UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
(Mark One)
[ X ] Annual report pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934 for the fiscal year ended April 3, 1999 or
[ ] Transition report pursuant to section 13 or 15(d) of the Securities
Exchange Act of 1934
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, including Zip Code)
(408) 559-7778
(Registrant's telephone number, including area code)
SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:
None
SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT:
COMMON STOCK, $.01 PAR VALUE
(Title of Class)
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 [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of the registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [ X ]
The aggregate market value of the voting stock held by non-affiliates of the
registrant, based upon the closing sale price of the Common Stock on June 9,
1999 as reported on the NASDAQ National Market was approximately $6,243,143,000.
Shares of Common Stock held by each executive officer and director and by each
person who owns 5% or more of the outstanding Common Stock have been excluded in
that such persons may be deemed affiliates. This determination of affiliate
status is not necessarily a conclusive determination for other purposes.
At June 9, 1999, the registrant had 156,988,000 shares of Common Stock
outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
Parts of the Proxy Statement for the Registrant's 1999 Annual Meeting of
Stockholders are incorporated by reference in this Form 10-K Report (Part III).
PART I
------
ITEM 1. BUSINESS
Items 1 and 3 of this 10-K contain forward-looking statements concerning the
Company's development efforts, strategy, new product introductions, backlog and
litigation. These statements involve numerous risks and uncertainties including
those discussed throughout this document as well as under "Factors Affecting
Future Operating Results" in Item 7.
GENERAL
Xilinx, Inc. (Xilinx or the Company) designs, develops and markets complete
programmable logic solutions, including advanced integrated circuits (ICs),
software design tools, predefined system functions delivered as cores of logic
and field engineering support. The Company's programmable logic devices (PLDs)
include field programmable gate arrays (FPGAs) and complex programmable logic
devices (CPLDs). These components are standard ICs programmed by Xilinx's
customers to perform desired logic operations. Xilinx also markets HardWire
devices, which are specifically programmed during the manufacturing process and
functionally equivalent to programmed FPGAs. The Company's products are
designed to provide high integration and quick time-to-market for electronic
equipment manufacturers in the computer, peripheral, telecommunications,
networking, industrial control, instrumentation, high-reliability/military, and
consumer markets.
Competitive pressures require manufacturers of electronic systems to bring
increasingly complex products to market rapidly. Customer requirements for
improved functionality, performance, reliability and lower cost are often
addressed through the use of components that integrate ever larger numbers of
logic gates onto a single integrated circuit because such integration often
results in greater speed, smaller die size, lower power consumption and lower
costs. However, while global competition is increasing the demand for more
complex products, it is also shortening product life cycles and requiring more
frequent product enhancements.
Xilinx provides programmable logic solutions, which combine the high density
typically associated with custom gate arrays with the time to market advantages
of programmable logic and the availability of a standard product. The Company
offers a broad product line of PLDs, which serve a wide variety of applications
requiring high levels of integration, competitive speed and acceptable pricing.
In many of these applications where time to market is important, customer demand
is unpredictable and frequent design modifications are necessary, the
flexibility achieved through the products' programmability features is integral.
Xilinx CPLDs complement the Company's FPGA products and contribute to the
Company's efforts to offer comprehensive programmable logic solutions. With
FPGAs, which have the advantages of higher density and lower power consumption,
and CPLDs, which are typically faster and have lower densities, the Company's
products enable electronic equipment manufacturers to rapidly bring their
products to volume production.
The Xilinx software strategy is to deliver an integrated design solution for a
broad customer base ranging from customers who are not familiar with designing
systems using PLDs to the most sophisticated customers accustomed to designing
with high density, custom gate arrays. The objective is to deliver strategic
software advantages that combine ease of use with design flexibility, effective
silicon utilization and leadership performance.
System designers use Xilinx proprietary software design tools together with
industry standard electronic design automation (EDA) tools and predefined system
functions delivered as cores of logic to design, develop and implement Xilinx
programmable logic applications. Designers define the logic functions of the
circuit and revise such functions as necessary. Programmable logic can often be
designed and verified in a few days, as opposed to several weeks or months for
gate arrays, which are customized devices that are defined during the
manufacturing process. Moreover, programmable logic design changes can
typically be implemented in as little as a few hours, as compared to several
weeks for a custom gate array. In addition, significant savings result from the
elimination of non-recurring engineering costs and the reduction of expenses
associated with the redesign and testing of custom gate arrays. By reducing the
cost and scheduling risks of design iterations, PLDs allow greater designer
creativity, including the consideration of design alternatives that often lead
to product improvements. Further, since PLDs are standard products and
production quantities are readily available, exposure to obsolete inventory can
be significantly reduced.
Xilinx was organized in California in February 1984 and in November 1985 was
reorganized to incorporate its research and development limited partnership. In
April 1990, the Company reincorporated in Delaware. The Company's corporate
facilities and executive offices are located at 2100 Logic Drive, San Jose,
California 95124 and its website is www.xilinx.com.
The Company's fiscal year ends on the Saturday nearest March 31. For ease of
presentation, March 31 has been utilized as the fiscal year-end for all
financial statement captions. Fiscal 1999 ended on April 3, 1999 while fiscal
1998 and 1997 ended on March 28, 1998 and March 29, 1997, respectively.
PRODUCTS
The timely introduction of new products which address customer requirements and
compete effectively on the basis of price, functionality and performance is a
significant factor in the future success of the Company's business. Delays in
developing new products with anticipated technological advances or delays in
commencing volume shipments of new products could have an adverse effect on the
Company's financial condition and results of operations. In addition, there can
be no assurance that such products, if introduced, will gain market acceptance
or respond effectively to new technological changes or new product introductions
by other companies.
Programmable Logic Devices
The Company's PLD products include both FPGA and CPLD product lines. All
product offerings are currently classified into four categories. The Base
products consist of the Company's mature product families that are currently
manufactured on technology greater than 0.5 micron; this includes the XC2000,
XC3000, XC3100, XC4000 and XC7000 families. Mainstream products are currently
manufactured on 0.5 micron technology and include the XC4000E, XC4000EX, XC5200
and XC9500 product lines. Support products include serial proms, HardWire and
software.
Advanced products include the Company's newest technologies manufactured on 0.35
micron and smaller, which include the XC4000XL/XLA, XC4000XV, XC9500XL/XV,
Spartan, Spartan XL and Virtex product lines.
The XC4000XL family is the industry's first 3.3 volt FPGA family manufactured on
0.35 micron technology. The family has 11 members shipping in volume ranging in
density from 2,000 to 180,000 system gates. The XC4000XLA family expands on the
XC4000XL architecture with reduced power consumption and improved performance
making it the industry's highest performance 3.3 volt FPGA family. The family
has 8 members shipping in volume ranging in density from 30,000 to 180,000
system gates. The XC4000XV is a 2.5 volt FPGA family that utilizes 0.25 micron
technology. The family has 4 members with up to 500,000 system gates. The
XC9500XL family utilizes a Flash-based CPLD architecture and offers in-system
programmability. This family delivers high speeds, while giving the flexibility
of an enhanced, customer-proven pin-locking architecture and direct interface to
both 3.3 and 5.0 volt systems. The XC9500XV is the industry's first 2.5 volt
CPLD family with significantly reduced power consumption. The Spartan Series of
FPGAs is the Company's first product line that is price competitive with high
volume application-specific integrated circuits (ASICs). Derived from the
XC4000 architecture and spanning up to 40,000 system gates, the Spartan Series
combines high performance, on-chip RAM, software cores, and low prices in high
volumes. The Virtex series of FPGAs redefines the FPGA by offering high density
and performance with unprecedented system level integration. Fabricated in
leading edge 0.22 micron technology, the Virtex family delivers the first fully
programmable alternative to high density system-level ASIC design. Xilinx began
revenue shipments of its 1,000,000 system-gate Virtex device during the third
quarter of fiscal 1999.
The preceding paragraph contains forward-looking statements which are subject to
risks and uncertainties including those discussed in Item 7 in "Management's
Discussion and Analysis of Financial Condition and Results of Operation -
Factors Affecting Future Results."
PLDs are available in a wide variety of plastic and ceramic package types,
including pin-grid array, quad flat pack and ball grid array configurations.
These devices meet the current industry standard operating temperature ranges of
commercial, industrial and military users.
Software design tools
Xilinx offers complete software design tool solutions, which enable the
implementation of designs in Xilinx PLDs. These software design tools combine
powerful technology with a flexible, easy to use graphical interface to help
achieve the best possible designs within each customer's project schedule,
regardless of the designer's experience level.
The Company offers two complementary software design tool solutions. The
Foundation Series provides designers with a complete, ready-to-use design
solution based on industry-standard hardware description languages (HDLs) and is
easy to learn and use. For those customers new to designing with PLDs or
desiring a low cost approach, the Company offers this fully integrated software
solution. The Alliance Series is for designers who want maximum flexibility to
integrate programmable logic design into their existing EDA environment and
methodology. With interfaces to over 50 EDA vendors, this product allows users
to select tools with which they are most familiar thereby shortening their
design cycle.
In addition, the Company offers WebFITTER, a free web-based, CPLD design fitting
software tool that allows system designers to evaluate their designs using the
XC9500/XL/XV families of CPLDs, on the latest version of Xilinx software.
Design results are made available via the Internet in minutes. The Company also
recently purchased software assets including PLSynthesizer, a synthesis tool;
ABEL, the industry's most widely used high-level description language for
programmable logic devices; and Design Navigator, a team-based, Internet-enabled
software environment that integrates design entry, synthesis, place and route
and simulation functions.
The Company also offers more than 75 pre-implemented, fully verified, drop-in
cores of logic for commonly used complex functions such as digital signal
processing (DSP), bus interfaces, processors and peripheral interfaces. Using
logic cores, available from the Company and third party AllianceCORE partners,
customers can shorten development time, reduce design risk and obtain superior
performance for their designs. Additionally, the Company's CORE Generator
system is the delivery mechanism for cores. It offers a simple user interface,
complete cataloging of available cores, easy selection of parameter-based cores
optimized for the Company's FPGAs and features an interface to third-party
system level DSP design tools. The CORE Generator is shipped with the Company's
software design tools and is also available via the Company's Web site.
Xilinx's software design tools operate on desktop computer platforms, including
personal computers using Windows 95, 98 and NT and workstations from IBM, HP,
DEC and Sun Microsystems. Through March 31, 1999, the Company had sold
approximately 53,000 software design systems worldwide.
RESEARCH AND DEVELOPMENT
Xilinx's research and development activities are primarily directed towards the
design of new integrated circuits, the development of advanced semiconductor
manufacturing processes, the development of new software design tools and cores
of logic as well as ongoing cost reductions and performance improvements in
existing products. The Company's recent primary areas of focus have been: to
introduce the industry's first programmable system integration solution (Virtex)
and a low-cost ASIC replacement FPGA solution (Spartan), to extend the
performance and density range of the industry's most popular FPGA series
(XC4000XLA/XV), and to increase market share of the CPLD market (XC9500XL/XV).
The Company also plans to place increasing emphasis on the involvement of Xilinx
Labs, Xilinx's corporate R&D group which concentrates on developing longer-term,
future generation technology.
Xilinx supports all its product families with easy-to-use, fully automated
software design tools and cores of logic. However, there can be no assurance
that any of the Company's development efforts will be successful, timely or
cost-effective.
Xilinx believes that software design tools and logic cores are important factors
in expanding the use of programmable logic devices. The Company's research and
development challenge is to continue to develop new products that create
cost-effective solutions for customers. In fiscal 1999, 1998 and 1997, the
Company's research and development expenses were approximately $94.5 million,
$80.5 million and $71.1 million, respectively. The Company expects that it will
continue to spend substantial funds on research and development. The Company
believes that technical leadership is essential to its future success and is
committed to continuing a significant level of research and development effort.
MARKETING AND SALES
Xilinx sells its products through several channels of distribution: direct sales
to manufacturers by independent sales representative firms, sales through
franchised domestic distributors, and sales through foreign distributors.
Xilinx also utilizes a direct sales management organization and field
applications engineers (FAEs) as well as manufacturer's representatives and
distributors to reach a broad base of potential customers. The Company's
independent representatives generally address larger OEM customers and act as a
direct sales force, while distributors serve the balance of the Company's
customer base. The Company's sales and customer support personnel support all
channels and consult with customers about their plans, ensuring that the right
software and devices are selected at the beginning of a customer's project.
In North America, Avnet, Inc., and Insight Electronics, Inc. distribute the
Company's products nationwide, and Nu Horizons Electronics provides additional
regional sales coverage. The Company also utilized Marshall Industries through
the third quarter of fiscal 1999. The Company believes that distributors
provide a cost-effective means of reaching certain customers. Since the
Company's PLDs are standard products, they do not present many of the inventory
risks to distributors as compared to custom gate arrays, and they simplify the
requirements for distributor technical support.
The Company changed its accounting method during fiscal 1999 for recognizing
revenue on all shipments to international distributors. While the Company
previously deferred revenue on shipments to domestic distributors until the
product was sold to the end user, it recognized revenue upon shipment to
international distributors, net of appropriate reserves for returns and
allowances. Following the accounting change, revenue recognition on shipments
to distributors worldwide is deferred until the products are sold to the end
customer. Distributors have certain rights of return and price protection
privileges on unsold product until the distributor sells the product.
BACKLOG AND CUSTOMERS
As of March 31, 1999, the Company's backlog of purchase orders scheduled for
delivery within the next three months was approximately $122.0 million, after
adjustments for estimated discounts. Because of the previous slowdown in the
semiconductor market and a widespread perception by customers that product is
readily available, many of the Company's customers are currently placing orders
for near-term delivery and providing the Company limited visibility to demand
for products beyond three months. Backlog as of March 28, 1998 was
approximately $74.0 million, after adjustments for estimated discounts. Backlog
amounts for both years include orders to distributors, which may receive price
adjustments upon sale to end customers. Also, orders constituting the Company's
current backlog are subject to changes in delivery schedule or to cancellation
at the option of the purchaser without significant penalty. Accordingly,
although useful for scheduling production, backlog as of any particular date may
not be a reliable measure of revenues for any future period.
No end customer accounted for more than 10% of revenues in fiscal 1999, 1998 or
1997. See Note 11 of Notes to Consolidated Financial Statements in Item 8 for
geographic information.
WAFER FABRICATION
The Company does not manufacture processed wafers used for its products. Over
the last several years, the majority of wafers purchased by the Company were
manufactured by Seiko Epson Corporation (Seiko Epson) and United
Microelectronics Corporation, (UMC) with fiscal 1999 production also coming from
UMC affiliated companies including our joint venture, United Silicon Inc.
(USIC). Precise terms with respect to the volume and timing of wafer production
and the pricing of wafers produced by UMC, Seiko Epson and USIC are determined
by periodic negotiations between the Company and these wafer foundry partners.
Xilinx's strategy is to focus its resources on creating new integrated circuits
and software design tools and on market development rather than on wafer
fabrication. The Company continuously evaluates opportunities to enhance
foundry relationships and/or obtain additional capacity from both its main
suppliers as well as other suppliers of leading-edge process technologies. As a
result, the Company has entered into agreements with UMC and Seiko Epson as
discussed below.
The Company, United Microelectronics Corporation (UMC) and other parties entered
into a joint venture to construct a wafer fabrication facility in Taiwan, known
as United Silicon Inc. (USIC). See Note 4 of Notes to Consolidated Financial
Statements in Item 8. During fiscal 1999, the Company invested additional
equity of $5.4 million in USIC to bring the total cumulative investment to
$107.1 million. However, as other parties increased their equity in USIC during
the most recent investment, the Company's equity ownership decreased to 20%.
The Company can receive up to 31.25% of the wafers produced in this facility.
