UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)

þ		QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

o		TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission File Number 000-18548

Xilinx, Inc.

(Exact name of registrant as specified in its charter)

Delaware (State or other jurisdiction of incorporation or organization)		77-0188631 (I.R.S. Employer Identification No.)

2100 Logic Drive, San Jose, California		95124
(Address of principal executive offices)		(Zip Code)

(408) 559-7778
(Registrant’s telephone number, including area code)

N/A
(Former name, former address, and former fiscal year, if changed since last report)

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 þ       No o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

Yes þ       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 þ		Accelerated filer o		Non-accelerated filer o		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 o       No þ

Shares outstanding of the registrant’s common stock:

Class		Shares Outstanding as of October 22, 2010
Common Stock, $.01 par value		259,116,334

 

 

PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

XILINX, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)

		Three Months Ended								Six Months Ended
		Oct. 2,				Sept. 26,				Oct. 2,				Sept. 26,
(In thousands, except per share amounts)		2010				2009				2010				2009
Net revenues		$	619,666			$	414,950			$	1,214,403			$	791,185
Cost of revenues			213,260				158,177				421,436				301,999
Gross margin			406,406				256,773				792,967				489,186
Operating expenses:
Research and development			96,578				90,145				191,062				173,378
Selling, general and administrative			87,174				78,621				171,232				152,177
Amortization of acquisition-related intangibles			—				—				—				2,493
Restructuring charges			—				5,915				—				21,686
Total operating expenses			183,752				174,681				362,294				349,734
Operating income			222,654				82,092				430,673				139,452
Interest and other expense, net			(3,484	)			(1,782	)			(8,614	)			(12,692	)
Income before income taxes			219,170				80,310				422,059				126,760
Provision for income taxes			48,275				16,272				92,577				24,716
Net income		$	170,895			$	64,038			$	329,482			$	102,044
Net income per common share:
Basic		$	0.66			$	0.23			$	1.23			$	0.37
Diluted		$	0.65			$	0.23			$	1.22			$	0.37
Cash dividends declared per common share		$	0.16			$	0.14			$	0.32			$	0.28
Shares used in per share calculations:
Basic			260,151				276,353				267,355				275,735
Diluted			263,286				276,988				270,484				276,271

See notes to condensed consolidated financial statements.

XILINX, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS

		Oct. 2,				Apr. 3,
(In thousands, except par value amounts)		2010				2010*
		(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents		$	774,505			$	1,031,457
Short-term investments			632,159				355,148
Accounts receivable, net			556,766				262,735
Inventories			170,180				130,628
Deferred tax assets			98,158				101,126
Prepaid expenses and other current assets			112,145				25,972
Total current assets			2,343,913				1,907,066
Property, plant and equipment, at cost			740,633				714,905
Accumulated depreciation and amortization			(366,249	)			(349,027	)
Net property, plant and equipment			374,384				365,878
Long-term investments			704,586				582,202
Goodwill			117,955				117,955
Other assets			175,013				211,217
Total Assets		$	3,715,851			$	3,184,318
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable		$	131,008			$	96,169
Accrued payroll and related liabilities			123,898				114,663
Income taxes payable			1,393				14,452
Deferred income on shipments to distributors			93,608				80,132
Other accrued liabilities			40,927				51,745
Total current liabilities			390,834				357,161
Convertible debentures			884,390				354,798
Deferred tax liabilities			350,702				294,149
Long-term income taxes payable			61,478				56,248
Other long-term liabilities			1,216				1,492
Commitments and contingencies
Stockholders’ equity:
Preferred stock, $.01 par value (none issued)			—				—
Common stock, $.01 par value			2,590				2,735
Additional paid-in capital			1,006,787				1,102,411
Retained earnings			1,009,448				1,016,545
Accumulated other comprehensive income (loss)			8,406				(1,221	)
Total stockholders’ equity			2,027,231				2,120,470
Total Liabilities and Stockholders’ Equity		$	3,715,851			$	3,184,318

See notes to condensed consolidated financial statements.

XILINX, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)

		Six Months Ended
		Oct. 2,				Sept. 26,
(In thousands)		2010				2009
Cash flows from operating activities:
Net income		$	329,482			$	102,044
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation			24,938				25,065
Amortization			3,686				8,567
Stock-based compensation			30,541				25,491
Net (gain) loss on sale of available-for-sale securities			(4,198	)			97
Amortization of debt discount on convertible debentures			6,266				1,911
Derivatives — revaluation and amortization			375				(550	)
Tax benefit from exercise of stock options			647				3,727
(Excess) reduction of tax benefit from stock-based compensation			(2,079	)			16,297
Changes in assets and liabilities:
Accounts receivable, net			(294,031	)			(10,283	)
Inventories			(39,536	)			18,862
Deferred income taxes			62,015				(762	)
Prepaid expenses and other current assets			(9,266	)			(1,790	)
Other assets			6,129				30,577
Accounts payable			34,839				43,965
Accrued liabilities (including restructuring activities)			(4,218	)			10,799
Income taxes payable			(12,408	)			(22,465	)
Deferred income on shipments to distributors			13,476				13,391
Net cash provided by operating activities			146,658				264,943
Cash flows from investing activities:
Purchases of available-for-sale securities			(1,307,889	)			(803,322	)
Proceeds from sale and maturity of available-for-sale securities			920,628				589,872
Purchases of property, plant and equipment			(33,444	)			(8,847	)
Other investing activities			(1,000	)			(2,816	)
Net cash used in investing activities			(421,705	)			(225,113	)
Cash flows from financing activities:
Repurchases of common stock			(466,309	)			—
Proceeds from issuance of common stock through various stock plans			45,554				15,918
Payment of dividends to stockholders			(85,462	)			(77,318	)
Proceeds from issuance of convertible debts, net of issuance costs			587,644				—
Purchase of call options			(112,319	)			—
Proceeds from issuance of warrants			46,908				—
Excess (reduction of) tax benefit from stock-based compensation			2,079				(16,297	)
Net cash provided by (used in) financing activities			18,095				(77,697	)
Net decrease in cash and cash equivalents			(256,952	)			(37,867	)
Cash and cash equivalents at beginning of period			1,031,457				1,065,987
Cash and cash equivalents at end of period		$	774,505			$	1,028,120
Supplemental disclosure of cash flow information:
Interest paid		$	10,914			$	10,776
Income taxes paid, net of refunds		$	36,055			$	18,285

See notes to condensed consolidated financial statements.

XILINX, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

Note 1. Basis of Presentation

The accompanying interim condensed consolidated financial statements have been prepared in conformity with United States (U.S.) generally accepted accounting principles for interim financial information and the instructions to Form 10-Q and Article 10 of Regulation S-X, and should be read in conjunction with the Xilinx, Inc. (Xilinx or the Company) consolidated financial statements filed with the U.S. Securities and Exchange Commission (SEC) on Form 10-K for the fiscal year ended April 3, 2010. The interim financial statements are unaudited, but reflect all adjustments which are, in the opinion of management, of a normal, recurring nature necessary to provide a fair statement of results for the interim periods presented. The results of operations for the interim periods shown in this report are not necessarily indicative of the results that may be expected for the fiscal year ending April 2, 2011 or any future period.

