Form 10-Q
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 |
For the quarterly period ended January 1, 2011
or
|
|
|
o |
|
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from to .
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
(Address of principal executive offices)
|
|
95124
(Zip Code) |
(408) 559-7778
(Registrants 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 registrants common stock:
|
|
|
Class |
|
Shares Outstanding as of January 21, 2011 |
|
|
|
Common Stock, $.01 par value
|
|
261,060,301 |
TABLE OF CONTENTS
PART I. FINANCIAL INFORMATION
|
|
|
ITEM 1. |
|
FINANCIAL STATEMENTS |
XILINX, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
|
Nine Months Ended |
|
|
|
Jan. 1, |
|
|
Jan. 2, |
|
|
Jan. 1, |
|
|
Jan. 2, |
|
(In thousands, except per share amounts) |
|
2011 |
|
|
2010 |
|
|
2011 |
|
|
2010 |
|
Net revenues |
|
$ |
567,190 |
|
|
$ |
513,349 |
|
|
$ |
1,781,593 |
|
|
$ |
1,304,534 |
|
Cost of revenues |
|
|
194,419 |
|
|
|
184,320 |
|
|
|
615,855 |
|
|
|
486,319 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross margin |
|
|
372,771 |
|
|
|
329,029 |
|
|
|
1,165,738 |
|
|
|
818,215 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Research and development |
|
|
98,453 |
|
|
|
101,867 |
|
|
|
289,515 |
|
|
|
275,245 |
|
Selling, general and administrative |
|
|
86,531 |
|
|
|
85,037 |
|
|
|
257,763 |
|
|
|
237,214 |
|
Amortization of acquisition-related intangibles |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,493 |
|
Restructuring charges |
|
|
4,276 |
|
|
|
5,531 |
|
|
|
4,276 |
|
|
|
27,217 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total operating expenses |
|
|
189,260 |
|
|
|
192,435 |
|
|
|
551,554 |
|
|
|
542,169 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income |
|
|
183,511 |
|
|
|
136,594 |
|
|
|
614,184 |
|
|
|
276,046 |
|
Impairment loss on investments |
|
|
|
|
|
|
(3,041 |
) |
|
|
|
|
|
|
(3,041 |
) |
Interest and other expense, net |
|
|
(3,302 |
) |
|
|
(542 |
) |
|
|
(11,916 |
) |
|
|
(13,234 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before income taxes |
|
|
180,209 |
|
|
|
133,011 |
|
|
|
602,268 |
|
|
|
259,771 |
|
Provision for income taxes |
|
|
27,868 |
|
|
|
26,103 |
|
|
|
120,445 |
|
|
|
50,819 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income |
|
$ |
152,341 |
|
|
$ |
106,908 |
|
|
$ |
481,823 |
|
|
$ |
208,952 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income per common share: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
|
$ |
0.59 |
|
|
$ |
0.39 |
|
|
$ |
1.82 |
|
|
$ |
0.76 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted |
|
$ |
0.58 |
|
|
$ |
0.38 |
|
|
$ |
1.79 |
|
|
$ |
0.75 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash dividends declared per common share |
|
$ |
0.16 |
|
|
$ |
0.16 |
|
|
$ |
0.48 |
|
|
$ |
0.44 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares used in per share calculations: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
|
|
259,418 |
|
|
|
276,832 |
|
|
|
265,085 |
|
|
|
275,989 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted |
|
|
263,612 |
|
|
|
278,566 |
|
|
|
268,778 |
|
|
|
277,030 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See notes to condensed consolidated financial statements.
2
XILINX, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
|
|
|
|
|
|
|
|
|
|
|
Jan. 1, |
|
|
Apr. 3, |
|
(In thousands, except par value amounts) |
|
2011 |
|
|
2010* |
|
|
|
(Unaudited) |
|
|
|
|
ASSETS |
|
|
|
|
|
|
|
|
Current assets: |
|
|
|
|
|
|
|
|
Cash and cash equivalents |
|
$ |
1,101,050 |
|
|
$ |
1,031,457 |
|
Short-term investments |
|
|
663,715 |
|
|
|
355,148 |
|
Accounts receivable, net |
|
|
369,657 |
|
|
|
262,735 |
|
Inventories |
|
|
242,532 |
|
|
|
130,628 |
|
Deferred tax assets |
|
|
99,998 |
|
|
|
101,126 |
|
Prepaid expenses and other current assets |
|
|
53,703 |
|
|
|
25,972 |
|
|
|
|
|
|
|
|
Total current assets |
|
|
2,530,655 |
|
|
|
1,907,066 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Property, plant and equipment, at cost |
|
|
745,670 |
|
|
|
714,905 |
|
Accumulated depreciation and amortization |
|
|
(368,906 |
) |
|
|
(349,027 |
) |
|
|
|
|
|
|
|
Net property, plant and equipment |
|
|
376,764 |
|
|
|
365,878 |
|
Long-term investments |
|
|
660,167 |
|
|
|
582,202 |
|
Goodwill |
|
|
117,955 |
|
|
|
117,955 |
|
Other assets |
|
|
172,892 |
|
|
|
211,217 |
|
|
|
|
|
|
|
|
Total Assets |
|
$ |
3,858,433 |
|
|
$ |
3,184,318 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS EQUITY |
|
|
|
|
|
|
|
|
Current liabilities: |
|
|
|
|
|
|
|
|
Accounts payable |
|
$ |
147,160 |
|
|
$ |
96,169 |
|
Accrued payroll and related liabilities |
|
|
119,073 |
|
|
|
114,663 |
|
Income taxes payable |
|
|
814 |
|
|
|
14,452 |
|
Deferred income on shipments to distributors |
|
|
80,536 |
|
|
|
80,132 |
|
Other accrued liabilities |
|
|
27,436 |
|
|
|
51,745 |
|
|
|
|
|
|
|
|
Total current liabilities |
|
|
375,019 |
|
|
|
357,161 |
|
|
|
|
|
|
|
|
|
|
Convertible debentures |
|
|
887,197 |
|
|
|
354,798 |
|
|
|
|
|
|
|
|
|
|
Deferred tax liabilities |
|
|
368,521 |
|
|
|
294,149 |
|
|
|
|
|
|
|
|
|
|
Long term income taxes payable |
|
|
52,889 |
|
|
|
56,248 |
|
|
|
|
|
|
|
|
|
|
Other long-term liabilities |
|
|
1,201 |
|
|
|
1,492 |
|
|
|
|
|
|
|
|
|
|
Commitments and contingencies |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stockholders equity: |
|
|
|
|
|
|
|
|
Preferred stock, $.01 par value (none issued) |
|
|
|
|
|
|
|
|
Common stock, $.01 par value |
|
|
2,600 |
|
|
|
2,735 |
|
Additional paid-in capital |
|
|
1,043,429 |
|
|
|
1,102,411 |
|
Retained earnings |
|
|
1,120,112 |
|
|
|
1,016,545 |
|
Accumulated other comprehensive income (loss) |
|
|
7,465 |
|
|
|
(1,221 |
) |
|
|
|
|
|
|
|
Total stockholders equity |
|
|
2,173,606 |
|
|
|
2,120,470 |
|
|
|
|
|
|
|
|
Total Liabilities and Stockholders Equity |
|
$ |
3,858,433 |
|
|
$ |
3,184,318 |
|
|
|
|
|
|
|
|
|
|
|
* |
|
Derived from audited financial statements |
See notes to condensed consolidated financial statements.
3
XILINX, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended |
|
|
|
Jan. 1, |
|
|
Jan. 2, |
|
(In thousands) |
|
2011 |
|
|
2010 |
|
Cash flows from operating activities: |
|
|
|
|
|
|
|
|
Net income |
|
$ |
481,823 |
|
|
$ |
208,952 |
|
Adjustments to reconcile net income to net cash provided by operating activities: |
|
|
|
|
|
|
|
|
Depreciation |
|
|
37,438 |
|
|
|
37,932 |
|
Amortization |
|
|
5,559 |
|
|
|
11,777 |
|
Stock-based compensation |
|
|
45,295 |
|
|
|
41,010 |
|
Net (gain) loss on sale of available-for-sale securities |
|
|
(3,564 |
) |
|
|
12 |
|
Amortization of debt discount on convertible debentures |
|
|
10,084 |
|
|
|
2,893 |
|
Derivatives revaluation and amortization |
|
|
(59 |
) |
|
|
(542 |
) |
Impairment loss on investments |
|
|
|
|
|
|
3,041 |
|
Tax benefit (expense) from exercise of stock options |
|
|
385 |
|
|
|
(7,662 |
) |
(Excess) reduction of tax benefit from stock-based compensation |
|
|
(2,677 |
) |
|
|
15,868 |
|
Changes in assets and liabilities: |
|
|
|
|
|
|
|
|
Accounts receivable, net |
|
|
(106,922 |
) |
|
|
(14,688 |
) |
Inventories |
|
|
(111,675 |
) |
|
|
(8,883 |
) |
Deferred income taxes |
|
|
78,352 |
|
|
|
35,307 |
|
Prepaid expenses and other current assets |
|
|
(5,002 |
) |
|
|
(5,272 |
) |
Other assets |
|
|
7,357 |
|
|
|
25,042 |
|
Accounts payable |
|
|
50,991 |
|
|
|
60,250 |
|
Accrued liabilities (including restructuring activities) |
|
|
(18,128 |
) |
|
|
57,893 |
|
Income taxes payable |
|
|
9,524 |
|
|
|
(27,540 |
) |
Deferred income on shipments to distributors |
|
|
404 |
|
|
|
15,031 |
|
|
|
|
|
|
|
|
Net cash provided by operating activities |
|
|
479,185 |
|
|
|
450,421 |
|
|
|
|
|
|
|
|
Cash flows from investing activities: |
|
|
|
|
|
|
|
|
Purchases of available-for-sale securities |
|
|
(1,824,321 |
) |
|
|
(1,325,973 |
) |
Proceeds from sale and maturity of available-for-sale securities |
|
|
1,435,276 |
|
|
|
1,001,091 |
|
Purchases of property, plant and equipment |
|
|
(48,324 |
) |
|
|
(17,540 |
) |
Other investing activities |
|
|
(1,400 |
) |
|
|
(2,972 |
) |
|
|
|
|
|
|
|
Net cash used in investing activities |
|
|
(438,769 |
) |
|
|
(345,394 |
) |
|
|
|
|
|
|
|
Cash flows from financing activities: |
|
|
|
|
|
|
|
|
Repurchases of common stock |
|
|
(468,943 |
) |
|
|
(25,000 |
) |
Proceeds from issuance of common stock through various stock plans |
|
|
69,947 |
|
|
|
29,035 |
|
Payment of dividends to stockholders |
|
|
(126,951 |
) |
|
|
(121,617 |
) |
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 |
|
|
|
|
|
Proceeds from sale of interest rate swaps |
|
|
30,214 |
|
|
|
|
|
Excess (reduction of) tax benefit from stock-based compensation |
|
|
2,677 |
|
|
|
(15,868 |
) |
|
|
|
|
|
|
|
Net cash provided by (used in) financing activities |
|
|
29,177 |
|
|
|
(133,450 |
) |
|
|
|
|
|
|
|
Net increase
(decrease) in cash and cash equivalents |
|
|
69,593 |
|
|
|
(28,423 |
) |
Cash and cash equivalents at beginning of period |
|
|
1,031,457 |
|
|
|
1,065,987 |
|
|
|
|
|
|
|
|
Cash and cash equivalents at end of period |
|
$ |
1,101,050 |
|
|
$ |
1,037,564 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Supplemental disclosure of cash flow information: |
|
|
|
|
|
|
|
|
Interest paid |
|
$ |
19,051 |
|
|
$ |
10,776 |
|
Income taxes paid, net of refunds |
|
$ |
23,529 |
|
|
$ |
25,238 |
|
See notes to condensed consolidated financial statements.
4
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 third quarter of fiscal 2011 was a 13-week quarter ended on January 1, 2011.
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 entitys
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 entitys 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 Companys 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 Companys first
quarter of fiscal 2012.
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 entitys
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 December 2010, the FASB issued the authoritative guidance to amend Step 1 of the goodwill
impairment test for reporting units with zero or negative carrying amounts. For those reporting
units, an entity is required to perform Step 2 of the goodwill impairment test if it is more likely
than not that a goodwill impairment exists. In determining whether it is more likely than
not that a goodwill impairment exists, an entity should consider whether there are any adverse
qualitative factors indicating that an impairment may exist. This guidance is effective for public
entities for fiscal years, and interim periods within those years, beginning after December 15,
2010, which for Xilinx is its first quarter fiscal 2012. The Company does not expect these new
standards to have significant impacts on the Companys consolidated financial statements.
In December 2010, the FASB issued the authoritative guidance to clarify the pro forma revenue and
earnings disclosure requirements for business combinations. The guidance specifies that if a public
entity presents comparative financial statements, the entity should
disclose revenue and earnings of the combined entity as though the business combination(s) that
occurred during the current year had occurred as of the beginning of the comparable prior annual
reporting period only. This guidance is effective for public entities prospectively for business
combinations for which the acquisition date is on or after the beginning of the first annual
reporting period beginning on or after December 15, 2010, which for Xilinx is its first quarter
fiscal 2012.
5
Note 3. Significant Customers and Concentrations of Credit Risk
Avnet, Inc. (Avnet), one of the Companys distributors, distributes the substantial majority of the
Companys products worldwide. As of January 1, 2011 and April 3, 2010, Avnet accounted for 97% and
83% of the Companys total accounts receivable, respectively. Resale of product through Avnet
accounted for 53% and 52% of the Companys worldwide net revenues in the third quarter and the
first nine months of fiscal 2011, respectively. For both the third quarter and the first nine
months of fiscal 2010 periods, resale of product through Avnet accounted for 49% of the Companys
worldwide net revenues. 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
January 1, 2011. The increase was primarily due to the timing of collections from and credits
issued to other customers, and to a lesser extent due to the extended payment terms temporarily
granted to Avnet. The Company has further strengthened its partnership with Avnet, and Avnet now
supports more of the Companys customers and has committed more personnel and resources to the
Companys business. As part of this relationship, beginning in our first quarter of fiscal 2011 the
Company agreed to temporarily extend payment terms for Avnet. The extensions of payment terms are
scheduled to be reduced each quarter and Avnet is expected to return to standard payment terms by
the beginning of the fourth quarter of fiscal 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.
No end customer accounted for more than 10% of our net revenues for the third quarter and the first
nine months of fiscal 2011 and 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 & Poors or Moodys Investors Service. The Companys 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 Companys forward currency exchange and interest rate
swap contracts. Additionally, Xilinx limits its investments in the debt securities of a single
issuer based upon the issuers credit rating and attempts to further mitigate credit risk by
diversifying risk across geographies and type of issuer.
As of January 1, 2011, less than 3% of the Companys $2.34 billion investment portfolio consisted
of student loan auction rate securities and all of these securities are rated AAA with the
exception of $8.3 million that were downgraded to an A rating during fiscal 2009. Nearly all 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 nine months of fiscal 2011, $7.2 million of these student loan auction rate
securities were redeemed for cash by the issuers at par value. In addition, during the third
quarter of fiscal 2011 the Company sold $5.8 million notional value of student loan securities.
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 January 1, 2011, approximately 22% 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 Companys available-for-sale
securities.
6
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
Companys fair value methodology during the first nine months of fiscal 2011 and the Company did
not adjust or override any fair value measurements as of January 1, 2011.
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 Companys 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 Companys 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 Companys Level 2 assets and liabilities
include foreign currency forward contracts.
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 Companys Level 3 assets and liabilities include student loan auction rate securities and the
embedded derivative related to the Companys debentures.
7
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
Companys 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 Companys assets and liabilities
measured at fair value on a recurring basis as of January 1, 2011 and April 3, 2010:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Jan. 1, 2011 |
|
|
|
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 |
|
$ |
341,866 |
|
|
$ |
|
|
|
$ |
|
|
|
$ |
341,866 |
|
Bank certificates of deposit |
|
|
|
|
|
|
64,992 |
|
|
|
|
|
|
|
64,992 |
|
Commercial paper |
|
|
|
|
|
|
497,904 |
|
|
|
|
|
|
|
497,904 |
|
Corporate bonds |
|
|
|
|
|
|
30,204 |
|
|
|
|
|
|
|
30,204 |
|
Auction rate securities |
|
|
|
|
|
|
|
|
|
|
52,416 |
|
|
|
52,416 |
|
Municipal bonds |
|
|
|
|
|
|
10,391 |
|
|
|
|
|
|
|
10,391 |
|
U.S. government and agency securities |
|
|
38,761 |
|
|
|
86,329 |
|
|
|
|
|
|
|
125,090 |
|
Foreign government and agency securities |
|
|
|
|
|
|
615,319 |
|
|
|
|
|
|
|
615,319 |
|
Floating rate notes |
|
|
|
|
|
|
97,038 |
|
|
|
|
|
|
|
97,038 |
|
Mortgage-backed securities |
|
|
|
|
|
|
506,820 |
|
|
|
|
|
|
|
506,820 |
|
Foreign currency forward contracts (net) |
|
|
|
|
|
|
4,317 |
|
|
|
|
|
|
|
4,317 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets measured at fair value |
|
$ |
380,627 |
|
|
$ |
1,913,314 |
|
|
$ |
52,416 |
|
|
$ |
2,346,357 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Convertible debentures embedded derivative |
|
|
|
|
|
|
|
|
|
|
1,014 |
|
|
|
1,014 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities measured at fair value |
|
$ |
|
|
|
$ |
|
|
|
$ |
1,014 |
|
|
$ |
1,014 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net assets measured at fair value |
|
$ |
380,627 |
|
|
$ |
1,913,314 |
|
|
$ |
51,402 |
|
|
$ |
2,345,343 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
8
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 |
|
|
Nine months Ended |
|
|
|
Jan. 1, |
|
|
Jan. 2, |
|
|
Jan. 1, |
|
|
Jan. 2, |
|
(In thousands) |
|
2011 |
|
|
2010 |
|
|
2011 |
|
|
2010 |
|
Balance as of beginning of period |
|
$ |
62,520 |
|
|
$ |
79,256 |
|
|
$ |
60,796 |
|
|
$ |
92,736 |
|
Total realized and unrealized gains (losses): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Included in interest and other expense, net |
|
|
(132 |
) |
|
|
7 |
|
|
|
(746 |
) |
|
|
(414 |
) |
Included in other comprehensive income (loss) |
|
|
934 |
|
|
|
3,311 |
|
|
|
3,722 |
|
|
|
10,202 |
|
Sales and settlements, net |
|
|
(11,920 |
)(1) |
|
|
(20,300 |
)(1) |
|
|
(12,370 |
)(2) |
|
|
(40,250 |
)(2) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance as of end of period |
|
$ |
51,402 |
|
|
$ |
62,274 |
|
|
$ |
51,402 |
|
|
$ |
62,274 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
During the third quarter of fiscal 2011, $6.7 million of student loan auction rate
securities were redeemed for cash at par value and $5.8 million notional value of student
loan auction rate securities was sold at a $580 thousand loss. During the third quarter of
fiscal 2010, $20.0 million notional value of senior class asset-backed securities matured
at par value and $300 thousand of student loan auction rate securities were redeemed for
cash at par value. |
|
(2) |
|
During the first nine months
of fiscal 2011 and 2010, the Company redeemed $7.2 million and $1.3 million of
student loan auction rate securities, respectively, for cash at par value.
