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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 March 30, 1996 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 77-0188631
(State or other jurisdiction (I.R.S. Employer Identification No.)
of incorporation or organization)
2100 LOGIC DRIVE, SAN JOSE, CA 95124
(Address of principal executive offices) (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
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 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. [ ]
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 4,
1996 as reported on the Nasdaq National Market was approximately
$2,089,824,088. 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 4, 1996, registrant had 72,196,484 shares of Common Stock outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
Parts of the Proxy Statement for Registrant's 1996 Annual Meeting of
Stockholders are incorporated by reference in this Form 10-K Report (Part
III).
PART I
ITEM 1. BUSINESS
GENERAL
Xilinx, Inc. ("Xilinx" or "the Company") designs, develops and markets
complementary metal-oxide-silicon ("CMOS") programmable logic devices and
related development system software. The Company's programmable logic product
lines include field programmable gate arrays ("FPGAs") and complex
programmable logic devices ("CPLDs"). These components are standard
integrated circuits ("ICs") programmed by Xilinx's customers to perform
desired logic operations. Xilinx introduced the first FPGA device in 1985,
holds patents on certain FPGA architectures and technology and continues to be
the leading supplier to this market. Xilinx also markets hardwire devices,
which are mask-programmed ICs that are functionally equivalent to a programmed
FPGA.
Competitive pressures require manufacturers of electronic systems to bring
increasingly complex products to market rapidly. Requirements for improved
functionality, performance, reliability and lower cost are often addressed
through the use of components that integrate ever larger numbers of
transistors onto a single integrated circuit. For electronic equipment
manufacturers in the data processing, telecommunications, networking,
industrial control, instrumentation, and military markets, integration often
results in faster speed, smaller 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. The length of time required to develop these
more sophisticated electronic systems is often incompatible with stringent
time to market requirements.
Xilinx was founded to design, develop and market FPGAs which uniquely combine
the high logic 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 programmable
logic devices to provide solutions for customers. The Company's programmable
logic devices serve a wide variety of applications which require high levels
of integration and for which time to market is critical, production volumes
are unpredictable and/or frequent design modifications are necessary to adapt
a product to new markets. Xilinx CPLD's complement the Company's FPGA
products and contribute to the Company's efforts to offer total programmable
logic solutions. With FPGAs, which have the advantages of higher density,
lower power and lower cost, and CPLDs, which are typically faster, have lower
density and have simpler, easier to use software, the Company's products
enable electronic system manufacturers to rapidly bring complex products to
market in volume.
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 FPGA's to the most sophisticated customers who are accustomed to
designing high density, mask programmed gate arrays. The objective is to
deliver strategic software advantages that combine ease of use with design
flexibility, effective silicon utilization and competitive performance.
System designers use proprietary Xilinx development system software together
with industry standard electronic design automation ("EDA") tools to design
and develop Xilinx programmable logic applications. Designers define the
logic functions of the circuit and revise such functions as necessary.
Programmable logic can 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 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, programmable
logic devices allow greater designer creativity, including the consideration
of design alternatives which often lead to product improvements. Further,
since programmable logic devices are standard products and production
quantities are more readily available, exposures to obsolete inventory can be
significantly reduced.
On April 10, 1995, the Company acquired NeoCAD, Inc. ("NeoCAD"), a company
engaged in the design, development, and sale of software design tools for
programmable electronic technologies. In fiscal 1996, the Company has been
integrating NeoCAD's advanced FPGA software technology into its development
system software.
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.
PRODUCTS
The timely introduction of new products is a key factor in the success of the
Company's business. Delays in developing new products with anticipated
technological advances or delays in commencing volume shipments of new
products would be expected to have an adverse effect on the Company's
business. 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 announcements by others.
Programmable Logic Devices
The Company's FPGA products include the XC2000, XC3000 and XC4000 families and
the recently introduced XC5000, XC6000 and XC8000 families. The Company's
CPLD products include the XC7000 family and the recently introduced XC9000
family. The Company has also recently introduced new members of the XC4000
family which include the XC4000E and XC4000EX. The XC4000E family increased
performance over previous versions of the XC4000 family by approximately fifty
percent. This improvement is the result of a new design, a new process
technology and new on-chip RAM features. The XC4000EX family utilizes the
benefits of the XC4000E architecture and provides additional routing resources
which are expected to meet the design requirements for ICs with gate densities
ranging from 28,000 to 125,000 useable gates. The XC4000EX family will offer
the most powerful solution for the mask-programmed gate array replacement
market by addressing 80% of the density requirements for today's gate array
design starts. The XC5000 family represents the first FPGA specifically
developed as a cost effective, high volume production alternative to gate
arrays. The XC5000 family significantly reduces the price premium for
customers evaluating an FPGA device against a comparable custom gate array.
Use of the XC5000 as a low cost solution for high density designs permits the
customer to also take advantage of design ease and to accelerate time to
volume production. The XC6000 family is designed for reconfigurable
coprocessing applications within the embedded controller market. The XC8000
family consists of one-time programmable FPGAs which utilize the Company's
innovative MicroVia antifuse technology and proprietary sea-of-gates
architecture and was developed for high gate efficiency and ease-of-use. The
XC9000 family utilizes Flash-based architecture and offers in-system
programmability. The Company shipped XC4000E and XC8000 products in fiscal
1996 and expects to ship the XC4000EX, XC6000 and XC9000 products in fiscal
1997.
FPGAs are available in a wide variety of plastic and ceramic package types,
including pin-grid array, surface mount and quad flat pack configurations.
These devices meet the industry standard operating temperature ranges of
commercial, industrial and military users.
The Company's hardwire products offer a low cost migration path for high
volume applications. Once a programmable logic design is finalized, customers
can take advantage of hardwire products which are mask-programmed during the
manufacturing process. For every Xilinx FPGA family, there is a corresponding
hardwire family.
In order to minimize the printed circuit board area required for external
storage of the FPGA configuration program, the Company has developed a family
of erasable programmable read-only memories ("EPROMs"). These devices are
sold by the Company in conjunction with its FPGAs.
Development System Software
The Company's current version of XACTstep software combines powerful
technology with a flexible, easy to use graphical interface to help achieve
the best possible designs. XACTstep provides all of the implementation
technology required to design with Xilinx logic devices, including module
generation, design optimization and mapping, placement and routing, timing
analysis, and program file generation. The Company's next generation software
will build upon the existing user interface of the current XACTstep software
release, but underneath will be a new generation software platform based on
the NeoCAD core technologies. This merged release, which is expected to be
available in fiscal 1997, is designed to satisfy the complete spectrum of FPGA
and CPLD customers.
The Company currently offers two different series of software solutions. One
series, which was released in April 1996, is an off-the-shelf, or
"shrink-wrapped", solution that is easy to learn and use. For those customers
that are new to designing with PLDs or want a low cost solution, the Company
offers this entirely integrated software solution. The second series is for
designers who want to integrate programmable logic design into their existing
EDA tool environment. With interfaces to over 50 EDA vendors, this product
allows users to select tools with which they are most familiar and therefore
shortens their design cycle.
The Company is preparing a third software solution series to be directed
towards high-end system level design applications which have historically been
dominated by gate arrays. Xilinx will provide pre-implemented, fully-verified
"drop-in modules", called LogiCores, for commonly used complex functions such
as digital signal processing. These cores of intellectual property are
expected to change the way in which logic has been historically designed. As
a result, users should be able to shorten development time, reduce design risk
and obtain superior performance for their designs.
Xilinx's XACTstep development system software operates on desktop computer
platforms, including personal computers and workstations from IBM,
IBM-compatible manufacturers, HP, DEC and Sun Microsystems. Through March 30,
1996, the Company had distributed over 26,700 development systems to more than
5,000 system manufacturers worldwide.
In fiscal 1996, sales of FPGAs, CPLDs, EPROMS, Hardwire and development system
software products accounted for 85%, 2%, 5%, 5% and 3% of total revenues,
respectively. For additional information on the Company's revenues, see
Management's Discussion and Analysis of Results of Operations and Financial
Condition in Item 7.
RESEARCH AND DEVELOPMENT
Xilinx's research and development activities are primarily directed towards
the design of new integrated circuits, the design of new development system
software and ongoing cost reductions and performance improvements in existing
products. The Company's recent research and product development efforts have
been directed principally towards its XC3100, XC4000, XC5000, XC6000 and
XC8100 families of FPGAs, CPLD products, XACT development system software and
towards other proprietary new architectures and processes.
Xilinx believes that development system software is an important factor in
expanding the use of programmable logic devices. The Company's R&D challenge
is to continue to develop new products that create solutions for customers
while simultaneously reducing product development time. A further challenge
will be the completion of integrating NeoCAD's advanced FPGA software
technology into the existing product line. The Company presently allocates
approximately 60% and 40% of its research and development staff for integrated
circuit design or process development and development system software
products, respectively. As of March 30, 1996, 388 employees were engaged in
research and development. In fiscal 1996, 1995, and 1994, the Company's
research and development expenses were $64.6 million, $45.3 million, and $34.3
million, respectively. The Company expects that it will continue to spend
substantial funds on research and development.
Research and development expenses, while having increased in amount in each
period presented, have approximated 12% of revenues in 1996 and 13% in 1995
and 1994. The Company believes that technical leadership is essential to its
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 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 address larger OEM customers and act as a direct sales force,
while distributors serve the balance of the Company's customer base. All
channels are supported by Xilinx sales and technical support personnel.
In North America, Hamilton-Hallmark, Marshall Industries, and Insight
Electronics, Inc. distribute the Company's products nationwide, and Nu
Horizons Electronics provides additional regional sales coverage. The Company
believes that distributors provide a cost effective means of reaching small
and medium-sized customers. Since the Company's programmable logic devices
are standard products, they do not present many of the inventory risks to
distributors of custom gate arrays, and they simplify the requirements for
distributor technical support.
Because of the uncertainty associated with future pricing adjustments and
product returns, the Company defers recognition of revenues and related cost
of revenues for products sold through domestic distributors until the
merchandise is sold by the distributors.
BACKLOG AND CUSTOMERS
As of March 30, 1996, the Company's backlog was approximately $143.8 million,
as compared to approximately $94.9 million as of April 1, 1995. Xilinx
includes in its backlog all purchase orders scheduled for delivery within the
next six months. Xilinx produces standard products which can generally be
shipped from inventory within a short time after receipt of an order. The
Company's business, and to a large and growing extent that of the entire
semiconductor industry, is characterized by short-term order and shipment
schedules. 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.
In fiscal 1996, the Company shipped products to over 5,000 customers directly
or through domestic and foreign distributors. No single end customer
accounted for more than 6% of revenues in fiscal 1996 or 1995 and 4% in fiscal
1994. See Note 9 of Notes to Consolidated Financial Statements in Item 8 for
Industry and Geographic Information.
WAFER FABRICATION
The majority of wafers for FPGAs shipped by the Company have been manufactured
by Seiko Epson Corporation (Seiko) and Yamaha Corporation (Yamaha). Seiko has
non-exclusive, non-transferable rights to manufacture and sell FPGAs designed
by Xilinx in Japan and Europe but is not currently exercising these rights.
In exchange, Seiko has provided the Company with access to advanced CMOS
processes. Precise terms with respect to the volume and timing of wafer
production and the pricing of wafers produced by Seiko and Yamaha are
determined by periodic negotiations between the Company and these foundry
partners. From time to time, Xilinx may contract with other suppliers to
provide wafers for the Company's products.
