XLNX 10-Q Quarterly Report Dec. 28, 2019

XILINX INC

10-Qs and 10-Ks

10-Q	Quarter ended Jan. 1, 2022
10-Q	Quarter ended Oct. 2, 2021
10-Q	Quarter ended July 3, 2021
10-K	Fiscal year ended April 3, 2021
10-Q	Quarter ended Jan. 2, 2021
10-Q	Quarter ended Sept. 26, 2020
10-Q	Quarter ended June 27, 2020
10-K	Fiscal year ended March 28, 2020
10-Q	Quarter ended Dec. 28, 2019
10-Q	Quarter ended Sept. 28, 2019
10-Q	Quarter ended June 29, 2019
10-K	Fiscal year ended March 30, 2019
10-Q	Quarter ended Dec. 29, 2018
10-Q	Quarter ended Sept. 29, 2018
10-Q	Quarter ended June 30, 2018
10-K	Fiscal year ended March 31, 2018
10-Q	Quarter ended Dec. 30, 2017
10-Q	Quarter ended Sept. 30, 2017
10-Q	Quarter ended July 1, 2017
10-K	Fiscal year ended April 1, 2017
10-Q	Quarter ended Dec. 31, 2016
10-Q	Quarter ended Oct. 1, 2016
10-Q	Quarter ended July 2, 2016
10-K	Fiscal year ended April 2, 2016
10-Q	Quarter ended Jan. 2, 2016
10-Q	Quarter ended Sept. 26, 2015
10-Q	Quarter ended June 27, 2015
10-K	Fiscal year ended March 28, 2015
10-Q	Quarter ended Dec. 27, 2014
10-Q	Quarter ended Sept. 27, 2014
10-Q	Quarter ended June 28, 2014
10-K	Fiscal year ended March 29, 2014
10-Q	Quarter ended Dec. 28, 2013
10-Q	Quarter ended Sept. 28, 2013
10-Q	Quarter ended June 29, 2013
10-K	Fiscal year ended March 30, 2013
10-Q	Quarter ended Dec. 29, 2012
10-Q	Quarter ended Sept. 29, 2012
10-Q	Quarter ended June 30, 2012
10-K	Fiscal year ended March 31, 2012
10-Q	Quarter ended Dec. 31, 2011
10-Q	Quarter ended Oct. 1, 2011
10-Q	Quarter ended July 2, 2011
10-K	Fiscal year ended April 2, 2011
10-Q	Quarter ended Jan. 1, 2011
10-Q	Quarter ended Oct. 2, 2010
10-Q	Quarter ended July 3, 2010
10-K	Fiscal year ended April 3, 2010
10-Q	Quarter ended Jan. 2, 2010

PROXIES

DEF 14A	Filed on June 17, 2021
DEF 14A	Filed on June 19, 2020
DEF 14A	Filed on June 21, 2019
DEF 14A	Filed on June 20, 2018
DEF 14A	Filed on June 2, 2017
DEF 14A	Filed on June 1, 2016
DEF 14A	Filed on May 29, 2015
DEF 14A	Filed on May 30, 2014
DEF 14A	Filed on June 3, 2013
DEF 14A	Filed on May 29, 2012
DEF 14A	Filed on May 31, 2011
DEF 14A	Filed on June 1, 2010

Document

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)



☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended December 28, 2019 or



☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ________ to _______ .

Commission File Number 000-18548

______________________________________________________________________________

XILINX, INC .

(Exact name of registrant as specified in its charter)

______________________________________________________________________________



Delaware	2100 Logic Drive	77-0188631
(State or other jurisdiction of incorporation or organization)	San Jose	(I.R.S. Employer Identification No.)
	California	95124
	(Address of principal executive offices)	(Zip Code)

( 408 ) 559-7778

(Registrant’s telephone number, including area code)

N/A

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

Securities registered pursuant to Section 12(b) of the Act:



Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, $0.01 par value	XLNX	The Nasdaq Global Select Market

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

subject to such filing requirements for the past 90 days. Yes x No ¨

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes x No ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act.



Large accelerated filer	x	Accelerated filer	o	Non-accelerated filer	o
Smaller reporting company	☐	Emerging growth company	☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No x

Shares outstanding of the registrant’s common stock:



Class		Shares Outstanding as of January 10, 2020
Common Stock, $0.01 par value		248,836,561

Table of Contents

TABLE OF CONTENTS




PART I. FINANCIAL INFORMATION	3
ITEM 1. FINANCIAL STATEMENTS	3
CONDENSED CONSOLIDATED STATEMENTS OF INCOME	3
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME	4
CONDENSED CONSOLIDATED BALANCE SHEETS	5
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS	6
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY	7
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS	9
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS	28
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	35
ITEM 4. CONTROLS AND PROCEDURES	37

PART II. OTHER INFORMATION	38
ITEM 1. LEGAL PROCEEDINGS	38
ITEM 1A. RISK FACTORS	38
ITEM 2. UNREGISTERED SALE OF EQUITY SECURITIES AND USE OF PROCEEDS	48
ITEM 6. EXHIBITS	49
SIGNATURES	50

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FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q contains forward-looking statements, within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements may be found throughout this Quarterly Report and involve numerous known and unknown risks and uncertainties and are based on current expectations. The reader should not place undue reliance on these forward-looking statements. Our actual results could differ materially from those anticipated in these forward-looking statements for many reasons, including those risks discussed under "Risk Factors" 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 Quarterly Report or in any of our other communications for any reason.


PART I.	FINANCIAL INFORMATION


Item 1.	Financial Statements

XILINX, INC.

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(Unaudited)



	Three Months Ended					Nine Months Ended
(In thousands, except per share amounts)	December 28, 2019		December 29, 2018			December 28, 2019		December 29, 2018
Net revenues	$	723,499	$	800,057		$	2,406,497	$	2,230,678
Cost of revenues:
Cost of products sold	233,324		247,903			804,197		686,411
Amortization of acquisition-related intangibles	6,697		—			15,699		—
Total cost of revenues	240,021		247,903			819,896		686,411
Gross margin	483,478		552,154			1,586,601		1,544,267
Operating expenses:
Research and development	211,541		189,329			638,621		543,527
Selling, general and administrative	109,612		103,039			328,633		291,256
Amortization of acquisition-related intangibles	2,919		1,866			5,488		3,064
Total operating expenses	324,072		294,234			972,742		837,847
Operating income	159,406		257,920			613,859		706,420
Interest and other income (expense), net	6,437		( 1,330		)	30,378		2,231
Income before income taxes	165,843		256,590			644,237		708,651
Provision for income taxes	3,831		17,230			13,774		63,542
Net income	$	162,012	$	239,360		$	630,463	$	645,109
Net income per common share:
Basic	$	0.65	$	0.95		$	2.50	$	2.55
Diluted	$	0.64	$	0.93		$	2.47	$	2.53
Cash dividends per common share	$	0.37	$	0.36		$	1.11	$	1.08
Shares used in per share calculations:
Basic	250,546		253,060			252,330		252,634
Diluted	252,808		256,374			255,758		255,227

See notes to condensed consolidated financial statements.

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XILINX, INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Unaudited)



	Three Months Ended						Nine Months Ended
(In thousands)	December 28, 2019			December 29, 2018			December 28, 2019			December 29, 2018
Net income	$	162,012		$	239,360		$	630,463		$	645,109
Other comprehensive income (loss), net of tax:
Change in net unrealized gains (losses) on available-for-sale securities	548			7,029			12,264			3,244
Reclassification adjustment for (gains) losses on available-for-sale securities	( 91		)	( 131		)	( 890		)	( 181		)
Change in unrealized gains (losses) on hedging transactions	2,184			( 480		)	( 1,829		)	( 9,252		)
Reclassification adjustment for (gains) losses on hedging transactions	96			2,522			2,247			4,693
Cumulative translation adjustment, net	2,294			5			( 487		)	( 4,187		)
Other comprehensive income (loss)	5,031			8,945			11,305			( 5,683		)
Total comprehensive income	$	167,043		$	248,305		$	641,768		$	639,426

See notes to condensed consolidated financial statements.

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XILINX, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS



(In thousands, except par value amounts)	December 28, 2019			March 30, 2019
	(unaudited)
ASSETS
Current assets:
Cash and cash equivalents	$	1,292,088		$	1,544,490
Short-term investments	1,133,077			1,631,194
Accounts receivable, net	253,548			335,165
Inventories	328,209			315,358
Prepaid expenses and other current assets	121,099			65,771
Total current assets	3,128,021			3,891,978
Property, plant and equipment, at cost	983,830			902,993
Accumulated depreciation and amortization	( 605,588		)	( 574,064		)
Net property, plant and equipment	378,242			328,929
Long-term investments	—			53,433
Goodwill	619,196			340,718
Acquisition-related intangibles, net	210,441			80,723
Other assets	615,322			455,567
Total Assets	$	4,951,222		$	5,151,348

LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	102,691		$	117,491
Accrued payroll and related liabilities	259,974			247,268
Income taxes payable	24,222			28,718
Other accrued liabilities	128,993			81,559
Total current liabilities	515,880			475,036
Long-term debt	1,246,000			1,234,807
Long-term income taxes payable	447,990			515,192
Other long-term liabilities	100,190			64,804
Commitments and contingencies (Note 17)
Stockholders' equity:
Preferred stock, $.01 par value (none issued and outstanding)	—			—
Common stock, $.01 par value	2,489			2,539
Additional paid-in capital	1,105,568			1,005,411
Retained earnings	1,545,210			1,876,969
Accumulated other comprehensive loss	( 12,105		)	( 23,410		)
Total stockholders’ equity	2,641,162			2,861,509
Total Liabilities and Stockholders’ Equity	$	4,951,222		$	5,151,348

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)	December 28, 2019			December 29, 2018
Cash flows from operating activities:
Net income	$	630,463		$	645,109
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization of software	68,882			49,097
Amortization - others	37,326			23,461
Stock-based compensation	142,732			109,194
Deferred income taxes	1,417			( 9,040		)
Others	( 24,083		)	8,686
Changes in assets and liabilities:
Accounts receivable, net	86,370			22,879
Inventories	( 6,845		)	( 46,573		)
Prepaid expenses and other current assets	912			13,151
Other assets	( 26,217		)	( 25,141		)
Accounts payable	( 26,466		)	11,013
Accrued liabilities	7,735			30,652
Income taxes payable	( 46,741		)	( 29,280		)
Net cash provided by operating activities	845,485			803,208
Cash flows from investing activities:
Purchases of available-for-sale securities	( 1,273,015		)	( 1,340,057		)
Proceeds from sale and maturity of available-for-sale and equity securities	1,838,572			1,080,850
Purchases of property, plant and equipment and software	( 96,980		)	( 60,803		)
Other investing activities	( 15,233		)	( 37,572		)
Acquisition of businesses, net of cash acquired	( 454,651		)	( 233,941		)
Net cash used in investing activities	( 1,307		)	( 591,523		)
Cash flows from financing activities:
Repurchases of common stock	( 738,184		)	( 161,551		)
Taxes paid related to net share settlements of restricted stock units	( 75,417		)	( 42,029		)
Proceeds from issuance of common stock through various stock plans	19,876			18,436
Payment of dividends to stockholders	( 280,376		)	( 272,860		)
Other financing activities	( 22,479		)	( 3,488		)
Net cash used in financing activities	( 1,096,580		)	( 461,492		)
Net decrease in cash and cash equivalents	( 252,402		)	( 249,807		)
Cash and cash equivalents at beginning of period	1,544,490			2,179,328
Cash and cash equivalents at end of period	$	1,292,088		$	1,929,521
Supplemental disclosure of cash flow information:
Interest paid	$	41,576		$	57,514
Income taxes paid, net	$	58,937		$	101,557

See notes to condensed consolidated financial statements.

Table of Contents

XILINX, INC.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

(Unaudited)



Three Months Ended December 28, 2019	Common Stock Outstanding					Additional Paid-in Capital			Retained Earnings			Accumulated Other Comprehensive Income (Loss)			Total Stockholders' Equity
(In thousands, except per share amounts)	Shares		Amount			Additional Paid-in Capital			Retained Earnings			Accumulated Other Comprehensive Income (Loss)			Total Stockholders' Equity
Balance as of September 28, 2019	251,466		$	2,515		$	978,222		$	1,732,304		$	( 17,136	)	$	2,695,905
Components of comprehensive income:
Net income	—		—			—			162,012			—			162,012
Other comprehensive income	—		—			—			—			5,031			5,031
Issuance of common shares under employee stock plans, net	153		2			( 3,567		)	—			—			( 3,565		)
Repurchase and retirement of common stock	( 2,784	)	( 28		)	( 1,132		)	( 256,175		)	—			( 257,335		)
Stock-based compensation expense	—		—			50,157			—			—			50,157
Cash dividends declared ($0.37 per common share)	—		—			—			( 92,931		)	—			( 92,931		)
Additional tax benefit recognized relating to fiscal 2014 redemption of convertible debt	—		—			81,888			—			—			81,888
Balance as of December 28, 2019	248,835		$	2,489		$	1,105,568		$	1,545,210		$	( 12,105	)	$	2,641,162



Nine Months Ended December 28, 2019	Common Stock Outstanding					Additional Paid-in Capital			Retained Earnings			Accumulated Other Comprehensive Income (Loss)			Total Stockholders' Equity
(In thousands, except per share amounts)	Shares		Amount			Additional Paid-in Capital			Retained Earnings			Accumulated Other Comprehensive Income (Loss)			Total Stockholders' Equity
Balance as of March 30, 2019	253,891		$	2,539		$	1,005,411		$	1,876,969		$	( 23,410	)	$	2,861,509
Components of comprehensive income:
Net income	—		—			—			630,463			—			630,463
Other comprehensive income	—		—			—			—			11,305			11,305
Issuance of common shares under employee stock plans, net	2,171		22			( 55,563		)	—			—			( 55,541		)
Repurchase and retirement of common stock	( 7,227	)	( 72		)	( 68,900		)	( 681,846		)	—			( 750,818		)
Stock-based compensation expense	—		—			142,732			—			—			142,732
Cash dividends declared ($1.11 per common share)	—		—			—			( 280,376		)	—			( 280,376		)
Additional tax benefit recognized relating to fiscal 2014 redemption of convertible debt	—		—			81,888			—			—			81,888
Balance as of December 28, 2019	248,835		$	2,489		$	1,105,568		$	1,545,210		$	( 12,105	)	$	2,641,162

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XILINX, INC.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

(Unaudited)



Three Months Ended December 29, 2018	Common Stock Outstanding				Additional Paid-in Capital			Retained Earnings			Accumulated Other Comprehensive Income (Loss)			Total Stockholders' Equity
(In thousands, except per share amounts)	Shares		Amount		Additional Paid-in Capital			Retained Earnings			Accumulated Other Comprehensive Income (Loss)			Total Stockholders' Equity
Balance as of September 29, 2018	253,019		$	2,530	$	906,618		$	1,576,476		$	( 40,738	)	$	2,444,886
Components of comprehensive income:
Net income	—		—		—			239,360			—			239,360
Other comprehensive income	—		—		—			—			8,945			8,945
Issuance of common shares under employee stock plans, net	110		1		( 2,516		)	—			—			( 2,515		)
Repurchase and retirement of common stock	( 14	)	—		—			( 1,015		)	—			( 1,015		)
Stock-based compensation expense	—		—		38,641			—			—			38,641
Cash dividends declared ($0.36 per common share)	—		—		—			( 91,107		)	—			( 91,107		)
Balance as of December 29, 2018	253,115		$	2,531	$	942,743		$	1,723,714		$	( 31,793	)	$	2,637,195



Nine Months Ended December 29, 2018	Common Stock Outstanding					Additional Paid-in Capital			Retained Earnings			Accumulated Other Comprehensive Income (Loss)			Total Stockholders' Equity
(In thousands, except per share amounts)	Shares		Amount			Additional Paid-in Capital			Retained Earnings			Accumulated Other Comprehensive Income (Loss)			Total Stockholders' Equity
Balance as of March 31, 2018	253,377		$	2,534		$	878,672		$	1,513,656		$	( 34,509	)	$	2,360,353
Components of comprehensive income:
Net income	—		—			—			645,109			—			645,109
Other comprehensive loss	—		—			—			—			( 5,683		)	( 5,683		)
Cumulative-effect of equity investments adoption	—		—			—			( 8,399		)	8,399			—
Issuance of common shares under employee stock plans, net	2,174		22			( 23,615		)	—			—			( 23,593		)
Repurchase and retirement of common stock	( 2,436	)	( 25		)	( 21,508		)	( 140,016		)	—			( 161,549		)
Stock-based compensation expense	—		—			109,194			—			—			109,194
Cumulative-effect of deferred tax from intra-entity asset transfer adoption	—		—			—			( 13,776		)	—			( 13,776		)
Cash dividends declared ($1.08 per common share)	—		—			—			( 272,860		)	—			( 272,860		)
Balance as of December 29, 2018	253,115		$	2,531		$	942,743		$	1,723,714		$	( 31,793	)	$	2,637,195

See notes to condensed consolidated financial statements.