In fiscal 1997, the Company signed an agreement with Seiko Epson. See Note 2 of
Notes to Consolidated Financial Statements in Item 8. This agreement was
amended in fiscal 1998 and provides for an advance to Seiko Epson of $150.0
million. In conjunction with the agreement, $60.0 million was paid in fiscal
1997 and an additional $90.0 million was paid in fiscal 1998. Repayment of this
advance is made in the form of wafer deliveries, which began during the fourth
quarter of fiscal 1998. Specific wafer pricing is in U.S. dollars and is based
upon the prices of similar wafers manufactured by other, specifically
identified, leading-edge foundry suppliers. The advance payment provision also
provides for interest to be paid to the Company in the form of free wafers.
SORT, ASSEMBLY AND TEST
Wafers purchased by the Company are sorted by the wafer foundry, independent
sort subcontractors or by the Company. Sorted wafers are assembled by
subcontractors in facilities in Pacific Rim countries. During the assembly
process, the wafers are separated into individual die, which are then assembled
into various package types. Following assembly, the packaged units are tested
by independent test subcontractors or by Xilinx personnel at the Company's San
Jose or Dublin, Ireland facilities.
PATENTS AND LICENSES
Through March 31, 1999, the Company held approximately 300 United States patents
and maintains an active program of filing for additional patents in the areas of
software, IC architecture and design. The Company intends to vigorously protect
its intellectual property. The Company believes that failure to enforce its
patents or to effectively protect its trade secrets could have an adverse effect
on the Company's financial condition and results of operations. See Legal
Proceedings in Item 3 and Note 12 of Notes to Consolidated Financial Statements
in Item 8.
Xilinx has acquired various software licenses that permit the Company to grant
object code sublicenses to its customers for certain third party software
programs licensed with the Company's software design tools. In addition, the
Company has licensed certain software for internal use in product design.
EMPLOYEES
Xilinx's employee population grew by 7% during the past year. As of March 31,
1999, Xilinx had 1,491 employees compared to 1,391 at the end of the prior year.
None of the Company's employees are represented by a labor union. The Company
has not experienced any work stoppages and believes it has good relations with
its employees.
COMPETITION
Our FPGAs and CPLDs compete in the programmable logic marketplace, with a
substantial majority of our revenues derived from our FPGA product families.
The industries in which we compete are intensely competitive and are
characterized by rapid technological change, product obsolescence and continuous
price erosion. We expect increased competition, both from existing competitors
and from a number of new companies that may enter our market. We believe that
important competitive factors in the programmable logic market include:
- - product pricing;
- - product performance, reliability and density;
- - the adaptability of products to specific applications;
- - ease of use and functionality of software design tools;
- - functionality of predefined cores of logic; and
- - the ability to provide timely customer service and support.
Our strategy for expansion in the programmable logic market includes continued
introduction of new product architectures which address high volume, low cost
applications as well as high performance, leading-edge density applications. In
addition, we would anticipate continued price reductions proportionate with our
ability to lower the cost of manufacture for established products. However, we
cannot assure that we will be successful in achieving these strategies. Our
major sources of competition are comprised of several elements:
- - the manufacturers of custom CMOS gate arrays;
- - providers of high density programmable logic products characterized by
FPGA-type architectures;
- - providers of high speed, low density CPLD devices; and
- - other providers of new or emerging programmable logic products.
We compete with custom gate array manufacturers on the basis of lower design
costs, shorter development schedules, reduced inventory risks and field
upgradability. The primary attributes of custom gate arrays are high density,
high speed and low production costs in high volumes. We continue to develop
lower cost architectures intended to narrow the gap between current custom gate
array production costs (in high volumes) and PLD production costs. We compete
with high density programmable logic suppliers on the basis of performance, the
ability to deliver complete solutions to customers, voltage and customer support
by taking advantage of the primary characteristics of our PLD product offerings
which include: flexibility, high speed implementation, quick time-to-market and
system level capabilities. Competition among CPLD suppliers and manufacturers
of new or emerging programmable logic products is based primarily on price,
performance, design, customer support, software utility and the ability to
deliver complete solutions to customers. Some of our current or potential
competitors have substantially greater financial, manufacturing, marketing and
technical resources than we do. To the extent that such efforts to compete are
not successful, our financial condition and results of operations could be
materially adversely affected.
The benefits of programmable logic have attracted a number of companies to this
market. Competition is based primarily on density, speed, design, price or
software utility. We recognize that different applications require different
programmable technologies, and we are developing architectures, processes and
products to meet these varying customer needs. Recognizing the increasing
importance of standard software solutions, we have developed common software
design tools that support the full range of integrated circuit products. We
believe that automation and ease of design are significant competitive factors
in the programmable logic market.
Several companies, both large and small, have introduced products that compete
with ours or have announced their intention to enter this market. Some of our
competitors may possess innovative technology, which could prove superior to our
technology in certain applications. In addition, we anticipate potential
competition from suppliers of logic products based on new technologies. Some of
our current or potential competitors have substantially greater financial,
manufacturing, marketing and technical resources than we do. This additional
competition could adversely affect our financial condition and results of
operations.
We could also face competition from our licensees. Under a license from us,
Lucent Technologies is manufacturing and marketing our non-proprietary XC3000
FPGA products and is employing that technology to provide additional FPGA
products offering higher density. Seiko Epson has rights to manufacture our
products and market them in Japan and Europe, but is not currently doing so.
Advanced Micro Devices is licensed to use certain of our patents to manufacture
and market products other than SRAM-based FPGAs.
EXECUTIVE OFFICERS OF THE REGISTRANT
Certain information regarding each of Xilinx's executive officers is set forth
below:
<TABLE>
<CAPTION>
Officer
Name Age Position Since
<S> <C> <C> <C>
Willem P. Roelandts 54 President and Chief Executive Officer 1996
Kris Chellam 48 Senior Vice President, Finance and Chief Financial Officer 1998
Steven Haynes 48 Vice President, Worldwide Sales 1995
Dennis Segers 46 Senior Vice President and General Manager 1995
Richard W. Sevcik 51 Senior Vice President and General Manager 1997
Sandeep S. Vij 33 Vice President, Marketing and General Manager 1996
</TABLE>
There are no family relationships among the executive officers of the Company.
On the Board of Directors, Mr. Vonderschmitt, Chairman of the Board, is the
brother-in-law of Mr. Sanda, Director.
Willem P. "Wim" Roelandts joined the Company in January 1996 as Chief Executive
Officer and a member of the Company's Board of Directors. In April 1996, he was
appointed to the additional position as President of the Company. Prior to
joining the Company, he served at Hewlett-Packard Company, a computer
manufacturer, as Senior Vice President and General Manager of Computer Systems
Organizations from August 1992 through January 1996 and as Vice President and
General Manager of the Network Systems Group from December 1990 through August
1992.
Kris Chellam joined the Company in July 1998 as Senior Vice President, Finance
and Chief Financial Officer. Prior to joining the Company, he served at Atmel
Corporation as Senior Vice President and General Manager of a product group from
March to July 1998 and as Vice President, Finance and Administration, and Chief
Financial Officer from September 1991 through March 1998.
Steven Haynes joined the Company in 1987 as the Regional Sales Manager of the
Northeast region, was promoted to Area Sales Director in 1988, and was appointed
Vice President, North American Sales in 1995. In November 1998, he was promoted
and now holds the position of Vice President, Worldwide Sales.
Dennis Segers joined the Company in January 1994 as Director of Strategic
Products and was promoted to Vice President and General Manager in November
1995. In April 1998, he was appointed Senior Vice President, and General
Manger.
Richard W. Sevcik joined the Company in April 1997 as Senior Vice President and
General Manager. He was at Hewlett-Packard Company for 10 years where, from
1994 through 1996, he served as Group General Manager of the company's Systems
Technology Group and oversaw five divisions involved with product development
for servers, workstations, operating systems, microprocessors, networking and
security. In 1995 he was named Vice President. From 1992 to 1994, he served as
Group General Manager of Computer Systems and Servers and was responsible for
four divisions.
Sandeep S. Vij joined the Company in April 1996 as Director, FPGA Marketing and
was promoted to Vice President, Marketing in October 1996. In October 1997, he
was appointed to the additional position of General Manager. From 1990 until
April 1996, he served at Altera Corporation, a semiconductor manufacturer, where
he most recently served as the Product Marketing Manager.
ITEM 2. PROPERTIES
Xilinx's corporate offices, which include the administrative, sales, customer
support, marketing, research and development and final testing groups are
located in San Jose, California. The site includes adjacent buildings providing
335,000 square feet of available space, which are leased through 1999. The
Company has entered into lease agreements relating to these facilities which
would allow the Company to purchase these facilities on or before the lease
expiration dates in December 1999. The Company has also entered into an
agreement whereby an 180,000 square foot facility is being constructed on
property adjacent to the Company's corporate facilities. The Company will have
the option to purchase the building after an initial lease term. See Note 6 of
Notes to Consolidated Financial Statements in Item 8.
In addition, the Company has a 100,000 square foot administrative, research and
development and final testing facility in the metropolitan area of Dublin,
Ireland and a 60,000 square foot facility in Boulder, Colorado. The Irish
facility is being used to service the Company's customer base outside of North
America, while the Boulder facility is the primary location for the Company's
software efforts in the areas of research and development, manufacturing and
quality control. Additionally, the Company purchased a 59-acre parcel of land
located in Longmont, Colorado, near the Company's current Boulder facility.
Plans for infrastructure and the future development of the new property have not
been finalized.
The Company also maintains North America sales offices in twenty-six locations
which include the metropolitan areas of Atlanta, Chicago, Denver, Dallas, Los
Angeles, Minneapolis, Philadelphia, Raleigh and San Jose as well as ten
international sales offices located in the metropolitan areas of London, Munich,
Paris, Stockholm, Milan, Brussels, Tokyo, Taipei, Seoul and Hong Kong.
ITEM 3. 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 have 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. Both Altera
and the Company have filed motions with the Court for summary judgement with
respect to certain of the issues pending in the litigation. Those motions are
still pending.
On July 22, 1998, Altera and Joseph Ward, a former Xilinx employee, filed suit
against the Company in Superior Court in Santa Clara County, California, arising
out of the Company's efforts to prevent disclosure of certain Company
confidential information. Altera's suit requests declaratory relief and claims
the Company engages in unfair business practices and interference with
contractual relations. On September 10, 1998 the Company filed cross claims
against Altera and Ward for unfair competition and breach of contract, among
other claims, in the California action. On October 20, 1998, Altera and Ward
filed crossclaims against the Company for malicious prosecution of civil action
and defamation.
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 of these matters could differ
materially due to the uncertain nature of each legal proceeding and because the
lawsuits are still in the pre-discovery or pre-trial stages.
On July 31, 1998, the Lemelson Foundation Partnership (Lemelson) filed a lawsuit
in the United States District Court in Phoenix, Arizona against the Company and
twenty-five (25) other United States semiconductor companies for infringement of
certain of its patents. During the third quarter of fiscal 1999, the Company
entered into a license settlement with Lemelson. In response, Lemelson
dismissed with prejudice all claims against the Company.
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 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of security holders during the fourth
quarter of the fiscal year covered by this report.
PART II
-------
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND
RELATED STOCKHOLDER MATTERS
Xilinx's Common Stock is listed on the NASDAQ/AMEX National Market System under
the symbol XLNX. As of March 31, 1999, there were approximately 580 shareholders
of record. Since many holders' shares are listed under their brokerage firms'
names, the actual number of shareholders is estimated by the Company to be over
30,000.
<TABLE>
<CAPTION>
Fiscal Year 1999 Fiscal Year 1998
High Low High Low
------ ------ ------ ------
<S> <C> <C> <C> <C>
First Quarter $23.63 $16.06 $28.75 $22.63
Second Quarter 21.50 15.25 28.19 22.59
Third Quarter 32.56 15.94 25.63 14.84
Fourth Quarter 43.63 32.50 23.31 17.03
</TABLE>
ITEM 6. SELECTED FINANCIAL DATA
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENT OF INCOME DATA
(In thousands, except per share amounts) Years ended March 31,
1999 1998 1997 1996 1995
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Net revenues $661,983 $613,593 $568,143 $560,802 $355,130
Operating income 181,974 173,868 159,061 ^ 165,756 & 92,048 #
Income before equity in joint venture and
cumulative effect of change in accounting
principle 189,399 180,596 165,758 ^ 170,902 & 94,845 #
Provision for income taxes 54,925 56,728 55,382 69,448 35,567
Net income 102,592 ~ 126,587 110,376 ^ 101,454 & 59,278 #
Net income per share:
Basic $ 0.70 $ 0.86 $ 0.76 ^ $ 0.71 & $ 0.43 #
Diluted $ 0.67 $ 0.79 $ 0.69 ^ $ 0.64 & $ 0.40 #
Shares used in per share calculations:
Basic 146,422 147,482 145,632 142,184 138,828
Diluted 154,310 160,020 159,350 157,910 148,218
Pro forma amounts with the change in
accounting principle related to revenue
recognition applied retroactively: (unaudited)
Net revenues $661,983 $598,065 $568,173 * *
Net income 129,238 118,987 110,391 * *
Net income per share:
Basic $ 0.88 $ 0.81 $ 0.76 * *
Diluted $ 0.84 $ 0.74 $ 0.69 * *
<FN>
^ After write-off of discontinued product family of $5,000, $0.03 per basic and diluted
shares net of tax.
& After non-recurring charge for in-process technology related to the acquisition of NeoCAD of
$19,366, $0.14 per basic share and $0.12 per diluted share.
# After non-recurring charge for the write-off of a minority investment of $2,500, $0.01 per basic
and diluted shares net of tax.
* Data was not available in sufficient detail to provide pro forma information for these years.
~ Net income includes $26,646 cumulative effect of change in accounting principle.
</TABLE>
<TABLE>
<CAPTION>
CONSOLIDATED BALANCE SHEET DATA
(In thousands) Years ended March 31,
1999 1998 1997 1996 1995
---------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Working capital $ 490,512 $474,567 $504,302 $436,070 $180,064
Total assets 1,070,248 941,238 847,693 720,880 320,940
Long-term debt - 250,000 250,000 250,000 -
Stockholders' equity 879,318 550,175 490,680 368,244 243,971
---------- -------- -------- -------- --------
</TABLE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
CAUTIONARY STATEMENT
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 under "Factors Affecting Future Operating Results".
Forward looking statements can often be identified by the use of forward looking
words, such as "may," "will," "could," "should," "expect," "believe,"
"anticipate," "estimate," "continue," "plan," "intend," "project," or other
similar words.
NATURE OF OPERATIONS
Xilinx, Inc. (Xilinx or the Company) designs, develops and markets complete
programmable logic solutions, including advanced integrated circuits (ICs),
software design tools, predefined system functions delivered as cores of logic
and field engineering support. The Company's programmable logic ICs include
field programmable gate arrays (FPGAs) and complex programmable logic devices
(CPLDs). These components are standard ICs programmed by Xilinx's customers to
perform desired logic operations. Xilinx also markets HardWire devices, which
are mask-programmed ICs functionally equivalent to programmed FPGAs. The
Company's products are designed to provide high integration and quick
time-to-market for electronic equipment manufacturers in the data processing,
telecommunications, networking, industrial control, instrumentation,
high-reliability/military and consumer markets. The Company markets its
products throughout the world through a direct sales organization, direct sales
to manufacturers by independent sales representative firms, sales through
franchised domestic distributors and sales through foreign distributors.
Xilinx's products have provided effective solutions for a wide range of customer
logic requirements.