Xilinx's strategy is to focus its resources on creating new integrated
circuits and development system software and on market development rather than
on wafer fabrication. The Company continuously evaluates opportunities to
enhance foundry relationships and/or obtain additional capacity. As a result,
the Company has entered into recent agreements with United Microelectronics
Corporation and Seiko as discussed below.
The Company entered into a series of agreements with United Microelectronics
Corporation (UMC) pursuant to which the Company has agreed to join UMC and
other parties to form a joint venture for the purpose of building and managing
an advanced semiconductor manufacturing facility in Taiwan. See Note 4 of
Notes to Consolidated Financial Statements in Item 8. Under the terms of the
agreement, the Company invested $34 million in fiscal 1996 and will invest an
additional $68 million and $34 million in December 1996 and July 1997,
respectively, for a 25% equity interest in the venture. As a result of its
equity ownership, the Company will receive rights to purchase at market prices
a percentage of the facility 's wafer production. The proposed facility is
expected to commence limited production of eight-inch sub-micron wafers during
fiscal 1998. The Company is currently receiving eight-inch, sub-micron wafers
in limited volume from a recently constructed foundry in which UMC is the
major shareholder. Xilinx believes it will continue to receive such products
in moderate volumes until the joint venture facility is operational.
On May 17, 1996, the Company signed an agreement with Seiko. The agreement
provides for an advance to Seiko of $200 million to be used in the
construction of a wafer fabrication facility in Japan which will provide
access to eight-inch sub-micron wafers. In conjunction with the agreement,
$30 million was paid in May 1996 and further installments are scheduled
starting in November 1996. Repayment of this advance will be in the form of
wafer deliveries expected to begin in the first half of 1998. In addition to
the advance payments, the Company will provide further funding to Seiko in the
amount of $100 million. This additional funding will be paid after the final
installment of the $200 million advance, and the form of the additional
funding will be negotiated at that time.
ASSEMBLY AND TEST
Wafers purchased by the Company are tested by the manufacturer or by the
Company. Tested wafers are assembled by a subcontractor in facilities in
various Pacific Rim countries. In the assembly process, the wafers are
separated into individual integrated circuits which are then assembled in
packages. Following assembly, the packaged units are returned to the
Company's U.S. or Ireland facilities for further testing, marking and final
inspection prior to shipment to customers.
PATENTS AND LICENSES
Through March 30, 1996, the Company held 92 United States patents and has
filed for an additional 139 United States 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 business. See Legal Proceedings in Item 3 and Note 10
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 development system software. In addition,
the Company has licensed certain software for internal use in product design.
EMPLOYEES
Xilinx's employee population has grown by 38% during the past year. As of
March 30, 1996, Xilinx had 1,201 employees compared to 868 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 considers its
relations with its employees to be good.
COMPETITION
The Company's FPGA and CPLD products compete in the programmable logic
marketplace, with a substantial majority of the Company's revenues derived
from its FPGA product families. The industries in which the Company competes
are intensely competitive and are characterized by rapid technological change,
rapid product obsolescence and price erosion. The Company expects
significantly increased competition both from existing competitors and from a
number of companies that may enter its market. Xilinx believes that important
competitive factors in the programmable logic market include price, product
performance and reliability, adaptability of products to specific
applications, ease of use and functionality of development system software,
and technical service and support. The Company 's strategy for expansion in
the programmable logic market includes continued price reductions commensurate
with the ability to lower the cost of manufacture and continued introduction
of new product architectures which target high volume, low cost applications.
However, there can be no assurances that the Company will be successful in
achieving this strategy.
The Company's major sources of competition are comprised of three elements:
the manufacturers of custom CMOS gate arrays, providers of high density
programmable logic products characterized by FPGA-type architectures and other
providers of programmable logic products. The Company competes with custom
gate array manufacturers on the basis of lower design costs, shorter
development schedules and reduced inventory risks. The primary attributes of
custom gate arrays are high density, high speed and low production costs in
high volumes. However, the Company believes that the design specifications
for many customers can be met by the density and speed capabilities of
Xilinx's programmable logic products which are cost effective over a broad
range of production volumes. In addition, the Company 's efforts to introduce
lower cost architectures are intended to narrow the gap between current custom
gate array production costs (in high volumes) and FPGA production costs. To
the extent that such efforts are not successful, the Company's business could
be materially adversely affected.
The Company competes with providers of high density programmable logic
products characterized by FPGA-type architectures on the basis of software
capability, product functionally, price, performance and customer service.
The Company believes that certain of its patents have been infringed by a
competitor and has initiated legal action to protect its intellectual
property. See Legal Proceedings in Item 3 and Note 10 of Notes to
Consolidated Financial Statements in Item 8.
The benefits of programmable logic have attracted a number of companies to
this market, competing primarily on the basis of speed, density or cost.
Xilinx recognizes that different applications require different programmable
technologies, and the Company is developing multiple architectures, processes
and products to meet these varying customer needs. Recognizing the increasing
importance of standard software solutions, Xilinx is working to develop common
design software that supports the full range of integrated circuit products.
Xilinx believes that automation and ease of design will be significant
competitive factors in the programmable logic market.
Although certain manufacturers of PLDs compete with Xilinx, significant
differences in logic density between most complex PLDs and FPGAs limit the
amount of competitive overlap. While the architecture of complex PLDs gives
them a performance advantage in certain instances, the Company believes that
the higher density available with FPGAs makes them more economical for many
designs.
Several companies, both large and small, have introduced products competitive
with those of the Company or have announced their intention to enter this
market. Some of the Company's competitors may possess innovative technology
which could prove superior to Xilinx's technology in some applications. In
addition, the Company anticipates potential competition from suppliers of
logic products based on new technologies. Many of the Company's current or
potential competitors have substantially greater financial, manufacturing,
marketing and technical resources than Xilinx. This additional competition
could adversely affect the Company.
Xilinx also faces competition from its licensees. Under a license from the
Company, AT&T is manufacturing and marketing the Company's non-proprietary
XC3000 FPGA products and is employing that technology to provide additional
FPGA products offering high density. Seiko has rights to manufacture the
Company's products and market them in Japan and Europe but is not currently
doing so. AMD is licensed to use certain of the Company's patents to
manufacture and market products other than SRAM-based FPGAs and, after March
19, 1997, could also compete directly in this market.
EXECUTIVE OFFICERS OF THE REGISTRANT
Certain information regarding each of Xilinx's executive officers is set forth
below:
Officer
Name Age Position Since
Bernard V. Vonderschmitt 72 Chairman of the Board 1984
Willem P. Roelandts 51 Chief Executive Officer 1996
Robert C. Hinckley 48 Vice President, Strategic Plans and 1991
Programs, General Counsel, and Secretary
Gordon M. Steel 51 Senior Vice President, Finance and Chief 1987
Financial Officer
R. Scott Brown 55 Senior Vice President, Sales 1985
C. Frank Myers 62 Vice President, Operations 1985
Except as set forth below, each of the Company's executive officers has been
engaged in his principal occupation described above during the past five
years. There is no family relationship between any director or executive
officer of the Company.
Willem P. "Wim" Roelandts joined the Company in January 1996 as Chief
Executive Officer. He is a 28-year veteran of Hewlett-Packard Company, where
he most recently served as a senior vice president and managed the company's
Computer Systems Organization from November 1992 through January 1996. In
this capacity, he was responsible for all aspects of the computer systems
business worldwide, including research and development, manufacturing,
marketing, professional services and sales. He also served as vice president
and general manager of the Network Systems Group from December 1990 to
November 1992.
Robert C. Hinckley joined the Company in November 1991 as Vice President,
Strategic Plans and Programs, serves as the Company's General Counsel, and was
appointed Secretary in May 1993. He acted as interim Chief Operating Officer
from March 1994 until August 1994. From August 1990 to November 1991 he was
engaged in the private practice of law. From January 1989 until August 1990,
he served as Senior Vice President, Chief Financial Officer, Secretary and
Treasurer of Spectra Physics, Inc.
In April 1996, Curtis S. Wozniak, President and Chief Operating Officer,
resigned from the Company. He had joined Xilinx in August 1994.
ITEM 2. PROPERTIES
Xilinx's principal administrative, sales, marketing, research and development
and final testing facility is located in adjacent buildings providing 335,000
square feet of available space in San Jose, California and 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. In addition, the Company
maintains domestic sales offices in nineteen locations which include the
metropolitan areas of Atlanta, Boston, Chicago, Denver, Dallas, Los Angeles,
Minneapolis, Philadelphia, Raleigh and San Jose as well as international sales
offices located in the metropolitan areas of London, Munich, Paris, Stockholm,
Tokyo, Taipei, Seoul and Hong Kong. The Company completed construction of a
100,000 square foot administrative, research and development and final testing
facility in the metropolitan area of Dublin, Ireland in 1995. This facility
is being used to service the Company's customer base outside of North America.
The Company is currently constructing a 60,000 square foot facility in
Boulder, Colorado. This facility will replace the former NeoCAD facility and
will be the primary location for the Company's software efforts in the areas
of research and development, manufacturing and quality control.
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 discovery has been completed in both
cases. No trial date has been set. The Court has stayed further proceedings
in both cases until August 30, 1996, when the next status conference with the
Court is scheduled. On April 20, 1995, Altera filed an additional suit
against the Company in Federal District Court in Delaware (the Delaware suit)
alleging that the Company's XC5000 family infringes a certain Altera patent.
The Company answered the Delaware suit denying that the XC5000 family
infringes the patent in suit, which is the subject of the litigation,
asserting certain affirmative defenses and counterclaiming that the Altera Max
9000 family infringes certain of the Company's patents. The Delaware suit has
now been transferred to the United States District Court for the Northern
District of California. Due to the uncertain nature of the litigation with
Altera and because the lawsuits are still in the pre-trial stage, 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 and actual results
could differ materially.
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 National Market under the symbol
XLNX. The table below reflects for the periods indicated the high and low
closing sales prices per share of the Common Stock, as reported on the Nasdaq
National Market. Xilinx has never paid a cash dividend on its Common Stock
and intends to continue this policy for the foreseeable future. As of March
31, 1996, there were approximately 671 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 35,000.
Fiscal Year 1996 Fiscal Year 1995
Quarter Ended High Low High Low
- ------------- ------ ------ ------ ------
June 30 $33.17 $21.25 $18.67 $11.33
September 30 53.88 31.67 16.92 9.92
December 31 48.38 24.75 20.25 15.33
March 31 45.50 27.88 23.67 18.38
The price range of the Company's Common Stock has been restated for all
periods presented to reflect the three-for-one stock split, which was effected
in July 1995.
ITEM 6. SELECTED FINANCIAL DATA - (in thousands, except per share data)
CONSOLIDATED STATEMENT OF INCOME DATA:
Years ended March 31,
1996 1995 1994 1993 1992
Net revenues $560,802 $355,130 $256,448 $177,998 $135,827
Operating income 165,756 # 92,048 + 65,168 41,586 30,137 *
Income before taxes 170,902 # 94,845 + 67,436 43,610 33,758 *
Provision for income taxes 69,448 35,567 26,157 16,379 12,493
Net income 101,454 # 59,278 + 41,279 27,231 21,265 *
Net income per share $ 1.28 # $ 0.80 + $ 0.57 $ 0.38 $ 0.30 *
Shares used in per share
calculations 78,955 74,109 72,237 70,848 71,868
- -------------------------- -------- -------- -------- -------- --------
# After non-recurring charge for in-process technology related to the acquisition
of NeoCAD of $19,366 and $0.25 per share.
+ After non-recurring charge for the write-off of a minority investment of $2,500
and $0.02 per share net of tax.
