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TMCNet:  XILINX INC - 10-Q - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

[February 01, 2013]

XILINX INC - 10-Q - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

(Edgar Glimpses Via Acquire Media NewsEdge) The statements in this Management's Discussion and Analysis that are forward-looking, within the meaning of the Private Securities Litigation Reform Act of 1995, involve numerous risks and uncertainties and are based on current expectations. The reader should not place undue reliance on these forward-looking statements. Our actual results could differ materially from those anticipated in these forward-looking statements for many reasons, including those risks discussed under "Risk Factors" and elsewhere in this document. Often, forward-looking statements can be identified by the use of forward-looking words, such as "may," "will," "could," "should," "expect," "believe," "anticipate," "estimate," "continue," "plan," "intend," "project" and other similar terminology, or the negative of such terms. We disclaim any responsibility to update or revise any forward-looking statement provided in this Management's Discussion and Analysis for any reason.



Critical Accounting Policies and Estimates The methods, estimates and judgments we use in applying our most critical accounting policies have a significant impact on the results we report in our consolidated financial statements. The SEC has defined critical accounting policies as those that are most important to the portrayal of our financial condition and results of operations and require us to make our most difficult and subjective judgments, often as a result of the need to make estimates of matters that are inherently uncertain. Based on this definition, our critical accounting policies include: valuation of marketable securities, which impacts losses on debt and equity securities when we record impairments; revenue recognition, which impacts the recording of revenues; and valuation of inventories, which impacts cost of revenues and gross margin. Our critical accounting policies also include: the assessment of impairment of long-lived assets including acquisition-related intangibles, which impacts their valuation; the assessment of the recoverability of goodwill, which impacts goodwill impairment; accounting for income taxes, which impacts the provision or benefit recognized for income taxes, as well as, the valuation of deferred tax assets recorded on our consolidated balance sheet; and valuation and recognition of stock-based compensation, which impacts gross margin, research and development (R&D) expenses, and selling, general and administrative (SG&A) expenses. For more discussion please refer to "Item 7. Management's Discussion and Analysis of Financial condition and Results of Operations" included in our Form 10-K for the year ended March 31, 2012 filed with the SEC. We also have other key accounting policies that are not as subjective, and therefore, their application would not require us to make estimates or judgments that are as difficult, but which nevertheless could significantly affect our financial reporting.

Results of Operations: Third quarter and first nine months of fiscal 2013 compared to the third quarter and first nine months of fiscal 2012 The following table sets forth statement of income data as a percentage of net revenues for the periods indicated: Three Months Ended Nine Months Ended December 29, 2012 December 31, 2011 December 29, 2012 December 31, 2011 Net revenues 100.0 % 100.0 % 100.0 % 100.0 % Cost of revenues 33.4 34.2 34.0 35.6 Gross margin 66.6 65.8 66.0 64.4 Operating expenses: Research and development 25.4 21.2 22.3 19.0 Selling, general and administrative 17.0 17.4 16.8 16.3 Amortization of acquisition-related intangibles 0.5 0.4 0.4 0.3 Restructuring charges - - - 0.2 Total operating expenses 42.9 39.0 39.5 35.8 Operating income 23.7 26.8 26.5 28.6 Interest and other expense, net 1.0 1.4 1.5 1.4 Income before income taxes 22.7 25.4 25.0 27.2 Provision for income taxes 2.4 0.5 3.2 3.0 Net income 20.3 % 24.9 % 21.8 % 24.2 % Net Revenues We sell our products to global manufacturers of electronic products in end markets such as wired and wireless communications, aerospace and defense, industrial, scientific and medical and audio, video and broadcast. The vast majority of our net revenues 25-------------------------------------------------------------------------------- Table of Contents are generated by sales of our semiconductor products, but we also generate sales from support products. We classify our product offerings into four categories: New, Mainstream, Base and Support Products. The composition of each product category is as follows: • New Products include our most recent product offerings and include the Virtex®-7, Kintex™-7, Artix™-7, Zynq™-7000, Virtex-6 and Spartan®-6 product families.

