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100% of Cisco's $550 million in Q3'FY12 stock buybacks supported John Chambers' dilutive management compensation practices

Even after buying back 27 million Cisco shares during Q3'FY12, Cisco shares used in its per-share diluted calculation increased by a staggering +55 million shares.

Thu, 5/24/12 - 11:30am    View comments

Update 5/25/12:

Today there's been a very significant development for Cisco' beleaguered longtime shareholders (at least in my opinion):

I mean, it's quite a coincidence that on the day after this blog story was published, for the first time in 10 very long years, Cisco has removed from registration with the U.S. Securities and Exchange Commission; 373,695 shares of Cisco common stock that had been offered to Cisco employees pursuant to employee benefit plans (SEC Form S-8 POS page 22).

View the last time 10-years ago when Cisco filed an S-8 POS form
 

CiscoDuring Cisco's Q3'FY12 earnings conference call, Cisco CFO Frank Calderoni modestly gushed:

"In the third quarter, we returned approximately $1 billion in cash to our shareholders through our stock repurchases and dividend payments.

"During Q3, we repurchased $550 million of common stock under the stock repurchase program or 27 million shares at an average price of $20.28 per share.

"A dividend payment of $432 million, representing $0.08 per share, was also declared and paid during the quarter."

According to Cisco's most recent Form 10-Q (page 3) filed on May 23, 2012 and previous Form 10-Q (page 3) filed on February 21, 2012:

Cisco common stock shares issued and outstanding*

4/28/12   1/28/12   Plus or Minus
5,383   5,378   +5

*Millions of shares

According to Cisco's most recent Form 10-Q (page 4) filed on May 23, 2012 and previous Form 10-Q (page 4) filed on February 21, 2012:

Cisco shares used in per-share basic calculation*

4/28/12   1/28/12   Plus or Minus
5,388   5,368   +20

*Millions of shares

According to Cisco's most recent Form 10-Q (page 4) filed on May 23, 2012 and previous Form 10-Q (page 4) filed on February 21, 2012:

Cisco shares used in per-share diluted calculation*

4/28/12   1/28/12   Plus or Minus
5,456   5,401   +55

*Millions of shares
   
Year Dollar Amounts
of Cisco Stock
Buybacks
by Fiscal Year
2012 $ 2.560 billion*
2011 $ 6.791 billion
2010 $ 7.803 billion
2009 $ 3.600 billion
2008 $10.350 billion
2007 $ 7.781 billion
2006 $ 8.295 billion
2005 $10.200 billion
2004$ 9.100 billion
2003 $ 6.000 billion
2002 $ 1.853 billion

Total $ 74.333 billion
*First 9-months Cisco FY12

Source: U.S. Securities and Exchange Commission

According to Cisco's most recent Form 10-Q (page 5) filed on May 23, 2012 and previous Form 10-Q (page 5) filed on February 21, 2012:

Dividends paid*

4/28/12   1/28/12   Plus or Minus
$1,076   $644   +$432

*Millions

During Q3'FY12, Cisco paid $.08 per share in cash dividends (page 3) for a total amount of $432 million.

Dividing Cisco's $432 million in cash dividends paid during Q3'FY12 by Cisco's common stock shares issued and outstanding as of 4/28/12:

$432,000,000 (divided by) 5,383,000,000 = $.08025 per share

Dividing Cisco's $432 million in cash dividends paid during Q3'FY12 by Cisco's per-share basic calculation as of 4/28/12:

$432,000,000 (divided by) 5,388,000,000 = $.08017 per share

Dividing Cisco's $432 million in cash dividends paid during Q3'FY12 by Cisco's per-share diluted calculation as of 4/28/12:

$432,000,000 (divided by) 5,456,000,000 = $.07917 per share

Meanwhile, according to Cisco's most recent Form 10-Q (page 32) filed on May 23, 2012 and previous Form 10-Q (page 29) filed on February 21, 2012:

Cisco shares repurchased*

4/28/12   1/28/12   Plus or Minus
3,631   3,604   +27

*Millions of shares

Again most interestingly, during Cisco's Q3'FY12 earnings conference call, Cisco CFO Frank Calderoni gushed:

"In the third quarter, we returned approximately $1 billion in cash to our shareholders through our stock repurchases and dividend payments.

"During Q3, we repurchased $550 million of common stock under the stock repurchase program or 27 million shares at an average price of $20.28 per share.

"A dividend payment of $432 million, representing $0.08 per share, was also declared and paid during the quarter.

"As we have stated previously, our capital allocation strategy remains committed to returning cash to our shareholders through a combination of dividends and our share repurchase program."

So we've got Cisco CFO Frank Calderoni gushing that during Q3'FY12 Cisco returned approximately $1 billion in cash to shareholders, but only $432 million was dividends while the rest of the cash, $550 million, was used to repurchase Cisco stock.

I've got to admit, I just don't get it.

I mean, if Cisco returned $550 million in cash during Q3'FY12 to shareholders by repurchasing 27 million shares, how could Cisco's common stock shares issued and outstanding during Q3'FY12 increase by +5 million shares?

Furthermore, how could Cisco's shares used in its per-share basic calculation during Q3'FY12 increase by +20 million shares?

Finally, how could Cisco's shares used in its per-share diluted calculation during Q3'FY12 increase by +55 million shares?

Well, it's quite possible that I might have found at least one of the culprits based on Cisco's most recent Form 10-Q (page 37) filed on May 23, 2012 and previous Form 10-Q (page 34) filed on February 21, 2012:

Total number of in-the-money Cisco employee stock options exercisable*

4/28/12   1/28/12   Plus or Minus
249   219   +30

*Millions of shares

Related documents:

Cisco's Q3'FY12 Form 10-Q

Cisco's Q2'FY12 Form 10-Q

Related stories:

Why is Cisco's Board of Directors allowing scandalously exorbitant corporate compensation shenanigans on such an epic scale?

Dilutive management compensation practices claimed 68% of stock buybacks during Cisco's Q4'FY11

Cisco CEO John Chambers ranked 10th in restricted stock grant compensation among the 350 biggest public company CEOs

Half of Cisco's stock buybacks went to support Cisco's dilutive management compensation practices during Q2'FY11

Cisco's management and employees appear to have pocketed $32 billion of Cisco shareholder cash

Congratulations to Cisco Insiders for Dumping 6,620,750 Shares, 60% of Holdings in 6 Month; Cisco CEO Whines about Taxes; Is Chambers Worth a Dime?

Cisco CEO John Chambers raked in almost $400 million while Cisco's shareholders lost almost 30% of their investment

John Chambers appears to lack a true conviction that Cisco's stock price will appreciate in value

Cisco CEO John Chambers had perfect timing executing his insider Cisco stock trades

Cisco's quiet March 9 non-announcement: CEO John Chambers sold 1.8 million of his Cisco shares valued at $45 million

John Chambers slams Cisco with $2.3 million in private jet expense

Cisco stock repurchases ... what's the point?

Cisco tops potential options overhang dilution ranking on Motley Fool
 


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