UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C.  20549

FORM 10-Q/A

(Amendment No. 1)

 

(Mark One)
x	Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
	For the quarterly period ended December 30, 2006 or
o	Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
	For the transition period from                   to                   .

Commission File Number   0-18548

Xilinx, Inc.

(Exact name of registrant as specified in its charter)

N/A

(Former name, former address, and former fiscal year, if changed since last report)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes  x    No  o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer.  See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act.  (Check one):

Large accelerated filer x         Accelerated filer o         Non-accelerated filer o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes  o    No  x

Shares outstanding of the Registrant’s common stock:

Class		Shares Outstanding at January 23, 2007
Common Stock, $.01 par value		331,864,381

 

EXPLANATORY NOTE

This Form 10-Q/A is being filed solely to correct a typographical error in Part I, Item 1 of Xilinx’s Quarterly Report on Form 10-Q for the period ended December 30, 2006 filed with the Securities and Exchange Commission on February 2, 2007. Specifically, in the Condensed Consolidated Statements of Cash Flows, under the sub-heading “Nine Months Ended,” the right hand date should be Dec. 31, 2005 and not Dec. 31, 2007.

The amendment conforms the Form 10-Q as filed to the version that was certified by Xilinx’s Chief Executive Officer and by the Chief Financial Officer, pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as amended. No other changes are being made by means of this filing.

PART I.        FINANCIAL INFORMATION

ITEM 1.  FINANCIAL STATEMENTS

XILINX, INC.

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(Unaudited)

		Three Months Ended						Nine Months Ended
		Dec. 30,			Dec. 31,			Dec. 30,			Dec. 31,
(In thousands, except per share amounts)		2006			2005			2006			2005
Net revenues		$	450,725		$	449,605		$	1,399,267		$	1,253,913
Cost of revenues		177,963			166,476			550,602			478,926
Gross margin		272,762			283,129			848,665			774,987
Operating expenses:
Research and development		96,092			81,073			289,625			239,730
Selling, general and administrative		89,973			80,683			279,853			234,414
Amortization of acquisition-related intangibles		2,007			1,536			6,069			5,047
Litigation settlements and contingencies		2,500			—			2,500			3,165
Stock-based compensation related to prior years		—			—			2,209			—
Total operating expenses		190,572			163,292			580,256			482,356
Operating income		82,190			119,837			268,409			292,631
Impairment loss on investments		(1,513		)	—			(1,950		)	—
Interest income and other, net		22,440			10,943			63,413			36,196
Income before income taxes		103,117			130,780			329,872			328,827
Provision for income taxes		15,608			49,811			66,826			85,419
Net income		$	87,509		$	80,969		$	263,046		$	243,408
Net income per common share:
Basic		$	0.26		$	0.23		$	0.77		$	0.70
Diluted		$	0.26		$	0.23		$	0.76		$	0.68
Cash dividends declared per common share		$	0.09		$	0.07		$	0.27		$	0.21
Shares used in per share calculations:
Basic		334,062			348,203			339,571			349,674
Diluted		339,669			353,237			345,347			355,881

 

See notes to condensed consolidated financial statements.

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XILINX, INC.

 CONDENSED CONSOLIDATED BALANCE SHEETS

		Dec. 30,			April 1,
(In thousands, except par value amounts)		2006			2006
		(Unaudited)			(1)
ASSETS
Current assets:
Cash and cash equivalents		$	540,048		$	783,366
Short-term investments		617,605			201,551
Investment in United Microelectronics Corporation, current portion		—			37,285
Accounts receivable, net		147,711			194,205
Inventories		185,232			201,029
Deferred tax assets		116,450			110,928
Prepaid expenses and other current assets		117,687			119,884
Total current assets		1,724,733			1,648,248
Property, plant and equipment, at cost		708,253			666,360
Accumulated depreciation and amortization		(340,505		)	(308,103		)
Net property, plant and equipment		367,748			358,257
Long-term investments		641,223			616,296
Investment in United Microelectronics Corporation, net of current portion		72,284			239,209
Goodwill		124,898			125,084
Acquisition-related intangibles, net		16,566			22,651
Other assets		151,615			163,802
Total Assets		$	3,099,067		$	3,173,547
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable		$	60,071		$	71,004
Accrued payroll and related liabilities		92,832			79,260
Income taxes payable		46,682			30,048
Deferred income on shipments to distributors		96,144			126,558
Other accrued liabilities		28,778			38,154
Total current liabilities		324,507			345,024
Deferred tax liabilities		105,425			92,153
Other long-term liabilities		1,321			7,485
Commitments and contingencies
Stockholders’ equity:
Preferred stock, $.01 par value (none issued)		—			—
Common stock, $.01 par value		3,317			3,426
Additional paid-in capital		1,330,223			1,375,120
Retained earnings		1,327,592			1,334,530
Accumulated other comprehensive income		6,682			15,809
Total stockholders’ equity		2,667,814			2,728,885
Total Liabilities and Stockholders’ Equity		$	3,099,067		$	3,173,547

 

(1)          Derived from audited financial statements

See notes to condensed consolidated financial statements.