RESULTS OF OPERATIONS
NET REVENUE
<TABLE>
<CAPTION>
(In thousands) 1999 Change 1998 Change 1997
-------------- -------- ------- -------- ------- --------
<S> <C> <C> <C> <C> <C>
Net revenues $661,983 7.9% $613,593 8.0% $568,143
</TABLE>
Xilinx's net revenue increased 7.9% during fiscal 1999. The increase was
primarily due to the continued penetration in high-growth end markets
attributable to the XC4000EX, XC4000XL and XC9500 product lines, which was
partially offset by decreased revenues relating to the Company's mature XC4000
family as well as the XC3000 family. Despite the revenue growth in fiscal 1999,
revenues continue to be impacted by the Japanese and Asia Pacific economic
conditions. The Company believes that this factor, as well as others described
in "Factors Affecting Future Operating Results," could continue to impact
revenues in the near term. The 8.0% increase in fiscal 1998 over 1997 was
primarily due to the revenue growth of the, XC4000EX and XC4000XL devices as
well as theXC5200 and XC9500 product lines.
The Company currently classifies its product offerings into four categories.
Base products consist of the Company's mature product families that are
currently manufactured on technologies greater than 0.5 micron; this includes
the XC2000, XC3000, XC3100, XC4000 and XC7000 families. Base products
represented 22.2% of total revenues in fiscal 1999, as compared to 42.9% in
fiscal 1998. Mainstream products are currently manufactured on 0.5 micron
technology and include the XC4000E, XC4000EX, XC5200 and XC9500 product lines.
Mainstream products represented 41.1% of total revenues in fiscal 1999 and 38.0%
in fiscal 1998. Advanced products include the Company's newest technologies
manufactured on 0.35 micron and smaller, which include the XC4000XL, XC4000XV,
XC4000XLA, XC9500XL, Virtex, Spartan and SpartanXL product lines. Advanced
products represented 25.0% and 6.7% of total revenues in fiscal 1999 and 1998,
respectively, representing an increase of over 300% year over year. The revenue
increase in Advanced products was driven primarily by the XC4000XL product
family along with the Virtex and Spartan product lines. The Company's Support
products make up the remainder of its product offerings and include serial
proms, HardWire, High Reliability and software. Support products represented
11.7% and 12.4% of total revenues in fiscal 1999 and 1998, respectively. No end
customer accounted for more than 10% of revenues in fiscal 1999, 1998 or 1997.
During fiscal 1999, the Company's total PLD unit shipments increased 21%,
compared to fiscal 1998. However, the average selling price for the highest
volume PLD products decreased approximately 30% from fiscal 1998 prices while
individual products within certain families experienced price decreases in
excess of 50% during the year. In order to expand market share, the Company
passes on to customers manufacturing cost reductions by reducing prices to the
extent that the Company can maintain acceptable returns. Price erosion has been
common in the semiconductor industry, as advances in both architecture and
manufacturing process technology have permitted continual reductions in unit
cost. The Company has historically been able to offset much of the revenue
declines of its mature technologies with increased revenues from newer
technologies, although no assurance can be given that the Company can continue
to do so in the future.
International revenues represented approximately 32%, 38%, and 36% of total
revenues for fiscal years 1999, 1998 and 1997, respectively. International
revenues are derived from customers in Europe, Japan and Asia Pacific/Rest of
World which represented approximately 21%, 7% and 4% of the Company's worldwide
revenues, respectively, in fiscal 1999 as compared to approximately 23%, 10% and
5% of worldwide revenues, respectively, in fiscal year 1998. Japan and Asia
Pacific/Rest of World experienced revenue declines in fiscal 1999 as compared to
a year ago primarily as a result of the continued weak economic environment in
those regions. Europe, Japan and Asia Pacific/Rest of World experienced revenue
growth in fiscal 1998 as compared to fiscal 1997 although the revenue growth in
Japan was adversely impacted by the weakened yen relative to the U.S. dollar.
During the fourth quarter of fiscal 1999, the Company changed its accounting
method for recognizing revenue on all shipments to international distributors.
The change was made retroactive to the beginning of fiscal 1999. While the
Company previously deferred revenue on shipments to domestic distributors until
the products were sold to the end user, it recognized revenue upon shipment to
international distributors, net of appropriate reserves for returns and
allowances. Following the accounting change, revenue recognition on shipments
to distributors worldwide is deferred until the products are sold to the end
customer. The Company believes that deferral of revenue on shipments to
distributors until the product is shipped by the distributor to an end customer
is a more meaningful measurement of results of operations as it better conforms
to the substance of the transaction considering the changing business
environment in the international marketplace, is consistent with industry
practice, and accordingly, it will better focus the Company on end customer
sales; therefore it is a preferable method of accounting. The cumulative effect
of the change in accounting method for prior years was a charge of $26.6
million, net of $12.0 million in taxes, or $0.17 net income per diluted share.
GROSS MARGIN
<TABLE>
<CAPTION>
(In thousands) 1999 Change 1998 Change 1997
-------------------------- --------- ------- --------- ------ ---------
<S> <C> <C> <C> <C> <C>
Gross margin $410,717 7.3% $382,903 9.8%* $348,806*
Percentage of revenue 62.0% 62.4% 61.4%*
<FN>
* Includes write-off of discontinued product family of $5.0 million. Gross
margin as a percentage of revenues was 62.3% excluding this charge.
</TABLE>
During fiscal 1999, the Company's gross margin percentage declined from the
prior year primarily as a result of a non-recurring royalty payment made
pursuant to a license settlement with Lemelson Foundation Partnership which was
partially offset by lower wafer prices from wafer suppliers, manufacturing
process technology improvements, and improved yields that offset selling price
reductions. See Note 12 of Notes to Consolidated Financial Statements. The
gross margin percentage remained consistent from fiscal 1997 to 1998, excluding
the impact of a $5.0 million write-off of a discontinued product family, as
selling price reductions were offset by the favorable impact of lower wafer
prices from wafer suppliers, manufacturing process technology improvements, the
impact of the stronger U.S. dollar against the yen, and improved yields. The
Company recognizes that ongoing price reductions for its integrated circuits are
a significant element in expanding the market for its products. Management
believes that a gross margin objective in the range of 60% to 62% of revenues is
consistent with expanding market share while realizing acceptable returns,
although there can be no assurance that future gross margins can remain in this
range.
During fiscal 1997, the Company discontinued the XC8100 family of one-time
programmable antifuse devices. As a result, the Company recorded a pretax
charge against earnings of $5.0 million. This charge primarily related to the
write-off of inventory and termination charges related to purchase commitments
to foundry partners for work-in-process wafers which had not completed the
manufacturing process.
RESEARCH AND DEVELOPMENT
<TABLE>
<CAPTION>
(In thousands) 1999 Change 1998 Change 1997
-------------------------- -------- ------- -------- ------- --------
<S> <C> <C> <C> <C> <C>
Research and development $94,493 17.4% $80,456 13.2% $71,075
Percentage of revenue 14.3% 13.1% 12.5%
</TABLE>
The company increased its expenditures in research and development as it has
done each year during its fifteen-year history. The increase in research and
development expenditures from fiscal 1998 to 1999 was associated with designing
and developing new product architectures of complex, high density devices
including wafer purchases, software development, increased labor-related costs,
and testing of new products along with a $3.6 million charge to acquire
in-process technology in conjunction with certain assets purchased from MI
Acquisition LLP. See Note 13 of Notes to Consolidated Financial Statements.
The increase in research and development expenses from fiscal 1997 to 1998 was
primarily due to increased costs associated with designing and developing new
product architectures as well as labor-related expenses. The Company remains
committed to a significant level of research and development effort in order to
maintain its technology leadership in the programmable logic marketplace.
Through March 31, 1999, the Company has received approximately 300 U.S. patents
and maintains an active program of filing for additional patents in the areas of
software, IC architecture and design.
SALES, GENERAL AND ADMINISTRATIVE
<TABLE>
<CAPTION>
(In thousands) 1999 Change 1998 Change 1997
-------------------------- --------- ------- --------- ------- ---------
<S> <C> <C> <C> <C> <C>
Sales, general and
administrative $134,250 4.4% $128,579 8.4% $118,670
Percentage of revenue 20.3% 21.0% 20.9%
</TABLE>
The 4.4% increase in sales, general and administrative expenses in fiscal 1999
was primarily attributable to increased marketing expenses for new product
introductions, increased sales commissions on higher revenues from U.S.
distributors along with increased personnel costs. Sales, general and
administrative expenses increased in fiscal 1998 over 1997 due to increased
headcount and related employee expenses and, to a lesser extent, an increase in
legal expenses. The Company remains committed to controlling 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 significantly increase in the future.
INTEREST AND OTHER, NET
<TABLE>
<CAPTION>
(In thousands) 1999 Change 1998 Change 1997
-------------------------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Interest income and other $7,425 10.4% $6,728 0.5% $6,697
Percentage of revenue 1.1% 1.1% 1.2%
</TABLE>
The Company earns interest income on its cash, cash equivalents and short-term
and long-term investments. The amount of interest earned is a function of the
balance of cash invested as well as prevailing interest rates. The Company
incurred interest expense on the $250.0 million 5 1/4% convertible subordinated
notes, which were fully converted in February 1999. The Company's investment
portfolio contains tax-advantaged municipal securities, which had pretax yields
that were less than the interest rate on the convertible subordinated notes.
For financial reporting purposes, the Company effectively recorded the
difference between the pretax and tax-equivalent yields as a reduction in
provision for taxes on income.
Average cash and investment balances decreased slightly from the prior year
while interest rates increased moderately keeping interest income constant from
fiscal 1998 to fiscal 1999. The 10.4% increase in interest and other income in
fiscal 1999 was primarily due to the decrease in interest expense related to the
redemption of the convertible notes in fiscal 1999 offset partially by the
increase in foreign currency exchange losses from $0.7 million in foreign
exchange gains in the prior year to $0.4 million foreign exchange losses in
fiscal 1999. In 1998, average cash and investment balances and average interest
rates remained fairly consistent with the prior year, resulting in comparable
net interest and other income in both years. The amount of net interest and
other income in the future will continue to be impacted by the level of the
Company's average cash and investment balance, prevailing interest rates, the
balance of any debt outstanding, and foreign currency exchange rates.
PROVISION FOR INCOME TAXES
<TABLE>
<CAPTION>
(In thousands) 1999 Change 1998 Change 1997
------------------------------ -------- ------- -------- ------- --------
<S> <C> <C> <C> <C> <C>
Provision for taxes on income $54,925 (3.2%) $56,728 2.4% $55,382
Effective tax rate 29.0% 31.4% 33.4%
</TABLE>
The tax rates from fiscal 1997 through fiscal 1999 were favorably impacted by
legislation reinstating the R&D Tax Credit. Furthermore, increased profits
in foreign operations where the tax rate is lower than the U.S. rate combined
with lower state taxes favorably impacted the Company's tax rates.
JOINT VENTURE EQUITY INCOME
The Company records its proportional ownership of the net income (loss) of
United Silicon Inc. (USIC), a wafer fabrication joint venture located in Taiwan,
as joint venture equity income (loss). The fiscal 1999 net loss was a result of
the continued ramp up in production of the wafer fabrication facility. The net
income in fiscal 1998 was primarily attributable to foreign exchange gains as
well as interest earned on its investment portfolio. Many of the expenses
associated with full foundry operations are being incurred although the facility
has not reached full production.
INFLATION
To date, the effects of inflation upon the Company's financial results have not
been significant.
FINANCIAL CONDITION, LIQUIDITY AND CAPITAL RESOURCES
The Company's financial condition as of March 31, 1999 continued to be strong
with total current assets exceeding total current liabilities by 3.9 times. At
March 31, 1998, total current assets exceeded total current liabilities by 4.8
times. The Company has used a combination of equity and debt financing and cash
flow from operations to support on-going business activities, secure
acquisitions and investments in complementary technologies, obtain facilities
and capital equipment and finance inventory and accounts receivable.
CASH, CASH EQUIVALENTS AND SHORT-TERM INVESTMENTS
Xilinx's cash, cash equivalents and short-term investments increased by $40.3
million in 1999 as the Company continued to generate positive cash flows from
operations. Cash, cash equivalents and short-term investments represented 37.6%
of total assets at March 31, 1999. The Company generated cash flow of $243.6
million from operating activities in 1999, offset by $298.6 million of cash used
for investing activities and $58.3 million used in financing activities.
Investing activities during fiscal 1999 included the net purchase of
investments, expenditures for property, plant and equipment, an additional
investment in the USIC joint venture, and certain assets purchased from MI
Acquisition LLP. Financing activities during 1999 included $113.8 million to
acquire treasury stock offset by $55.5 million in proceeds from sales of common
stock under employee option and stock purchase plans.
RECEIVABLES
Receivables increased 20.5% from $60.9 million at the end of 1998 to $73.4
million at the end of 1999. Days sales outstanding at the end of 1999 and 1998
were both 36 days. The consistency in days sales outstanding was primarily a
result of the increase in domestic sales through distribution where some
distributors received discounts for prompt payment.
INVENTORIES
Inventories decreased 5.9% from $55.3 million at March 1998 to $52.0 million at
March 1999. Inventory levels at March 31, 1999 represent 68 days of inventory
compared to 86 days at March 31, 1998. Inventory levels decreased during fiscal
1999 due to higher than expected shipments and increased focus on supply chain
management in addition to both architecture and manufacturing process technology
improvements that have permitted continued cost reductions. The Company seeks
to balance two competing objectives with regard to inventory management. On the
one hand, the Company believes that its standard, off-the-shelf products should
be available for prompt shipment to customers. Accordingly, it attempts to
maintain sufficient levels of inventory in various product, package and speed
configurations to meet anticipated customer demand. On the other hand, the
Company also wishes to minimize the handling costs associated with maintaining
higher inventory levels and to realize fully the opportunities for cost
reductions associated with architecture and manufacturing process advancements.
The Company continually strives to balance these two objectives to provide
excellent customer response at a competitive cost.
PROPERTY, PLANT AND EQUIPMENT
During 1999, Xilinx invested $40.9 million in property and equipment, as
compared to $29.7 million in 1998. Primary investments in fiscal 1999 were for
software development tools and semiconductor design, test and manufacturing
equipment at each of its manufacturing locations.
CURRENT LIABILITIES
Current liabilities increased from $125.7 million at the end of fiscal 1998 to
$167.2 million at the end of fiscal 1999. The increase was primarily
attributable to an increase in deferred income on shipments to distributors.
This is a result of the accounting change, under which the Company now defers
revenue from international distributors in addition to domestic distributors
until the distributor ships the product to an end customer.
LONG-TERM DEBT AND LINES OF CREDIT
In fiscal 1999, the Company converted in full $250.0 million of 5 1/4%
Convertible Subordinated Notes due 2002 (Notes) for a total of 9.8 million
shares of common stock at a price of $25.50 per share. The Company has credit
facilities for up to $46.2 million of which $6.2 million is intended to meet
occasional working capital requirements for the Company's Ireland manufacturing
facility. At March 31, 1999 and 1998, no borrowings were outstanding under the
lines of credit. See Note 5 of Notes to Consolidated Financial Statements.
STOCKHOLDERS' EQUITY
Stockholders' equity grew by 59.8% in 1999 to $879.3 million. The increase of
$329.1 million was primarily attributable to $102.6 million in net income, $90.3
million related to the issuance of common stock from the employee stock plan and
the tax benefit from stock options, and $250.3 million related to the issuance
of common stock from the debt conversion partially offset by the $113.8 million
used to acquire treasury stock.
SUMMARY OF LIQUIDITY
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. However, the risk factors discussed in Item 7 could affect
the Company's cash positions adversely. The Company will continue to evaluate
opportunities for investments to obtain additional wafer 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.
FACTORS AFFECTING FUTURE OPERATING RESULTS
The semiconductor industry is characterized by rapid technological change,
intense competition and cyclical market patterns. Cyclical market patterns are
characterized by several factors, including:
- - reduced product demand;
- - limited visibility of demand for products beyond three to nine months;
- - accelerated erosion of average selling prices; and
- - volatile capacity availability.
