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XILINX INC - 10-Q - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(Edgar Glimpses Via Acquire Media NewsEdge)
The statements in this Management's Discussion and Analysis that are
forward-looking, within the meaning of the Private Securities Litigation Reform
Act of 1995, involve numerous risks and uncertainties and are based on current
expectations. The reader should not place undue reliance on these
forward-looking statements. Our actual results could differ materially from
those anticipated in these forward-looking statements for many reasons,
including those risks discussed under "Risk Factors" and elsewhere in this
document. Often, forward-looking statements can be identified by the use of
forward-looking words, such as "may," "will," "could," "should," "expect,"
"believe," "anticipate," "estimate," "continue," "plan," "intend," "project" and
other similar terminology, or the negative of such terms. We disclaim any
responsibility to update or revise any forward-looking statement provided in
this Management's Discussion and Analysis for any reason.
Critical Accounting Policies and Estimates
The methods, estimates and judgments we use in applying our most critical
accounting policies have a significant impact on the results we report in our
consolidated financial statements. The SEC has defined critical accounting
policies as those that are most important to the portrayal of our financial
condition and results of operations and require us to make our most difficult
and subjective judgments, often as a result of the need to make estimates of
matters that are inherently uncertain. Based on this definition, our critical
accounting policies include: valuation of marketable securities, which impacts
losses on debt and equity securities when we record impairments; revenue
recognition, which impacts the recording of revenues; and valuation of
inventories, which impacts cost of revenues and gross margin. Our critical
accounting policies also include: the assessment of impairment of long-lived
assets including acquisition-related intangibles, which impacts their valuation;
the assessment of the recoverability of goodwill, which impacts goodwill
impairment; accounting for income taxes, which impacts the provision or benefit
recognized for income taxes, as well as, the valuation of deferred tax assets
recorded on our consolidated balance sheet; and valuation and recognition of
stock-based compensation, which impacts gross margin, research and development
(R&D) expenses, and selling, general and administrative (SG&A) expenses. For
more discussion please refer to "Item 7. Management's Discussion and Analysis of
Financial condition and Results of Operations" included in our Form 10-K for the
year ended March 31, 2012 filed with the SEC. We also have other key accounting
policies that are not as subjective, and therefore, their application would not
require us to make estimates or judgments that are as difficult, but which
nevertheless could significantly affect our financial reporting.
Results of Operations: Third quarter and first nine months of fiscal 2013
compared to the third quarter and first nine months of fiscal 2012
The following table sets forth statement of income data as a percentage of net
revenues for the periods indicated:
Three Months Ended Nine Months Ended
December 29, 2012 December 31, 2011 December 29, 2012 December 31, 2011
Net revenues 100.0 % 100.0 % 100.0 % 100.0 %
Cost of revenues 33.4 34.2 34.0 35.6
Gross margin 66.6 65.8 66.0 64.4
Operating expenses:
Research and development 25.4 21.2 22.3 19.0
Selling, general and administrative 17.0 17.4 16.8 16.3
Amortization of acquisition-related
intangibles 0.5 0.4 0.4 0.3
Restructuring charges - - - 0.2
Total operating expenses 42.9 39.0 39.5 35.8
Operating income 23.7 26.8 26.5 28.6
Interest and other expense, net 1.0 1.4 1.5 1.4
Income before income taxes 22.7 25.4 25.0 27.2
Provision for income taxes 2.4 0.5 3.2 3.0
Net income 20.3 % 24.9 % 21.8 % 24.2 %
Net Revenues
We sell our products to global manufacturers of electronic products in end
markets such as wired and wireless communications, aerospace and defense,
industrial, scientific and medical and audio, video and broadcast. The vast
majority of our net revenues
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are generated by sales of our semiconductor products, but we also generate sales
from support products. We classify our product offerings into four
categories: New, Mainstream, Base and Support Products. The composition of each
product category is as follows:
• New Products include our most recent product offerings and include the
Virtex®-7, Kintex™-7, Artix™-7, Zynq™-7000, Virtex-6 and Spartan®-6
product families.
