UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
[ X ] Quarterly report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 for the quarterly period ended January 1, 2000 or
---------------
[ ] Transition report pursuant to section 13 or 15(d) of the Securities
Exchange Act of 1934 for the transition period from _______ to ________.
COMMISSION FILE NUMBER 0-18548
XILINX, INC.
(Exact name of registrant as specified in its charter)
DELAWARE
(State or other jurisdiction of incorporation or organization)
77-0188631
(I.R.S. Employer Identification No.)
2100 LOGIC DRIVE, SAN JOSE, CA 95124
(Address of principal executive offices, including Zip Code)
(408) 559-7778
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such requirements
for the past 90 days.
YES [ X ] NO [ ]
Class Shares Outstanding at February 1, 2000
- ----- ---------------------------------------
Common Stock, $.01 par value 321,293,000
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
<TABLE>
<CAPTION>
XILINX, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
Three Months Ended Nine Months Ended
(in thousands, except per share amounts) Jan. 1, Jan. 2 Jan. 1, Jan. 2
2000 1999 2000 1999
-------- --------- -------- ---------
<S> <C> <C> <C> <C>
Net revenues . . . . . . . . . . . . . . . . . . . . . . . . $264,259 $171,633 $714,424 $477,673
Costs and expenses:
Cost of revenues. . . . . . . . . . . . . . . . . . . . 99,576 67,116 269,539 182,172
Research and development. . . . . . . . . . . . . . . . 31,590 23,036 86,944 66,399
Sales, general and administrative . . . . . . . . . . . 47,950 33,858 131,391 97,739
Write-off of in-process research and development. . . . - - 4,560 -
-------- --------- -------- ---------
Operating costs and expenses . . . . . . . . . . . 179,116 124,010 492,434 346,310
-------- --------- -------- ---------
Operating income . . . . . . . . . . . . . . . . . . . . . . 85,143 47,623 221,990 131,363
Interest income and other, net . . . . . . . . . . . . . . . 7,254 1,853 19,253 3,433
-------- --------- -------- ---------
Income before provision for taxes on income, equity
in joint venture and cumulative effect of change
in accounting principle. . . . . . . . . . . . . . . . . 92,397 49,476 241,243 134,796
Provision for taxes on income. . . . . . . . . . . . . . . . 26,795 12,642 69,960 39,091
-------- --------- -------- ---------
Income before equity in joint venture and cumulative
effect of change in accounting principle . . . . . . . . 65,602 36,834 171,283 95,705
Equity in income (loss) of joint venture . . . . . . . . . . 2,902 (727) 4,810 (5,721)
-------- --------- -------- ---------
Income before cumulative effect of change in . . . . . . . . 68,504 36,107 176,093 89,984
accounting principle
Cumulative effect of change in accounting principle. . . . . - - - (26,646)
-------- --------- -------- ---------
Net income . . . . . . . . . . . . . . . . . . . . . . . . . $ 68,504 $ 36,107 $176,093 $ 63,338
======== ========= ======== =========
Net income per share:
Basic
Income before cumulative effect of change in
accounting principle. . . . . . . . . . . . . . $ 0.21 $ 0.13 $ 0.56 $ 0.31
Cumulative effect of change in accounting principle. - - - (0.09)
-------- --------- -------- ---------
Basic net income per share . . . . . . . . . . . . . $ 0.21 $ 0.13 $ 0.56 $ 0.22
======== ========= ======== =========
Diluted
Income before cumulative effect of change in
accounting principle. . . . . . . . . . . . . . $ 0.20 $ 0.12 $ 0.52 $ 0.30
Cumulative effect of change in accounting principle. - - - (0.09)
-------- --------- -------- ---------
Diluted net income per share . . . . . . . . . . . . $ 0.20 $ 0.12 $ 0.52 $ 0.21
======== ========= ======== =========
Shares used in per share calculations:
Basic . . . . . . . . . . . . . . . . . . . . . . . . . 319,891 287,639 315,678 288,886
======== ========= ======== =========
Diluted . . . . . . . . . . . . . . . . . . . . . . . . 346,162 302,325 341,068 303,066
======== ========= ======== =========
<FN>
(See accompanying Notes to Condensed Consolidated Financial Statements.)
