NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 1. Nature of Operations
Xilinx, Inc. (Xilinx or the Company) designs, develops and markets programmable devices and associated technologies, including advanced ICs in the form of PLDs, boards, software design tools and predefined system functions delivered as IP. In addition to its programmable platforms, the Company provides design services, customer training, field engineering and technical support. The wafers used to manufacture its products are obtained primarily from independent wafer manufacturers located in Taiwan and Korea. The Company is dependent on these foundries to produce and deliver silicon wafers on a timely basis. The Company is also dependent on subcontractors, primarily located in the Asia Pacific region, to provide semiconductor assembly, test and shipment services. Xilinx is a global company with sales offices throughout the world. The Company derives over one-half of its revenues from international sales, primarily in the Asia Pacific region, Europe and Japan.
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Note 2.
|
Summary of Significant Accounting Policies and Concentrations of Risk
|
Basis of Presentation
The accompanying consolidated financial statements include the accounts of Xilinx and its wholly-owned subsidiaries after elimination of all intercompany transactions. The Company uses a 52- to 53-week fiscal year ending on the Saturday nearest March 31. Fiscal 2020, 2019 and 2018 were 52-week years ended on March 28, 2020, March 30, 2019 and March 31, 2018, respectively. Fiscal 2021 will be a 53-week year ending on April 3, 2021.
Use of Estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the U.S. requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent liabilities at the date of the financial statements and the reported amounts of net revenues and expenses during the reporting period. Such estimates relate to, among others, the useful lives of assets, assessment of recoverability of property, plant and equipment, long-lived assets and goodwill, inventory write-downs, allowances for doubtful accounts, valuation of intangible assets, customer returns, deferred tax assets, stock-based compensation, potential reserves relating to litigation and tax matters, valuation of certain investments and derivative financial instruments as well as other accruals or reserves. Actual results may differ from those estimates and such differences may be material to the financial statements.
Due to the COVID-19 pandemic, there has been uncertainty and disruption in the global economy and financial markets. The Company is not currently aware of any specific event or circumstance that would require an update to its estimates or judgments or a revision of the carrying value of its assets or liabilities as of March 28, 2020. These estimates may change, as new events occur and additional information is obtained. Actual results could differ materially from these estimates under different assumptions or conditions.
Cash Equivalents and Investments
Cash equivalents consist of highly liquid investments with original maturities from the date of purchase of three months or less. These investments consist of money market funds, non-financial institution securities, U.S. and foreign government and agency securities and financial institution securities. Short-term investments consist of mortgage-backed securities, non-financial institution securities, U.S. and foreign government and agency securities, financial institution securities, asset-backed securities, commercial mortgage-backed securities and debt mutual funds with original maturities greater than three months and remaining maturities less than one year from the balance sheet date. Long-term investments consist of debt mutual funds. Long-term investments are investments with remaining maturities greater than one year, unless the investments are specifically identified to fund current operations, in which case they are classified as short-term investments. Equity investments are also classified as long-term investments if they are not intended to fund current operations.
The Company maintains its cash balances with various banks with high quality ratings, and with investment banking and asset management institutions. The Company manages its liquidity risk by investing in a variety of money market funds, high-grade commercial paper, corporate bonds, U.S. and foreign government and agency securities, asset-backed securities, mortgage-backed securities, commercial mortgage-backed securities, bank time deposits and debt mutual funds. This diversification of investments is consistent with its policy to maintain liquidity and ensure the ability to collect principal. The Company maintains an offshore investment portfolio denominated in U.S. dollars. All investments are made pursuant to corporate investment policy guidelines. Investments include Euro commercial paper, Euro dollar bonds, Euro dollar floating rate notes, offshore time deposits, U.S. and foreign government and agency securities, asset-backed securities, commercial mortgage-backed securities, debt mutual funds and mortgage-backed securities issued by U.S. government-sponsored enterprises and agencies.
Management classifies investments as available-for-sale or held-to-maturity at the time of purchase and re-evaluates such designation at each balance sheet date, although classification is not generally changed. Securities are classified as held-to-maturity when the Company has the positive intent and the ability to hold the securities until maturity. Held-to-maturity securities are carried at cost adjusted for amortization of premiums and accretion of discounts to maturity. Such amortization, as well as any interest on the securities, is included in interest income. No investments were classified as held-to-maturity as of March 28, 2020 or March 30, 2019. Available-for-sale securities are carried at fair value with the unrealized gains or losses, net of tax, included as a component of accumulated other comprehensive income (loss) in stockholders' equity. See "Note 3. Fair Value Measurements" for information relating to the determination of fair value. Realized gains and losses on available-for-sale securities and declines in value judged to be other than temporary are included in interest and other expense, net. In determining if and when a decline in value below the adjusted cost of available for sale securities is other than temporary, we evaluate on an ongoing basis the market conditions, trends of earnings, financial condition, credit ratings, any underlying collateral and other key measures for our investments. The cost of securities matured or sold is based on the specific identification method.
The Company's investments in non-marketable equity securities of private companies are accounted for under the measurement alternative method upon the adoption of ASU 2016-01. The carrying value is measured at cost, less any impairment, plus or minus changes resulting from observable price changes in orderly transactions for the identical or a similar investment of the same issuer. Determining whether an observed transaction is similar to a security within the Company's portfolio requires judgment based on the rights and obligations of the securities. The Company's periodic assessment of impairment is made by considering available evidence, including the general market conditions in the investee’s industry, the investee’s product development status and subsequent rounds of financing and the related valuation and/or company's participation in such financings. The Company also assesses the investee’s ability to meet business milestones and the financial condition and near-term prospects of the individual investee, including the rate at which the investee is using its cash, the investee’s need for possible additional funding at a lower valuation and any bona fide offer to purchase the investee from a prospective acquirer.
Accounts Receivable
The allowance for doubtful accounts reflects the Company's best estimate of probable losses inherent in the accounts receivable balance. The Company determines the allowance based on the aging of Xilinx's accounts receivable, historical experience, known troubled accounts, management judgment and other currently available evidence. Xilinx writes off accounts receivable against the allowance when Xilinx determines a balance is uncollectible and no longer actively pursues collection of the receivable. The amounts of accounts receivable written off were insignificant for all periods presented.
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:
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|
|
|
|
|
|
|
|
(In thousands)
|
March 28, 2020
|
|
March 30, 2019
|
Raw materials
|
$
|
35,562
|
|
|
$
|
39,727
|
|
Work-in-process
|
204,501
|
|
|
213,784
|
|
Finished goods
|
64,277
|
|
|
61,847
|
|
|
$
|
304,340
|
|
|
$
|
315,358
|
|
The Company reviews and sets standard costs quarterly to approximate current actual manufacturing costs. The Company's manufacturing overhead standards for product costs are calculated assuming full absorption of actual spending over actual volumes. Given the cyclicality of the market, the obsolescence of technology and product lifecycles, the Company writes down inventory based on forecasted demand and technological obsolescence. These forecasts are developed based on inputs from the Company's customers, including bookings and extended but uncommitted demand forecasts, and internal analyses such as customer historical purchasing trends and actual and anticipated design wins, as well as market and economic conditions, technology changes, new product introductions and changes in strategic direction. These factors require estimates that may include uncertain elements. The estimates of future demand that the Company uses in the valuation of inventory are the basis for its published revenue forecasts, which are also consistent with our short-term manufacturing plans. The differences between the Company's demand forecast and the actual demand in the recent past have not resulted in any material write down in the Company's inventory. If the Company's demand forecast for specific products is greater than actual demand and the Company fails to reduce manufacturing output accordingly, the Company could be required to write down additional inventory, which would have a negative impact on the Company's gross margin.
Property, Plant and Equipment
Property, plant and equipment are recorded at cost, net of accumulated depreciation. Depreciation for financial reporting purposes is computed using the straight-line method over the estimated useful lives of the assets of three to five years for machinery, equipment, furniture and fixtures and 15 to 30 years for buildings. Depreciation expense totaled $60.7 million, $53.3 million and $46.4 million for fiscal 2020, 2019 and 2018, respectively.
Impairment of Long-Lived Assets
The Company evaluates the carrying value of long-lived assets to be held and used for impairment if indicators of potential impairment exist. Assets are grouped and evaluated for impairment at the lowest level of identifiable cash flows. Impairment indicators are reviewed on a quarterly basis. When indicators of impairment exist and assets are held for use, the Company estimates future undiscounted cash flows attributable to the related assets groups. In the event such cash flows are not expected to be sufficient to recover the recorded value of the assets, the assets are written down to their estimated fair values based on the expected discounted future cash flows attributable to the asset groups or based on appraisals. When assets are removed from operations and held for sale, Xilinx estimates impairment losses as the excess of the carrying value of the assets over their fair value.
Goodwill
Goodwill is not amortized but is subject to impairment tests on an annual basis, or more frequently if indicators of potential impairment exist, using a fair-value-based approach. Based on the impairment review performed during the fourth quarter of fiscal 2020, there was no impairment of goodwill in fiscal 2020. Unless there are indicators of impairment, the Company's next impairment review for goodwill will be performed and completed in the fourth quarter of fiscal 2021. To date, no impairment indicators have been identified.
Revenue Recognition
Revenue from sales to the Company's distributors is recognized upon the transfer of control, which typically occurs at shipment, and is reduced by estimated allowances for distributor price adjustments and rights of return. The distributor price adjustments are estimated using the expected value method based on an analysis of actual and forecasted ship and debit claims, at the distributor and part level to account for current pricing and business trends. For fiscal 2020, approximately 53% of the Company's net revenues were from products sold to distributors for subsequent resale to OEMs or their subcontract manufacturers.
Revenue from sales to the Company's non-distributors is recognized net of sales incentives (if any) upon transfer of control to the customer, which typically occurs at shipment. Sales returns and allowances on product sales are recorded as a reduction of revenue.
Revenue from software license agreements and renewals is recognized at point of sales. Revenue from support services is recognized when the service is performed. Revenue from software licenses and support services sales was approximately 1% or less of net revenues for all of the periods presented.
Foreign Currency Translation
The U.S. dollar is the functional currency for the Company's Ireland and Singapore subsidiaries. Monetary assets and liabilities that are not denominated in the functional currency are remeasured into U.S. dollars, and the resulting gains or losses are included in the consolidated statements of income under interest and other expense, net. The remeasurement gains or losses were immaterial for all fiscal periods presented.