Our results of operations are affected by several factors. These factors include
general economic conditions, conditions specific to technology companies and to
the semiconductor industry in particular, decreases in average selling prices
over the life of particular products and the timing of new product introductions
(by us, our competitors and others.) In addition, our results of operations are
affected by the ability to manufacture sufficient quantities of a given product
in a timely manner, the timely implementation of new manufacturing technologies,
the ability to safeguard patents and intellectual property from competitors, the
impact of new technologies which result in rapid escalation of demand for some
products in the face of equally steep declines in demand for others, and the
inability to predict the success of our customers' products into their markets.
Market demand for our 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 we 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 affect our
financial condition and results of operations. We attempt 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 these and
other factors, our past results, including those described in this report, are
much less reliable predictors of the future than with companies in many older,
more stable and less dynamic industries. Based on the factors noted herein, we
may experience substantial period-to-period fluctuations in future operating
results.
Our future success depends in a large part on the continued service of our key
technical, sales, marketing and management personnel and on our ability to
continue to attract and retain qualified employees. Particularly important are
those highly skilled design, process, software 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 our financial condition and
results of operations.
Sales and operations outside of the United States subject us to the risks
associated with conducting business in foreign economic and regulatory
environments. Our financial condition and results of operations could be
adversely affected by unfavorable economic conditions in countries in which we
do significant business and by changes in foreign currency exchange rates
affecting those countries. Specifically, we have sales and operations in
Southeast Asia and Japan. The recent economic weakness in these markets has
adversely affected revenues and may continue to impact those markets in several
ways. Customers may face reduced access to capital and exchange rate
fluctuations may adversely affect their ability to purchase our products. In
addition, our ability to sell at competitive prices may be diminished. This
instability may increase credit risks as the continued weakness of certain Asian
currencies may impair our customers' ability to repay existing obligations.
Depending on the recovery in Asia in coming quarters, any or all of these
factors could adversely affect our financial condition and results of operations
in the near future.
Our financial condition and results of operations are becoming increasingly
dependent on a global economy. The increased instability in worldwide economic
environments could lead to a contraction of capital spending. Additional risks
to us include government regulation of exports, imposition of tariffs and other
potential trade barriers, reduced protection for intellectual property rights in
some countries and generally longer receivable collection periods. Our 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. We cannot predict whether quotas, duties, taxes or other charges or
restrictions will be imposed by the United States or other countries upon the
import or export of our products in the future or what effect, if any, such
actions would have on our financial condition and results of operations.
Many of our operations are centered in an area of California that has been
seismically active. Should there be a major earthquake in this area, our
operations may be disrupted. This type of disruption could result in our
inability to ship products in a timely manner, thereby materially adversely
affecting our financial condition and results of operations.
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 our common stock.
DEPENDENCE UPON INDEPENDENT MANUFACTURERS AND SUBCONTRACTORS
We do not manufacture the wafers used for our products. During the past several
years, most of our wafers have been manufactured by UMC and Seiko Epson
Corporation (Seiko Epson), with recent wafers also manufactured by USIC. We
have depended upon these suppliers and others to produce wafers with competitive
performance and cost attributes which include transitioning to advanced
manufacturing process technologies, producing wafers at acceptable yields and
delivering them in a timely manner. While the timeliness, yield and quality of
wafer deliveries have met our requirements to date, we cannot assure that our
wafer suppliers will not experience future manufacturing problems, including
delays in the realization of advanced manufacturing process technologies.
Additionally, disruption of operations at these foundries for any reason,
including natural disasters such as fires, floods, or earthquakes, as well as
disruptions to access to adequate supplies of electricity, natural gas or water
could cause delays in shipments of our products, and could have a material
adverse effect on our results of operations. We are 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 delivery, or any other circumstance
that would require us to seek alternative sources of supply, could delay
shipments and have a material adverse effect on our financial condition and
results of operations.
Our growth will depend in a large part upon our ability to obtain increased
wafer fabrication capacity and assembly services from suppliers that are cost
competitive. We consider various alternatives in order to secure additional
wafer capacity. These alternatives include, without limitation, equity
investments in, or loans, deposits, or other financial commitments to
independent wafer manufacturers. We also consider the use of contracts which
commit us to purchase specified quantities of wafers over extended periods. We
are currently able to obtain wafers from existing suppliers in a timely manner.
However, at times we have 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 to satisfy
customer delivery dates, as well as our ability to process products for
shipment. In addition, a significant increase in general industry demand or any
interruption of supply could reduce our supply of wafers or increase our cost of
such wafers. These events could have a material adverse affect on our financial
condition and results of operations.
DEPENDENCE ON NEW PRODUCTS
Our future success depends in a large part on our ability to develop and
introduce on a timely basis new products which address customer requirements and
compete effectively on the basis of price, density, functionality and
performance. The success of new product introductions is dependent upon several
factors, including:
- - timely completion of new product designs;
- - our ability to utilize advanced manufacturing process technologies;
- - achieving acceptable yields;
- - the availability of supporting software design tools;
- - utilization of predefined cores of logic; and
- - market acceptance.
We cannot assure that our product development efforts will be successful or that
our new products will achieve market acceptance. Revenues relating to our
mature products are expected to continue to decline in the future. As a result,
we will be increasingly dependent on revenues derived from newer products along
with cost reductions on current products. We rely 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 that enable us to increase revenues while
maintaining consistent margins. To the extent that such cost reductions and new
product introductions do not occur in a timely manner, or to the extent that our
products do not achieve market acceptance at prices with higher margins, our
financial condition and results of operations could be materially adversely
affected.
COMPETITION
See "Competition" discussion in Item 1.
INTELLECTUAL PROPERTY
We rely upon patent, trademark, trade secret and copyright law to protect our
intellectual property. We cannot assure 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 our
competitors, have asserted patent, copyright and other intellectual property
rights to technologies that are important to us. We cannot assure that third
parties will not assert infringement claims against us in the future, that
assertions by third parties will not result in costly litigation or that we
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 costs and diversion of
our resources. Any infringement claim or other litigation against us or by us
could materially adversely affect our financial condition and results of
operations.
COMPUTER INFORMATION SYSTEMS
In order to compete effectively in an industry characterized by rapid
technological change, intense competition and cyclical market patterns, we
continually evaluate our computer information systems. As a result, we have
recently implemented new computer information systems or system enhancements
relating to our semiconductor manufacturing, software manufacturing, order entry
processing and financial applications.
Like most other companies using computer information systems in their
operations, we are currently working to resolve the potential impact of the Year
2000 on the processing of date-sensitive information by our computerized
information systems, as well as the vendor and customer date-sensitive
computerized information electronically transferred to us. The Year 2000 issue
is the result of computer programs being written using two digits, rather than
four, to define the applicable Year. Any of our systems that have
time-sensitive software may recognize a year ending in "00" as 1900 rather than
the year 2000, which could result in miscalculations, classification errors or
system failures.
We have performed a thorough review of our internal use software and hardware
applications and software products in order to identify those applications and
products that are not Year 2000 compliant. Currently, our Year 2000 efforts have
been focused on final Year 2000 integrated verification for the software and
hardware applications identified in the review in addition to those newly
implemented or enhanced. We are also placing additional emphasis on finalizing
the assessment of our outside suppliers and other critical business partners for
which initial assessments were incomplete. We believe that our internal
computer system implementation or enhancement efforts principally conducted to
improve competitive and operating efficiencies, as described above, have also
addressed some of our internal Year 2000 compliance issues. Additional internal
information systems are also currently being upgraded. Electronic data
interchange modifications have been completed that are intended to ensure all
dates are handled properly, although we cannot assure that all dates will be
handled properly. With regard to all information technology hardware, including
desktops, servers, networking and telecom equipment, we have completed our
assessments, are making the necessary upgrades and expect to complete the
upgrades by mid-calendar 1999, although we cannot assure these upgrades will be
completed as scheduled.
We believe that our latest software release, version M1.5, is Year 2000
compliant, although we cannot assure that it is Year 2000 compliant. However,
some of our customers are running product versions that are not Year 2000
compliant. We have been encouraging such customers to migrate to the current
product version.
We plan to take several steps to minimize any Year 2000 effects, including
miscalculations, classification errors or system failures. Our internal
preparedness includes specific steps that will be taken in anticipation of the
Year 2000. In addition, we are relying on a contingency plan which has been
developed and is now being implemented which includes manual workarounds,
attention to inventory levels, the ability to utilize both our San Jose and
Ireland manufacturing facilities for shipment and having multiple vendors who
can provide critical services, wafer assembly as well as test products.
The costs directed solely towards Year 2000 compliance are not incremental to
us, but rather represent a reallocation of existing resources. To date, we have
incurred less than $1.5 million on efforts directed solely towards Year 2000
compliance and expect to incur a total of less than $2.0 million when the
process is completed, although we cannot assure that this will be the case. The
costs of addressing potential problems are not currently expected to have a
material adverse impact on our financial position, results of operations or cash
flows in future periods. If, however, we, our customers or vendors are unable
to resolve such processing issues on a timely, cost-effective basis, our
financial condition and results of operations could be adversely affected.
The statements above represent forward-looking statements subject to risks and
uncertainties and actual results may differ materially from those described
above due to a number of risk factors. These factors include, but are not
limited to:
- - the complexity of identifying potential Year 2000 issues;
- - our ability to allocate and/or obtain qualified resources to resolve Year
2000 issues;
- - our ability to work effectively with vendors and other critical business
partners; and
- - our effectiveness at encouraging customers to migrate towards our current
software product version.
We cannot assure that we will be able to successfully modify all systems and
products to comply with Year 2000 requirements, which could have a material
adverse effect on our financial condition and results of operations. If we were
to discontinue our Year 2000 preparedness at this time, we would not be able to
ensure all internal networks and desktops were operational, nor ensure third
party vendors were able to meet our inventory demands or send information
electronically. In addition, disruptions to the economy generally resulting
from the Year 2000 issues could also materially adversely impact us. We could
be subject to litigation for computer system failures such as equipment
shutdowns or failure to properly date business records. At this time, we cannot
reasonably estimate the amount of potential liability and lost revenue.
EURO CURRENCY
Beginning in 1999, 11 member countries of the European Union established fixed
conversion rates between their existing sovereign currencies and adopted the
Euro as their common legal currency. During the three year transition, the Euro
will be available for non-cash transactions and legacy currencies will remain
legal tender. We are continuing to assess the Euro's impact on our business.
We are reviewing the ability of our accounting and information systems to handle
the conversion, the ability of foreign banks to report on dual currencies, the
legal and contractual implications of agreements, as well as reviewing our
pricing strategies. We expect that any additional modifications to our
operations and systems will be completed on a timely basis and do not believe
the conversion will have a material adverse impact on our operations. However,
we cannot assure that we will be able to successfully modify all systems and
contracts to comply with Euro requirements.
LITIGATION
We are currently engaged in several legal matters. See Legal Proceedings in
Item 3 and Note 12 of Notes to Consolidated Financial Statements in Item 8.
ITEM 7A. MARKET RATE RISKS
Interest Rate Risk - The Company's exposure to interest rate risk relates
primarily to the Company's investment portfolio. See Note 5 of Notes to
Consolidated Financial Statements. The Company's primary aim with its
investment portfolio is to invest available cash while preserving principal and
meeting liquidity needs. The portfolio includes tax-advantaged municipal bonds,
tax-advantaged auction rate preferred municipal bonds, certificates of deposit,
and U.S. Treasury securities. In accordance with the Company's investment
policy, the Company places investments with high credit quality issuers and
limits the amount of credit exposure to any one issuer. These securities are
subject to interest rate risk and will decrease in value if market interest
rates increase. A hypothetical 10% increase in interest rates would result in a
$1.5 million (less than 0.3%) decrease in the fair value of the Company's
available-for-sale securities as of the end of fiscal 1999 and 1998. In
addition, the Company has historically had the ability and has the intent to
hold its securities until maturity and therefore, does not expect to recognize
an adverse impact on income or cash flows, although there can be no assurance of
this. Until the conversion of the long-term debt to equity in fiscal 1999, the
Company also had a liability interest rate exposure which was mitigated through
the use of a liability interest rate swap agreement.
Foreign currency risk - The Company uses forward currency exchange contracts to
reduce financial market risks. The Company's sales to Japanese customers are
denominated in yen while its purchases of processed silicon wafers from Japanese
foundries are primarily denominated in U.S. dollars. Gains and losses on
foreign currency forward contracts that are designated and effective as hedges
of anticipated transactions, for which a firm commitment has been attained, are
deferred and included in the basis of the transaction in the same period that
the underlying transactions are settled. Gains and losses on any instruments not
meeting the above criteria would be recognized in income in the current period.
A 15% adverse change in yen exchange rates based on historical average rate
fluctuations would have had approximately a 1.0% adverse impact on revenue for
fiscal years 1999 and 1998. In fiscal 2000, the Company has also begun to share
the yen exchange rate risk with some of its Japanese customers through risk
sharing agreements. As the Company will continue to have a net yen exposure in
the near future, it will continue to mitigate the exposure through yen hedging
contracts. However, no forward currency contracts were outstanding as of March
31, 1999.
The Company has several subsidiaries and an equity investment in the USIC joint
venture whose financial statements are recorded in currencies other than the
U.S. dollar. As these foreign currency financial statements are translated at
each month end during consolidation, fluctuations of exchange rates between the
foreign currency and the U.S. dollar increase or decrease the value of those
investments. If permanent changes occur in exchange rates after an investment
is made, the investment's value will increase or decrease accordingly. These
fluctuations are recorded as a component of stockholders' equity as a component
of accumulated other comprehensive income. To date, the USIC joint venture has
recorded $17.5 million in cumulative translation adjustments, as the New Taiwan
dollar has decreased in value against the U.S. dollar. Also, as the Company's
subsidiaries and the USIC joint venture maintain investments denominated in
other than local currencies, exchange rate fluctuations will occur.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
<TABLE>
<CAPTION>
XILINX, INC.
CONSOLIDATED STATEMENTS OF INCOME
Years ended March 31,
(In thousands, except per share amounts) 1999 1998 1997
--------- --------- ---------
<S> <C> <C> <C>
Net revenues $661,983 $613,593 $568,143
Costs and expenses:
Cost of revenues 251,266 230,690 214,337
Write-off of discontinued product family - - 5,000
Research and development 94,493 80,456 71,075
Sales, general and administrative 134,250 128,579 118,670
Total operating costs and expenses 480,009 439,725 409,082
--------- --------- ---------
Operating income 181,974 173,868 159,061
Interest income and other 19,341 20,652 21,258
Interest expense (11,916) (13,924) (14,561)
--------- --------- ---------
Income before provision for taxes on income,
equity in joint venture and cumulative effect of change in
accounting principle 189,399 180,596 165,758
Provision for taxes on income 54,925 56,728 55,382
--------- --------- ---------
Income before equity in joint venture and cumulative effect
of change in accounting principle 134,474 123,868 110,376
Equity in (loss)/income of joint venture (5,236) 2,719 -
--------- --------- ---------
Income before cumulative effect of change in
accounting principle 129,238 126,587 110,376
Cumulative effect of change in accounting principle (26,646) - -
--------- --------- ---------
NET INCOME $102,592 $126,587 $110,376
========= ========= =========
Net income per share:
Basic
Income before cumulative effect of change in
accounting principle $ 0.88 $ 0.86 $ 0.76
Cumulative effect of change in accounting principle (0.18) - -
--------- --------- ---------
Basic net income per share $ 0.70 $ 0.86 $ 0.76
========= ========= =========
Diluted
Income before cumulative effect of change in
accounting principle $ 0.84 $ 0.79 $ 0.69
Cumulative effect of change in accounting principle (0.17) - -
--------- --------- ---------
Diluted net income per share $ 0.67 $ 0.79 $ 0.69
========= ========= =========
Shares used in per share calculations:
Basic 146,422 147,482 145,632
========= ========= =========
Diluted 154,310 160,020 159,350
========= ========= =========
Pro forma amounts with the change in accounting principle
related to revenue recognition applied retroactively (unaudited):
Net revenues $661,983 $598,065 $568,173
Net income $129,238 $118,987 $110,391
Net income per share:
Basic $ 0.88 $ 0.81 $ 0.76
Diluted $ 0.84 $ 0.74 $ 0.69
<FN>
See accompanying notes.
