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 (GAAP) 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 2, 2016
. 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 1, 2017
or any future period.
The Company uses a 52- to 53-week fiscal year ending on the Saturday nearest March 31. Fiscal
2017
will be a 52-week year ending on
April 1, 2017
, while fiscal
2016
was a 53-week year ended on
April 2, 2016
. The quarters ended
July 2, 2016
and
June 27, 2015
each included 13 weeks.
|
|
Note 2.
|
Recent Accounting Changes and Accounting Pronouncements
|
Adoption of New Accounting Guidance
In the
first
quarter of fiscal
2017
, the Company adopted an amended authoritative guidance simplifying the presentation of debt issuance costs as a direct deduction from the carrying value of the debt liability rather than showing the debt issuance costs as an asset. We have applied the amendment retrospectively to the comparable period presented and it did not have a significant impact on our financial statements.
In the
first
quarter of fiscal
2017
, the Company early adopted the authoritative guidance that simplifies how share-based payments are accounted for and presented in the financial statements. Under the new guidance, excess tax benefits or tax deficiencies are recorded in the condensed consolidated statement of income when the awards vest or are settled. Previously, they were recorded in stockholders' equity in the condensed consolidated balance sheet. In addition, cash flows related to excess tax benefits are now classified as an operating activity, with prior periods adjusted accordingly. While the new guidance provides an accounting policy election to account for forfeitures as they occur, the Company elected to continue to estimate forfeitures to determine the amount of compensation cost to be recognized in each period. As a result of the adoption of this guidance, the condensed consolidated statement of cash flows for the three months ended June 27, 2015 was adjusted as follows: a
$3.8 million
increase to net cash provided by operating activities and a
$3.8 million
increase to the net cash used in financing activities. Additionally, the Company recorded excess tax benefits of
$6.8 million
, resulting in an increase in net income per diluted share of
$0.02
for the
first
quarter of fiscal
2017
in the condensed consolidated statement of income as a component of the provision for income taxes.
Recent Accounting Pronouncements
In April
2014
, the Financial Accounting Standards Board (FASB) issued a new global revenue recognition guidance that replaces virtually all existing US GAAP guidance on contracts with customers and the related other assets and deferred costs. The guidance provides a five-step process for recognizing revenue that depicts the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The guidance also requires expanded qualitative and quantitative disclosures relating to the nature, amount, timing and uncertainty of revenue and cash flows arising from contracts with customers. In July 2015, FASB approved the deferral of the effective date of this guidance by one year. As a result, this guidance will be effective for the Company beginning in fiscal year 2019, with an option to early adopt in fiscal year 2018. The new guidance is required to be applied retrospectively to each prior reporting period presented, or retrospectively with the cumulative effect of initially applying it recognized at the date of initial application. The Company is currently evaluating the full impact of this new guidance on its consolidated financial statements, including selection of the transition method. However, assuming all other revenue recognition criteria have been met, it is likely that the new guidance would require the Company to recognize revenue and cost relating to distributor sales upon product delivery, subject to estimated allowance for distributor price adjustments and rights of return.
In February 2016, the FASB issued the authoritative guidance on leases. The new guidance requires the recognition of assets and liabilities arising from lease transactions on the balance sheet and will also require significant additional disclosures about the amount, timing and uncertainty of cash flows from leases. Accordingly, a lessee will recognize a lease asset for its right to use the
underlying asset and a lease liability for the corresponding lease obligation. The new guidance is effective for public business entities for fiscal years beginning after December 15, 2018, and interim periods within those fiscal years, which for Xilinx would be the first quarter of fiscal year 2020. Early adoption is permitted. The new guidance must be adopted using a modified retrospective transition, and provides for certain practical expedients. In addition, the transition will require application of the new guidance at the beginning of the earliest comparative period presented. The Company is currently evaluating the impact of this new guidance on its consolidated financial statements.
In March 2016, the FASB finalized its amendments in the new revenue recognition guidance on assessing whether an entity is a principal or an agent in a revenue transaction. The amendments clarify how an entity should identify the unit of accounting for the principal versus agent evaluation, and how it should apply the control principle to certain types of arrangements, such as service transactions, by explaining what a principal controls before the specified good or service is transferred to the customer. The FASB also addressed how an entity acting as a principal would determine its transaction price when it does not know the price charged to its customer for its goods or services by an intermediary. The amendments have the same effective date and transition requirements as the new revenue recognition guidance, which for Xilinx would be the beginning of fiscal year 2019. The Company is currently evaluating the impact of this new guidance on its consolidated financial statements.
In April 2016, the FASB finalized amendments in the new revenue recognition guidance on identifying performance obligations and accounting for licenses of intellectual property. The amendments address implementation issues that were raised by stakeholders and discussed by the Revenue Recognition Transition Resource Group (TRG). The amendments have the same effective date and transition requirements as the new revenue recognition guidance, which for Xilinx would be the beginning of fiscal year 2019. The Company is currently evaluating the impact of this new guidance on its consolidated financial statements.
In May 2016, the FASB finalized amendments in the new revenue recognition guidance on collectability, noncash consideration, presentation of sales tax, and transition. The amendments are intended to address implementation issues that were raised by stakeholders and discussed by TRG, and provide additional practical expedients. The amendments have the same effective date and transition requirements as the new revenue recognition guidance, which for Xilinx would be the beginning of fiscal year 2019. The Company is currently evaluating the impact of this new guidance on its consolidated financial statements.
In June 2016, the FASB issued the authoritative guidance which introduces new guidance for the accounting for credit losses on instruments for both financial services and non-financial services entities. The new guidance introduces an approach based on expected losses to estimate credit losses on certain types of financial instruments. It also modifies the impairment model for available-for-sale debt securities and provides for a simplified accounting model for purchased financial assets with credit deterioration since their origination. The new guidance will be effective for public business entities in fiscal years beginning after December 15, 2019, including interim periods within those years, which for Xilinx would be the first quarter of fiscal year 2021. Early adoption is permitted. The Company is currently evaluating the impact of this new guidance on its consolidated financial statements.
|
|
Note 3.
|
Significant Customers and Concentrations of Credit Risk
|
Avnet, Inc. (Avnet), one of the Company’s distributors, distributes the Company’s products worldwide. As of
July 2, 2016
and
April 2, 2016
, Avnet accounted for
54%
and
75%
of the Company’s total net accounts receivable, respectively. Resale of product through Avnet accounted for
42%
and
51%
of the Company’s worldwide net revenues in the
first
quarter of fiscal
2017
and
2016
, respectively. While they may fluctuate quarter over quarter due to timing of shipment or cash collections, the percentage of accounts receivable due from Avnet and the percentage of worldwide net revenues from Avnet are consistent with historical range.
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 sheet. 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 distributors.
No
end customer accounted for more than 10% of the Company’s worldwide net revenues for the
first
quarter of fiscal
2017
and
2016
.
The Company mitigates concentrations of credit risk in its investments in debt securities by currently investing more than
88%
of its portfolio in AA or higher grade securities as rated by Standard & Poor’s or Moody’s Investors Service. The Company’s methods to arrive at investment decisions are not solely based on the rating agencies’ credit ratings. Xilinx also performs additional credit due diligence and conducts regular portfolio credit reviews, including a review of counterparty credit risk related to the Company’s forward currency exchange contracts. Additionally, Xilinx limits its investments in the debt securities of a single issuer
based upon the issuer’s credit rating and attempts to further mitigate credit risk by diversifying risk across geographies and type of issuer.
