Securities and Exchange Commission
Washington, D.C. 20549
|☑||Annual report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934|
For the fiscal year ended April 3, 2021
|☐||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 000-18548
(Exact name of registrant as specified in its charter)
|Delaware|| ||2100 Logic Drive|| ||77-0188631|
|(State or other jurisdiction of|
incorporation or organization)
| ||San Jose|| ||(I.R.S. Employer|
|(Address of principal executive offices)||(Zip Code)|
(Registrant's telephone number, including area code) (408) 559-7778
Securities registered pursuant to Section 12(b) of the Act:
|Title of each class||Trading Symbol||Name of each exchange on which registered|
|Common stock, $0.01 par value||XLNX||The Nasdaq Global Select Market|
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes þ No o
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes o No þ
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 filing requirements for the past 90 days. Yes þ No o
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes þ No o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer", "smaller reporting company" and "emerging growth company" in Rule 12b-2 of the Exchange Act.
|Large accelerated filer|
|Non-accelerated filer ||o|
|Smaller reporting company|
|Emerging growth company|
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report ☑
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ☐ No þ
The aggregate market value of the voting stock held by non-affiliates of the registrant based upon the closing price of the registrant's common stock on September 26, 2020 as reported on the Nasdaq Global Select Market was approximately $20,370,129,000. Shares of common stock held by each executive officer and director and by each person who owns 5% or more of the outstanding common stock have been excluded in that such persons may be deemed affiliates. This determination of affiliate status is not necessarily a conclusive determination for other purposes.
As of April 30, 2021, the registrant had approximately 245,840,000 shares of Common Stock outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
Parts of the Proxy Statement for the Registrant's Annual Meeting of Stockholders to be held on August 4, 2021 are incorporated by reference into Part III of this Annual Report on Form 10-K.
For the Fiscal Year Ended April 3, 2021
TABLE OF CONTENTS
This Annual Report on Form 10-K contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements may be found throughout this Annual Report, which may include discussions concerning our pending merger with Advanced Micro Devices, Inc., development efforts, strategy, new product introductions, backlog, litigation and other matters, including potential risks and other statements regarding the COVID-19 pandemic. Forward-looking statements involve numerous known and unknown risks and uncertainties and are based on current expectations that could cause actual results to differ materially and adversely from those expressed or implied. Such risks include, but are not limited to, those discussed throughout this document as well as in Item 1A "Risk Factors" and elsewhere in this document. Often, forward-looking statements can be identified by the use of forward-looking words, such as "may," "will," "could," "should," "expect," "believe," "anticipate," "estimate," "continue," "plan," "would," "intend," "project" and other similar terminology, or the negative of such terms. We disclaim any responsibility to update or revise any forward-looking statement provided in this Annual Report or in any of our other communications for any reason.
Xilinx, Inc. (Xilinx, the Registrant, the Company or we) designs and develops programmable devices and associated technologies, including:
•integrated circuits (ICs) in the form of programmable logic devices (PLDs), including programmable System on Chips (SoCs), three-dimensional ICs (3D ICs) and Adaptive Compute Acceleration Platform (ACAP): a highly integrated multi-core heterogeneous compute platform;
•software design tools to program the PLDs;
•software development environments and embedded platforms;
•targeted reference designs;
•printed circuit boards; and
•intellectual property (IP), which consists of Xilinx and various third-party verification and IP cores.
In addition to its programmable platforms, Xilinx provides design services, customer training, field engineering and technical support.
Xilinx develops highly flexible and adaptive processing platforms that enable rapid innovation across a variety of technologies –from the endpoint to the edge to the cloud. Xilinx is the inventor of field programmable gate arrays (FPGA), hardware programmable SoCs and ACAP, designed to deliver the most dynamic processor technology in the industry and enable the adaptable, intelligent and connected world of the future. Our product portfolio is designed to provide high integration and quick time-to-market for electronic equipment manufacturers in sub-markets such as data center, wireless, wired, aerospace and defense, test, measurement and emulation, industrial, scientific and medical, automotive, audio, video and broadcast and consumer.
We sell our products and services through independent domestic and foreign distributors and through direct sales to original equipment manufacturers (OEMs) and electronic manufacturing service providers (EMS). Sales are generated by these independent distributors, independent sales representatives or our direct sales organization.
Xilinx was founded and incorporated in California in February 1984. In April 1990, the Company was reincorporated in Delaware. Our corporate facilities and executive offices are located at 2100 Logic Drive, San Jose, California 95124, and our website address is www.xilinx.com.
Please also see the discussion in Item 7. "Management's Discussion and Analysis of Financial Condition and Results of Operations" as well as in Item 1A "Risk Factors" for further information regarding the COVID-19 pandemic declared by the World Health Organization in March 2020.
Merger with Advanced Micro Devices, Inc.
On October 27, 2020, we announced that we had entered into an Agreement and Plan of Merger (as it may be amended from time to time, the Merger Agreement) with Advanced Micro Devices, Inc. (AMD), a Delaware corporation, and Thrones Merger Sub, Inc., a wholly-owned subsidiary of AMD (Merger Sub), under which, subject to the satisfaction or (to the extent permissible) waiver of the conditions set forth therein, Merger Sub will merge with and into us, and we will survive the merger as a wholly-owned subsidiary of AMD (Merger). Under the terms of the Merger Agreement, at the effective time of the Merger (Effective Time), each share of our common stock, par value $0.01 per share, issued and outstanding immediately prior to the Effective Time (other than treasury shares and any shares of our common stock held by AMD or Merger Sub) will be converted into the right to receive 1.7234 fully paid and non-assessable shares of common stock, par value $0.01 per share, of AMD (with cash being paid, without interest and less applicable withholding taxes, in lieu of any fractional shares of AMD common stock).
The Merger has been approved by our board of directors, the board of directors of AMD, our stockholders and the stockholders of AMD. The completion of the Merger is subject to customary closing conditions, including, among others, the receipt of various regulatory approvals. Subject to the satisfaction or (to the extent permissible) waiver of such conditions, the Merger is currently expected to close by the end of calendar year 2021. We cannot guarantee that the Merger will be completed on a timely basis or at all or that, if completed, it will be completed on the terms set forth in the Merger Agreement.
The aggregate financial advisor fees associated with the Merger are $90.0 million in total, $9.0 million of which was paid upon the public announcement of the Merger, and the remainder is contingent upon the closing of the Merger. We are also obligated to pay up to an additional $40.0 million calculated based on the extent to which the value of our shares in the Merger at the time of closing exceeds a specified threshold. If the Merger is not completed, we could be required to pay a termination fee of $1.0 billion to AMD under certain circumstances as described in the Merger Agreement or AMD could be required to pay a termination fee to us equal to $1.5 billion, or $1.0 billion under certain circumstances, as described in the Merger Agreement.
Several silicon architectures including microprocessors, graphics processing units (GPUs), application specific standard products (ASSPs), and custom application specific integrated circuits (ASICs) are used for compute in most digital electronic systems today. Central processing units (CPUs) historically have been the most common platform used by software developers but have limitations when used for modern compute tasks ranging from real-time control to machine learning. Fixed function acceleration and heterogeneous systems ranging from GPUs, ASSPs, and custom ASICs meet some of these compute demands but with a limited range of flexibility.
Xilinx develops adaptable hardware platforms that enable hardware acceleration and rapid innovation across a variety of technologies - from the endpoint to the edge to the cloud. Xilinx is the inventor of the FPGA, hardware programmable SoCs and the ACAP, all designed to deliver the most dynamic processor technology for adaptable systems. In particular, the ACAP draws on the strengths of CPUs, FPGAs, and fixed function accelerators to accelerate any workload with ease-of-use for software and hardware developers alike.
Other advantages of Xilinx adaptable platforms include:
•Faster time-to-market and increased design flexibility. Both advantages are enabled by Xilinx development tools which allow users to implement and revise their designs quickly. In contrast, ASICs and ASSPs require significant development time and offer limited, if any, flexibility to make design changes.
•Xilinx adaptable platforms are standard components. This means that the same device can be sold to many different users for a myriad of applications. In sharp contrast, ASICs and ASSPs are customized for an individual user or a specific application.
Hardware adaptable platforms are generally disadvantaged in terms of relative device size when compared to devices that are designed to perform a fixed function in a single or small set of applications. ASICs and ASSPs tend to be smaller than FPGAs, hardware programmable SoCs, and ACAPs performing the same fixed function, resulting in a lower unit cost.
However, there is a high fixed cost associated with ASIC and ASSP development that is not applicable to customers of hardware programmable ICs. This fixed cost of ASIC and ASSP development significantly increases for every next generation technology node. From a total cost of development perspective, ASICs and ASSPs have generally been more cost effective when used in high-volume production, and hardware programmable platforms have generally been more cost effective when used in low- to mid-volume production. However, we expect hardware adaptable platforms to be able to address higher volume applications and gain market share from ASIC and ASSP suppliers as the fixed cost of ASIC and ASSP development increases on next generation technology nodes.
An overview of PLD and market applications for our products is shown in the following table:
|A&D, Industrial and TME||Aerospace and Defense|
• Secure Communications
|Industrial, Scientific and Medical|
• Factory Automation
|• Medical Imaging|
|• Machine Vision|
|Test, Measurement and Emulation|
• Semiconductor Test and Measurement Equipment
• Semiconductor Emulation and Prototyping
|Automotive, Broadcast and||Automotive|
• Driver Assistance Systems
• Driver Information Systems
• Infotainment Systems
|Audio, Video and Broadcast||• Post Production Equipment|
| ||• "Prosumer" Video Equipment|
|Consumer||• Digital Projectors|
| ||• Multifunction printers|
|Wired and Wireless||Wireless|
• 3G/4G/5G Base Stations/Antennas
• Wireless Backhaul
• Enterprise Routers and Switches
• Metro Optical Networks
|Data Center||Data Center|
• Compute, Networking and Storage
Strategy and Competition
Our strategy for growth is to displace ASICs, ASSPs and traditional PLDs in next generation electronic systems. Additionally, we focus on enabling “building the adaptable intelligent world" with an emphasis on the three major elements described below.
•Data center first: Xilinx is ramping up its efforts with key data center customers, ecosystem partners and software application developers, to further enable innovation and deployments in compute acceleration, computational storage and network acceleration.
•Accelerated growth in core markets: core markets consist of automotive; wireless infrastructure; wired communications; audio, video and broadcast; aerospace and defense; industrial, scientific and medical; test, measurement and emulation; and consumer technologies where the Company has leadership technology and substantial market traction. These core markets and customers are central to Xilinx, and Xilinx continues to drive and enable innovation in these areas.
•Drive adaptive computing with the introduction of ACAP: in March 2018, we announced ACAP, which we believe is a breakthrough product category. ACAP is a highly integrated multi-core heterogeneous compute platform that can be programmed at the hardware level to adapt to the needs of a wide range of applications and workloads. An ACAP's adaptability, which can be done dynamically in milliseconds during operation, delivers levels of performance and performance per-watt that is unmatched by CPUs or GPUs.
The costs and risks associated with application-specific devices can only be justified for high-volume or highly-specialized commodity products. Programmable platforms, alternatively, are becoming critical for our customers to meet increasingly stringent product requirements – cost, power, performance and density – in a business environment characterized by increased complexity, shrinking market windows, rapidly changing market demands, capped engineering budgets, escalating ASIC and ASSP engineering costs and increased economic and development risk.
With every new generation of our products, our strategy is to increase the performance, density and system-level functionality and integration, while driving down cost and power consumption at each manufacturing process node. This enables us to provide simpler, smarter programmable platforms and design methodologies allowing our customers to focus on innovation and differentiation of their products. Our strategy includes expanding our user base by making our platforms more accessible to users who don’t have prior experience with hardware programmable devices.
Our products now compete in several areas of the semiconductor industry that are intensely competitive and characterized by rapid technological change, increasing levels of integration, product obsolescence and continuous price erosion. We expect continued competition from our primary PLD competitors such as Intel Corporation (Intel), Lattice Semiconductor Corporation (Lattice) and Microsemi Corporation (Microsemi, acquired by Microchip), and from ASSP vendors such as Broadcom Corporation (Broadcom), Marvell Technology Group, Ltd. (Marvell), Analog Devices and Texas Instruments Incorporated (Texas Instruments), as well as from companies such as NVIDIA with whom we historically have not competed. In addition, we expect continued competition from the ASIC market, which has been ongoing since the inception of FPGAs. Other competitors include manufacturers of:
•high-density programmable logic products characterized by FPGA-type architectures;
•high-volume and low-cost FPGAs as programmable replacements for ASICs and ASSPs;
•ASICs and ASSPs with incremental amounts of embedded programmable logic;
•high-speed, low-density complex programmable logic devices (CPLDs);
•high-performance digital signal processing (DSP) devices;
•products with embedded processors;
•products with embedded multi-gigabit transceivers;
•discrete general-purpose GPUs targeting data center and automotive applications; and
•other new or emerging programmable logic products.
We believe that important competitive factors in the logic IC industry include:
•product performance, reliability, quality, power consumption and density;
•adaptability of products to specific applications;
•ease of use and functionality of software design tools;
•availability and functionality of predefined IP;
•completeness of applicable software solutions;
•adherence to industry-standard programming environments;
•inventory and supply chain management;
•access to leading-edge process technology and assembly capacity;
•ability to provide timely customer service and support; and
•access to advanced packaging technology.
A brief overview of the product offerings is listed in the table below. These products make up most of our revenues. Additionally, some of our more mature product families have been excluded from the table, even though they continue to generate revenues. We operate and track our results in one operating segment.
|Artix UltraScale+||March 2021|
|Alveo SmartNIC||February 2021|
|Versal Premium||March 2020|
|Versal Prime||October 2018|
|Versal AI Core||October 2018|
|Zynq UltraScale+ RFSoCs||February 2017|
|Virtex UltraScale+||January 2016|
|Kintex UltraScale+||December 2015|
|Zynq UltraScale+||September 2015|
See information under the caption "Results of Operations - Net Revenues" in Item 7. "Management's Discussion and Analysis of Financial Condition and Results of Operations" for information about our revenues from our product families. See also "Note 15. Segment Information" to our consolidated financial statements included in Item 8. "Financial Information and Supplementary Data" for information regarding segments.
Versal ACAP Products
Versal, the first ACAP, is a fully software-programmable, heterogeneous compute platform that combines Scalar Engines, Adaptable Engines, and Intelligent Engines to achieve dramatic performance improvements over today's fastest FPGA and CPU implementations for data center, wired network, 5G wireless, automotive driver assist applications and will be used in nearly all markets that we serve over time. The Scalar Engines are built from the dual-core ARM Cortex-A72, providing a 2X increase in
per-core single-threaded performance compared to Xilinx's previous-generation ARM Cortex-A53 core. A combination of advanced architecture and power improvements from the 7 nanometer (nm) Fin Field Effect Transistor (FinFET) process yields a 2X improvement in watt over the earlier 16nm implementation. The Adaptable Engines are made up of programmable logic and memory cells connected with the next generation of the industry's fastest programmable logic. The Intelligent Engines are an array of innovative Very Long Instruction Word (VLIW) and Single Instruction, Multiple Data (SIMD) processing engines and memories, all interconnected with 100s of terabits per second of interconnect and memory bandwidth.
Alveo Board Products
The Alveo accelerator cards provide optimized acceleration for a broad range of workloads spanning compute, networking, and storage and are available for deployment in servers from the edge to the cloud. As a real-time computing platform, Alveo is built for maximum application-specific performance and low-latency and is built on our latest FPGA architectures with the industry’s fastest memory, networking connectivity, and PCIe interconnect. Customers can develop accelerated applications on Alveo using tools like the Vitis Developer Environment or choose from a broad range of pre-built accelerated applications via a large and growing ecosystem of software partners. Scale-out architectures are made easy through Alveo support for Docker containers and Kubernetes orchestration.
UltraScale+ Product Families
The UltraScale+ portfolio consists of three product families and is manufactured using Taiwan Semiconductor Manufacturing Company Limited's (TSMC) 16 nm FinFET+ process. The UltraScale+ portfolio includes FPGAs, 3D IC technology, Multi- Processing System on a Chip (MPSoCs) products, combining new memory, 3D on 3D and multiprocessing SoC technologies, and the industry’s first All Programmable SoC architecture with integrated radio frequency (RF) data converters.
•Zynq UltraScale+ RFSoCs integrate RF data converters into an All Programmable SoC architecture. Complete with an ARM Cortex-A53 processing subsystem, UltraScale+ programmable logic, and the highest signal processing bandwidth in a Zynq UltraScale+ device, the new family provides a comprehensive RF signal chain for wireless, cable access, test and measurement, early warning/radar, and other high-performance RF applications.
•Virtex UltraScale+ FPGAs, which include industry-leading capabilities such as 58G Transceivers, Peripheral Component Interconnect Express (PCIe) Gen 4 integrated cores, and UltraRam on-chip memory technology, provide the required performance and integration needed for next generation data center, 400G and terabit wireline, test and measurement, and aerospace and defense applications. We have recently expanded the Virtex portfolio to include devices with integrated High Bandwidth Memory (HBM) for the highest on chip memory density, and also added the industry’s highest capacity FPGA , the VU19P for ASIC prototyping and emulation applications.
•Kintex UltraScale+ devices provide a strong price/performance watt balance in a FinFET node, delivering a very cost-effective solution for high-end capabilities including transceiver and memory interface line rates, as well as 100G connectivity cores. These devices are ideal for both packet processing and DSP-intensive functions and are well suited for applications ranging from wireless technology to high-speed wired networking and data center.
•The Zynq UltraScale+ MPSoC product family represents the Company's second generation All Programmable SoC family. This new family combines seven user programmable processors cores including a 64-bit quad-core ARM Cortex A53 Application Processing Unit, a 32-bit dual-core ARM Cortex R5 Real Time Processing Unit, and an ARM Mali 400 Graphics Processing Unit. These devices enable the development of next generation embedded vision, automotive, industrial Internet of things (IoT) and communication systems by providing significant increases in system level performance/watt and any-to-any connectivity with the security and safety required for next generation systems.
UltraScale Product Families
These devices deliver an ASIC-class advantage, based on the UltraScale architecture and utilizing TSMC's 20nm gate density process. These devices deliver next generation routing, ASIC-like clocking, and enhancements to logic and fabric to eliminate interconnect bottlenecks while supporting consistent device utilization.