The local currency is the functional currency for each of the Company's other wholly-owned foreign subsidiaries. Assets and liabilities are translated from foreign currencies into U.S. dollars at month-end exchange rates and statements of income are translated at the average monthly exchange rates. Exchange gains or losses arising from translation of foreign currency denominated assets and liabilities (i.e., cumulative translation adjustment) are included as a component of accumulated other comprehensive income (loss) in stockholders' equity.
Derivative Financial Instruments
To reduce financial risk, the Company periodically enters into financial arrangements as part of the Company's ongoing asset and liability management activities. Xilinx uses derivative financial instruments to hedge fair values of underlying assets and liabilities or future cash flows which are exposed to interest rate, foreign currency or commodity price fluctuations. The Company does not enter into derivative financial instruments for trading or speculative purposes. See "Note 5. Derivative Financial Instruments" for detailed information about the Company's derivative financial instruments.
Research and Development Expenses
Research and development costs are current period expenses and charged to expense as incurred.
Stock-Based Compensation
The Company has equity incentive plans that are more fully discussed in "Note 6. Stock-Based Compensation Plans." The authoritative guidance of accounting for share-based payment requires the Company to measure the cost of all employee equity awards (that are expected to be exercised or vested) based on the grant-date fair value of those awards, and to record that cost as compensation expense over the period during which the employee is required to perform service in exchange for the award (over the vesting period of the award). Additionally, the Company's ESPP is deemed to be a compensatory plan under the authoritative guidance of accounting for share-based payments. Accordingly, the ESPP is included in the computation of stock-based compensation expense.
The Company uses the straight-line attribution method to recognize stock-based compensation costs over the requisite service period of the award. Upon exercise, cancellation or expiration of stock options, deferred tax assets for options with multiple vesting dates are eliminated for each vesting period on a first-in, first-out basis as if each award had a separate vesting period.
Income Taxes
All income tax amounts reflect the use of the liability method under the accounting for income taxes, as interpreted by Financial Accounting Standards Board (FASB) authoritative guidance for measuring uncertain tax positions. Under this method, deferred tax assets and liabilities are determined based on the expected future tax consequences of temporary differences between the carrying amounts of assets and liabilities for financial and income tax reporting purposes.
The TCJA introduced GILTI, which subjects a U.S. shareholder to current tax on income earned by certain foreign subsidiaries. The FASB allows companies to either (1) recognize deferred taxes for temporary differences that are expected to reverse as GILTI in future years (deferred method) or (2) account for taxes on GILTI as period costs in the year the tax is incurred (period method). The Company elected the deferred method.
Business Combinations
We use the acquisition method of accounting and allocate the fair value of purchase consideration to the assets acquired and liabilities assumed from the acquiree based on their respective fair values as of the acquisition date. The excess of the fair value of purchase consideration over the fair value of these assets acquired and liabilities assumed is recorded as goodwill. When determining the fair values of assets acquired and liabilities assumed, management makes significant estimates and assumptions, especially with respect to intangible assets. Critical estimates in valuing intangible assets include, but are not limited to, expected future cash flows, which includes consideration of future growth and margins, future changes in technology, expected cost and time to develop in-process research and development, brand awareness and discount rates. Fair value estimates are based on the assumptions that management believes a market participant would use in pricing the asset or liability.
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 both fiscal 2020 and 2019, the accrual balance of the product warranty liability was immaterial.
The Company offers, subject to certain terms and conditions, to indemnify customers and distributors for costs and damages awarded against these parties in the event the Company's hardware products are found to infringe third-party intellectual property rights, including patents, copyrights or trademarks, and to compensate certain customers for limited specified costs they actually incur in the event our hardware products experience epidemic failure. To a lesser extent, the Company may from time-to-time offer limited indemnification with respect to its software products. The terms and conditions of these indemnity obligations are limited by contract, which obligations are typically perpetual from the effective date of the agreement. The Company has historically received only a limited number of requests for indemnification under these provisions and has not made any significant payments pursuant to these provisions. The Company cannot estimate the maximum amount of potential future payments, if any, that the Company may be required to make as a result of these obligations due to the limited history of indemnification claims and the unique facts and circumstances that are likely to be involved in each particular claim and indemnification provision. However, there can be no assurances that the Company will not incur any material financial liabilities in the future as a result of these obligations.
Concentrations of Credit Risk
Avnet, one of the Company's distributors, distributes the Company's products worldwide. As of March 28, 2020 and March 30, 2019, Avnet accounted for 31% and 37% of the Company's total net accounts receivable, respectively. We expect our accounts receivable to fluctuate as we partner with our distributors to manage their inventory requirements. Avnet 's revenue accounted for 42%, 45% and 43% of the Company's worldwide net revenues in fiscal 2020, 2019 and 2018, respectively. The percentage of worldwide net revenues from Avnet is consistent with historical patterns.
No other distributor or end customer accounted for more than 10% of the Company's worldwide net revenues for any of the periods presented.
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 and 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.
The Company mitigates concentrations of credit risk in its investments in debt securities by currently investing more than 94% of its portfolio in AA (or its equivalent) or higher-grade securities as rated by Standard & Poor's or Moody's Investors Service equivalent. 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 March 28, 2020, 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.
The global credit markets may experience adverse conditions that negatively impact the values of various types of investment and non-investment grade securities. The global credit and capital markets may experience significant volatility and disruption due to instability in the global financial system, uncertainty related to global economic conditions and concerns regarding sovereign financial stability. Therefore, there is a risk that we may incur other-than-temporary impairment charges for certain types of investments should credit market conditions deteriorate. See "Note 4. Financial Instruments" for a table of the Company's available-for-sale securities.
Recent Accounting Pronouncements Adopted
Leases
In February 2016, the FASB issued authoritative guidance on leases. The new authoritative guidance requires the recognition of assets and liabilities arising from lease transactions on the balance sheet and additional disclosures about the amount, timing and uncertainty of cash flows from leases. Accordingly, a lessee recognizes a lease asset for its right to use the underlying asset and a lease liability for the corresponding lease obligation. The Company determines if an arrangement is a lease, or contains a lease, at the inception of the arrangement. On the commencement date, leases are evaluated for classification, and assets and liabilities are recognized based on the present value of lease payments over the lease term. The Company uses the incremental borrowing rate based on the information available at commencement in determining the present value of lease payments. Operating lease expense is generally recognized on a straight-line basis over the lease term. The Company adopted this authoritative guidance using the modified retrospective method during first quarter of fiscal 2020 and resulted in the recognition of right-of-use assets of approximately $50.0 million and lease liabilities for operating leases of approximately $50.0 million on March 31, 2019, the beginning of fiscal 2020. The Company elected the practical expedients to not separate lease and non-lease components within lease transactions, and not to record on the balance sheet leases with a term of 12 months or less. The Company also has elected the package of practical expedients, which allows the Company not to reassess (1) whether any expired or existing contracts as of the adoption date are or contain a lease, (2) lease classification for any expired or existing leases as of the adoption date and (3) initial direct costs for any existing leases as of the adoption date. The Company did not elect to apply the hindsight practical expedient when determining lease term and assessing impairment of right-of-use assets.
The Company recognizes its operating leases within its other assets, other accrued liabilities and other long-term liabilities on the Company's consolidated balance sheets. The Company's finance leases were immaterial.
Recent Accounting Pronouncements Not Yet Adopted
Credit Loss
In June 2016, the 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 Company will be required to use a forward-looking expected credit loss model for financial assets. For public entities, the guidance is effective for fiscal years beginning after December 15, 2019, and interim periods within those fiscal years, which for Xilinx would be the first quarter of fiscal 2021. The Company does not expect a material impact on its consolidated financial statements upon adoption of this authoritative guidance.
Goodwill
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 requires 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 will remain largely unchanged. Entities will continue to have the option to perform a qualitative assessment to determine if a quantitative impairment test is necessary. For public entities, the guidance is effective for fiscal years beginning after December 15, 2019, and interim periods within those fiscal years, which for Xilinx would be the first quarter of fiscal 2021. The Company does not expect a material impact on its consolidated financial statements upon adoption of this authoritative guidance.
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. For public entities, the guidance is effective for fiscal years beginning after December 15, 2019, and interim periods within those fiscal years, which for Xilinx would be the first quarter of fiscal 2021. The Company does not expect a material impact on its consolidated financial statements upon adoption of this authoritative guidance.
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.
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Note 3.
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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 and equity 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 fiscal 2020 and the Company did not adjust or override any fair value measurements as of March 28, 2020.
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 March 28, 2020 and March 30, 2019:
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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 securities
|
|
150,999
|
|
|
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 securities
|
|
1,000
|
|
|
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
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 30, 2019
|
(In thousands)
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
|
Total Fair
Value
|
Assets
|
|
|
|
|
|
|
|
|
Cash equivalents:
|
|
|
|
|
|
|
|
|
Money market funds
|
|
$
|
428,150
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
428,150
|
|
Financial institution securities
|
|
—
|
|
|
287,945
|
|
|
—
|
|
|
287,945
|
|
Non-financial institution securities
|
|
—
|
|
|
461,884
|
|
|
—
|
|
|
461,884
|
|
U.S. government and agency securities
|
|
149,578
|
|
|
53,520
|
|
|
—
|
|
|
203,098
|
|
Foreign government and agency securities
|
|
—
|
|
|
99,750
|
|
|
—
|
|
|
99,750
|
|
Short-term investments:
|
|
|
|
|
|
|
|
|
Financial institution securities
|
|
—
|
|
|
249,850
|
|
|
—
|
|
|
249,850
|
|
Non-financial institution securities
|
|
—
|
|
|
240,040
|
|
|
—
|
|
|
240,040
|
|
U.S. government and agency securities
|
|
93,149
|
|
|
37,838
|
|
|
—
|
|
|
130,987
|
|
Foreign government and agency securities
|
|
—
|
|
|
114,705
|
|
|
—
|
|
|
114,705
|
|
Mortgage-backed securities
|
|
—
|
|
|
670,770
|
|
|
—
|
|
|
670,770
|
|
Debt mutual fund
|
|
—
|
|
|
31,934
|
|
|
—
|
|
|
31,934
|
|
Asset-backed securities
|
|
—
|
|
|
76,369
|
|
|
—
|
|
|
76,369
|
|
Commercial mortgage-backed securities
|
|
—
|
|
|
116,539
|
|
|
—
|
|
|
116,539
|
|
Long-term investments:
|
|
|
|
|
|
|
|
|
Debt mutual fund
|
|
—
|
|
|
53,433
|
|
|
—
|
|
|
53,433
|
|
Total assets measured at fair value
|
|
$
|
670,877
|
|
|
$
|
2,494,577
|
|
|
$
|
—
|
|
|
$
|
3,165,454
|
|
Liabilities
|
|
|
|
|
|
|
|
|
Derivative financial instruments, net
|
|
$
|
—
|
|
|
$
|
9,009
|
|
|
$
|
—
|
|
|
$
|
9,009
|
|
Total liabilities measured at fair value
|
|
$
|
—
|
|
|
$
|
9,009
|
|
|
$
|
—
|
|
|
$
|
9,009
|
|
Net assets measured at fair value
|
|
$
|
670,877
|
|
|
$
|
2,485,568
|
|
|
$
|
—
|
|
|
$
|
3,156,445
|
|
For certain of the Company’s financial instruments, including cash held in banks, accounts receivable and accounts payable, the carrying amounts approximate fair value due to their short maturities, and are therefore excluded from the fair value tables above.