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
XILINX, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands) Jan. 1 April 3,
2000 1999
------------ -----------
<S> <C> <C>
(Unaudited) (1)
ASSETS
Current assets:
Cash and cash equivalents . . . . . . . . . . . $ 80,548 $ 53,584
Short-term investments. . . . . . . . . . . . . 416,993 348,888
Accounts receivable, net. . . . . . . . . . . . 96,266 73,409
Inventories . . . . . . . . . . . . . . . . . . 97,580 52,036
Advances for wafer purchases. . . . . . . . . . 41,854 59,450
Deferred income taxes and other current assets. 124,184 70,342
------------ -----------
Total current assets. . . . . . . . . . . . . . . . 857,425 657,709
Property, plant and equipment, at cost. . . . . . . 305,421 187,482
Accumulated depreciation and amortization . . . . . (107,224) (85,777)
------------ -----------
Net property, plant and equipment . . . . . . . 198,197 101,705
Long-term investments . . . . . . . . . . . . . . . 196,710 94,002
Restricted investments. . . . . . . . . . . . . . . - 34,358
Investment in joint venture . . . . . . . . . . . . 103,210 91,057
Advances for wafer purchases. . . . . . . . . . . . - 36,694
Developed technology and other assets, net. . . . . 35,395 54,723
------------ -----------
TOTAL ASSETS. . . . . . . . . . . . . . . . . . . . $ 1,390,937 $1,070,248
============ ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable. . . . . . . . . . . . . . . . $ 43,806 $ 23,326
Accrued payroll and other accrued liabilities . 38,845 32,164
Income tax payable. . . . . . . . . . . . . . . 17,212 25,998
Deferred income on shipments to distributors. . 73,047 85,709
------------ -----------
Total current liabilities . . . . . . . . . . . . . 172,910 167,197
Deferred tax liabilities. . . . . . . . . . . . . . 23,956 23,733
Stockholders' equity:
Preferred stock, $.01 par value . . . . . . . . - -
Common stock, $.01 par value . . . . . . . . . 3,206 3,124
Additional paid-in capital. . . . . . . . . . . 422,153 291,669
Retained earnings . . . . . . . . . . . . . . . 783,153 607,060
Treasury stock, at cost . . . . . . . . . . . . - (5,112)
Accumulated other comprehensive income. . . . . (14,441) (17,423)
------------ -----------
Total stockholders' equity. . . . . . . . . . . . . 1,194,071 879,318
------------ -----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY. . . . . $ 1,390,937 $1,070,248
============ ===========
<FN>
(See accompanying Notes to Condensed Consolidated Financial Statements.)
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
XILINX, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Nine Months Ended
(in thousands) Jan. 1, Jan. 2,
2000 1999
------------ ----------
Increase (decrease) in cash and cash equivalents<S> <C> <C>
Cash flows from operating activities:
Net income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 176,093 $ 63,338
Adjustments to reconcile net income to net cash provided by operating
Activities:
Cumulative effect of change in accounting principle. . . . . . . . . . . . . - 26,646
Depreciation and amortization. . . . . . . . . . . . . . . . . . . . . . . . 31,221 24,643
Write-off of in-process research and development . . . . . . . . . . . . . . 4,560 -
Undistributed (earnings) / losses of joint venture . . . . . . . . . . . . . (4,810) 5,721
Changes in assets and liabilities:
Accounts receivable. . . . . . . . . . . . . . . . . . . . . . . . . (22,857) (19,823)
Inventories. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14,451 45,545
Other prepaid assets . . . . . . . . . . . . . . . . . . . . . . . . (33,143) (7,906)
Deferred income taxes and other assets . . . . . . . . . . . . . . . (11,208) 891
Accounts payable and accrued liabilities . . . . . . . . . . . . . . 27,161 (5,906)
Income tax payable . . . . . . . . . . . . . . . . . . . . . . . . . 55,030 22,577
Deferred income on shipments to distributors . . . . . . . . . . . . (12,662) 10,466
------------ ----------
Total adjustments. . . . . . . . . . . . . . . . . . . . . . 47,743 102,854
------------ ----------
Net cash provided by operating activities . . . . . . . 223,836 166,192
Cash flows from investing activities:
Purchases of available-for-sale investments . . . . . . . . . . . . . . . . . . . . . . (1,757,263) (671,399)
Proceeds from sale or maturity of available-for-sale investments. . . . . . . . . . . . 1,584,036 514,906
Purchases of restricted held-to-maturity investments. . . . . . . . . . . . . . . . . . - (36,228)
Proceeds from maturity of restricted held-to-maturity investments . . . . . . . . . . . 34,359 72,347
Property, plant and equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (91,523) (28,405)
Investment in joint venture . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . - (5,448)
Assets purchased from Philips . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (22,750) -
------------ ----------
Net cash used in investing activities. . . . . . . . . (253,141) (154,227)
Cash flows from financing activities:
Acquisition of treasury stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (5,289) (108,634)
Proceeds from issuance of common stock. . . . . . . . . . . . . . . . . . . . . . . . . 51,520 41,491
Proceeds from sales of put warrants . . . . . . . . . . . . . . . . . . . . . . . . . . 10,038 -
------------ ----------
Net cash provided by / (used in) financing activities. 56,269 (67,143)
------------ ----------
Net increase / (decrease) in cash and cash equivalents. . . . . . . . . . . . . . . . . . . 26,964 (55,178)
Cash and cash equivalents at beginning of period. . . . . . . . . . . . . . . . . . . . . . 53,584 166,861
------------ ----------
Cash and cash equivalents at end of period. . . . . . . . . . . . . . . . . . . . . . . . . $ 80,548 $ 111,683
============ ==========
Schedule of non-cash transactions:
Tax benefit from stock options. . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 79,408 $ 14,124
Issuance of treasury stock under employee stock plans . . . . . . . . . . . . . . . . . 10,400 85,385
Supplemental disclosures of cash flow information:
Interest paid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 12,991
Income taxes paid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 11,660 $ 15,568
<FN>
(See accompanying Notes to Condensed Consolidated Financial Statements.)
