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 September 30, 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 [ ] NO [ X ]
Class Shares Outstanding at October 27, 2000
----- --------------------------------------
Common Stock, $.01 par value 329,700,000
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
<TABLE>
<CAPTION>
XILINX, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
Three Months Ended Six Months Ended
(in thousands, except per share amounts) Sep. 30, Oct. 2, Sep. 30, Oct. 2,
2000 1999 2000 1999
--------- -------- --------- --------
<S> <C> <C> <C> <C>
Net revenues. . . . . . . . . . . . . . . . . . . . . . $ 437,360 $238,762 $ 802,235 $450,165
Costs and expenses:
Cost of revenues . . . . . . . . . . . . . . . . . 168,325 90,205 305,254 169,963
Research and development . . . . . . . . . . . . . 51,433 29,345 94,626 55,354
Sales, general and administrative. . . . . . . . . 70,514 43,902 133,913 83,441
Write-off of in-process research and development . - 4,560 - 4,560
--------- -------- --------- --------
Operating costs and expenses. . . . . . . . . 290,272 168,012 533,793 313,318
--------- -------- --------- --------
Operating income. . . . . . . . . . . . . . . . . . . . 147,088 70,750 268,442 136,847
Interest income and other, net. . . . . . . . . . . . . 11,323 6,320 20,283 11,999
--------- -------- --------- --------
Income before provision for taxes on income and equity
in net income of joint venture. . . . . . . . . . . 158,411 77,070 288,725 148,846
Provision for taxes on income . . . . . . . . . . . . . 44,355 22,350 80,843 43,165
--------- -------- --------- --------
Income before equity in net income of joint venture . . 114,056 54,720 207,882 105,681
Equity in net income of joint venture . . . . . . . . . - 1,254 - 1,908
--------- -------- --------- --------
Net income. . . . . . . . . . . . . . . . . . . . . . . $ 114,056 $ 55,974 $ 207,882 $107,589
========= ======== ========= ========
Net income per share:
Basic. . . . . . . . . . . . . . . . . . . . . . . $ 0.35 $ 0.18 $ 0.64 $ 0.34
========= ======== ========= ========
Diluted. . . . . . . . . . . . . . . . . . . . . . $ 0.32 $ 0.16 $ 0.59 $ 0.32
========= ======== ========= ========
Shares used in per share calculations:
Basic. . . . . . . . . . . . . . . . . . . . . . . 329,650 317,534 327,009 315,700
========= ======== ========= ========
Diluted. . . . . . . . . . . . . . . . . . . . . . 356,046 343,007 353,909 340,220
========= ======== ========= ========
<FN>
(See accompanying Notes to Condensed Consolidated Financial Statements.)
</TABLE>
<TABLE>
<CAPTION>
XILINX, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
Sep. 30, Apr. 1,
(in thousands) 2000 2000
------------ -----------
(Unaudited) (Audited)
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents. . . . . . . . . . . . $ 162,509 $ 85,548
Short-term investments . . . . . . . . . . . . . 503,618 522,202
Accounts receivable, net . . . . . . . . . . . . 243,858 135,048
Inventories. . . . . . . . . . . . . . . . . . . 190,097 131,307
Deferred income taxes. . . . . . . . . . . . . . 93,610 91,282
Advances for wafer purchases . . . . . . . . . . - 22,485
Other current assets . . . . . . . . . . . . . . 48,643 53,053
------------ -----------
Total current assets. . . . . . . . . . . . . . . . . 1,242,335 1,040,925
------------ -----------
Property, plant and equipment, at cost: . . . . . . . 479,005 336,942
Accumulated depreciation and amortization . . . . . . (114,140) (96,568)
------------ -----------
Net property, plant and equipment . . . . . . . . . . 364,865 240,374
Long-term investments . . . . . . . . . . . . . . . . 187,550 185,073
Investment in United Microelectronics Corp. . . . . . 651,571 838,923
Developed technology and other assets . . . . . . . . 64,297 43,344
------------ -----------
TOTAL ASSETS. . . . . . . . . . . . . . . . . . . . . $ 2,510,618 $2,348,639
============ ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable . . . . . . . . . . . . . . . . $ 100,641 $ 56,361
Accrued payroll and payroll related liabilities. 33,755 29,796
Income tax payable . . . . . . . . . . . . . . . - 27,982
Deferred income on shipments to distributors . . 187,006 115,002
Other accrued liabilities. . . . . . . . . . . . 24,177 15,571
------------ -----------
Total current liabilities . . . . . . . . . . . . . . 345,579 244,712
------------ -----------
