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EX-32.1 - EXHIBIT 32.1 - XILINX INCxlnx122016ex321.htm
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EX-31.1 - EXHIBIT 31.1 - XILINX INCxlnx122016ex311.htm


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

FORM 10-Q
(Mark One)
x
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended January 2, 2016
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
 
 
 
77-0188631
(State or other jurisdiction of
incorporation or organization)
 
 
 
(I.R.S. Employer
Identification No.)
 
 
 
 
 
2100 Logic Drive, San Jose, California
 
 
 
95124
(Address of principal executive offices)
 
 
 
(Zip Code)
(408) 559-7778
(Registrant’s telephone number, including area code)
N/A
(Former name, former address, and former fiscal year, if changed since last report)
 ______________________________________________________________________________
 
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  x    No  ¨
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes  x    No  ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See the definitions of "large accelerated filer," "accelerated filer" and "smaller reporting company" in Rule 12b-2 of the Exchange Act.
Large accelerated filer
 
x
  
Accelerated filer
 
¨
 
 
 
 
 
 
 
Non-accelerated filer
 
¨
  
Smaller reporting company
 
¨
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, 2016
Common Stock, $.01 par value
 
255,539,932




TABLE OF CONTENTS
 

2


PART I.
FINANCIAL INFORMATION

Item 1.
Financial Statements
XILINX, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
 
 
Three Months Ended
 
Nine Months Ended
(In thousands, except per share amounts)
January 2, 2016
 
December 27, 2014
 
January 2, 2016
 
December 27, 2014
Net revenues
$
566,235

 
$
593,549

 
$
1,642,815

 
$
1,810,445

Cost of revenues
178,514

 
179,638

 
496,108

 
538,445

Gross margin
387,721

 
413,911

 
1,146,707

 
1,272,000

Operating expenses:

 

 

 

Research and development
141,378

 
133,455

 
398,246

 
393,803

Selling, general and administrative
84,470

 
88,076

 
251,374

 
274,472

Amortization of acquisition-related intangibles
1,769

 
2,371

 
5,306

 
7,167

Total operating expenses
227,617

 
223,902

 
654,926

 
675,442

Operating income
160,104

 
190,009

 
491,781

 
596,558

Interest and other expense, net
5,053

 
4,007

 
24,793

 
15,960

Income before income taxes
155,051

 
186,002

 
466,988

 
580,598

Provision for income taxes
24,232

 
17,536

 
61,155

 
67,005

Net income
$
130,819

 
$
168,466

 
$
405,833

 
$
513,593

Net income per common share:

 

 

 

Basic
$
0.51

 
$
0.64

 
$
1.58

 
$
1.93

Diluted
$
0.49

 
$
0.62

 
$
1.51

 
$
1.85

Cash dividends per common share
$
0.31

 
$
0.29

 
$
0.93

 
$
0.87

Shares used in per share calculations:

 

 

 

Basic
256,450

 
262,881

 
257,491

 
266,299

Diluted
269,611

 
273,795

 
268,716

 
277,709


See notes to condensed consolidated financial statements.



3


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

 
Three Months Ended
 
Nine Months Ended
(In thousands)
January 2, 2016
 
December 27, 2014
 
January 2, 2016
 
December 27, 2014
Net income
$
130,819

 
$
168,466

 
$
405,833

 
$
513,593

Other comprehensive income (loss), net of tax:


 


 


 


Change in net unrealized gains (losses) on available-for-sale securities
(7,911
)
 
(409
)
 
(13,091
)
 
3,822

Reclassification adjustment for (gains) losses on available-for-sale securities
8

 
(1,868
)
 
(188
)
 
(3,187
)
Change in net unrealized losses on hedging transactions
(696
)
 
(3,896
)
 
(1,074
)
 
(6,957
)
Reclassification adjustment for losses on hedging transactions
2,166

 
1,786

 
6,110

 
768

Cumulative translation adjustment, net
(451
)
 
(1,475
)
 
(1,997
)
 
(1,882
)
Other comprehensive loss
(6,884
)
 
(5,862
)
 
(10,240
)
 
(7,436
)
Total comprehensive income
$
123,935

 
$
162,604

 
$
395,593

 
$
506,157


See notes to condensed consolidated financial statements.


4


XILINX, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
 
(In thousands, except par value amounts)
January 2, 2016
 
March 28,
2015 [1]
 
(unaudited)
 
 
ASSETS

 

Current assets:

 

Cash and cash equivalents
$
898,264

 
$
892,572

Short-term investments
2,498,272

 
2,410,489

Accounts receivable, net
203,176

 
246,615

Inventories
195,969

 
231,328

Deferred tax assets
96,827

 
79,519

Prepaid expenses and other current assets
115,786

 
74,528

Total current assets
4,008,294

 
3,935,051

Property, plant and equipment, at cost
797,866

 
804,623

Accumulated depreciation and amortization
(517,625
)
 
(503,585
)
Net property, plant and equipment
280,241

 
301,038

Long-term investments
224,614

 
266,902

Goodwill
159,296

 
159,296

Acquisition-related intangibles, net
7,446

 
12,752

Other assets
218,266

 
223,026

Total Assets
$
4,898,157

 
$
4,898,065

 
 
 
 
LIABILITIES, TEMPORARY EQUITY AND STOCKHOLDERS’ EQUITY

 

Current liabilities:

 

Accounts payable
$
74,602

 
$
80,113

Accrued payroll and related liabilities
156,316

 
156,600

Income taxes payable
7,782

 
19,693

Deferred income on shipments to distributors
47,016

 
66,071

Other accrued liabilities
62,850

 
64,676

Current portion of long-term debt
584,343

 
576,053

Total current liabilities
932,909

 
963,206

Long-term debt
995,584

 
994,839

Deferred tax liabilities
347,995

 
289,868

Long-term income taxes payable
15,198

 
13,245

Other long-term liabilities
1,110

 
1,366

Commitments and contingencies

 

Temporary equity (Note 10)
15,657

 
23,947

Stockholders' equity:

 

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

 

Common stock, $.01 par value
2,552

 
2,583

Additional paid-in capital
710,303

 
653,882

Retained earnings
1,898,238

 
1,966,278

Accumulated other comprehensive loss
(21,389
)
 
(11,149
)
Total stockholders’ equity
2,589,704

 
2,611,594

Total Liabilities, Temporary Equity and Stockholders’ Equity
$
4,898,157

 
$
4,898,065


[1]
Derived from audited financial statements
See notes to condensed consolidated financial statements.