</TABLE>
<PAGE>
XILINX, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. The accompanying interim consolidated financial statements have been
prepared in conformity with generally accepted accounting principles and should
be read in conjunction with the Xilinx, Inc. (Xilinx or the Company)
consolidated financial statements for the year ended April 3, 1999. The balance
sheet at April 3, 1999 is derived from audited financial statements. The interim
financial statements are unaudited but reflect all adjustments which are in the
opinion of management of a normal, recurring nature necessary to present fairly
the statements of financial position, results of operations and cash flows for
the interim periods presented. The results for the three-month period and
nine-month period ended January 1, 2000 are not necessarily indicative of the
results that may be expected for the year ending April 1, 2000. The three-month
and nine-month periods ended January 1, 2000 consisted of thirteen and
thirty-nine weeks, respectively. The three-month and nine-month periods ended
January 2, 1999 consisted of thirteen and forty weeks, respectively.
2. Inventories are stated at the lower of cost (first-in, first-out) or
market (estimated net realizable value). Inventories at January 1, 2000 and
April 3, 1999 are as follows:
<TABLE>
<CAPTION>
(in thousands) Jan. 1 April 3,
2000 1999
-------- --------
<S> <C> <C>
Raw materials. . $ 6,675 $ 5,139
Work-in-process. 55,953 27,824
Finished goods . 34,952 19,073
-------- --------
$ 97,580 $ 52,036
======== ========
</TABLE>
3. In December 1999, we exercised our option to purchase three buildings
previously leased at our San Jose corporate facility. The restricted
investment of $34.4 million related to certain collateral requirements on the
building leases was used to purchase the three buildings.
4. The computation of basic net income per share for all years presented is
derived from the information on the face of the statement of operations, 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 26.3 million and 25.4 million
incremental common shares attributable to outstanding options for the third
quarter and first nine months of fiscal year 2000, respectively, as compared to
14.7 million and 14.2 million in the comparable fiscal 1999 periods,
respectively.
Outstanding options to purchase approximately 0.2 million and 0.9 million shares
for the third quarter and first nine months of fiscal year 2000, respectively,
and 3.0 million and 12.8 million shares in the comparable fiscal 1999 periods,
respectively, under the Company's Stock Option Plan were not included in the
treasury stock calculation to derive diluted net income per share as their
inclusion would have had an anti-dilutive effect. In addition, the put warrants
disclosed in Note 7 did not have any impact on basic or diluted net income per
share in the three and nine months ended January 1, 2000 as their inclusion
would have had an anti-dilutive effect.
5. The components of comprehensive income for the three and nine month
periods ended January 1, 2000 and January 2, 1999 are as follows:
<PAGE>
<TABLE>
<CAPTION>
Three months ended Nine months ended
(in thousands) Jan. 1, Jan. 2, Jan. 1, Jan. 2,
2000 1999 2000 1999
--------- -------- -------- --------
<S> <C> <C> <C> <C>
Net income . . . . . . . . . . . . . . . . . . $ 68,504 $ 36,107 $176,093 $ 63,338
Cumulative translation adjustment. . . . . . . 193 6,221 4,430 1,726
Unrealized (loss) /gain on available for sale
securities, net of tax. . . . . . . . . . (433) 139 (1,448) 159
--------- -------- --------- --------
Comprehensive income . . . . . . . . . . . . . $ 68,264 $ 42,467 $179,075 $ 65,223
========= ======== ========= ========
</TABLE>
The components of accumulated other comprehensive income (loss) at January 1,
2000 and April 3, 1999 are as follows:
<TABLE>
<CAPTION>
(in thousands) Jan. 1, April 3,
2000 1999
--------- ---------
<S> <C> <C>
Cumulative translation adjustment . . . . . . . $(13,225) $ (17,655)
Unrealized (loss) / gain on available for sale
securities, net of tax . . . . . . . . . . (1,216) 232
--------- ----------
Accumulated other comprehensive loss. . . . . . $(14,441) $ (17,423)
========= ==========
</TABLE>
6. Xilinx, 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). We had a 20% equity ownership in
USIC and had the right to receive up to 31.25% of the wafer capacity from this
facility. We accounted for this investment using the equity method of
accounting with a one-month lag in recording our share of results for the
entity.