•Kintex UltraScale FPGAs represent the Company's second-generation mid-range FPGA family. These devices offer high price-performance at the lowest power. Kintex UltraScale devices are designed to meet the requirements for the growing number of key applications including next generation wireline and wireless communications and ultra-high definition displays and equipment.
•Virtex UltraScale FPGAs provide advanced levels of performance, system integration and bandwidth on a single chip. The largest family member delivers 4.4M logic cells, more than doubling our largest 28nm device and delivering 50M equivalent ASIC gates. Virtex UltraScale devices are used in the industry's most challenging applications including: 400G communication applications, high-performance computing, surveillance and reconnaissance systems and ASIC emulation and prototyping.
28nm Product Families
The 28nm product families are fabricated on a high-K metal gate, high-performance and low power 28nm process technology. These product families are based on a scalable and optimized architecture, which enables design, IP portability and re-use across all families as well as provides designers the ability to achieve the appropriate combination of input/output (I/O) support, performance, feature quantities, packaging and power consumption to address a wide range of applications. The 28nm product families include:
▪Virtex-7 FPGAs, including 3D ICs, are optimized for applications requiring the highest capacity, performance, DSP and serial connectivity with transceivers operating up to 28G. Target applications include 400G and 100G line cards, high-performance computing and test and measurement applications.
•Kintex-7 FPGAs represent Xilinx's first mid-range FPGA family. These devices maximize price-performance and performance per watt. Target applications include wireless Long Term Evolution (LTE) infrastructure, video display technology and medical imaging.
•Artix-7 FPGAs offer the lowest power and system cost at higher performance than alternative high-volume FPGAs. These devices are targeted to high-volume applications such as handheld portable ultrasound devices, multi-function printers and software defined radios.
•The Zynq-7000 family is the first family of Xilinx programmable SoCs. This class of product combines an industry-standard ARM dual-core Cortex-A9 MPCore processing system with Xilinx 28nm architecture. There are five devices in the Zynq-7000 SoC family that allow designers to target cost sensitive as well as high-performance applications from a single platform using industry-standard tools. These devices are designed to enable incremental market opportunities in applications such as industrial motor control, driver assistance and smart surveillance systems and smart heterogeneous wireless networks.
•Spartan-7 FPGAs offer the best performance and power consumption in their class, along with small form factor packaging to meet the most stringent requirements. These devices are ideally suited for industrial, consumer, and automotive applications including any-to-any connectivity, sensor fusion, and embedded vision.
40nm and 45nm Product Families
The Virtex-6 FPGA family consists of 13 devices and is the sixth generation in the Virtex series of FPGAs. Virtex-6 FPGAs are fabricated on a high-performance 40nm process technology. There are three Virtex-6 families, and each is optimized to deliver different feature mixes to address a variety of markets.
The Spartan-6 FPGA family is fabricated on a low-power 45nm process technology. The Spartan-6 family is the PLD industry's only 45nm high-volume FPGA family, consisting of 11 devices in two product families.
Other Product Families
Prior generation Virtex families include Virtex-5, Virtex-4, Virtex-II Pro, Virtex-II and the original Virtex family. Spartan family FPGAs include Spartan-3 FPGAs, the Spartan-3E family and the Spartan-3A family. Prior generation Spartan families include Spartan-IIE, Spartan-II, Spartan XL and the original Spartan family.
CPLDs operate on the lowest end of the programmable logic density spectrum. CPLDs are single-chip, nonvolatile solutions characterized by instant-on and universal interconnect. CPLDs combine the advantages of ultra-low power consumption with the benefits of high performance and low cost. Prior generations of CPLDs include the CoolRunner and XC9500 product families.
Design Platforms and Services
We offer three types of platforms that support our customers' designs and reduce their development efforts: FPGAs, hardware programmable SoCs, and ACAPs. All devices feature adaptable hardware that enable our customers to implement domain-specific architectures on the same physical device. With both hardware-accelerated performance and flexibility beyond what CPUs, GPUs, ASSPs, and ASICs can offer, customers can introduce new innovations to the market quickly.
FPGAs feature reconfigurable hardware as well as integrated memory, digital signal processing, analog mixed signal, high-speed serial transceivers, and networking cores coupled with advanced software for a broad range of applications in all of Xilinx’s end markets.
Our hardware programmable SoCs feature multi-core processors with integrated programmable hardware fabric targeting autonomous embedded systems needing real-time control, analytics, sensor fusion, and adaptable hardware for differentiation and acceleration. Our Zynq UltraScale+ RFSoCs feature integrated high-performance RF data converters targeting wireless, radar, and cable access applications. Enabled by both hardware and software design tools and an extensive operating system, middleware, software stack, and IP ecosystem, Xilinx SoC platforms target software developers as well as traditional hardware designers.
ACAPs are the most recent addition to the silicon portfolio and represent a new device category. Versal (the industry’s first ACAP) combines Scalar Processing Engines, Adaptable Hardware Engines, and Intelligent Engines with leading-edge memory and interfacing technologies to deliver powerful heterogeneous acceleration for any application. ACAPs are ideally suited to accelerate a broad set of applications in the emerging era of big data and artificial intelligence. Versal ACAP's hardware and software can be programmed and optimized by software developers, data scientists, and hardware developers alike, enabled by a host of tools, software, libraries, IP, middleware, and frameworks that enable industry-standard design flows.
Software Development Platform
To accommodate hardware designers, as well as software developers and AI scientists, we provide design tools and software stacks tailored to each user profile.
In 2012, we introduced the next-generation hardware design environment with the Vivado Design Suite, aimed at improving designer productivity. Vivado supplies hardware design teams with the tools and methodology needed to leverage C-based functions, optimized IP reuse, system integration automation, functional verification and accelerated design closure. When coupled with the UltraFast Design Methodology, this unique combination is proven to accelerate productivity by an order of magnitude compared with traditional hardware design methodologies, by enabling designers to work at a high level of abstraction.
In 2015, we introduced the SDx development environment, which expanded our user base to include a broad community of software developers in both existing and new markets. The SDSoC and SDAccel environments respectively offered familiar embedded and accelerated server-based application development environments, for C++ and Open Computing Language (OpenCL) developers.
In 2019 and 2020, we introduced the Vitis unified software platform, as well as Vitis AI. Vitis enables the development and deployment of embedded software and accelerated applications, on our heterogeneous platforms based on FPGAs or Adaptive SoCs. It provides a unified programming model for accelerating End-point, Edge, Cloud, and Hybrid computing applications. Vitis includes a rich set of hardware-accelerated open-source libraries optimized for our platforms. It also integrates with open source Frameworks such as Gstreamer for video analytics, FFmpeg for video transcoding. Vitis AI integrates with Deep Learning Framework such as TensorFlow and PyTorch. This enables a growing ecosystem to develop applications, accelerated on our hardware platforms, from End-point to the Cloud. These applications range from Data Center to 5G wireless, automotive, industrial and various other computing applications.
Xilinx and various third parties offer hundreds of no charge and fee-bearing IP core licenses covering Ethernet, memory controllers, Interlaken and peripheral component interconnect express (PCIe) interfaces, as well as an abundance of domain-specific IP in the areas of embedded, DSP and connectivity, and market-specific IP cores. In addition, our products and technology leverage industry standards such as ARM AMBA AXI-4 interconnect technology, IP-XACT and Institute of Electrical and Electronics Engineers (IEEE) P1735 encryption to facilitate plug-and-play FPGA design and take advantage of the large ecosystem of ARM IP developers.
Alveo Board Products
Our Alveo accelerator cards provide an ideal platform for developing applications and solutions for deployment in the data center, at the edge or the cloud. To make it highly accessible for developers, Alveo is available on most major OEM server platforms, as well as a growing presence across all major cloud providers as FPGA-as-a-Service. A wealth of developer tools is available for Alveo through Vitis accelerated libraries, as well as developer articles on our website.
Development Boards, Kits and Configuration Products
In addition to the broad selection of legacy development boards presently offered, we have introduced a new unified board strategy that enables the creation of a standardized and coordinated set of base boards available both from Xilinx and our ecosystem vendors, all utilizing the industry-standard extensions that enable customization for market specific applications. Adopting this standard for all our base boards enables the creation of a scalable and extensible delivery mechanism for all Xilinx programmable platforms.
We also offer comprehensive development kits including hardware, design tools, IP and reference designs that are designed to streamline and accelerate the development of domain-specific and market-specific applications.
Finally, we offer a range of configuration products including one-time programmable and in-system programmable storage devices to configure our FPGAs. These programmable read-only memory (PROM) products support all our FPGA devices.
We and certain third parties have developed and continue to offer a robust ecosystem of IP, boards, tools, services and support through our alliance program. We also work with these third parties to promote our programmable platforms through third-party tools, IP, software, boards and design services.
In May 2016, we led the formation of the very broad Cache Coherent Interconnect Acceleration (CCIX) consortium with the singular goal of bringing a high-performance, open acceleration framework to the data center market. As of March 2021, this consortium had approximately 40 members, ranging from silicon providers to a rich ecosystem of partners including design, foundry, verification, software and system vendors.
Our engineering services provide customers with engineering resources to augment their design teams and to provide expert design-specific advice. We tailor our engineering services to the needs of its customers, ranging from hands-on training to full design creation and implementation.
Research and Development
Our research and development (R&D) activities are primarily directed towards the design of new ICs and the development of products, containing design automation tools for hardware, embedded software, optimized software tools and libraries that extend the reach of our platforms to software developers, the design of logic IP, the adoption of advanced semiconductor manufacturing processes for ongoing cost reductions, performance and signal integrity improvements and lowering PLD power consumption. We are also actively contributing to numerous industry open source software initiatives across a broad range of technologies.
As a result of our R&D efforts, we have introduced a number of new products during the past several years including the Virtex and Kintex UltraScale and UltraScale+, Zynq UltraScale+MPSoC, Zynq UltraScale+ RFSoCs, Alveo board and Versal ACAP families. We have enhanced our IP core offerings and software design suite (Vivado) as well as introduced our unified software platform (Vitis). Through process technology collaboration with our foundry suppliers along with strategic investment in Electronic Design Automation (EDA) tools and improved design techniques, we were the first PLD company to ship 45nm, 28nm, 20nm and 16nm FPGA devices in high volume. Additionally, our investments in R&D have allowed us to ship the first adaptable 28nm, 16nm and 7nm devices with embedded ARM technology, the industry's first All Programmable SoC with integrated RF Data Converters, as well as the industry's first 3D Stacked Silicon Interconnect Technology IC devices on the 28nm, 20nm and 16nm process nodes.
The COVID-19 pandemic did not have any significant impact on our R&D activities and efforts in fiscal 2021. Although almost all of our employees have been working remotely since March 16, 2020, we have long had a business continuity plan and invested in technologies and tools that would support our employees in effectively working remotely. We believe technical leadership and innovation are essential to our future success, and we will continue to invest in our technology.
Sales and Distribution
We sell our products to OEMs, EMS and to electronic components distributors who resell these products to OEMs and EMS. We are also developing a network of Value Added Resellers (VARs) and Integrated Solution Vendors (ISVs) for our Alveo products. We characterize distributors, VARs and ISVs as our distribution channel.
We use a dedicated global sales and marketing organization, and to a lesser extent, independent sales representatives, to generate sales. In general, we focus our direct demand creation efforts on key accounts. Our distribution channel and independent sales representatives create demand within the balance of our customer base in defined territories or for markets aligned with their focus. The distributor channel also provides inventory, value-added services and logistics for a wide range of OEM or end customers.
As discussed under the caption "We are subject to regulatory and operational risks associated with conducting business operations outside of the U.S. which could adversely affect our business." in Item 1A "Risk Factors," how, where and to whom we sell our products is affected by an evolving regulatory environment, among other factors. Even when specific regulatory changes – such as the April 2020 announcement by the Bureau of Industry and Security (BIS) of the U.S. Department of Commerce of the elimination of the license exception CIV (civil end-users), which had permitted certain national security-controlled items to be exported to certain destinations, such as China, without a license, and the expansion of controls over items for military end-uses in China, Russia and Venezuela – are not ultimately expected to have a material adverse effect on our business, financial condition and/or operating results, they nonetheless require substantial management and operational resources in order to maintain compliance.
Whether Xilinx, the distributor, or the independent sales representative identifies the sales opportunity, a local distributor will process and fulfill the majority of all customer orders. In such situations, distributors are the sellers of the products and as such they bear most legal and financial risks generally related to the sale of commercial goods, including such risks as credit loss, inventory shrinkage, theft and foreign currency fluctuations, but excluding certain indemnity and warranty liabilities.
In accordance with our distribution agreements and industry practice, we have granted our authorized distributors the contractual right to return certain amounts of unsold product on a periodic basis and also receive price adjustments for unsold product in the case of a change in list prices subsequent to the initial sale. Revenues from sales to our distributors and non-distributors are recognized upon the transfer of control, which typically occurs at shipment.
Avnet, Inc. (Avnet) distributes our products worldwide. Avnet's revenue accounted for 43%, 42% and 45% of our worldwide net revenues in fiscal 2021, 2020 and 2019, respectively. As of April 3, 2021 and March 28, 2020, Avnet accounted for 13% and 31%, respectively, of our total net accounts receivable. We expect our accounts receivable to fluctuate as we partner with our distributors to manage their inventory requirements. We also use other regional distributors throughout the world. We believe distributors provide a cost-effective means of reaching a broad range of customers while providing efficient logistics services. Since PLDs are standard products, they do not carry many of the inventory risks posed by ASICs. From time to time, we may add or terminate distributors in specific geographies, or move customers to a direct support or fulfillment model as we deem appropriate given our strategies, the level of distributor business activity and distributor performance and financial condition. See "Note 2. Summary of Significant Accounting Policies and Concentrations of Risk" to our consolidated financial statements, included in Item 8. "Financial Statements and Supplementary Data," for information about concentrations of credit risk and "Note 15. Segment Information" for information about our revenues from external customers and domestic and international operations.
No other distributor or end customer accounted for more than 10% of our net revenues in fiscal 2021, 2020 or 2019.
As most of our employees, and those of our customers, are currently working remotely in response to the COVID-19 pandemic, we may experience some delays in processing orders and deliveries in fiscal 2022 for the duration of the pandemic.
As of April 3, 2021, our backlog from OEM customers and backlog from end customers reported by our distributors scheduled for delivery within the next three months was $645.0 million, compared to $503.0 million as of March 28, 2020. Orders from end customers to our distributors are subject to changes in delivery schedules or to cancellation without significant penalty. As a result, backlog from both OEM customers and end customers reported by our distributors as of any particular period may not be a reliable indicator of revenue for any future period.
As a fabless semiconductor company, we do not manufacture wafers used for our IC products or PROMs. Rather, we purchase our wafers from independent foundries including TSMC, United Microelectronics Corporation (UMC) and Samsung Electronics Co., Ltd. (Samsung). TSMC manufactures the wafers for our Advanced Products.
Precise terms with respect to the volume and timing of wafer production and the pricing of wafers produced by the semiconductor foundries are determined by periodic negotiations with each wafer foundry.
Our strategy is to focus our resources on market development and creating new ICs, board products and supporting software ecosystem rather than on wafer fabrication. We continuously evaluate opportunities to enhance foundry relationships and/or obtain additional capacity from our main suppliers as well as other suppliers of wafers manufactured with leading-edge process technologies, and we adjust loadings at particular foundries to meet our business needs.
While we did not experience any manufacturing or supply disruption in fiscal 2021, as the COVID-19 pandemic continues, the pandemic's impact on the timing and overall demand from customers and the availability of supply chain, logistical services and component supply may adversely impact our business and financial results.
Sort, Assembly and Test
Wafers are sorted by the foundry or independent sort subcontractors. Sorted die are assembled by subcontractors. During the assembly process, the wafers are separated into individual die, which are then assembled into various package types. Following assembly, the packaged units are generally tested by independent test subcontractors or by Xilinx personnel. We purchase most of our assembly services from Siliconware Precision Industries Ltd. and most of our test services from King Yuan Electronics Company in Taiwan.
Generally, the COVID-19 pandemic and related business closures have not disrupted our sorting, testing and packaging activities to date. However, if the pandemic is not contained and its social, economic and business impact broadens, we may experience delay in deliveries by business partners and, as a result, a material adverse impact on our operations and financial conditions.
Xilinx has achieved and currently maintains quality management system certification to ISO9001 for our facilities in San Jose, California; Longmont, Colorado; Singapore; and Hyderabad, India. In addition, Xilinx achieved and currently maintains ISO 14001 and ISO45001 environmental health and safety management system certifications in the San Jose and Singapore locations.
Intellectual Property and Licenses
While our various intellectual property rights (including patents, copyrights, trade secrets, and trademarks) are important to our success, we believe our business as a whole is not materially dependent on any particular patent or license, or any particular group of patents or licenses. As of April 3, 2021, we held over 5,300 issued patents, which vary in duration, and over 1,300 pending patent applications relating to our technology in various jurisdictions around the world. We maintain an active patent filing program in the areas of, but not limited to, circuits, software, applications, system and platform architecture, IP cores, testing methodologies, semiconductor manufacturing and other technologies relating to our products and business. We have licensed portions of our patent portfolio to certain external parties and have obtained patent licenses from certain external parties as well.
We have acquired various licenses from external parties to certain technologies that are implemented in our products, including our IP cores and devices. These licenses support our continuing ability to make and sell our products. We have also acquired licenses to certain proprietary software, open-source software, and related technologies, such as compilers, for our design tools. Continued use of such software and technology is important to the operation of the design tools upon which our customers depend.
Xilinx, the Xilinx logo, Alveo, Artix, CoolRunner, ISE, Kintex, Spartan, Versal, Virtex, Vitis, Vivado and Zynq are trademarks of Xilinx in the United States and/or other countries. Maintaining these trademarks, and the goodwill associated with them, is important to our business. We have also obtained the rights to use certain trademarks owned by consortiums and other trademark owners that are related to our products and business.
We intend to continue to protect our intellectual property vigorously. We believe that failure to enforce our intellectual property rights or failure to protect our trade secrets effectively could have an adverse effect on our financial condition and results of operations. We incurred, and in the future we may continue to incur, litigation expenses to defend against claims of infringement and to enforce our intellectual property rights against third parties. However, any such litigation may or may not be successful.
