UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
[ X ] Quarterly report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 for the quarterly period ended June 29, 1996 or
[ ] Transition report pursuant to section 13 or 15(d) of the Securities
Exchange Act of 1934 for the transition period from to .
Commission File Number 0-18548
Xilinx, Inc.
(Exact name of registrant as specified in its charter)
Delaware 77-0188631
(State or other jurisdiction of (I.R.S. Employer Identification
incorporation or organization) Number)
2100 Logic Drive, San Jose, California 95124
(Address of principal executive offices) (Zip Code)
(408) 559-7778
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such requirements for the past 90 days.
YES [ X ] NO [ ]
Class Shares Outstanding at June 29, 1996
Common Stock, $.01 par value 72,248,189
<TABLE>
<CAPTION>
XILINX, INC.
CONSOLIDATED CONDENSED STATEMENT OF INCOME
(in thousands except per share amounts)
Three Months Ended
June 29, July 1,
1996 1995
---------- ---------
<S> <C> <C>
Net revenues $ 150,200 $125,760
Costs and expenses:
Cost of revenues 53,325 48,506
Research and development 17,837 14,853
Marketing, general and administrative 29,548 24,966
Non-recurring charges - 19,366
---------- ---------
Operating costs and expenses 100,710 107,691
---------- ---------
Operating income 49,490 18,069
Interest income and other 4,360 1,858
Interest expense (3,475) (58)
---------- ---------
Income before provision for taxes on income 50,375 19,869
Provision for taxes on income 17,883 14,321
---------- ---------
Net income $ 32,492 $ 5,548
========== =========
Net income per share $ .41 $ .07
========== =========
Common and common equivalent
shares used in computing
per share amounts 78,944 77,489
========== =========
<FN>
(See accompanying Notes to Consolidated Condensed Financial Statements.)
</TABLE>
<TABLE>
<CAPTION>
XILINX, INC.
CONSOLIDATED CONDENSED BALANCE SHEET
(in thousands except per share amounts)
June 29, March 30,
1996 1996
---------- -----------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 129,826 $ 110,893
Short-term investments 268,947 267,068
Accounts receivable, net 72,004 79,528
Inventories 49,324 39,238
Advances for wafer purchases 2,404 9,034
Deferred income taxes and other current assets 30,175 32,945
---------- -----------
Total current assets 552,680 538,706
Property, plant and equipment, at cost 138,387 128,283
Accumulated depreciation and amortization (50,881) (45,645)
---------- -----------
Net property, plant and equipment 87,506 82,638
Investment in joint venture 34,316 34,316
Restricted investments 36,666 36,212
Advances for wafer purchases 30,000 -
Developed technology and other assets 26,761 29,008
---------- -----------
$ 767,929 $ 720,880
========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable, accrued liabilities
and income taxes payable $ 72,101 $ 64,082
Deferred income on shipments to distributors 34,178 37,568
Current obligations under capital leases 703 986
---------- -----------
Total current liabilities 106,982 102,636
Long-term debt 250,000 250,000
Stockholders' equity:
Preferred stock, $.01 par value - -
Common stock, $.01 par value 722 719
Additional paid-in capital 110,228 100,020
Retained earnings 299,997 267,505
---------- -----------
Total stockholders' equity 410,947 368,244
---------- -----------
$ 767,929 $ 720,880
========== ===========
<FN>
(See accompanying Notes to Consolidated Condensed Financial Statements.)
</TABLE>
<TABLE>
<CAPTION>
XILINX, INC.
