UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)

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

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

Commission File Number 000-18548

Xilinx, Inc.

(Exact name of registrant as specified in its charter)

Delaware		77-0188631
(State or other jurisdiction of		(I.R.S. Employer
incorporation or organization)		Identification No.)
2100 Logic Drive, San Jose, 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)

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 þ No o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Website, if any, every Interactive Data File required to be submitted and posted 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 and post such files). Yes þ No o

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

Large accelerated filer þ		Accelerated filer o		Non-accelerated filer o		Smaller reporting company o

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

Shares outstanding of the registrant’s common stock:

Class		Shares Outstanding as of October 21, 2011
Common Stock, $.01 par value		262,461,679

 

 

PART I. FINANCIAL INFORMATION

ITEM 1.		FINANCIAL STATEMENTS

XILINX, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)

		Three Months Ended								Six Months Ended
		October 1,				October 2,				October 1,				October 2,
(In thousands, except per share amounts)		2011				2010				2011				2010
Net revenues		$	555,209			$	619,666			$	1,170,672			$	1,214,403
Cost of revenues			200,564				213,260				423,696				421,436
Gross margin			354,645				406,406				746,976				792,967
Operating expenses:
Research and development			105,774				96,578				211,791				191,062
Selling, general and administrative			88,681				87,174				185,077				171,232
Amortization of acquisition-related intangibles			1,982				0				3,605				0
Restructuring charges			3,369				0				3,369				0
Total operating expenses			199,806				183,752				403,842				362,294
Operating income			154,839				222,654				343,134				430,673
Interest and other expense, net			(8,598	)			(3,484	)			(16,409	)			(8,614	)
Income before income taxes			146,241				219,170				326,725				422,059
Provision for income taxes			19,955				48,275				46,065				92,577
Net income		$	126,286			$	170,895			$	280,660			$	329,482
Net income per common share:
Basic		$	0.48			$	0.66			$	1.06			$	1.23
Diluted		$	0.47			$	0.65			$	1.03			$	1.22
Cash dividends per common share		$	0.19			$	0.16			$	0.38			$	0.32
Shares used in per share calculations:
Basic			264,006				260,151				264,853				267,355
Diluted			267,927				263,286				273,009				270,484

See notes to condensed consolidated financial statements.

XILINX, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS

		October 1,				April 2,
(In thousands, except par value amounts)		2011				2011*
		(unaudited)
ASSETS
Current assets:
Cash and cash equivalents		$	602,952			$	1,222,359
Short-term investments			1,204,593				704,054
Accounts receivable, net			216,416				286,464
Inventories			247,652				264,745
Deferred tax assets			84,584				88,064
Prepaid expenses and other current assets			58,061				57,100
Total current assets			2,414,258				2,622,786
Property, plant and equipment, at cost:			772,928				747,941
Accumulated depreciation and amortization			(388,035	)			(367,371	)
Net property, plant and equipment			384,893				380,570
Long-term investments			1,048,492				766,452
Goodwill			149,693				133,580
Acquisition-related intangibles, net			40,296				26,896
Other assets			230,167				210,566
Total Assets		$	4,267,799			$	4,140,850
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts Payable		$	84,186			$	99,252
Accrued payroll and related liabilities			116,571				125,582
Deferred income on shipments to distributors			72,504				99,763
Other accrued liabilities			94,188				43,543
Total current liabilities			367,449				368,140
Convertible debentures			899,803				890,980
Deferred tax liabilities			433,491				403,990
Long-term income taxes payable			48,874				45,306
Other long-term liabilities			25,768				17,817
Commitments and contingencies
Stockholder’s equity:
Preferred stock, $.01 par value (none issued)			0				0
Common stock, $.01 par value			2,624				2,646
Additional paid-in capital			1,121,868				1,163,410
Retained earnings			1,361,552				1,238,044
Accumulated other comprehensive income			6,370				10,517
Total stockholders’ equity			2,492,414				2,414,617
Total Liabilities and Stockholders’ Equity		$	4,267,799			$	4,140,850

	*	Derived from audited financial statements

See notes to condensed consolidated financial statements.

XILINX, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)

		Six Months Ended
		October 1,				October 2,
(In thousands)		2011				2010
Cash flows from operating activities:
Net income		$	280,660			$	329,482
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation			27,094				24,938
Amortization			8,036				3,686
Stock-based compensation			30,666				30,541
Net gain on sale of available-for-sale securities			(1,071	)			(4,198	)
Amortization of debt discount on convertible debentures			7,732				6,266
Derivatives — revaluation and amortization			1,091				375
Tax benefit from exercise of stock options			6,531				647
Excess tax benefit from stock-based compensation			(7,928	)			(2,079	)
Changes in assets and liabilities:
Accounts receivable, net			70,048				(294,031	)
Inventories			17,271				(39,536	)
Deferred income taxes			30,034				62,015
Prepaid expenses and other current assets			(7,659	)			(9,266	)
Other assets			9,362				6,129
Accounts payable			(15,067	)			34,839
Accrued liabilities (including restructuring activities)			280				(4,218	)
Income taxes payable			7,457				(12,408	)
Deferred income on shipments to distributors			(27,259	)			13,476
Net cash provided by operating activities			437,278				146,658
Cash flows from investing activities:
Purchases of available-for-sale securities			(2,287,016	)			(1,307,889	)
Proceeds from sale and maturity of available-for-sale securities			1,514,431				920,628
Purchases of property, plant and equipment			(31,417	)			(33,444	)
Other investing activities			(34,507	)			(1,000	)
Net cash used in investing activities			(838,509	)			(421,705	)
Cash flows from financing activities:
Repurchases of common stock			(177,191	)			(466,309	)
Proceeds from issuance of common stock through various stock plans			51,891				45,554
Payment of dividends to stockholders			(100,804	)			(85,462	)
Proceeds from issuance of convertible debts, net of issuance costs			0				587,644
Purchase of call options			0				(112,319	)
Proceeds from issuance of warrants			0				46,908
Excess tax benefit from stock-based compensation			7,928				2,079
Net cash provided by (used in) financing activities			(218,176	)			18,095
Net decrease in cash and cash equivalents			(619,407	)			(256,952	)
Cash and cash equivalents at beginning of period			1,222,359				1,031,457
Cash and cash equivalents at end of period		$	602,952			$	774,505
Supplemental disclosure of cash flow information:
Interest paid		$	18,651			$	10,914
Income taxes paid, net of refunds		$	3,807			$	36,055

See notes to condensed consolidated financial statements.