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XILINX, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)


Note 1.	Basis of Presentation

The accompanying interim condensed consolidated financial statements have been prepared in conformity with United States (U.S.) generally accepted accounting principles (GAAP) for interim financial information and the instructions to Form 10-Q and Article 10 of Regulation S-X, and should be read in conjunction with the Xilinx, Inc. (Xilinx or the Company) consolidated financial statements filed with the U.S. Securities and Exchange Commission (SEC) on Form 10-K for the fiscal year ended March 30, 2019 . 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 28, 2020 or any future period.

The Company uses a 52- to 53-week fiscal year ending on the Saturday nearest March 31. Fiscal 2020 and fiscal 2019 are both 52-week years ending on March 28, 2020 and March 30, 2019 , respectively. The quarters ended December 28, 2019 and December 29, 2018 each consisted of 13 weeks.


Note 2.	Recent Accounting Changes and Accounting Pronouncements

Recent Accounting Pronouncements Adopted

Leases

In February 2016, the Financial Accounting Standards Board (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 condensed 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 is currently evaluating the impact of this authoritative guidance on its consolidated financial statements.

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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 in fiscal 2020. The Company is currently evaluating the impact of this authoritative guidance on its consolidated financial statements.

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 is currently evaluating the impact of this authoritative guidance on its consolidated financial statements.


Note 3.	Significant Customers and Concentrations of Credit Risk

Avnet, Inc. (Avnet), one of the Company’s distributors, distributes the Company’s products worldwide. As of December 28, 2019 and March 30, 2019 , Avnet accounted for 33 % and 37 % of the Company’s total net accounts receivable, respectively. Net revenues from Avnet accounted for 45 % and 41 % of the Company’s worldwide net revenues in the third quarter and first nine months of fiscal 2020 , respectively. Net revenues from Avnet accounted for 42 % and 47 % of the Company’s worldwide net revenues in the third quarter and the first nine months of fiscal 2019 , respectively. While the percentage of worldwide net revenues from Avnet fluctuates from period to period, overall the percentage is within historical ranges.

For the third quarter and the first nine months of fiscal 2020 , approximately 57 % and 52 % , respectively, of the Company's net revenues were from products sold to distributors for subsequent resale to original equipment manufacturers (OEMs) or their subcontract manufacturers. For the third quarter and the first nine months of fiscal 2019 , the percentages of the Company's net revenues from distributors were 50 % and 56 % , respectively.

No other distributor accounted for more than 10% of the Company’s worldwide net revenues for the third quarter and the first nine months of fiscal 2020 and 2019 . One end customer accounted for 12 % and 11 % of the Company's worldwide net revenues for the third quarter and the first nine months of fiscal 2020 , respectively. No end customer accounted for more than 10% of the Company's worldwide net revenues for the third quarter and the first nine months of fiscal 2019 .

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. Xilinx generally does not require collateral for receivables from its end customers or distributors.

The Company mitigates concentrations of credit risk in its investments in debt securities by currently investing approximately 94 % of its portfolio in AA (or its equivalent) or higher-grade securities as rated by Standard & Poor’s or Moody’s Investors Service. The Company’s methods to arrive at investment decisions are not solely based on the rating agencies’ credit ratings. 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 and interest rate swap 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 December 28, 2019 , all of the mortgage-backed securities in the Company's investment portfolio were issued by U.S. government-sponsored enterprises and agencies and are rated AA+ by Standard & Poor’s and Aaa by Moody’s Investors Service.

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Note 4.	Fair Value Measurements

The authoritative guidance for fair value measurements established by the FASB defines fair value as the exchange price that would be received from selling an asset or paid to transfer a liability (an exit price) in an orderly transaction between market participants at the measurement date. When determining the fair value measurements for assets and liabilities required or permitted to be recorded at fair value, the Company considers the principal or most advantageous market in which Xilinx would transact and also considers assumptions that market participants would use when pricing the asset or liability, such as inherent risk, transfer restrictions and risk of nonperformance.

The Company determines the fair value for marketable debt securities using industry standard pricing services, data providers and other third-party sources and by internally performing valuation testing and analysis. The Company primarily uses a consensus price or weighted-average price for its fair value assessment. The Company determines the consensus price using market prices from a variety of industry standard pricing services, data providers, security master files from large financial institutions and other third-party sources and uses those multiple prices as inputs into a distribution-curve-based algorithm to determine the daily market value. The pricing services use multiple inputs to determine market prices, including reportable trades, benchmark yield curves, credit spreads and broker/dealer quotes as well as other industry and economic events. For certain securities with short maturities, such as discount commercial paper and certificates of deposit, the security is accreted from purchase price to face value at maturity. If a subsequent transaction on the same security is observed in the marketplace, the price on the subsequent transaction is used as the current daily market price and the security will be accreted to face value based on the revised price.

The Company validates the consensus prices by taking random samples from each asset type and corroborating those prices using reported trade activity, benchmark yield curves, binding broker/dealer quotes or other relevant price information. There have not been any changes to the Company’s fair value methodology during the third quarter and first nine months of fiscal 2020 and the Company did not adjust or override any fair value measurements as of December 28, 2019 .

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 December 28, 2019 and March 30, 2019 :

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	December 28, 2019
(In thousands)	Level 1		Level 2		Level 3		Total Fair Value
Assets
Cash equivalents:
Money market funds	$	444,604	$	—	$	—	$	444,604
Financial institution securities	—		100,000		—		100,000
Non-financial institution securities	—		362,554		—		362,554
U.S. government and agency securities	131,757		59,903		—		191,660
Foreign government and agency securities	—		68,295		—		68,295
Short-term investments:
Financial institution securities	—		300,000		—		300,000
Non-financial institution securities	—		64,398		—		64,398
U.S. government and agency securities	9,997		9,994		—		19,991
Foreign government and agency securities	—		266,063		—		266,063
Mortgage-backed securities	—		395,451		—		395,451
Asset-backed securities	—		23,238		—		23,238
Commercial mortgage-backed securities	—		63,936		—		63,936
Derivative financial instruments, net	—		1,580		—		1,580
Total assets measured at fair value	$	586,358	$	1,715,412	$	—	$	2,301,770

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	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 December 28, 2019 were approximately $ 506.3 million and $ 770.7 million , respectively, based on the last trading price for the period (classified as Level 2 in fair value hierarchy due to relatively low trading volume).

Assets and Liabilities Measured at Fair Value on a Non-Recurring Basis

As of December 28, 2019 , the Company had non-marketable equity securities in private companies of $ 87.1 million , which were classified as Level 3 assets. The Company’s investments in non-marketable securities of private companies are recorded at fair value if the Company recognizes an observable price adjustment or an impairment. Such impairment losses or observable price adjustments were not material during all periods presented. The Company’s investments in non-financial assets such as property, plant and equipment, goodwill and acquisition-related intangibles, are recorded at cost (net of accumulated depreciation or amortization, where applicable). These non-financial assets are reduced to fair value when impaired.


Note 5.	Financial Instruments

The following is a summary of cash equivalents and available-for-sale securities as of the end of the periods presented:

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	December 28, 2019									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	$	444,604	$	—	$	—		$	444,604	$	428,150	$	—	$	—		$	428,150
Financial institution
securities	400,000		—		—			400,000		537,795		—		—			537,795
Non-financial institution
securities	426,959		20		( 27		)	426,952		702,483		3		( 562		)	701,924
U.S. government and
agency securities	211,644		10		( 3		)	211,651		334,185		39		( 139		)	334,085
Foreign government and
agency securities	334,353		5		—			334,358		214,455		—		—			214,455
Mortgage-backed securities	396,873		1,261		( 2,683		)	395,451		684,596		809		( 14,635		)	670,770
Asset-backed securities	23,244		16		( 22		)	23,238		76,852		—		( 483		)	76,369
Commercial mortgage-
backed securities	64,333		32		( 429		)	63,936		118,115		42		( 1,618		)	116,539
	$	2,302,010	$	1,344	$	( 3,164	)	$	2,300,190	$	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 December 28, 2019 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 December 28, 2019 and March 30, 2019 :



	December 28, 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	$	5,195	$	( 2	)	$	3,550	$	( 25	)	$	8,745	$	( 27	)
U.S. government and
agency securities	—		—			1,997		( 3		)	1,997		( 3		)
Mortgage-backed securities	63,878		( 254		)	199,346		( 2,429		)	263,224		( 2,683		)
Asset-backed securities	8,277		( 4		)	10,182		( 18		)	18,459		( 22		)
Commercial mortgage-
backed securities	28,104		( 56		)	25,689		( 373		)	53,793		( 429		)
	$	105,454	$	( 316	)	$	240,764	$	( 2,848	)	$	346,218	$	( 3,164	)

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	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	)

As of December 28, 2019 , the gross unrealized losses that had been outstanding for both less than twelve months and more than twelve months were primarily related to mortgage-backed securities, which was primarily due to the general rising of the interest-rate environment although the percentage of such losses to the total estimated fair value of the mortgage-backed securities was relatively insignificant.

The Company reviewed the investment portfolio and determined that the gross unrealized losses as of December 28, 2019 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-backed securities, mortgage-backed securities and commercial mortgage-backed securities) are highly rated by the credit rating agencies, there have been no defaults on any of these securities and the Company has received interest payments as they become due. Therefore, the Company believes that it will be able to collect both principal and interest amount due to the Company. Additionally, in the past several years a portion of the Company's investment in the mortgage-backed securities was redeemed or prepaid by the debtors at par. Furthermore, the aggregate of individual unrealized losses that had been outstanding for twelve months or more was not significant as of December 28, 2019 and March 30, 2019 . The Company neither intends to sell these investments nor concludes that it is more-likely-than-not that it will have to sell them until recovery of their carrying values.

The amortized cost and estimated fair value of marketable debt securities, by contractual maturity, are shown in the table below. Actual maturities may differ from contractual maturities because issuers may have the right to call or prepay obligations without call or prepayment penalties.



	December 28, 2019
(In thousands)	Amortized Cost		Estimated Fair Value
Due in one year or less	$	1,371,519	$	1,371,529
Due after one year through five years	39,724		39,676
Due after five years through ten years	104,585		104,790
Due after ten years	341,578		339,591
	$	1,857,406	$	1,855,586

As of December 28, 2019 , $ 484.1 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:

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	Three Months Ended						Nine Months Ended
(In thousands)	December 28, 2019			December 29, 2018			December 28, 2019			December 29, 2018
Proceeds from sale of available-for-sale securities	$	23,605		$	12,692		$	323,228		$	13,594
Gross realized gains on sale of available-for-sale securities	$	128		$	173		$	1,339		$	269
Gross realized losses on sale of available-for-sale securities	( 9		)	( 114		)	( 181		)	( 162		)
Net realized gains on sale of available-for-sale securities	$	119		$	59		$	1,158		$	107
Amortization of premiums on available-for-sale securities	$	1,063		$	1,403		$	3,411		$	6,539

The cost of securities matured or sold is based on the specific identification method.


Note 6.	Derivative Financial Instruments

The Company’s primary objective for holding derivative financial instruments is to manage foreign currency exchange rate risk and interest rate risk. As a result of the use of derivative financial instruments, the Company is exposed to the risk that counterparties to derivative contracts may fail to meet their contractual obligations. The Company manages counterparty credit risk in derivative contracts by reviewing counterparty creditworthiness on a regular basis, establishing collateral requirement and limiting exposure to any single counterparty. The right of set-off that exists with certain transactions enables the Company to net amounts due to and from the counterparty, reducing the maximum loss from credit risk in the event of counterparty default.

In May 2017, 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. 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. Changes in fair values of the interest rate swap contracts and the 2024 Notes were 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 condensed consolidated balance sheets. See “Note 10. Debt and Credit Facility” for more discussion related to interest rate swap contracts. There was no ineffectiveness during all periods presented.


Note 7.	Stock-Based Compensation Plans

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

Stock-Based Compensation

The following table summarizes stock-based compensation expense related to stock awards granted under the Company’s equity incentive plans and rights to acquire stock granted under the Company’s Employee Stock Purchase Plan (ESPP):



	Three Months Ended				Nine Months Ended
(In thousands)	December 28, 2019		December 29, 2018		December 28, 2019		December 29, 2018
Stock-based compensation included in:
Cost of revenues	$	2,961	$	2,366	$	8,386	$	6,650
Research and development	31,543		22,352		86,119		63,329
Selling, general and administrative	15,653		13,923		48,227		39,215
	$	50,157	$	38,641	$	142,732	$	109,194

Employee Stock Option Plans

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The types of awards allowed under the 2007 Equity Incentive Plan (2007 Equity Plan) include incentive stock options, non-qualified stock options, restricted stock units (RSUs), restricted stock and stock appreciation rights. To date, the Company has issued a mix of non-qualified stock options and RSUs under the 2007 Equity Plan; however, there was no issuance of stock options during the first nine months of fiscal 2020 and the entire fiscal 2019 . The Company's stock-based compensation expenses related to options during the third quarter and the first nine months of fiscal 2020 and the number of options outstanding as of December 28, 2019 were not material. On August 8, 2019, the stockholders approved an amendment to increase the authorized number of shares reserved for issuance under the 2007 Equity Plan by 6.0 million shares. As of December 28, 2019 , 14.9 million shares remained available for grant under the 2007 Equity Plan.