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XILINX, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

		Nine Months Ended
(In thousands)		Dec. 30, 2006			Dec. 31, 2005
Cash flows from operating activities:
Net income		$	263,046		$	243,408
Adjustments to reconcile net income to net cash provided by operating
activities:
Depreciation		38,103			39,177
Amortization		13,390			11,815
Stock-based compensation		70,157			—
Stock-based compensation related to prior years, net of tax		1,559			—
Net (gain) loss on sale of available-for-sale securities		(1,302		)	1,375
Litigation settlements and contingencies		2,500			3,165
Impairment loss on investments		1,950			—
Noncash compensation expense		—			735
Tax benefit from exercise of stock options		19,973			25,027
Excess tax benefit from stock-based compensation		(19,056		)	—
Changes in assets and liabilities:
Accounts receivable, net		46,494			71,188
Inventories		18,204			(26,160		)
Deferred income taxes		(19,284		)	(5,179		)
Prepaid expenses and other current assets		22,104			(38,130		)
Other assets		(17,651		)	(47,764		)
Accounts payable		(10,933		)	15,638
Accrued liabilities		(6,662		)	20,734
Income taxes payable		53,757			81,404
Deferred income on shipments to distributors		(30,414		)	9,207
Net cash provided by operating activities		445,935			405,640
Cash flows from investing activities:
Purchases of available-for-sale securities		(1,295,107		)	(1,308,277		)
Proceeds from sale and maturity of available-for-sale securities		1,042,059			1,435,765
Purchases of property, plant and equipment		(47,594		)	(44,556		)
Other investing activities		(1,564		)	(24,109		)
Net cash provided by (used in) investing activities		(302,206		)	58,823
Cash flows from financing activities:
Repurchases of common stock		(400,000		)	(276,584		)
Proceeds from issuance of common stock through various stock plans		85,117			59,716
Payment of dividends to stockholders		(91,220		)	(73,076		)
Excess tax benefit from stock-based compensation		19,056			—
Net cash used in financing activities		(387,047		)	(289,944		)
Net increase (decrease) in cash and cash equivalents		(243,318		)	174,519
Cash and cash equivalents at beginning of period		783,366			449,388
Cash and cash equivalents at end of period		$	540,048		$	623,907
Supplemental schedule of non-cash activities:
Accrual of affordable housing credit investments		$	—		$	19,821
Supplemental disclosure of cash flow information:
Income taxes paid, net of refunds		$	20,211		$	7,503

 

See notes to condensed consolidated financial statements.

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XILINX, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

1.               Basis of Presentation

The accompanying interim condensed consolidated financial statements have been prepared in conformity with United States (U.S.) generally accepted accounting principles (GAAP) for interim financial information and the instructions to Form 10-Q and Article 10 of Regulation S-X, and should be read in conjunction with the Xilinx, Inc. (Xilinx or the Company) consolidated financial statements filed on Form 10-K for the fiscal year ended April 1, 2006. The interim financial statements are unaudited, but reflect all adjustments which are, in the opinion of management, of a normal, recurring nature necessary to provide a fair statement of results for the interim periods presented. The results of operations for the interim periods shown in this report are not necessarily indicative of the results that may be expected for the fiscal year ending March 31, 2007 or any future period.

The Company uses a 52- to 53-week fiscal year ending on the Saturday nearest March 31. Fiscal 2007 is a 52-week year ending on March 31, 2007. Fiscal 2006, which ended on April 1, 2006, was a 52-week fiscal year. The first, second and third quarters of fiscal 2007 and 2006 were all 13-week quarters.

2.               Recent Accounting Pronouncements

In February 2006, the Financial Accounting Standards Board (FASB) issued Statement of Financial Accounting Standards (SFAS) No. 155, “Accounting for Certain Hybrid Financial Instruments,” an amendment of FASB Statements No. 133 and 140 (SFAS 155). SFAS 155 permits interests in hybrid financial instruments that contain an embedded derivative, which would otherwise require bifurcation, to be accounted for as a single financial instrument at fair value, with changes in fair value recognized in earnings. This election is permitted on an instrument-by-instrument basis for all hybrid financial instruments held, obtained, or issued as of the adoption date. SFAS 155 is effective for all financial instruments acquired or issued after the beginning of an entity’s first fiscal year that begins after September 15, 2006 (fiscal 2008 for Xilinx). The Company is currently assessing the impact of SFAS 155 on its financial condition and results of operations.

In July 2006, the FASB issued FASB Interpretation No. 48, “Accounting for Uncertainty in Income Taxes—an interpretation of FASB Statement No. 109” (FIN 48). This interpretation clarifies the accounting for uncertainty in income taxes recognized in an entity’s financial statements in accordance with SFAS No. 109, “Accounting for Income Taxes.” It prescribes a recognition threshold and measurement attribute for financial statement disclosure of tax positions taken or expected to be taken on a tax return. This interpretation is effective for fiscal years beginning after December 15, 2006. The Company will be required to adopt this interpretation in the first quarter of fiscal 2008. Management is currently evaluating the requirements of FIN 48 and has not yet determined the impact on the Company’s financial condition or results of operations.

3.     Stock-Based Compensation

Effective April 2, 2006, the Company adopted SFAS No. 123(R), “Share-Based Payment” (SFAS 123(R)). SFAS 123(R) requires the Company to measure the cost of all employee stock-based compensation awards that are expected to be exercised 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 (generally over the vesting period of the award). SFAS 123(R) addresses all forms of stock-based payment awards, including shares issued under employee stock purchase plans, stock options, restricted stock and stock appreciation rights. In addition, the Company is required to record compensation expense (as previous awards continue to vest) for the unvested portion of previously granted awards that remain outstanding at the date of adoption. The Company implemented the standard using the modified-prospective method and consequently has not retroactively adjusted results for prior periods. The Company previously accounted for stock-based compensation under Accounting Principles Board (APB) Opinion No. 25, “Accounting for Stock Issued to Employees,” (APB 25) and related interpretations, using the intrinsic value method and, as such, generally recognized no compensation cost for employee stock options. Prior to adopting SFAS 123(R), the Company presented all tax benefits resulting from the exercise of stock options as operating cash flows in its statements of cash flows. SFAS 123(R) requires cash flows resulting from excess tax benefits to be classified as a part of cash flows from financing activities. Excess tax benefits are realized tax benefits from tax deductions for exercised options in excess of the deferred tax asset attributable to stock compensation costs for such options. In addition,

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the Company provided the required pro forma disclosures related to its stock plans prescribed by SFAS 123 “Accounting for Stock-Based Compensation” (SFAS 123), as amended by SFAS No. 148, “Accounting for Stock-Based Compensation-Transition and Disclosure” (SFAS 148).

