Leases

3 Months Ended

Oct. 26, 2019

Leases [Abstract]

Leases

Leases

(a) Lessee Arrangements

We lease real estate, IT and other equipment and vehicles. We also have arrangements with certain suppliers and contract manufacturers which includes the leasing of dedicated space and equipment costs. Our leases have the option to extend or terminate the lease when it is reasonably certain that we will exercise that option.

Certain of our lease agreements contain variable lease payments. Our variable lease payments can fluctuate depending on the level of activity or the cost of certain services where we have elected to combine lease and non-lease components. While these payments are not included as part of our lease liabilities, they are recognized as variable lease expense in the period they are incurred.

As of October 26, 2019, our operating lease right-of-use assets were $1.1 billion and were recorded in other assets, and our operating lease liabilities were $1.1 billion, of which $367 million was included in other current liabilities and $780 million was included in other long-term liabilities.

The components of our lease expenses were as follows (in millions):

	Three Months Ended
	October 26, 2019
Operating lease expense	$	113
Short-term lease expense	17
Variable lease expense	40
Total lease expense	$	170

Supplemental information related to our operating leases is as follows:

	Three Months Ended
	October 26, 2019
Weighted-average remaining lease term (in years)	4.2
Weighted-average discount rate	1.9	%

	Three Months Ended
In millions:	October 26, 2019
Cash paid for amounts included in the measurement of lease liabilities — operating cash flows	$	104
Right-of-use assets obtained in exchange for operating leases liabilities	$	48

The maturities of our operating leases (undiscounted) as of October 26, 2019 are as follows (in millions):

Fiscal Year	Amount
2020 (remaining nine months)	$	296
2021	308
2022	212
2023	163
2024	102
Thereafter	107
Total lease payments	1,188
Less interest	(41		)
Total	$	1,147

Prior to the adoption of the new leasing standard, future minimum lease payments under all noncancelable operating leases with an initial term in excess of one year as of July 27, 2019 were as follows (in millions):

Fiscal Year	Amount
2020	$	441
2021	299
2022	195
2023	120
2024	70
Thereafter	54
Total	$	1,179

(b) Lessor Arrangements

Our leases primarily represent sales-type leases with terms of four years on average. We provide leasing of our equipment and complementary third-party products primarily through our channel partners and distributors, for which the income arising from these leases is recognized through interest income. Interest income for the first quarter of fiscal 2020 was $26 million and was included in interest income in the Consolidated Statement of Operations. The net investment of our lease receivables is measured at the commencement date as the gross lease receivable, residual value less unearned income and allowance for credit loss. For additional information, see Note 9.

Future minimum lease payments on our lease receivables as of October 26, 2019 are summarized as follows (in millions):

Fiscal Year	Amount
2020 (remaining nine months)	$	595
2021	736
2022	470
2023	268
2024	120
Thereafter	29
Total	2,218
Less: Present value of lease payments	2,084
Difference between undiscounted cash flows and discounted cash flows	$	134

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

Prior to the adoption of the new leasing standard, future minimum lease payments on our lease receivables as of July 27, 2019 were summarized as follows (in millions):

Fiscal Year	Amount
2020	$	1,028
2021	702
2022	399
2023	185
2024	53
Total	$	2,367

We provide 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 held by Cisco and the associated accumulated depreciation are summarized as follows (in millions):

	October 26, 2019			July 27, 2019
Operating lease assets	$	438		$	485
Accumulated depreciation	(274		)	(306		)
Operating lease assets, net	$	164		$	179

Our lease income for the first quarter of fiscal 2020 was $44 million and was included in product revenue in the Consolidated Statement of Operations.

Minimum future rentals on noncancelable operating leases as of October 26, 2019 are summarized as follows (in millions):

Fiscal Year	Amount
2020 (remaining nine months)	$	90
2021	64
2022	17
2023	2
Total	$	173

Leases

Leases

(a) Lessee Arrangements

We lease real estate, IT and other equipment and vehicles. We also have arrangements with certain suppliers and contract manufacturers which includes the leasing of dedicated space and equipment costs. Our leases have the option to extend or terminate the lease when it is reasonably certain that we will exercise that option.

Certain of our lease agreements contain variable lease payments. Our variable lease payments can fluctuate depending on the level of activity or the cost of certain services where we have elected to combine lease and non-lease components. While these payments are not included as part of our lease liabilities, they are recognized as variable lease expense in the period they are incurred.

As of October 26, 2019, our operating lease right-of-use assets were $1.1 billion and were recorded in other assets, and our operating lease liabilities were $1.1 billion, of which $367 million was included in other current liabilities and $780 million was included in other long-term liabilities.

The components of our lease expenses were as follows (in millions):

	Three Months Ended
	October 26, 2019
Operating lease expense	$	113
Short-term lease expense	17
Variable lease expense	40
Total lease expense	$	170

Supplemental information related to our operating leases is as follows:

	Three Months Ended
	October 26, 2019
Weighted-average remaining lease term (in years)	4.2
Weighted-average discount rate	1.9	%

	Three Months Ended
In millions:	October 26, 2019
Cash paid for amounts included in the measurement of lease liabilities — operating cash flows	$	104
Right-of-use assets obtained in exchange for operating leases liabilities	$	48

The maturities of our operating leases (undiscounted) as of October 26, 2019 are as follows (in millions):

Fiscal Year	Amount
2020 (remaining nine months)	$	296
2021	308
2022	212
2023	163
2024	102
Thereafter	107
Total lease payments	1,188
Less interest	(41		)
Total	$	1,147

Prior to the adoption of the new leasing standard, future minimum lease payments under all noncancelable operating leases with an initial term in excess of one year as of July 27, 2019 were as follows (in millions):

Fiscal Year	Amount
2020	$	441
2021	299
2022	195
2023	120
2024	70
Thereafter	54
Total	$	1,179

(b) Lessor Arrangements

Our leases primarily represent sales-type leases with terms of four years on average. We provide leasing of our equipment and complementary third-party products primarily through our channel partners and distributors, for which the income arising from these leases is recognized through interest income. Interest income for the first quarter of fiscal 2020 was $26 million and was included in interest income in the Consolidated Statement of Operations. The net investment of our lease receivables is measured at the commencement date as the gross lease receivable, residual value less unearned income and allowance for credit loss. For additional information, see Note 9.