During the first nine months of fiscal 2011, the Company sold $5.8 million notional value of student loan
auction rate securities and realized a $580 thousand loss, and during the first nine months
of fiscal 2010, the Company sold $20.0 million notional value of senior class asset-backed
securities and realized a $1.0 million loss. Additionally, during the first nine months of
fiscal 2010, $20.0 million notional value of senior class asset-backed securities matured
at par value. |
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 |
|
|
Nine months Ended |
|
|
|
Jan. 1, |
|
|
Jan. 2, |
|
|
Jan. 1, |
|
|
Jan. 2, |
|
(In thousands) |
|
2011 |
|
|
2010 |
|
|
2011 |
|
|
2010 |
|
Interest and other income (expense), net |
|
$ |
448 |
|
|
$ |
7 |
|
|
$ |
(166 |
) |
|
$ |
586 |
|
Impairment loss on investments |
|
|
|
|
|
|
(3,041 |
) |
|
|
|
|
|
|
(3,041 |
) |
As of January 1, 2011, marketable securities measured at fair value using Level 3 inputs were
comprised of $52.4 million of student loan auction rate securities. Auction failures and the lack
of market activity and liquidity required that the Companys student loan auction rate securities
be measured using observable market data and Level 3 inputs. The fair values of the Companys
student loan auction rate securities were based on the Companys assessment of the underlying
collateral and the creditworthiness of the issuers of the securities. Nearly all 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 Companys 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 January 1, 2011 was $689.6 million. The fair value of the 3.125% Debentures as of January 1,
2011 was approximately $718.6 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 Companys current
stock price, risk-free interest rates, the stock dividend yield, the stock volatility and the
3.125% Debentures 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.
Assets and Liabilities Measured at Fair Value on a Non-Recurring Basis
As of January 1, 2011, the Company had non-marketable equity securities in private companies
of $19.1 million (adjusted cost). The Companys 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 investees industry, the investees product
development status and subsequent rounds of financing and the related valuation and/or Xilinxs
participation in such financings. The Company also assesses the investees 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 investees 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 third quarter or the first nine months of fiscal 2011 and 2010.
9
Note 5. Financial Instruments
The following is a summary of available-for-sale securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Jan. 1, 2011 |
|
|
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 |
|
$ |
341,866 |
|
|
$ |
|
|
|
$ |
|
|
|
$ |
341,866 |
|
|
$ |
138,738 |
|
|
$ |
|
|
|
$ |
|
|
|
$ |
138,738 |
|
Bank certificates of deposit |
|
|
64,992 |
|
|
|
|
|
|
|
|
|
|
|
64,992 |
|
|
|
59,996 |
|
|
|
|
|
|
|
|
|
|
|
59,996 |
|
Commercial paper |
|
|
497,904 |
|
|
|
|
|
|
|
|
|
|
|
497,904 |
|
|
|
437,790 |
|
|
|
|
|
|
|
|
|
|
|
437,790 |
|
Corporate bonds |
|
|
30,157 |
|
|
|
49 |
|
|
|
(2 |
) |
|
|
30,204 |
|
|
|
523 |
|
|
|
15 |
|
|
|
|
|
|
|
538 |
|
Auction rate securities |
|
|
56,250 |
|
|
|
|
|
|
|
(3,834 |
) |
|
|
52,416 |
|
|
|
69,200 |
|
|
|
|
|
|
|
(7,556 |
) |
|
|
61,644 |
|
Municipal bonds |
|
|
10,319 |
|
|
|
124 |
|
|
|
(52 |
) |
|
|
10,391 |
|
|
|
9,688 |
|
|
|
75 |
|
|
|
(60 |
) |
|
|
9,703 |
|
U.S. government and agency
securities |
|
|
125,231 |
|
|
|
23 |
|
|
|
(164 |
) |
|
|
125,090 |
|
|
|
121,991 |
|
|
|
5 |
|
|
|
(40 |
) |
|
|
121,956 |
|
Foreign government and
agency securities |
|
|
615,317 |
|
|
|
6 |
|
|
|
(4 |
) |
|
|
615,319 |
|
|
|
488,845 |
|
|
|
|
|
|
|
|
|
|
|
488,845 |
|
Floating rate notes |
|
|
96,922 |
|
|
|
116 |
|
|
|
|
|
|
|
97,038 |
|
|
|
112,852 |
|
|
|
142 |
|
|
|
(564 |
) |
|
|
112,430 |
|
Mortgage-backed securities |
|
|
500,849 |
|
|
|
8,056 |
|
|
|
(2,085 |
) |
|
|
506,820 |
|
|
|
435,375 |
|
|
|
8,643 |
|
|
|
(1,819 |
) |
|
|
442,199 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
2,339,807 |
|
|
$ |
8,374 |
|
|
$ |
(6,141 |
) |
|
$ |
2,342,040 |
|
|
$ |
1,874,998 |
|
|
$ |
8,880 |
|
|
$ |
(10,039 |
) |
|
$ |
1,873,839 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Included in: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents |
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
1,018,158 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
936,489 |
|
Short-term investments |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
663,715 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
355,148 |
|
Long-term investments |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
660,167 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
582,202 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
2,342,040 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
1,873,839 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The following tables show the fair values and gross unrealized losses of the Companys
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 January 1, 2011 and
April 3, 2010:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Jan. 1, 2011 |
|
|
|
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 |
|
$ |
5,051 |
|
|
$ |
(2 |
) |
|
$ |
|
|
|
$ |
|
|
|
$ |
5,051 |
|
|
$ |
(2 |
) |
Auction rate securities |
|
|
|
|
|
|
|
|
|
|
46,416 |
|
|
|
(3,834 |
) |
|
|
46,416 |
|
|
|
(3,834 |
) |
Commercial Paper |
|
|
53,891 |
|
|
|
(1 |
) |
|
|
|
|
|
|
|
|
|
|
53,891 |
|
|
|
(1 |
) |
Municipal bonds |
|
|
2,166 |
|
|
|
(41 |
) |
|
|
1,010 |
|
|
|
(11 |
) |
|
|
3,176 |
|
|
|
(52 |
) |
U.S government and agency securities |
|
|
22,738 |
|
|
|
(163 |
) |
|
|
|
|
|
|
|
|
|
|
22,738 |
|
|
|
(163 |
) |
Foreign government and agency
securities |
|
|
20,013 |
|
|
|
(4 |
) |
|
|
|
|
|
|
|
|
|
|
20,013 |
|
|
|
(4 |
) |
Mortgage-backed securities |
|
|
190,502 |
|
|
|
(1,689 |
) |
|
|
9,506 |
|
|
|
(396 |
) |
|
|
200,008 |
|
|
|
(2,085 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
294,361 |
|
|
$ |
(1,900 |
) |
|
$ |
56,932 |
|
|
$ |
(4,241 |
) |
|
$ |
351,293 |
|
|
$ |
(6,141 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10
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 January 1, 2011 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 January 1, 2011 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
January 1, 2011, 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 |
|
$ |
1,339,926 |
|
|
$ |
1,340,007 |
|
Due after one year through five years |
|
|
101,960 |
|
|
|
102,041 |
|
Due after five years through ten years |
|
|
162,695 |
|
|
|
165,001 |
|
Due after ten years |
|
|
393,360 |
|
|
|
393,125 |
|
|
|
|
|
|
|
|
|
|
$ |
1,997,941 |
|
|
$ |
2,000,174 |
|
|
|
|
|
|
|
|
Certain information related to available-for-sale securities is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
|
Nine months Ended |
|
|
|
Jan. 1, |
|
|
Jan. 2, |
|
|
Jan. 1, |
|
|
Jan. 2, |
|
(In thousands) |
|
2011 |
|
|
2010 |
|
|
2011 |
|
|
2010 |
|
Proceeds from sale of available-for-sale securities |
|
$ |
86,741 |
|
|
$ |
36,163 |
|
|
$ |
244,241 |
|
|
$ |
98,238 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross realized gains on sale of available-for-sale securities |
|
$ |
488 |
|
|
$ |
622 |
|
|
$ |
4,842 |
|
|
$ |
2,359 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross realized losses on sale of available-for-sale securities |
|
|
(1,123 |
) |
|
|
(537 |
) |
|
|
(1,278 |
) |
|
|
(2,371 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Net realized gains (losses) on sale of available-for-sale securities |
|
$ |
(635 |
) |
|
$ |
85 |
|
|
$ |
3,564 |
|
|
$ |
(12 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortization of premiums (discounts) on available-for-sale securities |
|
$ |
2,279 |
|
|
$ |
58 |
|
|
$ |
5,381 |
|
|
$ |
(215 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
The cost of securities matured or sold is based on the specific identification method.
Note 6. Derivative Financial Instruments
The Companys 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 January 1, 2011 and April 3, 2010, the Company had the following outstanding forward currency
exchange contracts which are derivative financial instruments (notional amount):
|
|
|
|
|
|
|
|
|
|
|
Jan. 1, |
|
|
Apr. 3, |
|
(In thousands and U.S. dollars) |
|
2011 |
|
|
2010 |
|
Euro |
|
$ |
40,827 |
|
|
$ |
21,190 |
|
Singapore dollar |
|
|
49,732 |
|
|
|
58,420 |
|
Japanese Yen |
|
|
12,428 |
|
|
|
12,268 |
|
British Pound |
|
|
8,174 |
|
|
|
4,889 |
|
|
|
|
|
|
|
|
|
|
$ |
111,161 |
|
|
$ |
96,767 |
|
|
|
|
|
|
|
|
As part of the Companys 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 January 2011 and February 2012. 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 13 months.
11
As of January 1, 2011, 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 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 Companys consolidated statement of income. The
changes in the fair value of the embedded derivative of $448 thousand (decrease) and $7 thousand
(decrease) during the three months ended January 1, 2011 and January 2, 2010, respectively, and
$166 thousand (increase) and $586 thousand (decrease) during the nine months ended January 1, 2011
and January 2, 2010, respectively, were recorded respectively as an addition (reduction) to
interest and other expense, net, on the Companys condensed consolidated statements of income.
The Company had the following derivative instruments as of January 1, 2011 and April 3, 2010,
located on the condensed consolidated balance sheets, utilized for risk management purposes
detailed above:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign Exchange Contracts |
|
|
|
Asset Derivatives |
|
|
Liability Derivatives |
|
|
|
Balance Sheet |
|
|
|
|
|
|
Balance Sheet |
|
|
|
|
(In thousands) |
|
Location |
|
|
Fair Value |
|
|
Location |
|
|
Fair Value |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
January 1, 2011 |
|
Prepaid expenses and other current assets |
|
|
$ |
4,540 |
|
|
Other accrued liabilities |
|
|
$ |
223 |
|
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 nine months ended January 1, 2011:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amount of Gain |
|
|
|
|
|
|
Amount of Gain |
|
|
|
|
|
|
|
|
|
|
(Loss) Recognized |
|
|
|
|
|
|
(Loss) Reclassified |
|
|
|
|
|
|
|
|
|
|
in OCI on |
|
|
Statement of |
|
|
from Accumulated |
|
|
|
|
|
|
Amount of Gain |
|
(In thousands) |
|
Derivative |
|
|
Income |
|
|
OCI into Income |
|
|
Statement of |
|
|
(Loss) Recorded |
|
Type of Derivatives |
|
(Effective portion) |
|
|
Location |
|
|
(Effective portion) |
|
|
Income Location |
|
|
(Ineffective portion) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
Jan. 1, 2011 |
|
|
Foreign exchange
contracts (cash
flow hedging) |
|
$ |
(1,585 |
) |
|
Interest and other income (expense), net |
|
|
$ |
2,085 |
|
|
Interest and other income(expense), net |
|
|
$ |
(3 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine months Ended
Jan. 1, 2011 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign exchange
contracts (cash
flow hedging) |
|
$ |
5,903 |
|
|
Interest and other income (expense), net |
|
|
$ |
1,561 |
|
|
Interest and other income (expense), net |
|
|
$ |
5 |
|
12
Note 7. Stock-Based Compensation Plans
The Companys 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 Companys equity incentive plans and rights to acquire stock granted under the Companys
Employee Stock Purchase Plan:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
|
Nine months Ended |
|
|
|
Jan. 1, |
|
|
Jan. 2, |
|
|
Jan. 1, |
|
|
Jan. 2, |
|
(In thousands) |
|
2011 |
|
|
2010 |
|
|
2011 |
|
|
2010 |
|
Stock-based compensation included in: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of revenues |
|
$ |
1,092 |
|
|
$ |
1,291 |
|
|
$ |
3,671 |
|
|
$ |
3,678 |
|
Research and development |
|
|
7,120 |
|
|
|
7,289 |
|
|
|
21,665 |
|
|
|
18,140 |
|
Selling, general and administrative |
|
|
6,542 |
|
|
|
6,939 |
|
|
|
19,959 |
|
|
|
18,247 |
|
Restructuring charges |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
945 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
14,754 |
|
|
$ |
15,519 |
|
|
$ |
45,295 |
|
|
$ |
41,010 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
During the first nine 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 $385 thousand and $5.9 million, respectively.
The fair values of stock options and stock purchase plan rights under the Companys equity
incentive plans and Employee Stock Purchase Plan were estimated as of the grant date using the
Black-Scholes option pricing model. The Companys expected stock price volatility assumption for
stock options is estimated using implied volatility of the Companys 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 third quarter of fiscal
2011 was $6.53 ($5.88 for the third quarter of fiscal 2010) and for the first nine months of fiscal
2011 was $6.70 ($5.66 for the first nine months of fiscal 2010). The fair values of stock options
granted in fiscal 2011 and 2010 were estimated at the date of grant using the following
weighted-average assumptions:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
|
Nine months Ended |
|
|
|
Jan. 1, |
|
|
Jan. 2, |
|
|
Jan. 1, |
|
|
Jan. 2, |
|
|
|
2011 |
|
|
2010 |
|
|
2011 |
|
|
2010 |
|
Expected life of options (years) |
|
|
5.2 |
|
|
|
5.3 |
|
|
|
5.1 |
|
|
|
5.3 |
|
Expected stock price volatility |
|
|
0.32 |
|
|
|
0.34 |
|
|
|
0.35 |
|
|
|
0.36 |
|
Risk-free interest rate |
|
|
1.4 |
% |
|
|
2.3 |
% |
|
|
1.8 |
% |
|
|
2.5 |
% |
Dividend yield |
|
|
2.3 |
% |
|
|
2.8 |
% |
|
|
2.5 |
% |
|
|
2.7 |
% |
Under the Companys 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 third quarter of fiscal 2011 was $26.09 ($21.89 for the third quarter of fiscal 2010) and for
the first nine months of fiscal 2010 was $24.05 ($19.38 for the first nine months of fiscal 2010),
which were calculated based on the weighted-average estimates at the date of grant as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
|
Nine months Ended |
|
|
|
Jan. 1, |
|
|
Jan. 2, |
|
|
Jan. 1, |
|
|
Jan. 2, |
|
|
|
2011 |
|
|
2010 |
|
|
2011 |
|
|
2010 |
|
Risk-free interest rate |
|
|
0.8 |
% |
|
|
1.4 |
% |
|
|
1.0 |
% |
|
|
1.6 |
% |
Dividend yield |
|
|
2.3 |
% |
|
|
2.7 |
% |
|
|
2.5 |
% |
|
|
2.7 |
% |
13
Employee Stock Option Plans
A summary of the Companys 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 |
|
|
2,050 |
|
|
$ |
25.62 |
|
Exercised |
|
|
(2,657 |
) |
|
$ |
23.81 |
|
Forfeited/cancelled/expired |
|
|
(2,698 |
) |
|
$ |
50.69 |
|
|
|
|
|
|
|
|
|
January 1, 2011 |
|
|
27,721 |
|
|
$ |
28.83 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Options exercisable at: |
|
|
|
|
|
|
|
|
January 1, 2011 |
|
|
23,318 |
|
|
$ |
29.81 |
|
April 3, 2010 |
|
|
26,585 |
|
|
$ |
31.84 |
|
The 2007 Equity Plan, which became effective on January 1, 2007, replaced both the Companys 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 Xilinxs 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 Companys
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 January 1, 2011, 13.8 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 nine months
ended January 1, 2011 was $4.1 million and $10.5 million, respectively. The total pre-tax
intrinsic value of options exercised during the three months and nine months ended January 2, 2010
was $694 thousand and $925 thousand, respectively. This intrinsic value represents the difference
between the exercise price and the fair market value of the Companys common stock on the date of
exercise.
Restricted Stock Unit Awards
A summary of the Companys 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 |
|
|
1,598 |
|
|
$ |
24.05 |
|
Vested |
|
|
(938 |
) |
|
$ |
22.51 |
|
Cancelled |
|
|
(289 |
) |
|
$ |
22.00 |
|
|
|
|
|
|
|
|
|
January 1, 2011 |
|
|
4,023 |
|
|
$ |
22.42 |
|
|
|
|
|
|
|
|
|
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. There were no purchases in the first and third quarter of the Companys
fiscal year. 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 January 1, 2011, 8.7 million shares were available for future issuance out of 44.5
million shares authorized.
14
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 4.2 million and 3.7
million potentially dilutive common equivalent shares outstanding for the third quarter and the
first nine months of fiscal 2011, respectively, that are not included in basic net income per
common share. For the third quarter and the first nine months of fiscal 2010, the total shares
used in the denominator of the diluted net income per common share calculation includes 1.7 million
and 1.0 million 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 34.6 million and 35.6
million shares, for the third quarter and the first nine months of fiscal 2011, respectively, 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 Companys 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 $600.0 million principal amount of 2.625% senior convertible debentures due June
15, 2017 (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 Companys 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 Companys 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:
|
|
|
|
|
|
|
|
|
|
|
Jan. 1, |
|
|
Apr. 3, |
|
(In thousands) |
|
2011 |
|
|
2010 |
|
Raw materials |
|
$ |
19,815 |
|
|
$ |
13,257 |
|
Work-in-process |
|
|
181,243 |
|
|
|
85,990 |
|
Finished goods |
|
|
41,474 |
|
|
|
31,381 |
|
|
|
|
|
|
|
|
|
|
$ |
242,532 |
|
|
$ |
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 Companys
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 fair value of the
2.625% Debentures as of January 1, 2011 was approximately $703.8 million, based on the last trading
price of the 2.625% Debentures of the period. 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.
15
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.
In relation to the issuance of the 2.625% Debentures, in June 2010 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%. In October
2010, the Company sold the interest rate swaps for $30.2 million. In accordance to the
authoritative guidance for the accounting of derivative instruments and hedging activities issued
by the FASB, the fair value of hedge accounting adjustment at the time of the sale ($29.9 million)
is amortized as reduction to interest expense over the remaining life of the 2.625% Debentures.