Deferred tax liabilities. . . . . . . . . . . . . . . 244,757 327,272
Commitments and contingencies . . . . . . . . . . . . - -
STOCKHOLDERS' EQUITY:
Preferred stock, $.01 par value (none issued). . - -
Common stock, $.01 par value . . . . . . . . . . 3,296 3,255
Additional paid-in capital . . . . . . . . . . . 556,288 487,634
Retained earnings. . . . . . . . . . . . . . . . 1,467,392 1,259,510
Treasury stock, at cost. . . . . . . . . . . . . (23,585) -
Accumulated other comprehensive (loss) / income. (83,109) 26,256
------------ -----------
Total stockholders' equity . . . . . . . . . 1,920,282 1,776,655
------------ -----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY. . . . . . $ 2,510,618 $2,348,639
============ ===========
<FN>
(See accompanying Notes to Condensed Consolidated Financial Statements.)
</TABLE>
<TABLE>
<CAPTION>
XILINX, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Six Months Ended
(in thousands) Sep. 30, Oct. 2,
2000 1999
------------ -----------
Increase (decrease) in cash and cash equivalents<S> <C> <C>
Cash flows from operating activities:
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 207,882 $ 107,589
Adjustments to reconcile net income to net cash provided by operating
activities:
Depreciation and amortization . . . . . . . . . . . . . . . . . . . . . . . . 30,890 18,473
Undistributed earnings of joint venture . . . . . . . . . . . . . . . . . . . - (1,908)
Write-off of acquired in-process technology . . . . . . . . . . . . . . . . . - 4,560
Changes in assets and liabilities:
Accounts receivable . . . . . . . . . . . . . . . . . . . . . . . . . (108,810) (36,108)
Inventories . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (34,352) 8,900
Other current assets. . . . . . . . . . . . . . . . . . . . . . . . . 2,189 (31,204)
Deferred income taxes . . . . . . . . . . . . . . . . . . . . . . . . (32,015) (13,277)
Other assets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . (27,535) 14,708
Accounts payable. . . . . . . . . . . . . . . . . . . . . . . . . . . 44,280 8,714
Other accrued liabilities . . . . . . . . . . . . . . . . . . . . . . 7,419 4,744
Income tax payable. . . . . . . . . . . . . . . . . . . . . . . . . . 114,174 34,358
Deferred income on shipments to distributors. . . . . . . . . . . . . 72,004 1,928
----------- ------------
Total adjustments . . . . . . . . . . . . . . . . . . . . . . 68,244 13,888
----------- ------------
Net cash provided by operating activities. . . . . . . . 276,126 121,477
Cash flows from investing activities:
Purchases of available-for-sale investments. . . . . . . . . . . . . . . . . . . . . . . (1,780,792) (1,293,289)
Proceeds from sale or maturity of available-for-sale investments . . . . . . . . . . . . 1,796,707 1,208,627
Purchases of property, plant and equipment . . . . . . . . . . . . . . . . . . . . . . . (145,565) (30,021)
Purchase of Philips' CPLD assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . - (22,750)
----------- ------------
Net cash used in investing activities . . . . . . . . . (129,650) (137,433)
Cash flows from financing activities:
Acquisition of treasury stock. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (124,491) (5,289)
Proceeds from issuance of common stock . . . . . . . . . . . . . . . . . . . . . . . . . 42,652 38,517
Proceeds from sales of put warrants. . . . . . . . . . . . . . . . . . . . . . . . . . . 12,324 5,048
----------- ------------
Net cash (used in) /provided by financing activities. (69,515) 38,276
----------- ------------
Net increase in cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . 76,961 22,320
Cash and cash equivalents at beginning of period . . . . . . . . . . . . . . . . . . . . . . 85,548 53,584
----------- ------------
Cash and cash equivalents at end of period . . . . . . . . . . . . . . . . . . . . . . . . . $ 162,509 $ 75,904
=========== ============
Schedule of non-cash transactions:
Tax benefit from stock option exercises. . . . . . . . . . . . . . . . . . . . . . . . . $ 117,999 $ 35,990
Issuance of treasury stock under employee stock plans. . . . . . . . . . . . . . . . . . 104,980 10,400
Supplemental disclosures of cash flow information:
Interest paid. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 3 $ 5
Income taxes paid. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8,439 11,164
<FN>
(See accompanying Notes to Condensed Consolidated Financial Statements.)
