Form 10-Q (Period Ending December 28, 1996)

(Mark One)

[ X ] Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the quarterly period ended December 28, 1996 or

[ ] Transition report pursuant to section 13 or 15(d) of the Securities Exchange Act of 1934 for the transition period from to .

Commission File Number 0-18548  

Xilinx, Inc.  

Delaware 77-0188631

(State or other jurisdiction of (I.R.S. Employer Identification

incorporation or organization) Number)

2100 Logic Drive, San Jose, California 95124

(Address of principal executive offices) (Zip Code)

(408) 559-7778

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such requirements for the past 90 days.

YES X NO  

Class Shares Outstanding at December 28, 1996

Common Stock, $.01 par value 73,043,000

Three Months Ended Nine Months Ended

Nine Months Ended

1. The accompanying interim consolidated financial statements have been prepared in conformity with generally accepted accounting principles and should be read in conjunction with the Xilinx, Inc. consolidated financial statements for the year ended March 30, 1996. The balance sheet at March 30, 1996 is derived from audited financial statements. The interim financial statements are unaudited but reflect all adjustments which are in the opinion of management of a normal, recurring nature necessary to present a fair statement of results for the interim periods presented. The results for the nine month period ended December 28, 1996 are not necessarily indicative of the results that may be expected for the year ending March 29, 1997.

2. Inventories are stated at the lower of cost (first-in, first-out) or market (estimated net realizable value). Inventories at December 28, 1996 and March 30, 1996 are as follows:

3. On May 17, 1996, the Company signed an agreement with Seiko Epson Corporation (Seiko), a primary wafer supplier. The agreement provides for total payments to Seiko of $300 million to be used in the construction of a wafer fabrication facility in Japan which will provide access to eight-inch, sub-micron wafers. Of the total payments, $200 million represents an advance payment for future wafer deliveries. In conjunction with the agreement, $30 million installments were paid in May 1996 and November 1996 and additional installments of $30 million are scheduled for 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 or 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 will be $175 million. Repayment of this advance will be in the form of wafer deliveries using U.S. dollar denominated pricing. Specific wafer pricing will be based upon the prices of similar wafers manufactured by other, specifically identified, leading-edge foundry suppliers. The advance payment provision also provides for interest to be paid to the Company in the form of free wafers. 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.

4. The Company discontinued the XC8100 family of one-time programmable antifuse devices. As a result, the Company recorded a pretax charge against earnings of $5 million. This charge primarily related to the write-off of inventories held by Xilinx and its distributors and for termination charges related to purchase commitments to foundry partners for work in process wafers which had not completed the manufacturing process.

5. On September 16, 1996, the Company's Board of Directors authorized a stock repurchase program whereby up to 2 million shares of the Company's common stock may be purchased in the open market from time to time as market and business conditions warrant. The Company plans to use shares repurchased to meet the stock requirements of the Company's Stock Option and Employee Qualified Stock Purchase plans. During the quarter ended December 28, 1996, the Company repurchased 490,000 shares of common stock for $15.7 million, of which 483,000 shares were reissued during the period in response to stock option exercises and stock purchase plan requirements. As of January 31, 1997, an additional 252,500 shares of common stock have been repurchased for $10.3 million.

6. The Company is currently involved in patent litigation with Altera Corporation (see Part II, Item 1, 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, 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. Due to the uncertain nature of the litigation with Altera and because the lawsuits are still in the pre-trial stage, actual results could differ materially.

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 below.

Results of operations - Third quarter and first nine months of fiscal 1997 compared to the third quarter and first nine months of fiscal 1996

