XML 80 R10.htm IDEA: XBRL DOCUMENT v2.4.0.8
Fair Value Measurements
3 Months Ended
Jun. 28, 2014
Fair Value Disclosures [Abstract]  
Fair Value Measurements
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 testing and analysis. The Company primarily uses a consensus price or weighted-average price for its fair value assessment. The Company determines the consensus price using market prices from a variety of industry standard pricing services, data providers, security master files from large financial institutions and other third party sources and uses those multiple prices as inputs into a distribution-curve-based algorithm to determine the daily market value. The pricing services use multiple inputs to determine market prices, including reportable trades, benchmark yield curves, credit spreads and broker/dealer quotes as well as other industry and economic events. For certain securities with short maturities, such as discount commercial paper and certificates of deposit, the security is accreted from purchase price to face value at maturity. If a subsequent transaction on the same security is observed in the marketplace, the price on the subsequent transaction is used as the current daily market price and the security will be accreted to face value based on the revised price. 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 quarter of fiscal 2015 and the Company did not adjust or override any fair value measurements as of June 28, 2014.
Fair Value Hierarchy
The fair value framework requires the categorization of assets and liabilities into three levels based upon the assumptions (inputs) used to price the assets or liabilities. The guidance for fair value measurements requires that assets and liabilities carried at fair value be classified and disclosed in one of the following categories:
Level 1 — Quoted (unadjusted) prices in active markets for identical assets or liabilities.
The Company’s Level 1 assets consist of U.S. government and agency 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 financial institution securities, non-financial institution securities, municipal bonds, U.S. agency securities, foreign government and agency securities, mortgage-backed securities and debt mutual funds. The Company’s Level 2 assets and liabilities also include foreign currency forward contracts and commodity swap 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.
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 June 28, 2014 and March 29, 2014:

 
 
June 28, 2014
(In thousands)
 
Quoted
Prices in
Active
Markets for
Identical
Instruments
(Level 1)
 
Significant
Other
Observable
Inputs
(Level 2)
 
Significant
Unobservable
Inputs
(Level 3)
 
Total Fair
Value
Assets
 
 
 
 
 
 
 
 
Cash and cash equivalents:
 
 
 
 
 
 
 
 
Money market funds
 
$
174,031

 
$

 
$

 
$
174,031

Financial institution securities
 

 
124,986

 

 
124,986

Non-financial institution securities
 

 
120,984

 

 
120,984

U.S. government and agency securities
 
25,000

 

 

 
25,000

Foreign government and agency securities
 

 
94,992

 

 
94,992

Short-term investments:
 
 
 
 
 
 
 
 
Financial institution securities
 

 
129,983

 

 
129,983

Non-financial institution securities
 

 
317,015

 

 
317,015

Municipal bonds
 

 
23,495

 

 
23,495

U.S. government and agency securities
 
433,169

 
99,634

 

 
532,803

Foreign government and agency securities
 

 
315,898

 

 
315,898

Mortgage-backed securities
 

 
442,571

 

 
442,571

Debt mutual funds
 

 
40,703

 

 
40,703

Bank loans
 

 
57,707

 

 
57,707

Long-term investments:
 
 
 
 
 
 
 
 
Non-financial institution securities
 

 
188,007

 

 
188,007

Auction rate securities
 

 

 
20,704

 
20,704

Municipal bonds
 

 
15,346

 

 
15,346

U.S. government and agency securities
 
4,948

 
31,951

 

 
36,899

Mortgage-backed securities
 

 
789,964

 

 
789,964

Debt mutual fund
 

 
58,725

 

 
58,725

Derivative financial instruments, net
 

 
1,311

 

 
1,311

Total assets measured at fair value
 
$
637,148

 
$
2,853,272

 
$
20,704

 
$
3,511,124




 
March 29, 2014
(In thousands)
Quoted
Prices in
Active
Markets for
Identical
Instruments
(Level 1)
 
Significant
Other
Observable
Inputs
(Level 2)
 
