Search the web
Welcome, Guest
[Sign Out, My Account]
EDGAR_Online

Quotes & Info
Enter Symbol(s):
e.g. YHOO, ^DJI
Symbol Lookup | Financial Search
XLNX > SEC Filings for XLNX > Form 10-Q on 2-Nov-2012All Recent SEC Filings

Show all filings for XILINX INC | Request a Trial to NEW EDGAR Online Pro

Form 10-Q for XILINX INC


2-Nov-2012

Quarterly Report


ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The statements in this Management's Discussion and Analysis that are forward-looking, within the meaning of the Private Securities Litigation Reform Act of 1995, involve numerous risks and uncertainties and are based on current expectations. The reader should not place undue reliance on these forward-looking statements. Our actual results could differ materially from those anticipated in these forward-looking statements for many reasons, including those risks discussed under "Risk Factors" and elsewhere in this document. Often, forward-looking statements can be identified by the use of forward-looking words, such as "may," "will," "could," "should," "expect," "believe," "anticipate," "estimate," "continue," "plan," "intend," "project" and other similar terminology, or the negative of such terms. We disclaim any responsibility to update or revise any forward-looking statement provided in this Management's Discussion and Analysis for any reason. Critical Accounting Policies and Estimates The methods, estimates and judgments we use in applying our most critical accounting policies have a significant impact on the results we report in our consolidated financial statements. The SEC has defined critical accounting policies as those that are most important to the portrayal of our financial condition and results of operations and require us to make our most difficult and subjective judgments, often as a result of the need to make estimates of matters that are inherently uncertain. Based on this definition, our critical accounting policies include: valuation of marketable securities, which impacts losses on debt and equity securities when we record impairments; revenue recognition, which impacts the recording of revenues; and valuation of inventories, which impacts cost of revenues and gross margin. Our critical accounting policies also include: the assessment of impairment of long-lived assets including acquisition-related intangibles, which impacts their valuation; the assessment of the recoverability of goodwill, which impacts goodwill impairment; accounting for income taxes, which impacts the provision or benefit recognized for income taxes, as well as, the valuation of deferred tax assets recorded on our consolidated balance sheet; and valuation and recognition of stock-based compensation, which impacts gross margin, research and development (R&D) expenses, and selling, general and administrative (SG&A) expenses. For more discussion please refer to "Item 7. Management's Discussion and Analysis of Financial condition and Results of Operations" included in our Form 10-K for the year ended March 31, 2012 filed with the SEC. We also have other key accounting policies that are not as subjective, and therefore, their application would not require us to make estimates or judgments that are as difficult, but which nevertheless could significantly affect our financial reporting. Results of Operations: Second quarter and first six months of fiscal 2013 compared to the second quarter and first six months of fiscal 2012 The following table sets forth statement of income data as a percentage of net revenues for the periods indicated:

                                                       Three Months Ended                              Six Months Ended
                                           September 29, 2012          October 1, 2011    September 29, 2012        October 1, 2011
Net revenues                                        100.0 %                   100.0 %              100.0 %                 100.0 %
Cost of revenues                                     34.5                      36.1                 34.3                    36.2
Gross margin                                         65.5                      63.9                 65.7                    63.8
Operating expenses:
Research and development                             21.0                      19.0                 20.9                    18.1
Selling, general and administrative                  16.9                      16.0                 16.7                    15.8
Amortization of acquisition-related
intangibles                                           0.4                       0.4                  0.4                     0.3
Restructuring charges                                   -                       0.6                    -                     0.3
Total operating expenses                             38.3                      36.0                 38.0                    34.5
Operating income                                     27.2                      27.9                 27.7                    29.3
Interest and other expense, net                       1.8                       1.6                  1.7                     1.4
Income before income taxes                           25.4                      26.3                 26.0                    27.9
Provision for income taxes                            2.7                       3.6                  3.5                     3.9
Net income                                           22.7 %                    22.7 %               22.5 %                  24.0 %

Net Revenues
We sell our products to global manufacturers of electronic products in end markets such as wired and wireless communications, aerospace and defense, industrial, scientific and medical and audio, video and broadcast. The vast majority of our net revenues


Table of Contents

are generated by sales of our semiconductor products, but we also generate sales from support products. We classify our product offerings into four categories: New, Mainstream, Base and Support Products. The composition of each product category is as follows:
• New Products include our most recent product offerings and include the Virtex®-7, Kintex™-7, Zynq™-7000, Artix™-7, Virtex-6 and Spartan®-6 product families.