</TABLE>
<PAGE>
19
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 filed on Form 10-K for the year ended April 1,
2000. The balance sheet at April 1, 2000 is derived from the 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 six-month period ended September 30, 2000 are not necessarily indicative of
the results that may be expected for the year ending March 31, 2001 or any
future period.
2. Inventories are stated at the lower of cost (first-in, first-out) or
market (estimated net realizable value). Inventories at September 30, 2000 and
April 1, 2000 are as follows:
<TABLE>
<CAPTION>
(in thousands) Sep. 30, Apr. 1,
2000 2000
--------- --------
<S> <C> <C>
Raw materials. . $ 11,252 $ 6,602
Work-in-process. 120,488 78,697
Finished goods . 58,357 46,008
--------- --------
$ 190,097 $131,307
========= ========
</TABLE>
3. The computation of basic net income per share for all periods presented
is derived from the information on the face of the statement of operations, and
there are no reconciling items to net income. The total shares used in the
denominator of the diluted net income per share calculation includes 26.4
million and 26.9 million incremental common shares attributable to outstanding
options for the second quarter and first six months of fiscal year 2001,
respectively, as compared to 25.5 million and 24.5 million in the comparable
fiscal 2000 periods, respectively.
4. The changes in components of comprehensive income for the periods
presented are as follows:
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
(in thousands) Sep. 30, Oct. 2, Sep. 30, Oct. 2,
2000 1999 2000 1999
---------- -------- ---------- --------
<S> <C> <C> <C> <C>
Net income. . . . . . . . . . . . . . . . . . . . . . . $ 114,056 $ 55,974 $ 207,882 $107,589
Cumulative translation adjustment . . . . . . . . . . . (154) 3,346 (314) 4,237
Unrealized losses on available for sale securities
arising during the period, net of tax. . . . . . . . (31,067) (215) (108,886) (1,015)
Reclassification adjustment for gains/(losses) on
available for sale securities, net of tax, included
in earnings. . . . . . . . . . . . . . . . . . . . . 193 - (165) -
---------- --------- ---------- ---------
Comprehensive income. . . . . . . . . . . . . . . . . . $ 83,028 $ 59,105 $ 98,517 $110,811
========== ========= ========== =========
</TABLE>
The components of accumulated other comprehensive income (loss) at September 30,
2000 and April 3, 2000 are as follows:
<TABLE>
<CAPTION>
(in thousands) Sep. 30, Apr. 1,
2000 2000
---------- ---------
<S> <C> <C>
Cumulative translation adjustment. . . . . . . . $ (363) $ (49)
Unrealized (loss) / gain on available for sale
securities, net of tax. . . . . . . . . . . (82,746) 26,305
---------- ---------
Accumulated other comprehensive (loss) / income. $ (83,109) $ 26,256
========== =========
</TABLE>
5. The Board of Directors has approved stock repurchase programs that allow
the repurchase of common stock. During the quarter ended September 30, 2000,
954,000 shares of common stock were repurchased for $74.7 million, and 668,000
shares were issued during the period for Stock Option exercises and Stock
Purchase Plan requirements. In conjunction with the stock repurchase program,
during the six months ended September 30, 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 specified prices, ranging from $56 to $71 per share.
The outstanding put warrants will expire at various dates through July 2001. As
of September 30, 2000, 1.2 million put warrants were outstanding.
6. 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.