Revenues

Revenues for the third quarter of fiscal 1997 of $135.6 million represented a $8.5 million, or 5.9%, decrease from the corresponding period of fiscal 1996. Revenues for the first nine months of fiscal 1997 were $416.4 million, an increase of 1.3% from the corresponding period of 1996. Revenues for the third quarter of fiscal 1997, as compared to the comparable prior year period, were adversely impacted by the general slowdown in the semiconductor industry, customer efforts to reduce inventory levels, customer programs which have not ramped up as quickly as expected and price reductions in response to a competitive pricing environment. The revenue decrease during the third quarter of fiscal 1997 was primarily attributable to decreases in revenues relating to the non-proprietary members of the XC3000 family, the XC3100 family and the XC4000 family partially offset by increases in revenues relating to the XC5200 family. Relative to the prior year quarter, revenues for the non-proprietary members of the XC3000 family decreased by $9.7 million, or 45.4%, revenues for the XC3100 family decreased by $2.3 million, or 14.8% and revenues for the XC4000 family decreased by $4 million, or 6.3% offset by an $8.5 million increase in revenue for the XC5200 family, up from $2.8 million in the prior year. Revenues from two of the Company's newer product families, the XC4000EX and the XC9500, contributed more than $2 million in revenues during the third quarter of fiscal 1997. Revenues for the Company's first generation FPGA products, which includes the XC2000, XC3000 and XC3100 families, represented 32.5% of aggregate component revenues in the third quarter of fiscal 1997 and decreased 20.3% relative to the results of the comparable quarter of the prior fiscal year. Revenues for the Company's second generation FPGA products, which includes the XC4000, XC4000EX and XC5200 families as well as the recently introduced XC6200 family, represented 54.9% of aggregate component revenues and exceeded the revenues of the comparable quarter of the prior year by 8.6%. The increase in revenues relating to the second generation of products is primarily a function of increasing demand for the functionality, performance and pricing provided by these product families. The other products generation, consisting primarily of the CPLD families, the Hardwire product and serial proms, represented 12.6% of aggregate component revenues in the third quarter of fiscal 1997 and decreased 10.0% relative to the results of the comparable quarter of the prior year. Proprietary products constituted 91.4% of revenues for the third quarter of fiscal 1997, as compared to 85.2% in the comparable quarter last year. Software revenues represented approximately 3% of total revenues for all periods presented.

Independent semiconductor industry analyst projections indicated that the overall semiconductor industry would experience lower growth rates for 1996 than those experienced over the last few years. See "Factors Affecting Future Operating Results" for discussion relating to potential impact of semiconductor industry conditions on the Company's business.

The Company expects total revenues for fiscal 1997 to approximate fiscal 1996 revenues. The Company believes that the conditions that led to slow sequential quarterly revenue growth or declining sequential quarterly revenue growth over the last five fiscal quarters, are still present. The Company also realizes that a prolonged slowdown in the overall semiconductor industry would detrimentally impact Xilinx. Based on current inventory levels and wafer capacity availability, the Company is generally able to deliver products to customers within fairly short lead times. As a result, many of the Company's customers are placing orders for near-term delivery and providing the Company relatively limited visibility to demand for products in the intermediate to long-term range. In this environment, the level of customer orders for a given quarter is difficult to predict. While the Company currently projects the revenue growth rate for the last quarter of fiscal 1997 to be in the low single-digit range, no assurance can be given that this will be the case.

The preceding two paragraphs contain 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 Operating Results", "Dependence on New Products" and those described above.

Gross Margin

Cost of revenues were $52.2 million, or 38.5% of revenues, and $156.1 million, excluding the impact of the $5 million non-recurring write-off relating to the XC8100 product family in the second quarter of fiscal 1997, or 37.5% of revenues, for the third quarter and first nine months of fiscal 1997, respectively. Costs of revenues for the comparable periods of fiscal 1996 were $51.7 million, or 35.9% of revenues, and $151.8 million, or 36.9% of revenues, respectively. The increase in the cost of revenues as a percentage of revenues during the third quarter of fiscal 1997 over the comparable quarter of the prior year was primarily attributable to price reductions and increased inventory reserves relating to an expanded level of inventory partially offset by favorable impact of lower wafer costs (reflecting the strengthened U.S. dollar exchange rate against the yen) and improved yields. The Company was able to partially offset the negative impact of ongoing price reductions for its existing products with increased volumes of newer, proprietary, higher margin products although not to the extent the Company has done so in prior periods. 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 gross margins of up to 65.7% of revenues (achieved during the fourth quarter of fiscal 1996) were neither sustainable nor desirable in the future. Rather, gross margins closer to the historical range of 60% to 62% of revenues, including the 61.5% gross margin realized in the third quarter of fiscal 1997, 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.