Significant
Unobservable
Inputs
(Level 3)
 
Total Fair
Value
Assets
 
 
 
 
 
 
 
Cash and cash equivalents:
 
 
 
 
 
 
 
Money market funds
$
213,988

 
$

 
$

 
$
213,988

Financial institution securities

 
131,990

 

 
131,990

Non-financial institution securities

 
319,970

 

 
319,970

U.S. government and agency securities
69,998

 

 

 
69,998

Foreign government and agency securities

 
194,984

 

 
194,984

Short-term investments:

 

 

 


Financial institution securities

 
234,916

 

 
234,916

Non-financial institution securities

 
226,828

 

 
226,828

Municipal Bonds

 
15,780

 

 
15,780

U.S. government and agency securities
349,023

 
89,422

 

 
438,445

Foreign government and agency securities

 
159,951

 

 
159,951

Mortgage-backed securities

 
387,508

 

 
387,508

Debt mutual fund


20,216

 

 
20,216

Long-term investments:

 

 

 


Non-financial institution securities

 
209,274

 

 
209,274

Auction rate securities

 

 
20,160

 
20,160

Municipal bonds

 
15,986

 

 
15,986

U.S. government and agency securities
4,950

 
36,126

 

 
41,076

Mortgage-backed securities

 
847,581

 

 
847,581

Debt mutual fund

 
56,698

 

 
56,698

Derivative financial instruments, net

 
1,713

 

 
1,713

Total assets measured at fair value
$
637,959

 
$
2,948,943

 
$
20,160

 
$
3,607,062



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
(In thousands)
June 28, 2014
 
June 29, 2013
Balance as of beginning of period
$
20,160

 
$
27,610

Total realized and unrealized gains (losses):

 

Included in interest and other expense, net

 
(75
)
Included in other comprehensive income
544

 
846

Sales and settlements, net (1)

 
(300
)
Balance as of end of period
$
20,704

 
$
28,081


(1)
During the first quarter of fiscal 2014, the Company redeemed $300 thousand of student loan auction rate securities, respectively, for cash at par value. There was no redemption during the first quarter of fiscal 2015.
The amount of total losses included in net income attributable to the change in unrealized losses relating to assets and liabilities still held as of the end of the period are summarized as follows:
 
Three Months Ended
(In thousands)
June 28, 2014
 
June 29, 2013
Included in interest and other expense, net
$

 
$
(75
)


As of June 28, 2014, marketable securities measured at fair value using Level 3 inputs were comprised of $20.7 million of student loan auction rate securities. There was no material change to the input assumptions of the pricing model for these student loan auction securities.

The 2037 Convertible Notes, which were fully redeemed on March 12, 2014 (see "Note 10. Debt and Credit Facility"), included embedded features that qualify as an embedded derivative, and was separately accounted for as a discount on the 2037 Convertible Notes. Its fair value was established at the inception of the 2037 Convertible Notes. Prior to the redemption, each quarter, the change in the fair value of the embedded derivative, if any, was recorded in the consolidated statements of income. The Company used a derivative valuation model to derive the value of the embedded derivative. Key inputs into this valuation model were the Company’s current stock price, risk-free interest rates, the stock dividend yield, the stock volatility and the 2037 Convertible Notes’ credit spread over London Interbank Offered Rate. The first three inputs were based on observable market data and were considered Level 2 inputs while the last two inputs required management judgment and were Level 3 inputs.

Financial Instruments Not Recorded at Fair Value on a Recurring Basis

The Company’s 2017 Convertible Notes, 2019 Notes and 2021 Notes are measured at fair value on a quarterly basis for disclosure purposes. The fair values of the 2017 Convertible Notes, 2019 Notes and 2021 Notes as of June 28, 2014 were approximately $1.00 billion, $501.7 million and $505.9 million, respectively, based on the last trading price of the respective debentures for the period (classified as Level 2 in fair value hierarchy due to relatively low trading volume).