In December 1999, the Securities and Exchange Commission (SEC) issued SEC Staff
Accounting Bulletin No. 101 (SAB 101), "Revenue Recognition in Financial
Statements." SAB 101 summarizes certain of the SEC's views in applying
generally accepted accounting principles to revenue recognition in financial
statements. The SEC has delayed the required implementation date, which for
Xilinx, will be the fourth quarter of fiscal 2001. Previously reported
unaudited fiscal year 2001 quarterly operating results would be restated to
reflect the impact, if any, of SAB 101 on our revenue recognition policy. We
are still in the process of assessing the impact of SAB 101 on our consolidated
reported results of operations based on the SEC's most recently issued guidance.
In March 2000, the FASB issued FASB Interpretation No.44 ("FIN 44"), "Accounting
for Certain Transactions Involving Stock Compensation - an Interpretation of APB
Opinion No. 25". FIN 44 is intended to clarify the application of APB Opinion
No. 25 by providing guidance regarding among other issues: the definition of an
employee for purposes of applying APB Opinion No. 25; the criteria for
determining whether a plan qualifies as a noncompensatory plan; the accounting
consequence of various modifications to the terms of the previously fixed stock
options or awards; and the accounting for an exchange of stock compensation
awards in a business combination. FIN 44 was effective July 1, 2000. The
adoption of FIN 44 did not have a material impact on our consolidated financial
position or results of operations.
7. In 1996, 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. As a result of this
merger, we received approximately 222 million shares of UMC common stock, which
represented approximately 2% of the combined UMC Group. In July 2000, we
received a 20% stock dividend which increased our investment holdings in UMC to
approximately 266 millions shares. We retain equivalent wafer capacity rights
in UMC as we previously had in USIC, as long as we retain a specified percentage
of our shares of UMC common stock. If our holdings fall below this level, our
wafer capacity rights would be decreased prorated by the UMC shares we hold.
(See also, Item 2, Management's Discussion and Analysis of Financial Condition
and Results of Operations - Factors Affecting Future Operating Results -
Investment Company Act of 1940.)
Due to restrictions imposed by UMC and the Taiwan Stock Exchange, the UMC shares
were available to sell beginning in July 2000. These regulatory restrictions
will gradually expire between July 2000 and January 2004.
8. 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.
As a result of certain motions and rulings in the case, Altera is left with one
claim against Xilinx, which remains the subject of a Company motion for summary
judgment. A ruling on this motion is pending. The Court's rulings also dismissed
certain claims by us, leaving intact claims of infringement by Altera under two
Company patents. The remaining claims against Altera are being decided at a
trial which began on October 18, 2000. If the remaining claim against Xilinx
survives the motion for summary judgment, it will be decided at a trial, which
is unscheduled at this point.
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.
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
any actions by Mr. Ward. Claims against Xilinx are still pending.
On May 31, 2000, Altera filed an additional suit against Xilinx in the Federal
District Court for the Northern District of California, alleging that certain
Xilinx products, including our Virtex FPGAs, infringe three Altera patents.
Altera's suit requests unspecified monetary damages as well as issuance of an
injunction to prevent Xilinx from selling allegedly infringing parts. Xilinx
has answered the complaint, denied the allegations, and has filed a counterclaim
alleging that Altera is infringing additional Company patents. Altera's motion
for expedited discovery was denied by the Court. A claims construction hearing
to determine the interpretation of Altera's patent claims is scheduled for
December 7, 2000
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 are 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.
9. Subsequent Event
On November 9, 2000, we completed the acquisition of RocketChips, Inc., a
privately-held fabless semiconductor company. RocketChips is a developer of
ultra-high-speed CMOS mixed-signal transceivers serving the networking, wireless
and wired telecommunications, and enterprise storage markets.
In connection with the acquisition, we issued an aggregate of approximately
2,806,000 shares of Common stock in exchange for all outstanding preferred and
common stock of RocketChips and reserved approximately an additional 807,000
shares of Common stock for issuance upon exercise of outstanding employee stock
options of RocketChips.
The acquisition was accounted for under the purchase method of accounting. We
expect to record a one-time charge for purchased in-process research and
development and expenses related to the acquisition in the third fiscal quarter
ending December 30, 2000. In addition, we expect to record certain intangibles
representing goodwill, assembly work force, and acquired technology in
connection with the acquisition of RocketChips. The values attributed to
in-process research and development and intangible assets have not yet been
determined.