Prior to the sale of the interest rate swaps, from June to October 2010 the Company earned a net
interest amount of $5.0 million 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. In addition, the net change in fair values of $268 thousand, from the interest rate swaps
(prior to the sale from June to October 2010) and the underlying 2.625% Debentures, was included as
a reduction to interest and other expense, net, on the Companys condensed consolidated statements
of income.
The carrying values of the liability and equity components of the 2.625% Debentures are reflected
in the Companys condensed consolidated balance sheet as follows:
|
|
|
|
|
(In thousands) |
|
Jan. 1, 2011 |
|
Liability component: |
|
|
|
|
Principal amount of the 2.625% Debentures |
|
$ |
600,000 |
|
Unamortized discount of liability component |
|
|
(99,741 |
) |
Hedge accounting adjustment sale of interest rate swap |
|
|
28,823 |
|
|
|
|
|
Net carrying value of the 2.625% Debentures |
|
$ |
529,082 |
|
|
|
|
|
|
|
|
|
|
Equity component net carrying value |
|
$ |
105,620 |
|
|
|
|
|
The remaining unamortized debt discount, net of hedge accounting adjustment from sale of interest
rate swap, is being amortized as additional non-cash interest expense over the expected remaining
term of the 2.625% Debentures. As of January 1, 2011, the remaining term of the 2.625% Debentures
is 6.4 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 |
|
|
Nine months |
|
|
|
Ended |
|
|
Ended |
|
(In thousands) |
|
Jan. 1, 2011 |
|
|
Jan. 1, 2011 |
|
Contractual coupon interest |
|
$ |
3,938 |
|
|
$ |
8,925 |
|
Amortization of debt issuance costs |
|
|
362 |
|
|
|
845 |
|
Amortization of debt discount, net |
|
|
2,763 |
|
|
|
6,976 |
|
|
|
|
|
|
|
|
Total interest expense related to the 2.625% Debentures |
|
$ |
7,063 |
|
|
$ |
16,746 |
|
|
|
|
|
|
|
|
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 January 1, 2011, 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.
16
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.
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 Companys 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 entitys own stock, the Company concluded that the call options and
warrants were indexed to the Companys 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
Companys existing and future senior debt, including the 2.625% Debentures, and to the other
liabilities of the Companys 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 33.1695 shares of common stock per $1 thousand principal amount of 3.125%
Debentures, representing an adjusted conversion price of $30.15 per share at the end of third
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 January 1, 2011. 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 Companys condensed consolidated balance sheets as follows:
|
|
|
|
|
|
|
|
|
|
|
Jan. 1, |
|
|
Apr. 3, |
|
(In thousands) |
|
2011 |
|
|
2010 |
|
Liability component: |
|
|
|
|
|
|
|
|
Principal amount of the 3.125% Debentures |
|
$ |
689,635 |
|
|
$ |
689,635 |
|
Unamortized discount of liability component |
|
|
(331,015 |
) |
|
|
(334,123 |
) |
Unamortized discount of embedded derivative from date of issuance |
|
|
(1,519 |
) |
|
|
(1,562 |
) |
|
|
|
|
|
|
|
Carrying value of liability component |
|
|
357,101 |
|
|
|
353,950 |
|
Carrying value of embedded derivative component |
|
|
1,014 |
|
|
|
848 |
|
|
|
|
|
|
|
|
Net carrying value of the 3.125% Debentures |
|
$ |
358,115 |
|
|
$ |
354,798 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity component net carrying value |
|
$ |
229,513 |
|
|
$ |
229,513 |
|
|
|
|
|
|
|
|
17
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
January 1, 2011, the remaining term of the 3.125% Debentures is 26.2 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 |
|
|
Nine months Ended |
|
|
|
Jan. 1, |
|
|
Jan. 2, |
|
|
Jan. 1, |
|
|
Jan. 2, |
|
(In thousands) |
|
2011 |
|
|
2010 |
|
|
2011 |
|
|
2010 |
|
Contractual coupon interest |
|
$ |
5,388 |
|
|
$ |
5,388 |
|
|
$ |
16,163 |
|
|
$ |
16,428 |
|
Amortization of debt issuance costs |
|
|
56 |
|
|
|
56 |
|
|
|
168 |
|
|
|
168 |
|
Amortization of embedded derivative |
|
|
14 |
|
|
|
14 |
|
|
|
43 |
|
|
|
43 |
|
Amortization of debt discount |
|
|
1,055 |
|
|
|
982 |
|
|
|
3,108 |
|
|
|
2,893 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total interest expense related to the debentures |
|
$ |
6,513 |
|
|
$ |
6,440 |
|
|
$ |
19,482 |
|
|
$ |
19,532 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
On or after March 15, 2014, the Company may redeem all or part of the remaining 3.125% Debentures
outstanding for the principal amount plus any accrued and unpaid interest if the closing price of
the Companys common stock has been at least 130% of the conversion price then in effect for at
least 20 trading days during any 30 consecutive trading-day period prior to the date on which the
Company provides notice of redemption. Upon conversion, the Company would pay the holders of the
3.125% Debentures cash value of the applicable number of shares of Xilinx common stock, up to the
principal amount of the 3.125% Debentures. If the conversion value exceeds the aggregate principal
amount, the Company may also deliver, at its option, cash or common stock or a combination of cash
and common stock for the conversion value in excess of the 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 3.125% Debentures as that portion of the debt
instrument will deem to 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.
Holders of the 3.125% Debentures may convert their 3.125% Debentures only upon the occurrence of
certain events in the future, as outlined in the indenture. In addition, holders who convert their
3.125% 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 3.125% Debentures may require Xilinx to
purchase all or a portion of their 3.125% Debentures at a purchase price equal to 100% of the
principal amount of 3.125% Debentures, plus accrued and unpaid interest, if any. As of January 1,
2011, none of the conditions allowing holders of the 3.125% Debentures to convert had been met.
The Company concluded that the embedded features related to the contingent interest payments and
the Company making specific types of distributions (e.g., extraordinary dividends) qualify as
derivatives and should be bundled as a compound embedded derivative under the authoritative
guidance for derivatives instruments and hedging activities issued by the FASB. The fair value of
the derivative at the date of issuance of the 3.125% Debentures was $2.5 million and is accounted
for as a discount on the 3.125% Debentures. Due to the repurchase of a portion of the 3.125%
Debentures in fiscal 2009, the carrying value of the derivative was reduced to $1.6 million and
will continue to be amortized to interest expense over the remaining term of the 3.125% Debentures.
Any change in fair value of this embedded derivative will be included in interest and other
expense, net on the Companys consolidated statements of income. The Company also concluded that
the 3.125% Debentures are not conventional convertible debt instruments and that the embedded stock
conversion option qualifies as a derivative. In addition, the Company has 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.
Revolving Credit Facility
In April 2007, Xilinx entered into a five-year $250.0 million senior unsecured revolving credit
facility with a syndicate of banks. Borrowings under the credit facility will bear interest at a
benchmark rate plus an applicable margin based upon the Companys credit rating. In connection
with the credit facility, the Company is required to maintain certain financial and nonfinancial
covenants. As of January 1, 2011, the Company had made no borrowings under this credit facility
and was not in violation of any of the covenants.
Note 11. Common Stock and Debentures Repurchase Program
The Board of Directors has approved stock repurchase programs enabling the Company to repurchase
its common stock in the open market or through negotiated transactions with independent financial
institutions. In February 2008, the Board authorized the repurchase of up to $800.0 million of
common stock (2008 Repurchase Program). In November 2008, the Board of Directors approved an
amendment to the Companys 2008 Repurchase Program to provide that the funds may also be used to
repurchase outstanding debentures. In June 2010, the Board authorized the repurchase of up to
$500.0 million of common stock (2010 Repurchase Program). The 2008 and 2010 Repurchase Programs
have no stated expiration date. Through January 1, 2011, the Company had used the entire amount
authorized under the 2008 Repurchase program and $93.2 million of the $500.0 million authorized
under the 2010 Repurchase Program, leaving $406.8 million available for future purchases. Of the
$800.0 million used under the 2008 Repurchase Program, $606.8 million was used to repurchase 23.5
million shares of the Companys outstanding common stock and $193.2 million was used to repurchase
$310.4 million (principal amount) of its 3.125% Debentures. See Note 10.
Convertible Debentures and Revolving Credit Facility for additional information about the 3.125%
Debentures. The Companys current policy is to retire all repurchased shares and debentures, and
consequently, no treasury shares or debentures were held as of January 1, 2011 and April 3, 2010.
18
During fiscal 2010, the Company repurchased 6.2 million shares of common stock in the open market
for a total of $150.0 million under the 2008 Repurchase Program. During the first quarter of fiscal
2011, the Company entered into a stock repurchase agreement with an independent financial
institution to repurchase shares under both the 2008 Repurchase Program and 2010 Repurchase
Program. Under the agreement, Xilinx provided the financial institution with up-front payments
totaling $433.3 million during the first quarter of fiscal 2011. The financial institution
delivered to Xilinx a certain number of shares based upon the volume weighted-average price, during
an averaging period, less a specified discount. Under these arrangements, the Company received 16.3
million shares of common stock during the first quarter of fiscal 2011. During the second and third
quarter of fiscal 2011, the Company repurchased 1.3 million and 106 thousand shares, respectively,
of common stock in the open market for a total of $35.6 million under the 2010 Repurchase Program.
Note 12. Restructuring Charges
During the third quarter of fiscal 2011, the Company announced restructuring measures designed to
realign resources and drive overall operating efficiencies across the Company. These measures
impacted 56 positions, or less than 2% of the Companys global workforce, from various geographies
and functions worldwide (December 2010 restructuring). Certain positions were terminated during the
third quarter of fiscal 2011 and other positions will be terminated during the fourth quarter of
fiscal 2011. The reorganization plan is expected to be completed by the end of the fourth quarter
of fiscal 2011.
The Company recorded total restructuring charges of $4.3 million in the third quarter of fiscal
2011, primarily related to severance pay expenses. The Company expects to incur additional
restructuring charges of approximately $6.0 million over the remaining period of fiscal 2011.
The following table summarizes the restructuring accrual activity for the first nine months of
fiscal 2011:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Employee |
|
|
Facility- |
|
|
|
|
|
|
severance |
|
|
related and |
|
|
|
|
(In thousands) |
|
and benefits |
|
|
other costs |
|
|
Total |
|
Balance as of April 3, 2010 |
|
$ |
1,953 |
|
|
$ |
60 |
|
|
$ |
2,013 |
|
Restructuring charges |
|
|
3,987 |
|
|
|
290 |
|
|
|
4,277 |
|
Cash payments |
|
|
(4,395 |
) |
|
|
(345 |
) |
|
|
(4,740 |
) |
|
|
|
|
|
|
|
|
|
|
Balance as of January 1, 2011 |
|
$ |
1,545 |
|
|
$ |
5 |
|
|
$ |
1,550 |
|
|
|
|
|
|
|
|
|
|
|
The charges above, as well as the restructuring charges recorded in prior fiscal year (see below),
have been shown separately as restructuring charges on the condensed consolidated statements of
income. The remaining accrual as of January 1, 2011 primarily relates to severance pay and
benefits that are expected to be paid during the fourth quarter of fiscal 2011.
During the first quarter of fiscal 2010, the Company announced restructuring measures designed to
drive structural operating efficiencies across the company. The Company completed this
restructuring plan in the end of the fourth quarter of fiscal 2010, and reduced its global
workforce by approximately 200 net positions, or about 6%. These employee terminations impacted
various geographies and functions worldwide. The Company recorded total restructuring charges of
$5.5 million and $27.2 million in the third quarter and the first nine months of fiscal 2010,
respectively, primarily related to severance costs and benefits expenses.
Note 13. Impairment Loss on Investments
The Company recorded impairment loss on investments of $3.0 million for the third quarter and the
first nine months of fiscal 2010. This impairment loss was related to the write-down of the
Companys investments in non-marketable equity securities of private companies, resulted from the
weak financial condition of certain investees.
Note 14. Interest and Other Expense, Net
The components of interest and other expense, net are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
|
Nine months Ended |
|
|
|
Jan. 1, |
|
|
Jan. 2, |
|
|
Jan. 1, |
|
|
Jan. 2, |
|
(In thousands) |
|
2011 |
|
|
2010 |
|
|
2011 |
|
|
2010 |
|
Interest income |
|
$ |
4,550 |
|
|
$ |
4,453 |
|
|
$ |
13,612 |
|
|
$ |
14,043 |
|
Reversal of interest income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(8,656 |
) |
Interest expense |
|
|
(13,341 |
) |
|
|
(6,440 |
) |
|
|
(31,121 |
) |
|
|
(19,532 |
) |
Other income, net |
|
|
5,489 |
|
|
|
1,445 |
|
|
|
5,593 |
|
|
|
911 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
(3,302 |
) |
|
$ |
(542 |
) |
|
$ |
(11,916 |
) |
|
$ |
(13,234 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
19
Due to an earlier decision by the U.S. Court of Appeals for the Ninth Circuit (Appeals Court),
during the first quarter of fiscal 2010 the Company recorded expense of $8.7 million in order to
reverse the interest income it previously accrued related to an earlier prepayment it made to the
Internal Revenue Service (IRS). See Note 16. Income Taxes for additional information.
Note 15. Comprehensive Income
The components of comprehensive income are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
|
Nine months Ended |
|
|
|
Jan. 1, |
|
|
Jan. 2, |
|
|
Jan. 1, |
|
|
Jan. 2, |
|
(In thousands) |
|
2011 |
|
|
2010 |
|
|
2011 |
|
|
2010 |
|
Net income |
|
$ |
152,341 |
|
|
$ |
106,908 |
|
|
$ |
481,823 |
|
|
$ |
208,952 |
|
Net change in unrealized loss on
available-for-sale
securities, net of tax |
|
|
(344 |
) |
|
|
1,437 |
|
|
|
4,381 |
|
|
|
14,840 |
|
Reclassification adjustment for (gain) loss on
available-for-sale securities, net of tax,
included
in net income |
|
|
169 |
|
|
|
(104 |
) |
|
|
(2,280 |
) |
|
|
(97 |
) |
Net change in unrealized gain (loss) on hedging transactions, net of tax |
|
|
(1,585 |
) |
|
|
(4,104 |
) |
|
|
5,903 |
|
|
|
1,906 |
|
Net change in cumulative translation adjustment |
|
|
819 |
|
|
|
1,542 |
|
|
|
682 |
|
|
|
5,695 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive income |
|
$ |
151,400 |
|
|
$ |
105,679 |
|
|
$ |
490,509 |
|
|
$ |
231,296 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The components of accumulated other comprehensive income (loss) are as follows:
|
|
|
|
|
|
|
|
|
|
|
Jan. 1, |
|
|
Apr. 3, |
|
(In thousands) |
|
2011 |
|
|
2010 |
|
Accumulated unrealized gain (loss) on available-for-sale securities,
net of tax |
|
$ |
1,384 |
|
|
$ |
(718 |
) |
Accumulated unrealized gain (loss) on hedging transactions, net of tax |
|
|
4,349 |
|
|
|
(1,553 |
) |
Accumulated cumulative translation adjustment |
|
|
1,732 |
|
|
|
1,050 |
|
|
|
|
|
|
|
|
Accumulated other comprehensive income (loss) |
|
$ |
7,465 |
|
|
$ |
(1,221 |
) |
|
|
|
|
|
|
|
Note 16. Income Taxes
The Company recorded tax provisions of $27.9 million and $120.4 million for the third quarter and
the first nine months of fiscal 2011, respectively, representing effective tax rates of 15% and
20%, respectively. The rate for the third quarter includes a benefit of $6.4 million for the
retroactive extension of the federal research credit. The Company recorded tax provisions of $26.1
million and $50.8 million for the third quarter and the first nine months of fiscal 2010,
respectively, representing effective tax rates of 20% for both periods.
The difference between the U.S. federal statutory tax rate of 35% and the Companys effective tax
rate is primarily due to certain income earned in lower tax rate jurisdictions, for which no U.S.
income tax has been provided, as the Company intends to permanently reinvest these earnings outside
of the U.S.
The Companys total gross unrecognized tax benefits as of January 1, 2011, determined in accordance
with FASB authoritative guidance for measuring uncertain tax positions, decreased by $7.9 million
in the third quarter of fiscal 2011 to $87.2 million. The decrease was primarily attributable to
U.S. taxes for stock based compensation that were included in the Companys intercompany cost
sharing arrangement. The Companys tax returns filed during the quarter now reflect these amounts.
The total amount of unrecognized tax benefits that, if realized in a future period, would
favorably affect the effective tax rate was $63.0 million as of January 1, 2011.
The Companys policy is to include interest and penalties related to income tax liabilities within
the provision for income taxes on the consolidated statements of income. The balance of accrued
interest and penalties recorded in the consolidated balance sheet as of January 1, 2011 was $1.1
million. Reductions of interest and penalties included in the Companys provision for income taxes
totaled $521 thousand and $1.2 million in the three and nine months ended January 1, 2011,
respectively.
The Company is no longer subject to U.S. federal audits by taxing authorities for years through
fiscal 2007. The Company is no longer subject to U.S. state audits for years through fiscal 2004,
except for fiscal years 1996 through 2001 which are still open for audit purposes. The Company is
no longer subject to tax audits in Ireland for years through fiscal 2006. It is reasonably
possible that changes to our unrecognized tax benefits could be significant in the next twelve
months due to tax audit settlements and lapses of statutes of limitation. As a result of
uncertainties regarding tax audit settlements and their possible outcomes, an estimate of the range
of increase or decrease that could occur in the next twelve months cannot be made.
20
Note 17. Commitments
Xilinx leases some of its facilities and office buildings under non-cancelable operating leases
that expire at various dates through October 2018. Some of the operating leases for facilities and
office buildings require payment of operating costs, including property taxes, repairs, maintenance
and insurance. Most of the Companys leases contain renewal options for varying terms.
Approximate future minimum lease payments under non-cancelable operating leases are as follows:
|
|
|
|
|
End of fiscal year: |
|
(In thousands) |
|
2011 (remaining three months) |
|
$ |
1,868 |
|
2012 |
|
|
5,335 |
|
2013 |
|
|
4,405 |
|
2014 |
|
|
2,992 |
|
2015 |
|
|
1,494 |
|
Thereafter |
|
|
1,488 |
|
|
|
|
|
|
|
$ |
17,582 |
|
|
|
|
|
Aggregate future rental income to be received, which includes rents from both owned and leased
property, totaled $11.4 million as of January 1, 2011. Rent expense, net of rental income, under
all operating leases was $1.2 million and $3.6 million for the third quarter and the first nine
months of fiscal 2011, respectively. Rent expense, net of rental income, under all operating
leases was $1.1 million and $4.2 million for the third quarter and the first nine months of fiscal
2010, respectively. Rental income, which includes rents received from both owned and leased
property, was not material for the third quarter and the first nine months of fiscal 2011 or 2010.