CONSOLIDATED CONDENSED STATEMENT OF CASH FLOWS
Increase (decrease) in cash and cash equivalents
(in thousands)
Three Months Ended
June 29, July 1,
1996 1995
---------- ---------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 32,492 $ 5,548
Adjustments to reconcile net income to net cash
provided by operating activities:
Write-off of in-process technology - 19,366
Depreciation and amortization 6,498 4,328
Changes in assets and liabilities net of effects of NeoCAD acquisition:
Accounts receivable 7,524 (9,506)
Inventories (3,456) 5,564
Deferred income taxes and other 6,200 (1,974)
Accounts payable, accrued liabilities
and income taxes payable 8,019 (2,110)
Deferred income on shipments to distributors (3,390) 9,025
---------- ---------
Total adjustments net of effects of NeoCAD acquisition 21,395 24,693
---------- ---------
Net cash provided by operating activities 53,887 30,241
Cash flows from investing activities:
Purchases of short-term available-for-sale investments (36,822) (6,579)
Proceeds from sale or maturity of short-term available-for-sale investments 34,305 43,986
Advances for wafer purchases (30,000) -
Acquisition of NeoCAD, net of cash acquired - (33,412)
Purchases of restricted held-to-maturity investments - (23,759)
Property, plant and equipment (10,112) (14,990)
Other - 4,668
---------- ---------
Net cash used in investing activities (42,629) (30,086)
Cash flows from financing activities:
Principal payments on capital lease obligations (284) (327)
Proceeds from issuance of common stock 7,959 5,379
---------- ---------
Net cash provided by financing activities 7,675 5,052
---------- ---------
Net increase (decrease) in cash and cash equivalents 18,933 5,207
Cash and cash equivalents at beginning of period 110,893 56,703
---------- ---------
Cash and cash equivalents at end of period $ 129,826 $ 61,910
========== =========
Schedule of non-cash transactions:
Tax benefit from stock options $2,657 $2,191
Issuance of treasury stock under employee stock plans - $3,253
Receipts against advances for wafer purchases $6,630 $3,734
Supplemental disclosures of cash flow information:
Interest paid $6,145 $ 58
Income taxes paid $ 490 $5,757
<FN>
(See accompanying Notes to Consolidated Condensed Financial Statements.)
</TABLE>
XILINX, INC.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
1. The accompanying interim consolidated financial statements have been
pre-pared in conformity with generally accepted accounting principles and
should be read in conjunction with the Xilinx, Inc. consolidated financial
statements for the year ended March 30, 1996. The balance sheet at March
30, 1996 is derived from audited financial statements. The interim
financial statements are unaudited but reflect all adjustments which are in
the opinion of management of a normal, recurring nature necessary to
present a fair statement of results for the interim periods presented. The
results for the three month period ended June 29, 1996 are not necessarily
indicative of the results that may be expected for the year ending March
29, 1997.
2. Inventories are stated at the lower of cost (first-in, first-out) or
market (estimated net realizable value). Inventories at June 29, 1996 and
March 30, 1996 are as follows:
<TABLE>
<CAPTION>
June 29, March 30,
1996 1996
--------- ----------
<S> <C> <C>
Raw materials $ 6,342 $ 5,886
Work-in-process 29,337 21,927
Finished goods 13,645 11,425
--------- ----------
$ 49,324 $ 39,238
========= ==========
</TABLE>
3. On May 17, 1996, the Company signed an agreement with Seiko Epson
Corporation (Seiko), a primary wafer supplier. The agreement provides for
total payments to Seiko of $300 million to be used in the construction of a
wafer fabrication facility in Japan which will provide access to
eight-inch, sub-micron wafers. Of the total payments, $200 million
represents an advance payment for future wafer deliveries. In conjunction
with the agreement, $30 million was paid in May 1996 and additional
installments of $30 million are scheduled for November 1, 1996, May 1,
1997, November 1, 1997 and February 1, 1998 or upon the start of mass
production, whichever is later. The final installment for the advance
payment of $50 million is due on or after the later of April 1, 1998 or the
date the outstanding balance of the advance payment is less than $125
million. As a result, the maximum outstanding amount of the advance
payment at any time is $175 million. Repayment of this advance will be in
the form of wafer deliveries using U.S. dollar denominated pricing.
Specific wafer pricing will be based upon the prices of similar wafers
manufactured by other, specifically identified, leading-edge foundry
suppliers. Wafer deliveries are expected to begin in the first half of
calendar 1998. The advance payment provision also provides for interest to
be paid to the Company in the form of free wafers. In addition to the
advance payments, the Company will provide further funding to Seiko in the
amount of $100 million. This additional funding will be paid after the
final installment of the $200 million advance, and the form of the
additional funding will be negotiated at that time.
4. On July 31, 1996, the Company announced that it will discontinue the
XC8100 family of one-time programmable antifuse devices. As a result, the
Company anticipates taking a pretax charge against earnings of
approximately $5 million during the quarter ending September 28, 1996.
This charge primarily relates to the write-off of inventories held by
Xilinx and its distributors and for termination charges relating to
purchase commitments to foundry partners for wafers which have not
completed the manufacturing process.