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: SECOND QUARTER AND FIRST SIX MONTHS OF FISCAL 2001
--------------------------------------------------------------------------------
COMPARED TO THE SECOND QUARTER AND FIRST SIX MONTHS OF FISCAL 2000
-----------------------------------------------------------------------------
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 (TM) and CoolRunner (R)
product lines. Advanced products include our newest technologies manufactured
on 0.25-micron and smaller, which include the XC4000XV, XC4000XLA, Spartan XL,
Spartan-II, Virtex (R), and Virtex-E product lines. Our Support products make up
the remainder of our product offerings and include configuration solutions,
HardWire, and software.
Net revenues of $437.4 million in the second quarter of fiscal 2001 represented
an 83.2% increase from the comparable prior year quarter of $238.8 million.
Revenues for the first six months of fiscal 2001 were $802.2 million, a 78.2%
increase from the prior year comparable period. Product lines that experienced
significant growth during the six-month period include the XC4000XLA, XC9500XL,
CoolRunner, Spartan, Spartan XL, Virtex, and Virtex-E families. The increases
in revenues of Advanced products are due to the introduction and strong market
acceptance of XC4000XLA, Spartan XL, Virtex and Virtex-E products. Increases in
revenues of Mainstream products are attributable mainly to growth in the
Spartan, CoolRunner, XC9500 and XC9500XL product lines. Revenues of Base
products decreased slightly as customers migrated to newer product offerings.
Revenues of Support products increased due to increased sale of configuration
solutions and software, driven by growth in supporting Spartan and Virtex
families. 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 six month periods ended September
30, 2000 and October 2, 1999 are as follows:
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
(in millions) Sep. 30, Oct. 2, Sep. 30, Oct. 2,
2000 1999 2000 1999
--------- -------- --------- --------
<S> <C> <C> <C> <C>
Base products. . . . $ 29.3 $ 29.4 $ 58.6 $ 61.2
Mainstream products. 161.6 128.6 314.7 250.4
Advanced products. . 215.0 60.5 370.5 98.0
Support products . . 31.5 20.3 58.4 40.6
--------- -------- --------- --------
Total revenue. . . . $ 437.4 $ 238.8 $ 802.2 $ 450.2
========= ======== ========= ========
</TABLE>
International revenues represented approximately 33.9%, and 35.0% of total
revenues in the second quarter and first six months of fiscal 2001 as compared
to 32.2%, and 31.5% in the prior year periods. The revenue by geography for the
three and six month periods ended September 30, 2000 and October 2, 1999 are as
follows:
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
(in millions) Sep. 30, Oct. 2, Sep. 30, Oct. 2,
2000 1999 2000 1999
--------- -------- --------- --------
<S> <C> <C> <C> <C>
North America . . . . . . . $ 289.0 $ 161.8 $ 521.4 $ 308.2
Europe. . . . . . . . . . . 85.6 48.2 159.8 87.8
Japan . . . . . . . . . . . 34.8 15.4 67.5 30.0
Asia Pacific/Rest of World. 28.0 13.4 53.5 24.2
--------- -------- --------- --------
Total revenue . . . . . . . $ 437.4 $ 238.8 $ 802.2 $ 450.2
========= ======== ========= ========
</TABLE>
GROSS MARGIN
Gross margin was $269.0 million and $497.0 million for the second quarter and
first six months of fiscal 2001, or 61.5% and 61.9% of revenues, respectively.
Gross margin for the comparable periods of fiscal 2000 were $148.6 million and
$280.2 million, respectively, or 62.2% of revenues for both periods. The
decrease in gross margin percentage compared to last year was driven by product
mix shifts as the newly introduced Virtex-E family achieved very rapid revenue
growth while manufacturing efficiencies have not been fully realized. 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 60-62% of revenues are consistent with
expanding market share while realizing acceptable returns, although there can be
no assurance that future gross margins will remain in this range.
