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 28, 1997 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
(State or other jurisdiction of incorporation or organization)
77-0188631
(I.R.S. Employer Identification No.)
2100 LOGIC DRIVE, SAN JOSE, CA 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 28, 1997
- ----- ----------------------------------------
Common Stock, $.01 par value 73,593,796
<PAGE>
<TABLE>
<CAPTION>
XILINX, INC.
CONSOLIDATED CONDENSED STATEMENTS OF INCOME
(in thousands except per share amounts)
Three Months Ended
June 28, June 29,
1997 1996
---------- ----------
<S> <C> <C>
Net revenues $ 160,761 $ 150,200
Costs and expenses:
Cost of revenues 60,906 53,325
Research and development 19,938 17,837
Marketing, general and administrative 32,666 29,548
---------- ----------
Operating costs and expenses 113,510 100,710
---------- ----------
Operating income 47,251 49,490
Interest income and other 5,786 4,360
Interest expense (3,491) (3,475)
---------- ----------
Income before provision for taxes on income 49,546 50,375
Provision for taxes on income 16,102 17,883
---------- ----------
Net income $ 33,444 $ 32,492
========== ==========
Net income per share $ 0.41 $ 0.41
========== ==========
Weighted average common and common equivalent shares used
in computing per share amounts 81,326 78,944
========== ==========
<FN>
(See accompanying Notes to Consolidated Condensed Financial Statements.)
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
XILINX, INC.
CONSOLIDATED CONDENSED BALANCE SHEETS
(in thousands except per share amounts)
June 28, March 29,
1997 1997
---------- -----------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 130,531 $ 215,903
Short-term investments 334,954 209,944
Accounts receivable, net 72,704 72,248
Inventories 51,232 62,367
Advances for wafer purchases 18,000 -
Deferred income taxes and other current assets 43,581 41,093
---------- -----------
Total current assets 651,002 601,555
Property, plant and equipment, at cost 158,777 154,443
Accumulated depreciation and amortization (73,331) (67,863)
---------- -----------
Net property, plant and equipment 85,446 86,580
Restricted investments 36,743 36,257
Investment in joint venture 35,522 35,286
Advances for wafer purchases 72,000 60,000
Developed technology and other assets 27,510 28,015
---------- -----------
$ 908,223 $ 847,693
========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 24,082 $ 16,758
Accrued payroll, other accrued liabilities and interest payable 27,313 33,282
Income taxes payable 19,887 10,858
Deferred income on shipments to distributors 43,750 36,355
---------- -----------
Total current liabilities 115,032 97,253
Long-term debt 250,000 250,000
Deferred tax liabilities 11,943 9,760
Stockholders' equity:
Preferred stock, $.01 par value - -
Common stock, $.01 par value 736 733
Additional paid-in capital 119,957 114,530
Retained earnings 411,325 377,881
Treasury Stock, at cost - (1,847)
Cumulative translation adjustment (770) (617)
---------- -----------
Total stockholders' equity 531,248 490,680
---------- -----------
$ 908,223 $ 847,693
========== ===========
<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 28, June 29,
1997 1996
---------- ----------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 33,444 $ 32,492
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization 7,715 6,498
Undistributed earnings of joint venture (518) -
Changes in assets and liabilities:
Accounts receivable (456) 7,524
Inventories 11,135 (3,456)
Deferred income taxes and other 4,630 6,200
Accounts payable, accrued liabilities and income taxes payable 10,384 8,019
Deferred income on shipments to distributors 7,395 (3,390)
---------- ----------
Total adjustments 40,285 21,395
---------- ----------
Net cash provided by operating activities 73,729 53,887
Cash flows from investing activities:
Purchases of short-term available-for-sale investments (172,063) (36,822)
Proceeds from sale or maturity of short-term available-for-sale investments 46,927 34,305
Advances for wafer purchases (30,000) (30,000)
Property, plant and equipment (5,377) (10,112)
---------- ----------
Net cash used in investing activities (160,513) (42,629)
Cash flows from financing activities:
Acquisition of Treasury Stock (8,899) -
Principal payments on capital lease obligations - (284)
Proceeds from issuance of common stock 10,311 7,959
---------- ----------
Net cash provided by financing activities 1,412 7,675
---------- ----------