XILINX, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
The statements in this Management's Discussion and Analysis that are forward
looking involve numerous risks and uncertainties and are based on current
expectations. Actual results may differ materially. Such risks and
uncertainties are detailed in the Company's Form 10-K for the year ended March
30, 1996, and certain of these risks and uncertainties are discussed below.
RESULTS OF OPERATIONS - FIRST THREE MONTHS OFFISCAL 1997 COMPARED TO THE
FIRST THREE MONTHS OFFISCAL 1996
Revenue
Revenues for the first quarter of fiscal 1997 of $150.2 million represented a
19.4% increase over the corresponding period of fiscal 1996. The revenue
increase was primarily attributable to increases in the volume of shipments
relating to the Company 's XC4000 family, the XC5200 family and the
proprietary products within the XC3000 family. Relative to the prior year
quarter, revenues for the XC4000 family increased $17.7 million, or 32.8%,
revenues for the XC5200 family increased by $6.6 million from $0.1 million in
the prior year, and revenues for the proprietary products within the XC3000
family increased by $7.4 million, or 65%. Revenues for the non-proprietary
products within the XC3000 family decreased $6.5 million or 30.2% from the
prior year. The XC4000 integrated circuits represented 47.7% of revenue in
the first quarter of fiscal 1997 as compared to 42.9% in the comparable
quarter of last year. Revenues for the XC2000 family and the non-proprietary
members of the XC3000 family, the Company's most mature and lower margin
integrated circuits, decreased from 20% of aggregate revenues in the first
quarter of fiscal 1996 to 12.1% of aggregate revenues in the first quarter of
fiscal 1997 as a function of the slowing requirements for these products and
the increasing demand for the functionality and performance provided by the
proprietary products within the XC3000, XC4000, and XC5200 families. Software
revenues represented approximately 3% of total revenues for each period
presented.
Recently, several independent semiconductor industry analysts have indicated
their belief that the overall semiconductor industry will grow at lower rates
than actual growth rates over the last few years. See "Factors Affecting
Future Operating Results" for discussion relating to potential impact of
semiconductor industry conditions on the Company's business.
The Company expects its growth rate in revenue for fiscal 1997 to decrease
from the levels experienced in fiscal 1996. The Company believes that the
conditions that led to slow growth in the last two quarters of fiscal 1996 and
the first quarter of fiscal 1997 are still present, although probably to a
lesser degree. The Company also realizes that a prolonged slowdown in the
overall semiconductor industry would detrimentally impact Xilinx. While the
Company currently projects revenue growth rates for the next two quarters of
fiscal 1997 to be roughly comparable to the quarterly growth rate ranges
experienced in the past three quarters, no assurance can be given that this
will be the case.
The preceding two paragraphs contains forward-looking statements which involve
risks and uncertainties. The Company's actual results could differ materially
from those anticipated in these forward-looking statements as a result of
certain factors including those set forth in "Factors Affecting Future
Operating Results" and elsewhere in this section.
Gross Margin
Cost of revenues was $53.3 million, or 35.5% of revenues, in the first quarter
of fiscal 1997 in comparison to 38.6% in the comparable prior year quarter.
The reduction in the cost of revenues as a percent of revenues was due to the
favorable impact on manufacturing costs of lower wafer costs (reflecting the
strengthened U.S. dollar exchange rate against the yen), improved yields and
other manufacturing cost reductions. The Company was able to substantially
offset the negative impact of ongoing price erosion for its existing products
with increased volumes of newer, proprietary, higher margin products. The
Company recognizes that ongoing price reductions for its integrated circuits
are a significant element in expanding the market for its products. Company
management believes that the recent gross margins of 64.5% of revenues are
neither sustainable nor desirable in the future. Rather, gross margins closer
to the historical range of 60% to 62% of revenues are considered more
appropriate for expanding market share while realizing acceptable returns,
although there can be no assurance that future gross margins will be in this
range.
Research and Development
Research and development expenditures were $17.8 million for the first quarter
of fiscal 1997, or 11.9% of revenues, compared to $14.9 million, or 11.8% of
revenues, in the comparable fiscal 1996 period. The 20.1% increase in such
expenditures resulted primarily from increased staffing, higher wafer
purchases, and increased facility and support costs associated with an
expanded scope of operations. The Company remains committed to a significant
level of research and development effort in order to continue to compete
aggressively in the programmable logic marketplace.
