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Xilinx Inc (XLNX) SEC Filing 10-Q Quarterly report for the period ending Saturday, January 2, 2021

Xilinx Inc

CIK: 743988 Ticker: XLNX

Exhibit 99.1


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


XILINX REPORTS THIRD QUARTER FISCAL YEAR 2021 RESULTS

lRevenues of $803 million exceeded the high end of guidance, representing 5% sequential and 11% year over year growth
lWired and Wireless Group (WWG) revenue increased 14% sequentially due to strength in the Wireless markets as 5G deployments ramped in multiple regions
lAutomotive, Broadcast & Consumer (ABC) revenue increased 27% sequentially, driven by record quarters in the Automotive and Broadcast end markets
lAerospace & Defense, Industrial and Test, Measurement & Emulation (AIT) revenue increased 7% sequentially, driven by strong performance in the Test, Measurement and Emulation market
lData Center Group (DCG) revenue declined 45% sequentially, in line with expectations, compared to a record second quarter which benefited from trade-related order acceleration
lFree cash flow of $354 million, representing 44% of revenue
lReturned $93 million to stockholders through dividends

SAN JOSE, Calif., January 27, 2021
-- Xilinx, Inc. (Nasdaq: XLNX), the leader in adaptive computing, today announced revenues of $803 million for the third quarter of fiscal year 2021.

GAAP net income for the quarter was $171 million, or $0.69 per diluted share. Non-GAAP net income was $194 million, or $0.78 per diluted share.

Additional third quarter of fiscal year 2021 comparisons are provided in the charts below.

Q3 Fiscal 2021 Financial Highlights
(In millions, except EPS)



The following information was filed by Xilinx Inc (XLNX) on Wednesday, January 27, 2021 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 January 2, 2021 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 classTrading Symbol(s)Name of each exchange on which registered
Common Stock, $0.01 par valueXLNXThe 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 filerxAccelerated filer
 o
Non-accelerated filero
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 January 15, 2021
Common Stock, $0.01 par value 245,277,000


TABLE OF CONTENTS
 
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FORWARD-LOOKING STATEMENTS

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" in this document and subsequent filings with the U.S. Securities and Exchange Commission. 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 EndedNine Months Ended
(In thousands, except per share amounts)January 2, 2021December 28, 2019January 2, 2021December 28, 2019
Net revenues$803,404 $723,499 $2,296,612 $2,406,497 
Cost of revenues:
Cost of products sold249,529 233,324 693,753 804,197 
Amortization of acquisition-related intangibles6,875 6,697 20,268 15,699 
Total cost of revenues256,404 240,021 714,021 819,896 
Gross margin547,000 483,478 1,582,591 1,586,601 
Operating expenses:
Research and development235,018 211,541 664,776 638,621 
Selling, general and administrative136,701 109,612 355,877 328,633 
Amortization of acquisition-related intangibles2,856 2,919 8,581 5,488 
Total operating expenses374,575 324,072 1,029,234 972,742 
Operating income172,425 159,406 553,357 613,859 
Interest and other income (expense), net3,709 6,437 (19,215)30,378 
Income before income taxes176,134 165,843 534,142 644,237 
Provision for income taxes5,162 3,831 75,517 13,774 
Net income$170,972 $162,012 $458,625 $630,463 
Net income per common share:
Basic$0.70 $0.65 $1.88 $2.50 
Diluted$0.69 $0.64 $1.86 $2.47 
Cash dividends per common share$0.38 $0.37 $1.14 $1.11 
Shares used in per share calculations:
Basic245,145 250,546 243,976 252,330 
Diluted248,148 252,808 246,786 255,758 


See notes to condensed consolidated financial statements.

3

XILINX, INC.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Unaudited)
Three Months EndedNine Months Ended
(In thousands)January 2, 2021December 28, 2019January 2, 2021December 28, 2019
Net income$170,972 $162,012 $458,625 $630,463 
Other comprehensive income, net of tax:
Change in net unrealized gains (losses) on available-for-sale securities(253)548 15 12,264 
Reclassification adjustment for (gains) losses on available-for-sale securities58 (91)(87)(890)
Change in unrealized gains (losses) on hedging transactions5,967 2,184 15,515 (1,829)
Reclassification adjustment for (gains) losses on hedging transactions(2,239)96 (1,890)2,247 
Cumulative translation adjustment, net2,933 2,294 4,902 (487)
Other comprehensive income6,466 5,031 18,455 11,305 
Total comprehensive income$177,438 $167,043 $477,080 $641,768 

See notes to condensed consolidated financial statements.

4

XILINX, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
 
(In thousands, except par value amounts)January 2, 2021March 28, 2020
(unaudited)
ASSETS
Current assets:
Cash and cash equivalents$1,125,566 $1,777,703 
Short-term investments2,198,859 489,513 
Accounts receivable, net269,605 273,028 
Inventories300,107 304,340 
Prepaid expenses and other current assets73,112 64,557 
Total current assets3,967,249 2,909,141 
Property, plant and equipment, at cost1,008,277 989,315 
Accumulated depreciation and amortization(656,764)(616,741)
Net property, plant and equipment351,513 372,574 
Goodwill620,697 619,196 
Acquisition-related intangibles, net182,211 200,344 
Other assets627,295 592,079 
Total Assets$5,748,965 $4,693,334 
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable$110,075 $102,131 
Accrued payroll and related liabilities313,824 231,439 
Income taxes payable30,044 36,217 
Other accrued liabilities160,284 216,634 
Current portion of long-term debt499,865 499,260 
Total current liabilities1,114,092 1,085,681 
Long-term debt1,492,377 747,110 
Long-term income taxes payable472,546 447,383 
Other long-term liabilities71,059 98,111 
Commitments and contingencies (Note 17)
Stockholders' equity:
Preferred stock, $.01 par value
— — 
Common stock, $.01 par value
2,451 2,438 
Additional paid-in capital1,283,023 1,145,083 
Retained earnings1,315,239 1,187,805 
Accumulated other comprehensive loss(1,822)(20,277)
Total stockholders’ equity2,598,891 2,315,049 
Total Liabilities and Stockholders’ Equity$5,748,965 $4,693,334 


See notes to condensed consolidated financial statements.
5

XILINX, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Nine Months Ended
(In thousands)January 2, 2021December 28, 2019
Cash flows from operating activities:
Net income$458,625 $630,463 
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization of software92,816 68,882 
Amortization - others47,508 37,326 
Stock-based compensation175,153 142,732 
Deferred income taxes(18,519)1,417 
Others3,699 (24,083)
Changes in assets and liabilities:
Accounts receivable, net3,423 86,370 
Inventories4,232 (6,845)
Prepaid expenses and other current assets(4,665)912 
Other assets(48,258)(26,217)
Accounts payable6,381 (26,466)
Accrued liabilities110,836 7,735 
Income taxes payable21,960 (46,741)
Net cash provided by operating activities853,191 845,485 
Cash flows from investing activities:
Purchases of available-for-sale securities(4,278,552)(1,273,015)
Proceeds from sale and maturity of available-for-sale and equity securities2,493,984 1,838,572 
Purchases of property, plant and equipment and software(36,801)(96,980)
Other investing activities(16,109)(15,233)
Acquisition of business, net of cash acquired(7,103)(454,651)
Net cash used in investing activities(1,844,581)(1,307)
Cash flows from financing activities:
Repurchases of common stock(53,682)(738,184)
Taxes paid related to net share settlements of restricted stock units(57,987)(75,417)
Proceeds from issuance of common stock through various stock plans20,116 19,876 
Payment of dividends to stockholders(278,674)(280,376)
Proceeds from issuance of long-term debt, net744,427 — 
Other financing activities(34,947)(22,479)
Net cash provided by (used in) financing activities339,253 (1,096,580)
Net decrease in cash and cash equivalents(652,137)(252,402)
Cash and cash equivalents at beginning of period1,777,703 1,544,490 
Cash and cash equivalents at end of period$1,125,566 $1,292,088 
Supplemental disclosure of cash flow information:
Interest paid$41,852 $41,576 
Income taxes paid, net$72,414 $58,937 