Research and Development

Research and development expenditures were $17.7 million for the third quarter and $52.3 million for the first nine months of fiscal 1997, or 13.1% and 12.6% of revenues respectively, compared to $16.2 million and $47.7 million, or 11.3% and 11.6% of revenues, respectively, in the comparable fiscal 1996 periods. Research and development expenditures for the third quarter of fiscal 1997 increased as a percentage of revenues as a function of the decrease in revenues. Research and development expenses increased in the third quarter of fiscal 1997 over the comparable fiscal 1996 period as a result of increased headcount, increased purchases of engineering wafers and higher depreciation for design software. The 9.5% increase in research and development expenditures for the first nine months of fiscal 1997 as compared to the comparable fiscal 1996 period resulted primarily from increased headcount, higher engineering wafer purchases, and increased facility and support costs associated with an expanded scope of operations. 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.

Non-recurring Charges

During the first nine months of fiscal 1996, the Company incurred a $19.4 million non-recurring write-off of in-process technology relating to the acquisition of NeoCAD, Inc.

Marketing, General and Administrative

Marketing, general and administrative expenses were $28.8 million for the third quarter and $87.1 million for the first nine months of fiscal 1997, or 21.3% and 20.9% of revenues, respectively, compared to $26.9 million and $79.1 million, or 18.7% and 19.3% of revenues, respectively, in the comparable fiscal 1996 periods. These expenses have increased in amount primarily as a result of increased headcount as well as increased marketing and sales related costs. Such expenses have increased as a percentage of revenues in the third quarter of fiscal 1997 as compared to the comparable fiscal 1996 period, reflecting the recent decline in revenues. 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.

Operating Income

Operating income was $36.9 million, or 27.2% of revenues, and $120.9 million, excluding the impact of the $5 million non-recurring write-off relating to the XC8100 product family in the second quarter of fiscal 1996, or 29% of revenues, for the third quarter of fiscal 1997 and the first nine months of fiscal 1997, respectively. Operating income was $49.3 million, or 34.2% of revenues, and $132.4 million (excluding the impact of the $19.4 million write-off of in-process technology associated with the acquisition of NeoCAD), or 32.2% of revenues, respectively, for the comparable fiscal 1996 periods. Operating income decreased $12.4 million during the third quarter of fiscal 1997 as compared to the comparable period of the prior year. The decrease was primarily attributable to a decrease in revenues achieved in the comparable three month periods. Operating income decreased $11.6 million, excluding the impact of non-recurring write-offs, during the first nine months of fiscal 1997 as compared to the comparable period of the prior year. The decrease was primarily attributable to increased expenses and minimal revenue growth.

Interest and other income, net

The Company incurs interest expense on the $250 million of 5 1/4% convertible notes issued in November 1995. The Company earns interest income on its cash, cash equivalents, short-term investments, restricted investments and on the outstanding amount of the advances for wafer purchases. The amount of interest earned is a function of the balance of cash invested as well as the prevailing interest rates. The Company also records 25% of United Silicon Inc.'s net income as joint venture equity income. Net interest and other income was $1.9 million in the third quarter of fiscal 1997 as compared to $1.4 million during the comparable prior year period. The increase is primarily attributable to increased interest income resulting from higher investment portfolio balances and joint venture equity income. The Company's investment portfolio contains tax-advantaged municipal bonds, which generally have pretax yields which are less than the interest rate on the convertible notes. For financial reporting purposes, the Company 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 could decrease in the future.

Provision for Income Taxes

The Company recorded a tax provision of $12.6 million (32.5% of income before taxes) for the third quarter of fiscal 1997 and a tax provision of $40.7 million (33.8% of income before taxes) for the first nine months of fiscal 1997 as compared to a tax provision for the third quarter of fiscal 1996 of $18.5 million (36.5% of income before taxes) and a provision for taxes for the first nine months of fiscal 1996 of $50 million (42.5% of income before taxes). The higher tax rate for the first nine months of fiscal 1996 resulted from the non-recurring write-off of in-process technology which is not tax deductible. Excluding the non-recurring write-off of in-process technology, the Company's effective tax rate for the first nine months of fiscal 1996 was 36.5%. The reduced tax rate in fiscal 1997 resulted from legislation reinstating the R&D Tax Credit as well as an increase in foreign operations where tax rates are lower than the U. S. effective tax rate.