Xilinx places a high level of importance on corporate responsibility. Through senior-level sponsorship, regular environmental, health and safety assessments and company-wide performance targets, we strive to achieve a culture that emphasizes contribution to local and global communities through a number of key initiatives:
We strive to meet or exceed industry and regulatory standards for ethical business practices, product responsibility, and supplier management. All of Xilinx's directors, officers and employees are required to comply not only with the letter of the laws, rules and regulations that govern the conduct of our business, but also with the spirit of those laws.
We continually monitor regulatory requirement and resource trends in order to identify, manage and control activities that have an environmental impact. We focus on the conservation of energy and natural resources, reducing the solid and chemical waste of our operations, avoiding and preventing pollution and minimizing our overall environmental impact with regards to the communities around us and consistent with global climate change efforts.
We are committed to growing strategic relationships with a wide range of local organizations and programs that are designed to develop and strengthen communities located around the world. Xilinx develops local community relationships at key sites through funding and involvement that encourages active participation, teamwork, and volunteerism. Xilinx supports opportunities initiated by its employees and that involve participation and empowerment of its employees. We are committed to charitable giving programs that work towards systemic change and measurable results.
We provide a safe and healthy work environment for all employees. The Xilinx Code of Social Responsibility outlines standards to ensure that working conditions at Xilinx are safe and that workers are treated with respect, fairness and dignity.
To support the health and well-being of our employees, customers, partners and communities from the COVID-19 pandemic, almost all of our employees have been working remotely since mid-March 2020. We have long had a business continuity plan in place for unforeseeable situations and, over the years, have invested in technology that would provide our employees the flexibility and security to work effectively and remotely in case of business disruptions.
Our worldwide business activities are subject to various laws, rules, and regulations of the United States as well as of foreign governments. Compliance with these laws, rules, and regulations has not had a material effect upon our capital expenditures, results of operations, or competitive position, and we do not currently anticipate material capital expenditures for environmental control facilities. Nevertheless, compliance with existing or future governmental regulations, including, but not limited to, those pertaining to international operations, export controls, business acquisitions, consumer and data protection, employee health and safety, and taxes, could have a material impact on our business in subsequent periods. Refer to “Item 1A. Risk Factors” for a discussion of these potential impacts.
Our employees are our greatest assets and we are dedicated to providing a healthy and safe work environment that promotes respect, dignity, equality and inclusion. As of April 3, 2021, we had 4,890 employees in our global workforce. None of our employees are represented by a labor union and we have not experienced any work stoppages.
As a response to the spread of COVID-19 and local government requirements, we implemented global health and safety protocols to keep our workforce safe. We closed most of our offices around the world in March 2020 for all except essential workers. We eliminated business travel and provided our employees with curated information, enhanced wellness programs, and technical resources to work remotely. These measures helped Xilinx maintain operations with our regular employees and contingent workforce.
Attraction & Recruitment
The demand for hardware and software engineers, including those specializing in AI and machine learning, is very competitive. We leverage our intern and Entry Level Professional recruiting programs to ensure we acquire the needed talent. We also partner with higher education institutions globally to develop our candidate pipelines, recruit at industry conferences and actively promote and adjust our employee referral program to target hard-to-fill positions.
Additionally, we collaborate with community groups like the Society of Women Engineers, Society of Hispanic Professional Engineers and the National Society of Black Engineers to improve our reach and attract minority candidates. Through our Women in Technology employee resource group in India, we offer returnship programs designed to assist women professionals who would like to restart or rebuild their career in technology.
Development & Retention
We are committed to a culture that enables employees to perform at their best, realize their professional potential and be well, both physically and mentally. We benchmark our compensation and benefits annually to ensure we remain competitive and offer stock awards and an employee stock purchase plan to retain employees and align their interests with those of our stockholders.
We develop our employees year-round leveraging methods such as live training, personalized on-demand learning resources, coaching, courses and conferences. Additionally, we offer education reimbursement to help support future career growth.
We value diverse perspectives and actively listen to employees through numerous channels throughout the year. In addition to engagement surveys, we use a number of creative channels to facilitate dialogue including anonymous online inquiry tools during company-wide business meetings, executive skip level meetings and regular “Ask Me Anything” meetings where employees can personally raise any question to our executives.
Diversity, Equity and Inclusion
We believe inclusivity is essential to fostering a culture of innovation and creativity that can change the world. To that end, we are committed to providing an inclusive and equitable workplace for all employees and candidates, regardless of gender, gender identity, veteran status, race, ethnicity or ability. We design Diversity, Equity and Inclusion (DEI) programs to create an environment where everyone feels a deep sense of belonging and connection. We are committed to treating all employees around the world with respect and compassion.
We have increased our efforts to recruit, develop and retain a more diverse workforce with a focus on those historically underrepresented in the technology field, including women, Black and Hispanic candidates and are committed to ensuring diverse candidate representation in interviews.
We integrate DEI into our programs and processes and require unconscious bias training for all new hires. Employees are encouraged to view special guest DEI speaker presentations and join employee resource groups to provide support and promote inclusion.
Information about our Executive Officers
Certain information regarding the executive officers and persons chosen to become executive officers of Xilinx as of May 14, 2021 is set forth below:
|Victor Peng||61||President and Chief Executive Officer (CEO)|
|Brice Hill||54||Executive Vice President and Chief Financial Officer (CFO)|
|Vamsi Boppana||48||Senior Vice President, Central Products Group|
|Catia Hagopian||49||Senior Vice President, General Counsel and Secretary|
|William Christopher Madden||62||Executive Vice President and General Manager, Wired and Wireless Group|
|Salil Raje||51||Executive Vice President and General Manager, Data Center Group|
|Vincent L. Tong||59||Executive Vice President, Global Operations and Quality|
|Mark David Wadlington||59||Senior Vice President, Core Markets Group|
There are no family relationships among the executive officers of the Company or the Company's board of directors.
Victor Peng joined the Company in April 2008 and currently serves as President and Chief Executive Officer, a position he has held since February 2018. From April 2017 to February 2018, Mr. Peng served as Chief Operating Officer. From July 2014 to April 2017, he served as Executive Vice President and General Manager of Products. From May 2013 through July 2014, Mr. Peng served as Senior Vice President and General Manager of the Programmable Platforms Group. From May 2012 through April 2013, he served as Senior Vice President of the Programmable Platforms Group. From November 2008 through April 2012, he served as Senior Vice President of the Programmable Platforms Development Group. Prior to joining the Company, Mr. Peng served as Corporate Vice President, Graphics Products Group at AMD, a provider of processing solutions, from November 2005 to April 2008. Prior to joining AMD, Mr. Peng served in a variety of executive engineering positions at companies in the semiconductor and processor industries. Mr. Peng is also a director of KLA Corporation, a global capital equipment company serving the semiconductor industry.
Brice Hill joined the Company in April 2020 and currently serves as Executive Vice President and Chief Financial Officer. From April 2016 to April 2020, he served as Corporate Vice President and Chief Financial Officer and Chief Operating Officer, Technology, Systems and Core Engineering Group at Intel Corporation (Intel). Prior to that, Mr. Hill held a series of other positions with Intel, including Vice President, Corporate Strategy and Business Group Finance from 2013 to 2015, Vice President, Sales and Marketing Controller from 2010 to 2013, and Corporate Finance Controller from 2005 to 2010.
Vamsi Boppana joined the Company in October 2008 and currently serves as Senior Vice President, Central Products Group, a position he has held since February 2020. From February 2019 to February 2020, he served as Senior Vice President, Central Engineering. From January 2017 to January 2019, he served as Corporate Vice President, Silicon and Systems Development. From July 2013 to December 2016, Mr. Boppana served as Vice President, Processor and Development. From October 2008 to June 2013, he served as Senior Director in various engineering positions. Prior to joining the Company, Mr. Boppana managed technology development at Open-Silicon, Inc., a fabless chip maker, and served as Vice President, Engineering at Zenasis Technologies, a company which he co-founded.
Catia Hagopian joined the Company in February 2007 and currently serves as Senior Vice President, General Counsel and Secretary, a position she has held since March 2018. Ms. Hagopian is responsible for the Company’s legal operations globally covering matters such as commercial transactions, corporate activities and policies, corporate governance, employment, export compliance, intellectual property and litigation. From April 2012 to March 2018, Ms. Hagopian served as the Company’s Vice President, Legal Affairs, Global Compensation and Benefits. From February 2007 to April 2012, Ms. Hagopian held various senior positions in the Company’s Legal Department. Prior to joining the Company, Ms. Hagopian served as a law clerk for the U.S. District Court, Eastern District of California and worked at several law firms, including DLA Piper LLP (US).
William Christopher Madden joined the Company in May 2008 and currently serves as Executive Vice President and General Manager, Wired and Wireless Group, a position he has held since April 2019. From June 2018 to March 2019, he served as Executive Vice President, Hardware and Systems Product Development. From July 2017 to May 2018, he served as Senior Vice President, Hardware and Systems Product Development. From October 2010 to June 2017, Mr. Madden served as Corporate Vice President, FPGA Development and Silicon Technology. From May 2008 to September 2010, Mr. Madden served as Vice President of Silicon Technology. Prior to joining the Company, Mr. Madden served as a Senior Fellow at AMD where he drove AMD’s next generation chip integration methodology. Mr. Madden is also a Fellow of the Institute of Engineers Ireland and a Board Member of Science Foundation Ireland.
Salil Raje joined the Company in June 2004 and currently serves as Executive Vice President and General Manager, Data Center Group, a position he has held since April 2019. From June 2018 to March 2019, he served as Executive Vice President, Software and IP Products. From April 2017 to May 2018, he served as Senior Vice President, Software and IP Products. From June 2012 to April 2017, Mr. Raje served as Corporate Vice President, Software and IP Products Group. He has also served as Vice President, FPGA Software from January 2009 to June 2012, and as Director, Software Development from June 2004 to January 2009. Prior to joining the Company, Mr. Raje served as Chief Technology Officer and Chief Executive Officer of Hier Design, Inc., a company he co-founded in 2001 until it was acquired by the Company in June 2004.
Vincent L. Tong joined the Company in May 1990 and currently serves as Executive Vice President, Global Operations & Quality, a position he has held since May 2016. From January 2015 to May 2016, Mr. Tong served as Senior Vice President, Global Operations and Quality. He also has served as Executive Leader, Asia Pacific since October 2011. Mr. Tong previously served as Senior Vice President, Worldwide Quality and New Product Introductions from June 2008 to January 2015. He has also served as Vice President, Worldwide Quality and Reliability from August 2006 to June 2008 and prior to that as Vice President of Product Technology from May 2001 to July 2006. Prior to joining the Company, Mr. Tong served in a variety of engineering and management positions at Monolithic Memories, a producer of logic devices, and AMD. He holds seven U.S. patents.
Mark David Wadlington joined the Company in March 2018 and currently serves as Senior Vice President, Core Markets Group. From March 2018 to February 2020, he served as Senior Vice President, Global Sales. Prior to joining the Company, Mr. Wadlington was Senior Vice President, Worldwide Sales at Synaptics Incorporated from April 2017 to March 2018. Prior to joining Synaptics, from February 2013 to March 2017, Mr. Wadlington held executive positions at Lattice Semiconductor, including serving as Corporate Vice President and General Manager, Mobile and Consumer Division at Lattice Semiconductor and Corporate Vice President of Worldwide Sales. Prior to Lattice, Mr. Wadlington was Vice President of Worldwide Sales at Applied Micro Circuits Corporation (AMCC) from March 2011 to November 2012. Prior to AMCC, Mr. Wadlington served as the Vice President of America’s Sales at the Company, Vice President of Worldwide MCP (media communications processor) Sales at NVIDIA and held various senior-level positions at LSI Logic during his 21-year tenure there, including serving as LSI Logic’s Vice President of Worldwide Semiconductor Sales.
We make available, via a link through our investor relations website located at www.investor.xilinx.com, access to our Annual Report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and any amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended (Exchange Act) as soon as reasonably practicable after they are electronically filed with or furnished to the Securities and Exchange Commission (SEC). All such filings on our investor relations website are available free of charge. The SEC maintains an Internet site that contains reports, proxy and information statements and other information regarding our filings at http://www.sec.gov. The content on any website referred to in this filing is not incorporated by reference into this filing unless expressly noted otherwise.
This annual report includes trademarks and service marks of Xilinx and other companies that are unregistered and registered in the U.S. and other countries.
ITEM 1A.RISK FACTORS
The following risk factors and other information included in this Annual Report on Form 10-K should be carefully considered. The risks and uncertainties described below are not the only risks to the Company. Our business operations or financial condition could be impaired by risks and uncertainties not presently known to the Company, or that the Company's management does not currently consider material. If any of the risks described below were to occur, our business, financial condition, operating results and cash flows could be materially adversely affected.
AMD Merger Risks
The pendency of the Merger may have an adverse effect on our business, operating results and stock price.
We and AMD have operated and, until the completion of the Merger, will continue to operate independently. Uncertainty about the Merger may adversely affect our revenue, operating results and stock price, whether or not the Merger is completed. For example, strategic partners, customers, suppliers or other business partners may:
•delay, defer or cease purchasing goods or services from us or providing goods or services to us;
•delay or defer other decisions concerning us;
•cease further joint development activities; or
•otherwise seek to change the terms on which they do business with us.
The uncertainties around the Merger could adversely impact our relationships or contract negotiations with third parties, including our strategic partners, suppliers and other business partners, or those with which we are seeking to establish business relationships. We are subject to additional risks in connection with the announcement and pendency of the Merger which could adversely impact our operating results, including:
•the pendency and outcome of any legal proceedings that may be instituted against us, our directors and others relating to the transactions contemplated by the Merger Agreement;
•the restrictions imposed on our business and operations pursuant to certain covenants set forth in the Merger Agreement, which may prevent us from pursuing certain strategic opportunities without AMD’s approval;
•during the period that the Merger Agreement is in effect, except as permitted by certain limited exceptions in the Merger Agreement or required by their fiduciary duties and subject to the other requirements of the Merger Agreement, our board of directors may not withdraw or adversely modify its recommendation of approval by our stockholders of the Merger, which has the effect of delaying other strategic transactions and may, in some cases, make it impossible to pursue other strategic transactions that are available only for a limited time;
•that we may forego opportunities we might otherwise pursue absent the Merger;
•potential adverse effects on our ability to retain and motivate current employees, and attract and recruit prospective employees who may be uncertain about their future roles and relationships with us following the completion of the Merger; and
•the diversion of our employees’ and management’s attention due to activities related to the Merger, which could otherwise be devoted to other opportunities that may be beneficial to us.
Since the merger consideration our stockholders will receive in the Merger will be in the form of common stock of AMD, our stock price has been and will continue to be adversely impacted by a decline in AMD’s stock price and any adverse developments in AMD’s business outlook. AMD stock price changes may result from a variety of factors, such as changes in its business operations and outlook, changes in general market and economic conditions, and regulatory considerations. These factors are beyond our control.
In addition, we have incurred, and will continue to incur, significant costs, expenses and fees for professional services, other transaction costs and employee retention costs in connection with the Merger, and these fees and costs are payable by us regardless of whether the Merger is consummated.
The Merger may not be completed, may be delayed or may be approved subject to materially burdensome conditions, any of which may adversely affect our business, operating results and stock price. Our and AMD’s obligations to consummate the Merger are subject to the satisfaction or waiver of certain closing conditions, including, but not limited to, (i) receipt of regulatory clearance under certain foreign anti-trust laws including in the European Union and in China, (ii) the absence of any order prohibiting the Merger or enactment of any law that makes the consummation of the Merger illegal, (iii) the absence of any material adverse effect on either Xilinx or AMD since the date of the Merger Agreement that is continuing, (iv) subject to certain exceptions, the accuracy of the representations and warranties of the parties in the Merger Agreement, and (v) performance by us and AMD of our respective obligations under the Merger Agreement. There can be no assurance that the conditions to the completion of the Merger will be satisfied in a timely manner, or at all. Although we and AMD have agreed to use reasonable best efforts to obtain the requisite governmental approvals, there can be no assurance that these approvals will be obtained, and the governmental entities from which these approvals are required may impose conditions on the completion, or require changes to the terms of, the Merger. Any such conditions or changes could have the effect of jeopardizing or delaying completion of the Merger. Any delay in completing the Merger may significantly affect the synergies projected to result from the Merger and other benefits that the parties expect to achieve if the Merger is successfully completed. If the Merger is not completed by October 26, 2021 (subject to potential extensions to April 26, 2022, in the event receipt of certain required regulatory approvals related to antitrust matters have not been obtained), either we or AMD may choose to terminate the Merger Agreement. We or AMD may also elect to terminate the Merger Agreement in certain other circumstances, and the parties can mutually decide to terminate the Merger Agreement at any time prior to the closing of the Merger, before or after stockholder approval, as applicable.
Failure to complete the Merger could negatively affect our business, results of operations and stock price.
If the Merger is not completed, our stock price could fall to the extent that our current price reflects an assumption that the Merger will be completed. Furthermore, if the Merger is not completed, we may suffer other consequences that could adversely affect our business, results of operations and stock price, including, but not limited to:
•we could be required to pay a termination fee of $1 billion to AMD under certain circumstances as described in the Merger Agreement;
•we would have incurred significant costs in connection with the Merger that we would be unable to recover, including transaction, legal, employee-related and other costs;
•we may be subject to legal proceedings related to the Merger;
•the failure of the Merger to be consummated may result in negative publicity and a negative impression of us in the investment community;
•disruptions to our business resulting from the announcement and pendency of the Merger, including any adverse changes in our relationships with our customers, strategic partners, suppliers, licensees, other business partners and employees, may continue or intensify in the event the Merger is not consummated;
•we may not be able to take advantage of alternative business opportunities or effectively respond to competitive pressures; and
•we may experience an increase in employee departures.
Litigation filed against us or AMD could prevent or delay, or result in the payment of damages following, the completion of the Merger.