Non-recurring Charges
During the first quarter of fiscal 1996, the Company incurred a $19.4 million
non-recurring write-off of in-process technology relating to the acquisition
of NeoCAD, Inc.
Marketing, General and Administrative
Marketing, general and administrative expenses for the first quarter of fiscal
1997 increased by 18.4% to $29.5 million, or 19.7% of revenues, versus $25
million, or 19.9% of revenues, during the comparable fiscal 1996 period.
These expenses have increased in amount primarily as a result of increased
staffing as well as increased marketing and sales related costs. Such
expenses have decreased as a percentage of revenues, reflecting the Company's
commitment to control administrative expenses. However, the timing and extent
of future legal costs associated with the ongoing enforcement of the Company's
intellectual property rights are not readily predictable and may increase the
level of future general and administrative expenses.
Operating Income
Operating income of $49.5 million, or 32.9% of revenues, was generated during
the first quarter of fiscal 1997, an increase of 174% from the $18.1 million,
or 14.4% of revenues, for last year's comparable period. Excluding the impact
of the non-recurring write-off of in-process technology, operating income was
$37.4 million, or 29.8% of revenues for the comparable fiscal 1996 period and
operating income increased 32.2% in fiscal 1997 from the fiscal 1996 period.
Interest, net
The Company incurs interest expense on the $250 million of 5 1/4% convertible
subordinated notes issued in November 1995. The Company earns interest income
on its cash, cash equivalents, short-term investments and restricted
investments. The amount of interest earned is a function of the balance of
cash invested as well as the
prevailing interest rates. Although higher investment portfolio balances were
invested in the first quarter of fiscal 1997 in comparison to the prior year
quarter, net interest income for the first quarter of fiscal 1997 decreased by
$0.9 million from the comparable period of the prior year. In the first
quarter of fiscal 1997, the interest income earned from investing the net
proceeds of the notes was less than the interest expense relating to the
notes, resulting in a decrease in net interest income from the comparable
prior year quarter. The Company's investment portfolio contains tax-advantaged
municipal bonds, which have pretax yields which are less than the interest
rate on the notes. For financial reporting purposes, the Company records the
difference between the pretax and tax-equivalent yields as a reduction in
provision for taxes on income. As a result of the difference in yields and
future uses of the investment portfolio, levels of net interest income are
likely to decrease in the future.
Provision for Income Taxes
The Company recorded a tax provision of $17.9 million (35.5% of income before
taxes) for the first three months of fiscal 1997 as compared to a provision
for taxes for the three months ended July 1, 1995 of $14.3 million (72.1% of
income before taxes). The higher tax rate for the first three months of
fiscal 1996 resulted from the non-recurring write-off of in-process technology
which is not tax deductible. Excluding the non-recurring write-off of
in-process technology, the Company 's effective tax rate for the first three
months of fiscal 1996 was 36.5%. The reduced rate in fiscal 1997 is primarily
due to an increase in foreign operations where tax rates are lower than the U.
S. effective tax rate.
RISK FACTORS
The following risk factors may be associated with the Company's business:
Factors AffectingFuture Operating Results
The semiconductor industry is characterized by rapid technological change,
intense competitive pressure and cyclical market patterns. The Company's
results of operations are affected by a wide variety of factors, including
general economic conditions and conditions specific to the semiconductor
industry, decreases in average selling price over the life of any particular
product, the timing of new product introductions (both by the Company and its
competitors), the timely implementation of new manufacturing technologies, the
ability to safeguard patents and intellectual property in a rapidly evolving
market, and rapid escalation of demand for some products in the face of
equally steep decline in demand for others. Market demand for the Company 's
products, particularly for those most recently introduced, can be difficult to
predict, especially in light of customers ' demands to shorten product lead
time. This could lead to revenue volatility if the Company were unable to
provide sufficient quantities of specified products in a given quarter. In
addition, any difficulty in achieving targeted yields could adversely impact
the Company 's results of operations. The Company attempts to identify these
changes in market conditions as soon as possible; however, the rapidity of
their onset makes prediction of and reaction to such events difficult. Due to
the foregoing and other factors, past results, such as those described in this
report, are a much less useful predictor of the future than is the case in
many older, more stable and less dynamic industries.