• Mainstream Products include the Virtex-5, Spartan-3 and CoolRunner™-II
product families.
• Base Products consist of our older product families including the Virtex-4, Virtex-II, Virtex-E, Virtex, Spartan-II, Spartan, CoolRunner and
XC9500 products.
• Support Products include configuration solutions, HardWire, software and
support services.
These product categories, except for Support Products, are modified on a
periodic basis to better reflect the maturity of the products and advances in
technology. The most recent modification was made on April 1, 2012, which was
the beginning of our fiscal 2013. The amounts for the prior periods presented
have been reclassified to conform to the new categorization. New Products
include our most recent product offerings and are typically designed into our
customers' latest generation of electronic systems. Mainstream Products are
generally several years old and designed into customer programs that are
currently shipping in full production. Base Products are older than Mainstream
Products with demand generated generally by the customers' oldest systems still
in production. Support Products are generally products or services sold in
conjunction with our semiconductor devices to aid customers in the design
process.
Net revenues of $509.8 million in the third quarter of fiscal 2013 represented a
slight decrease from the comparable prior year period of $511.1 million. Net
revenues from New Products increased significantly in the third quarter of
fiscal 2013 versus the comparable prior year period, but were negatively offset
by declines from our Mainstream and Base Products. No end customer accounted for
10% of our net revenues for any of the periods presented.
For the first nine months of fiscal 2013, approximately 57% of our net revenues
were from products sold to distributors for subsequent resale to original
equipment manufacturers (OEMs) or their subcontract manufacturers. As of
December 29, 2012, we had $69.3 million of deferred revenue and $19.3 million of
deferred cost of revenues recognized as a net $50.0 million of deferred income
on shipments to distributors. As of March 31, 2012, we had $90.0 million of
deferred revenue and $23.0 million of deferred cost of revenues recognized as a
net $67.0 million of deferred income on shipments to distributors. The deferred
income on shipments to distributors that will ultimately be recognized in our
consolidated statement of income will be different than the amount shown on the
consolidated balance sheet due to actual price adjustments issued to the
distributors when the product is sold to their end customers.
Net Revenues by Product
Net revenues by product categories for the third quarter and the first nine
months of fiscal 2013 and 2012 were as follows:
Three Months Ended Nine Months Ended
(In millions) December 29, 2012 % Change December 31, 2011 December 29, 2012 % Change December 31, 2011
New Products $ 125.5 79 $ 70.1 $ 332.3 79 $ 185.2
Mainstream Products 211.9 (4 ) 220.8 724.8 (9 ) 795.9
Base Products 151.5 (24 ) 199.8 515.4 (18 ) 628.6
Support Products 20.9 2 20.4 64.0 (11 ) 72.1
Total net revenues $ 509.8 - $ 511.1 $ 1,636.5 (3 ) $ 1,681.8
Net revenues from New Products increased significantly both in the third quarter
and for the first nine months of fiscal 2013 from the comparable prior year
periods. The increase was due to sales growth of our 40-nanometer (nm) Virtex-6,
45-nm Spartan-6 product families as well as 28-nm 7 Series and Zynq product
lines. We expect sales of New Products to continue to grow as more customer
programs enter into volume production with our 40/45-nm products and as our
28-nm products continue their sales ramp.
Net revenues from Mainstream Products decreased both in the third quarter and
the first nine months of fiscal 2013 from the comparable prior year periods. The
decrease was largely due to the decline in sales of our Virtex-5 and Spartan-3
product families.
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Net revenues from Base Products decreased in the third quarter and the first
nine months of fiscal 2013 from the comparable prior year periods. The decrease
was mainly attributable to the decline in sales of our older products, in
particular our Virtex-II and Virtex 4 product families.