Net (decrease)/increase in cash and cash equivalents (85,372) 18,933
Cash and cash equivalents at beginning of period 215,903 110,893
---------- ----------
Cash and cash equivalents at end of period $ 130,531 $ 129,826
========== ==========
Schedule of non-cash transactions:
Tax benefit from stock options $ 5,940 $ 2,657
Issuance of Treasury Stock under employee stock plans 10,746 -
Receipts against advances for wafer purchases - 6,630
Supplemental disclosures of cash flow information:
Interest paid 6,469 6,145
Income taxes paid $ 6,168 $ 490
<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
prepared in conformity with generally accepted accounting principles and
should be read in conjunction with the Xilinx, Inc. (Xilinx or the Company)
consolidated financial statements for the year ended March 29, 1997. The
balance sheet at March 29, 1997 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 fairly the statements of financial position, results of operations
and cash flows for the interim periods presented. The results for the three
month period ended June 28, 1997 are not necessarily indicative of the results
that may be expected for the year ending March 28, 1998.
2. Inventories are stated at the lower of cost (first-in, first-out) or
market (estimated net realizable value). Inventories at June 28, 1997 and
March 29, 1997 are as follows:
<TABLE>
<CAPTION>
June 28, March 29,
1997 1997
--------- ----------
<S> <C> <C>
Raw materials $ 5,668 $ 4,477
Work-in-process 22,479 43,553
Finished goods 23,085 14,337
--------- ----------
$ 51,232 $ 62,367
========= ==========
</TABLE>
3. The Company, United Microelectronics Corporation (UMC) and other
parties have entered into a joint venture to construct a wafer fabrication
facility in Taiwan, known as United Silicon Inc. (USI). In July 1997, the
Company invested an additional $67.4 million, bringing the amount invested to
date to $101.7 million. The Board of Directors of USI has recently determined
that the originally scheduled final installment of approximately $34 million
will not be required in the foreseeable future. The Company will retain its
25% equity ownership in the joint venture. UMC has committed to and is
supplying the Company with wafers manufactured in an existing facility until
capacity is available in the new facility.
4. In February 1997, the Financial Accounting Standards Board issued
Statement No. 128, Earnings per Share, which the Company will be required to
adopt during the quarter ending December 31, 1997. At that time, the Company
will be required to change the method currently used to compute net income per
share and to restate all prior periods. The new requirements will include a
calculation of "basic" net income per share, which will exclude the dilutive
effect of stock options. The restated calculations of basic net income per
share for the first quarter of 1998 and 1997 result in net income per share of
$0.46 and $0.45, respectively. A calculation of "diluted" net income per
share will also be required. However, this calculation is not expected to
differ materially from the primary net income per share amounts reported for
the periods presented.
5. The Company is currently involved in patent litigation with Altera
Corporation (see Part II, Item 1, Legal Proceedings). Due to the uncertain
nature of the litigation with Altera and because the lawsuits are still in the
pre-trial stage, the ultimate outcome of these matters cannot be determined at
this time. Management believes that it has meritorious defenses to Altera's
claims and is defending them vigorously, and has not recorded a provision for
the ultimate outcome of these matters in its financial statements. The
foregoing is a forward-looking statement subject to risks and uncertainties,
and the future outcome could differ materially due to the uncertain nature of
the litigation with Altera and because the lawsuits are still in the pre-trial
stage.
<PAGE>
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. Certain of these risks
and uncertainties are discussed below.
RESULTS OF OPERATIONS - FIRST THREE MONTHS OF FISCAL 1998 COMPARED TO THE
FIRST THREE MONTHS OF FISCAL 1997
Revenues
- --------
Revenues for the first quarter of fiscal 1998 of $160.8 million represented a
7.0% increase over the corresponding period of fiscal 1997. The revenue
increase was primarily attributable to increases in the volume of shipments
relating to the Company's XC4000, XC4000X and XC5200 product families.
