Convertible Debentures and Revolving Credit Facility

9 Months Ended

Dec. 31, 2011

Convertible Debentures and Revolving Credit Facility [Abstract]

Convertible Debentures and Revolving Credit Facility

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 December 31, 2011 was approximately $763.4 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:

		September 30,			September 30,
	December 31,			April 2,
(In thousands)	2011			2011
Liability component:
Principal amount of the 2.625% Debentures	$	600,000		$	600,000
Unamortized discount of liability component		(84,197	)		(95,855	)
Hedge accounting adjustment — sale of interest rate swap		24,331			27,700
Net carrying value of the 2.625% Debentures	$	540,134		$	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:

		September 30,		September 30,		September 30,		September 30,
	Three Months Ended				Nine Months Ended
	December 31,		January 1,		December 31,		January 1,
(In thousands)	2011		2011		2011		2011
Contractual coupon interest	$	3,938	$	3,938	$	11,813	$	8,925
Amortization of debt issuance costs		362		362		1,086		845
Amortization of debt discount		2,763		2,763		8,289		6,976
Total interest expense related to the 2.625% Debentures	$	7,063	$	7,063	$	21,188	$	16,746

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 December 31, 2011. The 3.125% Debentures are convertible, subject to certain conditions, into shares of Xilinx common stock at a conversion rate of 33.5468 shares of common stock per $1 thousand principal amount of 3.125% Debentures, representing an effective conversion price of approximately $29.81 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:

		September 30,			September 30,
	December 31,			April 2,
(In thousands)	2011			2011
Liability component:
Principal amount of the 3.125% Debentures	$	689,635		$	689,635
Unamortized discount of liability component		(326,602	)		(329,941	)
Unamortized discount of embedded derivative from date of issuance		(1,460	)		(1,504	)
Carrying value of liability component — 3.125% Debentures		361,573			358,190
Carrying value of embedded derivative component		1,352			945
Net carrying value of the 3.125% Debentures	$	362,925		$	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:

		September 30,		September 30,		September 30,		September 30,
	Three Months Ended				Nine Months Ended
	December 31,		January 1,		December 31,		January 1,
(In thousands)	2011		2011		2011		2011
Contractual coupon interest	$	5,388	$	5,388	$	16,163	$	16,163
Amortization of debt issuance costs		55		56		168		168
Amortization of embedded derivative		14		14		43		43
Amortization of debt discount		1,133		1,055		3,339		3,108
Total interest expense related to the 3.125% Debentures	$	6,590	$	6,513	$	19,713	$	19,482

Revolving Credit Facility

In December 2011, Xilinx terminated the five-year $250.0 million senior unsecured revolving credit facility (originally expiring in April 2012), and entered into a new five-year $250.0 million senior unsecured revolving credit facility with a syndicate of banks (expiring in December 2016). Borrowings under the credit facility will bear interest at a benchmark rate plus an applicable margin based upon the Company’s credit rating. In connection with the credit facility, the Company is required to maintain certain financial and nonfinancial covenants. As of December 31, 2011, the Company had made no borrowings under this credit facility and was not in violation of any of the covenants.