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Xilinx Inc (XLNX) SEC Filing 10-Q Quarterly report for the period ending Saturday, June 29, 2019

Xilinx Inc

CIK: 743988 Ticker: XLNX


Exhibit 99.1
Investor Relations Contact:                        
Suresh Bhaskaran
Xilinx, Inc.
(408) 879-4784
ir@xilinx.com


XILINX REPORTS RECORD REVENUES IN FISCAL FIRST QUARTER 2020
Strong year-over-year revenue and earnings growth despite global trade actions

SAN JOSE, Calif., July 24, 2019
-- Xilinx, Inc. (Nasdaq: XLNX), the leader in adaptive and intelligent computing, today announced record revenues of $850 million for the first quarter of fiscal year 2020, up 3% from the prior quarter and up 24% year over year. GAAP net income for June quarter was $241 million, or $0.94 per diluted share. Non-GAAP net income for June quarter was $249 million, or $0.97 per diluted share.
The Xilinx Board of Directors declared a quarterly cash dividend of $0.37 per outstanding share of common stock payable on August 27, 2019 to all stockholders of record at the close of business on August 7, 2019.  
Additional first quarter of fiscal year 2020 comparisons are provided in the charts below.

Q1 2020 Financial Highlights
(In millions, except EPS)

 
 
GAAP
 
 
 
 
 
 
 
 
 
 
Q1
Q4
Q1
 
 
 
 
 
FY 2020
FY 2019
FY 2019
 
Q-T-Q
Y-T-Y
Net revenues*
$850
$828
$684
 
3%
24%
Operating income
$251
$250
$216
 
0%
16%
Net income
$241
$245
$190
 
-1%
27%
Diluted earnings per share
$0.94
$0.95
$0.74
 
-1%
27%
 
 
 
 
 
 
 
 
 
 
Non-GAAP
 
 
 
 
 
 
 
 
 
 
Q1
Q4
Q1
 
 
 
 
 
FY 2020
FY 2019
FY 2019
 
Q-T-Q
Y-T-Y
Net revenues*
$850
$828
$684
 
3%
24%
Operating income
$260
$259
$218
 
0%
19%
Net income
$249
$242
$192
 
3%
30%
Diluted earnings per share
$0.97
$0.94
$0.75
 
3%
29%
 
 
 
 
 
 
 
 
* No adjustment between GAAP and Non-GAAP
 
 
 








The following information was filed by Xilinx Inc (XLNX) on Wednesday, July 24, 2019 as an 8K 2.02 statement, which is an earnings press release pertaining to results of operations and financial condition. It may be helpful to assess the quality of management by comparing the information in the press release to the information in the accompanying 10-Q Quarterly Report statement of earnings and operation as management may choose to highlight particular information in the press release.


UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 10-Q
(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 29, 2019 or
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
 
2100 Logic Drive
 
77-0188631
(State or other jurisdiction of
incorporation or organization)
 
San Jose
 
(I.R.S. Employer
Identification No.)
 
 
California
 
95124
 
 
(Address of principal executive offices)
 
(Zip Code)
(408) 559-7778
(Registrant’s telephone number, including area code)
N/A
(Former name, former address, and former fiscal year, if changed since last report)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Trading Symbol(s)
Name of each exchange on which registered
Common Stock, $0.01 par value
XLNX
The Nasdaq Global Select Market

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  x    No  ¨
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes  x    No  ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act.
Large accelerated filer
x
Accelerated filer
 o
Non-accelerated filer
o
Smaller reporting company
Emerging growth company
 
 
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o
 
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes      No  x
Shares outstanding of the registrant’s common stock:
Class
 
Shares Outstanding as of July 12, 2019
Common Stock, $0.01 par value
 
252,604,743




TABLE OF CONTENTS
 

2


This Quarterly Report on Form 10-Q contains forward-looking statements, within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements may be found throughout this Quarterly Report and involve numerous known and unknown 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 Quarterly Report or in any of our other communications for any reason.

PART I.
FINANCIAL INFORMATION

Item 1.
Financial Statements
XILINX, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
 
 
Three Months Ended
(In thousands, except per share amounts)
June 29, 2019
 
June 30, 2018
Net revenues
$
849,632

 
$
684,370

Cost of revenues:
 
 
 
Cost of products sold
283,500

 
206,888

Amortization of acquisition-related intangibles
3,269

 

Total cost of revenues
286,769

 
206,888

Gross margin
562,863

 
477,482

Operating expenses:

 

Research and development
204,100

 
170,826

Selling, general and administrative
107,425

 
90,532

Amortization of acquisition-related intangibles
400

 
360

Total operating expenses
311,925

 
261,718

Operating income
250,938

 
215,764

Interest and other income (expense), net
11,612

 
(2,847
)
Income before income taxes
262,550

 
212,917

Provision for income taxes
21,091

 
22,879

Net income
$
241,459

 
$
190,038

Net income per common share:

 

Basic
$
0.95

 
$
0.75

Diluted
$
0.94

 
$
0.74

Cash dividends per common share
$
0.37

 
$
0.36

Shares used in per share calculations:

 

Basic
253,268

 
252,682

Diluted
257,928

 
255,935




See notes to condensed consolidated financial statements.



3


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

 
Three Months Ended
(In thousands)
June 29, 2019
 
June 30, 2018
Net income
$
241,459

 
$
190,038

Other comprehensive income (loss), net of tax:


 


Change in net unrealized gains (losses) on available-for-sale securities
9,754

 
(1,660
)
Reclassification adjustment for gains on available-for-sale securities
(433
)
 
(51
)
Change in unrealized gains (losses) on hedging transactions
430

 
(5,619
)
Reclassification adjustment for (gains) losses on hedging transactions
822

 
(441
)
Cumulative translation adjustment, net
(635
)
 
(2,050
)
Other comprehensive income (loss)
9,938

 
(9,821
)
Total comprehensive income
$
251,397

 
$
180,217


See notes to condensed consolidated financial statements.