RSU Awards

A summary of the Company’s RSU activity and related information is as follows:



	RSUs Outstanding
(Shares in thousands)	Number of Shares		Weighted-Average Grant-Date Fair Value Per Share
March 31, 2018	6,989		$	51.39
Granted	3,559		$	66.94
Vested	( 2,681	)	$	49.05
Cancelled	( 536	)	$	55.09
March 30, 2019	7,331		$	59.54
Granted	2,700		$	110.05
Vested	( 2,599	)	$	54.06
Cancelled	( 289	)	$	73.99
December 28, 2019	7,143		$	80.04

The estimated fair values of RSUs were calculated based on the market price of Xilinx common stock on the date of grant, reduced by the present value of dividends expected to be paid on Xilinx common stock prior to vesting. The per share weighted-average fair value of RSUs granted during the third quarter of fiscal 2020 was $ 89.57 ( $ 75.72 for the third quarter of fiscal 2019 ), which were calculated based on estimates at the date of grant using the following weighted-average assumptions:



	Three Months Ended				Nine Months Ended
	December 28, 2019		December 29, 2018		December 28, 2019		December 29, 2018
Risk-free interest rate	1.6	%	3.0	%	1.8	%	2.7	%
Dividend yield	1.6	%	1.8	%	1.3	%	2.1	%

For the majority of RSUs granted, the number of shares of common stock issued on the date the RSU awards vest is net of the minimum statutory withholding requirements that the Company pays in cash to the appropriate taxing authorities on behalf of the Company's employees. During the first nine months of fiscal 2020 and 2019 , the Company withheld $ 75.4 million and $ 42.0 million worth of RSU awards, respectively, to satisfy the employees’ tax obligations.

During the third quarter and the first nine months of fiscal 2020 , the Company realized excess tax benefits of $ 1.3 million and $ 35.6 million , respectively, primarily from RSU vesting. During the third quarter and the first nine months of fiscal 2019 , the excess tax benefits were $ 1.5 million and $ 10.2 million , respectively, primarily from RSU vesting. These tax benefits were recorded in the condensed consolidated statements of income as a component of the provision for income taxes.

Employee Stock Purchase Plan

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Under the Company’s ESPP, shares are only issued during the second and fourth quarters of each fiscal year. Employees purchased 241 thousand shares for $ 19.7 million during the second quarter of fiscal 2020 and 359 thousand shares for $ 18.0 million during the second quarter of fiscal 2019 . The per-share weighted-average fair value of stock purchase rights granted under the ESPP during the second quarter of fiscal 2020 and 2019 was $ 33.79 and $ 19.06 , respectively. The fair values of stock purchase plan rights granted in the second quarter of fiscal 2020 and 2019 were estimated using the Black-Scholes option pricing model at the date of grant using the following assumptions:



	2020		2019
Expected life of options (years)	1.25		1.25
Expected stock price volatility	0.37		0.29
Risk-free interest rate	1.9	%	2.5	%
Dividend yield	1.3	%	2.0	%

The next scheduled purchase under the ESPP is in the fourth quarter of fiscal 2020 . On August 8, 2019, the stockholders approved an amendment to increase the authorized number of shares reserved for issuance under the ESPP by 2.0 million shares. As of December 28, 2019 , 13.1 million shares were available for future issuance under the Company's ESPP.


Note 8.	Net Income Per Common Share

The computation of basic net income per common share for all periods presented is derived from information on the condensed consolidated statements of income, and there are no reconciling items in the numerator used to compute the diluted net income per common share. The following table summarizes the computation of basic and diluted net income per common share:



	Three Months Ended				Nine Months Ended
(In thousands, except per share amounts)	December 28, 2019		December 29, 2018		December 28, 2019		December 29, 2018
Net income available to common stockholders	$	162,012	$	239,360	$	630,463	$	645,109
Weighted average common shares outstanding-basic	250,546		253,060		252,330		252,634
Dilutive effect of employee equity incentive plans	2,262		3,314		3,428		2,593
Weighted average common shares outstanding-diluted	252,808		256,374		255,758		255,227
Basic net income per common share	$	0.65	$	0.95	$	2.50	$	2.55
Diluted net income per common share	$	0.64	$	0.93	$	2.47	$	2.53

The total shares used in the denominator of the diluted net income per common share calculation include potentially dilutive common equivalent shares outstanding that are not included in basic net income per common share calculation. The diluted shares were calculated by applying the treasury stock method to the impact of the equity incentive plans.

Certain shares of outstanding stock options and RSUs were excluded from diluted net income per common share calculation by applying the treasury stock method, as their inclusion would have been anti-dilutive. These excluded options and RSUs were immaterial for the third quarter and the first nine months of fiscal 2020 , 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.

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Note 9.	Inventories

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



(In thousands)	December 28, 2019		March 30, 2019
Raw materials	$	34,518	$	39,727
Work-in-process	232,075		213,784
Finished goods	61,616		61,847
	$	328,209	$	315,358


Note 10.	Debt and Credit Facility

2021 Notes

On March 12, 2014, the Company issued the 2021 Notes at a discounted price of 99.281 % of par. Interest on the 2021 Notes is payable semi-annually on March 15 and September 15.

The Company received net proceeds of $ 495.4 million from issuance of the 2021 Notes, after the debt discount and deduction of debt issuance costs. The debt discounts and issuance costs are amortized to interest expense over the terms of the 2021 Notes. As of December 28, 2019 , the remaining term of the 2021 Notes is 1.2 years.

The following table summarizes the carrying value of the 2021 Notes as of December 28, 2019 and March 30, 2019 :




(In thousands)	December 28, 2019			March 30, 2019
Principal amount of the 2021 Notes	$	500,000		$	500,000
Unamortized discount of the 2021 Notes	( 654		)	( 1,063		)
Unamortized debt issuance costs associated with 2021 Notes	( 285		)	( 467		)
Carrying value of the 2021 Notes	$	499,061		$	498,470

Interest expense related to the 2021 Notes was included in interest and other income (expense), net on the condensed consolidated statements of income as follows:



	Three Months Ended				Nine Months Ended
(In thousands)	December 28, 2019		December 29, 2018		December 28, 2019		December 29, 2018
Contractual coupon interest	$	3,750	$	3,750	$	11,250	$	11,250
Amortization of debt issuance costs	61		61		182		183
Amortization of debt discount, net	137		133		409		396
Total interest expense related to the 2021 Notes	$	3,948	$	3,944	$	11,841	$	11,829

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 Company received $ 745.2 million from the issuance of the 2024 Notes, after the debt discount and deduction of debt issuance costs. The debt discounts and issuance costs are amortized to interest expense over the term of the 2024 Notes. As of December 28, 2019 , the remaining term of the 2024 Notes is approximately 4.5 years.

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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 paid on a semi-annual basis, a variable interest rate equal to the three-month London Interbank Offered Rate (LIBOR) plus 91.43 bps , and received on a semi-annual basis, interest income at a fixed interest rate of 2.950 % . The Company did not incur any interest expense for the three months ended December 28, 2019 but incurred a net interest expense of $ 923 thousand for the nine months ended December 28, 2019 , from the interest rate swap contracts, which was included in interest and other income (expense), net on the condensed consolidated statements of income. The Company incurred a net interest expense of $ 939 thousand and $ 2.4 million for the three and nine months ended December 29, 2018 , respectively, from the interest rate swap contracts, which was included in interest and other income (expense), net on the condensed 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 as of December 28, 2019 and March 30, 2019 :



(In thousands)	December 28, 2019			March 30, 2019
Principal amount of the 2024 Notes	$	750,000		$	750,000
Unamortized discount of the 2024 Notes	( 555		)	( 642		)
Unamortized debt issuance costs associated with 2024 Notes	( 2,506		)	( 2,932		)
Carrying Value of the 2024 Notes	$	746,939		$	746,426
Fair value hedge adjustment — interest rate swap contracts	—			( 10,089		)
Net carrying value of the 2024 Notes	$	746,939		$	736,337

Interest expense related to the 2024 Notes was included in interest and other income (expense), net on the condensed consolidated statements of income as follows:



	Three Months Ended				Nine Months Ended
(In thousands)	December 28, 2019		December 29, 2018		December 28, 2019		December 29, 2018
Contractual coupon interest (including interest rate swap, net)	$	5,444	$	6,470	$	17,429	$	19,026
Amortization of debt issuance costs	142		142		426		426
Amortization of debt discount, net	29		28		87		84
Total interest expense related to the 2024 Notes	$	5,615	$	6,640	$	17,942	$	19,536

Revolving Credit Facility

On December 7, 2016 , the Company entered into a $ 400.0 million senior unsecured revolving credit facility that, upon certain conditions, may be extended by an additional $ 150.0 million , with a syndicate of banks (expiring in December 2021 ). Borrowings under the credit facility will bear interest at a benchmark rate plus an applicable margin based upon the Company’s credit rating. In connection with the credit facility, the Company is required to maintain certain financial and nonfinancial covenants. As of December 28, 2019 , the Company had made no borrowings under this credit facility and was not in violation of any of the covenants.

Note 11. Common Stock Repurchase Program

The Board of Directors (Board) 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 May 16, 2018, the Board authorized a repurchase program to repurchase the Company's common stock and debentures up to $ 500.0 million (2018 Repurchase Program). On October 22, 2019, the Board authorized another repurchase program to repurchase the Company's common stock and debentures up to $ 1.00 billion (2019 Repurchase Program). The 2018 and 2019 Repurchase Programs have no stated expiration date.

Through December 28, 2019 , the Company had fully utilized the entire amount authorized under the 2018 Repurchase Program and used $ 191.9 million of the $ 1.00 billion authorized under the 2019 Repurchase Program, leaving $ 808.1 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 December 28, 2019 and March 30, 2019 .

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

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the first nine months of fiscal 2019 , the Company repurchased 2.4 million shares of common stock in the open market with independent financial institutions for a total of $ 161.6 million .


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

The components of interest and other income (expense), net are as follows:



	Three Months Ended						Nine Months Ended
(In thousands)	December 28, 2019			December 29, 2018			December 28, 2019			December 29, 2018
Interest income	$	11,138		$	21,610		$	42,939		$	56,358
Interest expense	( 9,563		)	( 13,464		)	( 30,255		)	( 40,000		)
Other income (expense), net	4,862			( 9,476		)	17,694			( 14,127		)
Total interest and other income (expense), net	$	6,437		$	( 1,330	)	$	30,378		$	2,231


Note 13.	Accumulated Other Comprehensive Loss

Comprehensive income (loss) is defined as the change in equity of a company during a period from transactions and other events and circumstances from non-owner sources. The components of the Company's accumulated other comprehensive loss are as follows:



(In thousands)	December 28, 2019			March 30, 2019
Accumulated unrealized losses on available-for-sale securities, net of tax	$	( 1,351	)	$	( 12,725	)
Accumulated unrealized gains on hedging transactions, net of tax	513			95
Accumulated cumulative translation adjustment, net of tax	( 11,267		)	( 10,780		)
Total accumulated other comprehensive loss	$	( 12,105	)	$	( 23,410	)

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


Note 14.	Income Taxes

The Company recorded tax provisions of $ 3.8 million and $ 13.8 million for the third quarter and the first nine months of fiscal 2020 , respectively, representing effective tax rates of 2.3 % and 2.1 % , respectively. The Company recorded tax provisions of $ 17.2 million and $ 63.5 million for the third quarter and the first nine months of fiscal 2019 , respectively, representing effective tax rates of 6.7 % and 9.0 % , respectively.

The difference between the U.S. federal statutory tax rate of 21 % and the Company's effective tax rate in all periods presented was primarily due to the beneficial impact of income earned in lower tax rate jurisdictions and excess tax benefits with respect to stock-based compensation, which was partially offset by U.S. tax on global intangible low-taxed income.

The Company’s total gross unrecognized tax benefits as of December 28, 2019 , determined in accordance with FASB authoritative guidance for measuring uncertain tax positions, decreased by a net $ 79.4 million in the third quarter of fiscal 2020 to $ 87.7 million . The total amount of unrecognized tax benefits that, if realized in a future period, would favorably affect the effective tax rate was $ 49.2 million as of December 28, 2019 . Of the net change in uncertain tax benefits during the quarter, 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. It is reasonably possible that other changes to the Company's unrecognized tax benefits could be significant in the next twelve months due to tax audit settlements and lapses of statutes of limitation. As a result of uncertainties regarding tax audit settlements and their possible outcomes, an estimate of the range of increase or decrease that could occur in the next twelve months cannot be made.

The Company’s policy is to include interest and penalties related to income tax liabilities within the provision for income taxes on the condensed consolidated statements of income. The Company recorded net benefits of $ 5.2 million and $ 4.9 million for

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interest and penalties, which were included in the Company's provision for income taxes for the third quarter and first nine months of fiscal 2020, respectively. The amounts of interest and penalties included in the Company's provision for income taxes were not material for the third quarter and first nine months of fiscal 2019.

The statutes of limitations have closed for U.S. federal income tax purposes for years through fiscal 2014, for U.S. state income tax purposes for years through fiscal 2010, and for Ireland income tax purposes for years through fiscal 2014.

On July 27, 2015, the United States Tax Court (Tax Court) issued its 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. The decision is not yet final, however, because Altera has until February 10, 2020 to file a petition for certiorari with the U.S. Supreme Court. Nevertheless, we believe the law to be unsettled and continue to record tax benefits as we exclude stock-based compensation costs from our cost sharing arrangement. The cumulative potential impact of a final adverse decision to the consolidated statement of income is expected to be $ 55 million to $ 60 million by the end of fiscal 2020 for taxes and interest. We will continue to monitor developments in the Altera case and the potential effect on our consolidated financial statements.


Note 15.	Leases and Commitments

Xilinx leases some of its facilities and office buildings under non-cancelable operating leases that expire at various dates through August 2029 . Additionally, Xilinx entered into a land lease in conjunction with the Company’s building in Singapore, which will expire in November 2035 and the lease cost was settled in an up-front payment in June 2006. Some of the operating leases for facilities and office buildings require payment of operating costs, including property taxes, repairs, maintenance and insurance. Most of the Company’s leases contain renewal options for varying terms. T hese 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 December 28, 2019 :



Fiscal	(In thousands)
2020 (remaining three months)	$	3,436
2021	13,328
2022	11,731
2023	7,327
2024	6,299
Thereafter	35,854
Total lease payments	77,975
Less: Imputed interest	( 18,977		)
Total lease liabilities	$	58,998

The Company's leases were included as a component of the following condensed consolidated balance sheet lines:



(In thousands)	December 28, 2019
Other assets	$	56,242
Other accrued liabilities	10,588
Other long-term liabilities	48,410

The components of lease costs were as follows:

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	Three Months Ended			Nine Months Ended
(In thousands)	December 28, 2019			December 28, 2019
Operating lease cost	$	4,109		$	12,715
Lease income	( 768		)	( 2,236		)
Total lease cost	$	3,341		$	10,479

Other information related to leases was as follows:



	Three Months Ended		Nine Months Ended
(In thousands)	December 28, 2019		December 28, 2019
Cash paid for operating leases included in operating cash flows	$	3,054	$	9,133



	December 28, 2019
Weighted-average remaining lease term - operating leases (in years)	7.8
Weighted-average remaining discount rate - operating leases	5.7	%

Other commitments as of December 28, 2019 totaled $ 115.0 million and consisted of purchases of inventory and other non-cancelable purchase obligations related to subcontractors that manufacture silicon wafers and provide assembly and some test services. The Company expects to receive and pay for these materials and services in the next three to six months, as the products meet delivery and quality specifications. Additionally, as of December 28, 2019 , the Company also had $ 1.0 million commitments related to renovation of properties and $ 34.9 million commitments primarily related to open purchase orders from ordinary operations. These commitments expire at various dates through April 2024 .