* After non-recurring charge for in-process technology related to the acquisition
of Plus Logic of $3,507 and $0.03 per share net of tax.
CONSOLIDATED BALANCE SHEET DATA
1996 1995 1994 1993 1992
Working capital $436,070 $180,064 $143,103 $101,100 $ 88,414
Total assets 720,880 320,940 226,156 162,899 146,589
Long-term debt 250,000 867 2,195 3,911 4,959
Stockholders ' equity 368,244 243,971 172,878 123,299 108,662
- ---------------------- -------- -------- -------- -------- --------
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. Such risks and
uncertainties are detailed in the Company's SEC reports and filings. Certain
of these risks and uncertainties are discussed under "Factors Affecting Future
Results".
Nature of Operations
Xilinx, Inc. ("Xilinx" or the "Company") designs, develops and markets CMOS
(complementary metal-oxide-silicon) programmable logic devices and related
development system software. The Company's programmable logic product lines
include field programmable gate arrays ("FPGAs") and complex programmable
logic devices ("CPLDs"). These components are standard integrated circuits
("ICs") programmed by Xilinx's customers to perform desired logic operations.
Xilinx introduced the first FPGA device in 1985, holds patents on FPGA
architecture and technology, and continues to be the leading supplier to this
market. Xilinx also markets hardwire devices which are mask-programmed ICs
functionally equivalent to programmed FPGAs. The Company's products provide
high integration and quick time-to-market for electronic equipment
manufacturers in the data processing, telecommunications, networking,
industrial control, instrumentation and military 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 licensed domestic distributors and sales through foreign distributors.
Xilinx's products have provided effective solutions to a wide range of
customer logic requirements, thereby permitting the Company to increase
revenues and market share and to realize excellent profitability during fiscal
1996.
Results of Operations
The following table sets forth certain operational data both as percentages of
annual revenues and as percentage changes from the prior year 's results.
Years ended March 31, Increase from Prior Year
------------------------------- --------------------------
1996 1995 1994 1996 1995
----------- --------- ------- ----------- --------------
Revenues 100.0% 100.0% 100.0% 57.9% 38.5%
Cost of revenues 36.2% 39.0% 38.5% 46.7% 40.1%
Gross margin 63.8% 61.0% 61.5% 65.1% 37.4%
Research and development 11.5% 12.8% 13.4% 42.5% 32.0%
Marketing, general and administrative 19.2% 21.6% 22.7% 40.5% 32.1%
Operating income before
non-recurring charges 33.1% 26.6% 25.4% 95.8% 45.1%
Non-recurring charges 3.5% 0.7% - NM NM
Operating income 29.6% 25.9% 25.4% 80.1% 41.2%
Interest income (net) 0.9% 0.8% 0.9% 84.0% 23.3%
Income before taxes 30.5% 26.7% 26.3% 80.2% 40.6%
Provision for income taxes 12.4% 10.0% 10.2% 95.3% 36.0%
Net income 18.1% 16.7% 16.1% 71.1% 43.6%
- ---------------------------------------- ------------ --------- ------- --------- -----------
Revenue
Xilinx reported record revenues for 1996 of $560.8 million, representing an
increase of 57.9% from $355.1 million for 1995 and 118.7% from $256.4 million
reported for 1994. The growth in revenues was a function of increased unit
sales of programmable logic devices and, more specifically, was primarily
attributable to the revenue growth of the XC4000 family as well as the growth
of the Company's new product, the XC5000 family. Other contributors included
the Company 's XC3000, XC3100 and CPLD families.
Xilinx's development system software is used by the Company 's customers to
implement designs in the Company 's programmable logic devices. Software
revenues increased by 36.1% in 1996 to approximately $17.1 million as compared
to $12.6 million in 1995 and $11.6 million in 1994. Although software revenues
have increased in dollar amounts, sales have declined as a percentage of total
revenues, accounting for 3%, 4% and 5% of revenues for 1996, 1995 and 1994,
respectively. Cumulative licenses for proprietary development system software
distributed to customers through the end of 1996 approximated 26,700 units, as
compared to 21,000 and 16,500 at the end of 1995 and 1994, respectively.
Revenue contribution by product line reflected increased customer demand for
the functionality and performance provided by the Company's higher density and
higher speed programmable logic devices. Of the $205.7 million growth in
revenues between 1995 and 1996, 96% was provided by revenues from the
proprietary products within the XC3000 family as well as the XC3100, XC4000,
XC5000 and CPLD families, all of which are proprietary products. Revenues from
proprietary products increased from 74% of the aggregate revenues in 1995 to
85% in 1996. In the fourth quarter of 1996, proprietary products accounted for
88% of total revenues as compared to 79% for the comparable 1995 quarter.
Revenues from the XC4000 family increased 106% between 1995 and 1996 to $250
million. Deriving revenues from proprietary products has been emphasized by
the Company as an effective implementation of a corporate pricing strategy
whose aim is to expand the market for its products by reducing sales prices
coincident with and commensurate with reductions in the cost of manufacturing
these products. The Company is actively pursuing a strategy of broadening the
markets it serves through the enhancement of software development tools, the
introduction of architectures offering new functionality, and the reduction of
IC prices through continuous advancements in the silicon manufacturing
process.
During 1996, all product families except the non-proprietary members of the
XC3000 family, where there is a second source competitor, experienced
increases in unit volume. During this period, the average selling price of an
IC product family fell between 8% and 24%. Individual products within the
XC3000, XC3100 and XC4000 families experienced price decreases as much as 32%
during the past year, as prices were reduced in the higher complexity and
higher speed families in order to be more competitive in high volume
applications. Price erosion of this magnitude has been common in the
semiconductor industry, as advances in both architecture and manufacturing
process technology have permitted continual reductions in cost. The
approximately 70% increase in unit volume for the XC3100 family and the more
than doubling in unit volume for the XC4000 family outweighed the impact of
price erosion on individual product lines, as the weighted average selling
price for all ICs increased approximately 4% in 1996 relative to the previous
year.
The XC4000 products provide the widest range of densities of any family,
currently ranging from 2,000 to 28,000 gates. The Company 's HardWire products
offer a low cost migration path for high volume applications. During 1996, the
Company began volume production of the XC5000 family, which represents the
first FPGA specifically developed as a cost effective, high volume production
alternative to gate arrays. The XC5000 family is expected to allow the Company
to enter new market segments, for which most new designs are expected to
require higher quantities. However, there can be no assurances that the XC5000
family will be successful in entering new market segments. Revenues for the
XC5000 family were $9.1 million for 1996. In the second half of 1996 the
Company introduced the XC9500 CPLD family, which provides complete in-system
programming and test capabilities for users who need maximum design
flexibility throughout their product life cycle.
No single end customer accounted for more than 6% of revenues in 1996 or 1995
and 4% of revenues in 1994.
International revenues constituted 35%, 31% and 28% of total revenues for
1996, 1995 and 1994, respectively. International revenues continue to be
primarily to customers in Europe and Japan. Revenue growth over the past year
in these two international markets was 73% and 111%, respectively. In 1996,
the Company completed construction of a $32.3 million manufacturing facility
in Dublin, Ireland. The Ireland facility has increased production levels
throughout 1996 and has enhanced the Company 's ability to meet the needs of
its international customers. The Company believes that international revenues
will continue to grow at a faster rate over the intermediate future than
domestic sales and projects that such revenues will eventually comprise 50% of
the worldwide total. However, there can be no assurances that international
revenues will eventually reach this level in the future. Sales to Pacific Rim,
Middle East and other regions outside North America, Europe and Japan
represented approximately 4% of revenues in each year presented.
Recently, several independent semiconductor industry analysts have indicated
their belief that the overall semiconductor industry will grow at lower rates
than actual growth rates over the last few years. See "Other Factors Affecting
Operating Results" for discussion relating to potential impact of
semiconductor industry conditions on the Company's business.
The Company expects its growth rate in revenue for fiscal 1997 to decrease
from the levels experienced in fiscal 1996. The Company believes that the
conditions that led to slow growth in the last two quarters of fiscal 1996 are
still present, although probably to a lesser degree. The Company also realizes
that a prolonged slowdown in the overall semiconductor industry would
detrimentally impact Xilinx. While the Company currently projects revenue
growth rates for the first two quarters of fiscal 1997 to be comparable to or
above the two to four percent quarterly growth experienced in the final two
quarters of the prior fiscal year, no assurance can be given that this will be
the case.
The preceding three paragraphs contains forward-looking statements which
involve risks and uncertainties. The Company's actual results could differ
materially from those anticipated in these forward-looking statements as a
result of certain factors including those set forth in "Factors Affecting
Future Results" and elsewhere in this section.
Gross Margin
Gross margin as a percentage of revenues was 63.8% for 1996 as compared to 61%
for 1995 and 61.5% for 1994. Recent gross margin improvements are largely due
to the strengthening of the dollar versus the yen, recurring pricing
negotiations, improved product yields associated with recent manufacturing
technology enhancements, and realization of the benefits of expanded levels of
production. Over the past three years, Xilinx has also been able to offset
much of the erosion in gross margin percentages on the more mature integrated
circuits with increased volumes of newer, proprietary, higher margin products.
The Company recognizes that ongoing price reductions for its integrated
circuits are a significant element in expanding the market for its products.
Company management believes that the fiscal 1996 gross margins of 63.8% are
neither sustainable nor desirable in the future. Gross margins closer to the
Company's historical range of 60% to 62% of revenues are considered more
appropriate for expanding market share while realizing acceptable returns,
although there can be no assurance that future gross margins will be in this
range. Because the Company 's wafer purchases supplied by Japanese foundries
are denominated in yen, a strengthened U.S. dollar exchange rate against the
yen has had a positive impact on manufacturing costs. Manufacturing costs
would be adversely impacted if the dollar weakens against the yen. "See
Factors Affecting Future Results."
Research and Development
The Company has increased the dollars spent on research and development each
year in its twelve year history. These expenses in 1996 exceeded those of the
prior year by 43% and those of 1994 by 88%. The increase in research and
development expenses is primarily attributable to increased staffing, higher
engineering wafer purchases, and increased facility and support costs
associated with an expanded scope of operations. Increased staffing in fiscal
1996 was attributable in part to the acquisition and integration of NeoCAD.
See Note 3 of Notes to Consolidated Financial Statements. The Company remains
committed to a significant level of research and development effort in order
to continue to compete aggressively in the programmable logic marketplace.
Through March 31, 1996, the Company had 92 U.S. patents issued and has filed
for an additional 139 U.S. patents in the areas of software, IC architecture
and design. As of March 31, 1996, research and development personnel were
split 40% for software development and 60% for integrated circuit design and
process development. Xilinx has not capitalized any of the costs associated
with its software development.
Marketing, General and Administrative
Marketing, general and administrative costs have increased in each of the past
three years but declined as a percentage of revenues, reflecting both the
greater growth rate in revenues and the Company's commitment to control
administrative expenses. Sales expenses have increased each year due to
increasing personnel, increases in advertising, the costs of new sales
offices, and greater commission expenses associated with higher revenues. The
Company has nineteen sales offices located throughout the United States,
including the metropolitan areas of San Jose, Los Angeles, Denver, Dallas,
Chicago, Minneapolis, Atlanta, Raleigh, Philadelphia and Boston as well as
eight international sales offices located in the metropolitan areas of London,
Munich, Paris, Stockholm, Tokyo, Taipei, Seoul and Hong Kong. The increase in
general and administrative expenses since 1994 is primarily attributable to an
expanded number of employees and to continuing legal expenses associated with
litigation intended to protect the Company 's intellectual property rights.