As of
July 2, 2016
, approximately
34%
of the portfolio consisted of mortgage-backed securities. All of the mortgage-backed securities in the investment portfolio were issued by U.S. government-sponsored enterprises and agencies and are rated AA+ by Standard & Poor’s and AAA by Moody’s Investors Service.
|
|
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 testing and analysis. The Company primarily uses a consensus price or weighted-average price for its fair value assessment. The Company determines the consensus price using market prices from a variety of industry standard pricing services, data providers, security master files from large financial institutions and other third party sources and uses those multiple prices as inputs into a distribution-curve-based algorithm to determine the daily market value. The pricing services use multiple inputs to determine market prices, including reportable trades, benchmark yield curves, credit spreads and broker/dealer quotes as well as other industry and economic events. For certain securities with short maturities, such as discount commercial paper and certificates of deposit, the security is accreted from purchase price to face value at maturity. If a subsequent transaction on the same security is observed in the marketplace, the price on the subsequent transaction is used as the current daily market price and the security will be accreted to face value based on the revised price. For certain other securities, such as student loan auction rate securities, the Company performs its own valuation analysis using a discounted cash flow pricing model.
The Company validates the consensus prices by taking random samples from each asset type and corroborating those prices using reported trade activity, benchmark yield curves, binding broker/dealer quotes or other relevant price information. There have not been any changes to the Company’s fair value methodology during the
first
quarter of fiscal
2017
and the Company did not adjust or override any fair value measurements as of
July 2, 2016
.
Fair Value Hierarchy
The fair value framework requires the categorization of assets and liabilities into three levels based upon the assumptions (inputs) used to price the assets or liabilities. The guidance for fair value measurements requires that assets and liabilities carried at fair value be classified and disclosed in one of the following categories:
Level 1 — Quoted (unadjusted) prices in active markets for identical assets or liabilities.
The Company’s Level 1 assets consist of U.S. government and agency securities and money market funds.
Level 2 — Observable inputs other than quoted prices included in Level 1, such as quoted prices for similar assets or liabilities in active markets; quoted prices for identical or similar assets or liabilities in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the asset or liability.
The Company’s Level 2 assets consist of financial institution securities, non-financial institution securities, municipal bonds, U.S. government and agency securities, foreign government and agency securities, mortgage-backed securities, debt mutual funds, bank loans, asset-backed securities and commercial mortgage-backed securities. The Company’s Level 2 assets and liabilities also include foreign currency forward contracts and commodity swap 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 Company’s Level 3 assets and liabilities include student loan auction rate securities.
Assets and Liabilities Measured at Fair Value on a Recurring Basis
In instances where the inputs used to measure fair value fall into different levels of the fair value hierarchy, the fair value measurement has been determined based on the lowest level input that is significant to the fair value measurement in its entirety. The Company’s assessment of the significance of a particular item to the fair value measurement in its entirety requires judgment, including the consideration of inputs specific to the asset or liability. The following tables present information about the Company’s assets and liabilities measured at fair value on a recurring basis as of
July 2, 2016
and
April 2, 2016
:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
July 2, 2016
|
(In thousands)
|
|
Quoted
Prices in
Active
Markets for
Identical
Instruments
(Level 1)
|
|
Significant
Other
Observable
Inputs
(Level 2)
|
|
Significant
Unobservable
Inputs
(Level 3)
|
|
Total Fair
Value
|
Assets
|
|
|
|
|
|
|
|
|
Cash equivalents:
|
|
|
|
|
|
|
|
|
Money market funds
|
|
$
|
275,694
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
275,694
|
|
Financial institution securities
|
|
—
|
|
|
28,765
|
|
|
—
|
|
|
28,765
|
|
Non-financial institution securities
|
|
—
|
|
|
159,932
|
|
|
—
|
|
|
159,932
|
|
Foreign government and agency securities
|
|
—
|
|
|
37,971
|
|
|
|
|
|
37,971
|
|
Short-term investments:
|
|
|
|
|
|
|
|
|
Financial institution securities
|
|
—
|
|
|
479,779
|
|
|
—
|
|
|
479,779
|
|
Non-financial institution securities
|
|
—
|
|
|
426,673
|
|
|
—
|
|
|
426,673
|
|
Municipal bonds
|
|
—
|
|
|
51,203
|
|
|
—
|
|
|
51,203
|
|
U.S. government and agency securities
|
|
53,826
|
|
|
43,572
|
|
|
—
|
|
|
97,398
|
|
Foreign government and agency securities
|
|
—
|
|
|
234,731
|
|
|
—
|
|
|
234,731
|
|
Mortgage-backed securities
|
|
—
|
|
|
1,093,508
|
|
|
—
|
|
|
1,093,508
|
|
Debt mutual funds
|
|
—
|
|
|
33,718
|
|
|
—
|
|
|
33,718
|
|
Bank loans
|
|
—
|
|
|
98,318
|
|
|
—
|
|
|
98,318
|
|
Asset-backed securities
|
|
—
|
|
|
208,635
|
|
|
—
|
|
|
208,635
|
|
Commercial mortgage-backed securities
|
|
—
|
|
|
211,653
|
|
|
—
|
|
|
211,653
|
|
Long-term investments:
|
|
|
|
|
|
|
|
|
Auction rate securities
|
|
—
|
|
|
—
|
|
|
10,068
|
|
|
10,068
|
|
Municipal bonds
|
|
—
|
|
|
5,734
|
|
|
—
|
|
|
5,734
|
|
Mortgage-backed securities
|
|
—
|
|
|
129,601
|
|
|
—
|
|
|
129,601
|
|
Debt mutual fund
|
|
—
|
|
|
57,335
|
|
|
—
|
|
|
57,335
|
|
Asset-backed securities
|
|
—
|
|
|
6,277
|
|
|
—
|
|
|
6,277
|
|
Derivative financial instruments, net
|
|
—
|
|
|
216
|
|
|
—
|
|
|
216
|
|
Total assets measured at fair value
|
|
$
|
329,520
|
|
|
$
|
3,307,621
|
|
|
$
|
10,068
|
|
|
$
|
3,647,209
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
April 2, 2016
|
(In thousands)
|
Quoted
Prices in
Active
Markets for
Identical
Instruments
(Level 1)
|
|
Significant
Other
Observable
Inputs
(Level 2)
|
|
Significant
Unobservable
Inputs
(Level 3)
|
|
Total Fair
Value
|
Assets
|
|
|
|
|
|
|
|
Cash equivalents:
|
|
|
|
|
|
|
|
Money market funds
|
$
|
232,698
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
232,698
|
|
Non-financial institution securities
|
—
|
|
|
104,964
|
|
|
—
|
|
|
104,964
|
|
Foreign government and agency securities
|
—
|
|
|
98,967
|
|
|
—
|
|
|
98,967
|
|
Municipal bonds
|
—
|
|
|
1,003
|
|
|
—
|
|
|
1,003
|
|
Short-term investments:
|
|
|
|
|
|
|
|
|
Financial institution securities
|
—
|
|
|
284,853
|
|
|
—
|
|
|
284,853
|
|
Non-financial institution securities
|
—
|
|
|
460,148
|
|
|
—
|
|
|
460,148
|
|
Municipal Bonds
|
—
|
|
|
61,579
|
|
|
—
|
|
|
61,579
|
|
U.S. government and agency securities
|
81,873
|
|
|
110,420
|
|
|
—
|
|
|
192,293
|
|
Foreign government and agency securities
|
—
|
|
|
214,201
|
|
|
—
|
|
|
214,201
|
|
Mortgage-backed securities
|
—
|
|
|
1,067,157
|
|
|
—
|
|
|
1,067,157
|
|
Debt mutual fund
|
—
|
|
|
35,116
|
|
|
—
|
|
|
35,116
|
|
Bank loans
|
—
|
|
|
102,015
|
|
|
—
|
|
|
102,015
|
|
Asset-backed securities
|
—
|
|
|
210,051
|
|
|
—
|
|
|
210,051
|
|
Commercial mortgage-backed securities
|
—
|
|
|
206,470
|
|
|
—
|
|
|
206,470
|
|
Long-term investments:
|
|
|
|
|
|
|
|
|
Auction rate securities
|
—
|
|
|
—
|
|
|
9,977
|
|
|
9,977
|
|
Municipal bonds
|
—
|
|
|
7,100
|
|
|
—
|
|
|
7,100
|
|
Mortgage-backed securities
|
—
|
|
|
140,382
|
|
|
—
|
|
|
140,382
|
|
Debt mutual fund
|
—
|
|
|
56,785
|
|
|
—
|
|
|
56,785
|
|
Asset-backed securities
|
—
|
|
|
6,563
|
|
|
—
|
|
|
6,563
|
|
Derivative financial instruments, net
|
—
|
|
|
744
|
|
|
—
|
|
|
744
|
|
Total assets measured at fair value
|
$
|
314,571
|
|
|
$
|
3,168,518
|
|
|
$
|
9,977
|
|
|
$
|
3,493,066
|
|
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
|
(In thousands)
|
July 2, 2016
|
|
June 27, 2015
|
Balance as of beginning of period
|
$
|
9,977
|
|
|
$
|
10,312
|
|
Total realized and unrealized gains (losses):
|
|
|
|
Included in other comprehensive income
|
91
|
|
|
97
|
|
Balance as of end of period
|
$
|
10,068
|
|
|
$
|
10,409
|
|
As of
July 2, 2016
, marketable securities measured at fair value using Level 3 inputs were comprised of
$10.1 million
of student loan auction rate securities. There was no material change to the input assumptions of the pricing model for these student loan auction securities.