• Mainstream Products include the Virtex-5, Spartan-3 and CoolRunner™-II product families.

• Base Products consist of our older product families including the Virtex-4, Virtex-II, Virtex-E, Virtex, Spartan-II, Spartan, CoolRunner and XC9500 products.

• Support Products include configuration solutions, HardWire, software and support services.

These product categories, except for Support Products, are modified on a periodic basis to better reflect the maturity of the products and advances in technology. The most recent modification was made on April 1, 2012, which was the beginning of our fiscal 2013. The amounts for the prior periods presented have been reclassified to conform to the new categorization. New Products include our most recent product offerings and are typically designed into our customers' latest generation of electronic systems. Mainstream Products are generally several years old and designed into customer programs that are currently shipping in full production. Base Products are older than Mainstream Products with demand generated generally by the customers' oldest systems still in production. Support Products are generally products or services sold in conjunction with our semiconductor devices to aid customers in the design process.

Net revenues of $509.8 million in the third quarter of fiscal 2013 represented a slight decrease from the comparable prior year period of $511.1 million. Net revenues from New Products increased significantly in the third quarter of fiscal 2013 versus the comparable prior year period, but were negatively offset by declines from our Mainstream and Base Products. No end customer accounted for 10% of our net revenues for any of the periods presented.

For the first nine months of fiscal 2013, approximately 57% of our net revenues were from products sold to distributors for subsequent resale to original equipment manufacturers (OEMs) or their subcontract manufacturers. As of December 29, 2012, we had $69.3 million of deferred revenue and $19.3 million of deferred cost of revenues recognized as a net $50.0 million of deferred income on shipments to distributors. As of March 31, 2012, we had $90.0 million of deferred revenue and $23.0 million of deferred cost of revenues recognized as a net $67.0 million of deferred income on shipments to distributors. The deferred income on shipments to distributors that will ultimately be recognized in our consolidated statement of income will be different than the amount shown on the consolidated balance sheet due to actual price adjustments issued to the distributors when the product is sold to their end customers.

Net Revenues by Product Net revenues by product categories for the third quarter and the first nine months of fiscal 2013 and 2012 were as follows: Three Months Ended Nine Months Ended (In millions) December 29, 2012 % Change December 31, 2011 December 29, 2012 % Change December 31, 2011 New Products $ 125.5 79 $ 70.1 $ 332.3 79 $ 185.2 Mainstream Products 211.9 (4 ) 220.8 724.8 (9 ) 795.9 Base Products 151.5 (24 ) 199.8 515.4 (18 ) 628.6 Support Products 20.9 2 20.4 64.0 (11 ) 72.1 Total net revenues $ 509.8 - $ 511.1 $ 1,636.5 (3 ) $ 1,681.8 Net revenues from New Products increased significantly both in the third quarter and for the first nine months of fiscal 2013 from the comparable prior year periods. The increase was due to sales growth of our 40-nanometer (nm) Virtex-6, 45-nm Spartan-6 product families as well as 28-nm 7 Series and Zynq product lines. We expect sales of New Products to continue to grow as more customer programs enter into volume production with our 40/45-nm products and as our 28-nm products continue their sales ramp.

Net revenues from Mainstream Products decreased both in the third quarter and the first nine months of fiscal 2013 from the comparable prior year periods. The decrease was largely due to the decline in sales of our Virtex-5 and Spartan-3 product families.

26-------------------------------------------------------------------------------- Table of Contents Net revenues from Base Products decreased in the third quarter and the first nine months of fiscal 2013 from the comparable prior year periods. The decrease was mainly attributable to the decline in sales of our older products, in particular our Virtex-II and Virtex 4 product families.

Net revenues from Support Products increased slightly in the third quarter and decreased in the first nine months of fiscal 2013 compared to the prior year periods. The increase in the third quarter of fiscal 2013 was due primarily to a slight increase in sales from our PROM products while the decrease in the first nine months of fiscal 2013 was driven by a decline in PROM products.