Under the modified-prospective method of adoption for SFAS 123(R), the compensation cost recognized by the Company beginning in fiscal 2007 includes (a) compensation cost for all stock-based awards granted prior to, but not yet vested as of April 1, 2006, based on the grant-date fair value estimated in accordance with the original provisions of SFAS 123, and (b) compensation cost for all stock-based awards granted subsequent to April 1, 2006, based on the grant-date fair value estimated in accordance with the provisions of SFAS 123(R). The Company uses the straight-line attribution method to recognize stock-based compensation costs over the requisite service period of the award for stock-based awards granted after April 1, 2006. For stock-based awards granted prior to April 2, 2006, the Company continues to use the accelerated amortization method consistent with the amounts disclosed in the pro forma disclosure as prescribed by SFAS 123. 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. To calculate the excess tax benefits available for use in offsetting future tax shortfalls as of the date of implementation, the Company followed the alternative transition method discussed in FASB Staff Position (FSP) No. 123(R)-3, “Transition Election Related to Accounting for Tax Effects of Share-Based Payment Awards” (FSP 123(R)-3).

Options currently granted by the Company generally expire ten years from the grant date. Options granted to existing and newly hired employees generally vest over a four-year period from the date of grant.

Stock-based compensation recognized in the first nine months of fiscal 2007 as a result of the adoption of SFAS 123(R) as well as pro forma disclosures according to the original provisions of SFAS 123 for periods prior to the adoption of SFAS 123(R) use the Black-Scholes option pricing model for estimating fair value of options granted under the Company’s stock option plans and rights to acquire stock granted under the Company’s 1990 Employee Qualified Stock Purchase Plan (Stock Purchase Plan).

The following table summarizes the effects of stock-based compensation resulting from the application of SFAS 123(R) to options granted under the Company’s stock option plans and rights to acquire stock granted under the Stock Purchase Plan:

		Three Months Ended						Nine Months Ended
(In thousands, except per share amounts)		Dec. 30, 2006			Dec. 31, 2005			Dec. 30, 2006			Dec. 31, 2005
Stock-based compensation included in:
Cost of revenues		$	2,292		$	—		$	8,360		$	—
Research and development		10,029			—			32,203			—
Selling, general and administrative		9,123			—			29,595			—
Stock-based compensation related to prior years		—			—			2,209			—
Stock-based compensation effect on income before taxes		21,444			—			72,367			—
Provision for income taxes		(6,566		)	—			(17,568		)	—
Net stock-based compensation effect on net income		$	14,878		$	—		$	54,799		$	—
Stock-based compensation effect on basic net income per common share		$	0.04		$	—		$	0.16		$	—
Stock-based compensation effect on diluted net income per common share		$	0.04		$	—		$	0.16		$	—
Stock-based compensation effect on cash flows from operations		$	(5,999	)	$	—		$	(19,056	)	$	—
Stock-based compensation effect on cash flows from financing activities		$	5,999		$	—		$	19,056		$	—

 

In June 2006, under the direction of a Special Committee of the Board of Directors, outside counsel commenced an investigation of the Company’s historical stock option-granting practices and found no evidence of fraud in the Company’s practices in granting of stock options, nor any evidence of manipulation of the timing or exercise price of stock option grants. The investigation further found no issues of management integrity in the issuance of stock options. The investigation determined that in nearly all cases, stock options were issued as of pre-set dates.

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Based on the results of the investigation and the Company’s analysis of the facts, the Company took a $2.2 million charge to its earnings for the first quarter of fiscal 2007 related to minor differences between recorded grant dates and measurement dates for certain stock option grants between 1997 and 2006. This one-time charge did not have a material effect on the Company’s historical financial statements, and, thus, the Company did not restate its financial statements for prior years. See Note 14 for additional information about the conclusion of the investigation, which arose in response to the stockholder derivative complaints and a notification by the U.S. Securities and Exchange Commission (SEC) of an informal inquiry into the Company’s historical stock option-granting practices. The SEC subsequently terminated its informal inquiry of the Company’s stock option-granting practices and the stockholder derivative complaints were consolidated and subsequently dismissed.

In accordance with SFAS 123(R), 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 after April 1, 2006 is recognized in the period the forfeiture estimate is changed. The effect of forfeiture adjustments in the first nine months of fiscal 2007 was insignificant.

The amount that the Company would have capitalized to inventory as of April 1, 2006, if it had applied the provisions of SFAS 123(R) retrospectively, was $4.5 million. Under the provisions of SFAS 123(R), this $4.5 million has been recorded as a credit to additional paid-in-capital. The total stock-based compensation released from the inventory capitalization during the third quarter of fiscal 2007 was $400 thousand ($2.1 million for the first nine months of fiscal 2007), which resulted in an ending inventory balance of $2.4 million related to stock-based compensation at December 30, 2006. During the third quarter of fiscal 2007, the tax benefit realized for the tax deduction from option exercises and other awards totaled $6.7 million ($20.0 million for the first nine months of fiscal 2007). As of December 30, 2006, total unrecognized stock-based compensation costs related to stock options and Stock Purchase Plan was $102.3 million and $22.2 million, respectively. The total unrecognized stock-based compensation cost for stock options and Stock Purchase Plan is expected to be recognized over a weighted-average period of 2.6 years and 0.9 years, respectively.