The Company uses a 52- to 53-week fiscal year ending on the Saturday nearest March 31. Fiscal 2011 is a 52-week year ending on April 2, 2011. Fiscal 2010, which ended on April 3, 2010, was a 53-week fiscal year. The third quarter of fiscal 2010 was a 14-week quarter ended on January 2, 2010. The quarters ended October 2, 2010 and September 26, 2009 each included 13 weeks.

Note 2. Recent Accounting Pronouncements

In October 2009, the Financial Accounting Standards Board (FASB) issued the authoritative guidance to update the accounting and reporting requirements for revenue arrangements with multiple deliverables. This guidance established a selling price hierarchy, which allows the use of an estimated selling price to determine the selling price of a deliverable in cases where neither vendor-specific objective evidence nor third-party evidence is available. This guidance is to be applied prospectively for revenue arrangements entered into or materially modified in fiscal years beginning on or after June 15, 2010, which for the Company is its fiscal 2012. Early adoption is permitted, and if this update is adopted early in other than the first quarter of an entity’s fiscal year, then it must be applied retrospectively to the beginning of that fiscal year. The Company does not expect this guidance to have significant impacts on its consolidated financial statements.

In October 2009, the FASB issued the authoritative guidance that clarifies which revenue allocation and measurement guidance should be used for arrangements that contain both tangible products and software, in cases where the software is more than incidental to the tangible product as a whole. More specifically, if the software sold with or embedded within the tangible product is essential to the functionality of the tangible product, then this software as well as undelivered software elements that relate to this software are excluded from the scope of existing software revenue guidance. This guidance is to be applied prospectively for revenue arrangements entered into or materially modified in fiscal years beginning on or after June 15, 2010, which for the Company is its fiscal 2012. Early adoption is permitted, and if this update is adopted early in other than the first quarter of an entity’s fiscal year, then it must be applied retrospectively to the beginning of that fiscal year. The Company does not expect this guidance to have significant impacts on its consolidated financial statements.

In January 2010, the FASB issued amended standards that require additional disclosures about inputs and valuation techniques used to measure fair value as well as disclosures about significant transfers, beginning in the Company’s fourth quarter of fiscal 2010. Additionally, these amended standards require presentation of disaggregated activity within the reconciliation for fair value measurements using significant unobservable inputs (Level 3), beginning in the Company’s first quarter of fiscal 2012. The Company does not expect these new standards to have significant impacts on the Company’s consolidated financial statements.

In April 2010, the FASB issued the authoritative guidance on milestone method of revenue recognition. Under the new guidance, an entity can recognize revenue from consideration that is contingent upon achievement of a milestone in the period in which the milestone is achieved only if the milestone meets all criteria to be considered substantive. This guidance is to be applied prospectively for milestones achieved in fiscal years, and interim period within those years, beginning on or after June 15, 2010, which for the Company is its fiscal 2012. Early adoption is permitted, and if this update is adopted early in other than the first quarter of an entity’s fiscal year, then it must be applied retrospectively to the beginning of that fiscal year. The Company does not expect this guidance to have significant impacts on its consolidated financial statements.

Note 3. Significant Customers and Concentrations of Credit Risk

Avnet, Inc. (Avnet), one of the Company’s distributors, distributes the substantial majority of the Company’s products worldwide. As of October 2, 2010 and April 3, 2010, Avnet accounted for 87% and 83% of the Company’s total accounts receivable, respectively. Resale of product through Avnet accounted for 53% and 52% of the Company’s worldwide net revenues in the second quarter and the first six months of fiscal 2011, respectively. For the second quarter and the first six months of fiscal 2010, resale of product through Avnet accounted for 46% and 49% of the Company’s worldwide net revenues, respectively. While the percentage of worldwide net revenues from Avnet are consistent with historical patterns, the percentage of accounts receivable due from Avnet increased as of October 2, 2010. The Company has further strengthened its partnership with Avnet, and Avnet now supports more of the Company’s customers and has committed more personnel and resources to the Company’s business. As part of this relationship, beginning in our first quarter of fiscal 2011 the Company agreed to temporarily extend payment terms for Avnet through the next two quarters. The extensions of payment terms are scheduled to be reduced each quarter and Avnet is expected to return to standard payment terms by April 2011.

Xilinx is subject to concentrations of credit risk primarily in its trade accounts receivable and investments in debt securities to the extent of the amounts recorded on the consolidated balance sheets. The Company attempts to mitigate the concentration of credit risk in its trade receivables through its credit evaluation process, collection terms, distributor sales to diverse end customers and through geographical dispersion of sales. Xilinx generally does not require collateral for receivables from its end customers or from distributors.

One end customer accounted for 10% of our net revenues for the second quarter and the first six months of fiscal 2011. No end customer accounted more than 10% of our net revenues for the second quarter and the first six months of fiscal 2010.

The Company mitigates concentrations of credit risk in its investments in debt securities by currently investing more than 94% of its portfolio in AA or higher grade securities as rated by Standard & Poor’s or Moody’s Investors Service. The Company’s methods to arrive at investment decisions are not solely based on the rating agencies’ credit ratings. Xilinx also performs additional credit due diligence and conducts regular portfolio credit reviews, including a review of counterparty credit risk related to the Company’s forward currency exchange and interest rate swap contracts. Additionally, Xilinx limits its investments in the debt securities of a single issuer based upon the issuer’s credit rating and attempts to further mitigate credit risk by diversifying risk across geographies and type of issuer.

As of October 2, 2010, approximately 3% of the Company’s $2.01 billion investment portfolio consisted of student loan auction rate securities and all of these securities are rated AAA with the exception of $8.7 million that were downgraded to an A rating during fiscal 2009. More than 98% of the underlying assets that secure these securities are pools of student loans originated under the Federal Family Education Loan Program (FFELP), which are substantially guaranteed by the U.S. Department of Education. These securities experienced failed auctions in the fourth quarter of fiscal 2008 due to liquidity issues in the global credit markets. In a failed auction, the interest rates are reset to a maximum rate defined by the contractual terms for each security. The Company has collected and expects to collect all interest payable on these securities when due. During the first six months of fiscal 2011, $450 thousand of these student loan auction rate securities were redeemed for cash by the issuers at par value. Because there can be no assurance of a successful auction in the future, the student loan auction rate securities are reclassified as long-term investments on the consolidated balance sheets. The maturity dates range from March 2023 to November 2047.

As of October 2, 2010, approximately 25% of the portfolio consisted of mortgage-backed securities. All of the mortgage-backed securities in the investment portfolio are AAA rated and were issued by U.S. government-sponsored enterprises and agencies.

The global credit and capital markets have continued to experience adverse conditions that have negatively impacted the values of various types of investment and non-investment grade securities, and have experienced volatility and disruption due to instability in the global financial system, uncertainty related to global economic conditions and concerns regarding sovereign financial stability. While general conditions in the global credit markets have improved, there is a risk that the Company may incur other-than-temporary impairment charges for certain types of investments should credit market conditions deteriorate or the underlying assets fail to perform as anticipated. See “Note 5. Financial Instruments” for a table of the Company’s available-for-sale securities.

Note 4. Fair Value Measurements

The guidance for fair value measurements established by the FASB defines fair value as the exchange price that would be received from selling an asset or paid to transfer a liability (an exit price) in an orderly transaction between market participants at the measurement date. When determining the fair value measurements for assets and liabilities required or permitted to be recorded at fair value, the Company considers the principal or most advantageous market in which Xilinx would transact and also considers assumptions that market participants would use when pricing the asset or liability, such as inherent risk, transfer restrictions and risk of nonperformance.

