Leases

6 Months Ended

Jan. 25, 2020

Leases [Abstract]

Leases

Leases

(a) Lessee Arrangements

We lease real estate, information technology (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 January 25, 2020, our operating lease right-of-use assets were $1.0 billion and were recorded in other assets, and our operating lease liabilities were $1.1 billion, of which $380 million was included in other current liabilities and $698 million was included in other long-term liabilities. The weighted-average lease term was 4.1 years and the weighted-average discount rate was 1.8% as of January 25, 2020.

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

	January 25, 2020
	Three Months Ended		Six Months Ended
Operating lease expense	$	101	$	214
Short-term lease expense	16		33
Variable lease expense	39		79
Total lease expense	$	156	$	326

Supplemental information related to our operating leases is as follows:

	Six Months Ended
In millions:	January 25, 2020
Cash paid for amounts included in the measurement of lease liabilities — operating cash flows	$	206
Right-of-use assets obtained in exchange for operating leases liabilities	$	77

The maturities of our operating leases (undiscounted) as of January 25, 2020 are as follows (in millions):

Fiscal Year	Amount
2020 (remaining six months)	$	204
2021	316
2022	216
2023	166
2024	104
Thereafter	111
Total lease payments	1,117
Less interest	(39		)
Total	$	1,078

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 second quarter and first six months of fiscal 2020 was $23 million and $49 million, respectively, 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 January 25, 2020 are summarized as follows (in millions):

Fiscal Year	Amount
2020 (remaining six months)	$	438
2021	882
2022	479
2023	267
2024	123
Thereafter	58
Total	2,247
Less: Present value of lease payments	2,117
Difference between undiscounted cash flows and discounted cash flows	$	130

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):

	January 25, 2020			July 27, 2019
Operating lease assets	$	411		$	485
Accumulated depreciation	(247		)	(306		)
Operating lease assets, net	$	164		$	179

Our lease income for the second quarter and first six months of fiscal 2020 was $50 million and $94 million, respectively, and was included in product revenue in the Consolidated Statement of Operations.

Minimum future rentals on noncancelable operating leases as of January 25, 2020 are summarized as follows (in millions):

Fiscal Year	Amount
2020 (remaining six months)	$	61
2021	70
2022	24
2023	4
Total	$	159

Leases

Leases

(a) Lessee Arrangements

We lease real estate, information technology (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 January 25, 2020, our operating lease right-of-use assets were $1.0 billion and were recorded in other assets, and our operating lease liabilities were $1.1 billion, of which $380 million was included in other current liabilities and $698 million was included in other long-term liabilities. The weighted-average lease term was 4.1 years and the weighted-average discount rate was 1.8% as of January 25, 2020.

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

	January 25, 2020
	Three Months Ended		Six Months Ended
Operating lease expense	$	101	$	214
Short-term lease expense	16		33
Variable lease expense	39		79
Total lease expense	$	156	$	326

Supplemental information related to our operating leases is as follows:

	Six Months Ended
In millions:	January 25, 2020
Cash paid for amounts included in the measurement of lease liabilities — operating cash flows	$	206
Right-of-use assets obtained in exchange for operating leases liabilities	$	77

The maturities of our operating leases (undiscounted) as of January 25, 2020 are as follows (in millions):

Fiscal Year	Amount
2020 (remaining six months)	$	204
2021	316
2022	216
2023	166
2024	104
Thereafter	111
Total lease payments	1,117
Less interest	(39		)
Total	$	1,078

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 second quarter and first six months of fiscal 2020 was $23 million and $49 million, respectively, 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 January 25, 2020 are summarized as follows (in millions):

Fiscal Year	Amount
2020 (remaining six months)	$	438
2021	882
2022	479
2023	267
2024	123
Thereafter	58
Total	2,247
Less: Present value of lease payments	2,117
Difference between undiscounted cash flows and discounted cash flows	$	130

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):

	January 25, 2020			July 27, 2019
Operating lease assets	$	411		$	485
Accumulated depreciation	(247		)	(306		)
Operating lease assets, net	$	164		$	179

Our lease income for the second quarter and first six months of fiscal 2020 was $50 million and $94 million, respectively, and was included in product revenue in the Consolidated Statement of Operations.

Minimum future rentals on noncancelable operating leases as of January 25, 2020 are summarized as follows (in millions):

Fiscal Year	Amount
2020 (remaining six months)	$	61
2021	70
2022	24
2023	4
Total	$	159

Leases

Leases

(a) Lessee Arrangements

We lease real estate, information technology (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 January 25, 2020, our operating lease right-of-use assets were $1.0 billion and were recorded in other assets, and our operating lease liabilities were $1.1 billion, of which $380 million was included in other current liabilities and $698 million was included in other long-term liabilities. The weighted-average lease term was 4.1 years and the weighted-average discount rate was 1.8% as of January 25, 2020.

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

	January 25, 2020
	Three Months Ended		Six Months Ended
Operating lease expense	$	101	$	214
Short-term lease expense	16		33
Variable lease expense	39		79
Total lease expense	$	156	$	326

Supplemental information related to our operating leases is as follows:

	Six Months Ended
In millions:	January 25, 2020
Cash paid for amounts included in the measurement of lease liabilities — operating cash flows	$	206
Right-of-use assets obtained in exchange for operating leases liabilities	$	77

The maturities of our operating leases (undiscounted) as of January 25, 2020 are as follows (in millions):

Fiscal Year	Amount
2020 (remaining six months)	$	204
2021	316
2022	216
2023	166
2024	104
Thereafter	111
Total lease payments	1,117
Less interest	(39		)
Total	$	1,078

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 second quarter and first six months of fiscal 2020 was $23 million and $49 million, respectively, 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 January 25, 2020 are summarized as follows (in millions):

Fiscal Year	Amount
2020 (remaining six months)	$	438
2021	882
2022	479
2023	267
2024	123
Thereafter	58
Total	2,247
Less: Present value of lease payments	2,117
Difference between undiscounted cash flows and discounted cash flows	$	130

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):

	January 25, 2020			July 27, 2019
Operating lease assets	$	411		$	485
Accumulated depreciation	(247		)	(306		)
Operating lease assets, net	$	164		$	179

Our lease income for the second quarter and first six months of fiscal 2020 was $50 million and $94 million, respectively, and was included in product revenue in the Consolidated Statement of Operations.

Minimum future rentals on noncancelable operating leases as of January 25, 2020 are summarized as follows (in millions):

Fiscal Year	Amount
2020 (remaining six months)	$	61
2021	70
2022	24
2023	4
Total	$	159