In January 2000, our equity position in USIC was converted into shares of UMC
which are publicly traded on the Taiwan Stock Exchange. We will recognize an
approximate $400 million after-tax gain in our fiscal fourth quarter ending
April 1, 2000, as a result of the merger of United Silicon Inc. (USIC) with
United Microelectronics Corporation (UMC). The gain, to be reported as other
income, represents the appreciation of our investment in USIC. As a result of
this merger, we will own approximately 222 million UMC shares, which represents
2% of the combined UMC Group. We retain equivalent wafer capacity rights in UMC
as we previously had in USIC, as long as we retain one-half of our UMC shares.
Due to restrictions imposed by UMC and the Taiwan Stock Exchange, we will be
subject to a certain holding period during which time, we will not be able to
sell our UMC shares.
7. Our Board of Directors approved stock repurchase programs that allow us
to repurchase shares of our common stock. During the first nine months of
fiscal 2000, we repurchased 247,000 shares of common stock under our authorized
repurchase program at a cost of $5.3 million. In conjunction with the stock
repurchase program, during the nine months ended January 1, 2000, we sold put
warrants that entitle the holder of each warrant to sell to us, by physical
delivery, one share of common stock at a specified price, ranging from $32 to
$42 per share. The outstanding put warrants will expire at various dates
through October 2000. As of January 1, 2000, we have 2.2 million shares of
outstanding put warrants.
8. 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. We are 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 our consolidated results of operations
or financial position. FASB 133 will require us 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.
9. We completed the acquisition of Philips Seminconductors' line of
low-power complex programmable logic devices (CPLDs) on August 2, 1999. The
total cost, including acquisition related fees, was approximately $22.8 million.
The purchase price allocation based on an independent appraisal resulted in a
$4.6 million charge to research and development in the second quarter. The
acquired in-process technology represents the appraised value of technologies in
the development stage that had not yet reached technological feasibility and
does not have alternative future uses.
10. On October 18, 1999, our Board of Directors approved a 2 for 1 split of
our Common Stock, which was effected in the form of a 100% stock dividend. On
December 27, 1999, shareholders of record as of December 17, 1999 received one
additional share of Common Stock for every share held. Shares, per share
amounts, common stock at par value, and additional paid-in capital have been
restated to reflect the stock split for all periods presented.
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
The following discussion contains forward-looking statements, which involve
numerous risks and uncertainties. Actual results may differ materially.
Certain of these risks and uncertainties are discussed under "Factors Affecting
Future Operating Results".
RESULTS OF OPERATIONS: THIRD QUARTER AND FIRST NINE MONTHS OF FISCAL 2000
- --------------------------------------------------------------------------------
COMPARED TO THE THIRD QUARTER AND FIRST NINE MONTHS OF FISCAL 1999
- -----------------------------------------------------------------------------
NET REVENUES
We currently classify our product offerings into four categories by technology.
Base products consist of our mature product families that are currently
manufactured on technologies of 0.6 micron and older; this includes the XC2000,
XC3000, XC3100, XC4000 and XC7000 families. Mainstream products are currently
manufactured on 0.35 and 0.5 micron technologies and include the XC4000E,
XC4000EX, XC4000XL, XC5200, XC9500, XC9500XL, Spartan and CoolRunner product
lines. Advanced products include our newest technologies manufactured on 0.25
micron and smaller, which include the XC4000XV, XC4000XLA, Spartan XL, Spartan2,
Virtex, and VirtexE product lines. Our Support products make up the remainder
of our product offerings and include serial proms, HardWire, and software.
Net revenues of $264.3 million in the third quarter of fiscal 2000 represented a
54.0% increase from the comparable prior year quarter of $171.6 million.
Revenues for the first nine months of fiscal 2000 were $714.4 million, a 49.6%
increase from the prior year comparable period. Product lines that experienced
significant growth during the nine-month period include the XC4000XL, XC4000XLA,
XC9500, Spartan, and Virtex families. The increases in revenues of Advanced
products are due to the introduction and strong market acceptance of XC4000XLA,
Spartan XL and Virtex products. Increases in revenues of Mainstream products
are attributable mainly to growth in the XC4000XL, Spartan, and XC9500 product
lines, along with the acquisition of CoolRunner and introduction of XC9500XL.