• Mainstream Products include the Virtex-5, Spartan-3 and CoolRunner™-II product families.

• Base Products consist of our older product families including the Virtex-4, Virtex-II, Virtex-E, Virtex, Spartan-II, Spartan, CoolRunner and XC9500 products.

• Support Products include configuration products (PROMs), software, IP, customer training, design services and support.

These product categories, except for Support Products, are modified on a periodic basis to better reflect the maturity of the products and advances in technology. The most recent modification was made on April 1, 2012, which was the beginning of our fiscal 2013. The amounts for the prior periods presented have been reclassified to conform to the new categorization. New Products include our most recent product offerings and are typically designed into our customers' latest generation of electronic systems. Mainstream Products are generally several years old and designed into customer programs that are currently shipping in full production. Base Products are older than Mainstream Products with demand generated generally by the customers' oldest systems still in production. Support Products are generally products or services sold in conjunction with our semiconductor devices to aid customers in the design process.
Net revenues of $543.9 million in the second quarter of fiscal 2013 represented a 2% decrease from the comparable prior year period of $555.2 million. Net revenues from New Products increased significantly in the second quarter of fiscal 2013 versus the comparable prior year period, but were offset by declines from our Mainstream, Base and Support Products. One end customer accounted for 11% and 14% of our net revenues for the second quarter of fiscal 2013 and 2012, respectively. For the first six months of fiscal 2012, one end customer accounted for 11% of our net revenues. No end customer accounted for more than 10% of our net revenues for the first six months of fiscal 2013.
For the first six months of fiscal 2013, approximately 57% of our net revenues were from products sold to distributors for subsequent resale to original equipment manufacturers (OEMs) or their subcontract manufacturers. As of September 29, 2012, we had $68.3 million of deferred revenue and $20.3 million of deferred cost of revenues recognized as a net $48.0 million of deferred income on shipments to distributors. As of March 31, 2012, we had $90.0 million of deferred revenue and $23.0 million of deferred cost of revenues recognized as a net $67.0 million of deferred income on shipments to distributors. The deferred income on shipments to distributors that will ultimately be recognized in our consolidated statement of income will be different than the amount shown on the consolidated balance sheet due to actual price adjustments issued to the distributors when the product is sold to their end customers. Net Revenues by Product
Net revenues by product categories for the second quarter and the first six months of fiscal 2013 and 2012 were as follows:

                                                Three Months ended                                          Six Months Ended
(In millions)                  September 29, 2012     % Change      October 1, 2011       September 29, 2012     % Change      October 1, 2011
New Products                 $              106.9         81      $            59.0     $              206.8         80      $           115.2
Mainstream Products                         259.6         (5 )                274.2                    512.9        (11 )                575.1
Base Products                               156.8        (21 )                198.1                    363.9        (15 )                428.7
Support Products                             20.6        (14 )                 23.9                     43.1        (17 )                 51.7
Total net revenues           $              543.9         (2 )    $           555.2     $            1,126.7         (4 )    $         1,170.7

Net revenues from New Products increased significantly both in the second quarter and for the first six months of fiscal 2013 from the comparable prior year period. The increase was due to sales growth of our 40-nanometer (nm) Virtex-6, our 45-nm Spartan-6 product families and our 28-nm 7 Series and Zynq product lines. We expect sales of New Products to continue to grow as more customer programs enter into volume production with our 40/45-nm products and as our 28-nm products continue their sales ramp.
Net revenues from Mainstream Products decreased both in the second quarter and the first six months of fiscal 2013 from the comparable prior year period. The decrease was largely due to the decline in sales of our Virtex-5 and Spartan-3 product families.