4


XILINX, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
 
(In thousands, except par value amounts)
June 29, 2019
 
March 30, 2019
 
(unaudited)
 
 
ASSETS

 

Current assets:

 

Cash and cash equivalents
$
1,590,026

 
$
1,544,490

Short-term investments
1,293,111

 
1,631,194

Accounts receivable, net
305,955

 
335,165

Inventories
336,758

 
315,358

Prepaid expenses and other current assets
63,718

 
65,771

Total current assets
3,589,568

 
3,891,978

Property, plant and equipment, at cost
937,467

 
902,993

Accumulated depreciation and amortization
(586,912
)
 
(574,064
)
Net property, plant and equipment
350,555

 
328,929

Long-term investments
54,849

 
53,433

Goodwill
354,248

 
340,718

Acquisition-related intangibles, net
95,245

 
80,723

Other assets
523,433

 
455,567

Total Assets
$
4,967,898

 
$
5,151,348

 
 
 
 
LIABILITIES AND STOCKHOLDERS’ EQUITY

 

Current liabilities:

 

Accounts payable
$
121,375

 
$
117,491

Accrued payroll and related liabilities
229,718

 
247,268

Income taxes payable
49,443

 
28,718

Other accrued liabilities
96,574

 
81,559

Total current liabilities
497,110

 
475,036

Long-term debt
1,245,263

 
1,234,807

Long-term income taxes payable
514,318

 
515,192

Other long-term liabilities
98,623

 
64,804

Commitments and contingencies (Note 17)

 

Stockholders' equity:

 

Preferred stock, $.01 par value (none issued and outstanding)

 

Common stock, $.01 par value
2,510

 
2,539

Additional paid-in capital
880,305

 
1,005,411

Retained earnings
1,743,241

 
1,876,969

Accumulated other comprehensive loss
(13,472
)
 
(23,410
)
Total stockholders’ equity
2,612,584

 
2,861,509

Total Liabilities and Stockholders’ Equity
$
4,967,898

 
$
5,151,348




See notes to condensed consolidated financial statements.

5


XILINX, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
 
Three Months Ended
(In thousands)
June 29, 2019
 
June 30, 2018
Cash flows from operating activities:
 
 
 
Net income
$
241,459

 
$
190,038

Adjustments to reconcile net income to net cash provided by operating activities:
 
 
 
Depreciation and amortization of software
23,853

 
15,075

Amortization - others
9,085

 
7,333

Stock-based compensation
42,753

 
35,608

Benefit for deferred income taxes
(2,114
)
 
(13,532
)
Others
(10,240
)

6,442

Changes in assets and liabilities:
 
 
 
Accounts receivable, net
29,211

 
(74,652
)
Inventories
(21,400
)
 
(10,924
)
Prepaid expenses and other current assets
620

 
2,140

Other assets
(13,408
)
 
(7,770
)
Accounts payable
(9,106
)
 
9,320

Accrued liabilities
(13,830
)
 
(32,437
)
Income taxes payable
21,333

 
49,527

Net cash provided by operating activities
298,216

 
176,168

Cash flows from investing activities:
 
 
 
Purchases of available-for-sale securities
(361,315
)
 
(559,159
)
Proceeds from sale and maturity of available-for-sale and equity securities
707,388

 
155,230

Purchases of property, plant and equipment and software
(29,201
)
 
(26,359
)
Other investing activities
3,549

 
(13,900
)
Acquisition of business, net of cash acquired
(25,145
)
 

Net cash provided by (used in) investing activities
295,276

 
(444,188
)
Cash flows from financing activities:
 
 
 
Repurchases of common stock
(444,995
)
 
(137,300
)
Taxes paid related to net share settlements of restricted stock units
(4,122
)
 
(5,495
)
Proceeds from issuance of common stock through various stock plans
3

 
214

Payment of dividends to stockholders
(93,961
)
 
(90,675
)
Other financing activities
(4,881
)
 
(663
)
Net cash used in financing activities
(547,956
)
 
(233,919
)
Net increase (decrease) in cash and cash equivalents
45,536

 
(501,939
)
Cash and cash equivalents at beginning of period
1,544,490

 
2,179,328

Cash and cash equivalents at end of period
$
1,590,026

 
$
1,677,389

Supplemental disclosure of cash flow information:
 
 
 
Interest paid
$
23,013

 
$
21,174

Income taxes paid (refunded), net
$
1,661

 
$
(13,328
)


See notes to condensed consolidated financial statements.

6


XILINX, INC.
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(Unaudited)
Three Months Ended June 29, 2019
Common Stock
Outstanding
 
Additional
Paid-in
Capital
 
Retained
Earnings
 
Accumulated
Other
Comprehensive
Income (Loss)
 
Total
Stockholders'
Equity
(In thousands, except per share amounts)
Shares
 
Amount
 
 
 
 
Balance as of March 30, 2019
253,891

 
$
2,539

 
$
1,005,411

 
$
1,876,969

 
$
(23,410
)
 
$
2,861,509

Components of comprehensive income:
 
 
 
 
 
 
 
 
 
 
 
Net income

 

 

 
241,459

 

 
241,459

Other comprehensive income

 

 

 

 
9,938

 
9,938

Tax withholding related to vesting of restricted stock units and other
96

 
1

 
(4,120
)
 

 

 
(4,119
)
Repurchase and retirement of common stock
(2,967
)
 
(30
)
 
(163,739
)
 
(281,226
)
 

 
(444,995
)
Stock-based compensation expense

 

 
42,753

 

 

 
42,753

Cash dividends declared ($0.37 per common share)

 

 

 
(93,961
)
 

 
(93,961
)
Balance as of June 29, 2019
251,020

 
$
2,510

 
$
880,305

 
$
1,743,241

 
$
(13,472
)
 
$
2,612,584


Three Months Ended June 30, 2018
Common Stock
Outstanding
 
Additional
Paid-in
Capital
 
Retained
Earnings
 
Accumulated
Other
Comprehensive
Income (Loss)
 
Total
Stockholders'
Equity
(In thousands, except per share amounts)
Shares
 
Amount
 
 
 
 
Balance as of March 31, 2018
253,377

 
$
2,534

 
$
878,672

 
$
1,513,656

 
$
(34,509
)
 
$
2,360,353

Components of comprehensive income:
 
 
 
 
 
 
 
 
 
 
 
Net income

 

 

 
190,038

 

 
190,038

Other comprehensive loss

 

 

 

 
(9,821
)
 
(9,821
)
Cumulative-effect of equity investments adoption

 

 

 
(8,399
)
 
8,399

 

Tax withholding related to vesting of restricted stock units and other
144

 
2

 
(5,283
)
 

 

 
(5,281
)
Repurchase and retirement of common stock
(2,071
)
 
(21
)
 
(14,409
)
 
(133,377
)
 

 
(147,807
)
Stock-based compensation expense

 

 
35,608

 

 

 
35,608

Cumulative-effect of deferred tax from intra-entity asset transfer adoption

 

 

 
(13,776
)
 

 
(13,776
)
Cash dividends declared ($0.36 per common share)

 

 

 
(90,675
)
 

 
(90,675
)
Balance as of June 30, 2018
251,450

 
$
2,515

 
$
894,588

 
$
1,457,467

 
$
(35,931
)
 
$
2,318,639



See notes to condensed consolidated financial statements.