Net Revenues by End Markets Our end market revenue data is derived from our understanding of our end customers' primary markets. On April 1, 2012, we modified our end market categories in two ways. First, Data Center customers were moved from the Data Processing category into the Communications category. Additionally, all end market categories were renamed to better reflect actual sales composition.

Amounts for the prior periods presented have been reclassified to conform to the new categorization. Net revenues by end markets were reclassified into the following four categories: Communications and Data Center; Industrial, Aerospace and Defense; Broadcast, Consumer and Automotive; and Other. The percentage change calculation in the table below represents the year-to-year dollar change in each end market.

Net revenues by end markets for the third quarter and the first nine months of fiscal 2013 and 2012 were as follows: Three Months Ended Nine Months Ended (% of total net % Change in % Change in revenues) December 29, 2012 Dollars December 31, 2011 December 29, 2012 Dollars December 31, 2011 Communications and Data Center 47 % 2 46 % 47 % (1 ) 46 % Industrial, Aerospace and Defense 36 5 34 34 (3 ) 34 Broadcast, Consumer and Automotive 15 (2 ) 15 16 2 15 Other 2 (52 ) 5 3 (28 ) 5 Total net revenues 100 % - 100 % 100 % (3 ) 100 % Net revenues from the Communications and Data Center end market increased in the third quarter, but decreased in the first nine months of fiscal 2013 in terms of absolute dollars, compared to the prior year periods. The increase in the third quarter of fiscal 2013 was due to stronger sales from wireless communication applications, and the decrease in the first nine months of fiscal 2013 was driven by weaker sales in wired communications.

Net revenues from the Industrial, Aerospace & Defense end market increased in the third quarter and decreased in the first nine months of fiscal 2013 versus the comparable prior year periods. The increase in the third quarter of fiscal 2013 was primarily due to an increase in sales from defense and test and measurement applications. The decrease in the first nine months of fiscal 2013 was driven by weaker sales in defense applications.

Net revenues from the Broadcast, Consumer and Automotive end market decreased in the third quarter, but increased in the first nine months of fiscal 2013 from the comparable prior year periods. The decrease in net revenues in the third quarter of fiscal 2013 was due to a decline in sales from audio, video and broadcast, consumer, and automotive applications. The increase in net revenues in the first nine months of fiscal 2013 was driven by increases in sales from audio, video and broadcast, and automotive applications.

Net revenues from the Other end market decreased in both the third quarter and the first nine months of fiscal 2013 from the comparable prior year periods. The decreases were due primarily to weaker sales from computing and storage applications.

Net Revenues by Geography Geographic revenue information reflects the geographic location of the distributors, OEMs or contract manufacturers who purchased our products. This may differ from the geographic location of the end customers. Net revenues by geography for the third quarter and the first nine months of fiscal 2013 and 2012 were as follows: 27-------------------------------------------------------------------------------- Table of Contents Three Months Ended Nine Months Ended (In millions) December 29, 2012 % Change December 31, 2011 December 29, 2012 % Change December 31, 2011 North America $ 162.7 - $ 162.8 $ 488.4 (3 ) $ 505.5 Asia Pacific 174.7 (3 ) 180.2 573.6 1 568.8 Europe 119.4 1 117.7 412.2 (6 ) 439.8 Japan 52.8 5 50.4 162.3 (3 ) 167.7 Total net revenues $ 509.6 - $ 511.1 $ 1,636.5 (3 ) $ 1,681.8 Net revenues in North America were flat in the third quarter and decreased in the first nine months of fiscal 2013 from the comparable prior year periods. The decreases were primarily due to weaker sales across most end markets, including Communications & Data Center and Industrial and Aerospace & Defense.

Net revenues in Asia Pacific declined in the third quarter and increased slightly in the first nine months of fiscal 2013 from the comparable prior year periods. The decline in the third quarter of fiscal 2013 was primarily due to a decrease in sales from the Communications and Data Center end market, particularly wireless communications applications. The increase in sales in the first nine months of fiscal 2013 was driven by the Communications & Data Center end market.