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 April 2, 2011. The interim financial statements are unaudited, but reflect all adjustments which are, in the opinion of management, of a normal, recurring nature necessary to provide a fair statement of results for the interim periods presented. The results of operations for the interim periods shown in this report are not necessarily indicative of the results that may be expected for the fiscal year ending March 31, 2012 or any future period.

The Company uses a 52- to 53-week fiscal year ending on the Saturday nearest March 31. Fiscal 2012 is a 52-week year ending on March 31, 2012. Fiscal 2011, which ended on April 2, 2011, was also a 52-week fiscal year. The quarters ended October 1, 2011 and October 2, 2010 each included 13 weeks.

Note 2. Recent Accounting Changes and Accounting Pronouncements

In the first quarter of fiscal 2012, the Company adopted the new authoritative guidance for revenue arrangements with multiple deliverables. This guidance established a selling price hierarchy, which allows the use of an estimated selling price to determine the selling price of a deliverable in cases where neither vendor-specific objective evidence nor third-party evidence is available. The adoption of this new guidance did not have a significant impact on the Company’s consolidated financial statements.

In the first quarter of fiscal 2012, the Company adopted the new authoritative guidance that clarifies which revenue allocation and measurement guidance should be used for arrangements that contain both tangible products and software, in cases where the software is more than incidental to the tangible product as a whole. More specifically, if the software sold with or embedded within the tangible product is essential to the functionality of the tangible product, then this software as well as undelivered software elements that relate to this software are excluded from the scope of existing software revenue guidance. The adoption of this new guidance did not have a significant impact on the Company’s consolidated financial statements.

In April 2011, the Financial Accounting Standards Board (FASB) issued the authoritative guidance that results in common principles and requirements for measuring and disclosing fair value, which apply to all reporting entities that are required or permitted to measure or disclose the fair value of an asset, a liability, or an instrument classified in a reporting entity’s shareholders’ equity in the financial statements. Some of the amendments clarify the FASB’s intent about the application of existing fair value measurement requirements. Other amendments change a particular principle or requirement for measuring fair value or for disclosing information about fair value measurements. This guidance is to be applied prospectively. For public entities, this guidance is effective during interim and annual periods beginning after December 15, 2011, which for the Company is its fourth quarter of fiscal 2012. Early application is not permitted. The Company does not expect this new guidance to have significant impact on the Company’s consolidated financial statements.

In June 2011, the FASB issued the authoritative guidance to improve the comparability, consistency, and transparency of financial reporting and to increase the prominence of items reported in other comprehensive income. Under this guidance, an entity has the option to present the total of comprehensive income, the components of net income, and the components of other comprehensive income either in a single continuous statement of comprehensive income or in two separate but consecutive statements. The guidance is to be applied retrospectively. For public entities, this guidance is effective for fiscal years, and interim periods within those years, beginning after December 15, 2011, which for the Company is its first quarter of fiscal 2013. Early application is permitted. This guidance does not affect the underlying accounting for components of other comprehensive income, but will change the presentation of the Company’s consolidated financial statements.

In September 2011, the FASB issued the authoritative guidance that gives companies the option to perform a qualitative assessment to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount and, in some cases, skip the two-step impairment test for purposes of evaluating goodwill. The guidance is effective for fiscal years beginning after December 15, 2011, which for the Company is for its fiscal year 2013. Early adoption is permitted. The Company does not expect this new guidance to have significant impact on the Company’s consolidated financial statements.

Note 3. Significant Customers and Concentrations of Credit Risk

Avnet, Inc. (Avnet), one of the Company’s distributors, distributes the substantial majority of the Company’s products worldwide. As of October 1, 2011 and April 2, 2011, Avnet accounted for 84% and 79% of the Company’s total net accounts receivable, respectively.

Resale of product through Avnet accounted for 47% and 48% of the Company’s worldwide net revenues in the second quarter and the first six months of fiscal 2012, respectively. For the second quarter and the first six months of fiscal 2011, resale of product through Avnet accounted for 53% and 52% of the Company’s worldwide net revenues, respectively. The percentage of accounts receivable due from Avnet and the percentage of worldwide net revenues from Avnet are consistent with historical patterns.

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

One end customer accounted for 14% and 11% of net revenues for the second quarter of fiscal 2012 and 2011, respectively. One end customer accounted for 11% and 10% of net revenues for the first half of fiscal 2012 and 2011, respectively.

The Company mitigates concentrations of credit risk in its investments in debt securities by currently investing approximately 92% of its portfolio in AA 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 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 October 1, 2011, approximately 1% of the Company’s $2.79 billion investment portfolio consisted of student loan auction rate securities and all of these securities are rated AAA with the exception of $3.4 million that were downgraded to an A rating during fiscal 2009. While these securities experienced failed auctions in the fourth quarter of fiscal 2008 due to liquidity issues in the global credit markets, which have not been completely resolved as of October 1, 2011, the Company has collected and expects to collect all interest payable on these securities when due. Substantially all of the underlying assets that secure these securities are pools of student loans originated under the Federal Family Education Loan Program (FFELP), which are substantially guaranteed by the U.S. Department of Education. Because there can be no assurance of a successful auction in the future, these student loan auction rate securities are classified as long-term investments on the consolidated balance sheets. The maturity dates range from December 2027 to May 2046.