7


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 (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 March 30, 2019. 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 March 28, 2020 or any future period.

The Company uses a 52- to 53-week fiscal year ending on the Saturday nearest March 31. Fiscal 2020 and fiscal 2019 are both 52-week years ending on March 28, 2020 and March 30, 2019, respectively. The quarters ended June 29, 2019 and June 30, 2018 each consisted of 13 weeks.

Note 2.
Recent Accounting Changes and Accounting Pronouncements
 
Recent Accounting Pronouncements Adopted

Leases

In February 2016, the Financial Accounting Standards Board (FASB) issued authoritative guidance on leases. The new authoritative guidance requires the recognition of assets and liabilities arising from lease transactions on the balance sheet and additional disclosures about the amount, timing and uncertainty of cash flows from leases. Accordingly, a lessee recognizes a lease asset for its right to use the underlying asset and a lease liability for the corresponding lease obligation. The Company adopted this authoritative guidance using modified retrospective method during first quarter of fiscal 2020 and resulted in the recognition of right-of-use assets of approximately $50.0 million and lease liabilities for operating leases of approximately $50.0 million on March 31, 2019, the beginning of fiscal 2020. The Company determines if an arrangement is a lease, or contains a lease, at the inception of the arrangement. On the commencement date, leases are evaluated for classification, and assets and liabilities are recognized based on the present value of lease payments over the lease term. The Company uses the incremental borrowing rate based on the information available at commencement in determining the present value of lease payments. Operating lease expense is generally recognized on a straight-line basis over the lease term. The Company has elected the practical expedients to not separate lease and non-lease components within lease transactions, and not to record on the balance sheet leases with a term of 12 months or less. The Company also has elected the package of practical expedients, which allows the Company not to reassess (1) whether any expired or existing contracts as of the adoption date are or contain a lease, (2) lease classification for any expired or existing leases as of the adoption date and (3) initial direct costs for any existing leases as of the adoption date. The Company did not elect to apply the hindsight practical expedient when determining lease term and assessing impairment of right-of-use assets. 

The Company recognizes its operating leases within its other assets, other accrued liabilities and other long-term liabilities on the Company's condensed consolidated balance sheets. The Company's finance leases were immaterial.

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 June 29, 2019 and March 30, 2019, Avnet accounted for 40% and 37% of the Company’s total net accounts receivable, respectively. Net revenues from Avnet accounted for 40% and 52% of the Company’s worldwide net revenues in the first quarter of fiscal 2020 and 2019, respectively. While the percentage of worldwide net revenues from Avnet fluctuates from period to period, overall the percentage is within historical ranges.
For the first quarter of fiscal 2020 and 2019, approximately 50% and 63%, respectively, of the Company's net revenues were from products sold to distributors for subsequent resale to original equipment manufacturers (OEMs) or their subcontract manufacturers.
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 condensed 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

8


and through geographical dispersion of sales. Xilinx generally does not require collateral for receivables from its end customers or distributors.

No other distributor or end customer accounted for more than 10% of the Company’s worldwide net revenues for the first quarter of fiscal 2020 and 2019.

The Company mitigates concentrations of credit risk in its investments in debt securities by currently investing approximately 91% of its portfolio in AA (or its equivalent) or higher-grade securities as rated by Standard & Poor’s or Moody’s Investors Service. The Company’s methods to arrive at investment decisions are not solely based on the rating agencies’ credit ratings. Xilinx also performs additional credit due diligence and conducts regular portfolio credit reviews, including a review of counterparty credit risk related to the Company’s forward currency exchange and interest rate swap contracts. Additionally, Xilinx limits its investments in the debt securities of a single issuer based upon the issuer’s credit rating and attempts to further mitigate credit risk by diversifying risk across geographies and type of issuer.

As of June 29, 2019, all of the mortgage-backed securities in the Company's 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 authoritative 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.

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 2020 and the Company did not adjust or override any fair value measurements as of June 29, 2019.

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 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, U.S. agency securities, foreign government and agency securities, mortgage-backed securities, debt mutual funds, asset-backed securities and commercial

9


mortgage-backed securities. The Company’s Level 2 assets and liabilities also include foreign currency forward contracts and interest rate 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 has no Level 3 assets and liabilities measured at fair value on a recurring basis.

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 June 29, 2019 and March 30, 2019:

 
 
June 29, 2019
(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
 
$
585,075

 
$

 
$

 
$
585,075

Financial institution securities
 

 
209,853

 

 
209,853

Non-financial institution securities
 

 
179,408

 

 
179,408

U.S. government and agency securities
 
149,935

 
12,304

 

 
162,239

Foreign government and agency securities
 

 
364,461

 

 
364,461

Short-term investments:
 
 
 
 
 
 
 
 
Financial institution securities
 

 
300,000

 

 
300,000

Non-financial institution securities
 

 
132,405

 

 
132,405

U.S. government and agency securities
 
67,095

 
38,082

 

 
105,177

Foreign government and agency securities
 

 
34,946

 

 
34,946

Mortgage-backed securities
 

 
576,547

 

 
576,547

Asset-backed securities
 

 
50,271

 

 
50,271

Commercial mortgage-backed securities
 

 
93,765

 

 
93,765

Long-term investments:
 
 
 
 
 
 
 
 
Debt mutual fund
 

 
54,849

 