Net revenues from Support Products increased slightly in the third quarter and
decreased in the first nine months of fiscal 2013 compared to the prior year
periods. The increase in the third quarter of fiscal 2013 was due primarily to a
slight increase in sales from our PROM products while the decrease in the first
nine months of fiscal 2013 was driven by a decline in PROM products.
Net Revenues by End Markets
Our end market revenue data is derived from our understanding of our end
customers' primary markets. On April 1, 2012, we modified our end market
categories in two ways. First, Data Center customers were moved from the Data
Processing category into the Communications category. Additionally, all end
market categories were renamed to better reflect actual sales composition.
Amounts for the prior periods presented have been reclassified to conform to the
new categorization. Net revenues by end markets were reclassified into the
following four categories: Communications and Data Center; Industrial, Aerospace
and Defense; Broadcast, Consumer and Automotive; and Other. The percentage
change calculation in the table below represents the year-to-year dollar change
in each end market.
Net revenues by end markets for the third quarter and the first nine months of
fiscal 2013 and 2012 were as follows:
Three Months Ended Nine Months Ended
(% of total net % Change in % Change in
revenues) December 29, 2012 Dollars December 31, 2011 December 29, 2012 Dollars December 31, 2011
Communications and Data
Center 47 % 2 46 % 47 % (1 ) 46 %
Industrial, Aerospace
and Defense 36 5 34 34 (3 ) 34
Broadcast, Consumer and
Automotive 15 (2 ) 15 16 2 15
Other 2 (52 ) 5 3 (28 ) 5
Total net revenues 100 % - 100 % 100 % (3 ) 100 %
Net revenues from the Communications and Data Center end market increased in the
third quarter, but decreased in the first nine months of fiscal 2013 in terms of
absolute dollars, compared to the prior year periods. The increase in the third
quarter of fiscal 2013 was due to stronger sales from wireless communication
applications, and the decrease in the first nine months of fiscal 2013 was
driven by weaker sales in wired communications.
Net revenues from the Industrial, Aerospace & Defense end market increased in
the third quarter and decreased in the first nine months of fiscal 2013 versus
the comparable prior year periods. The increase in the third quarter of fiscal
2013 was primarily due to an increase in sales from defense and test and
measurement applications. The decrease in the first nine months of fiscal 2013
was driven by weaker sales in defense applications.
Net revenues from the Broadcast, Consumer and Automotive end market decreased in
the third quarter, but increased in the first nine months of fiscal 2013 from
the comparable prior year periods. The decrease in net revenues in the third
quarter of fiscal 2013 was due to a decline in sales from audio, video and
broadcast, consumer, and automotive applications. The increase in net revenues
in the first nine months of fiscal 2013 was driven by increases in sales from
audio, video and broadcast, and automotive applications.
Net revenues from the Other end market decreased in both the third quarter and
the first nine months of fiscal 2013 from the comparable prior year periods. The
decreases were due primarily to weaker sales from computing and storage
applications.
Net Revenues by Geography
Geographic revenue information reflects the geographic location of the
distributors, OEMs or contract manufacturers who purchased our products. This
may differ from the geographic location of the end customers. Net revenues by
geography for the third quarter and the first nine months of fiscal 2013 and
2012 were as follows:
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Three Months Ended Nine Months Ended
(In millions) December 29, 2012 % Change December 31, 2011 December 29, 2012 % Change December 31, 2011
North America $ 162.7 - $ 162.8 $ 488.4 (3 ) $ 505.5
Asia Pacific 174.7 (3 ) 180.2 573.6 1 568.8
Europe 119.4 1 117.7 412.2 (6 ) 439.8
Japan 52.8 5 50.4 162.3 (3 ) 167.7
Total net revenues $ 509.6 - $ 511.1 $ 1,636.5 (3 ) $ 1,681.8
Net revenues in North America were flat in the third quarter and decreased in
the first nine months of fiscal 2013 from the comparable prior year periods. The
decreases were primarily due to weaker sales across most end markets, including
Communications & Data Center and Industrial and Aerospace & Defense.