As of October 1, 2011, approximately 28% of the portfolio consisted of mortgage-backed securities. All of the mortgage-backed securities in the investment portfolio were issued by U.S. government-sponsored enterprises and agencies and are rated AA+ by Standard & Poor’s and AAA by Moody’s Investors Service.

The global credit and capital markets have continued to experience adverse conditions that have negatively impacted the values of various types of investment and non-investment grade securities, and have experienced volatility and disruption due to instability in the global financial system, uncertainty related to global economic conditions and concerns regarding sovereign financial stability. While general conditions in the global credit markets have improved, there is a risk that the Company 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. See “Note 5. Financial Instruments” for a table of the Company’s available-for-sale securities.

Note 4. Fair Value Measurements

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

The Company determines the fair value for marketable debt securities using industry standard pricing services, data providers and other third-party sources and by internally performing valuation analyses. 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. For certain other securities, such as student loan auction rate securities, the Company performs its own valuation analysis using a discounted cash flow pricing model.

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 first six months of fiscal 2012 and the Company did not adjust or override any fair value measurements as of October 1, 2011.

Fair Value Hierarchy

The measurements of fair value were established based on a fair value hierarchy that prioritizes the utilized inputs. This hierarchy requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. 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.

The Company’s Level 1 assets consist of U.S. Treasury securities and money market funds.

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.

The Company’s Level 2 assets consist of bank certificates of deposit, commercial paper, corporate bonds, municipal bonds, U.S. agency securities, foreign government and agency securities, floating-rate notes and mortgage-backed securities. The Company’s Level 2 assets and liabilities include foreign currency forward contracts.

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.

The Company’s Level 3 assets and liabilities include student loan auction rate securities and the embedded derivative related to the Company’s debentures.

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 October 1, 2011 and April 2, 2011:

		October 1, 2011
		Quoted
		Prices in
		Active				Significant
		Markets for				Other				Significant
		Identical				Observable				Unobservable
		Instruments				Inputs				Inputs				Total Fair
(In thousands)		(Level 1)				(Level 2)				(Level 3)				Value
Assets
Cash and cash equivalents:
Money market funds		$	222,364			$	0			$	0			$	222,364
Bank certificates of deposit			0				15,000				0				15,000
Commercial paper			0				154,302				0				154,302
U.S. government and agency securities			0				9,998				0				9,998
Foreign government and agency securities			0				136,474				0				136,474
Short-term investments:
Bank certificates of deposit			0				132,784				0				132,784
Commercial paper			0				499,831				0				499,831
Corporate bonds			0				36,516				0				36,516
U.S. government and agency securities			0				72,059				0				72,059
Foreign government and agency securities			0				463,363				0				463,363
Mortgage-backed securities			0				40				0				40
Long-term investments:
Corporate bonds			0				158,119				0				158,119
Auction rate securities			0				0				29,048				29,048
Municipal bonds			0				26,170				0				26,170
U.S. government and agency securities			19,459				44,834				0				64,293
Mortgage-backed securities			0				770,862				0				770,862
Total assets measured at fair value		$	241,823			$	2,520,352			$	29,048			$	2,791,223
Liabilities
Foreign currency forward contracts, net		$	0			$	3,445			$	0			$	3,445
Convertible debentures — embedded derivative			0				0				2,007				2,007
Total liabilities measured at fair value		$	0			$	3,445			$	2,007			$	5,452
Net assets measured at fair value		$	241,823			$	2,516,907			$	27,041			$	2,785,771

		April 2, 2011
		Quoted
		Prices in
		Active				Significant
		Markets for				Other				Significant
		Identical				Observable				Unobservable
		Instruments				Inputs				Inputs				Total Fair
(In thousands)		(Level 1)				(Level 2)				(Level 3)				Value
Assets
Cash and cash equivalents:
Money market funds		$	275,596			$	0			$	0			$	275,596
Bank certificates of deposit			0				79,984				0				79,984
Commercial paper			0				485,315				0				485,315
U.S. government and agency securities			29,998				99,974				0				129,972
Foreign government and agency securities			0				161,970				0				161,970
Short-term investments:
Bank certificates of deposit			0				10,000				0				10,000
Commercial paper			0				224,896				0				224,896
Municipal bonds			0				45				0				45
U.S. government and agency securities			14,404				7,996				0				22,400
Foreign government and agency securities			0				384,428				0				384,428
Floating rate notes			0				62,261				0				62,261
Mortgage-backed securities			0				24				0				24
Long-term investments:
Corporate bonds			0				25,566				0				25,566
Auction rate securities			0				0				34,950				34,950
Municipal bonds			0				16,913				0				16,913
U.S. government and agency securities			7,941				45,570				0				53,511
Floating rate notes			0				29,869				0				29,869
Mortgage-backed securities			0				605,643				0				605,643
Foreign currency forward contracts, net			0				5,134				0				5,134
Total assets measured at fair value		$	327,939			$	2,245,588			$	34,950			$	2,608,477
Liabilities
Convertible debentures — embedded derivative		$	0			$	0			$	945			$	945
Total liabilities measured at fair value		$	0			$	0			$	945			$	945
Net assets measured at fair value		$	327,939			$	2,245,588			$	34,005			$	2,607,532

Changes in Level 3 Instruments Measured at Fair Value on a Recurring Basis

The following table is a reconciliation of all assets and liabilities measured at fair value on a recurring basis using significant unobservable inputs (Level 3):

		Three Months Ended								Six Months Ended
		October 1,				October 2,				October 1,				October 2,
(In thousands)		2011				2010				2011				2010
Balance as of beginning of period		$	30,636			$	61,725			$	34,005			$	60,796
Total realized and unrealized gains (losses):
Included in interest and other expense, net			(1,435	)			(145	)			(1,062	)			(614	)
Included in other comprehensive income			(1,210	)			940				(552	)			2,788
Sales and settlements, net (1)			(950	)			0				(5,350	)			(450	)
Balance as of end of period		$	27,041			$	62,520			$	27,041			$	62,520

(1)		During the three months ended October 1, 2011, $950 thousand of student loan auction rate securities were redeemed for cash at par value. During the first six months ended October 1, 2011 and October 2, 2010, $5.4 million and $450 thousand of student loan auction rate securities, respectively, were redeemed for cash at par value.