Prior to the adoption of SFAS 123(R), the Company adopted the disclosure-only alternative allowed under SFAS 123, as amended by SFAS 148. Stock-based compensation expense recognized under SFAS 123(R) was not reflected in the Company’s results of operations for the three and nine months ended December 31, 2005 for stock option awards as all options were granted with an exercise price equal to the market value of the underlying common stock on the date of grant. In addition, the Stock Purchase Plan was deemed non-compensatory under the provisions of APB 25. Forfeitures of awards were recognized as they occurred for the period prior to the adoption.

Pro forma information required under SFAS 123 for periods prior to fiscal 2007 as if the Company had applied the fair value recognition provisions of SFAS 123 to stock-based compensation, was as follows:

		Three Months Ended			Nine Months Ended
(In thousands, except per share amounts)		Dec. 31, 2005			Dec. 31, 2005
Net income as reported		$	80,969		$	243,408
Deduct: Stock-based employee compensation expense determined under fair value method for all awards, net of tax		(21,380		)	(62,327		)
Pro forma net income		$	59,589		$	181,081
Net income per share:
Basic-as reported		$	0.23		$	0.70
Basic-pro forma		$	0.17		$	0.52
Diluted-as reported		$	0.23		$	0.68
Diluted-pro forma		$	0.17		$	0.50

 

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The fair values of stock options and stock purchase plan rights under the Company’s stock option plans and Stock Purchase Plan were estimated as of the grant date using the Black-Scholes option pricing model. In the first quarter of fiscal 2006, the Company modified its volatility assumption to use implied volatility for options granted. Previously, the Company used only historical volatility in deriving its volatility assumption. Management determined that implied volatility is more reflective of market conditions and a better indicator of expected volatility than historical volatility. The expected life of options granted is based on the historical exercise activity as well as the expected disposition of all options outstanding. Calculated under SFAS 123(R) (SFAS 123 for fiscal 2006), the per share weighted-average fair values of stock options granted during the third quarter of fiscal 2007 was $9.19 ($7.80 for the third quarter of fiscal 2006) and for the first nine months of fiscal 2007 was $9.03 ($7.91 for the first nine months of fiscal 2006). The fair value of stock options granted in fiscal 2007 and 2006 were estimated at the date of grant using the following weighted-average assumptions:

		Three Months Ended				Nine Months Ended
		Dec. 30, 2006		Dec. 31, 2005		Dec. 30, 2006		Dec. 31, 2005
Expected life of options (years)		6.4		5.0		6.3 to 6.4		4.9 to 5.0
Expected stock price volatility		0.33 to 0.35		0.31 to 0.33		0.33 to 0.39		0.29 to 0.36
Risk-free interest rate		4.4% to 4.7	%	4.3% to 4.5	%	4.4% to 5.2	%	3.7% to 4.5	%
Dividend yield		1.5	%	1.1	%	1.5% to 1.6	%	1.0% to 1.1	%

 

Under the Company’s Stock Purchase Plan, shares are only issued during the second and fourth quarters of each fiscal year. The per share weighted-average fair values of stock purchase rights granted under the Stock Purchase Plan during the third quarter of fiscal 2007 and 2006 were $5.95 and $7.47, respectively. The fair value of stock purchase plan rights granted in the third quarter of fiscal 2007 and 2006 were estimated at the date of grant using the following weighted-average assumptions:

		2007		2006
Expected life of options (years)		0.5 to 2.0		0.5 to 2.0
Expected stock price volatility		0.37 to 0.38		0.27 to 0.30
Risk-free interest rate		5.0% to 5.1	%	3.6% to 4.0	%
Dividend yield		1.6% to 1.8	%	1.4	%

 

Options outstanding that have vested and are expected to vest in future periods as of December 30, 2006 are as follows:

(Shares and intrinsic value in  thousands)		Number  of Shares		Weighted-Average  Exercise Price Per Share			Weighted-Average  Remaining  Contractual Term (Years)		Aggregate  Intrinsic Value (1)
Vested (i.e. exercisable)		42,552		$	32.26		4.54		$	97,456
Expected to vest		14,454		$	26.99		8.65		6,261
Total vested and expected to vest		57,006		$	30.76		5.59		$	103,717
Total outstanding		57,992		$	30.83		5.64		$	104,270

 

(1) These amounts represent the difference between the exercise price and $23.81, the closing price per share of Xilinx’s stock on December 29, 2006, for all in-the-money options outstanding.

Options outstanding that are expected to vest are net of estimated future option forfeitures in accordance with the provisions of SFAS 123(R), which are estimated when compensation costs are recognized. Options with a fair value of $27.1 million completed vesting during the third quarter of fiscal 2007 and options with a fair value of $77.9 million completed vesting during the first nine months of fiscal 2007.

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A summary of the Company’s option plans activity and related information are as follows:

				Options Outstanding
(Shares in thousands)		Shares  Available for  Options		Number of  Shares		Weighted-  Average  Exercise Price  Per Share
April 2, 2005		33,754		60,643		$	30.18
Granted		(8,489	)	8,489		$	25.91
Exercised		—		(6,090	)	$	11.71
Forfeited/cancelled/expired		3,212		(3,212	)	$	38.64
April 1, 2006		28,477		59,830		$	30.99
Granted		(7,691	)	7,691		$	23.30
Exercised		—		(4,784	)	$	14.02
Forfeited/cancelled/expired		4,745		(4,745	)	$	37.60
December 30, 2006		25,531		57,992		$	30.83

 

The total pre-tax intrinsic value of options exercised during the three and nine months ended December 30, 2006 was $18.1 million and $53.7 million, respectively. This intrinsic value represents the difference between the fair market value of the Company’s common stock on the date of exercise and the exercise price of each option.

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.

On July 26, 2006, the stockholders approved the adoption of the 2007 Equity Incentive Plan and authorized 10.0 million shares to be reserved for issuance thereunder. Since the new plan is not effective until January 1, 2007, the 10.0 million shares to be reserved for issuance are not included as shares available for options in the table above. The 2007 Equity Incentive Plan will replace the Company’s 1997 Stock Option Plan (which expires on May 6, 2007) and the Supplemental Stock Option Plan. See Appendix A to the Company’s 2006 Proxy Statement for the full text of the 2007 Equity Incentive Plan.