Net revenues in Europe increased in the third quarter and decreased in the first nine months of fiscal 2013 compared with the prior year periods. The increase in the third quarter of fiscal 2013 was primarily due to increased sales from the Communications and Data Center and Automotive end markets. The decline in the first nine months of fiscal 2013 was due to decreased sales from the Communications and Data Center and Other end markets.

Net revenues in Japan increased in the third quarter and decreased in the first nine months of fiscal 2013 compared with the prior year periods. The increase in the third quarter of fiscal 2013 was primarily due to increased sales in industrial, scientific, and medical applications. The decline in the first nine months of fiscal 2013 was driven by a decline in sales in the Industrial and Aerospace & Defense end market.

Gross Margin Three Months Ended Nine Months Ended (In millions) December 29, 2012 Change December 31,2011 December 29, 2012 Change December 31, 2011 Gross margin $ 339.3 1 % $ 336.3 $ 1,079.9 - % $ 1,083.3 Percentage of net revenues 66.6 % 65.8 % 66.0 % 64.4 % Gross margin was 0.8 and 1.6 percentage points higher, respectively, in the third quarter and in the first nine months of fiscal 2013 from the comparable prior year periods. The gross margin increases in both periods were driven primarily by continued cost improvement and mix of customers, and was negatively offset, in part, by mix of products. New Products generally have lower gross margins than Mainstream and Base Products as they are in the early stage of their product life cycle and have higher unit costs associated with relatively lower volumes and early manufacturing maturity.

Gross margin may be affected in the future due to shifts in the mix of customers and products, competitive-pricing pressure, manufacturing-yield issues and wafer pricing. We expect to mitigate any adverse impacts from these factors by continuing to improve yields on our New Products, improve manufacturing efficiencies, and improve average selling price management.

In order to compete effectively, we pass manufacturing cost reductions to our customers in the form of reduced prices to the extent that we can maintain acceptable margins. Price erosion is common in the semiconductor industry, as advances in both product architecture and manufacturing process technology permit continual reductions in unit cost. We have historically been able to offset much of this revenue decline in our mature products with increased revenues from newer products.

Research and Development 28-------------------------------------------------------------------------------- Table of Contents Three Months Ended Nine Months Ended (In millions) December 29, 2012 Change December 31, 2011 December 29, 2012 Change December 31, 2011 Research and development $ 129.1 19 % $ 108.2 $ 364.4 14 % $ 320.0 Percentage of net revenues 25 % 21 % 22 % 19 % R&D spending increased $20.9 million, or 19%, for the third quarter of fiscal 2013 compared to the same period last year. For the first nine months of fiscal 2013, R&D spending increased by $44.4 million, or 14%. The increases in both periods were primarily attributable to higher employee-related expenses (including stock-based compensation expense), mask and wafer expenses related to our 28-nm development activities during the current period.

We plan to continue to selectively invest in R&D efforts in areas such as new products and more advanced process development, IP cores and the development of new design and layout software. We may also consider acquisitions to complement our strategy for technology leadership and engineering resources in critical areas.

Selling, General and Administrative Three Months Ended Nine Months Ended (In millions) December 29, 2012 Change December 31, 2011 December 29, 2012 Change December 31, 2011 Selling, general and administrative $ 86.8 (2 )% $ 88.9 $ 275.0 - % $ 274.0 Percentage of net revenues 17 % 17 % 17 % 16 % SG&A expenses decreased by $2.1 million during the third quarter of fiscal 2013 compared to the same period last year. The decrease during the third quarter of fiscal 2013 was primarily due to lower litigation expenses. For the first nine months of fiscal 2013, SG&A expenses were relatively flat compared to the same period last year as higher employee-related expenses (including stock-based compensation expense) were offset by lower sales commission due to lower revenues.