The amount of total losses included in net income attributable to the change in unrealized gains or losses relating to assets and liabilities still held as of the end of the period was as follows:

		Three Months Ended								Six Months Ended
		October 1,				October 2,				October 1,				October 2,
(In thousands)		2011				2010				2011				2010
Interest and other expense, net		$	(1,435	)		$	(145	)		$	(1,062	)		$	(614	)

As of October 1, 2011, marketable securities measured at fair value using Level 3 inputs were comprised of $29.0 million of student loan auction rate securities. Auction failures during the fourth quarter of fiscal 2008 and the lack of market activity and liquidity required that the Company’s student loan auction rate securities be measured using observable market data and Level 3 inputs. The fair values of the Company’s student loan auction rate securities were based on the Company’s assessment of the underlying collateral and the creditworthiness of the issuers of the securities. Substantially all of the underlying assets that secure the student loan auction rate securities are pools of student loans originated under FFELP, which are substantially guaranteed by the U.S. Department of Education. The fair values of the Company’s student loan auction rate securities were determined using a discounted cash flow pricing model that incorporated financial inputs such as projected cash flows, discount rates, expected interest rates to be paid to investors and an estimated liquidity discount. The weighted-average life over which cash flows were projected was determined to be approximately nine years, given the collateral composition of the securities. The discount rates that were applied to the pricing model were based on market data and information for comparable- or similar-term student loan asset-backed securities. The expected interest rate to be paid to investors in a failed auction was determined by the contractual terms for each security. The liquidity discount represents an estimate of the additional return an investor would require to compensate for the lack of liquidity of the student loan auction rate securities. The Company does not intend to sell, nor does it believe it is more likely than not that it would be required to sell, the student loan auction rate securities before anticipated recovery, which could be at final maturity that ranges from December 2027 to May 2046.

In March 2007, the Company issued $1.00 billion principal amount of 3.125% junior convertible debentures due March 15, 2037 (3.125% Debentures) to an initial purchaser in a private offering. As a result of repurchases in fiscal 2009, the remaining principal amount of the 3.125% Debentures as of October 1, 2011 was $689.6 million. The fair value of the 3.125% Debentures as of October 1, 2011 was approximately $694.8 million, based on the last trading price of the 3.125% Debentures of the period. The 3.125% Debentures included embedded features that qualify as an embedded derivative, and was separately accounted for as a discount on the 3.125% Debentures. Its fair value was established at the inception of the 3.125% Debentures. Each quarter, the change in the fair value of the embedded derivative, if any, is recorded in the consolidated statements of income. The Company uses a derivative valuation model to derive the value of the embedded derivative. Key inputs into this valuation model are the Company’s current stock price, risk-free interest rates, the stock dividend yield, the stock volatility and the 3.125% Debenture’s credit spread over London Interbank Offered Rate (LIBOR). The first three inputs are based on observable market data and are considered Level 2 inputs while the last two inputs require management judgment and are Level 3 inputs.

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

As of October 1, 2011, the Company had non-marketable equity securities in private companies of $12.5 million (adjusted cost, which approximates fair value). The Company’s investments in non-marketable securities of private companies are accounted for by using the cost method. These investments are measured at fair value on a non-recurring basis when they are deemed to be other-than-temporarily impaired. In determining whether a decline in value of non-marketable equity investments in private companies has occurred and is other than temporary, an assessment is made by considering available evidence, including the general market conditions in the investee’s industry, the investee’s product development status and subsequent rounds of financing and the related valuation and/or Xilinx’s participation in such financings. The Company also assesses the investee’s ability to meet business milestones and the financial condition and near-term prospects of the individual investee, including the rate at which the investee is using its cash, the investee’s need for possible additional funding at a lower valuation and bona fide offers to purchase the investee from a prospective acquirer. The valuation methodology for determining the fair value of non-marketable equity securities is based on the factors noted above which require management judgment and are Level 3 inputs. No material impairment loss on non-marketable equity investments was recognized during the first six months of fiscal 2012 or 2011.

Note 5. Financial Instruments

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

		October 1, 2011																	April 2, 2011
						Gross				Gross				Estimated									Gross				Gross				Estimated
		Amortized				Unrealized				Unrealized				Fair					Amortized				Unrealized				Unrealized				Fair
(In thousands)		Cost				Gains				Losses				Value					Cost				Gains				Losses				Value
Money market funds		$	222,364			$	0			$	0			$	222,364				$	275,596			$	0			$	0			$	275,596
Bank certificates of deposit			147,784				0				0				147,784					89,984				0				0				89,984
Commercial paper			654,132				1				0				654,133					710,210				2				(1	)			710,211
Corporate bonds			193,538				1,667				(570	)			194,635					25,501				69				(4	)			25,566
Auction rate securities			32,900				0				(3,852	)			29,048					38,250				0				(3,300	)			34,950
Municipal bonds			25,138				1,047				(15	)			26,170					16,818				192				(52	)			16,958
U.S. government and agency securities			146,037				358				(45	)			146,350					206,052				38				(207	)			205,883
Foreign government and agency securities			599,818				27				(8	)			599,837					546,407				7				(16	)			546,398
Floating rate notes			0				0				0				0					91,927				204				(1	)			92,130
Mortgage-backed securities			758,995				13,429				(1,522	)			770,902					598,046				8,984				(1,363	)			605,667
		$	2,780,706			$	16,529			$	(6,012	)		$	2,791,223				$	2,598,791			$	9,496			$	(4,944	)		$	2,603,343