 
54,849

Derivative financial instruments, net
 

 
1,306

 

 
1,306

Total assets measured at fair value
 
$
802,105

 
$
2,048,197

 
$

 
$
2,850,302




10


 
March 30, 2019
(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
$
428,150

 
$

 
$

 
$
428,150

Financial institution securities

 
287,945

 

 
287,945

Non-financial institution securities

 
461,884

 

 
461,884

U.S. government and agency securities
149,578

 
53,520

 

 
203,098

Foreign government and agency securities

 
99,750

 

 
99,750

Short-term investments:

 

 

 


Financial institution securities

 
249,850

 

 
249,850

Non-financial institution securities

 
240,040

 

 
240,040

U.S. government and agency securities
93,149

 
37,838

 

 
130,987

Foreign government and agency securities

 
114,705

 

 
114,705

Mortgage-backed securities

 
670,770

 

 
670,770

Debt mutual fund

 
31,934

 

 
31,934

Asset-backed securities

 
76,369

 

 
76,369

Commercial mortgage-backed securities

 
116,539

 

 
116,539

Long-term investments:

 
 
 

 


Debt mutual fund

 
53,433

 

 
53,433

Total assets measured at fair value
$
670,877

 
$
2,494,577

 
$

 
$
3,165,454

Liabilities
 
 
 
 
 
 
 
Derivative financial instruments, net
$

 
$
9,009

 
$

 
$
9,009

Total liabilities measured at fair value
$

 
$
9,009

 
$

 
$
9,009

Net assets measured at fair value
$
670,877

 
$
2,485,568

 
$

 
$
3,156,445



For certain of the Company’s financial instruments, including cash held in banks, accounts receivable and accounts payable, the carrying amounts approximate fair value due to their short maturities, and are therefore excluded from the fair value tables above.
 

Financial Instruments Not Recorded at Fair Value on a Recurring Basis

The Company's $500.0 million principal amount of 3.000% notes due March 15, 2021 (2021 Notes) and $750.0 million principal amount of 2.950% senior notes due June 1, 2024 (2024 Notes) are measured at fair value on a quarterly basis for disclosure purposes. The fair values of the 2021 Notes and 2024 Notes as of June 29, 2019 were approximately $503.7 million and $762.5 million, respectively, based on the last trading price for the period (classified as Level 2 in fair value hierarchy due to relatively low trading volume).

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

As of June 29, 2019, the Company had non-marketable equity securities in private companies of $72.8 million, which were classified as Level 3 assets. The Company’s investments in non-marketable securities of private companies are recorded at fair value if the Company recognizes an observable price adjustment or an impairment. Such impairment losses or observable price adjustments were not material during all periods presented. The Company’s investments in non-financial assets such as property, plant and equipment, goodwill and acquisition-related intangibles, are recorded at cost (net of accumulated depreciation or amortization, where applicable). These non-financial assets are reduced to fair value when impaired.


11


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:

 
June 29, 2019
 
 
March 30, 2019
(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
$
585,075

 
$

 
$

 
$
585,075

 
 
$
428,150

 
$

 
$

 
$
428,150

Financial institution


 


 


 


 
 


 


 


 


securities
509,853

 

 

 
509,853

 
 
537,795

 

 

 
537,795

Non-financial institution


 


 


 


 
 


 


 


 


securities
311,954

 
35

 
(176
)
 
311,813

 
 
702,483

 
3

 
(562
)
 
701,924

U.S. government and

 

 

 

 
 

 

 

 

agency securities
267,414

 
49

 
(47
)
 
267,416

 
 
334,185

 
39

 
(139
)
 
334,085

Foreign government and

 

 

 

 
 

 

 

 

agency securities
399,407

 

 

 
399,407

 
 
214,455

 

 

 
214,455

Mortgage-backed securities
580,189

 
1,524

 
(5,166
)
 
576,547

 
 
684,596

 
809

 
(14,635
)
 
670,770

Asset-backed securities
50,358

 
26

 
(113
)
 
50,271

 
 
76,852

 

 
(483
)
 
76,369

Commercial mortgage-


 


 


 


 
 


 


 


 


backed securities
94,298

 
60

 
(593
)
 
93,765

 
 
118,115

 
42

 
(1,618
)
 
116,539

 
$
2,798,548

 
$
1,694

 
$
(6,095
)
 
$
2,794,147

 
 
$
3,096,631

 
$
893

 
$
(17,437
)
 
$
3,080,087



Financial institution securities include securities issued or managed by financial institutions in various forms, such as commercial paper and time deposits. Substantially all time deposits were issued by institutions outside the U.S. as of June 29, 2019 and March 30, 2019.

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 June 29, 2019 and March 30, 2019:

 
June 29, 2019
 
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
$

 
$

 
$
38,010

 
$
(176
)
 
$
38,010

 
$
(176
)
U.S. government and

 

 

 

 


 


    agency securities

 

 
13,633

 
(47
)
 
13,633

 
(47
)
Mortgage-backed securities
40,762

 
(148
)
 
411,450

 
(5,018
)
 
452,212

 
(5,166
)
Asset-backed securities
6,458

 
(3
)
 
35,955

 
(110
)
 
42,413

 
(113
)
Commercial mortgage-

 

 

 

 
 
 
 
backed securities
7,060

 
(16
)
 
68,478

 
(577
)
 
75,538

 
(593
)
 
$
54,280

 
$
(167
)
 
$
567,526

 
$
(5,928
)
 
$
621,806

 
$
(6,095
)


12


 
March 30, 2019
 
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
$
4,767

 
$
(4
)
 
$
51,044

 
$
(558
)
 
$
55,811

 
$
(562
)
U.S. government and

 

 

 

 

 

    agency securities

 

 
13,542

 
(139
)
 
13,542

 
(139
)
Mortgage-backed securities
34,595

 
(480
)
 
597,394

 
(14,155
)
 
631,989

 
(14,635
)
Asset-backed securities

 

 
76,103

 
(483
)
 
76,103


(483
)
Commercial mortgage-
 
 
 
 
 
 
 
 
 
 
 
    backed securities
1,354

 
(3
)
 
112,294

 
(1,615
)
 
113,648

 
(1,618
)
 
$
40,716

 
$
(487
)
 
