Xilinx (XLNX) 8-K Xilinx - Adoption of New Revenue Standard

Exhibit 99.1

Investor Relations Contact:

Suresh Bhaskaran

Xilinx, Inc.

(408) 879-4784

ir@xilinx.com

Xilinx - Adoption of New Revenue Standard

Background

• In April 2014, the Financial Accounting Standards Board issued guidance that outlines a new global revenue standard (ASC 606) that is effective for all public companies for annual reporting periods beginning after December 15, 2017.

• Xilinx adopted this standard beginning in its fiscal 2019 (April 1, 2018). To assist investors and analysts in comparing our reported results with prior periods on a consistent basis, Xilinx has provided adjusted financials for fiscal 2017 and 2018 and quarterly results for fiscal 2018 as though the new standard were effective in those periods.

Changes

For Xilinx, the new revenue standard primarily impacts revenue recognition for sales to distributors (see below). Approximately 53% of our business in fiscal 2018 was attributed to sales to distributors. There will be no significant changes in revenue recognition for sales to direct customers.

Impact of change from “Sell-Through” to “Sell-In”

Prior to the adoption of ASC 606, Xilinx recognized revenue from sales to distributors only when product was sold through from distributors to customers consuming our products. This is commonly known as the “Sell-Through” method. Under ASC 606, Xilinx is required to recognize revenue and cost relating to distributor sales upon product shipment to distributors (Sell-In), subject to estimated allowance for distributor price adjustments and rights of return.

The Company has elected to adopt ASC 606 on a full retrospective basis. As such, inventory held by distributors (i.e., deferred income on shipments to distributors), subject to tax and other immaterial adjustments, at the start of fiscal 2017 will be reflected in retained earnings as of the beginning of fiscal 2017. Additionally, fiscal 2017 and 2018 financial results will be adjusted to reflect the accounting under ASC 606.

The impact of this change to the Company’s fiscal 2017 and 2018 financial statements (as though the standard were effective during those periods) is as follows:

Summary of impact to 2017 financials

• Fiscal 2017 revenues under the new standard were $2.36 billion, and were approximately $7.0 million higher versus $2.35 billion under the old standard.

• Gross margin percentage was 69.9% under both standards.

• Operating income percentage was 30.0% under the new standard versus 29.8% under the old standard.

• Diluted EPS was 2 cents higher under the new standard versus the previous standard.

Summary of impact to 2018 financials

In anticipation of the impact of the adoption of ASC 606, Xilinx has worked with its distribution partners to implement new inventory management practices. The intent of these new inventory management practices is to reduce both overall distributor inventory and increase the stability of inventory levels while supporting our growth and customer service objectives in the distribution channel.

• Fiscal 2018 revenues under the new standard were $2.47 billion and were approximately $72.0 million lower versus $2.54 billion under the old standard.

• The new distribution inventory management practices implemented in Q3 and Q4 of fiscal 2018 drove the ASC 606 based revenue decline. Shipments to distributors were reduced substantially and distributors used their existing inventory on hand to meet end customer demand. As a result, distributor inventory declined to 3 days as of Q4 fiscal 2018 compared to the historical inventory level ranging from 8 to 12 days.

• Gross margin percentage was 69.9% under the new standard versus 70.2% under the old standard.

• Operating income percentage was 27.8% under the new standard versus 29.3% under the old standard.

• EPS was 19 cents lower under the new standard versus the old standard.

Guidance

We plan to provide a revenue guidance range and since adjusted numbers are available for past 5 quarters, analysts and investors will be able to compare the figures on a consistent basis with prior periods. Gross margin guidance range will comprehend the impact from the “Sell-In” method though we do not expect the impact to be material. Discussion of end market guidance will not change due to this issue and we will continue to provide information based on our best judgment about end markets associated with channel shipments. As distributor inventory levels stabilize, we currently expect no material impact on our business in the long-term.