Revenues of Base products decreased as customers migrated to newer product
offerings while revenues of Support products remain relatively flat. We have
historically been able to offset much of the revenue declines of our mature
technologies with increased revenues from newer technologies, although no
assurance can be given that we can continue to do so in the future. The revenue
by technology for the three and nine month periods ended January 1, 2000 and
January 2, 1999 are as follows:
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
(in millions) Jan. 1 Jan. 2 Jan. 1 Jan. 2
2000 1999 2000 1999
------- ------- ------- -------
<S> <C> <C> <C> <C>
Base products. . . . $ 35.2 $ 37.4 $ 96.4 $ 114.6
Mainstream products. 136.0 111.0 386.4 300.3
Advanced products. . 71.5 3.8 169.4 5.0
Support products . . 21.6 19.4 62.2 57.8
------- ------- ------- -------
Total revenue. . . . $ 264.3 $ 171.6 $ 714.4 $ 477.7
======= ======= ======= =======
</TABLE>
International revenues represented approximately 35.0%, and 32.8% of total
revenues in the third quarter and first nine months of fiscal 2000 as compared
to 31.2%, and 32.8% in the prior year periods. The European revenue increases
are due to several customer programs commencing production. The revenue
increases in Japan are due to wider adoption of our new products in consumer and
telecommunications applications as well as to favorable exchange rates. Asia
Pacific/Rest of World experienced significant increases in revenue as a result
of economic recovery in those regions following the economic downturn a year
ago. The revenue by geography for the three and nine month periods ended
January 1, 2000 and January 2, 1999 are as follows:
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
(in millions) Jan. 1 Jan. 2 Jan. 1 Jan. 2
2000 1999 2000 1999
------- ------- ------- -------
<S> <C> <C> <C> <C>
North America . . . . . . . $ 171.7 $ 118.1 $ 479.9 $ 321.0
Europe. . . . . . . . . . . 51.6 36.7 139.4 105.1
Japan . . . . . . . . . . . 26.6 9.8 56.6 32.6
Asia Pacific/Rest of World. 14.4 7.0 38.5 19.0
------- ------- ------- -------
Total revenue . . . . . . . $ 264.3 $ 171.6 $ 714.4 $ 477.7
======= ======= ======= =======
</TABLE>
GROSS MARGIN
Gross margin was $164.7 million and $444.9 million for the third quarter and
first nine months of fiscal 2000, respectively, or 62.3% of revenues for both
periods. Gross margin for the comparable periods of fiscal 1999 was $104.5
million, or 60.9% of revenues, and $295.5 million, or 61.9% of revenues,
respectively. Gross margin percentage increased slightly for the three and
nine-month periods as we continue to benefit from cost improvements,
manufacturing process technology advances and improved yields that offset
selling price reductions. We recognize that ongoing price reductions for our
integrated circuits are a significant element in expanding the market for our
products. Management believes that gross margin objectives of approximately 62%
of revenues are consistent with expanding market share while realizing
acceptable returns, although there can be no assurance that future gross margins
can remain in this range.
RESEARCH AND DEVELOPMENT
Research and development expenditures were $31.6 million, or 12.0% of revenues
for the third quarter, and $86.9 million, or 12.2% of revenues for the first
nine months of fiscal 2000. Research and development expenditures for the
comparable periods in the prior year were $23.0 million and $66.4 million, or
13.4% and 13.9% of revenues, respectively. Although total expenditures on
research and development increased significantly, they decreased as a percent of
revenue because of strong revenue growth. The 30.9% increase in expenditures
over the prior year's nine month period was primarily due to designing and
developing new product architectures of complex, high density devices including
wafer purchases, development of advanced process technologies using 0.22 micron
and 0.18 micron, software development, increased labor-related costs, and
testing of new products, along with increased costs associated with the
acquisition of the CPLD CoolRunner business from Philips Semiconductors. We
remain committed to a significant level of research and development effort in
order to maintain our technology leadership in the programmable logic industry.
SALES, GENERAL AND ADMINISTRATIVE
Sales, general and administrative expenses were $48.0 million, or 18.1% of
revenues and $131.4 million, or 18.4% of revenues for the third quarter and
first nine months of fiscal 2000, respectively. They were $33.9 million, or
19.7% of revenues and $97.7 million, or 20.5% of revenues in the comparable
prior year periods. Although total sales, general and administrative expenses
increased, they decreased as a percent of revenue because of strong revenue
growth. The increases in sales, general and administrative expenses were
primarily attributable to increased marketing expenses for new product
introductions, increased sales costs on higher revenues along with increased
personnel and facilities expenses. We remain committed to controlling
administrative expenses. However, the timing and extent of future legal costs
associated with the ongoing enforcement of our intellectual property rights are
not readily predictable and may increase significantly in the future.