Under the Stock Purchase Plan, employees purchased 885 thousand shares for $15.3 million in the second quarter of fiscal 2007 and 631 thousand shares for $15.2 million in the second quarter of fiscal 2006. No shares were issued during the first or third quarters of fiscal 2007 or 2006. The next scheduled purchase under the Stock Purchase Plan is in the fourth quarter of fiscal 2007. On July 26, 2006, the stockholders approved an amendment to increase the authorized number of shares available for issuance under the Stock Purchase Plan by 2.0 million shares. At December 30, 2006, 9.1 million shares were available for future issuance out of 36.5 million shares authorized.

4.               Net Income Per Common Share

The computation of basic net income per common share for all periods presented is derived from the information on the condensed consolidated statements of income, and there are no reconciling items in the numerator used to compute diluted net income per common share. The total shares used in the denominator of the diluted net income per common share calculation includes 5.6 million and 5.8 million common equivalent shares attributable to outstanding stock options for the third quarter and the first nine months of fiscal 2007, respectively, that are not included in basic net income per common share. For the third quarter and the first nine months of fiscal 2006, the total shares used in the denominator of the diluted net income per common share calculation includes 5.0 million and 6.2 million common equivalent shares attributable to outstanding stock options, respectively.

Outstanding out-of-the-money stock options to purchase approximately 41.0 million and 40.8 million shares, for the third quarter and the first nine months of fiscal 2007, respectively, under the Company’s stock option plans were excluded from diluted net income per common share, applying the treasury stock method, as their inclusion would have been antidilutive. These options 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. For the third quarter and the first nine months of fiscal 2006, respectively, 37.6 million and 31.3 million of the Company’s stock options outstanding were excluded from the calculation.

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5.               Inventories

Inventories are stated at the lower of cost (determined using the first-in, first-out method), or market (estimated net realizable value) and are comprised of the following:

(In thousands)		Dec. 30,  2006			April 1,  2006
Raw materials		$	30,180		$	10,390
Work-in-process		110,324			137,939
Finished goods		44,728			52,700
		$	185,232		$	201,029

 

6.               Investment in United Microelectronics Corporation

At December 30, 2006, the fair value of the Company’s equity investment in United Microelectronics Corporation (UMC) stock totaled $72.3 million on the Company’s condensed consolidated balance sheet. The Company accounts for its investment in UMC as available-for-sale marketable securities in accordance with SFAS 115, “Accounting for Certain Debt and Equity Securities.”

The following table summarizes the cost basis and fair values of the investment in UMC:

		Dec. 30, 2006						April 1, 2006
(In thousands)		Adjusted Cost			Fair Value			Adjusted Cost			Fair Value
Current portion		$	—		$	—		$	32,235		$	37,285
Long-term portion		62,537			72,284			206,807			239,209
Total investment		$	62,537		$	72,284		$	239,042		$	276,494

 

During the third quarter of fiscal 2007, the Company sold 20.4 million shares of its UMC investment for approximately $12.1 million in cash, resulting in a gain of approximately $1.0 million. During the first nine months of fiscal 2007, the Company sold 325.9 million shares of its UMC investment for approximately $183.5 million in cash, resulting in a gain of approximately $7.0 million. The gains are included in interest income and other, net in the consolidated statements of income.

During the first nine months of fiscal 2007, the fair value of the UMC investment decreased by $204.2 million, including the sale of shares noted above. The fair value of the Company’s total UMC investment decreased by $4.4 million during the three months ended December 30, 2006, including the sale of shares noted above. At December 30, 2006, the Company recorded a total of $3.7 million of deferred tax liabilities and a $6.0 million balance (net of tax) in accumulated other comprehensive income associated with the UMC investment.

7.         Common Stock 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 financial institutions. During the first quarter of fiscal 2007, the Company completed its $350.0 million repurchase program announced in April 2005 by repurchasing 2.8 million shares for $73.9 million. On February 9, 2006, the Board authorized the repurchase of up to an additional $600.0 million of common stock. This share repurchase program has no stated expiration date. Through December 30, 2006, the Company had repurchased $326.1 million of the $600.0 million of common stock approved for repurchase under the February 2006 authorization. Between both repurchase programs the Company repurchased a total of $400.0 million of common stock during the nine months ended December 30, 2006. Beginning with the third quarter of fiscal 2006, the Company adopted the policy of retiring all repurchased shares, and consequently, no treasury shares were held at December 30 or April 1, 2006.

During the first nine months of fiscal 2007 and 2006, the Company entered into stock repurchase agreements with independent financial institutions. Under these agreements, Xilinx provided these financial institutions with up-front payments totaling $150.0 million for the third quarter of fiscal 2007 ($350.0 million for the first nine months of fiscal 2007) and $125.0 million for the third quarter of fiscal 2006 ($225.0 million for the first nine months of fiscal 2006). These financial institutions agreed to deliver to Xilinx a certain number of shares based upon the volume weighted-average price, during the contract period, less a specified discount. As of December 30, 2006 and December 31, 2005, no up-front payment balances remained under these agreements. In addition, under the

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guidelines of Rule 10b5-1 under the U.S. Securities Exchange Act of 1934, as amended, Xilinx entered into other agreements with the same independent financial institutions within the first and second quarters of fiscal 2007 and 2006 to repurchase additional shares on its behalf. No additional shares were repurchased in the third quarter of fiscal 2007 or 2006 after the conclusion of the aforementioned agreements.