The Company determines the fair value for marketable debt securities using industry standard pricing services, data providers and other third-party sources and by internally performing valuation analyses. The Company primarily uses a consensus price or weighted average price for its fair value assessment. The Company determines the consensus price using market prices from a variety of industry standard pricing services, data providers, security master files from large financial institutions and other third party sources and uses those multiple prices as inputs into a distribution-curve-based algorithm to determine the daily market value. The pricing services use multiple inputs to determine market prices, including reportable trades, benchmark yield curves, credit spreads and broker/dealer quotes as well as other industry and economic events. For certain securities with short maturities, such as discount commercial paper and certificates of deposit, the security is accreted from purchase price to face value at maturity. If a subsequent transaction on the same security is observed in the marketplace, the price on the subsequent transaction is used as the current daily market price and the security will be accreted to face value based on the revised price. For certain other securities, such as student loan auction rate securities, the Company performs its own valuation analysis using a discounted cash flow pricing model.

The Company validates the consensus prices by taking random samples from each asset type and corroborating those prices using reported trade activity, benchmark yield curves, binding broker/dealer quotes or other relevant price information. There have not been any changes to the Company’s fair value methodology during the first six months of fiscal 2011 and the Company did not adjust or override any fair value measurements as of October 2, 2010.

Fair Value Hierarchy

The measurements of fair value were established based on a fair value hierarchy that prioritizes the utilized inputs. This hierarchy requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. The fair value framework requires the categorization of assets and liabilities into three levels based upon the assumptions (inputs) used to price the assets or liabilities. The guidance for fair value measurements requires that assets and liabilities carried at fair value be classified and disclosed in one of the following categories:

Level 1 — Quoted (unadjusted) prices in active markets for identical assets or liabilities.

The Company’s Level 1 assets consist of U.S. Treasury securities and money market funds.

Level 2 — Observable inputs other than quoted prices included in Level 1, such as quoted prices for similar assets or liabilities in active markets; quoted prices for identical or similar assets or liabilities in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the asset or liability.

The Company’s Level 2 assets consist of bank certificates of deposit, commercial paper, corporate bonds, municipal bonds, U.S. agency securities, foreign government and agency securities, floating-rate notes and mortgage-backed securities. The Company’s Level 2 assets and liabilities include foreign currency forward contracts and interest rate swaps.

Level 3 — Unobservable inputs to the valuation methodology that are supported by little or no market activity and that are significant to the measurement of the fair value of the assets or liabilities. Level 3 assets and liabilities include those whose fair value measurements are determined using pricing models, discounted cash flow methodologies or similar valuation techniques, as well as significant management judgment or estimation.

The Company’s Level 3 assets and liabilities include student loan auction rate securities and the embedded derivative related to the Company’s debentures.

Assets and Liabilities Measured at Fair Value on a Recurring Basis

In instances where the inputs used to measure fair value fall into different levels of the fair value hierarchy, the fair value measurement has been determined based on the lowest level input that is significant to the fair value measurement in its entirety. The Company’s assessment of the significance of a particular item to the fair value measurement in its entirety requires judgment, including the consideration of inputs specific to the asset or liability. The following tables present information about the Company’s assets and liabilities measured at fair value on a recurring basis as of October 2, 2010 and April 3, 2010:

		Oct. 2, 2010
		Quoted Prices
		in Active				Significant
		Markets for				Other				Significant
		Identical				Observable				Unobservable
		Instruments				Inputs				Inputs				Total Fair
(In thousands)		(Level 1)				(Level 2)				(Level 3)				Value
Assets:
Money market funds		$	174,230			$	—			$	—			$	174,230
Bank certificates of deposit			—				35,010				—				35,010
Commercial paper			—				434,814				—				434,814
Corporate bonds			—				20,972				—				20,972
Auction rate securities			—				—				63,982				63,982
Municipal bonds			—				8,572				—				8,572
U.S. government and agency securities			39,443				92,946				—				132,389
Foreign government and agency securities			—				534,881				—				534,881
Floating rate notes			—				96,929				—				96,929
Mortgage-backed securities			—				511,185				—				511,185
Interest rate swaps (net)			—				268				—				268
Foreign currency forward contracts (net)			—				5,862				—				5,862
Total assets measured at fair value		$	213,673			$	1,741,439			$	63,982			$	2,019,094
Liabilities:
Convertible debentures — embedded derivative			—				—				1,462				1,462
Total liabilities measured at fair value		$	—			$	—			$	1,462			$	1,462
Net assets measured at fair value		$	213,673			$	1,741,439			$	62,520			$	2,017,632

		Apr. 3, 2010
		Quoted Prices
		in Active				Significant
		Markets for				Other				Significant
		Identical				Observable				Unobservable
		Instruments				Inputs				Inputs				Total Fair
(In thousands)		(Level 1)				(Level 2)				(Level 3)				Value
Assets:
Money market funds		$	138,738			$	—			$	—			$	138,738
Bank certificates of deposit			—				59,996				—				59,996
Commercial paper			—				437,790				—				437,790
Corporate bonds			—				538				—				538
Auction rate securities			—				—				61,644				61,644
Municipal bonds			—				9,703				—				9,703
U.S. government and agency securities			49,995				71,961				—				121,956
Foreign government and agency securities			—				488,845				—				488,845
Floating rate notes			—				112,430				—				112,430
Mortgage-backed securities			—				442,199				—				442,199
Total assets measured at fair value		$	188,733			$	1,623,462			$	61,644			$	1,873,839
Liabilities:
Foreign currency forward contracts (net)		$	—			$	1,477			$	—			$	1,477
Convertible debentures — embedded derivative			—				—				848				848
Total liabilities measured at fair value		$	—			$	1,477			$	848			$	2,325
Net assets measured at fair value		$	188,733			$	1,621,985			$	60,796			$	1,871,514

Changes in Level 3 Instruments Measured at Fair Value on a Recurring Basis

The following table is a reconciliation of all assets and liabilities measured at fair value on a recurring basis using significant unobservable inputs (Level 3):

		Three Months Ended								Six Months Ended
		Oct. 2,				Sept. 26,				Oct. 2,				Sept. 26,
(In thousands)		2010				2009				2010				2009
Balance as of beginning of period		$	61,725			$	96,153			$	60,796			$	92,736
Total realized and unrealized gains (losses):
Included in interest and other expense, net			(145	)			(1,159	)			(614	)			(421	)
Included in other comprehensive income (loss)			940				3,462				2,788				6,891
Sales and settlements, net (1)			—				(19,200	)			(450	)			(19,950	)
Balance as of end of period		$	62,520			$	79,256			$	62,520			$	79,256

The amount of total gains or (losses) included in net income attributable to the change in unrealized gains or losses relating to assets and liabilities still held as of the end of the period:

		Three Months Ended								Six Months Ended
		Oct. 2,				Sept. 26,				Oct. 2,				Sept. 26,
(In thousands)		2010				2009				2010				2009
Interest and other income (expense), net		$	(145	)		$	(159	)		$	(614	)		$	579