Table of Contents

Net revenues from Base Products decreased in the second quarter and the first six months of fiscal 2013 from the comparable prior year period. The decrease was mainly attributable to the decline in sales of our older products, in particular our Virtex-II and Virtex 4 product families. Additionally, the base product category declined due to completion of a product discontinuance program in the first quarter of fiscal 2013.
Net revenues from Support Products decreased in the second quarter and the first six months of fiscal 2013 compared to the prior year period. The decrease was due primarily to a decline in sales from our PROM products.

Net Revenues by End Markets

Our end market revenue data is derived from our understanding of our end customers' primary markets. On April 1, 2012, we modified our end market categories in two ways. First, Data Center customers were moved from the Data Processing category into the Communications category. Additionally, all end market categories were renamed to better reflect actual sales composition. Amounts for the prior periods presented have been reclassified to conform to the new categorization. Net revenues by end markets were reclassified into the following four categories: Communications and Data Center; Industrial, Aerospace and Defense; Broadcast, Consumer and Automotive; and Other. The percentage change calculation in the table below represents the year-to-year dollar change in each end market.
Net revenues by end markets for the second quarter and the first six months of fiscal 2013 and 2012 were as follows:

                                               Three Months Ended                                            Six Months Ended
                                                      % Change in                                                 % Change in
(% of total net revenues)  September 29, 2012           Dollars       October 1, 2011    September 29, 2012         Dollars       October 1, 2011
Communications and Data
Center                               49 %                  5                   46 %                47 %               (3 )                 46 %
Industrial, Aerospace and
Defense                              32                   (8 )                 33                  33                 (7 )                 34
Broadcast, Consumer and
Automotive                           15                   (5 )                 16                  16                  5                   15
Other                                 4                  (17 )                  5                   4                (18 )                  5
Total net revenues                  100 %                 (2 )                100 %               100 %               (4 )                100 %

Net revenues from the Communications and Data Center end market increased in the second quarter, but decreased in the first six months of fiscal 2013 in terms of absolute dollars, compared to the prior year periods. The increase in the second quarter was due to stronger sales from both wired and wireless communication applications, and the decrease in the first six months of fiscal 2013 was driven by weaker sales in wired communications during the first quarter of fiscal 2013. Net revenues from the Industrial, Aerospace & Defense end market decreased in both the second quarter and the first six months of fiscal 2013 versus the comparable prior year periods. The decreases were primarily due to a decline in sales from industrial, scientific and medical applications as well as defense applications.
Net revenues from the Broadcast, Consumer and Automotive end market decreased in the second quarter, but increased in the first six months of fiscal 2013 from the comparable prior year period. The decrease in net revenues in the second quarter of fiscal 2013 was due to a decline in sales from audio, video and broadcast, consumer, and automotive applications. The increase in net revenues in the first six months of fiscal 2013 was driven by increases in sales from audio, video and broadcast, and automotive applications.
Net revenues from the Other end market decreased in both the second quarter and the first six months of fiscal 2013 from the comparable prior year periods. The decreases were due primarily to weaker sales from computing and storage applications.
Net Revenues by Geography
Geographic revenue information reflects the geographic location of the distributors, OEMs or contract manufacturers who purchased our products. This may differ from the geographic location of the end customers. Net revenues by geography for the second quarter and the first six months of fiscal 2013 and 2012 were as follows:


Table of Contents

                                                Three Months ended                                          Six Months Ended
(In millions)                  September 29, 2012     % Change      October 1, 2011       September 29, 2012      % Change      October 1, 2011
North America                $              153.1         (5 )    $           161.4     $              325.7         (5 )     $           342.6
Asia Pacific                                195.6         14                  172.0                    398.7          3                   388.6
Europe                                      140.3        (13 )                161.7                    292.8         (9 )                 322.1
Japan                                        54.9         (9 )                 60.1                    109.5         (7 )                 117.4
Total net revenues           $              543.9         (2 )    $           555.2     $            1,126.7         (4 )     $         1,170.7

Net revenues in North America decreased in the second quarter and the first six months of fiscal 2013 from the comparable prior year periods. The decreases were primarily due to weaker sales across most end markets including Communications & Data Center and Industrial, Aerospace & Defense.
Net revenues in Asia Pacific increased in the second quarter and the first six months of fiscal 2013 from the comparable prior year periods. The increases were primarily due to an increase in sales from the Communications and Data Center end market, particularly wireless communications applications.
Net revenues in Europe declined in the second quarter and the first six months of fiscal 2013 compared with the prior year periods. The decline was primarily due to decreased sales from the Communications and Data Center and Other end markets.
Net revenues in Japan declined in the second quarter and the first six months of fiscal 2013 compared with the prior year periods. The decline was primarily due to decreased sales in industrial, scientific, and medical applications.