Risk Factors

The following risk factors may be associated with the Company's business:

Factors Affecting Future 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 and implementation 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 and minimize inventory levels. 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, such as those described in this report, are a much less useful predictor of the future than is the case in many older, more stable and less dynamic industries.

The semiconductor industry has historically been cyclical and subject to significant economic downturns at various times, 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.

Many 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, a factor which may adversely affect the market price of the Company's Common Stock.

Dependence Upon Independent Manufacturers

The Company does not manufacture the wafers used for its products. In fiscal 1997, most of the Company's wafers have been manufactured by Seiko Epson Corporation (Seiko) and United Microelectronics Corporation (UMC). The Company has depended upon these suppliers and others to produce wafers with competitive performance and cost attributes and to deliver them to the Company in a timely manner. While the timeliness, yield and quality of wafer deliveries to date from these 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 a material adverse effect on the Company's operating results. In addition, the Company's purchases from Seiko are denominated in yen. In fiscal 1997 the US dollar has strengthened against the yen; however, prolonged periods of a weakened US dollar exchange rate against the yen could adversely affect manufacturing costs.

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. Although the Company is currently able to obtain wafers from existing suppliers in a timely manner, 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 satisfaction of customer delivery dates, 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., with UMC and other parties to obtain wafer capacity from a new wafer fabrication facility. 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's recent agreement with Seiko was made to obtain additional capacity from a facility currently under construction and expected to provide wafers in volume in calendar 1998. 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.

Dependence on New Products

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, the ability to utilize advanced process technologies, 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. Revenues relating to the Company's first generation FPGA products are expected to decline in the future as a percentage of aggregate component revenues and the Company will be increasingly dependent on revenues derived from second generation FPGA's and other products. 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.

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 assurance 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. The Company is currently involved in developing lower cost architectures which 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 functionality, 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 "Litigation").

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.

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, Lucent Technologies is manufacturing and marketing the Company's non-proprietary XC3000 products and is employing that technology to provide additional FPGA products offering higher density. Seiko has rights to manufacture the Company's products and market them in Japan and Europe but is not currently doing so. Advanced Micro Devices 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. Intellectual Property

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. There can be no assurance that third parties will not assert infringement claims against the Company in the future, that assertions by third parties will not result in costly litigation or that the Company would prevail in such litigation or be able to license any valid and infringed patents from third parties on commercially reasonable terms. Litigation, regardless of its outcome, could result in substantial 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.

Litigation

The Company is currently engaged in patent litigation with Altera Corporation (Altera). See ìLegal Proceedingsî in Part II.

Financial Condition, Liquidity and Capital Resources

The Company's financial condition at December 28, 1996 remained strong. Total current assets exceeded total current liabilities by 5.6 times, as compared to 5.2 times at March 30, 1996. Since its inception, the Company has used a combination of equity and debt financing and internal cash flow to support operations, obtain additional wafer supply capacity, make acquisitions and investments in complementary technologies, obtain additional capital equipment and facilities and finance inventory and accounts receivable.

The Company has generated positive cash flow from operations for the first nine months of fiscal 1997. As of December 28, 1996, the Company had cash, cash equivalents and short-term investments of $390.1 million and working capital of $463.2 million as compared to $378 million and $436.1 million, respectively, at March 30, 1996. Cash generated by operations of $88.7 million for the first nine months of fiscal 1997 was $19.3 million lower than the $108 million generated for the first nine months of fiscal 1996. The decrease in cash generated by operations during the first nine months of fiscal 1997 over the comparable fiscal 1996 period resulted primarily from the unfavorable impact of the changes in inventory and deferred income on shipments to distributors offset by the favorable impact of the change in accounts receivable.