Relative to the prior year quarter, revenues for the XC4000 family increased
by $2.6 million while revenues for the XC4000X product, introduced in the
second quarter of fiscal 1997, represented $5.0 million during the first
quarter of fiscal 1998. In addition, revenues for the XC5200 family increased
91.8% to $12.9 million in the first quarter of fiscal 1998 from $6.7 million
in the prior year quarter. The XC4000 and XC4000X integrated circuits
represented 49.3% of revenue in the first quarter of fiscal 1998 as compared
to 47.7% in the comparable quarter of last year for the XC4000 family.
Revenues for the Company's first generation FPGA products, which include the
XC2000, XC3000 and XC3100 families, represented 27.8% of aggregate revenues in
the first quarter of fiscal 1998, compared to 33.3% of aggregate revenues
during the comparable quarter of the prior fiscal year. The decrease is a
function of the slowing requirements for these products and the increasing
demand for the functionality and performance provided by the second generation
FPGA products. Revenues for the Company's second generation FPGA products,
which include the XC4000, XC4000X and XC5200 families, represented 57.4% of
aggregate revenues compared to 52.2% of aggregate revenues in the comparable
quarter of the prior fiscal year. The other product generations, consisting
primarily of the CPLD families, HardWire Arrays and serial proms, represented
12.5% of aggregate revenues in the first quarter of fiscal 1998 compared to
11.6% of aggregate revenues relative to the results of the comparable quarter
of the prior year. Proprietary products constituted 93.0% of revenues for the
first quarter of fiscal 1998, as compared to 90.1% in the comparable quarter
last year. Additionally, software revenues represented approximately 2% of
total revenues for the first quarter of 1998, representing approximately 1700
revenue seats, and 3%, which represented approximately 1200 revenue seats, for
the first quarter of fiscal 1997.
International revenues constituted approximately 37% of total revenues in the
first quarter of fiscal 1998 in comparison to approximately 36% in the prior
year quarter. International revenues include customers in Europe, Japan and
Rest of World. Revenue growth in the European and Rest of World markets was
10.1% and 75.5%, respectively, in the first quarter of 1998 as compared to the
first quarter in 1997, while revenues declined during the same periods by 5%
in the Japanese market.
Gross Margin
- -------------
Cost of revenues was $60.9 million, or 37.9% of revenues, in the first quarter
of fiscal 1998 in comparison to 35.5% in the comparable prior year quarter.
The increase in the cost of revenues as a percentage of revenues from the
prior year's quarter was primarily attributable to selling price reductions,
partially offset by improved yields and the favorable impact of lower wafer
costs, including the impact of favorable movement in the yen exchange rate.
In the past, Xilinx has also been able to offset much of the erosion in gross
margin percentages on more mature integrated circuits with increased volumes
of newer, proprietary, higher margin products. The Company recognizes that
ongoing price reductions for its integrated circuits, which are passed on to
customers, are a significant element in expanding the market for its products.
Company management believes that future gross margin objectives in the range
of 60% to 62% of revenues are consistent with 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 $19.9 million for the first quarter
of fiscal 1998, or 12.4% of revenues, compared to $17.8 million, or 11.9% of
revenues, in the comparable fiscal 1997 period. The 11.8% increase in
expenditures resulted primarily from increased labor related expenses
partially offset by a decline in engineering wafer purchases. 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.
Marketing, General and Administrative
- ----------------------------------------
Marketing, general and administrative expenses for the first quarter of fiscal
1998 increased by 10.6% to $32.7 million, or 20.3% of revenues, versus $29.5
million, or 19.7% of revenues, during the comparable fiscal 1997 period.
These expenses have increased in amount primarily as a result of increased
staffing and labor related expenses as well as increased legal costs. The
Company remains committed to controlling administrative expenses and believes
that most of these expenses should grow at a lower rate than revenue growth.
