exchange and other
(3
)
 
(1
)
 

 
(4
)
Allowance for credit loss as of January 23, 2016
$
248

 
$
80

 
$
37

 
$
365


17

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. 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 January 28, 2017 and July 30, 2016, 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):
 
January 28, 2017
 
July 30, 2016
Operating lease assets
$
297

 
$
296

Accumulated depreciation
(169
)
 
(161
)
Operating lease assets, net
$
128

 
$
135

Minimum future rentals on noncancelable operating leases as of January 28, 2017 are summarized as follows (in millions):
Fiscal Year
Amount
2017 (remaining six months)
$
123

2018
168

2019
76

2020
14

2021
5

Thereafter
2

Total
$
388


18

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 28, 2017
Amortized
Cost
 
Gross
Unrealized
Gains
 
Gross
Unrealized
Losses
 
Fair
Value
Fixed income securities:
 
 
 
 
 
 
 
U.S. government securities
$
22,910

 
$
4

 
$
(82
)
 
$
22,832

U.S. government agency securities
2,401

 
1

 
(5
)
 
2,397

Non-U.S. government and agency securities
1,211

 

 
(6
)
 
1,205

Corporate debt securities
30,878

 
85

 
(265
)
 
30,698

U.S. agency mortgage-backed securities
2,031

 
2

 
(27
)
 
2,006

Commercial paper
195

 

 

 
195

Total fixed income securities
59,626

 
92

 
(385
)
 
59,333

Publicly traded equity securities
1,225

 
463

 
(74
)
 
1,614

Total (1)
$
60,851

 
$
555

 
$
(459
)
 
$
60,947

July 30, 2016
Amortized
Cost
 
Gross
Unrealized
Gains
 
Gross
Unrealized
Losses
 
Fair
Value
Fixed income securities:
 
 
 
 
 
 
 
U.S. government securities
$
26,473

 
$
73

 
$
(2
)
 
$
26,544

U.S. government agency securities
2,809

 
8

 

 
2,817

Non-U.S. government and agency securities
1,096

 
4

 

 
1,100

Corporate debt securities
24,044

 
263

 
(15
)
 
24,292

U.S. agency mortgage-backed securities
1,846

 
22

 

 
1,868

Total fixed income securities
56,268

 
370

 
(17
)
 
56,621

Publicly traded equity securities
1,211

 
333

 
(40
)
 
1,504

Total (1)
$