Financial Instruments Not Recorded at Fair Value on a Recurring Basis
The Company's $500.0 million principal amount of 3.000% notes due March 15, 2021 (2021 Notes) and $750.0 million principal amount of 2.950% senior notes due June 1, 2024 (2024 Notes) are measured at fair value on a quarterly basis for disclosure purposes. The fair values of the 2021 Notes and 2024 Notes as of March 28, 2020 were approximately, $496.7 million and $753.1 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).
Assets and Liabilities Measured at Fair Value on a Non-Recurring Basis
As of March 28, 2020, the Company had non-marketable equity securities in private companies of $101.0 million, which were classified as Level 3 assets. The Company’s investments in non-marketable securities of private companies are also 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 only measured at fair value when indicators of impairment exist.
|
|
Note 4.
|
Financial Instruments
|
The following is a summary of cash equivalents and available-for-sale securities as of the end of the periods presented:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 28, 2020
|
|
|
March 30, 2019
|
(In thousands)
|
Amortized Cost
|
|
Gross Unrealized Gains
|
|
Gross Unrealized Losses
|
|
Estimated Fair Value
|
|
|
Amortized Cost
|
|
Gross Unrealized Gains
|
|
Gross Unrealized Losses
|
|
Estimated Fair Value
|
Money market funds
|
$
|
656,038
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
656,038
|
|
|
|
$
|
428,150
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
428,150
|
|
Financial institution
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
securities
|
325,000
|
|
|
—
|
|
|
—
|
|
|
325,000
|
|
|
|
537,795
|
|
|
—
|
|
|
—
|
|
|
537,795
|
|
Non-financial institution
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
securities
|
476,735
|
|
|
—
|
|
|
—
|
|
|
476,735
|
|
|
|
702,483
|
|
|
3
|
|
|
(562
|
)
|
|
701,924
|
|
U.S. government and
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
agency securities
|
216,178
|
|
|
95
|
|
|
—
|
|
|
216,273
|
|
|
|
334,185
|
|
|
39
|
|
|
(139
|
)
|
|
334,085
|
|
Foreign government and
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
agency securities
|
254,283
|
|
|
7
|
|
|
(17
|
)
|
|
254,273
|
|
|
|
214,455
|
|
|
—
|
|
|
—
|
|
|
214,455
|
|
Mortgage-backed securities
|
156,836
|
|
|
2,445
|
|
|
(477
|
)
|
|
158,804
|
|
|
|
684,596
|
|
|
809
|
|
|
(14,635
|
)
|
|
670,770
|
|
Asset-backed securities
|
2,533
|
|
|
18
|
|
|
(2
|
)
|
|
2,549
|
|
|
|
76,852
|
|
|
—
|
|
|
(483
|
)
|
|
76,369
|
|
Commercial mortgage-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
backed securities
|
50,566
|
|
|
134
|
|
|
(556
|
)
|
|
50,144
|
|
|
|
118,115
|
|
|
42
|
|
|
(1,618
|
)
|
|
116,539
|
|
|
$
|
2,138,169
|
|
|
$
|
2,699
|
|
|
$
|
(1,052
|
)
|
|
$
|
2,139,816
|
|
|
|
$
|
3,096,631
|
|
|
$
|
893
|
|
|
$
|
(17,437
|
)
|
|
$
|
3,080,087
|
|
Financial institution securities include securities issued or managed by financial institutions in various forms, such as commercial paper and time deposits. Substantially all time deposits were issued by institutions outside the U.S. as of March 28, 2020 and March 30, 2019.
The following tables show the fair values and gross unrealized losses of the Company's investments, aggregated by investment category, for individual securities that have been in a continuous unrealized loss position for the length of time specified, as of March 28, 2020 and March 30, 2019:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 28, 2020
|
|
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
|
Mortgage-backed securities
|
$
|
13,492
|
|
|
$
|
(88
|
)
|
|
$
|
31,819
|
|
|
$
|
(389
|
)
|
|
$
|
45,311
|
|
|
$
|
(477
|
)
|
Asset-backed securities
|
1,641
|
|
|
(2
|
)
|
|
—
|
|
|
—
|
|
|
1,641
|
|
|
(2
|
)
|
Foreign government and
|
|
|
|
|
|
|
|
|
|
|
|
agency securities
|
30,998
|
|
|
(17
|
)
|
|
—
|
|
|
—
|
|
|
30,998
|
|
|
(17
|
)
|
Commercial mortgage-
|
|
|
|
|
|
|
|
|
|
|
|
backed securities
|
30,593
|
|
|
(282
|
)
|
|
2,589
|
|
|
(274
|
)
|
|
33,182
|
|
|
(556
|
)
|
|
$
|
76,724
|
|
|
$
|
(389
|
)
|
|
$
|
34,408
|
|
|
$
|
(663
|
)
|
|
$
|
111,132
|
|
|
$
|
(1,052
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 30, 2019
|
|
Less Than 12 Months
|
|
12 Months or Greater
|
|
Total
|
(In thousands)
|
Fair Value
|
|
Gross Unrealized Losses
|
|
Fair Value
|
|
Gross Unrealized Losses
|
|
Fair Value
|
|
Gross Unrealized Losses
|
Non-financial institution securities
|
$
|
4,767
|
|
|
$
|
(4
|
)
|
|
$
|
51,044
|
|
|
$
|
(558
|
)
|
|
$
|
55,811
|
|
|
$
|
(562
|
)
|
U.S. government and
|
|
|
|
|
|
|
|
|
|
|
|
|
|
agency securities
|
—
|
|
|
—
|
|
|
13,542
|
|
|
(139
|
)
|
|
13,542
|
|
|
(139
|
)
|
Mortgage-backed securities
|
34,595
|
|
|
(480
|
)
|
|
597,394
|
|
|
(14,155
|
)
|
|
631,989
|
|
|
(14,635
|
)
|
Asset-backed securities
|
—
|
|
|
—
|
|
|
76,103
|
|
|
(483
|
)
|
|
76,103
|
|
|
(483
|
)
|
Commercial mortgage-
|
|
|
|
|
|
|
|
|
|
|
|
backed securities
|
1,354
|
|
|
(3
|
)
|
|
112,294
|
|
|
(1,615
|
)
|
|
113,648
|
|
|
(1,618
|
)
|
|
$
|
40,716
|
|
|
$
|
(487
|
)
|
|
$
|
850,377
|
|
|
$
|
(16,950
|
)
|
|
$
|
891,093
|
|
|
$
|
(17,437
|
)
|
The Company reviewed the investment portfolio and determined that the gross unrealized losses on these investments as of March 28, 2020 and March 30, 2019 were temporary in nature as evidenced by the fluctuations in the gross unrealized losses within the investment categories. The marketable debt securities (financial institution securities, non-financial institution securities, U.S. and foreign government and agency securities, asset-back 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 amounts due to the Company. Additionally, in the past several years a portion of the Company's investment in 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 March 28, 2020 and March 30, 2019. The Company neither intends to sell these marketable debt securities 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.
|
|
|
|
|
|
|
|
|
|
March 28, 2020
|
(In thousands)
|
Amortized
Cost
|
|
Estimated
Fair Value
|
Due in one year or less
|
$
|
1,274,196
|
|
|
$
|
1,274,283
|
|
Due after one year through five years
|
7,628
|
|
|
7,670
|
|
Due after five years through ten years
|
31,432
|
|
|
32,369
|
|
Due after ten years
|
168,875
|
|
|
169,456
|
|
|
$
|
1,482,131
|
|
|
$
|
1,483,778
|
|
As of March 28, 2020, $209.5 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:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years Ended
|
(In thousands)
|
March 28, 2020
|
|
March 30, 2019
|
|
March 31, 2018
|
Proceeds from sale of available-for-sale and equity securities
|
$
|
670,604
|
|
|
$
|
35,734
|
|
|
$
|
1,161,410
|
|
Gross realized gains on sale of available-for-sale securities
|
$
|
3,349
|
|
|
$
|
372
|
|
|
$
|
7,258
|
|
Gross realized losses on sale of available-for-sale securities
|
(216
|
)
|
|
(51
|
)
|
|
(7,947
|
)
|
Net realized gains (losses) on sale of available-for-sale securities
|
$
|
3,133
|
|
|
$
|
321
|
|
|
$
|
(689
|
)
|
Amortization of premiums on available-for-sale securities
|
$
|
3,551
|
|
|
$
|
8,118
|
|
|
$
|
24,569
|
|
The cost of securities matured or sold is based on the specific identification method.
|
|
Note 5.
|
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.
The Company entered into interest rate swap contracts with certain independent financial institutions to manage interest rate risks related to fixed interest rate expenses from its 2024 Notes and floating interest rate income from its investments in marketable debt securities. See “Note 10. Debt and Credit Facility” for more discussion related to interest rate swap contracts. The interest rate swap contracts were designated and qualified as fair value hedges of the 2024 Notes and were separately accounted for as a derivative. The interest rate swap contracts and the 2024 Notes were initially measured at fair value. Any subsequent changes in fair values of the interest rate swap contracts and the 2024 Notes will be recorded in the Company’s consolidated balance sheets. During the first quarter of fiscal 2020, the Company sold the interest rate swap contracts for an immaterial gain. The gain has been amortized as a reduction to interest expense over the remaining life of the 2024 Notes. As a result of the sale, the Company recorded the net change in fair value of the interest rate swap contracts of $11.7 million in the Company's consolidated balance sheets. See “Note 12. Debt and Credit Facility” for more discussion related to interest rate swap contracts. There was no ineffectiveness during all periods presented.