$
850,377

 
$
(16,950
)
 
$
891,093

 
$
(17,437
)


As of June 29, 2019, the gross unrealized losses that had been outstanding for both less than twelve months and more than twelve months were primarily related to mortgage-backed securities, which was primarily 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 Company reviewed the investment portfolio and determined that the gross unrealized losses on these investments as of June 29, 2019 and March 30, 2019 were temporary in nature as evidenced by the fluctuations in the gross unrealized losses within the investment categories. The marketable debt securities (financial institution securities, non-financial institution securities, U.S. and foreign government and agency securities, asset-backed securities, mortgage-backed securities and commercial mortgage-backed securities) are highly rated by the credit rating agencies, there have been no defaults on any of these securities and the Company has received interest payments as they become due. Therefore, the Company believes that it will be able to collect both principal and interest amount due to the Company. Additionally, in the past several years a portion of the Company's investment in the mortgage-backed securities was 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 June 29, 2019 and March 30, 2019. 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 amortized cost and estimated fair value of marketable debt securities, by contractual maturity, are shown in the table below. Actual maturities may differ from contractual maturities because issuers may have the right to call or prepay obligations without call or prepayment penalties.

 
June 29, 2019
(In thousands)
Amortized
Cost
 
Estimated
Fair Value
Due in one year or less
$
1,449,786

 
$
1,449,796

Due after one year through five years
112,270

 
111,905

Due after five years through ten years
120,976

 
120,656

Due after ten years
530,441

 
526,715


$
2,213,473

 
$
2,209,072



As of June 29, 2019, $759.3 million of marketable debt securities with contractual maturities of greater than one year were classified as short-term investments. Additionally, the above table does not include investments in money market funds and debt mutual funds because these investments do not have specific contractual maturities.

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


13


 
Three Months Ended
(In thousands)
June 29, 2019
 
June 30, 2018
Proceeds from sale of available-for-sale securities
$
156,094

 
$
895

Gross realized gains on sale of available-for-sale securities
$
604

 
$
96

Gross realized losses on sale of available-for-sale securities
(39
)
 
(47
)
Net realized gains on sale of available-for-sale securities
$
565

 
$
49

Amortization of premiums on available-for-sale securities
$
711

 
$
2,491



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

The Company records the change in the fair value of its investment in debt mutual funds as part of its interest and other income (expense), net. This change in fair value was a net increase of $1.4 million for the three months ended June 29, 2019 and resulted in a gain within interest and other income (expense) net for the period. During the three months ended June 29, 2019, the Company sold a debt mutual fund and recognized a loss of an immaterial amount.

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.

In May 2017, the Company entered into interest rate swap contracts with certain independent financial institutions to manage interest rate risks related to fixed interest rate expenses from its 2024 Notes and floating interest rate income from its investments in marketable debt securities. The interest rate swap contracts were designated and qualified as fair value hedges of the 2024 Notes and were separately accounted for as a derivative. The interest rate swap contracts and the 2024 Notes were initially measured at fair value. Changes in fair values of the interest rate swap contracts and the 2024 Notes were recorded in the Company’s consolidated balance sheets. During the three months ended June 29, 2019, the Company sold the interest rate swap contracts for an immaterial gain. The gain will be amortized as a reduction to interest expense over the remaining life of the 2024 Notes. As a result of the sale, the Company recorded the net change in fair value of the interest rate swap contracts of $11.7 million in the Company's condensed consolidated balance sheets for the period ended June 29, 2019. See “Note 10. Debt and Credit Facility” for more discussion related to interest rate swap contracts. There was no ineffectiveness during all periods presented.

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):


14


 
Three Months Ended
(In thousands)
June 29, 2019
 
June 30, 2018
Stock-based compensation included in:

 

Cost of revenues
$
2,613

 
$
2,035

Research and development
24,874

 
20,930

Selling, general and administrative
15,266

 
12,643

 
$
42,753

 
$
35,608



Employee Stock Option Plans

The types of awards allowed under the 2007 Equity Incentive Plan (2007 Equity Plan) include incentive stock options, non-qualified stock options, restricted stock units (RSUs), restricted stock and stock appreciation rights. As of June 29, 2019, 11.1 million shares remained available for grant under the 2007 Equity Plan.

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 31, 2018
6,989

 
$
51.39

Granted
3,559

 
$
66.94

Vested
(2,681
)
 
$
49.05

Cancelled
(536
)
 
$
55.09

March 30, 2019
7,331

 
$
59.54

Granted
325

 
$
98.73

Vested
(133
)
 
$
55.40

Cancelled
(64
)
 
$
64.91

June 29, 2019
7,459

 
$
61.28



The estimated fair values of RSUs 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 2020 was $98.73 ($65.69 for the first quarter of fiscal 2019), which were calculated based on estimates at the date of grant using the following weighted-average assumptions: 

 
Three Months Ended

June 29, 2019

June 30, 2018
Risk-free interest rate
2.1
%
 
2.7
%
Dividend yield
1.2
%
 
2.1
%


For the majority of RSUs granted, the number of shares of common stock issued on the date the RSU awards vest is net of the minimum statutory withholding requirements that the Company pays in cash to the appropriate taxing authorities on behalf of the Company's employees. During the first three months of fiscal 2020 and 2019, the Company withheld $4.1 million and $5.5 million worth of RSU awards, respectively, to satisfy the employees’ tax obligations. The amounts of excess tax benefits, primarily from RSU vesting, were immaterial for all periods presented.


Employee Stock Purchase Plan


15


The fair values of stock purchase plan rights under the Company’s ESPP were estimated using the Black-Scholes option pricing model. Under the Company’s ESPP, shares are only issued during the second and fourth quarters of each fiscal year. Therefore, no shares were issued during the first quarter of fiscal 2020 or 2019. The next scheduled purchase under the ESPP is in the second quarter of fiscal 2020. As of June 29, 2019, 11.4 million shares were available for future issuance under the Company's ESPP.