RESEARCH AND DEVELOPMENT
Research and development expenditures were $51.4 million for the second quarter
and $94.6 million for the first six months of fiscal 2001, or 11.8% of revenues
for both periods. Research and development expenditures for the comparable
periods in the prior year were $29.3 million and $55.4 million, or 12.3% of
revenues for both periods. Although total expenditures on research and
development increased significantly, they decreased as a percent of revenue
because of strong revenue growth. The 70.9% increase in expenditures over the
prior year's six 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, and increased
labor-related costs. 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 $70.5 million, or 16.1% of
revenues and $133.9 million or 16.7% of revenues for the second quarter and
first six months of fiscal 2001, respectively. They were $43.9 million, or
18.4% of revenues and $83.4 million or 18.5% of revenues for 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 and improvements in operating efficiencies. The increases in sales,
general and administrative expenses were primarily attributable to increased
marketing expenses and increased sales costs on higher revenues along with
increased personnel costs. 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 in the future.
INTEREST AND OTHER, NET
Interest and other income, net increased to $11.3 million in the second quarter
of fiscal 2001 from $6.3 million in the prior year quarter, and increased to
$20.3 million in the first six months of fiscal 2001 from $12.0 million in the
prior year's comparable period. The increases were primarily due to the
increased average cash and investment balances in the second quarter and the
first six months of fiscal 2001 as compared to the prior year periods resulting
in increased interest income of $4.6 million and $9.2 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 $44.4 million and $80.8 million for the second
quarter and first six months of fiscal 2001, respectively, representing
effective tax rates of 28.0% for both periods. We recorded a provision of $22.4
million and $43.2 million for the second quarter and first six months of fiscal
2000, respectively, representing effective tax rates of 29.0% for both periods.
The lower tax rate is primarily due to increased profits in foreign
jurisdictions where the tax rate is lower than the U.S. rate.
JOINT VENTURE EQUITY INCOME
Prior to the conversion of USIC shares to UMC shares, we recorded our
proportional ownership of the net income of USIC, a wafer fabrication joint
venture located in Taiwan, as joint venture equity income. We recorded $1.3
million and $1.9 million equity in income of joint venture for the second
quarter and the first six months of fiscal 2000, respectively. As a result of
the conversion of our equity position in USIC to shares of UMC in January 2000,
as discussed in Note 7, we no longer record joint venture equity income.
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 are
recognized in income in the current period. We are also sharing 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 September 30, 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 September 30, 2000 remained strong. Total current
assets exceeded total current liabilities by 3.6 times, compared to 4.3 times at
April 1, 2000. 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
six months of fiscal 2001. As of September 30, 2000, we had cash, cash
equivalents and short-term investments of $666.1 million and working capital of
$896.8 million. Cash generated by operations of $276.1 million for the first
six months of fiscal 2001 was $154.6 million higher than the $121.5 million
generated from the first six months of fiscal 2000. Increases in cash generated
by operations resulted primarily from the cash flow impact of increased net
income, and increases in accounts payable, income taxes payable, and deferred
income on shipments to distributors which were partially offset by increases in
accounts receivable, inventories and other assets.
Cash flows used for investing activities during the first six months of fiscal
2001 included net investment proceeds of $15.9 million, and $145.6 million for
property, plant and equipment purchases. During the first six months of fiscal
2000, investing activities included net investment purchases of $84.7 million,
$30.0 million of property, plant and equipment and $22.8 million for assets
purchased from Philips' CPLD business.
Net cash flows used by financing activities were $69.5 million in the first six
months of fiscal 2001 and were attributable to $124.5 million in acquisition of
treasury stock, offset by $42.7 million of proceeds from the issuance of common
stock under employee stock plans and $12.3 million in proceeds from sales of put
warrants. For the comparable fiscal 2000 period, cash provided by financing
activities of $38.3 million included $38.5 million of proceeds from issuance of
common stock under employee stock plans and $5.0 million in proceeds from sales
of put warrants, offset by acquisition of treasury stock of $5.3 million.
Stockholders' equity increased $143.6 million during the first six months of
fiscal 2001, principally as a result of the $207.9 million in net income for the
six months ended September 30, 2000. In addition, the proceeds from the
issuance of common stock under employee stock plans of $43.4 million, related
tax benefits from stock options of $118.0 million, and $12.3 million in proceeds
from sales of put warrants contributed to the increase, which were partially
offset by $109.4 million in unrealized losses on available-for-sale securities
primarily from our investment in UMC stock and the cumulative translation
adjustments, and $128.6 million for acquisition of treasury stock. At the end
of September 2000, approximately $4.8 million from acquisition of treasury stock
and the issuance of common stock under employee stock plans were accrued and the
cash settlements were incurred in October 2000.
