-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, E95scKtxxAK9mefCuTxqs7sHbTVOyjAWHkxC0qOm9SC7ZdkW2Vd8HxesyfvaoqK7 AdZHQe1OEyXtVdy7Wa/FCA== 0000743988-99-000004.txt : 19990621 0000743988-99-000004.hdr.sgml : 19990621 ACCESSION NUMBER: 0000743988-99-000004 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 6 CONFORMED PERIOD OF REPORT: 19990403 FILED AS OF DATE: 19990618 FILER: COMPANY DATA: COMPANY CONFORMED NAME: XILINX INC CENTRAL INDEX KEY: 0000743988 STANDARD INDUSTRIAL CLASSIFICATION: SEMICONDUCTORS & RELATED DEVICES [3674] IRS NUMBER: 770188631 STATE OF INCORPORATION: DE FISCAL YEAR END: 0331 FILING VALUES: FORM TYPE: 10-K SEC ACT: SEC FILE NUMBER: 000-18548 FILM NUMBER: 99648343 BUSINESS ADDRESS: STREET 1: 2100 LOGIC DR CITY: SAN JOSE STATE: CA ZIP: 95124 BUSINESS PHONE: 4085597778 MAIL ADDRESS: STREET 1: 2100 LOGIC DRIVE STREET 2: 2100 LOGIC DRIVE CITY: SAN JOSE STATE: CA ZIP: 95124 10-K 1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-K (Mark One) [ X ] Annual report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the fiscal year ended April 3, 1999 or [ ] Transition report pursuant to section 13 or 15(d) of the Securities Exchange Act of 1934 COMMISSION FILE NUMBER 0-18548 XILINX, INC. (Exact name of registrant as specified in its charter) DELAWARE (State or other jurisdiction of incorporation or organization) 77-0188631 (I.R.S. Employer Identification No.) 2100 LOGIC DRIVE, SAN JOSE, CA 95124 (Address of principal executive offices, including Zip Code) (408) 559-7778 (Registrant's telephone number, including area code) SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT: None SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT: COMMON STOCK, $.01 PAR VALUE (Title of Class) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such requirements for the past 90 days. YES [ X ] NO [ ] Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of the registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [ X ] The aggregate market value of the voting stock held by non-affiliates of the registrant, based upon the closing sale price of the Common Stock on June 9, 1999 as reported on the NASDAQ National Market was approximately $6,243,143,000. Shares of Common Stock held by each executive officer and director and by each person who owns 5% or more of the outstanding Common Stock have been excluded in that such persons may be deemed affiliates. This determination of affiliate status is not necessarily a conclusive determination for other purposes. At June 9, 1999, the registrant had 156,988,000 shares of Common Stock outstanding. DOCUMENTS INCORPORATED BY REFERENCE Parts of the Proxy Statement for the Registrant's 1999 Annual Meeting of Stockholders are incorporated by reference in this Form 10-K Report (Part III). PART I ------ ITEM 1. BUSINESS Items 1 and 3 of this 10-K contain forward-looking statements concerning the Company's development efforts, strategy, new product introductions, backlog and litigation. These statements involve numerous risks and uncertainties including those discussed throughout this document as well as under "Factors Affecting Future Operating Results" in Item 7. GENERAL Xilinx, Inc. (Xilinx or the Company) designs, develops and markets complete programmable logic solutions, including advanced integrated circuits (ICs), software design tools, predefined system functions delivered as cores of logic and field engineering support. The Company's programmable logic devices (PLDs) include field programmable gate arrays (FPGAs) and complex programmable logic devices (CPLDs). These components are standard ICs programmed by Xilinx's customers to perform desired logic operations. Xilinx also markets HardWire devices, which are specifically programmed during the manufacturing process and functionally equivalent to programmed FPGAs. The Company's products are designed to provide high integration and quick time-to-market for electronic equipment manufacturers in the computer, peripheral, telecommunications, networking, industrial control, instrumentation, high-reliability/military, and consumer markets. Competitive pressures require manufacturers of electronic systems to bring increasingly complex products to market rapidly. Customer requirements for improved functionality, performance, reliability and lower cost are often addressed through the use of components that integrate ever larger numbers of logic gates onto a single integrated circuit because such integration often results in greater speed, smaller die size, lower power consumption and lower costs. However, while global competition is increasing the demand for more complex products, it is also shortening product life cycles and requiring more frequent product enhancements. Xilinx provides programmable logic solutions, which combine the high density typically associated with custom gate arrays with the time to market advantages of programmable logic and the availability of a standard product. The Company offers a broad product line of PLDs, which serve a wide variety of applications requiring high levels of integration, competitive speed and acceptable pricing. In many of these applications where time to market is important, customer demand is unpredictable and frequent design modifications are necessary, the flexibility achieved through the products' programmability features is integral. Xilinx CPLDs complement the Company's FPGA products and contribute to the Company's efforts to offer comprehensive programmable logic solutions. With FPGAs, which have the advantages of higher density and lower power consumption, and CPLDs, which are typically faster and have lower densities, the Company's products enable electronic equipment manufacturers to rapidly bring their products to volume production. The Xilinx software strategy is to deliver an integrated design solution for a broad customer base ranging from customers who are not familiar with designing systems using PLDs to the most sophisticated customers accustomed to designing with high density, custom gate arrays. The objective is to deliver strategic software advantages that combine ease of use with design flexibility, effective silicon utilization and leadership performance. System designers use Xilinx proprietary software design tools together with industry standard electronic design automation (EDA) tools and predefined system functions delivered as cores of logic to design, develop and implement Xilinx programmable logic applications. Designers define the logic functions of the circuit and revise such functions as necessary. Programmable logic can often be designed and verified in a few days, as opposed to several weeks or months for gate arrays, which are customized devices that are defined during the manufacturing process. Moreover, programmable logic design changes can typically be implemented in as little as a few hours, as compared to several weeks for a custom gate array. In addition, significant savings result from the elimination of non-recurring engineering costs and the reduction of expenses associated with the redesign and testing of custom gate arrays. By reducing the cost and scheduling risks of design iterations, PLDs allow greater designer creativity, including the consideration of design alternatives that often lead to product improvements. Further, since PLDs are standard products and production quantities are readily available, exposure to obsolete inventory can be significantly reduced. Xilinx was organized in California in February 1984 and in November 1985 was reorganized to incorporate its research and development limited partnership. In April 1990, the Company reincorporated in Delaware. The Company's corporate facilities and executive offices are located at 2100 Logic Drive, San Jose, California 95124 and its website is www.xilinx.com. The Company's fiscal year ends on the Saturday nearest March 31. For ease of presentation, March 31 has been utilized as the fiscal year-end for all financial statement captions. Fiscal 1999 ended on April 3, 1999 while fiscal 1998 and 1997 ended on March 28, 1998 and March 29, 1997, respectively. PRODUCTS The timely introduction of new products which address customer requirements and compete effectively on the basis of price, functionality and performance is a significant factor in the future success of the Company's business. Delays in developing new products with anticipated technological advances or delays in commencing volume shipments of new products could have an adverse effect on the Company's financial condition and results of operations. In addition, there can be no assurance that such products, if introduced, will gain market acceptance or respond effectively to new technological changes or new product introductions by other companies. Programmable Logic Devices The Company's PLD products include both FPGA and CPLD product lines. All product offerings are currently classified into four categories. The Base products consist of the Company's mature product families that are currently manufactured on technology greater than 0.5 micron; this includes the XC2000, XC3000, XC3100, XC4000 and XC7000 families. Mainstream products are currently manufactured on 0.5 micron technology and include the XC4000E, XC4000EX, XC5200 and XC9500 product lines. Support products include serial proms, HardWire and software. Advanced products include the Company's newest technologies manufactured on 0.35 micron and smaller, which include the XC4000XL/XLA, XC4000XV, XC9500XL/XV, Spartan, Spartan XL and Virtex product lines. The XC4000XL family is the industry's first 3.3 volt FPGA family manufactured on 0.35 micron technology. The family has 11 members shipping in volume ranging in density from 2,000 to 180,000 system gates. The XC4000XLA family expands on the XC4000XL architecture with reduced power consumption and improved performance making it the industry's highest performance 3.3 volt FPGA family. The family has 8 members shipping in volume ranging in density from 30,000 to 180,000 system gates. The XC4000XV is a 2.5 volt FPGA family that utilizes 0.25 micron technology. The family has 4 members with up to 500,000 system gates. The XC9500XL family utilizes a Flash-based CPLD architecture and offers in-system programmability. This family delivers high speeds, while giving the flexibility of an enhanced, customer-proven pin-locking architecture and direct interface to both 3.3 and 5.0 volt systems. The XC9500XV is the industry's first 2.5 volt CPLD family with significantly reduced power consumption. The Spartan Series of FPGAs is the Company's first product line that is price competitive with high volume application-specific integrated circuits (ASICs). Derived from the XC4000 architecture and spanning up to 40,000 system gates, the Spartan Series combines high performance, on-chip RAM, software cores, and low prices in high volumes. The Virtex series of FPGAs redefines the FPGA by offering high density and performance with unprecedented system level integration. Fabricated in leading edge 0.22 micron technology, the Virtex family delivers the first fully programmable alternative to high density system-level ASIC design. Xilinx began revenue shipments of its 1,000,000 system-gate Virtex device during the third quarter of fiscal 1999. The preceding paragraph contains forward-looking statements which are subject to risks and uncertainties including those discussed in Item 7 in "Management's Discussion and Analysis of Financial Condition and Results of Operation - Factors Affecting Future Results." PLDs are available in a wide variety of plastic and ceramic package types, including pin-grid array, quad flat pack and ball grid array configurations. These devices meet the current industry standard operating temperature ranges of commercial, industrial and military users. Software design tools Xilinx offers complete software design tool solutions, which enable the implementation of designs in Xilinx PLDs. These software design tools combine powerful technology with a flexible, easy to use graphical interface to help achieve the best possible designs within each customer's project schedule, regardless of the designer's experience level. The Company offers two complementary software design tool solutions. The Foundation Series provides designers with a complete, ready-to-use design solution based on industry-standard hardware description languages (HDLs) and is easy to learn and use. For those customers new to designing with PLDs or desiring a low cost approach, the Company offers this fully integrated software solution. The Alliance Series is for designers who want maximum flexibility to integrate programmable logic design into their existing EDA environment and methodology. With interfaces to over 50 EDA vendors, this product allows users to select tools with which they are most familiar thereby shortening their design cycle. In addition, the Company offers WebFITTER, a free web-based, CPLD design fitting software tool that allows system designers to evaluate their designs using the XC9500/XL/XV families of CPLDs, on the latest version of Xilinx software. Design results are made available via the Internet in minutes. The Company also recently purchased software assets including PLSynthesizer, a synthesis tool; ABEL, the industry's most widely used high-level description language for programmable logic devices; and Design Navigator, a team-based, Internet-enabled software environment that integrates design entry, synthesis, place and route and simulation functions. The Company also offers more than 75 pre-implemented, fully verified, drop-in cores of logic for commonly used complex functions such as digital signal processing (DSP), bus interfaces, processors and peripheral interfaces. Using logic cores, available from the Company and third party AllianceCORE partners, customers can shorten development time, reduce design risk and obtain superior performance for their designs. Additionally, the Company's CORE Generator system is the delivery mechanism for cores. It offers a simple user interface, complete cataloging of available cores, easy selection of parameter-based cores optimized for the Company's FPGAs and features an interface to third-party system level DSP design tools. The CORE Generator is shipped with the Company's software design tools and is also available via the Company's Web site. Xilinx's software design tools operate on desktop computer platforms, including personal computers using Windows 95, 98 and NT and workstations from IBM, HP, DEC and Sun Microsystems. Through March 31, 1999, the Company had sold approximately 53,000 software design systems worldwide. RESEARCH AND DEVELOPMENT Xilinx's research and development activities are primarily directed towards the design of new integrated circuits, the development of advanced semiconductor manufacturing processes, the development of new software design tools and cores of logic as well as ongoing cost reductions and performance improvements in existing products. The Company's recent primary areas of focus have been: to introduce the industry's first programmable system integration solution (Virtex) and a low-cost ASIC replacement FPGA solution (Spartan), to extend the performance and density range of the industry's most popular FPGA series (XC4000XLA/XV), and to increase market share of the CPLD market (XC9500XL/XV). The Company also plans to place increasing emphasis on the involvement of Xilinx Labs, Xilinx's corporate R&D group which concentrates on developing longer-term, future generation technology. Xilinx supports all its product families with easy-to-use, fully automated software design tools and cores of logic. However, there can be no assurance that any of the Company's development efforts will be successful, timely or cost-effective. Xilinx believes that software design tools and logic cores are important factors in expanding the use of programmable logic devices. The Company's research and development challenge is to continue to develop new products that create cost-effective solutions for customers. In fiscal 1999, 1998 and 1997, the Company's research and development expenses were approximately $94.5 million, $80.5 million and $71.1 million, respectively. The Company expects that it will continue to spend substantial funds on research and development. The Company believes that technical leadership is essential to its future success and is committed to continuing a significant level of research and development effort. MARKETING AND SALES Xilinx sells its products through several channels of distribution: direct sales to manufacturers by independent sales representative firms, sales through franchised domestic distributors, and sales through foreign distributors. Xilinx also utilizes a direct sales management organization and field applications engineers (FAEs) as well as manufacturer's representatives and distributors to reach a broad base of potential customers. The Company's independent representatives generally address larger OEM customers and act as a direct sales force, while distributors serve the balance of the Company's customer base. The Company's sales and customer support personnel support all channels and consult with customers about their plans, ensuring that the right software and devices are selected at the beginning of a customer's project. In North America, Avnet, Inc., and Insight Electronics, Inc. distribute the Company's products nationwide, and Nu Horizons Electronics provides additional regional sales coverage. The Company also utilized Marshall Industries through the third quarter of fiscal 1999. The Company believes that distributors provide a cost-effective means of reaching certain customers. Since the Company's PLDs are standard products, they do not present many of the inventory risks to distributors as compared to custom gate arrays, and they simplify the requirements for distributor technical support. The Company changed its accounting method during fiscal 1999 for recognizing revenue on all shipments to international distributors. While the Company previously deferred revenue on shipments to domestic distributors until the product was sold to the end user, it recognized revenue upon shipment to international distributors, net of appropriate reserves for returns and allowances. Following the accounting change, revenue recognition on shipments to distributors worldwide is deferred until the products are sold to the end customer. Distributors have certain rights of return and price protection privileges on unsold product until the distributor sells the product. BACKLOG AND CUSTOMERS As of March 31, 1999, the Company's backlog of purchase orders scheduled for delivery within the next three months was approximately $122.0 million, after adjustments for estimated discounts. Because of the previous slowdown in the semiconductor market and a widespread perception by customers that product is readily available, many of the Company's customers are currently placing orders for near-term delivery and providing the Company limited visibility to demand for products beyond three months. Backlog as of March 28, 1998 was approximately $74.0 million, after adjustments for estimated discounts. Backlog amounts for both years include orders to distributors, which may receive price adjustments upon sale to end customers. Also, orders constituting the Company's current backlog are subject to changes in delivery schedule or to cancellation at the option of the purchaser without significant penalty. Accordingly, although useful for scheduling production, backlog as of any particular date may not be a reliable measure of revenues for any future period. No end customer accounted for