Net revenues in Asia Pacific declined in the third quarter and increased
slightly in the first nine months of fiscal 2013 from the comparable prior year
periods. The decline in the third quarter of fiscal 2013 was primarily due to a
decrease in sales from the Communications and Data Center end market,
particularly wireless communications applications. The increase in sales in the
first nine months of fiscal 2013 was driven by the Communications & Data Center
end market.
Net revenues in Europe increased in the third quarter and decreased in the first
nine months of fiscal 2013 compared with the prior year periods. The increase in
the third quarter of fiscal 2013 was primarily due to increased sales from the
Communications and Data Center and Automotive end markets. The decline in the
first nine months of fiscal 2013 was due to decreased sales from the
Communications and Data Center and Other end markets.
Net revenues in Japan increased in the third quarter and decreased in the first
nine months of fiscal 2013 compared with the prior year periods. The increase in
the third quarter of fiscal 2013 was primarily due to increased sales in
industrial, scientific, and medical applications. The decline in the first nine
months of fiscal 2013 was driven by a decline in sales in the Industrial and
Aerospace & Defense end market.
Gross Margin
Three Months Ended Nine Months Ended
(In millions) December 29, 2012 Change December 31,2011 December 29, 2012 Change December 31, 2011
Gross margin $ 339.3 1 % $ 336.3 $ 1,079.9 - % $ 1,083.3
Percentage of net revenues 66.6 % 65.8 % 66.0 % 64.4 %
Gross margin was 0.8 and 1.6 percentage points higher, respectively, in the
third quarter and in the first nine months of fiscal 2013 from the comparable
prior year periods. The gross margin increases in both periods were driven
primarily by continued cost improvement and mix of customers, and was negatively
offset, in part, by mix of products. New Products generally have lower gross
margins than Mainstream and Base Products as they are in the early stage of
their product life cycle and have higher unit costs associated with relatively
lower volumes and early manufacturing maturity.
Gross margin may be affected in the future due to shifts in the mix of customers
and products, competitive-pricing pressure, manufacturing-yield issues and wafer
pricing. We expect to mitigate any adverse impacts from these factors by
continuing to improve yields on our New Products, improve manufacturing
efficiencies, and improve average selling price management.
In order to compete effectively, we pass manufacturing cost reductions to our
customers in the form of reduced prices to the extent that we can maintain
acceptable margins. Price erosion is common in the semiconductor industry, as
advances in both product architecture and manufacturing process technology
permit continual reductions in unit cost. We have historically been able to
offset much of this revenue decline in our mature products with increased
revenues from newer products.
Research and Development
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Three Months Ended Nine Months Ended
(In millions) December 29, 2012 Change December 31, 2011
December 29, 2012 Change December 31, 2011
Research and
development $ 129.1 19 % $ 108.2 $ 364.4 14 % $ 320.0
Percentage of net
revenues 25 % 21 % 22 % 19 %
R&D spending increased $20.9 million, or 19%, for the third quarter of fiscal
2013 compared to the same period last year. For the first nine months of fiscal
2013, R&D spending increased by $44.4 million, or 14%. The increases in both
periods were primarily attributable to higher employee-related expenses
(including stock-based compensation expense), mask and wafer expenses related to
our 28-nm development activities during the current period.
We plan to continue to selectively invest in R&D efforts in areas such as new
products and more advanced process development, IP cores and the development of
new design and layout software. We may also consider acquisitions to complement
our strategy for technology leadership and engineering resources in critical
areas.