5


XILINX, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
 
Nine Months Ended
(In thousands)
January 2, 2016
 
December 27, 2014
Cash flows from operating activities:
 
 
 
Net income
$
405,833

 
$
513,593

Adjustments to reconcile net income to net cash provided by operating activities:
 
 
 
Depreciation
38,768

 
40,857

Amortization
13,149

 
15,556

Stock-based compensation
84,464

 
79,900

Net gain on sale of available-for-sale securities
(599
)
 
(5,508
)
Amortization of debt discounts
9,033

 
9,014

Provision for deferred income taxes
49,435

 
19,712

Excess tax benefit from stock-based compensation
(12,326
)
 
(16,669
)
Changes in assets and liabilities:
 
 
 
Accounts receivable, net
43,439

 
80,337

Inventories
35,050

 
(12,299
)
Prepaid expenses and other current assets
(148
)
 
(11,703
)
Other assets
(3,291
)
 
(322
)
Accounts payable
(5,511
)
 
(91,464
)
Accrued liabilities
4,909

 
1,640

Income taxes payable
(35,982
)
 
5,710

Deferred income on shipments to distributors
(19,055
)
 
(3,613
)
Net cash provided by operating activities
607,168

 
624,741

Cash flows from investing activities:
 
 
 
Purchases of available-for-sale securities
(2,253,840
)
 
(2,112,128
)
Proceeds from sale and maturity of available-for-sale securities
2,183,296

 
2,646,410

Purchases of property, plant and equipment
(19,169
)
 
(23,682
)
Other investing activities
(5,700
)
 
(7,440
)
Net cash provided by (used in) investing activities
(95,413
)
 
503,160

Cash flows from financing activities:
 
 
 
Repurchases of common stock
(299,998
)
 
(476,012
)
Proceeds from issuance of common stock through various stock plans, net
21,720

 
19,338

Payment of dividends to stockholders
(240,111
)
 
(230,550
)
Excess tax benefit from stock-based compensation
12,326

 
16,669

Net cash used in financing activities
(506,063
)
 
(670,555
)
Net increase in cash and cash equivalents
5,692

 
457,346

Cash and cash equivalents at beginning of period
892,572

 
973,677

Cash and cash equivalents at end of period
$
898,264

 
$
1,431,023

Supplemental disclosure of cash flow information:
 
 
 
Interest paid
$
28,563

 
$
28,776

Income taxes paid, net
$
47,562

 
$
41,252


See notes to condensed consolidated financial statements.

6


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, 2015. The interim financial statements are unaudited, but reflect all adjustments which are, in the opinion of management, of a normal, recurring nature necessary to provide a fair statement of results for the interim periods presented. The results of operations for the interim periods shown in this report are not necessarily indicative of the results that may be expected for the fiscal year ending April 2, 2016 or any future period.
The Company uses a 52- to 53-week fiscal year ending on the Saturday nearest March 31. Fiscal 2016 will be a 53-week year ending on April 2, 2016, while fiscal 2015 was a 52-week year ending on March 28, 2015. The third quarter of fiscal 2016 was a 14-week quarter ended on January 2, 2016. The third quarter of fiscal 2015 was a 13-week quarter ended on December 27, 2014.

Note 2.
Recent Accounting Changes and Accounting Pronouncements

In April 2014, the Financial Accounting Standards Board (FASB) issued the authoritative guidance that outlines a new global revenue recognition standard that replaces virtually all existing US GAAP guidance on contracts with customers and the related other assets and deferred costs. The guidance provides a five-step process for recognizing revenue that depicts the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The standard also requires expanded qualitative and quantitative disclosures relating to the nature, amount, timing and uncertainty of revenue and cash flows arising from contracts with customers. In July 2015, FASB approved the deferral of the effective date of this guidance by one year. As a result, this guidance will be effective for the Company beginning in fiscal year 2019, with an option to early adopt in fiscal year 2018. The new standard is required to be applied retrospectively to each prior reporting period presented, or retrospectively with the cumulative effect of initially applying it recognized at the date of initial application. The Company is currently evaluating the impact of this new guidance on its consolidated financial statements, including selection of the transition method and the adoption date.

In May 2015, the FASB issued the authoritative guidance that eliminates current requirement to categorize within the fair value hierarchy investments whose fair values are measured at net asset value using the practical expedient approach. Instead, entities will be required to disclose the fair values of such investments so that financial statement users can reconcile amounts reported in the fair value hierarchy table and the amounts reported on the balance sheet. This guidance is effective for public business entities for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2015, which for Xilinx would be the first quarter of fiscal year 2017 and should be applied using a retrospective approach. Earlier adoption is permitted. This guidance does not affect the underlying accounting for such investments.
In July 2015, the FASB issued the authoritative guidance that requires an entity to measure inventory at the lower of cost or net realizable value (NRV). NRV is the estimated selling price in the ordinary course of business, less reasonably predictable cost of completion, disposal, and transportation. This guidance is effective for reporting periods beginning after December 15, 2016, including interim periods within those fiscal years, which for Xilinx would be the first quarter of fiscal year 2018. The amendments should be applied prospectively with earlier application permitted as of the beginning of an interim or annual reporting period. The Company is currently evaluating the impact of this new guidance on its consolidated financial statements.
In August 2015, the FASB issued the authoritative guidance that clarifies the guidance regarding presentation and subsequent measurement of debt issuance costs related to line-of-credit arrangements. This guidance clarifies that an entity may defer and present debt issuance costs as an asset and subsequently amortize the deferred debt issuance costs ratably over the term of the line-of-credit arrangement, regardless of whether there are any outstanding borrowings on the line-of-credit arrangement. The Company does not expect the adoption of this guidance to have significant impact on its consolidated financial statements.

In September 2015, the FASB issued the authoritative guidance regarding simplifying the accounting for measurement-period adjustments in business combinations. This guidance eliminates the requirement for an acquirer in a business combination to account for adjustments it makes to the provisional amounts recorded for assets and liabilities retrospectively. Instead the acquirer must recognize these measurement-period adjustments during the period in which it determines the amounts, including the effect on earnings of any amounts they would have recorded in previous periods if the accounting had been completed at the acquisition

7


date. This guidance is effective for public business entities for fiscal years beginning after December 15, 2015, and interim periods within those fiscal years. The Company will adopt this guidance in the first quarter of fiscal year 2017.

In November 2015, the FASB issued the authoritative guidance regarding balance sheet classification of deferred taxes. The guidance requires companies to classify all deferred tax assets and liabilities as non-current on the balance sheet instead of separating deferred taxes into current and non-current amounts. This guidance is effective for public business entities for financial statements issued for annual periods beginning after December 15, 2016, and interim periods within those annual periods. The amendments can be applied retrospectively or prospectively with earlier application permitted as of the beginning of an interim or annual reporting period. This guidance will be effective for Xilinx beginning in the first quarter of fiscal year 2018. The Company is currently evaluating the impact of this new guidance on its consolidated financial statements.

In January 2016, the FASB issued the final guidance regarding how companies measure equity investments that do not result in consolidation and are not accounted for under the equity method and how they present changes in the fair value of financial liabilities measured under the fair value option that are attributable to their own credit. The new guidance also changes certain disclosure requirements and other aspects of current US GAAP. It does not change the guidance for classifying and measuring investments in debt securities and loans. Early adoption is permitted. The guidance is effective for public business entities for annual periods beginning after December 15, 2017, and interim periods therein, which for Xilinx would be the first quarter of fiscal year 2019. The Company is currently evaluating the impact of this new guidance on its consolidated financial statements.