Cash flows used for investing activities for the nine months ended December 28, 1996, included $31.5 million of net short-term investment proceeds. Uses of cash included the $60 million advance to Seiko for wafer purchases (see Note 3 of Notes to Consolidated Condensed Financial Statements) and $22.3 million of property, plant and equipment acquisitions. Property, plant and equipment additions decreased $20.9 million from the comparable fiscal 1996 period. This decrease is primarily due to significantly reduced expenditures relating to the Company's Ireland manufacturing facility which were partially offset by expenditures incurred relating to the Company's facility being constructed in Boulder, Colorado. In the first nine months of fiscal 1996, the Company's investing activities included $33.4 million (net of cash acquired) incurred relating to the acquisition of NeoCAD and $23.5 million of net purchases of restricted investments relating to the Company's Corporate facilities. Additionally, the Company invested the majority of the $244.2 million net proceeds from the issuance of convertible notes in short-term investments.

Cash flows provided by financing activities were $6.2 million in the first nine months of fiscal 1997 and was attributable to $22.7 million in proceeds from the issuance of common stock under employee stock plans offset by acquisitions of treasury stock of $15.7 (see Note 5 of Notes to Consolidated Condensed Financial Statements). For the comparable fiscal 1996 period, financing activities included $244.2 million in net proceeds from the issuance of convertible notes and $11.7 million in proceeds from issuance of common stock under corporate stock plans.

Stockholders' equity increased by $91.9 million, principally as a result of the net income for the nine months ended December 28, 1996, proceeds from the issuance of common stock under employee stock plans and related tax benefits from stock options, offset by the $15.7 million in Treasury Stock purchased during the period.

The Company has available credit line facilities for up to $47 million of which $7 million is intended to meet occasional working capital requirements for the Company's wholly owned Irish subsidiary. At December 28, 1996, no borrowings were outstanding under the lines of credit.

Under the terms of the Company's agreement relating to the United Silicon Inc. (USI) joint venture, the Company expected to invest additional amounts in installments of approximately $68 million and $34 million. The USI joint venture is accounted for by the equity method, as the Company records 25% of USI's net income as joint venture equity income. The Board of Directors of USI recently voted to postpone the wafer fabrication facility construction schedule by approximately six months. As a result, the additional payments are also postponed. The revised timing of construction of the facility and the related payments are subject to further change based on overall industry conditions and other factors. United Microelectronics Corporation has committed to and is supplying the Company with wafers manufactured in an existing facility until capacity is available in the new facility.

In the first quarter of fiscal 1997, the Company entered into a wafer foundry/supply agreement with Seiko. The agreement provides for total payments of $300 million to be made to Seiko, of which $200 million is in the form of advance payments and $100 million is in the form of an advance or an alternate form to be negotiated at a later date. Repayment of the advances will be in the form of wafer deliveries, which are expected to begin in the first half of calendar 1998, using dollar denominated pricing. The advance payment provision also provides for interest to be paid to the Company in the form of free wafers. See Note 3 of Notes to Consolidated Condensed Financial Statements.

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. Part II. Other Information

Item 1. 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. Both cases have been consolidated and assigned to Judge Spencer Williams. The cases are currently scheduled for trial on September 15, 1997. 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 that suit, denying that the XC5000 family infringes the patent in suit, asserting certain affirmative defenses and counterclaiming that the Altera Max 9000 family infringes certain of the Company's patents. That suit has now been transferred to the United States District Court for the Northern District of California and is also before Judge Spencer Williams. Management believes that it has meritorious defenses to Altera's claims and is defending them vigorously. The foregoing is a forward looking statement based on information presently known to management. Due to the uncertain nature of the litigation with Altera and because the lawsuits are still in the pre-trial stage, 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 6. Exhibits and Reports on Form 8-K.

(a) Exhibit 11: Statement of Computation of Net Income Per Share

Exhibit 12: Statement of Computation of Ratio of Earning to Fixed Charges

(b) Reports on Form 8-K - None

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

XILINX, INC.  

Date February 10, 1997 /s/ Gordon M. Steel

Gordon M. Steel

Senior Vice President of Finance and

Chief Financial Officer

(as principal accounting and financial

officer and on behalf of Registrant)

EXHIBIT 11

Three Months Ended Nine Months Ended

Dec. 28, Dec. 30, Dec. 28, Dec. 30

NOTE: The convertible debt is not included in the calculation of fully diluted net income per share since their inclusion would have had an anti-dilutive effect.

EXHIBIT 12

Three Months Ended Nine Months Ended

Dec. 28, Dec. 30 Dec. 28 Dec. 30