During the fourth quarter of fiscal 2020, the Company entered into interest rate swap contracts with an independent financial institution to reduce the risk of changes in benchmark interest rate from future debt issuance. The interest rate swap contracts were designated and qualified as cash flow hedges. The interest rate swap contracts were initially measured at fair value and subsequent changes in fair values recorded in other comprehensive income (loss). As a result, the aggregate fair values of the outstanding interest rate swap contracts as of March 28, 2020 was $3.3 million and recorded in other long-term liabilities. An unrealized loss, net of tax, of $2.6 million was deferred in accumulated other comprehensive income (loss) at March 28, 2020. The interest rate swap contracts will be reclassified into net income in the same period during which the hedged transaction affects earnings. There was no ineffectiveness during the period presented.
As of March 28, 2020 and March 30, 2019, the Company had the following outstanding forward currency exchange contracts (in notional amount), which were derivative financial instruments:
|
|
|
|
|
|
|
|
|
(In thousands and U.S. dollars)
|
March 28, 2020
|
|
March 30, 2019
|
Singapore Dollar
|
$
|
28,875
|
|
|
$
|
29,420
|
|
Euro
|
33,474
|
|
|
39,408
|
|
Indian Rupee
|
76,076
|
|
|
77,973
|
|
British Pound
|
20,191
|
|
|
10,575
|
|
Japanese Yen
|
2,433
|
|
|
3,840
|
|
Chinese Yuan
|
26,266
|
|
|
34,386
|
|
|
$
|
187,315
|
|
|
$
|
195,602
|
|
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 2022. The net unrealized losses, which approximate the fair market value of the outstanding forward currency exchange contracts, are expected to be recognized in the consolidated statements of income within the next two years.
As of March 28, 2020, 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 March 28, 2020 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 March 28, 2020 and March 30, 2019, located on the 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
|
March 28, 2020
|
Prepaid expenses and other current assets
|
$
|
30
|
|
|
Other accrued liabilities
|
$
|
9,140
|
|
March 30, 2019
|
Prepaid expenses and other current assets
|
2,802
|
|
|
Other accrued liabilities
|
1,722
|
|
The Company does not offset or net the fair value amounts of derivative financial instruments in its consolidated balance sheets. The potential effect of rights of set-off associated with the derivative financial instruments was not material to the Company's consolidated balance sheet for all periods presented.
The following table summarizes the effect of derivative instruments on the consolidated statements of income for fiscal 2020 and 2019:
|
|
|
|
|
|
|
|
|
|
Foreign Exchange Contracts
|
|
Years Ended
|
(In thousands)
|
March 28, 2020
|
|
|
March 30, 2019
|
|
Amount of (losses)/gains recognized in other comprehensive income on derivative (effective portion of cash flow hedging)
|
$
|
(7,637
|
)
|
|
$
|
(1,427
|
)
|
Amount of (losses)/gains reclassified from accumulated other comprehensive income into income (effective portion) *
|
(2,923
|
)
|
|
(5,603
|
)
|
Amount of losses recorded (ineffective portion) *
|
(8
|
)
|
|
(4
|
)
|
*Recorded in interest and other expense, net within the consolidated statements of income.
|
|
Note 6.
|
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 Amended and Restated 1990 Employee Qualified Stock Purchase Plan (ESPP):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years Ended
|
(In thousands)
|
March 28, 2020
|
|
March 30, 2019
|
|
March 31, 2018
|
Stock-based compensation included in:
|
|
|
|
|
|
Cost of revenues
|
$
|
10,035
|
|
|
$
|
8,820
|
|
|
$
|
8,492
|
|
Research and development
|
114,976
|
|
|
86,428
|
|
|
76,790
|
|
Selling, general and administrative
|
61,540
|
|
|
52,694
|
|
|
51,912
|
|
Restructuring charges and Executive transition costs
|
172
|
|
|
—
|
|
|
16,621
|
|
Stock-based compensation effect on income before taxes
|
186,723
|
|
|
147,942
|
|
|
153,815
|
|
Income tax effect
|
(38,013
|
)
|
|
(29,361
|
)
|
|
(40,188
|
)
|
Net stock-based compensation effect on net income
|
$
|
148,710
|
|
|
$
|
118,581
|
|
|
$
|
113,627
|
|
The Company adjusts stock-based compensation on a quarterly basis for changes to the estimate of expected equity award forfeitures based on actual forfeiture experience. The effect of adjusting the forfeiture rate for all expense amortization was recognized in the period the forfeiture estimate was changed and was not material for all periods presented.
As of March 28, 2020 and March 30, 2019, the ending inventory balances included $3.0 million and $2.1 million of capitalized stock-based compensation. During fiscal 2020, 2019 and 2018, the tax benefit realized for the tax deduction from restricted stock units (RSUs) and other awards totaled $72.7 million, $44.4 million and $60.6 million, respectively. The tax deduction includes amounts credited to income tax expense.
The fair values of ESPP were estimated as of the grant date using the Black-Scholes option pricing model. The Company's expected stock price volatility assumption is estimated using implied volatility of the Company's traded options. The expected life of options granted is based on the historical exercise activity as well as the expected disposition of all options outstanding. The expected life of options granted also considers the actual contractual term.
The weighted-average fair value per share of stock purchase rights granted under the ESPP during fiscal 2020, 2019 and 2018 were $31.97, $26.57 and $17.95, respectively. These fair values per share were estimated at the date of grant using the following weighted-average assumptions:
|
|
|
|
|
|
|
|
|
|
|
Employee Stock Purchase Plan
|
|
Fiscal 2020
|
|
Fiscal 2019
|
|
Fiscal 2018
|
Expected life of options (years)
|
1.3
|
|
|
1.3
|
|
|
1.3
|
|
Expected stock price volatility
|
0.35
|
|
|
0.33
|
|
|
0.29
|
|
Risk-free interest rate
|
1.7
|
%
|
|
2.5
|
%
|
|
1.6
|
%
|
Dividend yield
|
1.5
|
%
|
|
1.7
|
%
|
|
2.1
|
%
|
The estimated fair values of RSU awards were calculated based on the market price of Xilinx common stock on the date of grant, reduced by the present value of dividends expected to be paid on Xilinx common stock prior to vesting. The per share weighted-average fair value of RSUs granted during fiscal 2020, 2019 and 2018 were $109.53, $66.94 and $60.18, respectively. The weighted average fair value of RSUs granted in fiscal 2020, 2019 and 2018 were calculated based on estimates at the date of grant using the following weighted-average assumptions:
|
|
|
|
|
|
|
|
|
|
|
Fiscal 2020
|
|
Fiscal 2019
|
|
Fiscal 2018
|
Risk-free interest rate
|
1.8
|
%
|
|
2.7
|
%
|
|
1.8
|
%
|
Dividend yield
|
1.3
|
%
|
|
2.1
|
%
|
|
2.2
|
%
|
As of March 28, 2020, total unrecognized stock-based compensation costs related to ESPP was $33.4 million. The total unrecognized stock-based compensation cost for ESPP is expected to be recognized over a weighted-average period of 1.1 years.
Equity Incentive Plans
As of March 28, 2020, 15.0 million shares are available for future grants under the 2007 Equity Incentive Plan (2007 Equity Plan). The contractual term for stock awards granted under the 2007 Equity Plan is seven years from the grant date. Stock awards granted to existing and newly hired employees generally vest over a four-year period from the date of grant.
A summary of shares available for grant under the 2007 Equity Plan is as follows:
|
|
|
|
|
(Shares in thousands)
|
|
Shares Available for Grant
|
April 1, 2017
|
|
12,459
|
|
Additional shares reserved
|
|
1,900
|
|
RSUs granted
|
|
(3,718
|
)
|
RSUs cancelled
|
|
701
|
|
March 31, 2018
|
|
11,342
|
|
Additional shares reserved
|
|
3,000
|
|
RSUs granted
|
|
(3,559
|
)
|
RSUs cancelled
|
|
536
|
|
March 30, 2019
|
|
11,319
|
|
Additional shares reserved
|
|
6,000
|
|
RSUs granted
|
|
(2,756
|
)
|
RSUs cancelled
|
|
487
|
|
March 28, 2020
|
|
15,050
|
|
The types of awards allowed under the 2007 Equity Plan include incentive stock options, non-qualified stock options, RSUs, restricted stock and stock appreciation rights. To date, the Company has issued a mix of non-qualified stock options and RSUs under the 2007 Equity Plan.
The total pre-tax intrinsic value of options exercised during fiscal 2020 and 2019 was $331 thousand and $475 thousand, 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.
Since the Company adopted the policy of retiring all repurchased shares of its common stock, new shares are issued upon employees' exercise of their stock options.
RSU Awards
A summary of the Company's RSU activity and related information is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
RSUs Outstanding
|
(Shares and intrinsic value in thousands)
|
Number of Shares
|
|
Weighted-Average Grant-Date Fair Value Per Share
|
|
Weighted Average Remaining Contractual Term (Years)
|
|
Aggregate Intrinsic Value (1)
|
April 1, 2017
|
6,988
|
|
|
$42.93
|
|
|
|
|
Granted
|
3,718
|
|
|
$60.18
|
|
|
|
|
Vested (2)
|
(3,016
|
)
|
|
$43.30
|
|
|
|
|
Cancelled
|
(701
|
)
|
|
$48.16
|
|
|
|
|
March 31, 2018
|
6,989
|
|
|
$51.39
|
|
|
|
|
Granted
|
3,559
|
|
|
$66.94
|
|
|
|
|
Vested (2)
|
(2,681
|
)
|
|
$49.05
|
|
|
|
|
Cancelled
|
(536
|
)
|
|
$55.09
|
|
|
|
|
March 30, 2019
|
7,331
|
|
|
$59.54
|
|
|
|
|
Granted
|
2,756
|
|
|
$109.53
|
|
|
|
|
Vested (2)
|
(2,820
|
)
|
|
$55.24
|
|
|
|
|
Cancelled
|
(487
|
)
|
|
$75.09
|
|
|
|
|
March 28, 2020
|
6,780
|
|
|
$80.53
|
|
2.28
|
|
$
|
510,083
|
|
|
|
|
|
|
|
|
|
|
|
Expected to vest as of March 28, 2020
|
5,380
|
|
|
$80.54
|
|
2.28
|
|
$
|
404,702
|
|
|
|
(1)
|
Aggregate intrinsic value for RSUs represents the closing price per share of Xilinx's stock on March 28, 2020 of $75.22, multiplied by the number of RSUs outstanding or expected to vest as of March 28, 2020.
|
|
|
(2)
|
The number of RSUs vested includes shares that the Company withheld on behalf of employees to satisfy the statutory tax withholding requirements.
|
RSUs with a fair value of $155.8 million vested during fiscal 2020. As of March 28, 2020, total unrecognized stock-based compensation costs related to non-vested RSUs was $352.4 million. The total unrecognized stock-based compensation cost for RSUs is expected to be recognized over a weighted-average period of 2.6 years.