As of October 2, 2010, marketable securities measured at fair value using Level 3 inputs were comprised of $64.0 million of student loan auction rate securities. Auction failures during the fourth quarter of fiscal 2008 and the lack of market activity and liquidity required that the Company’s student loan auction rate securities be measured using observable market data and Level 3 inputs. The fair values of the Company’s student loan auction rate securities were based on the Company’s assessment of the underlying collateral and the creditworthiness of the issuers of the securities. More than 98% of the underlying assets that secure the student loan auction rate securities are pools of student loans originated under FFELP, which are substantially guaranteed by the U.S. Department of Education. The fair values of the Company’s student loan auction rate securities were determined using a discounted cash flow pricing model that incorporated financial inputs such as projected cash flows, discount rates, expected interest rates to be paid to investors and an estimated liquidity discount. The weighted-average life over which cash flows were projected was determined to be approximately nine years, given the collateral composition of the securities. The discount rates that were applied to the pricing model were based on market data and information for comparable- or similar-term student loan asset-backed securities. The expected interest rate to be paid to investors in a failed auction was determined by the contractual terms for each security. The liquidity discount represents an estimate of the additional return an investor would require to compensate for the lack of liquidity of the student loan auction rate securities. The Company does not intend to sell, nor does it believe it is more likely than not that it would be required to sell, the student loan auction rate securities before anticipated recovery, which could be at final maturity that ranges from March 2023 to November 2047.

In March 2007, the Company issued $1.00 billion principal amount of 3.125% junior convertible debentures due March 15, 2037 (3.125% Debentures) to an initial purchaser in a private offering. As a result of repurchases in fiscal 2009, the remaining principal amount of the 3.125% Debentures as of October 2, 2010 was $689.6 million. The fair value of the 3.125% Debentures as of October 2, 2010 was approximately $670.1 million, based on the last trading price of the 3.125% Debentures of the period. The 3.125% Debentures included embedded features that qualify as an embedded derivative under authoritative guidance for derivatives instruments and hedging activities issued by the FASB. The embedded derivative was separately accounted for as a discount on the 3.125% Debentures and its fair value was established at the inception of the 3.125% Debentures. Each quarter, the change in the fair value of the embedded derivative, if any, is recorded in the consolidated statements of income. The Company uses a derivative valuation model to derive the value of the embedded derivative. Key inputs into this valuation model are the Company’s current stock price, risk-free interest rates, the stock dividend yield, the stock volatility and the 3.125% Debenture’s credit spread over London Interbank Offered Rate (LIBOR). The first three inputs are based on observable market data and are considered Level 2 inputs while the last two inputs require management judgment and are Level 3 inputs.

Interest Rate Swaps

In June 2010, the Company issued $600.0 million principal amount of 2.625% senior convertible debentures due June 15, 2017 (2.625% Debentures) to qualified institutional investors. The fair value of the 2.625% Debentures as of October 2, 2010 was approximately $674.7 million, based on the last trading price of the 2.625% Debentures. In relation to this issuance, the Company also entered into fixed to floating interest rate swap agreements (interest rate swaps) with certain independent financial institutions. The interest rate swaps were designated and qualified as fair value hedges of the 2.625% Debentures, and were separately accounted for as a derivative. Each quarter, the change in fair value of the interest rate swaps and the underlying 2.625% Debentures, if any, is recorded in the consolidated statements of income. The fair value of the interest rate swaps is estimated using a discounted cash flows model, with the three-month forward discount curve of LIBOR and discount rates as the key inputs. These inputs are based on observable market data and are considered Level 2 inputs. See “Note 10. Convertible Debentures and Revolving Credit Facility” for more discussion related to the interest rate swaps.

Assets and Liabilities Measured at Fair Value on a Non-Recurring Basis

As of October 2, 2010, the Company had non-marketable equity securities in private companies of $18.7 million (adjusted cost). The Company’s investments in non-marketable securities of private companies are accounted for by using the cost method. These investments are measured at fair value on a non-recurring basis when they are deemed to be other-than-temporarily impaired. In determining whether a decline in value of non-marketable equity investments in private companies has occurred and is other than temporary, an assessment is made by considering available evidence, including the general market conditions in the investee’s industry, the investee’s product development status and subsequent rounds of financing and the related valuation and/or Xilinx’s participation in such financings. The Company also assesses the investee’s ability to meet business milestones and the financial condition and near-term prospects of the individual investee, including the rate at which the investee is using its cash and the investee’s need for possible additional funding at a lower valuation. The valuation methodology for determining the fair value of non-marketable equity securities is based on the factors noted above which require management judgment and are Level 3 inputs. No impairment loss on non-marketable equity investments was recognized during the second quarter or the first six months of fiscal 2011 and 2010.

Note 5. Financial Instruments

The following is a summary of available-for-sale securities:

		Oct. 2, 2010																Apr. 3, 2010
						Gross				Gross				Estimated								Gross				Gross				Estimated
		Amortized				Unrealized				Unrealized				Fair				Amortized				Unrealized				Unrealized				Fair
(In thousands)		Cost				Gains				Losses				Value				Cost				Gains				Losses				Value
Money market funds		$	174,230			$	—			$	—			$	174,230			$	138,738			$	—			$	—			$	138,738
Bank certificates of deposit			35,010				—				—				35,010				59,996				—				—				59,996
Commercial paper			434,814				—				—				434,814				437,790				—				—				437,790
Corporate bonds			20,889				87				(4	)			20,972				523				15				—				538
Auction rate securities			68,750				—				(4,768	)			63,982				69,200				—				(7,556	)			61,644
Municipal bonds			8,499				88				(15	)			8,572				9,688				75				(60	)			9,703
U.S. government and agency securities			132,084				306				(1	)			132,389				121,991				5				(40	)			121,956
Foreign government and agency securities			534,865				22				(6	)			534,881				488,845				—				—				488,845
Floating rate notes			96,924				82				(77	)			96,929				112,852				142				(564	)			112,430
Mortgage-backed securities			504,383				8,466				(1,664	)			511,185				435,375				8,643				(1,819	)			442,199
		$	2,010,448			$	9,051			$	(6,535	)		$	2,012,964			$	1,874,998			$	8,880			$	(10,039	)		$	1,873,839
Included in:
Cash and cash equivalents														$	676,219															$	936,489
Short-term investments															632,159																355,148
Long-term investments															704,586																582,202
														$	2,012,964															$	1,873,839

The following tables show the fair values and gross unrealized losses of the Company’s investments, aggregated by investment category, for individual securities that have been in a continuous unrealized loss position for the length of time specified, as of October 2, 2010 and April 3, 2010:

		Oct. 2, 2010
		Less Than 12 Months								12 Months or Greater								Total
						Gross								Gross								Gross
		Fair				Unrealized				Fair				Unrealized				Fair				Unrealized
(In thousands)		Value				Losses				Value				Losses				Value				Losses
Corporate Bonds		$	1,397			$	(4	)		$	—			$	—			$	1,397			$	(4	)
Auction rate securities			—				—				63,982				(4,768	)			63,982				(4,768	)
Municipal bonds			620				(7	)			1,426				(8	)			2,046				(15	)
U.S government and agency securities			35,253				(1	)			—				—				35,253				(1	)
Foreign government and agency securities			30,094				(6	)			—				—				30,094				(6	)
Floating rate notes			44,618				(77	)			—				—				44,618				(77	)
Mortgage-backed securities			178,118				(1,663	)			226				(1	)			178,344				(1,664	)
		$	290,100			$	(1,758	)		$	65,634			$	(4,777	)		$	355,734			$	(6,535	)