more than 10% of revenues in fiscal 1999, 1998 or 1997. See Note 11 of Notes to Consolidated Financial Statements in Item 8 for geographic information. WAFER FABRICATION The Company does not manufacture processed wafers used for its products. Over the last several years, the majority of wafers purchased by the Company were manufactured by Seiko Epson Corporation (Seiko Epson) and United Microelectronics Corporation, (UMC) with fiscal 1999 production also coming from UMC affiliated companies including our joint venture, United Silicon Inc. (USIC). Precise terms with respect to the volume and timing of wafer production and the pricing of wafers produced by UMC, Seiko Epson and USIC are determined by periodic negotiations between the Company and these wafer foundry partners. Xilinx's strategy is to focus its resources on creating new integrated circuits and software design tools and on market development rather than on wafer fabrication. The Company continuously evaluates opportunities to enhance foundry relationships and/or obtain additional capacity from both its main suppliers as well as other suppliers of leading-edge process technologies. As a result, the Company has entered into agreements with UMC and Seiko Epson as discussed below. The Company, United Microelectronics Corporation (UMC) and other parties entered into a joint venture to construct a wafer fabrication facility in Taiwan, known as United Silicon Inc. (USIC). See Note 4 of Notes to Consolidated Financial Statements in Item 8. During fiscal 1999, the Company invested additional equity of $5.4 million in USIC to bring the total cumulative investment to $107.1 million. However, as other parties increased their equity in USIC during the most recent investment, the Company's equity ownership decreased to 20%. The Company can receive up to 31.25% of the wafers produced in this facility. In fiscal 1997, the Company signed an agreement with Seiko Epson. See Note 2 of Notes to Consolidated Financial Statements in Item 8. This agreement was amended in fiscal 1998 and provides for an advance to Seiko Epson of $150.0 million. In conjunction with the agreement, $60.0 million was paid in fiscal 1997 and an additional $90.0 million was paid in fiscal 1998. Repayment of this advance is made in the form of wafer deliveries, which began during the fourth quarter of fiscal 1998. Specific wafer pricing is in U.S. dollars and is based upon the prices of similar wafers manufactured by other, specifically identified, leading-edge foundry suppliers. The advance payment provision also provides for interest to be paid to the Company in the form of free wafers. SORT, ASSEMBLY AND TEST Wafers purchased by the Company are sorted by the wafer foundry, independent sort subcontractors or by the Company. Sorted wafers are assembled by subcontractors in facilities in Pacific Rim countries. During the assembly process, the wafers are separated into individual die, which are then assembled into various package types. Following assembly, the packaged units are tested by independent test subcontractors or by Xilinx personnel at the Company's San Jose or Dublin, Ireland facilities. PATENTS AND LICENSES Through March 31, 1999, the Company held approximately 300 United States patents and maintains an active program of filing for additional patents in the areas of software, IC architecture and design. The Company intends to vigorously protect its intellectual property. The Company believes that failure to enforce its patents or to effectively protect its trade secrets could have an adverse effect on the Company's financial condition and results of operations. See Legal Proceedings in Item 3 and Note 12 of Notes to Consolidated Financial Statements in Item 8. Xilinx has acquired various software licenses that permit the Company to grant object code sublicenses to its customers for certain third party software programs licensed with the Company's software design tools. In addition, the Company has licensed certain software for internal use in product design. EMPLOYEES Xilinx's employee population grew by 7% during the past year. As of March 31, 1999, Xilinx had 1,491 employees compared to 1,391 at the end of the prior year. None of the Company's employees are represented by a labor union. The Company has not experienced any work stoppages and believes it has good relations with its employees. COMPETITION Our FPGAs and CPLDs compete in the programmable logic marketplace, with a substantial majority of our revenues derived from our FPGA product families. The industries in which we compete are intensely competitive and are characterized by rapid technological change, product obsolescence and continuous price erosion. We expect increased competition, both from existing competitors and from a number of new companies that may enter our market. We believe that important competitive factors in the programmable logic market include: - - product pricing; - - product performance, reliability and density; - - the adaptability of products to specific applications; - - ease of use and functionality of software design tools; - - functionality of predefined cores of logic; and - - the ability to provide timely customer service and support. Our strategy for expansion in the programmable logic market includes continued introduction of new product architectures which address high volume, low cost applications as well as high performance, leading-edge density applications. In addition, we would anticipate continued price reductions proportionate with our ability to lower the cost of manufacture for established products. However, we cannot assure that we will be successful in achieving these strategies. Our major sources of competition are comprised of several elements: - - the manufacturers of custom CMOS gate arrays; - - providers of high density programmable logic products characterized by FPGA-type architectures; - - providers of high speed, low density CPLD devices; and - - other providers of new or emerging programmable logic products. We compete with custom gate array manufacturers on the basis of lower design costs, shorter development schedules, reduced inventory risks and field upgradability. The primary attributes of custom gate arrays are high density, high speed and low production costs in high volumes. We continue to develop lower cost architectures intended to narrow the gap between current custom gate array production costs (in high volumes) and PLD production costs. We compete with high density programmable logic suppliers on the basis of performance, the ability to deliver complete solutions to customers, voltage and customer support by taking advantage of the primary characteristics of our PLD product offerings which include: flexibility, high speed implementation, quick time-to-market and system level capabilities. Competition among CPLD suppliers and manufacturers of new or emerging programmable logic products is based primarily on price, performance, design, customer support, software utility and the ability to deliver complete solutions to customers. Some of our current or potential competitors have substantially greater financial, manufacturing, marketing and technical resources than we do. To the extent that such efforts to compete are not successful, our financial condition and results of operations could be materially adversely affected. The benefits of programmable logic have attracted a number of companies to this market. Competition is based primarily on density, speed, design, price or software utility. We recognize that different applications require different programmable technologies, and we are developing architectures, processes and products to meet these varying customer needs. Recognizing the increasing importance of standard software solutions, we have developed common software design tools that support the full range of integrated circuit products. We believe that automation and ease of design are significant competitive factors in the programmable logic market. Several companies, both large and small, have introduced products that compete with ours or have announced their intention to enter this market. Some of our competitors may possess innovative technology, which could prove superior to our technology in certain applications. In addition, we anticipate potential competition from suppliers of logic products based on new technologies. Some of our current or potential competitors have substantially greater financial, manufacturing, marketing and technical resources than we do. This additional competition could adversely affect our financial condition and results of operations. We could also face competition from our licensees. Under a license from us, Lucent Technologies is manufacturing and marketing our non-proprietary XC3000 FPGA products and is employing that technology to provide additional FPGA products offering higher density. Seiko Epson has rights to manufacture our products and market them in Japan and Europe, but is not currently doing so. Advanced Micro Devices is licensed to use certain of our patents to manufacture and market products other than SRAM-based FPGAs. EXECUTIVE OFFICERS OF THE REGISTRANT Certain information regarding each of Xilinx's executive officers is set forth below:
Officer Name Age Position Since Willem P. Roelandts 54 President and Chief Executive Officer 1996 Kris Chellam 48 Senior Vice President, Finance and Chief Financial Officer 1998 Steven Haynes 48 Vice President, Worldwide Sales 1995 Dennis Segers 46 Senior Vice President and General Manager 1995 Richard W. Sevcik 51 Senior Vice President and General Manager 1997 Sandeep S. Vij 33 Vice President, Marketing and General Manager 1996
There are no family relationships among the executive officers of the Company. On the Board of Directors, Mr. Vonderschmitt, Chairman of the Board, is the brother-in-law of Mr. Sanda, Director. Willem P. "Wim" Roelandts joined the Company in January 1996 as Chief Executive Officer and a member of the Company's Board of Directors. In April 1996, he was appointed to the additional position as President of the Company. Prior to joining the Company, he served at Hewlett-Packard Company, a computer manufacturer, as Senior Vice President and General Manager of Computer Systems Organizations from August 1992 through January 1996 and as Vice President and General Manager of the Network Systems Group from December 1990 through August 1992. Kris Chellam joined the Company in July 1998 as Senior Vice President, Finance and Chief Financial Officer. Prior to joining the Company, he served at Atmel Corporation as Senior Vice President and General Manager of a product group from March to July 1998 and as Vice President, Finance and Administration, and Chief Financial Officer from September 1991 through March 1998. Steven Haynes joined the Company in 1987 as the Regional Sales Manager of the Northeast region, was promoted to Area Sales Director in 1988, and was appointed Vice President, North American Sales in 1995. In November 1998, he was promoted and now holds the position of Vice President, Worldwide Sales. Dennis Segers joined the Company in January 1994 as Director of Strategic Products and was promoted to Vice President and General Manager in November 1995. In April 1998, he was appointed Senior Vice President, and General Manger. Richard W. Sevcik joined the Company in April 1997 as Senior Vice President and General Manager. He was at Hewlett-Packard Company for 10 years where, from 1994 through 1996, he served as Group General Manager of the company's Systems Technology Group and oversaw five divisions involved with product development for servers, workstations, operating systems, microprocessors, networking and security. In 1995 he was named Vice President. From 1992 to 1994, he served as Group General Manager of Computer Systems and Servers and was responsible for four divisions. Sandeep S. Vij joined the Company in April 1996 as Director, FPGA Marketing and was promoted to Vice President, Marketing in October 1996. In October 1997, he was appointed to the additional position of General Manager. From 1990 until April 1996, he served at Altera Corporation, a semiconductor manufacturer, where he most recently served as the Product Marketing Manager. ITEM 2. PROPERTIES Xilinx's corporate offices, which include the administrative, sales, customer support, marketing, research and development and final testing groups are located in San Jose, California. The site includes adjacent buildings providing 335,000 square feet of available space, which are leased through 1999. The Company has entered into lease agreements relating to these facilities which would allow the Company to purchase these facilities on or before the lease expiration dates in December 1999. The Company has also entered into an agreement whereby an 180,000 square foot facility is being constructed on property adjacent to the Company's corporate facilities. The Company will have the option to purchase the building after an initial lease term. See Note 6 of Notes to Consolidated Financial Statements in Item 8. In addition, the Company has a 100,000 square foot administrative, research and development and final testing facility in the metropolitan area of Dublin, Ireland and a 60,000 square foot facility in Boulder, Colorado. The Irish facility is being used to service the Company's customer base outside of North America, while the Boulder facility is the primary location for the Company's software efforts in the areas of research and development, manufacturing and quality control. Additionally, the Company purchased a 59-acre parcel of land located in Longmont, Colorado, near the Company's current Boulder facility. Plans for infrastructure and the future development of the new property have not been finalized. The Company also maintains North America sales offices in twenty-six locations which include the metropolitan areas of Atlanta, Chicago, Denver, Dallas, Los Angeles, Minneapolis, Philadelphia, Raleigh and San Jose as well as ten international sales offices located in the metropolitan areas of London, Munich, Paris, Stockholm, Milan, Brussels, Tokyo, Taipei, Seoul and Hong Kong. ITEM 3. LEGAL PROCEEDINGS On June 7, 1993, the Company filed suit against Altera Corporation (Altera) in the United States District Court for the Northern District of California for infringement of certain of the Company's patents. Subsequently, Altera filed suit against the Company, alleging that certain of the Company's products infringe certain Altera patents. Fact and expert discovery have been completed in both cases, which have been consolidated. On April 20, 1995, Altera filed an additional suit against the Company in the Federal District Court in Delaware, alleging that the Company's XC5200 family infringes an Altera patent. The Company answered the Delaware suit denying that the XC5200 family infringes the patent in suit, asserting certain affirmative defenses and counterclaiming that the Altera Max 9000 family infringes certain of the Company's patents. The Delaware suit was transferred to the United States District Court for the Northern District of California and is also before the same judge. Both Altera and the Company have filed motions with the Court for summary judgement with respect to certain of the issues pending in the litigation. Those motions are still pending. On July 22, 1998, Altera and Joseph Ward, a former Xilinx employee, filed suit against the Company in Superior Court in Santa Clara County, California, arising out of the Company's efforts to prevent disclosure of certain Company confidential information. Altera's suit requests declaratory relief and claims the Company engages in unfair business practices and interference with contractual relations. On September 10, 1998 the Company filed cross claims against Altera and Ward for unfair competition and breach of contract, among other claims, in the California action. On October 20, 1998, Altera and Ward filed crossclaims against the Company for malicious prosecution of civil action and defamation. The ultimate outcome of these matters cannot be determined at this time. Management believes that it has meritorious defenses to such claims and is defending them vigorously. The foregoing is a forward-looking statement subject to risks and uncertainties, and the future outcome of these matters could differ materially due to the uncertain nature of each legal proceeding and because the lawsuits are still in the pre-discovery or pre-trial stages. On July 31, 1998, the Lemelson Foundation Partnership (Lemelson) filed a lawsuit in the United States District Court in Phoenix, Arizona against the Company and twenty-five (25) other United States semiconductor companies for infringement of certain of its patents. During the third quarter of fiscal 1999, the Company entered into a license settlement with Lemelson. In response, Lemelson dismissed with prejudice all claims against the Company. There are no other pending legal proceedings of a material nature to which the Company is a party or of which any of its property is the subject. The Company knows of no legal proceedings contemplated by any governmental authority or agency. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS No matters were submitted to a vote of security holders during the fourth quarter of the fiscal year covered by this report. PART II ------- ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS Xilinx's Common Stock is listed on the NASDAQ/AMEX National Market System under the symbol XLNX. As of March 31, 1999, there were approximately 580 shareholders of record. Since many holders' shares are listed under their brokerage firms' names, the actual number of shareholders is estimated by the Company to be over 30,000.
Fiscal Year 1999 Fiscal Year 1998 High Low High Low ------ ------ ------ ------ First Quarter $23.63 $16.06 $28.75 $22.63 Second Quarter 21.50 15.25 28.19 22.59 Third Quarter 32.56 15.94 25.63 14.84 Fourth Quarter 43.63 32.50 23.31 17.03
ITEM 6. SELECTED FINANCIAL DATA
CONSOLIDATED STATEMENT OF INCOME DATA (In thousands, except per share amounts) Years ended March 31, 1999 1998 1997 1996 1995 -------- -------- -------- -------- -------- Net revenues $661,983 $613,593 $568,143 $560,802 $355,130 Operating income 181,974 173,868 159,061 ^ 165,756 & 92,048 # Income before equity in joint venture and cumulative effect of change in accounting principle 189,399 180,596 165,758 ^ 170,902 & 94,845 # Provision for income taxes 54,925 56,728 55,382 69,448 35,567 Net income 102,592 ~ 126,587 110,376 ^ 101,454 & 59,278 # Net income per share: Basic $ 0.70 $ 0.86 $ 0.76 ^ $ 0.71 & $ 0.43 # Diluted $ 0.67 $ 0.79 $ 0.69 ^ $ 0.64 & $ 0.40 # Shares used in per share calculations: Basic 146,422 147,482 145,632 142,184 138,828 Diluted 154,310 160,020 159,350 157,910 148,218 Pro forma amounts with the change in accounting principle related to revenue recognition applied retroactively: (unaudited) Net revenues $661,983 $598,065 $568,173 * * Net income 129,238 118,987 110,391 * * Net income per share: Basic $ 0.88 $ 0.81 $ 0.76 * * Diluted $ 0.84 $ 0.74 $ 0.69 * * ^ After write-off of discontinued product family of $5,000, $0.03 per basic and diluted shares net of tax. & After non-recurring charge for in-process technology related to the acquisition of NeoCAD of $19,366, $0.14 per basic share and $0.12 per diluted share. # After non-recurring charge for the write-off of a minority investment of $2,500, $0.01 per basic and diluted shares net of tax. * Data was not available in sufficient detail to provide pro forma information for these years. ~ Net income includes $26,646 cumulative effect of change in accounting principle.