Financial Instruments Not Recorded at Fair Value on a Recurring Basis
The Company’s 2017 Convertible Notes, 2019 Notes and 2021 Notes are measured at fair value on a quarterly basis for disclosure purposes. The fair values of the 2017 Convertible Notes, 2019 Notes and 2021 Notes as of
July 2, 2016
were approximately
$963.1 million
,
$508.2 million
and
$524.0 million
, respectively, based on the last trading price of the respective debentures for the period (classified as Level 2 in fair value hierarchy due to relatively low trading volume).
|
|
Note 5.
|
Financial Instruments
|
The following is a summary of cash equivalents and available-for-sale securities as of the end of the periods presented:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
July 2, 2016
|
|
|
April 2, 2016
|
(In thousands)
|
Amortized Cost
|
|
Gross Unrealized Gains
|
|
Gross Unrealized Losses
|
|
Estimated Fair Value
|
|
|
Amortized Cost
|
|
Gross Unrealized Gains
|
|
Gross Unrealized Losses
|
|
Estimated Fair Value
|
Money market funds
|
$
|
275,694
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
275,694
|
|
|
|
$
|
232,698
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
232,698
|
|
Financial institution
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
securities
|
508,544
|
|
|
—
|
|
|
—
|
|
|
508,544
|
|
|
|
284,853
|
|
|
—
|
|
|
—
|
|
|
284,853
|
|
Non-financial institution
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
securities
|
584,819
|
|
|
1,819
|
|
|
(33
|
)
|
|
586,605
|
|
|
|
564,480
|
|
|
862
|
|
|
(230
|
)
|
|
565,112
|
|
Auction rate securities
|
10,500
|
|
|
—
|
|
|
(432
|
)
|
|
10,068
|
|
|
|
10,500
|
|
|
—
|
|
|
(523
|
)
|
|
9,977
|
|
Municipal bonds
|
55,964
|
|
|
1,053
|
|
|
(80
|
)
|
|
56,937
|
|
|
|
68,938
|
|
|
877
|
|
|
(133
|
)
|
|
69,682
|
|
U.S. government and
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
agency securities
|
97,441
|
|
|
55
|
|
|
(98
|
)
|
|
97,398
|
|
|
|
192,291
|
|
|
73
|
|
|
(71
|
)
|
|
192,293
|
|
Foreign government and
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
agency securities
|
272,711
|
|
|
—
|
|
|
(9
|
)
|
|
272,702
|
|
|
|
313,168
|
|
|
—
|
|
|
—
|
|
|
313,168
|
|
Mortgage-backed securities
|
1,211,457
|
|
|
16,330
|
|
|
(4,678
|
)
|
|
1,223,109
|
|
|
|
1,200,071
|
|
|
12,848
|
|
|
(5,380
|
)
|
|
1,207,539
|
|
Asset-backed securities
|
213,753
|
|
|
1,508
|
|
|
(349
|
)
|
|
214,912
|
|
|
|
216,068
|
|
|
1,151
|
|
|
(605
|
)
|
|
216,614
|
|
Debt mutual funds
|
101,350
|
|
|
—
|
|
|
(10,297
|
)
|
|
91,053
|
|
|
|
101,350
|
|
|
—
|
|
|
(9,449
|
)
|
|
91,901
|
|
Bank loans
|
98,681
|
|
|
145
|
|
|
(508
|
)
|
|
98,318
|
|
|
|
102,092
|
|
|
25
|
|
|
(102
|
)
|
|
102,015
|
|
Commercial mortgage-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
backed securities
|
212,184
|
|
|
1,075
|
|
|
(1,606
|
)
|
|
211,653
|
|
|
|
207,847
|
|
|
432
|
|
|
(1,809
|
)
|
|
206,470
|
|
|
$
|
3,643,098
|
|
|
$
|
21,985
|
|
|
$
|
(18,090
|
)
|
|
$
|
3,646,993
|
|
|
|
$
|
3,494,356
|
|
|
$
|
16,268
|
|
|
$
|
(18,302
|
)
|
|
$
|
3,492,322
|
|
The following tables show the fair values and gross unrealized losses of the Company’s investments, aggregated by investment category, for individual securities that have been in a continuous unrealized loss position for the length of time specified, as of
July 2, 2016
and
April 2, 2016
:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
July 2, 2016
|
|
Less Than 12 Months
|
|
12 Months or Greater
|
|
Total
|
(In thousands)
|
Fair Value
|
|
Gross Unrealized Losses
|
|
Fair Value
|
|
Gross Unrealized Losses
|
|
Fair Value
|
|
Gross Unrealized Losses
|
Non-financial institution securities
|
$
|
9,237
|
|
|
$
|
(32
|
)
|
|
$
|
1,218
|
|
|
$
|
(1
|
)
|
|
$
|
10,455
|
|
|
$
|
(33
|
)
|
Auction rate securities
|
—
|
|
|
—
|
|
|
10,068
|
|
|
(432
|
)
|
|
10,068
|
|
|
(432
|
)
|
Municipal bonds
|
1,550
|
|
|
(9
|
)
|
|
2,962
|
|
|
(71
|
)
|
|
4,512
|
|
|
(80
|
)
|
U.S. government and
|
|
|
|
|
|
|
|
|
|
|
|
|
|
agency securities
|
32,103
|
|
|
(98
|
)
|
|
—
|
|
|
—
|
|
|
32,103
|
|
|
(98
|
)
|
Foreign government and
|
|
|
|
|
|
|
|
|
|
|
|
|
|
agency securities
|
19,966
|
|
|
(9
|
)
|
|
—
|
|
|
—
|
|
|
19,966
|
|
|
(9
|
)
|
Mortgage-backed securities
|
224,966
|
|
|
(2,957
|
)
|
|
105,378
|
|
|
(1,721
|
)
|
|
330,344
|
|
|
(4,678
|
)
|
Asset-backed securities
|
44,459
|
|
|
(217
|
)
|
|
9,715
|
|
|
(132
|
)
|
|
54,174
|
|
|
(349
|
)
|
Debt mutual fund
|
—
|
|
|
—
|
|
|
91,053
|
|
|
(10,297
|
)
|
|
91,053
|
|
|
(10,297
|
)
|
Bank loans
|
50,001
|
|
|
(412
|
)
|
|
4,865
|
|
|
(96
|
)
|
|
54,866
|
|
|
(508
|
)
|
Commercial mortgage-
|
|
|
|
|
|
|
|
|
|
|
|
backed securities
|
90,252
|
|
|
(468
|
)
|
|
10,435
|
|
|
(1,138
|
)
|
|
100,687
|
|
|
(1,606
|
)
|
|
$
|
472,534
|
|
|
$
|
(4,202
|
)
|
|
$
|
235,694
|
|
|
$
|
(13,888
|
)
|
|
$
|
708,228
|
|
|
$
|
(18,090
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
April 2, 2016
|
|
Less Than 12 Months
|
|
12 Months or Greater
|
|
Total
|
(In thousands)
|
Fair Value
|
|
Gross Unrealized Losses
|
|
Fair Value
|
|
Gross Unrealized Losses
|
|
Fair Value
|
|
Gross Unrealized Losses
|
Non-financial institution securities
|
$
|
52,756
|
|
|
$
|
(230
|
)
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
52,756
|
|
|
$
|
(230
|
)
|
Auction rate securities
|
—
|
|
|
—
|
|
|
9,977
|
|
|
(523
|
)
|
|
9,977
|
|
|
(523
|
)
|
Municipal bonds
|
10,138
|
|
|
(44
|
)
|
|
3,867
|
|
|
(89
|
)
|
|
14,005
|
|
|
(133