Note 16.	Product Warranty and Indemnification

The Company generally sells products with a limited warranty for product quality. The Company provides an accrual for known product issues if a loss is probable and can be reasonably estimated. As of the end of the third quarter of fiscal 2020 and the end of fiscal 2019 , the accrual balances of the product warranty liability were immaterial.

The Company offers, subject to certain terms and conditions, to indemnify customers and distributors for costs and damages awarded against these parties in the event the Company’s hardware products are found to infringe third-party intellectual property rights, including patents, copyrights or trademarks, and to compensate certain customers for limited specified costs they actually incur in the event the Company's hardware products experience epidemic failure. To a lesser extent, the Company may from time-to-time offer limited indemnification with respect to its software products. The terms and conditions of these indemnity obligations are limited by contract, which obligations are typically perpetual from the effective date of the agreement. The Company has historically received only a limited number of requests for indemnification under these provisions and has not made any significant payments pursuant to these provisions. The Company cannot estimate the maximum amount of potential future payments, if any, that the Company may be required to make as a result of these obligations due to the limited history of indemnification claims and the unique facts and circumstances that are likely to be involved in each particular claim and indemnification provision. However, there can be no assurances that the Company will not incur any financial liabilities in the future as a result of these obligations.


Note 17.	Contingencies

Patent Litigation

On October 18, 2019, a patent infringement lawsuit was filed by Arbor Global Strategies LLC (Arbor) against the Company in the U.S. District Court in Delaware (Arbor Global Strategies LLC, v. Xilinx, Inc., Case No. 1:19-cv-01986). The lawsuit pertains to four patents and Arbor seeks unspecified damages, interest, attorneys’ fees, and costs. The Company filed a motion to dismiss the case on December 19, 2019. 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.

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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 on January 21, 2020. No schedule has been set in the case. The Company is unable to estimate its range of possible loss, if any, in this matter at this time.

The Company intends to continue to protect and defend our intellectual property 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.

From time to time, the Company is involved in various disputes and litigation matters that arise in the ordinary course of its business. These include disputes and lawsuits related to intellectual property, mergers and acquisitions, licensing, contract law, tax, regulatory, distribution arrangements, employee relations and other matters. Periodically, the Company reviews the status of each matter and assesses its potential financial exposure. If the potential loss from any claim or legal proceeding is considered probable and a range of possible losses can be estimated, the Company accrues a liability for the estimated loss. Legal proceedings are subject to uncertainties, and the outcomes are difficult to predict. Because of such uncertainties, accruals are based only on the best information available at the time. As additional information becomes available, the Company continues to reassess the potential liability related to pending claims and litigation and may revise estimates.

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Note 18.	Goodwill and Acquisition-Related Intangibles

A summary of the goodwill and acquisitions-related intangibles balances as of December 28, 2019 and March 30, 2019 was as follows:



							Weighted-Average
(In thousands)	December 28, 2019			March 30, 2019			Amortization Life
Goodwill	$	619,196		$	340,718
Core technology, gross	$	209,131		$	107,250
Less accumulated amortization	( 98,310		)	( 82,611		)
Core technology, net	110,821			24,639			4.2 years
Other intangibles, gross	95,759			51,016
Less accumulated amortization	( 53,130		)	( 47,642		)
Other intangibles, net	42,629			3,374			4.1 years

In-process research and development	56,991			52,710

Total acquisition-related intangibles, gross	361,881			210,976
Less total accumulated amortization	( 151,440		)	( 130,253		)
Total acquisition-related intangibles, net	$	210,441		$	80,723

Based on the carrying value of acquisition-related intangibles recorded as of December 28, 2019 , and assuming no subsequent acquisition or impairment of the underlying assets, the annual amortization expense for acquisition-related intangibles is expected to be as follows:



Fiscal	(In thousands)
2020 (remaining three months)	$	9,616
2021	38,440
2022	35,599
2023	33,749
2024	29,443
Thereafter	6,603
Total	$	153,450

In-process research and development is not subject to amortization prior to the completion of the projects and therefore the balance is excluded from the above annual amortization expense schedule.


Note 19.	Segment Information

Xilinx designs, develops and markets programmable logic semiconductor devices and the related software design tools. The Company operates and tracks its results in one operating segment. Xilinx sells its products to OEMs and to electronic components distributors who resell these products to OEMs or subcontract manufacturers. Net revenues by geography for the periods indicated were as follows:



	Three Months Ended				Nine Months Ended
(In thousands)	December 28, 2019		December 29, 2018		December 28, 2019		December 29, 2018
North America	$	203,862	$	227,203	$	636,269	$	628,484
Asia Pacific	343,416		366,766		1,197,489		997,533
Europe	118,646		145,903		395,779		431,324
Japan	57,575		60,185		176,960		173,337
Total net revenues	$	723,499	$	800,057	$	2,406,497	$	2,230,678

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Geographic revenue information for the third quarter of fiscal 2020 and 2019 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.


Note 20.	Business Combination

In July 2019, the Company completed the acquisition of Solarflare Communications, Inc. (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 the Company's condensed 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 condensed consolidated statements of income as part of interest and other income (expense), net.

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:



	Amount
	(In thousands)
Cash and cash equivalents	$	6,765
Tangible assets	19,308
Deferred tax assets	44,016
Identifiable intangible assets	106,000
Goodwill	237,163
Current liabilities	( 9,229		)
Non-current liabilities	( 3,797		)
Total	$	400,226

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.



	Amount		Amortization Life
	(In thousands)
Trade names & trademarks	$	2,000	2.0 years
Developed technology	34,000		5.0 years
Customer relationships	40,000		5.0 years
In-process research and development	30,000		N/A
Total identifiable intangible assets	$	106,000


Note 21.	Subsequent Events

On January 27, 2020 , the Board declared a cash dividend of $ 0.37 per common share for the fourth quarter of fiscal 2020 . The dividend is payable on February 20, 2020 to stockholders of record on February 11, 2020 .

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On January 28, 2020, the Company announced cost-saving measures designed to drive structural operating efficiencies across the Company, including a targeted global workforce reduction in force. As a result of this reduction, the Company expects to incur a pre-tax charge of approximately $ 25.0 million to $ 30.0 million in the fourth quarter of fiscal 2020 primarily related to severance pay expenses.

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

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 condensed consolidated financial statements. The SEC has defined critical accounting policies as those that are most important to the portrayal of our financial condition and results of operations and require us to make our most difficult and subjective judgments, often as a result of the need to make estimates of matters that are inherently uncertain. Based on this definition, our critical accounting policies include: valuation of marketable securities, which impacts losses on debt and equity securities when we record impairments; revenue recognition, which impacts the recording of revenues; and valuation of inventories, which impacts cost of revenues and gross margin. Our critical accounting policies also include: the assessment of impairment of long-lived assets, which impacts their valuation; the assessment of the recoverability of goodwill, which impacts goodwill impairment; accounting for income taxes, which impacts the provision or benefit recognized for income taxes, as well as the valuation of deferred tax assets recorded on our condensed consolidated balance sheet; and accounting for business combinations, which impacts the valuation of tangible and intangible assets recognized and liabilities assumed. For 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 30, 2019 filed with the SEC, and to "Note 2. Recent Accounting Changes and Accounting Pronouncements" to our condensed consolidated financial statements, included in Part I. "Financial Information." We also have other key accounting policies that are not as subjective, and therefore, their application would not require us to make estimates or judgments that are as difficult, but which nevertheless could significantly affect our financial reporting.

Results of Operations: third quarter and the first nine months of fiscal 2020 compared to the third quarter and first nine months of fiscal 2019

The following table sets forth statement of income data as a percentage of net revenues for the periods indicated:



	Three Months Ended				Nine Months Ended
	December 28, 2019		December 29, 2018		December 28, 2019		December 29, 2018
Net revenues	100.0	%	100.0	%	100.0	%	100.0	%
Cost of revenues:
Cost of products sold	32.3		31.0		33.4		30.8
Amortization of acquisition-related intangibles	0.9		—		0.7		—
Total cost of revenues	33.2		31.0		34.1		30.8
Gross margin	66.8		69.0		65.9		69.2
Operating expenses:
Research and development	29.2		23.7		26.5		24.4
Selling, general and administrative	15.2		12.9		13.7		13.0
Amortization of acquisition-related intangibles	0.4		0.2		0.2		0.1
Total operating expenses	44.8		36.8		40.4		37.5
Operating income	22.0		32.2		25.5		31.7
Interest and other income (expense), net	0.9		(0.1	)	1.3		0.1
Income before income taxes	22.9		32.1		26.8		31.8
Provision for income taxes	0.5		2.2		0.6		2.9
Net income	22.4	%	29.9	%	26.2	%	28.9	%

Net Revenues

We sell our products to global manufacturers of electronic products in various end markets. The vast majority of our net revenues is generated by sales of our semiconductor products, but we also generate sales from support products. We classify our product offerings into two categories, Advanced Products and Core Products:

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•	Advanced Products include our most recent product offerings and consist of the UltraScale+, UltraScale and 7-series product families and our Alveo boards products.


•	Core Products consist of all other product families.

These product categories are modified on a periodic basis to better reflect the maturity of the products and advances in technology. The most recent modification was made on April 3, 2016, which was the beginning of our fiscal 2017, whereby we reclassified our product categories to be consistent with how these categories are analyzed and reviewed internally. Specifically, we group devices and board products utilizing 28 nanometer (nm), 20nm and 16nm nodes and beyond into the Advanced Products category while all other products are grouped in the Core Products category.

Except for Avnet, no other distributor accounted for more than 10% of our net revenues for the third quarter of fiscal 2020 or 2019 . One end customer accounted for 12% and 11% of our worldwide net revenues for the third quarter and the first nine months of fiscal 2020 , respectively. No end customer accounted for more than 10% of our worldwide net revenues for the third quarter and the first nine months of fiscal 2019 .

Net Revenues by Product

Net revenues by product categories for the third quarter and the first nine months of fiscal 2020 and 2019 were as follows:



	Three Months Ended						Nine Months Ended
(In millions)	December 28, 2019		% Change		December 29, 2018		December 28, 2019		% Change		December 29, 2018
Advanced Products	$	504.7	(4	)	$	524.2	$	1,709.2	23		$	1,387.8
Core Products	218.8		(21	)	275.9		697.3		(17	)	842.9
Total net revenues	$	723.5	(10	)	$	800.1	$	2,406.5	8		$	2,230.7

Net revenues from Advanced Products decreased in the third quarter but increased the first nine months of fiscal 2020 from the comparable prior year periods. The decrease in the third quarter of fiscal 2020 was due to weak sales from our 28nm and 20nm product families; but was partially offset by the strong growth from our 16nm product family. The increase in the first nine months of fiscal 2020 was a result of strong sales growth from our 16nm product; but was partially offset by declines in sales from our 28nm and 20nm product families. We expect sales of Advanced Products to continue to grow as more customer programs enter into volume production with our 16nm and 7nm products.

Net revenues from Core Products decreased in the third quarter and the first nine months of fiscal 2020 from the comparable prior year periods. The decreases were largely due to lower sales from our Virtex-5 and older Spartan product families. Core Products are relatively mature products and, as a result, their sales are expected to decline over time.

Net Revenues by End Markets

Our end market revenue data is derived from our understanding of our end customers’ primary markets, which is based on reports provided by distributors and our internal records. To provide additional visibility, starting March 31, 2019, we classify our end markets into businesses with similar market drivers: Aerospace & Defense, Industrial and Test, Measurement & Emulation (AIT); Automotive, Broadcast & Consumer; Wired & Wireless; and Data Center. Additionally, we classify revenue recognized from shipments to distributors but not yet subsequently sold to the end markets as Channel Revenue. The Channel Revenue represents the difference between the shipments to distributors and what the distributors subsequently sold to the end customers within the same period. The percentage change calculation in the table below represents the year-to-year dollar change in each end market.

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Net revenues by end markets for the third quarter and the first nine months of fiscal 2020 and 2019 were as follows:



	Three Months Ended						Nine Months Ended
(% of total net revenues)	December 28, 2019		% Change in Dollars		December 29, 2018		December 28, 2019		% Change in Dollars	December 29, 2018
AIT	40	%	(10	)	40	%	39	%	2	41	%
Automotive, Broadcast and Consumer	19		10		15		16		10	16
Wired and Wireless	31		(18	)	35		37		20	33
Data Center	9		8		8		8		8	8
Channel Revenue	1		NM*		2		—		NM*	2
Total net revenues	100	%	(10	)	100	%	100	%	8	100	%

*Not meaningful

Net revenues from AIT decreased, in terms of absolute dollar, in the third quarter but increased in the first nine months of fiscal 2020 from the comparable prior year periods. The decrease for the third quarter of fiscal 2020 was primarily due to lower sales from Test, Measurement and Emulation business. For the first nine months of fiscal 2020 , higher sales from Aerospace and Defense and Industrial businesses were largely offset by the decline in sales from Test, Measurement and Emulation business.

Net revenues from Automotive, Broadcast and Consumer increased, in terms of absolute dollar, in the third quarter and the first nine months of fiscal 2020 from the comparable prior year periods. The increase was primarily due to higher sales from Consumer business, and to a lesser extent, from Audio, Video and Broadcast business for the third quarter of fiscal 2020 . The increase for the first nine months of fiscal 2020 was due to higher sales from all sub-segments of the business.

Net revenues from Wired and Wireless decreased, in terms of absolute dollar, in the third quarter but increased in the first nine months of fiscal 2020 from the comparable prior year periods. The decrease for the third quarter of fiscal 2020 was primarily due to lower sales from Wired and Wireless businesses. The increase for the first nine months of fiscal 2020 was due to higher sales from Wireless business driven by the initial deployment ramp of 5G wireless networks; but was partially offset by lower sales from Wired business.

Net revenues from Data Center increased, in terms of absolute dollar, in the third quarter and the first nine months of fiscal 2020 from the comparable prior year periods. The increases were largely driven by higher sales in the Networking business.