See notes to condensed consolidated financial statements.
6

XILINX, INC.
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(Unaudited)
Three Months Ended January 2, 2021
Common Stock
Outstanding
Additional
Paid-in
Capital
Retained
Earnings
Accumulated
Other
Comprehensive
Income (Loss)
Total
Stockholders'
Equity
(In thousands, except per share amounts)SharesAmount
Balance as of September 26, 2020
245,059 $2,450 $1,221,254 $1,237,421 $(8,288)$2,452,837 
Components of comprehensive income: 
Net income— — — 170,972 — 170,972 
Other comprehensive income— — — — 6,466 6,466 
Issuance of common shares under employee stock plans, net142 (4,562)— — (4,561)
Stock-based compensation expense— — 66,331 — — 66,331 
Cash dividends declared ($0.38 per common share)
— — — (93,154)— (93,154)
Balance as of January 2, 2021
245,201 $2,451 $1,283,023 $1,315,239 $(1,822)$2,598,891 



Nine Months Ended January 2, 2021
Common Stock
Outstanding
Additional
Paid-in
Capital
Retained
Earnings
Accumulated
Other
Comprehensive
Income (Loss)
Total
Stockholders'
Equity
(In thousands, except per share amounts)SharesAmount
Balance as of March 28, 2020
243,810 $2,438 $1,145,083 $1,187,805 $(20,277)$2,315,049 
Components of comprehensive income:
Net income— — — 458,625 — 458,625 
Other comprehensive income— — — — 18,455 18,455 
Issuance of common shares under employee stock plans, net2,076 20 (39,735)— — (39,715)
Repurchase and retirement of common stock(685)(7)2,522 (52,517)— (50,002)
Stock-based compensation expense— — 175,153 — — 175,153 
Cash dividends declared ($1.14 per common share)
— — — (278,674)— (278,674)
Balance as of January 2, 2021
245,201 $2,451 $1,283,023 $1,315,239 $(1,822)$2,598,891 






















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XILINX, INC.
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(Unaudited)

Three Months Ended December 28, 2019
Common Stock
Outstanding
Additional
Paid-in
Capital
Retained
Earnings
Accumulated
Other
Comprehensive
Income (Loss)
Total
Stockholders'
Equity
(In thousands, except per share amounts)SharesAmount
Balance as of September 28, 2019
251,466 $2,515 $978,222 $1,732,304 $(17,136)$2,695,905 
Components of comprehensive income:
Net income— — — 162,012 — 162,012 
Other comprehensive income— — — — 5,031 5,031 
Issuance of common shares under employee stock plans, net153 (3,567)— — (3,565)
Repurchase and retirement of common stock(2,784)(28)(1,132)(256,175)— (257,335)
Stock-based compensation expense— — 50,157 — — 50,157 
Cash dividends declared ($0.37 per common share)
— — — (92,931)— (92,931)
Additional tax benefit recognized relating to fiscal 2014 redemption of convertible debt— — 81,888 — — 81,888 
Balance as of December 28, 2019
248,835 $2,489 $1,105,568 $1,545,210 $(12,105)$2,641,162 




Nine Months Ended December 28, 2019
Common Stock
Outstanding
Additional
Paid-in
Capital
Retained
Earnings
Accumulated
Other
Comprehensive
Income (Loss)
Total
Stockholders'
Equity
(In thousands, except per share amounts)SharesAmount
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— — — 630,463 — 630,463 
Other comprehensive income— — — — 11,305 11,305 
Issuance of common shares under employee stock plans, net2,171 22 (55,563)— — (55,541)
Repurchase and retirement of common stock(7,227)(72)(68,900)(681,846)— (750,818)
Stock-based compensation expense— — 142,732 — — 142,732 
Cash dividends declared ($1.11 per common share)
— — — (280,376)— (280,376)
Additional tax benefit recognized relating to fiscal 2014 redemption of convertible debt— — 81,888 — — 81,888 
Balance as of December 28, 2019
248,835 $2,489 $1,105,568 $1,545,210 $(12,105)$2,641,162 




See notes to condensed consolidated financial statements.

8

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 28, 2020. 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 3, 2021 or any future period.

The Company uses a 52- to 53-week fiscal year ending on the Saturday nearest March 31. Fiscal 2021 and fiscal 2020 are 53-week and 52-week years ending on April 3, 2021 and March 28, 2020, respectively. The quarter ended January 2, 2021 consisted of 14 weeks. The quarter ended December 28, 2019 consisted of 13 weeks.

Merger with Advanced Micro Devices, Inc.

On October 27, 2020, the Company announced that it had entered into an Agreement and Plan of Merger, dated October 26, 2020 (as it may be amended from time to time, the Merger Agreement) with Advanced Micro Devices, Inc., a Delaware corporation (AMD), and Thrones Merger Sub, Inc., a wholly-owned subsidiary of AMD (Merger Sub), under which, subject to the satisfaction or (to the extent permissible) waiver of the conditions set forth therein, Merger Sub will merge with and into the Company, and the Company will survive the merger as a wholly-owned subsidiary of AMD (Merger). Under the terms of the Merger Agreement, at the effective time of the Merger (Effective Time), each share of common stock, par value $0.01 per share, of the Company, issued and outstanding immediately prior to the Effective Time (other than treasury shares and any shares of Company common stock held by AMD or Merger Sub) will be converted into the right to receive 1.7234 fully paid and non-assessable shares of common stock, par value $0.01 per share, of AMD (with cash being paid, without interest and less applicable withholding taxes, in lieu of any fractional shares of AMD common stock).

The Merger has been approved by both the Company’s board of directors and the board of directors of AMD. The completion of the Merger is subject to customary closing conditions, including, among others, the approvals of the Company’s stockholders and AMD’s stockholders and the receipt of various regulatory approvals. Subject to the satisfaction or (to the extent permissible) waiver of such conditions, the Merger is currently expected to close by the end of calendar year 2021. The Company cannot guarantee that the Merger will be completed on a timely basis or at all or that, if completed, it will be completed on the terms set forth in the Merger Agreement.

The aggregate financial advisor fees associated with the Merger are $90.0 million in total, $9.0 million of which was paid upon the public announcement of the Merger, and the remainder is contingent upon the closing of the Merger. The Company is also obligated to pay up to an additional $40.0 million calculated based on the extent to which the value of the Company’s shares in the Merger at the time of closing exceeds a specified threshold. If the Merger is not completed, the Company could be required to pay a termination fee of $1.00 billion to AMD under certain circumstances as described in the Merger Agreement.