The semiconductor industry has historically been cyclical and subject to
significant economic downturns at various times, characterized by diminished
product demand, accelerated erosion of average selling prices and
overcapacity. The Company may experience substantial period-to-period
fluctuations in future operating results due to general semiconductor industry
conditions, overall economic conditions or other factors.
Currently, most of the Company 's operations are centered in an area that has
been seismically active. Should there be a major earthquake in this area, the
Company 's operations may be disrupted resulting in the inability of the
Company to ship products in a timely manner, thereby materially adversely
affecting the Company 's business.
In addition, the securities of many high technology companies have
historically been subject to extreme price and volume fluctuations, a factor
which may adversely affect the market price of the Company's Common Stock.
Dependence Upon Independent Manufacturers
The Company does not manufacture the wafers used for its products. To date,
most of the Company's wafers have been manufactured by Seiko Epson Corporation
and Yamaha Corporation. The Company has depended upon these suppliers and
others to produce wafers with competitive performance and cost attributes and
to deliver them to the Company in a timely manner. While the timeliness,
yield and quality of wafer deliveries to date from these suppliers have been
acceptable, there can be no assurance that manufacturing problems will not
occur in the future. Any prolonged inability to obtain wafers with
competitive performance and cost attributes, adequate yields or timely
deliveries from these manufacturers, or any other circumstance that would
require the Company to seek alternative sources of supply, could delay
shipments. Any significant delays could have a material adverse effect on the
Company's operating results. In addition, the Company's purchases from these
wafer suppliers are denominated in yen, and prolonged periods of a weakened US
dollar exchange rate against the yen could adversely affect manufacturing
costs.
The Company 's long-term growth will depend in large part on the Company 's
ability to obtain increased wafer fabrication capacity from suppliers. A
significant increase in general industry demand or any interruption of supply
could reduce the Company 's supply of wafers or increase the Company 's cost
of such wafers, thereby materially adversely affecting the Company 's
business.
In order to secure additional wafer capacity, the Company from time to time
considers a number of alternatives, including, without limitation, equity
investments in, or loans, deposits, or other financial commitments to,
independent wafer manufacturers in exchange for production capacity, or the
use of contracts which commit the Company to purchase specified quantities of
wafers over extended periods. The Company has at times been unable, and may
in the future be unable, to fully satisfy customer demand because of
production constraints, including the ability of suppliers and subcontractors
to provide materials and services in a timely manner, as well as the ability
of the Company to process products for shipment. The Company 's future growth
will depend in part on its ability to locate and qualify additional suppliers
and subcontractors and to increase its own capacity to ship products, and
there can be no assurance that the Company will be able to do so. Any
increase in these constraints on the Company 's production could materially
adversely affect the Company 's business. In this regard, the Company has
entered into a joint venture, United Silicon Inc., to construct a new wafer
fabrication facility. However, there are many risks associated with the
construction of a new facility, and there can be no assurance that such
facility will become operational in a timely manner. In addition, the Company
has recently entered into an agreement with Seiko Epson to obtain additional
capacity through an advance payment which will be repaid in the form of
wafers. If the Company requires additional capacity and such capacity is
unavailable, or unavailable on reasonable terms, the Company 's business could
be materially adversely affected.
Dependence on New Products
The Company's future success depends on its ability to develop and introduce
on a timely basis new products which compete effectively on the basis of price
and performance and which address customer requirements. The success of new
product introductions is dependent upon several factors, including timely
completion of new product designs, achievement of acceptable yields and market
acceptance. No assurance can be given that the Company's product development
efforts will be successful or that its new products will achieve market
acceptance. In addition, the average selling price for any particular product
tends to decrease rapidly over the product's life. To offset such decreases,
the Company relies primarily on obtaining yield improvements and corresponding
cost reductions in the manufacture of existing products and on introducing new
products which incorporate advanced features and other price/performance
factors such that higher average selling prices and higher margins are
achievable relative to mature product lines. To the extent that such cost
reductions and new product introductions with higher margins do not occur in a
timely manner or the Company's products do not achieve market acceptance, the
Company's operating results could be adversely affected.