Other commitments as of January 1, 2011 totaled $145.5 million and consisted of purchases of
inventory and other non-cancelable purchase obligations related to subcontractors that manufacture
silicon wafers and provide assembly and some test services. The Company expects to receive and pay
for these materials and services in the next three to six months, as the products meet delivery and
quality specifications. As of January 1, 2011, the Company also had $19.4 million of
non-cancelable license obligations to providers of electronic design automation software and
hardware/software maintenance expiring at various dates through December, 2013.
The Company committed up to $5.0 million to acquire, in the future, licenses to intellectual
property until July 2023. License payments will be amortized over the useful life of the
intellectual property acquired.
Note 18. Product Warranty and Indemnification
The Company generally sells products with a limited warranty for product quality. The Company
provides an accrual for known product issues if a loss is probable and can be reasonably estimated.
As of the end of the third quarter of fiscal 2011 and the end of fiscal 2010, the accrual balances
of the product warranty liability were immaterial.
The Company offers, subject to certain terms and conditions, to indemnify certain customers and
distributors for costs and damages awarded against these parties in the event the Companys
hardware products are found to infringe third-party intellectual property rights, including
patents, copyrights or trademarks, and to compensate certain customers for limited specified costs
they actually incur in the event our hardware products experience epidemic failure. To a lesser
extent, the Company may from time-to-time offer limited indemnification with respect to its
software products. The terms and conditions of these indemnity obligations are limited by
contract, which obligations are typically perpetual from the effective date of the agreement. The
Company has historically received only a limited number of requests for indemnification under these
provisions and has not made any significant payments pursuant to these provisions. The Company
cannot estimate the maximum amount of potential future payments, if any, that the Company may be
required to make as a result of these obligations due to the limited history of indemnification
claims and the unique facts and circumstances that are likely to be involved in each particular
claim and indemnification provision. However, there can be no assurances that the Company will not
incur any financial liabilities in the future as a result of these obligations.
21
Note 19. Contingencies
Patent Litigation
On December 28, 2007, a patent infringement lawsuit was filed by PACT XPP Technologies, AG (PACT)
against the Company in the U.S. District Court for the Eastern District of Texas, Marshall Division
(PACT XPP Technologies, AG. v. Xilinx, Inc. and Avnet, Inc. Case No. 2:07-CV-563). The lawsuit
pertains to 11 different patents and PACT seeks injunctive relief, unspecified damages, interest
and attorneys fees. Neither the likelihood, nor the amount of any potential exposure to the
Company is estimable at this time.
On July 30, 2010, a patent infringement lawsuit was filed by Intellitech Corporation (Intellitech)
against the Company in the U.S. District Court for the District of Delaware (Intellitech
Corporation v. Altera Corporation, Xilinx, Inc. and Lattice Semiconductor Corporation Case No.
1:10-CV-00645-UNA). The lawsuit pertains to a single patent and Intellitech seeks declaratory and
injunctive
relief, unspecified damages, interest and attorneys fees. Neither the likelihood, nor the amount
of any potential exposure to the Company is estimable at this time.
On December 6, 2010, a patent infringement lawsuit was filed by Bala Delay Line, Inc. (Bala Delay)
against the Company in the U.S. District Court for the Eastern District of Texas, Texarkana
Division (Bala Delay Line, Inc V. Xilinx, Inc., Case No. 5:10-CV-211), and on January 31, 2011,
Bala Delay filed another patent infringement lawsuit against the Company in the U.S. District Court
for the Eastern District of Texas, Sherman Division (Bala Delay Line, Inc v. Xilinx, Inc. and
Bonser-Philhower Sales, Inc., Case No. 4:11-CV-46). Both lawsuits pertain to the same single
patent and in each case Bala Delay seeks declaratory and injunctive relief, unspecified damages,
interest and attorneys fees. Neither the likelihood, nor the amount of any potential exposure to
the Company is estimable at this time.
Other Matters
Except as stated above, there are no pending legal proceedings of a material nature to which the
Company is a party or of which any of its property is the subject.
Note 20. Goodwill
As of January 1, 2011 and April 3, 2010, the balance of goodwill was $118.0 million. All other
acquisition-related intangibles were fully amortized as of the end of the Companys first quarter
of fiscal 2010. Amortization expense for acquisition-related intangible assets for the first
quarter of fiscal 2010 was $2.5 million, which was based on a straight-line basis.
Note 21. Subsequent Events
On January 18, 2011, the Companys Board of Directors declared a cash dividend of $0.16 per common
share for the third quarter of fiscal 2011. The dividend is payable on March 2, 2011 to
stockholders of record on February 9, 2011.
22
|
|
|
ITEM 2. |
|
MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS |
The statements in this Managements Discussion and Analysis that are forward looking, within
the meaning of the Private Securities Litigation Reform Act of 1995, involve numerous risks and
uncertainties and are based on current expectations. The reader should not place undue reliance on
these forward-looking statements. Our actual results could differ materially from those anticipated
in these forward-looking statements for many reasons, including those risks discussed under Risk
Factors and elsewhere in this document. Often, forward-looking statements can be identified by
the use of forward-looking words, such as may, will, could, should, expect, believe,
anticipate, estimate, continue, plan, intend, project and other similar terminology, or
the negative of such terms. We disclaim any responsibility to update or revise any forward-looking
statement provided in this document for any reason.
Critical Accounting Policies and Estimates
The methods, estimates and judgments we use in applying our most critical accounting policies have
a significant impact on the results we report in our consolidated financial statements. The SEC
has defined critical accounting policies as those that are most important to the portrayal of our
financial condition and results of operations and require us to make our most difficult and
subjective judgments, often as a result of the need to make estimates of matters that are
inherently uncertain. Based on this definition, our critical accounting policies include:
valuation of marketable and non-marketable securities, which impacts losses on debt and equity
securities when we record impairments; revenue recognition, which impacts the recording of
revenues; and valuation of inventories, which impacts cost of revenues and gross margin. Our
critical accounting policies also include: the assessment of impairment of long-lived assets, which
impacts their valuation; the assessment of the recoverability of goodwill, which impacts goodwill
impairment; accounting for income taxes, which impacts the provision or benefit recognized for
income taxes, as well as the valuation of deferred tax assets recorded on our consolidated balance
sheet; and valuation and recognition of stock-based compensation, which impacts gross margin,
research and development (R&D) expenses, and selling, general and administrative (SG&A) expenses.
Below, we discuss these policies further, as well as the estimates and judgments involved. We also
have other key accounting policies that are not as subjective, and therefore, their application
would not require us to make estimates or judgments that are as difficult, but which nevertheless
could significantly affect our financial reporting.
Valuation of Marketable and Non-marketable Securities
Our short-term and long-term investments include marketable debt securities and non-marketable
equity securities. As of January 1, 2011, we had marketable debt securities with a fair value of
$2.00 billion and non-marketable equity securities in private companies of $19.1 million (adjusted
cost).
We determine the fair values for marketable debt and equity securities using industry standard
pricing services, data providers and other third-party sources and by internally performing
valuation analyses. See Note 4. Fair Value Measurements to our condensed consolidated financial
statements, included in Part 1. Financial Information, for details of the valuation
methodologies. In determining if and when a decline in value below adjusted cost of marketable debt
and equity securities is other than temporary, we evaluate on an ongoing basis the market
conditions, trends of earnings, financial condition, credit ratings, any underlying collateral and
other key measures for our investments. We assess other-than-temporary impairment of debt and
equity securities in accordance with the latest guidance issued by the FASB. We did not record any
other-than-temporary impairment for marketable debt or equity securities during the first nine
months of fiscal 2011 and 2010.
Our 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 investees industry, the investees product development status and subsequent rounds of
financing and the related valuation and/or our participation in such financings. We also assess
the investees 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 investees 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. See Note 4. Fair
Value Measurements to our condensed consolidated financial statements, included in Part 1.
Financial Information, for additional information. When a decline in value is deemed to be other
than temporary, we recognize an impairment loss in the current periods operating results to the
extent of the decline. We recorded $3.0 million of other-than-temporary impairment for
non-marketable equity securities during the first nine months of fiscal 2010. We did not record any
other-than-temporary impairment for non-marketable equity securities during the first nine months
of fiscal 2011.
23
Revenue Recognition
Sales to distributors are made under agreements providing distributor price adjustments and rights
of return under certain circumstances. Revenue and costs relating to distributor sales are
deferred until products are sold by the distributors to the distributors end customers. For the
first nine months of fiscal 2011, approximately 65% of our net revenues were from products sold to
distributors for subsequent resale to original equipment manufacturers (OEMs) or their subcontract
manufacturers. Revenue recognition depends on notification from the distributor that product has
been sold to the distributors end customer. Also reported by the distributor are product resale
price, quantity and end customer shipment information, as well as inventory on hand. Reported
distributor inventory on hand is reconciled to deferred revenue balances monthly. We maintain
system controls to validate distributor data and to verify that the reported information is
accurate. Deferred income on shipments to distributors reflects the effects of distributor price
adjustments and the amount of gross margin expected to be realized when distributors sell through
product purchased from us. Accounts receivable from distributors are recognized and inventory is
relieved when title to inventories transfers, typically upon shipment from Xilinx at which point we
have a legally enforceable right to collection under normal payment terms.
As of January 1, 2011, we had $115.6 million of deferred revenue and $35.1 million of deferred cost
of revenues recognized as a net $80.5 million of deferred income on shipments to distributors. As
of April 3, 2010, we had $110.4 million of deferred revenue and $30.3 million of deferred cost of
revenues recognized as a net $80.1 million of deferred income on shipments to distributors. The
deferred income on shipments to distributors that will ultimately be recognized in our consolidated
statement of income will be different than the amount shown on the consolidated balance sheet due
to actual price adjustments issued to the distributors when the product is sold to their end
customers.
Revenue
from sales to our direct customers is recognized upon shipment, provided that persuasive
evidence of a sales arrangement exists, the price is fixed, title has transferred, collection of
resulting receivables is reasonably assured, and there are no customer acceptance requirements and
no remaining significant obligations. For each of the periods presented, there were no significant
formal acceptance provisions with our direct customers.
Revenue from software licenses is deferred and recognized as revenue over the license term of one
year. Revenue from support services is recognized when the service is performed. Revenue from
Support Products, which includes software and services sales, was less than 5% of net revenues for
all of the periods presented.
Allowances for end customer sales returns are recorded based on historical experience and for known
pending customer returns or allowances.
Valuation of Inventories
Inventories are stated at the lower of actual cost (determined using the first-in, first-out
method) or market (estimated net realizable value). The valuation of inventory requires us to
estimate excess or obsolete inventory as well as inventory that is not of saleable quality. We
review and set standard costs quarterly to approximate current actual manufacturing costs. Our
manufacturing overhead standards for product costs are calculated assuming full absorption of
actual spending over actual volumes, adjusted for excess capacity. Given the cyclicality of the
market and the obsolescence of technology and product lifecycles, we write down inventory based on
forecasted demand and technological obsolescence. These factors are impacted by market and
economic conditions, technology changes, new product introductions and changes in strategic
direction and require estimates that may include uncertain elements. The estimates of future
demand that we use in the valuation of inventory are the basis for our published revenue forecasts,
which are also consistent with our short-term manufacturing plans. If our demand forecast for
specific products is greater than actual demand and we fail to reduce manufacturing output
accordingly, we could be required to write down additional inventory, which would have a negative
impact on our gross margin.
Impairment of Long-Lived Assets
Long-lived assets to be held and used are reviewed for impairment if indicators of potential
impairment exist. Impairment indicators are reviewed on a quarterly basis. When indicators of
impairment exist and assets are held for use, we estimate future undiscounted cash flows
attributable to the assets. In the event such cash flows are not expected to be sufficient to
recover the recorded value of the assets, the assets are written down to their estimated fair
values based on the expected discounted future cash flows attributable to the assets or based on
appraisals. Factors affecting impairment of assets held for use include the ability of the
specific assets to generate separately identifiable positive cash flows.
When assets are removed from operations and held for sale, we estimate impairment losses as the
excess of the carrying value of the assets over their fair value. Factors affecting impairment of
assets held for sale include market conditions. Changes in any of these factors could necessitate
impairment recognition in future periods for assets held for use or assets held for sale.
Long-lived assets such as goodwill, other intangible assets and property, plant and equipment, are
considered non-financial assets, and are only measured at fair value when indicators of impairment
exist.
24
Goodwill
As required by the authoritative guidance for goodwill established by the FASB, goodwill is not
amortized but is subject to impairment tests on an annual basis, or more frequently if indicators
of potential impairment exist, and goodwill is written down when it is determined to be impaired.
We perform an annual impairment review in the fourth quarter of each fiscal year and compare the
fair value of the reporting unit in which the goodwill resides to its carrying value. If the
carrying value exceeds the fair value, the goodwill of the reporting unit is potentially impaired.
For purposes of impairment testing, Xilinx operates as a single reporting unit. We use the quoted
market price method to determine the fair value of the reporting unit. Based on the impairment
review performed during the fourth quarter of fiscal 2010, there was no impairment of goodwill in
fiscal 2010. Unless there are indicators of impairment, our next impairment review for goodwill
will be performed and completed in the fourth quarter of fiscal 2011. To date, no impairment
indicators have been identified.
Accounting for Income Taxes
Xilinx is a multinational corporation operating in multiple tax jurisdictions. We must determine
the allocation of income to each of these jurisdictions based on estimates and assumptions and
apply the appropriate tax rates for these jurisdictions. We undergo routine audits by taxing
authorities regarding the timing and amount of deductions and the allocation of income among
various tax jurisdictions. Tax audits often require an extended period of time to resolve and may
result in income tax adjustments if changes to the allocation are required between jurisdictions
with different tax rates.
In determining income for financial statement purposes, we must make certain estimates and
judgments. These estimates and judgments occur in the calculation of certain tax liabilities and
in the determination of the recoverability of certain deferred tax assets, which arise from
temporary differences between the tax and financial statement recognition of revenue and expense.
Additionally, we must estimate the amount and likelihood of potential losses arising from audits or
deficiency notices issued by taxing authorities. The taxing authorities positions and our
assessment can change over time resulting in a material effect on the provision for income taxes in
periods when these changes occur.
We must also assess the likelihood that we will be able to recover our deferred tax assets. If
recovery is not likely, we must increase our provision for taxes by recording a reserve in the form
of a valuation allowance for the deferred tax assets that we estimate will not ultimately be
recoverable.
We perform a two-step approach to recognizing and measuring uncertain tax positions relating to
accounting for income taxes. The first step is to evaluate the tax position for recognition by
determining if the weight of available evidence indicates that it is more likely than not that the
position will be sustained on audit, including resolution of related appeals or litigation
processes, if any. The second step is to measure the tax benefit as the largest amount that is
more than 50% likely of being ultimately realized. See Note 16. Income Taxes to our condensed
consolidated financial statements included in Part 1. Financial Information.
Stock-Based Compensation
Determining the appropriate fair-value model and calculating the fair value of stock-based awards
at the date of grant requires judgment. We use the Black-Scholes option-pricing model to estimate
the fair value of employee stock options and rights to purchase shares under our Employee Stock
Purchase Plan. Option pricing models, including the Black-Scholes model, also require the use of
input assumptions, including expected stock price volatility, expected life, expected dividend
rate, expected forfeiture rate and expected risk-free rate of return. We use implied volatility
based on traded options in the open market as we believe implied volatility is more reflective of
market conditions and a better indicator of expected volatility than historical volatility. In
determining the appropriateness of implied volatility, we considered: the volume of market activity
of traded options, and determined there was sufficient market activity; the ability to reasonably
match the input variables of traded options to those of options granted by us, such as date of
grant and the exercise price, and determined the input assumptions were comparable; and the length
of term of traded options used to derive implied volatility, which is generally one to two years
and which was extrapolated to match the expected term of the employee options granted by us, and
determined the length of the option term was reasonable. The expected life of options granted is
based on the historical exercise activity as well as the expected disposition of all options
outstanding. We will continue to review our input assumptions and make changes as deemed
appropriate depending on new information that becomes available. Higher volatility and expected
lives result in a proportional increase to stock-based compensation determined at the date of
grant. The expected dividend rate and expected risk-free rate of return do not have as significant
an effect on the calculation of fair value.
In addition, we developed an estimate of the number of stock-based awards which will be forfeited
due to employee turnover. Quarterly changes in the estimated forfeiture rate have an effect on
reported stock-based compensation, as the effect of adjusting the rate for all expense amortization
is recognized in the period the forfeiture estimate is changed. If the actual forfeiture rate is
higher than the estimated forfeiture rate, then an adjustment is made to increase the estimated
forfeiture rate, which will result in a decrease to the expense recognized in the financial
statements. If the actual forfeiture rate is lower than the estimated forfeiture rate, then an
adjustment is made to decrease the estimated forfeiture rate, which will result in an increase to
the expense recognized in the financial statements. The impact of forfeiture true up and
forfeiture rate estimates in the first nine months of fiscal 2011 and 2010 reduced stock-based
compensation expense by $10.9 million and $12.2 million, respectively. The expense we recognize in
future periods could also differ significantly from the current period and/or our forecasts due to
adjustments in the assumed forfeiture rates.
25
Results of Operations: Third quarter and first nine months of fiscal 2011 compared to the
third quarter and first nine months of fiscal 2010
The third quarter and first nine months of fiscal 2011 were a 13-week quarter and 39-week
period, respectively, ended on January 1, 2011 while the third quarter and the first nine months of
fiscal 2010 were a 14-week and 40-week period, respectively, ended on January 2, 2010.