Supplemental information on the impact of the adoption of ASC 606 on fiscal 2017 and 2018 financial information

Xilinx, Inc.
Condensed Consolidated Statements of Income
(Unaudited)
(In thousands, except per share amounts)
	Years Ended
	March 31, 2018				April 1, 2017
	As Reported		As Adjusted		As Reported			As Adjusted
Net revenues	$	2,539,004	$	2,467,023	$	2,349,330		$	2,356,742
Cost of revenues	756,368		743,419		708,216			708,632
Gross margin	1,782,636		1,723,604		1,641,114			1,648,110
Operating expenses:
Research and development	639,750		639,750		601,443			601,443
Selling, general and administrative	362,329		362,329		335,150			335,150
Amortization of acquisition-related intangibles	2,152		2,152		5,127			5,127
Executive transition costs	33,351		33,351		—			—
Total operating expenses	1,037,582		1,037,582		941,720			941,720
Operating income	745,054		686,022		699,394			706,390
Interest and other income (expense), net	5,357		5,357		(8,314		)	(8,314		)
Income before income taxes	750,411		691,379		691,080			698,076
Provision for income taxes	238,030		227,398		68,568			69,943
Net income	$	512,381	$	463,981	$	622,512		$	628,133
Net income per common share:
Basic	$	2.05	$	1.86	$	2.47		$	2.49
Diluted	$	1.99	$	1.80	$	2.32		$	2.34
Shares used in per share calculations:
Basic	249,595		249,595		252,301			252,301
Diluted	257,960		257,960		268,813			268,813

Xilinx, Inc.
Condensed Consolidated Statements of Income
(Unaudited)
(In thousands, except per share amounts)
	Three Months Ended
	July 1, 2017				September 30, 2017				December 30, 2017					March 31, 2018
	As Reported		As Adjusted		As Reported		As Adjusted		As Reported		As Adjusted			As Reported			As Adjusted
Net revenues	$	615,446	$	602,810	$	619,503	$	627,419	$	631,193	$	598,603		$	672,862		$	638,191
Cost of revenues	192,095		190,824		184,786		185,685		182,156		177,969			197,331			188,941
Gross margin	423,351		411,986		434,717		441,734		449,037		420,634			475,531			449,250
Operating expenses:
Research and development	153,051		153,051		157,985		157,985		166,231		166,231			162,483			162,483
Selling, general and administrative	89,175		89,175		91,053		91,053		92,753		92,753			89,348			89,348
Amortization of acquisition-related intangibles	705		705		510		510		353		353			584			584
Executive transition costs	—		—		—		—		—		—			33,351			33,351
Total operating expenses	242,931		242,931		249,548		249,548		259,337		259,337			285,766			285,766
Operating income	180,420		169,055		185,169		192,186		189,700		161,297			189,765			163,484
Interest and other income (expense), net	1,839		1,839		1,831		1,831		5,469		5,469			(3,781		)	(3,781		)
Income before income taxes	182,259		170,894		187,000		194,017		195,169		166,766			185,984			159,703
Provision for income taxes	15,014		13,650		19,468		20,266		183,224		179,251			20,325			14,232
Net income (loss)	$	167,245	$	157,244	$	167,532	$	173,751	$	11,945	$	(12,485	)	$	165,659		$	145,471
Net income (loss) per common share:
Basic	$	0.67	$	0.63	$	0.68	$	0.70	$	0.05	$	(0.05	)	$	0.65		$	0.57
Diluted	$	0.63	$	0.59	$	0.65	$	0.67	$	0.05	$	(0.05	)	$	0.64		$	0.56
Shares used in per share calculations:
Basic	247,911		247,911		248,094		248,094		254,089		254,089			254,559			254,559
Diluted	265,797		265,797		258,217		258,217		258,108		254,089			257,916			257,916

Xilinx, Inc.
Condensed Consolidated Balance Sheet Data
(Unaudited)
	March 31, 2018				April 1, 2017
	As Reported		As Adjusted		As Reported		As Adjusted
Accounts receivable	$	372,144	$	382,246	$	243,915	$	283,850
Other assets	342,644		337,402		275,440		272,407
Deferred income on shipments to distributors	25,166		—		54,567		—
Other accrued liabilities	59,772		59,680		95,098		95,209
Deferred tax liabilities	75		75		317,639		330,479
Retained earnings	1,483,538		1,513,656		1,726,312		1,804,830