Competition
The Company 's FPGA and CPLD products compete in the programmable logic
marketplace, with a substantial majority of the Company 's revenues derived
from its FPGA product families. The industries in which the Company competes
are intensely competitive and are characterized by rapid technological change,
rapid product obsolescence and price erosion. The Company expects
significantly increased competition both from existing competitors and from a
number of companies that may enter its market. Xilinx believes that important
competitive factors in the programmable logic market include price, product
performance and reliability, adaptability of products to specific
applications, ease of use and functionality of development system software,
and technical service and support. The Company's strategy for expansion in
the programmable logic market includes continued price reductions commensurate
with the ability to lower the cost of manufacture and continued introduction
of new product architectures which target high volume, low cost applications.
However, there can be no assurance that the Company will be successful in
achieving this strategy.
The Company's major sources of competition are comprised of three elements:
the manufacturers of custom CMOS gate arrays, providers of high density
programmable logic products characterized by FPGA-type architectures and other
providers of programmable logic products. The Company competes with custom
gate array manufacturers on the basis of lower design costs, shorter
development schedules and reduced inventory risks. The primary attributes of
custom gate arrays are high density, high speed and low production costs in
high volumes. However, the Company believes that the design specifications
for many customers can be met by the density and speed capabilities of
Xilinx's programmable logic products which are cost effective over a broad
range of production volumes. In addition, the Company's efforts to introduce
lower cost architectures are intended to narrow the gap between current custom
gate array production costs (in high volumes) and FPGA production costs. To
the extent that such efforts are not successful, the Company's business could
be materially adversely affected.
The Company competes with providers of high density programmable logic
products characterized by FPGA-type architectures on the basis of software
capability, product functionality, price, performance and customer service.
The Company believes that certain of its patents have been infringed by a
competitor and has initiated legal action to protect its intellectual property
(See Litigation).
The benefits of programmable logic have attracted a number of companies to
this market, competing primarily on the basis of speed, density or cost.
Xilinx recognizes that different applications require different programmable
technologies, and the Company is developing multiple architectures, processes
and products to meet these varying customer needs. Recognizing the increasing
importance of standard software solutions, Xilinx is working to develop common
design software that supports the full range of integrated circuit products.
Xilinx believes that automation and ease of design will be significant
competitive factors in the programmable logic market.
Although certain manufacturers of programmable logic devices ("PLDs") compete
with Xilinx, significant differences in logic density between most CPLDs and
FPGAs limit the amount of competitive overlap. While the architecture of
CPLDs gives them a performance advantage in certain instances, the Company
believes that the higher density available with FPGAs makes them more
economical for many designs.
Several companies, both large and small, have introduced products competitive
with those of the Company or have announced their intention to enter this
market. Some of the Company's competitors may possess innovative technology
which could prove superior to Xilinx's technology in some applications. In
addition, the Company anticipates potential competition from suppliers of
logic products based on new technologies. Many of the Company's current or
potential competitors have substantially greater financial, manufacturing,
marketing and technical resources than Xilinx. This additional competition
could adversely affect the Company.
Xilinx also faces competition from its licensees. Under a license from the
Company, AT&T is manufacturing and marketing the Company's non-proprietary
XC3000 products and is employing that technology to provide additional FPGA
products offering higher density. Seiko has rights to manufacture the
Company's products and market them in Japan and Europe but is not currently
doing so. AMD is licensed to use certain of the Company's patents to
manufacture and market products other than SRAM-based FPGAs and, after March
19, 1997, could also compete directly in this market.
Intellectual Property
The Company relies upon patent, trademark, trade secret and copyright law to
protect its intellectual property. There can be no assurance that such
intellectual property rights can be successfully asserted in the future or
will not be invalidated, circumvented or challenged. From time to time, third
parties, including competitors of the Company, may assert exclusive patent,
copyright and other intellectual property rights to technologies that are
important to the Company. There can be no assurance that third parties will
not assert infringement claims against the Company in the future, that
assertions by third parties will not result in costly litigation or that the
Company would prevail in such litigation or be able to license any valid and
infringed patents from third parties on commercially reasonable terms.
Litigation, regardless of its outcome, could result in substantial cost and
diversion of resources of the Company. Any infringement claim or other
litigation against or by the Company could materially adversely affect the
Company's financial condition and results of operations.
Litigation
The Company is currently engaged in patent litigation with Altera Corporation
(Altera). See "Legal Proceedings " in Part II.
FINANCIAL CONDITION, LIQUIDITY AND CAPITAL RESOURCES
The Company 's financial condition at June 29, 1996 remained strong. Total
current assets exceeded total current liabilities by 5.2 times, which was
consistent with March 30, 1996. Since its inception, the Company has used a
combination of equity and debt financing and internal cash flow to support
operations, obtain additional wafer supply capacity, make acquisitions and
investments in complementary technologies, obtain additional capital equipment
and facilities and finance inventory and accounts receivable.