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 increase the level of future general and administrative
expenses.
Non-recurring Charges
During the first quarter of fiscal 1996, the Company incurred a $19.4 million
non-recurring write-off of in-process technology relating to the Company 's
acquisition of NeoCAD. During 1996, the Company has incurred research and
development expenses relating to its efforts to combine the Xilinx and NeoCAD
technologies into an integrated software product. See Note 3 of Notes to
Consolidated Financial Statements. During 1995, the Company incurred a $2.5
million write-off of a minority investment in Star Semiconductor Corporation.
Operating Income
Operating income grew from $65.2 million in 1994 to $92 million in 1995 and to
$165.8 million in 1996. Operating income in 1996 was $185.1 million before
consideration of the non-recurring write-off of in-process technology. Over
the past three years, operating income as a percentage of revenues (before
consideration of non-recurring charges) has increased from 25.4% in 1994 to
26.6% in 1995 and to 33% in 1996. Operating income as a percentage of revenues
could be adversely impacted in future years by the factors noted above, and as
the Company expands its efforts in research and development and continues to
assert its intellectual property rights.
Interest, Net
The Company incurs interest expense on the $250 million of 5 1/4% convertible
subordinated notes issued in November 1995. The Company earns interest income
on its cash, cash equivalents, short-term investments and restricted
investments. The amount of interest earned is a function of the balance of
cash invested as well as the prevailing interest rates. Net interest income
for 1996 increased by $2.3 million over 1995. In 1996, the increased interest
expense incurred relating to the notes was partially offset by the interest
income earned from investing the net proceeds of such notes. The Company's
investment portfolio contains tax-advantaged municipal bonds which have pretax
yields which are less than the interest rate on the notes. For financial
reporting purposes, the Company effectively records the difference between the
pretax and tax-equivalent yields as a reduction in provision for taxes on
income. As a result of the difference in yields and future uses of the
investment portfolio, levels of net interest income are likely to decrease in
the future.
Provision for Income Taxes
Xilinx 's effective tax rate was 40.6% for 1996 as compared to 37.5% and 38.8%
for 1995 and 1994, respectively. The higher tax rate for fiscal 1996 resulted
from the non-recurring write-off of in-process technology relating to the
acquisition of NeoCAD, which is not tax deductible. Excluding the
non-recurring write-off of in-process technology, the Company 's effective tax
rate for fiscal 1996 was 36.5%. The reduced rate from the previous fiscal
year is primarily due to the Company 's expanded operations in certain foreign
jurisdictions that offer statutory tax rates beneath the US effective tax
rate. The Company believes that net deferred tax assets (approximately $25.1
million at March 31, 1996) are realizable due to the taxable income existing
in potential carryback years.
Inflation
The effects of inflation upon the Company's financial results have not been
significant.
FACTORS AFFECTING FUTURE RESULTS
Dependence Upon Independent Manufacturers
The Company does not manufacture the wafers used for its products. To date,
most of the Company 's FPGA wafers have been manufactured by Seiko Epson
Corporation (Seiko) and Yamaha Corporation. The Company has depended upon
these suppliers and others to produce wafers with competitive performance and
cost attributes, to produce wafers at acceptable yields and to deliver them to
the Company in a timely manner. While the quality, yield and timeliness of
wafer deliveries to date from its suppliers have been acceptable, there can be
no assurance that manufacturing problems will not occur in the future. Any
prolonged inability to obtain wafers with competitive performance and cost
attributes, adequate yields or timely deliveries from these manufacturers, or
any other circumstance that would require the Company to seek alternative
sources of supply, could delay shipments. Any significant delays could have an
adverse effect on the Company 's operating results.
The Company 's long-term growth will depend in large part on the Company 's
ability to obtain increased wafer fabrication capacity from suppliers. A
significant increase in general industry demand or any interruption of supply
could reduce the Company 's supply of wafers or increase the Company 's cost
of such wafers, thereby materially adversely affecting the Company 's
business.
In order to secure additional wafer capacity, the Company from time to time
considers a number of alternatives, including, without limitation, equity
investments in, or loans, deposits, or other financial commitments to,
independent wafer manufacturers in exchange for production capacity, or the
use of contracts which commit the Company to purchase specified quantities of
wafers over extended periods. The Company has at times 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 in a timely manner, as well as the ability
of the Company to process products for shipment. The Company 's future growth
will depend in part on its ability to locate and qualify additional suppliers
and subcontractors and to increase its own capacity to ship products, and
there can be no assurance that the Company will be able to do so. Any
increase in these constraints on the Company 's production could materially
adversely affect the Company 's business. In this regard, the Company has
entered into a joint venture, United Silicon Inc. (USI), to construct a new
wafer fabrication facility. See Notes 4 and 5 of Notes to Consolidated
Financial Statements and the Commitments discussion within "Financial
Condition, Liquidity and Capital Resources." However, there are many risks
associated with the construction of a new facility, and there can be no
assurance that such facility will become operational in a timely manner. In
addition, the Company has recently entered into an agreement for additional
capacity with another foundry. See Note 11 of Notes to Consolidated
Financial Statements and the Commitments discussion within "Financial
Condition, Liquidity and Capital Resources." If the Company requires
additional capacity and such capacity is unavailable, or unavailable on
reasonable terms, the Company 's business could be materially adversely
affected.
Impact of Currency
The Company has historically purchased most of the processed silicon wafers
used in its integrated circuits from Japanese foundries, which have been
denominated in yen. The Company has often limited its exposure to fluctuations
in foreign exchange rates through the purchase of forward exchange and option
contracts and by denominating billings to Japanese customers in yen. The
Company has entered into currency option contracts to cover approximately 50%
of 1997 yen requirements for wafer purchases after consideration of foreign
sales denominated in yen. Weakness in the purchasing power of the U.S. dollar
could increase the effective cost of processed silicon and adversely affect
the Company 's future results of operations. Foreign sales are billed in U.S.
dollars except for sales in Japan denominated in yen. The Company has also
entered into foreign exchange forward contracts to eliminate the impact of
future exchange fluctuations on the US dollar cost of investing in the USI
joint venture.
Litigation
The Company is currently involved in patent litigation with Altera Corporation
(see Note 10 of Notes to Consolidated Financial Statements and Item 3, Legal
Proceedings). Due to the uncertain nature of the litigation with Altera and
because the lawsuits are still in the pre-trial stage, 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 and the future outcome could differ.
Other Factors Affecting Operating Results
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 and conditions specific to the semiconductor
industry, decreases in average selling price over the life of any particular
product, the timing of new product introductions (both by the Company and its
competitors), the timely implementation of new manufacturing technologies, the
ability to safeguard patents and intellectual property in a rapidly evolving
market, and rapid escalation of demand for some products in the face of
equally steep decline in demand for others. Market demand for the Company 's
products, particularly for those most recently introduced, can be difficult to
predict, especially in light of customers ' demands to shorten product lead
time. This could lead to revenue volatility if the Company were unable to
provide sufficient quantities of specified products in a given quarter. In
addition, any difficulty in achieving targeted yields could adversely impact
the Company 's results of operations. The Company attempts to identify these
changes in market conditions as soon as possible; however, the rapidity of
their onset makes prediction of and reaction to such events difficult. Due to
the foregoing and other factors, past results are a much less reliable
predictor of the future than is the case in many older, more stable and less
dynamic industries.
The Company 's future success depends on its ability to develop and introduce
on a timely basis new products which compete effectively on the basis of price
and performance and which address customer requirements. The success of new
product introductions is dependent upon several factors, including timely
completion of new product designs, achievement of acceptable yields and market
acceptance. No assurance can be given that the Company 's product development
efforts will be successful or that its new products will achieve market
acceptance. In addition, the average selling price for any particular product
tends to decrease rapidly over the product 's life. To offset such decreases,
the Company relies 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 such that higher average selling prices and higher margins are
achievable relative to mature product lines. To the extent that such cost
reductions and new product introductions with higher margins do not occur in a
timely manner or the Company 's products do not achieve market acceptance, the
Company 's operating results could be adversely affected.
The Company's FPGA and CPLD products compete in the programmable logic
marketplace, with a substantial majority of the Company's revenues derived
from its FPGA product families. The industries in which the Company competes
are intensely competitive and are characterized by rapid technological change,
rapid product obsolescence and price erosion. The Company expects
significantly increased competition both from existing competitors and from a
number of companies that may enter its market. Xilinx believes that important
competitive factors in the programmable logic market include price, product
performance and reliability, adaptability of products to specific
applications, ease of use and functionality of development system software,
and technical service and support. The Company's strategy for expansion in
the programmable logic market includes continued price reductions commensurate
with the ability to lower the cost of manufacture and continued introduction
of new product architectures which target high volume, low cost applications.
The Company's major sources of competition are comprised of three elements:
the manufacturers of custom CMOS gate arrays, providers of high density
programmable logic products characterized by FPGA-type architectures and other
providers of programmable logic products. The Company competes with custom
gate array manufacturers on the basis of lower design costs, shorter
development schedules and reduced inventory risks. The primary attributes of
custom gate arrays are high density, high speed and low production costs in
high volumes. However, the Company believes that the design specifications
for many customers can be met by the density and speed capabilities of
Xilinx's programmable logic products which are cost effective in the required
production volumes. In addition, the Company's efforts to introduce lower
cost architectures are intended to narrow the gap between current custom gate
array production costs (in high volumes) and FPGA production costs. To the
extent that such efforts are not successful, the Company's business could be
materially adversely affected.
The Company relies upon patent, trademark, trade secret and copyright law to
protect its intellectual property. There can be no assurance 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 competitors of the Company, may assert exclusive patent,
copyright and other intellectual property rights to technologies that are
important to the Company. Litigation, regardless of its outcome, could result
in substantial cost and diversion of resources of the Company. Any
infringement claim or other litigation against or by the Company could
materially, adversely affect the Company 's financial condition and results of
operations.
The Company's future success depends in large part on the continued service of
its key technical, marketing and management personnel and on its ability to
continue to attract and retain qualified employees, particularly those highly
skilled design, process 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 the Company's financial condition and
results of operations.
Sales outside of the United States carry a number of inherent risks, including
risks of currency exchange fluctuations, the need for export licenses, tariffs
and other potential trade barriers, reduced protection for intellectual
property rights in some countries, the impact of recessionary environments in
economies outside the United States and generally longer receivable collection
periods. The Company's business is also subject to the risks associated with
the imposition of legislation and regulations relating to the import or export
of semiconductor products. The Company cannot predict whether quotas, duties,
taxes or other charges or restrictions will be imposed by the United States or
other countries upon the importation or exportation of the Company's products
in the future or what, if any, effect such actions would have on the Company's
financial condition and results of operations.
In order to expand international sales and service, the Company will need to
maintain and expand existing foreign operations or establish new foreign
operations. This entails hiring additional personnel and maintaining or
expanding existing relationships with international distributors and sales
representatives. This will require significant management attention and
financial resources and could adversely affect the Company's results of
operations. There can be no assurance that the Company will be successful in
its maintenance or expansion of existing foreign operations, in its
establishment of new foreign operations or in its efforts to maintain or
expand its relationships with international distributors or sales
representatives.
The semiconductor industry has historically been cyclical and subject to, at
various times, significant economic downturns characterized by diminished
product demand, accelerated erosion of average selling prices and
overcapacity. The Company may experience substantial period-to-period
fluctuations in future operating results due to general semiconductor industry
conditions, overall economic conditions or other factors.