Selling, General and Administrative
Three Months Ended Nine Months Ended
(In millions) December 29, 2012 Change December 31, 2011 December 29, 2012 Change December 31, 2011
Selling, general and
administrative $ 86.8 (2 )% $ 88.9 $ 275.0 - % $ 274.0
Percentage of net revenues 17 % 17 % 17 % 16 %
SG&A expenses decreased by $2.1 million during the third quarter of fiscal 2013
compared to the same period last year. The decrease during the third quarter of
fiscal 2013 was primarily due to lower litigation expenses. For the first nine
months of fiscal 2013, SG&A expenses were relatively flat compared to the same
period last year as higher employee-related expenses (including stock-based
compensation expense) were offset by lower sales commission due to lower
revenues.
Amortization of Acquisition-Related Intangibles
Three Months Ended Nine Months Ended
(In millions) December 29, 2012 Change December 31, 2011 December 29, 2012 Change December 31, 2011
Amortization of
acquisition-related
intangibles $ 2.6 29 % $ 2.0 $ 7.0 26 % $ 5.6Percentage of net revenues 1 % - % - % - %
Amortization expense for the three and nine months ended December 29, 2012
increased compared to the same periods last year. The increases were primarily
due to the impact of amortization of intangible assets obtained from the recent
acquisitions in the second quarter of fiscal 2013.
Stock-Based Compensation
Three Months Ended Nine Months Ended
December 29,
(In millions) 2012 Change December 31, 2011 December 29, 2012 Change December 31, 2011
Stock-based compensation
included in:
Cost of revenues $ 1.5 12 % $ 1.3 $ 4.7 20 % $ 3.9
Research and development 9.7 12 % 8.7 27.7 19 % 23.3
Selling, general and
administrative 8.6 10 % 7.8 24.2 14 % 21.3
$ 19.8 11 % $ 17.8 $ 56.6 17 % $ 48.5
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The increases in stock-based compensation expense for the third quarter and the
first nine months of fiscal 2013 compared to the prior year periods were
primarily related to higher expenses associated with restricted stock units, as
we granted more restricted stock units at a higher fair value in the recent
years. The higher expense from restricted stock units was partially offset by
lower expenses related to stock option grants as we granted lower number of
stock options in the current fiscal year.
The impact of forfeiture true up in the first nine months of fiscal 2013 and
2012 reduced stock-based compensation expense by $2.0 million and $3.4 million,
respectively.
Interest and Other Expense, Net
Three Months Ended Nine Months Ended
(In millions) December 29, 2012 Change December 31, 2011 December 29, 2012 Change December 31, 2011
Interest and other expense, net $
5.1 (28 )% $ 7.2 $ 24.8 5 % $ 23.6
Percentage of net revenues 1 % 1 % 2 % 1 %
Our net interest and other expense decreased by $2.1 million for the third
quarter of fiscal 2013 compared to the same period last year. The decrease was
due to a royalty payment received during the quarter. For the first nine months
of fiscal 2013, our net interest and other expense increased by $1.2 million as
compared to the same period last year. The increase was primarily due to higher
losses related to foreign exchange hedging for the current period, partially
offset by the royalty payment received during the third quarter of fiscal 2013.
Provision for Income Taxes
Three Months Ended Nine Months Ended
(In millions) December 29, 2012 Change December 31, 2011 December 29, 2012 Change December 31, 2011
Provision for income taxes $ 12.0 312 % $ 2.9 $ 51.8 6 % $ 49.0
Percentage of net revenues 2 % 1 % 3 % 3 %
Effective tax rate 10 % 2 % 13 % 11 %
The difference between the U.S. federal statutory tax rate of 35% and the
Company's effective tax rate in all periods is primarily due to income earned in
lower tax rate jurisdictions, for which no U.S. income tax has been provided, as
the Company intends to permanently reinvest these earnings outside of the U.S.
The increase in the effective tax rate in the third quarter of fiscal 2013 as
compared to the prior year period was primarily attributable to a difference in
the amount of reserves released for uncertain tax positions in the two periods.
In each period, there were lapses of statutes of limitation and the amount for
fiscal 2013 was smaller than the amount for fiscal 2012. The increase in the
effective tax rate for the first nine months of fiscal year 2013 as compared to
the same prior year period was primarily attributable to the expiration of the
U.S. federal research tax credit in fiscal 2012. The rate for the first nine
months of fiscal 2013 did not include benefits for the credit as did the rate
for the first nine months of fiscal 2012.