Employee Stock Purchase Plan
Under the Company's ESPP, qualified employees can obtain a 24-month purchase right to purchase the Company's common stock at the end of each six-month exercise period. Participation is limited to 15% of the employee's annual earnings up to a maximum of $21 thousand in a calendar year. Approximately 86% of all eligible employees participated in the ESPP. The purchase price of the stock is 85% of the lower of the fair market value at the beginning of the 24-month offering period or at the end of each six-month exercise period. Employees purchased 719 thousand shares for $53.0 million in fiscal 2020, 1.0 million shares for $48.3 million in fiscal 2019, and 918 thousand shares for $44.3 million in fiscal 2018. The next scheduled purchase under the ESPP is in the second quarter of fiscal 2021. As of March 28, 2020, 12.6 million shares were available for future issuance.
Note 7. Supplemental Financial Information
The following tables disclose the current liabilities and other assets that individually exceed 5% of the respective consolidated balance sheet amounts in each fiscal year. Individual balances that are less than 5% of the respective consolidated balance sheet amounts are aggregated and disclosed as "other."
|
|
|
|
|
|
|
|
|
(In thousands)
|
March 28, 2020
|
|
|
March 30, 2019
|
|
Accrued payroll and related liabilities:
|
|
|
|
Accrued compensation
|
$
|
99,197
|
|
|
$
|
120,658
|
|
Deferred compensation plan liability
|
121,936
|
|
|
118,560
|
|
Others
|
10,306
|
|
|
8,050
|
|
|
$
|
231,439
|
|
|
$
|
247,268
|
|
|
|
|
|
|
|
|
|
|
(In thousands)
|
March 28, 2020
|
|
|
March 30, 2019
|
|
Other accrued liabilities:
|
|
|
|
Interest payable
|
$
|
9,480
|
|
|
$
|
16,583
|
|
Accruals related to software licenses
|
41,093
|
|
|
18,660
|
|
Unsettled investment transactions
|
77,936
|
|
|
—
|
|
Restructuring accruals
|
13,454
|
|
|
—
|
|
Lease liabilities
|
11,109
|
|
|
—
|
|
Others
|
63,562
|
|
|
46,316
|
|
|
$
|
216,634
|
|
|
$
|
81,559
|
|
|
|
|
|
|
|
|
|
|
(In thousands)
|
March 28, 2020
|
|
|
March 30, 2019
|
|
Other assets:
|
|
|
|
Deferred tax asset
|
$
|
149,415
|
|
|
$
|
126,702
|
|
Trust asset (deferred compensation plan)
|
111,092
|
|
|
109,271
|
|
Lease assets
|
57,819
|
|
|
—
|
|
Investments in non-marketable equity securities
|
101,026
|
|
|
74,638
|
|
Software license contracts
|
121,439
|
|
|
97,406
|
|
Others
|
51,288
|
|
|
47,550
|
|
|
$
|
592,079
|
|
|
$
|
455,567
|
|
|
|
Note 8.
|
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 March 28, 2020:
|
|
|
|
|
Fiscal
|
(In thousands)
|
2021
|
$
|
13,778
|
|
2022
|
12,426
|
|
2023
|
7,783
|
|
2024
|
6,705
|
|
2025
|
6,410
|
|
Thereafter
|
29,577
|
|
Total lease payments
|
76,679
|
|
Less: Imputed interest
|
(16,606
|
)
|
Total lease liabilities
|
$
|
60,073
|
|
The Company's leases were included as a component of the following consolidated balance sheet lines:
|
|
|
|
|
(In thousands)
|
March 28, 2020
|
Other assets
|
$
|
57,819
|
|
Other accrued liabilities
|
11,109
|
|
Other long-term liabilities
|
48,964
|
|
The components of lease costs were as follows:
|
|
|
|
|
(In thousands)
|
March 28, 2020
|
Operating lease cost
|
$
|
16,584
|
|
Lease income
|
(2,799
|
)
|
Total lease cost
|
$
|
13,785
|
|
Other information related to leases was as follows:
|
|
|
|
|
(In thousands)
|
March 28, 2020
|
Cash paid for operating leases included in operating cash flows
|
$
|
12,571
|
|
|
|
|
|
|
March 28, 2020
|
Weighted-average remaining lease term - operating leases (in years)
|
7.3
|
|
Weighted-average remaining discount rate - operating leases
|
5.6
|
%
|
Other commitments as of March 28, 2020 totaled $142.4 million and consisted of purchases of inventory and other non-cancelable purchase obligations related to subcontractors that manufacture silicon wafers and provide assembly and 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 March 28, 2020, the Company had $41.3 million in commitments primarily related to open purchase orders from ordinary operations and $1.6 million related to renovation of three of its properties. These commitments expire at various dates through April 2025.
As of March 30, 2019, prior to the adoption of the new authoritative guidance on leases, future minimum lease payments under non-cancelable operating leases were as follows:
|
|
|
|
|
Fiscal
|
(In thousands)
|
2020
|
$
|
11,991
|
|
2021
|
10,747
|
|
2022
|
9,580
|
|
2023
|
5,444
|
|
2024
|
5,338
|
|
Thereafter
|
29,293
|
|
Total
|
$
|
72,393
|
|
|
|
Note 9.
|
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 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:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years Ended
|
(In thousands, except per share amounts)
|
March 28, 2020
|
|
|
March 30, 2019
|
|
|
March 31, 2018
|
|
Net income available to common stockholders
|
$
|
792,721
|
|
|
$
|
889,750
|
|
|
$
|
463,981
|
|
Weighted average common shares outstanding-basic
|
251,732
|
|
|
252,762
|
|
|
249,595
|
|
Dilutive effect of employee equity incentive plans
|
3,211
|
|
|
3,672
|
|
|
2,754
|
|
Dilutive effect of 2017 Convertible Notes and warrants
|
—
|
|
|
—
|
|
|
5,611
|
|
Weighted average common shares outstanding-diluted
|
254,943
|
|
|
256,434
|
|
|
257,960
|
|
Basic earnings per common share
|
$
|
3.15
|
|
|
$
|
3.52
|
|
|
$
|
1.86
|
|
Diluted earnings per common share
|
$
|
3.11
|
|
|
$
|
3.47
|
|
|
$
|
1.80
|
|
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, the incremental shares issuable assuming conversion of the Company's $600.0 million principal amount of 2.625% convertible notes issued in June 2010 (2017 Convertible Notes), before its maturity on June 15, 2017, and exercise of warrants on a weighted-average outstanding basis, before the final settlements during the third quarter of fiscal 2018. The 2017 Convertible Notes matured during the first quarter of fiscal 2018, and the Company exercised its call options to neutralize the dilutive effect of the incremental shares from the 2017 Convertible Notes. Because the number of diluted shares in the above table for the 12 months ended March 31, 2018 was calculated based on a weighted-average outstanding basis, it included approximately 1.5 million shares of dilutive impact from the 2017 Convertible Notes through the maturity date and 4.1 million shares of dilutive impact from warrants before the settlement.
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 antidilutive. These options and RSUs were immaterial for fiscal 2020, 2019 and 2018. 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 10.
|
Interest and Other Income (Expense), Net
|
The components of interest and other income (expense), net are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years Ended
|
(In thousands)
|
March 28, 2020
|
|
March 30, 2019
|
|
March 31, 2018
|
Interest income
|
$
|
52,462
|
|
|
$
|
77,295
|
|
|
$
|
58,604
|
|
Interest expense
|
(39,820
|
)
|
|
(52,883
|
)
|
|
(45,837
|
)
|
Other income (expense), net
|
29,454
|
|
|
(12,879
|
)
|
|
(7,410
|
)
|
|
$
|
42,096
|
|
|
$
|
11,533
|
|
|
$
|
5,357
|
|
|
|
Note 11.
|
Accumulated Other Comprehensive Loss
|
Comprehensive 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)
|
March 28, 2020
|
|
|
March 30, 2019
|
|
Accumulated unrealized gains (losses) on available-for-sale securities, net of tax
|
$
|
1,319
|
|
|
$
|
(12,725
|
)
|
Accumulated unrealized gains (losses) on hedging transactions, net of tax
|
(10,170
|
)
|
|
95
|
|
Accumulated cumulative translation adjustment, net of tax
|
(11,426
|
)
|
|
(10,780
|
)
|
Accumulated other comprehensive loss
|
$
|
(20,277
|
)
|
|
$
|
(23,410
|
)
|
The related tax effects of other comprehensive loss were not material for all periods presented.
|
|
Note 12.
|
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 3.12%.
The Company received net proceeds of $495.4 million from issuance of the 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 term of the 2021 Notes. As of March 28, 2020, the remaining term of the 2021 Notes is 1.0 years.
The following table summarizes the carrying value of the 2021 Notes in the Company's consolidated balance sheets:
|
|
|
|
|
|
|
|
|
|
(In thousands)
|
|
March 28, 2020
|
|
|
March 30, 2019
|
|
Principal amount of the 2021 Notes
|
|
$
|
500,000
|
|
|
$
|
500,000
|
|
Unamortized discount of the 2021 Notes
|
|
(517
|
)
|
|
(1,063
|
)
|
Unamortized debt issuance costs associated with the 2021 Notes
|
|
(223
|
)
|
|
(467
|
)
|
Carrying value of the 2021 Notes
|
|
$
|
499,260
|
|
|
$
|
498,470
|
|
Interest expense related to the 2021 Notes was included in interest and other income (expense), net on the consolidated statements of income as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years Ended
|
(In thousands)
|
|
March 28, 2020
|
|
March 30, 2019
|
|
March 31, 2018
|
Contractual coupon interest
|
|
$
|
15,000
|
|
|
$
|
15,000
|
|
|
$
|
15,000
|
|
Amortization of debt issuance costs
|
|
244
|
|
|
244
|
|
|
244
|
|
Amortization of debt discount, net
|
|
546
|
|
|
530
|
|
|
514
|
|
Total interest expense related to the 2021 Notes
|
|
$
|
15,790
|
|
|
$
|
15,774
|
|
|
$
|
15,758
|
|
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 2.97%.