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 significantly increase the level of general and
administrative expenses in the future.
Operating Income
- -----------------
Operating income of $47.3 million, or 29.4% of revenues, was generated during
the first quarter of fiscal 1998, a decrease of 4.5% from the $49.5 million,
or 32.9% of revenues, for the prior year comparable period. The decrease in
the first quarter of 1998 compared to the first quarter of 1997 is primarily a
result of the 7.0% revenue growth in comparison to the 12.7% increase in
operating costs and expenses. Operating income as a percentage of revenues
could be adversely impacted in future years by the factors noted herein.
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 prevailing interest rates. The Company also records
25% of the net income of United Silicon Inc. (USI), a wafer fabrication joint
venture in which the Company participates, as joint venture equity income. To
date, USI's net income has resulted primarily from interest earned on its
investment portfolio. Net interest and other income increased by $1.4 million
over the comparable period in the prior year. The increased interest and other
income is primarily attributable to higher investment portfolio balances and
joint venture equity income. The Company expects that as the USI wafer
fabrication facility begins to ramp up operations over the next year to
eighteen months the Company may incur joint venture equity losses.
The Company's investment portfolio contains tax-advantaged municipal
securities, which have pretax yields that are less than the interest rate on
the convertible subordinated notes. For financial reporting purposes, the
Company effectively 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, future uses of the investment portfolio
and operating results for USI, levels of net interest and other income could
decrease in the future.
Provision for Income Taxes
- -----------------------------
The Company recorded a tax provision of $16.1 million (32.5% of income before
taxes) for the first three months of fiscal 1998 as compared to a provision
for taxes for the three months ended June 29, 1996 of $17.9 million (35.5% of
income before taxes). The lower tax rate for the first three months of fiscal
1998 is due to legislation reinstating the R&D Tax Credit through May 3, 1997
as well as increased profits in foreign operations.
RISK FACTORS
The following risk factors may be associated with the Company's business:
Factors Affecting Future 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, conditions relating to technology companies,
conditions specific to the semiconductor industry, decreases in average
selling prices over the life of any particular product, the timing of new
product introductions (by the Company, its competitors and others), the
ability to manufacture in a timely manner sufficient quantities of a given
product, the timely implementation of new manufacturing technologies, the
ability to safeguard patents and intellectual property from competitors, and
the impact of new technologies resulting in 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 times and minimize inventory levels.
Unpredictable market demand 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 wafer production
yields could adversely impact the Company's financial condition and results of
operations. The Company attempts to identify changes in market conditions as
soon as possible; however, the dynamics of the market make prediction of and
timely reaction to such events difficult. Due to the foregoing and other
factors, past results, including those described in this report, are much less
reliable predictors of the future than is the case in many older, more stable
and less dynamic industries. Based on the factors noted herein, the Company
may experience substantial period-to-period fluctuations in future operating
results.
The semiconductor industry has historically been cyclical and subject to, at
various times, significant economic downturns characterized by diminished
product demand, limited visibility to demand for products further out than
three months, 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.
The Company's future success depends in large part on the continued service of
its key technical, sales, marketing and management personnel and on its
ability to continue to attract and retain qualified employees. Particularly
important are those highly skilled design, process and test engineers involved
in the manufacture of existing products and the development of new products
and processes. The competition for such personnel is intense, and the loss of
key employees could have a material, adverse effect on the Company's financial
condition and results of operations.
Sales outside of the United States carry a number of inherent risks, including
risks of currency exchange fluctuations, government regulation of exports,
tariffs and other potential trade barriers, reduced protection for
intellectual property rights in some countries, the impact of recessionary
environments in economies outside the United States and generally longer
receivable collection periods. The Company's business is also subject to the
risks associated with the imposition of legislation and regulations relating
specifically to the import or export of semiconductor products. The Company
cannot predict whether quotas, duties, taxes or other charges or restrictions
will be imposed by the United States or other countries upon the importation
or exportation of the Company's products in the future or what, if any, effect
such actions would have on the Company's financial condition and results of
operations.