</TABLE>
<TABLE>
<CAPTION>
XILINX, INC.
CONSOLIDATED BALANCE SHEETS
March 31,
(In thousands) 1999 1998
----------- ---------
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 53,584 $166,861
Short-term investments 348,888 195,326
Accounts receivable, net of allowances for doubtful accounts, pricing
adjustments and customer returns of $7,409 and $8,408 in 1999 and
1998, respectively 73,409 60,912
Inventories 52,036 55,289
Deferred income taxes 54,911 38,694
Advances for wafer purchases 59,450 72,267
Other current assets 15,431 10,875
----------- ---------
Total current assets 657,709 600,224
----------- ---------
Property, plant and equipment, at cost:
Land 10,361 10,361
Construction in progress 11,076 -
Building 36,941 37,065
Machinery and equipment 117,814 105,304
Furniture and fixtures 11,290 10,902
----------- ---------
187,482 163,632
Accumulated depreciation and amortization (85,777) (75,356)
----------- ---------
Net property, plant and equipment 101,705 88,276
Long-term investments 94,002 -
Restricted investments 34,358 36,271
Investment in joint venture 91,057 90,872
Advances for wafer purchases 36,694 77,342
Developed technology and other assets 54,723 48,253
----------- ---------
$1,070,248 $941,238
=========== =========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 23,326 $ 20,332
Accrued payroll and payroll related liabilities 20,223 15,318
Income tax payable 25,998 16,692
Deferred income on shipments to distributors 85,709 55,898
Interest payable and other accrued liabilities 11,941 17,417
----------- ---------
Total current liabilities 167,197 125,657
----------- ---------
Long-term debt - 250,000
Deferred tax liabilities 23,733 15,406
Commitments and contingencies
STOCKHOLDERS' EQUITY:
Preferred stock, $.01 par value; 2,000 shares authorized;
none issued and outstanding - -
Common stock, $.01 par value; 300,000 shares authorized; 156,381 and
148,726 shares issued; 156,243 and 145,826 shares outstanding at
March 31, 1999 and 1998, respectively 1,562 1,458
Additional paid-in capital 293,231 118,341
Retained earnings 607,060 504,468
Treasury stock, at cost (5,112) (56,973)
Accumulated other comprehensive income (17,423) (17,119)
----------- ---------
Total stockholders' equity 879,318 550,175
----------- ---------
$1,070,248 $941,238
=========== =========
<FN>
See accompanying notes.
</TABLE>
<TABLE>
<CAPTION>
XILINX, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
Years ended March 31,
(In thousands) 1999 1998 1997
------------ ---------- ----------
<S> <C> <C> <C>
Increase / (decrease) in Cash and Cash Equivalents
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 102,592 $ 126,587 $ 110,376
Adjustments to reconcile net income to net cash provided
by operating activities:
Cumulative effect of change in accounting principle 26,646 - -
Depreciation and amortization 32,112 32,709 27,997
Write-off of acquired in-process technology 3,600 - -
Undistributed earnings of joint venture 5,236 (3,747) (1,336)
Changes in assets and liabilities:
Accounts receivable (12,497) 11,336 7,280
Inventories 58,328 7,469 (14,095)
Deferred income taxes and other (3,996) 15,644 14,134
Accounts payable, accrued liabilities and income taxes payable 40,410 8,861 (3,193)
Deferred income on shipments to distributors (8,806) 19,543 (1,213)
------------ ---------- ----------
Total adjustments 141,033 91,815 29,574
------------ ---------- ----------
Net cash provided by operating activities 243,625 218,402 139,950
------------ ---------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of available-for-sale investments (1,177,948) (337,500) (247,022)
Proceeds from sale or maturity of available-for-sale investments 896,396 352,149 303,604
Purchases of held-to-maturity investments (36,228) (72,281) (72,227)
Proceeds from maturity of held-to-maturity investments 36,145 72,267 72,189
Proceeds from sale of held-to-maturity investment 36,202 - -
Advances for wafer purchases - (90,000) (60,000)
Property, plant and equipment (40,922) (29,700) (26,803)
Investment in joint venture (5,448) (67,422) -
Assets purchased from MI Acquisition LLP (6,776) - -
Deposit on building - (28,351) -
------------ ---------- ----------
Net cash used in investing activities (298,579) (200,838) (30,259)
------------ ---------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Acquisition of treasury stock (113,804) (93,795) (32,028)
Principal payments on capital lease obligations - - (977)
Proceeds from issuance of common stock 55,481 27,189 28,324
------------ ---------- ----------
Net cash used in financing activities (58,323) (66,606) (4,681)
------------ ---------- ----------
Net (decrease) / increase in cash and cash equivalents (113,277) (49,042) 105,010
Cash and cash equivalents at beginning of period 166,861 215,903 110,893
------------ ---------- ----------
Cash and cash equivalents at end of period $ 53,584 $ 166,861 $ 215,903
============ ========== ==========
SCHEDULE OF NON-CASH TRANSACTIONS:
Tax benefit from stock options $ 34,856 $ 16,099 $ 16,730
Issuance of treasury stock under employee stock plans 112,162 38,669 30,181
Issuance of treasury stock from debt conversion 53,503 - -
Conversion of long term debt to common stock 250,322 - -
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Interest paid 12,992 13,008 13,309
Income taxes paid $ 21,469 $ 39,472 $ 34,426
<FN>
See accompanying notes.
</TABLE>
<TABLE>
<CAPTION>
XILINX, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
Three years ended March 31, 1999 Accumulated
Common Stock Additional Other Total
(In thousands) Outstanding Paid-in Retained Treasury Comprehensive Stockholders'
Shares Amount Capital Earnings Stock Income Equity
---------- ------ ---------- --------- ------------ ------------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE AT MARCH 31, 1996 143,866 $ 1,439 $ 98,868 $ 267,505 $ - $ 432 $ 368,244
Components of comprehensive income:
Net income - - - 110,376 - - 110,376
Unrealized (loss) on
available-for-sale Securities,
net of tax benefit of $233 - - - - - (349) (349)
Cumulative translation adjustment - - - - - (617) (617)
---------
Total comprehensive income 109,410
---------
Issuance of common shares
under employee stock plans 4,574 28 28,296 - - - 28,324
Acquisition of treasury stock (1,756) - - - (32,028) - (32,028)
Issuance of treasury stock
under employee stock plans - - (30,181) - 30,181 - -
Tax benefit from exercise
of stock options - - 16,730 - - - 16,730
------- -------- --------- ---------- -------- ---------------- ----------
BALANCE AT MARCH 31, 1997 146,684 1,467 113,713 377,881 (1,847) (534) 490,680
Components of comprehensive income:
Net income - - - 126,587 - - 126,587
Unrealized gain on
available-for-sale Securities,
net of tax expense of $13 - - - - - 19 19
Cumulative translation adjustment - - - - - (16,604) (16,604)
----------
Total comprehensive income 110,002
----------
Issuance of common shares
under employee stock plans 3,802 (9) 27,198 - - - 27,189
Acquisition of treasury stock (4,660) - - - (93,795) - (93,795)
Issuance of treasury stock
under employee stock plans - - (38,669) - 38,669 - -
Tax benefit from exercise
of stock options - - 16,099 - - - 16,099
------- -------- --------- ---------- -------- ---------------- ----------
BALANCE AT MARCH 31, 1998 145,826 1,458 118,341 504,468 (56,973) (17,119) 550,175
Components of comprehensive income:
Net income - - - 102,592 - - 102,592
Unrealized gain on
available-for-sale Securities,
net of tax expense of $87 - - - - - 130 130
Cumulative translation adjustment - - - - - (434) (434)
---------
Total comprehensive income 102,288
---------
Issuance of common shares
under employee stock plans 6,229 104 55,377 - - - 55,481
Issuance of common shares
from convertible debt 9,804 - 250,322 - - - 250,322
Acquisition of treasury stock (5,616) - - - (113,804) - (113,804)
Issuance of treasury stock
under employee stock plans - - (112,162) - 112,162 - -
Issuance of treasury stock
from debt conversion - - (53,503) - 53,503 - -
Tax benefit from exercise of
stock options - - 34,856 - - - 34,856
-------- ------- --------- ---------- --------- --------------- ----------
BALANCE AT MARCH 31, 1999 156,243 $ 1,562 $ 293,231 $ 607,060 $ (5,112) $ (17,423) $879,318
======== ======= ========= ========== ========= =============== ===========
<FN>
See accompanying notes.
</TABLE>
XILINX, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1. NATURE OF OPERATIONS
Xilinx designs, develops and markets complete programmable logic solutions,
including advanced integrated circuits, software design tools, predefined system
functions delivered as cores of logic and field engineering support. The wafers
used to manufacture the Company's products are obtained from independent wafer
manufacturers, located in Japan and Taiwan. The Company is dependent upon
these manufacturers to produce and deliver wafers on a timely basis. The
Company is also dependent on subcontractors, located in the Asia Pacific region,
to provide semiconductor assembly services. Xilinx is a global company with
manufacturing facilities in the United States and Ireland and sales offices
throughout the world. The Company derives approximately one-third of its
revenues from international sales, primarily in Europe and Japan.
NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND CONCENTRATIONS OF RISK
Basis of presentation
The accompanying consolidated financial statements include the accounts of the
Company and its wholly owned subsidiaries after elimination of all intercompany
transactions. The Company's fiscal year ends on the Saturday nearest March 31.
For ease of presentation, March 31 has been utilized as the fiscal year-end for
all financial statement captions. Fiscal 1999 was a 53-week year ended on April
3, 1999 while fiscal 1998 and 1997 were 52-week years ended on March 28, 1998
and March 29, 1997, respectively. Certain amounts from the prior year have been
reclassified to conform to the current year presentation.
Cash equivalents and investments
Cash and cash equivalents consist of cash on deposit with banks and investments
in money market instruments with minimal interest rate risk and original
maturities at date of acquisition of 90 days or less. Short-term investments
consist of tax-advantaged municipal bonds and tax-advantaged auction rate
preferred municipal bonds with maturities greater than 90 days but less than one
year from the balance sheet date, unless funds are specifically identified for
current operations. Restricted investments consist of certificates of deposit
held as collateral relating to leases for the Company's facilities. See Note 6
of Notes to Consolidated Financial Statements. Long-term investments consist of
U.S. Treasury notes and tax-advantaged municipal bonds with maturities greater
than one year but less than 4 years from the balance sheet date, which are not
required for current operations. The Company invests its cash, cash
equivalents, short-term and long-term investments through various banks and
investment banking institutions. This diversification of risk is consistent
with the Company policy to maintain liquidity and ensure the safety of
principal.
Management classifies investments as available-for-sale or held-to-maturity at
the time of purchase and re-evaluates such designation at each balance sheet
date, although classification is generally not changed. Securities are
classified as held-to-maturity when the Company has the positive intent and the
ability to hold the securities until maturity. Held-to-maturity securities are
carried at cost adjusted for amortization of premiums and accretion of discounts
to maturity. Such amortization, as well as any interest on the securities, is
included in interest income. Available-for-sale securities are carried at
fair value with the unrealized gains or losses, net of tax, included as a
component of accumulated other comprehensive income in stockholders' equity.
Realized gains and losses and declines in value judged to be
other-than-temporary on available-for-sale securities are included in other
income. The fair values for marketable debt and equity securities are based on
quoted market prices. The cost of securities matured or sold is based on the
specific identification method.
Inventories
Inventories are stated at the lower of cost (first-in, first-out) or market
(estimated net realizable value) and are comprised of the following at March 31,
1999 and 1998:
<TABLE>
<CAPTION>
(In thousands) 1999 1998
------- -------
<S> <C> <C>
Raw materials $ 5,139 $ 5,976
Work-in-progress 27,824 24,845
Finished goods 19,073 24,468
------- -------
$52,036 $55,289
======= =======
</TABLE>
Advances for wafer purchases
In fiscal 1997, the Company signed an agreement with Seiko Epson, a primary
wafer supplier. This agreement was amended in fiscal 1998 providing for an
advance to Seiko Epson of $150.0 million. In conjunction with the agreement,
$60.0 million was paid in fiscal 1997 and an additional $90.0 million was paid
in fiscal 1998. Repayment of this advance is made in the form of wafer
deliveries, which began during the fourth quarter of fiscal 1998. The advance
payment provision also provides for interest to be paid to the Company in the
form of free wafers. Related interest income has been accrued monthly and the
accrued balance is offset as free wafers are received. Through March 31, 1999,
the Company has received $55.1 million in wafers against this advance, of which
$1.6 million was in the form of free wafers. Specific wafer pricing is in U.S.
dollars and is based upon foundries with comparable technology, products and
volume, and prices quoted by specific research firms for foundry prices for
similar wafers.
Property, Plant and Equipment
Property, plant and equipment are stated at cost. Depreciation for financial
reporting purposes is computed using the straight-line method over the estimated
useful lives of the assets of three to five years for machinery, equipment,
furniture and fixtures and up to thirty years for buildings.
Revenue Recognition
The Company recognizes revenue from product sales upon shipment to OEMs and end
users. Reserves for sales returns and allowances are recorded at the time of
shipment. As further explained in Note 3 of Notes to Consolidated Financial
Statements, commencing in fiscal 1999, revenue on shipments to all distributors
is deferred until products are sold by the distributors to end users. Prior to
fiscal 1999, revenue on shipments to domestic distributors was deferred until
resale to end users because arrangements with these distributors included
returns and price protection privileges which could not be reasonably estimated.
Revenue on all shipments to international distributors was recognized upon
shipment to the distributor, with appropriate provision of reserves for returns
and allowances.
Foreign currency translation
The U.S. dollar is the functional currency for the Company's Ireland
manufacturing facility. Assets and liabilities that are not denominated in the
functional currency are remeasured into U.S. dollars, and the resulting gains or
losses are included in "Interest income and other". The functional currency is
the local currency for each of the Company's other foreign subsidiaries and the
USIC joint venture. Assets and liabilities are translated at month-end exchange
rates, and statements of operations are translated at the average exchange rates
during the year. Exchange gains or losses arising from translation of foreign
currency denominated assets and liabilities are included as a component of
accumulated other comprehensive income in stockholders' equity.
Derivative financial instruments
As part of its ongoing asset and liability management activities, the Company
periodically enters into certain derivative financial arrangements to reduce
financial market risks. These instruments are used to hedge foreign currency,
equity and interest rate market exposures of underlying assets and liabilities.
The Company does not enter into derivative financial instruments for trading
purposes.
The Company uses forward currency exchange contracts to reduce financial market
risks. The Company's sales to Japanese customers are denominated in yen while
its purchases of processed silicon wafers from Japanese foundries are primarily
denominated in U.S. dollars. Gains and losses on foreign currency forward
contracts that are designated and effective as hedges of anticipated
transactions, for which a firm commitment has been attained, are deferred and
included in the basis of the transaction in the same period that the underlying
transactions are settled. Gains and losses on any instruments not meeting the
above criteria would be recognized in income in the current period. No currency
forward contracts were outstanding as of March 31, 1999.