The following table sets forth statement of income data as a percentage of net revenues for the
periods indicated:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
|
Nine Months Ended |
|
|
|
Jan. 1, |
|
|
Jan. 2, |
|
|
Jan. 1, |
|
|
Jan. 2, |
|
|
|
2011 |
|
|
2010 |
|
|
2011 |
|
|
2010 |
|
Net revenues |
|
|
100.0 |
% |
|
|
100.0 |
% |
|
|
100.0 |
% |
|
|
100.0 |
% |
Cost of revenues |
|
|
34.3 |
|
|
|
35.9 |
|
|
|
34.6 |
|
|
|
37.3 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross margin |
|
|
65.7 |
|
|
|
64.1 |
|
|
|
65.4 |
|
|
|
62.7 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Research and development |
|
|
17.4 |
|
|
|
19.8 |
|
|
|
16.3 |
|
|
|
21.1 |
|
Selling, general and administrative |
|
|
15.2 |
|
|
|
16.6 |
|
|
|
14.5 |
|
|
|
18.2 |
|
Amortization of acquisition-related intangibles |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
0.2 |
|
Restructuring charges |
|
|
0.7 |
|
|
|
1.1 |
|
|
|
0.2 |
|
|
|
2.1 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total operating expenses |
|
|
33.3 |
|
|
|
37.5 |
|
|
|
31.0 |
|
|
|
41.6 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income |
|
|
32.4 |
|
|
|
26.6 |
|
|
|
34.4 |
|
|
|
21.1 |
|
Impairment loss on investments |
|
|
|
|
|
|
(0.6 |
) |
|
|
|
|
|
|
(0.2 |
) |
Interest and other expense, net |
|
|
(0.6 |
) |
|
|
(0.1 |
) |
|
|
(0.6 |
) |
|
|
(1.0 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before income taxes |
|
|
31.8 |
|
|
|
25.9 |
|
|
|
33.8 |
|
|
|
19.9 |
|
Provision for income taxes |
|
|
4.9 |
|
|
|
5.1 |
|
|
|
6.8 |
|
|
|
3.9 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income |
|
|
26.9 |
% |
|
|
20.8 |
% |
|
|
27.0 |
% |
|
|
16.0 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Revenues
We sell our products to global manufacturers of electronic products in end markets such as wired
and wireless communications, aerospace and defense, industrial, scientific and medical and audio,
video and broadcast. The vast majority of our net revenues are generated by sales of our
semiconductor products, but we also generate sales from support products. We classify our product
offerings into four categories: New, Mainstream, Base and Support Products. The composition of
each product category is as follows:
|
|
|
New Products include our most recent product offerings and include the
Virtex®-6, Virtex-5, Spartan®-6, Spartan-3A and Spartan-3E product
families. |
|
|
|
Mainstream Products include the Virtex-4, Spartan-3, Spartan-II and CoolRunner-II
product families. |
|
|
|
Base Products consist of our older product families including the Virtex, Virtex-E,
Virtex-II, Spartan, XC4000, CoolRunner and XC9500 products. |
|
|
|
Support Products include configuration products or programmable read-only memory
(PROMs), software, intellectual property (IP) cores, customer training, design services and
support. |
These product categories, except for Support Products, are modified on a periodic basis to better
reflect the age of the products and advances in technology. The most recent modification was made
on March 29, 2009, which was the beginning of our fiscal 2010. New Products include our most recent
product offerings and are typically designed into our customers latest generation of electronic
systems. Mainstream Products are generally several years old and designed into customer programs
that are currently shipping in full production. Base Products are older than Mainstream Products
with demand generated generally by the oldest customer systems still in production. Support
Products are generally products or services sold in conjunction with our semiconductor devices to
aid customers in the design process.
Net revenues of $567.2 million in the third quarter of fiscal 2011 represented a 10% increase from
the comparable prior year period of $513.3 million. Net revenues for the first nine months of
fiscal 2011 were $1.78 billion, a 37% increase from the comparable prior year period of $1.30
billion. The year-over-year increases in net revenues were primarily driven by strong New Product
growth. Total unit sales increased in the third quarter and the first nine months of fiscal 2011
compared with prior year periods. The average selling price per unit also increased during the
same time periods.
No end customer accounted more than 10% of our net revenues for the third quarter and the first
nine months of fiscal 2011 and 2010.
26
Net Revenues by Product
Net revenues by product categories for the third quarter and the first nine months of fiscal 2011
and 2010 were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
|
Nine months Ended |
|
|
|
Jan. 1, |
|
|
Jan. 2, |
|
|
|
|
|
|
Jan. 1, |
|
|
Jan. 2, |
|
|
|
|
(In millions) |
|
2011 |
|
|
2010 |
|
|
Change |
|
|
2011 |
|
|
2010 |
|
|
Change |
|
New Products |
|
$ |
245.5 |
|
|
$ |
168.4 |
|
|
|
46 |
% |
|
$ |
750.5 |
|
|
$ |
390.3 |
|
|
|
92 |
% |
Mainstream Products |
|
|
151.0 |
|
|
|
169.0 |
|
|
|
(11 |
)% |
|
|
499.2 |
|
|
|
441.6 |
|
|
|
13 |
% |
Base Products |
|
|
143.0 |
|
|
|
151.4 |
|
|
|
(6 |
)% |
|
|
453.6 |
|
|
|
408.2 |
|
|
|
11 |
% |
Support Products |
|
|
27.7 |
|
|
|
24.5 |
|
|
|
13 |
% |
|
|
78.3 |
|
|
|
64.4 |
|
|
|
22 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total net revenues |
|
$ |
567.2 |
|
|
$ |
513.3 |
|
|
|
10 |
% |
|
$ |
1,781.6 |
|
|
$ |
1,304.5 |
|
|
|
37 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net revenues from New Products increased significantly in the third quarter and first nine months
of fiscal 2011 from the comparable prior year periods as a result of continued strong market
acceptance of these products, particularly for our 65-nanometer (nm) Virtex-5, 40-nm Virtex-6 and
45-nm Spartan-6 product families. We expect sales of New Products to continue to increase over
time as more customer programs enter volume production with our 40/45-nm products.
Net revenues from Mainstream Products decreased in the third quarter of fiscal 2011 from the
comparable prior year period. The decrease was primarily due to lower sales of our Spartan-3 and
Virtex-4 product families. Net revenues from Mainstream Products increased in the first nine
months of fiscal 2011 from the comparable prior year period. The increase was primarily due to
higher sales of our Virtex-4 product family during the first and second quarter of fiscal 2011.
Net revenues from Base Products decreased in the third quarter of fiscal 2011 from the comparable
prior year period. The decrease was due to lower sales for some of our oldest products. Net
revenues from Base Products increased in the first nine months of fiscal 2011 from the comparable
prior year period. The increase was due to last time buying activities for some of our oldest
products, as well as higher sales in Virtex-II Pro during the second quarter of fiscal 2011.
Net revenues from Support Products increased in the third quarter and first nine months of fiscal
2011 from the comparable prior year periods. The increases were primarily due to higher sales in
our PROM products.
Net Revenues by End Markets
Our end market revenue data is derived from our understanding of our end customers primary
markets. We classify our net revenues by end markets into four categories: Communications,
Industrial and Other, Consumer and Automotive and Data Processing. The percentage change
calculation in the table below represents the year-to-year dollar change in each end market.
Net revenues by end markets for the third quarter and the first nine months of fiscal 2011 and 2010
were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
|
Nine months Ended |
|
|
|
Jan. 1, |
|
|
Jan. 2, |
|
|
% Change |
|
|
Jan. 1, |
|
|
Jan. 2, |
|
|
% Change |
|
(% of total net revenues) |
|
2011 |
|
|
2010 |
|
|
in Dollars |
|
|
2011 |
|
|
2010 |
|
|
in Dollars |
|
Communications |
|
|
45 |
% |
|
|
46 |
% |
|
|
8 |
% |
|
|
47 |
% |
|
|
47 |
% |
|
|
36 |
% |
Industrial and Other |
|
|
34 |
|
|
|
32 |
|
|
|
15 |
% |
|
|
32 |
|
|
|
31 |
|
|
|
40 |
% |
Consumer and Automotive |
|
|
15 |
|
|
|
15 |
|
|
|
15 |
% |
|
|
15 |
|
|
|
15 |
|
|
|
38 |
% |
Data Processing |
|
|
6 |
|
|
|
7 |
|
|
|
(6 |
)% |
|
|
6 |
|
|
|
7 |
|
|
|
20 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total net revenues |
|
|
100 |
% |
|
|
100 |
% |
|
|
10 |
% |
|
|
100 |
% |
|
|
100 |
% |
|
|
37 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net revenues from Communications increased during the third quarter and the first nine months of
fiscal 2011 from the comparable prior year periods. The increases were due to higher sales in both
wireless and wired communication applications.
Net revenues from Industrial and Other increased during the third quarter and the first nine months
of fiscal 2011 from the comparable prior year periods. The increases were primarily due to higher
sales in industrial, scientific and medical and test and measurement applications.
Net revenues from Consumer and Automotive increased during the third quarter and the first nine
months of fiscal 2011 from the comparable prior year periods. The increases were due to increased
sales in audio, video and broadcast applications as well as automotive applications.
Net revenues from Data Processing decreased during the third quarter of fiscal 2011 from the
comparable prior year period due to lower sales in computing and storage applications. Net
revenues from Data Processing increased during the first nine months of fiscal 2011 from the
comparable prior year period as higher sales in computing and storage applications during the first
and second quarters of fiscal 2011 more than offset lower sales in these applications in the third
quarter of fiscal 2011.
27
Net Revenues by Geography
Geographic revenue information reflects the geographic location of the distributors, OEMs or
contract manufacturers who purchased our products. This may differ from the geographic location of
the end customers. Net revenues by geography for the third quarter and the first nine months of
fiscal 2011 and 2010 were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
|
Nine months Ended |
|
|
|
Jan. 1, |
|
|
Jan. 2, |
|
|
|
|
|
|
Jan. 1, |
|
|
Jan. 2, |
|
|
|
|
(In millions) |
|
2011 |
|
|
2010 |
|
|
Change |
|
|
2011 |
|
|
2010 |
|
|
Change |
|
North America |
|
$ |
173.0 |
|
|
$ |
181.7 |
|
|
|
(5 |
)% |
|
$ |
551.4 |
|
|
$ |
456.5 |
|
|
|
21 |
% |
Asia Pacific |
|
|
216.5 |
|
|
|
182.3 |
|
|
|
19 |
% |
|
|
638.7 |
|
|
|
465.4 |
|
|
|
37 |
% |
Europe |
|
|
125.3 |
|
|
|
103.3 |
|
|
|
21 |
% |
|
|
440.4 |
|
|
|
265.9 |
|
|
|
66 |
% |
Japan |
|
|
52.4 |
|
|
|
46.0 |
|
|
|
14 |
% |
|
|
151.1 |
|
|
|
116.7 |
|
|
|
30 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total net revenues |
|
$ |
567.2 |
|
|
$ |
513.3 |
|
|
|
10 |
% |
|
$ |
1,781.6 |
|
|
$ |
1,304.5 |
|
|
|
37 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net revenues in North America decreased in the third quarter of fiscal 2011 from the comparable
prior year period. The decrease was mainly due to lower sales in Communications end market,
including both wired and wireless applications. Net revenues in North America grew during the
first nine months of fiscal 2011 from the comparable prior year period. The increase was due to
broad-based strength across all end market segments, with particular strength coming from the
Industrial and Other end market segment.
Net revenues in Asia Pacific increased during the third quarter and the first nine months of fiscal
2011 from the comparable prior year periods. The increases were mainly due to higher sales in
wired and wireless communications and industrial, scientific and medical applications.
The year over year increases during the third quarter and the first nine months of fiscal 2011 in
Europe were driven by broad-based strength in each of the end market segments. Communications end
market was particularly strong, mainly due to higher sales from wireless communications
applications.
Net revenues in Japan increased during the third quarter and the first nine months of fiscal 2011
from the comparable prior year periods. The increases were due to higher sales in the Consumer and
Industrial and Other end market segments.
Gross Margin
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
|
Nine Months Ended |
|
|
|
Jan. 1, |
|
|
Jan. 2, |
|
|
|
|
|
|
Jan. 1, |
|
|
Jan. 2, |
|
|
|
|
(In millions) |
|
2011 |
|
|
2010 |
|
|
Change |
|
|
2011 |
|
|
2010 |
|
|
Change |
|
Gross margin |
|
$ |
372.8 |
|
|
$ |
329.0 |
|
|
|
13 |
% |
|
$ |
1,165.7 |
|
|
$ |
818.2 |
|
|
|
42 |
% |
Percentage of net revenues |
|
|
65.7 |
% |
|
|
64.1 |
% |
|
|
|
|
|
|
65.4 |
% |
|
|
62.7 |
% |
|
|
|
|
The gross margin increases of 1.6 and 2.7 percentage points in the third quarter and the first nine
months of fiscal 2011, respectively, from the comparable prior year periods were driven primarily
by improvement in product costs and cost savings related to overall restructuring measures in
fiscal 2010.
Gross margin may be affected in the future due to mix shifts, competitive-pricing pressure,
manufacturing-yield issues and wafer pricing. New Products generally have lower gross margins than
Mainstream and Base Products as they are in the early stage of their product life cycle and have
higher unit costs associated with relatively lower volumes and early manufacturing maturity. We
expect to mitigate any adverse impacts from these factors by continuing to improve yields on our
New Products and by improving manufacturing efficiencies. Additionally, we expect our inventory
levels to remain higher than historical norms as we build incremental safety stock, which could
impact our future gross margin in the event demand does not materialize.
In order to compete effectively, we pass manufacturing cost reductions to our customers in the form
of reduced prices to the extent that we can maintain acceptable margins. Price erosion is common
in the semiconductor industry, as advances in both product architecture and manufacturing process
technology permit continual reductions in unit cost. We have historically been able to offset much
of this revenue decline in our mature products with increased revenues from newer products.
28
Research and Development
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
|
Nine Months Ended |
|
|
|
Jan. 1, |
|
|
Jan. 2, |
|
|
|
|
|
|
Jan. 1, |
|
|
Jan. 2, |
|
|
|
|
(In millions) |
|
2011 |
|
|
2010 |
|
|
Change |
|
|
2011 |
|
|
2010 |
|
|
Change |
|
Research and development |
|
$ |
98.5 |
|
|
$ |
101.9 |
|
|
|
(3 |
)% |
|
$ |
289.5 |
|
|
$ |
275.2 |
|
|
|
5 |
% |
Percentage of net revenues |
|
|
17 |
% |
|
|
20 |
% |
|
|
|
|
|
|
16 |
% |
|
|
21 |
% |
|
|
|
|
R&D spending decreased $3.4 million during the third quarter of fiscal 2011 but increased $14.3
million during the first nine months of fiscal 2011 compared to the same periods last year. The
decrease during the third quarter of fiscal 2011 was primarily due to lower mask and wafer spending
during the quarter. The increase during the first nine months of fiscal 2011 was primarily
attributable to higher variable spending, such as incentive compensation expenses, associated with
higher revenue and operating margin.
We plan to continue to selectively invest in R&D efforts in areas such as new products and more
advanced process development, IP cores and the development of new design and layout software. We
may also consider acquisitions to complement our strategy for technology leadership and engineering
resources in critical areas.
Selling, General and Administrative
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
|
Nine Months Ended |
|
|
|
Jan. 1, |
|
|
Jan. 2, |
|
|
|
|
|
|
Jan. 1, |
|
|
Jan. 2, |
|
|
|
|
(In millions) |
|
2011 |
|
|
2010 |
|
|
Change |
|
|
2011 |
|
|
2010 |
|
|
Change |
|
Selling, general and administrative |
|
$ |
86.5 |
|
|
$ |
85.0 |
|
|
|
2 |
% |
|
$ |
257.8 |
|
|
$ |
237.2 |
|
|
|
9 |
% |
Percentage of net revenues |
|
|
15 |
% |
|
|
17 |
% |
|
|
|
|
|
|
15 |
% |
|
|
18 |
% |
|
|
|
|
SG&A expenses increased $1.5 million during the third quarter of fiscal 2011 and $20.6 million
during the first nine months of fiscal 2011 compared to the same periods last year. The increases
were primarily attributable to higher variable spending associated with higher revenue and
operating margin, particularly sales commissions and incentive compensation expenses, more notably
during the first half of fiscal 2011.
Amortization of Acquisition-Related Intangibles
Amortization expense was related to the intangible assets acquired from prior acquisitions, which
had been fully amortized as of the end of the first quarter of fiscal 2010.
Stock-Based Compensation
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
|
Nine months Ended |
|
|
|
Jan. 1, |
|
|
Jan. 2, |
|
|
|
|
|
|
Jan. 1, |
|
|
Jan. 2, |
|
|
|
|
(In millions) |
|
2011 |
|
|
2010 |
|
|
Change |
|
|
2011 |
|
|
2010 |
|
|
Change |
|
Stock-based compensation included in: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of revenues |
|
$ |
1.1 |
|
|
$ |
1.3 |
|
|
|
(15 |
%) |
|
$ |
3.7 |
|
|
$ |
3.7 |
|
|
|
0 |
% |
Research and development |
|
|
7.1 |
|
|
|
7.3 |
|
|
|
(2 |
%) |
|
|
21.7 |
|
|
|
18.1 |
|
|
|
19 |
% |
Selling, general and administrative |
|
|
6.6 |
|
|
|
6.9 |
|
|
|
(6 |
%) |
|
|
19.9 |
|
|
|
18.3 |
|
|
|
9 |
% |
Restructuring charges |
|
|
|
|
|
|
|
|
|
|
0 |
% |
|
|
|
|
|
|
0.9 |
|
|
|
(100 |
)% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
14.8 |
|
|
$ |
15.5 |
|
|
|
(5 |
%) |
|
$ |
45.3 |
|
|
$ |
41.0 |
|
|
|
10 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The 5% decrease in stock-based compensation expense for the third quarter of fiscal 2011 was
primarily due to a 13-week quarter versus a 14-week quarter in the same period of prior year. The
10% increase in stock-based compensation expense for the first nine months of fiscal 2011 was due
mainly to increase option and award grants at higher weighted-average fair values during fiscal
2011. In addition, lower forfeitures in fiscal 2011 contributed to a higher net stock-based
compensation expense than the same period of prior year.
Impairment Loss on Investments
We recorded an impairment loss on investments of $3.0 million for the third quarter of fiscal 2010,
which also represented the total impairment loss for the first nine months of fiscal 2010, due to
the weak financial condition of certain investees. No impairment charges were recorded during the
nine months ended January 1, 2011.
29
Restructuring Charges
During the third quarter of fiscal 2011, we announced restructuring measures designed to realign
resources and drive overall operating efficiencies across the Company. These measures impacted 56
positions, or less than 2% of our global workforce, from various geographies and functions
worldwide. Certain positions were terminated during the third quarter of fiscal 2011 and other
positions will be terminated during the fourth quarter of fiscal 2011. The reorganization plan is
expected to be completed by the end of the fourth quarter of fiscal 2011.
We recorded total restructuring charges of $4.3 million in the third quarter of fiscal 2011,
primarily related to severance pay expenses. We expect to incur additional restructuring charges
of approximately $6.0 million over the remaining period of fiscal 2011.
We estimate that these measures will result in gross annual savings related to employee
compensation of approximately $4.0 million before taxes. However, there can be no assurance that
these expected savings will be completely realized in the future as they may be offset by increases
in other expenses.
The following table summarizes the restructuring accrual activity for the first nine months of
fiscal 2011:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Employee |
|
|
Facility- |
|
|
|
|
|
|
severance |
|
|
related and |
|
|
|
|
(In millions) |
|
and benefits |
|
|
other costs |
|
|
Total |
|
Balance as of April 3, 2010 |
|
$ |
1.9 |
|
|
$ |
0.1 |
|
|
$ |
2.0 |
|
Restructuring charges |
|
|
4.0 |
|
|
|
0.3 |
|
|
|
4.3 |
|
Cash payments |
|
|
(4.4 |
) |
|
|
(0.3 |
) |
|
|
(4.7 |
) |
|
|
|
|
|
|
|
|
|
|
Balance as of January 1, 2011 |
|
$ |
1.5 |
|
|
$ |
0.1 |
|
|
$ |
1.6 |
|
|
|
|
|
|
|
|
|
|
|
The charges above, as well as the restructuring charges recorded in prior fiscal year (see below),
have been shown separately as restructuring charges on the condensed consolidated statements of
income. The remaining accrual as of January 1, 2011 primarily relates to severance pay and
benefits that are expected to be paid during the fourth quarter of fiscal 2011.