The Company received net proceeds of $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 March 28, 2020, the remaining term of the 2024 Notes is approximately 4.2 years.
In relation to the issuance of the 2024 Notes, the Company entered into interest rate swap contracts with certain independent financial institutions, whereby the Company pays on a semi-annual basis, a variable interest rate equal to the three-month London Interbank Offered Rate (LIBOR) plus 91.43 bps, and receives on a semi-annual basis, interest income at a fixed interest rate of 2.950%. The Company incurred a net interest expense of $923.0 thousand during the twelve months ended March 28, 2020 and incurred a net interest expense of $3.8 million during the twelve months ended March 30, 2019, respectively, from the interest rate swap contracts, which was included in interest and other income (expense), net on the consolidated statements of income. During the first quarter of fiscal 2020, the Company sold the interest rate swap contracts for an immaterial gain. The gain is being amortized as a reduction to interest expense over the remaining life of the 2024 Notes.
The following table summarizes the carrying value of the 2024 Notes in the Company's consolidated balance sheets:
|
|
|
|
|
|
|
|
|
|
(In thousands)
|
|
March 28, 2020
|
|
|
March 30, 2019
|
|
Principal amount of the 2024 Notes
|
|
$
|
750,000
|
|
|
$
|
750,000
|
|
Unamortized discount of the 2024 Notes
|
|
(525
|
)
|
|
(642
|
)
|
Unamortized debt issuance costs associated with the 2024 Notes
|
|
(2,365
|
)
|
|
(2,932
|
)
|
Carrying value of the 2024 Notes
|
|
747,110
|
|
|
746,426
|
|
Fair value hedge adjustment - interest rate swap contracts
|
|
—
|
|
|
(10,089
|
)
|
Net carrying value of the 2024 Notes
|
|
$
|
747,110
|
|
|
$
|
736,337
|
|
Interest expense related to the 2024 Notes was included in interest and other income (expense), net on the consolidated statements of income as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years Ended
|
(In thousands)
|
|
March 28, 2020
|
|
March 30, 2019
|
|
March 31, 2018
|
Contractual coupon interest
|
|
$
|
22,873
|
|
|
$
|
25,875
|
|
|
$
|
14,122
|
|
Amortization of debt issuance costs
|
|
567
|
|
|
568
|
|
|
473
|
|
Amortization of debt discount
|
|
117
|
|
|
113
|
|
|
92
|
|
Total interest expense related to the 2024 Notes
|
|
$
|
23,557
|
|
|
$
|
26,556
|
|
|
$
|
14,687
|
|
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 non-financial covenants. As of March 28, 2020, the Company had made no borrowings under this credit facility and was not in violation of any of the covenants.
Note 13. Stockholders' Equity
Preferred Stock
The Company's Certificate of Incorporation authorized 2.0 million shares of undesignated preferred stock. The preferred stock may be issued in one or more series. The Board of Directors is authorized to determine or alter the rights, preferences, privileges and restrictions granted to, or imposed upon, any wholly unissued series of preferred stock. As of March 28, 2020 and March 30, 2019, no preferred shares were issued or outstanding.
Common Stock and Debentures Repurchase Programs
The Board of Directors has approved stock repurchase programs enabling the Company to repurchase its common stock in the open market or through negotiated transactions with independent financial institutions. On October 22, 2019, the Board authorized a repurchase program to repurchase the Company's common stock and debentures up to $1.00 billion (2019 Repurchase Program). The 2019 Repurchase Program has no stated expiration date.
Through March 28, 2020, the Company has used $662.6 million of the $1.00 billion authorized under the 2019 Repurchase Program, leaving $337.4 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 March 28, 2020 and March 30, 2019.
During fiscal 2020, the Company repurchased 12.9 million shares of common stock in the open market and through accelerated share repurchase agreements with independent financial institutions for a total of $1.21 billion. During fiscal 2019, the Company repurchased 2.4 million in the open market with independent financial institutions for a total of $161.6 million.
The provision for income taxes consists of the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years Ended
|
(In thousands)
|
|
March 28, 2020
|
|
March 30, 2019
|
|
March 31, 2018
|
Federal:
|
|
|
|
|
|
|
Current
|
|
$
|
(2,056
|
)
|
|
$
|
90,674
|
|
|
$
|
565,765
|
|
Deferred
|
|
11,527
|
|
|
(30,746
|
)
|
|
(370,893
|
)
|
|
|
9,471
|
|
|
59,928
|
|
|
194,872
|
|
State:
|
|
|
|
|
|
|
Current
|
|
5,480
|
|
|
4,623
|
|
|
2,520
|
|
Deferred
|
|
9,289
|
|
|
2,545
|
|
|
7,813
|
|
|
|
14,769
|
|
|
7,168
|
|
|
10,333
|
|
Foreign:
|
|
|
|
|
|
|
Current
|
|
26,915
|
|
|
16,282
|
|
|
23,483
|
|
Deferred
|
|
(9,892
|
)
|
|
(4,796
|
)
|
|
(1,290
|
)
|
|
|
17,023
|
|
|
11,486
|
|
|
22,193
|
|
Total
|
|
$
|
41,263
|
|
|
$
|
78,582
|
|
|
$
|
227,398
|
|
The domestic and foreign components of income before income taxes were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(In thousands)
|
|
March 28, 2020
|
|
March 30, 2019
|
|
March 31, 2018
|
Domestic
|
|
$
|
145,339
|
|
|
$
|
173,082
|
|
|
$
|
21,198
|
|
Foreign
|
|
688,645
|
|
|
795,250
|
|
|
670,181
|
|
Income before income taxes
|
|
$
|
833,984
|
|
|
$
|
968,332
|
|
|
$
|
691,379
|
|
On December 22, 2017, the TCJA was enacted into law. It made significant tax law changes and modifications including the reduction of the U.S. federal corporate income tax rate from 35% to 21%, the requirement for companies to pay a one-time transition tax on earnings of certain foreign subsidiaries that were previously tax deferred and the creation of new taxes on certain foreign-sourced earnings. Some provisions of the TCJA began to impact the Company in fiscal 2018, while other provisions impacted the Company beginning in fiscal 2019.
SAB 118 allows companies to record provisional amounts and recognize the effect of the tax law changes during a measurement period. The Company recorded provisional income tax expense of $214.7 million in its fiscal 2018 results. During fiscal 2019, the Company recorded income tax expense of $2.4 million as measurement period adjustments to the provisional amounts recorded in fiscal 2018. The measurement period adjustments include the impact of the Company's accounting policy election to recognize deferred taxes for temporary basis differences that are expected to reverse as GILTI income in future years. The measurement period ended in the third quarter of fiscal 2019.
The Company recorded excess tax benefits associated with stock-based compensation of $37.4 million, $14.2 million, and $21.5 million in the provision for income taxes during fiscal 2020, 2019, and 2018 respectively.
As of March 28, 2020, the Company had federal net operating loss carryforwards of $195.8 million from acquisition activity. The net operating loss carryforwards have expirations between fiscal 2021 and fiscal 2037 and some are subject to change of ownership limitations provided by the Internal Revenue Code. As of March 28, 2020, the Company had state net operating loss carryforwards of $186.5 million primarily from acquisition activity. The state net operating loss carryforwards include $175.6 million which is not likely to be recovered and has been reduced by a valuation allowance.
As of March 28, 2020, the Company had state research tax credit carryforwards of approximately $215.3 million. The credits have no expiration date. Some of the state credit carryforwards are subject to change of ownership limitations provided by state provisions similar to that of the Internal Revenue Code. The state credit carryforwards include $172.6 million that is not likely to be recovered and has been reduced by a valuation allowance. As of March 28, 2020, the Company had foreign credit carryforwards of $2.3 million, all of which is not likely to be recovered and has been reduced by a valuation allowance.
The provision for income taxes reconciles to the amount derived by applying the federal statutory income tax rate to income before provision for taxes as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years Ended
|
(In thousands)
|
|
March 28, 2020
|
|
March 30, 2019
|
|
March 31, 2018
|
Income before provision for taxes
|
|
$
|
833,984
|
|
|
$
|
968,332
|
|
|
$
|
691,379
|
|
Federal statutory tax rate
|
|
21.0
|
%
|
|
21.0
|
%
|
|
31.5
|
%
|
Computed expected tax
|
|
175,137
|
|
|
203,350
|
|
|
217,784
|
|
State taxes, net of federal benefit
|
|
16,085
|
|
|
6,379
|
|
|
9,785
|
|
Foreign earnings at lower tax rates
|
|
(69,103
|
)
|
|
(98,387
|
)
|
|
(188,174
|
)
|
Tax credits
|
|
(35,846
|
)
|
|
(31,679
|
)
|
|
(19,708
|
)
|
Transition tax
|
|
—
|
|
|
21,063
|
|
|
208,523
|
|
Deferred tax remeasurement
|
|
—
|
|
|
—
|
|
|
21,834
|
|
Excess benefits from stock-based compensation
|
|
(37,428
|
)
|
|
(14,196
|
)
|
|
(21,520
|
)
|
Fiscal 2014 amended returns*
|
|
(9,398
|
)
|
|
—
|
|
|
—
|
|
Other
|
|
1,816
|
|
|
(7,948
|
)
|
|
(1,126
|
)
|
Provision for income taxes
|
|
$
|
41,263
|
|
|
$
|
78,582
|
|
|
$
|
227,398
|
|
*Interest income on refunds and release of unrecognized tax benefits for related research credits. Refer to gross unrecognized tax benefits discussion below for more detail.
The Company has manufacturing operations in Singapore where the Company has been granted "Pioneer Status" that is effective through fiscal 2021. The Pioneer Status reduces the Company's tax on the majority of Singapore income from 17% to zero percent. During the quarter ended September 28, 2019, the Company received awards from the Singapore Economic Development Board for a Development and Expansion Incentive that will reduce its local tax on Singapore income from a statutory rate of 17% to 5% for the fiscal years 2022 through 2031. The benefits of Pioneer Status in Singapore for fiscal 2020, fiscal 2019 and fiscal 2018 were approximately $42.3 million ($0.17 per diluted share), $48.0 million ($0.19 per diluted share), and $61.5 million ($0.24 per
diluted share), respectively. The tax effect of operations in low tax jurisdictions on the Company's overall tax rate is reflected in the table above.