We and members of our board of directors were and may in the future be parties, among others, to various claims and litigation related to the pending Merger, including putative stockholder class actions. Among other remedies, the plaintiffs in such potential future matters could seek to enjoin the Merger. The results of complex legal proceedings are difficult to predict, and could delay or prevent the Merger from becoming effective in a timely manner. Moreover, the pending litigation is, and any future additional litigation could be, time consuming and expensive, could divert management’s attention away from their regular business, and, if any potential future lawsuit is adversely resolved, could have a material adverse effect on our financial condition. For additional information regarding these pending litigation matters, see “Note 16. Litigation Settlements and Contingencies” to our consolidated financial statements, included in Item 8. “Financial Statements and Supplementary Data” of this Annual Report on Form 10-K.
One of the conditions to the closing of the Merger is that no applicable governmental entity having jurisdiction over Xilinx, AMD or Merger Sub shall have issued an order, decree or ruling preventing, enjoining or prohibiting the consummation of the Merger that remains in effect, and that no law shall have been entered, issued or adopted by any applicable governmental entity that makes illegal the consummation of the Merger that remains in effect. Consequently, if any plaintiffs secure injunctive or other relief prohibiting, delaying or otherwise adversely affecting our and/or AMD’s ability to complete the Merger on the terms contemplated by the Merger Agreement, then such injunctive or other relief may prevent the Merger from becoming effective in a timely manner, or at all.
Business and Operational Risks
The ongoing COVID-19 pandemic could have a material adverse effect on our business, financial condition and results of operations.
The ongoing COVID-19 pandemic has led to severe disruptions in the market and the global and U.S. economies that may continue for a prolonged duration. In response, various governmental bodies and private enterprises have implemented and continue to impose numerous measures to limit the spread of the virus, such as travel bans and restrictions, quarantines, shelter-in-place orders, and factory and office shutdowns. These measures and other public and private responses to the pandemic have impacted, and may further impact, our workforce and operations, and those of our customers, partners, vendors and suppliers.
The manufacture of product components, the final assembly of our products and other critical operations are concentrated in certain geographic locations, including the U.S., Singapore, South Korea, and Taiwan. Each of these countries has been affected by the pandemic and has taken measures to limit the spread, and there is considerable uncertainty regarding the impact and duration of such measures and potential future measures. Restrictions on our access to our manufacturing facilities or on our support operations or workforce, similar limitations for our vendors and suppliers, and disruptions of transportation, such as reduced availability of air transport, port closures and increased border controls or closures, could limit our capacity to meet customer demand.
Due to the spread of COVID-19, we have modified our business practices, including employee travel restrictions, employee work locations, and cancellation of physical participation in non-critical meetings, events and conferences pursuant to applicable government guidelines and mandates. There is no certainty that such measures will be sufficient to mitigate the risks posed by COVID-19, which could adversely impact our ability to perform critical functions, such as the research and development of new products, the manufacture of product components, the final assembly of our products, and the distribution and sale of our products.
The COVID-19 pandemic and the efforts to control it have slowed economic activity and may trigger a recession or a prolonged period of economic slowdown, particularly if the pandemic becomes more severe or continues for an extended period of time. Customer demand may be reduced to the extent customers experience shortages of other necessary materials and are forced to slow production of their end products (with a corresponding decline in the rate at which they purchase materials from us), or to the extent our customers experience reduced consumer demand for their end-products as consumers curtail purchases.
The full extent and nature of the impact of the COVID-19 pandemic and related containment measures on our business and financial performance cannot be predicted as a result of ongoing uncertainties, including the extent and rate of the spread, the availability and distribution of an effective vaccine or other treatment, and the severity and duration of the global economic downturn that results from the pandemic. An extended period of disruption to global supply chain and economic activities due to the pandemic, as well as other factors that are currently unforeseeable, could have a material adverse impact on our ability to access sources of liquidity, as well as our financial condition and results of operations. A prolonged impact of the pandemic also could heighten many of the other risks, such as those relating to disruptions on our operations and our reliance on customers and other third parties, described in this Annual Report on Form 10-K.
Our success depends on our ability to develop and introduce new products and our failure to do so would have a material adverse impact on our financial condition and results of operations.
Our success depends in large part on our ability to develop and introduce new products that address customer requirements and compete effectively on the basis of price, density, functionality, power consumption and performance. Consolidation in our industry may increasingly result in our competitors having greater resources, or other synergies, that provide them with a competitive advantage in those regards. The success of new product introductions is dependent upon several factors, including:
•timely completion of new product designs;
•ability to generate new design opportunities and design wins;
•availability of specialized field application engineering resources supporting demand creation and customer adoption of new products;
•ability to utilize advanced manufacturing process technologies on circuit geometries of 28nm and smaller;
•achieving acceptable yields;
•ability to obtain adequate production capacity from our wafer foundries and assembly and test subcontractors;
•ability to obtain advanced packaging;
•availability and completeness of supporting software design tools;
•utilization of predefined IP logic;
•customer acceptance of advanced features in our new products;
•ability of our customers to complete their product designs and bring them to market; and
•market acceptance of our customers' products.
Our product development efforts may not be successful, our new products may not achieve industry acceptance, or we may not achieve the necessary volume of production that would lead to further per unit cost reductions. Revenues relating to our mature products are expected to decline in the future, which is normal for our product life cycles. As a result, we may become increasingly dependent on revenues derived from design wins for our newer products as well as anticipated cost reductions in the manufacture of our current products. We rely primarily on obtaining yield improvements and corresponding cost reductions in the manufacture of existing products, and on introducing new products that incorporate advanced features and other price/performance factors that enable us to increase revenues while maintaining consistent margins. To the extent that such cost reductions and new product introductions do not occur in a timely manner, or to the extent that our products do not achieve market acceptance at prices with higher margins, our financial condition and results of operations could be materially adversely affected.
Public health crises, earthquakes or other natural disasters could disrupt our operations and have a material adverse effect on our financial condition and results of operations.
Our worldwide operations could be disrupted by public health crises such as an outbreak of contagious diseases like COVID-19, earthquakes or other natural disasters such as typhoons, tsunamis, volcano eruptions, fires or floods, as well as disruptions in access to adequate supplies of electricity, natural gas or water. The independent foundries, upon which we rely to manufacture our products, as well as our California and Singapore facilities, are located in regions that are subject to earthquakes, wildfires or other natural disasters. TSMC's and UMC's foundries in Taiwan and our assembly and test partners in other regions as well as many of our operations in California are located in areas that have been seismically active in the past and some of these areas have also been affected by other natural disasters such as typhoons. Disruption of operations at these foundries and our facilities could cause delays in manufacturing and shipments of our products, and could have a material adverse effect on our results of operations. Any catastrophic event in these locations would disrupt our operations, and our insurance may not cover losses resulting from such disruptions of our operations, thereby materially adversely affecting our financial condition and results of operations. Furthermore, natural disasters can also indirectly impact us. For example, our customers' supply of other complimentary products may be disrupted by a natural disaster and may cause them to delay orders of our products. More vertically-integrated competitors may be less exposed to some or all of these and other risks.
We depend on distributors, primarily Avnet, to generate a significant portion of our sales and complete order fulfillment.
Avnet's revenue accounted for 43% of our worldwide net revenues in fiscal 2021, and, as of April 3, 2021, Avnet accounted for 13% of our total net accounts receivable. Any adverse change to our relationship with Avnet or our other distributors could have a material impact on our business. Furthermore, if a key distributor materially defaulted on a contract or otherwise failed to perform, our business and financial results would suffer. In addition, we are subject to concentrations of credit risk in our trade accounts receivable, which includes accounts of our distributors. A significant reduction of effort by a distributor to sell our products or a material change in our relationship with one or more distributors may reduce our access to certain end customers and adversely affect our ability to sell our products.
In addition, the financial health of our distributors and our continuing relationships with them are important to our success. Unpredictable economic conditions may adversely impact the financial health of some of these distributors, particularly our smaller distributors. This could increase our credit risk exposure relating to the insolvency of certain distributors, the inability of distributors to obtain credit to finance the purchase of our products, or delayed payment for such purchases. Our business could be harmed if the financial health of these distributors impaired their performance and we were unable to secure alternate distributors.
A number of factors, including our inventory strategy, can impact our gross margins.
A number of factors can cause our gross margins to fluctuate, including yield, wafer pricing, product mix, market acceptance of our new products, competitive pricing dynamics, licensing costs, geographic and/or market segment pricing strategies. In addition, forecasting our gross margins is difficult because a significant portion of our business is based on turns within the same quarter.
While our overall inventory levels fluctuate over time, the inventory of newer product lines may be higher than other products due to a planned increase in safety stock in anticipation of future revenue growth. In the event demand does not materialize, we may be subject to incremental obsolescence costs. In addition, future product cost reductions could adversely impact our inventory valuation as well as our operating results.
Our failure to protect and defend our IP could impair our ability to compete effectively.
We rely upon patent, copyright, trade secret, mask work and trademark laws to protect our IP. We cannot provide assurance that such IP rights can be successfully asserted in the future or will not be invalidated, violated, circumvented or challenged. From time to time, third parties, including our competitors, have asserted against us patent, copyright or other IP rights to technologies that are important to us. Third parties may attempt to misappropriate our IP through electronic or other means or assert infringement claims against us or parties we have agreed to indemnify. Such assertions by third parties may result in costly litigation, indemnity claims or other legal actions, and we may not prevail in such matters or be able to license any valid and infringed patents from third parties on commercially reasonable terms. This could result in the loss of our ability to import and sell our products or require us to pay costly royalties to third parties in connection with sales of our products. Any infringement claim, indemnification claim, or impairment or loss of use of our IP could materially adversely affect our financial condition and results of operations.
Our ability to design and introduce new products in a timely manner is dependent upon third-party IP.
In the design and development of new products and product enhancements, we rely on third-party intellectual property such as software development tools and hardware testing tools. Furthermore, certain product features may rely on intellectual property acquired from third parties, including hardware and software tools and products. The design requirements necessary to meet future consumer demands for more features and greater functionality from semiconductor products may exceed the capabilities of the third-party intellectual property or development tools that are available to us. In addition, hardware and software tools and products procured from third parties may contain design or manufacturing defects, including flaws that could unexpectedly interfere with the operation of our products. If the third-party intellectual property that we use becomes unavailable or fails to produce designs that meet consumer demands, our business could be adversely affected.
Any failure of our information technology systems to function properly could result in business disruption.
We rely on various information technology (IT) systems to manage our operations, including, but not limited to, financial reporting, and we regularly evaluate these systems and make changes to improve them as necessary. Consequently, we periodically implement new, or upgrade or enhance existing, operational and IT systems, procedures and controls. Any delay in the implementation of, or disruption in the transition to, new or enhanced systems, procedures or controls, could harm our ability to record and report financial, management, or operational information on a timely and accurate basis. In addition, hardware and software tools and products procured from third parties included in our IT systems could contain design or
manufacturing defects, including flaws that could unexpectedly interfere with the operation of our IT systems. These systems are also subject to power and telecommunication outages or other general system failures. Failure of our IT systems or difficulties in managing them could result in business disruption.
Cyber-attacks and data breaches could have an adverse effect on our business and reputation and negatively impact our financial condition and results of operations.
Security breaches, including cyber-attacks, phishing attacks or attempts to misappropriate or compromise confidential or proprietary information or sabotage enterprise IT systems, are becoming increasingly frequent and more sophisticated. We depend on the uninterrupted operation of our IT systems to manage our operations, store and retrieve business and financial data and facilitate internal communications and communications with customers, subcontractors, suppliers and distribution partners. We experience security incidents of varying degrees on an ongoing basis. We take steps to detect and investigate any security incidents and prevent their recurrence, but, in some cases, we might be unaware of an incident or its magnitude and effects. Because the techniques used to obtain unauthorized access to or sabotage networks and systems change frequently, we may be unable to anticipate these techniques or to implement adequate protections. These security incidents may involve unauthorized access, misuse or disclosure of intellectual property or confidential or proprietary information regarding our business or that of our customers or business partners. We also may be subject to unauthorized access to our IT systems through a security breach or cyber-attack. In the past, there have been attempts by third parties to penetrate and/or infect our network and systems with malicious software in an effort to gain access to our network and systems. Recently, several large organizations have been infected by “ransomware,” through which an attacker gains access to the organization’s computer files, renders them temporarily inaccessible and threatens to permanently delete them if a cash ransom is not paid by a specified deadline. Third parties may continue to attempt to fraudulently induce employees, users, or customers to disclose sensitive information in order to gain access to our network and systems. The IT systems of our remote internet-connected third party server providers (sometimes called the "cloud"), customers, suppliers, and distribution partners and the links between our IT systems and our customers are subject to the same risks as those of our IT systems. The costs to us to prevent, detect or alleviate cyber- or other security problems, bugs, viruses, worms, malicious software programs and security vulnerabilities could be significant, and our efforts to address these problems may not be successful. In addition, as a result of the COVID-19 pandemic, most of our employees have been working remotely, which may pose additional IT security risks. In the event of a security breach, our business and reputation could be harmed and we could be subject to legal and regulatory claims which could negatively impact our financial condition and results of operations.
Acquisitions and strategic investments present risks, and we may not realize the goals that were contemplated at the time of a transaction.
We have acquired technology companies whose products complement our products. We also have made a number of strategic investments in other technology companies. Due to certain covenants in the Merger Agreement relating to the conduct of both parties in the interim period until the Merger is completed, we may be precluded from certain future acquisitions or strategic investments. Risks associated with past or future acquisitions or strategic investments include, but are not limited to:
•our ongoing business may be disrupted and our management's attention may be diverted by investment, acquisition, transition or integration activities;
•an acquisition or strategic investment may not further our business strategy as we expected, and we may not integrate an acquired company or technology as successfully as we expected;
•our operating results or financial condition may be adversely impacted by claims or liabilities that we assume from an acquired company or technology or that are otherwise related to an acquisition;
•we may have difficulty incorporating acquired technologies or products with our existing product lines;
•we may have higher than anticipated costs in continuing support and development of acquired products, and in general and administrative functions that support such products;
•our strategic investments may not perform as expected, and we may be required to recognize a loss on any or all of our strategic investments; and
•we may experience unexpected changes in how we are required to account for our acquisitions and strategic investments pursuant to U.S. GAAP.
The occurrence of any of these risks could have a material adverse effect on our business, results of operations, financial condition or cash flows, particularly in the case of a larger acquisition or several concurrent acquisitions or strategic investments.
Our inability to effectively control the sale of our products on the gray market could have a material adverse effect on our business or results of operations.
We market and sell our products directly to OEMs and through authorized third-party distributors which helps to ensure that products delivered to our customers are authentic and properly handled. From time to time, customers may purchase products bearing our name from the unauthorized "gray market". These parts may be counterfeit, salvaged or re-marked parts, or parts that have been altered, mishandled, or damaged. Gray market products result in shadow inventory that is not visible to us, thus making it difficult to forecast supply or demand. Also, when gray market products enter the market, we and our authorized distributors may compete with brokers of these discounted products, which can adversely affect demand for our products and negatively impact our margins. In addition, our reputation with customers may be negatively impacted when gray market products bearing our name fail or are found to be substandard.
Supply and Manufacturing Risks
We rely on independent foundries for the manufacture of all of our products and a manufacturing problem or insufficient foundry capacity could adversely affect our operations.
Most of our wafers are manufactured in Taiwan by TSMC and UMC. We also have wafers manufactured in South Korea by Samsung Electronics Co., Ltd. Terms with respect to the volume and timing of wafer production and the pricing of wafers produced by the semiconductor foundries are determined through periodic negotiations with these wafer foundries, which usually result in short-term agreements that do not provide for long-term supply or allocation commitments. We are dependent on these foundries to supply the substantial majority of our wafers. We rely on TSMC, UMC and our other foundries to produce wafers with competitive performance attributes. Therefore, the foundries, particularly TSMC which manufactures our newest products, must be able to transition to advanced manufacturing process technologies and increased wafer sizes, produce wafers at acceptable yields and deliver them in a timely manner. Furthermore, we cannot guarantee that the foundries that supply our wafers will offer us competitive pricing terms or other commercial terms important to our business.
We cannot guarantee that our foundries will not experience manufacturing problems, including delays in the realization of advanced manufacturing process technologies or difficulties due to limitations of new and existing process technologies. For example, we may experience supply shortages due to the difficulties that foundries may encounter if they must rapidly increase their production capacities from low utilization levels to high utilization levels because of an unexpected increase in demand. Furthermore, we cannot guarantee that the foundries will be able to manufacture sufficient quantities of our products or that they will continue to manufacture a given product for the full life of the product. We could also experience supply shortages due to very strong demand for our products, or a surge in demand for semiconductors in general, which may lead to tightening of foundry capacity across the industry. For example, recent sharp increases in demand for semiconductor products have resulted in a global shortage of manufacturing capacities. As a result, we may experience increases in the costs to manufacture our products and may not be able to manufacture and deliver all of the orders placed by our customers in time. If we are unable to secure manufacturing capacities from the foundries we rely on, our ability to deliver our products to our customers in time may be negatively impacted. Moreover, foundries may increase their fees in response to the global shortage of manufacturing capacities, which would increase our manufacturing costs that we may not be fully able to pass to our customers. A prolonged shortage in manufacturing capacities of the foundries we rely on could disrupt our operations and negatively impact our financial condition and results of operations. Further, public health crises, such as an outbreak of contagious diseases like COVID-19, may affect the operations of our foundries. In addition, weak economic conditions may adversely impact the financial health and viability of the foundries and result in their insolvency or their inability to meet their commitments to us. The insolvency of a foundry or any significant manufacturing problem or insufficient foundry capacity would disrupt our operations and negatively impact our financial condition and results of operations.
Increased costs of wafers and materials, or shortages in wafers and materials, could adversely impact our gross margins and lead to reduced revenues.
If greater demand for wafers is not offset by an increase in foundry capacity, market demand for wafers or production and assembly materials increases, or if a supplier of our wafers or other materials ceases or suspends operations, for example due to shutdown measures implemented in response to the COVID-19 outbreak, our supply of wafers and other materials could become limited. Such shortages raise the likelihood of potential wafer price increases, wafer shortages or shortages in materials at production and test facilities, resulting in potential inability to address customer product demands in a timely manner. For example, in 2011, when certain suppliers located in Japan were forced to temporarily halt production as the result of a natural disaster, this resulted in a tightening of supply for those materials. Such shortages of wafers and materials as well as increases in wafer or materials prices could adversely affect our gross margins and would adversely affect our ability to meet customer demands and lead to reduced revenue.
