Cisco 2011 Annual Report Download - page 78

Interest is payable semiannually on each class of the senior fixed-rate notes, each of which is redeemable by us at
any time, subject to a make-whole premium. Interest is payable quarterly on the floating rate notes. We were in
compliance with all debt covenants as of July 30, 2011. In March 2011, we issued $1.25 billion of senior floating
interest rate notes due 2014, $2.0 billion of 1.625% fixed-rate senior notes due 2014, and $750 million of 3.15%
fixed-rate senior notes due 2017, for an aggregate principal amount of $4.0 billion. To achieve our interest rate
risk management objectives, we entered into interest rate swaps with an aggregate notional amount of $2.75
billion designated as fair value hedges of the senior fixed-rate notes included in the March 2011 debt issuance. In
effect, these interest rate swaps convert the fixed interest rates of the fixed-rate senior notes to floating interest
rates based on LIBOR. The gains and losses related to the changes in the fair value of the interest rate swaps
substantially offset changes, attributable to market interest rates, in the fair value of the hedged portion of the
underlying debt.
In addition, in February 2011 we repaid $3.0 billion of fixed-rate senior notes upon their maturity.
Commercial Paper In the third quarter of fiscal 2011 we established a short-term debt financing program of up to
$3.0 billion through the issuance of commercial paper notes. As of July 30, 2011, we had commercial paper notes
of $500 million outstanding under this program.
Other Notes and Borrowings Other notes and borrowings include notes and credit facilities with a number of
financial institutions that are available to certain of our foreign subsidiaries. The amount of borrowings
outstanding under these arrangements was $88 million and $59 million as of July 30, 2011 and July 31, 2010,
respectively.
Credit Facility We have a credit agreement with certain institutional lenders that provides for a $3.0 billion
unsecured revolving credit facility that is scheduled to expire on August 17, 2012. Any advances under the credit
agreement will accrue interest at rates that are equal to, based on certain conditions, either (i) the higher of the
Federal Funds rate plus 0.50% or Bank of America’s “prime rate” as announced from time to time or (ii) LIBOR
plus a margin that is based on our senior debt credit ratings as published by Standard & Poor’s Ratings Services
and Moody’s Investors Service, Inc. The credit agreement requires that we comply with certain covenants,
including that we maintain an interest coverage ratio as defined in the agreement.
We may also, upon the agreement of either the then-existing lenders or additional lenders not currently parties to
the agreement, increase the commitments under the credit facility by up to an additional $1.9 billion and/or
extend the expiration date of the credit facility up to August 15, 2014. As of July 30, 2011, we were in
compliance with the required interest coverage ratio and the other covenants, and we had not borrowed any funds
under the credit facility.
Deferred Revenue The following table presents the breakdown of deferred revenue (in millions):
July 30, 2011 July 31, 2010 Increase
Service ..................................... $ 8,521 $ 7,428 $1,093
Product .................................... 3,686 3,655 31
Total .............................. $12,207 $11,083 $1,124
Reported as:
Current ................................ $ 8,025 $ 7,664 $ 361
Noncurrent ............................. 4,182 3,419 763
Total .............................. $12,207 $11,083 $1,124
The increase in deferred service revenue reflects the impact of new contract initiations and renewals, partially
offset by the ongoing amortization of deferred service revenue. The increase in deferred product revenue was
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