During the third quarter and the first nine months of fiscal 2007, the Company repurchased a total of 5.9 million and 16.5 million shares of common stock for $150.0 million and $400.0 million, respectively, including the amounts purchased by the financial institutions and remitted to the Company. During the third quarter and the first nine months of fiscal 2006, the Company repurchased a total of 5.0 million and 10.5 million shares of common stock for $125.0 million and $274.9 million, respectively, including the amounts purchased by the financial institutions and remitted to the Company.

8.               Impairment Loss

The Company recognized impairment losses on investments of $1.5 million and $2.0 million during the third quarter and the first nine months of fiscal 2007, respectively, related to non-marketable equity securities in private companies. These impairment losses resulted from certain investees diluting Xilinx’s investment through the receipt of additional rounds of investment at a lower per share price.

9.               Comprehensive Income

The components of comprehensive income are as follows:

		Three Months Ended						Nine Months Ended
(In thousands)		Dec. 30, 2006			Dec. 31, 2005			Dec. 30, 2006			Dec. 31, 2005
Net income		$	87,509		$	80,969		$	263,046		$	243,408
Net change in unrealized gain (loss) on available- for-sale securities, net of tax		3,872			(27,074		)	(13,952		)	(3,598		)
Reclassification adjustment for losses on available-for-sale securities, net of tax, included in earnings		598			68			3,053			680
Net change in unrealized gain (loss) on hedging transactions, net of tax		63			(331		)	(113		)	(751		)
Net change in cumulative translation adjustment		636			(1,248		)	1,885			(1,979		)
Comprehensive income		$	92,678		$	52,384		$	253,919		$	237,760

 

The components of accumulated other comprehensive income at December 30, 2006 and April 1, 2006 are as follows:

(In thousands)		Dec. 30, 2006			April 1, 2006
Accumulated unrealized gain on available-for-sale securities, net of tax		$	3,898		$	14,797
Accumulated unrealized gain on hedging transactions, net of tax		5			118
Accumulated cumulative translation adjustment		2,779			894
Accumulated other comprehensive income		$	6,682		$	15,809

 

The change in the accumulated unrealized gain on available-for-sale securities, net of tax, at December 30, 2006, primarily reflects the decrease in value of the UMC investment since April 1, 2006 (see Note 6). In addition, the unrealized loss on the Company’s short-term and long-term investments decreased by $10.2 million during the nine months ended December 30, 2006.

10.         Significant Customers and Concentrations of Credit Risk

In July 2005, two of the Company’s distributors, Avnet, Inc. (Avnet) and the Memec Group (Memec), consolidated and merged into one entity, with Avnet as the surviving company. As of December 30, 2006, the combined Avnet/Memec entity accounted for 86% of the Company’s total accounts receivable. Resale of product

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through this combined entity accounted for 64% and 67% of the Company’s worldwide net revenues in the third quarter and the first nine months of fiscal 2007, respectively. Had this acquisition been completed for all periods presented, resale of product through this combined entity would have accounted for 69% and 71% of the Company’s worldwide net revenues in the third quarter and the first nine months of fiscal 2006, respectively.

Xilinx is subject to concentrations of credit risk primarily in its trade accounts receivable and investments in debt securities to the extent of the amounts recorded on the condensed consolidated balance sheet. The Company attempts to mitigate the concentration of credit risk in its trade receivables through its credit evaluation process, collection terms, distributor sales to diverse end customers and through geographical dispersion of sales. During the third quarter of fiscal 2007, the Company obtained credit insurance for a portion of its accounts receivable balance to further mitigate the concentration of its credit risk. Xilinx generally does not require collateral for receivables from its end customers or from distributors.

No end customer accounted for more than 10% of net revenues for any of the periods presented.

The Company mitigates concentrations of credit risk in its investments in debt securities by investing more than 80% of its portfolio in AA or higher grade securities as rated by Standard & Poor’s. Additionally, Xilinx limits its investments in the debt securities of a single issuer and attempts to further mitigate credit risk by diversifying risk across geographies and type of issuer.

11.   Income Taxes

The Company recorded tax provisions of $15.6 million and $66.8 million for the third quarter and the first nine months of fiscal 2007, respectively, representing effective tax rates of 15% and 20%, respectively. The Company recorded tax provisions of $49.8 million and $85.4 million for the third quarter and the first nine months of fiscal 2006, respectively, representing effective tax rates of 38% and 26%, respectively.

When compared to the third quarter of fiscal 2006, the lower effective tax rate for the third quarter of fiscal 2007 was primarily due to a decrease in the net charge to income tax expense for items unique to the quarter. The effective tax rate also benefited from an increase in the portion of income earned in lower tax rate jurisdictions. However, this benefit was partially offset by certain non-deductible stock-based compensation expenses. In the third quarter of fiscal 2007, the Company recorded a $1.3 million tax benefit for federal research and development (R&D) tax credits for the fourth quarter of fiscal 2006 and reduced its estimated effective tax rate for fiscal 2007 by approximately one percentage point due to the retroactive re-enactment of the federal R&D tax credit on December 20, 2006. In addition, the Company recorded a $1.2 million tax benefit for adjustments to the estimated fiscal 2006 tax accruals upon filing its 2006 U.S. federal income tax return.

 During the third quarter of fiscal 2006, the Company’s Chief Executive Officer and its Board of Directors approved a $500.0 million repatriation dividend from its foreign subsidiaries that qualified for the 85% dividends received deduction under the provisions of the American Jobs Creation Act of 2004. The dividend was paid prior to the end of the fourth quarter of fiscal 2006. The tax effect of the repatriation dividend recorded in the third quarter of fiscal 2006 resulted in a net increase in federal and state tax (net of federal benefit) of $25.3 million. The negative effects were partially offset by approximately $5.9 million in tax benefit related to the recognition of deferred tax assets for state R&D tax credits where the Company determined that it was more likely than not that the asset would be realized. The Company also recorded a $1.4 million tax benefit for the adjustment to estimated fiscal 2005 tax accruals upon filing the 2005 U.S. federal income tax return and a $2.3 million tax benefit related to the release of reserves due to the expiration of the federal statute of limitations for fiscal 2002. Also included in the first nine months of fiscal 2006 was a net tax benefit of $8.0 million ($9.4 million offset by taxes of $1.4 million on interest income) related to a favorable U.S. Tax Court (Tax Court) decision.