We are dependent on independent subcontractors for most of our assembly and test services, and unavailability or disruption of these services could negatively impact our financial condition and results of operations.
We are dependent on subcontractors to provide semiconductor assembly, substrate, test and shipment services. Any (i) prolonged inability to obtain wafers with competitive performance and cost attributes, adequate yields or timely delivery, (ii) disruption in assembly, test or shipment services, (iii) delays in stabilizing manufacturing processes and ramping up volume for new products, (iv) transitions to new service providers, or (v) other circumstance that would require us to seek alternative sources of supply, could delay shipments and have a material adverse effect on our ability to meet customer demands. In addition, unpredictable economic conditions may adversely impact the financial health and viability of these subcontractors and result in their insolvency or their inability to meet their commitments to us. These factors would result in reduced net revenues and could negatively impact our financial condition and results of operations.
Industry and Market Risks
The semiconductor industry is characterized by cyclical market patterns and a significant industry downturn could adversely affect our operating results.
The semiconductor industry is highly cyclical and our financial performance has been affected by downturns in the industry. Down cycles are generally characterized by price erosion and weaker demand for our products. Weaker demand for our products resulting from economic conditions in the end markets we serve and reduced capital spending by our customers can result, and in the past has resulted, in excess and obsolete inventories and corresponding inventory write-downs. We attempt to identify changes in market conditions as soon as possible; however, the dynamics of the market in which we operate make prediction of and timely reaction to such events difficult. Due to these and other factors, our past results are not reliable predictors of our future results.
The nature of our business makes our revenues difficult to predict which could have an adverse impact on our business.
In addition to the challenging market conditions we may face, we have limited visibility into the demand for our products, particularly new products, because demand for our products depends upon our products being designed into our end customers' products and those products achieving market acceptance. Due to the complexity of our customers' designs, the design to volume production process for our customers requires a substantial amount of time, frequently longer than a year. In addition, other factors may affect our end customers' demand for our products, including, but not limited to, end customer program delays and the ability of end customers to secure other complementary products. We also are dependent upon "turns," orders received and turned for shipment in the same quarter. These factors make it difficult for us to forecast future sales and project quarterly revenues. The difficulty in forecasting future sales impairs our ability to project our inventory requirements, which could result, and in the past has resulted, in inventory write-downs or failure to meet customer product demands in a timely manner. In addition, difficulty in forecasting revenues compromises our ability to provide forward-looking revenue and earnings guidance.
If we are not able to compete successfully in our industry, our financial results and future prospects will be adversely affected.
Our products compete in several areas of the semiconductor industry which is intensely competitive and characterized by rapid technological change, increasing levels of integration, product obsolescence and continual price erosion. We expect continued competition from our primary PLD competitors such as Intel Corporation (Intel), Lattice Semiconductor Corporation (Lattice) and Microchip Corporation, and from ASSP vendors such as Broadcom Corporation (Broadcom), Marvell Technology Group, Ltd. (Marvell) and Texas Instruments Incorporated (Texas Instruments), as well as from companies such as NVIDIA with whom we historically have not competed. In addition, we expect continued competition from the ASIC market, which has been ongoing since the inception of FPGAs. We believe that important competitive factors in the logic IC industry include:
•product performance, reliability, quality, power consumption and density;
•adaptability of products to specific applications;
•ease of use and functionality of software design tools;
•availability and functionality of predefined IP logic;
•completeness of applicable software solutions;
•adherence to industry-standard programming environments;
•inventory and supply chain management;
•access to leading-edge process technology and assembly capacity;
•ability to provide timely customer service and support; and
•access to advanced packaging technology.
Our strategy for expansion in the logic market includes continued introduction of new product architectures that address high-volume, low-cost and low-power applications as well as high-performance, high-density applications. However, we may not be successful in executing this strategy. In addition, we anticipate continued pressure from our customers to reduce prices, which may outpace our ability to lower the cost for established products.
Other competitors include manufacturers of:
•high-density programmable logic products characterized by FPGA-type architectures;
•high-volume and low-cost FPGAs as programmable replacements for ASICs and ASSPs;
•ASICs and ASSPs with incremental amounts of embedded programmable logic;
•high-speed, low-density complex programmable logic devices;
•high-performance digital signal processing devices;
•products with embedded processors;
•products with embedded multi-gigabit transceivers;
•discrete general-purpose Graphics Processing Units (GPUs) targeting data center and automotive applications; and
•other new or emerging programmable logic products.
Several companies have introduced products that compete with ours or have announced their intention to sell PLD products. To the extent that our efforts to compete are not successful, our financial condition and results of operations could be materially adversely affected.
The benefits of programmable logic have attracted a number of competitors to this segment. We recognize that different applications require different programmable technologies, and we are developing architectures, processes and products to meet these varying customer needs. Recognizing the increasing importance of standard software solutions, we have developed common software design tools that support the full range of our IC products. We believe that automation and ease of design are significant competitive factors in this segment.
We could also face competition from our licensees. In the past we have granted limited rights to other companies with respect to certain aspects of our older technology, and we may do so in the future. Granting such rights may enable these companies to manufacture and market products that may be competitive with some of our older products.
Reductions in the average selling prices of our products could have a negative impact on our gross margins.
The average selling prices of our products generally decline as the products mature. We seek to offset the decrease in selling prices through yield improvement, manufacturing cost reductions and increased unit sales. We also continue to develop higher value products or product features that increase the average selling prices of our products, or slow the decline of such prices. However, there is no guarantee that our ongoing efforts will be successful or that they will keep pace with the decline in selling prices of our products, which could ultimately lead to a decline in our revenues and gross margins.
Our products could have defects which could result in reduced revenues and claims against us.
We develop complex and evolving products that include both hardware and software. Despite our testing efforts and those of our subcontractors, defects may be discovered in existing or new products. Such defects may cause us to incur significant warranty, support and repair or replacement costs, divert the attention of our engineering personnel from our product development efforts and harm our relationships with customers. Subject to certain terms and conditions, we have agreed to compensate certain customers for limited specified costs they actually incur in the event our hardware products experience epidemic failure. As a result, epidemic failure and other performance problems could result in claims against us or the delay or loss of market acceptance of our products and would likely harm our business. Our customers could also seek damages from us for their losses.
In addition, we could be subject to product liability claims. A product liability claim brought against us, even if unsuccessful, would likely be time-consuming and costly to defend. Product liability risks are particularly significant with respect to aerospace, automotive and medical applications because of the risk of serious harm to users of these products. Any product liability claim, whether or not determined in our favor, could result in significant expense, divert the efforts of our technical and management personnel, and harm our business.
Legal and Regulatory Risks
We are subject to regulatory and operational risks associated with conducting business operations outside of the U.S. which could adversely affect our business.
In addition to international sales and support operations and development activities, we purchase our wafers from foreign foundries, have our commercial products assembled, packaged and tested by subcontractors located outside the U.S. and utilize third party warehouse operators to store and manage inventory levels for certain of our products. All of these activities are subject to the uncertainties associated with international business operations, including global laws and regulations, trade barriers, economic sanctions, tax regulations, import and export regulations, duties and tariffs and other trade restrictions, changes in trade policies, anti-corruption laws, foreign governmental regulations, potential vulnerability of and reduced protection for IP, longer receivable collection periods, disruptions or delays in production or shipments and the impact from a global pandemic, such as COVID-19 and responsive government measures, any of which could have a material adverse effect on our business, financial condition and/or operating results.
In 2018, the U.S. and China began to impose partial tariffs on each other's products, leading to concerns of a trade war. It is not clear yet how the U.S.-China relationship will proceed under the Biden Administration, but the new Administration has continued to impose export control restrictions and sanctions on Chinese companies that make it difficult to continue to do business with such companies. If tensions continue to escalate between the U.S. and China, such escalation could result in general economic downturn or otherwise have a material adverse effect on our business. For example, ZTE Corporation (ZTE) has been subject to trade restrictions under a denial order issued by the Bureau of Industry and Security (BIS) of the U.S. Department of Commerce. Although ZTE was granted relief from this denial order and is not currently subject to its restrictions, ZTE could become subject to the denial order again if the company fails to comply with the terms of the superseding settlement agreement or BIS determines that further sanctions are appropriate in the future. Also, in May 2019, BIS added Huawei Technologies Co., Ltd. (Huawei) and dozens of its affiliates to the Entity List, which imposes restrictions on the supply of certain U.S. and non-U.S. items and product support to listed Huawei entities. In addition, BIS has continued to add other China-based technology companies to the Entity List, including seven supercomputing companies in April 2021, thereby further expanding the scope of companies subject to trade restrictions. In May 2020, the Department of Commerce also published a new interim final rule amending the Foreign-Produced Direct Product Rule under the Export Administration Regulations (EAR) to impose new controls over certain foreign-produced items destined to designated entities on the Entity List (namely, Huawei). The Foreign-Produced Direct Product Rule was further revised in August 2020 in order to further restrict access to a broader swath of products by certain entities on the Entity List, including Huawei. As a result of these and other recent trade restrictions, we, along with others in the semi-conductor industry, are unable to sell certain products to Huawei without a license from BIS (for which there is a presumption of denial), and our ability to do business with Huawei has been adversely impacted. Further geopolitical and regulatory changes may result in shifting regulatory barriers, tax regulations and other trade restrictions that could further negatively impact our business, financial condition and/or operating results. In April 2020, for example, BIS announced further export control regulations effective on June 29, 2020, including the elimination of the license exception CIV (civil end-users), which had permitted certain national security-controlled items to be exported to certain destinations, such as China, without a license and the expansion of controls over items for MEU (military end-uses) in China, Russia and Venezuela. BIS also proposed modifications to the license exception APR (additional permissible reexports), which, if enacted, will impose a licensing requirement on items to be reexported to certain destinations. In June 2020, the Department of Commerce also announced the suspension of all Department of Commerce regulations that afford preferential treatment to Hong Kong under the EAR, including the availability of certain export license exceptions. This means that Hong Kong will now be treated the same as China under the EAR, which may impact certain of our logistical operations. Furthermore, BIS may still be considering other regulatory changes. We are dependent upon our ability to obtain export licenses, or exceptions to export license requirements, from U.S. and other foreign regulatory agencies. There is no assurance that we will be issued these licenses or be granted exceptions, and failure to obtain such licenses or exceptions could limit our ability to sell our products into certain countries and negatively impact our business, financial condition and/or operating results.
Additional factors that could adversely affect us due to our international operations include volatility in oil prices and increased costs, or limited supply of other natural resources. Moreover, our financial condition and results of operations could be
adversely affected in the event of political conflicts, economic crises or changes in international relations affecting countries where our main wafer providers, warehouses, end customers, and contract manufacturers who provide assembly and test services worldwide, are located. For example, the United Kingdom's exit from the European Union, commonly referred to as "Brexit," has led to significant instability and uncertainty in such regions, which could have a material adverse effect on our business.
Unfavorable results of legal proceedings could adversely affect our financial condition and operating results.
From time to time we are subject to various legal proceedings and claims that arise out of the ordinary conduct of our business. The amount of damages alleged in certain legal claims may be significant. Certain other claims involving the Company are not yet resolved, including those that are discussed under "Note 16. Litigation Settlements and Contingencies" to our consolidated financial statements, included in Item 8. "Financial Statements and Supplementary Data" of this Annual Report on Form 10-K, and additional claims may arise in the future. Results of legal proceedings cannot be predicted with certainty. Regardless of its merit, litigation may be both time-consuming and disruptive to our operations and cause significant expense and diversion of management attention and we may enter into material settlements to avoid these risks. Entering into settlements may result in payment of significant amounts which may materially and adversely affect our financial condition and operation results. Should we fail to prevail in certain matters, or should several of these matters be resolved against us, we may be faced with significant monetary damages or injunctive relief against us that would materially and adversely affect a portion of our business and might materially and adversely affect our financial condition and operating results.
Our failure to comply with the requirements of the Export Administration Regulations (EAR) and the International Traffic and Arms Regulations (ITAR) could have a material adverse effect on our financial condition and results of operations.
Our FPGAs and related technologies are subject to EAR, which are administered by the U.S. Department of Commerce. In addition, we may, from time to time, receive technical data from third parties that is subject to the ITAR, which are administered by the U.S. Department of State. EAR and ITAR govern the export and re-export of these FPGAs, the transfer of related technologies, whether in the U.S. or abroad, and the provision of services. We are required to maintain an internal compliance program and security infrastructure to meet EAR and ITAR requirements.
An inability to obtain the required export licenses, or to predict when they will be granted, increases the difficulties of forecasting shipments. In addition, security or compliance program failures that could result in penalties or a loss of export privileges, as well as stringent licensing restrictions that may make our products less attractive to overseas customers, could have a material adverse effect on our business, financial condition and/or operating results.
The conflict minerals provisions of the Dodd-Frank Wall Street Reform and Consumer Protection Act could result in additional costs and liabilities.
In accordance with the Dodd-Frank Wall Street Reform and Consumer Protection Act, the SEC established disclosure and reporting requirements for companies whose products incorporate "conflict" minerals mined from the Democratic Republic of Congo and adjoining countries, regardless of whether such products are manufactured by those companies or by third parties. These requirements could affect the sourcing and availability of minerals used in the manufacture of our semiconductor products. The costs associated with complying with the disclosure requirements include those for due diligence in regard to the sources of any conflict minerals used in our products, remediation and other changes to products, processes, or sources of supply as a consequence of such verification activities. We may face reputational challenges if we are unable to sufficiently verify the origins for all minerals used in our products through the due diligence process we implement. Moreover, some of our customers may require that all of the components of our products are certified as conflict-free, and we may be unable to verify the origin of the raw materials used in our products to the extent necessary to make this certification.
Exposure to greater-than-anticipated income tax liabilities, changes in tax rules and regulations, changes in interpretation of tax rules and regulations, or unfavorable assessments from tax audits could affect our effective tax rates, financial condition and results of operations.
We are a U.S.-based multinational company subject to tax in multiple U.S. and foreign tax jurisdictions. Our income tax obligations could be affected by many factors, including but not limited to changes to our corporate operating structure, intercompany arrangements and tax planning strategies. In addition, changes to existing tax rules and regulations under the new U.S. administration may further affect our tax rates and obligations.
Our income tax expense is computed based on tax rates at the time of the respective financial period. Our future effective tax rates, financial condition and results from operations could be unfavorably affected by changes in the tax rates in jurisdictions where our income is earned, by changes in the tax rules and regulations or the interpretation of tax rules and regulations in the jurisdictions in which we do business or by changes in the valuation of our deferred tax assets.
In addition, we are subject to examinations of our income tax returns by domestic and foreign tax authorities. We regularly assess the likelihood of outcomes resulting from these examinations to determine the adequacy of our provision for income taxes and have reserved for potential adjustments that may result from the current examinations. There can be no assurance that the final determination of any of these examinations will not have an adverse effect on our effective tax rates, financial condition and results of operations.
Liquidity and Capital Resources Risks
Because we have international business and operations, we are vulnerable to the economic conditions of the countries in which we operate and currency fluctuations could have a material adverse effect on our business and negatively impact our financial condition and results of operations.
In addition to our U.S. operations, we also have significant international operations, including foreign sales offices to support our international customers and distributors, our regional headquarters in Ireland and Singapore and an R&D site in India. Sales and operations outside of the U.S. subject us to the risks associated with conducting business in foreign economic and regulatory environments. Our financial condition and results of operations could be adversely affected by unfavorable economic conditions in countries in which we do significant business or by changes in foreign currency exchange rates affecting those countries. We derive more than half of our revenues from international sales, primarily in the Asia Pacific region, Europe and Japan where economic weaknesses have adversely affected our revenues in the past. Sales to all direct OEMs and distributors are denominated in U.S. dollars. Currency instability and volatility and disruptions in the credit and capital markets may increase credit risks for some of our customers and may impair our customers' ability to repay existing obligations. For example, the United Kingdom's "Brexit" transition has created economic uncertainty and currency volatility in the European Union. Increased currency volatility could also positively or negatively impact our foreign-currency-denominated costs, assets and liabilities. In addition, any devaluation of the U.S. dollar relative to other foreign currencies may increase the operating expenses of our foreign subsidiaries adversely affecting our results of operations. Furthermore, because we are increasingly dependent on the global economy, instability in worldwide economic environments occasioned, for example, directly or indirectly by political instability (such as due to Brexit), terrorist activity, U.S. or other military actions, changes to U.S. domestic and foreign policy and international sanctions or other diplomatic actions (potentially including sanctions adopted or under consideration by the U.S. or European Union with respect to Russia or Russian individuals or businesses), could adversely impact economic activity and lead to a contraction of capital spending by our customers generally or in specific regions. Any or all of these factors could adversely affect our financial condition and results of operations in the future.
We are exposed to fluctuations in interest rates and changes in credit risk which could have a material adverse impact on our financial condition and results of operations as it relates to the market value of our investment portfolio.
Our cash, short-term and long-term investments represent significant assets that may be subject to fluctuating or even negative returns depending upon interest rate movements, changes in credit risk and financial market conditions. Global credit market disruptions and economic slowdown and uncertainty have in the past negatively impacted the values of various types of investment and non-investment grade securities. The global credit and capital markets may again experience significant volatility and disruption due to instability in the global financial system, uncertainty related to global economic conditions and concerns regarding sovereign financial stability.
Therefore, there is a risk that we may incur impairment charges for certain types of investments should credit market conditions deteriorate or the underlying assets fail to perform as anticipated. Our future investment income may fall short of expectations due to changes in interest rates or declines in fair values of our debt securities which are judged to be resulting from credit
losses. Furthermore, we may suffer losses in principal on our investments if we are forced to sell securities that have declined in market value due to changes in interest rates or financial market conditions.
We have indebtedness that could adversely affect our financial condition and prevent us from fulfilling our debt obligations.