In order to expand international sales and service, the Company will need to
maintain and expand existing foreign operations or establish new foreign
operations. This entails hiring additional personnel and maintaining or
expanding existing relationships with international distributors and sales
representatives. This will require significant management attention and
financial resources and could adversely affect the Company's financial
condition and results of operations. There can be no assurance that the
Company will be successful in its maintenance or expansion of existing foreign
operations, in its establishment of new foreign operations or in its efforts
to maintain or expand its relationships with international distributors or
sales representatives.
Many of the Company's operations are centered in an area of California 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 financial condition and results of operations.
In addition, the securities of many high technology companies have
historically been subject to extreme price and volume fluctuations, 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. During the
past year, most of the Company's wafers have been manufactured by Seiko Epson
Corporation (Seiko Epson) and United Microelectronics Corporation (UMC). The
Company has depended upon these suppliers and others to produce wafers with
competitive performance and cost attributes, including transitioning to
advanced process technologies, producing wafers at acceptable yields, and
delivering them to the Company in a timely manner. While the timeliness,
yield and quality of wafer deliveries have met the Company's requirements to
date, there can be no assurance that the Company's wafer suppliers will not
experience future manufacturing problems, including delays in the realization
of advanced process technologies. The Company is also dependent on
subcontractors to provide semiconductor assembly services. Any prolonged
inability to obtain wafers or assembly services with competitive performance
and cost attributes, adequate yields or timely deliveries from these
manufacturers/subcontractors, or any other circumstance that would require the
Company to seek alternative sources of supply, could delay shipments, and have
an adverse effect on the Company's financial condition and results of
operations.
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 financial
condition and results of operations.
In order to secure additional wafer capacity, the Company from time to time
considers alternatives, including, without limitation, equity investments in,
or loans, deposits, or other financial commitments to, independent wafer
manufacturers to secure production capacity, or the use of contracts which
commit the Company to purchase specified quantities of wafers over extended
periods. Although the Company is currently able to obtain wafers from
existing suppliers in a timely manner, 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 satisfaction of customer delivery dates,
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 result in a material adverse impact on the Company's
financial condition and results of operations. In this regard, the Company
has entered into the USI joint venture with UMC and other parties to obtain
wafer capacity from 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 and/or cost effective in
a timely manner. In addition, the Company has entered into an agreement with
Seiko Epson to obtain additional capacity from a facility currently under
construction and expected to provide wafers in calendar 1998. If the Company
requires additional capacity and such capacity is unavailable, or unavailable
on reasonable terms, the Company's financial condition and results of
operations could be materially adversely affected.
Litigation
- ----------
The Company is currently engaged in patent litigation with Altera Corporation
(Altera). See "Legal Proceedings" in Part II.
<PAGE>
Dependence on New Products
- -----------------------------
The Company's future success depends in large part on its ability to develop
and introduce on a timely basis new products which address customer
requirements and compete effectively on the basis of price and performance.
The success of new product introductions is dependent upon several factors,
including timely completion of new product designs, the ability to utilize
advanced process technologies, achievement of acceptable yields, availability
of supporting design software 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. Revenues relating to
the Company's first generation FPGA products are expected to continue to
decline in the future as a percentage of aggregate revenues, and the Company
will be increasingly dependent on revenues derived from second generation
FPGAs and future generation products. 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 do not occur in
a timely manner, or the Company's products do not achieve market acceptance at
prices with higher margins, the Company's financial condition and results of
operations 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 continuous 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 design
software, and the ability to provide timely customer 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 for established products and continued introduction of new product
architectures which address high volume, low cost applications as well as high
performance, leading edge density applications. However, there can be no
assurance that the Company will be successful in achieving these strategies.
