10-Q 1 0001.txt 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
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 --------- -------- --------- -------- 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 ========= ======== ========= ======== (See accompanying Notes to Condensed Consolidated Financial Statements.)
XILINX, INC. CONDENSED CONSOLIDATED BALANCE SHEETS Sep. 30, Apr. 1, (in thousands) 2000 2000 ------------ ----------- (Unaudited) (Audited) 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 ============ =========== (See accompanying Notes to Condensed Consolidated Financial Statements.)
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 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 (See accompanying Notes to Condensed Consolidated Financial Statements.)
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:
(in thousands) Sep. 30, Apr. 1, 2000 2000 --------- -------- Raw materials. . $ 11,252 $ 6,602 Work-in-process. 120,488 78,697 Finished goods . 58,357 46,008 --------- -------- $ 190,097 $131,307 ========= ========
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:
Three Months Ended Six Months Ended (in thousands) Sep. 30, Oct. 2, Sep. 30, Oct. 2, 2000 1999 2000 1999 ---------- -------- ---------- -------- 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 ========== ========= ========== =========
The components of accumulated other comprehensive income (loss) at September 30, 2000 and April 3, 2000 are as follows:
(in thousands) Sep. 30, Apr. 1, 2000 2000 ---------- --------- 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 ========== =========
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:
Three Months Ended Six Months Ended (in millions) Sep. 30, Oct. 2, Sep. 30, Oct. 2, 2000 1999 2000 1999 --------- -------- --------- -------- 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 ========= ======== ========= ========
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:
Three Months Ended Six Months Ended (in millions) Sep. 30, Oct. 2, Sep. 30, Oct. 2, 2000 1999 2000 1999 --------- -------- --------- -------- 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 ========= ======== ========= ========
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)