Currently, most of the Company 's operations are centered in an area that has
been seismically active. Should there be a major earthquake in this area, the
Company 's operations may be disrupted resulting in the inability of the
Company to ship products in a timely manner, thereby materially adversely
affecting the Company 's business.
In addition, 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 the Company 's Common Stock.
FINANCIAL CONDITION, LIQUIDITY AND CAPITAL RESOURCES
The Company 's financial condition at March 31, 1996 remained strong. Total
current assets exceeded total current liabilities by 5.2 times, compared to
3.4 times at March 31, 1995. Since its inception, the Company has used a
combination of equity and debt financing and internal cash flow to support
operations, make acquisitions and investments in complementary technologies,
obtain capital equipment and finance inventory and accounts receivable.
Total assets have grown from $320.9 million in 1995 to $720.9 million in 1996.
This increase reflects the net proceeds of $243.9 million received from the
sale of convertible subordinated notes during the year as well as the year's
favorable operating results. The percentage changes of selected balance sheet
items from March 1995 to March 1996 are shown below:
% Change from
Description 1995 to 1996
- ------------------------------ --------------
Cash, cash equivalents and
short-term investments 207.6%
Receivables 81.2%
Inventories 53.4%
Total current assets 110.3%
Total assets 124.6%
Total current liabilities 34.9%
Stockholder's equity 50.9%
Cash, Cash Equivalents and Short-term Investments
Xilinx 's cash, cash equivalents and short-term investments increased by
$255.1 million in 1996 to $378 million. The Company generated cash flow of
approximately $150.3 million from operating activities in 1996, offset by
$352.7 million of cash used for investing activities, including the
acquisition of NeoCAD, the USI joint venture, net purchases of investments and
investments in property, plant and equipment. In addition, the Company
generated $256.7 million of cash from financing activities, reflecting the
proceeds derived from the convertible debt offering, which netted $243.9
million, and $14.2 million of common stock proceeds under employee option and
stock purchase plans, offset by $1.4 million of principal payments on capital
lease obligations. At March 31, 1996, cash, cash equivalents and short-term
investments represented 52% of total assets.
Receivables
Receivables grew 81.2% from $43.9 million at the end of 1995 to $79.5 million
at the end of 1996. The increase in receivables year-to-year is primarily due
to the greater volume of shipments which occurred in the last month of fiscal
1996.
Inventories
Inventories increased 53.4% from $25.6 million at March 1995 to $39.2 million
at March 1996. Inventory levels at March 31, 1996 represent 69 days of
inventory, which is consistent with Company objectives, and compares to 54
days at March 31, 1995. The Company confronts dual, contradictory 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, range and speed configurations to meet
unpredictable customer demand. At the same time, the Company also wishes to
minimize the handling costs associated with higher inventory levels and to
realize fully the opportunities for cost reduction associated with future
manufacturing process advancements. The Company continually strives to balance
these two objectives so as to provide excellent customer response at a
competitive cost. Year-end inventories as a percentage of the fourth quarter
's cost of revenues increased from 60% in 1995 to 76% in 1996.
Property, Plant and Equipment
Xilinx 's investment in property and equipment was $60.5 million in 1996
compared to $26.2 million in 1995. The Company continues to invest in
software design tools and semiconductor design, test and manufacturing
equipment. The Company completed construction of a $32.3 million
manufacturing facility in Dublin, Ireland in 1996 to establish capacity to
meet increased product demand. Although the Company anticipates significantly
lower capital expenditures in fiscal 1997 as a result of the completion of the
Ireland facility, significant investments with wafer suppliers are planned for
1997. See Commitments discussion.
Current Liabilities
Current liabilities grew by 34.9% to $102.6 million at the end of 1996. This
growth is primarily attributable to increased deferred income for shipments
made to domestic distributors, increased trade payables associated with an
expanded scale of operations and interest payable relating to the convertible
subordinated notes.
Line of Credit
The Company has obtained credit line facilities for up to $47 million (see
Note 5 of Notes to Consolidated Financial Statements) of which $7 million is
intended to meet occasional working capital requirements for the Company 's
wholly owned Irish subsidiary. At March 31, 1996, no borrowings were
outstanding under the lines of credit.
Long-term Debt
In November 1995, the Company issued $250 million in convertible subordinated
notes. See Note 5 of Notes to Consolidated Financial Statements. There was no
significant long-term debt in 1995.
Stockholders ' Equity
Stockholders ' equity grew by 50.9% in 1996 to $368.2 million. The increase of
$124.3 million was primarily attributable to $101.5 million in net income and
$22.1 million related to the issuance of common stock in accordance with the
Company 's stock plans and the tax benefit from stock options. Stockholders '
equity as a percentage of total assets was 51.1% for 1996 and 76% for 1995.
Commitments
The Company entered into a series of agreements with United Microelectronics
Corporation (UMC) pursuant to which the Company has agreed to join UMC and
other parties to form a joint venture for the purpose of building and managing
an advanced semiconductor manufacturing facility in Taiwan. See Note 4 of
Notes to Consolidated Financial Statements. Under the terms of the agreement,
the Company invested $34 million in fiscal 1996 and will invest an additional
$68 million and $34 million in December 1996 and July 1997, respectively, for
a 25% equity interest in the venture. As a result of its equity ownership, the
Company will receive rights to purchase at market prices a percentage of the
facility 's wafer production. The proposed facility is expected to commence
limited production of eight-inch sub-micron wafers during fiscal 1998. The
Company is currently receiving eight-inch, sub-micron wafers in limited volume
from a recently constructed foundry in which UMC is the major shareholder.
Xilinx believes it will continue to receive such products in moderate volumes
until the proposed facility is operational.
On May 17, 1996, the Company signed an agreement with Seiko Epson Corporation
(Seiko), a primary wafer supplier. See Note 11 of Notes to Consolidated
Financial Statements. The agreement provides for an advance to Seiko of $200
million to be used in the construction of a wafer fabrication facility in
Japan which will provide access to eight-inch sub-micron wafers. In
conjunction with the agreement, $30 million was paid in May 1996 and further
installments are scheduled starting in November 1996. Repayment of this
advance will be in the form of wafer deliveries expected to begin in the first
half of 1998. In addition to the advance payments, the Company will provide
further funding to Seiko in the amount of $100 million. This additional
funding will be paid after the final installment of the $200 million advance
and the form of the additional funding will be negotiated at that time.
Employees
The number of Company employees grew by 38% during the past year. Xilinx had
1,201 employees at the end of 1996 as compared to 868 at the end of the prior
year.
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. The Company will continue to evaluate opportunities for
investments to obtain additional wafer supply 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.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
CONSOLIDATED STATEMENT OF INCOME
Years ended March 31,
1996 1995 1994
--------- --------- ---------
Net revenues $560,802 $355,130 $256,448
Costs and expenses:
Cost of revenues 203,192 138,492 98,835
Research and development 64,600 45,318 34,334
Marketing, general and administrative 107,888 76,772 58,111
Non-recurring charges 19,366 2,500 -
Total costs and expenses 395,046 263,082 191,280
- -------------------------------------------------- --------- --------- ---------
Operating income 165,756 92,048 65,168
Interest income and other 10,791 13,083 2,803
Interest expense (5,645) (10,286) (535)
- -------------------------------------------------- --------- --------- ---------
Income before provision for taxes on income 170,902 94,845 67,436
Provision for taxes on income 69,448 35,567 26,157
- -------------------------------------------------- --------- --------- ---------
Net income $101,454 $ 59,278 $ 41,279
================================================== ========= ========= =========
Net income per share $ 1.28 $ .80 $ .57
================================================== ========= ========= =========
Weighted average common and common equivalent
shares used in computing per share amounts 78,955 74,109 72,237
================================================== ========= ========= =========
See accompanying notes.
CONSOLIDATED BALANCE SHEET
March 31,
1996 1995
----------- ----------
ASSETS
Current assets
Cash and cash equivalents $110,893 $56,703
Short-term investments 267,068 66,181
Accounts receivable, net of allowance for doubtful
accounts and customer returns of $5,199 and $4,863
in 1996 and 1995, respectively 79,528 43,901
Inventories 39,238 25,586
Advances for wafer purchases 9,034 42,000
Deferred income taxes and other current assets 32,945 21,795
- -------------------------------------------------------- ----------- ----------
Total current assets 538,706 256,166
----------- ----------
Property, plant and equipment at cost:
Land 2,426 2,195
Building 18,029 -
Machinery and equipment 95,463 62,070
Furniture and fixtures 7,457 4,514
Construction in progress 4,908 1,797
- -------------------------------------------------------------------- ----------- ----------
128,283 70,576
Accumulated depreciation and amortization (45,645) (31,336)
- -------------------------------------------------------------------- ----------- ----------
Net property, plant and equipmet 82,638 39,240
Investment in joint venture 34,316 -
Restricted investments 36,212 12,625
Other assets 29,008 12,909
- -------------------------------------------------------------------- ----------- ----------
$720,880 $320,940
=========== ==========
LIABILITIES AND STOCKHOLDERS ' EQUITY
Current liabilities
Accounts payable $30,673 $22,484
Accrued payroll and payroll related liabilities 9,526 9,438
Income taxes payable 5,175 10,959
Other accrued liabilities 18,708 10,085
Deferred income on shipments to distributors 37,568 21,812
Current obligations under capital leases 986 1,324
- -------------------------------------------------------------------- ----------- ----------
Total current liabilities 102,636 76,102
----------- ----------
Long-term debt 250,000 867
Commitments and contingencies
Stockholders ' equity
Preferred Stock, $.01 par value; 2,000 shares authorized;
none issued and outstanding - -
Common Stock, $.01 par value; 200,000 shares authorized;
71,933 and 71,658 shares issued; 71,933 and 70,227
shares outstanding at March 31, 1996 and 1995, respectively 719 717
Additional paid-in capital 99,588 85,755
Retained earnings 267,505 166,051
Unrealized gain/(loss) on available-for-sale securities, 432 (329)
net of tax
Treasury stock, at cost - (8,223)
----------- ----------
Total stockholders' equity 368,244 243,971
----------- ----------
$720,880 $320,940
=========== ==========
See accompanying notes
CONSOLIDATED STATEMENT OF CASH FLOWS
Years ended March 31,
1996 1995 1994
----------- ---------- ---------
Increase (decrease) in Cash and Cash Equivalents
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 101,454 $ 59,278 $ 41,279
Adjustments to reconcile net income to net cash provided
by operating activities:
Write-off of in-process technology 19,366 - -
Depreciation and amortization 22,464 12,241 10,811
Changes in assets and liabilities net of effects of
NeoCAD acquisition:
Accounts receivable (34,777) (7,959) (8,813)
Inventories, including the impact of receipts against
advances for wafer purchases 19,375 1,011 (13,536)
Deferred income taxes and other (783) (1,685) (2,293)
Accounts payable, accrued liabilities and income
taxes payable 7,408 21,959 10,352
Deferred income on shipments to distributors 15,755 3,153 5,389
- -------------------------------------------------------------------- ----------- ---------- ---------
Total adjustments net of effects of NeoCAD acquisition 48,808 28,720 1,910
----------- ---------- ---------
Net cash provided by operating activities 150,262 87,998 43,189
----------- ---------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of short-term available-for-sale investments (292,013) (75,590) (38,212)
Proceeds from maturity of short-term available-for-sale
investments 92,333 77,193 24,717
Purchases of held-to-maturity investments (96,141) (362,625) -
Proceeds from maturity of held-to-maturity investments 72,555 350,000 -
Advances for wafer purchases - (42,000) -
Acquisition of NeoCAD, net of cash acquired (33,412) - -
Acquisition of property, plant and equipment (60,506) (26,227) (12,334)
Investment in joint venture (34,316) - -
Other (1,235) (6,647) (3,815)
- -------------------------------------------------------------------- ----------- ---------- ---------
Net cash used in investing activities (352,735) (85,896) (29,644)
----------- ---------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES
Net proceeds from issuance of long-term debt 243,901 - -
Principal payments on capital lease obligations (1,389) (1,421) (2,063)
Proceeds from issuance of common stock 14,151 8,688 5,883
- -------------------------------------------------------------------- ----------- ---------- ---------
Net cash provided by financing activities 256,663 7,267 3,820
----------- ---------- ---------
Net increase in cash and cash equivalents 54,190 9,369 17,365
Cash and cash equivalents at beginning of period 56,703 47,334 29,969
- -------------------------------------------------------------------- ----------- ---------- ---------
Cash and cash equivalents at end of period $ 110,893 $ 56,703 $ 47,334
- -------------------------------------------------------------------- =========== ========== =========
SCHEDULE OF NON-CASH TRANSACTIONS:
Tax benefit from stock options $ 7,907 $ 3,456 $ 2,417
Issuance of treasury stock under employee stock plans $ 8,223 $ 9,195 -
Receipts against advances for wafer purchases $ 32,966 - -
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Interest paid relating to capital lease obligations $ 201 $ 549 $ 535
Interest paid relating to reverse repurchase agreements $ - $ 9,737 $ -
Income taxes paid $ 74,688 $ 34,730 $ 24,587
==================================================================== =========== ========== =========
See accompanying notes.