INTEREST AND OTHER, NET
Interest and other income, net increased to $7.3 million in the third quarter of
fiscal 2000 from $1.9 million in the prior year third quarter, and increased to
$19.3 million in the first nine months of fiscal 2000 from $3.4 million in the
prior year's comparable period. The increases were primarily due to the
decrease in interest expense related to the convertible notes which were
redeemed in the fourth quarter of fiscal 1999. In addition, average cash and
investment balances have increased in both the third quarter and the first nine
months of fiscal 2000 as compared to the prior year periods resulting in
increased interest income of $2.9 million and $5.9 million over the respective
prior year periods. The amount of net interest and other income in the future
will continue to be impacted by the level of our average cash and investment
balance, prevailing interest rates, and foreign currency exchange rates.
PROVISION FOR INCOME TAXES
We recorded a tax provision of $26.8 million and $70.0 million for the third
quarter and first nine months of fiscal 2000, representing effective tax rates
of 29.0% for both periods. We recorded a provision of $12.6 million and $39.1
million for the third quarter and first nine months of fiscal 1999, representing
effective tax rates of 25.6% and 29.0%, respectively. The lower tax rate in
the third quarter of fiscal 1999 was primarily due to legislation reinstating
the R&D Tax Credit through June 30, 1999 as well as increased profits in foreign
jurisdictions where the tax rate is lower than the U.S. rate.
JOINT VENTURE EQUITY INCOME
We record our 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). We recorded $2.9 million and $4.8 million equity
in income of joint venture for the third quarter and the first nine months of
fiscal 2000, respectively, as compared to $0.7 million and $5.7 million equity
in loss of joint venture in the prior year periods, respectively. The fiscal
1999 equity in loss of joint venture was a result of the early stage in the
production ramp of the wafer fabrication facility. The fiscal 2000 net gains
were recorded as USIC began to have volume wafer production and shipments.
In January 2000, our equity position in USIC was converted into shares of UMC
which are publicly traded on the Taiwan Stock Exchange. We will recognize an
approximate $400 million after-tax gain in our fiscal fourth quarter ending
April 1, 2000, as a result of the merger of USIC with UMC. The gain, to be
reported as other income, represents the appreciation of our investment in USIC.
As a result of this merger, we will own approximately 222 million UMC shares,
which represents 2% of the combined UMC Group. We retain equivalent wafer
capacity rights in UMC as we previously had in USIC, as long as we retain
one-half of our UMC shares.
Due to restrictions imposed by UMC and the Taiwan Stock Exchange, we will be
subject to a certain holding period during which time, we will not be able to
sell our UMC shares.
HEDGING
We use forward currency exchange contracts to reduce financial market risks.
Our sales to Japanese customers are denominated in yen while our 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. In fiscal 2000, we have also begun
to share the yen exchange rate risk with some of our Japanese customers through
risk sharing agreements. As we will continue to have a net yen exposure in the
near future, we will continue to mitigate the exposure through yen hedging
contracts. No currency forward contracts were outstanding as of January 1,
2000.
INFLATION
To date, the effects of inflation upon our financial results have not been
significant.
FINANCIAL CONDITION, LIQUIDITY AND CAPITAL RESOURCES
- ---------------------------------------------------------
Our financial condition at January 1, 2000 remained strong. Total current
assets exceeded total current liabilities by 5.0 times, compared to 3.9 times at
April 3, 1999. We have used a combination of equity and cash flow from
operations to support on-going business activities, secure manufacturing
capacity from foundry partners, make acquisitions and investments in
complementary technologies, obtain facilities and capital equipment and finance
inventory and accounts receivable.
We continued to generate positive cash flows from operations during the first
nine months of fiscal 2000. As of January 1, 2000, we had cash, cash
equivalents and short-term investments of $497.5 million and working capital of
$684.5 million. Cash generated by operations of $223.8 million for the first
nine months of fiscal 2000 was $57.6 million higher than the $166.2 million
generated from the first nine months of fiscal 1999. Increases in cash
generated by operations resulted primarily from the cash flow impact of
increased net income, and increases in accounts payable, accrued liabilities and
income taxes payable, which were partially offset by increases in accounts
receivable, inventory, prepaids for building deposit and decreases in deferred
income on shipments to distributors.
Cash flows used for investing activities during the nine months ended January 1,
2000 included net investment purchases of $138.8 million, $91.5 million for
property, plant and equipment and $22.8 million for assets purchased from
Philips' CPLD business. During the first nine months of fiscal 1999, investing
activities included net investment purchases of $120.4 million, $28.4 million
of property, plant and equipment acquisitions and an additional $5.4 million
equity investment in the USIC joint venture. We increased our property, plant
and equipment purchases significantly in the first nine month of fiscal 2000 as
we purchased more testers, equipment, and facilities for our growing business.
Net cash flows provided by financing activities were $56.3 million in the first
nine months of fiscal 2000 and were attributable to $51.5 million in proceeds
from the issuance of common stock under employee stock plans and $10.1 million
in proceeds from sales of put warrants, offset by acquisition of treasury stock
of $5.3 million. For the comparable fiscal 1999 period, cash used in financing
activities of $67.1 million included $108.6 million in acquisition of treasury
stock partially offset by $41.5 million of proceeds from issuance of common
stock under employee stock plans.