CONSOLIDATED BALANCE SHEET DATA (In thousands) Years ended March 31, 1999 1998 1997 1996 1995 ---------- -------- -------- -------- -------- Working capital $ 490,512 $474,567 $504,302 $436,070 $180,064 Total assets 1,070,248 941,238 847,693 720,880 320,940 Long-term debt - 250,000 250,000 250,000 - Stockholders' equity 879,318 550,175 490,680 368,244 243,971 ---------- -------- -------- -------- --------
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS CAUTIONARY STATEMENT The statements in this Management's Discussion and Analysis that are forward looking involve numerous risks and uncertainties and are based on current expectations. Actual results may differ materially. Certain of these risks and uncertainties are discussed under "Factors Affecting Future Operating Results". Forward looking statements can often be identified by the use of forward looking words, such as "may," "will," "could," "should," "expect," "believe," "anticipate," "estimate," "continue," "plan," "intend," "project," or other similar words. NATURE OF OPERATIONS Xilinx, Inc. (Xilinx or the Company) designs, develops and markets complete programmable logic solutions, including advanced integrated circuits (ICs), software design tools, predefined system functions delivered as cores of logic and field engineering support. The Company's programmable logic ICs include field programmable gate arrays (FPGAs) and complex programmable logic devices (CPLDs). These components are standard ICs programmed by Xilinx's customers to perform desired logic operations. Xilinx also markets HardWire devices, which are mask-programmed ICs functionally equivalent to programmed FPGAs. The Company's products are designed to provide high integration and quick time-to-market for electronic equipment manufacturers in the data processing, telecommunications, networking, industrial control, instrumentation, high-reliability/military and consumer markets. The Company markets its products throughout the world through a direct sales organization, direct sales to manufacturers by independent sales representative firms, sales through franchised domestic distributors and sales through foreign distributors. Xilinx's products have provided effective solutions for a wide range of customer logic requirements. RESULTS OF OPERATIONS NET REVENUE
(In thousands) 1999 Change 1998 Change 1997 -------------- -------- ------- -------- ------- -------- Net revenues $661,983 7.9% $613,593 8.0% $568,143
Xilinx's net revenue increased 7.9% during fiscal 1999. The increase was primarily due to the continued penetration in high-growth end markets attributable to the XC4000EX, XC4000XL and XC9500 product lines, which was partially offset by decreased revenues relating to the Company's mature XC4000 family as well as the XC3000 family. Despite the revenue growth in fiscal 1999, revenues continue to be impacted by the Japanese and Asia Pacific economic conditions. The Company believes that this factor, as well as others described in "Factors Affecting Future Operating Results," could continue to impact revenues in the near term. The 8.0% increase in fiscal 1998 over 1997 was primarily due to the revenue growth of the, XC4000EX and XC4000XL devices as well as theXC5200 and XC9500 product lines. The Company currently classifies its product offerings into four categories. Base products consist of the Company's mature product families that are currently manufactured on technologies greater than 0.5 micron; this includes the XC2000, XC3000, XC3100, XC4000 and XC7000 families. Base products represented 22.2% of total revenues in fiscal 1999, as compared to 42.9% in fiscal 1998. Mainstream products are currently manufactured on 0.5 micron technology and include the XC4000E, XC4000EX, XC5200 and XC9500 product lines. Mainstream products represented 41.1% of total revenues in fiscal 1999 and 38.0% in fiscal 1998. Advanced products include the Company's newest technologies manufactured on 0.35 micron and smaller, which include the XC4000XL, XC4000XV, XC4000XLA, XC9500XL, Virtex, Spartan and SpartanXL product lines. Advanced products represented 25.0% and 6.7% of total revenues in fiscal 1999 and 1998, respectively, representing an increase of over 300% year over year. The revenue increase in Advanced products was driven primarily by the XC4000XL product family along with the Virtex and Spartan product lines. The Company's Support products make up the remainder of its product offerings and include serial proms, HardWire, High Reliability and software. Support products represented 11.7% and 12.4% of total revenues in fiscal 1999 and 1998, respectively. No end customer accounted for more than 10% of revenues in fiscal 1999, 1998 or 1997. During fiscal 1999, the Company's total PLD unit shipments increased 21%, compared to fiscal 1998. However, the average selling price for the highest volume PLD products decreased approximately 30% from fiscal 1998 prices while individual products within certain families experienced price decreases in excess of 50% during the year. In order to expand market share, the Company passes on to customers manufacturing cost reductions by reducing prices to the extent that the Company can maintain acceptable returns. Price erosion has been common in the semiconductor industry, as advances in both architecture and manufacturing process technology have permitted continual reductions in unit cost. The Company has historically been able to offset much of the revenue declines of its mature technologies with increased revenues from newer technologies, although no assurance can be given that the Company can continue to do so in the future. International revenues represented approximately 32%, 38%, and 36% of total revenues for fiscal years 1999, 1998 and 1997, respectively. International revenues are derived from customers in Europe, Japan and Asia Pacific/Rest of World which represented approximately 21%, 7% and 4% of the Company's worldwide revenues, respectively, in fiscal 1999 as compared to approximately 23%, 10% and 5% of worldwide revenues, respectively, in fiscal year 1998. Japan and Asia Pacific/Rest of World experienced revenue declines in fiscal 1999 as compared to a year ago primarily as a result of the continued weak economic environment in those regions. Europe, Japan and Asia Pacific/Rest of World experienced revenue growth in fiscal 1998 as compared to fiscal 1997 although the revenue growth in Japan was adversely impacted by the weakened yen relative to the U.S. dollar. During the fourth quarter of fiscal 1999, the Company changed its accounting method for recognizing revenue on all shipments to international distributors. The change was made retroactive to the beginning of fiscal 1999. While the Company previously deferred revenue on shipments to domestic distributors until the products were sold to the end user, it recognized revenue upon shipment to international distributors, net of appropriate reserves for returns and allowances. Following the accounting change, revenue recognition on shipments to distributors worldwide is deferred until the products are sold to the end customer. The Company believes that deferral of revenue on shipments to distributors until the product is shipped by the distributor to an end customer is a more meaningful measurement of results of operations as it better conforms to the substance of the transaction considering the changing business environment in the international marketplace, is consistent with industry practice, and accordingly, it will better focus the Company on end customer sales; therefore it is a preferable method of accounting. The cumulative effect of the change in accounting method for prior years was a charge of $26.6 million, net of $12.0 million in taxes, or $0.17 net income per diluted share. GROSS MARGIN
(In thousands) 1999 Change 1998 Change 1997 -------------------------- --------- ------- --------- ------ --------- Gross margin $410,717 7.3% $382,903 9.8%* $348,806* Percentage of revenue 62.0% 62.4% 61.4%* * Includes write-off of discontinued product family of $5.0 million. Gross margin as a percentage of revenues was 62.3% excluding this charge.
During fiscal 1999, the Company's gross margin percentage declined from the prior year primarily as a result of a non-recurring royalty payment made pursuant to a license settlement with Lemelson Foundation Partnership which was partially offset by lower wafer prices from wafer suppliers, manufacturing process technology improvements, and improved yields that offset selling price reductions. See Note 12 of Notes to Consolidated Financial Statements. The gross margin percentage remained consistent from fiscal 1997 to 1998, excluding the impact of a $5.0 million write-off of a discontinued product family, as selling price reductions were offset by the favorable impact of lower wafer prices from wafer suppliers, manufacturing process technology improvements, the impact of the stronger U.S. dollar against the yen, and improved yields. The Company recognizes that ongoing price reductions for its integrated circuits are a significant element in expanding the market for its products. Management believes that a gross margin objective in the range of 60% to 62% of revenues is consistent with expanding market share while realizing acceptable returns, although there can be no assurance that future gross margins can remain in this range. During fiscal 1997, the Company discontinued the XC8100 family of one-time programmable antifuse devices. As a result, the Company recorded a pretax charge against earnings of $5.0 million. This charge primarily related to the write-off of inventory and termination charges related to purchase commitments to foundry partners for work-in-process wafers which had not completed the manufacturing process. RESEARCH AND DEVELOPMENT
(In thousands) 1999 Change 1998 Change 1997 -------------------------- -------- ------- -------- ------- -------- Research and development $94,493 17.4% $80,456 13.2% $71,075 Percentage of revenue 14.3% 13.1% 12.5%
The company increased its expenditures in research and development as it has done each year during its fifteen-year history. The increase in research and development expenditures from fiscal 1998 to 1999 was associated with designing and developing new product architectures of complex, high density devices including wafer purchases, software development, increased labor-related costs, and testing of new products along with a $3.6 million charge to acquire in-process technology in conjunction with certain assets purchased from MI Acquisition LLP. See Note 13 of Notes to Consolidated Financial Statements. The increase in research and development expenses from fiscal 1997 to 1998 was primarily due to increased costs associated with designing and developing new product architectures as well as labor-related expenses. The Company remains committed to a significant level of research and development effort in order to maintain its technology leadership in the programmable logic marketplace. Through March 31, 1999, the Company has received approximately 300 U.S. patents and maintains an active program of filing for additional patents in the areas of software, IC architecture and design. SALES, GENERAL AND ADMINISTRATIVE
(In thousands) 1999 Change 1998 Change 1997 -------------------------- --------- ------- --------- ------- --------- Sales, general and administrative $134,250 4.4% $128,579 8.4% $118,670 Percentage of revenue 20.3% 21.0% 20.9%
The 4.4% increase in sales, general and administrative expenses in fiscal 1999 was primarily attributable to increased marketing expenses for new product introductions, increased sales commissions on higher revenues from U.S. distributors along with increased personnel costs. Sales, general and administrative expenses increased in fiscal 1998 over 1997 due to increased headcount and related employee expenses and, to a lesser extent, an increase in legal expenses. The Company remains committed to controlling administrative expenses. However, the timing and extent of future legal costs associated with the ongoing enforcement of the Company's intellectual property rights are not readily predictable and may significantly increase in the future. INTEREST AND OTHER, NET
(In thousands) 1999 Change 1998 Change 1997 -------------------------- ------- ------- ------- ------- ------- Interest income and other $7,425 10.4% $6,728 0.5% $6,697 Percentage of revenue 1.1% 1.1% 1.2%
The Company earns interest income on its cash, cash equivalents and short-term and long-term investments. The amount of interest earned is a function of the balance of cash invested as well as prevailing interest rates. The Company incurred interest expense on the $250.0 million 5 1/4% convertible subordinated notes, which were fully converted in February 1999. The Company's investment portfolio contains tax-advantaged municipal securities, which had pretax yields that were less than the interest rate on the convertible subordinated notes. For financial reporting purposes, the Company effectively recorded the difference between the pretax and tax-equivalent yields as a reduction in provision for taxes on income. Average cash and investment balances decreased slightly from the prior year while interest rates increased moderately keeping interest income constant from fiscal 1998 to fiscal 1999. The 10.4% increase in interest and other income in fiscal 1999 was primarily due to the decrease in interest expense related to the redemption of the convertible notes in fiscal 1999 offset partially by the increase in foreign currency exchange losses from $0.7 million in foreign exchange gains in the prior year to $0.4 million foreign exchange losses in fiscal 1999. In 1998, average cash and investment balances and average interest rates remained fairly consistent with the prior year, resulting in comparable net interest and other income in both years. The amount of net interest and other income in the future will continue to be impacted by the level of the Company's average cash and investment balance, prevailing interest rates, the balance of any debt outstanding, and foreign currency exchange rates. PROVISION FOR INCOME TAXES
(In thousands) 1999 Change 1998 Change 1997 ------------------------------ -------- ------- -------- ------- -------- Provision for taxes on income $54,925 (3.2%) $56,728 2.4% $55,382 Effective tax rate 29.0% 31.4% 33.4%
The tax rates from fiscal 1997 through fiscal 1999 were favorably impacted by legislation reinstating the R&D Tax Credit. Furthermore, increased profits in foreign operations where the tax rate is lower than the U.S. rate combined with lower state taxes favorably impacted the Company's tax rates. JOINT VENTURE EQUITY INCOME The Company records its proportional ownership of the net income (loss) of United Silicon Inc. (USIC), a wafer fabrication joint venture located in Taiwan, as joint venture equity income (loss). The fiscal 1999 net loss was a result of the continued ramp up in production of the wafer fabrication facility. The net income in fiscal 1998 was primarily attributable to foreign exchange gains as well as interest earned on its investment portfolio. Many of the expenses associated with full foundry operations are being incurred although the facility has not reached full production. INFLATION To date, the effects of inflation upon the Company's financial results have not been significant. FINANCIAL CONDITION, LIQUIDITY AND CAPITAL RESOURCES The Company's financial condition as of March 31, 1999 continued to be strong with total current assets exceeding total current liabilities by 3.9 times. At March 31, 1998, total current assets exceeded total current liabilities by 4.8 times. The Company has used a combination of equity and debt financing and cash flow from operations to support on-going business activities, secure acquisitions and investments in complementary technologies, obtain facilities and capital equipment and finance inventory and accounts receivable. CASH, CASH EQUIVALENTS AND SHORT-TERM INVESTMENTS Xilinx's cash, cash equivalents and short-term investments increased by $40.3 million in 1999 as the Company continued to generate positive cash flows from operations. Cash, cash equivalents and short-term investments represented 37.6% of total assets at March 31, 1999. The Company generated cash flow of $243.6 million from operating activities in 1999, offset by $298.6 million of cash used for investing activities and $58.3 million used in financing activities. Investing activities during fiscal 1999 included the net purchase of investments, expenditures for property, plant and equipment, an additional investment in the USIC joint venture, and certain assets purchased from MI Acquisition LLP. Financing activities during 1999 included $113.8 million to acquire treasury stock offset by $55.5 million in proceeds from sales of common stock under employee option and stock purchase plans. RECEIVABLES Receivables increased 20.5% from $60.9 million at the end of 1998 to $73.4 million at the end of 1999. Days sales outstanding at the end of 1999 and 1998 were both 36 days. The consistency in days sales outstanding was primarily a result of the increase in domestic sales through distribution where some distributors received discounts for prompt payment. INVENTORIES Inventories decreased 5.9% from $55.3 million at March 1998 to $52.0 million at March 1999. Inventory levels at March 31, 1999 represent 68 days of inventory compared to 86 days at March 31, 1998. Inventory levels decreased during fiscal 1999 due to higher than expected shipments and increased focus on supply chain management in addition to both architecture and manufacturing process technology improvements that have permitted continued cost reductions. The Company seeks to balance two competing objectives with regard to inventory management. On the one hand, the Company believes that its standard, off-the-shelf products should be available for prompt shipment to customers. Accordingly, it attempts to maintain sufficient levels of inventory in various product, package and speed configurations to meet anticipated customer demand. On the other hand, the Company also wishes to minimize the handling costs associated with maintaining higher inventory levels and to realize fully the opportunities for cost reductions associated with architecture and manufacturing process advancements. The Company continually strives to balance these two objectives to provide excellent customer response at a competitive cost. PROPERTY, PLANT AND EQUIPMENT During 1999, Xilinx invested $40.9 million in property and equipment, as compared to $29.7 million in 1998. Primary investments in fiscal 1999 were for software development tools and semiconductor design, test and manufacturing equipment at each of its manufacturing locations. CURRENT LIABILITIES Current liabilities increased from $125.7 million at the end of fiscal 1998 to $167.2 million at the end of fiscal 1999. The increase was primarily attributable to an increase in deferred income on shipments to distributors. This is a result of the accounting change, under which the Company now defers revenue from international distributors in addition to domestic distributors until the distributor ships the product to an end customer. LONG-TERM DEBT AND LINES OF CREDIT In fiscal 1999, the Company converted in full $250.0 million of 5 1/4% Convertible Subordinated Notes due 2002 (Notes) for a total of 9.8 million shares of common stock at a price of $25.50 per share. The Company has credit facilities for up to $46.2 million of which $6.2 million is intended to meet occasional working capital requirements for the Company's Ireland manufacturing facility. At March 31, 1999 and 1998, no borrowings were outstanding under the lines of credit. See Note 5 of Notes to Consolidated Financial Statements. STOCKHOLDERS' EQUITY Stockholders' equity grew by 59.8% in 1999 to $879.3 million. The increase of $329.1 million was primarily attributable to $102.6 million in net income, $90.3 million related to the issuance of common stock from the employee stock plan and the tax benefit from stock options, and $250.3 million related to the issuance of common stock from the debt conversion partially offset by the $113.8 million used to acquire treasury stock. SUMMARY OF LIQUIDITY The Company anticipates that existing sources of liquidity and cash flow from operations will be sufficient to satisfy the Company's cash needs for the foreseeable future. However, the risk factors discussed in Item 7 could affect the Company's cash positions adversely. The Company will continue to evaluate opportunities for investments to obtain additional wafer capacity, procurement of additional capital equipment and facilities, development of new products, and potential acquisitions of businesses, products or technologies that would complement the Company's businesses and may use available cash or other sources of funding for such purposes. FACTORS AFFECTING FUTURE OPERATING RESULTS The semiconductor industry is characterized by rapid technological change, intense competition and cyclical market patterns. Cyclical market patterns are characterized by several factors, including: - - reduced product demand; - - limited visibility of demand for products beyond three to nine months; - - accelerated erosion of average selling prices; and - - volatile capacity availability. Our results of operations are affected by several factors. These factors include general economic conditions, conditions specific to technology companies and to the semiconductor industry in particular, decreases in average selling prices over the life of particular products and the timing of new product introductions (by us, our competitors and others.) In addition, our results of operations are affected by the ability to manufacture sufficient quantities of a given product in a timely manner, the timely implementation of new manufacturing technologies, the ability to safeguard patents and intellectual property from competitors, the impact of new technologies which result in rapid escalation of demand for some products in the face of equally steep declines in demand for others, and the inability to predict the success of our customers' products into their markets. Market demand for our products, particularly for those most recently introduced, can be difficult to predict, especially in light