Future minimum lease payments on our lease receivables as of October 26, 2019 are summarized as follows (in millions):

Fiscal Year	Amount
2020 (remaining nine months)	$	595
2021	736
2022	470
2023	268
2024	120
Thereafter	29
Total	2,218
Less: Present value of lease payments	2,084
Difference between undiscounted cash flows and discounted cash flows	$	134

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

Prior to the adoption of the new leasing standard, future minimum lease payments on our lease receivables as of July 27, 2019 were summarized as follows (in millions):

Fiscal Year	Amount
2020	$	1,028
2021	702
2022	399
2023	185
2024	53
Total	$	2,367

We provide 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 held by Cisco and the associated accumulated depreciation are summarized as follows (in millions):

	October 26, 2019			July 27, 2019
Operating lease assets	$	438		$	485
Accumulated depreciation	(274		)	(306		)
Operating lease assets, net	$	164		$	179

Our lease income for the first quarter of fiscal 2020 was $44 million and was included in product revenue in the Consolidated Statement of Operations.

Minimum future rentals on noncancelable operating leases as of October 26, 2019 are summarized as follows (in millions):

Fiscal Year	Amount
2020 (remaining nine months)	$	90
2021	64
2022	17
2023	2
Total	$	173

Leases

Leases

(a) Lessee Arrangements

We lease real estate, IT and other equipment and vehicles. We also have arrangements with certain suppliers and contract manufacturers which includes the leasing of dedicated space and equipment costs. Our leases have the option to extend or terminate the lease when it is reasonably certain that we will exercise that option.

Certain of our lease agreements contain variable lease payments. Our variable lease payments can fluctuate depending on the level of activity or the cost of certain services where we have elected to combine lease and non-lease components. While these payments are not included as part of our lease liabilities, they are recognized as variable lease expense in the period they are incurred.

As of October 26, 2019, our operating lease right-of-use assets were $1.1 billion and were recorded in other assets, and our operating lease liabilities were $1.1 billion, of which $367 million was included in other current liabilities and $780 million was included in other long-term liabilities.

The components of our lease expenses were as follows (in millions):

	Three Months Ended
	October 26, 2019
Operating lease expense	$	113
Short-term lease expense	17
Variable lease expense	40
Total lease expense	$	170

Supplemental information related to our operating leases is as follows:

	Three Months Ended
	October 26, 2019
Weighted-average remaining lease term (in years)	4.2
Weighted-average discount rate	1.9	%

	Three Months Ended
In millions:	October 26, 2019
Cash paid for amounts included in the measurement of lease liabilities — operating cash flows	$	104
Right-of-use assets obtained in exchange for operating leases liabilities	$	48

The maturities of our operating leases (undiscounted) as of October 26, 2019 are as follows (in millions):

Fiscal Year	Amount
2020 (remaining nine months)	$	296
2021	308
2022	212
2023	163
2024	102
Thereafter	107
Total lease payments	1,188
Less interest	(41		)
Total	$	1,147

Prior to the adoption of the new leasing standard, future minimum lease payments under all noncancelable operating leases with an initial term in excess of one year as of July 27, 2019 were as follows (in millions):

Fiscal Year	Amount
2020	$	441
2021	299
2022	195
2023	120
2024	70
Thereafter	54
Total	$	1,179

(b) Lessor Arrangements

Our leases primarily represent sales-type leases with terms of four years on average. We provide leasing of our equipment and complementary third-party products primarily through our channel partners and distributors, for which the income arising from these leases is recognized through interest income. Interest income for the first quarter of fiscal 2020 was $26 million and was included in interest income in the Consolidated Statement of Operations. The net investment of our lease receivables is measured at the commencement date as the gross lease receivable, residual value less unearned income and allowance for credit loss. For additional information, see Note 9.

Future minimum lease payments on our lease receivables as of October 26, 2019 are summarized as follows (in millions):

Fiscal Year	Amount
2020 (remaining nine months)	$	595
2021	736
2022	470
2023	268
2024	120
Thereafter	29
Total	2,218
Less: Present value of lease payments	2,084
Difference between undiscounted cash flows and discounted cash flows	$	134

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

Prior to the adoption of the new leasing standard, future minimum lease payments on our lease receivables as of July 27, 2019 were summarized as follows (in millions):

Fiscal Year	Amount
2020	$	1,028
2021	702
2022	399
2023	185
2024	53
Total	$	2,367

We provide 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 held by Cisco and the associated accumulated depreciation are summarized as follows (in millions):

	October 26, 2019			July 27, 2019
Operating lease assets	$	438		$	485
Accumulated depreciation	(274		)	(306		)
Operating lease assets, net	$	164		$	179

Our lease income for the first quarter of fiscal 2020 was $44 million and was included in product revenue in the Consolidated Statement of Operations.

Minimum future rentals on noncancelable operating leases as of October 26, 2019 are summarized as follows (in millions):

Fiscal Year	Amount
2020 (remaining nine months)	$	90
2021	64
2022	17
2023	2
Total	$	173