Stockholders' equity increased by $314.8 million during the first nine months of
fiscal 2000, principally as a result of the $176.1 million in net income for the
nine months ended January 1, 2000. In addition, the proceeds from the issuance
of common stock under employee stock plans of $51.5 million, related tax
benefits from stock options of $79.4 million, and $10.1 million in proceeds from
sales of put warrants contributed to the increase, which were partially offset
by the $5.3 million in acquisition of treasury stock.
We have available credit facilities for up to $46.2 million of which $6.2
million is intended to meet occasional working capital requirements for our
wholly owned Irish subsidiary. As of January 1, 2000, no borrowings were
outstanding under the lines of credit.
We anticipate that existing sources of liquidity and cash flow from operations
will be sufficient to satisfy our cash needs for the foreseeable future. We
will continue to evaluate opportunities to obtain additional wafer capacity,
procure additional capital equipment and facilities, develop new products, and
acquire businesses, products or technologies that would complement our
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 months;
- accelerated erosion of average selling prices; and
- tight 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 in 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. For example, we have sales and operations in
Southeast Asia and Japan. Past economic weakness in these markets adversely
affected revenues, and such conditions may occur in the future. 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. Currency instability may increase
credit risks as the weak currencies may impair our customers' ability to repay
existing obligations. 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. Any 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.
Our foundry partners in Taiwan and Japan and many of our operations in
California are centered in areas that have been seismically active, as
demonstrated by the earthquakes that occurred in Taiwan during the fall of 1999.
Those earthquakes disrupted manufacturing activities at our foundry partner for
approximately 10 days. Should there be a major earthquake in our operating
locations in the future, our operations may again 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), with recent wafers also manufactured by USIC. We are
dependent 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 large part upon our ability to obtain additional 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 success depends in 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;
- ability to utilize advanced manufacturing process technologies;
- achieving acceptable yields;
- availability of supporting software design tools;
- utilization of predefined cores of logic;
- market acceptance; and
- successful deployment of systems by our customers.
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 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
Our FPGAs and CPLDs compete in the logic industry, 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 segment. We believe that important
competitive factors in the programmable logic business 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 expanding the market for the programmable logic industry
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 ASIC devices, including custom CMOS gate arrays and
standard cells;
- 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 and
processors.
We compete with custom gate array manufacturers on the basis of lower design
costs, shorter development schedules, reduced inventory risks and field
upgradability. The CMOS gate array market has been declining, and gate arrays
are being replaced by other logic options. 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 our 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 competitors.
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 industry.
Several companies, both large and small, have introduced products that compete
with ours or have announced their intention to enter this market segment. 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 has rights to manufacture certain of
our products and market them in Japan and Europe, but is not currently doing so.
We granted a license to use certain of our patents to Advanced Micro Devices
("AMD"). AMD produced certain programmable logic devices under that license
through its wholly-owned subsidiary, Vantis. During 1999, AMD sold the Vantis
subsidiary to Lattice Semiconductor.
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. See Part II - Other Information, Item 1 - Legal Proceedings for a
discussion of litigation between Xilinx and Altera Corporation.
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 worked over the past several years on resolutions to 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 could have recognized a year ending in "00" as
1900 rather than the year 2000, which could have resulted in miscalculations,
classification errors or system failures.
During the past several years, we performed a thorough review of our internal
use software and hardware applications and software products in order to
identify those applications and products that were not Year 2000 compliant. We
have encountered no Year 2000 problems with any of our software or hardware
applications or hardware products to date. Currently, our Year 2000 efforts are
focused on ongoing monitoring of these applications. We will continue this
monitoring over the next several months in addition to our normal systems
maintenance. In addition, we have already tested all of our systems for
February 29 but will continue to monitor them and other dates that may pose
greater systems risks during this year. We have also not encountered any supply
disruptions from any vendors to date. While we have encountered no problems to
date, we cannot assure that no Year 2000 issues will occur.
We believe that our software releases beginning with version M1.5i and including
version M2.1i which we started shipping in July 1999, are Year 2000 compliant,
although we cannot assure that they are Year 2000 compliant. We have received
no indications from customers that these versions are not 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.
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 no more 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 incur
problems currently unforeseen and which cannot be resolved on a timely,
cost-effective basis, our financial condition and results of operations could be
adversely affected.
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
Part II.
Item 3. Quantitative and Qualitative Disclosures about Market Risk
INTEREST RATE RISK
Our exposure to interest rate risk relates primarily to our investment
portfolio. Our primary aim with our 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 our investment policy, we place investments with high credit
quality issuers and limit 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 not materially affect the fair value of our available-for-sale securities.