The difference between the U.S. federal statutory tax rate of 35% and the Company’s effective tax rate is primarily due to income earned in lower tax rate jurisdictions, for which no U.S. income tax has been provided, as the Company intends to permanently reinvest these earnings outside of the U.S.

The Company was examined by the Internal Revenue Service (IRS) for its fiscal 1996 through 2001 tax years. All issues were settled with the exception of issues related to the cost sharing of stock options. On August 30, 2005, the Tax Court issued its opinion concerning whether the value of stock options must be included in the cost sharing agreement with Xilinx Ireland. The Tax Court agreed with the Company that no amount for stock options was to be included in the cost sharing agreement, and thus, the Company had no tax, interest or penalties due for this issue. The decision was entered by the Tax Court on May 31, 2006. On August 25, 2006, the IRS appealed the decision to the Ninth Circuit Court of Appeals. The Company intends to oppose this appeal as it believes that

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the Tax Court decided the case correctly. Management has assessed the risk of loss, and determined that no accrual is required. If the Company were to lose on appeal, the amount due to the IRS would be approximately $39.3 million. Of that amount, only $6.2 million would be an expense to the consolidated statement of income and the remaining $33.1 million would be an adjustment to additional paid-in capital. The Company would also be required to reverse $3.2 million of interest income accrued to date on prepayments to the IRS.

12.         Commitments

Xilinx leases some of its facilities and office buildings under non-cancelable operating leases that expire at various dates through July 2016. During the third quarter of fiscal 2006, Xilinx entered into a land lease in conjunction with the Company’s new building investment in Singapore. 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.

Approximate future minimum lease payments under non-cancelable operating leases are as follows:

 

Most of the Company’s leases contain renewal options for varying terms. Rent expense, net of rental income, under all operating leases was $2.0 million and $5.9 million for the third quarter and the first nine months of fiscal 2007, respectively. Rent expense, net of rental income, under all operating leases was $1.5 million and $4.9 million for the third quarter and the first nine months of fiscal 2006, respectively.

In November 2005, Xilinx made an investment commitment of $37.0 million for a new building in Singapore, the Company’s Asia Pacific regional headquarters. As of December 30, 2006, approximately $24.0 million of the Company’s investment commitment remains outstanding. The project is expected to be completed in June 2007.

Other commitments at December 30, 2006 totaled $74.4 million and consisted of purchases of inventory and other non-cancelable purchase obligations related to subcontractors that manufacture silicon wafers and provide assembly and some test services. The Company expects to receive and pay for these materials and services in the next three to six months, as the products meet delivery and quality specifications. As of December 30, 2006, the Company also has $24.0 million of non-cancelable license obligations to providers of electronic design automation software expiring at various dates through December 2010.

In the fourth quarter of fiscal 2005, the Company committed up to $20.0 million to acquire, in the future, rights to intellectual property until July 2023. License payments will be amortized over the useful life of the intellectual property acquired.

13.   Product Warranty and Indemnification

The Company generally sells products with a limited warranty for product quality. The Company provides for known product issues if a loss is probable and can be reasonably estimated. The warranty accrual and related provision for known product issues increased in the first quarter of fiscal 2007 predominantly due to a specific quality issue with one of our vendors. The following table presents a reconciliation of the Company’s product warranty liability, which is included in other accrued liabilities on the Company’s condensed consolidated balance sheets:

		Nine Months Ended
(In thousands)		Dec. 30, 2006			Dec. 31, 2005
Balance at beginning of period		$	893		$	—
Provision		2,614			1,649
Utilized		(3,041		)	(551		)
Balance at end of period		$	466		$	1,098

 

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The Company generally sells its products with a limited indemnification of customers against intellectual property infringement claims related to the Company’s products. Xilinx has historically received only a limited number of requests for indemnification under these provisions and has not been requested to make any significant payments pursuant to these provisions.

14. Contingencies

Internal Revenue Service

On August 25, 2006, the IRS filed a Notice of Appeal that it appeals to the U.S. Court of Appeal for the Ninth Circuit, the August 30, 2005 decision of the Tax Court. In its 2005 decision, the Tax Court decided in favor of the Company and rejected the IRS’s position that the value of compensatory stock options must be included in the Company’s cost sharing agreement with its Irish affiliate. The Company intends to oppose this appeal as it believes that the Tax Court decided the case correctly. Management has assessed the risk of loss, and determined that no accrual is required (see Note 11).

The IRS recently notified the Company that they will audit the Company’s fiscal 2005 income tax return. The Company believes that adequate amounts have been reserved for any adjustments which may ultimately result.

Other than as stated above, the Company knows of no legal proceedings contemplated by any governmental authority or agency against the Company.

Patent Litigation

On October 17, 2005, a patent infringement lawsuit was filed by Lizy K. John (John) against Xilinx in the U.S. District Court for the Eastern District of Texas, Marshall Division. John sought an injunction, unspecified damages and attorneys’ fees.

On November 27, 2006, the Company settled the patent infringement lawsuit with John, under which the Company agreed to pay $6.5 million. John agreed to dismiss the patent infringement lawsuit with prejudice, granted a patent license to the Company and executed an agreement not to sue the Company under any patent owned or controlled by John for ten years. As a result of the settlement agreement, the Company recorded a current period charge of $2.5 million during the third quarter of fiscal 2007. The remaining balance of $4.0 million represented the value of the prepaid patent license granted as part of the settlement. This balance will be amortized over the asset’s remaining useful life.