		Apr. 3, 2010
		Less Than 12 Months								12 Months or Greater								Total
						Gross								Gross								Gross
		Fair				Unrealized				Fair				Unrealized				Fair				Unrealized
(In thousands)		Value				Losses				Value				Losses				Value				Losses
Auction rate securities		$	—			$	—			$	61,644			$	(7,556	)		$	61,644			$	(7,556	)
Municipal bonds			623				(1	)			1,727				(59	)			2,350				(60	)
U.S. government and agency securities			109,451				(40	)			—				—				109,451				(40	)
Floating rate notes			—				—				67,145				(564	)			67,145				(564	)
Mortgage-backed securities			191,255				(1,819	)			—				—				191,255				(1,819	)
		$	301,329			$	(1,860	)		$	130,516			$	(8,179	)		$	431,845			$	(10,039	)

The gross unrealized losses on these investments were primarily related to failed auction rate securities, which was due to adverse conditions in the global credit markets during the past two years. The Company reviewed the investment portfolio and determined that the gross unrealized losses on these investments as of October 2, 2010 and April 3, 2010 were temporary in nature, as evidenced by the reduction in the total gross unrealized losses in recent periods. The aggregate of individual unrealized losses that had been outstanding for 12 months or more were not significant as of October 2, 2010 and April 3, 2010. The Company neither intends to sell these investments nor concludes that it is more-likely-than-not that it will have to sell them until recovery of their carrying values. The Company also believes that it will be able to collect both principal and interest amounts due to the Company at maturity, given the high credit quality of these investments and any related underlying collateral.

The amortized cost and estimated fair value of marketable debt securities (bank certificates of deposit, commercial paper, corporate bonds, auction rate securities, municipal bonds, U.S. and foreign government and agency securities, floating rate notes and mortgage-backed securities) as of October 2, 2010, by contractual maturity, are shown below. Actual maturities may differ from contractual maturities because issuers may have the right to call or prepay obligations without call or prepayment penalties.

		Amortized				Estimated
(In thousands)		Cost				Fair Value
Due in one year or less		$	1,134,054			$	1,134,148
Due after one year through five years			128,751				129,100
Due after five years through ten years			174,355				176,936
Due after ten years			399,058				398,550
		$	1,836,218			$	1,838,734

Certain information related to available-for-sale securities is as follows:

		Three Months Ended								Six Months Ended
		Oct. 2,				Sept. 26,				Oct. 2,				Sept. 26,
(In thousands)		2010				2009				2010				2009
Proceeds from sale of available-for-sale securities		$	132,098			$	48,467			$	157,500			$	62,075
Gross realized gains on sale of available-for-sale securities		$	3,785			$	1,521			$	4,356			$	1,738
Gross realized losses on sale of available-for-sale securities			(135	)			(1,552	)			(158	)			(1,835	)
Net realized gains (losses) on sale of available-for-sale securities		$	3,650			$	(31	)		$	4,198			$	( 97	)
Amortization of premiums (discounts) on available-for-sale securities		$	1,561			$	(1,236	)		$	3,102			$	(2,607	)

The cost of securities matured or sold is based on the specific identification method.

Note 6. Derivative Financial Instruments

The Company’s primary objective for holding derivative financial instruments is to manage foreign currency exchange rate risk and interest rate risk. As a result of the use of derivative financial instruments, the Company is exposed to the risk that counterparties to derivative contracts will fail to meet their contractual obligations. The Company manages counterparty credit risk in derivative contracts by reviewing counterparty creditworthiness on a regular basis, establishing collateral requirement and limiting exposure to any single counterparty. The right of set-off that exists with certain transactions enables the Company to net amounts due to and from the counterparty, reducing the maximum loss from credit risk in the event of counterparty default.

As of October 2, 2010 and April 3, 2010, the Company had the following outstanding forward currency exchange contracts which are derivative financial instruments:

		Oct. 2,				Apr. 3,
(In thousands and U.S. dollars)		2010				2010
Euro		$	35,233			$	21,190
Singapore dollar			56,765				58,420
Japanese Yen			13,195				12,268
British Pound			7,113				4,889
		$	112,306			$	96,767

As part of the Company’s strategy to reduce volatility of operating expenses due to foreign exchange rate fluctuations, the Company employs a hedging program with a five-quarter forward outlook for major foreign-currency-denominated operating expenses. The outstanding forward currency exchange contracts expire at various dates between October 2010 and October 2011. The net unrealized gain or loss, which approximates the fair market value of the above contracts, is expected to be realized and reclassified into net income within the next 12 months.

As of October 2, 2010, all the forward foreign currency exchange contracts were designated and qualified as cash flow hedges and the effective portion of the gain or loss on the forward contract was reported as a component of other comprehensive income and reclassified into net income in the same period during which the hedged transaction affects earnings. The ineffective portion of the gain or loss on the forward contract was immaterial and included in the net income for all periods presented.

The Company may enter into forward foreign currency exchange contracts to hedge firm commitments such as the acquisition of capital expenditures. Gains and losses on foreign currency forward contracts that are designated as hedges of anticipated transactions, for which a firm commitment has been attained and the hedged relationship has been effective, are deferred and included in income or expenses in the same period that the underlying transaction is settled. Gains and losses on any instruments not meeting the above criteria are recognized in income or expenses in the consolidated statements of income as they are incurred.

The Company entered into interest rate swaps with certain independent financial institutions in the attempt to manage interest rate risks related to fixed interest rate expenses from its 2.625% Debentures and floating interest rate income from its investments in marketable debt securities. See “Note 10. Convertible Debentures and Revolving Credit Facility” for more discussion related to interest rate swaps. The interest rate swaps were designated and qualified as fair value hedges of the 2.625% Debentures, and were separately accounted for as a derivative. The interest rate swaps and the 2.625% Debentures were initially measured at fair value. Any subsequent changes in fair values of the interest rate swaps and the 2.625% Debentures will be recorded in the Company’s consolidated statements of income. During the three and six months ended October 2, 2010, the net change in fair values of the interest rate swaps and the underlying 2.625% Debentures was $224 thousand and $268 thousand, respectively, which was recorded as a reduction to interest and other expense, net, on the Company’s condensed consolidated statements of income.

The 3.125% Debentures include provisions which qualify as an embedded derivative. See “Note 10. Convertible Debentures and Revolving Credit Facility” for detailed discussion about the embedded derivative. The embedded derivative was separated from the 3.125% Debentures and its fair value was established at the inception of the 3.125% Debentures. Any subsequent change in fair value of the embedded derivative would be recorded in the Company’s consolidated statement of income. The changes in the fair value of the embedded derivative of $145 thousand and $159 thousand during the three months ended October 2, 2010 and September 26, 2009, respectively, and $614 thousand and $(579) thousand during the six months ended October 2, 2010 and September 26, 2009, respectively, were recorded respectively as an addition (reduction) to interest and other expense, net, on the Company’s condensed consolidated statements of income.