The aggregate amount of our consolidated indebtedness as of April 3, 2021 was $1.50 billion (principal amount), which consists of $750.0 million principal amount of our 2.950% senior notes due 2024 (2024 Notes) and $750.0 million in aggregate principal amount of our 2.375% senior notes due 2030 (2030 Notes). We also may incur additional indebtedness in the future. Our indebtedness may:
•make it difficult for us to satisfy our financial obligations, including making scheduled principal and interest payments on the notes and our other indebtedness;
•limit our ability to borrow additional funds for working capital, capital expenditures, acquisitions or other general corporate purposes;
•limit our ability to use our cash flow or obtain additional financing for future working capital, capital expenditures, acquisitions or other general business purposes;
•require us to use a portion of our cash flow from operations to make debt service payments;
•limit our flexibility to plan for, or react to, changes in our business and industry;
•place us at a competitive disadvantage compared to our less leveraged competitors; and
•increase our vulnerability to the impact of adverse economic and industry conditions.
Our ability to meet our debt service obligations will depend on our future performance, which will be subject to financial, business and other factors affecting our operations, many of which are beyond our control.
The agreements governing our debt obligations contain covenants that may adversely affect our ability to operate our business.
The indentures governing the 2024 Notes and the 2030 Notes contain various covenants limiting our and our subsidiaries' ability to, among other things:
•create certain liens on principal property or the capital stock of certain subsidiaries;
•enter into certain sale and leaseback transactions with respect to principal property; and
•consolidate or merge with, or convey, transfer or lease all or substantially all our assets, taken as a whole, to another person.
A failure to comply with these covenants or other provisions in these agreements could result in events of default under the agreements, which could permit acceleration of the related debt obligations, as well as other debt obligations. Any required repayment as a result of such acceleration could have a material adverse effect on our business, results of operations, financial condition or cash flows.
General Risk Factors
We compete with others to attract and retain key personnel, and any loss of, or inability to attract, such personnel would harm us.
We depend on the efforts and abilities of certain key members of management and other technical personnel. Our future success depends, in part, upon our ability to retain, develop and transition such personnel and attract and retain other highly qualified personnel, particularly product engineers. Competition for such personnel is intense and we may not be successful in hiring or retaining new or existing qualified personnel. Changes to the U.S. immigration laws may also impact the availability of qualified personnel. From time to time we have effected restructurings that eliminate a number of positions. For example, during the fourth quarter of fiscal 2020, we announced cost-saving measures designed to drive structural operating efficiencies across the Company by reducing our global workforce by approximately 5% through a targeted global workforce reduction in force. Even if such personnel are not directly affected by the restructuring effort, such terminations can have a negative impact on morale and our ability to attract and hire new qualified personnel in the future. In addition, the Merger could adversely affect our ability to retain and motivate current employees or attract and recruit prospective employees, each of whom may be uncertain about their future roles and relationships with us following the completion of the Merger. If we are unable to retain or develop existing qualified personnel or are unable to hire new qualified personnel, as needed, our business, financial condition and results of operations could be seriously harmed. Further, changes to our qualified personnel, including key members of
management, may be disruptive to our business, and any failure to successfully assimilate key new hires, or to successfully retain, develop and transition promoted employees, could adversely affect our business and results of operations.
General negative economic conditions and any related deterioration in the global business environment could have a material adverse effect on our business, operating results and financial condition.
If weak economic conditions happen, there may be a number of negative effects on our business, including customers or potential customers reducing or delaying orders, the insolvency of key suppliers, potentially causing production delays, the inability of customers to obtain credit, and the insolvency of one or more customers. Any of these effects could impact our ability to effectively manage inventory levels and collect receivables and ultimately decrease our net revenues and profitability.
In preparing our financial statements, we make good faith estimates and judgments that may change or turn out to be erroneous.
In preparing our financial statements in conformity with accounting principles generally accepted in the U.S., we must make estimates and judgments in applying our critical accounting policies. Those estimates and judgments have a significant impact on the results we report in our consolidated financial statements. The most difficult estimates and subjective judgments that we make concern valuation of marketable and non-marketable securities, revenue recognition, inventories, long-lived assets including acquisition-related intangibles, goodwill, taxes and stock-based compensation. We base our estimates on historical experience, input from outside experts and various other assumptions that we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. We also have other key accounting policies that are not as subjective, and therefore, their application would not require us to make estimates or judgments that are as difficult, but which nevertheless could significantly affect our financial reporting. Actual results may differ materially from these estimates. If these estimates or their related assumptions change, our operating results for the periods in which we revise our estimates or assumptions could be adversely and materially affected.
If we are unable to maintain effective internal controls, our stock price could be adversely affected.
We are subject to the ongoing internal control provisions of Section 404 of the Sarbanes-Oxley Act of 2002 (the Sarbanes-Oxley Act). Our controls necessary for continued compliance with the Sarbanes-Oxley Act may not operate effectively at all times and may result in a material weakness disclosure. The identification of material weaknesses in internal control, if any, could indicate a lack of proper controls to generate accurate financial statements and could cause investors to lose confidence and our stock price to drop.
Considerable amounts of shares of our common stock are available for issuance under our equity incentive plans, and significant issuances in the future may adversely impact the market price of our common stock.
As of April 3, 2021, we had 2.00 billion authorized shares of common stock, of which 245.8 million shares were outstanding. In addition, 31.2 million shares of common stock were reserved for issuance pursuant to our equity incentive plans and Amended and Restated 1990 Employee Qualified Stock Purchase Plan (ESPP). The availability of substantial amounts of our common stock resulting from the exercise or settlement of equity awards outstanding under our equity incentive plans, which would be dilutive to existing stockholders, could adversely affect the prevailing market price of our common stock and could impair our ability to raise additional capital through the sale of equity securities.
ITEM 1B.UNRESOLVED STAFF COMMENTS
Our corporate offices, which include the administrative, sales, customer support, marketing, R&D and manufacturing and testing groups, are located in San Jose, California. This main site consists of adjacent buildings providing 588,000 square feet of space, which we own. We also own one parcel of land totaling approximately 84 acres in South San Jose near our corporate facility.
We own a 228,000 square foot facility in the metropolitan area of Dublin, Ireland, which serves as our regional headquarters in Europe. The Irish facility is primarily used for service and support for our customers in Europe, R&D, marketing and IT support.
We own a 222,000 square foot facility in Singapore, which serves as our Asia Pacific regional headquarters. We own the building but the land is subject to a 30-year lease expiring in November 2035. The Singapore facility is primarily used for manufacturing support and testing of our products and services for our customers in Asia Pacific/Japan, coordination and management of certain third parties in our supply chain and R&D. Excess space in the facility is leased to tenants under long-term lease agreements.
We own a 130,000 square foot facility in Longmont, Colorado. The Longmont facility serves as a primary location and data center for our software efforts in the areas of R&D, manufacturing and quality control. In addition, we own a 200,000 square foot facility and 40 acres of land adjacent to the Longmont facility for future expansion. The facility is partially leased to tenants under long-term lease agreements and partially used by us.
We lease office facilities for our engineering design centers in Hyderabad, India and smaller offices in other regions.
ITEM 3.LEGAL PROCEEDINGS
For information regarding our legal proceedings, see "Note 16. Litigation Settlements and Contingencies" to our consolidated financial statements, included in Item 8. "Financial Statements and Supplementary Data", which is incorporated herein by reference.
ITEM 4.MINE SAFETY DISCLOSURES
ITEM 5.MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
Our common stock trades on the Nasdaq Global Select Market under the symbol XLNX. As of April 30, 2021, there were approximately 380 stockholders of record, which does not include beneficial owner of stock held in street name (i.e., through a brokerage firm, bank, broker-dealer, trust or other similar organization).
Under the Merger Agreement, our quarterly dividends have been suspended until a date that is at least 12 months after the signing date of the Merger Agreement.
Securities Authorized for Issuance Under Equity Compensation Plans
See "Equity Compensation Plan Information," included in Item 12. "Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters" in Part III of this Form 10-K for information regarding our equity compensation plans.
Issuer Purchases of Equity Securities
Pursuant to the terms of the Merger Agreement, we suspended our repurchase program on October 27, 2020, the date that we announced our planned merger with AMD.
In October 2019, the Board authorized a repurchase program to repurchase the Company's common stock and debentures up to $1.00 billion (2019 Repurchase Program). Through April 3, 2021, the Company had used $716.3 million of the $1.00 billion authorized under the 2019 Repurchase Program, leaving a balance of $283.7 million available for future repurchases. The Company's current policy is to retire all repurchased shares, and consequently, no treasury shares were held as of April 3, 2021 and March 28, 2020.
See "Note 13. Stockholders' Equity" to our consolidated financial statements, included in Item 8. "Financial Statements and Supplementary Data" for information regarding our stock repurchase plans.
Company Stock Price Performance
The following graph shows a comparison of cumulative total return for our common stock, the Standard & Poor's 500 Stock Index (S&P 500 Index), and the Standard & Poor's 500 Semiconductors Index (S&P 500 Semiconductors Index). The graph covers the period from April 1, 2016, the last trading day before our fiscal 2016, to April 1, 2021, the last trading day of our fiscal 2021. The graph and table assume that $100 was invested on April 1, 2016 in our common stock, the S&P 500 Index and the S&P 500 Semiconductors Index and that all dividends were reinvested.
|Company / Index||04/01/16||03/31/17||03/29/18||03/29/19||03/27/20||04/01/21|
|Xilinx, Inc.||100.00 ||124.81 ||159.05 ||284.11 ||171.09 ||298.57 |
|S&P 500 Index||100.00 ||116.43 ||132.73 ||145.33 ||132.90 ||213.87 |
|S&P 500 Semiconductors Index||100.00 ||137.22 ||187.29 ||196.34 ||205.56 ||380.39 |
Note: Stock price performance and indexed returns for our common stock are historical and are not indicators of future price performance or future investment returns.
ITEM 6.SELECTED FINANCIAL DATA
Consolidated Statement of Income Data
Five years ended April 3, 2021
(In thousands, except per share amounts)
|April 3, 2021|
March 28, 2020 (1)
|March 30, 2019|
March 31, 2018(2)
|April 1, 2017|
|Net revenues||$||3,147,599 ||$||3,162,666 ||$||3,059,040 ||$||2,467,023 ||$||2,356,742 |
|Operating income||753,139 ||791,888 ||956,799 ||686,022 ||706,390 |
|Income before income taxes||729,678 ||833,984 ||968,332 ||691,379 ||698,076 |
|Provision for income taxes||83,170 ||41,263 ||78,582 ||227,398 ||69,943 |
|Net income||646,508 ||792,721 ||889,750 ||463,981 ||628,133 |
|Net income per common share:|
|Basic||$||2.65 ||$||3.15 ||$||3.52 ||$||1.86 ||$||2.49 |
|Diluted||$||2.62 ||$||3.11 ||$||3.47 ||$||1.80 ||$||2.34 |
|Shares used in per share calculations:|
|Basic||244,257 ||251,732 ||252,762 ||249,595 ||252,301 |
|Diluted||247,229 ||254,943 ||256,434 ||257,960 ||268,813 |
|Cash dividends per common share||$||1.14 ||$||1.48 ||$||1.44 ||$||1.40 ||$||1.32 |
(1)Fiscal 2020 consolidated statement of income data included restructuring charges of $28,362.
(2)Fiscal 2018 consolidated statement of income data included executive transition costs of $33,351 and the impact of the US tax law changes of $190,503.
Consolidated Balance Sheet Data
Five years ended April 3, 2021
|Working capital||$||3,121,707 ||$||1,823,460 ||$||3,416,942 ||$||3,242,643 ||$||3,077,311 |
|Total assets||5,519,201 ||4,693,334 ||5,151,348 ||5,060,547 ||4,777,434 |
|Long-term debt||1,492,688 ||747,110 ||1,234,807 ||1,214,440 ||995,247 |
|Other long-term liabilities||514,997 ||545,494 ||579,996 ||573,809 ||351,890 |
|Stockholders' equity||2,886,961 ||2,315,049 ||2,861,509 ||2,360,353 ||2,586,151 |
ITEM 7.MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
This discussion and analysis of financial condition and results of operations should be read in conjunction with our consolidated financial statements and accompanying notes included in Item 8. "Financial Statements and Supplementary Data."
Nature of Operations
We design, develop and market programmable devices and associated technologies, including advanced ICs in the form of PLDs, boards, software design tools and predefined system functions delivered as IP. In addition to our programmable platforms, we provide design services, customer training, field engineering and technical support. Our PLDs include FPGAs, CPLDs and programmable SoCs. These devices are standard products that our customers program to perform desired logic functions. Our products are designed to provide high integration and quick time-to-market for electronic equipment manufacturers in end markets such as Aerospace & Defense (A&D), Industrial Test and Measurement and Emulation (TME), Automotive, Broadcast and Consumer, Wired and Wireless and Data Center. We sell our products globally through an independent domestic and foreign distributor channel and through direct sales to OEMs by selected independent sales representative firms and by a direct sales management organization.
Impact of COVID-19
The social and economic impact of the COVID-19 outbreak has continued to increase since it was declared a pandemic by the World Health Organization in March 2020. The governmental authorities throughout the U.S. and the world have continued to implement numerous measures to contain the virus, including travel bans and restrictions, quarantines, shelter-in-place orders, and business limitations and shutdowns. While COVID-19 did not have a significant impact on our financial results in fiscal 2021, it is difficult to accurately predict the full impact that COVID-19 will have on our future results from operations, financial condition, liquidity and cash flows due to numerous uncertainties, including the availability and distribution of vaccines, the duration and severity of the pandemic and related containment measures. Our compliance with these measures has impacted, and could continue to impact, our business and operations, as well as those of our key customers, suppliers (including contract manufacturers) and other counterparties, for an indefinite period of time. During this unprecedented time, our priority has been to support our employees, customers, partners and communities, while positioning Xilinx for the future. For example, almost all of our employees have been working remotely since March 16, 2020. In addition, employees of many of our customers are also working remotely, which may delay the timing of some orders and deliveries expected in fiscal 2022.
As we continue to experience uncertainties and disruptions caused by COVID-19, it remains uncertain when we would resume normal operations to pre-pandemic levels. Uncertainties and disruptions caused by the COVID-19 pandemic continue to affect the overall demand from customers and the availability of supply chain, logistical services and component supply, which may adversely impact our business and financial results. For example, recent sharp increases in demand for semiconductor products, combined with the pandemic’s impacts, have resulted in a global shortage of manufacturing capacities, increased lead times, inability to meet demand, and increased costs in the semiconductor industry. As a result, we may experience increases in the costs to manufacture our products and may not be able to manufacture and deliver all of the orders placed by our customers in time. We will continue to closely monitor the pandemic's associated effects, such as our ability to collect receivables from those customers significantly impacted by COVID-19 related closures and disruptions, as well as changes in orders in a given period likely to affect our revenues in future periods, particularly if experienced on a sustained basis.
We currently expect that current cash and cash equivalent balances and cash flows that are generated from operations will be sufficient to meet our domestic and international working capital needs and other capital and liquidity requirements in the foreseeable future.
Critical Accounting Policies and Estimates
The methods, estimates and judgments we use in applying our most critical accounting policies have a significant impact on the results we report in our consolidated financial statements. The SEC has defined critical accounting policies as those that are most important to the portrayal of our financial condition and results of operations and require us to make our most difficult and subjective judgments, often as a result of the need to make estimates of matters that are inherently uncertain. Based on this definition, our critical accounting policies include: revenue recognition, which impacts the recording of revenues; and valuation of inventories, which impacts cost of revenues and gross margin. Our critical accounting policies also include: valuation of marketable securities, which impacts losses on debt and equity securities when we record impairments; the assessment of impairment of long-lived assets, which impacts their valuation; the assessment of the recoverability of goodwill, which impacts goodwill impairment; accounting for income taxes, which impacts the provision or benefit recognized for income taxes, as well as the valuation of deferred tax assets recorded on our consolidated balance sheet; and accounting for business combinations, which impacts the valuation of tangible and intangible assets recognized and liabilities assumed. Below, we discuss these policies further, as well as the estimates and judgments involved. We also have other key accounting policies that are not as subjective, and therefore, their application would not require us to make estimates or judgments that are as difficult, but which nevertheless could significantly affect our financial reporting.
Due to the COVID-19 pandemic, there has been uncertainty and disruption in the global economy and financial markets. We are not currently aware of any specific event or circumstance that would require an update to our estimates or judgments or a revision of the carrying value of our assets or liabilities as of April 3, 2021. These estimates may change, as new events occur and additional information is obtained. Actual results could differ materially from these estimates under different assumptions or conditions.
Revenue from sales to our distributors is recognized upon the transfer of control, which typically occurs at shipment, and is reduced by estimated allowances for distributor price adjustments and rights of return. The distributor price adjustments are estimated using the expected value method based on an analysis of actual and forecasted ship and debit claims, at the distributor and part level to account for current pricing and business trends. For fiscal 2021, approximately 58% of our net revenues were from products sold to distributors primarily for subsequent resale to OEMs or their subcontract manufacturers.
Revenue from sales to our non-distributor customers is recognized net of sales incentives (if any) upon transfer of control to the customer, which typically occurs at shipment. Sales returns and allowances on product sales are recorded as a reduction of revenue.
Revenue from software license agreements and renewals is recognized at commencement date. Revenue from support services is recognized when the service is performed. Revenue from software licenses and support services was approximately 1% or less of net revenues for all of the periods presented.
Valuation of Inventories
Inventories are stated at the lower of actual cost (determined using the first-in, first-out method) or market (estimated net realizable value). The valuation of inventory requires us to estimate excess or obsolete inventory as well as inventory that is not of salable quality. We review and set standard costs quarterly to approximate current actual manufacturing costs. Our manufacturing overhead standards for product costs are calculated assuming full absorption of actual spending over actual volumes. Given the cyclicality of the market, the obsolescence of technology and product lifecycles, we write down inventory based on forecasted demand and technological obsolescence. These forecasts are developed based on inputs from our customers, including bookings and extended but uncommitted demand forecasts, and internal analyses such as customer historical purchasing trends and actual and anticipated design wins, as well as market and economic conditions, technology changes, new product introductions and changes in strategic direction. These factors require estimates that may include uncertain elements. The estimates of future demand that we use in the valuation of inventory are the basis for our published revenue forecasts, which are also consistent with our short-term manufacturing plans. The differences between our demand forecast and the actual demand in the recent past have not resulted in any material write down in our inventory. If our demand forecast for specific products is greater than actual demand and we fail to reduce manufacturing output accordingly, we could be required to write down additional inventory, which would have a negative impact on our gross margin.