During the first quarter of fiscal 2010, we announced restructuring measures designed to drive
structural operating efficiencies across the Company. We completed this restructuring plan in the
end of the fourth quarter of fiscal 2010, and reduced our global workforce by approximately 200 net
positions, or about 6%. These employee terminations impacted various geographies and functions
worldwide. We recorded total restructuring charges of $5.5 million and $27.2 million in the third
quarter and the first nine months of fiscal 2010, respectively, primarily related to severance pay
expenses. The remaining accrual as of January 1, 2011 was immaterial.
Interest and Other Expense, Net
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
|
Nine Months Ended |
|
|
|
Jan. 1, |
|
|
Jan. 2, |
|
|
|
|
|
|
Jan. 1, |
|
|
Jan. 2, |
|
|
|
|
(In millions) |
|
2011 |
|
|
2010 |
|
|
Change |
|
|
2011 |
|
|
2010 |
|
|
Change |
|
Interest and other expense, net |
|
$ |
(3.3 |
) |
|
$ |
(0.5 |
) |
|
|
509 |
% |
|
$ |
(11.9 |
) |
|
$ |
(13.2 |
) |
|
|
(10 |
)% |
Percentage of net revenues |
|
|
(1 |
)% |
|
|
(0 |
)% |
|
|
|
|
|
|
(1 |
)% |
|
|
(1 |
)% |
|
|
|
|
During the first quarter of fiscal 2010, we recorded expense of $8.7 million in order to reverse
the interest income we accrued through March 28, 2009 related to an earlier prepayment we made to
the IRS. Excluding the reversal of interest income, interest and other expense, net, increased
$2.8 million and $7.4 million for the third quarter and the first nine months of fiscal 2011,
respectively, compared to the same periods last year, primarily due to the impact of the interest
expense and debt discount amortization related to the 2.625% Debentures issued in fiscal 2011.
Provision for Income Taxes
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
|
Nine Months Ended |
|
|
|
Jan. 1, |
|
|
Jan. 2, |
|
|
|
|
|
|
Jan. 1, |
|
|
Jan. 2, |
|
|
|
|
(In millions) |
|
2011 |
|
|
2010 |
|
|
Change |
|
|
2011 |
|
|
2010 |
|
|
Change |
|
Provision for income taxes |
|
$ |
27.9 |
|
|
$ |
26.1 |
|
|
|
7 |
% |
|
$ |
120.4 |
|
|
$ |
50.8 |
|
|
|
137 |
% |
Percentage of net revenues |
|
|
5 |
% |
|
|
5 |
% |
|
|
|
|
|
|
7 |
% |
|
|
4 |
% |
|
|
|
|
Effective tax rate |
|
|
15 |
% |
|
|
20 |
% |
|
|
|
|
|
|
20 |
% |
|
|
20 |
% |
|
|
|
|
The effective tax rates in all periods reflect the favorable impact of foreign income at statutory
rates, which are less than the U.S. rate, and tax credits earned.
The decrease in the effective tax rate in the third quarter of fiscal 2011 as compared to the prior
year period was primarily due to an increase in tax benefit from the extension of the federal
research credit that is retroactive to January 1, 2010. The effective tax rate for the first nine
months of fiscal 2011 was flat when compared to the prior year period. While the rate for the
first nine months of fiscal 2011 included a benefit for the cumulative effect of the extension of
the federal research credit, it was offset by an increase in taxes due to a change in the
geographic mix of profit before tax.
30
Financial Condition, Liquidity and Capital Resources
We have historically used a combination of cash flows from operations and equity and debt
financing to support ongoing business activities, acquire or invest in critical or complementary
technologies, purchase facilities and capital equipment, repurchase our common stock and debentures
under our repurchase program, pay dividends and finance working capital. Additionally, our
investments in debt securities are available for future sale.
To align with our strategic initiative to consolidate our distribution channel, we further
strengthened our partnership with Avnet. Avnet now supports more of our customers and has committed
more personnel and resources to our business. In return for these long-term commitments, beginning
in our first quarter of fiscal 2011, we agreed to temporarily extend payment terms for Avnet. The
extensions of payment terms are scheduled to be reduced each quarter and Avnet is expected to
return to standard payment terms by the beginning of the fourth quarter of fiscal 2011. As a
result, at the end of third quarter of fiscal 2011 our accounts receivable balance and days sales
outstanding (DSO) increased when compared to our historical level, which negatively impacted our
cash flows from operations. We expect our DSO to remain higher than historical levels in the short
term, with our DSO specific to Avnet decreasing through April 2011. The negative impact on our cash
flows from operations will also be reduced.
The combination of cash, cash equivalents and short-term and long-term investments as of January 1,
2011 and April 3, 2010 totaled $2.42 billion and $1.97 billion, respectively. As of January 1,
2011, we had cash, cash equivalents and short-term investments of $1.76 billion and working capital
of $2.16 billion. As of April 3, 2010, cash, cash equivalents and short-term investments were $1.39
billion and working capital was $1.55 billion.
Operating Activities During the first nine months of fiscal 2011, our operations generated net
positive cash flow of $479.2 million, which was $28.8 million higher than the $450.4 million
generated during the first nine months of fiscal 2010. The positive cash flow from operations
generated during the first nine months of fiscal 2011 was primarily from net income as adjusted for
noncash related items and decreases in deferred income taxes, and increase in accounts payable.
These items were partially offset by an increase in inventories and accounts receivable, and
decrease in accrued liabilities. Accounts receivable increased by $106.9 million at January 1, 2011
from the levels at April 3, 2010, primarily due to temporary increase in payment terms to Avnet as
discussed above as well as increase in revenue in general. Consequently, DSO increased to 58 days
at January 1, 2011 from 53 days at April 3, 2010. Our inventory levels were $111.9 million higher
at January 1, 2011 compared to April 3, 2010. Combined inventory days at Xilinx and distribution
increased to 126 days at January 1, 2011 from 89 days at April 3, 2010. Our combined inventory days
could remain at this level for the next four to six quarters as we execute new supply strategies
with our foundry partners. In anticipation of future demand, we are increasing safety stock levels
on certain parts in light of tight capacity at our foundry partners, and we are building ahead a
number of legacy parts due to the closure of a particular foundry line. This amount will begin to
decline as our end-of-life process with customers begins to offset the builds.
For the first nine months of fiscal 2010, the net positive cash flow from operations was primarily
from net income as adjusted for noncash related items, net increases in accounts payable, accrued
liabilities, deferred taxes (net liabilities position) and deferred income on shipments to
distributors, and decrease in other assets. These items were partially offset by a decrease in
income taxes payable and increases in accounts receivable, inventories and prepaid expenses and
other current assets.
Investing Activities Net cash used in investing activities of $438.8 million during the first
nine months of fiscal 2011 included net purchases of available-for-sale securities of $389.1
million, $48.3 million for purchases of property, plant and equipment and $1.4 million for other
investing activities. Net cash used in investing activities of $345.4 million during the first nine
months of fiscal 2010 included net purchases of available-for-sale securities of $324.9 million,
$17.5 million for purchases of property, plant and equipment and $3.0 million for other investing
activities.
Financing Activities Net cash provided by financing activities was $29.2 million in the first
nine months of fiscal 2011 and consisted of $587.6 million of net proceeds from issuance of the
2.625% Debentures, $46.9 million of proceeds from issuance of warrants, $69.9 million of proceeds
from issuance of common stock under employee stock plans, $30.2 million of proceeds from sale of
interest rate swaps and $2.7 million for the excess of the tax benefit from stock-based
compensation, offset by $468.9 million of repurchase of common stocks, $112.3 million for purchase
of call options to hedge against potential dilution upon conversion of the 2.625% Debentures and
$127.0 million for dividend payments to stockholders. For the comparable fiscal 2010 period, net
cash used in financing activities was $133.5 million in the first nine months of fiscal 2010 and
consisted of $121.6 million for dividend payments to stockholders, $25.0 million in repurchases of
common stock and $15.9 million for the reduction of tax benefit from stock-based compensation and
was partially offset by $29.0 million of proceeds from the issuance of common stock under employee
stock plans.
31
Stockholders equity increased $53.1 million during the first nine months of fiscal 2011. The
increase was attributable to $481.8 million in net income for the first nine months of fiscal 2011,
$69.9 million of issuance of common stock under employee stock plans, $66.4 million of debt
discount of liability component related to the issuance of the 2.625% Debentures, net of deferred
tax liabilities, $46.9 million of proceeds from issuance of warrants, $45.3 million of stock-based
compensation, $5.9 million of change in hedging transaction gain and $2.1 million of change in
unrealized losses on available-for-sale securities, net of deferred tax liabilities. The increases
were offset by $468.9 million of repurchase of common stocks, $127.0 million of payment of
dividends to stockholders and $70.6 million for purchase of call options to hedge against potential
dilution upon conversion of the 2.625% Debentures, net of deferred tax assets.
We have historically used a combination of cash flows from operations and equity and debt financing
to support ongoing business activities, acquire or invest in critical or complementary
technologies, purchase facilities and capital equipment, repurchase our common stock and debentures
under our repurchase program, pay dividends and finance working capital. Additionally, our
investments in debt securities are available for future sale.
Contractual Obligations
We lease some of our facilities, office buildings and land under non-cancelable operating leases
that expire at various dates through October 2018. See Note 17. Commitments to our condensed
consolidated financial statements, included in Part 1. Financial Information, for a schedule of
our operating lease commitments as of January 1, 2011 and additional information about operating
leases.
Due to the nature of our business, we depend entirely upon subcontractors to manufacture our
silicon wafers and provide assembly and some test services. The lengthy subcontractor lead times
require us to order the materials and services in advance, and we are obligated to pay for the
materials and services when completed. As of January 1, 2011, we had $145.5 million of outstanding
inventory and other non-cancelable purchase obligations to subcontractors. We expect to receive
and pay for these materials and services in the next three to six months, as the products meet
delivery and quality specifications. As of January 1, 2011, we also had $19.4 million of
non-cancelable license obligations to providers of electronic design automation software and
hardware/software maintenance expiring at various dates through June 2013.
We committed up to $5.0 million to acquire, in the future, licenses to intellectual property until
July 2023. License payments will be amortized over the useful life of the intellectual property
acquired.
In March 2007, we issued $1.00 billion principal amount of 3.125% Debentures. As a result of the
repurchases in fiscal 2009, the remaining principal amount of the 3.125% Debentures as of June 27,
2009 was $689.6 million. The 3.125% Debentures require payment of interest semiannually on March
15 and September 15 of each year, beginning September 15, 2007. In June 2010, we issued another
$600.0 million principal amount of 2.625% Debentures. The 2.625% Debentures require payment of
interest semiannually on June 15 and December 15 of each year, beginning December 15, 2010. See
Note 10. Convertible Debentures and Revolving Credit Facility to our condensed consolidated
financial statements, included in Part 1. Financial Information, for additional information about
our debentures.
As of January 1, 2011, $52.9 million of liabilities for uncertain tax position and related interest
and penalties were classified as long-term income taxes payable in the condensed consolidated
balance sheet. Due to the inherent uncertainty with respect to the timing of future cash outflows
associated with such liabilities, we are unable to reliably estimate the timing of cash settlement
with the respective taxing authority.
Off-Balance-Sheet Arrangements
As of January 1, 2011, we did not have any significant off-balance-sheet arrangements, as defined
in Item 303(a)(4)(ii) of SEC Regulation S-K.
Liquidity and Capital Resources
Cash generated from operations is used as our primary source of liquidity and capital resources.
Our investment portfolio is also available for future cash requirements as is our $250.0 million
revolving credit facility entered into in April 2007. We are not aware of any lack of access to
the revolving credit facility. However, we can provide no assurance that access to the credit
facility will not be impacted by adverse conditions in the financial markets. Our credit facility
is not reliant upon a single bank. There have been no borrowings to date under our existing
revolving credit facility.
During the first nine months of fiscal 2011, we used $468.9 million of cash to repurchase 17.8
million shares of our common stock. During the first nine months of fiscal 2010, we used $25.0
million of cash to repurchase 1.1 million shares of our common stock. During the first nine months
of fiscal 2011, we paid $127.0 million in cash dividends to stockholders, representing $0.48 per
common share. During the first nine months of fiscal 2010, we paid $121.6 million in cash dividends
to stockholders, representing an aggregate amount of $0.44 per common share. On January 18, 2011,
our Board of Directors declared a cash dividend of $0.16 per common share for the third quarter of
fiscal 2011. The dividend is payable on March 2, 2011 to stockholders of record on February 9,
2011. Our common stock and debentures repurchase program and dividend policy could be impacted by,
among other items, our views on potential future capital requirements relating to R&D, investments
and acquisitions, legal risks, principal and interest payments on our debentures and other
strategic investments.
32
The global credit crisis has imposed exceptional levels of volatility and disruption in the capital
markets, severely diminished liquidity and credit availability, and increased counterparty risk.
Nevertheless, we anticipate that existing sources of liquidity and cash flows from operations will
be sufficient to satisfy our cash needs for the foreseeable future. We will continue to evaluate
opportunities for investments to obtain additional wafer capacity, procurement of additional
capital equipment and facilities, development of new products, and potential acquisitions of
technologies or businesses that could complement our business. However, the risk factors discussed
in Item 1A included in Part II. Other Information and below could affect our cash positions
adversely. In addition, certain types of investments such as auction rate securities may present
risks arising from liquidity and/or credit concerns. In the event that our investments in auction
rate securities become illiquid, we do not expect this will materially affect our liquidity and
capital resources or results of operations.
As of January 1, 2011, marketable securities measured at fair value using Level 3 inputs were
comprised of $52.4 million of student loan auction rate securities. The amount of assets and
liabilities measured using significant unobservable inputs (Level 3) as a percentage of the total
assets and liabilities measured at fair value were approximately 2% as of January 1, 2011. See
Note 4. Fair Value Measurements to our condensed consolidated financial statements, included in
Part 1. Financial Information, for additional information.
|
|
|
ITEM 3. |
|
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK |
Interest Rate Risk
Our exposure to interest rate risk relates primarily to our investment portfolio, which consists of
fixed income securities with a fair value of approximately $2.00 billion as of January 1, 2011.
Our primary aim with our investment portfolio is to invest available cash while preserving
principal and meeting liquidity needs. Our investment portfolio includes municipal bonds, floating
rate notes, mortgage-backed securities, bank certificates of deposit, commercial paper, corporate
bonds, student loan auction rate securities and U.S. and foreign government and agency securities.
In accordance with our investment policy, we place investments with high credit quality issuers and
limit the amount of credit exposure to any one issuer based upon the issuers credit rating. These
securities are subject to interest rate risk and will decrease in value if market interest rates
increase. A hypothetical 100 basis-point (one percentage point) increase or decrease in interest
rates compared to rates at January 1, 2011 would have affected the fair value of our investment
portfolio by less than $12.0 million.
Credit Market Risk
Since September 2007, the global credit markets have experienced adverse conditions that have
negatively impacted the values of various types of investment and non-investment grade securities.
During this time the global credit and capital markets have experienced significant 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 we 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 to our
condensed consolidated financial statements, included in Part 1. Financial Information, for
additional information about our investments.
Foreign Currency Exchange Risk
Sales to all direct OEMs and distributors are denominated in U.S. dollars.
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.
We enter into forward currency exchange contracts to hedge our overseas operating expenses and
other liabilities when deemed appropriate. As of January 1, 2011 and April 3, 2010, we had the
following outstanding forward currency exchange contracts (notional amount):
|
|
|
|
|
|
|
|
|
|
|
Jan. 1, |
|
|
Apr. 3, |
|
(In thousands and U.S. dollars) |
|
2011 |
|
|
2010 |
|
Euro |
|
$ |
40,827 |
|
|
$ |
21,190 |
|
Singapore dollar |
|
|
49,732 |
|
|
|
58,420 |
|
Japanese Yen |
|
|
12,428 |
|
|
|
12,268 |
|
British Pound |
|
|
8,174 |
|
|
|
4,889 |
|
|
|
|
|
|
|
|
|
|
$ |
111,161 |
|
|
$ |
96,767 |
|
|
|
|
|
|
|
|
33
As part of our strategy to reduce volatility of operating expenses due to foreign exchange rate
fluctuations, we employ 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 January 2011 and February 2012. The net unrealized gain
or loss, which approximates the fair market value of the above contracts, was $4.3 million (net
gain) and $1.5 million (net loss) as of January 1, 2011 and April 3, 2010, respectively.
Our investments in several of our wholly-owned subsidiaries are recorded in currencies other than
the U.S. dollar. As the financial statements of these subsidiaries are translated at each quarter
end during consolidation, fluctuations of exchange rates between the foreign currency and the U.S.
dollar increase or decrease the value of those investments. These fluctuations are recorded within
stockholders equity as a component of accumulated other comprehensive income (loss). Other
monetary foreign-denominated assets and liabilities are revalued on a monthly basis with gains and
losses on revaluation reflected in net income. A hypothetical 10% favorable or unfavorable change
in foreign currency exchange rates at January 1, 2011 would have affected the annualized
foreign-currency-denominated operating expenses of our foreign subsidiaries by less than $8.0
million. In addition, a hypothetical 10% favorable or unfavorable change in foreign currency
exchange rates compared to rates at January 1, 2011 would have affected the value of
foreign-currency-denominated cash and investments by less than $4.0 million.
|
|
|
ITEM 4. |
|
CONTROLS AND PROCEDURES |
We maintain a system of disclosure controls and procedures designed to ensure that information
required to be disclosed in our reports filed or submitted under the U.S. Securities Exchange Act
of 1934, as amended (Exchange Act), is recorded, processed, summarized and reported within the time
periods specified in the SEC rules and forms. These controls and procedures are also designed to
ensure that such information is accumulated and communicated to our management, including the Chief
Executive Officer (CEO) and Chief Financial Officer (CFO), as appropriate to allow timely decisions
regarding required disclosure. Internal controls are procedures designed to provide reasonable
assurance that: transactions are properly authorized; assets are safeguarded against unauthorized
or improper use; and transactions are properly recorded and reported, to permit the preparation of
our financial statements in conformity with generally accepted accounting principles.
A control system, no matter how well designed and operated, can provide only reasonable, not
absolute, assurance that the control systems objectives will be met. Further, the design of a
control system must reflect the fact that there are resource constraints, and the benefits of
controls must be considered relative to their costs. Because of the inherent limitations in all
control systems, no evaluation of controls can provide absolute assurance that all control issues
and instances of fraud, if any, within the company have been detected. These inherent limitations
include the realities that judgments in decision-making can be faulty, and that breakdowns can
occur because of simple errors or mistakes. Controls can also be circumvented by the individual
acts of some persons, by collusion of two or more people, or by management override of the
controls. The design of any system of controls is based in part upon certain assumptions about the
likelihood of future events, and there can be no assurance that any design will succeed in
achieving its stated goals under all potential future conditions. Over time, controls may become
inadequate because of changes in conditions or deterioration in the degree of compliance with its
policies or procedures. Because of the inherent limitations in a cost-effective control system,
misstatements due to error or fraud may occur and not be detected. We continuously evaluate our
internal controls and make changes to improve them as necessary. Our intent is to maintain our
disclosure controls as dynamic systems that change as conditions warrant.