In fiscal 1999, the Company's two and a half year interest rate swap agreement
terminated. The interest rate swap agreement was in place in order to mitigate
the interest rate risks whereby the long-term debt fixed interest rate liability
was matched against the Company's short-term variable interest rate assets. The
liability interest rate swap agreement involved the exchange of fixed interest
rate payments for variable interest rate payments over the life of the agreement
without an exchange of the notional amount. The differential to be paid or
received as the variable interest rate changes was accrued and recognized as
interest expense. The related amounts payable or receivable from the third
party was included in other liabilities or assets. For the period of time the
swap was outstanding, the fair value of the swap agreement and changes in the
fair value as a result of changes in market interest rates were not material.
See Note 5 of Notes to Consolidated Financial Statements.
Employee stock plans
The Company accounts for its stock option and employee stock purchase plans in
accordance with provisions of the Accounting Principles Board's Opinion No. 25
(APB 25), "Accounting for Stock Issued to Employees." In addition the Company
discloses pro forma information related to its stock plans according to
Financial Accounting Standards Board's Statement No. 123, "Accounting for
Stock-Based Compensation" (FASB 123). See Note 9 of Notes to Consolidated
Financial Statements.
Use of estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent liabilities at the date of the financial statements and the reported
amounts of net revenues and expenses during the reporting period. Such
estimates relate to the useful lives of fixed assets and intangible assets,
allowances for doubtful accounts, pricing adjustments, customer returns,
inventory reserves, international distributor sell-through, potential reserves
relating to litigation matters as well as other accruals or reserves. Actual
results may differ from those estimates, and such differences may be material to
the financial statements.
New Accounting Pronouncement
In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 133, (FASB 133), "Accounting for Derivative
Instruments and Hedging Activities", which requires adoption in fiscal years
beginning after June 15, 2000 while earlier adoption is permitted at the
beginning of any fiscal quarter. The Company is required to adopt by fiscal
2002. The effect of adopting the Standard is currently being evaluated but is
not expected to have a material effect on the Company's consolidated results of
operations or financial position. FASB 133 will require the Company to
recognize all derivatives on the balance sheet at fair value. Derivatives that
are not hedges must be adjusted to fair value through income. If the derivative
is a hedge, depending on the nature of the hedge, changes in the fair value of
derivatives will either be offset against the change in fair value of the hedged
assets, liabilities, or firm commitments through earnings or recognized in
accumulated other comprehensive income until the hedged item is recognized in
earnings. The ineffective portion, if any, of a derivative's change in fair
value will be immediately recognized in earnings.
Concentrations of credit risk
The Company attempts to mitigate the concentration of credit risk in its trade
receivables with respect to the high-technology industry with the Company's
credit evaluation process, relatively short collection terms, distributor
agreements, sales among various end-user applications throughout the
high-technology market and the geographical dispersion of sales. The Company
generally does not require collateral. Bad debt write-offs have been
insignificant for all years presented.
Concentration of other risks
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 specifically relating to technology
companies and 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
sufficient quantities of a given product in a timely manner, the timely
implementation of new manufacturing process 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. Based on the factors
noted herein, the Company may experience substantial period-to-period
fluctuations in future operating results.
NOTE 3. ACCOUNTING CHANGE - DEFERRED REVENUE RECOGNITION ON SALES TO
INTERNATIONAL DISTRIBUTORS
During the fourth quarter of fiscal 1999, the Company changed its accounting
method for recognizing revenue on all shipments to international distributors.
The change was made retroactive to the beginning of fiscal 1999. While the
Company previously deferred revenue on shipments to domestic distributors until
the products were sold to the end user, it recognized revenue upon shipment to
international distributors, net of appropriate reserves for returns and
allowances. Following the accounting change, revenue recognition on shipments
to distributors worldwide is deferred until the products are sold to the end
customer. The Company believes that deferral of revenue on shipments to
distributors until the product is shipped by the distributor to an end customer
is a more meaningful measurement of results of operations as it better conforms
to the substance of the transaction considering the changing business
environment in the international marketplace, is consistent with industry
practice, and accordingly, it will better focus the Company on end customer
sales; therefore it is a preferable method of accounting. The cumulative effect
of the change in accounting method for prior years was a charge of $26.6
million, net of $12.0 million in taxes, or $0.17 net income per diluted share.
NOTE 4. JOINT VENTURE
The Company, United Microelectronics Corporation (UMC) and other parties entered
into the United Silicon Inc. (USIC) joint venture to construct a wafer
fabrication facility in Taiwan. The Company invested an additional $5.4 million
in USIC during fiscal 1999 to bring the total cumulative investment to $107.2
million. However, as other parties increased their equity in USIC during the
most recent investment, the Company decreased its equity ownership from 25% to
20%. The Company has the right to receive up to 31.25% of the wafer capacity
from this facility. In fiscal 1999, the Company purchased wafers totaling $18.9
million from USIC. UMC has committed to and is supplying the Company with
wafers manufactured in an existing facility until full capacity is available in
the USIC facility. The Company is accounting for this investment using the
equity method of accounting with a one-month lag in recording the Company's
share of results for the entity. The USIC fiscal 1999 net loss was a result of
the continued ramp up in production of the wafer fabrication facility. The
fiscal 1998 net income resulted primarily from favorable foreign currency
exchange gains as well as interest earned on its investment portfolio. Through
the second quarter of fiscal 1998, equity income was immaterial and remained
classified in "Interest income and other." Undistributed earnings of the USIC
joint venture totaled $0.2 million since its inception.
NOTE 5. FINANCIAL INSTRUMENTS
Cash and Investments
The following is a summary of available-for-sale securities:
<TABLE>
<CAPTION>
March 31, 1999 March 31, 1998
------------------------------------------- ----------------------------------------------
Gross Gross Estimated Gross Gross Estimated
(In thousands) Amortized Unrealized Unrealized Fair Amortized Unrealized Unrealized Fair
Cost Gains Losses Value Cost Gains Losses Value
--------- --------- ---------- --------- ---------- ---------- ----------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Money market funds $ 34,829 $ - $ - $ 34,829 $ 13,614 $ - $ - $ 13,614
Certificate of Deposit 34,358 - - 34,358 - - - -
U.S. Treasury Notes 2,071 8 - 2,079 - - - -
Auction rate preferred 262,007 25 (10) 262,022 30,292 12 (2) 30,302
Municipal bonds 178,425 437 (73) 178,789 296,509 189 (29) 296,669
--------- --------- ---------- --------- ---------- ---------- ----------- ---------
$ 511,690 $ 470 $ (83) $ 512,077 $ 340,415 $ 201 $ (31) $ 340,585
========== ========= ========== ========= ========== ========== =========== ==========
Included in:
Cash and cash equivalents $ 34,829 $ 145,259
Short-term investments 348,888 195,326
Long-term investments 94,002 -
Restricted investment 34,358 -
---------- ---------
$ 512,077 $ 340,585
========== ==========
</TABLE>
Realized gains or losses from sale of available-for-sale securities were
immaterial for all periods presented. Short-term investments consist of
tax-advantaged municipal bonds and tax-advantaged auction rate preferred
municipal bonds with maturities greater than 90 days but less than one year from
the balance sheet date, unless funds are specifically identified for current
operations. Restricted investments consist of certificates of deposit held as
collateral relating to leases for the Company's facilities. Long-term
investments consist of U.S. Treasury notes and tax-advantaged municipal bonds
with maturities greater than one year but less than 4 years from the balance
sheet date, which are not required for current operations.
In fiscal 1999, the Company sold its held-to-maturity, restricted investment,
which had an amortized cost and fair value of $36.8 million upon sale resulting
in no gain or loss. The restricted investment relates to certain collateral
requirements for lease agreements associated with the Company's corporate
facilities. The agreement was modified during fiscal 1999 requiring a change in
the collateral requirements, which resulted in the sale of the security. Until
its sale in fiscal 1999, the restricted investment was a U.S. Treasury Security,
which was classified as held-to-maturity and was $36.3 million at March 31,
1998. Amortized cost approximated estimated fair value. At the end of fiscal
1999, the restricted investment is in the form of a certificate of deposit and
is classified as available-for-sale with a maturity of less than one year. See
Note 6 of Notes to Consolidated Financial Statements.
Derivatives
In fiscal 1999, the Company utilized currency forward contracts to protect
against the net yen exposure created when the Company began purchasing most of
its wafers from Japanese suppliers in U.S. dollars yet continued to invoice
Japanese customers in yen. Realized losses of $2.3 million were offset
against revenue when there was a firm commitment, otherwise they were included
in "Interest income and other". At March 31, 1999 and 1998, no commitments
under foreign currency forward or option contracts were outstanding.
In fiscal 1997, the Company entered into an interest rate swap agreement with a
third party in order to reduce risk related to movements in interest rates.
Under the agreement, the Company effectively converted the fixed rate interest
payments related to $125.0 million of the Company's convertible long-term debt
to variable rate interest payments without the exchange of the underlying
principal amounts. The Company received fixed interest rate payments (equal to
5.935%) from the third party and was obligated to make variable rate payments
(equal to the three month Libor rate) to the third party during the term of the
agreement. In fiscal 1999, the interest rate swap agreement terminated, and the
gain was immaterial. For the period of time the swap was outstanding, the fair
value of the swap agreement and changes in the fair value as a result of changes
in market interest rates were not material.
In fiscal 1997, the Company entered into foreign exchange forward contracts to
minimize the impact of future exchange fluctuations on the U.S. dollar cost of
investing in the USIC joint venture. The contracts required the Company to
exchange U.S. dollars for New Taiwan dollars and matured within one year. The
contracts were accounted for as a hedge of an identifiable foreign currency
commitment. Realized losses, which were immaterial, were recognized upon
maturity of the contracts in fiscal 1998 and included in the USIC joint venture
investment.
Long-Term Debt and Lines of Credit
In February 1999, the Company converted in full $250.0 million of 5 1/4%
Convertible Subordinated Notes due 2002 (Notes) into a total of 9.8 million
shares of common stock at a price of $25.50 per share. Interest expense accrued
but not paid prior to conversion of $3.6 million were added to additional
paid-in-capital. Debt issuance costs of $0.7 million were recorded during the
year. The unamortized debt issuance costs as of the redemption date of
approximately $3.3 million were recorded as a reduction to additional
paid-in-capital.
The Company has $40 million available under a syndicated bank revolving credit
line agreement, which expires in March 2001. Under this agreement, borrowings
bear interest at the prime rate or 0.625% over the Libor rate. Additionally,
the Company's Ireland manufacturing facility has an additional $6.2 million
available under a multicurrency credit line, which expires in November 1999.
Under this agreement, borrowings bear interest at the bank's prime rate. At
March 31, 1999, no borrowings were outstanding under any credit lines. The
Company is in full compliance with the agreement's required covenants and
financial ratios. The agreements prohibit the payment of cash dividends without
prior bank approval.
NOTE 6. COMMITMENTS
The Company leases most of its manufacturing and office facilities under
operating leases that expire at various dates through December 2014. Lease
agreements for certain corporate facilities contain payment provisions, which
allow for changes in rental amounts based upon interest rate changes. The
approximate future minimum lease payments under operating leases are as follows:
Years ended March 31, (In thousands)
--------------
2000 $ 3,723
2001 1,681
2002 1,508
2003 1,235
2004 958
Thereafter 765
-----------
$ 9,870
===========
Rent expense was approximately $4.5 million for each of the years ended March
31, 1999, 1998 and 1997.
The Company has entered into lease agreements relating to certain corporate
facilities which would allow the Company to purchase the facilities on or before
the end of the lease term in December 1999. If at the end of the lease term the
Company does not purchase the property under lease or arrange a third party
purchase, then the Company would be obligated to the lessor for a guarantee
payment equal to a specified percentage of the Company's purchase price for the
property. The Company would also be obligated to the lessor for all or some
portion of this amount if the price paid by the third party is below a specified
percentage of the Company's purchase price. The Company is also required to
comply with certain covenants and maintain certain financial ratios. As of
March 31, 1999, the total amount related to the leased facilities for which the
Company is contingently liable is $39.8 million. Under the terms of the
agreements, the Company is required to maintain collateral (restricted
investments) of approximately $34.4 million during the remainder of the lease
term.
During fiscal 1998, the Company entered into an agreement for a facility to be
built on property adjacent to the Company's corporate facilities. Building
construction will be completed in fiscal 2000. Upon signing the lease
agreement, the Company paid the lessor $31.3 million for prepaid rent and an
option to purchase the facility. The rent prepayment covers one year and was
discounted to its present value. Additionally, the Company can exercise the
lease agreement's purchase option between the sixth and twelfth month following
the commencement date of the lease term. If the Company elects to exercise the
option, the prepaid purchase option will be considered payment in full.
However, if the Company decides not to exercise the purchase option, the prepaid
option will be returned without interest at the end of the first year of the
lease.
NOTE 7. NET INCOME PER SHARE
Basic net income per share is computed by dividing net income available to
common stockholders by the weighted average number of common shares outstanding
during the period. In computing diluted net income per share, the average stock
price for the period is used in determining the number of shares assumed to be
purchased from the exercise of stock options. Diluted earnings per share is
computed using the weighted average common and dilutive common equivalent shares
outstanding, plus other dilutive shares which are not common equivalent shares.
The computation of basic net income per share for all years presented is derived
from the information on the face of the income statement, and there are no
reconciling items in either the numerator or denominator. Additionally, there
are no reconciling items in the numerator used to compute diluted net income per
share. The total shares used in the denominator of the diluted net income per
share calculation includes 7.9 million, 12.5 million and 13.7 million
incremental common shares attributable to outstanding options for fiscal years
1999, 1998 and 1997, respectively.
Before the shares were converted from long-term debt to equity, approximately
9.8 million shares, they were not included in the calculation of diluted net
income per share as their inclusion would have had an anti-dilutive effect for
all periods presented. In addition, outstanding options to purchase
approximately 4.8 million, 3.7 million and 2.0 million shares, for the fiscal
years 1999, 1998 and 1997, respectively, under the Company's Stock Option Plan
were not included in the treasury stock calculation to derive diluted income per
share as their inclusion would have had an anti-dilutive effect.
NOTE 8. COMPREHENSIVE INCOME
The Company adopted the Statement of Financial Accounting Standards No. 130
(FASB 130), "Reporting Comprehensive Income" in the first quarter of fiscal
1999. FASB 130 established standards for the reporting and disclosure of
comprehensive income and its components; however, the disclosure has no impact
on the Company's consolidated results of operations, financial position or cash
flows. Comprehensive income is defined as the change in equity of a company
during a period resulting from certain transactions and other events and
circumstances, excluding transactions resulting from investments by owners and
distributions to owners. The difference between net income and comprehensive
income for Xilinx is from foreign currency translation adjustments and
unrealized gains or losses on the Company's available-for-sale securities.
The components of accumulated other comprehensive income net of related tax
effects for the fiscal years 1999, 1998 and 1997 are as follows:
<TABLE>
<CAPTION>
March 31,
(in thousands) 1999 1998 1997
--------- --------- ------
<S> <C> <C> <C>
Cumulative translation adjustment $(17,655) $(17,221) $(617)
Unrealized gain on available for sale securities 232 102 83
--------- --------- ------
Accumulated other comprehensive income $(17,423) $(17,119) $(534)
========= ========= ======
</TABLE>
Cumulative translation adjustments are not tax affected.
NOTE 9. STOCKHOLDERS' EQUITY
The Company's Certificate of Incorporation provides for 300 million shares of
common stock and 2 million shares of undesignated preferred stock.