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 October 1, 2011 and April 2, 2011:

		October 1, 2011
		Less Than 12 Months								12 Months or Greater								Total
						Gross								Gross								Gross
		Fair				Unrealized				Fair				Unrealized				Fair				Unrealized
(In thousands)		Value				Losses				Value				Losses				Value				Losses
Corporate bonds		$	29,634			$	(570	)		$	0			$	0			$	29,634			$	(570	)
Auction rate securities			0				0				29,048				(3,852	)			29,048				(3,852	)
Municipal bonds			4,607				(9	)			486				(6	)			5,093				(15	)
U.S. government and agency securities			93,586				(45	)			0				0				93,586				(45	)
Foreign government and agency securities			24,974				(8	)			0				0				24,974				(8	)
Mortgage-backed securities			171,611				(1,488	)			4,051				(34	)			175,662				(1,522	)
		$	324,412			$	(2,120	)		$	33,585			$	(3,892	)		$	357,997			$	(6,012	)

		April 2, 2011
		Less Than 12 Months								12 Months or Greater								Total
						Gross								Gross								Gross
		Fair				Unrealized				Fair				Unrealized				Fair				Unrealized
(In thousands)		Value				Losses				Value				Losses				Value				Losses
Commercial paper		$	44,982			$	(1	)		$	0			$	0			$	44,982			$	(1	)
Corporate bonds			6,129				(4	)			0				0				6,129				(4	)
Auction rate securities			0				0				34,950				(3,300	)			34,950				(3,300	)
Municipal bonds			4,992				(42	)			936				(10	)			5,928				(52	)
U.S. government and agency securities			108,464				(207	)			0				0				108,464				(207	)
Foreign government and agency securities			67,061				(16	)			0				0				67,061				(16	)
Floating rate notes			25,020				(1	)			0				0				25,020				(1	)
Mortgage-backed securities			178,844				(1,356	)			1,094				(7	)			179,938				(1,363	)
		$	435,492			$	(1,627	)		$	36,980			$	(3,317	)		$	472,472			$	(4,944	)

The Company reviewed the investment portfolio and determined that the gross unrealized losses on these investments as of October 1, 2011 and April 2, 2011 were temporary in nature as evidenced by the fluctuations in the gross unrealized losses within the investment categories. The aggregate of individual unrealized losses that had been outstanding for 12 months or more was not significant as of October 1, 2011 and April 2, 2011, and was primarily related to failed auction rate securities due to adverse conditions in the global credit markets during the past three years. 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 Company also believes that it will be able to collect both principal and interest amounts due to the Company at maturity, given the high credit quality of these investments and any related underlying collateral.

The amortized cost and estimated fair value of marketable debt securities (bank certificates of deposit, commercial paper, corporate bonds, auction rate securities, municipal bonds, U.S. and foreign government and agency securities and mortgage-backed securities), by contractual maturity, are shown below. Actual maturities may differ from contractual maturities because issuers may have the right to call or prepay obligations without call or prepayment penalties.

		October 1, 2011
		Amortized				Estimated
(In thousands)		Cost				Fair Value
Due in one year or less		$	1,520,356			$	1,520,367
Due after one year through five years			242,217				244,044
Due after five years through ten years			254,356				258,891
Due after ten years			541,413				545,557
		$	2,558,342			$	2,568,859

Certain information related to available-for-sale securities is as follows:

		Three Months Ended								Six Months Ended
		October 1,				October 2,				October 1,				October 2,
(In thousands)		2011				2010				2011				2010
Proceeds from sale of available-for-sale securities		$	77,608			$	132,098			$	107,985			$	157,500
Gross realized gains on sale of available-for-sale securities		$	758			$	3,785			$	1,097			$	4,356
Gross realized losses on sale of available-for-sale securities			(21	)			(135	)			(26	)			(158	)
Net realized gains on sale of available-for-sale securities		$	737			$	3,650			$	1,071			$	4,198
Amortization of premiums on available-for-sale securities		$	3,262			$	1,561			$	5,575			$	3,102

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.

As of October 1, 2011 and April 2, 2011, the Company had the following outstanding forward currency exchange contracts which are derivative financial instruments:

		October 1,				April 2,
(In thousands and U.S. dollars)		2011				2011
Euro		$	40,479			$	38,787
Singapore dollar			62,809				52,782
Japanese Yen			11,863				12,382
British Pound			14,619				8,853
		$	129,770			$	112,804

As part of the Company’s strategy to reduce volatility of operating expenses due to foreign exchange rate fluctuations, the Company employs a hedging program with a forward outlook of up to two years for major foreign-currency-denominated operating expenses. The outstanding forward currency exchange contracts expire at various dates between October 2011 and August 2013. The net unrealized gain or loss, which approximates the fair market value of the above contracts, is expected to be realized and reclassified into net income within the next two years.

As of October 1, 2011, 97% of the forward foreign currency exchange contracts were designated and qualified as cash flow hedges and the effective portion of the gain or loss on the forward contracts was reported as a component of other comprehensive income and reclassified into net income in the same period during which the hedged transaction affects earnings. The estimated net amount of the existing gains or losses as of October 1, 2011 that is expected to be reclassified into earnings within the next 12 months was $2.1 million. The ineffective portion of the gain or loss on the forward contract was included in the net income for all periods presented.