The major components of deferred tax assets and liabilities consisted of the following:
|
|
|
|
|
|
|
|
|
|
(In thousands)
|
|
March 28, 2020
|
|
|
March 30, 2019
|
|
Deferred tax assets:
|
|
|
|
|
Stock-based compensation
|
|
$
|
18,600
|
|
|
$
|
18,514
|
|
Accrued expenses
|
|
12,159
|
|
|
7,744
|
|
Tax credit carryforwards
|
|
172,998
|
|
|
155,036
|
|
Deferred compensation plan
|
|
28,394
|
|
|
27,186
|
|
Low income housing and other investments
|
|
2,880
|
|
|
6,366
|
|
GILTI deferred taxes
|
|
24,306
|
|
|
38,410
|
|
Tax loss carryforwards
|
|
57,969
|
|
|
—
|
|
Intangible assets
|
|
1,755
|
|
|
—
|
|
Operating leases
|
|
11,317
|
|
|
—
|
|
Other
|
|
7,465
|
|
|
22,997
|
|
Subtotal
|
|
337,843
|
|
|
276,253
|
|
Valuation allowance
|
|
(150,907
|
)
|
|
(118,773
|
)
|
Total deferred tax assets
|
|
186,936
|
|
|
157,480
|
|
Deferred tax liabilities:
|
|
|
|
|
Unremitted foreign earnings
|
|
(8,432
|
)
|
|
(5,142
|
)
|
Intangible assets
|
|
—
|
|
|
(20,775
|
)
|
Distributor price adjustments
|
|
(7,540
|
)
|
|
(11,464
|
)
|
Operating leases
|
|
(11,317
|
)
|
|
—
|
|
Other
|
|
(12,499
|
)
|
|
(4,975
|
)
|
Total deferred tax liabilities
|
|
(39,788
|
)
|
|
(42,356
|
)
|
Total net deferred tax assets
|
|
$
|
147,148
|
|
|
$
|
115,124
|
|
Long-term deferred tax assets of $149.4 million and $126.7 million as of March 28, 2020 and March 30, 2019, respectively, were included in other assets on the consolidated balance sheet.
As of March 28, 2020 and March 30, 2019, gross deferred tax assets were offset by valuation allowances of $150.9 million and $118.8 million, respectively, which were primarily associated with federal and state net operating losses and state tax credit carryforwards.
The aggregate changes in the balance of gross unrecognized tax benefits were as follows:
|
|
|
|
|
|
|
|
|
|
(In thousands)
|
|
March 28, 2020
|
|
|
March 30, 2019
|
Balance as of beginning of fiscal year
|
|
$
|
147,616
|
|
|
$
|
125,148
|
|
Increases in tax positions for prior years
|
|
4,481
|
|
|
18,156
|
|
Decreases in tax positions for prior years
|
|
(90,521
|
)
|
|
(666
|
)
|
Increases in tax positions for current year
|
|
27,524
|
|
|
5,132
|
|
Settlements
|
|
—
|
|
|
—
|
|
Lapses in statutes of limitation
|
|
(260
|
)
|
|
(154
|
)
|
Balance as of end of fiscal year
|
|
$
|
88,840
|
|
|
$
|
147,616
|
|
The Company’s total gross unrecognized tax benefits decreased by $58.8 million during fiscal 2020. Of the net change in uncertain tax benefits during the year, there was an $85.5 million decrease related to an additional deduction claimed on federal and state
amended tax returns (refund claim) for fiscal 2014 for redemption premium paid in that year in connection with the early redemption of the Company’s 3.125% Junior Convertible debenture due March 15, 2037. During the third quarter of fiscal 2020, the Company received written notification from the Internal Revenue Service that the Joint Committee on Taxation had completed its review of the Company's refund claim and had taken no exception. The tax benefit of the refund claim, net of state tax adjustments, of $81.9 million was recognized as an increase to additional paid-in capital in the third quarter of fiscal 2020. The decrease in gross unrecognized tax benefits was partially offset by new gross unrecognized tax benefits associated with acquisition and post-acquisition restructuring activities. If the remaining balance of $88.8 million and $147.6 million of unrecognized tax benefits as of March 28, 2020 and March 30, 2019, respectively, were realized in a future period, it would result in a tax benefit of $47.4 million and $35.3 million, respectively, thereby reducing the effective tax rate.
The Company's policy is to include interest and penalties related to income tax liabilities within the provision for income taxes on the consolidated statements of income. The balances of accrued interest and penalties recorded in the consolidated balance sheets and the amounts of interest and penalties included in the Company's provisions for income taxes were not material for any period presented.
The statutes of limitations have closed for U.S. federal income tax purposes for years through fiscal 2014 as well as fiscal 2016, for U.S. state income tax purposes for years through fiscal 2010, and for Ireland income tax purposes for years through fiscal 2015.
The Company believes its provision for unrecognized tax benefits is adequate for adjustments that may result from tax audits. However, the outcome of tax audits cannot be predicted with certainty. If any issues addressed in the Company's tax audits are resolved in a manner not consistent with management's expectations, the Company could be required to adjust its provision for income taxes in the period such resolution occurs. 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 audits and their possible outcomes, an estimate of the range of increase or decrease that could occur in the next twelve months cannot be made at this time.
On July 27, 2015, the United States Tax Court (Tax Court) issued an opinion in Altera Corp. v. Commissioner, and, in a 15-0 decision, concluded that related parties in a cost sharing arrangement are not required to share expenses related to stock-based compensation. The Commissioner appealed the Tax Court decision to the Ninth Circuit Court of Appeals (Ninth Circuit). The Ninth Circuit overturned the Tax Court’s decision in an opinion issued on July 24, 2018, but subsequently withdrew it. After rehearing the arguments on October 16, 2018, the Ninth Circuit issued a subsequent opinion on June 7, 2019. In a 2-1 decision, the Ninth Circuit overturned the Tax Court’s decision. On July 22, 2019, Altera filed a petition for an en banc rehearing with the Ninth Circuit. On November 12, 2019, the Ninth Circuit issued an order denying Altera's petition. On February 10, 2020, Altera filed a writ of certiorari with the U.S. Supreme Court for review of the case. As such, the decision is not final. The Company has concluded that the law is unsettled and continue to record tax benefits as we exclude stock-based compensation costs from our cost sharing arrangement. As of March 28, 2020, the cumulative potential impact of a final adverse decision to the consolidated statement of income was $55 million to $60 million for taxes and interest. The Company will continue to monitor developments in the Altera case and the potential effect on our consolidated financial statements.
Note 15. 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.
Geographic revenue information for fiscal 2020, 2019 and 2018 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. Long-lived assets include property, plant and equipment, which were based on the physical location of the asset as of the end of each fiscal year.
Net revenues by geographic region were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years Ended
|
(In thousands)
|
March 28, 2020
|
|
March 30, 2019
|
|
March 31, 2018
|
North America:
|
|
|
|
|
|
United States
|
$
|
807,260
|
|
|
$
|
748,245
|
|
|
$
|
652,222
|
|
Other (individual countries less than 10%)
|
107,692
|
|
|
100,478
|
|
|
96,694
|
|
Total North America
|
914,952
|
|
|
848,723
|
|
|
748,916
|
|
|
|
|
|
|
|
Asia Pacific:
|
|
|
|
|
|
China
|
912,729
|
|
|
850,595
|
|
|
638,180
|
|
Other (individual countries less than 10%)
|
562,493
|
|
|
534,987
|
|
|
370,307
|
|
Total Asia Pacific
|
1,475,222
|
|
|
1,385,582
|
|
|
1,008,487
|
|
|
|
|
|
|
|
Europe (individual countries less than 10%)
|
533,984
|
|
|
586,893
|
|
|
501,049
|
|
Japan
|
238,508
|
|
|
237,842
|
|
|
208,571
|
|
Total Foreign
|
2,247,714
|
|
|
2,210,317
|
|
|
1,718,107
|
|
|
|
|
|
|
|
Worldwide Total
|
$
|
3,162,666
|
|
|
$
|
3,059,040
|
|
|
$
|
2,467,023
|
|
Net long-lived assets by country at fiscal year-ends were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years Ended
|
(In thousands)
|
March 28, 2020
|
|
March 30, 2019
|
|
March 31, 2018
|
United States
|
$
|
222,715
|
|
|
$
|
212,385
|
|
|
$
|
206,406
|
|
Foreign:
|
|
|
|
|
|
Ireland
|
38,208
|
|
|
36,984
|
|
|
38,257
|
|
Singapore
|
62,642
|
|
|
62,257
|
|
|
45,013
|
|
India
|
36,397
|
|
|
12,015
|
|
|
10,117
|
|
Other (individual countries less than 10%)
|
12,612
|
|
|
5,288
|
|
|
4,324
|
|
Total foreign
|
149,859
|
|
|
116,544
|
|
|
97,711
|
|
Worldwide total
|
$
|
372,574
|
|
|
$
|
328,929
|
|
|
$
|
304,117
|
|
|
|
Note 16.
|
Litigation Settlements and 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. This motion is still pending. 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 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. ADI filed a motion to dismiss the Company’s willful infringement claims on March 20, 2020. The Company filed amended counterclaims on April 3, 2020. The parties’ claims are set for back-to-back trials beginning January 24, 2022 for ADI’s claims and January 31, 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. 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.
The Company intends to continue to protect and defend its IP vigorously.