Treasury Stock
The Company authorized a stock buyback program in December 1997 whereby up to 4
million shares of the Company's common stock could be purchased in the open
market from time to time as market and business conditions warranted. This
program was completed in November 1998. In April and September 1998, additional
stock repurchase programs were authorized to each buyback up to 6 million shares
of its common stock. The Company has reissued treasury shares repurchased in
response to Employee Stock Option exercises and Employee Qualified Stock
Purchase Plan requirements as well as in conjunction with its redemption of
convertible debt. During fiscal 1999 and 1998, the Company repurchased a total
of 5,616,000 and 4,660,000 shares of common stock for $113.8 million and $93.8
million, respectively. In fiscal 1999 and 1998, 8,378,000 and 1,842,000 shares
were reissued, respectively. As a result, the Company was holding approximately
138,000 treasury stock shares at March 31, 1999.
Stock split
On January 18, 1999, the Company's Board of Directors approved a 2 for 1 split
of the Company's Common Stock, which was effected in the form of a 100% stock
dividend. On March 11, 1999 shareholders of record as of February 18, 1999
received one additional share of Common Stock for every share currently held.
Shares, per share amounts, common stock, and additional paid-in capital have
been restated to reflect the stock split for all periods presented.
Stockholder Rights Plan
In October 1991, the Company adopted a stockholder rights plan and declared a
dividend distribution of one preferred stock purchase right for each outstanding
share of common stock. The rights become exercisable based upon the occurrence
of certain conditions including acquisitions of Company stock, tender or
exchange offers and certain business combination transactions of the Company.
In the event one of the conditions is triggered, each right entitles the
registered holder to purchase a number of shares of preferred stock of the
Company or, under limited circumstances, of the acquirer. The rights are
redeemable at the Company's option, under certain conditions, for $.01 per right
and expire on October 4, 2001.
Employee Stock Option Plans
Under existing stock option plans (Option Plans), options reserved for future
issuance to employees and directors of the Company total 34,391,000 shares.
Options to purchase shares of the Company's common stock under the Option Plans
are granted at 100% of the fair market value of the stock on the date of grant.
Options granted to date expire ten years from date of grant and vest at varying
rates over four or five years.
A summary of the Company's Option Plans activity, and related information,
follows:
<TABLE>
<CAPTION>
Years ended March 31, 1999 1998 1997
----------------- ------------------ ------------------
Weighted Weighted Weighted
Average Average Average
Shares Exercise Shares Exercise Shares Exercise
(000) Price (000) Price (000) Price
------- --------- ------- --------- ------- ---------
<S> <C> <C> <C> <C> <C> <C>
Outstanding at beginning of year 29,049 $ 13.35 27,416 $ 10.27 27,776 $ 8.39
Granted 9,280 30.08 5,958 23.91 5,193 16.76
Exercised (5,422) 7.96 (3,080) 5.36 (3,503) 5.29
Forfeited (1,328) 18.07 (1,245) 15.88 (2,050) 9.74
------- --------- ------- --------- ------- ---------
Outstanding at end of year 31,579 $ 18.99 29,049 $ 13.35 27,416 $ 10.27
------- --------- ------- --------- ------- ---------
Shares available for grant 2,812 7,770 5,984
------- ------- -------
</TABLE>
The following information relates to options outstanding and exercisable under
the Option Plan at March 31, 1999:
<TABLE>
<CAPTION>
Options Outstanding Options Exercisable
---------------------------------------- ------------------------
Weighted
Average Weighted Weighted
Options Remaining Average Options Average
Range of Outstanding Contractual Exercise Exercisable Exercise
Exercise Prices (000) Life (Years) Price (000) Price
--------------- -------------- -------------- --------- ------------ ---------
<S> <C> <C> <C> <C> <C>
$ 0.38 - $10.85 8,545 4.62 $ 6.75 7,788 $ 6.56
$11.44 - $18.59 8,150 7.13 15.68 4,157 15.12
$18.81 - $23.94 8,850 8.35 21.20 3,200 21.51
$24.00 - $43.63 6,034 9.42 37.58 824 26.74
---------------- ------------ ------------- ---------- ------------ ---------
$0.38 - $43.63 31,579 7.23 $ 18.99 15,969 $ 12.83
</TABLE>
At March 31, 1998, 14.2 million options were exercisable.
Employee Qualified Stock Purchase Plan
Under the Company's 1990 Employee Qualified Stock Purchase Plan (Stock Purchase
Plan), qualified employees can elect to have up to 15 percent of their annual
earnings withheld, up to a maximum of $21,250, to purchase the Company's common
stock at the end of six-month enrollment periods. The purchase price of the
stock is 85% of the lower of the fair market value at the beginning of the
twenty-four month offering period or at the end of each six-month purchase
period. Almost all employees are eligible to participate. Under this plan,
807,000 and 722,000 shares were issued during 1999 and 1998, respectively, and
4,823,000 shares were available for issuance at March 31, 1999.
Stock-Based Compensation
As permitted under FASB Statement No. 123, "Accounting for Stock-Based
Compensation" (FASB 123), the Company has elected to continue to follow
Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to
Employees" (APB 25) and related Interpretations in accounting for its
stock-based awards to employees. Under APB 25, the Company generally recognizes
no compensation expense with respect to such awards.
Pro forma information regarding net income and earnings per share is required by
FASB 123 and has been determined as if the Company had accounted for awards to
employees under the fair value method of FASB 123. The fair value of stock
options and stock purchase plan rights under the Option Plan and Stock Purchase
Plan was estimated as of the grant date using the Black-Scholes option pricing
model. The Black-Scholes model was originally developed for use in estimating
the fair value of traded options and requires the input of highly subjective
assumptions including expected stock price volatility. The Company's stock
options and stock purchase plan rights have characteristics significantly
different from those of traded options, and changes in the subjective input
assumptions can materially affect the fair value estimate. The fair value of
stock options and stock purchase plan rights granted in fiscal years 1999, 1998,
and 1997 were estimated at the date of grant assuming no expected dividends and
the following weighted average assumptions.
<TABLE>
<CAPTION>
Stock Options Stock Purchase Plan Rights
Years ended March 31, 1999 1998 1997 1999 1998 1997
-------------------------------- ------ ----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C> <C>
Expected Life (years) 3 3 4 .5 .5 .5
Expected Stock Price Volatility .65 .62 .56 .64 .65 .56
Risk-Free Interest Rate 5.0% 6.0% 6.3% 5.0% 5.5% 5.4%
</TABLE>
For purposes of pro forma disclosures, the estimated fair value of stock-based
awards is amortized against pro forma net income over the stock-based awards'
vesting period. Because FASB 123 is applicable only to the Company's awards
granted subsequent to March 31, 1995, its pro forma effect will not be fully
reflected until approximately fiscal 2000. Had the Company accounted for
stock-based awards to employees under FASB 123, the Company's net income would
have been $65.2 million, $95.6 million and $87.4 million in 1999, 1998 and 1997,
respectively. Basic net income per share would have been $0.45, $0.65 and $0.60
in 1999, 1998 and 1997, respectively, while diluted net income per share would
have been $0.42, $0.63 and $0.56, respectively.
Calculated under FASB 123, the weighted-average fair value of the stock options
granted during 1999, 1998 and 1997 was $13.80, $10.69 and $7.96 per share,
respectively. The weighted-average fair value of stock purchase rights granted
under the Stock Purchase Plan during 1999, 1998 and 1997 were $9.96, $7.25 and
$7.24 per share, respectively.
NOTE 10. INCOME TAXES
<TABLE>
<CAPTION>
Years ended March 31,
(In thousands) 1999 1998 1997
-------- -------- --------
<S> <C> <C> <C> <C>
Federal: Current $45,482 $45,808 $40,901
Deferred (3,558) (3,880) (200)
-------- -------- --------
41,924 41,928 40,701
-------- -------- --------
State: Current 9,187 9,285 12,073
Deferred (3,049) (311) (1,483)
-------- -------- --------
6,138 8,974 10,590
-------- -------- --------
Foreign: Current 6,863 5,826 4,091
-------- -------- --------
Total $54,925 $56,728 $55,382
======== ======== ========
</TABLE>
The tax benefits associated with the disqualifying dispositions of stock options
or employee stock purchase plan shares reduce taxes currently payable by $34.9
million, $16.1 million, and $16.7 million for 1999, 1998, and 1997,
respectively. Such benefits are credited to additional paid-in capital when
realized. Pretax income from foreign operations was $61.2 million, $55.5
million, and $36.1 million for fiscal years 1999, 1998, and 1997, respectively.
Unremitted foreign earnings that are considered to be permanently invested
outside the United States and on which no deferred taxes have been provided,
accumulated to approximately $50.8 million as of March 31, 1999. The residual
U.S. tax liability, if such amounts were remitted, would be approximately $12.7
million.
The provision for income taxes reconciles to the amount obtained by applying the
Federal statutory income tax rate to income before provision for taxes as
follows:
<TABLE>
<CAPTION>
Years ended March 31,
(In thousands) 1999 1998 1997
--------- --------- ---------
<S> <C> <C> <C>
Income before provision for taxes $189,399 $180,596 $165,758
Federal statutory tax rate 35% 35% 35%
Computed expected tax $ 66,290 $ 63,209 $ 58,016
State taxes net of federal benefit 3,990 5,833 6,884
Tax exempt interest (3,822) (4,003) (3,278)
Foreign earnings at lower tax rates (4,415) (4,586) (2,478)
Research and development tax credit (3,999) (3,007) (2,522)
Other (3,119) (718) (1,240)
--------- --------- ---------
Provision for taxes on income $ 54,925 $ 56,728 $ 55,382
========= ========= =========
</TABLE>
The major components of deferred tax assets and liabilities consist of the
following:
<TABLE>
<CAPTION>
Years ended March 31,
(In thousands) 1999 1998
--------- ---------
<S> <C> <C>
Deferred tax assets:
Inventory valuation differences $ 10,347 $ 7,846
Deferred income on shipments to distributors 49,449 23,431
Nondeductible accrued expenses 5,666 6,904
Other (30) 326
--------- ---------
Total 65,432 38,507
--------- ---------
Deferred tax liabilities:
Depreciation and amortization 3,908 763
Unremitted foreign earnings (26,576) (16,032)
Other (1,065) (137)
--------- ---------
Total net deferred tax assets $ 41,699 $ 23,101
========= =========
</TABLE>
NOTE 11. SEGMENT INFORMATION
The Company adopted the Financial Accounting Standards Board's Statement No. 131
(FASB 131), "Disclosures about Segments of an Enterprise and Related
Information". The new standard revises the way operating segments are reported.
The Company operates and tracks its results in one operating segment. The
Company designs, develops and markets programmable logic semiconductor devices
and the related software design tools.
Enterprise wide information is provided in accordance with FASB 131. Geographic
revenue information for the fiscal years 1999, 1998 and 1997 is based on the
shipment location. Long-lived assets include property, plant and equipment as
well as intangible assets including, developed technology, assembled workforce
and goodwill. Property, plant and equipment information is based on the
physical location of the asset at the end of each fiscal year while the
intangibles are based on the location of the owning entity.
Net Revenues from unaffiliated customers by geographic region were as follows:
<TABLE>
<CAPTION>
Years ended March 31,
(In thousands) 1999 1998 1997
-------- -------- --------
<S> <C> <C> <C>
United States $447,147 $381,357 $361,040
Europe 139,815 137,131 122,506
Japan 47,522 62,668 58,975
Southeast Asia/Rest of World 27,499 32,437 25,622
-------- -------- --------
$661,983 $613,593 $568,143
======== ======== ========
</TABLE>
Net long-lived assets by country was as follows:
<TABLE>
<CAPTION>
Years ended March 31,
(In thousands) 1999 1998
-------- --------
<S> <C> <C>
United States $ 77,856 $ 74,896
Ireland 27,888 28,141
Other 10,360 3,451
-------- --------
$116,104 $106,488
======== ========
</TABLE>
No end customer accounted for more than 10% of revenues in 1999,1998 or 1997.
Approximately 20%, 14% and 15% of net revenues were made through the Company's
largest domestic distributor in 1999, 1998 and 1997, respectively. A second
domestic distributor accounted for approximately 17% and 11% of net revenues in
fiscal 1999 and 1998, respectively.
NOTE 12. LITIGATION
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 have 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. Both Altera
and the Company have filed motions with the Court for summary judgement with
respect to certain of the issues pending in the litigation. Those motions are
still pending.
On July 22, 1998, Altera and Joseph Ward, a former Xilinx employee, filed suit
against the Company in Superior Court in Santa Clara County, California, arising
out of the Company's efforts to prevent disclosure of certain Company
confidential information. Altera's suit requests declaratory relief and claims
the Company engages in unfair business practices and interference with
contractual relations. On September 10, 1998 the Company filed cross claims
against Altera and Ward for unfair competition and breach of contract, among
other claims, in the California action. On October 20, 1998, Altera and Ward
filed crossclaims against the Company for malicious prosecution of civil action
and defamation.
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 of these matters could differ
materially due to the uncertain nature of each legal proceeding and because the
lawsuits are still in the pre-discovery or pre-trial stages.
On July 31, 1998, the Lemelson Foundation Partnership (Lemelson) filed a lawsuit
in the United States District Court in Phoenix, Arizona against the Company and
twenty-five (25) other United States semiconductor companies for infringement of
certain of its patents. During the third quarter of fiscal 1999, the Company
entered into a license settlement with Lemelson. In response, Lemelson
dismissed with prejudice all claims against the Company.
In addition, in the normal course of business, the Company receives and makes
inquiries with regard to possible patent infringement. Where deemed advisable,
the Company may seek or extend licenses or negotiate settlements. Outcomes of
such negotiations may not be determinable at any point in time; however,
management does not believe that such licenses or settlements will, individually
or in the aggregate, have a material adverse effect on the Company's financial
position or results of operations.
NOTE 13. WRITE-OFF OF IN-PROCESS TECHNOLOGY AND DISCONTINUED PRODUCT FAMILY
In January 1999, the Company acquired certain assets of MI Acquisition LLP, for
a total purchase price of $6.8 million. The purchase price allocation based on
an independent appraisal resulted in a $3.6 million charge to research and
development in the fourth quarter of fiscal 1999 for acquired in-process
technology. The acquired in-process technology represents the appraised value
of technology in the development stage that had not yet reached technological
feasibility and does not have alternative future uses.
During fiscal 1997, the Company discontinued the XC8100 family of one-time
programmable antifuse devices. As a result, the Company recorded a pretax
charge against earnings of $5.0 million. This charge primarily related to the
write-off of inventory and for termination charges related to purchase
commitments to foundry partners for work-in-process wafers which had not
completed the manufacturing process.
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
The Board of Directors and Stockholders
Xilinx, Inc.
We have audited the accompanying consolidated balance sheets of Xilinx, Inc. as
of March 31, 1999 and 1998, and the related consolidated statements of income,
stockholders' equity and cash flows for each of the three years in the period
ended March 31, 1999. Our audits also included the financial statement schedule
listed in the Index at Item 14(a). These financial statements and schedule are
the responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements and schedule based on our
audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of Xilinx,
Inc. at March 31, 1999 and 1998, and the consolidated results of its operations
and its cash flows for each of the three years in the period ended March 31,
1999, in conformity with generally accepted accounting principles. Also, in our
opinion, the related financial statement schedule, when considered in relation
to the basic financial statements taken as a whole, presents fairly in all
material respects the information set forth therein.
As discussed in Notes 2 and 3 to the consolidated financial statements, in the
fiscal year ended March 31, 1999, the Company changed its method of recognizing
revenue on certain shipments to its distributors.
/s/ Ernst & Young LLP
San Jose, California
April 21, 1999
<TABLE>
<CAPTION>
XILINX, INC.