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

Credit Losses

In June 2016, the Financial Accounting Standards Board (FASB) issued authoritative guidance to replace the incurred loss impairment methodology under current GAAP with a methodology that reflects expected credit losses and requires consideration of a broader range of reasonable and supportable information to inform credit loss estimates. The guidance requires a forward-looking expected credit loss model for financial assets, including accounts receivable and available for sale debt securities. The Company adopted this authoritative guidance in the first quarter of fiscal 2021 and the impact of the adoption was not material to the Company's condensed consolidated financial statements.

Goodwill
9


In January 2017, the FASB issued authoritative guidance that simplifies the accounting for goodwill impairment. The authoritative guidance removes Step 2 of the goodwill impairment test, which required a hypothetical purchase price allocation. Goodwill impairment will now be the amount by which a reporting unit’s carrying value exceeds its fair value, not to exceed the carrying amount of goodwill. All other goodwill impairment guidance remains largely unchanged. Entities will continue to have the option to perform a qualitative assessment to determine if a quantitative impairment test is necessary. The Company adopted this authoritative guidance in the first quarter of fiscal 2021 and the adoption did not impact the Company's condensed consolidated financial statements.

Cloud Computing Arrangements

In August 2018, the FASB issued new guidance requiring a customer in a cloud computing arrangement (i.e., hosting arrangement) that is a service contract to follow the internal-use software guidance to determine which implementation costs to capitalize as assets or expense as incurred. Capitalized implementation costs related to a hosting arrangement that is a service contract will be amortized over the term of the hosting arrangement, beginning when the module or component of the hosting arrangement is ready for its intended use. The Company adopted this authoritative guidance in the first quarter of fiscal 2021 and the impact of the adoption was not material to the Company's condensed consolidated financial statements.

Recent Accounting Pronouncements Not Yet Adopted

Income Taxes

In December 2019, the FASB issued authoritative guidance that simplifies the accounting for income taxes as part of the overall initiative to reduce complexity in accounting standards. Amendments include removal of certain exceptions to the general principles of Accounting Standards Codification 740, Income Taxes. The amendments also include simplification in several other areas, such as recognition of deferred tax assets on step-up in tax basis in goodwill and accounting for franchise tax that is partially based on income. For public entities, the guidance is effective for fiscal years beginning after December 15, 2020, and interim periods within those fiscal years, which for Xilinx would be the first quarter of fiscal 2022. Early adoption is permitted in any interim or annual period, with any adjustments reflected as of the beginning of the fiscal year of adoption. The Company has decided not to early adopt this new authoritative guidance and is currently evaluating the impact of this authoritative 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 January 2, 2021 and March 28, 2020, Avnet accounted for 34% and 31% of the Company’s total net accounts receivable, respectively. Net revenues from Avnet accounted for 44% and 43% of the Company’s worldwide net revenues in the third quarter and the first nine months of fiscal 2021, respectively. Net revenues from Avnet accounted for 45% and 41% of the Company’s worldwide net revenues in the third quarter and the first nine months of fiscal 2020. While the percentage of worldwide net revenues from Avnet fluctuates from period to period, overall the percentage is within historical ranges.
For the third quarter and the first nine months of fiscal 2021, approximately 56% and 57% of the Company's net revenues were from products sold to distributors for subsequent resale to original equipment manufacturers (OEMs) or their subcontract manufacturers, respectively. For the third quarter and the first nine months of fiscal 2020, the percentages of the Company's net revenues from distributors were 57% and 52%, respectively.
No other distributor or end customer accounted for more than 10% of the Company’s worldwide net revenues for the third quarter and the first nine months of fiscal 2021. No other distributor accounted for more than 10% of the Company’s worldwide net revenues for the third quarter and the first nine months of fiscal 2020. However, one end customer accounted for 12% and 11% of the Company's worldwide net revenues for the third quarter and the first nine months of fiscal 2020, respectively.

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 concentrations 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.

The Company mitigates concentrations of credit risk in its investments in debt securities by currently investing approximately 96% 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.
10

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 January 2, 2021, 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 third quarter of fiscal 2021, and the Company did not adjust or override any fair value measurements as of January 2, 2021.

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.

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.

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.

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 January 2, 2021 and March 28, 2020:
11

January 2, 2021
(In thousands)
(Level 1)

(Level 2)

(Level 3)
Total Fair
Value
Assets
Cash equivalents:
Money market funds$334,209 $— $— $334,209 
Financial institution securities— 174,988 — 174,988 
Non-financial institution securities— 207,764 — 207,764 
U.S. government and agency securities36,999 83,995 — 120,994 
Foreign government and agency securities— 121,470 — 121,470 
Short-term investments:
Financial institution securities— 299,991 — 299,991 
Non-financial institution securities— 430,783 — 430,783 
U.S. government and agency securities643,877 341,331 — 985,208 
Foreign government and agency securities— 376,855 — 376,855 
Mortgage-backed securities— 89,617 — 89,617 
Asset-backed securities— 856 — 856 
Commercial mortgage-backed securities— 15,549 — 15,549 
Derivative financial instruments, net— 6,756 — 6,756 
Total assets measured at fair value$1,015,085 $2,149,955 $— $3,165,040 


March 28, 2020
(In thousands)

(Level 1)

(Level 2)

(Level 3)
Total Fair
Value
Assets
Cash equivalents:
Money market funds$656,038 $— $— $656,038 
Financial institution securities— 175,000 — 175,000 
Non-financial institution securities— 361,692 — 361,692 
U.S. government and agency securities150,999 62,274 — 213,273 
Foreign government and agency securities— 244,300 — 244,300 
Short-term investments:
Financial institution securities— 150,000 — 150,000 
Non-financial institution securities— 115,043 — 115,043 
U.S. government and agency securities1,000 2,000 — 3,000 
Foreign government and agency securities— 9,973 — 9,973 
Mortgage-backed securities— 158,804 — 158,804 
Asset-backed securities— 2,549 — 2,549 
Commercial mortgage-backed securities— 50,144 — 50,144 
Total assets measured at fair value$808,037 $1,331,779 $— $2,139,816 
Liabilities
Derivative financial instruments, net$— $12,381 $— $12,381 
Total liabilities measured at fair value$— $12,381 $— $12,381 
Net assets measured at fair value$808,037 $1,319,398 $— $2,127,435 

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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), $750.0 million principal amount of 2.950% senior notes due June 1, 2024 (2024 Notes) and $750.0 million principal amount of 2.375% senior notes due June 1, 2030 (2030 Notes) are measured at fair value on a quarterly basis for disclosure purposes. The fair values of the 2021 Notes, 2024 Notes and 2030 Notes as of January 2, 2021 were approximately $502.7 million, $807.8 million and $785.2 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 January 2, 2021, the Company had non-marketable securities in private companies of $107.4 million, which were classified as Level 3 assets. The Company’s investments in non-marketable equity 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.