Gross Margin

                                              Three Months Ended                                        Six Months Ended
(In millions)                 September 29, 2012      Change      October 1, 2011     September 29, 2012       Change      October 1, 2011
Gross margin                 $           356.2           - %     $         354.6     $           740.6           (1 )%    $         747.0
Percentage of net revenues                65.5 %                            63.9 %                65.7 %                             63.8 %

Gross margin was 1.6 and 1.9 percentage points higher, respectively, in the second quarter and in the first six months of fiscal 2013 from the comparable prior year periods. The gross margin increases in both periods were driven primarily by continued cost improvement, which was negatively offset, in part, by mix of products. New Products generally have lower gross margins than Mainstream and Base Products as they are in the early stage of their product life cycle and have higher unit costs associated with relatively lower volumes and early manufacturing maturity.
Gross margin may be affected in the future due to shifts in the mix of customers and products, competitive-pricing pressure, manufacturing-yield issues and wafer pricing. We expect to mitigate any adverse impacts from these factors by continuing to improve yields on our New Products and by improving manufacturing efficiencies.
In order to compete effectively, we pass manufacturing cost reductions to our customers in the form of reduced prices to the extent that we can maintain acceptable margins. Price erosion is common in the semiconductor industry, as advances in both product architecture and manufacturing process technology permit continual reductions in unit cost. We have historically been able to offset much of this revenue decline in our mature products with increased revenues from newer products.

Research and Development

                                            Three Months Ended                                       Six Months Ended
(In millions)               September 29, 2012      Change      October 1, 2011     September 29, 2012      Change      October 1, 2011
Research and development   $           113.9           8 %     $         105.8     $           235.3           11 %    $         211.8
Percentage of net revenues                21 %                              19 %                  21 %                              18 %

R&D spending increased $8.1 million, or 8%, for the second quarter of fiscal 2013 compared to the same period last year. For the first six months of fiscal 2013, R&D spending increased by $23.5 million, or 11%. The increases in both periods were primarily


Table of Contents

attributable to higher employee-related expenses (including stock-based compensation expense), mask and wafer expenses related to our 28-nm development activities during the current period.
We plan to continue to selectively invest in R&D efforts in areas such as new products and more advanced process development, IP cores and the development of new design and layout software. We may also consider acquisitions to complement our strategy for technology leadership and engineering resources in critical areas.
Selling, General and Administrative

                                               Three Months Ended                                         Six Months Ended
(In millions)                 September 29, 2012       Change      October 1, 2011      September 29, 2012       Change      October 1, 2011
Selling, general and
administrative               $           91.9             4 %     $         88.7       $           188.1            2 %     $         185.1
Percentage of net revenues                 17 %                               16 %                    17 %                               16 %

SG&A expenses increased by $3.2 million during the second quarter of fiscal 2013 and by $3.0 million during the first six months of fiscal 2013 compared to the same periods last year. The increases were primarily due to higher employee-related expenses, including stock-based compensation expense, and were partially offset by reduction in outside sales commission due to lower revenues.

Amortization of Acquisition-Related Intangibles

                                                Three Months Ended                                        Six Months Ended
(In millions)                 September 29, 2012         Change      October 1, 2011     September 29, 2012      Change      October 1, 2011
Amortization of
acquisition-related
intangibles                  $           2.3                17 %    $         2.0       $           4.5             24 %    $         3.6
Percentage of net revenues                 - %                                  - %                   - %                               - %

Amortization expense for the three and six months ended September 29, 2012 increased compared to the same periods last year. The increases were primarily due to the impact of amortization of intangible assets obtained from the recent acquisitions in the second quarter of fiscal 2013.