|
)
|
U.S. government and
|
|
|
|
|
|
|
|
|
|
|
|
agency securities
|
84,024
|
|
|
(71
|
)
|
|
—
|
|
|
—
|
|
|
84,024
|
|
|
(71
|
)
|
Mortgage-backed securities
|
346,560
|
|
|
(3,916
|
)
|
|
114,285
|
|
|
(1,464
|
)
|
|
460,845
|
|
|
(5,380
|
)
|
Asset-backed securities
|
81,038
|
|
|
(502
|
)
|
|
20,793
|
|
|
(103
|
)
|
|
101,831
|
|
|
(605
|
)
|
Debt mutual funds
|
—
|
|
|
—
|
|
|
91,901
|
|
|
(9,449
|
)
|
|
91,901
|
|
|
(9,449
|
)
|
Bank loans
|
34,358
|
|
|
(31
|
)
|
|
42,832
|
|
|
(71
|
)
|
|
77,190
|
|
|
(102
|
)
|
Commercial mortgage-
|
|
|
|
|
|
|
|
|
|
|
|
backed securities
|
141,761
|
|
|
(878
|
)
|
|
2,150
|
|
|
(931
|
)
|
|
143,911
|
|
|
(1,809
|
)
|
|
$
|
750,635
|
|
|
$
|
(5,672
|
)
|
|
$
|
285,805
|
|
|
$
|
(12,630
|
)
|
|
$
|
1,036,440
|
|
|
$
|
(18,302
|
)
|
As of
July 2, 2016
, the gross unrealized losses that had been outstanding for less than twelve months were primarily related to mortgage-backed securities due to the general rising of the interest-rate environment, although the percentage of such losses to the total estimated fair value of the mortgage-backed securities was relatively insignificant. The gross unrealized losses that had been outstanding for more than twelve months were primarily related to debt mutual funds and mortgage-backed securities, which were primarily due to the general rising of the interest-rate environment and foreign currency movement.
The Company reviewed the investment portfolio and determined that the gross unrealized losses on these investments as of
July 2, 2016
and
April 2, 2016
were temporary in nature as evidenced by the fluctuations in the gross unrealized losses within the investment categories. These investments are highly rated by the credit rating agencies, there have been no defaults on any of these securities and we have received interest payments as they become due. Additionally, in the past several years a portion of the Company's investment in the mortgage-backed securities were redeemed or prepaid by the debtors at par. Furthermore, the aggregate of individual unrealized losses that had been outstanding for twelve months or more was not significant as of
July 2, 2016
and
April 2, 2016
. 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 (financial institution securities, non-financial institution securities, auction rate securities, municipal bonds, U.S. and foreign government and agency securities, asset-backed securities, bank loans, mortgage-backed securities and commercial mortgage-backed securities), 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.
|
|
|
|
|
|
|
|
|
|
July 2, 2016
|
(In thousands)
|
Amortized
Cost
|
|
Estimated
Fair Value
|
Due in one year or less
|
$
|
1,288,507
|
|
|
$
|
1,288,548
|
|
Due after one year through five years
|
488,890
|
|
|
489,855
|
|
Due after five years through ten years
|
244,043
|
|
|
245,600
|
|
Due after ten years
|
1,244,614
|
|
|
1,256,243
|
|
|
$
|
3,266,054
|
|
|
$
|
3,280,246
|
|
As of
July 2, 2016
,
$1.87 billion
of marketable debt securities with contractual maturities of greater than one year were classified as short-term investments. Additionally, the above table did not include investments in money market and mutual funds because these funds do not have specific contractual maturities.
Certain information related to available-for-sale securities is as follows:
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
(In thousands)
|
July 2, 2016
|
|
June 27, 2015
|
Proceeds from sale of available-for-sale securities
|
$
|
99,474
|
|
|
$
|
66,041
|
|
Gross realized gains on sale of available-for-sale securities
|
$
|
721
|
|
|
$
|
359
|
|
Gross realized losses on sale of available-for-sale securities
|
(512
|
)
|
|
(129
|
)
|
Net realized gains on sale of available-for-sale securities
|
$
|
209
|
|
|
$
|
230
|
|
Amortization of premiums on available-for-sale securities
|
$
|
6,762
|
|
|
$
|
6,468
|
|
The cost of securities matured or sold is based on the specific identification method.
|
|
Note 6.
|
Derivative Financial Instruments
|
The Company’s primary objective for holding derivative financial instruments is to manage foreign currency exchange rate risk and interest rate risk. As a result of the use of derivative financial instruments, the Company is exposed to the risk that counterparties to derivative contracts may 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
July 2, 2016
and
April 2, 2016
, the Company had the following outstanding forward currency exchange contracts (in notional amount), which were derivative financial instruments:
|
|
|
|
|
|
|
|
|
(In thousands and U.S. dollars)
|
July 2, 2016
|
|
April 2, 2016
|
Singapore Dollar
|
$
|
26,179
|
|
|
$
|
26,978
|
|
Euro
|
23,968
|
|
|
19,123
|
|
Indian Rupee
|
25,829
|
|
|
23,302
|
|
British Pound
|
10,722
|
|
|
10,716
|
|
Japanese Yen
|
4,310
|
|
|
3,387
|
|
|
$
|
91,008
|
|
|
$
|
83,506
|
|
As part of the Company’s strategy to reduce volatility of operating expenses due to foreign exchange rate fluctuations, the Company employs a hedging program with a forward outlook of up to
two years
for major foreign-currency-denominated operating expenses. The outstanding forward currency exchange contracts expire at various dates through
August 2017
. The net unrealized losses, which approximate the fair market value of the outstanding forward currency exchange contracts, are expected to be realized into net income within the next
two years
.