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:
January 2, 2021March 28, 2020
(In thousands)Amortized CostGross Unrealized GainsGross Unrealized LossesEstimated Fair ValueAmortized CostGross Unrealized GainsGross Unrealized LossesEstimated Fair Value
Money market funds$334,209 $— $— $334,209 $656,038 $— $— $656,038 
Financial institution
securities474,979 — — 474,979 325,000 — — 325,000 
Non-financial institution
securities638,547 — — 638,547 476,735 — — 476,735 
U.S. government and
agency securities1,106,192 19 (9)1,106,202 216,178 95 — 216,273 
Foreign government and
agency securities498,325 — — 498,325 254,283 (17)254,273 
Mortgage-backed securities
88,100 1,819 (302)89,617 156,836 2,445 (477)158,804 
Asset-backed securities840 16 — 856 2,533 18 (2)2,549 
Commercial mortgage-
backed securities15,572 123 (146)15,549 50,566 134 (556)50,144 
$3,156,764 $1,977 $(457)$3,158,284 $2,138,169 $2,699 $(1,052)$2,139,816 

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 January 2, 2021 and March 28, 2020.
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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 January 2, 2021 and March 28, 2020:
January 2, 2021
Less Than 12 Months12 Months or GreaterTotal
(In thousands)Fair ValueGross Unrealized LossesFair ValueGross Unrealized LossesFair ValueGross Unrealized Losses
U.S. government and
    agency securities$431,873 $(9)$— $— $431,873 $(9)
Mortgage-backed securities13,052 (120)12,287 (182)25,339 (302)
Commercial mortgage-
backed securities2,635 (5)638 (141)3,273 (146)
$447,560 $(134)$12,925 $(323)$460,485 $(457)

March 28, 2020
Less Than 12 Months12 Months or GreaterTotal
(In thousands)Fair ValueGross Unrealized LossesFair ValueGross Unrealized LossesFair ValueGross Unrealized Losses
Mortgage-backed securities$13,492 $(88)$31,819 $(389)$45,311 $(477)
Asset-backed securities1,641 (2)— — 1,641 (2)
Foreign government and
    agency securities30,998 (17)— — 30,998 (17)
Commercial mortgage-
    backed securities30,593 (282)2,589 (274)33,182 (556)
$76,724 $(389)$34,408 $(663)$111,132 $(1,052)

The Company reviewed the investment portfolio and determined that the gross unrealized losses on these investments as of January 2, 2021 and March 28, 2020 were temporary in nature as evidenced by the fluctuations in the gross unrealized losses within the investment categories. The marketable debt 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 January 2, 2021 and March 28, 2020. 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.
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 January 2, 2021
(In thousands)Amortized
Cost
Estimated
Fair Value
Due in one year or less$2,719,288 $2,719,301 
Due after one year through five years3,398 3,460 
Due after five years through ten years13,443 14,079 
Due after ten years86,426 87,235 
$2,822,555 $2,824,075 

As of January 2, 2021, $104.8 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 because these investments do not have specific contractual maturities.

Certain information related to available-for-sale securities is as follows:
Three Months EndedNine Months Ended
(In thousands)January 2, 2021December 28, 2019January 2, 2021December 28, 2019
Proceeds from sale of available-for-sale and equity securities$3,896 $23,605 $60,351 $323,228 
Gross realized gains on sale of available-for-sale securities$— $128 $413 $1,339 
Gross realized losses on sale of available-for-sale securities(75)(9)(299)(181)
Net realized gains (losses) on sale of available-for-sale securities$(75)$119 $114 $1,158 
Amortization of premiums (discounts) on available-for-sale securities$(141)$1,063 $(257)$3,411 

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.

In March and May 2020, the Company entered into interest rate swap contracts with an independent financial institution in an effort to reduce the risk of changes in the underlying benchmark interest rate. During the first quarter of fiscal 2021, the Company unwound the interest rate swap contracts and recognized an immaterial loss. The loss is being amortized as an additional increase to interest expense over the remaining life of the 2030 Notes. 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

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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 EndedNine Months Ended
(In thousands)January 2, 2021December 28, 2019January 2, 2021December 28, 2019
Stock-based compensation included in:
Cost of revenues$3,465 $2,961 $9,149 $8,386 
Research and development40,228 31,543 106,707 86,119 
Selling, general and administrative22,638 15,653 59,297 48,227 
$66,331 $50,157 $175,153 $142,732 

In order to retain its current workforce and maintain continuous business operations during the pending period of the Merger, the Company implemented an employee retention bonus program in December 2020 for certain employees consisting of both cash bonuses and RSUs. The cash bonuses are payable in separate installments through the later of December 2021 or the closing of the Merger, and the RSUs will vest in equal annual installments over three years, with payment and vesting contingent upon a participant employee's continuing employment with the Company. The retention bonus program resulted in the issuance of 721 thousand RSUs. The stock-based compensation expense with respect to the retention bonus program was immaterial for the third quarter of fiscal 2021.

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 January 2, 2021, 11.9 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 SharesWeighted-Average Grant-Date Fair Value Per Share
March 30, 20197,331 $59.54 
Granted2,756 $109.53 
Vested(2,820)$55.24 
Cancelled(487)$75.09 
March 28, 20206,780 $80.53 
Granted3,785 $105.48 
Vested(2,387)$70.61 
Cancelled(594)$83.77 
January 2, 20217,584 $95.46 

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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. For the RSUs granted during the fiscal quarter ended January 2, 2021, the Company does not expect to declare a dividend due to the required dividend suspension in connection with the Merger. The per share weighted-average fair value of RSUs granted during the third quarter of fiscal 2021 was $143.18 ($89.57 for the third quarter of fiscal 2020), which were calculated based on estimates at the date of grant using the following weighted-average assumptions: 
Three Months EndedNine Months Ended
January 2, 2021December 28, 2019January 2, 2021December 28, 2019
Risk-free interest rate0.2 %1.6 %0.2 %1.8 %
Dividend yield— %1.6 %1.2 %1.3 %

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 nine months of fiscal 2021 and 2020, the Company withheld $58.0 million and $75.4 million worth of RSU awards, respectively, to satisfy the employees’ tax obligations.

During the third quarter and the first nine months of fiscal 2021, the Company realized excess tax benefits of $2.3 million and $15.0 million, respectively, primarily from RSU vesting. During the third quarter and the first nine months of fiscal 2020, the excess tax benefits were $1.3 million and $35.6 million, respectively, primarily from RSU vesting. These tax benefits were recorded in the condensed consolidated statements of income as a component of the provision for income taxes.

Employee Stock Purchase Plan

Under the Company’s ESPP, shares are only issued during the second and fourth quarters of each fiscal year. Employees purchased 283 thousand shares for $19.8 million during the second quarter of fiscal 2021 and 241 thousand shares for $19.7 million during the second quarter of fiscal 2020. The per-share weighted-average fair value of stock purchase rights granted under the ESPP during the second quarter of fiscal 2021 and 2020 was $31.40 and $33.79, respectively. The fair values of stock purchase plan rights granted in the second quarter of fiscal 2021 and 2020 were estimated using the Black-Scholes option pricing model at the date of grant using the following assumptions:

20212020
Expected life of options (years)1.251.25
Expected stock price volatility0.380.37
Risk-free interest rate0.1 %1.9 %
Dividend yield1.4 %1.3 %

The next scheduled purchase under the ESPP is in the fourth quarter of fiscal 2021. As of January 2, 2021, 12.4 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:
17

Three Months EndedNine Months Ended
(In thousands, except per share amounts)January 2, 2021December 28, 2019January 2, 2021December 28, 2019
Net income available to common stockholders$170,972 $162,012 $458,625 $630,463 
Weighted average common shares outstanding-basic245,145 250,546 243,976 252,330 
Dilutive effect of employee equity incentive plans3,003 2,262 2,810 3,428 
Weighted average common shares outstanding-diluted248,148 252,808 246,786 255,758 
Basic net income per common share$0.70 $0.65 $1.88 $2.50 
Diluted net income per common share$0.69 $0.64 $1.86 $2.47 

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 excluded options and RSUs were immaterial for the third quarter and the first nine months of fiscal 2021 and 2020, 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)January 2, 2021March 28, 2020
Raw materials$27,549 $35,562 
Work-in-process206,607 204,501 
Finished goods65,951 64,277 
$300,107 $304,340 

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 effective interest rate of the 2021 Notes is 3.115%. The coupon interest rate of the 2021 Notes is 3.000%.