Channel Revenue was a positive amount in the third quarter and the first nine months of fiscal 2020 as shipments to distributors were higher than what the distributors subsequently shipped to the end customers in the periods. While we strive to improve the stability of distributor inventory balances, Channel Revenue could fluctuate in the future driven by external factors such as the distributors' own inventory management and customer service objectives.

Net Revenues by Geography

Geographic revenue information reflects the geographic location of the distributors, original equipment manufacturers (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 third quarter and the first nine months of fiscal 2020 and 2019 were as follows:



	Three Months Ended						Nine Months Ended
(In millions)	December 28, 2019		% Change		December 29, 2018		December 28, 2019		% Change		December 29, 2018
North America	$	203.9	(10	)	$	227.2	$	636.3	1		$	628.6
Asia Pacific	343.4		(6	)	366.8		1,197.5		20		997.5
Europe	118.6		(19	)	145.9		395.7		(8	)	431.3
Japan	57.6		(4	)	60.2		177.0		2		173.3
Total net revenues	$	723.5	(10	)	$	800.1	$	2,406.5	8		$	2,230.7

Net revenues in North America decreased in the third quarter but increased in the first nine months of fiscal 2020 from the comparable prior year periods. The decrease for the third quarter of fiscal 2020 was primarily due to lower sales from Wired and

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Test, Measurement and Emulation businesses. The increase for the first nine months of fiscal 2020 was primarily due to higher sales from Aerospace and Defense business, but was partially offset by lower sales from Wired business.

Net revenues in Asia Pacific decreased in the third quarter but increased in the first nine months of fiscal 2020 from the comparable prior year periods. The decrease for the third quarter of fiscal 2020 was primarily due to lower sales from Wired and Wireless businesses. The increase for the first nine months of fiscal 2020 was primarily due to higher sales from Wireless business, driven by the initial deployment ramp of 5G wireless networks, but was partially offset by lower sales from Wired business.

Net revenues in Europe decreased in the third quarter and the first nine months of fiscal 2020 from the comparable prior year periods. The decreases were primarily due to lower sales from Test, Measurement and Emulation business.

Net revenues in Japan decreased in the third quarter of fiscal 2020 ; but increased in the first nine months of fiscal 2020 from the comparable prior year periods. The decrease in the third quarter of fiscal 2020 was primarily due to lower sales from Test, Measurement and Emulation business. The increase in the first nine months of fiscal 2020 was primarily due to higher sales from Wireless business.

Gross Margin



	Three Months Ended								Nine Months Ended
(In millions)	December 28, 2019			Change		December 29, 2018			December 28, 2019			Change		December 29, 2018
Gross margin	$	483.5		(12	)%	$	552.2		$	1,586.6		3	%	$	1,544.3
Percentage of net revenues	66.8		%			69.0		%	65.9		%			69.2		%

Gross margin was lower in both the third quarter and in the first nine months of fiscal 2020 from the comparable prior year periods. The decrease for the third quarter of fiscal 2020 was due to unfavorable changes in the end market mix driven by weakness in Test, Measurement and Emulation business, which had relatively higher gross margin. The decrease for the first nine months of fiscal 2020 was driven primarily by unfavorable changes in the end market mix, as the percentage of revenue derived from wireless business, which had relatively lower gross margin, increased significantly. Lower gross margin was also affected, to a lesser extent, by amortization of acquisition-related intangibles.

Gross margin may be affected in the future due to multiple factors, including but not limited to those set forth in Item 1A. "Risk Factors," included in Part II of this Form 10-Q, 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 Advanced Products, manufacturing efficiencies, and average selling price management. However, continuing growth in wireless business driven by the accelerated global deployment ramp of 5G wireless networks might negatively impact gross margin in the future.

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 reduction in unit cost. We historically have been able to offset much of such revenue decline in our mature products with increased revenue from newer products.

Research and Development



	Three Months Ended								Nine Months Ended
(In millions)	December 28, 2019			Change		December 29, 2018			December 28, 2019			Change		December 29, 2018
Research and development	$	211.5		12	%	$	189.3		$	638.6		17	%	$	543.5
Percentage of net revenues	29		%			24		%	27		%			24		%

Research and development (R&D) spending increased by $22.2 million, or 12% , for the third quarter of fiscal 2020 from the comparable prior year period, and by $95.1 million, or 17% , for the first nine months of fiscal 2020 . The increases were primarily attributable to increased headcount and employee compensation (including stock-based compensation), and to a lesser extent higher mask and wafer spending, related to our continuing new products development.

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We plan to continue to selectively invest in R&D efforts in areas such as new products and more advanced process development, intellectual property (IP) cores and software development environments. 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								Nine Months Ended
(In millions)	December 28, 2019			Change		December 29, 2018			December 28, 2019			Change		December 29, 2018
Selling, general and administrative	$	109.6		6	%	$	103.0		$	328.6		13	%	$	291.3
Percentage of net revenues	15		%			13		%	14		%			13		%

Selling, general and administrative expenses increased by $6.6 million and $37.3 million, respectively, for the third quarter and the first nine months of fiscal 2020 from the comparable prior year periods. We incurred higher employee compensation (including stock-based compensation) due primarily to increased headcount. For the first nine months of fiscal 2020 , we also incurred higher expenses related to merger and acquisition activities.

Stock-Based Compensation



	Three Months Ended						Nine Months Ended
(In millions)	December 28, 2019		Change		December 29, 2018		December 28, 2019		Change		December 29, 2018
Stock-based compensation included in:
Cost of revenues	$	3.0	31	%	$	2.3	$	8.4	26	%	$	6.7
Research and development	31.5		41	%	22.4		86.1		36	%	63.3
Selling, general and administrative	15.7		13	%	13.9		48.2		23	%	39.2
	$	50.2	30	%	$	38.6	$	142.7	31	%	$	109.2

The 30% and 31% increases in stock-based compensation expense for the third quarter and the first nine months of fiscal 2020 , respectively, as compared to the prior year periods were primarily related to higher expenses associated with RSUs to remain competitive in employee compensation, as we granted RSUs at a higher fair value than in the prior years.

Interest and Other Income (Expense), Net



	Three Months Ended								Nine Months Ended
(In millions)	December 28, 2019			Change		December 29, 2018			December 28, 2019			Change		December 29, 2018
Interest and other income (expense), net	$	6.4		584	%	$	(1.3	)	$	30.4		1,262	%	$	2.2
Percentage of net revenues	1		%			—		%	1		%			—		%

Our interest and other income (expense), net was a net income of $6.4 million in the third quarter of fiscal 2020 , as compared to a net expense of $1.3 million in the same prior year period. For the first nine months of fiscal 2020 , our interest and other income (expense), net was a net income of $30.4 million comparing to $2.2 million of the same period last year. The increases were primarily due to gains on our investments during the fiscal 2020 period.

Provision for Income Taxes

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	Three Months Ended								Nine Months Ended
(In millions)	December 28, 2019			Change		December 29, 2018			December 28, 2019			Change		December 29, 2018
Provision for income taxes	$	3.8		(78	)%	$	17.2		$	13.8		(78	)%	$	63.5
Percentage of net revenues	1		%			2		%	1		%			3		%
Effective tax rate	2		%			7		%	2		%			9		%

The decrease in the effective tax rate in the third quarter of fiscal 2020 as compared to the same prior year period was primarily due to net tax benefits recognized on the intercompany transfer of intellectual property, the release of reserves for uncertain tax positions and the benefit of interest accrued on tax refunds in fiscal 2020. The decrease in the effective tax rate was partially offset by a benefit for the initial recognition of deferred tax assets on global intangible low taxed income in fiscal 2019.

The decrease in the effective tax rate in the first nine months of fiscal 2020 as compared to the same prior year period was primarily due to an increase in excess tax benefits with respect to stock-based compensation and adjustments in the prior year period to the provisional estimates previously recorded under the Tax Cuts and Jobs Act (TCJA).

The difference between the U.S. federal statutory tax rate of 21% and our effective tax rate in all periods presented was primarily due to the beneficial impact of income earned in lower tax rate jurisdictions and excess tax benefits with respect to stock-based compensation, which was partially offset by U.S. tax on global intangible low-taxed income.

On July 27, 2015, the United States Tax Court (Tax Court) issued its 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. The decision is not yet final, however, because Altera has until February 10, 2020 to file a petition for certiorari with the U.S. Supreme Court. Nevertheless, we believe the law to be unsettled and continue to record tax benefits as we exclude stock-based compensation costs from our cost sharing arrangement. The cumulative potential impact of a final adverse decision to the consolidated statement of income is expected to be $55 million to $60 million by the end of fiscal 2020 for taxes and interest. We will continue to monitor developments in the Altera case and the potential effect on our consolidated financial statements.

We have manufacturing operations in Singapore for which we have been granted "Pioneer Status" that is effective through fiscal 2021. The Pioneer Status reduces our local tax on Singapore income from a statutory rate of 17% to zero percent. Without obtaining a further Singapore incentive, the tax rate on Singapore income would increase to 17% beginning in fiscal 2022. During the quarter ended September 28, 2019, we received an award from the Singapore Economic Development Board for a Development and Expansion Incentive that will reduce our local tax on Singapore income from a statutory rate of 17% to 5%, effective for fiscal years 2022 through 2031.

Financial Condition, Liquidity and Capital Resources

We have historically used a combination of cash flows from operations and equity, as well as 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 investments in debt securities are liquid and available for future business needs.

The combination of cash, cash equivalents and short-term and long-term investments as of December 28, 2019 and March 30, 2019 totaled $2.43 billion and $3.23 billion , respectively. As of December 28, 2019 , we had cash, cash equivalents and short-term investments of $2.43 billion and working capital of $2.61 billion . As of March 30, 2019 , cash, cash equivalents and short-term investments were $3.18 billion and working capital was $3.42 billion .

As of December 28, 2019 , we had $1.24 billion of cash and cash equivalents and short-term investments held in our non-U.S. jurisdictions. Substantially all $1.24 billion of cash, cash equivalents and short-term investments held by our non-U.S. entities is available for use in the U.S. without incurring additional U.S federal income taxes.

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Operating Activities —During the first nine months of fiscal 2020 , our operations generated net positive cash flow of $845.5 million , which was $42.3 million higher than the $803.2 million generated during the first nine months of fiscal 2019 . The positive cash flow from operations generated during the first nine months of fiscal 2020 was primarily from net income as adjusted for non-cash related items and decrease in accounts receivable, partially offset by decreases in income taxes payable and accounts payable and increase in other assets. Accounts receivable decreased by $81.6 million and days sales outstanding decreased to 29 days at December 28, 2019 from 40 days at March 30, 2019 . We had no collectability issues and our accounts receivable remained current as of December 28, 2019 . Our inventory levels as of December 28, 2019 were $12.9 million higher at $328.2 million compared to $315.4 million at March 30, 2019 , but the inventory days decreased to 109 days at December 28, 2019 from 120 days at March 30, 2019 .

Investing Activities —Net cash used in investing activities was $1.3 million during the first nine months of fiscal 2020 , as compared to $591.5 million used in the first nine months of fiscal 2019 . Net cash used in investing activities during the first nine months of fiscal 2020 consisted primarily of $454.7 million acquisition of businesses (net of cash acquired) and purchases of property, plant and equipment and software of $97.0 million , which was offset by $565.6 million of net proceeds from sale and maturity of available-for-sale and equity securities.

Financing Activities —Net cash used in financing activities was $1.10 billion in the first nine months of fiscal 2020 , as compared to $461.5 million in the first nine months of fiscal 2019 . Net cash used in financing activities during the first nine months of fiscal 2020 consisted primarily of $738.2 million of cash payment (See "Note 11. Common Stock Repurchase Program" to our condensed consolidated financial statements, included in Part I. "Financial Information") to repurchase shares of common stock, $280.4 million dividend payments to stockholders, $75.4 million of payment for RSU withholdings and $22.5 million of payments related to other financing activities.

Contractual Obligations

We lease some of our facilities, office buildings and land under non-cancelable operating leases that expire at various dates through November 2035 . See "Note 15. Leases and Commitments" to our condensed consolidated financial statements, included in Part I. "Financial Information," for a schedule of our operating lease commitments as of December 28, 2019 and additional information about operating leases.

Due to the nature of our business, we depend entirely upon subcontractors to manufacture our silicon wafers and provide assembly and some test services. The lengthy subcontractor lead times require us to order the materials and services in advance, and we are obligated to pay for the materials and services when completed. As of December 28, 2019 , we had $115.0 million of outstanding inventory and other non-cancelable purchase obligations to subcontractors. We expect 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 28, 2019 , we also had $1.0 million commitments related to renovation of properties and $34.9 million commitments primarily related to open purchase orders from ordinary operations. These commitments expire at various dates through April 2024 .

As of December 28, 2019 , we had $448.0 million of liabilities classified as long-term income taxes payable in the condensed consolidated balance sheets. Of the $448.0 million , $405.3 million was the estimated long-term portion of the one-time transition tax that resulted from the enactment of the TCJA, which will be payable in six remaining annual installments. The remaining $42.7 million of the long-term income taxes payable is for uncertain tax positions and related interest and penalties. Due to the inherent uncertainty with respect to the timing of future cash outflows associated with liabilities for uncertain tax positions, we are unable to reliably estimate the timing of cash settlement with the respective taxing authorities.

Off-Balance-Sheet Arrangements

As of December 28, 2019 , we did not have any significant off-balance-sheet arrangements, as defined in Item 303(a)(4)(ii) of SEC Regulation S-K.

Liquidity and Capital Resources

Cash generated from operations is used as our primary source of liquidity and capital resources. Our investment portfolio is also available for future cash requirements as is our $400.0 million revolving credit facility entered into in December 2016 (expiring in December 2021 ). We are not aware of any lack of access to the revolving credit facility; however, we can provide no assurance that access to the revolving credit facility will not be impacted by adverse conditions in the financial markets. Our revolving credit facility is not reliant upon a single bank. There have been no borrowings to date under our existing revolving credit facility.

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During the first nine months of fiscal 2020 , we repurchased a total of 7.2 million shares of common stock for $738.2 million in the open market and through an accelerated share repurchase program with independent financial institutions. During the first nine months of fiscal 2019 , we repurchased 2.4 million shares of common stock in the open market with independent financial institutions for a total of $161.6 million .

During the first nine months of fiscal 2020 , we paid $280.4 million in cash dividends to stockholders, representing $0.37 per common share per quarter. During the first nine months of fiscal 2019 , we paid $272.9 million in cash dividends to stockholders, representing $0.36 per common share per quarter. On January 27, 2020 , our Board of Directors declared a cash dividend of $0.37 per common share for the fourth quarter of fiscal 2020 . The dividend is payable on February 20, 2020 to stockholders of record on February 11, 2020 . On October 22, 2019, the Board increased the Company’s authorization to repurchase its common stock and debentures by $1.0 billion. Our common stock and debentures repurchase program and dividend policy could be impacted by, among other items, our views on potential future capital requirements relating to R&D, investments and acquisitions, legal risks, principal and interest payments on our debentures and other strategic investments.