As of
July 2, 2016
, all of 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 contracts was reported as a component of other comprehensive income (loss) and reclassified into net income in the same period during which the hedged transaction affects earnings. The estimated amount of such gains or losses as of
July 2, 2016
that is expected to be reclassified into earnings was not material. The ineffective portion of the gains or losses on the forward contracts 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 acquisitions and capital expenditures. Gains and losses on foreign currency forward contracts that are designated as hedges of anticipated transactions, for which a firm commitment has been attained and the hedged relationship has been effective, are deferred and included in income or expenses in the same period that the underlying transaction is settled. Gains and losses on any instruments not meeting the above criteria are recognized in income or expenses in the consolidated statements of income as they are incurred.
The Company had the following derivative instruments as of
July 2, 2016
and
April 2, 2016
, located on the condensed consolidated balance sheet, utilized for risk management purposes detailed above:
|
|
|
|
|
|
|
|
|
|
|
|
Foreign Exchange Contracts
|
|
Asset Derivatives
|
|
Liability Derivatives
|
(In thousands)
|
Balance Sheet Location
|
Fair Value
|
|
Balance Sheet Location
|
Fair Value
|
July 2, 2016
|
Prepaid expenses and other current assets
|
$
|
1,755
|
|
|
Other accrued liabilities
|
$
|
1,539
|
|
April 2, 2016
|
Prepaid expenses and other current assets
|
$
|
2,161
|
|
|
Other accrued liabilities
|
$
|
1,417
|
|
The Company does not offset or net the fair value amounts of derivative financial instruments in its condensed consolidated balance sheets. The potential effect of rights of set-off associated with the derivative financial instruments was not material to the Company's condensed consolidated balance sheet for all periods presented.
The following table summarizes the effect of derivative instruments on the condensed consolidated statements of income for the first quarter of fiscal
2017
and
2016
:
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
(In thousands)
|
July 2, 2016
|
|
June 27, 2015
|
Amount of losses recognized in other comprehensive income on derivative (effective portion of cash flow hedging)
|
$
|
(488
|
)
|
|
$
|
(3,990
|
)
|
|
|
|
|
Amount of losses reclassified from accumulated other comprehensive income into income (effective portion) *
|
$
|
(293
|
)
|
|
$
|
(1,873
|
)
|
|
|
|
|
Amount of gains (losses) recorded (ineffective portion) *
|
$
|
8
|
|
|
$
|
(29
|
)
|
|
|
*
|
Recorded in Interest and Other Expense location within the condensed consolidated statements of income.
|
|
|
Note 7.
|
Stock-Based Compensation Plans
|
The Company’s equity incentive plans are broad-based, long-term retention programs that cover employees, consultants and non-employee directors of the Company. These plans are intended to attract and retain talented employees, consultants and non-employee directors and to provide such persons with a proprietary interest in the Company.
Stock-Based Compensation
The following table summarizes stock-based compensation expense related to stock awards granted under the Company’s equity incentive plans and rights to acquire stock granted under the Company’s Employee Stock Purchase Plan (ESPP):
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
(In thousands)
|
July 2, 2016
|
|
June 27, 2015
|
Stock-based compensation included in:
|
|
|
|
Cost of revenues
|
$
|
2,119
|
|
|
$
|
1,964
|
|
Research and development
|
15,120
|
|
|
14,692
|
|
Selling, general and administrative
|
12,165
|
|
|
9,664
|
|
|
$
|
29,404
|
|
|
$
|
26,320
|
|
As a result of the early adoption of new guidance on accounting for share-based payments and in the
first
quarter of fiscal
2017
, the Company recorded excess tax benefits realized for the tax deduction from option exercises and other awards of
$6.8 million
in the provision for income taxes. Please refer to "Note 2. Recent Accounting Changes and Accounting Pronouncements" and "Note 14. Income Taxes" for more details regarding the adoption of the new guidance. During the
first
quarter of fiscal
2016
, the Company recorded excess tax benefits realized for the tax deduction from option exercises and other awards of
$2.2 million
in additional paid-in capital.
The fair values of stock purchase plan rights under the Company’s ESPP were estimated using the Black-Scholes option pricing model.
The estimated fair values of restricted stock unit (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 value of RSUs granted during the
first
quarter of fiscal
2017
was
$42.52
(
$42.45
for the
first
quarter of fiscal
2016
), which were calculated based on estimates at the date of grant using the following weighted-average assumptions:
|
|
|
|
|
|
|
|
Three Months Ended
|
|
July 2, 2016
|
|
June 27, 2015
|
Risk-free interest rate
|
1.0
|
%
|
|
1.3
|
%
|
Dividend yield
|
2.8
|
%
|
|
2.7
|
%
|
Employee Stock Option Plans
A summary of the Company’s option plans activity and related information is as follows:
|
|
|
|
|
|
|
|
|
Options Outstanding
|
(Shares in thousands)
|
Number of Shares
|
|
Weighted-Average Exercise Price Per Share
|
March 28, 2015
|
3,247
|
|
|
$
|
24.81
|
|
Exercised
|
(1,977
|
)
|
|
$
|
24.38
|
|
Forfeited/cancelled/expired
|
(13
|
)
|
|
$
|
32.10
|
|
April 2, 2016
|
1,257
|
|
|
$
|
25.42
|
|
Exercised
|
(561
|
)
|
|
$
|
23.40
|
|
Forfeited/cancelled/expired
|
(1
|
)
|
|
$
|
27.86
|
|
July 2, 2016
|
695
|
|
|
$
|
27.04
|
|
Options exercisable at:
|
|
|
|
July 2, 2016
|
682
|
|
|
$
|
26.95
|
|
April 2, 2016
|
1,241
|
|
|
$
|
25.33
|
|
The types of awards allowed under the 2007 Equity Incentive Plan (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, but there was
no
issuance of stock options during the
first
quarter of fiscal
2017
and the entire fiscal
2016
. As of
July 2, 2016
,
12.9 million
shares remained available for grant under the 2007 Equity Plan.
The total pre-tax intrinsic value of options exercised during the
three
months ended
July 2, 2016
and
June 27, 2015
was
$12.6 million
and
$15.8 million
, respectively. This intrinsic value represents the difference between the exercise price and the fair market value of the Company’s common stock on the date of exercise.