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 January 2, 2021, the remaining term of the 2021 Notes is 0.2 years.

The following table summarizes the carrying value of the 2021 Notes as of January 2, 2021 and March 28, 2020:
(In thousands)January 2, 2021March 28, 2020
Principal amount of the 2021 Notes$500,000 $500,000 
Unamortized discount of the 2021 Notes(95)(517)
Unamortized debt issuance costs associated with 2021 Notes(40)(223)
Carrying value of the 2021 Notes$499,865 $499,260 

18

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 EndedNine Months Ended
(In thousands)January 2, 2021December 28, 2019January 2, 2021December 28, 2019
Contractual coupon interest$3,750 $3,750 $11,250 $11,250 
Amortization of debt issuance costs61 61 183 182 
Amortization of debt discount, net142 137 422 409 
Total interest expense related to the 2021 Notes$3,953 $3,948 $11,855 $11,841 

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 effective interest rate of the 2024 Notes is 2.968%. The coupon interest rate of the 2024 Notes is 2.950%.

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 January 2, 2021, the remaining term of the 2024 Notes is approximately 3.4 years.

The following table summarizes the carrying value of the 2024 Notes as of January 2, 2021 and March 28, 2020:
(In thousands)January 2, 2021March 28, 2020
Principal amount of the 2024 Notes$750,000 $750,000 
Unamortized discount of the 2024 Notes(436)(525)
Unamortized debt issuance costs associated with 2024 Notes(1,939)(2,365)
Carrying Value of the 2024 Notes $747,625 $747,110 

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 EndedNine Months Ended
(In thousands)January 2, 2021December 28, 2019January 2, 2021December 28, 2019
Contractual coupon interest$5,444 $5,444 $16,331 $17,429 
Amortization of debt issuance costs142 142 426 426 
Amortization of debt discount, net30 29 89 87 
Total interest expense related to the 2024 Notes$5,616 $5,615 $16,846 $17,942 

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2030 Notes

On May 19, 2020, the Company issued the 2030 Notes at a discounted price of 99.973% of par. Interest on the 2030 Notes is payable semi-annually on June 1 and December 1. The effective interest rate of the 2030 Notes is 2.378%. The coupon interest rate of the 2030 Notes is 2.375%.

The Company received $744.4 million from the issuance of the 2030 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 2030 Notes. As of January 2, 2021, the remaining term of the 2030 Notes is approximately 9.4 years.

The following table summarizes the carrying value of the 2030 Notes as of January 2, 2021:

(In thousands)January 2, 2021
Principal amount of the 2030 Notes$750,000 
Unamortized discount of the 2030 Notes(191)
Unamortized debt issuance costs associated with 2030 Notes(5,057)
Carrying Value of the 2030 Notes$744,752 

Interest expense related to the 2030 Notes was included in interest and other income (expense), net on the condensed consolidated statements of income as follows:

Three Months EndedNine Months Ended
(In thousands)January 2, 2021December 28, 2019January 2, 2021December 28, 2019
Contractual coupon interest$4,521 $— $11,086 $— 
Amortization of debt issuance costs134 — 313 — 
Amortization of debt discount, net— 11 — 
Total interest expense related to the 2030 Notes$4,659 $— $11,410 $— 


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. On December 1, 2020, the Company terminated the senior unsecured revolving credit facility. The Company had made no borrowings under this credit facility and was not in violation of any of the covenants before the termination.

Note 11. Common Stock Repurchase Program

The Company's board of directors has approved stock repurchase programs enabling the Company to repurchase its common stock and debentures in the open market or through negotiated transactions with independent financial institutions. On October 22, 2019, the Board authorized another program (2019 Repurchase Program) to repurchase the Company's common stock and debentures up to $1.00 billion. The 2019 Repurchase Program has no stated expiration date. 

Through January 2, 2021, the Company has used $716.3 million of the $1.00 billion authorized under the 2019 Repurchase Program, leaving $283.7 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 January 2, 2021 and March 28, 2020.

During the first nine months of fiscal 2021, the Company repurchased 0.7 million shares of common stock in the open market for a total of $53.7 million. Pursuant to the terms of the Merger Agreement, the Company suspended its repurchase program on October 27, 2020, the date the Company announced its planned merger with AMD.

During the first nine months of fiscal 2020, the Company repurchased 7.2 million shares of common stock for $738.2 million in the open market and through an accelerated share repurchase program with independent financial institutions.
20


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

The components of interest and other income (expense), net are as follows: 
Three Months EndedNine Months Ended
(In thousands)January 2, 2021December 28, 2019January 2, 2021December 28, 2019
Interest income$2,581 $11,138 $9,504 $42,939 
Interest expense(14,228)(9,563)(40,111)(30,255)
Other income, net15,356 4,862 11,392 17,694 
   Total interest and other income (expense), net$3,709 $6,437 $(19,215)$30,378 

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)January 2, 2021March 28, 2020
Accumulated unrealized gains on available-for-sale securities, net of tax$1,247 $1,319 
Accumulated unrealized gains (losses) on hedging transactions, net of tax3,455 (10,170)
Accumulated cumulative translation adjustment, net of tax(6,524)(11,426)
Total accumulated other comprehensive loss$(1,822)$(20,277)

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

Note 14. Income Taxes

The Company recorded tax provisions of $5.2 million and $75.5 million for the third quarter and the first nine months of fiscal 2021, respectively, representing effective tax rates of 2.9% and 14.1%, respectively. The Company recorded tax provisions of $3.8 million and $13.8 million for the third quarter and the first nine months of fiscal 2020, respectively, representing effective tax rates of 2.3% and 2.1%, 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 and excess tax benefits with respect to stock-based compensation, which was partially offset by the U.S. tax on global intangible low-taxed income (GILTI). In addition, the first nine months of fiscal 2021 included the recognition of prior period tax and interest related to impacts of including stock-based compensation in the intercompany research and development (R&D) cost sharing arrangement.

On June 22, 2020, the United States Supreme Court denied certiorari in the case of Altera Corp. v. Commissioner (Altera). The company is not a party to the proceedings but is subject to the findings of the case. The Altera tax case concerns related party R&D cost sharing arrangements and whether stock-based compensation should be included in the pool of costs to be shared. With the Supreme Court’s decision not to hear the Altera case, the decision of the 9th Circuit (which applies to taxpayers such as Xilinx) that stock-based compensation is to be included in the pool of costs to be shared remains in place. During the fiscal quarter ended June 27, 2020, the Company recorded a one-time charge of $56.8 million for prior year taxes and interest representing the cumulative adverse impact for fiscal 2017 through fiscal 2020. Despite the decision in the Altera case, the Company has concluded the related law remains unsettled and will continue to monitor developments and the potential effect on its consolidated financial statements and tax filings.