The Company has generated positive cash flow from operations for the first
three months of fiscal 1997. As of June 29, 1996, the Company had cash, cash
equivalents and short-term investments of $398.8 million and working capital
of $445.7 million. Cash generated by operations of $53.9 million for the
first three months of fiscal 1997 was $23.7 million higher than the $30.2
million generated for the first three months of fiscal 1996. The increase in
cash generated by operations during the first three months of fiscal 1997 over
the comparable fiscal 1996 period resulted from the favorable impact of
changes in net income (net of the impact of the non-recurring write-off of
in-process technology in 1996) accounts receivable, deferred income taxes and
other and accounts payable, accrued liabilities and income taxes payable
offset by the unfavorable impact of inventory and deferred income on shipments
to distributors.
Cash flows used for investing activities for the three months ended June 29,
1996, included the $30 million advance to Seiko for wafer purchases (see Note
3 of Notes to Consolidated Condensed Financial Statements), $2.5 million of
net short-term investment purchases and $10.1 million of property, plant and
equipment acquisitions. Property, plant and equipment additions decreased
$4.9 million from the comparable fiscal 1996 period. This decrease is
primarily due to significantly reduced expenditures relating to the Company's
Ireland manufacturing facility which were partially offset by expenditures
incurred relating to the Company's facility being constructed in Boulder,
Colorado. In the first quarter of 1996, the Company's investing activities
included $33.4 million (net of cash acquired) incurred relating to the
acquisition of NeoCAD and $23.8 million of purchases of restricted investments
relating to the Company's Corporate facilities offset by $37.4 million of net
short-term investments which matured.
Cash flows provided by financing activities were $7.7 million in the first
three months of fiscal 1997 and was attributable to $8 million in proceeds
from the issuance of common stock under employee stock plans offset by
principal payments on capital lease obligations of $0.3 million. For the
comparable fiscal 1996 period, $5.4 million in proceeds from issuance of
common stock under corporate stock plans was offset by $0.3 million in
principal payments on capital lease obligations.
Stockholders' equity increased by $42.7 million at June 29, 1996, principally
as a result of the net income for the three months ended June 29, 1996,
proceeds from the issuance of common stock under employee stock plans and
related tax benefits from stock options.
The Company has obtained credit line facilities for up to $47 million of which
$7 million is intended to meet occasional working capital requirements for the
Company 's wholly owned Irish subsidiary. At June 29, 1996, no borrowings
were outstanding under the lines of credit.
Under the terms of the Company's agreement relating to the United Silicon Inc.
(USI) joint venture, the Company expected to invest additional amounts of
approximately $68 million and $34 million in December 1996 and June 1997,
respectively. The Board of Directors of USI recently voted to postpone the
wafer fabrication facility construction schedule by approximately six months.
As a result, the additional payments are tentatively postposed to June 1997
and December 1997. The revised timing of construction of the facility and the
related payments are subject to further change based on overall industry
conditions and other factors. United Microelectronics Corporation has
committed to supply the Company with wafers manufactured in an existing
facility until capacity is available in the new facility. In the first
quarter of fiscal 1997, the Company entered into an agreement with Seiko. The
agreement provides for a total payments of $300 million to be made to Seiko,
of which $200 million is in the form of an advance payment and $100 million is
in the form of an advance or an alternate form to be negotiated at a later
date. See Note 4 of Notes to Consolidated Condensed Financial Statements.
The Company anticipates that existing sources of liquidity and cash flow from
operations will be sufficient to satisfy the Company 's cash needs for the
foreseeable future. The Company will continue to evaluate opportunities for
investments to obtain additional wafer supply capacity, procurement of
additional capital equipment and facilities, development of new products, and
potential acquisitions of businesses, products or technologies that would
complement the Company 's businesses and may use available cash or other
sources of funding for such purposes.
Part II. Other Information
Item 1. Legal Proceedings.