RSU Awards
A summary of the Company’s RSU activity and related information is as follows:
|
|
|
|
|
|
|
|
|
RSUs Outstanding
|
(Shares in thousands)
|
Number of Shares
|
|
Weighted-Average Grant-Date Fair Value Per Share
|
March 28, 2015
|
6,873
|
|
|
$
|
39.07
|
|
Granted
|
3,088
|
|
|
$
|
41.19
|
|
Vested
|
(2,691
|
)
|
|
$
|
37.23
|
|
Cancelled
|
(592
|
)
|
|
$
|
39.43
|
|
April 2, 2016
|
6,678
|
|
|
$
|
40.74
|
|
Granted
|
155
|
|
|
$
|
42.52
|
|
Vested
|
(2,010
|
)
|
|
$
|
39.45
|
|
Cancelled
|
(149
|
)
|
|
$
|
40.77
|
|
July 2, 2016
|
4,674
|
|
|
$
|
41.35
|
|
Employee Stock Purchase Plan
Under the Company’s ESPP,
no
shares were issued during the
first
quarter of fiscal
2017
or
2016
. The next scheduled purchase under the ESPP is in the second quarter of fiscal
2017
. As of
July 2, 2016
,
9.4 million
shares were available for future issuance.
|
|
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 following table summarizes the computation of basic and diluted net income per common share:
|
|
|
|
|
|
|
|
|
(In thousands, except per share amounts)
|
July 2, 2016
|
|
June 27, 2015
|
Net income available to common stockholders
|
$
|
163,049
|
|
|
$
|
147,715
|
|
Weighted average common shares outstanding-basic
|
252,901
|
|
|
258,021
|
|
Dilutive effect of employee equity incentive plans
|
3,064
|
|
|
3,388
|
|
Dilutive effect of 2017 Convertible Notes and warrants
|
10,241
|
|
|
9,321
|
|
Weighted average common shares outstanding-diluted
|
266,206
|
|
|
270,730
|
|
Basic earnings per common share
|
$
|
0.64
|
|
|
$
|
0.57
|
|
Diluted earnings per common share
|
$
|
0.61
|
|
|
$
|
0.55
|
|
The total shares used in the denominator of the diluted net income per common share calculation includes potentially dilutive common equivalent shares outstanding that are not included in basic net income per common share by applying the treasury stock method to the impact of the equity incentive plans and to the incremental shares issuable assuming conversion of the Company's convertible debt and warrants (see "Note 10. Debt and Credit Facility" for more discussion of the Company's debt and warrants).
Outstanding stock options and RSUs under the Company's stock award plans to purchase approximately
297 thousand
and
319 thousand
shares, for the
first
quarter of fiscal
2017
and
2016
, respectively, were excluded from diluted net income per common share by applying the treasury stock method, as their inclusion would have been antidilutive. These options and RSUs could be dilutive in the future if the Company’s average share price increases and is greater than the combined exercise prices and the unamortized fair values of these options and RSUs.
To hedge against potential dilution upon conversion of the 2017 Convertible Notes, 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
20.8 million
shares of its common stock at
$28.86
per share. These call options 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 would serve
to neutralize the dilutive effect of the 2017 Convertible Notes and potentially reduce the weighted number of diluted shares used in per share calculations.
Inventories are stated at the lower of actual cost (determined using the first-in, first-out method), or market (estimated net realizable value) and are comprised of the following:
|
|
|
|
|
|
|
|
|
(In thousands)
|
July 2, 2016
|
|
April 2, 2016
|
Raw materials
|
$
|
15,737
|
|
|
$
|
15,346
|
|
Work-in-process
|
143,805
|
|
|
123,675
|
|
Finished goods
|
35,740
|
|
|
39,529
|
|
|
$
|
195,282
|
|
|
$
|
178,550
|
|
|
|
Note 10.
|
Debt and Credit Facility
|
2017 Convertible Notes
As of
July 2, 2016
, the Company had
$600.0 million
principal amount of 2017 Convertible Notes outstanding. The 2017 Convertible Notes are senior in right of payment to the Company’s existing and future unsecured indebtedness that is expressly subordinated in right of payment to the 2017 Convertible Notes, and are ranked equally with all of our other existing and future unsecured senior indebtedness, including the 2019 and 2021 Notes discussed below. The Company may not redeem the 2017 Convertible Notes prior to maturity.
The 2017 Convertible Notes are convertible, subject to certain conditions, into shares of Xilinx common stock at a conversion rate of
34.6495
shares of common stock per
$1 thousand
principal amount of the 2017 Convertible Notes, representing an effective conversion price of approximately
$28.86
per share of common stock. The conversion rate is subject to adjustment for certain events as outlined in the indenture governing the 2017 Convertible Notes, but will not be adjusted for accrued interest. One of the conditions allowing holders of the 2017 Convertible Notes to convert during any fiscal quarter is if the last reported sale price of the Company's common stock for at least 20 trading days during a period of 30 consecutive trading days ending on the last trading day of the preceding fiscal quarter is greater than or equal to 130% of the conversion price on each applicable trading day. This condition was met as of
July 2, 2016
and as a result, the 2017 Convertible Notes were convertible at the option of the holders. As of
July 2, 2016
, the 2017 Convertible Notes were classified as a current liability on the Company's condensed consolidated balance sheet. Additionally, a portion of the equity component attributable to the conversion feature of the 2017 Convertible Notes was classified in temporary stockholders' equity. The amount classified as temporary equity was equal to the difference between the principal amount and carrying value of the 2017 Convertible Notes.
Upon conversion, the Company would pay the holders of the 2017 Convertible Notes cash up to the aggregate principal amount of the 2017 Convertible Notes. 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 2017 Convertible Notes, 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.
The carrying values of the liability and equity components of the 2017 Convertible Notes are reflected in the Company’s condensed consolidated balance sheets as follows:
|
|
|
|
|
|
|
|
|
(In thousands)
|
July 2, 2016
|
|
|
April 2, 2016
|
Liability component:
|
|
|
|
Principal amount of the 2017 Convertible Notes (discount is based on imputed discount rate of 5.75%)
|
$
|
600,000
|
|
|
$
|
600,000
|
|
Unamortized discount of liability component
|
(14,249
|
)
|
|
(18,135
|
)
|
Hedge accounting adjustment – sale of interest rate swap
|
4,118
|
|
|
5,241
|
|
Unamortized debt issuance costs associated with 2017 Convertible Notes
|
$
|
(1,327
|
)
|
|
$
|
(1,689
|
)
|
Net carrying value of the 2017 Convertible Notes
|
$
|
588,542
|
|
|
$
|
585,417
|
|
|
|
|
|
|
|
Equity component (including temporary equity) – net carrying value
|
$
|
66,415
|
|
|
$
|
66,415
|
|
The remaining unamortized debt discount, net of the hedge accounting adjustment from the previous sale of the interest rate swap, is being amortized as additional non-cash interest expense over the expected remaining term of the 2017 Convertible Notes. As of
July 2, 2016
, the remaining term of the 2017 Convertible Notes is
1.0
year, and the if-converted value of the 2017 Convertible Notes was
$967.5 million
.
Interest expense related to the 2017 Convertible Notes was included in interest and other expense, net on the condensed consolidated statements of income as follows:
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
(In thousands)
|
July 2, 2016
|
|
June 27, 2015
|
Contractual coupon interest
|
$
|
3,938
|
|
|
$
|
3,938
|
|
Amortization of debt issuance costs
|
362
|
|
|
362
|
|
Amortization of debt discount, net
|
2,763
|
|
|
2,763
|
|
Total interest expense related to the 2017 Convertible Notes
|
$
|
7,063
|
|
|
$
|
7,063
|
|
To hedge against potential dilution upon conversion of the 2017 Convertible Notes, the Company purchased call options on its common stock from the hedge counterparties. The call options give the Company the right to purchase up to
20.8 million
shares of its common stock at
$28.86
per share. The call options will terminate upon the earlier of the maturity of the 2017 Convertible Notes or the last day any of the 2017 Convertible Notes 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
20.8 million
shares of the Company’s common stock at
$40.89
per share. These warrants expire on a gradual basis over a specified period starting on September 13, 2017.