An evaluation was carried out, under the supervision of and with the participation of our
management, including our CEO and CFO, of the effectiveness of our disclosure controls and
procedures (as defined in Rules 13a15(e) and 15d15(e) under the Exchange Act) as of the end of
the period covered by this report. Based upon the controls evaluation, our CEO and CFO have
concluded that, as of the end of the period covered by this Form 10-Q, our disclosure controls and
procedures are effective to provide reasonable assurance that information required to be disclosed
in our Exchange Act reports is recorded, processed, summarized and reported within the time periods
specified in the SEC rules and forms, and is accumulated and communicated to our management,
including our CEO and CFO, as appropriate to allow timely decisions regarding required disclosure.
There were no changes in our internal control over financial reporting (as defined in Rules
13a-15(f) and 15d-15(f) under the Exchange Act) during the fiscal quarter ended January 1, 2011
that materially affected, or are reasonably likely to materially affect, our internal control over
financial reporting.
34
PART II. OTHER INFORMATION
|
|
|
ITEM 1. |
|
LEGAL PROCEEDINGS |
Patent Litigation
On December 28, 2007, a patent infringement lawsuit was filed by PACT XPP Technologies, AG (PACT)
against the Company in the U.S. District Court for the Eastern District of Texas, Marshall Division
(PACT XPP Technologies, AG. v. Xilinx, Inc. and Avnet, Inc. Case No. 2:07-CV-563). The lawsuit
pertains to eleven different patents and PACT seeks injunctive relief, unspecified damages,
interest and attorneys fees. Neither the likelihood, nor the amount of any potential exposure to
the Company is estimable at this time.
On July 30, 2010, a patent infringement lawsuit was filed by Intellitech Corporation (Intellitech)
against the Company in the U.S. District Court for the District of Delaware (Intellitech
Corporation v. Altera Corporation, Xilinx, Inc. and Lattice Semiconductor Corporation Case No.
1:10-CV-00645-UNA). The lawsuit pertains to a single patent and Intellitech seeks declaratory and
injunctive relief, unspecified damages, interest and attorneys fees. Neither the likelihood, nor
the amount of any potential exposure to the Company is estimable at this time.
On December 6, 2010, a patent infringement lawsuit was filed by Bala Delay Line, Inc. (Bala Delay)
against the Company in the U.S. District Court for the Eastern District of Texas, Texarkana
Division (Bala Delay Line, Inc V. Xilinx, Inc., Case No. 5:10-CV-211), and on January 31, 2011,
Bala Delay filed another patent infringement lawsuit against the Company in the U.S. District Court
for the Eastern District of Texas, Sherman Division (Bala Delay Line, Inc v. Xilinx, Inc. and
Bonser-Philhower Sales, Inc., Case No. 4:11-CV-46). Both lawsuits pertain to the same single
patent and in each case Bala Delay seeks declaratory and injunctive relief, unspecified damages,
interest and attorneys fees. Neither the likelihood, nor the amount of any potential exposure to
the Company is estimable at this time.
Other Matters
From time to time, we are involved in various disputes and litigation matters that arise in the
ordinary course of our business. These include disputes and lawsuits related to intellectual
property, mergers and acquisitions, licensing, contract law, tax, regulatory, distribution
arrangements, employee relations and other matters. Periodically, we review the status of each
matter and assess its potential financial exposure. If the potential loss from any claim or legal
proceeding is considered probable and a range of possible losses can be estimated, we accrue a
liability for the estimated loss. Legal proceedings are subject to uncertainties, and the outcomes
are difficult to predict. Because of such uncertainties, accruals are based only on the best
information available at the time. As additional information becomes available, we continue to
reassess the potential liability related to pending claims and litigation and may revise estimates.
The following risk factors and other information included in this Quarterly Report on Form
10-Q should be carefully considered. The risks and uncertainties described below are not the only
risks to the Company. Additional risks and uncertainties not presently known to the Company or
that the Companys management currently deems immaterial also may impair its business operations.
If any of the risks described below were to occur, our business, financial condition, operating
results and cash flows could be materially adversely affected.
We have updated the risk factors previously disclosed in Part I, Item 1A of our Annual Report on
Form 10-K for the fiscal year ended April 3, 2010 as set forth below. The updated risk factors
below include risks related to the change in our relationship with our key distribution partner,
factors impacting our gross margins, our outstanding debentures and transactions related to our
2.625% Debentures, and risks related to acquisitions and strategic investments.
Our success depends on our ability to develop and introduce new products and failure to do so would
have a material adverse impact on our financial condition and results of operations.
Our success depends in large part on our ability to develop and introduce new products that
address customer requirements and compete effectively on the basis of price, density,
functionality, power consumption and performance. The success of new product introductions is
dependent upon several factors, including:
|
|
|
timely completion of new product designs; |
|
|
|
ability to generate new design opportunities or design wins; |
|
|
|
availability of specialized field application engineering resources supporting demand
creation and customer adoption of new products; |
|
|
|
ability to utilize advanced manufacturing process technologies on circuit geometries of
45-nm and smaller; |
|
|
|
achieving acceptable yields; |
|
|
|
ability to obtain adequate production capacity from our wafer foundries and assembly and
test subcontractors; |
|
|
|
ability to obtain advanced packaging; |
|
|
|
availability of supporting software design tools; |
35
|
|
|
utilization of predefined IP cores of logic; |
|
|
|
customer acceptance of advanced features in our new products; and |
|
|
|
market acceptance of our customers products. |
Our product development efforts may not be successful, our new products may not achieve industry
acceptance and we may not achieve the necessary volume of production that would lead to further per
unit cost reductions. Revenues relating to our mature products are expected to decline in the
future, which is normal for our product life cycles. As a result, we may be increasingly dependent
on revenues derived from design wins for our newer products as well as anticipated cost reductions
in the manufacture of our current products. We rely primarily on obtaining yield improvements and
corresponding cost reductions in the manufacture of existing products and on introducing new
products that incorporate advanced features and other price/performance factors that enable us to
increase revenues while maintaining consistent margins. To the extent that such cost reductions and
new product introductions do not occur in a timely manner, or to the extent that our products do
not achieve market acceptance at prices with higher margins, our financial condition and results of
operations could be materially adversely affected.
We rely on independent foundries for the manufacture of all of our products and a manufacturing
problem or insufficient foundry capacity could adversely affect our operations.
Nearly all of our wafers were manufactured either in Taiwan, by United Microelectronics Corporation
(UMC), or in Japan, by Toshiba Corporation (Toshiba). In addition, the wafers for our older
products are manufactured in Japan by Seiko Epson Corporation (Seiko) and the wafers for some of
our newer products are manufactured in South Korea, by Samsung Electronics Co., Ltd. and in Taiwan,
by Taiwan Semiconductor Manufacturing Company Limited. Terms with respect to the volume and timing
of wafer production and the pricing of wafers produced by the semiconductor foundries are
determined by periodic negotiations between Xilinx and these wafer foundries, which usually result
in short-term agreements that do not provide for long-term supply or allocation commitments. We are
dependent on these foundries, especially UMC, which supplies the substantial majority of our
wafers. We rely on UMC and our other foundries to produce wafers with competitive performance and
cost attributes. These attributes include an ability to transition to advanced manufacturing
process technologies and increased wafer sizes, produce wafers at acceptable yields and deliver
them in a timely manner. We cannot guarantee that the foundries that supply our wafers will not
experience manufacturing problems, including delays in the realization of advanced manufacturing
process technologies or difficulties due to limitations of new and existing process technologies.
Furthermore, we cannot guarantee the foundries will be able to manufacture sufficient quantities of
our products or continue to manufacture a product for the full life of the product. In addition,
unpredictable economic conditions may adversely impact the financial health and viability of the
foundries and result in their insolvency or their inability to meet their commitments to us. For
example, in the first quarter of fiscal 2010, we experienced supply shortages due to the
difficulties encountered by the foundries in rapidly increasing their production capacities from
low utilization levels to high utilization levels because of an unexpected increase in demand. In
the first nine months of fiscal 2011 and fourth quarter of fiscal 2010, we also experienced supply
shortages due to very strong demand for our products and a surge in demand for semiconductors in
general, which has led to tightening of foundry capacity across the industry. The insolvency of a
foundry or any significant manufacturing problem or insufficient foundry capacity would disrupt our
operations and negatively impact our financial condition and results of operations.
We have established other sources of wafer supply for many of our products in an effort to secure a
continued supply of wafers. However, establishing, maintaining and managing multiple foundry
relationships require the investment of management resources as well as additional costs. If we do
not manage these relationships effectively, it could adversely affect our results of operations.
General economic conditions and the related deterioration in the global business environment could
have a material adverse effect on our business, operating results and financial condition.
During the past two years, global consumer confidence eroded amidst concerns over declining asset
values, inflation, volatility in energy costs, geopolitical issues, the availability and cost of
credit, rising unemployment, and the stability and solvency of financial institutions, financial
markets, businesses and sovereign nations, among other concerns. These concerns slowed global
economic growth and resulted in recessions in numerous countries, including many of those in North
America, Europe and Asia. These economic conditions had a negative impact on our results of
operations during the third and fourth quarters of fiscal 2009 and the first and second quarters of
fiscal 2010 due to reduced customer demand. While there have been recent improvements in global
economic conditions and our results of operations improved during the second half of fiscal 2010
and the first nine months of fiscal 2011, there
is no guarantee that these improvements will continue in the future. Recent events have highlighted
that the financial condition of sovereign nations, particularly in Europe, is of continuing
concern. If unpredictable economic conditions persist or worsen, a number of negative effects on
our business could result, including customers or potential customers reducing or delaying orders,
the insolvency of key suppliers, which could result in production delays, the inability of
customers to obtain credit, and the insolvency of one or more customers. Any of these effects could
impact our ability to effectively manage inventory levels and collect receivables and ultimately
decrease our net revenues and profitability.
The semiconductor industry is characterized by cyclical market patterns and a significant industry
downturn could adversely affect our operating results.
The semiconductor industry is highly cyclical and our financial performance had been affected by
downturns in the industry. Down cycles are generally characterized by price erosion and weaker
demand for our products. Weaker demand for our products resulting from economic conditions in the
end markets we serve and reduced capital spending by our customers can result, and in the past has
resulted in excess and obsolete inventories and corresponding inventory write-downs. We attempt to
identify changes in market conditions as soon as possible; however, the dynamics of the market in
which we operate make prediction of and timely reaction to such events difficult. Due to these and
other factors, our past results are not reliable predictors of our future results.
36
The nature of our business makes our revenues difficult to predict which could have an adverse
impact on our business.
In addition to the challenging market conditions we may face, we have limited visibility into the
demand for our products, particularly new products, because demand for our products depends upon
our products being designed into our end customers products and those products achieving market
acceptance. Due to the complexity of our customers designs, the design to volume production
process for our customers requires a substantial amount of time, frequently longer than a year. In
addition, we are dependent upon turns, orders received and turned for shipment in the same
quarter. These factors make it difficult for us to forecast future sales and project quarterly
revenues. The difficulty in forecasting future sales impairs our ability to project our inventory
requirements, which could result, and in the past has resulted, in inventory write-downs or failure
to timely meet customer product demands. In addition, difficulty in forecasting revenues
compromises our ability to provide forward-looking revenue and earnings guidance.
If we are not able to successfully compete in our industry, our financial results and future
prospects will be adversely affected.
Our programmable logic devices (PLDs) compete in the logic IC industry, an industry that is
intensely competitive and characterized by rapid technological change, increasing levels of
integration, product obsolescence and continuous price erosion. We expect increased competition
from our primary PLD competitors, Altera Corporation, Lattice Semiconductor Corporation and Actel
Corporation (acquired by Microsemi Corporation during the third quarter of fiscal 2011), from the
application specific integrated circuit (ASIC) market, which has been ongoing since the inception
of FPGAs, from the application specific standard product (ASSP) market, and from new companies that
may enter the traditional programmable logic market segment. We believe that important competitive
factors in the logic IC industry include:
|
|
|
product performance, reliability, quality, power consumption and density; |
|
|
|
adaptability of products to specific applications; |
|
|
|
ease of use and functionality of software design tools; |
|
|
|
availability and functionality of predefined IP cores of logic; |
|
|
|
inventory and supply chain management; |
|
|
|
access to leading-edge process technology and assembly capacity; and |
|
|
|
ability to provide timely customer service and support. |
Our strategy for expansion in the logic market includes continued introduction of new product
architectures that address high-volume, low-cost and low-power applications as well as
high-performance, high-density applications. In addition, we anticipate continued price reductions
proportionate with our ability to lower the cost for established products. However, we may not be
successful in executing these strategies.
Other competitors include manufacturers of:
|
|
|
high-density programmable logic products characterized by FPGA-type architectures; |
|
|
|
high-volume and low-cost FPGAs as programmable replacements for ASICs and ASSPs; |
|
|
|
ASICs and ASSPs with incremental amounts of embedded programmable logic; |
|
|
|
high-speed, low-density complex programmable logic devices; |
|
|
|
|
high-performance digital signal processing devices; |
|
|
|
products with embedded processors; |
|
|
|
products with embedded multi-gigabit transceivers; and |
|
|
|
other new or emerging programmable logic products. |
Several companies have introduced products that compete with ours or have announced their intention
to sell PLD products. To the extent that our efforts to compete are not successful, our financial
condition and results of operations could be materially adversely affected.
The benefits of programmable logic have attracted a number of competitors to this segment. We
recognize that different applications require different programmable technologies, and we are
developing architectures, processes and products to meet these varying customer needs. Recognizing
the increasing importance of standard software solutions, we have developed common software design
tools that support the full range of our IC products. We believe that automation and ease of design
are significant competitive factors in this segment.
37
We could also face competition from our licensees. In the past we have granted limited rights to
other companies with respect to certain of our older technology, and we may do so in the future.
Granting such rights may enable these companies to manufacture and market products that may be
competitive with some of our older products.
Increased costs of wafers and materials, or shortages in wafers and materials, could adversely
impact our gross margins and lead to reduced revenues.
If greater demand for wafers is not offset by an increase in foundry capacity, or market demand for
wafers or production and assembly materials increases, our supply of wafers and other materials
could become limited. Such shortages raise the likelihood of potential wafer price increases and
wafer shortages or shortages in materials at production and test facilities and our resulting
potential inability to address customer product demands in a timely manner. Such increases in wafer
prices or materials could adversely affect our gross margins and shortages of wafers and materials
would adversely affect our ability to meet customer demands and lead to reduced revenue.
We depend on distributors, primarily Avnet, to generate a majority of our sales and complete order
fulfillment.
Resale of product through Avnet accounted for 53% of the Companys worldwide net revenues in the
first nine months of fiscal 2011, and as of January 1, 2011, Avnet accounted for 97% of our total
accounts receivable. To align with our strategic initiative to consolidate our distribution
channel, we have further strengthened our partnership with Avnet and recently, Avnet committed more
personnel and resources to our business. In return for these long-term commitments, we have agreed
to temporarily extend payment terms for Avnet, which increased our trade accounts receivable
balance and DSO as of the end of our third quarter of fiscal 2011 compared to our historical level.
We expect our DSO level to remain higher than historical levels in the short term, with our DSO
levels specific to Avnet decreasing through the beginning of our fourth quarter of fiscal 2011,
when we expect Avnet to return to standard payment terms. Any adverse change to our relationship
with Avnet or our remaining distributors could have a material impact on our business. Furthermore,
if a key distributor materially defaults on a contract or otherwise fails to perform, our business
and financial results would suffer. In addition, we are subject to concentrations of credit risk in
our trade accounts receivable, which includes accounts of our distributors. A significant reduction
of effort by a distributor to sell our products or a material change in our relationship with one
or more distributors may reduce our access to certain end customers and adversely affect our
ability to sell our products.
In addition, the financial health of our distributors and our continuing relationships with them
are important to our success. Unpredictable economic conditions may adversely impact the financial
health of some of these distributors, particularly our smaller distributors. This could result in
the insolvency of certain distributors, the inability of distributors to obtain credit to finance
the purchase of our products, or cause distributors to delay payment of their obligations to us and
increase our credit risk exposure. Our business could be harmed if the financial health of these
distributors impairs their performance and we are unable to secure alternate distributors.
We are dependent on independent subcontractors for most of our assembly and test services and
unavailability or disruption of these services could negatively impact our financial condition and
results of operations.
We are also dependent on subcontractors to provide semiconductor assembly, substrate, test and
shipment services. Any prolonged inability to obtain wafers with competitive performance and cost
attributes, adequate yields or timely delivery, any disruption in assembly, test or shipment
services, or any other circumstance that would require us to seek alternative sources of supply,
could delay shipments and have a material adverse effect on our ability to meet customer demands.
In addition, unpredictable economic conditions may adversely impact the financial health and
viability of these subcontractors and result in their insolvency or their inability to meet
their commitments to us. These factors would result in reduced net revenues and could negatively
impact our financial condition and results of operations.
A number of factors, including our inventory strategy, can impact our gross margins.
A number of factors, including yield, wafer pricing, product mix, market acceptance of our new
products, competitive pricing dynamics, geographic and/or market segment pricing strategies cause
our gross margins to fluctuate. In addition, forecasting our gross margins is difficult because a
significant portion of our business is based on turns within the same quarter.
Our inventory levels are higher than historical norms due to our decision to build incremental
safety stock and to build ahead of a planned closure of a particular foundry process line at one of
our foundry partners. In the event demand does not materialize, we may be subject to incremental
obsolescence costs.
38
Reductions in the average selling prices of our products could have a negative impact on our gross
margins.
The average selling prices of our products generally decline as the products mature. We seek to
offset the decrease in selling prices through yield improvement, manufacturing cost reductions and
increased unit sales. We also continue to develop higher value products or product features that
increase, or slow the decline of, the average selling price of our products. However, there is no
guarantee that our ongoing efforts will be successful or that they will keep pace with the decline
in selling prices of our products, which could ultimately lead to a decline in revenues and have a
negative effect on our gross margins.
Because of our international business and operations, we are vulnerable to the economic conditions
of the countries in which we operate and currency fluctuations could have a material adverse affect
on our business and negatively impact our financial condition and results of operations.