Note 3.
Significant Customers and Concentrations of Credit Risk
Avnet, Inc. (Avnet), one of the Company’s distributors, distributes the Company’s products worldwide. As of January 2, 2016 and March 28, 2015, Avnet accounted for 51% and 67% of the Company’s total net accounts receivable, respectively. For the third quarter and first nine months of fiscal 2016, resale of product through Avnet accounted for 49% and 50% of the Company’s worldwide net revenues, respectively. For the third quarter and the first nine months of fiscal 2015, resale of product through Avnet accounted for 40% and 42% of the Company’s worldwide net revenues, 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 consolidated balance sheet. The Company attempts to mitigate the concentration of credit risk in its trade receivables through its credit evaluation process, collection terms, distributor sales to diverse end customers and through geographical dispersion of sales. Xilinx generally does not require collateral for receivables from its end customers or from distributors.
No end customer accounted for more than 10% of the Company’s worldwide net revenues for the third quarter as well as the first nine months of fiscal 2016 and 2015.
The Company mitigates concentrations of credit risk in its investments in debt securities by currently investing approximately 88% of its portfolio in AA or higher grade securities as rated by Standard & Poor’s or Moody’s Investors Service. The Company’s methods to arrive at investment decisions are not solely based on the rating agencies’ credit ratings. Xilinx also performs additional credit due diligence and conducts regular portfolio credit reviews, including a review of counterparty credit risk related to the Company’s forward currency exchange contracts. Additionally, Xilinx limits its investments in the debt securities of a single issuer based upon the issuer’s credit rating and attempts to further mitigate credit risk by diversifying risk across geographies and type of issuer.
As of January 2, 2016, approximately 33% of the portfolio consisted of mortgage-backed securities. All of the mortgage-backed securities in the investment portfolio were issued by U.S. government-sponsored enterprises and agencies and are rated AA+ by Standard & Poor’s and AAA by Moody’s Investors Service.

Note 4.
Fair Value Measurements
The guidance for fair value measurements established by the FASB defines fair value as the exchange price that would be received from selling an asset or paid to transfer a liability (an exit price) in an orderly transaction between market participants at the measurement date. When determining the fair value measurements for assets and liabilities required or permitted to be recorded at fair value, the Company considers the principal or most advantageous market in which Xilinx would transact and also considers assumptions that market participants would use when pricing the asset or liability, such as inherent risk, transfer restrictions and risk of nonperformance.
The Company determines the fair value for marketable debt securities using industry standard pricing services, data providers and other third-party sources and by internally performing valuation testing and analysis. The Company primarily uses a consensus price or weighted-average price for its fair value assessment. The Company determines the consensus price using market prices

8


from a variety of industry standard pricing services, data providers, security master files from large financial institutions and other third party sources and uses those multiple prices as inputs into a distribution-curve-based algorithm to determine the daily market value. The pricing services use multiple inputs to determine market prices, including reportable trades, benchmark yield curves, credit spreads and broker/dealer quotes as well as other industry and economic events. For certain securities with short maturities, such as discount commercial paper and certificates of deposit, the security is accreted from purchase price to face value at maturity. If a subsequent transaction on the same security is observed in the marketplace, the price on the subsequent transaction is used as the current daily market price and the security will be accreted to face value based on the revised price. For certain other securities, such as student loan auction rate securities, the Company performs its own valuation analysis using a discounted cash flow pricing model.
The Company validates the consensus prices by taking random samples from each asset type and corroborating those prices using reported trade activity, benchmark yield curves, binding broker/dealer quotes or other relevant price information. There have not been any changes to the Company’s fair value methodology during the first nine months of fiscal 2016 and the Company did not adjust or override any fair value measurements as of January 2, 2016.
Fair Value Hierarchy
The fair value framework requires the categorization of assets and liabilities into three levels based upon the assumptions (inputs) used to price the assets or liabilities. The guidance for fair value measurements requires that assets and liabilities carried at fair value be classified and disclosed in one of the following categories:
Level 1 — Quoted (unadjusted) prices in active markets for identical assets or liabilities.
The Company’s Level 1 assets consist of U.S. government and agency securities and money market funds.
Level 2 — Observable inputs other than quoted prices included in Level 1, such as quoted prices for similar assets or liabilities in active markets; quoted prices for identical or similar assets or liabilities in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the asset or liability.
The Company’s Level 2 assets consist of financial institution securities, non-financial institution securities, municipal bonds, U.S. government and agency securities, foreign government and agency securities, mortgage-backed securities, debt mutual funds, bank loans, asset-backed securities and commercial mortgage-backed securities. The Company’s Level 2 assets and liabilities also include foreign currency forward contracts and commodity swap contracts.
Level 3 — Unobservable inputs to the valuation methodology that are supported by little or no market activity and that are significant to the measurement of the fair value of the assets or liabilities. Level 3 assets and liabilities include those whose fair value measurements are determined using pricing models, discounted cash flow methodologies or similar valuation techniques, as well as significant management judgment or estimation.

The Company’s Level 3 assets and liabilities include student loan auction rate securities.

Assets and Liabilities Measured at Fair Value on a Recurring Basis

In instances where the inputs used to measure fair value fall into different levels of the fair value hierarchy, the fair value measurement has been determined based on the lowest level input that is significant to the fair value measurement in its entirety. The Company’s assessment of the significance of a particular item to the fair value measurement in its entirety requires judgment, including the consideration of inputs specific to the asset or liability. The following tables present information about the Company’s assets and liabilities measured at fair value on a recurring basis as of January 2, 2016 and March 28, 2015:

9



 
 
January 2, 2016
(In thousands)
 
Quoted
Prices in
Active
Markets for
Identical
Instruments
(Level 1)
 
Significant
Other
Observable
Inputs
(Level 2)
 
Significant
Unobservable
Inputs
(Level 3)
 
Total Fair
Value
Assets
 
 
 
 
 
 
 
 
Cash equivalents:
 
 
 
 
 
 
 
 
Money market funds
 
$
222,433

 
$

 
$

 
$
222,433

Financial institution securities
 

 
63,995

 

 
63,995

Non-financial institution securities
 

 
319,224

 

 
319,224

U.S. government and agency securities
 
25,007

 
55,486

 

 
80,493

Foreign government and agency securities
 

 
54,997

 

 
54,997

Short-term investments:
 

 

 

 

Financial institution securities
 

 
264,950

 

 
264,950

Non-financial institution securities
 

 
353,443

 

 
353,443

Municipal bonds
 

 
59,019

 

 
59,019

U.S. government and agency securities
 
102,967

 
114,857

 

 
217,824

Foreign government and agency securities
 

 
81,378

 