of customers' demands to shorten product lead times and minimize inventory levels. Unpredictable market demand could lead to revenue volatility if we were unable to provide sufficient quantities of specified products in a given quarter. In addition, any difficulty in achieving targeted wafer production yields could adversely affect our financial condition and results of operations. We attempt to identify changes in market conditions as soon as possible; however, the dynamics of the market make prediction of and timely reaction to such events difficult. Due to these and other factors, our past results, including those described in this report, are much less reliable predictors of the future than with companies in many older, more stable and less dynamic industries. Based on the factors noted herein, we may experience substantial period-to-period fluctuations in future operating results. Our future success depends in a large part on the continued service of our key technical, sales, marketing and management personnel and on our ability to continue to attract and retain qualified employees. Particularly important are those highly skilled design, process, software and test engineers involved in the manufacture of existing products and the development of new products and processes. The competition for such personnel is intense, and the loss of key employees could have a material adverse effect on our financial condition and results of operations. Sales and operations outside of the United States subject us to the risks associated with conducting business in foreign economic and regulatory environments. Our financial condition and results of operations could be adversely affected by unfavorable economic conditions in countries in which we do significant business and by changes in foreign currency exchange rates affecting those countries. Specifically, we have sales and operations in Southeast Asia and Japan. The recent economic weakness in these markets has adversely affected revenues and may continue to impact those markets in several ways. Customers may face reduced access to capital and exchange rate fluctuations may adversely affect their ability to purchase our products. In addition, our ability to sell at competitive prices may be diminished. This instability may increase credit risks as the continued weakness of certain Asian currencies may impair our customers' ability to repay existing obligations. Depending on the recovery in Asia in coming quarters, any or all of these factors could adversely affect our financial condition and results of operations in the near future. Our financial condition and results of operations are becoming increasingly dependent on a global economy. The increased instability in worldwide economic environments could lead to a contraction of capital spending. Additional risks to us include government regulation of exports, imposition of tariffs and other potential trade barriers, reduced protection for intellectual property rights in some countries and generally longer receivable collection periods. Our business is also subject to the risks associated with the imposition of legislation and regulations relating specifically to the import or export of semiconductor products. We cannot predict whether quotas, duties, taxes or other charges or restrictions will be imposed by the United States or other countries upon the import or export of our products in the future or what effect, if any, such actions would have on our financial condition and results of operations. Many of our operations are centered in an area of California that has been seismically active. Should there be a major earthquake in this area, our operations may be disrupted. This type of disruption could result in our inability to ship products in a timely manner, thereby materially adversely affecting our financial condition and results of operations. The securities of many high technology companies have historically been subject to extreme price and volume fluctuations, which may adversely affect the market price of our common stock. DEPENDENCE UPON INDEPENDENT MANUFACTURERS AND SUBCONTRACTORS We do not manufacture the wafers used for our products. During the past several years, most of our wafers have been manufactured by UMC and Seiko Epson Corporation (Seiko Epson), with recent wafers also manufactured by USIC. We have depended upon these suppliers and others to produce wafers with competitive performance and cost attributes which include transitioning to advanced manufacturing process technologies, producing wafers at acceptable yields and delivering them in a timely manner. While the timeliness, yield and quality of wafer deliveries have met our requirements to date, we cannot assure that our wafer suppliers will not experience future manufacturing problems, including delays in the realization of advanced manufacturing process technologies. Additionally, disruption of operations at these foundries for any reason, including natural disasters such as fires, floods, or earthquakes, as well as disruptions to access to adequate supplies of electricity, natural gas or water could cause delays in shipments of our products, and could have a material adverse effect on our results of operations. We are also dependent on subcontractors to provide semiconductor assembly services. Any prolonged inability to obtain wafers or assembly services with competitive performance and cost attributes, adequate yields or timely delivery, or any other circumstance that would require us to seek alternative sources of supply, could delay shipments and have a material adverse effect on our financial condition and results of operations. Our growth will depend in a large part upon our ability to obtain increased wafer fabrication capacity and assembly services from suppliers that are cost competitive. We consider various alternatives in order to secure additional wafer capacity. These alternatives include, without limitation, equity investments in, or loans, deposits, or other financial commitments to independent wafer manufacturers. We also consider the use of contracts which commit us to purchase specified quantities of wafers over extended periods. We are currently able to obtain wafers from existing suppliers in a timely manner. However, at times we have been unable, and may in the future be unable, to fully satisfy customer demand because of production constraints, including the ability of suppliers and subcontractors to provide materials and services to satisfy customer delivery dates, as well as our ability to process products for shipment. In addition, a significant increase in general industry demand or any interruption of supply could reduce our supply of wafers or increase our cost of such wafers. These events could have a material adverse affect on our financial condition and results of operations. DEPENDENCE ON NEW PRODUCTS Our future success depends in a large part on our ability to develop and introduce on a timely basis new products which address customer requirements and compete effectively on the basis of price, density, functionality and performance. The success of new product introductions is dependent upon several factors, including: - - timely completion of new product designs; - - our ability to utilize advanced manufacturing process technologies; - - achieving acceptable yields; - - the availability of supporting software design tools; - - utilization of predefined cores of logic; and - - market acceptance. We cannot assure that our product development efforts will be successful or that our new products will achieve market acceptance. Revenues relating to our mature products are expected to continue to decline in the future. As a result, we will be increasingly dependent on revenues derived from newer products along with cost reductions on current products. We rely primarily on obtaining yield improvements and corresponding cost reductions in the manufacture of existing products and on introducing new products which incorporate advanced features and other price/performance factors that enable us to increase revenues while maintaining consistent margins. To the extent that such cost reductions and new product introductions do not occur in a timely manner, or to the extent that our products do not achieve market acceptance at prices with higher margins, our financial condition and results of operations could be materially adversely affected. COMPETITION See "Competition" discussion in Item 1. INTELLECTUAL PROPERTY We rely upon patent, trademark, trade secret and copyright law to protect our intellectual property. We cannot assure that such intellectual property rights can be successfully asserted in the future or will not be invalidated, circumvented or challenged. From time to time, third parties, including our competitors, have asserted patent, copyright and other intellectual property rights to technologies that are important to us. We cannot assure that third parties will not assert infringement claims against us in the future, that assertions by third parties will not result in costly litigation or that we would prevail in such litigation or be able to license any valid and infringed patents from third parties on commercially reasonable terms. Litigation, regardless of its outcome, could result in substantial costs and diversion of our resources. Any infringement claim or other litigation against us or by us could materially adversely affect our financial condition and results of operations. COMPUTER INFORMATION SYSTEMS In order to compete effectively in an industry characterized by rapid technological change, intense competition and cyclical market patterns, we continually evaluate our computer information systems. As a result, we have recently implemented new computer information systems or system enhancements relating to our semiconductor manufacturing, software manufacturing, order entry processing and financial applications. Like most other companies using computer information systems in their operations, we are currently working to resolve the potential impact of the Year 2000 on the processing of date-sensitive information by our computerized information systems, as well as the vendor and customer date-sensitive computerized information electronically transferred to us. The Year 2000 issue is the result of computer programs being written using two digits, rather than four, to define the applicable Year. Any of our systems that have time-sensitive software may recognize a year ending in "00" as 1900 rather than the year 2000, which could result in miscalculations, classification errors or system failures. We have performed a thorough review of our internal use software and hardware applications and software products in order to identify those applications and products that are not Year 2000 compliant. Currently, our Year 2000 efforts have been focused on final Year 2000 integrated verification for the software and hardware applications identified in the review in addition to those newly implemented or enhanced. We are also placing additional emphasis on finalizing the assessment of our outside suppliers and other critical business partners for which initial assessments were incomplete. We believe that our internal computer system implementation or enhancement efforts principally conducted to improve competitive and operating efficiencies, as described above, have also addressed some of our internal Year 2000 compliance issues. Additional internal information systems are also currently being upgraded. Electronic data interchange modifications have been completed that are intended to ensure all dates are handled properly, although we cannot assure that all dates will be handled properly. With regard to all information technology hardware, including desktops, servers, networking and telecom equipment, we have completed our assessments, are making the necessary upgrades and expect to complete the upgrades by mid-calendar 1999, although we cannot assure these upgrades will be completed as scheduled. We believe that our latest software release, version M1.5, is Year 2000 compliant, although we cannot assure that it is Year 2000 compliant. However, some of our customers are running product versions that are not Year 2000 compliant. We have been encouraging such customers to migrate to the current product version. We plan to take several steps to minimize any Year 2000 effects, including miscalculations, classification errors or system failures. Our internal preparedness includes specific steps that will be taken in anticipation of the Year 2000. In addition, we are relying on a contingency plan which has been developed and is now being implemented which includes manual workarounds, attention to inventory levels, the ability to utilize both our San Jose and Ireland manufacturing facilities for shipment and having multiple vendors who can provide critical services, wafer assembly as well as test products. The costs directed solely towards Year 2000 compliance are not incremental to us, but rather represent a reallocation of existing resources. To date, we have incurred less than $1.5 million on efforts directed solely towards Year 2000 compliance and expect to incur a total of less than $2.0 million when the process is completed, although we cannot assure that this will be the case. The costs of addressing potential problems are not currently expected to have a material adverse impact on our financial position, results of operations or cash flows in future periods. If, however, we, our customers or vendors are unable to resolve such processing issues on a timely, cost-effective basis, our financial condition and results of operations could be adversely affected. The statements above represent forward-looking statements subject to risks and uncertainties and actual results may differ materially from those described above due to a number of risk factors. These factors include, but are not limited to: - - the complexity of identifying potential Year 2000 issues; - - our ability to allocate and/or obtain qualified resources to resolve Year 2000 issues; - - our ability to work effectively with vendors and other critical business partners; and - - our effectiveness at encouraging customers to migrate towards our current software product version. We cannot assure that we will be able to successfully modify all systems and products to comply with Year 2000 requirements, which could have a material adverse effect on our financial condition and results of operations. If we were to discontinue our Year 2000 preparedness at this time, we would not be able to ensure all internal networks and desktops were operational, nor ensure third party vendors were able to meet our inventory demands or send information electronically. In addition, disruptions to the economy generally resulting from the Year 2000 issues could also materially adversely impact us. We could be subject to litigation for computer system failures such as equipment shutdowns or failure to properly date business records. At this time, we cannot reasonably estimate the amount of potential liability and lost revenue. EURO CURRENCY Beginning in 1999, 11 member countries of the European Union established fixed conversion rates between their existing sovereign currencies and adopted the Euro as their common legal currency. During the three year transition, the Euro will be available for non-cash transactions and legacy currencies will remain legal tender. We are continuing to assess the Euro's impact on our business. We are reviewing the ability of our accounting and information systems to handle the conversion, the ability of foreign banks to report on dual currencies, the legal and contractual implications of agreements, as well as reviewing our pricing strategies. We expect that any additional modifications to our operations and systems will be completed on a timely basis and do not believe the conversion will have a material adverse impact on our operations. However, we cannot assure that we will be able to successfully modify all systems and contracts to comply with Euro requirements. LITIGATION We are currently engaged in several legal matters. See Legal Proceedings in Item 3 and Note 12 of Notes to Consolidated Financial Statements in Item 8. ITEM 7A. MARKET RATE RISKS Interest Rate Risk - The Company's exposure to interest rate risk relates primarily to the Company's investment portfolio. See Note 5 of Notes to Consolidated Financial Statements. The Company's primary aim with its investment portfolio is to invest available cash while preserving principal and meeting liquidity needs. The portfolio includes tax-advantaged municipal bonds, tax-advantaged auction rate preferred municipal bonds, certificates of deposit, and U.S. Treasury securities. In accordance with the Company's investment policy, the Company places investments with high credit quality issuers and limits the amount of credit exposure to any one issuer. These securities are subject to interest rate risk and will decrease in value if market interest rates increase. A hypothetical 10% increase in interest rates would result in a $1.5 million (less than 0.3%) decrease in the fair value of the Company's available-for-sale securities as of the end of fiscal 1999 and 1998. In addition, the Company has historically had the ability and has the intent to hold its securities until maturity and therefore, does not expect to recognize an adverse impact on income or cash flows, although there can be no assurance of this. Until the conversion of the long-term debt to equity in fiscal 1999, the Company also had a liability interest rate exposure which was mitigated through the use of a liability interest rate swap agreement. Foreign currency risk - The Company uses forward currency exchange contracts to reduce financial market risks. The Company's sales to Japanese customers are denominated in yen while its purchases of processed silicon wafers from Japanese foundries are primarily denominated in U.S. dollars. Gains and losses on foreign currency forward contracts that are designated and effective as hedges of anticipated transactions, for which a firm commitment has been attained, are deferred and included in the basis of the transaction in the same period that the underlying transactions are settled. Gains and losses on any instruments not meeting the above criteria would be recognized in income in the current period. A 15% adverse change in yen exchange rates based on historical average rate fluctuations would have had approximately a 1.0% adverse impact on revenue for fiscal years 1999 and 1998. In fiscal 2000, the Company has also begun to share the yen exchange rate risk with some of its Japanese customers through risk sharing agreements. As the Company will continue to have a net yen exposure in the near future, it will continue to mitigate the exposure through yen hedging contracts. However, no forward currency contracts were outstanding as of March 31, 1999. The Company has several subsidiaries and an equity investment in the USIC joint venture whose financial statements are recorded in currencies other than the U.S. dollar. As these foreign currency financial statements are translated at each month end during consolidation, fluctuations of exchange rates between the foreign currency and the U.S. dollar increase or decrease the value of those investments. If permanent changes occur in exchange rates after an investment is made, the investment's value will increase or decrease accordingly. These fluctuations are recorded as a component of stockholders' equity as a component of accumulated other comprehensive income. To date, the USIC joint venture has recorded $17.5 million in cumulative translation adjustments, as the New Taiwan dollar has decreased in value against the U.S. dollar. Also, as the Company's subsidiaries and the USIC joint venture maintain investments denominated in other than local currencies, exchange rate fluctuations will occur. ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
XILINX, INC. CONSOLIDATED STATEMENTS OF INCOME Years ended March 31, (In thousands, except per share amounts) 1999 1998 1997 --------- --------- --------- Net revenues $661,983 $613,593 $568,143 Costs and expenses: Cost of revenues 251,266 230,690 214,337 Write-off of discontinued product family - - 5,000 Research and development 94,493 80,456 71,075 Sales, general and administrative 134,250 128,579 118,670 Total operating costs and expenses 480,009 439,725 409,082 --------- --------- --------- Operating income 181,974 173,868 159,061 Interest income and other 19,341 20,652 21,258 Interest expense (11,916) (13,924) (14,561) --------- --------- --------- Income before provision for taxes on income, equity in joint venture and cumulative effect of change in accounting principle 189,399 180,596 165,758 Provision for taxes on income 54,925 56,728 55,382 --------- --------- --------- Income before equity in joint venture and cumulative effect of change in accounting principle 134,474 123,868 110,376 Equity in (loss)/income of joint venture (5,236) 2,719 - --------- --------- --------- Income before cumulative effect of change in accounting principle 129,238 126,587 110,376 Cumulative effect of change in accounting principle (26,646) - - --------- --------- --------- NET INCOME $102,592 $126,587 $110,376 ========= ========= ========= Net income per share: Basic Income before cumulative effect of change in accounting principle $ 0.88 $ 0.86 $ 0.76 Cumulative effect of change in accounting principle (0.18) - - --------- --------- --------- Basic net income per share $ 0.70 $ 0.86 $ 0.76 ========= ========= ========= Diluted Income before cumulative effect of change in accounting principle $ 0.84 $ 0.79 $ 0.69 Cumulative effect of change in accounting principle (0.17) - - --------- --------- --------- Diluted net income per share $ 0.67 $ 0.79 $ 0.69 ========= ========= ========= Shares used in per share calculations: Basic 146,422 147,482 145,632 ========= ========= ========= Diluted 154,310 160,020 159,350 ========= ========= ========= Pro forma amounts with the change in accounting principle related to revenue recognition applied retroactively (unaudited): Net revenues $661,983 $598,065 $568,173 Net income $129,238 $118,987 $110,391 Net income per share: Basic $ 0.88 $ 0.81 $ 0.76 Diluted $ 0.84 $ 0.74 $ 0.69 See accompanying notes.