21

The Company’s total gross unrecognized tax benefits as of January 2, 2021, determined in accordance with authoritative guidance for measuring uncertain tax positions, decreased by $2.6 million in the third quarter of fiscal 2021 to $152.3 million. The total amount of unrecognized tax benefits that, if realized in a future period, would favorably affect the effective tax rate was $115.4 million as of January 2, 2021. 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 was $5.0 million as of January 2, 2021 and not material for the prior period presented. 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 2016, for significant U.S. state income tax purposes for years through fiscal 2014, and for Ireland income tax purposes for years through fiscal 2015.

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 January 2, 2021:
Fiscal(In thousands)
2021 (remaining three months)$3,317 
202211,865 
20237,658 
20246,530 
20256,264 
Thereafter28,764 
Total lease payments$64,398 
Less: Imputed interest(12,969)
Total lease liabilities$51,429 

The Company's leases were included as a component of the following condensed consolidated balance sheet lines:
(In thousands)January 2, 2021March 28, 2020
Other assets$48,655 $57,819 
Other accrued liabilities10,921 11,109 
Other long-term liabilities40,508 48,964 

The components of lease costs were as follows:
Three Months EndedNine Months Ended
(In thousands)January 2, 2021December 28, 2019January 2, 2021December 28, 2019
Operating lease cost$4,103 $4,109 $11,361 $12,715 
Lease income(811)(768)(2,783)(2,236)
Total lease cost$3,292 $3,341 $8,578 $10,479 

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Other information related to leases were as follows:
Nine Months Ended
($ in thousands)January 2, 2021December 28, 2019
Cash paid for operating leases included in operating cash flows$10,302 $9,133 

January 2, 2021
Weighted-average remaining lease term - operating leases (in years)7.1
Weighted-average remaining discount rate - operating leases5.8 %

Other commitments as of January 2, 2021 totaled $199.1 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. Additionally, as of January 2, 2021, the Company had $31.7 million commitments primarily related to open purchase orders from ordinary operations. These commitments expire at various dates through August 2025.

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 third quarter of fiscal 2021 and the end of fiscal 2020, 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.

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Note 17. Contingencies

Patent Litigation

On October 18, 2019, a patent infringement lawsuit was filed by Arbor Global Strategies LLC (Arbor) against the Company in the U.S. District Court in Delaware (Arbor Global Strategies LLC, v. Xilinx, Inc., Case No. 1:19-cv-01986). The lawsuit pertains to four patents and Arbor seeks unspecified damages, interest, attorneys’ fees, and costs. The Company filed a motion to dismiss the case on December 19, 2019 that was denied on August 12, 2020. Discovery in the case is now open, and Arbor served its infringement contentions on December 9, 2020. A trial has been set to begin on May 23, 2022. On September 4, 2020, the Company filed four inter partes review (IPR) petitions directed at each of the four Arbor patents. The Company is unable to estimate its range of possible loss, if any, in this matter at this time.

On December 5, 2019, Analog Devices, Inc. (ADI) filed a patent infringement lawsuit against the Company in the United States District Court for the District of Delaware (Analog Devices, Inc. v. Xilinx, Inc., Case No. 1-19-cv-02225). The lawsuit pertains to eight patents and ADI seeks unspecified damages, interest, attorneys’ fees, costs, and a permanent injunction. The Company filed its answer and counterclaims alleging infringement by ADI of eight patents on January 21, 2020. The Company filed amended counterclaims on April 3, 2020. The Company filed a motion to strike ADI's affirmative defense of inequitable conduct on May 8, 2020. This motion is still pending. The parties exchanged infringement contentions on August 17, 2020, and invalidity contentions on September 15, 2020. Between July 17 and December 4, 2020, the Company filed nine IPR petitions challenging the patentability of seven ADI asserted patents. Between August 31 and September 15, 2020, ADI filed eight IPR petitions challenging eight Xilinx asserted patents. The parties’ claims are set for back-to-back trials beginning March 14, 2022 for ADI’s claims and March 28, 2022 for the Company’s claims. The Company is unable to estimate its range of possible loss, if any, in this matter at this time.

On April 30, 2020, a patent infringement lawsuit was filed by FG SRC LLC (SRC) against the Company in the U.S. District Court in Delaware (FG SRC LLC v. Xilinx, Inc., Case No. 1:20-cv-00601). The lawsuit pertains to two patents and SRC seeks unspecified damages, interest, and an on-going royalty. The Company filed its answer to the complaint on June 29, 2020. On July 20, 2020, SRC filed an amended complaint. On August 3, 2020, the Company filed a motion to dismiss the amended complaint. On August 6, 2020 the Company filed a motion to stay this case in Delaware bankruptcy court in view of the pending bankruptcy of the prior owner of the patents. This motion to stay was denied on September 23, 2020. No schedule has been set in the case. The Company is unable to estimate its range of possible loss, if any, in this matter at this time.

On September 16, 2020, five patent infringement lawsuits (Case Nos. 1:20-cv-01228, 1:20-cv-01229, 1:20-cv-01231, 1:20-cv-01232 1:20-cv-01233) were filed by WSOU Investments, LLC, d/b/a Brazos Licensing and Development (WSOU Investments) in the U.S. District Court in Delaware. Each lawsuit pertains to a single patent and WSOU Investments seeks unspecified damages, interest, attorneys’ fees, and costs. No schedule has been set in any of the cases. On November 9, 2020, the Company filed a motion to dismiss WSOU Investments’ indirect infringement claims in each of the cases. In response, WSOU Investments filed amended complaints, limiting its request for pre-suite damages to the direct infringement claims. The Company filed motions to dismiss the indirect infringement claims in the amended complaints on December 7, 2020. These motions remain pending. 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 its IP vigorously.

Shareholder Litigation

On December 7, 2020, a purported stockholder of the Company filed a complaint in the United States District Court for the Northern District of California against the Company and the members of its board of directors (Stein v. Xilinx, Inc., et al., Case No. 5:20-cv-08637). The complaint alleges that the registration statement issued in connection with the Merger omitted material information in violation of Sections 14(a) and 20(a) of the Securities Exchange Act of 1934, Rule 14a-9 thereunder and SEC Regulation G, rendering the registration statement false and misleading.

Specifically, the complaint alleges that the registration statement failed to disclose material information regarding AMD's and the Company’s financial projections and Credit Suisse's discounted cash flow analyses of the Company and AMD.

The complaint seeks an order: enjoining the Merger unless and until additional disclosures are issued; rescinding the Merger, to the extent it closes; awarding damages; awarding costs, including attorneys’ fees, expert fees and expenses; and awarding such other relief as the court deems proper.

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On December 11, 2020, a purported stockholder of the Company filed a putative class-action complaint in the New York Supreme Court against the Company, the members of its board of directors, AMD and Merger Sub (Nunez v. Xilinx, Inc., et al., Case No. 656971/2020). The complaint alleges that the Company's board of directors breached their fiduciary duties by entering into the Merger, agreeing to purportedly preclusive deal protection terms and engaging in an allegedly flawed process that did not involve an adequate market check or approval by a committee of disinterested and independent directors. The complaint also alleges that the Company's board of directors "caused to be filed" the registration statement issued in connection with the Merger that purportedly omitted material information with respect to the Merger. The registration statement allegedly omits information regarding the sale process, AMD's and the Company's financial projections, certain details regarding the financial analyses performed by each of Morgan Stanley, Bank of America, Credit Suisse and DBO and certain details regarding compensation for Morgan Stanley. Finally, the complaint alleges that the Company and AMD aided and abetted the Company's board of directors in their breach of fiduciary duties. The complaint seeks certification of a class action, injunctive relief enjoining the Merger, damages and costs, among other remedies.