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
Three years ended March 31, 1996 Unrealized
Gain/(Loss)
Additional on Available Total
Common Stock Paid-in Retained For Sale Treasury Stockholders'
Shares Amount Capital Earnings Securities Stock Equity
------ ------ ---------- --------- ------------ -------- -------------
BALANCE AT MARCH 31, 1993 70,272 $ 703 $ 74,520 $ 65,494 - $ (17,418) $ 123,299
Issuance of common shares
under employee stock
plans 1,386 14 5,869 - - - 5,883
Tax benefit from exercise
of stock options - - 2,417 - - - 2,417
Net income - - - 41,279 - - 41,279
- ------------------------------- ------ ------- ---------- --------- ------------ --------- -------------
BALANCE AT MARCH 31, 1994 71,658 717 82,806 106,773 - (17,418) 172,878
Reissuance of Treasury Stock
under employee stock
plans - - (507) - - 9,195 8,688
Tax benefit from exercise of
stock options - - 3,456 - - - 3,456
Unrealized loss on available-
for-sale securities, net of
tax - - - - (329) - (329)
Net income - - - 59,278 - - 59,278
- ------------------------------- ------ ------- ---------- --------- ------------- --------- ---------------
BALANCE AT MARCH 31, 1995 71,658 717 85,755 166,051 (329) (8,223) 243,971
Issuance of common shares
under employee stock
plans 275 2 2,070 - - - 2,072
Reissuance of Treasury Stock
under employee stock
plans - - 3,856 - - 8,223 12,079
Tax benefit from exercise
of stock options - - 7,907 - - - 7,907
Unrealized gain on available-
for-sale securities, net of
tax - - - - 761 - 761
Net income - - - 101,454 - - 101,454
- ------------------------------- ------ ------- ------------ --------- ------------ --------- ---------------
BALANCE AT MARCH 31, 1996 71,933 $ 719 $ 99,588 $ 267,505 $ 432 $ - $ 368,244
- ------------------------------- ====== ======= ============ ========= ============ ========= ===============
See accompanying notes.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. NATURE OF OPERATIONS
Xilinx designs, develops and markets programmable logic semiconductor devices
and related development system software. The Company 's product lines include
field programmable gate arrays and complex programmable logic devices. The
wafers used to manufacture the Company 's products are obtained from
independent wafer manufacturers, located primarily in Japan. 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 Asia
Pacific, 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's products are sold to
customers in the data processing, telecommunications, networking, industrial
control, instrumentation and military markets. The Company derives more than
one-third of its revenues from international sales, primarily in Europe and
Japan.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND CONCENTRATIONS OF RISKS
Basis of presentation
The accompanying consolidated financial statements include the accounts of the
Company and its wholly owned subsidiaries after elimination of all significant
intercompany accounts and 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
years 1996, 1995 and 1994 each consisted of 52 weeks.
Cash equivalents and investments
Cash and cash equivalents consists of cash on deposit with banks, tax-
advantaged municipal bonds, and investments in money market instruments with
insignificant 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 corporate bonds with maturities greater
than 90 days but less than one year. Restricted investments consist of U.S.
Treasury Securities held as collateral relating to leases for the Company 's
facilities. See Note 6 of Notes to Consolidated Financial Statements. The
Company maintains its cash, cash equivalents and short-term investments in
several financial instruments with various banks and investment banking
institutions. This diversification of risk is consistent with 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 as of each balance
sheet date. 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. Securities not
classified as held to maturity are classified as available-for sale.
Available-for-sale securities are carried at fair value with the unrealized
gains or losses, net of tax, included as a separate component of 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, 1996 and 1995:
(in thousands) 1996 1995
- ----------------- ------- -------
Raw materials $ 5,886 $ 2,098
Work-in-progress 21,927 16,990
Finished goods 11,425 6,498
- ----------------- ------- -------
$39,238 $25,586
------- -------
Advances for wafer purchases
During fiscal 1995, the Company advanced $42 million to a primary wafer
supplier. Repayment of this amount is in the form of wafer deliveries and is
expected to be completed during fiscal 1997. Through March 31, 1996, the
Company has received $33 million in wafers against this advance.
Property, Plant and Equipment
Property, plant and equipment are stated at cost. Depreciation is computed for
financial reporting purposes 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. Assets under
capital leases are amortized using the straight-line method over the shorter
of the lease term or estimated economic life. Depreciation and amortization
for income tax purposes is computed using accelerated methods.
Deferred income on shipments to distributors
Certain of the Company 's sales are made to distributors under agreements
allowing for price protection and limited right of return on merchandise
unsold by the distributors. Because of the uncertainty associated with future
pricing concessions and returns, the Company defers recognition of revenues
and related cost of revenues until the merchandise is sold by the
distributors.
Foreign currency translation
The US dollar is the functional currency for the Company 's Irish subsidiary.
Assets and liabilities that are not denominated in the functional currency are
translated into US dollars, and the resulting gains or losses are included in
net income. The functional currency is the local currency for each of the
Company 's other foreign subsidiaries. Translation adjustments, resulting
from the process of translating foreign currency financial statements into US
dollars, have not been material and therefore are not disclosed as a separate
component of stockholders ' equity.
Derivative financial instruments
As part of its ongoing asset and liability management activities, the Company
enters into certain derivative financial arrangements to reduce financial
market risks. The Company does not enter into derivative financial instruments
for trading purposes. See Note 5 of Notes to Consolidated Financial
Statements.
Long Lived Assets
In 1995, the Financial Accounting Standards Board released the Statement of
Financial Accounting Standard No. 121 (SFAS 121), "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed of. "
SFAS 121 requires recognition of impairment of long-lived assets in the event
the net book value of such assets exceeds the future undiscounted cash flows
attributable to such assets. SFAS 121 is effective for fiscal years beginning
after December 15, 1995. Adoption of SFAS 121 is not expected to have a
material impact on the Company's financial position or results of operations.
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 1995, the Financial
Accounting Standards Board released the Statement of Financial Accounting
Standard No. 123 (SFAS 123), "Accounting for Stock Based Compensation." SFAS
123 provides an alternative to APB 25 and is effective for fiscal years
beginning after December 15, 1995. The Company expects to continue to account
for its employee stock plans in accordance with the provisions of APB 25.
Accordingly, SFAS 123 is not expected to have a material impact on the
Company's financial position or results of operations.
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 revenues and expenses during the reporting period. Such
estimates relate to the useful lives of fixed assets and intangible assets,
allowances for doubtful accounts and customer returns, inventory reserves,
potential reserves relating to litigation matters and other reserves. Actual
results may differ from those estimates, and such differences may be material
to the financial statements.
Net income per share
Net income per common and common equivalent share is computed using the
weighted average number of common and dilutive common equivalent shares
outstanding during the period. Dilutive common equivalent shares consist of
stock options (using the treasury stock method). Fully 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 effect of the convertible subordinated notes was
antidilutive in the calculation of fully diluted earnings per share for the
periods presented.
Concentrations of credit risk
The Company believes that the concentration of credit risk in its trade
receivables with respect to the high-technology industry is substantially
mitigated by the Company 's credit evaluation process, relatively short
collection terms, distributor agreements, 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 and conditions specific to the semiconductor
industry, decreases in average selling prices over the life of a particular
product, the timely receipt of wafers with competitive performance and cost
attributes, the ability to locate and qualify additional wafer suppliers and
subcontractors, the timing of new product introductions, the timely
implementation of new manufacturing technologies, the ability to safeguard
patents and intellectual property in a rapidly evolving market, and rapid
escalation of demand for some products in the face of equally steep decline in
demand for others. As a result, the Company may experience substantial
period-to-period fluctuations in future operating results due to the factors
mentioned above or other factors.
3. ACQUISITION
On April 10, 1995, the Company acquired NeoCAD, Inc. (NeoCAD), a private
company engaged in the design, development and sale of FPGA software design
tools for programmable electronic technologies, for $35 million in cash. The
transaction was treated as a purchase for accounting purposes; accordingly,
the purchase price has been allocated to the assets acquired and liabilities
assumed based on their estimated fair values. The excess of the purchase
price over the fair values of liabilities assumed, net of tangible assets
acquired, was allocated to in-process technology ($19.4 million), developed
technology ($15.7 million) and the assembled workforce ($0.7 million). The
amount of in-process technology was written-off as a non-recurring item during
the first quarter of fiscal 1996. The developed technology and assembled
workforce assets are being amortized over six and two years, respectively. In
fiscal 1996, the Company recorded amortization of $2.6 million and $0.3
million relating to the developed technology and assembled workforce assets,
respectively.
The following pro forma information reflects the statements of income for the
years ended March 31, 1996 and March 31, 1995 as if the acquisition had
occurred at the beginning of fiscal 1995, and includes certain adjustments for
amortization of the developed technology and assembled workforce assets,
reduced interest income and the related income tax impact. The pro forma
information excludes the $19.4 million write-off of in-process technology as
it represents a non-recurring item. This pro forma information may not be
indicative of the results that actually would have occurred if the combination
had been in effect on the dates indicated or which may be realized in the
future.
(in thousands, except per share amounts) Years ended March 31:
1996 1995
------------ ----------
Net revenues $ 560,802 $ 359,399
Net income $ 120,820 $ 55,609
Net income per share $ 1.53 $ .75
4. JOINT VENTURE
The Company, United Microelectronics Corporation (UMC) and other parties have
entered into a joint venture to construct in Taiwan a wafer fabrication
facility, which is known as United Silicon Inc. (USI). The Company has agreed
to invest a total of $3.75 billion New Taiwan dollars (approximately $136
mil-lion), which will result in a 25% equity ownership in the joint venture
and the right to receive 31.25% of the wafer capacity from this facility. In
January 1996, the Company invested $937.5 million New Taiwan dollars
(approximately $34 million) in the joint venture and expects to invest $1.875
billion New Taiwan dollars (approximately $68 million) and $937.5 million New
Taiwan dollars (approximately $34 million) in December 1996 and July 1997,
respectively. The joint venture is accounted for by the equity method, and
the operating results to date have not been material.