XILINX, INC. CONSOLIDATED BALANCE SHEETS March 31, (In thousands) 1999 1998 ----------- --------- ASSETS CURRENT ASSETS: Cash and cash equivalents $ 53,584 $166,861 Short-term investments 348,888 195,326 Accounts receivable, net of allowances for doubtful accounts, pricing adjustments and customer returns of $7,409 and $8,408 in 1999 and 1998, respectively 73,409 60,912 Inventories 52,036 55,289 Deferred income taxes 54,911 38,694 Advances for wafer purchases 59,450 72,267 Other current assets 15,431 10,875 ----------- --------- Total current assets 657,709 600,224 ----------- --------- Property, plant and equipment, at cost: Land 10,361 10,361 Construction in progress 11,076 - Building 36,941 37,065 Machinery and equipment 117,814 105,304 Furniture and fixtures 11,290 10,902 ----------- --------- 187,482 163,632 Accumulated depreciation and amortization (85,777) (75,356) ----------- --------- Net property, plant and equipment 101,705 88,276 Long-term investments 94,002 - Restricted investments 34,358 36,271 Investment in joint venture 91,057 90,872 Advances for wafer purchases 36,694 77,342 Developed technology and other assets 54,723 48,253 ----------- --------- $1,070,248 $941,238 =========== ========= LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES: Accounts payable $ 23,326 $ 20,332 Accrued payroll and payroll related liabilities 20,223 15,318 Income tax payable 25,998 16,692 Deferred income on shipments to distributors 85,709 55,898 Interest payable and other accrued liabilities 11,941 17,417 ----------- --------- Total current liabilities 167,197 125,657 ----------- --------- Long-term debt - 250,000 Deferred tax liabilities 23,733 15,406 Commitments and contingencies STOCKHOLDERS' EQUITY: Preferred stock, $.01 par value; 2,000 shares authorized; none issued and outstanding - - Common stock, $.01 par value; 300,000 shares authorized; 156,381 and 148,726 shares issued; 156,243 and 145,826 shares outstanding at March 31, 1999 and 1998, respectively 1,562 1,458 Additional paid-in capital 293,231 118,341 Retained earnings 607,060 504,468 Treasury stock, at cost (5,112) (56,973) Accumulated other comprehensive income (17,423) (17,119) ----------- --------- Total stockholders' equity 879,318 550,175 ----------- --------- $1,070,248 $941,238 =========== ========= See accompanying notes.
XILINX, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS Years ended March 31, (In thousands) 1999 1998 1997 ------------ ---------- ---------- Increase / (decrease) in Cash and Cash Equivalents CASH FLOWS FROM OPERATING ACTIVITIES: Net income $ 102,592 $ 126,587 $ 110,376 Adjustments to reconcile net income to net cash provided by operating activities: Cumulative effect of change in accounting principle 26,646 - - Depreciation and amortization 32,112 32,709 27,997 Write-off of acquired in-process technology 3,600 - - Undistributed earnings of joint venture 5,236 (3,747) (1,336) Changes in assets and liabilities: Accounts receivable (12,497) 11,336 7,280 Inventories 58,328 7,469 (14,095) Deferred income taxes and other (3,996) 15,644 14,134 Accounts payable, accrued liabilities and income taxes payable 40,410 8,861 (3,193) Deferred income on shipments to distributors (8,806) 19,543 (1,213) ------------ ---------- ---------- Total adjustments 141,033 91,815 29,574 ------------ ---------- ---------- Net cash provided by operating activities 243,625 218,402 139,950 ------------ ---------- ---------- CASH FLOWS FROM INVESTING ACTIVITIES: Purchases of available-for-sale investments (1,177,948) (337,500) (247,022) Proceeds from sale or maturity of available-for-sale investments 896,396 352,149 303,604 Purchases of held-to-maturity investments (36,228) (72,281) (72,227) Proceeds from maturity of held-to-maturity investments 36,145 72,267 72,189 Proceeds from sale of held-to-maturity investment 36,202 - - Advances for wafer purchases - (90,000) (60,000) Property, plant and equipment (40,922) (29,700) (26,803) Investment in joint venture (5,448) (67,422) - Assets purchased from MI Acquisition LLP (6,776) - - Deposit on building - (28,351) - ------------ ---------- ---------- Net cash used in investing activities (298,579) (200,838) (30,259) ------------ ---------- ---------- CASH FLOWS FROM FINANCING ACTIVITIES: Acquisition of treasury stock (113,804) (93,795) (32,028) Principal payments on capital lease obligations - - (977) Proceeds from issuance of common stock 55,481 27,189 28,324 ------------ ---------- ---------- Net cash used in financing activities (58,323) (66,606) (4,681) ------------ ---------- ---------- Net (decrease) / increase in cash and cash equivalents (113,277) (49,042) 105,010 Cash and cash equivalents at beginning of period 166,861 215,903 110,893 ------------ ---------- ---------- Cash and cash equivalents at end of period $ 53,584 $ 166,861 $ 215,903 ============ ========== ========== SCHEDULE OF NON-CASH TRANSACTIONS: Tax benefit from stock options $ 34,856 $ 16,099 $ 16,730 Issuance of treasury stock under employee stock plans 112,162 38,669 30,181 Issuance of treasury stock from debt conversion 53,503 - - Conversion of long term debt to common stock 250,322 - - SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION: Interest paid 12,992 13,008 13,309 Income taxes paid $ 21,469 $ 39,472 $ 34,426 See accompanying notes.
XILINX, INC. CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY Three years ended March 31, 1999 Accumulated Common Stock Additional Other Total (In thousands) Outstanding Paid-in Retained Treasury Comprehensive Stockholders' Shares Amount Capital Earnings Stock Income Equity ---------- ------ ---------- --------- ------------ ------------- ----------- BALANCE AT MARCH 31, 1996 143,866 $ 1,439 $ 98,868 $ 267,505 $ - $ 432 $ 368,244 Components of comprehensive income: Net income - - - 110,376 - - 110,376 Unrealized (loss) on available-for-sale Securities, net of tax benefit of $233 - - - - - (349) (349) Cumulative translation adjustment - - - - - (617) (617) --------- Total comprehensive income 109,410 --------- Issuance of common shares under employee stock plans 4,574 28 28,296 - - - 28,324 Acquisition of treasury stock (1,756) - - - (32,028) - (32,028) Issuance of treasury stock under employee stock plans - - (30,181) - 30,181 - - Tax benefit from exercise of stock options - - 16,730 - - - 16,730 ------- -------- --------- ---------- -------- ---------------- ---------- BALANCE AT MARCH 31, 1997 146,684 1,467 113,713 377,881 (1,847) (534) 490,680 Components of comprehensive income: Net income - - - 126,587 - - 126,587 Unrealized gain on available-for-sale Securities, net of tax expense of $13 - - - - - 19 19 Cumulative translation adjustment - - - - - (16,604) (16,604) ---------- Total comprehensive income 110,002 ---------- Issuance of common shares under employee stock plans 3,802 (9) 27,198 - - - 27,189 Acquisition of treasury stock (4,660) - - - (93,795) - (93,795) Issuance of treasury stock under employee stock plans - - (38,669) - 38,669 - - Tax benefit from exercise of stock options - - 16,099 - - - 16,099 ------- -------- --------- ---------- -------- ---------------- ---------- BALANCE AT MARCH 31, 1998 145,826 1,458 118,341 504,468 (56,973) (17,119) 550,175 Components of comprehensive income: Net income - - - 102,592 - - 102,592 Unrealized gain on available-for-sale Securities, net of tax expense of $87 - - - - - 130 130 Cumulative translation adjustment - - - - - (434) (434) --------- Total comprehensive income 102,288 --------- Issuance of common shares under employee stock plans 6,229 104 55,377 - - - 55,481 Issuance of common shares from convertible debt 9,804 - 250,322 - - - 250,322 Acquisition of treasury stock (5,616) - - - (113,804) - (113,804) Issuance of treasury stock under employee stock plans - - (112,162) - 112,162 - - Issuance of treasury stock from debt conversion - - (53,503) - 53,503 - - Tax benefit from exercise of stock options - - 34,856 - - - 34,856 -------- ------- --------- ---------- --------- --------------- ---------- BALANCE AT MARCH 31, 1999 156,243 $ 1,562 $ 293,231 $ 607,060 $ (5,112) $ (17,423) $879,318 ======== ======= ========= ========== ========= =============== =========== See accompanying notes.
XILINX, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 1. NATURE OF OPERATIONS Xilinx designs, develops and markets complete programmable logic solutions, including advanced integrated circuits, software design tools, predefined system functions delivered as cores of logic and field engineering support. The wafers used to manufacture the Company's products are obtained from independent wafer manufacturers, located in Japan and Taiwan. The Company is dependent upon these manufacturers to produce and deliver wafers on a timely basis. The Company is also dependent on subcontractors, located in the Asia Pacific region, to provide semiconductor assembly services. Xilinx is a global company with manufacturing facilities in the United States and Ireland and sales offices throughout the world. The Company derives approximately one-third of its revenues from international sales, primarily in Europe and Japan. NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND CONCENTRATIONS OF RISK Basis of presentation The accompanying consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries after elimination of all intercompany transactions. The Company's fiscal year ends on the Saturday nearest March 31. For ease of presentation, March 31 has been utilized as the fiscal year-end for all financial statement captions. Fiscal 1999 was a 53-week year ended on April 3, 1999 while fiscal 1998 and 1997 were 52-week years ended on March 28, 1998 and March 29, 1997, respectively. Certain amounts from the prior year have been reclassified to conform to the current year presentation. Cash equivalents and investments Cash and cash equivalents consist of cash on deposit with banks and investments in money market instruments with minimal interest rate risk and original maturities at date of acquisition of 90 days or less. Short-term investments consist of tax-advantaged municipal bonds and tax-advantaged auction rate preferred municipal bonds with maturities greater than 90 days but less than one year from the balance sheet date, unless funds are specifically identified for current operations. Restricted investments consist of certificates of deposit held as collateral relating to leases for the Company's facilities. See Note 6 of Notes to Consolidated Financial Statements. Long-term investments consist of U.S. Treasury notes and tax-advantaged municipal bonds with maturities greater than one year but less than 4 years from the balance sheet date, which are not required for current operations. The Company invests its cash, cash equivalents, short-term and long-term investments through various banks and investment banking institutions. This diversification of risk is consistent with the Company policy to maintain liquidity and ensure the safety of principal. Management classifies investments as available-for-sale or held-to-maturity at the time of purchase and re-evaluates such designation at each balance sheet date, although classification is generally not changed. Securities are classified as held-to-maturity when the Company has the positive intent and the ability to hold the securities until maturity. Held-to-maturity securities are carried at cost adjusted for amortization of premiums and accretion of discounts to maturity. Such amortization, as well as any interest on the securities, is included in interest income. Available-for-sale securities are carried at fair value with the unrealized gains or losses, net of tax, included as a component of accumulated other comprehensive income in stockholders' equity. Realized gains and losses and declines in value judged to be other-than-temporary on available-for-sale securities are included in other income. The fair values for marketable debt and equity securities are based on quoted market prices. The cost of securities matured or sold is based on the specific identification method. Inventories Inventories are stated at the lower of cost (first-in, first-out) or market (estimated net realizable value) and are comprised of the following at March 31, 1999 and 1998:
(In thousands) 1999 1998 ------- ------- Raw materials $ 5,139 $ 5,976 Work-in-progress 27,824 24,845 Finished goods 19,073 24,468 ------- ------- $52,036 $55,289 ======= =======
Advances for wafer purchases In fiscal 1997, the Company signed an agreement with Seiko Epson, a primary wafer supplier. This agreement was amended in fiscal 1998 providing for an advance to Seiko Epson of $150.0 million. In conjunction with the agreement, $60.0 million was paid in fiscal 1997 and an additional $90.0 million was paid in fiscal 1998. Repayment of this advance is made in the form of wafer deliveries, which began during the fourth quarter of fiscal 1998. The advance payment provision also provides for interest to be paid to the Company in the form of free wafers. Related interest income has been accrued monthly and the accrued balance is offset as free wafers are received. Through March 31, 1999, the Company has received $55.1 million in wafers against this advance, of which $1.6 million was in the form of free wafers. Specific wafer pricing is in U.S. dollars and is based upon foundries with comparable technology, products and volume, and prices quoted by specific research firms for foundry prices for similar wafers. Property, Plant and Equipment Property, plant and equipment are stated at cost. Depreciation for financial reporting purposes is computed using the straight-line method over the estimated useful lives of the assets of three to five years for machinery, equipment, furniture and fixtures and up to thirty years for buildings. Revenue Recognition The Company recognizes revenue from product sales upon shipment to OEMs and end users. Reserves for sales returns and allowances are recorded at the time of shipment. As further explained in Note 3 of Notes to Consolidated Financial Statements, commencing in fiscal 1999, revenue on shipments to all distributors is deferred until products are sold by the distributors to end users. Prior to fiscal 1999, revenue on shipments to domestic distributors was deferred until resale to end users because arrangements with these distributors included returns and price protection privileges which could not be reasonably estimated. Revenue on all shipments to international distributors was recognized upon shipment to the distributor, with appropriate provision of reserves for returns and allowances. Foreign currency translation The U.S. dollar is the functional currency for the Company's Ireland manufacturing facility. Assets and liabilities that are not denominated in the functional currency are remeasured into U.S. dollars, and the resulting gains or losses are included in "Interest income and other". The functional currency is the local currency for each of the Company's other foreign subsidiaries and the USIC joint venture. Assets and liabilities are translated at month-end exchange rates, and statements of operations are translated at the average exchange rates during the year. Exchange gains or losses arising from translation of foreign currency denominated assets and liabilities are included as a component of accumulated other comprehensive income in stockholders' equity. Derivative financial instruments As part of its ongoing asset and liability management activities, the Company periodically enters into certain derivative financial arrangements to reduce financial market risks. These instruments are used to hedge foreign currency, equity and interest rate market exposures of underlying assets and liabilities. The Company does not enter into derivative financial instruments for trading purposes. The Company uses forward currency exchange contracts to reduce financial market risks. The Company's sales to Japanese customers are denominated in yen while its purchases of processed silicon wafers from Japanese foundries are primarily denominated in U.S. dollars. Gains and losses on foreign currency forward contracts that are designated and effective as hedges of anticipated transactions, for which a firm commitment has been attained, are deferred and included in the basis of the transaction in the same period that the underlying transactions are settled. Gains and losses on any instruments not meeting the above criteria would be recognized in income in the current period. No currency forward contracts were outstanding as of March 31, 1999. In fiscal 1999, the Company's two and a half year interest rate swap agreement terminated. The interest rate swap agreement was in place in order to mitigate the interest rate risks whereby the long-term debt fixed interest rate liability was matched against the Company's short-term variable interest rate assets. The liability interest rate swap agreement involved the exchange of fixed interest rate payments for variable interest rate payments over the life of the agreement without an exchange of the notional amount. The differential to be paid or received as the variable interest rate changes was accrued and recognized as interest expense. The related amounts payable or receivable from the third party was included in other liabilities or assets. For the period of time the swap was outstanding, the fair value of the swap agreement and changes in the fair value as a result of changes in market interest rates were not material. See Note 5 of Notes to Consolidated Financial Statements. Employee stock plans The Company accounts for its stock option and employee stock purchase plans in accordance with provisions of the Accounting Principles Board's Opinion No. 25 (APB 25), "Accounting for Stock Issued to Employees." In addition the Company discloses pro forma information related to its stock plans according to Financial Accounting Standards Board's Statement No. 123, "Accounting for Stock-Based Compensation" (FASB 123). See Note 9 of Notes to Consolidated Financial Statements. Use of estimates The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent liabilities at the date of the financial statements and the reported amounts of net revenues and expenses during the reporting period. Such estimates relate to the useful lives of fixed assets and intangible assets, allowances for doubtful accounts, pricing