 
81,378

Asset-backed securities
 

 
206,793

 

 
206,793

Mortgage-backed securities
 

 
987,110

 

 
987,110

Debt mutual funds
 

 
34,883

 

 
34,883

Bank loans
 

 
102,652

 

 
102,652

Commercial mortgage-backed securities



190,220




190,220

Long-term investments:
 

 

 

 

Auction rate securities
 

 

 
10,111

 
10,111

Asset-backed securities
 

 
6,874

 

 
6,874

Municipal bonds
 

 
7,176

 

 
7,176

Mortgage-backed securities
 

 
147,038

 

 
147,038

Debt mutual fund
 

 
53,234

 

 
53,234

Commercial mortgage-backed securities



181




181

Total assets measured at fair value
 
$
350,407

 
$
3,103,510

 
$
10,111

 
$
3,464,028

 
 
 
 
 
 
 
 
 
Liabilities
 
 
 
 
 
 
 
 
Derivative financial instruments, net
 
$

 
$
2,638

 
$

 
$
2,638

Total liabilities measured at fair value
 
$

 
$
2,638

 
$

 
$
2,638

Net assets measured at fair value
 
$
350,407

 
$
3,100,872

 
$
10,111

 
$
3,461,390






10


 
March 28, 2015
(In thousands)
Quoted
Prices in
Active
Markets for
Identical
Instruments
(Level 1)
 
Significant
Other
Observable
Inputs
(Level 2)
 
Significant
Unobservable
Inputs
(Level 3)
 
Total Fair
Value
Assets
 
 
 
 
 
 
 
Cash equivalents:
 
 
 
 
 
 
 
Money market funds
$
235,583

 
$

 
$

 
$
235,583

Financial institution securities

 
229,999

 

 
229,999

Non-financial institution securities

 
89,995

 

 
89,995

U.S. government and agency securities

 
200,392

 

 
200,392

Foreign government and agency securities

 
37,996

 

 
37,996

Short-term investments:

 

 

 


Financial institution securities

 
75,000

 

 
75,000

Non-financial institution securities

 
339,029

 

 
339,029

Municipal Bonds

 
40,006

 

 
40,006

U.S. government and agency securities
256,514

 
301,010

 

 
557,524

Foreign government and agency securities

 
159,936

 

 
159,936

Mortgage-backed securities

 
859,330

 

 
859,330

Debt mutual fund

 
38,608

 

 
38,608

Bank loans

 
98,100

 

 
98,100

Asset-backed securities

 
204,510

 

 
204,510

Commercial mortgage-backed securities


38,446




38,446

Long-term investments:

 

 

 


Auction rate securities

 

 
10,312

 
10,312

Municipal bonds

 
9,650

 

 
9,650

Mortgage-backed securities

 
180,906

 

 
180,906

Debt mutual fund

 
56,592

 

 
56,592

Asset-backed securities


7,948




7,948

Commercial mortgage-backed securities


1,494




1,494

Total assets measured at fair value
$
492,097

 
$
2,968,947

 
$
10,312

 
$
3,471,356

Liabilities
 
 
 
 
 
 
 
Derivative financial instruments, net
$

 
$
9,251

 
$

 
$
9,251

Total liabilities measured at fair value
$

 
$
9,251

 
$

 
$
9,251

Net assets measured at fair value
$
492,097

 
$
2,959,696

 
$
10,312

 
$
3,462,105


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

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

11


 
Three Months Ended
 
Nine Months Ended
(In thousands)
January 2, 2016
 
December 27, 2014
 
January 2, 2016
 
December 27, 2014
Balance as of beginning of period
$
10,413

 
$
20,608

 
$
10,312

 
$
20,160

Total realized and unrealized gains (losses):

 

 

 

Included in other comprehensive income (loss)
(302
)
 
717

 
(201
)
 
1,165

 
 
 
 
 
 
 
 
Sales and settlements, net (1)

 
(11,000
)
 

 
(11,000
)
Balance as of end of period
$
10,111

 
$
10,325

 
$
10,111

 
$
10,325


(1)
During the first nine months of fiscal 2015, the Company redeemed $11.0 million of student loan auction rate securities for cash at par value. There was no redemption during the first nine months of fiscal 2016.

As of January 2, 2016, marketable securities measured at fair value using Level 3 inputs were comprised of $10.1 million of student loan auction rate securities. There was no material change to the input assumptions of the pricing model for these student loan auction securities.

Financial Instruments Not Recorded at Fair Value on a Recurring Basis

The Company’s 2.625% Senior Convertible Debentures due June 15, 2017 (2017 Convertible Notes), 2.125% Notes due 2019 (2019 Notes) and 3.000% Notes due 2021 (2021 Notes) are measured at fair value on a quarterly basis for disclosure purposes. The fair values of the 2017 Convertible Notes, 2019 Notes and 2021 Notes as of January 2, 2016 were approximately $976.5 million, $497.3 million and $503.4 million, respectively, based on the last trading price of the respective debentures for the period (classified as Level 2 in fair value hierarchy due to relatively low trading volume).

Note 5.
Financial Instruments
The following is a summary of cash equivalents and available-for-sale securities as of the end of the periods presented:
 
January 2, 2016
 
 
March 28, 2015
(In thousands)
Amortized Cost
 
Gross Unrealized Gains
 
Gross Unrealized Losses
 
Estimated Fair Value
 
 
Amortized Cost
 
Gross Unrealized Gains
 
Gross Unrealized Losses
 
Estimated Fair Value
Money market funds
$
222,433

 
$

 
$

 
$
222,433

 
 
$
235,583

 
$

 
$

 
$
235,583

Financial institution


 


 


 


 
 


 


 


 


securities
328,945

 

 

 
328,945

 
 
304,999

 

 

 
304,999

Non-financial institution


 


 


 


 
 


 


 


 


securities
673,436

 
38

 
(807
)
 
672,667

 
 
429,005

 
25

 
(6
)
 
429,024

Auction rate securities
10,500

 

 
(389
)
 
10,111

 
 
10,500

 

 
(188
)
 
10,312

Municipal bonds
65,920

 
577

 
(302
)
 
66,195

 
 
49,064

 
744

 
(152
)
 
49,656

U.S. government and

 

 

 

 
 

 

 

 

agency securities
298,492

 
21

 
(196
)
 
298,317

 
 
757,954

 
91

 
(129
)
 
757,916

Foreign government and
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
agency securities
136,384

 

 
(9
)
 
136,375

 
 
197,932

 

 

 
197,932

Mortgage-backed securities
1,138,412

 
6,504

 
(10,768
)
 
1,134,148

 
 
1,035,598

 
8,809

 
(4,171
)
 
1,040,236

Asset-backed securities
213,908

 
635

 
(876
)
 
213,667

 
 
211,487

 
1,130

 
(159
)
 
212,458

Debt mutual funds
101,350

 

 
(13,233
)
 
88,117

 
 