SCHEDULE II
VALUATION AND QUALIFYING ACCOUNTS
(in thousands)
Beginning Charged to Deductions Balance at
Description of Year Income (a) End of Year
<S> <C> <C> <C> <C>
For the year ended March 31, 1997:
Allowances for doubtful accounts, pricing
Adjustments and customer returns $ 5,199 $ 7,991 $ 7,456 $ 5,734
For the year ended March 31, 1998:
Allowance for doubtful accounts, pricing
adjustments and customer returns $ 5,734 $ 5,637 $ 2,963 $ 8,408
For the year ended March 31, 1999:
Allowance for doubtful accounts, pricing
adjustments and customer returns $ 8,408 $ 2,129 $ 3,128 $ 7,409
<FN>
(a) Represents amounts written off against the allowance, customer returns or pricing
adjustments to international distributors.
</TABLE>
SUPPLEMENTARY FINANCIAL DATA
QUARTERLY DATA (UNAUDITED)
<TABLE>
<CAPTION>
Year Ended March 31, 1999
(In thousands, except per share amounts) First Second Third Fourth
Quarter Quarter Quarter Quarter
--------- -------- -------- --------
<S> <C> <C> <C> <C>
NET REVENUES
As previously reported $151,603 $156,443 $167,357 $184,310
Effect of change in accounting principle (2,078) 72 4,276 -
--------- -------- -------- --------
As restated in first three quarters and
Reported in fourth quarter 149,525 156,515 171,633 184,310
--------- -------- -------- --------
Gross margin
As previously reported 94,780 97,629 101,395 115,216
Effect of change in accounting principle (1,475) 50 3,122 -
As restated in first three quarters and reported
in fourth quarter 93,305 97,679 104,517 115,216
--------- -------- -------- --------
NET INCOME
As previously reported 27,029 27,831 33,919 39,254
Effect of change in accounting principle (27,664) 35 2,188 -
--------- -------- -------- --------
As restated in first three quarters and reported
in fourth quarter $ (635) $ 27,866 $ 36,107 $ 39,254
========= ======== ======== ========
NET INCOME PER BASIC SHARE:
Earnings per share before cumulative effect of
change in accounting principle
As previously reported $ 0.19 $ 0.19 $ 0.24 $ 0.26
Effect of change in accounting principle (0.01) - 0.01 -
--------- -------- -------- --------
As restated in first three quarters and reported
in fourth quarter 0.18 0.19 0.25 0.26
Cumulative effect of change in accounting
Principle (0.18) - - -
Earnings after cumulative effect of change in accounting principle - 0.19 0.25 0.26
--------- -------- -------- --------
NET INCOME PER DILUTED SHARE:
Earnings per share before cumulative effect of
change in accounting principle
As previously reported 0.18 0.19 0.22 0.24
Effect of change in accounting principle (0.01) - 0.02 -
--------- -------- -------- --------
As restated in first three quarters and reported
in fourth quarter 0.17 0.19 0.24 0.24
Cumulative effect of change in accounting
Principle (0.17) - - -
--------- -------- -------- --------
Earnings after cumulative effect of change in
accounting principle $ - $ 0.19 $ 0.24 $ 0.24
--------- -------- -------- --------
Shares used in per share calculations:
Basic 145,686 143,823 143,820 152,357
Diluted 153,676 149,761 151,163 162,641
--------- -------- -------- --------
</TABLE>
QUARTERLY DATA (UNAUDITED)
<TABLE>
<CAPTION>
Year ended March 31, 1998
(In thousands, except per share amounts) First Second Third Fourth
Quarter Quarter Quarter Quarter
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Net revenues $160,761 $150,272 $148,735 $153,825
Gross margin 99,855 94,224 93,067 95,757
Net income 33,444 30,950 31,600 30,593
Net income per share:
Basic $ 0.23 $ 0.21 $ 0.21 $ 0.21
Diluted $ 0.21 $ 0.19 $ 0.20 $ 0.20
Pro forma amounts with the change in
accounting principle related to revenue
recognition applied retroactively
Net revenues $158,962 $144,278 $147,749 $147,076
Net income 32,558 27,972 31,124 27,333
Net income per share:
Basic $ 0.22 $ 0.19 $ 0.21 $ 0.19
Diluted $ 0.20 $ 0.17 $ 0.20 $ 0.18
Shares used in per share calculations:
Basic 146,990 147,842 148,392 146,700
Diluted 162,652 162,832 158,496 156,106
-------- -------- -------- --------
</TABLE>
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
PART III
--------
Certain information required by Part III is omitted from this Report in that the
Registrant will file a definitive proxy statement pursuant to Regulation 14A
(the Proxy Statement) not later than 120 days after the end of the fiscal year
covered by this Report, and certain information included therein is incorporated
herein by reference. Only those sections of the Proxy Statement which
specifically address the items set forth herein are incorporated by reference.
Such incorporation does not include the Compensation Committee Report or the
Performance Graph included in the Proxy Statement.
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information concerning the Company's directors required by this Item is
incorporated by reference to the Company's Proxy Statement.
The information concerning the Company's executive officers required by this
Item is incorporated by reference to the section in Item 1 hereof entitled
"Executive Officers of the Registrant".
ITEM 11. EXECUTIVE COMPENSATION
The information required by this Item is incorporated by reference to the
Company's Proxy Statement.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information required by this Item is incorporated by reference to the
Company's Proxy Statement.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information required by this Item is incorporated by reference to the
Company's Proxy Statement.
PART IV
-------
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) (1) The Financial Statements required by Item 14 (a) are filed as Item 8
of this annual report.
(2) The Financial Statement Schedule reqquired by Item 14 (a) is file as
Item 8 of this annual report.
Schedules not filed have been omitted because they are not applicable, are not
required or the information required to be set forth therein is included in the
financial statements or notes thereto.
(3) The exhibits listed below in (c) are filed or incorporated by
reference as part of this annual report.
(b) Reports on Form 8-K. No reports on Form 8-K were filed during the
----------------------
fourth quarter of fiscal 1999.
(c) Exhibits.
--------
<TABLE>
Exhibit Number Description
- --------------- -----------
<S> <C>
3.1 (1) Restated Certificate of Incorporation of the Company, as amended to date.
3.2 (2) Bylaws of the Company, as amended to date.
4.1 (3) Preferred Shares Rights Agreement dated as of October 4, 1991 between
the Company and The First National Bank of Boston, as Rights Agent.
10.1 (4) Lease dated March 27, 1995 for adjacent facilities at 2055 Logic
Drive and 2065 Logic Drive, San Jose, California.
10.2 (4) First Amendment to Master Lease dated April 27, 1995 for the Company's
facilities at 2100 Logic Drive and 2101 Logic Drive, San Jose, California.
10.3 (5) Lease dated October 8, 1997 for an additional facility on Logic Drive, San Jose,
California.
10.4.1 (6) Agreement of Purchase and Sale of Land in Longmont Colorado, dated November 24, 1997.
10.4.2 (6) First Amendment to Agreement of Purchase and Sale of Land in Longmont Colorado,
dated January 15, 1998.
10.5 (2) 1988 Stock Option Plan, as amended.
10.6 (7) 1990 Employee Qualified Stock Purchase Plan, as amended.
10.7 (7) 1997 Stock Option Plan.
10.8 (2) Form of Indemnification Agreement between the Company and its officers and directors.
10.9 (8) Letter Agreement dated as of January 22, 1996 of the Company to Willem P. Roelandts.
10.10.1 (8) Consulting Agreement dated as of June 1, 1996 between the Company and
Bernard V. Vonderschmitt.
10.10.2 (6) Amended Services and Compensation Exhibit to the Consulting Agreement dated as of
June 1, 1996 between the Company and Bernard Vonderschmitt.
10.10.3 (6) Second Amendment to the Consulting Agreement dated as of June 1, 1996 between the
Company and Bernard Vonderschmitt.
10.11 (9) Letter Agreement dated as of April 1, 1997 of the Company to Richard W. Sevcik.
10.12.1 (10) (11) Foundry Venture Agreement dated as of September 14, 1995 between the Company and
United Microelectronics Corporation (UMC).
10.12.2 (10) (11) Fabven Foundry Capacity Agreement dated as of September 14, 1995 between the
Company and UMC.
10.12.3 (10) (11) Written Assurances Re Foundry Venture Agreement dated as of September 29,
1995 between UMC and the Company.
10.13.1 (8) (10) Advance Payment Agreement entered into on May 17, 1996 between Seiko Epson
Corporation and the Company.
10.13.2 (6) (10) Amended and Restated Advance Payment Agreement with Seiko Epson dated
December 12, 1997.
10.14 (8) Indenture dated November 1, 1995 between the Company and State Street
Bank and Trust Company.
18.1 Letter from Ernst & Young, LLP re: Change in Accounting Principle.
21.1 Subsidiaries of the Company.
23 Consent of Ernst & Young LLP, Independent Auditors.
24.1 Power of Attorney.
27.1 Financial Data Schedule for fiscal year ended March 31, 1999.
</TABLE>
<TABLE>
<CAPTION>
<C> <S>
(1) Filed as an exhibit to the Company's Annual Report on Form 10-K for the fiscal year ended March 30,
1991.
(2) Filed as an exhibit to the Company's Registration Statement on Form S-1 (File No. 33-34568) which was
declared effective June 11, 1990.
(3) Filed as an exhibit to the Company's Registration Statement on Form S-1 (File No. 33-43793) effective
November 26, 1991.
(4) Filed as an exhibit to the Company's Quarterly Report on Form 10-Q for the quarter ended
April 1, 1995.
(5) Filed as an exhibit to the Company's Quarterly Report on Form 10-Q for the quarter ended
September 27, 1997.
(6) Filed as an exhibit to the Company's Quarterly Report on Form 10-Q for the quarter ended
December 27, 1997.
(7) Filed as an exhibit to the Company's Registration Statement on Form S-8 (File No. 333-62897)
effective September 4, 1998.
(8) Filed as an exhibit to the Company's Annual Report on Form 10-K for the fiscal year ended
March 30, 1996.
(9) Filed as an exhibit to the Company's Annual Report on Form 10-K for the fiscal year ended
March 29, 1997.
(10) Confidential treatment requested as to certain portions of these documents.
(11) Filed as an exhibit to the Company's Quarterly Report on Form 10-Q for the quarter ended
September 30, 1995.
</TABLE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the Registrant, has duly caused this Annual Report to be signed on
its behalf by the undersigned, thereunto duly authorized, in the City of San
Jose, State of California, on the 16th day of June, 1999.
XILINX, INC.
By: /s/ Willem P. Roelandts
--------------------------------
Willem P. Roelandts,
Chief Executive Officer and President
EXHIBIT 18.1
April 21, 1999
Kris Chellam
Senior Vice President Finance and
Chief Financial Officer
Xilinx, Inc.
2100 Logic Drive
San Jose, CA 95124
Dear Mr. Chellam:
Notes 2 and 3 of the Notes to Consolidated Financial Statements of Xilinx, Inc.
included in its Form 10-K for the year ended March 31, 1999 describe a change in
the method of recognizing revenue on shipments to international distributors.
Previously, the Company recognized revenue from these transactions upon shipment
of product to the distributor, but provided specific reserves for possible
returns and allowances. Following the accounting change, revenue on shipments of
products is deferred for these transactions until the products are sold to end
users. You have advised us that you believe that the change is to a preferable
method in your circumstances because it better conforms with the substance of
the event being recognized considering the changing business environment
in the international marketplace, is consistent with industry practice and
provides greater consistency among all transactions of the Company.
There are no authoritative criteria for determining a 'preferable' method of
revenue recognition for these transactions based on the particular
circumstances, however, we conclude that the change in the method of accounting
for recognizing revenue on shipments to international distributors is to an
acceptable alternative method which, based on your business judgment to make
this change for the reasons cited above, is preferable in your circumstances.
Very truly yours,
/s/ Ernst & Young LLP
EXHIBIT 21.1
XILINX, INC.
SUBSIDIARIES OF REGISTRANT
PLACE OF INCORPORATION
NAME OR ORGANIZATION
------------------------------ ----------------------
Xilinx, Ltd. United Kingdom
Xilinx, KK Japan
Xilinx Development Corporation California, U.S.A.
Xilinx International Inc. Colorado, U.S.A.
Xilinx, SARL France
Xilinx, GmbH Germany
Xilinx AB Sweden
Xilinx, Benelux Belgium
Xilinx Holding One, Ltd. Ireland
Xilinx Holding Two, Ltd. Ireland
Xilinx Holding Three, Ltd. Cayman Islands
Xilinx, Ireland ULC Ireland
EXHIBIT 23
CONSENT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
We consent to the incorporation by reference in the Registration Statements
(Form S-8 Nos. 33-80075, 33-83036, 33-52184, 33-67808, 333-12339, 333-44233 and
333-62897) pertaining to the 1988 Stock Option Plan, 1997 Stock Plan and the
1990 Employee Qualified Stock Purchase Plan of Xilinx, Inc. of our report dated
April 21, 1999, with respect to the consolidated financial statements and
schedule of Xilinx, Inc. included in the Annual Report (Form 10-K) for the year
ended March 31, 1999.
/s/ Ernst & Young LLP
San Jose, California
June 15, 1999
EXHIBIT 24.1
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints Willem P. Roelandts and Kris Chellam, jointly and
severally, his attorneys-in-fact, each with the power of substitution, for him
in any and all capacities, to sign any amendments to this Report on Form 10-K,
and to file the same, with exhibits thereto and other documents in connection
therewith, with the Securities and Exchange Commission, hereby ratifying and
confirming all that each of said attorneys-in-fact, or his substitute or
substitutes, may do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Exchange Act of 1934 this Report
on Form 10-K has been signed below by the following persons on behalf of the
Registrant in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
<S> <C> <C>
Signature Title Date
-------------------------- ------------------------------------------------------------------- -------------
Bernard V. Vonderschmitt Chairman of the Board June 16, 1999
--------------------------
(Bernard V. Vonderschmitt)
Willem P. Roelandts President and Chief Executive Officer (Principal Executive Officer) June 16, 1999
--------------------------
(Willem P. Roelandts)
Kris Chellam Senior Vice President, Finance and Chief June 16, 1999
-------------------------- Financial Officer (Principal Accounting and
(Kris Chellam) Financial Officer)
John L. Doyle Director June 16, 1999
--------------------------
(John L. Doyle)
Philip T. Gianos Director June 16, 1999
--------------------------
(Philip T. Gianos)
William G. Howard, Jr. Director June 16, 1999
--------------------------
(William G. Howard, Jr.)
Frank Sanda Director June 16, 1999
--------------------------
(Frank Sanda)
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary information extracted from Xilinx, Inc.'s
CONSOLIDATED STATEMENTS OF INCOME AND CONSOIDATED BALANCE SHEETS and is
qualified in its entirety by reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> APR-03-1999
<PERIOD-START> MAR-29-1998
<PERIOD-END> APR-03-1999
<CASH> 53,584
<SECURITIES> 348,888
<RECEIVABLES> 80,818
<ALLOWANCES> 7,409
<INVENTORY> 52,036
<CURRENT-ASSETS> 657,709
<PP&E> 187,482
<DEPRECIATION> 85,777
<TOTAL-ASSETS> 1,070,248
<CURRENT-LIABILITIES> 167,197
<BONDS> 0
0
0
<COMMON> 1,562
<OTHER-SE> 877,756
<TOTAL-LIABILITY-AND-EQUITY> 1,070,248
<SALES> 661,983
<TOTAL-REVENUES> 661,983
<CGS> 251,266
<TOTAL-COSTS> 251,266
<OTHER-EXPENSES> 228,743
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 11,916
<INCOME-PRETAX> 189,399
<INCOME-TAX> 54,925
<INCOME-CONTINUING> 129,238
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> (26,646)
<NET-INCOME> 102,592
<EPS-BASIC> 0.70 <F1>
<EPS-DILUTED> 0.67
<FN>
<F1> Represents basic earnings per share.
</TABLE>
