• Consolidated Statement of Income
• Consolidated Balance Sheet
• Consolidated Statement of Cash Flows
• Consolidated Statement of Stockholders' Equity
• Notes to Consolidated Financial Statements
• Selected Consolidated Financial Data

Consolidated Statement of Income

Consolidated Balance Sheet

Consolidated Statement of Cash Flows

(in thousands)

Consolidated Statement of Stockholders' Equity

(in thousands)

See accompanying notes.

Notes to Consolidated Financial Statements

1. Organization and summary of significant accounting policies

Organization The Company 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 designs and supplies field programmable gate arrays (FPGAs), erasable programmable logic devices (EPLDs) and related development system software. Wafers have been manufactured primarily by two Japanese suppliers. The Company is dependent upon these suppliers to produce and deliver wafers on a timely basis. 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 1995, 1994 and 1993 consisted of 52, 52 and 53 weeks, respectively. Cash equivalents and investments Cash and cash equivalents consist 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 with original 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 3 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.

Effective April 3, 1994, the Company adopted Statement of Financial Accounting Standards No. 115 "Accounting for Certain Investments in Debt and Equity Securities " (FAS 115), which creates certain classification categories for investments held as of or acquired after April 3, 1994, based on the nature of the securities and the intent and investment goals of the Company. FAS 115 has been adopted on a prospective basis, and the financial statements of prior years have not been restated. The cumulative effect of the adoption was not material.

Under FAS 115, 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 interest income. The fair values for marketable debt and equity securities are based on quoted market prices. The cost of securities sold is based on the specific identification method.

The following is a summary of available-for-sale and held-to-maturity securities at March 31, 1995:

All investments classified as "available-for-sale securities" have maturities due in one year or less. The net adjustment to unrealized holding losses on available-for-sale securities is included as a separate component of stockholders' equity, totaled $329,000 in 1995. Proceeds from sales of available-for-sale securities and the related realized gains or losses were immaterial in 1995.

At March 31, 1995, held-to-maturity securities relate to certain collateral requirements of a new lease agreement for an adjacent office facility and have maturities due in one year or less. See Note 3 of Notes to Consolidated Financial Statements.

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, 1995 and 1994:

Advances for wafer purchases During fiscal 1995, the Company advanced $42,000,000 to a primary wafer supplier. Repayment of this amount will be in the form of wafer deliveries, which are expected to be received during fiscal 1996.

Depreciation and amortization Depreciation is computed for financial reporting purposes using the straight-line method over the estimated useful lives of the assets of three to thirty years. 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.

Translation of foreign currencies The Company translates accounts denominated in foreign currencies in accordance with Statement of Financial Accounting Standards No. 52 using the U.S. dollar as the functional currency. Foreign currency transaction gains and losses have not been material in any year.

Concentrations of credit risk The Company believes that the concentration of credit risk in its trade receivable 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.

Derivative financial instruments Effective April 3, 1994, the Company adopted the provisions of Financial Accounting Standards Board Statement No. 119, "Disclosure about Derivative Financial Instruments and Fair Value of Financial Instruments" (FAS 119).

As part of its ongoing asset and liability management activities, the Company enters into currency forward and option contracts to hedge foreign exchange risk relating to the Company's purchase of wafers, which are primarily denominated in yen. The maturities on these foreign currency instruments are less than 12 months. The Company does not enter into derivative financial instruments for trading purposes.

At March 31, 1995, commitments under contracts to purchase yen in fiscal 1996 were outstanding in the aggregate amount of $4,000,000. At March 31, 1995, these contracts to purchase yen had an unrealized gain of $600,000, which represents their fair value. 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.

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 have not been presented because the amounts would be antidilutive.

2. Obligations Under Capital Leases

The Company leases certain equipment under capital equipment lease lines. At March 31, 1995 and 1994, equipment under capital leases amounted to approximately $6,875,000 and $7,604,000, respectively. Accumulated amortization for such equipment was approximately $5,342,000 and $4,668,000 at March 31, 1995 and 1994, respectively.

The approximate future minimum lease payments and the present value of these payments are as follows:

3. Commitments

The Company leases its manufacturing and office facilities under operating leases that expire at various dates through December 1999. Lease agreements for the Company's primary 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:

Rent expense for the years ended March 31, 1995, 1994 and 1993 was approximately $3,985,000, $3,466,000 and $3,132,000 respectively.

During 1995, the Company entered into a lease agreement relating to an adjacent office facility which would allow the Company to purchase the facility 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, 1995, the total amount related to the leased facility for which the Company is contingently liable is $13,375,000. Under the terms of this agreement, the Company is required to maintain collateral (restricted investments) of $12,625,000 during the lease term.

Subsequent to March 31, 1995, the Company entered into another lease agreement relating to its primary manufacturing and office facilities. The terms and conditions of this lease are the same as those described in the preceding paragraph. The Company is also required to maintain additional collateral (restricted investments) during the lease term of $23,800,000 beginning in April 1995. The approximate future minimum lease payments for this lease are included in the amounts above.

4. Stockholders' equity

The Company's Certificate of Incorporation provides for 50,000,000 shares of common stock and 2,000,000 shares of undesignated preferred stock.

Treasury stock The Company authorized a stock buyback program in June 1992 to repurchase up to 1,500,000 shares of common stock. The Company is using 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 1,010,000 shares of its common stock on the open market during 1993 for a total cost of $17,418,000. Such shares are carried at cost. During 1995, the Company issued 533,166 of these shares in response to stock option exercises and stock purchase plan requirements. At March 31, 1995, 476,834 shares of treasury stock were outstanding.