We have available credit facilities totaling $46.2 million of which $6.2 million
is intended to meet occasional working capital requirements for our wholly owned
Irish subsidiary.
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;
- tight capacity availability; and
- shortages of other electronic components.
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. Shortages of other
electronic components could lead to customers canceling orders for our products
due to the inability to complete their end system. Unpredictable market demand
could lead to revenue volatility if we were unable to provide sufficient
quantities of specified products. 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 Asia
Pacific and Japan. Past economic weakness in these markets adversely affected
revenues, and such conditions may occur in the future. While the recent
weakness of the Euro against the Dollar has had no material impact to our
business, continued weakness could lead to adverse conditions from our European
customers. 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 the global economy. Any instability in worldwide economic
environments could lead to a contraction of capital spending by our customers.
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. Moreover, our financial condition and results of operations could be
affected in the event of political conflicts in Taiwan where our main foundry
partner, UMC, is located.
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.
We do not directly manufacture our silicon wafers. Presently, all of our wafers
are manufactured by our foundry partners in Taiwan by UMC and in Japan by Seiko.
We depend on our foundry partners to deliver reliable silicon wafers, with
acceptable yields, in a timely manner. If our foundry partners are unable to
produce and deliver silicon wafers that meet our specifications, including
acceptable yields, our results of operation could be adversely affected.
Our foundry partners in Taiwan and Japan and many of our operations in
California are centered in areas that have been seismically active in the recent
past. Should there be a major earthquake in our operating locations in the
future, our operations, including our manufacturing activities, 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 semiconductor wafers used for our products. During
the past several years, most of our wafers have been manufactured by UMC and
Seiko, with recent wafers also manufactured by USIC until its merger into UMC.
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
guarantee 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 in 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 effect 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 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 PLDs compete in the logic industry. 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 our primary competitors, Altera Corporation, and Lattice
Semiconductor Corporation and from a number of new companies that may enter our
market. We believe that important competitive factors in the programmable logic
industry 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 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
anticipate continued price reductions proportionate with our ability to lower
the manufacturing cost for established products. However, we cannot provide
assurance that we will be successful in achieving these strategies.
Our major sources of competition are comprised of several elements:
- providers of high density programmable logic products characterized by
FPGA-type architectures;
- providers of high volume and low cost FPGAs as programmable replacement
for ASICs and application specific standard products (ASSPs).;
- providers of high speed, low density CPLD devices;
- the manufacturers of custom gate arrays;
- providers of competitive software development tools;
- other providers of new or emerging programmable logic products.
We compete with high density programmable logic suppliers on the basis of device
performance, the ability to deliver complete solutions to customers, device
power consumption 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. We
compete with ASIC manufacturers on the basis of lower design costs, shorter
development schedules, reduced inventory risk and field upgradability. The ASIC
market segment has been declining, and ASICs are being replaced by other logic
options. The primary attributes of ASICs 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 ASIC production costs
(in high volumes) and PLD production costs. As PLDs have increased in density
and performance and decreased in cost due to the advanced manufacturing
processes, they have become more directly competitive with ASICs. With the
introduction of our Spartan family, which is Xilinx's low cost programmable
replacement for ASICs, we seek to grow by directly competing with other
companies in the ASIC segment. Many of the companies in the ASIC segment have
substantially greater financial, technical and marketing resources than Xilinx.
Consequently, there can be no assurance that we will be successful in competing
in the ASIC segment. Competition among PLD 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, distribution 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 companies to this
market. 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 PLD
segment.
Several companies, both large and small, have introduced products that compete
with ours or have announced their intention to enter the PLD 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 has rights to manufacture and market our XC3000 FPGA
products and also employ that technology to provide additional high density FPGA
products. Seiko Epson has rights to manufacture some 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. In June 1999, AMD sold the Vantis subsidiary to Lattice
Semiconductor Corporation.
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.)