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. The Company continues to develop lower cost architectures
intended to narrow the gap between current custom gate array production costs
(in high volumes) and FPGA production costs. The Company competes with high
density programmable logic suppliers on the basis of performance, the ability
to deliver complete solutions to customers and customer support, taking
advantage of the primary characteristics of flexible, high speed
implementation and quick time-to-market capabilities of the Company's PLD
product offerings. In addition, the Company competes with manufacturers of
other programmable logic products on the basis of price, performance, design
and software utility. Some of the Company's current or potential competitors
have substantially greater financial, manufacturing, marketing and technical
resources than Xilinx. To the extent that such efforts to compete are not
successful, the Company's financial condition and results of operations could
be materially adversely affected.
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, have asserted 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.
FINANCIAL CONDITION, LIQUIDITY AND CAPITAL RESOURCES
The Company's financial condition at June 28, 1997 remained strong. Total
current assets exceeded total current liabilities by 5.7 times, compared to
6.2 times at March 29, 1997. Since its inception, the Company has used a
combination of equity and debt financing and cash flow from operations to
support on-going business activities, make acquisitions and investments in
complementary technologies, obtain facilities and capital equipment and
finance inventory and accounts receivable.
The Company continued to generate positive cash flow from operations during
the first three months of fiscal 1998. As of June 28, 1997, the Company had
cash, cash equivalents and short-term investments of $465.5 million and
working capital of $536 million. Cash generated by operations of $73.7
million for the first three months of fiscal 1998 was $19.8 million higher
than the $53.9 million generated for the first three months of fiscal 1997.
The increase in cash generated by operations during the first three months of
fiscal 1998 over the comparable fiscal 1997 period resulted primarily from the
favorable cash flow impact of changes in inventories and deferred income on
shipments to distributors partially offset by the unfavorable cash flow impact
of changes in accounts receivable.
Cash flows used for investing activities for the three months ended June 28,
1997, included a $30 million advance to Seiko Epson for wafer purchases,
$125.1 million of net short-term investment purchases and $5.4 million of
property, plant and equipment acquisitions. Net purchases of short-term
investments increased $122.6 million over the prior year as the Company has
increased its investments in securities with maturities over 90 days during
fiscal 1998, yielding higher interest rates. Property, plant and equipment
additions decreased $4.7 million from the comparable fiscal 1997 period. This
decrease is primarily due to reduced expenditures relating to the Company's
facility constructed last year in Boulder, Colorado.
Net cash flows provided by financing activities were $1.4 million in the first
three months of fiscal 1998 and were attributable to $10.3 million in proceeds
from the issuance of common stock under employee stock plans offset by
acquisition of Treasury Stock during the quarter of $8.9 million. For the
comparable fiscal 1997 period, $8.0 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 $40.6 million at June 28, 1997, principally
as a result of the net income for the three months ended June 28, 1997,
proceeds from the issuance of common stock under employee stock plans and
related tax benefits from stock options, offset by the Treasury Stock
repurchased in the period.
The Company has available credit line facilities for up to $46.2 million of
which $6.2 million is intended to meet occasional working capital requirements
for the Company's wholly owned Irish subsidiary. At June 28, 1997, no
borrowings were outstanding under the lines of credit.
The Company, United Microelectronics Corporation (UMC) and other parties have
entered into a joint venture to construct a wafer fabrication facility in
Taiwan, known as United Silicon Inc. (USI). In July 1997, the Company
invested an additional $67.4 million, bringing the amount invested to date to
$101.7 million. The Board of Directors of USI has recently determined that
the originally scheduled final installment of approximately $34 million will
not be required in the foreseeable future. The Company will retain its 25%
equity ownership in the joint venture. 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 addition, during
the first quarter of fiscal 1997, the Company entered into an agreement with
Seiko Epson. The agreement provides for an advance to Seiko Epson of up to
$200 million to be used in the construction of a wafer fabrication facility in
Japan. Through June 28, 1997, the Company has advanced $90 million to Seiko
Epson under the agreement. Additional $30 million installments are currently
scheduled for 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. In
addition to the advance payments, the Company may also provide further funding
to Seiko Epson in the amount of $100 million. This additional funding would
be paid after the final installment of the advance and the form of the
additional funding will be negotiated at that time.