As part of the American Taxpayer Relief Act of 2012 enacted on January 2, 2013,
the research tax credit was reinstated retroactively to January 1, 2012. As a
result, the income tax provision for the fourth quarter of fiscal 2013 will
include a discrete tax benefit which will reduce the effective tax rate.
Financial Condition, Liquidity and Capital Resources
We have historically used a combination of cash flows from operations and equity
and debt financing to support ongoing business activities, acquire or invest in
critical or complementary technologies, purchase facilities and capital
equipment, repurchase our common stock and debentures under our repurchase
program, pay dividends and finance working capital. Additionally, our
investments in debt securities are available for future sale.
The combination of cash, cash equivalents and short-term and long-term
investments as of December 29, 2012 and March 31, 2012 totaled $3.25 billion and
$3.13 billion, respectively. As of December 29, 2012, we had cash, cash
equivalents and short-term investments of $1.69 billion and working capital of
$1.93 billion. As of March 31, 2012, cash, cash equivalents and short-term
investments were $1.92 billion and working capital was $2.11 billion.
Operating Activities - During the first nine months of fiscal 2013, our
operations generated net positive cash flow of $482.9 million, which was $135.4
million lower than the $618.2 million generated during the first nine months of
fiscal 2012. The positive
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cash flow from operations generated during the third quarter of fiscal 2013 was
primarily from net income as adjusted for non-cash related items, decreases in
deferred income taxes and prepaid expenses and other current assets, as well as
an increase in accounts payable and accrued liabilities. These items were
partially offset by increases in inventories, accounts receivable and other
assets, as well as decreases in deferred income on shipments to distributors and
income taxes payable. Accounts receivable increased by $17.3 million and days
sales outstanding (DSO) increased to 39 days at December 29, 2012 from 35 days
at March 31, 2012 due to timing of shipments and collections. Due to our
decision to build ahead a previously planned closure of a particular foundry
process line at one of our foundry partners, weaker than anticipated sales and a
planned increase in safety stock across newer technologies in anticipation of
future revenue growth, our inventory level was $21.1 million higher at
December 29, 2012 compared to March 31, 2012, and combined inventory days at
Xilinx and distribution increased to 120 days at December 29, 2012 from 106 days
at March 31, 2012.
For the first nine months of fiscal 2012, the net positive cash flow from
operations was primarily from net income as adjusted for non-cash related items,
decreases in accounts receivable, deferred income taxes, inventories, and other
assets, as well as an increase in accrued liabilities. These items were
partially offset by decreases in deferred income on shipments to distributors
and income taxes payable, as well as an increase in prepaid expenses and other
current assets.
Investing Activities - Net cash used in investing activities of $336.4 million
during the first nine months of fiscal 2013 consisted of net purchases of
available-for-sale securities of $280.0 million, $32.3 million for other
investing activities and $24.1 million for purchases of property, plant and
equipment. Net cash used in investing activities of $881.1 million during the
first nine months of fiscal 2012 consisted of net purchases of
available-for-sale securities of $796.8 million, $50.4 million for purchases of
property, plant equipment and $33.9 million for other investing activities.
Financing Activities - Net cash used in financing activities was $312.1 million
in the first nine months of fiscal 2013 and consisted of $197.8 million of
repurchase of common stocks and $172.6 million for dividend payments to
stockholders, offset by $52.0 million of proceeds from the issuance of common
stock under employee stock plans and $6.3 million for the excess tax benefit
from stock-based compensation. For the comparable fiscal 2012 period, net cash
used in financing activities was $298.2 million and consisted of $219.6 million
of repurchase of common stocks and $150.4 million for dividend payments to
stockholders, offset by $63.3 million proceeds from the issuance of common stock
under employee stock plans and $8.6 million for the excess tax benefit from
stock-based compensation.