On December 11, 2020, a purported stockholder of the Company filed a complaint in the United States District Court for the District of Colorado against the Company and the members of its board of directors (Hale v. Xilinx, Inc., et al., Case No. 1:20-cv-03629). The complaint raises federal securities disclosure claims and alleges, among other things, that the registration statement issued in connection with the Merger omitted material information with respect to the Merger, including information regarding AMD's and the Company's financial projections, certain details regarding the financial analyses performed by Morgan Stanley and Bank of America, and certain details regarding compensation for Morgan Stanley. The complaint seeks injunctive relief enjoining the Merger, damages and costs, among other remedies.

On December 15, 2020, a purported stockholder of the Company filed a complaint in the United States District Court for the Southern District of New York against the Company, the members of its board of directors, AMD and Merger Sub (Shumacher v. Xilinx, Inc., et al., Case No. 1:20-cv-10595). The complaint raises federal securities disclosure claims and alleges, among other things, that the registration statement issued in connection with the Merger omitted material information with respect to the Merger, including information regarding AMD's and the Company's financial projections, certain details regarding the financial analyses performed by Morgan Stanley and Bank of America, and certain details regarding compensation for Morgan Stanley. The complaint seeks injunctive relief enjoining the merger, damages and costs, among other remedies.

On December 18, 2020, a purported stockholder of the Company filed a complaint in the United States District Court for the Southern District of New York against the Company and the members of its board of directors (Achterberg v. Xilinx, Inc., et al., Case No. 1:20-cv-10715). The complaint raises federal securities disclosure claims and alleges, among other things, that the registration statement issued in connection with the Merger omitted material information with respect to the Merger, including information regarding AMD's and the Company's financial projections and certain details regarding the financial analyses performed by Morgan Stanley and Bank of America. The complaint seeks injunctive relief enjoining the Merger, an amended registration statement, damages and costs, among other remedies.

On December 30, 2020, a purported stockholder of the Company filed a complaint in the United States District Court for the Northern District of California against Xilinx and the members of its board of directors (Sandhu v. Xilinx, Inc., et al., Case No. 5:20-cv-09440). The complaint raises federal securities disclosure claims and alleges, among other things, that the registration statement issued in connection with the Merger omitted material information with respect to the Merger, including information regarding AMD's and the Company's financial projections, certain details regarding the financial analyses performed by Morgan Stanley and Bank of America, and certain details regarding compensation for Morgan Stanley. The complaint seeks injunctive relief enjoining the Merger, damages and costs, among other remedies.

The Company believes that the allegations in the shareholder litigation matters are without merit.

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
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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. On July 22, 2019, the Trustee filed his notice of appeal and filed his opening appellate brief on September 17, 2019. On October 30, 2019, Xilinx filed its appellee brief. On November 20, 2019, the Trustee filed his reply brief. On April 7, 2020, the Sixth Circuit affirmed the District Court’s judgment which granted both of Xilinx’s motions for summary judgment, disposing of all claims asserted against Xilinx. On April 14, 2020, the Trustee filed a motion to extend the time for filing a petition for rehearing, and the Sixth Circuit granted the motion extending the due date until May 14, 2020. On May 14, 2020, the Trustee filed a petition for a rehearing. On August 11, 2020, the petition for a rehearing was denied.

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 January 2, 2021 and March 28, 2020 was as follows:
 
Weighted-Average
(In thousands)January 2, 2021March 28, 2020Amortization Life
Goodwill$620,697 $619,196 
Core technology, gross219,847 209,131 
Less accumulated amortization(125,275)(105,007)
Core technology, net94,572 104,124 3.6 years
Other intangibles, gross95,759 95,759 
Less accumulated amortization(65,112)(56,531)
Other intangibles, net30,647 39,228 3.6 years
In-process research and development56,992 56,992 
Total acquisition-related intangibles, gross372,598 361,882 
Less accumulated amortization(190,387)(161,538)
Total acquisition-related intangibles, net$182,211 $200,344 

During the quarter, the Company completed an immaterial business combination, which resulted in increases of goodwill and core technology intangibles.

Based on the carrying value of acquisition-related intangibles recorded as of January 2, 2021, 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)
2021 (remaining three months)$10,078 
202237,544 
202335,836 
202431,586 
20258,747 
Thereafter1,428 
Total$125,219 
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:
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Three Months EndedNine Months Ended
(In thousands)January 2, 2021December 28, 2019January 2, 2021December 28, 2019
North America$236,214 $203,862 $646,289 $636,269 
Asia Pacific356,060 343,416 1,114,991 1,197,489 
Europe152,434 118,646 381,293 395,779 
Japan58,696 57,575 154,039 176,960 
Total net revenues$803,404 $723,499 $2,296,612 $2,406,497 
Geographic revenue information for the third quarter and the first nine months of fiscal 2021 and 2020 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.
The Company's end market revenue data is derived from the understanding of end customers’ primary markets, which is based on reports provided by distributors and the Company's internal records. The Company classifies end markets into businesses with similar market drivers: Aerospace & Defense, Industrial and Test, Measurement & Emulation (AIT); Automotive, Broadcast & Consumer; Wired & Wireless; and Data Center. Additionally, revenue recognized from shipments to distributors but not yet subsequently sold to the end markets is classified as Channel Revenue. The Channel Revenue represents the difference between the shipments to distributors and what the distributors subsequently sold to the end customers within the same period. The percentage change calculation in the table below represents the year-to-year dollar change in each end market.
Three Months EndedNine Months Ended
(% of total net revenues)January 02, 2021December 28, 2019January 02, 2021December 28, 2019
AIT45 %40 %44 %39 %
Automotive, Broadcast and Consumer19 19 16 16 
Wired and Wireless29 31 29 37 
Data Center11 
Channel Revenue— — — 
Total net revenues100 %100 %100 %100 %

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

Recent Development

On October 27, 2020, we entered into the Merger Agreement, dated October 26, 2020, with AMD and Merger Sub, under which, subject to the satisfaction or (to the extent permissible) waiver of the conditions set forth therein, Merger Sub will merge with and into us, and we will survive the Merger as a wholly-owned subsidiary of AMD. Under the terms of the Merger Agreement, at the Effective Time of the Merger, each share of our common stock, par value $0.01 per share, issued and outstanding immediately prior to the Effective Time (other than treasury shares and any shares of our common stock held by AMD or Merger Sub) will be converted into the right to receive 1.7234 fully paid and non-assessable shares of common stock, par value $0.01 per share, of AMD (with cash being paid, without interest and less applicable withholding taxes, in lieu of any fractional shares of AMD common stock).

The Merger has been approved by both our board of directors and the board of directors of AMD. The completion of the Merger is subject to customary closing conditions, including, among others, the approvals of our stockholders and AMD’s stockholders and the receipt of various regulatory approvals. Subject to the satisfaction or (to the extent permissible) waiver of such conditions, the transaction is currently expected to close by the end of calendar year 2021. We cannot guarantee that the Merger will be completed on a timely basis or at all or that, if completed, it will be completed on the terms set forth in the Merger Agreement.