Stock-Based Compensation

                                             Three Months Ended                                       Six Months Ended
                               September 29,      Change      October 1, 2011       September 29, 2012       Change      October 1, 2011
(In millions)                      2012
Stock-based compensation
included in:
Cost of revenues             $           1.5         15 %    $            1.3     $            3.2              23 %    $            2.6
Research and development                 9.4         16 %                 8.1                 18.1              24 %                14.6
Selling, general and
administrative                           8.3         10 %                 7.5                 15.6              16 %                13.5
                             $          19.2         14 %    $           16.9     $           36.9              20 %    $           30.7

The increases in stock-based compensation expense for the second quarter and the first six months of fiscal 2013 compared to the prior year periods were primarily related to higher expenses associated with restricted stock units, as we granted more restricted stock units at a higher fair value in the recent years. The higher expense from restricted stock units was partially offset by lower expenses related to stock option grants as we granted lower number of stock options in the current fiscal year.

The impact of forfeiture true up and forfeiture rate estimates in the first six months of fiscal 2013 and 2012 reduced stock-based compensation expense by $1.4 million and $6.6 million, respectively.
Interest and Other Expense, Net


Table of Contents

                                                 Three Months Ended                                       Six Months Ended
(In millions)                    September 29, 2012      Change      October 1, 2011     September 29, 2012     Change      October 1, 2011
Interest and other expense, net $           10.0            16 %    $         8.6       $             19.7         20 %    $         16.4
Percentage of net revenues                     2 %                              2 %                      2 %                            1 %

Our net interest and other expense increased by $1.4 million and $3.3 million, respectively for the second quarter and the first six months of fiscal 2013 compared to the same period last year. The increases were primarily due to higher losses related to foreign exchange hedging for the periods.

Provision for Income Taxes
                                              Three Months Ended                                       Six Months Ended
(In millions)                 September 29, 2012     Change      October 1, 2011      September 29, 2012     Change      October 1, 2011
Provision for income taxes   $             14.6        (27 )%   $         20.0       $           39.7          (14 )%   $         46.1
Percentage of net revenues                    3 %                            4 %                    4 %                              4 %
Effective tax rate                           11 %                           14 %                   14 %                             14 %

The effective tax rates in all periods reflected the favorable impact of foreign income at statutory rates less than the U.S. rate and tax credits earned. The decrease in the effective tax rate in the second quarter of fiscal 2013 as compared to the prior year period was primarily attributable to a release of reserves for uncertain tax positions in fiscal 2013. The decrease was partially offset by an increase due to the expiration of the U.S. federal research tax credit on December 31, 2011. The effective tax rate remained flat for the first six months of fiscal year 2013 as compared to the same prior year period due to the release of reserves for uncertain tax positions in fiscal 2013 offset by the expiration of the credit in fiscal 2012 and by a change in the geographic mix of profit before tax.
Financial Condition, Liquidity and Capital Resources We have historically used a combination of cash flows from operations and equity and debt financing to support ongoing business activities, acquire or invest in critical or complementary technologies, purchase facilities and capital equipment, repurchase our common stock and debentures under our repurchase program, pay dividends and finance working capital. Additionally, our . . .

  Add XLNX to Portfolio     Set Alert         Email to a Friend  
Get SEC Filings for Another Symbol: Symbol Lookup
Quotes & Info for XLNX - All Recent SEC Filings
Sign Up for a Free Trial to the NEW EDGAR Online Pro
Detailed SEC, Financial, Ownership and Offering Data on over 12,000 U.S. Public Companies.
Actionable and easy-to-use with searching, alerting, downloading and more.
Request a Trial      Sign Up Now


Copyright © 2014 Yahoo! Inc. All rights reserved. Privacy Policy - Terms of Service
SEC Filing data and information provided by EDGAR Online, Inc. (1-800-416-6651). All information provided "as is" for informational purposes only, not intended for trading purposes or advice. Neither Yahoo! nor any of independent providers is liable for any informational errors, incompleteness, or delays, or for any actions taken in reliance on information contained herein. By accessing the Yahoo! site, you agree not to redistribute the information found therein.