The Company had the following derivative instruments as of October 2, 2010 and April 3, 2010, located on the condensed consolidated balance sheets, utilized for risk management purposes detailed above:

Foreign Exchange Contracts and Interest Rate Swaps

Asset Derivatives

Liability Derivatives

Balance Sheet

Balance Sheet

(In thousands)

Location

Fair Value

Location

Fair Value

October 2, 2010

Prepaid expenses and other current assets

$

37,078

Other accrued liabilities

$

425

Convertible debts

$

30,523

April 3, 2010

Prepaid expenses and other current assets

$

700

Other accrued liabilities

$

2,177

The following table summarizes the effect of derivative instruments on the condensed consolidated statements of income for the three and six months ended October 2, 2010:

		Amount of Gain								Amount of Gain
		(Loss) Recognized								(Loss) Reclassified
		in OCI on				Statement of				from Accumulated				Statement of				Amount of Gain
(In thousands)		Derivative				Income				OCI into Income				Income				(Loss) Recorded
Type of Derivatives		(Effective portion)				Location				(Effective portion)				Location				(Ineffective portion)
Three Months Ended October 2, 2010
Foreign exchange contracts (cash flow hedging)		$	6,620			Interest and other income (expense), net				$	89			Interest and other income (expense), net				$	7
Interest rate swaps (fair value hedging)		$	—			Interest and other income (expense), net				$	—			Interest and other income (expense), net				$	224
Six Months Ended October 2, 2010
Foreign exchange contracts (cash flow hedging)		$	7,488			Interest and other income (expense), net					(523	)		Interest and other income (expense), net				$	8
Interest rate swaps (fair value hedging)		$	—			Interest and other income (expense), net				$	—			Interest and other income (expense), net				$	268

Note 7. Stock-Based Compensation Plans

The Company’s equity incentive plans are broad-based, long-term retention programs that cover employees, consultants and non-employee directors of the Company. These plans are intended to attract and retain talented employees, consultants and non-employee directors and to provide such persons with a proprietary interest in the Company.

Stock-Based Compensation

The following table summarizes stock-based compensation expense related to stock awards granted under the Company’s equity incentive plans and rights to acquire stock granted under the Company’s Employee Stock Purchase Plan:

		Three Months Ended								Six Months Ended
		Oct. 2,				Sept. 26,				Oct. 2,				Sept. 26,
(In thousands)		2010				2009				2010				2009
Stock-based compensation included in:
Cost of revenues		$	1,312			$	1,272			$	2,579			$	2,387
Research and development			7,341				5,205				14,545				11,201
Selling, general and administrative			6,768				5,285				13,417				10,958
Restructuring charges			—				—				—				945
		$	15,421			$	11,762			$	30,541			$	25,491

During the first six months of fiscal 2011 and 2010, the tax benefit realized for the tax deduction from option exercises and other awards, including amounts credited to additional paid-in capital, totaled $647 thousand and $3.7 million, respectively.

The fair values of stock options and stock purchase plan rights under the Company’s equity incentive plans and Employee Stock Purchase Plan were estimated as of the grant date using the Black-Scholes option pricing model. The Company’s expected stock price volatility assumption for stock options is estimated using implied volatility of the Company’s traded options. The expected life of options granted is based on the historical exercise activity as well as the expected disposition of all options outstanding. The expected life of options granted also considers the contractual term which is seven years for all option awards granted on or after April 1, 2007. The per-share weighted-average fair values of stock options granted during the second quarter of fiscal 2011 was $6.72 ($5.63 for the second quarter of fiscal 2010) and for the first six months of fiscal 2011 was $6.72 ($5.66 for the first six months of fiscal 2010). The fair values of stock options granted in fiscal 2010 and 2009 were estimated at the date of grant using the following weighted-average assumptions:

		Three Months Ended								Six Months Ended
		Oct. 2,				Sept. 26,				Oct. 2,				Sept. 26,
		2010				2009				2010				2009
Expected life of options (years)			5.1				5.3				5.1				5.3
Expected stock price volatility			0.36				0.36				0.36				0.36
Risk-free interest rate			1.8	%			2.5	%			1.8	%			2.5	%
Dividend yield			2.5	%			2.7	%			2.5	%			2.7	%

Under the Company’s Employee Stock Purchase Plan, shares are only issued during the second and fourth quarters of each fiscal year. The per-share weighted-average fair values of stock purchase rights granted under the Employee Stock Purchase Plan during the second quarter of fiscal 2011 and 2010 were $7.82 and $6.13, respectively. The fair values of stock purchase plan rights granted in the second quarter of fiscal 2011 and 2010 were estimated at the date of grant using the following assumptions:

		2011				2010
Expected life of options (years)			1.25				1.25
Expected stock price volatility			0.33				0.33
Risk-free interest rate			0.3	%			0.6	%
Dividend yield			2.3	%			2.5	%

The estimated fair values of RSU awards were calculated based on the market price of Xilinx common stock on the date of grant, reduced by the present value of dividends expected to be paid on Xilinx common stock prior to vesting. The per share weighted-average fair values of RSUs granted during the second quarter of fiscal 2011 was $23.90 ($19.27 for the second quarter of fiscal 2010) and for the first six months of fiscal 2010 was $23.91 ($19.25 for the first six months of fiscal 2010), which were calculated based on the weighted-average estimates at the date of grant as follows:

		Three Months Ended								Six Months Ended
		Oct. 2,				Sept. 26,				Oct. 2,				Sept. 26,
		2010				2009				2010				2009
Risk-free interest rate			1.0	%			1.6	%			1.0	%			1.6	%
Dividend yield			2.5	%			2.7	%			2.5	%			2.7	%

Employee Stock Option Plans

A summary of the Company’s option plans activity and related information is as follows:

		Options Outstanding
						Weighted-
						Average
		Number of				Exercise Price
(Shares in thousands)		Shares				Per Share
March 28, 2009			41,021			$	32.51
Granted			2,461			$	21.19
Exercised			(1,600	)		$	22.95
Forfeited/cancelled/expired			(10,856	)		$	37.04
April 3, 2010			31,026			$	30.51
Granted			1,870			$	25.42
Exercised			(1,594	)		$	23.78
Forfeited/cancelled/expired			(1,357	)		$	57.65
October 2, 2010			29,945			$	29.33
Options exercisable at:
October 2, 2010			24,984			$	30.49
April 3, 2010			26,585			$	31.84

The 2007 Equity Plan, which became effective on January 1, 2007, replaced both the Company’s 1997 Stock Plan (which expired on May 8, 2007) and the Supplemental Stock Option Plan and all available but unissued shares under these prior plans were cancelled as of April 1, 2007. The 2007 Equity Plan is now Xilinx’s only plan for providing stock-based awards to eligible employees, consultants and non-employee directors. The types of awards allowed under the 2007 Equity Plan include incentive stock options, non-qualified stock options, RSUs, restricted stock and stock appreciation rights. To date, the Company has issued a mix of non-qualified stock options and RSUs under the 2007 Equity Plan. The mix of stock options and RSU awards will change depending upon the grade level of the employees. Employees at the lower grade levels will receive mostly RSUs and may also receive stock options, whereas employees at the higher grade levels, including the Company’s executive officers, will receive mostly stock options and may also receive RSUs. On August 11, 2010, the stockholders approved an amendment to increase the authorized number of shares reserved for issuance under the 2007 Equity Plan by 4.5 million shares. As of October 2, 2010, 13.7 million shares remained available for grant under the 2007 Equity Plan.

The total pre-tax intrinsic value of options exercised during the three months and six months ended October 2, 2010 was $4.8 million and $6.4 million, respectively. The total pre-tax intrinsic value of options exercised during the three months and six months ended September 26, 2009 was $180 thousand and $232 thousand, respectively. This intrinsic value represents the difference between the exercise price and the fair market value of the Company’s common stock on the date of exercise.