101,350

 

 
(6,150
)
 
95,200

Bank loans
102,724

 
31

 
(103
)
 
102,652

 
 
98,131

 
29

 
(60
)
 
98,100

Commercial mortgage-
























backed securities
193,033


26


(2,658
)

190,401


 
40,132


133


(325
)

39,940

 
$
3,485,537

 
$
7,832

 
$
(29,341
)
 
$
3,464,028

 
 
$
3,471,735

 
$
10,961

 
$
(11,340
)
 
$
3,471,356



12


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, 2016 and March 28, 2015:

 
January 2, 2016
 
Less Than 12 Months
 
12 Months or Greater
 
Total
(In thousands)
Fair Value
 
Gross Unrealized Losses
 
Fair Value
 
Gross Unrealized Losses
 
Fair Value
 
Gross Unrealized Losses
Non-financial institution securities
$
113,246

 
$
(807
)
 
$

 
$

 
$
113,246

 
$
(807
)
Auction rate securities

 

 
10,111

 
(389
)
 
10,111

 
(389
)
Municipal bonds
24,009

 
(148
)
 
3,408

 
(154
)
 
27,417

 
(302
)
U.S. government and

 

 

 

 


 


    agency securities
167,906

 
(196
)
 

 

 
167,906

 
(196
)
Foreign government and













agency securities
9,986


(9
)





9,986


(9
)
Mortgage-backed securities
822,404

 
(9,365
)
 
55,649

 
(1,403
)
 
878,053

 
(10,768
)
Asset-backed securities
154,782

 
(749
)
 
25,470

 
(127
)
 
180,252

 
(876
)
Debt mutual funds
17,628

 
(2,372
)
 
70,489

 
(10,861
)
 
88,117

 
(13,233
)
Bank loans
41,534

 
(64
)

31,080

 
(39
)
 
72,614

 
(103
)
Commercial mortgage-













backed securities
182,372


(2,038
)

1,512


(620
)

183,884


(2,658
)
 
$
1,533,867

 
$
(15,748
)
 
$
197,719

 
$
(13,593
)
 
$
1,731,586

 
$
(29,341
)

 
March 28, 2015
 
Less Than 12 Months
 
12 Months or Greater
 
Total
(In thousands)
Fair Value
 
Gross Unrealized Losses
 
Fair Value
 
Gross Unrealized Losses
 
Fair Value
 
Gross Unrealized Losses
Non-financial institution securities
$
7,190

 
$
(6
)
 
$

 
$

 
$
7,190

 
$
(6
)
Auction rate securities

 

 
10,312

 
(188
)
 
10,312

 
(188
)
Municipal bonds
10,014

 
(94
)
 
1,931

 
(58
)
 
11,945

 
(152
)
U.S. government and

 

 

 

 

 

    agency securities
451,296

 
(129
)
 

 

 
451,296

 
(129
)
Mortgage-backed securities
442,786

 
(2,901
)
 
48,263

 
(1,270
)
 
491,049

 
(4,171
)
Asset-backed securities
75,009

 
(159
)
 

 

 
75,009

 
(159
)
Debt mutual funds
38,608

 
(1,392
)
 
56,592

 
(4,758
)
 
95,200

 
(6,150
)
Bank loans
65,085


(60
)





65,085


(60
)
Commercial mortgage-

















 backed securities
5,984


(268
)
 
944


(57
)

6,928


(325
)
 
$
1,095,972

 
$
(5,009
)
 
$
118,042

 
$
(6,331
)
 
$
1,214,014

 
$
(11,340
)

As of January 2, 2016, the gross unrealized losses that had been outstanding for less than twelve months were primarily related to mortgage-backed securities, debt mutual funds and commercial mortgage-backed securities due to the general rising of the interest-rate environment and foreign currency movement. The gross unrealized losses that had been outstanding for more than twelve months were primarily related to debt mutual funds and mortgage-backed securities, which were primarily due to the same reasons stated above. The percentage of the losses to the total estimated fair value of the Company's investments was insignificant.


13


The Company reviewed the investment portfolio and determined that the gross unrealized losses on these investments as of January 2, 2016 and March 28, 2015 were temporary in nature as evidenced by the fluctuations in the gross unrealized losses within the investment categories. These investments are highly rated by the credit rating agencies and there have been no defaults on any of these securities, and we have received interest payments as they become due. Additionally, in the past several years a portion of the Company's investment in the mortgage-backed securities were redeemed or prepaid by the debtors at par. Furthermore, the aggregate of individual unrealized losses that had been outstanding for twelve months or more was not significant as of January 2, 2016 and March 28, 2015. The Company neither intends to sell these investments nor concludes that it is more-likely-than-not that it will have to sell them until recovery of their carrying values. The Company also believes that it will be able to collect both principal and interest amounts due to the Company at maturity, given the high credit quality of these investments and any related underlying collateral.
The amortized cost and estimated fair value of marketable debt securities (financial institution securities, non-financial institution securities, auction rate securities, municipal bonds, U.S. and foreign government and agency securities, mortgage-backed securities, asset-backed securities, bank loans and commercial mortgage-backed securities), by contractual maturity, are shown below. Actual maturities may differ from contractual maturities because issuers may have the right to call or prepay obligations without call or prepayment penalties.
 
January 2, 2016
(In thousands)
Amortized
Cost
 
Estimated
Fair Value
Due in one year or less
$
1,232,756

 
$
1,232,713

Due after one year through five years
503,374

 
501,371

Due after five years through ten years
272,546

 
271,353

Due after ten years
1,153,078

 
1,148,041


$
3,161,754

 
$
3,153,478

As of January 2, 2016, $1.78 billion of marketable debt securities with contractual maturities of greater than one year were classified as short-term investments. Additionally, the above table did not include investments in money market and mutual funds because these funds do not have specific contractual maturities.
Certain information related to available-for-sale securities is as follows:
 
Three Months Ended
 
Nine Months Ended
(In thousands)
January 2, 2016
 
December 27, 2014
 
January 2, 2016
 
December 27, 2014
Proceeds from sale of available-for-sale securities
$
82,396

 
$
478,562

 
$
203,426

 
$
774,406

Gross realized gains on sale of available-for-sale securities
$
203

 
$
4,759

 
$
1,038

 
$
7,838

Gross realized losses on sale of available-for-sale securities
(221
)
 
(1,663
)
 
(439
)
 
(2,330
)
Net realized gains (losses) on sale of available-for-sale securities
$
(18
)
 
$
3,096

 
$
599

 
$
5,508

Amortization of premiums on available-for-sale securities
$
6,906

 
$
5,913

 
$
20,417

 
$
18,559


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.