Note 8.
Net Income Per Common Share

The computation of basic net income per common share for all periods presented is derived from information on the condensed consolidated statements of income, and there are no reconciling items in the numerator used to compute the 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)
June 29, 2019
 
June 30, 2018
Net income available to common stockholders
$
241,459

 
$
190,038

Weighted average common shares outstanding-basic
253,268

 
252,682

Dilutive effect of employee equity incentive plans
4,660

 
3,253

Weighted average common shares outstanding-diluted
257,928

 
255,935

Basic net income per common share
$
0.95

 
$
0.75

Diluted net income per common share
$
0.94

 
$
0.74



The total shares used in the denominator of the diluted net income per common share calculation include potentially dilutive common equivalent shares outstanding that are not included in basic net income per common share calculation. The diluted shares were calculated by applying the treasury stock method to the impact of the equity incentive plans.

Certain shares of outstanding stock options and RSUs were excluded from diluted net income per common share calculation by applying the treasury stock method, as their inclusion would have been anti-dilutive. These options and RSUs were immaterial for the first quarter of fiscal 2020 and 2019, respectively, but 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.

Note 9.
Inventories

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)
June 29, 2019
 
March 30, 2019
Raw materials
$
40,593

 
$
39,727

Work-in-process
233,149

 
213,784

Finished goods
63,016

 
61,847

 
$
336,758

 
$
315,358



Note 10.
Debt and Credit Facility
2021 Notes

On March 12, 2014, the Company issued the 2021 Notes at a discounted price of 99.281% of par. Interest on the 2021 Notes is payable semi-annually on March 15 and September 15.

The Company received net proceeds of $495.4 million from issuance of the 2021 Notes, after the debt discount and deduction of debt issuance costs. The debt discounts and issuance costs are amortized to interest expense over the terms of the 2021 Notes. As of June 29, 2019, the remaining term of the 2021 Notes is 1.7 years respectively.


16


The following table summarizes the carrying value of the 2021 Notes as of June 29, 2019 and March 30, 2019:
 
 
 
 
(In thousands)
June 29, 2019
 
March 30, 2019
Principal amount of the 2021 Notes
$
500,000


$
500,000

Unamortized discount of the 2021 Notes
(928
)

(1,063
)
Unamortized debt issuance costs associated with 2021 Notes
(406
)

(467
)
Carrying value of the 2021 Notes
$
498,666

 
$
498,470



Interest expense related to the 2021 Notes was included in interest and other income (expense), net on the condensed consolidated statements of income as follows:
 
Three Months Ended
(In thousands)
June 29, 2019
 
June 30, 2018
Contractual coupon interest
$
3,750

 
$
3,750

Amortization of debt issuance costs
61

 
61

Amortization of debt discount, net
135

 
131

Total interest expense related to the 2021 Notes
$
3,946

 
$
3,942



2024 Notes

On May 30, 2017, the Company issued the 2024 Notes at a discounted price of 99.887% of par. Interest on the 2024 Notes is payable semi-annually on June 1 and December 1.

The Company received $745.2 million from the issuance of the 2024 Notes, after the debt discount and deduction of debt issuance costs. The debt discounts and issuance costs are amortized to interest expense over the term of the 2024 Notes. As of June 29, 2019, the remaining term of the 2024 Notes is approximately 5.0 years.

In relation to the issuance of the 2024 Notes, the Company entered into interest rate swap contracts with certain independent financial institutions, whereby the Company pays on a semi-annual basis, a variable interest rate equal to the three-month London Interbank Offered Rate (LIBOR) plus 91.43 bps, and receives on a semi-annual basis, interest income at a fixed interest rate of 2.950%. The Company incurred a net interest expense of $1.0 million for the three months ended June 29, 2019 and earned a net interest income of $851 thousand for the three months ended June 30, 2018, from the interest rate swap contracts, which was included in interest and other income (expense), net on the condensed consolidated statements of income. During the three months ended June 29, 2019, the Company sold the interest rate swap contracts for an immaterial gain. The gain will be amortized as a reduction to interest expense over the remaining life of the 2024 Notes.

The following table summarizes the carrying value of the 2024 Notes as of June 29, 2019 and March 30, 2019:

(In thousands)
 
June 29, 2019

March 30, 2019
Principal amount of the 2024 Notes
 
$
750,000


$
750,000

Unamortized discount of the 2024 Notes
 
(613
)

(642
)
Unamortized debt issuance costs associated with 2024 Notes
 
(2,790
)

(2,932
)
Carrying Value of the 2024 Notes
 
$
746,597


$
746,426

Fair value hedge adjustment — interest rate swap contracts
 


(10,089
)
Net carrying value of the 2024 Notes
 
$
746,597


$
736,337




17


Interest expense related to the 2024 Notes was included in interest and other income (expense), net on the condensed consolidated statements of income as follows:
 
Three Months Ended
(In thousands)
June 29, 2019

June 30, 2018
Contractual coupon interest (including interest rate swap, net)
$
6,542


$
6,382

Amortization of debt issuance costs
142


142

Amortization of debt discount, net
29


28

Total interest expense related to the 2024 Notes
$
6,713


$
6,552




Revolving Credit Facility

On December 7, 2016, the Company entered into a $400.0 million senior unsecured revolving credit facility that, upon certain conditions, may be extended by an additional $150.0 million, with a syndicate of banks (expiring in December 2021). 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 June 29, 2019, 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 (Board) 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 May 16, 2016, the Board authorized the repurchase of up to $1.00 billion of the Company's common stock and debentures (2016 Repurchase Program). On May 16, 2018, the Board authorized another program (2018 Repurchase Program) to repurchase the Company's common stock and debentures up to $500.0 million. The 2016 and 2018 Repurchase Programs have no stated expiration date. 

Through June 29, 2019, the Company fully utilized the entire amount authorized under the 2016 Repurchase Program and used $266.7 million of the $500.0 million authorized under the 2018 Repurchase Program, leaving $233.3 million available for future repurchases. The Company’s current policy is to retire all repurchased shares, and consequently, no treasury shares were held as of June 29, 2019 and March 30, 2019.