We anticipate that existing sources of liquidity and cash flows from operations will be sufficient to satisfy our cash needs for the foreseeable future. We will continue to evaluate opportunities for investments to obtain additional wafer capacity, to procure additional capital equipment and facilities, to develop new products, and to potentially acquire technologies or businesses that could complement our business. However, certain risks and events, such as the risk factors discussed in Item 1A included in Part II. "Risk Factors" and below could affect our cash positions adversely.


Item 3.	Quantitative and Qualitative Disclosures About Market Risk

Interest Rate Risk

Our exposure to interest rate risk relates to certain types of investments, which consist of fixed income securities with a fair value of approximately $1.86 billion as of December 28, 2019 . The fixed income investments include mortgage-backed securities, asset-backed securities, financial institution securities, non-financial institution securities, U.S. and foreign government and agency securities and commercial mortgage-backed securities. Our primary aim with our investment portfolio is to invest available cash while preserving principal and meeting liquidity needs. In accordance with our investment policy, we place investments with high credit quality issuers and limit the amount of credit exposure to any one issuer based upon the issuer’s credit rating. These securities are subject to interest rate risk and will decrease in value if market interest rates increase. A hypothetical 100 basis-point (one percentage point) increase or decrease in interest rates compared to rates at December 28, 2019 would have affected the fair value of our investment portfolio by less than $15.0 million.

Credit Market Risk

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 5. Financial Instruments" to our condensed consolidated financial statements, included in Part I. "Financial Information."

Foreign Currency Exchange Risk

Sales to all direct OEMs and distributors are denominated in U.S. dollars.

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 condensed consolidated statements of income as they are incurred.

We enter into forward currency exchange contracts to hedge our overseas operating expenses and other liabilities when deemed appropriate. As of December 28, 2019 and March 30, 2019 , we had the following outstanding forward currency exchange contracts (in notional amount):

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(In millions and U.S. dollars)	December 28, 2019		March 30, 2019
Singapore Dollar	$	30.7	$	29.4
Euro	46.0		39.4
Indian Rupee	73.4		78.0
British Pound	19.4		10.6
Japanese Yen	3.9		3.8
Chinese Yuan	34.0		34.4
	$	207.4	$	195.6

As part of our strategy to reduce volatility of operating expenses due to foreign exchange rate fluctuations, we employ a hedging program with 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 November 2021. The net unrealized gains, which approximate the fair market value of the forward currency exchange contracts, are expected to be realized into net income within the next two years.

Our investments in several of our wholly-owned subsidiaries are recorded in currencies other than the U.S. dollar. As the financial statements of these subsidiaries are translated at each quarter end during consolidation, fluctuations of exchange rates between the foreign currency and the U.S. dollar increase or decrease the value of those investments. These fluctuations are recorded within stockholders’ equity as a component of accumulated other comprehensive income (loss). Other monetary foreign-denominated assets and liabilities are revalued on a monthly basis with gains and losses on revaluation reflected in net income. A hypothetical 10% favorable or unfavorable change in foreign currency exchange rates at December 28, 2019 would have affected the annualized foreign-currency-denominated operating expenses of our foreign subsidiaries by less than $17.0 million . In addition, a hypothetical 10% favorable or unfavorable change in foreign currency exchange rates compared to rates at December 28, 2019 would have affected the value of foreign-currency-denominated cash and investments by less than $13.0 million .

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Item 4.	Controls and Procedures

We maintain a system of disclosure controls and procedures designed to ensure that information required to be disclosed in our reports filed or submitted under the Securities Exchange Act of 1934, as amended (Exchange Act), is recorded, processed, summarized and reported within the time periods specified in the SEC rules and forms. These controls and procedures are also designed to ensure that such information is accumulated and communicated to our management, including the principal executive officer (PEO), who serves as our principal financial officer (PFO), collectively referred to herein as the PEO/PFO, as appropriate to allow timely decisions regarding required disclosure. Internal controls are procedures designed to provide reasonable assurance that: transactions are properly authorized; assets are safeguarded against unauthorized or improper use; and transactions are properly recorded and reported, to permit the preparation of our financial statements in conformity with generally accepted accounting principles.

A control system, no matter how well designed and operated, can provide only reasonable, not absolute, assurance that the control system’s objectives will be met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the company have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of simple errors or mistakes. Controls can also be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the controls. The design of any system of controls is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Over time, controls may become inadequate because of changes in conditions or deterioration in the degree of compliance with its policies or procedures. Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected. We continuously evaluate our internal controls and make changes to improve them as necessary. Our intent is to maintain our disclosure controls as dynamic systems that change as conditions warrant.

An evaluation was carried out, under the supervision of and with the participation of our management, including our PEO/PFO, of the effectiveness of our disclosure controls and procedures (as defined in Rules 13a–15(e) and 15d–15(e) under the Exchange Act) as of the end of the period covered by this report. Based upon this evaluation, our PEO/PFO has concluded that, as of the end of the period covered by this Form 10-Q, our disclosure controls and procedures are effective to provide reasonable assurance that information required to be disclosed in our Exchange Act reports is recorded, processed, summarized and reported within the time periods specified in the SEC rules and forms, and is accumulated and communicated to our management, including our PEO/PFO, as appropriate to allow timely decisions regarding required disclosure.

There were no changes in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the fiscal quarter ended December 28, 2019 that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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PART II.	OTHER INFORMATION


Item 1.	Legal Proceedings

See "Note 17. Contingencies" to our condensed consolidated financial statements, included in Item 1. "Financial Statements" for information regarding our legal proceedings.


Item 1A.	Risk Factors

The following risk factors and other information included in this Quarterly Report on Form 10-Q should be carefully considered. The risks and uncertainties described below are not the only risks to the Company. Additional risks and uncertainties not presently known to the Company or that the Company’s management currently deems immaterial also may impair its business operations. If any of the risks described below were to occur, our business, financial condition, operating results and cash flows could be materially adversely affected.

Our success depends on our ability to develop and introduce new products and our failure to do so would have a material adverse impact on our financial condition and results of operations.

Our success depends in large part on our ability to develop and introduce new products that address customer requirements and compete effectively on the basis of price, density, functionality, power consumption and performance. Consolidation in our industry may increasingly result in our competitors having greater resources, or other synergies, that provide them with a competitive advantage in those regards. The success of new product introductions is dependent upon several factors, including:


•	timely completion of new product designs;


•	ability to generate new design opportunities and design wins;


•	availability of specialized field application engineering resources supporting demand creation and customer adoption of new products;


•	ability to utilize advanced manufacturing process technologies on circuit geometries of 28nm and smaller;


•	achieving acceptable yields;


•	ability to obtain adequate production capacity from our wafer foundries and assembly and test subcontractors;


•	ability to obtain advanced packaging;


•	availability and completeness of supporting software design tools;


•	utilization of predefined IP logic;


•	customer acceptance of advanced features in our new products;


•	ability of our customers to complete their product designs and bring them to market; and


•	market acceptance of our customers' products.

Our product development efforts may not be successful, our new products may not achieve industry acceptance, or we may not achieve the necessary volume of production that would lead to further per unit cost reductions. Revenues relating to our mature products are expected to decline in the future, which is normal for our product life cycles. As a result, we may become increasingly dependent on revenues derived from design wins for our newer products as well as anticipated cost reductions in the manufacture of our current products. We rely primarily on obtaining yield improvements and corresponding cost reductions in the manufacture of existing products, and on introducing new products that incorporate advanced features and other price/performance factors that enable us to increase revenues while maintaining consistent margins. To the extent that such cost reductions and new product introductions do not occur in a timely manner, or to the extent that our products do not achieve market acceptance at prices with higher margins, our financial condition and results of operations could be materially adversely affected.

We rely on independent foundries for the manufacture of all of our products and a manufacturing problem or insufficient foundry capacity could adversely affect our operations.

Most of our wafers are manufactured in Taiwan by Taiwan Semiconductor Manufacturing Company Limited (TSMC) and United Microelectronics Corporation (UMC). We also have wafers manufactured in South Korea by Samsung Electronics Co., Ltd. Terms with respect to the volume and timing of wafer production and the pricing of wafers produced by the semiconductor foundries are determined through periodic negotiations with these wafer foundries, which usually result in short-term agreements that do not provide for long-term supply or allocation commitments. We are dependent on these foundries to supply the substantial majority of our wafers. We rely on TSMC, UMC and our other foundries to produce wafers with competitive performance attributes. Therefore, the foundries, particularly TSMC which manufactures our newest products, must be able to transition to advanced manufacturing process technologies and increased wafer sizes, produce wafers at acceptable yields and deliver them in a timely

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manner. Furthermore, we cannot guarantee that the foundries that supply our wafers will offer us competitive pricing terms or other commercial terms important to our business.

We cannot guarantee that our foundries will not experience manufacturing problems, including delays in the realization of advanced manufacturing process technologies or difficulties due to limitations of new and existing process technologies. For example, we may experience supply shortages due to the difficulties foundries may encounter if they must rapidly increase their production capacities from low utilization levels to high utilization levels because of an unexpected increase in demand. Furthermore, we cannot guarantee that the foundries will be able to manufacture sufficient quantities of our products or that they will continue to manufacture a given product for the full life of the product. We could also experience supply shortages due to very strong demand for our products, or a surge in demand for semiconductors in general, which may lead to tightening of foundry capacity across the industry. In addition, weak economic conditions may adversely impact the financial health and viability of the foundries and result in their insolvency or their inability to meet their commitments to us. The insolvency of a foundry or any significant manufacturing problem or insufficient foundry capacity would disrupt our operations and negatively impact our financial condition and results of operations.

Earthquakes or other natural disasters could disrupt our operations and have a material adverse effect on our financial condition and results of operations.

Our worldwide operations could be disrupted by earthquakes or other natural disasters such as typhoons, tsunamis, volcano eruptions, fires or floods, as well as disruptions in access to adequate supplies of electricity, natural gas or water. The independent foundries, upon which we rely to manufacture our products, as well as our California and Singapore facilities, are located in regions that are subject to earthquakes and other natural disasters. TSMC's and UMC's foundries in Taiwan and our assembly and test partners in other regions as well as many of our operations in California are located in areas that have been seismically active in the past and some of these areas have also been affected by other natural disasters such as typhoons. Disruption of operations at these foundries and our facilities could cause delays in manufacturing and shipments of our products, and could have a material adverse effect on our results of operations. Any catastrophic event in these locations would disrupt our operations, and our insurance may not cover losses resulting from such disruptions of our operations, thereby materially adversely affecting our financial condition and results of operations. For example, as a result of the March 2011 earthquake in Japan, production at the Seiko factory at Sakata was halted temporarily, impacting production of some of our older devices. In addition, suppliers of wafers and substrates were forced to halt production temporarily. Furthermore, natural disasters can also indirectly impact us. For example, our customers' supply of other complimentary products may be disrupted by a natural disaster and may cause them to delay orders of our products. More vertically-integrated competitors may be less exposed to some or all of these and other risks.

The semiconductor industry is characterized by cyclical market patterns and a significant industry downturn could adversely affect our operating results.

The semiconductor industry is highly cyclical and our financial performance has been affected by downturns in the industry. Down cycles are generally characterized by price erosion and weaker demand for our products. Weaker demand for our products resulting from economic conditions in the end markets we serve and reduced capital spending by our customers can result, and in the past has resulted, in excess and obsolete inventories and corresponding inventory write-downs. We attempt to identify changes in market conditions as soon as possible; however, the dynamics of the market in which we operate make prediction of and timely reaction to such events difficult. Due to these and other factors, our past results are not reliable predictors of our future results.

The nature of our business makes our revenues difficult to predict which could have an adverse impact on our business.

In addition to the challenging market conditions we may face, we have limited visibility into the demand for our products, particularly new products, because demand for our products depends upon our products being designed into our end customers' products and those products achieving market acceptance. Due to the complexity of our customers' designs, the design to volume production process for our customers requires a substantial amount of time, frequently longer than a year. In addition, other factors may affect our end customers' demand for our products, including, but not limited to, end customer program delays and the ability of end customers to secure other complementary products. We also are dependent upon "turns," orders received and turned for shipment in the same quarter. These factors make it difficult for us to forecast future sales and project quarterly revenues. The difficulty in forecasting future sales impairs our ability to project our inventory requirements, which could result, and in the past has resulted, in inventory write-downs or failure to meet customer product demands in a timely manner. In addition, difficulty in forecasting revenues compromises our ability to provide forward-looking revenue and earnings guidance.

If we are not able to compete successfully in our industry, our financial results and future prospects will be adversely affected.

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Our products now compete in several areas of the semiconductor industry, an industry that is intensely competitive and characterized by rapid technological change, increasing levels of integration, product obsolescence and continual price erosion. We expect continued competition from our primary Programmable Logic Device (PLD) competitors such as Intel Corporation (Intel), Lattice Semiconductor Corporation (Lattice) and Microsemi Corporation (Microsemi, acquired by Microchip), and from Application Specific Standard Products (ASSP) vendors such as Broadcom Corporation (Broadcom), Marvell Technology Group, Ltd. (Marvell) and Texas Instruments Incorporated (Texas Instruments), as well as from companies such as NVIDIA with whom we historically have not competed. In addition, we expect continued competition from the Application Specific Integrated Circuits (ASIC) market, which has been ongoing since the inception of Field Programmable Gate Arrays (FPGAs). We believe that important competitive factors in the logic Integrated Circuits (IC) industry include:


•	product pricing;


•	time-to-market;


•	product performance, reliability, quality, power consumption and density;


•	field upgradeability;


•	adaptability of products to specific applications;


•	ease of use and functionality of software design tools;


•	availability and functionality of predefined IP logic;


•	completeness of applicable software solutions;


•	adherence to industry-standard programming environments;


•	inventory and supply chain management;


•	access to leading-edge process technology and assembly capacity;


•	ability to provide timely customer service and support; and


•	access to advanced packaging technology.

Our strategy for expansion in the logic market includes continued introduction of new product architectures that address high-volume, low-cost and low-power applications as well as high-performance, high-density applications. However, we may not be successful in executing this strategy. In addition, we anticipate continued pressure from our customers to reduce prices, which may outpace our ability to lower the cost for established products.

Other competitors include manufacturers of:


•	high-density programmable logic products characterized by FPGA-type architectures;


•	high-volume and low-cost FPGAs as programmable replacements for ASICs and ASSPs;


•	ASICs and ASSPs with incremental amounts of embedded programmable logic;


•	high-speed, low-density complex programmable logic devices;


•	high-performance digital signal processing devices;


•	products with embedded processors;


•	products with embedded multi-gigabit transceivers;


•	discrete general-purpose Graphics Processing Units (GPUs) targeting data center and automotive applications;


•	other new or emerging programmable logic products; and


•	large enterprises, like hyperscalers, that have the resources to develop proprietary semiconductors.

Several companies have introduced products that compete with ours or have announced their intention to sell PLD products. To the extent that our efforts to compete are not successful, our financial condition and results of operations could be materially adversely affected.