14


As of January 2, 2016 and March 28, 2015, the Company had the following outstanding forward currency exchange contracts (in notional amount), which were derivative financial instruments:
 
(In thousands and U.S. dollars)
January 2, 2016
 
March 28, 2015
Singapore Dollar
$
26,620

 
$
43,901

Euro
18,262

 
29,973

Indian Rupee
22,754

 
22,228

British Pound
11,749

 
12,946

Japanese Yen
3,338

 
4,994

 
$
82,723

 
$
114,042


As part of the Company’s strategy to reduce volatility of operating expenses due to foreign exchange rate fluctuations, the Company employs a hedging program with a forward outlook of up to two years for major foreign-currency-denominated operating expenses. The outstanding forward currency exchange contracts expire at various dates through February 2017. The majority of net unrealized losses, which approximate the fair market value of the outstanding forward currency exchange contracts, are expected to be realized into net income within the next twelve months.
As of January 2, 2016, all of the forward foreign currency exchange contracts were designated and qualified as cash flow hedges and the effective portion of the gain or loss on the forward contracts was reported as a component of other comprehensive income (loss) and reclassified into net income in the same period during which the hedged transaction affects earnings. The estimated amount of such gains or losses as of January 2, 2016 that is expected to be reclassified into earnings was not material. The ineffective portion of the gains or losses on the forward contracts was included in the net income for all periods presented.
The Company may enter into forward foreign currency exchange contracts to hedge firm commitments such as acquisitions and capital expenditures. Gains and losses on foreign currency forward contracts that are designated as hedges of anticipated transactions, for which a firm commitment has been attained and the hedged relationship has been effective, are deferred and included in income or expenses in the same period that the underlying transaction is settled. Gains and losses on any instruments not meeting the above criteria are recognized in income or expenses in the consolidated statements of income as they are incurred.
The Company had the following derivative instruments as of January 2, 2016 and March 28, 2015, located on the condensed consolidated balance sheet, utilized for risk management purposes detailed above:
 
Foreign Exchange Contracts
 
Asset Derivatives
 
Liability Derivatives
(In thousands)
Balance Sheet Location
Fair Value
 
Balance Sheet Location
Fair Value
January 2, 2016
Prepaid expenses and other current assets
$
446

 
Other accrued liabilities
$
3,084

March 28, 2015
Prepaid expenses and other current assets
$

 
Other accrued liabilities
$
9,320

 
The Company does not offset or net the fair value amounts of derivative financial instruments in its condensed consolidated balance sheets. The potential effect of rights of set-off associated with the derivative financial instruments was not material to the Company's condensed consolidated balance sheet for all periods presented.


15


The following table summarizes the effect of derivative instruments on the condensed consolidated statements of income for the third quarter and the first nine months of fiscal 2016 and 2015:

 
Three Months Ended
 
Nine Months Ended
(In thousands)
January 2, 2016
 
December 27, 2014
 
January 2, 2016
 
December 27, 2014
Amount of losses recognized in other comprehensive income on derivative (effective portion of cash flow hedging)
$
(1,470
)
 
$
(2,110
)
 
$
(5,035
)
 
$
(6,189
)

 
 
 
 

 

Amount of losses reclassified from accumulated other comprehensive income into income (effective portion) *
$
(2,166
)
 
$
(1,786
)
 
$
(6,110
)
 
$
(768
)

 
 
 
 

 

Amount of gains (losses) recorded (ineffective portion) *
$
7

 
$
(3
)
 
$
(15
)
 
$
(16
)

*
Recorded in Interest and Other Expense location within the condensed consolidated statements of income.

Note 7.
Stock-Based Compensation Plans
The Company’s equity incentive plans are broad-based, long-term retention programs that cover employees, consultants and non-employee directors of the Company. These plans are intended to attract and retain talented employees, consultants and non-employee directors and to provide such persons with a proprietary interest in the Company.
Stock-Based Compensation

The following table summarizes stock-based compensation expense related to stock awards granted under the Company’s equity incentive plans and rights to acquire stock granted under the Company’s Employee Stock Purchase Plan (ESPP):
 
Three Months Ended
 
Nine Months Ended
(In thousands)
January 2, 2016
 
December 27, 2014
 
January 2, 2016
 
December 27, 2014
Stock-based compensation included in:

 

 

 

Cost of revenues
$
2,145

 
$
2,339

 
$
5,872

 
$
6,408

Research and development
16,935

 
14,909

 
44,561

 
40,245

Selling, general and administrative
12,383

 
11,806

 
34,031

 
33,247

 
$
31,463

 
$
29,054

 
$
84,464

 
$
79,900


During the first nine months of fiscal 2016 and 2015, the tax benefits realized for the tax deduction from option exercises and other awards credited to additional paid-in capital were $8.5 million and $12.3 million, respectively.


16


Employee Stock Option Plans

A summary of the Company’s option plans activity and related information is as follows:
 
 
Options Outstanding
(Shares in thousands)
Number of Shares
 
Weighted-Average Exercise Price Per Share
March 29, 2014
5,280

 
$
25.22

Exercised
(2,009
)
 
$
25.80

Forfeited/cancelled/expired
(24
)
 
$
32.22

March 28, 2015
3,247

 
$
24.81

Exercised
(1,503
)
 
$
24.43

Forfeited/cancelled/expired
(12
)
 
$
31.99

January 2, 2016
1,732

 
$
25.09

Options exercisable at:

 

January 2, 2016
1,705

 
$
24.96

March 28, 2015
3,173

 
$
24.59

The types of awards allowed under the 2007 Equity Incentive Plan (2007 Equity Plan) include incentive stock options, non-qualified stock options, restricted stock unit (RSU) awards, restricted stock and stock appreciation rights. To date, the Company has issued a mix of non-qualified stock options and RSUs under the 2007 Equity Plan. As of January 2, 2016, 13.0 million shares remained available for grant under the 2007 Equity Plan.
The total pre-tax intrinsic value of options exercised during the three and nine months ended January 2, 2016 was $8.3 million and $31.6 million, respectively. The total pre-tax intrinsic value of options exercised during the three and nine months ended December 27, 2014 was $11.7 million and $27.7 million, respectively.
This intrinsic value represents the difference between the exercise price and the fair market value of the Company’s common stock on the date of exercise.

The Company's stock-based compensation expense relating to options during the first nine months of fiscal 2016 and 2015 was not material.