Restricted Stock Unit Awards

A summary of the Company’s RSU activity and related information is as follows:

		RSUs Outstanding
						Weighted-
						Average
						Grant-Date
		Number of				Fair Value
(Shares in thousands)		Shares				Per Share
March 28, 2009			2,970			$	22.99
Granted			1,885			$	20.38
Vested			(901	)		$	22.16
Cancelled			(302	)		$	22.56
April 3, 2010			3,652			$	21.70
Granted			1,495			$	23.91
Vested			(885	)		$	22.64
Cancelled			(154	)		$	21.82
October 2, 2010			4,108			$	22.30

Employee Stock Purchase Plan

Under the Employee Stock Purchase Plan, employees purchased 958 thousand shares for $13.9 million in the second quarter of fiscal 2011 and 719 thousand shares for $10.2 million in the second quarter of fiscal 2010. The next scheduled purchase under the Employee Stock Purchase Plan is in the fourth quarter of fiscal 2011. On August 11, 2010, the stockholders approved an amendment to increase the authorized number of shares reserved for issuance under the Employee Stock Purchase Plan by 2.0 million shares. As of October 2, 2010, 8.7 million shares were available for future issuance out of 44.5 million shares authorized.

Note 8. Net Income Per Common Share

The computation of basic net income per common share for all periods presented is derived from the information on the condensed consolidated statements of income, and there are no reconciling items in the numerator used to compute diluted net income per common share. The total shares outstanding used in the denominator were calculated on weighted-average basis. The total shares used in the denominator of the diluted net income per common share calculation includes 3.1 million potentially dilutive common equivalent shares outstanding for both the second quarter and the first six months of fiscal 2011, that are not included in basic net income per common share. For the second quarter and the first six months of fiscal 2010, the total shares used in the denominator of the diluted net income per common share calculation includes 635 thousand and 536 thousand potentially dilutive common equivalent shares, respectively. Potentially dilutive common equivalent shares are determined by applying the treasury stock method to the assumed exercise of outstanding stock options, the assumed vesting of outstanding RSUs and the assumed issuance of common stock under the Employee Stock Purchase Plan.

Outstanding stock options, RSUs and warrants (see “Note 10. Convertible Debentures and Revolving Credit Facility” for more discussion of warrants) to purchase approximately 36.9 million and 33.0 million shares, for the second quarter and the first six months of fiscal 2011, respectively, under the Company’s stock award plans were excluded from diluted net income per common share, applying the treasury stock method, as their inclusion would have been antidilutive. These options and RSUs could be dilutive in the future if the Company’s average share price increases and is greater than the combined exercise prices and the unamortized fair values of these options and RSUs.

Diluted net income per common share does not include any incremental shares issuable upon the exchange of the 2.625% Debentures and the 3.125% Debentures (see “Note 10. Convertible Debentures and Revolving Credit Facility”). The debentures will have no impact on diluted net income per common share until the price of the Company’s common stock exceeds the conversion price of each debenture, because the principal amount of these debentures will be settled in cash upon conversion. Prior to conversion, the Company will include, in the diluted net income per common share calculation, the effect of the additional shares that may be issued upon conversions using the treasury stock method.

The call options to purchase the Company’s common stock, which the Company purchased to hedge against potential dilution upon conversion of the 2.625% Debentures (see “Note 10. Convertible Debentures and Revolving Credit Facility”), are not considered for purposes of calculating the total shares outstanding under the basic and diluted net income per share, as their effect would be anti-dilutive. Upon exercise, the call options will automatically serve to neutralize the dilutive effect of the 2.625% Debentures.

Note 9. Inventories

Inventories are stated at the lower of cost (determined using the first-in, first-out method), or market (estimated net realizable value) and are comprised of the following:

		Oct. 2,				Apr. 3,
(In thousands)		2010				2010
Raw materials		$	17,992			$	13,257
Work-in-process			116,118				85,990
Finished goods			36,070				31,381
		$	170,180			$	130,628

Note 10. Convertible Debentures and Revolving Credit Facility

2.625% Senior Convertible Debentures

In June 2010, the Company issued $600.0 million principal amount of 2.625% Debentures to qualified institutional investors. The 2.625% Debentures are senior in right of payment to the Company’s existing and future unsecured indebtedness that is expressly subordinated in right of payment to the 2.625% Debentures, including the 3.125% Debentures described below. The 2.625% Debentures are initially convertible, subject to certain conditions, into shares of Xilinx common stock at a conversion rate of 33.0164 shares of common stock per $1 thousand principal amount of the 2.625% Debentures, representing an initial effective conversion price of approximately $30.29 per share of common stock. The conversion rate is subject to adjustment for certain events as outlined in the indenture governing the 2.625% Debentures but will not be adjusted for accrued interest.

The Company received net proceeds of $587.6 million from issuance of the 2.625% Debentures, after deduction of issuance costs of $12.4 million. The debt issuance costs, as adjusted based on the authoritative guidance for the accounting of convertible debentures issued by the FASB, are recorded in current and non-current assets and are being amortized to interest expense over 7 years. Interest is payable semiannually in arrears on June 15 and December 15, beginning on December 15, 2010. The Company recognizes an effective interest rate of 5.75% on the carrying value of the 2.625% Debentures. The effective rate is based on the interest rate for a similar instrument that does not have a conversion feature. Additionally, the Company may be required to pay additional interest under certain events as outlined in the indenture governing the 2.625% Debentures. During the three months ended July 3, 2010, the Company utilized $433.3 million of the net proceeds to repurchase its common stock under an accelerated share repurchase agreement (see “Note 11. Common Stock and Debentures Repurchase Program”). A portion of the remaining net proceeds was used to purchase call options to hedge against potential dilution upon conversion of the 2.625% Debentures (see below) as well as for other general corporate purposes.

The carrying values of the liability and equity components of the 2.625% Debentures are reflected in the Company’s condensed consolidated balance sheet as follows:

		Oct. 2,
(In thousands)		2010
Liability component:
Principal amount of the 2.625% Debentures		$	600,000
Unamortized discount of liability component			(103,627	)
Carrying value of liability component		$	496,373
Fair value hedge adjustment — interest rate swap			30,523
Net carrying value of the 2.625% Debentures		$	526,896
Equity component — net carrying value		$	105,620

The remaining debt discount is being amortized as additional non-cash interest expense over the expected remaining term of the 2.625% Debentures, using the effective interest rate of 5.75%. As of October 2, 2010, the remaining term of the 2.625% Debentures is 6.7 years.

Interest expense related to the 2.625% Debentures was included in interest and other expense, net on the condensed consolidated statements of income as follows:

		Three Months				Six Months
		Ended				Ended
(In thousands)		Oct. 2, 2010				Oct. 2, 2010
Contractual coupon interest		$	3,938			$	4,988
Amortization of debt issuance costs			365				482
Amortization of debt discount			3,167				4,213
Total interest expense related to the 2.625% Debentures		$	7,470			$	9,683

The Company may not redeem the 2.625% Debentures prior to maturity. However, holders of the 2.625% Debentures may convert their 2.625% Debentures only upon the occurrence of certain events in the future, as outlined in the indenture. The Company will adjust the conversion rate for holders who elect to convert their 2.625% Debentures in connection with the occurrence of certain specified corporate events, as defined in the indenture. In addition, holders who convert their 2.625% Debentures in connection with a fundamental change, as defined in the indenture, may be entitled to a make-whole premium in the form of an increase in the conversion rate. Furthermore, in the event of a fundamental change, the holders of the 2.625% Debentures may require Xilinx to purchase all or a portion of their 2.625% Debentures at a purchase price equal to 100% of the principal amount of the 2.625% Debentures, plus accrued and unpaid interest, if any. As of October 2, 2010, none of the conditions allowing holders of the 2.625% Debentures to convert had been met.