INVESTMENT COMPANY ACT OF 1940
The Investment Company Act of 1940 regulates mutual funds and closed-end
investment companies that are traded on the public stock markets. In January
2000, as a result of USIC's merger with UMC (see Note 7 to Condensed
Consolidated Financial Statements), we received approximately 222 million shares
of UMC stock, which are publicly traded on the Taiwan Stock Exchange. We view
this investment in UMC as an operating investment primarily intended to secure
adequate wafer manufacturing capacity. Although from time to time we could be
viewed as holding a larger portion of our assets in investment securities than
is presumptively permitted by the 1940 Act for a company not registered as an
investment company due to the success of our investments, in particular UMC, we
believe we should not be considered an investment company under the Act. The
1940 Act, and rules issued under it, contain provisions and set forth principles
that are designed to differentiate "true" operating companies from companies
that may be considered to have sufficient investment company-like
characteristics to require regulation by the 1940 Act. At this time, we believe
that we qualify as an operating company under these provisions. In the future,
however, our situation may change which might require us to seek an alternate
solution such as exemptive or no-action relief from the SEC.
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, commercial paper, 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 six months ended in
fiscal years 2001 and 2000. We are also sharing 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. However, no currency
forward contracts were outstanding as of September 30, 2000.
Our investments in several subsidiaries and in the UMC securities are recorded
in currencies other than the U.S. dollar. As these foreign currency denominated
investments 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 within stockholders'
equity as a component of accumulated other comprehensive income. Also, as our
subsidiaries 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 patentsAs a
result of certain motions and rulings in the case, Altera is left with one claim
against Xilinx, which remains the subject of a Company motion for summary
judgment. A ruling on this motion is pending. The Court's rulings also dismissed
certain claims by us, leaving intact claims of infringement by Altera under two
Company patents. The remaining claims against Altera are being decided at a
trial which began on October 18, 2000. If the remaining claim against Xilinx
survives the motion for summary judgment, it will be decided at a trial, which
is unscheduled at this point.
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.
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
any actions by Mr. Ward. Claims against Xilinx are still pending.
On May 31, 2000, Altera filed an additional suit against Xilinx in the Federal
District Court for the Northern District of California, alleging that certain
Xilinx products, including our Virtex FPGAs, infringe three Altera patents.
Altera's suit requests unspecified monetary damages as well as issuance of an
injunction to prevent Xilinx from selling allegedly infringing parts. Xilinx
has answered the complaint, denied the allegations, and has filed a counterclaim
alleging that Altera is infringing additional Company patents. Altera's motion
for expedited discovery was denied by the Court. A claims construction hearing
to determine the interpretation of Altera's patent claims is scheduled for
December 7, 2000
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 are 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
The following matters were submitted to a vote of security holders in
conjunction with the Annual Meeting of Stockholders of Xilinx held on August 10,
2000.
(1) Election of directors
Votes For Votes Against
--------- -------------
Bernard V. Vonderschmitt 281,044,875 4,109,970
Willem P. Roelandts 243,371,534 41,783,311
John L. Doyle 281,068,581 4,086,264
Jerald G. Fishman 281,140,547 4,014,298
Philip T. Gianos 281,158,875 3,995,970
William G. Howard, Jr. 281,138,285 4,016,560
Frank S. Sanda 275,262,811 9,892,034
Dennis Segers 280,951,324 4,203,521
Richard W. Sevcik 280,804,496 4,350,349
(2) To consider and vote upon a proposed amendment to 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
500,000,000 to 2,000,000,000.
For Against Abstain No Vote
--- ------- ------- --------
165,589,481 119,301,614 263,240 510
(3) To ratify the appointment of Ernst & Young LLP as independent
auditors of the Company for the fiscal year ending March 31, 2001.
For Against Abstain No Vote
--- ------- ------- --------
284,833,486 100,943 220,416 -
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits None
(b) Reports on Form 8-K None
Items 2, 3 and 5 are not applicable and have been omitted.
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 November 13, 2000 /s/ Kris Chellam
--------------------------- -----------------------------
Kris Chellam
Senior Vice President of Finance and
Chief Financial Officer
(as principal accounting and financial
officer and behalf of Registrant)