adjustments, customer returns, inventory reserves, international distributor sell-through, potential reserves relating to litigation matters as well as other accruals or reserves. Actual results may differ from those estimates, and such differences may be material to the financial statements. New Accounting Pronouncement In June 1998, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 133, (FASB 133), "Accounting for Derivative Instruments and Hedging Activities", which requires adoption in fiscal years beginning after June 15, 2000 while earlier adoption is permitted at the beginning of any fiscal quarter. The Company is required to adopt by fiscal 2002. The effect of adopting the Standard is currently being evaluated but is not expected to have a material effect on the Company's consolidated results of operations or financial position. FASB 133 will require the Company to recognize all derivatives on the balance sheet at fair value. Derivatives that are not hedges must be adjusted to fair value through income. If the derivative is a hedge, depending on the nature of the hedge, changes in the fair value of derivatives will either be offset against the change in fair value of the hedged assets, liabilities, or firm commitments through earnings or recognized in accumulated other comprehensive income until the hedged item is recognized in earnings. The ineffective portion, if any, of a derivative's change in fair value will be immediately recognized in earnings. Concentrations of credit risk The Company attempts to mitigate the concentration of credit risk in its trade receivables with respect to the high-technology industry with the Company's credit evaluation process, relatively short collection terms, distributor agreements, sales among various end-user applications throughout the high-technology market and the geographical dispersion of sales. The Company generally does not require collateral. Bad debt write-offs have been insignificant for all years presented. Concentration of other risks The semiconductor industry is characterized by rapid technological change, intense competitive pressure and cyclical market patterns. The Company's results of operations are affected by a wide variety of factors, including general economic conditions, conditions specifically relating to technology companies and the semiconductor industry, decreases in average selling prices over the life of any particular product, the timing of new product introductions (by the Company, its competitors and others), the ability to manufacture sufficient quantities of a given product in a timely manner, the timely implementation of new manufacturing process technologies, the ability to safeguard patents and intellectual property from competitors, and the impact of new technologies resulting in rapid escalation of demand for some products in the face of equally steep decline in demand for others. Based on the factors noted herein, the Company may experience substantial period-to-period fluctuations in future operating results. NOTE 3. ACCOUNTING CHANGE - DEFERRED REVENUE RECOGNITION ON SALES TO INTERNATIONAL DISTRIBUTORS During the fourth quarter of fiscal 1999, the Company changed its accounting method for recognizing revenue on all shipments to international distributors. The change was made retroactive to the beginning of fiscal 1999. While the Company previously deferred revenue on shipments to domestic distributors until the products were sold to the end user, it recognized revenue upon shipment to international distributors, net of appropriate reserves for returns and allowances. Following the accounting change, revenue recognition on shipments to distributors worldwide is deferred until the products are sold to the end customer. The Company believes that deferral of revenue on shipments to distributors until the product is shipped by the distributor to an end customer is a more meaningful measurement of results of operations as it better conforms to the substance of the transaction considering the changing business environment in the international marketplace, is consistent with industry practice, and accordingly, it will better focus the Company on end customer sales; therefore it is a preferable method of accounting. The cumulative effect of the change in accounting method for prior years was a charge of $26.6 million, net of $12.0 million in taxes, or $0.17 net income per diluted share. NOTE 4. JOINT VENTURE The Company, United Microelectronics Corporation (UMC) and other parties entered into the United Silicon Inc. (USIC) joint venture to construct a wafer fabrication facility in Taiwan. The Company invested an additional $5.4 million in USIC during fiscal 1999 to bring the total cumulative investment to $107.2 million. However, as other parties increased their equity in USIC during the most recent investment, the Company decreased its equity ownership from 25% to 20%. The Company has the right to receive up to 31.25% of the wafer capacity from this facility. In fiscal 1999, the Company purchased wafers totaling $18.9 million from USIC. UMC has committed to and is supplying the Company with wafers manufactured in an existing facility until full capacity is available in the USIC facility. The Company is accounting for this investment using the equity method of accounting with a one-month lag in recording the Company's share of results for the entity. The USIC fiscal 1999 net loss was a result of the continued ramp up in production of the wafer fabrication facility. The fiscal 1998 net income resulted primarily from favorable foreign currency exchange gains as well as interest earned on its investment portfolio. Through the second quarter of fiscal 1998, equity income was immaterial and remained classified in "Interest income and other." Undistributed earnings of the USIC joint venture totaled $0.2 million since its inception. NOTE 5. FINANCIAL INSTRUMENTS Cash and Investments The following is a summary of available-for-sale securities:
March 31, 1999 March 31, 1998 ------------------------------------------- ---------------------------------------------- Gross Gross Estimated Gross Gross Estimated (In thousands) Amortized Unrealized Unrealized Fair Amortized Unrealized Unrealized Fair Cost Gains Losses Value Cost Gains Losses Value --------- --------- ---------- --------- ---------- ---------- ----------- --------- Money market funds $ 34,829 $ - $ - $ 34,829 $ 13,614 $ - $ - $ 13,614 Certificate of Deposit 34,358 - - 34,358 - - - - U.S. Treasury Notes 2,071 8 - 2,079 - - - - Auction rate preferred 262,007 25 (10) 262,022 30,292 12 (2) 30,302 Municipal bonds 178,425 437 (73) 178,789 296,509 189 (29) 296,669 --------- --------- ---------- --------- ---------- ---------- ----------- --------- $ 511,690 $ 470 $ (83) $ 512,077 $ 340,415 $ 201 $ (31) $ 340,585 ========== ========= ========== ========= ========== ========== =========== ========== Included in: Cash and cash equivalents $ 34,829 $ 145,259 Short-term investments 348,888 195,326 Long-term investments 94,002 - Restricted investment 34,358 - ---------- --------- $ 512,077 $ 340,585 ========== ==========
Realized gains or losses from sale of available-for-sale securities were immaterial for all periods presented. Short-term investments consist of tax-advantaged municipal bonds and tax-advantaged auction rate preferred municipal bonds with maturities greater than 90 days but less than one year from the balance sheet date, unless funds are specifically identified for current operations. Restricted investments consist of certificates of deposit held as collateral relating to leases for the Company's facilities. Long-term investments consist of U.S. Treasury notes and tax-advantaged municipal bonds with maturities greater than one year but less than 4 years from the balance sheet date, which are not required for current operations. In fiscal 1999, the Company sold its held-to-maturity, restricted investment, which had an amortized cost and fair value of $36.8 million upon sale resulting in no gain or loss. The restricted investment relates to certain collateral requirements for lease agreements associated with the Company's corporate facilities. The agreement was modified during fiscal 1999 requiring a change in the collateral requirements, which resulted in the sale of the security. Until its sale in fiscal 1999, the restricted investment was a U.S. Treasury Security, which was classified as held-to-maturity and was $36.3 million at March 31, 1998. Amortized cost approximated estimated fair value. At the end of fiscal 1999, the restricted investment is in the form of a certificate of deposit and is classified as available-for-sale with a maturity of less than one year. See Note 6 of Notes to Consolidated Financial Statements. Derivatives In fiscal 1999, the Company utilized currency forward contracts to protect against the net yen exposure created when the Company began purchasing most of its wafers from Japanese suppliers in U.S. dollars yet continued to invoice Japanese customers in yen. Realized losses of $2.3 million were offset against revenue when there was a firm commitment, otherwise they were included in "Interest income and other". At March 31, 1999 and 1998, no commitments under foreign currency forward or option contracts were outstanding. In fiscal 1997, the Company entered into an interest rate swap agreement with a third party in order to reduce risk related to movements in interest rates. Under the agreement, the Company effectively converted the fixed rate interest payments related to $125.0 million of the Company's convertible long-term debt to variable rate interest payments without the exchange of the underlying principal amounts. The Company received fixed interest rate payments (equal to 5.935%) from the third party and was obligated to make variable rate payments (equal to the three month Libor rate) to the third party during the term of the agreement. In fiscal 1999, the interest rate swap agreement terminated, and the gain was immaterial. For the period of time the swap was outstanding, the fair value of the swap agreement and changes in the fair value as a result of changes in market interest rates were not material. In fiscal 1997, the Company entered into foreign exchange forward contracts to minimize the impact of future exchange fluctuations on the U.S. dollar cost of investing in the USIC joint venture. The contracts required the Company to exchange U.S. dollars for New Taiwan dollars and matured within one year. The contracts were accounted for as a hedge of an identifiable foreign currency commitment. Realized losses, which were immaterial, were recognized upon maturity of the contracts in fiscal 1998 and included in the USIC joint venture investment. Long-Term Debt and Lines of Credit In February 1999, the Company converted in full $250.0 million of 5 1/4% Convertible Subordinated Notes due 2002 (Notes) into a total of 9.8 million shares of common stock at a price of $25.50 per share. Interest expense accrued but not paid prior to conversion of $3.6 million were added to additional paid-in-capital. Debt issuance costs of $0.7 million were recorded during the year. The unamortized debt issuance costs as of the redemption date of approximately $3.3 million were recorded as a reduction to additional paid-in-capital. The Company has $40 million available under a syndicated bank revolving credit line agreement, which expires in March 2001. Under this agreement, borrowings bear interest at the prime rate or 0.625% over the Libor rate. Additionally, the Company's Ireland manufacturing facility has an additional $6.2 million available under a multicurrency credit line, which expires in November 1999. Under this agreement, borrowings bear interest at the bank's prime rate. At March 31, 1999, no borrowings were outstanding under any credit lines. The Company is in full compliance with the agreement's required covenants and financial ratios. The agreements prohibit the payment of cash dividends without prior bank approval. NOTE 6. COMMITMENTS The Company leases most of its manufacturing and office facilities under operating leases that expire at various dates through December 2014. Lease agreements for certain corporate facilities contain payment provisions, which allow for changes in rental amounts based upon interest rate changes. The approximate future minimum lease payments under operating leases are as follows: Years ended March 31, (In thousands) -------------- 2000 $ 3,723 2001 1,681 2002 1,508 2003 1,235 2004 958 Thereafter 765 ----------- $ 9,870 =========== Rent expense was approximately $4.5 million for each of the years ended March 31, 1999, 1998 and 1997. The Company has entered into lease agreements relating to certain corporate facilities which would allow the Company to purchase the facilities on or before the end of the lease term in December 1999. If at the end of the lease term the Company does not purchase the property under lease or arrange a third party purchase, then the Company would be obligated to the lessor for a guarantee payment equal to a specified percentage of the Company's purchase price for the property. The Company would also be obligated to the lessor for all or some portion of this amount if the price paid by the third party is below a specified percentage of the Company's purchase price. The Company is also required to comply with certain covenants and maintain certain financial ratios. As of March 31, 1999, the total amount related to the leased facilities for which the Company is contingently liable is $39.8 million. Under the terms of the agreements, the Company is required to maintain collateral (restricted investments) of approximately $34.4 million during the remainder of the lease term. During fiscal 1998, the Company entered into an agreement for a facility to be built on property adjacent to the Company's corporate facilities. Building construction will be completed in fiscal 2000. Upon signing the lease agreement, the Company paid the lessor $31.3 million for prepaid rent and an option to purchase the facility. The rent prepayment covers one year and was discounted to its present value. Additionally, the Company can exercise the lease agreement's purchase option between the sixth and twelfth month following the commencement date of the lease term. If the Company elects to exercise the option, the prepaid purchase option will be considered payment in full. However, if the Company decides not to exercise the purchase option, the prepaid option will be returned without interest at the end of the first year of the lease. NOTE 7. NET INCOME PER SHARE Basic net income per share is computed by dividing net income available to common stockholders by the weighted average number of common shares outstanding during the period. In computing diluted net income per share, the average stock price for the period is used in determining the number of shares assumed to be purchased from the exercise of stock options. Diluted earnings per share is computed using the weighted average common and dilutive common equivalent shares outstanding, plus other dilutive shares which are not common equivalent shares. The computation of basic net income per share for all years presented is derived from the information on the face of the income statement, and there are no reconciling items in either the numerator or denominator. Additionally, there are no reconciling items in the numerator used to compute diluted net income per share. The total shares used in the denominator of the diluted net income per share calculation includes 7.9 million, 12.5 million and 13.7 million incremental common shares attributable to outstanding options for fiscal years 1999, 1998 and 1997, respectively. Before the shares were converted from long-term debt to equity, approximately 9.8 million shares, they were not included in the calculation of diluted net income per share as their inclusion would have had an anti-dilutive effect for all periods presented. In addition, outstanding options to purchase approximately 4.8 million, 3.7 million and 2.0 million shares, for the fiscal years 1999, 1998 and 1997, respectively, under the Company's Stock Option Plan were not included in the treasury stock calculation to derive diluted income per share as their inclusion would have had an anti-dilutive effect. NOTE 8. COMPREHENSIVE INCOME The Company adopted the Statement of Financial Accounting Standards No. 130 (FASB 130), "Reporting Comprehensive Income" in the first quarter of fiscal 1999. FASB 130 established standards for the reporting and disclosure of comprehensive income and its components; however, the disclosure has no impact on the Company's consolidated results of operations, financial position or cash flows. Comprehensive income is defined as the change in equity of a company during a period resulting from certain transactions and other events and circumstances, excluding transactions resulting from investments by owners and distributions to owners. The difference between net income and comprehensive income for Xilinx is from foreign currency translation adjustments and unrealized gains or losses on the Company's available-for-sale securities. The components of accumulated other comprehensive income net of related tax effects for the fiscal years 1999, 1998 and 1997 are as follows:
March 31, (in thousands) 1999 1998 1997 --------- --------- ------ Cumulative translation adjustment $(17,655) $(17,221) $(617) Unrealized gain on available for sale securities 232 102 83 --------- --------- ------ Accumulated other comprehensive income $(17,423) $(17,119) $(534) ========= ========= ======