In addition to our U.S. operations, we also have significant international operations, including
foreign sales offices to support our international customers and distributors, our regional
headquarters in Ireland and Singapore and a research and development site in India. In connection
with the restructuring we announced in April 2009, our international operations grew as we
relocated certain operations and administrative functions outside the U.S. Sales and operations
outside of the U.S. subject us to the risks associated with conducting business in foreign economic
and regulatory environments. Our financial condition and results of operations could be adversely
affected by unfavorable economic conditions in countries in which we do significant business or by
changes in foreign currency exchange rates affecting those countries. We derive over one-half of
our revenues from international sales, primarily in the Asia Pacific region, Europe and Japan. Past
economic weakness in these markets adversely affected revenues. While there have been signs of
economic recovery in the U.S. and other markets, there can be no assurance that such improvement
will continue or is sustainable. Sales to all direct OEMs and distributors are denominated in U.S.
dollars. While the recent movement of the Euro and Yen against the U.S. dollar had no material
impact to our business, increased volatility could impact our European and Japanese customers.
Currency instability and volatility and disruptions in the credit and capital markets may increase
credit risks for some of our customers and may impair our customers ability to repay existing
obligations. Increased currency volatility could also positively or negatively impact our
foreign-currency-denominated costs, assets and liabilities. In addition, devaluation of the U.S.
dollar relative to other foreign currencies may increase the operating expenses of our foreign
subsidiaries adversely affecting our results of operations. Furthermore, because we are
increasingly dependent on the global economy, instability in worldwide economic environments
occasioned, for example, by political instability, terrorist activity or U.S. or other military
actions could adversely impact economic activity and lead to a contraction of capital spending by
our customers. Any or all of these factors could adversely affect our financial condition and
results of operations in the future.
We are subject to the risks associated with conducting business operations outside of the U.S.
which could adversely affect our business.
In addition to international sales and support operations and development activities, we purchase
our wafers from foreign foundries and have our commercial products assembled, packaged and tested
by subcontractors located outside the U.S. All of these activities are subject to the uncertainties
associated with international business operations, including tax laws and regulations, trade
barriers, economic sanctions, import and export regulations, duties and tariffs and other trade
restrictions, changes in trade policies, foreign governmental regulations, potential vulnerability
of and reduced protection for IP, longer receivable collection periods and disruptions or delays in
production or shipments, any of which could have a material adverse effect on our business,
financial condition and/or operating results. Additional factors that could adversely affect us due
to our international operations include rising oil prices and increased costs of natural resources.
Moreover, our financial condition and results of operations could be affected in the event of
political conflicts or economic crises in countries where our main wafer providers, end customers
and contract manufacturers who provide assembly and test services worldwide, are located. Adverse
change to the circumstances or conditions of our international business operations could have a
material adverse effect on our business.
We are exposed to fluctuations in interest rates and changes in credit rating and in the market
values of our portfolio investments which could have a material adverse impact on our financial
condition and results of operations.
Our cash, short-term and long-term investments represent significant assets that may be subject to
fluctuating or even negative returns depending upon interest rate movements, changes in credit
rating and financial market conditions. Since September 2007, the global credit markets have
experienced adverse conditions that have negatively impacted the values of various types of
investment and non-investment grade securities. During this time, the global credit and capital
markets have experienced significant 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 we 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. Our future
investment income may fall short of expectations due to changes in interest rates or if the decline
in fair values of our debt securities is judged to be other than temporary. Furthermore, we may
suffer losses in principal if we are forced to sell securities that have declined in market value
due to changes in interest rates or financial market conditions.
39
Our failure to protect and defend our intellectual property could impair our ability to compete
effectively.
We rely upon patent, copyright, trade secret, mask work and trademark laws to protect our
intellectual property. We cannot provide assurance that such intellectual property rights can be
successfully asserted in the future or will not be invalidated, violated, circumvented or
challenged. From time to time, third parties, including our competitors, have asserted against us
patent, copyright and other intellectual property rights to technologies that are important to us.
Third parties may attempt to misappropriate our IP through electronic or other means or assert
infringement claims against our indemnitees or us in the future. Such assertions by third parties
may result in costly litigation, indemnity claims or other legal actions and we may not prevail in
such matters or be able to license any valid and infringed patents from third parties on
commercially reasonable terms. This could result in the loss of our ability to import and sell our
products. Any infringement claim, indemnification claim, or impairment or loss of use of our
intellectual property could materially adversely affect our financial condition and results of
operations.
We rely on information technology systems, and failure of these systems to function properly or
unauthorized access to our systems could result in business disruption.
We rely in part on various information technology (IT) systems to manage our operations, including
financial reporting, and we regularly evaluate these systems and make changes to improve them as
necessary. Consequently, we periodically implement new, or enhance existing, operational and IT
systems, procedures and controls. For example, in the past we simplified our supply chain and were
required to make certain changes to our IT systems. Any delay in the implementation of, or
disruption in the transition to, new or enhanced systems, procedures or controls, could harm our
ability to record and report financial and management information on a timely and accurate basis.
These systems are also subject to power and telecommunication outages or other general system
failures. Failure of our IT systems or difficulties in managing them could result in business
disruption. We also may be subject to unauthorized access to our IT systems through a security
breach or attack. We seek to detect and investigate any security incidents and prevent their
recurrence, but in some cases, we might be unaware of an incident or its magnitude and effects.
Our business could be significantly harmed and we could be subject to third party claims in the
event of such a security breach.
Earthquakes and other natural disasters could disrupt our operations and have a material adverse
affect on our financial condition and results of operations.
The independent foundries upon which we rely to manufacture our products, as well as our California
and Singapore facilities, are located in regions that are subject to earthquakes and other natural
disasters. UMCs foundries in Taiwan and Toshibas and Seikos foundries in Japan as well as many
of our operations in California are centered in areas that have been seismically active in the
recent past and some areas have been affected by other natural disasters such as typhoons. Any
catastrophic event in these locations will disrupt our operations, including our manufacturing
activities. This type of disruption could result in our inability to manufacture or ship products,
thereby materially adversely affecting our financial condition and results of operations. Our
insurance may not cover losses resulting from such disruptions of our operations. Additionally,
disruption of operations at these foundries for any reason, including other natural disasters such
as typhoons, volcano eruptions, fires or floods, as well as disruptions in access to adequate
supplies of electricity, natural gas or water could cause delays in shipments of our products, and
could have a material adverse effect on our results of operations.
If we are unable to maintain effective internal controls, our stock price could be adversely
affected.
We are subject to the ongoing internal control provisions of Section 404 of the Sarbanes-Oxley Act
of 2002 (the Act). Our controls necessary for continued compliance with the Act may not operate
effectively at all times and may result in a material weakness
disclosure. The identification of material weaknesses in internal control, if any, could indicate a
lack of proper controls to generate accurate financial statements and could cause investors to lose
confidence and our stock price to drop.
We compete with others to attract and retain key personnel, and any loss of, or inability to
attract, such personnel would harm us.
We depend on the efforts and abilities of certain key members of management and other technical
personnel. Our future success depends, in part, upon our ability to retain such personnel and
attract and retain other highly qualified personnel, particularly product engineers. Competition
for such personnel is intense and we may not be successful in hiring or retaining new or existing
qualified personnel. From time to time we have effected restructurings which eliminate a number of
positions. Even if such personnel are not directly affected by the restructuring effort, such
terminations can have a negative impact on morale and our ability to attract and hire new qualified
personnel in the future. If we lose existing qualified personnel or are unable to hire new
qualified personnel, as needed, our business, financial condition and results of operations could
be seriously harmed.
40
Unfavorable results of legal proceedings could adversely affect our financial condition and
operating results.
From time to time we are subject to various legal proceedings and claims that arise out of the
ordinary conduct of our business. Certain claims are not yet resolved, including those that are
discussed under Item 1. Legal Proceedings, included in Part II, and additional claims may arise
in the future. Results of legal proceedings cannot be predicted with certainty. Regardless of its
merit, litigation may be both time-consuming and disruptive to our operations and cause significant
expense and diversion of management attention and we may enter into material settlements to avoid
these risks. Should we fail to prevail in certain matters, or should several of these matters be
resolved against us in the same reporting period, we may be faced with significant monetary damages
or injunctive relief against us that would materially and adversely affect a portion of our
business and might materially and adversely affect our financial condition and operating results.
Our products could have defects which could result in reduced revenues and claims against us.
We develop complex and evolving products that include both hardware and software. Despite our
testing efforts and those of our subcontractors, defects may be found in existing or new products.
These defects may cause us to incur significant warranty, support and repair or replacement costs,
divert the attention of our engineering personnel from our product development efforts and harm our
relationships with customers. Subject to certain terms and conditions, we have agreed to compensate
certain customers for limited specified costs they actually incur in the event our hardware
products experience epidemic failure. As a result, epidemic failure and other performance problems
could result in claims against us, the delay or loss of market acceptance of our products and would
likely harm our business. Our customers could also seek damages from us for their losses.
In addition, we could be subject to product liability claims. A product liability claim brought
against us, even if unsuccessful, would likely be time-consuming and costly to defend. Product
liability risks are particularly significant with respect to aerospace, automotive and medical
applications because of the risk of serious harm to users of these products. Any product liability
claim, whether or not determined in our favor, could result in significant expense, divert the
efforts of our technical and management personnel, and harm our business.
In preparing our financial statements, we make good faith estimates and judgments that may change
or turn out to be erroneous.
In preparing our financial statements in conformity with accounting principles generally accepted
in the U. S., we must make estimates and judgments in applying our most critical accounting
policies. Those estimates and judgments have a significant impact on the results we report in our
consolidated financial statements. The most difficult estimates and subjective judgments that we
make concern valuation of marketable and non-marketable securities, revenue recognition,
inventories, long-lived assets, goodwill, taxes and stock-based compensation. We base our estimates
on historical experience and on various other assumptions that we believe to be reasonable under
the circumstances, the results of which form the basis for making judgments about the carrying
values of assets and liabilities that are not readily apparent from other sources. We also have
other key accounting policies that are not as subjective, and therefore, their application would
not require us to make estimates or judgments that are as difficult, but which nevertheless could
significantly affect our financial reporting. Actual results may differ materially from these
estimates. If these estimates or their related assumptions change, our operating results for the
periods in which we revise our estimates or assumptions could be adversely and perhaps materially
affected.
Our failure to comply with the requirements of the International Traffic and Arms Regulations could
have a material adverse effect on our financial condition and results of operations.
Certain Xilinx space-grade FPGAs and related technologies are subject to the International Traffic
in Arms Regulations (ITAR), which are administered by the U.S. Department of State. The ITAR
governs the export and reexport of these FPGAs, the transfer of
related technical data and the provision of defense services, as well as offshore production, test
and assembly. We are required to maintain an internal compliance program and security
infrastructure to meet ITAR requirements.
An inability to obtain the required export licenses, or to predict when they will be granted,
increases the difficulties of forecasting shipments. In addition, security or compliance program
failures that could result in penalties or a loss of export privileges, as well as stringent ITAR
licensing restrictions that may make our products less attractive to overseas customers, could have
a material adverse effect on our business, financial condition, and/or operating results.
Considerable amounts of our common shares are available for issuance under our equity incentive
plans and convertible debentures, and significant issuances in the future may adversely impact the
market price of our common shares.
As of January 1, 2011, we had 2.00 billion authorized common shares, of which 260.0 million shares
were outstanding. In addition, 54.2 million common shares were reserved for issuance pursuant to
our equity incentive plans and Employee Stock Purchase Plan, 42.4 million common shares were
reserved for issuance upon conversion or repurchase of the convertible debentures and 19.8 million
common shares were reserved for issuance upon exercise of warrants. The availability of substantial
amounts of our common shares resulting from the exercise or settlement of equity awards outstanding
under our equity incentive plans or the conversion or repurchase of convertible debentures using
common shares, which would be dilutive to existing stockholders, could adversely affect the
prevailing market price of our common shares and could impair our ability to raise additional
capital through the sale of equity securities.
41
We have indebtedness that could adversely affect our financial position and prevent us from
fulfilling our debt obligations.
The aggregate principal amount of our consolidated indebtedness as of January 1, 2011 was $1.29
billion (principal amount). We also may incur additional indebtedness in the future. Our
indebtedness may:
|
|
|
make it difficult for us to satisfy our financial obligations, including making
scheduled principal and interest payments on the debentures and our other indebtedness; |
|
|
|
limit our ability to borrow additional funds for working capital, capital
expenditures, acquisitions or other general corporate purposes; |
|
|
|
limit our ability to use our cash flow or obtain additional financing for future
working capital, capital expenditures, acquisitions or other general business purposes; |
|
|
|
require us to use a substantial portion of our cash flow from operations to make debt
service payments; |
|
|
|
limit our flexibility to plan for, or react to, changes in our business and industry; |
|
|
|
place us at a competitive disadvantage compared to our less leveraged competitors; and |
|
|
|
increase our vulnerability to the impact of adverse economic and industry conditions. |
Our ability to meet our debt service obligations will depend on our future performance, which will
be subject to financial, business and other factors affecting our operations, many of which are
beyond our control.
The call options and warrant transactions related to our 2.625% Debentures may affect the value of
the debentures and our common stock.
To hedge against potential dilution upon conversion of the 2.625% Debentures, we purchased call
options on our common stock from the hedge counterparties. We also sold warrants to the hedge
counterparties, which could separately have a dilutive effect on our earnings per share to the
extent that the market price per share of our common stock exceeds the applicable strike price of
the warrants of $42.91 per share.
As the hedge counterparties and their respective affiliates modify hedge positions, they may enter
or unwind various derivatives with respect to our common stock and/or purchase or sell our common
stock in secondary market transactions. This activity also could affect the market price of our
common stock and/or debentures, which could affect the ability of the holders of the debentures to
convert and the number of shares and value of the consideration that will be received by the
holders of the debentures upon conversion.
The conditional conversion features of the outstanding debentures, if triggered, may adversely
affect our financial condition and operating results.
Our outstanding debentures have conditional conversion features. In the event the conditional
conversion features of the debentures are triggered, holders of such debentures will be entitled to
convert the debentures at any time during specified periods at their option. If one or more holders
elect to convert their debentures, we would be required to settle any converted principal through
the payment of cash, which could adversely affect our liquidity. In addition, even if holders do
not elect to convert their debentures, we could be required under applicable accounting rules to
reclassify all or a portion of the outstanding principal of the debentures as a current rather than
long-term liability, which would result in a material reduction of our net working capital.
Acquisitions and strategic investments present risks, and we may not realize the goals that were
contemplated at the time of a transaction.
We recently acquired a technology company whose product is complementary to our own products, and
in the past we have made a number of strategic investments in other technology companies. We may
make similar acquisitions and strategic investments in the future. Acquisitions and strategic
investments present risks, including:
|
|
|
our ongoing business may be disrupted and our managements attention may be diverted
by investment, acquisition, transition or integration activities; |
|
|
|
an acquisition or strategic investment may not further our business strategy as we
expected, and we may not integrate an acquired company or technology as successfully as
we expected; |
|
|
|
our operating results or financial condition may be adversely impacted by claims or
liabilities that we assume from an acquired company or technology or that are otherwise
related to an acquisition; |
42
|
|
|
we may have difficulty incorporating acquired technologies or products with our
existing product lines; |
|
|
|
we may have higher than anticipated costs in continuing support and development of
acquired products, in general and administrative functions that support such products; |
|
|
|
our strategic investments may not perform as expected; and |
|
|
|
we may experience unexpected changes in how we are required to account for our
acquisitions and strategic investments pursuant to U.S. generally accepted accounting
principles. |
The occurrence of any of these risks could have a material adverse effect on our business, results
of operations, financial condition or cash flows, particularly in the case of a larger acquisition
or several concurrent acquisitions or strategic investments.
|
|
|
ITEM 2. |
|
UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS |
In February 2008, the Board authorized the repurchase of up to $800.0 million of common stock
(2008 Repurchase Program). In November 2008, the Board of Directors approved an amendment to the
Companys 2008 Repurchase Program to provide that the funds may also be used to repurchase
outstanding debentures. In June 2010, the Board authorized the repurchase of up to $500.0 million
of common stock (2010 Repurchase Program). The 2008 and 2010 Repurchase Programs have no stated
expiration date. Through January 1, 2011, the Company had used the entire amount authorized under
the 2008 Repurchase program and $93.2 million authorized under the 2010 Repurchase Program, leaving
$406.8 million available for future purchases under the 2010 Repurchase Program.
The following table summarizes the Companys repurchase of its common stock during the third
quarter of fiscal 2011:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Approximate |
|
|
|
|
|
|
|
|
|
|
|
Total Number of |
|
|
Dollar Value of |
|
(In thousands, except per share amounts) |
|
Total Number |
|
|
Average |
|
|
Shares Purchased |
|
|
Shares that May |
|
|
|
of Shares |
|
|
Price Paid |
|
|
as Part of Publicly |
|
|
Yet Be Purchased |
|
Period |
|
Purchased |
|
|
per Share |
|
|
Announced Program |
|
|
Under the Programs |
|
October 3, 2010 to November 6, 2010 |
|
|
106 |
|
|
$ |
24.93 |
|
|
|
106 |
|
|
$ |
406,767 |
|
November 7, 2010 to December 4, 2010 |
|
|
|
|
|
$ |
|
|
|
|
|
|
|
$ |
406,767 |
|
December 5, 2010 to January 1, 2011 |
|
|
|
|
|
$ |
|
|
|
|
|
|
|
$ |
406,767 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total for the Quarter |
|
|
106 |
|
|
$ |
24.93 |
|
|
|
106 |
|
|
|
|
|
See Note 11. Common Stock and Debentures Repurchase Program to our condensed consolidated
financial statements, included in Part 1. Financial Information, for information regarding our
stock repurchase plans.
|
|
|
|
|
|
31.1 |
|
|
Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley
Act of 2002 |
|
31.2 |
|
|
Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of
2002 |
|
32.1 |
|
|
Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002 |
|
32.2 |
|
|
Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002 |
|
101.INS |
* |
|
XBRL Instance Document |
|
101.SCH |
* |
|
XBRL Taxonomy Extension Schema Document |
|
101.CAL |
* |
|
XBRL Taxonomy Extension Calculation Linkbase Document |
|
101.LAB |
* |
|
XBRL Taxonomy Extension Label Linkbase Document |
|
101.PRE |
* |
|
XBRL Taxonomy Extension Presentation Linkbase Document |
|
* |
Pursuant to applicable securities laws and regulations, we are deemed to have
complied with the reporting obligation relating to the submission of interactive data files in such
exhibits and are not subject to liability under any anti-fraud provisions of the federal securities
laws as long as we have made a good faith attempt to comply with the submission requirements and
promptly amend the interactive data files after becoming aware that the interactive data files
fail to comply with the submission requirements. Users of this data are advised that pursuant to
Rule 406T, these interactive data files are deemed not filed and otherwise are not subject to
liability. |
Items 3, 4 and 5 are not applicable and have been omitted.
43
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused
this report to be signed on its behalf by the undersigned thereunto duly authorized.
|
|
|
|
|
|
XILINX, INC.
|
|
Date: February 7, 2011 |
/s/ Jon A. Olson
|
|
|
Jon A. Olson |
|
|
Senior Vice President, Finance
and
Chief Financial Officer
(as principal accounting and financial
officer and on behalf of Registrant) |
|
44