Employee qualified stock purchase plan Under the Company's 1990 Employee Qualified 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 800,000 shares authorized to be issued under this plan, 211,822 and 179,202 shares were issued during 1995 and 1994, respectively, and 88,167 shares were available for issuance at March 31, 1995. In April 1995, the Company's Board of Directors amended the Stock Purchase Plan to increase the number of shares for issuance thereunder by 150,000 shares, subject to shareholder approval.

Employee stock option plan The Company has adopted the 1988 Stock Option Plan (the Option Plan) under which a total of 9,927,000 common shares are 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 April 1995, the Company's Board of Directors amended the Option Plan to increase the number of shares reserved for issuance thereunder by 980,000 shares, subject to shareholder approval.

Additional information relative to the Option Plan is as follows:

The range of exercise prices for options outstanding at March 31, 1995 was $0.35 to $70.25. Prices for options exercised during the 3 year period ended March 31, 1995 ranged from $0.35 to $54.00.

Stock Split On March 17, 1995, the Company's Board of Directors approved a two-for-one stock split, subsequently revised to a three-for-one stock split on May 20, 1995, subject to stockholder approval, effected in the form of a stock dividend payable to stockholders of record as of July 28, 1995. Prior to effecting the stock split, the Company will increase the amount of Common Stock shares authorized, subject to stockholder approval, to 200,000,000 shares. No share or per share amounts in the accompanying consolidated financial statements and notes have been retroactively adjusted to reflect the split for any period presented.

5. Income Taxes

The provision for taxes on income consists of:

The tax benefits associated with the disqualifying dispositions of stock options or employee stock purchase plan shares reduce taxes currently payable by $3,456,000, $2,417,000 and $1,312,000, for 1995, 1994, and 1993, respectively. Such benefits are credited to additional paid-in capital when realized.

The provision for taxes reconciles to the amount obtained by applying the Federal statutory rate to income before provision for taxes as follows:

The major components of deferred tax assets and liabilities consist of the following:

6. Industry and Geographic Information

The Company operates in a single industry segment. The Company markets and services its products in the United States and in foreign countries through its sales organizations and through distributors. U.S. export revenue from shipments to Europe represented 19%, 18% and 19% of net revenue in 1995, 1994 and 1993, respectively, which U.S. export revenue from shipments to Japan and the Pacific Rim represented 10%, 10% and 11% of net revenue, respectively, during these same periods.

Approximately 14%, 14% and 15% of net product sales were made through the Company's largest domestic distributor in 1995, 1994 and 1993, respectively, and another domestic distributor accounted for 10%, 12% and 11% of net product sales in 1995, 1994 and 1993, respectively.

7. Write-off of Minority Investment

During 1995, the Company incurred a $2,500,000 write-off of a minority investment in Star Semiconductor Corporation (Star) after Star advised its investors that it lacked sufficient capital to continue as a business concern. The write-off included the balance of the Company's investment in Star and the costs of certain lease guaranties provided Star.

8. Reverse Repurchase Transaction

During 1995, the Company completed a reverse repurchase transaction relating to $350,000,000 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 write-off of the investment in Star. As a result of this transaction, the Company recorded approximately $9,700,000 of interest expense, $4,700,000 of interest income and $4,800,000 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.

9. Litigation

On June 7, 1993, the Company filed suit against Altera Corporation in the United States District Court for the Northern District of California for infringement of certain of the Company's patents . On the same day, Altera Corporation filed suit against the Company alleging that certain of the Company's products infringe certain Altera patents. On June 18, 1993, the Company filed a motion for a preliminary injunction asking the court to enjoin the sales of certain Altera products.

On May 24, 1994, the Court denied the Company's motion. On June 27, 1994, the Company filed a motion for a partial summary judgment seeking a ruling that the Company's products do not infringe certain of the Altera patents. On December 9, 1994, the Court denied the Company's motion.

On March 10, 1995, the Court appointed a Special Master and noted that the Xilinx vs. Altera case would be tried first. The Court stayed all proceedings in the Altera vs. Xilinx case. Discovery in the Xilinx vs. Altera case is ongoing. No trial date has been set.

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.

Management believes it is unlikely that the ultimate outcome of the litigation will have a material, adverse effect on the Company's financial position and results of operations.

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.

10. Subsequent Event

On April 10, 1995, the Company acquired NeoCAD, Inc. (a Delaware Corporation) for $35,000,000 in cash. In conjunction with the acquisition, the Company will allocate the purchase price to the assets acquired and liabilities assumed based on their estimated fair values. As a result of the purchase price allocation, the Company expects to expense the portion of the purchase price which represents in-process technology during the Company's fiscal quarter ended July 1, 1995. NeoCAD has been engaged in business to develop, market and sell development tool software for programmable electronic technologies. The Company intends to continue the business of NeoCAD and to integrate NeoCAD's operations with its own as soon as reasonably practicable.

REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS

The Board of Directors and Stockholders

Xilinx, Inc.

We have audited the accompanying consolidated balance sheet of Xilinx, Inc. as of March 31, 1995 and 1994, and the related consolidated statements of income, stockholders' equity and cash flows for each of the three years in the period ended March 31, 1995. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements 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 financial statements referred to above present fairly, in all material respects, the consolidated financial position of Xilinx, Inc. at March 31, 1995 and 1994, and the consolidated results of its operations and its cash flows for each of the three years in the period ended March 31, 1995, in conformity with generally accepted accounting principles.

San Jose, California
April 18, 1995

Selected Consolidated Financial Data

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