The aggregate financial advisor fees associated with the Merger are $90.0 million in total, $9.0 million of which was paid upon the public announcement of the Merger, and the remainder is contingent upon the closing of the Merger. We are also obligated to pay up to an additional $40.0 million calculated based on the extent to which the value of our shares in the Merger at the time of closing exceeds a specified threshold. If the Merger is not completed, we could be required to pay a termination fee of $1.00 billion to AMD under certain circumstances as described in the Merger Agreement.

Impact of COVID-19

The social and economic impact of the COVID-19 outbreak has continued to increase exponentially since it was declared a pandemic by the World Health Organization in March 2020. The governmental authorities throughout the U.S. and the world have continued to implement numerous measures to contain the virus, including travel bans and restrictions, quarantines, shelter-in-place orders, and business limitations and shutdowns. While COVID-19 did not have a significant impact on our financial results in the third quarter and the first nine months of fiscal 2021, it is difficult to accurately predict the full impact that COVID-19 will have on our future results from operations, financial condition, liquidity and cash flows due to numerous uncertainties, including the duration and severity of the pandemic and related containment measures. Our compliance with these measures has impacted, and could continue to impact, our business and operations, as well as those of our key customers, suppliers (including contract manufacturers) and other counterparties, for an indefinite period of time. During this unprecedented time, our priority has been to support our employees, customers, partners and communities, while positioning Xilinx for the future. For example, almost all of our employees have been working remotely since March 16, 2020. In addition, employees of many of our customers are also working remotely, which may delay the timing of some orders and deliveries expected in fiscal 2021 and fiscal 2022.

As we continue to experience uncertainties and disruptions caused by COVID-19, it remains uncertain when we would eventually resume some degree of normalcy. Therefore, our business may in the future be adversely impacted as a result of the pandemic’s global economic impact. We will continue to closely monitor the pandemic's associated effects, such as our ability to collect receivables from those customers significantly impacted by COVID-19 related closures and disruptions, as well as changes in orders in a given period likely to affect our revenues in future periods, particularly if experienced on a sustained basis.

We currently expect that current cash and cash equivalent balances and cash flows that are generated from operations will be sufficient to meet our domestic and international working capital needs and other capital and liquidity requirements in the foreseeable future.

Critical Accounting Policies and Estimates

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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 additional discussion, please refer to the information under the caption "Critical Accounting Policies and Estimates" in "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 28, 2020 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.

Due to the ongoing COVID-19 pandemic, there has been uncertainty and disruption in the global economy and financial markets. We have considered the potential impact of the COVID-19 pandemic on the business operations, recognizing that there is substantial uncertainty in the nature and degree of COVID-19’s continued effects over time. While we are not currently aware of any specific event or circumstance that would require an update to our estimates or judgments or a revision of the carrying value of our assets or liabilities as of January 2, 2021, these estimates may change as additional events occur and information is obtained. Actual results could differ materially from these estimates under different assumptions or conditions.

Results of Operations: third quarter and first nine months of fiscal 2021 compared to the third quarter and first nine months of fiscal 2020

The following table sets forth statement of income data as a percentage of net revenues for the periods indicated:
Three Months EndedNine Months Ended
January 2, 2021December 28, 2019January 2, 2021December 28, 2019
Net revenues100.0 %100.0 %100.0 %100.0 %
Cost of revenues:
Cost of products sold31.0 32.3 30.2 33.4 
Amortization of acquisition-related intangibles0.9 0.9 0.9 0.7 
Total cost of revenues31.9 33.2 31.1 34.1 
Gross margin68.1 66.8 68.9 65.9 
Operating expenses:
Research and development29.2 29.2 28.9 26.5 
Selling, general and administrative17.0 15.2 15.5 13.7 
Amortization of acquisition-related intangibles0.4 0.4 0.4 0.2 
Total operating expenses46.6 44.8 44.8 40.4 
Operating income21.5 22.0 24.1 25.5 
Interest and other income (expense), net0.4 0.9 (0.8)1.3 
Income before income taxes21.9 22.9 23.3 26.8 
Provision for income taxes0.6 0.5 3.3 0.6 
Net income21.3 %22.4 %20.0 %26.2 %
 
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:
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Advanced Products include our most recent product offerings and consist of the UltraScale+, UltraScale and 7-series product families and our Alveo boards products.

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, 16nm and 7nm 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 the Company’s worldwide net revenues for the third quarter and the first nine months of fiscal 2021. No other distributor accounted for more than 10% of the Company’s worldwide net revenues for the third quarter and the first nine months of fiscal 2020. One end customer accounted for 12% and 11% of the Company's worldwide net revenues for the third quarter and the first nine months of fiscal 2020, respectively.

Net Revenues by Product

Net revenues by product categories for the third quarter and the first nine months of fiscal 2021 and 2020 were as follows:
 
Three Months EndedNine Months Ended
(In millions)January 2, 2021% ChangeDecember 28, 2019January 2, 2021% ChangeDecember 28, 2019
Advanced Products$582.2 15 $504.7 $1,615.2 (5)$1,709.2 
Core Products221.2 218.8 681.4 (2)697.3 
Total net revenues$803.4 11 $723.5 $2,296.6 (5)$2,406.5 

Net revenues from Advanced Products increased in the third quarter but decreased in the first nine months of fiscal 2021 compared to the comparable prior year periods. The increase in the third quarter of fiscal 2021 was primarily due to strong sales from Virtex UltraScale+ in our Test, Measurement & Emulation business. The decrease in the first nine months of fiscal 2021 was primarily due to lower sales from Virtex UltraScale+ and Zynq UltraScale+ MPSoC in our Wireless business.

Net revenues from Core Products increased in the third quarter but decreased in the first nine months of fiscal 2021 from the comparable prior year periods. The increase in the third quarter of fiscal 2021 was a result of higher sales from Virtex2 Pro products in our Aerospace & Defense business. The decrease in the first nine months of fiscal 2021 was largely due to lower sales from Spartan-6 in our Audio, Video and Broadcast business and Virtex-4 in our Aerospace & Defense business. Core Products are relatively mature products and, as a result, sales are expected to decline over time.

Net Revenues by End Markets

Our end market revenue data is derived from our understanding of our end customers’ primary markets, which is based on reports provided by distributors and our internal records. To provide additional visibility, starting April 1, 2019, we classify our end markets into businesses with similar market drivers: (i) Aerospace & Defense, Industrial and Test, Measurement & Emulation (AIT); (ii) Automotive, Broadcast & Consumer; (iii) Wired & Wireless; and (iv) Data Center. Additionally, we classify revenue recognized from shipments to distributors but not yet subsequently sold to the end markets as Channel Revenue. The Channel Revenue represents the difference between the shipments to distributors and what the distributors subsequently sold to the end customers within the same period. The percentage change calculation in the table below represents the year-to-year dollar change in each end market.

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Net revenues by end markets for the third quarter and the first nine months of fiscal 2021 and 2020 were as follows:
 
Three Months EndedNine Months Ended
(% of total net revenues)January 2, 2021% Change in DollarsDecember 28, 2019January 2, 2021% Change in DollarsDecember 28, 2019
AIT45 %25 40 %44 %11 39 %
Automotive, Broadcast and Consumer19 14 19 16 (7)16 
Wired and Wireless29 31 29 (25)37