The benefits of programmable logic have attracted a number of competitors to this segment. We recognize that different applications require different programmable technologies, and we are developing architectures, processes and products to meet these varying customer needs. Recognizing the increasing importance of standard software solutions, we have developed common software design tools that support the full range of our IC products. We believe that automation and ease of design are significant competitive factors in this segment.

We could also face competition from our licensees. In the past we have granted limited rights to other companies with respect to certain aspects of our older technology, and we may do so in the future. Granting such rights may enable these companies to manufacture and market products that may be competitive with some of our older products.

Increased costs of wafers and materials, or shortages in wafers and materials, could adversely impact our gross margins and lead to reduced revenues.

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If greater demand for wafers is not offset by an increase in foundry capacity, market demand for wafers or production and assembly materials increases, or if a supplier of our wafers or other materials ceases or suspends operations, our supply of wafers and other materials could become limited. Such shortages raise the likelihood of potential wafer price increases, wafer shortages or shortages in materials at production and test facilities, resulting in potential inability to address customer product demands in a timely manner. For example, in 2011, when certain suppliers located in Japan were forced to temporarily halt production as the result of a natural disaster, this resulted in a tightening of supply for those materials. Such shortages of wafers and materials as well as increases in wafer or materials prices could adversely affect our gross margins and would adversely affect our ability to meet customer demands and lead to reduced revenue.

We depend on distributors, primarily Avnet, to generate a significant portion of our sales and complete order fulfillment.

Resale of product through Avnet accounted for 45% and 41% of our worldwide net revenues in the third quarter and first nine months of fiscal 2020 and as of December 28, 2019 , Avnet accounted for 33% of our total net accounts receivable. Any adverse change to our relationship with Avnet or our other distributors could have a material impact on our business. Furthermore, if a key distributor materially defaulted on a contract or otherwise failed to perform, our business and financial results would suffer. In addition, we are subject to concentrations of credit risk in our trade accounts receivable, which includes accounts of our distributors. A significant reduction of effort by a distributor to sell our products or a material change in our relationship with one or more distributors may reduce our access to certain end customers and adversely affect our ability to sell our products.

In addition, the financial health of our distributors and our continuing relationships with them are important to our success. Unpredictable economic conditions may adversely impact the financial health of some of these distributors, particularly our smaller distributors. This could increase our credit risk exposure relating to the insolvency of certain distributors, the inability of distributors to obtain credit to finance the purchase of our products, or delayed payment for such purchases. Our business could be harmed if the financial health of these distributors impaired their performance and we were unable to secure alternate distributors.

We are dependent on independent subcontractors for most of our assembly and test services, and unavailability or disruption of these services could negatively impact our financial condition and results of operations.

We are dependent on subcontractors to provide semiconductor assembly, substrate, test and shipment services. Any (i) prolonged inability to obtain wafers with competitive performance and cost attributes, adequate yields or timely delivery, (ii) disruption in assembly, test or shipment services, (iii) delays in stabilizing manufacturing processes and ramping up volume for new products, (iv) transitions to new service providers, or (v) other circumstance that would require us to seek alternative sources of supply, could delay shipments and have a material adverse effect on our ability to meet customer demands. In addition, unpredictable economic conditions may adversely impact the financial health and viability of these subcontractors and result in their insolvency or their inability to meet their commitments to us. These factors would result in reduced net revenues and could negatively impact our financial condition and results of operations.

A number of factors, including our inventory strategy, can impact our gross margins.

A number of factors can cause our gross margins to fluctuate, including yield, wafer pricing, product mix, market acceptance of our new products, competitive pricing dynamics, licensing costs, geographic and/or market segment pricing strategies. In addition, forecasting our gross margins is difficult because a significant portion of our business is based on turns within the same quarter.

While our overall inventory levels fluctuate over time, the inventory of newer product lines may be higher than other products due to a planned increase in safety stock in anticipation of future revenue growth. In the event demand does not materialize, we may be subject to incremental obsolescence costs. In addition, future product cost reductions could have impact on our inventory valuation as well as our operating results.

Reductions in the average selling prices of our products could have a negative impact on our gross margins.

The average selling prices of our products generally decline as the products mature. We seek to offset the decrease in selling prices through yield improvement, manufacturing cost reductions and increased unit sales. We also continue to develop higher value products or product features that increase the average selling prices of our products, or slow the decline of such prices. However, there is no guarantee that our ongoing efforts will be successful or that they will keep pace with the decline in selling prices of our products, which could ultimately lead to a decline in our revenues and gross margins.

General negative economic conditions and any related deterioration in the global business environment could have a material adverse effect on our business, operating results and financial condition.

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If economic conditions weaken, there may be a number of negative effects on our business, including customers or potential customers reducing or delaying orders, the insolvency of key suppliers, potentially causing production delays, the inability of customers to obtain credit, and the insolvency of one or more customers. Any of these effects could adversely impact our ability to effectively manage inventory levels and collect receivables and ultimately decrease our net revenues and profitability.

We are subject to the risks associated with conducting business operations outside of the U.S. which could adversely affect our business.

In addition to international sales and support operations and development activities, we purchase our wafers from foreign foundries, have our commercial products assembled, packaged and tested by subcontractors located outside the U.S. and utilize third party warehouse operators to store and manage inventory levels for certain of our products. All of these activities are subject to the uncertainties associated with international business operations, including global laws and regulations, trade barriers, economic sanctions, tax regulations, import and export regulations, duties and tariffs and other trade restrictions, changes in trade policies, anti-corruption laws, foreign governmental regulations, potential vulnerability of and reduced protection for IP, longer receivable collection periods and disruptions or delays in production or shipments, any of which could have a material adverse effect on our business, financial condition and/or operating results. Further, global laws, regulations and policies are subject to change and reinterpretation. For example, in 2018, the U.S. and China began to impose partial tariffs and commercial restrictions on each other's products, leading to concerns of an escalating trade war, which, if were to fully materialize, could contribute to a general economic downturn and could have a material adverse effect on our business. Further, even in the absence of concrete adverse developments affecting international trade, marketplace uncertainty regarding the potential for such developments may have similar effects. In addition, the U.S. government has and may continue to focus on the business practices of specific foreign companies, including large technology companies based in China. This focus has resulted in additional trade restrictions and denial orders being placed on certain foreign companies by the U.S. Department of Commerce and other U.S. government agencies. Future U.S. government actions may include long-term commercial and trade restrictions that may impact our ability to do business with foreign companies. Additional factors that could adversely affect us due to our international operations include rising oil prices and increased costs, or limited supply of other natural resources. Moreover, our financial condition and results of operations could be adversely affected in the event of political conflicts, economic crises or changes in international relations affecting countries where our main wafer providers, warehouses, end customers and contract manufacturers who provide assembly and test services worldwide, are located. For example, the United Kingdom's pending exit from the European Union, commonly referred to as "Brexit," has led to significant instability and uncertainty in such regions, which could have a material adverse effect on our business.

Because we have international business and operations, we are vulnerable to the economic conditions of the countries in which we operate and currency fluctuations could have a material adverse effect on our business and negatively impact our financial condition and results of operations.

In addition to our U.S. operations, we also have significant international operations, including foreign sales offices to support our international customers and distributors, our regional headquarters in Ireland and Singapore and an R&D site in India. Sales and operations outside of the U.S. subject us to the risks associated with conducting business in foreign economic and regulatory environments. Our financial condition and results of operations could be adversely affected by unfavorable economic conditions in countries in which we do significant business or by changes in foreign currency exchange rates affecting those countries. We derive more than half of our revenues from international sales, primarily in the Asia Pacific region, Europe and Japan where economic weaknesses have adversely affected our revenues in the past. Sales to all direct OEMs and distributors are denominated in U.S. dollars. While the recent movements of the Euro and Yen exchange rates against the U.S. dollar have not materially impacted our business, increased volatility could impact our European and Japanese customers. Currency instability and volatility and disruptions in the credit and capital markets may increase credit risks for some of our customers and may impair our customers' ability to repay existing obligations. For example, the United Kingdom's pending "Brexit" has created economic uncertainty and currency volatility in the European Union. Increased currency volatility could also positively or negatively impact our foreign-currency-denominated costs, assets and liabilities. In addition, any devaluation of the U.S. dollar relative to other foreign currencies may increase the operating expenses of our foreign subsidiaries adversely affecting our results of operations. Furthermore, because we are increasingly dependent on the global economy, instability in worldwide economic environments occasioned, for example, directly or indirectly by political instability (such as due to Brexit), terrorist activity, U.S. or other military actions, changes to U.S. domestic and foreign policy and international sanctions or other diplomatic actions (potentially including sanctions adopted or under consideration by the U.S. or European Union with respect to Russia or Russian individuals or businesses), could adversely impact economic activity and lead to a contraction of capital spending by our customers generally or in specific regions. Any or all of these factors could adversely affect our financial condition and results of operations in the future.

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We are exposed to fluctuations in interest rates and changes in credit risk which could have a material adverse impact on our financial condition and results of operations as it relates to the market value of our investment portfolio.

Our cash, short-term and long-term investments represent significant assets that may be subject to fluctuating or even negative returns depending upon interest rate movements, changes in credit risk and financial market conditions. Global credit market disruptions and economic slowdown and uncertainty have in the past negatively impacted the values of various types of investment and non-investment grade securities. The global credit and capital markets may again 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 or the underlying assets fail to perform as anticipated. Our future investment income may fall short of expectations due to changes in interest rates or if the decline in fair values of our debt securities was judged to be other than temporary. Furthermore, we may suffer losses in principal on our investments if we are forced to sell securities that have declined in market value due to changes in interest rates or financial market conditions.

Our failure to protect and defend our IP could impair our ability to compete effectively.

We rely upon patent, copyright, trade secret, mask work and trademark laws to protect our IP. We cannot provide assurance that such IP rights can be successfully asserted in the future or will not be invalidated, violated, circumvented or challenged. From time to time, third parties, including our competitors, have asserted against us patent, copyright or other IP rights to technologies that are important to us. Third parties may attempt to misappropriate our IP through electronic or other means or assert infringement claims against us or parties we have agreed to indemnify. Such assertions by third parties may result in costly litigation, indemnity claims or other legal actions, and we may not prevail in such matters or be able to license any valid and infringed patents from third parties on commercially reasonable terms. This could result in the loss of our ability to import and sell our products or require us to pay costly royalties to third parties in connection with sales of our products. Any infringement claim, indemnification claim, or impairment or loss of use of our IP could materially adversely affect our financial condition and results of operations.

Our ability to design and introduce new products in a timely manner is dependent upon third-party IP.

In the design and development of new products and product enhancements, we rely on third-party intellectual property such as software development tools and hardware testing tools. Furthermore, certain product features may rely on intellectual property acquired from third parties, including hardware and software tools and products. The design requirements necessary to meet future consumer demands for more features and greater functionality from semiconductor products may exceed the capabilities of the third-party intellectual property or development tools that are available to us. In addition, hardware and software tools and products procured from third parties may contain design or manufacturing defects, including flaws that could unexpectedly interfere with the operation of our products. If the third-party intellectual property that we use becomes unavailable or fails to produce designs that meet consumer demands, our business could be adversely affected.

Any failure of our information technology systems to function properly could result in business disruption.

We rely in part on various information technology (IT) systems to manage our operations, including, but not limited to, financial reporting, and we regularly evaluate these systems and make changes to improve them as necessary. Consequently, we periodically implement new, or upgrade or enhance existing, operational and IT systems, procedures and controls. Any delay in the implementation of, or disruption in the transition to, new or enhanced systems, procedures or controls, could harm our ability to record and report financial, management, or operational information on a timely and accurate basis. In addition, hardware and software tools and products procured from third parties included in our IT systems could contain design or manufacturing defects, including flaws that could unexpectedly interfere with the operation of our IT systems. These systems are also subject to power and telecommunication outages or other general system failures. Failure of our IT systems or difficulties in managing them could result in business disruption.

Cyber-attacks and data breaches could have an adverse effect on our business and reputation and negatively impact our financial condition and results of operations.

Security breaches, including cyber-attacks, phishing attacks or attempts to misappropriate or compromise confidential or proprietary information or sabotage enterprise IT systems, are becoming increasingly frequent and more sophisticated. We depend on the uninterrupted operation of our IT systems to manage our operations, store and retrieve business and financial data and facilitate internal communications and communications with customers, subcontractors, suppliers and distribution partners. We experience security incidents of varying degrees on an ongoing basis. We take steps to detect and investigate any security incidents

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and prevent their recurrence, but, in some cases, we might be unaware of an incident or its magnitude and effects. Because the techniques used to obtain unauthorized access to or sabotage networks and systems change frequently, we may be unable to anticipate these techniques or to implement adequate protections. These security incidents may involve unauthorized access, misuse or disclosure of intellectual property or confidential or proprietary information regarding our business or that of our customers or business partners. We also may be subject to unauthorized access to our IT systems through a security breach or cyber-attack. In the past, there have been attempts by third parties to penetrate and/or infect our network and systems with malicious software in an effort to gain access to our network and systems. Recently, several large organizations have been infected by “ransomware,” through which an attacker gains access to the organization’s computer files, renders them temporarily inaccessible and threatens to permanently delete them if a cash ransom is not paid by a specified deadline. Third parties may continue to attempt to fraudulently induce employees, users, or customers to disclose sensitive information in order to gain access to our network and systems. The IT systems of our customers, suppliers, and distribution partners and the links between our IT systems and our customers are subject to the same risks as those of our IT systems. In the event of a security breach, our business and reputation could be harmed and we could be subject to legal and regulatory claims which could negatively impact our financial condition and results of operations.

Acquisitions and strategic investments present risks, and we may not realize the goals that were contemplated at the time of a transaction.

We have acquired technology companies whose products complement our products. We also have made a number of strategic investments in other technology companies. We may make similar acquisitions and strategic investments in the future, which present risks, including:


•	our ongoing business may be disrupted and our management's attention may be diverted by investment, acquisition, transition or integration activities;


•	an acquisition or strategic investment may not further our business strategy as we expected, and we may not integrate an acquired company or technology as successfully as we expected;


•	our operating results or financial condition may be adversely impacted by claims or liabilities that we assume from an acquired company or technology or that are otherwise related to an acquisition;


•	we may have difficulty incorporating acquired technologies or products with our existing product lines;


•	we may have higher than anticipated costs in continuing support and development of acquired products, and in general and administrative functions that support such products;


•	our strategic investments may not perform as expected, and we may be required to recognize a loss on any or all of our strategic investments; and


•	we may experience unexpected changes in how we are required to account for our acquisitions and strategic investments pursuant to U.S. GAAP.

The occurrence of any of these risks could have a material adverse effect on our business, results of operations, financial condition or cash flows, particularly in the case of a larger acquisition or several concurrent acquisitions or strategic investments.

If we are unable to maintain effective internal controls, our stock price could be adversely affected.

We are subject to the ongoing internal control provisions of Section 404 of the Sarbanes-Oxley Act of 2002 (Sarbanes-Oxley Act). Our controls necessary for continued compliance with the Sarbanes-Oxley Act may not operate effectively at all times and may result in a material weakness disclosure. The identification of material weaknesses in internal control, if any, could indicate a lack of proper controls to generate accurate financial statements and could cause investors to lose confidence and our stock price to drop.