Stockholders' equity increased $108.4 million during the first nine months of
fiscal 2013. The increase was primarily attributable to $356.9 million in net
income for the first nine months of fiscal 2013, $56.6 million of stock-based
compensation, $52.0 million of issuance of common stock under employee stock
plans and $7.9 million of other comprehensive income. The increase was partially
offset by $197.8 million of repurchase of common stocks and $172.6 million of
payment of dividends to stockholders.
Contractual Obligations
We lease some of our facilities, office buildings and land under non-cancelable
operating leases that expire at various dates through October 2021. See "Note
16. Commitments" to our condensed consolidated financial statements, included in
Part 1. "Financial Information," for a schedule of our operating lease
commitments as of December 29, 2012 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 29, 2012, we had $109.8 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 29, 2012, we also had $16.1 million of non-cancelable license
obligations to providers of electronic design automation software and
hardware/software maintenance expiring at various dates through March 2015.
We committed up to $5.0 million to acquire, in the future, rights to
intellectual property until July 2023. License payments will be amortized over
the useful life of the intellectual property acquired.
In March 2007, we issued $1.00 billion principal amount of 3.125% Debentures. As
a result of the repurchases in fiscal 2009, the remaining principal amount of
the 3.125% Debentures as of December 29, 2012 was $689.6 million. The 3.125%
Debentures require payment of interest semiannually on March 15 and September 15
of each year. In June 2010, we issued another $600.0 million principal amount of
2.625% Debentures. The 2.625% Debentures require payment of interest
semiannually on June 15 and December 15 of each year. See "Note 10. Convertible
Debentures and Revolving Credit Facility" to our condensed consolidated
financial statements, included in Part 1. "Financial Information," for
additional information about our debentures.
As of December 29, 2012, $15.8 million of liabilities for uncertain tax position
and related interest and penalties were classified as long-term income taxes
payable in the condensed consolidated balance sheet. Due to the inherent
uncertainty with respect to
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the timing of future cash outflows associated with such liabilities, we are
unable to reliably estimate the timing of cash settlement with the respective
taxing authorities.
Off-Balance-Sheet Arrangements
As of December 29, 2012, 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 $250.0 million revolving credit facility entered into in
December 2011 (expiring in December 2016). We are not aware of any lack of
access to the revolving credit facility; however, we can provide no assurance
that access to the credit facility will not be impacted by adverse conditions in
the financial markets. Our credit facility is not reliant upon a single bank.
There have been no borrowings to date under our existing revolving credit
facility.
We repurchased 6.2 million shares of our common stock for $197.8 million during
the first nine months of fiscal 2013 (see "Note 11. Common Stock Repurchase
Program" to our condensed consolidated financial statements, included in Part 1.
"Financial Information," for additional information). We used $219.6 million of
cash to repurchase 7.0 million shares of common stock during the first nine
months of fiscal 2012. During the first nine months of fiscal 2013, we paid
$172.6 million in cash dividends to stockholders, representing $0.66 per common
share. During the first nine months of fiscal 2012, we paid $150.4 million in
cash dividends to stockholders, representing $0.57 per common share. On January
16, 2013, our Board of Directors declared a cash dividend of $0.22 per common
share for the fourth quarter of fiscal 2013. The dividend is payable on
February 27, 2013 to stockholders of record on February 6, 2013. 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.
The global credit crisis has caused exceptional levels of volatility and
disruption in the capital markets, diminished liquidity and credit availability,
and increased counterparty risk. Nevertheless, 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, the risk factors discussed in Item 1A included in Part II.
"Other Information" and below could affect our cash positions adversely. In
addition, certain types of investments such as auction rate securities may
present risks arising from liquidity and/or credit concerns. In the event that
our investments in auction rate securities become illiquid, we do not expect
this will materially affect our liquidity and capital resources or results of
operations.
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