Amortization of Acquisition-Related Intangibles Three Months Ended Nine Months Ended (In millions) December 29, 2012 Change December 31, 2011 December 29, 2012 Change December 31, 2011 Amortization of acquisition-related intangibles $ 2.6 29 % $ 2.0 $ 7.0 26 % $ 5.6Percentage of net revenues 1 % - % - % - % Amortization expense for the three and nine months ended December 29, 2012 increased compared to the same periods last year. The increases were primarily due to the impact of amortization of intangible assets obtained from the recent acquisitions in the second quarter of fiscal 2013.

Stock-Based Compensation Three Months Ended Nine Months Ended December 29, (In millions) 2012 Change December 31, 2011 December 29, 2012 Change December 31, 2011 Stock-based compensation included in: Cost of revenues $ 1.5 12 % $ 1.3 $ 4.7 20 % $ 3.9 Research and development 9.7 12 % 8.7 27.7 19 % 23.3 Selling, general and administrative 8.6 10 % 7.8 24.2 14 % 21.3 $ 19.8 11 % $ 17.8 $ 56.6 17 % $ 48.5 29-------------------------------------------------------------------------------- Table of Contents The increases in stock-based compensation expense for the third quarter and the first nine months of fiscal 2013 compared to the prior year periods were primarily related to higher expenses associated with restricted stock units, as we granted more restricted stock units at a higher fair value in the recent years. The higher expense from restricted stock units was partially offset by lower expenses related to stock option grants as we granted lower number of stock options in the current fiscal year.

The impact of forfeiture true up in the first nine months of fiscal 2013 and 2012 reduced stock-based compensation expense by $2.0 million and $3.4 million, respectively.

Interest and Other Expense, Net Three Months Ended Nine Months Ended (In millions) December 29, 2012 Change December 31, 2011 December 29, 2012 Change December 31, 2011 Interest and other expense, net $ 5.1 (28 )% $ 7.2 $ 24.8 5 % $ 23.6 Percentage of net revenues 1 % 1 % 2 % 1 % Our net interest and other expense decreased by $2.1 million for the third quarter of fiscal 2013 compared to the same period last year. The decrease was due to a royalty payment received during the quarter. For the first nine months of fiscal 2013, our net interest and other expense increased by $1.2 million as compared to the same period last year. The increase was primarily due to higher losses related to foreign exchange hedging for the current period, partially offset by the royalty payment received during the third quarter of fiscal 2013.

Provision for Income Taxes Three Months Ended Nine Months Ended (In millions) December 29, 2012 Change December 31, 2011 December 29, 2012 Change December 31, 2011 Provision for income taxes $ 12.0 312 % $ 2.9 $ 51.8 6 % $ 49.0 Percentage of net revenues 2 % 1 % 3 % 3 % Effective tax rate 10 % 2 % 13 % 11 % The difference between the U.S. federal statutory tax rate of 35% and the Company's effective tax rate in all periods is primarily due to income earned in lower tax rate jurisdictions, for which no U.S. income tax has been provided, as the Company intends to permanently reinvest these earnings outside of the U.S.

The increase in the effective tax rate in the third quarter of fiscal 2013 as compared to the prior year period was primarily attributable to a difference in the amount of reserves released for uncertain tax positions in the two periods.

In each period, there were lapses of statutes of limitation and the amount for fiscal 2013 was smaller than the amount for fiscal 2012. The increase in the effective tax rate for the first nine months of fiscal year 2013 as compared to the same prior year period was primarily attributable to the expiration of the U.S. federal research tax credit in fiscal 2012. The rate for the first nine months of fiscal 2013 did not include benefits for the credit as did the rate for the first nine months of fiscal 2012.

As part of the American Taxpayer Relief Act of 2012 enacted on January 2, 2013, the research tax credit was reinstated retroactively to January 1, 2012. As a result, the income tax provision for the fourth quarter of fiscal 2013 will include a discrete tax benefit which will reduce the effective tax rate.

Financial Condition, Liquidity and Capital Resources We have historically used a combination of cash flows from operations and equity and debt financing to support ongoing business activities, acquire or invest in critical or complementary technologies, purchase facilities and capital equipment, repurchase our common stock and debentures under our repurchase program, pay dividends and finance working capital. Additionally, our investments in debt securities are available for future sale.