As of October 1, 2011, 3% of the forward foreign currency exchange contracts were designated and qualified as fair value hedges, and the related realized and unrealized gain or loss on the forward contracts was immaterial for all periods presented.

The Company may enter into forward foreign currency exchange contracts to hedge firm commitments such as acquisitions and capital expenditures. Gains and losses on foreign currency forward contracts that are designated as hedges of anticipated transactions, for which a firm commitment has been attained and the hedged relationship has been effective, are deferred and included in income or expenses in the same period that the underlying transaction is settled. Gains and losses on any instruments not meeting the above criteria are recognized in income or expenses in the consolidated statements of income as they are incurred.

The 3.125% Debentures include provisions which qualify as an embedded derivative. See “Note 4. Fair Value Measurements” for more discussion about the embedded derivative. The fair value of the embedded derivative was $2.0 million and $945 thousand as of October 1, 2011 and April 2, 2011, respectively. The changes in the fair value of the embedded derivative were recorded to interest and other expense, net, on the Company’s condensed consolidated statements of income.

The Company had the following derivative instruments as of October 1, 2011 and April 2, 2011, located on the condensed consolidated balance sheet, utilized for risk management purposes detailed above:

Foreign Exchange Contracts

Asset Derivatives

Liability Derivatives

Balance Sheet

Balance Sheet

(In thousands)

Location

Fair Value

Location

Fair Value

October 1, 2011

Prepaid expenses and other current assets

$

888

Other accrued liabilities

$

4,333

April 2, 2011

Prepaid expenses and other current assets

$

5,205

Other accrued liabilities

$

71

The following table summarizes the effect of derivative instruments on the condensed consolidated statements of income:

		Amount of Gain
		(Loss) Recognized				Amount of Gain
		in OCI on				(Loss) Reclassified
		Derivative				from Accumulated				Amount of Gain
(In thousands)		(Effective portion of				OCI into Income				(Loss) Recorded
Derivatives Types		cash flow hedging)				(Effective portion)*				(Ineffective portion)*
					Three Months Ended October 1, 2011
Foreign exchange contracts (cash flow hedging)		$	(8,187	)		$	2,339			$	(3	)
					Three Months Ended October 2, 2010
Foreign exchange contracts (cash flow hedging)		$	6,620			$	89			$	7
Interest rate swaps (fair value hedging)		$	0			$	0			$	224
					Six Months Ended October 1, 2011
Foreign exchange contracts (cash flow hedging)		$	(8,784	)		$	5,103			$	(4	)
					Six Months Ended October 2, 2010
Foreign exchange contracts (cash flow hedging)		$	7,488			$	(523	)		$	8
Interest rate swaps (fair value hedging)		$	0			$	0			$	268

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:

		Three Months Ended								Six Months Ended
		October 1,				October 2,				October 1,				October 2,
(In thousands)		2011				2010				2011				2010
Stock-based compensation included in:
Cost of revenues		$	1,284			$	1,312			$	2,594			$	2,579
Research and development			8,103				7,341				14,590				14,545
Selling, general and administrative			7,512				6,768				13,482				13,417
		$	16,899			$	15,421			$	30,666			$	30,541

During the first six months of fiscal 2012 and 2011, the tax benefit realized for the tax deduction from option exercises and other awards, including amounts credited to additional paid-in capital, totaled $6.5 million and $647 thousand, respectively.

The fair values of stock options and stock purchase plan rights under the Company’s equity incentive plans and Employee Stock Purchase Plan (ESPP) were estimated as of the grant date using the Black-Scholes option pricing model. The Company’s expected stock price volatility assumption for stock options is estimated using implied volatility of the Company’s traded options. The expected life of options granted is based on the historical exercise activity as well as the expected disposition of all options outstanding. The expected life of options granted also considers the actual contractual term. The weighted-average fair values per share of stock options granted during the second quarter of fiscal 2012 was $8.03 ($6.72 for the second quarter of fiscal 2011) and for the first six months of fiscal 2012 was $7.87 ($6.72 for the first six months of fiscal 2011), which were estimated at the date of grant using the following weighted-average assumptions:

		Three Months Ended								Six Months Ended
		October 1,				October 2,				October 1,				October 2,
		2011				2010				2011				2010
Expected life of options (years)			5.2				5.1				5.2				5.1
Expected stock price volatility			0.34				0.36				0.31				0.36
Risk-free interest rate			1.2	%			1.8	%			1.7	%			1.8	%
Dividend yield			2.3	%			2.5	%			2.3	%			2.5	%

The estimated fair values of restricted stock unit (RSU) awards were calculated based on the market price of Xilinx common stock on the date of grant, reduced by the present value of dividends expected to be paid on Xilinx common stock prior to vesting. The per share weighted-average fair values of RSUs granted during the second quarter of fiscal 2012 was $34.33 ($23.90 for the second quarter of fiscal 2011) and for the first six months of fiscal 2012 was $34.13 ($23.91 for the first six months of fiscal 2011), which were calculated based on estimates at the date of grant using the following weighted-average assumptions:

		Three Months Ended								Six Months Ended
		October 1,				October 2,				October 1,				October 2,
		2011				2010				2011				2010
Risk-free interest rate			0.7	%			1.0	%			0.8	%			1.0	%
Dividend yield			2.1	%			2.5	%			2.1	%			2.5	%

Employee Stock Option Plans

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

		Options Outstanding
						Weighted-
						Average
		Number of				Exercise Price
(Shares in thousands)		Shares				Per Share
April 3, 2010			31,026			$	30.51
Granted			2,345			$	26.36
Exercised			(5,704	)		$	25.42
Forfeited/cancelled/expired			(2,698	)		$	50.69
April 2, 2011			24,969			$	29.11
Granted			57			$	33.58
Exercised			(1,959	)		$	24.93
Forfeited/cancelled/expired			(2,344	)		$	36.86
October 1, 2011			20,723			$	28.63
Options exercisable at:
October 1, 2011			17,613			$	29.35
April 2, 2011			20,837			$	30.08