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We compete with others to attract and retain key personnel, and any loss of, or inability to attract, such personnel would harm us.

We depend on the efforts and abilities of certain key members of management and other technical personnel. Our future success depends, in part, upon our ability to retain, develop and transition such personnel and attract and retain other highly qualified personnel, particularly product engineers. Competition for such personnel is intense and we may not be successful in hiring or retaining new or existing qualified personnel. Changes to the U.S. immigration laws may also impact the availability of qualified personnel. From time to time we have effected restructurings that eliminate a number of positions. Even if such personnel are not directly affected by the restructuring effort, such terminations can have a negative impact on morale and our ability to attract and hire new qualified personnel in the future. If we are unable to retain or develop existing qualified personnel or are unable to hire new qualified personnel, as needed, our business, financial condition and results of operations could be seriously harmed. Further, changes to our qualified personnel, including key members of management, may be disruptive to our business, and any failure to successfully assimilate key new hires, or to successfully retain, develop and transition promoted employees, could adversely affect our business and results of operations.

Unfavorable results of legal proceedings could adversely affect our financial condition and operating results.

From time to time we are subject to various legal proceedings and claims that arise out of the ordinary conduct of our business. The amount of damages alleged in certain legal claims may be significant. Certain other claims involving the Company are not yet resolved, including those that are discussed under "Note 17. Contingencies" to our condensed consolidated financial statements, included in Item 1. "Financial Statements" of this Form 10-Q, and additional claims may arise in the future. Results of legal proceedings cannot be predicted with certainty. Regardless of its merit, litigation may be both time-consuming and disruptive to our operations and cause significant expense and diversion of management attention and we may enter into material settlements to avoid these risks. Entering into settlements may result in payment of significant amounts which may materially and adversely affect our financial condition and operation results. Should we fail to prevail in certain matters, or should several of these matters be resolved against us, we may be faced with significant monetary damages or injunctive relief against us that would materially and adversely affect a portion of our business and might materially and adversely affect our financial condition and operating results.

Our products could have defects which could result in reduced revenues and claims against us.

We develop complex and evolving products that include both hardware and software. Despite our testing efforts and those of our subcontractors, defects may be discovered in existing or new products. Such defects may cause us to incur significant warranty, support and repair or replacement costs, divert the attention of our engineering personnel from our product development efforts and harm our relationships with customers. Subject to certain terms and conditions, we have agreed to compensate certain customers for limited specified costs they actually incur in the event our hardware products experience epidemic failure. As a result, epidemic failure and other performance problems could result in claims against us or the delay or loss of market acceptance of our products and would likely harm our business. Our customers could also seek damages from us for their losses.

In addition, we could be subject to product liability claims. A product liability claim brought against us, even if unsuccessful, would likely be time-consuming and costly to defend. Product liability risks are particularly significant with respect to aerospace, automotive and medical applications because of the risk of serious harm to users of these products. Any product liability claim, whether or not determined in our favor, could result in significant expense, divert the efforts of our technical and management personnel, and harm our business.

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In preparing our financial statements, we make good faith estimates and judgments that may change or turn out to be erroneous.

In preparing our financial statements in conformity with accounting principles generally accepted in the U.S., we must make estimates and judgments in applying our critical accounting policies. Those estimates and judgments have a significant impact on the results we report in our consolidated financial statements. The most difficult estimates and subjective judgments that we make concern valuation of marketable and non-marketable securities, revenue recognition, inventories, long-lived assets including acquisition-related intangibles, goodwill, taxes and stock-based compensation. We base our estimates on historical experience, input from outside experts and various other assumptions that we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. 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. Actual results may differ materially from these estimates. If these estimates or their related assumptions change, our operating results for the periods in which we revise our estimates or assumptions could be adversely and materially affected.

Our failure to comply with the requirements of the Export Administration Regulations (EAR) and the International Traffic and Arms Regulations (ITAR) could have a material adverse effect on our financial condition and results of operations.

Our FPGAs and related technologies are subject to EAR, which are administered by the U.S. Department of Commerce. In addition, we may, from time to time, receive technical data from third parties that is subject to the ITAR, which are administered by the U.S. Department of State. EAR and ITAR govern the export and re-export of these FPGAs, the transfer of related technologies, whether in the U.S. or abroad, and the provision of services. We are required to maintain an internal compliance program and security infrastructure to meet EAR and ITAR requirements.

An inability to obtain the required export licenses, or to predict when they will be granted, increases the difficulties of forecasting shipments. In addition, security or compliance program failures that could result in penalties or a loss of export privileges, as well as stringent licensing restrictions that may make our products less attractive to overseas customers, could have a material adverse effect on our business, financial condition and/or operating results.

Our inability to effectively control the sale of our products on the gray market could have a material adverse effect on our business or results of operations.

We market and sell our products directly to OEMs and through authorized third-party distributors which helps to ensure that products delivered to our customers are authentic and properly handled. From time to time, customers may purchase products bearing our name from the unauthorized "gray market." These parts may be counterfeit, salvaged or re-marked parts, or parts that have been altered, mishandled, or damaged. Gray market products result in shadow inventory that is not visible to us, thus making it difficult to forecast supply or demand. Also, when gray market products enter the market, we and our authorized distributors may compete with brokers of these discounted products, which can adversely affect demand for our products and negatively impact our margins. In addition, our reputation with customers may be negatively impacted when gray market products bearing our name fail or are found to be substandard.

The conflict minerals provisions of the Dodd-Frank Wall Street Reform and Consumer Protection Act could result in additional costs and liabilities.

In accordance with the Dodd-Frank Wall Street Reform and Consumer Protection Act, the SEC established disclosure and reporting requirements for companies whose products incorporate "conflict" minerals mined from the Democratic Republic of Congo and adjoining countries, regardless of whether such products are manufactured by those companies or by third parties. These requirements could affect the sourcing and availability of minerals used in the manufacture of our semiconductor products. The costs associated with complying with the disclosure requirements include those for due diligence in regard to the sources of any conflict minerals used in our products, remediation and other changes to products, processes, or sources of supply as a consequence of such verification activities. We may face reputational challenges if we are unable to sufficiently verify the origins for all minerals used in our products through the due diligence process we implement. Moreover, some of our customers may require that all of the components of our products are certified as conflict-free, and we may be unable to verify the origin of the raw materials used in our products to the extent necessary to make this certification.

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Exposure to greater-than-anticipated income tax liabilities, changes in tax rules and regulations, changes in interpretation of tax rules and regulations, or unfavorable assessments from tax audits could affect our effective tax rates, financial condition and results of operations.

We are a U.S.-based multinational company subject to tax in multiple U.S. and foreign tax jurisdictions. Our income tax obligations could be affected by many factors, including but not limited to changes to our corporate operating structure and intercompany arrangements and implementation of tax planning strategies.

Our income tax expense is computed based on tax rates at the time of the respective financial period. Our future effective tax rates, financial condition and results from operations could be unfavorably affected by changes in the tax rates in jurisdictions where our income is earned, by changes in the tax rules and regulations or the interpretation of tax rules and regulations in the jurisdictions in which we do business or by changes in the valuation of our deferred tax assets.

The TCJA enacted in December 2017 had a significant impact on our tax obligations. The issuance of additional regulatory guidance related to the TCJA could materially affect our tax obligations and effective tax rate in the period issued. The TCJA could also be subject to amendments and technical corrections, any of which could lessen or increase certain adverse impacts. A significant portion of our earnings are earned by our subsidiaries outside the U.S. Changes to the taxation of certain foreign earnings resulting from the TCJA, along with the state tax impact of these changes, may have an adverse effect on our effective tax rate. Furthermore, changes to the taxation of undistributed foreign earnings could change our future intentions regarding reinvestment of such earnings. The foregoing items could have a material effect on our business, cash flow, results of operations or financial condition.

In addition, we are subject to examinations of our income tax returns by domestic and foreign tax authorities. We regularly assess the likelihood of outcomes resulting from these examinations to determine the adequacy of our provision or benefit for income taxes and have reserved for potential adjustments that may result from the current examinations. There can be no assurance that the final determination of any of these examinations will not have an adverse effect on our effective tax rates, financial condition and results of operations.

Considerable amounts of shares of our common stock are available for issuance under our equity incentive plans, and significant issuances in the future may adversely impact the market price of our common stock.

As of December 28, 2019 we had 2.00 billion authorized common shares, of which 248.8 million shares were outstanding. In addition, 35.2 million shares of common stock were reserved for issuance pursuant to our equity incentive plans and Amended and Restated 1990 Employee Qualified Stock Purchase Plan. The availability of substantial amounts of our common stock resulting from the exercise or settlement of equity awards outstanding under our equity incentive plans, which would be dilutive to existing stockholders, could adversely affect the prevailing market price of our common stock and could impair our ability to raise additional capital through the sale of equity securities.

We have indebtedness that could adversely affect our financial condition and prevent us from fulfilling our debt obligations.

The aggregate amount of our consolidated indebtedness as of December 28, 2019 was $1.25 billion (principal amount), which consists of $500.0 million in aggregate principal amount of our 3.000% Notes due 2021 (2021 Notes) and $750.0 million in aggregate principal amount of our 2.950% senior notes due 2024 (2024 Notes). We also may incur additional indebtedness in the future. Our indebtedness may:


•	make it difficult for us to satisfy our financial obligations, including making scheduled principal and interest payments on the debentures and our other indebtedness;


•	limit our ability to borrow additional funds for working capital, capital expenditures, acquisitions or other general corporate purposes;


•	limit our ability to use our cash flow or obtain additional financing for future working capital, capital expenditures, acquisitions or other general business purposes;


•	require us to use a portion of our cash flow from operations to make debt service payments;


•	limit our flexibility to plan for, or react to, changes in our business and industry;


•	place us at a competitive disadvantage compared to our less leveraged competitors; and


•	increase our vulnerability to the impact of adverse economic and industry conditions.

Our ability to meet our debt service obligations will depend on our future performance, which will be subject to financial, business and other factors affecting our operations, many of which are beyond our control.

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The agreements governing the 2021 Notes and 2024 Notes contain covenants that may adversely affect our ability to operate our business.

The indentures governing the 2021 Notes and 2024 Notes contain various covenants limiting our and our subsidiaries' ability to, among other things:


•	create certain liens on principal property or the capital stock of certain subsidiaries;


•	enter into certain sale and leaseback transactions with respect to principal property; and


•	consolidate or merge with, or convey, transfer or lease all or substantially all our assets, taken as a whole, to another person.

A failure to comply with these covenants and other provisions in these indentures could result in events of default under the indentures, which could permit acceleration of the 2021 Notes and the 2024 Notes. Any required repayment as a result of such acceleration could have a material adverse effect on our business, results of operations, financial condition or cash flows.


Item 2.	Unregistered Sale of Equity Securities and Use of Proceeds

On May 16, 2018, the Board authorized the 2018 Repurchase Program to repurchase the Company's common stock and debentures up to $500.0 million . On October 22, 2019, the Board authorized the 2019 Repurchase Program to repurchase the Company's common stock and debentures up to $1.00 billion . The 2018 and 2019 Repurchase Programs have no stated expiration date. Through December 28, 2019 , the Company had fully utilized the entire amount authorized under the 2018 Repurchase Program and used $191.9 million out of the $1.00 billion authorized under the 2019 Repurchase Program, leaving $808.1 million available for future purchases.

The following table summarizes the Company's repurchase of shares of our common stock during the third quarter of fiscal 2020 :



	Total Number of Shares Purchased	Average Price Paid per Share		Total Number of Shares Purchased as Part of Publicly Announced Program	Approximate Dollar Value of Shares that May Yet Be Purchased Under the Program
(In thousands, except per share amounts)
Period
September 29, 2019 to November 2, 2019	524	$	94.24	524	$	19,718
November 3, 2019 to November 30, 2019	916	$	93.93	916	$	933,720
December 1, 2019 to December 28, 2019	1,345	$	93.33	1,345	$	808,144
Total for the Quarter	2,785			2,785

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Item 6.	Exhibits

Incorporated by Reference

Exhibit No

Exhibit Title

Form

File No.

Exhibit

Filing
Date

Filed
Herewith

31.1

Certification of Principal Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

31.2

Certification of Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

32.1

Certification of Principal Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

32.2

Certification of Principal Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

101

The following financial information from the Company’s Quarterly Report on Form 10-Q for the quarter ended December 28, 2019, formatted in iXBRL (Inline Extensible Business Reporting Language): (i) Condensed Consolidated Statements of Income (ii) Condensed Consolidated Statements of Comprehensive Income; (iii) Condensed Consolidated Balance Sheets; (iv) Condensed Consolidated Statements of Cash Flows; (v) Condensed Consolidated Statements of Stockholders’ Equity; and (vi) Notes to Condensed Consolidated Financial Statements.

104

Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)

Items 3, 4 and 5 are not applicable and have been omitted.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.



			XILINX, INC.

Date: January 28, 2020			/s/ Sumeet Gagneja
			Sumeet Gagneja
			Chief Accounting Officer (as principal accounting officer and on behalf of Registrant)

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Part Iprint Item 1. Financial Statementsprint Note 1. Basis Of Presentationprint Note 2. Recent Accounting Changes and Accounting Pronouncementsprint Note 3. Significant Customers and Concentrations Of Credit Riskprint Note 4. Fair Value Measurementsprint Note 5. Financial Instrumentsprint Note 6. Derivative Financial Instrumentsprint Note 7. Stock-based Compensation Plansprint Note 8. Net Income Per Common Shareprint Note 9. Inventoriesprint Note 10. Debt and Credit Facilityprint Note 11. Common Stock Repurchase Programprint Note 12. Interest and Other Income (expense), Netprint Note 13. Accumulated Other Comprehensive Lossprint Note 14. Income Taxesprint Note 15. Leases and Commitmentsprint Note 16. Product Warranty and Indemnificationprint Note 17. Contingenciesprint Note 18. Goodwill and Acquisition-related Intangiblesprint Note 19. Segment Informationprint Note 20. Business Combinationprint Note 21. Subsequent Eventsprint Item 2. Management's Discussion and Analysis Of Financial Condition and Results Of Operationsprint Item 3. Quantitative and Qualitative Disclosures About Market Riskprint Item 4. Controls and Proceduresprint Part II. Other Informationprint Part IIprint Item 1. Legal Proceedingsprint Item 1A. Risk Factorsprint Item 2. Unregistered Sale Of Equity Securities and Use Of Proceedsprint Item 6. Exhibitsprint

Exhibits

31.1 Certification of Principal Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 31.2 Certification of Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 32.1 Certification of Principal Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 32.2 Certification of Principal Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

Supplier name	Ticker
ASML Holding N.V.	ASML
Agilent Technologies, Inc.	A
ASE Technology Holding Co., Ltd.	ASX
Freeport-McMoRan Inc.	FCX
International Business Machines Corporation	IBM
3M Company	MMM
Taiwan Semiconductor Manufacturing Company Limited	TSM

XLNX 10-Q Quarter ended Dec. 28, 2019

Exhibits