Valuation of Marketable Securities and Non-marketable Securities
Our short-term and long-term investments consist of primarily marketable debt, and to a lesser extent, equity securities. As of April 3, 2021, we had marketable debt securities with a fair value of $2.32 billion.
We determine the fair values for marketable debt and equity securities using industry standard pricing services, data providers and other third-party sources and by internally performing valuation testing and analysis. See "Note 3. Fair Value Measurements" to our consolidated financial statements, included in Item 8. "Financial Statements and Supplementary Data," for details of the valuation methodologies. In determining if and when a decline in value below the adjusted cost of marketable debt securities is other than temporary, we evaluate on an ongoing basis the market conditions, trends of earnings, financial condition, credit ratings, any underlying collateral and other key measures for our investments. We did not record any other-than-temporary impairment for marketable debt securities in fiscal 2021, 2020 or 2019. Marketable equity securities are measured and recorded at fair value on a recurring basis with changes in fair value, whether realized or unrealized, recorded through the consolidated statements of income beginning in fiscal 2019 after the adoption of Accounting Standards Update (ASU) 2016-01.
Our investments in non-marketable equity securities of private companies are accounted for under the measurement alternative upon the adoption of ASU 2016-01. The carrying value is measured at cost, less any impairment, plus or minus changes resulting from observable price changes in orderly transactions for the identical or a similar investment of the same issuer. Determining whether an observed transaction is similar to a security within our portfolio requires judgment based on the rights and obligations of the securities. Our periodic assessment of impairment is made by considering available evidence, including the general market conditions in the investee’s industry, the investee’s product development status and subsequent rounds of financing and the related valuation and/or our participation in such financings. We also assess the investee’s ability to meet business milestones and the financial condition and near-term prospects of the individual investee, including the rate at which the investee is using its cash, the investee’s need for possible additional funding at a lower valuation and any bona fide offer to purchase the investee from a prospective acquirer. The valuation methodology for determining the fair value of non-marketable equity securities is based on the factors noted above which require management judgment and are Level 3 inputs. See “Note 3. Fair Value Measurements” to our consolidated financial statements, included in Item 8. “Financial Statements and Supplementary Data,” for additional information. The impairments loss for non-marketable equity securities were not material during all periods presented.
Impairment of Long-Lived Assets
Long-lived assets to be held and used are reviewed for impairment if indicators of potential impairment exist. Impairment indicators are reviewed on a quarterly basis. Assets are grouped and evaluated for impairment at the lowest level of identifiable cash flows.
When indicators of impairment exist and assets are held for use, we estimate future undiscounted cash flows attributable to the related assets groups. In the event such cash flows are not expected to be sufficient to recover the recorded value of the assets, the assets are written down to their estimated fair values based on the expected discounted future cash flows attributable to the asset group or based on appraisals. Factors affecting impairment of assets held for use include the ability of the specific assets to generate separately identifiable positive cash flows.
When assets are removed from operations and held for sale, we estimate impairment losses as the excess of the carrying value of the assets over their fair value. Market conditions are amongst the factors affecting impairment of assets held for sale. Changes in any of these factors could necessitate impairment recognition in future periods for assets held for use or assets held for sale.
Long-lived assets such as property, plant and equipment are considered non-financial assets, and are only measured at fair value when indicators of impairment exist.
Goodwill is not amortized but is subject to impairment tests on an annual basis, or more frequently if indicators of potential impairment exist, and goodwill is written down when it is determined to be impaired. We perform an annual impairment review in the fourth quarter of each fiscal year and compare the fair value of the reporting unit in which the goodwill resides to its carrying value. If the carrying value exceeds the fair value, the goodwill of the reporting unit is potentially impaired. For purposes of impairment testing, Xilinx operates as a single reporting unit. We use the quoted market price method to determine the fair value of the reporting unit. Based on the impairment review performed during the fourth quarter of fiscal 2021, there was no impairment of goodwill in fiscal 2021. Unless there are indicators of impairment, our next impairment review for goodwill will be performed and completed in the fourth quarter of fiscal 2022. To date, no impairment indicators have been identified.
Accounting for Income Taxes
Xilinx is a multinational corporation operating in multiple tax jurisdictions. We must determine the allocation of income to each of these jurisdictions based on estimates and assumptions and apply the appropriate tax rates for these jurisdictions. We undergo routine audits by taxing authorities regarding the timing and amount of deductions and the allocation of income among various tax jurisdictions. Tax audits often require an extended period of time to resolve and may result in income tax adjustments if changes to the allocation are required between jurisdictions with different tax rates.
In determining income for financial statement purposes, we must make certain estimates and judgments. These estimates and judgments occur in the calculation of certain tax liabilities and in the determination of the recoverability of certain deferred tax assets, which arise from temporary differences between the tax and financial statement recognition of revenue and expense. Additionally, we must estimate the amount and likelihood of potential losses arising from audits or deficiency notices issued by taxing authorities. The taxing authorities' positions and our assessment can change over time resulting in a material effect on the provision for income taxes in periods when these changes occur.
We must also assess the likelihood that we will be able to recover our deferred tax assets. If recovery is not likely, we must increase our provision for taxes by recording a reserve in the form of a valuation allowance for the deferred tax assets that we estimate will not ultimately be recoverable.
We perform a two-step approach to recognize and measure uncertain tax positions relating to accounting for income taxes. The first step is to evaluate the tax position for recognition by determining if the weight of available evidence indicates that it is more likely than not that the position will be sustained on audit, including resolution of related appeals or litigation processes, if any. The second step is to measure the tax benefit as the largest amount that is more than 50% likely of being ultimately realized.
We use the acquisition method of accounting and allocate the fair value of purchase consideration to the assets acquired and liabilities assumed from the acquiree based on their respective fair values as of the acquisition date. The excess of the fair value of purchase consideration over the fair value of these assets acquired and liabilities assumed is recorded as goodwill. When determining the fair values of assets acquired and liabilities assumed, we make significant estimates and assumptions, especially with respect to intangible assets. Critical estimates in valuing intangible assets include, but are not limited to, expected future cash flows, which includes consideration of future growth and margins, future changes in technology, expected cost and time to develop in-process research and development, brand awareness and discount rates. Fair value estimates are based on the assumptions that we believe a market participant would use in pricing the asset or liability.
Results of Operations
The following table sets forth statement of income data as a percentage of net revenues for the fiscal years indicated.
|Net revenues||100.0 ||%||100.0 ||%||100.0 ||%|
|Cost of revenues:|
|Cost of products sold||30.7 ||32.4 ||31.2 |
|Amortization of acquisition-related intangibles||0.9 ||0.7 ||— |
|Total cost of revenues||31.6 ||33.1 ||31.2 |
|Gross margin||68.4 ||66.9 ||68.8 |
|Research and development||28.7 ||26.9 ||24.3 |
|Selling, general and administrative||15.4 ||13.7 ||13.0 |
|Amortization of acquisition-related intangibles||0.4 ||0.3 ||0.2 |
|Restructuring charges||— ||0.9 ||— |
|Total operating expenses||44.5 ||41.8 ||37.5 |
|Operating income||23.9 ||25.1 ||31.3 |
|Interest and other income (expense), net||(0.7)||1.3 ||0.4 |
|Income before income taxes||23.2 ||26.4 ||31.7 |
|Provision for income taxes||2.7 ||1.3 ||2.6 |
|Net income||20.5 ||%||25.1 ||%||29.1 ||%|
|Net revenues||$||3,147.6 ||— ||%||$||3,162.7 ||3 ||%||$||3,059.0 |
Net revenues in fiscal 2021 were $3.15 billion, which was flat compared to fiscal 2020. Revenues from Data Center and A&D, Industrial and TME end markets increased but were offset by declines from Wired and Wireless end market in fiscal 2021. Net revenues in fiscal 2020 were $3.16 billion, an increase of 3% as compared to fiscal 2019. Revenues from Advanced Products increased 15% in fiscal 2020 but were offset by declines from our Core Products. The fiscal 2020 increase in Advanced Products was due to higher Advanced Products sales across all end markets, particularly in Data Center. See also "Net Revenues by Product" and "Net Revenues by End Markets" below for more information on our product and end market categories.
Except for Avnet, no other distributor or end customer accounted for more than 10% of net revenues for any of the periods presented.
Net Revenues by Product
We sell our products primarily to independent distributors in domestic and international markets, OEMs and contract manufacturers in end markets such as A&D, Industrial and TME, Automotive, Broadcast and Consumer, Wired and Wireless and Data Center. The vast majority of our net revenues are generated from sales of our semiconductor products and solution board products, but we also generate sales from support products. We classify our product offerings into two categories: Advanced Products and Core Products:
•Advanced Products are our most recent product offerings and include the Versal, UltraScale+, UltraScale and 7-series product families, and our production boards business composed of Alveo, Solarflare, Network, and System-On-Module boards.
•Core Products are all other product families.
These product categories are modified on a periodic basis to better reflect the maturity of the products and advances in technology. The most recent modification was made on April 3, 2016, which was the beginning of our fiscal 2017, whereby we reclassified our product categories to be consistent with how these categories are analyzed and reviewed internally.
Specifically, we have grouped the products manufactured at the 28nm, 20nm, 16nm, 7nm nodes and production boards into a category named Advanced Products while all other products are included in a category named Core Products.
Net revenues by product categories for the fiscal years indicated were as follows:
|(In millions)||2021||% of Total||% Change||2020||% of Total||% Change||2019|
|Advanced Products||$||2,232.8 ||71 ||— ||$||2,239.5 ||71 ||15 ||$||1,952.4 |
|Core Products||914.8 ||29 ||(1)||923.2 ||29 ||(17)||1,106.6 |
|Total net revenues||$||3,147.6 ||100 ||— ||$||3,162.7 ||100 ||3 ||$||3,059.0 |
Net revenues from Advanced Products were flat in fiscal 2021 as compared to fiscal 2020. The lower sales from Virtex UltraScale+ products in Wireless business and Virtex UltraScale products in TME business were partially offset by stronger sales from Data Center board business and Zynq UltraScale+ RFSoC products in Wireless business. Net revenues from Advanced Products increased in fiscal 2020 as compared to fiscal 2019. The increase was primarily due to stronger sales from Zynq UltraScale+ MPSoC products in Wireless business and Virtex UltraScale+ products in Data Center and TME businesses.
Net revenues from Core Products decreased in both fiscal 2021 and fiscal 2020 from the comparable prior year periods. The decrease in fiscal 2021 was largely driven by the decline in sales from our Virtex-4 products in A&D business. The decrease in fiscal 2020 was mainly due to lower sales from our Virtex-5 products in TME and A&D businesses and lower sales from Spartan-3 and Spartan-6 products in various businesses.
Net Revenues by End Markets
Our end market revenue data is derived from our understanding of our end customers’ primary markets, which is based on reports provided by distributors and our internal records. To provide additional visibility, starting March 31, 2019, we classify our end markets into businesses with similar market drivers: A&D, Industrial and TME; Automotive, Broadcast and Consumer; Wired and Wireless; and Data Center. Additionally, we classify revenue recognized from shipments to distributors but not yet subsequently sold to the end markets as Channel Revenue. The Channel Revenue in the table below represents the difference between the shipments to distributors and what the distributors subsequently sold to the end customers within the same period. The percentage change calculation in the table below represents the year-to-year dollar change in each end market.
Net revenues by end markets for fiscal years indicated were as follows:
|(% of total net revenues)||2021||% Change in Dollars||2020||% Change in Dollars||2019|
|A&D, Industrial and TME||44 ||%||6 ||41 ||%||5 ||41 ||%|
|Automotive, Broadcast and Consumer||16 ||1 ||16 ||8 ||15 |
|Wired and Wireless||30 ||(14)||34 ||(1)||36 |
|Data Center||10 ||20 ||9 ||22 ||7 |
|Channel Revenue||— ||nm*||— ||nm*||1 |
|Total net revenues||100 ||%||— ||100 ||%||3 ||100 ||%|
Net revenues from A&D, Industrial and TME end market increased, in terms of absolute dollars, in both fiscal 2021 and 2020 from the comparable prior year periods. The increase in fiscal 2021 was primarily due to higher sales from TME and Industrial, Scientific and Medical (ISM) businesses, while the increase in fiscal 2020 was driven by higher sales from A&D business.
Net revenues from Automotive, Broadcast & Consumer end market increased, in terms of absolute dollars, in both fiscal 2021 and 2020 from the comparable prior year periods. The increases in fiscal 2021 and 2020 were primarily due to higher sales from Audio, Video and Broadcast business, while the increase in fiscal 2020 was driven by higher sales from Automotive business.
Net revenues from Wired and Wireless end market decreased, in terms of absolute dollars, in both fiscal 2021 and 2020 from the comparable prior year period. The decrease in fiscal 2021 was primarily due to trade restrictions and 5G deployment delays. The decrease in fiscal 2020 was due to lower sales from Wired business, but was partially offset by the increase from Wireless business with particular strength coming from the continued deployment of 4G Long Term Evolution (LTE) networks and the accelerated global deployment ramp of 5G wireless networks.
Net revenues from Data Center end market increased, in terms of absolute dollars, in both fiscal 2021 and 2020 from the comparable prior year periods. The increase in fiscal 2021 was due to higher sales from Compute and Networking businesses. The increase in fiscal 2020 was driven by higher sales from Networking business.
Channel revenue represents the net change in distribution inventory and was immaterial for all of the periods presented.
Net Revenues by Geography
Geographic revenue information reflects the geographic location of the distributors, OEMs or contract manufacturers who purchased our products. This may differ from the geographic location of the end customers. Net revenues by geography for the fiscal years indicated were as follows:
|(In millions)||2021||% of Total||% Change||2020||% of Total||% Change||2019|
|North America||$||880.1 ||28 ||(4)||$||915.0 ||29 ||8 ||$||848.7 |
|Asia Pacific||1,529.2 ||49 ||4 ||1,475.2 ||46 ||6 ||1,385.6 |
|Europe||515.0 ||16 ||(4)||534.0 ||17 ||(9)||586.9 |
|Japan||223.3 ||7 ||(6)||238.5 ||8 ||— ||237.8 |
|Total net revenues||$||3,147.6 ||100 ||— ||$||3,162.7 ||100 ||3 ||$||3,059.0 |
Net revenues in North America decreased in fiscal 2021 but increased in fiscal 2020 from the comparable prior year periods. The decrease in fiscal 2021 was primarily due to lower sales from A&D and Data Center businesses, while the increase in fiscal 2020 was primarily due to higher sales from A&D and TME businesses.
Net revenues in Asia Pacific increased in both fiscal 2021 and 2020 from the comparable prior year periods. The increase in fiscal 2021 was primarily due to higher sales from Data Center business, and to a lesser extent, from ISM, TME and Automotive, Broadcast & Consumer businesses. The increase in fiscal 2021 was partially offset by lower sales from Wireless business. The increase in fiscal 2020 was primarily driven by higher sales from Wireless business, and to a lesser extent from TME business.
Net revenues in Europe decreased in both fiscal 2021 and 2020 from the comparable prior year periods. In fiscal 2021, the decrease was primarily due to lower sales from Wired, Wireless, Automotive and Data Center businesses. The decrease in fiscal 2021 was partially offset by higher sales from TME business. The decrease in fiscal 2020 was driven by lower sales from TME business.
Net revenues in Japan decreased in fiscal 2021, while remained flat in 2020 from the comparable prior year periods. The decrease in fiscal 2021 was primarily driven by lower sales from Automotive, Broadcast & Consumer businesses. The decrease in fiscal 2021 was partially offset by higher sales from Wireless business.
|Gross margin||$||2,153.0 ||2 ||%||$||2,115.0 ||1 ||%||$||2,103.2 |
|Percentage of net revenues||68.4 ||%||66.9 ||%||68.8 ||%|
Gross margin was higher by 1.5 percentage points in fiscal 2021 and lower by 1.9 percentage points in fiscal 2020, from the comparable prior year periods. The increase in gross margin in fiscal 2021 was primarily due to end market mix, as the percentage of revenue derived from ISM and TME businesses (which have relatively higher gross margin) increased and percentage of revenue derived from Wireless business (which has relatively lower gross margin) decreased. Furthermore, strong sales in higher margin EDA cloud and fintech accelerator board in Data Center end market pushed gross margin upward. The decrease in gross margin in fiscal 2020 was primarily due to end market mix, as the percentage of revenue derived from Wireless business (which has relatively lower gross margin) increased significantly. Lower gross margin was also affected, to a lesser extent, by higher amortization of acquisition-related intangibles as we continued to make business acquisitions during fiscal 2020.
Gross margin may be affected in the future due to multiple factors, including but not limited to, those set forth above in "Risk Factors," included in Part I of this Form 10-K, shifts in the mix of customers and products, COVID-19 pandemic, competitive-pricing pressure, manufacturing-yield issues and wafer pricing. While we expect to mitigate any adverse impacts from these factors by continuing to improve yields on our Advanced Products, improve manufacturing efficiencies and improve average selling price management, continuing growth in Wireless driven by both the continued deployment of 4G Long Term Evolution (LTE) networks and the ramp up global deployment of 5G wireless networks could negatively impact gross margin in the future.
In order to compete effectively, we pass manufacturing cost reductions to our customers in the form of reduced prices to the extent that we can maintain acceptable margins. Price erosion is common in the semiconductor industry, as advances in both product architecture and manufacturing process technology permit continual reductions in unit cost. We have historically been able to offset much of this revenue decline in our mature products with increased revenues from newer products.
Research and Development
|Research and development||$||904.6 ||6 ||%||$||853.6 ||15 ||%||$||743.0 |
|Percentage of net revenues||29 ||%||27 ||%||24 ||%|
R&D spending increased by $51.0 million or 6% during fiscal 2021, and by $110.6 million or 15% during fiscal 2020, from the comparable prior year periods. The increases were primarily attributable to higher employee compensation (including stock-based compensation), as we increased headcount to support the development of new products during fiscal 2021 and 2020.