The types of awards allowed under the 2007 Equity Plan include incentive stock options, non-qualified stock options, RSUs, restricted stock and stock appreciation rights. To date, the Company has issued a mix of non-qualified stock options and RSUs under the 2007 Equity Plan. The mix of stock options and RSU awards changes depending upon the grade level of the employees. Employees at the lower grade levels typically receive mostly RSUs and may also receive stock options. Employees at the higher grade levels, including the Company’s executive officers, receive both stock options and RSUs. On August 10, 2011, the stockholders approved an amendment to increase the authorized number of shares reserved for issuance under the 2007 Equity Plan by 4.5 million shares. As of October 1, 2011, 15.7 million shares remained available for grant under the 2007 Equity Plan.

The total pre-tax intrinsic value of options exercised during the three months and six months ended October 1, 2011 was $3.3 million and $18.3 million, respectively. The total pre-tax intrinsic value of options exercised during the three months and six months ended October 2, 2010 was $4.8 million and $6.4 million, respectively. This intrinsic value represents the difference between the exercise price and the fair market value of the Company’s common stock on the date of exercise.

RSU Awards

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

		RSUs Outstanding
						Weighted-
						Average Grant-
		Number of				Date Fair Value
(Shares in thousands)		Shares				Per Share
April 3, 2010			3,652			$	21.70
Granted			2,043			$	25.14
Vested			(1,192	)		$	22.23
Cancelled			(288	)		$	21.99
April 2, 2011			4,215			$	23.19
Granted			2,128			$	34.13
Vested			(1,166	)		$	23.03
Cancelled			(249	)		$	26.95
October 1, 2011			4,928			$	27.91

Employee Stock Purchase Plan

Under the Company’s ESPP, shares are only issued during the second and fourth quarters of each fiscal year. Employees purchased 501 thousand shares for $13.3 million in the second quarter of fiscal 2012 and 958 thousand shares for $13.9 million in the second quarter of fiscal 2011. The per-share weighted-average fair values of stock purchase rights granted under the ESPP during the second quarter of fiscal 2012 and 2011 were $9.37 and $7.82, respectively. The fair values of stock purchase plan rights granted in the second quarter of fiscal 2012 and 2011 were estimated at the date of grant using the following assumptions:

		2012				2011
Expected life of options (years)			1.25				1.25
Expected stock price volatility			0.29				0.33
Risk-free interest rate			0.2	%			0.3	%
Dividend yield			2.4	%			2.3	%

The next scheduled purchase under the ESPP is in the fourth quarter of fiscal 2012. On August 10, 2011, 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 October 1, 2011, 8.9 million shares were available for future issuance.

Note 8. Net Income Per Common Share

The computation of basic net income per common share for all periods presented is derived from the information on the condensed consolidated statements of income, and there are no reconciling items in the numerator used to compute diluted net income per common share. The total shares used in the denominator of the diluted net income per common share calculation includes 3.9 million and 4.6 million potentially dilutive common equivalent shares outstanding for the second quarter and the first six months of fiscal 2012, respectively, that are not included in basic net income per common share. For both the second quarter and the first six months of fiscal 2011, the total shares used in the denominator of the diluted net income per common share calculation includes 3.1 million potentially dilutive common equivalent shares. Potentially dilutive common equivalent shares are determined by applying the treasury stock method to the impact of incremental shares issuable assuming conversion of the debentures, exercise of outstanding stock options, vesting of outstanding RSUs and issuance of common stock under the ESPP.

Outstanding stock options, RSUs and warrants (see “Note 10. Convertible Debentures and Revolving Credit Facility” for more discussion of warrants) to purchase approximately 29.0 million shares for both the second quarter and the first six months of fiscal 2012 under the Company’s stock award plans were excluded from diluted net income per common share by applying the treasury stock method, as their inclusion would have been antidilutive. These options, RSUs and warrants 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, RSUs and warrants.

Diluted net income per common share for all periods, other than the first six months of fiscal 2012, does not include any incremental shares assuming the conversion of $600.0 million principal amount of 2.625% senior convertible debentures due June 15, 2017 (2.625% Debentures) and the 3.125% Debentures (see “Note 10. Convertible Debentures and Revolving Credit Facility”). The debentures will have no impact on diluted net income per common share if the price of the Company’s common stock is below the conversion price of each debenture, because the principal amount of these debentures will be settled in cash upon conversion. Prior to conversion, the Company includes the effect of the additional shares that may be issued upon conversions using the treasury stock method in the diluted net income per common share calculation, provided that the impact was not anti dilutive.

The call options to purchase the Company’s common stock, which the Company purchased to hedge against potential dilution upon conversion of the 2.625% Debentures (see “Note 10. Convertible Debentures and Revolving Credit Facility”), are not considered for purposes of calculating the total shares outstanding under the basic and diluted net income per share, as their effect would be anti-dilutive. Upon exercise, the call options would serve to neutralize the dilutive effect of the 2.625% Debentures and potentially reduce the weighted number of diluted shares used in per share calculations.