During the first quarter of fiscal 2020, the Company repurchased 1.4 million shares of common stock in the open market for a total of $145.0 million. Additionally, the Company entered into a stock repurchase agreement with an independent financial institution to repurchase shares under the 2018 Repurchase Program. Under the agreement, the Company provided the financial institution with an up-front payment totaling $300.0 million and the financial institution agreed to deliver to the Company a certain number of shares based upon the volume weighted-average price, during an averaging period, less a specified discount. Under this arrangement, the Company received an initial 1.6 million shares of common stock during the first quarter of fiscal 2020 for $168.1 million (estimated based on volume-weighted average price up to June 29, 2019). The initial shares received by the Company were retired, accounted for as a reduction to stockholders' equity in the condensed consolidated balance sheets and treated as a repurchase of common stock for purposes of calculating earnings per share. The remaining estimated $131.9 million under this arrangement is considered indexed to the Company's common stock and met all of the applicable criteria for equity classification. The Company expects to receive additional shares and a portion of the remaining estimated $131.9 million back during the next quarter.

During the first quarter of fiscal 2019, the Company repurchased 2.1 million shares of common stock in the open market for a total of $136.8 million.


18


Note 12.
Interest and Other Income (Expense), Net

The components of interest and other income (expense), net are as follows: 
 
Three Months Ended
(In thousands)
June 29, 2019
 
June 30, 2018
Interest income
$
17,989

 
$
17,397

Interest expense
(10,659
)
 
(13,372
)
Other income (expense), net
4,282

 
(6,872
)
   Total interest and other income (expense), net
$
11,612

 
$
(2,847
)


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 the Company's accumulated other comprehensive loss are as follows:
 
(In thousands)
June 29, 2019
 
March 30, 2019
Accumulated unrealized losses on available-for-sale securities, net of tax
$
(3,404
)
 
$
(12,725
)
Accumulated unrealized gains on hedging transactions, net of tax
1,347

 
95

Accumulated cumulative translation adjustment, net of tax
(11,415
)
 
(10,780
)
Total accumulated other comprehensive loss
$
(13,472
)
 
$
(23,410
)

The related tax effects of other comprehensive income (loss) were not material for all periods presented.

Note 14.
Income Taxes

The Company recorded a tax provision of $21.1 million for the first quarter of fiscal 2020 as compared to $22.9 million in the same prior year period, representing effective tax rates of 8% and 11%, respectively.

The difference between the U.S. federal statutory tax rate of 21% and the Company's effective tax rate in all periods presented was primarily due to the beneficial impact of income earned in lower tax rate jurisdictions, which was partially offset by U.S. tax on global intangible low-taxed income (GILTI).

The Company’s total gross unrecognized tax benefits as of June 29, 2019, determined in accordance with FASB authoritative guidance for measuring uncertain tax positions, increased by $1.2 million in the first quarter of fiscal 2020 to $148.8 million. The total amount of unrecognized tax benefits that, if realized in a future period, would favorably affect the effective tax rate was $36.5 million as of June 29, 2019. Another $85.5 million would increase additional paid-in capital. The $85.5 million relates to an additional deduction claimed on federal and state amended tax returns for fiscal 2014 for repurchase premium paid in that year in connection with the early redemption of the Company’s 3.125% Junior Convertible debenture due March 15, 2037. It is reasonably possible that changes to the Company's 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 statutes of limitations have closed for U.S. federal income tax purposes for years through fiscal 2014, for U.S. state income tax purposes for years through fiscal 2010, and for Ireland income tax purposes for years through fiscal 2014.

On July 27, 2015, the United States Tax Court (Tax Court) issued its opinion in Altera Corp. v. Commissioner, and, in a 15-0 decision, concluded that related parties in a cost sharing arrangement are not required to share expenses related to stock-based compensation. The Commissioner appealed the Tax Court decision to the Ninth Circuit Court of Appeals (Ninth Circuit). The Ninth Circuit overturned the Tax Court’s decision in an opinion issued on July 24, 2018, but subsequently withdrew it. After

19


rehearing the arguments on October 16, 2018, the Ninth Circuit issued a subsequent opinion on June 7, 2019. In a 2-1 decision, the Ninth Circuit overturned the Tax Court’s decision. On July 22, 2019, Altera filed a petition for an en banc rehearing with the Ninth Circuit, which will consist of a panel of 11 judges. In the case of a denial of a Ninth Circuit en banc rehearing or a decision against Altera following an en banc rehearing, Altera can appeal to the United States Supreme Court for review. Since the Altera decision is not yet final, we believe the law to be unsettled and continue to record tax benefits as we exclude stock-based compensation costs from our cost sharing arrangement. As of the fiscal quarter ended June 29, 2019, the potential impact of a final adverse decision to the consolidated statement of income could be as much as $45.0 million for prior years' taxes and interest. We will continue to monitor developments in the Altera case and the potential effect on our consolidated financial statements.

Note 15.
Leases and Commitments

Xilinx leases some of its facilities and office buildings under non-cancelable operating leases that expire at various dates through August 2029. 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. These renewal terms can extend the lease term from 1 to 15 years, and are included in the lease term when it is reasonably certain that the Company will exercise the option. The following table presents the maturities of lease liabilities as of June 29, 2019:
Fiscal
(In thousands)
2020 (remaining nine months)
$
10,825

2021
9,785

2022
8,822

2023
6,369

2024
5,573

Thereafter
34,677

Total lease payments
$
76,051

Less: Imputed interest
$
(18,951
)
Total lease liabilities
$
57,100



The company's leases were included as a component of the following condensed consolidated balance sheet lines:
(In thousands)
June 29, 2019
Other assets
$
56,173

Other accrued liabilities
8,798

Other long-term liabilities
$
48,302



The components of lease costs were as follows:

(In thousands)
June 29, 2019
Operating lease cost
$
4,272

Lease income
(796
)
Total lease cost
$
3,476


Other information related to leases were as follows:
($ in thousands)
June 29, 2019
Cash paid for operating leases included in operating cash flows
$
3,343

Weighted-average remaining lease term - operating leases (in years)
8.1

Weighted-average remaining discount rate - operating leases
5.8
%


Other commitments as of June 29, 2019 totaled $197.4 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. Additionally, as of June 29, 2019, the Company also had $2.9 million of non-cancelable license

20


obligations to providers of electronic design automation software and hardware/software maintenance, $15.4 million related to renovation of properties and $36.1 million commitments primarily related to open purchase orders from ordinary operations. These commitments expire at various dates through June 2023.

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 2020 and the end of fiscal 2019, 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 the Company's 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.