Other Matters
On June 11, 2015, John P. Neblett, as Chapter 7 Trustee of Valley Forge Composite Technologies, Inc., filed a complaint against Xilinx and others in the U.S. Bankruptcy Court for the Middle District of Pennsylvania (Bankruptcy No. 1:13-bk-05253-JJT). The complaint alleges causes of actions against Xilinx for negligence and civil conspiracy relating to alleged violations of U.S. export laws. It seeks at least $50.0 million in damages, together with punitive damages, from the defendants. On September 21, 2015, the action was withdrawn from the U.S. Bankruptcy Court for the Middle District of Pennsylvania and transferred to the U.S. District Court for the Eastern District of Kentucky. On November 2, 2015, Xilinx, along with other defendants, filed a motion to dismiss the complaint. On November 3, 2015, Xilinx filed a motion for sanctions pursuant to Federal Rule of Civil Procedure 11. On June 27, 2016, the Court denied both motions. On September 11, 2017, Xilinx, along with other defendants, filed motions for summary judgment seeking to dispose of all claims against them. On July 3, 2018, the Court granted both of Xilinx’s Motions for Summary Judgment, disposing of all claims asserted against Xilinx. On August 1, 2018, the Trustee filed a Notice of Appeal. On August 9, 2018, the Court of Appeals for the Sixth Circuit issued an Order to Show Cause requesting that the appellant address a possible jurisdictional defect. On August 29, 2018, the appellant responded to the Order to Show Cause. On September 10, 2018, appellees, including Xilinx, filed a joint reply. On January 7, 2019, the Court of Appeals issued an order dismissing the appeal for lack of jurisdiction. On February 19, 2019, the District Court issued an order permitting any party seeking to certify the case for appeal to file a motion. On March 11, 2019, defendant Avnet filed a motion to certify the case for appeal. On May 14, 2019 the Court denied Avnet’s motion. On June 4, 2019, Avnet and the counterclaim and crossclaim defendants stipulated to dismissal of Avnet’s remaining counterclaims and crossclaims. The Court entered final judgment on June 25, 2019. 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.
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 17.
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Goodwill and Acquisition-Related Intangibles
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Summaries of goodwill and acquisitions-related intangibles balances as of March 28, 2020 and March 30, 2019 were as follows:
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(In thousands)
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March 30, 2019
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Acquisitions
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Other
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March 28, 2020
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Goodwill
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$
|
340,718
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|
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280,153
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|
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(1,675
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)
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$
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619,196
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Weighted-Average
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(In thousands)
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March 28, 2020
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March 30, 2019
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Amortization Life
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Core technology, gross
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$
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209,131
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|
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$
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107,250
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Less accumulated amortization
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(105,007
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)
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(82,611
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)
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Core technology, net
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104,124
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24,639
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4.1 years
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Other intangibles, gross
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95,759
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51,016
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Less accumulated amortization
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(56,531
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)
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(47,642
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)
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Other intangibles, net
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39,228
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3,374
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4.1 years
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In-process research and development
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56,992
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52,710
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Total acquisition-related intangibles, gross
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361,882
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210,976
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Less accumulated amortization
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(161,538
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)
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(130,253
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)
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Total acquisition-related intangibles, net
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$
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200,344
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$
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80,723
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During the second quarter of fiscal 2020, the Company recorded $237.2 million of goodwill and $106.0 million of intangibles attributable to the acquisition of Solarflare Communications, Inc. (Solarflare). See "Note 20. Business Combination" to the Company's consolidated financial statements.
Based on the carrying value of acquisition-related intangibles recorded as of March 28, 2020, and assuming no subsequent impairment of the underlying assets, the annual amortization expense for acquisition-related intangibles is expected to be as follows:
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Fiscal
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(In thousands)
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2021
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$
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38,212
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2022
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35,401
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2023
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33,693
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2024
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29,443
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2025
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6,603
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Total
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$
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143,352
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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 18. Employee Benefit Plans
Xilinx offers various retirement benefit plans for U.S. and non-U.S. employees. Total contributions to these plans were $16.5 million, $15.1 million and $14.7 million in fiscal 2020, 2019 and 2018, respectively. For employees in the U.S., Xilinx instituted a Company matching program pursuant to which the Company will match contributions to Xilinx's 401(k) Plan (the 401(k) Plan) based on the amount of salary deferral contributions the participant makes to the 401(k) Plan. Xilinx will match up to 50% of the first 8% of an employee's compensation that the employee contributed to their 401(k) accounts. The maximum Company contribution per year is $4,500 per employee. As permitted under Section 401(k) of the Internal Revenue Code, the 401(k) Plan allows tax deferred salary deductions for eligible employees. The Compensation Committee of the Board of Directors administers the 401(k) Plan. Participants in the 401(k) Plan may make salary deferrals of up to 75% of the eligible annual salary, limited by the maximum dollar amount allowed by the Internal Revenue Code. Participants who have reached the age of 50 before the close of the plan year may be eligible to make catch-up salary deferral contributions, up to 75% of eligible annual salary, limited by the maximum dollar amount allowed by the Internal Revenue Code.
The Company allows its U.S.-based officers, director-level employees and its board members to defer a portion of their compensation under the Deferred Compensation Plan (the Plan). The Compensation Committee administers the Plan. As of March 28, 2020, there were 258 participants in the Plan who self-direct their contributions into a menu of hypothetical investment options offered by the Plan that tracks a portfolio of various deemed investment funds. The Plan does not allow Plan participants to invest directly in Xilinx's stock. In the event Xilinx becomes insolvent, Plan assets are subject to the claims of the Company's general creditors. There are no Plan provisions that provide for any guarantees or minimum return on investments. As of March 28, 2020, Plan assets of $111.1 million were included in other assets within the consolidated balance sheet and obligations of $121.9 million were included in accrued payroll and related liabilities. As of March 30, 2019, Plan assets were $109.3 million and obligations were $118.6 million.
Note 19. Restructuring Charges and Executive Transition Costs
During the fourth quarter of fiscal 2020, the Company announced cost-saving measures designed to drive structural operating efficiencies across the Company, including a targeted global workforce reduction in force. The reorganization plan is expected to be substantially completed by the end of the first quarter of fiscal 2021. The Company recorded restructuring charges of $28.4 million in fiscal 2020, primarily related to severance pay expenses and separately presented on the consolidated statements of income. As of the end of fiscal 2020, there was $13.5 million accrual for severance and other benefits that are expected to be paid primarily during fiscal 2021.
The following table summarizes the restructuring accrual activity for fiscal 2020:
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(In thousands)
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Employee severance and benefits
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Others
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Total
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Restructuring charges
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$
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27,628
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$
|
734
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$
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28,362
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Cash payments
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(14,615
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)
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(121
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)
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(14,736
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)
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Non-cash charges
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|
(172
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)
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—
|
|
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(172
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)
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Balance as of March 28, 2020
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|
$
|
12,841
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|
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$
|
613
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|
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$
|
13,454
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During the fourth quarter of fiscal 2018, the Company announced the transition of its President and Chief Executive Officer position, whereby Moshe Gavrielov resigned from those roles and Victor Peng assumed these roles. Additionally, the Company also implemented restructuring measures to realign resources and drive overall operating efficiencies. The Company recorded total transition charges of $33.4 million in the fourth quarter of fiscal 2018, primarily related to severance pay expenses and other benefits. As of the end of fiscal 2020 and 2019, the remaining accrual for severance and other benefits related to executive transition costs was immaterial.
Note 20. Business Combinations
In July 2019, the Company completed the acquisition of Solarflare by acquiring all of its outstanding ordinary shares. Solarflare is a leading provider of high-performance, low latency networking solutions for customers spanning FinTech to cloud computing. This acquisition enables the Company to combine its industry leading solutions with Solarflare's ultra-low latency network interface card (NIC) technology and onload application acceleration software, to enable new converged SmartNIC solutions.
Total purchase consideration to acquire Solarflare was approximately $400.0 million, including $8.4 million of fair value from the Company's preexisting investment in Solarflare and net of $6.8 million of cash acquired. The Company incurred $4.2 million of acquisition related costs, which was recorded as operating expenses in its consolidated statements of income. Additionally, the Company was required to assess the fair value of its preexisting investment in Solarflare and, as a result, recorded an immaterial gain in its consolidated statements of income as part of interest and other income (expense), net.
Subsequent to the acquisition, the financial results for Solarflare are included in the Company's consolidated financial statements. Prior to the acquisition, the financial results for Solarflare were not significant for pro forma financial information.
The Company allocated the purchase price to tangible and identified intangible assets acquired and liabilities assumed based on estimated fair values. As additional information becomes available, such as the finalization of the estimated fair value of tax-related items, the Company may further update the preliminary purchase price allocation during the remainder of the measurement period (up to one year from the acquisition date). The preliminary fair values of the assets acquired and liabilities assumed in the acquisition of Solarflare, by major class, were recognized as follows:
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Amount
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(In thousands)
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Cash and cash equivalents
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$
|
6,765
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Tangible assets
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19,308
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Identifiable intangible assets
|
106,000
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Goodwill
|
237,163
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Deferred tax assets
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44,016
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Current liabilities
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(9,229
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)
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Non-current liabilities
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(3,797
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)
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Total
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$
|
400,226
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|
The goodwill of $237.2 million arising from the acquisition is attributed to the expected synergies and other benefits that will be generated from the combination of the Company and Solarflare. The goodwill recognized is not deductible for tax purposes.
The identified intangible assets assumed in the acquisition of Solarflare were recognized as follows, based upon the preliminary fair values as of the closing date of the acquisition.
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Amount
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Amortization Life
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(In thousands)
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Trade Names & Trademarks
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$
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2,000
|
|
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2.0 years
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Developed Technology
|
34,000
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|
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5.0 years
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Customer Relationships
|
40,000
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|
|
5.0 years
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In-Process Research and Development
|
30,000
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|
|
N/A
|
Total identifiable intangible assets
|
$
|
106,000
|
|
|
|
During fiscal 2020, the Company acquired Airrays GmbH, a German-based company that develops a game-changing radio antenna technology in mobile communications for approximately $29.0 million . This acquisition is part of the Company’s wireless strategy to build end-to-end radio reference designs, allowing the Company to maximize the value in its RFSoC technology. The Company recognized $14.1 million of goodwill and $18.2 million of acquisition-related intangibles from this acquisition.
During fiscal 2020, the Company acquired NGCodec, Inc., a leader in cloud video business for approximately $54.0 million. This acquisition accelerates the Company's strategic roadmap to help advance the key verticals within the data center. The Company recognized $28.9 million of goodwill and $26.7 million of acquisition-related intangibles from this acquisition.
The COVID-19 pandemic did not have any impact on the integrations of the Solarflare and other acquisitions as the integrations were completed by mid-February 2020, before the social distancing requirements were in place and the Company mandated its employees to work from home starting in mid-March 2020.
Note 21. Subsequent Event
On April 20, 2020, the Company's Board of Directors declared a cash dividend of $0.38 per common share for the first quarter of fiscal 2021. The dividend is payable on June 3, 2020 to stockholders of record as of May 13, 2020.