Note 9. Inventories

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

		October 1,				April 2,
(In thousands)		2011				2011
Raw materials		$	16,971			$	15,465
Work-in-process			200,140				214,023
Finished goods			30,541				35,257
		$	247,652			$	264,745

Note 10. Convertible Debentures and Revolving Credit Facility

2.625% Senior Convertible Debentures

In June 2010, the Company issued $600.0 million principal amount of 2.625% Debentures to qualified institutional investors. The 2.625% Debentures are senior in right of payment to the Company’s existing and future unsecured indebtedness that is expressly subordinated in right of payment to the 2.625% Debentures, including the 3.125% Debentures described below. The fair value of the 2.625% Debentures as of October 1, 2011 was approximately $675.0 million, based on the last trading price of the 2.625% Debentures for the period. The 2.625% Debentures are convertible, subject to certain conditions, into shares of Xilinx common stock at a conversion rate of 33.0164 shares of common stock per $1 thousand principal amount of the 2.625% Debentures, representing an effective conversion price of approximately $30.29 per share of common stock. The conversion rate is subject to adjustment for certain events as outlined in the indenture governing the 2.625% Debentures but will not be adjusted for accrued interest.

In connection with the issuance of the 2.625% Debentures, in June 2010 the Company entered into interest rate swaps with certain independent financial institutions, whereby the Company paid a variable interest rate equal to the three-month LIBOR minus 0.2077%, and received interest income at a fixed interest rate of 2.625%. In October 2010, the Company sold the interest rate swaps for $30.2 million. In accordance with the authoritative guidance for the accounting of derivative instruments and hedging activities issued by the FASB, the fair value of hedge accounting adjustment at the time of the sale of $29.9 million is amortized as reduction to interest expense over the remaining life of the 2.625% Debentures.

The carrying values of the liability and equity components of the 2.625% Debentures are reflected in the Company’s condensed consolidated balance sheets as follows:

		October 1,				April 2,
(In thousands)		2011				2011
Liability component:
Principal amount of the 2.625% Debentures		$	600,000			$	600,000
Unamortized discount of liability component			(88,083	)			(95,855	)
Hedge accounting adjustment — sale of interest rate swap			25,454				27,700
Net carrying value of the 2.625% Debentures		$	537,371			$	531,845
Equity component — net carrying value		$	105,620			$	105,620

Interest expense related to the 2.625% Debentures was included in interest and other expense, net on the condensed consolidated statements of income as follows:

		Three Months Ended								Six Months Ended
		October 1,				October 2,				October 1,				October 2,
(In thousands)		2011				2010				2011				2010
Contractual coupon interest		$	3,938			$	3,938			$	7,875			$	4,988
Amortization of debt issuance costs			362				365				724				482
Amortization of debt discount			2,763				3,167				5,526				4,213
Total interest expense related to the 2.625% Debentures		$	7,063			$	7,470			$	14,125			$	9,683

To hedge against potential dilution upon conversion of the 2.625% Debentures, the Company also purchased call options on its common stock from the hedge counterparties. The call options give the Company the right to purchase up to 19.8 million shares of its common stock at $30.29 per share. The Company paid an aggregate of $112.3 million to purchase these call options. The call options will terminate upon the earlier of the maturity of the 2.625% Debentures or the last day any of the 2.625% Debentures remain outstanding. To reduce the hedging cost, under separate transactions the Company sold warrants to the hedge counterparties, which give the hedge counterparties the right to purchase up to 19.8 million shares of the Company’s common stock at $42.91 per share. These warrants expire on a gradual basis over a specified period starting on September 13, 2017. The Company received an aggregate of $46.9 million from the sale of these warrants. In accordance with the authoritative guidance issued by the FASB on determining whether an instrument (or embedded feature) is indexed to an entity’s own stock, the Company concluded that the call options and warrants were indexed to the Company’s stock. Therefore, the call options and warrants were classified as equity instruments and will not be marked to market prospectively. The net amount of $65.4 million paid to the hedge counterparties, less the applicable tax benefit related to the call options of $41.7 million, was recorded as a reduction to additional paid-in capital. The settlement terms of the call options and warrants provide for net share settlement.

3.125% Junior Subordinated Convertible Debentures

In March 2007, the Company issued $1.00 billion principal amount of 3.125% Debentures to an initial purchaser in a private offering. The 3.125% Debentures are subordinated in right of payment to the Company’s existing and future senior debt, including the 2.625% Debentures, and to the other liabilities of the Company’s subsidiaries. During fiscal 2009, the Company repurchased some of its 3.125% Debentures, resulting in approximately $689.6 million of debt outstanding in principal amount as of October 1, 2011. The 3.125% Debentures are convertible, subject to certain conditions, into shares of Xilinx common stock at a conversion rate of 33.1695 shares of common stock per $1 thousand principal amount of 3.125% Debentures, representing an effective conversion price of approximately $30.15 per share of common stock. The conversion rate is subject to adjustment for certain events as outlined in the indenture governing the 3.125% Debentures but will not be adjusted for accrued interest.

The carrying values of the liability and equity components of the 3.125% Debentures are reflected in the Company’s condensed consolidated balance sheets as follows:

		October 1,				April 2,
(In thousands)		2011				2011
Liability component:
Principal amount of the 3.125% Debentures		$	689,635			$	689,635
Unamortized discount of liability component			(327,735	)			(329,941	)
Unamortized discount of embedded derivative from date of issuance			(1,475	)			(1,504	)
Carrying value of liability component — 3.125% Debentures			360,425				358,190
Carrying value of embedded derivative component			2,007				945
Net carrying value of the 3.125% Debentures		$	362,432			$	359,135
Equity component — net carrying value		$	229,513			$	229,513

Interest expense related to the 3.125% Debentures was included in interest and other expense, net on the condensed consolidated statements of income and was recognized as follows:

		Three Months Ended								Six Months Ended
		October 1,				October 2,				October 1,				October 2,
(In thousands)		2011				2010				2011				2010
Contractual coupon interest		$	5,388			$	5,388			$	10,766			$	10,776
Amortization of debt issuance costs			55				55				112				112
Amortization of embedded derivative			14				14				29				29
Amortization of debt discount			1,113				1,036				2,206				2,053
Total interest expense related to the 3.125% Debentures		$	6,570			$	6,493			$	13,113			$	12,970