RSU Awards

A summary of the Company’s RSU activity and related information is as follows:
 
 
RSUs Outstanding
(Shares in thousands)
Number of Shares
 
Weighted-Average Grant-Date Fair Value Per Share
March 29, 2014
6,901

 
$
35.08

Granted
3,201

 
$
43.11

Vested
(2,698
)
 
$
33.82

Cancelled
(531
)
 
$
32.91

March 28, 2015
6,873

 
$
39.07

Granted
2,889

 
$
41.24

Vested
(2,287
)
 
$
37.16

Cancelled
(517
)
 
$
39.77

January 2, 2016
6,958

 
$
40.54


The estimated fair values of RSU awards were calculated based on the market price of Xilinx common stock on the date of grant, reduced by the present value of dividends expected to be paid on Xilinx common stock prior to vesting. The per share weighted-

17


average fair value of RSUs granted during the third quarter of fiscal 2016 was $43.41 ($40.76 for the third quarter of fiscal 2015), and for the first nine months of fiscal 2016 was $41.24 ($43.76 for the first nine months of fiscal 2015), which were calculated based on estimates at the date of grant using the following weighted-average assumptions: 
 
Three Months Ended
 
Nine Months Ended

January 2, 2016
 
December 27, 2014
 
January 2, 2016
 
December 27, 2014
Risk-free interest rate
1.3
%
 
1.3
%
 
1.3
%
 
0.7
%
Dividend yield
2.7
%
 
2.7
%
 
2.8
%
 
2.4
%
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 we pay in cash to the appropriate taxing authorities on behalf of our employees. In the condensed consolidated statement of cash flows, these amounts have been included as a reduction in the cash proceeds from issuance of common stock under our various stock plans. During the first nine months of fiscal 2016 and 2015, we withheld $29.8 million and $33.2 million worth of RSU awards, respectively, to satisfy the employees’ tax obligations.
Employee Stock Purchase Plan
Under the ESPP, shares are only issued during the second and fourth quarters of each fiscal year. Employees purchased 438 thousand shares for $14.5 million during the second quarter of fiscal 2016 and 446 thousand shares for $14.9 million in the second quarter of fiscal 2015. The per-share weighted-average fair value of stock purchase rights granted under the ESPP during the second quarter of fiscal 2016 and 2015 was $9.78 and $9.75, respectively. The fair values of stock purchase plan rights granted in the second quarter of fiscal 2016 and 2015 were estimated using the Black-Scholes option pricing model at the date of grant using the following assumptions:

2016
 
2015
Expected life of options (years)
1.25

 
1.25

Expected stock price volatility
0.25

 
0.25

Risk-free interest rate
0.4
%
 
0.2
%
Dividend yield
3.0
%
 
2.8
%

The next scheduled purchase under the ESPP is in the fourth quarter of fiscal 2016. As of January 2, 2016, 10.1 million shares were available for future issuance under the ESPP.

Note 8.
Net Income Per Common Share
The computation of basic net income per common share for all periods presented is derived from the information on the condensed consolidated statements of income, and there are no reconciling items in the numerator used to compute diluted net income per common share. The following table summarizes the computation of basic and diluted net income per common share:
 
Three Months Ended
 
Nine Months Ended
(In thousands, except per share amounts)
January 2, 2016
 
December 27, 2014
 
January 2, 2016
 
December 27, 2014
Net income available to common stockholders
$
130,819

 
$
168,466

 
$
405,833

 
$
513,593

Weighted average common shares outstanding-basic
256,450

 
262,881

 
257,491

 
266,299

Dilutive effect of employee equity incentive plans
2,538

 
3,138

 
2,416

 
3,463

Dilutive effect of 2017 Convertible Notes and warrants
10,623

 
7,776

 
8,809

 
7,947

Weighted average common shares outstanding-diluted
269,611

 
273,795

 
268,716

 
277,709

Basic earnings per common share
$
0.51

 
$
0.64

 
$
1.58

 
$
1.93

Diluted earnings per common share
$
0.49

 
$
0.62

 
$
1.51

 
$
1.85


The total shares used in the denominator of the diluted net income per common share calculation includes potentially dilutive common equivalent shares outstanding that are not included in basic net income per common share by applying the treasury stock method to the impact of the equity incentive plans and to the incremental shares issuable assuming conversion of the Company's convertible debt and warrants (see "Note 10. Debt and Credit Facility" for more discussion of the Company's debt and warrants).

18


Outstanding stock options and RSUs under the Company's stock award plans to purchase approximately 222 thousand and 3.7 million shares, for the third quarter and the first nine months of fiscal 2016, respectively, were excluded from diluted net income per common share by applying the treasury stock method, as their inclusion would have been anti-dilutive. These options and RSUs could be dilutive in the future if the Company’s average share price increases and is greater than the combined exercise prices and the unamortized fair values of these options and RSUs.    
To hedge against potential dilution upon conversion of the 2017 Convertible Notes, the Company also purchased call options on its common stock from the hedge counter-parties. The call options give the Company the right to purchase up to 20.5 million shares of its common stock at $29.26 per share. These call options are not considered for purposes of calculating the total shares outstanding under the basic and diluted net income per share, as their effect would be anti-dilutive. Upon exercise, the call options would serve to neutralize the dilutive effect of the 2017 Convertible Notes and potentially reduce the weighted number of diluted shares used in per share calculations.

Note 9.
Inventories
Inventories are stated at the lower of actual cost (determined using the first-in, first-out method), or market (estimated NRV) and are comprised of the following:
(In thousands)
January 2, 2016
 
March 28, 2015
Raw materials
$
13,707

 
$
14,174

Work-in-process
141,529

 
183,472

Finished goods
40,733

 
33,682

 
$
195,969

 
$
231,328


Note 10.
Debt and Credit Facility
2017 Convertible Notes
As of January 2, 2016, the Company had $600.0 million principal amount of 2017 Convertible Notes outstanding. The 2017 Convertible Notes are senior in right of payment to the Company’s existing and future unsecured indebtedness that is expressly subordinated in right of payment to the 2017 Convertible Notes, and are ranked equally with all of our other existing and future unsecured senior indebtedness, including the 2019 and 2021 Notes discussed below. The Company may not redeem the 2017 Convertible Notes prior to maturity.
The 2017 Convertible Notes are convertible, subject to certain conditions, into shares of Xilinx common stock at a conversion rate of 34.1754 shares of common stock per $1 thousand principal amount of the 2017 Convertible Notes, representing an effective conversion price of approximately $29.26 per share of common stock. The conversion rate is subject to adjustment for certain events as outlined in the indenture governing the 2017 Convertible Notes, but will not be adjusted for accrued interest. One of the conditions allowing holders of the 2017 Convertible Notes to convert during any fiscal quarter is if the last reported sale price of the Company's common stock for at least 20 trading days during a period of 30 consecutive trading days ending on the last trading day of the preceding fiscal quarter is greater than or equal to 130% of the conversion price on each applicable trading day. This condition was met as of January 2, 2016 and as a result, the 2017 Convertible Notes were convertible at the option of the holders. As of January 2, 2016, the 2017 Convertible Notes were classified as a current liability on the Company's condensed consolidated balance sheet. Additionally, a portion of the equity component attributable to the conversion feature of the 2017 Convertible Notes was classified in temporary stockholders' equity. The amount classified as temporary equity was equal to the difference between the principal amount and carrying value of the 2017 Convertible Notes.
Upon conversion, the Company would pay the holders of the 2017 Convertible Notes cash up to the aggregate principal amount of the 2017 Convertible Notes. If the conversion value exceeds the principal amount, the Company would deliver shares of its common stock in respect to the remainder of its conversion obligation in excess of the aggregate principal amount (conversion spread). Accordingly, there is no adjustment to the numerator in the net income per common share computation for the cash settled portion of the 2017 Convertible Notes, as that portion of the debt liability will always be settled in cash. The conversion spread is included in the denominator for the computation of diluted net income per common share, using the treasury stock method.