5. FINANCIAL INSTRUMENTS
Cash and Investments
The following is a summary of available-for-sale and held-to-maturity
securities:
Available-for-sale securities
March 31, 1996 March 31, 1995
--------------------------------------------- --------------------------------------------
Amortized Gross Unrealized Estimated Amortized Gross Unrealized Estimated
(in thousands) Cost Gains Losses Fair Value Cost Gains Losses Fair Value
- ------------------------- ---------- ------ ------------ ----------- ---------- ------ ----------- -----------
Cash and cash equivalents:
Municipal bonds $101,850 $ - $ - $ 101,850 $ 42,468 $ - ($19) $ 42,449
Short-term investments:
Corporate bonds 31,782 60 - 31,842 - - - -
Municipal bonds 233,854 650 (30) 234,474 66,689 49 (557) 66,181
-------- ------ ------------ ----------- ---------- ------ ----------- ------------
$367,486 $ 710 ($30) $ 368,166 $ 109,157 $ 49 ($576) $ 108,630
-------- ------ ------------ ----------- ---------- ------ ----------- -----------
All investments classified as "available-for-sale securities " have
maturities due in one year or less. Proceeds from sales of available-for-sale
securities and the related realized gains or losses were immaterial in 1996,
1995 and 1994.
Held-to-maturity securities
March 31, 1996 March 31, 1995
-------------------------------------------- --------------------------------------------
Amortized Gross Unrealized Estimated Amortized Gross Unrealized Estimated
(in thousands) Cost Gains Losses Fair Value Cost Gains Losses Fair Value
- ------------------------ ---------- ------ ----------- ----------- ---------- ------ ----------- -----------
Restricted investments:
US Treasury securities $ 36,212 $ - $ - $ 36,212 $ 12,625 $ - $ - $ 12,625
Held-to-maturity securities relate to certain collateral requirements for
lease agreements associated with the Company's corporate facilities and have
maturities due in one year or less. See Note 6 of Notes to Consolidated
Financial Statements.
Derivatives
The Company enters into currency forward and option contracts to minimize
foreign exchange risk relating to the Company 's purchase of wafers, which are
primarily denominated in yen. At March 31, 1996, commitments under option
contracts to purchase yen in fiscal 1997 were outstanding in the aggregate
amount of $18.1 million. These contracts are accounted for as identifiable
hedges against wafer purchases. Realized gains or losses are recognized upon
maturity of the contracts and are included in cost of sales. At March 31,
1996, the fair value of these option contracts was immaterial based on market
exchange rates. The maturities on these contracts is less than twelve months.
The Company has entered into foreign exchange forward contracts to eliminate
the impact of future exchange fluctuations on the US dollar cost of investing
in the USI joint venture. The contracts require the Company to exchange US
dollars for New Taiwan dollars and have maturities from nine to twenty-one
months. The contracts are accounted for as a hedge of an identifiable foreign
currency commitment. Realized gains or losses will be recognized upon
maturity of the contracts and will be included in the USI joint venture
investment. At March 31, 1996, the outstanding foreign exchange contracts
related to the USI joint venture were $101.7 million and these contracts had
an unrealized gain of $1.5 million, which represents their fair value based on
market exchange rates.
The Company has entered into a two and one half year interest rate swap
agreement with a third party in order to reduce risk related to movements in
interest rates. Under the agreement, which is effective starting in May 1996,
the Company has effectively converted the fixed rate interest rate payments
related to $125 million of the Company 's convertible subordinated notes to
variable rate interest payments without the exchange of the underlying
principal amounts. The Company will receive fixed interest rate payments
(equal to 5.935%) from the third party and is obligated to make variable rate
payments (equal to the three month LIBOR rate) to the third party during the
term of the agreement. The net amount of interest payments received from the
third party and interest payments made by the Company to the third party will
be included in interest expense.
During 1995, the Company completed a reverse repurchase transaction relating
to $350 million of U.S. Treasury Securities. The transaction was entered into
with the intent of generating net interest income in an increasing interest
rate environment and capital gains that could be used to offset previously
incurred capital losses relating to the non-recurring $2.5 million write-off
of the investment in Star Semiconductor. As a result of this transaction, the
Company recorded approximately $9.7 million of interest expense, $4.7 million
of interest income and $4.8 million of bond premium amortization in 1995.
Although the Company has generally invested in more conventional investments,
such as municipal bonds, the Company believes that the short sale of U.S.
Treasury Securities met the Company 's investment objectives in 1995. Future
investment strategies will be made in accordance with investment policies
designed to preserve and enhance corporate assets as such strategies may be
adopted from time to time by the Company 's Board of Directors.
Long-Term Debt and Lines of Credit
In November 1995, the Company completed a private placement of $250 million
aggregate principal convertible subordinated notes under Rule 144A of the
Securities Act of 1933. The notes, which mature in 2002, are convertible at
the option of the note holders into the Company 's common stock at a
conversion price of $51 per share, subject to adjustment upon the occurrence
of certain events. The conversion price represented a 24.77% premium over the
closing price of the Company 's stock on November 7, 1995. Interest is
payable semi-annually at 5.25% per annum. At any time on or after November 4,
1997, the notes are redeemable at the option of the Company at an initial
redemption price of 103.75% of the principal amount, except that prior to
November 3, 1998, the notes are not redeemable unless the closing price of the
Company 's common stock has exceeded $71.40 (40% premium over the conversion
price) per share for twenty trading days within a period of thirty consecutive
trading days. Redemption prices as a percentage of the principal amount are
103.00%, 102.25%, 101.50% and 100.75% in the years beginning November 1, 1998,
November 1, 1999, November 1, 2000 and November 1, 2001, respectively. Debt
issuance costs of $6.1 million incurred in conjunction with issuance of the
convertible subordinated notes are being amortized over the seven year life of
the notes. In 1996, the Company recorded debt issuance cost amortization of
$0.4 million. At March 31, 1996, the fair value of the convertible
subordinated notes was approximately $233.8 million based on quoted market
prices. The Company has reserved 4,901,961 shares of common stock for the
conversion of these notes.
The Company has $40 million available under a multicurrency revolving credit
line agreement which expires on March 1, 1998. Under this agreement,
borrowings bear interest at the bank 's reference rate or 0.75% over the bank
's interbank market rate depending on the currency borrowed. Additionally,
the Company 's Irish subsidiary has $7 million available under a multicurrency
credit line. Under this agreement, borrowings bear interest at 0.75% over the
bank 's prime rate. At March 31, 1996, no borrowings were outstanding under
either credit line. The agreements require the Company to comply with certain
covenants and maintain certain financial ratios. The agreements prohibit the
payment of cash dividends without prior bank approval.
6. COMMITMENTS
The Company leases its manufacturing and office facilities under operating
leases that expire at various dates through December 2014. Lease agreements
for the Company 's corporate facilities contain payment provisions which allow
for changes in rental amounts based upon interest rate changes. The
approximate future minimum lease payments under these leases are as follows:
Year Ended March 31: (in thousands)
- -------------------- ---------------
1997 $ 4,462
1998 3,944
1999 2,979
2000 2,275
2001 206
Thereafter 2,209
- -------------------- ---------------
$ 16,075
---------------
Rent expense for the years ended March 31, 1996, 1995 and 1994 was
approximately $4.3 million, $4 million and $3.5 million, respectively.
The Company has entered into lease agreements relating to its 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, 1996, 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 $36 million during the
lease term.
7. STOCKHOLDERS ' EQUITY
The Company 's Certificate of Incorporation provides for 200 million shares of
common stock and 2 million shares of undesignated preferred stock.
Treasury stock
The Company authorized a stock buyback program in June 1992 to repurchase up
to 4,500,000 shares of common stock. The Company has used the shares actually
repurchased to meet the stock requirements of the Company 's Stock Option and
Employee Qualified Stock Purchase Plans. Under this program, the Company
repurchased 3,030,000 shares of its common stock on the open market during
1993 for a total cost of $17.4 million. During 1996 and 1995, the Company
issued 1,430,502 and 1,599,498, respectively, of these shares in response to
stock option exercises and stock purchase plan requirements. At March 31,
1996, there were no shares of treasury stock outstanding.
Employee qualified stock purchase plan
Under the Company 's 1990 Employee Qualified Stock Purchase Plan (the Stock
Purchase Plan), qualified employees are entitled to purchase shares of common
stock at 85% of the fair market value at certain specified dates. Of the
2,925,000 shares authorized to be issued under this plan, 537,451 and 635,466
shares were issued during 1996 and 1995, respectively, and 252,050 shares were
available for issuance at March 31, 1996. In March 1996, the Company 's Board
of Directors amended the Stock Purchase Plan to increase the number of shares
for issuance thereunder by 460,000 shares, subject to shareholder approval in
fiscal 1997.
Employee stock option plan
The Company has adopted the 1988 Stock Option Plan (the Option Plan) under
which a total of 32,781,000 common shares has been reserved for issuance to
employees, directors, and consultants of the Company. Options to purchase
shares of the Company 's common stock under the Option Plan may be granted at
not less than 85% of the fair value of the stock on the date of grant. To
date, no shares have been issued at less than 100% of the fair value. Options
granted to date expire ten years from date of grant and vest at varying rates
over five years. In March 1996, the Company 's Board of Directors amended the
Option Plan to increase the number of shares reserved for issuance thereunder
by 3,300,000 shares, subject to shareholder approval in fiscal 1997.
Additional information relative to the Option Plan is as follows:
Shares Outstanding Options
Available For Number of Aggregate
(in thousands) Grant Shares Price
Balance March 31, 1993 3,936 6,396 $ 28,052
- ----------------------------- -------------- ------------ -----------
Options granted (3,993) 3,993 52,889
Options exercised - (849) (2,493)
Options canceled 99 (99) (706)
Balance March 31, 1994 42 9,441 77,742
- ----------------------------- -------------- ------------ -----------
Options authorized 4,800 - -
Options granted (3,540) 3,540 56,083
Options exercised - (962) (4,048)
Options canceled 567 (567) (6,035)
Balance March 31, 1995 1,869 11,452 123,742
- ----------------------------- -------------- ------------ -----------
Options authorized 3,000 - -
Options granted (3,971) 3,971 122,885
Options exercised - (1,169) (7,277)
Options canceled 366 (366) (6,288)
Balance March 31, 1996 1,264 13,888 $ 233,062
- ----------------------------- -------------- ------------ -----------
Options exercisable at:
March 31, 1995 3,543 $ 20,796
March 31, 1996 4,577 $ 39,960
============================= ============ ===========
The range of exercise prices for options outstanding at March 31, 1996 was
$0.12 to $48.13. Prices for options exercised during the three year period
ended March 31, 1996 ranged from $0.12 to $23.42.
Stock split
On July 26, 1995, the Company's stockholders approved a 3-for-1 stock split,
in the form of a 200% dividend, payable to stockholders of record as of July
28, 1995. Shares, per share amounts, common stock at par value, and additional
paid in capital have been restated to reflect the stock split for all periods
presented.
Stockholder Rights Plan
In October 1991, the Company adopted a stockholder rights plan and declared a
dividend distribution of one common stock purchase right for each outstanding
share of its 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 common 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.