2019 and 2021 Notes
On March 12, 2014, the Company issued
$500.0 million
principal amount of 2019 Notes and
$500.0 million
principal amount of 2021 Notes with maturity dates of
March 15, 2019
and
March 15, 2021
respectively. The 2019 and 2021 Notes were offered to the public at a discounted price of
99.477%
and
99.281%
of par, respectively. Interest on the 2019 and 2021 Notes is payable semi-annually on March 15 and September 15.
The Company received net proceeds of
$990.1 million
from issuance of the 2019 and 2021 Notes, after the debt discounts and deduction of debt issuance costs. The debt discounts and issuance costs are amortized to interest expense over the terms of the 2019 and 2021 Notes. As of
July 2, 2016
, the remaining term of the 2019 and 2021 Notes are
2.7
years and
4.7
years respectively.
The following table summarizes the carrying value of the 2019 and 2021 Notes as of
July 2, 2016
and
April 2, 2016
:
|
|
|
|
|
|
|
|
|
|
|
|
|
(In thousands)
|
July 2, 2016
|
|
April 2, 2016
|
Principal amount of the 2019 Notes (discount is based on imputed interest rate of 2.236%)
|
$
|
500,000
|
|
|
$
|
500,000
|
|
Unamortized discount of the 2019 Notes
|
(1,430
|
)
|
|
(1,560
|
)
|
Unamortized debt issuance costs associated with 2019 Notes
|
(911
|
)
|
|
(996
|
)
|
Principal amount of the 2021 Notes (discount is based on imputed interest rate of 3.115%)
|
500,000
|
|
|
500,000
|
|
Unamortized discount of the 2021 Notes
|
(2,482
|
)
|
|
(2,605
|
)
|
Unamortized debt issuance costs associated with 2021 Notes
|
(1,138
|
)
|
|
(1,200
|
)
|
Total carrying value
|
$
|
994,039
|
|
|
$
|
993,639
|
|
Interest expense related to the 2019 and 2021 Notes was included in interest and other expense, net on the condensed consolidated statements of income as follows:
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
(In thousands)
|
July 2, 2016
|
|
June 27, 2015
|
Contractual coupon interest
|
$
|
6,406
|
|
|
$
|
6,406
|
|
Amortization of debt issuance costs
|
146
|
|
|
146
|
|
Amortization of debt discount, net
|
253
|
|
|
247
|
|
Total interest expense related to the 2019 and 2021 Notes
|
$
|
6,805
|
|
|
$
|
6,799
|
|
Revolving Credit Facility
On
December 7, 2011
, the Company entered into a
$250.0 million
senior unsecured revolving credit facility with a syndicate of banks (expiring in
December 2016
). Borrowings under the credit facility will bear interest at a benchmark rate plus an applicable margin based upon the Company’s credit rating. In connection with the credit facility, the Company is required to maintain certain financial and nonfinancial covenants. As of
July 2, 2016
, the Company had made
no
borrowings under this credit facility and was not in violation of any of the covenants.
Note 11. Common Stock 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. On November 17, 2014, the Board authorized the repurchase of
$800.0 million
of the Company's common stock (2014 Repurchase Program). On May 16, 2016, the Board authorized the repurchase of up to
$1.0 billion
of the Company's common stock and debentures (2016 Repurchase Program). The 2014 and 2016 Repurchase Programs have no stated expiration date.
Through
July 2, 2016
, the Company had used
$696.0 million
of the
$800.0 million
authorized under the 2014 Repurchase Program, and
none
of the
$1.0 billion
authorized under the 2016 Repurchase Program, leaving
$1.1 billion
available for future repurchases. The Company’s current policy is to retire all repurchased shares, and consequently,
no
treasury shares were held as of
July 2, 2016
and
April 2, 2016
.
During the
first
quarter of fiscal
2017
, the Company repurchased
2.2 million
shares of common stock for a total of
$100.2 million
and during the
first
quarter of fiscal
2016
, the Company also repurchased
2.2 million
shares of common stock for a total of
$100.0 million
.
|
|
Note 12.
|
Interest and Other Expense, Net
|
The components of interest and other expense, net are as follows:
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
(In thousands)
|
July 2, 2016
|
|
June 27, 2015
|
Interest income
|
$
|
11,466
|
|
|
$
|
7,975
|
|
Interest expense
|
(13,868
|
)
|
|
(13,862
|
)
|
Other expense, net
|
(2,185
|
)
|
|
(4,640
|
)
|
|
$
|
(4,587
|
)
|
|
$
|
(10,527
|
)
|
|
|
Note 13.
|
Accumulated Other Comprehensive Loss
|
Comprehensive income (loss) is defined as the change in equity of a company during a period from transactions and other events and circumstances from non-owner sources. The components of accumulated other comprehensive loss are as follows:
|
|
|
|
|
|
|
|
|
(In thousands)
|
July 2, 2016
|
|
April 2, 2016
|
Accumulated unrealized gains (losses) on available-for-sale securities, net of tax
|
$
|
2,419
|
|
|
$
|
(1,260
|
)
|
Accumulated unrealized gains (losses) on hedging transactions, net of tax
|
(232
|
)
|
|
256
|
|
Accumulated cumulative translation adjustment, net of tax
|
(5,592
|
)
|
|
(5,627
|
)
|
Accumulated other comprehensive loss
|
$
|
(3,405
|
)
|
|
$
|
(6,631
|
)
|
The related tax effects of other comprehensive income loss were not material for all periods presented.
The Company recorded a tax provision of
$18.6 million
for the
first
quarter of fiscal
2017
as compared to
$20.3 million
in the same prior year period, representing effective tax rates of
10%
and
12%
, respectively.
The difference between the U.S. federal statutory tax rate of
35%
and the Company’s effective tax rate in all periods is primarily due to 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 Company’s total gross unrecognized tax benefits as of
July 2, 2016
, determined in accordance with FASB authoritative guidance for measuring uncertain tax positions, increased by
$861 thousand
in the
first
quarter of fiscal
2017
to
$34.9 million
. The total amount of unrecognized tax benefits that, if realized in a future period, would favorably affect the effective tax rate was
$16.2 million
as of
July 2, 2016
. 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.
The Company’s policy is to include interest and penalties related to income tax liabilities within the provision for income taxes on the condensed consolidated statements of income. The balance of accrued interest and penalties recorded in the condensed consolidated balance sheets and the amounts of interest and penalties included in the Company's provision for income taxes were not material for all periods presented.
The Company is no longer subject to U.S. federal or Ireland audits by taxing authorities for years through fiscal 2011. The Company is no longer subject to U.S. state audits for years through fiscal 2010.
The Company has been subject to examination by the IRS for fiscal years 2012 through 2014. During the fourth quarter of fiscal 2016, the IRS completed its fieldwork and issued a Revenue Agent Report. The case has been moved forward to the Joint Committee on Taxation for review. As a result, the audit remains officially open until such review is completed. The Company believes its provision for unrecognized tax benefits is adequate for adjustments that may result from the tax audit.
As a result of the early adoption of new guidance on accounting for share-based payments, the Company recorded excess tax benefits of
$6.8 million
for the
first
quarter of fiscal
2017
in the condensed consolidated statement of income as a component of the provision for income taxes. Please refer to "Note 2. Recent Accounting Changes and Accounting Pronouncements" for more details regarding the adoption of the new guidance.