The Company has concluded that the 2.625% Debentures are not conventional convertible debt instruments and that the embedded stock conversion option discussed above qualifies as a derivative. In addition, the Company has also concluded that the embedded conversion option would be classified in stockholders’ equity if it were a freestanding instrument. Accordingly, the embedded conversion option is not required to be accounted for separately as a derivative.

Upon conversion, the Company would pay the holders of the 2.625% Debentures cash up to the aggregate principal amount of the 2.625% Debentures. If the conversion value exceeds the principal amount, the Company would deliver shares of its common stock in respect to the remainder of its conversion obligation in excess of the aggregate principal amount (conversion spread). Accordingly, there would be no adjustment to the numerator in the net income per common share computation for the cash settled portion of the 2.625% Debentures as that portion of the debt liability will always be settled in cash. The conversion spread will be included in the denominator for the computation of diluted net income per common share, using the treasury stock method.

In relation to the issuance of the 2.625% Debentures, the Company entered into interest rate swaps with certain independent financial institutions, whereby the Company pays on a quarterly basis, a variable interest rate equal to the three-month LIBOR minus 0.2077%, and receives on a semi-annual basis, interest income at a fixed interest rate of 2.625%. For the three and six months ended October 2, 2010, the Company earned a net interest amount of $4.0 million and $4.8 million, respectively, from these interest rate swaps, which were included in interest and other expense, net, on the condensed consolidated statements of income as a reduction to interest expense. As of October 2, 2010, the fair value of the interest rate swaps was a $30.8 million (unrealized gain), which was recorded in prepaid expenses and other current assets, and the fair value of the hedged items was a $30.5 million (unrealized loss), which was recorded in convertible debts on the condensed consolidated balance sheet. In addition, the net change in fair values of $224 thousand and $268 thousand, respectively, from the interest rate swaps and the underlying 2.625% Debentures during the three and six months ended October 2, 2010, were included as reduction to interest and other expense, net, on the Company’s condensed consolidated statements of income.

To hedge against potential dilution upon conversion of the 2.625% Debentures, the Company also purchased call options on its common stock from the hedge counterparties. The call options give the Company the right to purchase up to 19.8 million shares of its common stock at $30.29 per share. The Company paid an aggregate of $112.3 million to purchase these call options. The call options will terminate upon the earlier of the maturity of the 2.625% Debentures or the last day any of the 2.625% Debentures remain outstanding. To reduce the hedging cost, under separate transactions the Company sold warrants to the hedge counterparties, which give the hedge counterparties the right to purchase up to 19.8 million shares of the Company’s common stock at $42.91 per share. These warrants expire on a gradual basis over a specified period starting on September 13, 2017. The Company received an aggregate of $46.9 million from the sale of these warrants. In accordance to the authoritative guidance issued by the FASB on determining whether an instrument (or embedded feature) is indexed to an entity’s own stock, the Company concluded that the call options and warrants were indexed to the Company’s stock. Therefore, the call options and warrants were classified as equity instruments and will not be marked to market prospectively. The net amount of $65.4 million paid to the hedge counterparties, less the applicable tax benefit related to the call options of $41.7 million, was recorded as a reduction to additional paid-in capital. The settlement terms of the call options and warrants provide for net share settlement.

3.125% Junior Subordinated Convertible Debentures

In March 2007, the Company issued $1.00 billion principal amount of 3.125% Debentures to an initial purchaser in a private offering. The 3.125% Debentures are subordinated in right of payment to the Company’s existing and future senior debt, including the 2.625% Debentures, and to the other liabilities of the Company’s subsidiaries. The 3.125% Debentures were initially convertible, subject to certain conditions, into shares of Xilinx common stock at a conversion rate of 32.0760 shares of common stock per $1 thousand principal amount of 3.125% Debentures, representing an initial effective conversion price of approximately $31.18 per share of common stock. The conversion rate is subject to adjustment for certain events as outlined in the indenture governing the 3.125% Debentures but will not be adjusted for accrued interest. Due to the accumulation of cash dividend distributions to common stockholders, the conversion rate for the 3.125% Debentures was adjusted to 32.8092 shares of common stock per $1 thousand principal amount of 3.125% Debentures, representing an adjusted conversion price of $30.48 per share at the end of second quarter of fiscal 2011.

The Company received net proceeds of $980.0 million from issuance of the 3.125% Debentures, after deduction of issuance costs of $20.0 million. During fiscal 2009, the Company paid $193.2 million in cash to repurchase $310.4 million (principal amount) of its 3.125% Debentures, resulting in approximately $689.6 million of debt outstanding as of October 2, 2010. The debt issuance costs, as adjusted for the authoritative guidance for the accounting of convertible debentures issued by the FASB, were recorded in current and non-current assets and are being amortized to interest expense over 30 years. Interest is payable semiannually in arrears on March 15 and September 15, beginning on September 15, 2007. However, the Company recognizes an effective interest rate of 7.20% on the carrying value of the 3.125% Debentures. The effective rate is based on the interest rate for a similar instrument that does not have a conversion feature. The 3.125% Debentures also have a contingent interest component that may require the Company to pay interest based on certain thresholds beginning with the semi-annual interest period commencing on March 15, 2014 (the maximum amount of contingent interest that will accrue is 0.50% per year) and upon the occurrence of certain events, as outlined in the indenture governing the 3.125% Debentures.

The carrying values of the liability and equity components of the 3.125% Debentures are reflected in the Company’s condensed consolidated balance sheets as follows:

		Oct. 2,				Apr. 3,
(In thousands)		2010				2010
Liability component:
Principal amount of the 3.125% Debentures		$	689,635			$	689,635
Unamortized discount of liability component			(332,070	)			(334,123	)
Unamortized discount of embedded derivative from date of issuance			(1,533	)			(1,562	)
Carrying value of liability component			356,032				353,950
Carrying value of embedded derivative component			1,462				848
Net carrying value of the 3.125% Debentures		$	357,494			$	354,798
Equity component — net carrying value		$	229,513			$	229,513

The remaining debt discount is being amortized as additional non-cash interest expense over the expected remaining term of the 3.125% Debentures using the effective interest rate of 7.20%. As of October 2, 2010, the remaining term of the 3.125% Debentures is 26.4 years. Interest expense related to the 3.125% Debentures was included in interest and other expense, net on the condensed consolidated statements of income and was recognized as follows:

		Three Months Ended								Six Months Ended
		Oct. 2,				Sept. 26,				Oct. 2,				Sept. 26,
(In thousands)		2010				2009				2010				2009
Contractual coupon interest		$	5,388			$	5,388			$	10,776			$	11,040
Amortization of debt issuance costs			55				55				112				112
Amortization of embedded derivative			14				14				29				29
Amortization of debt discount			1,036				964				2,053				1,911
Total interest expense related to the debentures		$	6,493			$	6,421			$	12,970			$	13,092