8. INCOME TAXES
The provision for taxes on income consists of:
(in thousands)
Years ended March 31, 1996 1995 1994
- -------- ---------------- -------- -------- --------
Federal: Current $64,917 $34,698 $23,914
Deferred (7,004) (5,009) (2,481)
---------------- -------- -------- --------
57,913 29,689 21,433
-------- -------- --------
State: Current 10,343 6,748 4,589
Deferred (363) (1,167) (83)
---------------- -------- -------- --------
9,980 5,581 4,506
-------- -------- --------
Foreign: Current 1,555 297 218
Deferred - - -
---------------- -------- -------- --------
1,555 297 218
- -------- -------- -------- --------
TOTAL $69,448 $35,567 $26,157
- -------- -------- -------- --------
The tax benefits associated with the disqualifying dispositions of stock
options or employee stock purchase plan shares reduce taxes currently payable
by $7.9 million, $3.5 million and $2.4 million for 1996, 1995, and 1994,
respectively. Such benefits are credited to additional paid-in capital when
realized.
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:
(in thousands)
Years ended March 31, 1996 1995 1994
- ---------------------------------------------------------- --------- ------------ --------
Income before provision for taxes $170,902 $ 94,845 $67,436
Federal statutory tax rate 35% 35% 35%
Computed expected tax $ 59,816 $ 33,196 $23,602
State taxes net of federal benefit 6,487 3,627 2,929
Tax exempt interest (2,552) (1,155) (930)
Write-off of NeoCAD in-process technology 7,069 - -
Other (1,372) (101) 556
- ---------------------------------------------------------- --------- ------------ --------
Provision for taxes on income $ 69,448 $ 35,567 $26,157
- ---------------------------------------------------------- --------- ------------ --------
The major components of deferred tax assets and liabilities consist of the following:
(in thousands)
Years ended March 31, 1996 1995 1994
- ----------------------------------------------------------- --------- ------------- --------
Deferred tax assets:
Inventory valuation differences $ 3,887 $ 3,393 $ 2,689
Deferred income on shipments to distributors 15,917 9,232 5,459
Nondeductible accrued expenses 7,778 6,245 4,765
Depreciation and amortization (3,082) 1,524 1,620
Other 897 1,000 362
- ------------------------------------------------------------ --------- ------------- --------
Total 25,397 21,394 14,895
--------- ------------- --------
Deferred tax liabilities:
Other (264) (483) (357)
- ------------------------------------------------------------ --------- ------------- --------
Total net deferred tax assets $ 25,133 $ 20,911 $14,538
- -----------------------`------------------------------------ --------- ------------- --------
9. INDUSTRY AND GEOGRAPHIC INFORMATION
The Company operates in one single industry segment comprising the design,
development and marketing of programmable logic semiconductor devices and the
related development system software.
Export revenues consisting of sales from the US to non-affiliated customers in
certain geographic areas were as follows:
(In thousands)
Years ended March 31: 1996 1995 1994
- ---------------------------- -------- -------- -------
US exports to Europe $ 70,124 $ 68,616 $46,645
US exports to Japan 50,957 27,199 15,064
US exports to Rest of World 18,288 13,714 11,502
- ---------------------------- -------- -------- -------
$139,369 $109,529 $73,211
During fiscal 1996, the Company began operations in its European manufacturing
facility. Geographic information for fiscal 1996 is presented in the tables
below. Foreign operations prior to fiscal 1996 were not material.
(in thousands) Income
Fiscal Year Net Before Identifiable
1996 Revenues Taxes Assets
- -------------- --------- -------- -------------
United States $ 482,615 $157,872 $ 650,979
Europe 78,187 12,854 68,861
Other - 176 1,040
- -------------- --------- -------- -------------
$ 560,802 $170,902 $ 720,880
No single end customer accounted for more than 6% of revenues in 1996 or 1995
and 4% of revenues in 1994. Approximately 13%, 14% and 14% of net product
revenues were made through the Company 's largest domestic distributor in
1996, 1995 and 1994 respectively, and another domestic distributor accounted
for 10% of net product revenues in 1996 and 1995 and 12% of net product
revenues in 1994.
10. 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 discovery has been completed in both
cases. No trial date has been set. The Court has stayed further proceedings
in both cases until August 30, 1996 when the next status conference with the
Court is scheduled.
On April 20, 1995, Altera filed an additional suit against the Company in
Federal District Court in Delaware alleging that the Company 's XC5000 family
infringes a certain Altera patent. The Company answered the Delaware suit
denying that the XC5000 family infringes the patent in suit, which is the
subject of the litigation, asserting certain affirmative defenses and
counterclaiming that the Altera Max 9000 family infringes certain of the
Company's patents. The Delaware suit has now been transferred to the United
States District Court for the Northern District of California.
Due to the uncertain nature of the litigation with Altera and because the
lawsuits are still in the pre-trial stage, the ultimate outcome of these
matters cannot be determined at this time. Management believes that is has
meritorious defenses to such claims and is defending them vigorously, and has
not recorded a provision for the ultimate outcome of these matters in its
financial statements. The foregoing is a forward looking statement based on
information presently known to management, and the future outcome could
differ.
In the normal course of business, the Company receives and makes inquires 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.
11. SUBSEQUENT EVENT (UNAUDITED)
On May 17, 1996, the Company signed an agreement with Seiko Epson Corporation
(Seiko), a primary wafer supplier. The agreement provides for an advance to
Seiko of $200 million to be used in the construction of a wafer fabrication
facility in Japan which will provide access to eight-inch sub-micron wafers.
In conjunction with the agreement, $30 million was paid in May 1996 and
additional installments of $30 million are scheduled for November 1, 1996, May
1, 1997, November 1, 1997 and February 1, 1998 or upon the start of mass
production, whichever is later. The final installment for the advance payment
of $50 million is due on or after the later of April 1, 1998 and the date the
outstanding balance of the advance payment is less than $125 million. As a
result, the maximum outstanding amount of the advance payment at any time is
$175 million. Repayment of this advance will be in the form of wafer
deliveries expected to begin in the first half of 1998. In addition to the
advance payments, the Company will provide further funding to Seiko in the
amount of $100 million. This additional funding will be paid after the final
installment of the $200 million advance and the form of the additional funding
will be negotiated at that time.
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, 1996 and 1995, and the related consolidated statements of
income, stockholders' equity and cash flows for each of the three years in the
period ended March 31, 1996. 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, 1996 and 1995, and the consolidated results of
its operations and its cash flows for each of the three years in the period
ended March 31, 1996, in conformity with generally accepted accounting
principles. Also, in our opinion, the related financial statement schedule
taken as a whole, presents fairly in all material respects the information set
forth therein.
/s/ Ernst & Young LLP
San Jose, California
April 17, 1996
Supplementary Financial Data
(in thousands, except per share amounts)
QUARTERLY DATA (UNAUDITED)
Year Ended March 31, 1996
First Second Third Fourth
Quarter Quarter Quarter Quarter
-------- ----------- ------------ --------
Net revenues $125,760 $ 141,212 $ 144,123 $149,707
Gross margin 77,254 89,598 92,451 98,307
Operating income 18,069 * 45,675 49,318 52,694
Net income 5,548 * 29,826 32,190 33,890
Net income per share $ 0.07 * $ 0.37 $ 0.41 $ 0.43
Shares used in per share calculations 77,489 79,601 79,106 79,622
====================================== ======== =========== ============ ========
*After non-recurring charge for in-process technology related to the acquisition of NeoCAD
of $19,366 and $0.25 per share.
Year Ended March 31, 1995
First Second Third Fourth
Quarter Quarter Quarter Quarter
-------- ---------------- -------- --------
Net revenues $ 75,150 $ 79,507 $ 91,283 $109,190
Gross margin 45,991 48,816 55,602 66,229
Operating income 18,831 18,029 * 24,377 30,811
Net income 12,013 11,819 * 15,573 19,873
Net income per share $ 0.16 $ 0.16 * $ 0.21 $ 0.26
Shares used in per share calculations 73,023 72,843 74,778 75,798
====================================== ======== ================ ======== ========
*After non-recurring charge for the write-off of a minority investment of $2,500 and $0.02 per
share net of tax.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
Not applicable.
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
part of this annual report.
(2) The Financial Statement Schedule required by Item 14 (a) is
filed as part 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 1996.
(c) Exhibits.
Exhibit Number Description
- --------------- -------------------------------------------------------------
3.1 (2) Restated Certificate of Incorporation of the Company, as
amended to date.
3.2 (1) 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 (1) Technology Transfer Agreement and Preferred Shares and Warrant
Purchase Agreement for Series E Preferred Stock and Series F
Preferred Stock dated June 9, 1986 between the Company and
Monolithic Memories, Inc.
10.2 (1) Common Stock Purchase Agreement dated March 19, 1990 between
the Company and Advanced Micro Devices, Inc.
10.3 (8) Lease dated March 27, 1995 for adjacent facilities at 2055
Logic Drive and 2065 Logic Drive, San Jose, California.
10.4 (8) 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.
10.5* 1988 Stock Option Plan, as amended.
10.6* 1990 Employee Qualified Stock Purchase Plan, as amended.
10.7 (1) * Form of Indemnification Agreement between the Company and its
officers and directors.
10.8 (4) (6) Patent Cross License Agreement dated as of April 22, 1993
between the Company and Actel Corporation.
10.9.1 (5) Agreement and Plan of Reorganization dated as of March 29,
1995, among Registrant, NeoCAD, Inc. and XNX Acquisition
Corporation.
10.9.2 (5) Certificate of Merger filed on April 10, 1995 between NeoCAD,
Inc. and XNX Acquisition Corporation.
10.10 (7) Employment Offer Letter dated August 5, 1994.
10.11.1 (6) (9) Foundry Venture Agreement dated as of September 14, 1995
between the Company and United Microelectronics Corporation
("UMC").
10.11.2 (6) (9) Fabven Foundry Capacity Agreement dated as of September 14,
1995 between the Company and UMC.
10.11.3 (6) (9) Written Assurances Re Foundry Venture Agreement dated as of
September 29, 1995 between UMC and the Company.
10.12 Indenture dated November 1, 1995 between the Company and
State Street Bank and Trust Company.
10.13 Letter Agreement dated as of January 22, 1996 of the
Company to Willem P. Roelandts.
10.14 Separation Agreement dated as of April 8, 1996 between the
Company and Curtis Wozniak.
10.15 Consulting Agreement dated as of June 1, 1996 between the
Company and Bernard V. Vonderschmitt.
10.16 (6) Advance Payment Agreement entered into on May 17, 1996
between Seiko Epson Corporation and the Company.
11 Statement of Computation of Net Income Per Share.
12 Statement of Computation of Ratios of Earnings to Fixed
Charges.
22.1 Subsidiaries of the Company.
23 Consent of Ernst & Young LLP, Independent Auditors.
25.1 Power of Attorney.
27 Financial Statement Schedule - Schedule II.
___________
(1) 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.
(2) Filed as an exhibit to the Company's Annual Report on Form 10-K
for the fiscal year ended March 30, 1991.
(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 Annual Report on Form 10-K
for the fiscal year ended April 3, 1993.
(5) Filed as an exhibit to the Company's Current Report on Form 8-K
filed on April 18, 1995.
(6) Confidential treatment requested as to certain portions of these
exhibits.
(7) Filed as an exhibit to the Company's Quarterly Report on Form
10-Q for the quarter ended October 1, 1994.
(8) Filed as an exhibit to the company's Annual Report on Form 10-K for
the fiscal year ended April 1, 1995.
(9) Filed as an exhibit to the Company's Quarterly Report on Form
10-Q for the quarter ended September 30, 1995.
* Denotes a management contract or compensatory plan or arrangement.
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 20th day of June, 1996.
XILINX, INC.
By: /s/Willem P. Roelandts
---------------------------
Willem P. Roelandts,
Chief Executive Officer