The Company's financial condition at March 31, 1998 remained strong. Total current
assets exceeded total current liabilities by 4.8 times, compared to 6.2 times at March 31,
1997. Since its inception, the Company has used a combination of equity and debt financing
and cash flow from operations to support on-going business activities, make acquisitions
and investments in complementary technologies, obtain facilities and capital equipment and
finance inventory and accounts receivable.
CASH, CASH EQUIVALENTS AND SHORT-TERM INVESTMENTS. Xilinx's cash, cash
equivalents and short-term investments decreased by $63.7 million in 1998 as cash was used
to fund investing and financing activities. Cash, cash equivalents and short-term
investments represented 38.5% of total assets at March 31, 1998. The Company generated
cash flow of $218.4 million from operating activities in 1998, offset by $200.8 million of
cash used for investing activities and $66.6 million used in financing activities.
Investing activities during fiscal 1998 included expenditures for property, plant and
equipment together with a deposit for a facility under construction on the San Jose
corporate campus, an additional investment in the USIC joint venture and additional
advances to Seiko Epson for wafer purchases. Investment proceeds were received from the
net maturity of short-term investments. Financing activities during 1998 included $93.8
million to acquire treasury stock offset by $27.2 million in proceeds from sales of common
stock under employee option and stock purchase plans.
RECEIVABLES. Receivables decreased 15.7% from $72.2 million at the end of
1997 to $60.9 million at the end of 1998. In addition, days sales outstanding at the end
of each year decreased from 43 days in 1997 to 36 days in 1998. In fiscal 1998 receivables
decreased as the Company increased collection efforts relating to international sales as
well as increased allowances for pricing adjustments and customer returns.
INVENTORIES. Inventories decreased 11.3% from $62.4 million at March 1997
to $55.3 million at March 1998. Inventory levels at March 31, 1998 represent 86 days of
inventory, which is in line with the Company's objective of 70 to 90 days, compared to 96
days at March 31, 1997. Inventory levels decreased during fiscal 1998 as both architecture
and manufacturing process technology improvements have permitted continued cost reductions
as well as continued improvement of inventory management. The Company seeks to balance two
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, package and speed configurations to meet estimates of customer demand. At
the same time, the Company also wishes to minimize the handling costs associated with
maintaining higher inventory levels and to realize fully the opportunities for cost
reductions associated with architecture and manufacturing process advancements. The
Company continually strives to balance these two objectives so as to provide excellent
customer response at a competitive cost.
ADVANCES FOR WAFER PURCHASES. In fiscal 1997, the Company signed an
agreement with Seiko Epson, a primary wafer supplier. This agreement was amended in fiscal
1998 and now provides for an advance to Seiko Epson of $150.0 million. In conjunction with
the agreement, $60.0 million was paid in fiscal 1997 and an additional $90.0 million was
paid in fiscal 1998. Repayment of this advance is in the form of wafer deliveries, which
began during the fourth quarter of fiscal 1998. Specific wafer pricing is based upon the
prices of similar wafers manufactured by other, specifically identified, leading-edge
foundry suppliers. The advance payment provision also provides for interest to be paid to
the Company in the form of free wafers.
PROPERTY, PLANT AND EQUIPMENT. During 1998, Xilinx invested $29.7 million
in property and equipment, as compared to $26.8 million in 1997. During 1998, the Company
purchased land in Longmont, Colorado for approximately $7 million and continued to invest
in software development tools and semiconductor design, test and manufacturing equipment
at each of its manufacturing locations.
CURRENT LIABILITIES. Current liabilities increased from $97.3 million in
fiscal 1997 to $125.7 million at the end of 1998. The increase was primarily attributable
to an increase in deferred income on shipments to distributors due to increased sales
through distribution as well as distributor demand for new product lines.
LONG-TERM DEBT AND LINES OF CREDIT. In November 1995, the Company issued
$250 million in convertible subordinated notes. The Company has credit line facilities for
up to $46.2 million of which $6.2 million is intended to meet occasional working capital
requirements for the Company's Ireland manufacturing facility. At March 31, 1998 and 1997,
no borrowings were outstanding under the lines of credit. See Note 5 of Notes to
Consolidated Financial Statements.
STOCKHOLDERS' EQUITY. Stockholders' equity grew by 12.1% in 1998 to $550.2
million. The increase of $59.5 million was primarily attributable to $126.6 million in net
income and $43.3 million related to the issuance of common stock and the tax benefit from
stock options, partially offset by the $93.8 million used to acquire treasury stock.
Subsequent to March 31, 1998, the Company began an additional treasury stock program to
purchase up to approximately 3 million shares as market and business conditions warrant.
Stockholders' equity as a percentage of total assets was 58.5% for 1998 and 57.9% for
COMMITMENTS. The Company invested an additional $67.4 million in the USIC
joint venture in fiscal 1998 to bring the total investment in USIC at the end of fiscal
1998 to $101.7 million. The Company currently holds a 25% equity ownership in USIC and the
right to receive 31.25% of the wafer capacity from this facility. Under the terms of the
agreement entered into between the Company and USIC, the Company may be required to make a
third equity installment of up to an additional $30.0 million in the joint venture during
fiscal 1999, if warranted based on the capital and operational requirements of the joint
venture. United Microelectronics Corporation (UMC) has committed to and is supplying the
Company with wafers manufactured in an existing facility until capacity is available in
the USIC facility. The Company is accounting for this investment using the equity method.
See further discussion in Notes 4 and 6 of Notes to Consolidated Financial Statements. As
the US dollar increased in value relative to the New Taiwan dollar during fiscal 1998,
adjustments were made to the carrying value of the investment of approximately $17 million
since its inception. Offsetting amounts were recorded to the cumulative translation
adjustment account within stockholders' equity.
EMPLOYEES. During 1998, Xilinx experienced a 9% increase in the number of
its employees. The Company had 1,391 employees at the end of fiscal 1998 as compared to
1,277 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.