Cumulative translation adjustments are not tax affected. NOTE 9. STOCKHOLDERS' EQUITY The Company's Certificate of Incorporation provides for 300 million shares of common stock and 2 million shares of undesignated preferred stock. Treasury Stock The Company authorized a stock buyback program in December 1997 whereby up to 4 million shares of the Company's common stock could be purchased in the open market from time to time as market and business conditions warranted. This program was completed in November 1998. In April and September 1998, additional stock repurchase programs were authorized to each buyback up to 6 million shares of its common stock. The Company has reissued treasury shares repurchased in response to Employee Stock Option exercises and Employee Qualified Stock Purchase Plan requirements as well as in conjunction with its redemption of convertible debt. During fiscal 1999 and 1998, the Company repurchased a total of 5,616,000 and 4,660,000 shares of common stock for $113.8 million and $93.8 million, respectively. In fiscal 1999 and 1998, 8,378,000 and 1,842,000 shares were reissued, respectively. As a result, the Company was holding approximately 138,000 treasury stock shares at March 31, 1999. Stock split On January 18, 1999, the Company's Board of Directors approved a 2 for 1 split of the Company's Common Stock, which was effected in the form of a 100% stock dividend. On March 11, 1999 shareholders of record as of February 18, 1999 received one additional share of Common Stock for every share currently held. Shares, per share amounts, common stock, and additional paid-in capital have been restated to reflect the stock split for all periods presented. Stockholder Rights Plan In October 1991, the Company adopted a stockholder rights plan and declared a dividend distribution of one preferred stock purchase right for each outstanding share of common stock. The rights become exercisable based upon the occurrence of certain conditions including acquisitions of Company stock, tender or exchange offers and certain business combination transactions of the Company. In the event one of the conditions is triggered, each right entitles the registered holder to purchase a number of shares of preferred stock of the Company or, under limited circumstances, of the acquirer. The rights are redeemable at the Company's option, under certain conditions, for $.01 per right and expire on October 4, 2001. Employee Stock Option Plans Under existing stock option plans (Option Plans), options reserved for future issuance to employees and directors of the Company total 34,391,000 shares. Options to purchase shares of the Company's common stock under the Option Plans are granted at 100% of the fair market value of the stock on the date of grant. Options granted to date expire ten years from date of grant and vest at varying rates over four or five years. A summary of the Company's Option Plans activity, and related information, follows:
Years ended March 31, 1999 1998 1997 ----------------- ------------------ ------------------ Weighted Weighted Weighted Average Average Average Shares Exercise Shares Exercise Shares Exercise (000) Price (000) Price (000) Price ------- --------- ------- --------- ------- --------- Outstanding at beginning of year 29,049 $ 13.35 27,416 $ 10.27 27,776 $ 8.39 Granted 9,280 30.08 5,958 23.91 5,193 16.76 Exercised (5,422) 7.96 (3,080) 5.36 (3,503) 5.29 Forfeited (1,328) 18.07 (1,245) 15.88 (2,050) 9.74 ------- --------- ------- --------- ------- --------- Outstanding at end of year 31,579 $ 18.99 29,049 $ 13.35 27,416 $ 10.27 ------- --------- ------- --------- ------- --------- Shares available for grant 2,812 7,770 5,984 ------- ------- -------
The following information relates to options outstanding and exercisable under the Option Plan at March 31, 1999:
Options Outstanding Options Exercisable ---------------------------------------- ------------------------ Weighted Average Weighted Weighted Options Remaining Average Options Average Range of Outstanding Contractual Exercise Exercisable Exercise Exercise Prices (000) Life (Years) Price (000) Price --------------- -------------- -------------- --------- ------------ --------- $ 0.38 - $10.85 8,545 4.62 $ 6.75 7,788 $ 6.56 $11.44 - $18.59 8,150 7.13 15.68 4,157 15.12 $18.81 - $23.94 8,850 8.35 21.20 3,200 21.51 $24.00 - $43.63 6,034 9.42 37.58 824 26.74 ---------------- ------------ ------------- ---------- ------------ --------- $0.38 - $43.63 31,579 7.23 $ 18.99 15,969 $ 12.83
At March 31, 1998, 14.2 million options were exercisable. Employee Qualified Stock Purchase Plan Under the Company's 1990 Employee Qualified Stock Purchase Plan (Stock Purchase Plan), qualified employees can elect to have up to 15 percent of their annual earnings withheld, up to a maximum of $21,250, to purchase the Company's common stock at the end of six-month enrollment periods. The purchase price of the stock is 85% of the lower of the fair market value at the beginning of the twenty-four month offering period or at the end of each six-month purchase period. Almost all employees are eligible to participate. Under this plan, 807,000 and 722,000 shares were issued during 1999 and 1998, respectively, and 4,823,000 shares were available for issuance at March 31, 1999. Stock-Based Compensation As permitted under FASB Statement No. 123, "Accounting for Stock-Based Compensation" (FASB 123), the Company has elected to continue to follow Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees" (APB 25) and related Interpretations in accounting for its stock-based awards to employees. Under APB 25, the Company generally recognizes no compensation expense with respect to such awards. Pro forma information regarding net income and earnings per share is required by FASB 123 and has been determined as if the Company had accounted for awards to employees under the fair value method of FASB 123. The fair value of stock options and stock purchase plan rights under the Option Plan and Stock Purchase Plan was estimated as of the grant date using the Black-Scholes option pricing model. The Black-Scholes model was originally developed for use in estimating the fair value of traded options and requires the input of highly subjective assumptions including expected stock price volatility. The Company's stock options and stock purchase plan rights have characteristics significantly different from those of traded options, and changes in the subjective input assumptions can materially affect the fair value estimate. The fair value of stock options and stock purchase plan rights granted in fiscal years 1999, 1998, and 1997 were estimated at the date of grant assuming no expected dividends and the following weighted average assumptions.
Stock Options Stock Purchase Plan Rights Years ended March 31, 1999 1998 1997 1999 1998 1997 -------------------------------- ------ ----- ----- ----- ----- ----- Expected Life (years) 3 3 4 .5 .5 .5 Expected Stock Price Volatility .65 .62 .56 .64 .65 .56 Risk-Free Interest Rate 5.0% 6.0% 6.3% 5.0% 5.5% 5.4%
For purposes of pro forma disclosures, the estimated fair value of stock-based awards is amortized against pro forma net income over the stock-based awards' vesting period. Because FASB 123 is applicable only to the Company's awards granted subsequent to March 31, 1995, its pro forma effect will not be fully reflected until approximately fiscal 2000. Had the Company accounted for stock-based awards to employees under FASB 123, the Company's net income would have been $65.2 million, $95.6 million and $87.4 million in 1999, 1998 and 1997, respectively. Basic net income per share would have been $0.45, $0.65 and $0.60 in 1999, 1998 and 1997, respectively, while diluted net income per share would have been $0.42, $0.63 and $0.56, respectively. Calculated under FASB 123, the weighted-average fair value of the stock options granted during 1999, 1998 and 1997 was $13.80, $10.69 and $7.96 per share, respectively. The weighted-average fair value of stock purchase rights granted under the Stock Purchase Plan during 1999, 1998 and 1997 were $9.96, $7.25 and $7.24 per share, respectively. NOTE 10. INCOME TAXES
Years ended March 31, (In thousands) 1999 1998 1997 -------- -------- -------- Federal: Current $45,482 $45,808 $40,901 Deferred (3,558) (3,880) (200) -------- -------- -------- 41,924 41,928 40,701 -------- -------- -------- State: Current 9,187 9,285 12,073 Deferred (3,049) (311) (1,483) -------- -------- -------- 6,138 8,974 10,590 -------- -------- -------- Foreign: Current 6,863 5,826 4,091 -------- -------- -------- Total $54,925 $56,728 $55,382 ======== ======== ========
The tax benefits associated with the disqualifying dispositions of stock options or employee stock purchase plan shares reduce taxes currently payable by $34.9 million, $16.1 million, and $16.7 million for 1999, 1998, and 1997, respectively. Such benefits are credited to additional paid-in capital when realized. Pretax income from foreign operations was $61.2 million, $55.5 million, and $36.1 million for fiscal years 1999, 1998, and 1997, respectively. Unremitted foreign earnings that are considered to be permanently invested outside the United States and on which no deferred taxes have been provided, accumulated to approximately $50.8 million as of March 31, 1999. The residual U.S. tax liability, if such amounts were remitted, would be approximately $12.7 million. The provision for income taxes reconciles to the amount obtained by applying the Federal statutory income tax rate to income before provision for taxes as follows:
Years ended March 31, (In thousands) 1999 1998 1997 --------- --------- --------- Income before provision for taxes $189,399 $180,596 $165,758 Federal statutory tax rate 35% 35% 35% Computed expected tax $ 66,290 $ 63,209 $ 58,016 State taxes net of federal benefit 3,990 5,833 6,884 Tax exempt interest (3,822) (4,003) (3,278) Foreign earnings at lower tax rates (4,415) (4,586) (2,478) Research and development tax credit (3,999) (3,007) (2,522) Other (3,119) (718) (1,240) --------- --------- --------- Provision for taxes on income $ 54,925 $ 56,728 $ 55,382 ========= ========= =========
The major components of deferred tax assets and liabilities consist of the following:
Years ended March 31, (In thousands) 1999 1998 --------- --------- Deferred tax assets: Inventory valuation differences $ 10,347 $ 7,846 Deferred income on shipments to distributors 49,449 23,431 Nondeductible accrued expenses 5,666 6,904 Other (30) 326 --------- --------- Total 65,432 38,507 --------- --------- Deferred tax liabilities: Depreciation and amortization 3,908 763 Unremitted foreign earnings (26,576) (16,032) Other (1,065) (137) --------- --------- Total net deferred tax assets $ 41,699 $ 23,101 ========= =========
NOTE 11. SEGMENT INFORMATION The Company adopted the Financial Accounting Standards Board's Statement No. 131 (FASB 131), "Disclosures about Segments of an Enterprise and Related Information". The new standard revises the way operating segments are reported. The Company operates and tracks its results in one operating segment. The Company designs, develops and markets programmable logic semiconductor devices and the related software design tools. Enterprise wide information is provided in accordance with FASB 131. Geographic revenue information for the fiscal years 1999, 1998 and 1997 is based on the shipment location. Long-lived assets include property, plant and equipment as well as intangible assets including, developed technology, assembled workforce and goodwill. Property, plant and equipment information is based on the physical location of the asset at the end of each fiscal year while the intangibles are based on the location of the owning entity. Net Revenues from unaffiliated customers by geographic region were as follows:
Years ended March 31, (In thousands) 1999 1998 1997 -------- -------- -------- United States $447,147 $381,357 $361,040 Europe 139,815 137,131 122,506 Japan 47,522 62,668 58,975 Southeast Asia/Rest of World 27,499 32,437 25,622 -------- -------- -------- $661,983 $613,593 $568,143 ======== ======== ========
Net long-lived assets by country was as follows:
Years ended March 31, (In thousands) 1999 1998 -------- -------- United States $ 77,856 $ 74,896 Ireland 27,888 28,141 Other 10,360 3,451 -------- -------- $116,104 $106,488 ======== ========
No end customer accounted for more than 10% of revenues in 1999,1998 or 1997. Approximately 20%, 14% and 15% of net revenues were made through the Company's largest domestic distributor in 1999, 1998 and 1997, respectively. A second domestic distributor accounted for approximately 17% and 11% of net revenues in fiscal 1999 and 1998, respectively. NOTE 12. LITIGATION On June 7, 1993, the Company filed suit against Altera Corporation (Altera) in the United States District Court for the Northern District of California for infringement of certain of the Company's patents. Subsequently, Altera filed suit against the Company, alleging that certain of the Company's products infringe certain Altera patents. Fact and expert discovery have been completed in both cases, which have been consolidated. On April 20, 1995, Altera filed an additional suit against the Company in the Federal District Court in Delaware, alleging that the Company's XC5200 family infringes an Altera patent. The Company answered the Delaware suit denying that the XC5200 family infringes the patent in suit, asserting certain affirmative defenses and counterclaiming that the Altera Max 9000 family infringes certain of the Company's patents. The Delaware suit was transferred to the United States District Court for the Northern District of California and is also before the same judge. Both Altera and the Company have filed motions with the Court for summary judgement with respect to certain of the issues pending in the litigation. Those motions are still pending. On July 22, 1998, Altera and Joseph Ward, a former Xilinx employee, filed suit against the Company in Superior Court in Santa Clara County, California, arising out of the Company's efforts to prevent disclosure of certain Company confidential information. Altera's suit requests declaratory relief and claims the Company engages in unfair business practices and interference with contractual relations. On September 10, 1998 the Company filed cross claims against Altera and Ward for unfair competition and breach of contract, among other claims, in the California action. On October 20, 1998, Altera and Ward filed crossclaims against the Company for malicious prosecution of civil action and defamation. The ultimate outcome of these matters cannot be determined at this time. Management believes that it has meritorious defenses to such claims and is defending them vigorously. The foregoing is a forward-looking statement subject to risks and uncertainties, and the future outcome of these matters could differ materially due to the uncertain nature of each legal proceeding and because the lawsuits are still in the pre-discovery or pre-trial stages. On July 31, 1998, the Lemelson Foundation Partnership (Lemelson) filed a lawsuit in the United States District Court in Phoenix, Arizona against the Company and twenty-five (25) other United States semiconductor companies for infringement of certain of its patents. During the third quarter of fiscal 1999, the Company entered into a license settlement with Lemelson. In response, Lemelson dismissed with prejudice all claims against the Company. In addition, in the normal course of business, the Company receives and makes inquiries with regard to possible patent infringement. Where deemed advisable, the Company may seek or extend licenses or negotiate settlements. Outcomes of such negotiations may not be determinable at any point in time; however, management does not believe that such licenses or settlements will, individually or in the aggregate, have a material adverse effect on the Company's financial position or results of operations. NOTE 13. WRITE-OFF OF IN-PROCESS TECHNOLOGY AND DISCONTINUED PRODUCT FAMILY In January 1999, the Company acquired certain assets of MI Acquisition LLP, for a total purchase price of $6.8 million. The purchase price allocation based on an independent appraisal resulted in a $3.6 million charge to research and development in the fourth quarter of fiscal 1999 for acquired in-process technology. The acquired in-process technology represents the appraised value of technology in the development stage that had not yet reached technological feasibility and does not have alternative future uses. During fiscal 1997, the Company discontinued the XC8100 family of one-time programmable antifuse devices. As a result, the Company recorded a pretax charge against earnings of $5.0 million. This charge primarily related to the write-off of inventory and for termination charges related to purchase commitments to foundry partners for work-in-process wafers which had not completed the manufacturing process. REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS The Board of Directors and Stockholders Xilinx, Inc. We have audited the accompanying consolidated balance sheets of Xilinx, Inc. as of March 31, 1999 and 1998, and the related consolidated statements of income, stockholders' equity and cash flows for each of the three years in the period ended March 31, 1999. Our audits also included the financial statement schedule listed in the Index at Item 14(a). These financial statements and schedule are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements and schedule based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of Xilinx, Inc. at March 31, 1999 and 1998, and the consolidated results of its operations and its cash flows for each of the three years in the period ended March 31, 1999, in conformity with generally accepted accounting principles. Also, in our opinion, the related financial statement schedule, when considered in relation to the basic financial statements taken as a whole, presents fairly in all material respects the information set forth therein. As discussed in Notes 2 and 3 to the consolidated financial statements, in the fiscal year ended March 31, 1999, the Company changed its method of recognizing revenue on certain shipments to its distributors. /s/ Ernst & Young LLP San Jose, California April 21, 1999
XILINX, INC. SCHEDULE II VALUATION AND QUALIFYING ACCOUNTS (in thousands) Beginning Charged to Deductions Balance at Description of Year Income (a) End of Year For the year ended March 31, 1997: Allowances for doubtful accounts, pricing Adjustments and customer returns $ 5,199 $ 7,991 $ 7,456 $ 5,734 For the year ended March 31, 1998: Allowance for doubtful accounts, pricing adjustments and customer returns $ 5,734 $ 5,637 $ 2,963 $ 8,408 For the year ended March 31, 1999: Allowance for doubtful accounts, pricing adjustments and customer returns $ 8,408 $ 2,129 $ 3,128 $ 7,409 (a) Represents amounts written off against the allowance, customer returns or pricing adjustments to international distributors.