The combination of cash, cash equivalents and short-term and long-term investments as of December 29, 2012 and March 31, 2012 totaled $3.25 billion and $3.13 billion, respectively. As of December 29, 2012, we had cash, cash equivalents and short-term investments of $1.69 billion and working capital of $1.93 billion. As of March 31, 2012, cash, cash equivalents and short-term investments were $1.92 billion and working capital was $2.11 billion.

Operating Activities - During the first nine months of fiscal 2013, our operations generated net positive cash flow of $482.9 million, which was $135.4 million lower than the $618.2 million generated during the first nine months of fiscal 2012. The positive 30-------------------------------------------------------------------------------- Table of Contents cash flow from operations generated during the third quarter of fiscal 2013 was primarily from net income as adjusted for non-cash related items, decreases in deferred income taxes and prepaid expenses and other current assets, as well as an increase in accounts payable and accrued liabilities. These items were partially offset by increases in inventories, accounts receivable and other assets, as well as decreases in deferred income on shipments to distributors and income taxes payable. Accounts receivable increased by $17.3 million and days sales outstanding (DSO) increased to 39 days at December 29, 2012 from 35 days at March 31, 2012 due to timing of shipments and collections. Due to our decision to build ahead a previously planned closure of a particular foundry process line at one of our foundry partners, weaker than anticipated sales and a planned increase in safety stock across newer technologies in anticipation of future revenue growth, our inventory level was $21.1 million higher at December 29, 2012 compared to March 31, 2012, and combined inventory days at Xilinx and distribution increased to 120 days at December 29, 2012 from 106 days at March 31, 2012.

For the first nine months of fiscal 2012, the net positive cash flow from operations was primarily from net income as adjusted for non-cash related items, decreases in accounts receivable, deferred income taxes, inventories, and other assets, as well as an increase in accrued liabilities. These items were partially offset by decreases in deferred income on shipments to distributors and income taxes payable, as well as an increase in prepaid expenses and other current assets.

Investing Activities - Net cash used in investing activities of $336.4 million during the first nine months of fiscal 2013 consisted of net purchases of available-for-sale securities of $280.0 million, $32.3 million for other investing activities and $24.1 million for purchases of property, plant and equipment. Net cash used in investing activities of $881.1 million during the first nine months of fiscal 2012 consisted of net purchases of available-for-sale securities of $796.8 million, $50.4 million for purchases of property, plant equipment and $33.9 million for other investing activities.

Financing Activities - Net cash used in financing activities was $312.1 million in the first nine months of fiscal 2013 and consisted of $197.8 million of repurchase of common stocks and $172.6 million for dividend payments to stockholders, offset by $52.0 million of proceeds from the issuance of common stock under employee stock plans and $6.3 million for the excess tax benefit from stock-based compensation. For the comparable fiscal 2012 period, net cash used in financing activities was $298.2 million and consisted of $219.6 million of repurchase of common stocks and $150.4 million for dividend payments to stockholders, offset by $63.3 million proceeds from the issuance of common stock under employee stock plans and $8.6 million for the excess tax benefit from stock-based compensation.

Stockholders' equity increased $108.4 million during the first nine months of fiscal 2013. The increase was primarily attributable to $356.9 million in net income for the first nine months of fiscal 2013, $56.6 million of stock-based compensation, $52.0 million of issuance of common stock under employee stock plans and $7.9 million of other comprehensive income. The increase was partially offset by $197.8 million of repurchase of common stocks and $172.6 million of payment of dividends to stockholders.

Contractual Obligations We lease some of our facilities, office buildings and land under non-cancelable operating leases that expire at various dates through October 2021. See "Note 16. Commitments" to our condensed consolidated financial statements, included in Part 1. "Financial Information," for a schedule of our operating lease commitments as of December 29, 2012 and additional information about operating leases.