SEC Informal Inquiry

On June 22, 2006, the Company received notice from the SEC advising that the SEC had commenced an informal inquiry into the Company’s historical stock option-granting practices. The notice included an informal request for documents. Based on the results of the investigation performed by outside counsel at the direction of a Special Committee of the Board of Directors and the Company’s analysis of the facts, the Company took a $2.2 million charge to its earnings for the first quarter of fiscal 2007. The charge was based on the difference between recorded grant dates and measurement dates in certain stock option grants between 1997 and 2006. The investigation found no evidence of fraud in the Company’s practices in granting of stock options, nor any evidence of manipulation of the timing or exercise price of stock option grants. The investigation further found no issues of management integrity in the issuance of stock options. The investigation determined that in nearly all cases, stock options were issued as of pre-set dates. The Special Committee and the Board of Directors declared the investigation to be concluded.

On November 28, 2006, the SEC formally notified the Company that its investigation of the Company’s stock option granting practices was terminated and that no enforcement action was recommended.

Stockholder Derivative Lawsuits

On June 2, 2006, a Xilinx stockholder filed a derivative complaint in the U.S. District Court for the Northern District of California (Murphy v. Roelandts et al., Case No. C 06 3564 RMW), purportedly on behalf of the Company, against members of the Company’s Board of Directors and against certain of the Company’s officers. The complaint alleged, among other things, that defendants mismanaged corporate assets and breached their fiduciary duties between 1998 and the date of filing by authorizing or failing to halt the backdating of certain

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stock options. The complaint also alleged that the officer defendants were unjustly enriched by their receipt and retention of the backdated stock option grants and that the Company issued false and misleading proxy statements in fiscal 2002 and 2003.

On June 28, 2006, a second Xilinx stockholder filed a separate, but substantially similar, derivative complaint in the U.S. District Court for the Northern District of California (Blum v. Roelandts et al., Case No. C 06 4016 JW), purportedly on behalf of the Company, against members of the Company’s Board of Directors and against certain of the Company’s officers. The complaint alleged, among other things, that defendants mismanaged corporate assets and breached their fiduciary duties between 1998 and the date of filing by authorizing or failing to halt the backdating of certain stock options. The complaint also alleged that defendants were unjustly enriched by the receipt and retention of the backdated stock option grants and that certain of the defendants sold Xilinx stock for a profit while in possession of material, non-public information. The complaint also alleged that the Company issued false and misleading financial disclosures and proxy statements from fiscal 1998 through 2006. In addition, the complaint alleged that defendants engaged in a fraudulent scheme to divert millions of dollars to themselves via improper option grants.

The two stockholder derivative complaints were consolidated into one stockholder derivative case. The consolidated stockholder derivative case was subsequently dismissed by the U.S. District Court for the Northern District of California (see Note 16).

Other Matters

Except as stated above, there are no pending legal proceedings of a material nature to which the Company is a party or of which any of its property is the subject.

15. Goodwill and Acquisition-Related Intangibles

As of December 30, 2006 and April 1, 2006, the gross and net amounts of goodwill and of acquisition-related intangibles for all acquisitions were as follows:

(In thousands)		Dec. 30, 2006			April 1, 2006			Amortization Life
Goodwill-gross		$	176,422		$	176,608
Less accumulated amortization through fiscal 2002		51,524			51,524
Goodwill-net		$	124,898		$	125,084
Noncompete agreements-gross		$	24,304		$	24,304		2.5 to 3 years
Less accumulated amortization		24,304			24,116
Noncompete agreements-net		—			188
Patents-gross		22,752			22,752			5 to 7 years
Less accumulated amortization		17,861			15,288
Patents-net		4,891			7,464
Miscellaneous intangibles-gross		58,958			58,958			2 to 5 years
Less accumulated amortization		47,283			43,959
Miscellaneous intangibles-net		11,675			14,999
Total acquisition-related intangibles-gross		106,014			106,014
Less accumulated amortization		89,448			83,363
Total acquisition-related intangibles-net		$	16,566		$	22,651

 

The goodwill balance at December 30, 2006, compared to the balance at April 1, 2006, reflects the reduction for a tax adjustment related to RocketChips’ goodwill.

Amortization expense for all intangible assets for the third quarter and the first nine months of fiscal 2007 was $2.0 million and $6.1 million, respectively. For the third quarter and the first nine months of fiscal 2006, amortization expense for all intangible assets was $1.5 million and $5.1 million, respectively. Intangible assets are amortized on a straight-line basis. Based on the carrying value of acquisition-related intangibles recorded at December 30, 2006, and assuming no subsequent impairment of the underlying assets, the annual amortization

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expense for acquisition-related intangibles is expected to be as follows: fiscal 2007 (remaining three months) - $1.9 million; 2008 - $6.8 million; 2009 - $5.4 million; 2010 - $1.5 million; 2011 - $1.0 million.

16.         Subsequent Event

On January 8, 2007, the U.S. District Court for the Northern District of California dismissed the consolidated stockholder derivative lawsuit that was filed against members of the Company’s Board of Directors and certain of the Company’s officers.

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PART II.  OTHER INFORMATION

ITEM 6.  EXHIBITS

(a)              Exhibits

31.1 Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

31.2 Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

32.1 Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

32.2 Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this Amendment No. 1 on Form 10-Q/A to be signed on its behalf by the undersigned thereunto duly authorized.

		XILINX, INC.
Date:	February 6, 2007	/s/ Jon A. Olson
		Jon A. Olson
		Senior Vice President, Finance
		and Chief Financial Officer
		(as principal accounting and financial
		officer and on behalf of Registrant)

 

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