SUPPLEMENTARY FINANCIAL DATA QUARTERLY DATA (UNAUDITED)
Year Ended March 31, 1999 (In thousands, except per share amounts) First Second Third Fourth Quarter Quarter Quarter Quarter --------- -------- -------- -------- NET REVENUES As previously reported $151,603 $156,443 $167,357 $184,310 Effect of change in accounting principle (2,078) 72 4,276 - --------- -------- -------- -------- As restated in first three quarters and Reported in fourth quarter 149,525 156,515 171,633 184,310 --------- -------- -------- -------- Gross margin As previously reported 94,780 97,629 101,395 115,216 Effect of change in accounting principle (1,475) 50 3,122 - As restated in first three quarters and reported in fourth quarter 93,305 97,679 104,517 115,216 --------- -------- -------- -------- NET INCOME As previously reported 27,029 27,831 33,919 39,254 Effect of change in accounting principle (27,664) 35 2,188 - --------- -------- -------- -------- As restated in first three quarters and reported in fourth quarter $ (635) $ 27,866 $ 36,107 $ 39,254 ========= ======== ======== ======== NET INCOME PER BASIC SHARE: Earnings per share before cumulative effect of change in accounting principle As previously reported $ 0.19 $ 0.19 $ 0.24 $ 0.26 Effect of change in accounting principle (0.01) - 0.01 - --------- -------- -------- -------- As restated in first three quarters and reported in fourth quarter 0.18 0.19 0.25 0.26 Cumulative effect of change in accounting Principle (0.18) - - - Earnings after cumulative effect of change in accounting principle - 0.19 0.25 0.26 --------- -------- -------- -------- NET INCOME PER DILUTED SHARE: Earnings per share before cumulative effect of change in accounting principle As previously reported 0.18 0.19 0.22 0.24 Effect of change in accounting principle (0.01) - 0.02 - --------- -------- -------- -------- As restated in first three quarters and reported in fourth quarter 0.17 0.19 0.24 0.24 Cumulative effect of change in accounting Principle (0.17) - - - --------- -------- -------- -------- Earnings after cumulative effect of change in accounting principle $ - $ 0.19 $ 0.24 $ 0.24 --------- -------- -------- -------- Shares used in per share calculations: Basic 145,686 143,823 143,820 152,357 Diluted 153,676 149,761 151,163 162,641 --------- -------- -------- --------
QUARTERLY DATA (UNAUDITED)
Year ended March 31, 1998 (In thousands, except per share amounts) First Second Third Fourth Quarter Quarter Quarter Quarter -------- -------- -------- -------- Net revenues $160,761 $150,272 $148,735 $153,825 Gross margin 99,855 94,224 93,067 95,757 Net income 33,444 30,950 31,600 30,593 Net income per share: Basic $ 0.23 $ 0.21 $ 0.21 $ 0.21 Diluted $ 0.21 $ 0.19 $ 0.20 $ 0.20 Pro forma amounts with the change in accounting principle related to revenue recognition applied retroactively Net revenues $158,962 $144,278 $147,749 $147,076 Net income 32,558 27,972 31,124 27,333 Net income per share: Basic $ 0.22 $ 0.19 $ 0.21 $ 0.19 Diluted $ 0.20 $ 0.17 $ 0.20 $ 0.18 Shares used in per share calculations: Basic 146,990 147,842 148,392 146,700 Diluted 162,652 162,832 158,496 156,106 -------- -------- -------- --------
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE None. PART III -------- Certain information required by Part III is omitted from this Report in that the Registrant will file a definitive proxy statement pursuant to Regulation 14A (the Proxy Statement) not later than 120 days after the end of the fiscal year covered by this Report, and certain information included therein is incorporated herein by reference. Only those sections of the Proxy Statement which specifically address the items set forth herein are incorporated by reference. Such incorporation does not include the Compensation Committee Report or the Performance Graph included in the Proxy Statement. ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT The information concerning the Company's directors required by this Item is incorporated by reference to the Company's Proxy Statement. The information concerning the Company's executive officers required by this Item is incorporated by reference to the section in Item 1 hereof entitled "Executive Officers of the Registrant". ITEM 11. EXECUTIVE COMPENSATION The information required by this Item is incorporated by reference to the Company's Proxy Statement. ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT The information required by this Item is incorporated by reference to the Company's Proxy Statement. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS The information required by this Item is incorporated by reference to the Company's Proxy Statement. PART IV ------- ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K (a) (1) The Financial Statements required by Item 14 (a) are filed as Item 8 of this annual report. (2) The Financial Statement Schedule reqquired by Item 14 (a) is file as Item 8 of this annual report. Schedules not filed have been omitted because they are not applicable, are not required or the information required to be set forth therein is included in the financial statements or notes thereto. (3) The exhibits listed below in (c) are filed or incorporated by reference as part of this annual report. (b) Reports on Form 8-K. No reports on Form 8-K were filed during the ---------------------- fourth quarter of fiscal 1999. (c) Exhibits. -------- Exhibit Number Description - --------------- ----------- 3.1 (1) Restated Certificate of Incorporation of the Company, as amended to date. 3.2 (2) Bylaws of the Company, as amended to date. 4.1 (3) Preferred Shares Rights Agreement dated as of October 4, 1991 between the Company and The First National Bank of Boston, as Rights Agent. 10.1 (4) Lease dated March 27, 1995 for adjacent facilities at 2055 Logic Drive and 2065 Logic Drive, San Jose, California. 10.2 (4) First Amendment to Master Lease dated April 27, 1995 for the Company's facilities at 2100 Logic Drive and 2101 Logic Drive, San Jose, California. 10.3 (5) Lease dated October 8, 1997 for an additional facility on Logic Drive, San Jose, California. 10.4.1 (6) Agreement of Purchase and Sale of Land in Longmont Colorado, dated November 24, 1997. 10.4.2 (6) First Amendment to Agreement of Purchase and Sale of Land in Longmont Colorado, dated January 15, 1998. 10.5 (2) 1988 Stock Option Plan, as amended. 10.6 (7) 1990 Employee Qualified Stock Purchase Plan, as amended. 10.7 (7) 1997 Stock Option Plan. 10.8 (2) Form of Indemnification Agreement between the Company and its officers and directors. 10.9 (8) Letter Agreement dated as of January 22, 1996 of the Company to Willem P. Roelandts. 10.10.1 (8) Consulting Agreement dated as of June 1, 1996 between the Company and Bernard V. Vonderschmitt. 10.10.2 (6) Amended Services and Compensation Exhibit to the Consulting Agreement dated as of June 1, 1996 between the Company and Bernard Vonderschmitt. 10.10.3 (6) Second Amendment to the Consulting Agreement dated as of June 1, 1996 between the Company and Bernard Vonderschmitt. 10.11 (9) Letter Agreement dated as of April 1, 1997 of the Company to Richard W. Sevcik. 10.12.1 (10) (11) Foundry Venture Agreement dated as of September 14, 1995 between the Company and United Microelectronics Corporation (UMC). 10.12.2 (10) (11) Fabven Foundry Capacity Agreement dated as of September 14, 1995 between the Company and UMC. 10.12.3 (10) (11) Written Assurances Re Foundry Venture Agreement dated as of September 29, 1995 between UMC and the Company. 10.13.1 (8) (10) Advance Payment Agreement entered into on May 17, 1996 between Seiko Epson Corporation and the Company. 10.13.2 (6) (10) Amended and Restated Advance Payment Agreement with Seiko Epson dated December 12, 1997. 10.14 (8) Indenture dated November 1, 1995 between the Company and State Street Bank and Trust Company. 18.1 Letter from Ernst & Young, LLP re: Change in Accounting Principle. 21.1 Subsidiaries of the Company. 23 Consent of Ernst & Young LLP, Independent Auditors. 24.1 Power of Attorney. 27.1 Financial Data Schedule for fiscal year ended March 31, 1999.
(1) Filed as an exhibit to the Company's Annual Report on Form 10-K for the fiscal year ended March 30, 1991. (2) Filed as an exhibit to the Company's Registration Statement on Form S-1 (File No. 33-34568) which was declared effective June 11, 1990. (3) Filed as an exhibit to the Company's Registration Statement on Form S-1 (File No. 33-43793) effective November 26, 1991. (4) Filed as an exhibit to the Company's Quarterly Report on Form 10-Q for the quarter ended April 1, 1995. (5) Filed as an exhibit to the Company's Quarterly Report on Form 10-Q for the quarter ended September 27, 1997. (6) Filed as an exhibit to the Company's Quarterly Report on Form 10-Q for the quarter ended December 27, 1997. (7) Filed as an exhibit to the Company's Registration Statement on Form S-8 (File No. 333-62897) effective September 4, 1998. (8) Filed as an exhibit to the Company's Annual Report on Form 10-K for the fiscal year ended March 30, 1996. (9) Filed as an exhibit to the Company's Annual Report on Form 10-K for the fiscal year ended March 29, 1997. (10) Confidential treatment requested as to certain portions of these documents. (11) Filed as an exhibit to the Company's Quarterly Report on Form 10-Q for the quarter ended September 30, 1995.
SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant, has duly caused this Annual Report to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of San Jose, State of California, on the 16th day of June, 1999. XILINX, INC. By: /s/ Willem P. Roelandts -------------------------------- Willem P. Roelandts, Chief Executive Officer and President EX-18.1 2 EXHIBIT 18.1 April 21, 1999 Kris Chellam Senior Vice President Finance and Chief Financial Officer Xilinx, Inc. 2100 Logic Drive San Jose, CA 95124 Dear Mr. Chellam: Notes 2 and 3 of the Notes to Consolidated Financial Statements of Xilinx, Inc. included in its Form 10-K for the year ended March 31, 1999 describe a change in the method of recognizing revenue on shipments to international distributors. Previously, the Company recognized revenue from these transactions upon shipment of product to the distributor, but provided specific reserves for possible returns and allowances. Following the accounting change, revenue on shipments of products is deferred for these transactions until the products are sold to end users. You have advised us that you believe that the change is to a preferable method in your circumstances because it better conforms with the substance of the event being recognized considering the changing business environment in the international marketplace, is consistent with industry practice and provides greater consistency among all transactions of the Company. There are no authoritative criteria for determining a 'preferable' method of revenue recognition for these transactions based on the particular circumstances, however, we conclude that the change in the method of accounting for recognizing revenue on shipments to international distributors is to an acceptable alternative method which, based on your business judgment to make this change for the reasons cited above, is preferable in your circumstances. Very truly yours, /s/ Ernst & Young LLP EX-21.1 3 EXHIBIT 21.1 XILINX, INC. SUBSIDIARIES OF REGISTRANT PLACE OF INCORPORATION NAME OR ORGANIZATION ------------------------------ ---------------------- Xilinx, Ltd. United Kingdom Xilinx, KK Japan Xilinx Development Corporation California, U.S.A. Xilinx International Inc. Colorado, U.S.A. Xilinx, SARL France Xilinx, GmbH Germany Xilinx AB Sweden Xilinx, Benelux Belgium Xilinx Holding One, Ltd. Ireland Xilinx Holding Two, Ltd. Ireland Xilinx Holding Three, Ltd. Cayman Islands Xilinx, Ireland ULC Ireland EX-23 4 EXHIBIT 23 CONSENT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS We consent to the incorporation by reference in the Registration Statements (Form S-8 Nos. 33-80075, 33-83036, 33-52184, 33-67808, 333-12339, 333-44233 and 333-62897) pertaining to the 1988 Stock Option Plan, 1997 Stock Plan and the 1990 Employee Qualified Stock Purchase Plan of Xilinx, Inc. of our report dated April 21, 1999, with respect to the consolidated financial statements and schedule of Xilinx, Inc. included in the Annual Report (Form 10-K) for the year ended March 31, 1999. /s/ Ernst & Young LLP San Jose, California June 15, 1999 EX-24.1 5 EXHIBIT 24.1 POWER OF ATTORNEY KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints Willem P. Roelandts and Kris Chellam, jointly and severally, his attorneys-in-fact, each with the power of substitution, for him in any and all capacities, to sign any amendments to this Report on Form 10-K, and to file the same, with exhibits thereto and other documents in connection therewith, with the Securities and Exchange Commission, hereby ratifying and confirming all that each of said attorneys-in-fact, or his substitute or substitutes, may do or cause to be done by virtue hereof. Pursuant to the requirements of the Securities Exchange Act of 1934 this Report on Form 10-K has been signed below by the following persons on behalf of the Registrant in the capacities and on the dates indicated.
Signature Title Date -------------------------- ------------------------------------------------------------------- ------------- Bernard V. Vonderschmitt Chairman of the Board June 16, 1999 -------------------------- (Bernard V. Vonderschmitt) Willem P. Roelandts President and Chief Executive Officer (Principal Executive Officer) June 16, 1999 -------------------------- (Willem P. Roelandts) Kris Chellam Senior Vice President, Finance and Chief June 16, 1999 -------------------------- Financial Officer (Principal Accounting and (Kris Chellam) Financial Officer) John L. Doyle Director June 16, 1999 -------------------------- (John L. Doyle) Philip T. Gianos Director June 16, 1999 -------------------------- (Philip T. Gianos) William G. Howard, Jr. Director June 16, 1999 -------------------------- (William G. Howard, Jr.) Frank Sanda Director June 16, 1999 -------------------------- (Frank Sanda)
EX-27 6
5 This schedule contains summary information extracted from Xilinx, Inc.'s CONSOLIDATED STATEMENTS OF INCOME AND CONSOIDATED BALANCE SHEETS and is qualified in its entirety by reference to such financial statements. 1000 12-MOS APR-03-1999 MAR-29-1998 APR-03-1999 53,584 348,888 80,818 7,409 52,036 657,709 187,482 85,777 1,070,248 167,197 0 0 0 1,562 877,756 1,070,248 661,983 661,983 251,266 251,266 228,743 0 11,916 189,399 54,925 129,238 0 0 (26,646) 102,592 0.70 0.67 Represents basic earnings per share.
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