On June 7, 1993, the Company filed suit against Altera Corporation (Altera) in
the United States District Court for the Northern District of California for
infringement of certain of the Company's patents. Subsequently, Altera filed
suit against the Company, alleging that certain of the Company's products
infringe certain Altera patents. Fact discovery has been completed in both
cases. No trial date has been set. Both cases had been assigned to Judge
Robert Aguilar, who has now retired. The cases are awaiting reassignment to
another judge. On April 20, 1995, Altera filed an additional suit against the
Company in Federal District Court in Delaware (the Delaware suit), alleging
that the Company's XC5000 family infringes a certain Altera patent. The
Company answered the Delaware suit, denying that the XC5000 family infringes
the patent in suit, asserting certain affirmative defenses and counterclaiming
that the Altera Max 9000 family infringes certain of the Company's patents.
The Delaware suit has now been transferred to the United States District Court
for the Northern District of California. Management believes that it has
meritorious defenses to such claims and is defending them vigorously. The
foregoing is a forward looking statement. Due to the uncertain nature of the
litigation with Altera and because the lawsuits are still in the pre-trial
stage, actual results could differ materially.
There are no other pending legal proceedings of a material nature to which the
Company is a party or of which any of its property is the subject. The
Company knows of no legal proceedings contemplated by any governmental
authority or agency.
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibit 11: Statement of Computation of Net Income Per Share
Exhibit 12: Statement of Computation of Ratio of Earning to
Fixed Charges
(b) Reports on Form 8-K - None
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
XILINX, INC.
Date: August 9, 1996 /s/ Gordon M.Steel
-----------------------------------
Gordon M. Steel
Senior Vice President of Finance and
Chief Financial Officer
(as principal accounting and financial
officer and on behalf of Registrant)
EXHIBIT 11
<TABLE>
<CAPTION>
XILINX, INC.
STATEMENT OF COMPUTATION OF NET INCOME PER SHARE
(in thousands, except per share amounts)
Three Months Ended
June 29, July 1,
1996 1995
--------- --------
<S> <C> <C>
PRIMARY
Weighted average number of
common shares outstanding 72,176 70,497
Incremental common shares
attributable to outstanding options 6,768 6,992
--------- --------
Total shares 78,944 77,489
========= ========
Net income $ 32,492 $ 5,548
========= ========
Net income per share $ 0.41 $ 0.07
========= ========
FULLY DILUTED
Weighted average number of
common shares outstanding 72,176 70,497
Incremental common shares
attributable to outstanding options 6,768 7,591
--------- --------
Total shares 78,944 78,088
========= ========
Net income $ 32,492 $ 5,548
========= ========
Net income per share $ 0.41 $ 0.07
========= ========
</TABLE>
EXHIBIT 12
<TABLE>
<CAPTION>
XILINX, INC.
STATEMENT OF COMPUTATION OF RATIOS OF EARNINGS TO FIXED CHARGES
(in thousands, except ratios)
Three Months Ended
June 29, July 1,
1996 1995
--------- --------
<S> <C> <C>
Income before taxes $ 50,375 $ 19,869
Add fixed charges 3,635 249
--------- --------
Earnings (as defined) $ 54,010 $ 20,118
========= ========
Fixed charges
Interest expense $ 3,252 $ 58
Amortization of debt issuance costs 223 --
Estimated interest component of rent 160 191
expenses
Total fixed charges $ 3,635 $ 249
========= ========
Ratio of earnings to fixed charges 14.9 80.8
========= ========
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> MAR-29-1997
<PERIOD-START> MAR-31-1996
<PERIOD-END> JUN-29-1996
<CASH> 129,826
<SECURITIES> 268,947
<RECEIVABLES> 72,004
<ALLOWANCES> 5,119
<INVENTORY> 49,324
<CURRENT-ASSETS> 552,680
<PP&E> 138,387
<DEPRECIATION> 50,881
<TOTAL-ASSETS> 767,929
<CURRENT-LIABILITIES> 106,982
<BONDS> 250,000
0
0
<COMMON> 722
<OTHER-SE> 410,225
<TOTAL-LIABILITY-AND-EQUITY> 767,929
<SALES> 150,200
<TOTAL-REVENUES> 150,200
<CGS> 53,325
<TOTAL-COSTS> 100,710
<OTHER-EXPENSES> (4,360)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 3,475
<INCOME-PRETAX> 50,375
<INCOME-TAX> 17,883
<INCOME-CONTINUING> 32,492
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 32,492
<EPS-PRIMARY> 0.41
<EPS-DILUTED> 0.41
</TABLE>
