Attached files
| file | filename |
|---|---|
| 8-K - 8-K ASC 606 - XILINX INC | a8-kasc606filing5x10x18.htm |
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 | |||||||||||