Note 17.
Contingencies

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. On September 11, 2017, Xilinx, along with other defendants, filed motions for summary judgment seeking to dispose of all claims against them.  On July 3, 2018, the Court granted both of Xilinx’s Motions for Summary Judgment, disposing of all claims asserted against Xilinx. On August 1, 2018, the Trustee filed a Notice of Appeal.  On August 9, 2018, the Court of Appeals for the Sixth Circuit issued an Order to Show Cause requesting that the appellant address a possible jurisdictional defect.  On August 29, 2018, the appellant responded to the Order to Show Cause.  On September 10, 2018, appellees, including Xilinx, filed a joint reply.  On January 7, 2019, the Court of Appeals issued an order dismissing the appeal for lack of jurisdiction.  On February 19, 2019, the District Court issued an order permitting any party seeking to certify the case for appeal to file a motion.  On March 11, 2019, defendant Avnet filed a motion to certify the case for appeal.  On May 14, 2019 the Court denied Avnet’s motion. On June 4, 2019, Avnet and the counterclaim and crossclaim defendants stipulated to dismissal of Avnet’s remaining counterclaims and crossclaims. The Court entered final judgment on June 25, 2019.
 
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.


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Note 18.
Goodwill and Acquisition-Related Intangibles

A summary of the goodwill and acquisitions-related intangibles balances as of June 29, 2019 and March 30, 2019 was as follows:
 



 


 
Weighted-Average
(In thousands)
June 29, 2019
 
March 30, 2019
 
Amortization Life
Goodwill
$
354,248

 
$
340,718

 

Core technology, gross
159,960

 
107,250

 

Less accumulated amortization
(85,880
)
 
(82,611
)
 

Core technology, net
74,080

 
24,639

 
4.8 years
Other intangibles, gross
52,120

 
51,016

 

Less accumulated amortization
(48,042
)
 
(47,642
)
 

Other intangibles, net
4,078

 
3,374

 
2.1 years
 
 
 
 
 
 
In-process research and development
17,087

 
52,710

 
 
Total acquisition-related intangibles, gross
229,167

 
210,976

 

Less accumulated amortization
(133,922
)
 
(130,253
)
 

Total acquisition-related intangibles, net
$
95,245

 
$
80,723

 



Based on the carrying value of acquisition-related intangibles recorded as of June 29, 2019, 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)
2020 (remaining nine months)
$
13,919

2021
18,536

2022
16,723

2023
15,496

2024
12,606

Thereafter
878

Total
$
78,158

In-process research and development is not subject to amortization prior to the completion of the projects and therefore the balance is excluded from the above annual amortization expense schedule.

Note 19.
Segment Information

Xilinx designs, develops and markets programmable logic semiconductor devices and the related software design tools. The Company operates and tracks its results in one operating segment. Xilinx sells its products to OEMs and to electronic components distributors who resell these products to OEMs or subcontract manufacturers. Net revenues by geography for the periods indicated were as follows:
 
Three Months Ended
(In thousands)
June 29, 2019
 
June 30, 2018
North America
$
198,831

 
$
193,443

Asia Pacific
431,181

 
303,892

Europe
153,288

 
131,929

Japan
66,332

 
55,106

Total net revenues
$
849,632

 
$
684,370


Geographic revenue information for the first quarter of fiscal 2020 and 2019 reflects the geographic location of the distributors or OEMs who purchased the Company's products. This may differ from the geographic location of the end customers.

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Note 20.
Subsequent Events

On July 23, 2019, the Board declared a cash dividend of $0.37 per common share for the second quarter of fiscal 2020. The dividend is payable on August 27, 2019 to stockholders of record on August 7, 2019.

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Item 2.
Management's Discussion and Analysis of Financial Condition and Results of Operations

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 condensed 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 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 condensed consolidated balance sheet; and accounting for business combinations, which impacts the valuation of tangible and intangible assets recognized and liabilities assumed. For more discussion please refer to "Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations" included in our Form 10-K for the year ended March 30, 2019 filed with the SEC, and to "Note 2. Recent Accounting Changes and Accounting Pronouncements" to our condensed consolidated financial statements, included in Part I. "Financial Information." 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.

Results of Operations: first quarter of fiscal 2020 compared to the first quarter of fiscal 2019

The following table sets forth statement of income data as a percentage of net revenues for the periods indicated:

 
Three Months Ended

June 29, 2019

 
June 30, 2018

Net revenues
100.0
%
 
100.0
%
Cost of revenues:
 
 
 
Cost of products sold
33.4

 
30.2

Amortization of acquisition-related intangibles
0.4

 

Total cost of revenues
33.8

 
30.2

Gross margin
66.2

 
69.8

Operating expenses:


 

Research and development
24.0

 
25.0

Selling, general and administrative
12.7

 
13.2

Amortization of acquisition-related intangibles

 
0.1

Total operating expenses
36.7

 
38.3

Operating income
29.5

 
31.5

Interest and other income (expense), net
1.4

 
(0.4
)
Income before income taxes
30.9

 
31.1

Provision for income taxes
2.5

 
3.3

Net income
28.4
%
 
27.8
%
 
Net Revenues

We sell our products to global manufacturers of electronic products in various end markets. The vast majority of our net revenues is generated by sales of our semiconductor products, but we also generate sales from support products. We classify our product offerings into two categories: Advanced Products and Core Products:

Advanced Products include our most recent product offerings and consist of the UltraScale+, UltraScale and 7-series product families and our Alveo boards products.

24



Core Products consist of all other product families.

These product categories are modified on a periodic basis to better reflect the maturity of the products and advances in technology. The most recent modification was made on April 3, 2016, which was the beginning of our fiscal 2017, whereby we reclassified our product categories to be consistent with how these categories are analyzed and reviewed internally.  Specifically, we are grouping the products manufactured at the 28 nanometer (nm), 20nm and 16nm nodes into the Advanced Products category while all other products are grouped in the Core Products category.

Except for Avnet, no other distributor or end customer accounted for more than 10% of our net revenues for the first quarter of fiscal 2020 or 2019.

Net Revenues by Product

Net revenues by product categories for the first quarter of fiscal 2020 and 2019 were as follows:
 
 
Three Months Ended
(In millions)
June 29, 2019