FOREIGN CURRENCY RISK
We use forward currency exchange contracts to reduce financial market risks.
Our sales to Japanese customers are denominated in yen while our 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 the nine months ended in
fiscal years 2000 and 1999.
We have 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 $13.4 million in cumulative translation adjustments, as the New Taiwan
dollar has decreased in value against the U.S. dollar. Also, as our
subsidiaries and the USIC joint venture maintain investments denominated in
other than local currencies, exchange rate fluctuations will occur.
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
On June 7, 1993, we filed suit against Altera Corporation (Altera) in the United
States District Court for the Northern District of California for infringement
of certain of our patents. Subsequently, Altera filed suit against Xilinx,
alleging that certain of our 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 Xilinx
in the Federal District Court in Delaware, alleging that our XC5200 family
infringes an Altera patent. We 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 our 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 Xilinx filed motions with the Court for summary judgement with
respect to certain of the issues pending in the litigation. In October 1999,
the Court ruled on all but one of the motions. As a result of those rulings,
Altera is left with one claim against Xilinx. The Court's rulings also dismissed
certain claims by us, leaving intact claims of infringement under two Company
patents by Altera. The remaining claims against Altera will be decided at a
trial scheduled to begin on May 8, 2000. The remaining claim against Xilinx will
be decided at a trial scheduled to commence on June 19, 2000.
On July 22, 1998, Altera and Joseph Ward, a former Xilinx employee, filed suit
against Xilinx in Superior Court in Santa Clara County, California, arising out
of our efforts to prevent disclosure of certain Company confidential
information. Altera's suit requests declaratory relief and claims Xilinx
engages in unfair business practices and interference with contractual
relations. On September 10, 1998 we 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 Xilinx for malicious prosecution of civil action and defamation. On
September 15, 1999, the Court dismissed all of our claims against Altera and Mr.
Ward, finding that we were unable to show any damages we suffered as a result of
Mr. Ward's move to Altera. Claims against Xilinx are still pending.
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-trial stages.
There is no other pending legal proceedings of a material nature to which we are
a party or of which any of our property is the subject. We know of no legal
proceedings contemplated by any governmental authority or agency.
Item 4. Submission of Matters to a Vote of Security Holders
During a special meeting held on December 16, 1999, Xilinx shareholders voted to
approve an amendment to our certificate of incorporation to increase the number
of authorized shares of our common stock, $0.01 par value per share, from
300,000,000 to 500,000,000 to accommodate a proposed two-for-one split of our
common stock.
For Against Abstain No Vote
--- ------- ------- -------
138,164,055 115,560 166,386 0
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits None
(b) Reports on Form 8-K
1) On December 27, 1999, Xilinx filed a report on Form 8-K relating
to the amendment of the Company's certificate of incorporation to increase
the number of authorized shares of the Company's common stock, $0.01 par value
per share, from 300,000,000 to 500,000,000.
Items 2, 3 and 5 are not applicable and have been omitted.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
XILINX, INC.
---------------------
Date February 4, 2000 /s/ Kris Chellam
- ------------------------- ---------------------
Kris Chellam
Senior Vice President of Finance and
Chief Financial Officer
(as principal accounting and financial
officer and on behalf of Registrant)
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary information extracted from Xilinx, Inc.'s
CONSOLIDATED STATEMENTS OF INCOME AND CONSOLIDATED BALANCE SHEETS and is
qualified in its entirety by reference to such financial statements.
</LEGEND>
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<FISCAL-YEAR-END> APR-01-2000 APR-01-2000
<PERIOD-START> OCT-03-1999 APR-04-1999
<PERIOD-END> JAN-01-2000 JAN-01-2000
<CASH> 80,548 80,548
<SECURITIES> 416,993 416,993
<RECEIVABLES> 107,382 107,382
<ALLOWANCES> 11,116 11,116
<INVENTORY> 97,580 97,580
<CURRENT-ASSETS> 857,425 857,425
<PP&E> 305,421 305,421
<DEPRECIATION> 107,224 107,224
<TOTAL-ASSETS> 1,390,937 1,390,937
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0 0
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<COMMON> 3,206 3,206
<OTHER-SE> 1,190,865 1,190,865
<TOTAL-LIABILITY-AND-EQUITY> 1,390,937 1,390,937
<SALES> 264,259 714,424
<TOTAL-REVENUES> 264,259 714,424
<CGS> 99,576 269,539
<TOTAL-COSTS> 99,576 269,539
<OTHER-EXPENSES> 79,540 222,895
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 1 6
<INCOME-PRETAX> 92,397 241,243
<INCOME-TAX> 26,795 69,960
<INCOME-CONTINUING> 68,504 176,093
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 68,504 176,093
<EPS-BASIC> 0.21 0.56
<EPS-DILUTED> 0.20 0.52
</TABLE>