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, procure additional
capital equipment and facilities, develop 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 and expert discovery has been completed
in both cases, which have been consolidated. On April 20, 1995, Altera filed
an additional suit against the Company in the Federal District Court in
Delaware, alleging that the Company's XC5200 family infringes an Altera
patent. The Company answered the Delaware suit denying that the XC5200 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 was transferred to the United States
District Court for the Northern District of California and is also before the
same judge. The ultimate outcome of these matters cannot be determined at
this time. Management believes that it has meritorious defenses to such
claims and is defending them vigorously. The foregoing is a forward-looking
statement subject to risks and uncertainties, and the future outcome could
differ materially due to the uncertain nature of the litigation with Altera
and because the lawsuits are still in the pre-trial stage.
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
<PAGE>
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 8, 1997 /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)
<PAGE>
EXHIBIT 11
<TABLE>
<CAPTION>
XILINX, INC.
STATEMENT OF COMPUTATION OF NET INCOME PER SHARE
(in thousands, except per share amounts)
Three Months Ended
June 28, June 29,
1997 1996
--------- ---------
<S> <C> <C>
PRIMARY
Weighted average number of common shares outstanding 73,495 72,176
Incremental common shares
attributable to outstanding options 7,831 6,768
--------- ---------
Total shares 81,326 78,944
========= =========
Net income $ 33,444 $ 32,492
========= =========
Net income per share $ 0.41 $ 0.41
========= =========
FULLY DILUTED
Weighted average number of common shares outstanding 73,495 72,176
Incremental common shares
attributable to outstanding options 7,831 6,768
--------- ---------
Total shares 81,326 78,944
========= =========
Net income $ 33,444 $ 32,492
========= =========
Net income per share $ 0.41 $ 0.41
========= =========
<FN>
Note: The convertible debt is not included in the calculation of fully
diluted net income per share since its inclusion would have had an
anti-dilutive effect.
</TABLE>
<PAGE>
EXHIBIT 12
<TABLE>
<CAPTION>
XILINX, INC.
STATEMENT OF COMPUTATION OF RATIOS OF EARNINGS TO FIXED CHARGES
(in thousands, except ratios)
Three Months Ended
June 28, June 29,
1997 1996
--------- ---------
<S> <C> <C>
Income before taxes $ 49,546 $ 50,375
Add fixed charges 3,680 3,635
--------- ---------
Earnings (as defined) $ 53,226 $ 54,010
========= =========
Fixed charges
Interest expense $ 3,273 $ 3,252
Amortization of debt issuance costs 218 223
Estimated interest component of rent expenses 189 160
--------- ---------
Total fixed charges $ 3,680 $ 3,635
========= =========
Ratio of earnings to fixed charges 14.5 14.9
========= =========
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> MAR-28-1998
<PERIOD-START> MAR-30-1997
<PERIOD-END> JUN-28-1997
<CASH> 130,531
<SECURITIES> 334,954
<RECEIVABLES> 79,163
<ALLOWANCES> 6,459
<INVENTORY> 51,232
<CURRENT-ASSETS> 651,002
<PP&E> 158,777
<DEPRECIATION> 73,331
<TOTAL-ASSETS> 908,223
<CURRENT-LIABILITIES> 115,032
<BONDS> 250,000
0
0
<COMMON> 736
<OTHER-SE> 530,512
<TOTAL-LIABILITY-AND-EQUITY> 908,223
<SALES> 160,761
<TOTAL-REVENUES> 160,761
<CGS> 60,906
<TOTAL-COSTS> 60,906
<OTHER-EXPENSES> 52,604
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 3,491
<INCOME-PRETAX> 49,546
<INCOME-TAX> 16,102
<INCOME-CONTINUING> 33,444
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 33,444
<EPS-PRIMARY> 0.41
<EPS-DILUTED> 0.41
</TABLE>