Xilinx leases some of its facilities and office buildings under non-cancelable operating leases that expire at various dates through
December 2021
. Additionally, Xilinx entered into a land lease in conjunction with the Company’s building in Singapore, which will expire in
November 2035
and the lease cost was settled in an up-front payment in June 2006. 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 Company’s leases contain renewal options for varying terms. Approximate future minimum lease payments under non-cancelable operating leases are as follows:
|
|
|
|
|
Fiscal
|
(In thousands)
|
2017 (remaining nine months)
|
$
|
4,045
|
|
2018
|
3,477
|
|
2019
|
3,059
|
|
2020
|
2,151
|
|
2021
|
1,573
|
|
Thereafter
|
594
|
|
Total
|
$
|
14,899
|
|
Aggregate future rental income to be received, which includes rents from both owned and leased property, totaled
$2.8 million
as of
July 2, 2016
. Rent expense, net of rental income, under all operating leases was
$1.3 million
and
$756 thousand
for the
three
months ended
July 2, 2016
and
June 27, 2015
, respectively. Rental income was not material for the
first
quarter of fiscal
2017
or
2016
.
Other commitments as of
July 2, 2016
totaled
$123.1 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
July 2, 2016
, the Company also had
$30.2 million
of non-cancelable license obligations to providers of electronic design automation software and hardware/software maintenance expiring at various dates through
August 2018
, and open purchase obligations totaling
$6.6 million
related to the renovation of one of its properties. The Company expects to receive the materials and services and pay for these open purchase obligations within the next
six
months.
|
|
Note 16.
|
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
first
quarter of fiscal
2017
and the end of fiscal
2016
, the accrual balances of the product warranty liability were immaterial.
The Company offers, subject to certain terms and conditions, to indemnify customers and distributors for costs and damages awarded against these parties in the event the Company’s 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.
Patent Litigation
On November 7, 2014, the Company filed a complaint for declaratory judgment against Papst Licensing GmbH & Co., KG (Papst) in the U.S. District Court for the Northern District of California (Xilinx, Inc. v. Papst Licensing GmbH & Co., KG, Case No. 3:14-CV-04963) (the California Action). On the same date, a patent infringement lawsuit was filed by Papst against the Company in the U.S. District Court for the District of Delaware (Papst Licensing GmbH & Co., KG v. Xilinx, Inc., Case No. 1:14-CV-01376) (the Delaware Action). Both the California Action and the Delaware Action pertain to the same two patents. In the Delaware Action, Papst seeks unspecified damages, interest and costs. On July 9, 2015, the Court in the California Action granted Papst's motion to dismiss for lack of personal jurisdiction, and the California Action was dismissed. The Company has appealed the decision dismissing in the California Action. On September 1, 2015, the Court in the Delaware Action granted the Company's motion to transfer the Delaware Action to the U.S. District Court for the Northern District of California (Papst Licensing GmbH & Co., KG v. Xilinx, Inc., Case No. 3:16-cv-00925-EDL). On June 9, 2016, the Court in the transferred Delaware Action granted the Company’s motion for judgment on the pleadings, determining that each of the asserted claims is directed to a patent-ineligible abstract idea and dismissing Papst’s claims for infringement. On July 8, 2016, Papst filed a notice of appeal from the judgment in favor of the Company. The Company is unable to estimate is range of possible loss, if any, in this matter at this time.
On July 17, 2014, a patent infringement lawsuit was filed by PLL Technologies, Inc. (PTI) against the Company in the U.S. District Court for the District of Delaware (PLL Technologies, Inc. v. Xilinx, Inc., Case No. 1:14-CV-00945). On April 28, 2015, the United States Patent Trial and Appeal Board (PTAB) granted Xilinx's request for inter partes review (IPR) with respect to all claims in the litigation. On May 5, 2015, the Court ordered the litigation be stayed pending final resolution of the IPR. On April 18, 2016, the PTAB issued a final written decision in which all of the asserted claims were found unpatentable. On June 14, 2016, PTI filed notice of appeal from the final written decision. The lawsuit pertains to one patent and PTI seeks unspecified damages, interest and costs. The Company is unable to estimate its range of possible loss, if any, in this matter at this time.
The Company intends to continue to protect and defend our IP vigorously.
Other Matters
On June 11, 2015, John P. Neblett as Chapter 7 Trustee of Valley Forge Composite Technologies, Inc. filed a complaint against Xilinx and others in the U.S. Bankruptcy Court for the Middle District of Pennsylvania (Bankruptcy No. 1:13-bk-05253-JJT). The complaint alleges causes of actions against Xilinx for negligence and civil conspiracy relating to alleged violations of U.S. export laws. It seeks at least
$50.0 million
in damages, together with punitive damages, from the defendants. On September 21, 2015, the action was withdrawn from the U.S. Bankruptcy Court for the Middle District of Pennsylvania and transferred to the U.S. District Court for the Eastern District of Kentucky. On November 2, 2015, Xilinx, along with other defendants, filed a motion to dismiss the complaint. On November 3, 2015, Xilinx filed a motion for sanctions pursuant to Federal Rule of Civil Procedure 11. On June 27, 2016, the Court denied both motions. The Company intends to vigorously defend the case and is unable to estimate its range of possible loss, if any, in this matter at this time.
From time to time, the Company is involved in various disputes and litigation matters that arise in the ordinary course of its 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, the Company reviews the status of each matter and assesses 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, the Company accrues 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, the Company continues to reassess the potential liability related to pending claims and litigation and may revise estimates.
|
|
Note 18.
|
Goodwill and Acquisition-Related Intangibles
|
As of
July 2, 2016
and
April 2, 2016
, the gross and net amounts of goodwill and of acquisition-related intangibles for all acquisitions were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted-Average
|
(In thousands)
|
July 2, 2016
|
|
April 2, 2016
|
|
Amortization Life
|
Goodwill
|
$
|
159,296
|
|
|
$
|
159,296
|
|
|
|
Core technology, gross
|
77,640
|
|
|
77,640
|
|
|
5.6 years
|
Less accumulated amortization
|
(72,699
|
)
|
|
(71,472
|
)
|
|
|
Core technology, net
|
4,941
|
|
|
6,168
|
|
|
|
Other intangibles, gross
|
46,606
|
|
|
46,606
|
|
|
2.7 years
|
Less accumulated amortization
|
(46,589
|
)
|
|
(46,572
|
)
|
|
|
Other intangibles, net
|
17
|
|
|
34
|
|
|
|
Total acquisition-related intangibles, gross
|
124,246
|
|
|
124,246
|
|
|
|
Less accumulated amortization
|
(119,288
|
)
|
|
(118,044
|
)
|
|
|
Total acquisition-related intangibles, net
|
$
|
4,958
|
|
|
$
|
6,202
|
|
|
|
Amortization expense for acquisition-related intangibles for the
three
months ended
July 2, 2016
and
June 27, 2015
was
$1.2 million
and
$1.8 million
, respectively. Based on the carrying value of acquisition-related intangibles recorded as of
July 2, 2016
, and assuming no subsequent acquisition or impairment of the underlying assets, the annual amortization expense for acquisition-related intangibles is expected to be as follows:
|
|
|
|
|
Fiscal
|
(In thousands)
|
2017 (remaining nine months)
|
$
|
3,517
|
|
2018
|
1,374
|
|
2019
|
67
|
|
Total
|
$
|
4,958
|
|
|
|
Note 19.
|
Subsequent Events
|
On July 26, 2016, the Company’s Board of Directors declared a cash dividend of
$0.33
per common share for the
second
quarter of fiscal
2017
. The dividend is payable on August 24, 2016 to stockholders of record on August 11, 2016.