Due to the nature of our business, we depend entirely upon subcontractors to manufacture our silicon wafers and provide assembly and some test services. The lengthy subcontractor lead times require us to order the materials and services in advance, and we are obligated to pay for the materials and services when completed. As of December 29, 2012, we had $109.8 million of outstanding inventory and other non-cancelable purchase obligations to subcontractors. We expect to receive and pay for these materials and services in the next three to six months, as the products meet delivery and quality specifications. As of December 29, 2012, we also had $16.1 million of non-cancelable license obligations to providers of electronic design automation software and hardware/software maintenance expiring at various dates through March 2015.

We committed up to $5.0 million to acquire, in the future, rights to intellectual property until July 2023. License payments will be amortized over the useful life of the intellectual property acquired.

In March 2007, we issued $1.00 billion principal amount of 3.125% Debentures. As a result of the repurchases in fiscal 2009, the remaining principal amount of the 3.125% Debentures as of December 29, 2012 was $689.6 million. The 3.125% Debentures require payment of interest semiannually on March 15 and September 15 of each year. In June 2010, we issued another $600.0 million principal amount of 2.625% Debentures. The 2.625% Debentures require payment of interest semiannually on June 15 and December 15 of each year. See "Note 10. Convertible Debentures and Revolving Credit Facility" to our condensed consolidated financial statements, included in Part 1. "Financial Information," for additional information about our debentures.

As of December 29, 2012, $15.8 million of liabilities for uncertain tax position and related interest and penalties were classified as long-term income taxes payable in the condensed consolidated balance sheet. Due to the inherent uncertainty with respect to 31-------------------------------------------------------------------------------- Table of Contents the timing of future cash outflows associated with such liabilities, we are unable to reliably estimate the timing of cash settlement with the respective taxing authorities.

Off-Balance-Sheet Arrangements As of December 29, 2012, we did not have any significant off-balance-sheet arrangements, as defined in Item 303(a)(4)(ii) of SEC Regulation S-K.

Liquidity and Capital Resources Cash generated from operations is used as our primary source of liquidity and capital resources. Our investment portfolio is also available for future cash requirements as is our $250.0 million revolving credit facility entered into in December 2011 (expiring in December 2016). We are not aware of any lack of access to the revolving credit facility; however, we can provide no assurance that access to the credit facility will not be impacted by adverse conditions in the financial markets. Our credit facility is not reliant upon a single bank.

There have been no borrowings to date under our existing revolving credit facility.

We repurchased 6.2 million shares of our common stock for $197.8 million during the first nine months of fiscal 2013 (see "Note 11. Common Stock Repurchase Program" to our condensed consolidated financial statements, included in Part 1.

"Financial Information," for additional information). We used $219.6 million of cash to repurchase 7.0 million shares of common stock during the first nine months of fiscal 2012. During the first nine months of fiscal 2013, we paid $172.6 million in cash dividends to stockholders, representing $0.66 per common share. During the first nine months of fiscal 2012, we paid $150.4 million in cash dividends to stockholders, representing $0.57 per common share. On January 16, 2013, our Board of Directors declared a cash dividend of $0.22 per common share for the fourth quarter of fiscal 2013. The dividend is payable on February 27, 2013 to stockholders of record on February 6, 2013. Our common stock and debentures repurchase program and dividend policy could be impacted by, among other items, our views on potential future capital requirements relating to R&D, investments and acquisitions, legal risks, principal and interest payments on our debentures and other strategic investments.

The global credit crisis has caused exceptional levels of volatility and disruption in the capital markets, diminished liquidity and credit availability, and increased counterparty risk. Nevertheless, we anticipate that existing sources of liquidity and cash flows from operations will be sufficient to satisfy our cash needs for the foreseeable future. We will continue to evaluate opportunities for investments to obtain additional wafer capacity, to procure additional capital equipment and facilities, to develop new products, and to potentially acquire technologies or businesses that could complement our business. However, the risk factors discussed in Item 1A included in Part II.

"Other Information" and below could affect our cash positions adversely. In addition, certain types of investments such as auction rate securities may present risks arising from liquidity and/or credit concerns. In the event that our investments in auction rate securities become illiquid, we do not expect this will materially affect our liquidity and capital resources or results of operations.

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