19


The carrying values of the liability and equity components of the 2017 Convertible Notes are reflected in the Company’s condensed consolidated balance sheets as follows:
(In thousands)
January 2, 2016
 
March 28, 2015
Liability component:

 

   Principal amount of the 2017 Convertible Notes
$
600,000

 
$
600,000

   Unamortized discount of liability component
(22,021
)
 
(33,679
)
   Hedge accounting adjustment – sale of interest rate swap
6,364

 
9,732

   Net carrying value of the 2017 Convertible Notes
$
584,343

 
$
576,053




 


Equity component (including temporary equity) – net carrying value
$
66,415

 
$
66,415

The remaining unamortized debt discount, net of the hedge accounting adjustment from the previous sale of the interest rate swap, is being amortized as additional non-cash interest expense over the expected remaining term of the 2017 Convertible Notes. As of January 2, 2016, the remaining term of the 2017 Convertible Notes is 1.5 years. As of January 2, 2016, the if-converted value of the 2017 Convertible Notes was $990.8 million.

Interest expense related to the 2017 Convertible Notes was included in interest and other expense, net on the condensed consolidated statements of income as follows:
 
Three Months Ended
 
Nine Months Ended
(In thousands)
January 2, 2016
 
December 27, 2014
 
January 2, 2016
 
December 27, 2014
Contractual coupon interest
$
3,938

 
$
3,938

 
$
11,813

 
$
11,813

Amortization of debt issuance costs
362

 
362

 
1,086

 
1,086

Amortization of debt discount, net
2,763

 
2,763

 
8,289

 
8,289

Total interest expense related to the 2017 Convertible Notes
$
7,063

 
$
7,063

 
$
21,188

 
$
21,188

To hedge against potential dilution upon conversion of the 2017 Convertible Notes, the Company purchased call options on its common stock from the hedge counter parties. The call options give the Company the right to purchase up to 20.5 million shares of its common stock at $29.26 per share. The call options will terminate upon the earlier of the maturity of the 2017 Convertible Notes or the last day any of the 2017 Convertible Notes remain outstanding. To reduce the hedging cost, under separate transactions the Company sold warrants to the hedge counter parties, which give the hedge counter parties the right to purchase up to 20.5 million shares of the Company’s common stock at $41.45 per share. These warrants expire on a gradual basis over a specified period starting on September 13, 2017.
2019 and 2021 Notes
On March 12, 2014, the Company issued $500.0 million principal amount of 2019 Notes and $500.0 million principal amount of 2021 Notes with maturity dates of March 15, 2019 and March 15, 2021 respectively. The 2019 and 2021 Notes were offered to the public at a discounted price of 99.477% and 99.281% of par, respectively. Interest on the 2019 and 2021 Notes is payable semiannually on March 15 and September 15.

The Company received net proceeds of $990.1 million from issuance of the 2019 and 2021 Notes, after the debt discounts and deduction of debt issuance costs. The debt discounts and issuance costs are amortized to interest expense over the terms of the 2019 and 2021 Notes.


20


The following table summarizes the carrying value of the 2019 and 2021 Notes as of January 2, 2016 and March 28, 2015:
 
 
 
 
(In thousands)
January 2, 2016
 
March 28, 2015
Principal amount of the 2019 Notes
$
500,000

 
$
500,000

Unamortized discount of the 2019 Notes
(1,689
)
 
(2,073
)
Principal amount of the 2021 Notes
500,000

 
500,000

Unamortized discount of the 2021 Notes
(2,727
)
 
(3,088
)
Total carrying value
$
995,584

 
$
994,839


Interest expense related to the 2019 and 2021 Notes was included in interest and other expense, net on the condensed consolidated statements of income as follows:
 
Three Months Ended
 
Nine Months Ended
(In thousands)
January 2, 2016
 
December 27, 2014
 
January 2, 2016
 
December 27, 2014
Contractual coupon interest
$
6,406

 
$
6,406

 
$
19,219

 
$
19,219

Amortization of debt issuance costs
146

 
146

 
439

 
436

Amortization of debt discount, net
251

 
244

 
745

 
725

Total interest expense related to the 2019 and 2021 Notes
$
6,803

 
$
6,796

 
$
20,403

 
$
20,380

Revolving Credit Facility

On December 7, 2011, the Company entered into a $250.0 million senior unsecured revolving credit facility with a syndicate of banks (expiring in December 2016). Borrowings under the credit facility will bear interest at a benchmark rate plus an applicable margin based upon the Company’s credit rating. In connection with the credit facility, the Company is required to maintain certain financial and nonfinancial covenants. As of January 2, 2016, the Company had made no borrowings under this credit facility and was not in violation of any of the covenants.

Note 11. Common Stock Repurchase Program
The Board of Directors has approved stock repurchase programs enabling the Company to repurchase its common stock in the open market or through negotiated transactions with independent financial institutions. In November 2014, the Board authorized the repurchase of $800.0 million of the Company's common stock (2014 Repurchase Program). The 2014 Repurchase Program has no stated expiration date.
Through January 2, 2016, the Company had used $452.6 million of the $800.0 million authorized under the 2014 Repurchase Program, leaving $347.4 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, 2016 and March 28, 2015.

During the first nine months of fiscal 2016, the Company repurchased 6.7 million shares of common stock in the open market for a total of $300.0 million. During the first nine months of fiscal 2015, the Company repurchased 11.0 million shares of common stock in the open market for a total of $475.0 million.

Note 12.
Interest and Other Expense, Net
The components of interest and other expense, net are as follows: 
 
Three Months Ended
 
Nine Months Ended
(In thousands)
January 2, 2016
 
December 27, 2014
 
January 2, 2016
 
December 27, 2014
Interest income
$
12,640

 
$
11,375

 
$
28,739

 
$
28,268

Interest expense
(13,866
)
 
(13,859
)
 
(41,591
)
 
(41,567
)
Other expense, net
(3,827
)
 
(1,523
)
 
(11,941
)
 
(2,661
)

$
(5,053
)
 
$
(4,007
)
 
$
(24,793
)
 
$
(15,960
)

21



Note 13.
Accumulated Other Comprehensive Loss
Comprehensive income (loss) is defined as the change in equity of a company during a period from transactions and other events and circumstances from non-owner sources. The components of accumulated other comprehensive loss are as follows:
 
(In thousands)
January 2, 2016
 
March 28, 2015
Accumulated unrealized losses on available-for-sale securities, net of tax
$
(13,517
)
 
$
(238
)
Accumulated unrealized losses on hedging transactions, net of tax
(2,487
)
 
(7,523
)
Accumulated cumulative translation adjustment, net of tax