The COVID-19 pandemic that began in March 2020 did not have any significant impact on our R&D activities and efforts in fiscal 2021. Although almost all of our employees have been working remotely since March 16, 2020, we have long had a business continuity plan and invested in technologies and tools that have enabled the employees to work effectively and remotely. These investments have helped to minimize disruptions but may not be sufficient to eliminate them. Nevertheless, we currently do not believe our R&D activities and efforts would be severely impacted by the COVID-19 pandemic.
We plan to continue to selectively invest in R&D efforts in areas such as new products and more advanced process development, IP cores and software development environments. We may also consider acquisitions to complement our strategy for technology leadership and engineering resources in critical areas.
Selling, General and Administrative
|Selling, general and administrative||$||483.7 ||12 ||%||$||432.3 ||9 ||%||$||398.4 |
|Percentage of net revenues||15 ||%||14 ||%||13 ||%|
SG&A expenses increased by $51.4 million or 12% during fiscal 2021, and by $33.9 million or 9% during fiscal 2020, from the comparable prior year periods. The increase in fiscal 2021 was primarily due to higher employee compensation (including stock-based compensation), as well as expenses related to our planned merger with AMD. The increase was partially offset by savings in travel related expenses due to COVID-19 travel restrictions. The increase in fiscal 2020 was primarily due to higher employee compensation (including stock-based compensation) from increased headcount, as well as expenses related to merger and acquisition activities.
We had no restructuring charges during fiscal 2021 and fiscal 2019.
During the fourth quarter of fiscal 2020, we announced cost-saving measures designed to drive structural operating efficiencies across the company, including a targeted global workforce reduction. We recorded restructuring charges of $28.4 million in fiscal 2020, primarily related to severance pay expenses and separately presented on the consolidated statements of income. We completed the restructuring activities by the end of the first quarter of fiscal 2021.
|Stock-based compensation included in:|
|Cost of revenues||$||12.7 ||27 ||%||$||10.0 ||14 ||%||$||8.8 |
|Research and development||150.3 ||31 ||%||115.0 ||33 ||%||86.4 |
|Selling, general and administrative||83.2 ||35 ||%||61.5 ||17 ||%||52.7 |
|Restructuring charges||— ||nm*||0.2 ||nm*||— |
|$||246.2 ||32 ||%||$||186.7 ||26 ||%||$||147.9 |
Excluding the restructuring charges portion, stock-based compensation increased by $59.7 million and $38.6 million in fiscal 2021 and 2020, respectively, as compared to the prior year periods. The increases were primarily related to higher grant-date fair value of more recent restricted stock unit (RSU) grants replacing prior RSU grants with lower grant-date fair value that were fully amortized. In order to retain our current workforce and maintain continuous business operations during the pending period of the merger, we implemented an employee retention bonus program in December 2020 for certain employees consisting of both cash bonuses and RSUs. The addition of retention RSU grants also contributed to the increase in the fiscal 2021 stock-based compensation expense.
Interest and Other Income (Expense), Net
|Interest and other income (expense), net||$||(23.5)||(156)||%||$||42.1 ||265 ||%||$||11.5 |
|Percentage of net revenues||(1)||%||1 ||%||— ||%|
Net interest and other income (expense) was a net expense of $23.5 million in fiscal 2021 as compared to the net income of $42.1 million in fiscal 2020. The decrease in fiscal 2021 was primarily due to lower interest income and investment gains from the investment portfolio, and to a lesser extent, higher interest expense from the issuance of $750.0 million principal amount of 2.375% Notes in May 2020. Net interest and other income (expense) was a net income of $42.1 million in fiscal 2020 as compared to the net income of $11.5 million in fiscal 2019. The increase was primarily due to higher gains from the investment portfolio, and to a lesser extent, lower interest expenses from the maturity of the $500.0 million principal amount of 2.125% Notes issued in March 2014.
Provision for Income Taxes
|Provision for income taxes||$||83.2 ||102 ||%||$||41.3 ||(47)||%||$||78.6 |
|Percentage of net revenues||3 ||%||1 ||%||3 ||%|
|Effective tax rate||11 ||%||5 ||%||8 ||%|
The difference between the U.S. federal statutory tax rate of 21% and our effective tax rate in all periods presented was primarily due to the favorable impact of income earned in lower tax rate jurisdictions and excess tax benefits with respect to stock-based compensation, which was partially offset by tax on the global intangible low-taxed income (GILTI) of foreign subsidiaries. In addition, fiscal 2021 included the recognition of prior and current period tax and interest related to impacts of including stock-based compensation in the intercompany R&D cost sharing arrangement as a result of the decision in Altera Corp. v. Commissioner (Altera). See discussion below and in Note 14. Income Taxes for more about the Altera case.
The increase in the effective tax rate for fiscal 2021 compared with fiscal 2020 was primarily due to the recognition of prior and current year impacts of including stock-based compensation in the intercompany R&D cost sharing arrangement and a decrease in excess tax benefits with respect to stock-based compensation. The increase was partially offset by decreases in the tax rate due to nontaxable increases in the value of our deferred compensation plan assets and a shift in the geographic mix of earnings with less earnings subject to U.S. tax at 21%.
The decrease in the effective tax rate for fiscal 2020 compared with fiscal 2019 was primarily due to an increase in excess tax benefits with respect to stock-based compensation.
On June 22, 2020, the United States Supreme Court (Supreme Court) denied certiorari in the Altera tax case. Xilinx is not a party to the proceedings but is subject to the findings of the case. The Altera tax case concerns related party R&D cost sharing arrangements and whether stock-based compensation should be included in the pool of costs to be shared. With the Supreme Court’s decision not to hear the Altera case, the decision of the Ninth Circuit Court of Appeals (which applies to taxpayers such as Xilinx) that stock-based compensation is to be included in the pool of costs to be shared remains in place. During fiscal 2021, we recorded current year expense and expense for fiscal 2018 through fiscal 2020 taxes and interest representing the cumulative adverse impact. Despite the decision in the Altera case, we have concluded that the related law remains unsettled and we will continue to monitor developments and the potential effect on our consolidated financial statements and tax filings.
We have manufacturing operations in Singapore for which we have been granted "Pioneer Status" effective through fiscal 2021. The Pioneer Status reduces our local tax on Singapore income from a statutory rate of 17% to zero percent. During fiscal 2020, we received awards from the Singapore Economic Development Board for a Development and Expansion Incentive that will reduce our local tax on Singapore income from a statutory rate of 17% to 5%, effective for fiscal years 2022 through 2031.
Financial Condition, Liquidity and Capital Resources
We have historically used a combination of cash flows from operations and equity and debt financing to support ongoing business activities, acquire or invest in critical or complementary technologies, purchase facilities and capital equipment, repurchase our common stock and debentures under our repurchase program, pay dividends and finance working capital. Additionally, our investments in debt securities are liquid and available for future business needs.
To date, the COVID-19 pandemic has not had a significant impact on our liquidity, cash flows or capital resources. However, the continued spread of COVID-19 has led to disruption and volatility in the global capital markets, which, depending on future developments, could impact our capital resources and liquidity in the future.
Fiscal 2021 Compared to Fiscal 2020
Cash, Cash Equivalents and Short-term and Long-term Investments
As of April 3, 2021, we had cash, cash equivalents and short-term investments of $3.08 billion and working capital of $3.12 billion. As of March 28, 2020, cash, cash equivalents and short-term investments were $2.27 billion and working capital was $1.82 billion.
As of April 3, 2021, we had $882.2 million of cash, cash equivalents and short-term investments held by our non-U.S. entities. Substantially all $882.2 million of cash, cash equivalents and short-term investments held by our non-U.S. entities will be available for use in the U.S. without incurring additional U.S. federal income taxes.
During fiscal 2021, our operations generated net cash flow of $1.09 billion, which was $97.6 million lower than the $1.19 billion generated during fiscal 2020. The net cash flow from operations generated during fiscal 2021 was primarily from net income as adjusted for non-cash related items and increases in accrued liabilities, accounts payable and income taxes payable. These items were partially offset by increases in other assets and accounts receivable.
Net cash used in investing activities was $1.29 billion during fiscal 2021 as compared to net cash provided by investing activities of $680.2 million in fiscal 2020. Net cash used in investing activities during fiscal 2021 consisted of $1.21 billion of net purchase of available-for-sale, $49.7 million of purchases of property, plant and equipment and software, $20.3 million of other investing activities and $7.1 million of net cash paid in connection with the acquisitions.
Net cash used in financing activities was $145.0 million in fiscal 2021, as compared to $1.64 billion in fiscal 2020. Net cash used in financing activities during fiscal 2021 consisted of $500.0 million settlement of our $500.0 million principal amount of 3.000% Notes (2021 Notes) issued in March 2014, $53.7 million of payment to repurchase common stock, $278.7 million of dividend payments to stockholders, $64.1 million of taxes paid related to net share settlement of restricted stock units and $48.6 million payments related to other financing activities, which were partially offset by $744.4 million proceeds from issuance of the 2030 Notes and $55.6 million proceeds from the issuance of common stock under employee stock plans.
Accounts receivable increased by $12.2 million and days sales outstanding (DSO) increased to 34 days at April 3, 2021 from 31 days at March 28, 2020. Our accounts receivable was primarily current. The increase was primarily due to timing of customer shipments and collections.
Inventories increased to $311.1 million as of April 3, 2021 from $304.3 million as of March 28, 2020, while inventory days at Xilinx increased to 116 days at April 3, 2021 from 106 days at March 28, 2020. We attempt to maintain sufficient levels of inventory in various product, package and speed configurations in order to keep lead times short and to meet forecasted customer demand as well as address potential supply constraints. Conversely, we also attempt to minimize the handling costs associated with maintaining higher inventory levels and to fully realize the opportunities for cost reductions associated with architecture and manufacturing process advancements. We continually strive to balance these two objectives to provide excellent customer response at a competitive cost.
Property, Plant and Equipment and Software
During fiscal 2021, we invested $49.7 million in property, plant and equipment and software, as compared to $129.3 million in fiscal 2020. Primary investments in fiscal 2021 were for machinery and equipment, building improvements, software, computer equipment and equipment related to the support of our new products development and infrastructures.
Current liabilities decreased to $624.6 million at the end of fiscal 2021 from $1.09 billion at the end of fiscal 2020. The changes were primarily due to the settlement of our $500.0 million 2021 Notes in March 2021, as well as a decrease of $84.9 million in our other accrued liabilities. These decreases were partially offset by increases of $96.9 million in accrued payroll and related liabilities, $13.9 million in accounts payable and $12.3 million in income tax payable.
Stockholders' equity increased $571.9 million to $2.89 billion during fiscal 2021 from $2.32 billion in fiscal 2020. The increases were primarily due to $646.5 million in net income for fiscal 2021 and $246.2 million of stock-based compensation, partially offset by repurchase of common stock of approximately $50.00 million and $278.7 million of payment of dividends to stockholders.
Fiscal 2020 Compared to Fiscal 2019
For discussion related to the results of operations and liquidity and capital resources for fiscal 2020 compared to fiscal 2019, please refer to Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations" included in our Form 10-K for the year ended March 28, 2020 filed with the SEC.
Liquidity and Capital Resources
To date, the COVID-19 pandemic has not had a significant impact on our liquidity, cash flows or capital resources. However, the continued spread of COVID-19 has led to disruption and volatility in the global capital markets, which, depending on future developments, could impact our capital resources and liquidity in the future.
Cash generated from operations is used as our primary source of liquidity and capital resources. Additional sources of liquidity are cash, cash equivalents and short-term investments. We believe our cash, cash equivalents and short-term investments along with cash generated from operations will be sufficient to fund operations, including capital expenditures, working capital needs, debt-related payments and other business requirements over the next 12 months. On December 1, 2020, we terminated our $400.0 million senior unsecured revolving credit facility. We had made no borrowings under this credit facility and was not in violation of any of the covenants before the termination.
We repurchased 685 thousand shares of our common stock for approximately $53.7 million during fiscal 2021. Pursuant to the terms of the Merger Agreement, we suspended our repurchase program on October 27, 2020, the date we announced the planned merger with AMD. During fiscal 2020, we repurchased 12.9 million shares of common stock for approximately $1.21 billion. During fiscal 2021, we issued $750 million of debt, which further strengthens our liquidity and capital resources. During fiscal 2021, we paid $278.7 million in cash dividends to stockholders, representing $1.14 per common share. As required under the Merger Agreement, our quarterly dividends have been suspended until a date that is at least 12 months after the signing date of the Merger Agreement. During fiscal 2020, we paid $371.8 million in cash dividends to stockholders, representing $1.48 per common share. Our common stock and debentures repurchase program and dividend policy could be impacted by, among other items, our views on potential future capital requirements relating to R&D, investments and acquisitions, legal risks, principal and interest payments on our debentures and other strategic investments.
We anticipate that existing sources of liquidity and cash flows from operations will be sufficient to satisfy our cash needs for the foreseeable future. We will continue to evaluate opportunities for investments to obtain additional wafer capacity, to procure additional capital equipment and facilities, to develop new products, and to potentially acquire technologies or businesses that could complement our business. However, certain risks and other factors, including those discussed in Item 1A and below, could affect our cash positions adversely.
The following table summarizes our significant contractual obligations as of April 3, 2021 and the effect such obligations are expected to have on our liquidity and cash flows in future periods.
|Payments Due by Period|
|(In millions)||Total||Less than 1 year||1-3 years||3-5 years||More than 5 years|
|Inventory and manufacturing-related purchase obligations (1)||$||252.4 ||$||252.4 ||$||— ||$||— ||$||— |
|Other ongoing operations (2)||36.0 ||34.5 ||1.4 ||0.1 ||— |
|Operating leases (3)||64.3 ||12.9 ||15.6 ||12.9 ||22.9 |
|2024 Notes-principal and interest (4)||820.2 ||14.7 ||44.3 ||761.2 ||— |
|2030 Notes-principal and interest (4)||913.8 ||11.9 ||35.6 ||35.6 ||830.7 |
|Other long-term liabilities (5)||40.0 ||32.9 ||7.1 ||— ||— |
|Tax obligations (6)||406.7 ||42.8 ||123.1 ||240.8 ||— |
|Total||$||2,533.4 ||$||402.1 ||$||227.1 ||$||1,050.6 ||$||853.6 |
(1)Due to the nature of our business, we depend entirely upon subcontractors to manufacture our silicon wafers and provide assembly and some test services. The lengthy subcontractor lead times require us to order the materials and services in advance, and we are obligated to pay for the materials and services when completed. We expect to receive and pay for these materials and services in the next three to six months, as the products meet delivery and quality specifications.
(2)As of April 3, 2021, we had $36.0 million in commitments primarily related to open purchase orders from ordinary operations.
(3)Operating lease obligations represent undiscounted lease payments under non-cancelable leases as of April 3, 2021. See "Note 8. Leases and Commitments" to our consolidated financial statements, included in Item 8. "Financial Statements and Supplementary Data," for additional information about our operating lease obligations.
(4)For purposes of this table we have assumed the outstanding principal of our debentures will be paid on maturity dates, June 1, 2024 for the 2024 Notes and June 1, 2030 for the 2030 Notes. See "Note 12. Debt and Credit Facility" to our consolidated financial statements, included in Item 8. "Financial Statements and Supplementary Data," for additional information about our debentures.
(5)Other long-term liabilities primarily represent future fixed and non-cancellable cash payments associated with software license contracts, including the payments due within the next 12 months.
(6)Tax obligations represent future cash payments related to the one-time transition tax that resulted from the enactment of the Tax Cuts and Jobs Act.
As of April 3, 2021, $460.9 million of liabilities were classified as long-term income taxes payable in the consolidated balance sheets. Of the $460.9 million, $363.9 million was the estimated long-term portion of the one-time transition tax that resulted from the enactment of the Tax Cuts and Jobs Act. The remaining $97.0 million of the long-term income taxes payable was for uncertain tax positions and related interest and penalties.
As of April 3, 2021, we did not have any significant off-balance-sheet arrangements, as defined in Item 303(a)(4)(ii) of SEC Regulation S-K.
Recent Accounting Pronouncements
See "Note 2. Summary of Significant Accounting Policies and Concentrations of Risk" to our consolidated financial statements, included in Item 8. "Financial Statements and Supplementary Data," for information about recent accounting pronouncements, including the expected dates of adoption and estimated effects, if any, on our consolidated financial statements.
ITEM 7A.QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Interest Rate Risk
Our exposure to interest rate risk relates to certain types of investments, which consists of fixed income securities with a fair value of approximately $2.32 billion as of April 3, 2021. The fixed income investments include mortgage-backed securities, commercial mortgage-backed securities, financial institution securities, non-financial institution securities, U.S. and foreign government and agency securities and asset-backed securities. Our primary aim with our investment portfolio is to invest available cash while preserving principal and meeting liquidity needs. In accordance with our investment policy, we place investments with high credit quality issuers and limit the amount of credit exposure to any one issuer based upon the issuer's credit rating. These securities are subject to interest rate risk and will decrease in value if market interest rates increase. A hypothetical 100 basis-point (one percentage point) increase or decrease in interest rates compared to rates at April 3, 2021 and March 28, 2020 would have affected the fair value of our investment portfolio by approximately $9.3 million and $8.0 million, respectively.
Credit Market Risk
The global credit markets may experience adverse conditions that negatively impact the values of various types of investment and non-investment grade securities. The global credit and capital markets may experience significant volatility and disruption due to instability in the global financial system, uncertainty related to global economic conditions and concerns regarding sovereign financial stability and uncertainty over the COVID-19 pandemic. Therefore, there is a risk that we may incur other-than-temporary impairment charges for certain types of investments should credit market conditions deteriorate. See "Note 4. Financial Instruments" to our consolidated financial statements, included in Item 8. "Financial Statements and Supplementary Data."
Foreign Currency Exchange Risk
Substantially all sales are denominated in U.S. dollars.
Gains and losses on foreign currency forward contracts that are designated as hedges of anticipated transactions, for which a firm commitment has been attained and the hedged relationship has been effective, are deferred and included in income or expenses in the same period that the underlying transaction is settled. Gains and losses on any instruments not meeting the above criteria are recognized in income or expenses in the consolidated statements of income as they are incurred.
We enter into forward currency exchange contracts to hedge our overseas operating expenses and other liabilities when deemed appropriate. As of April 3, 2021 and March 28, 2020, we had the following outstanding forward currency exchange contracts (in notional amount):
|(In millions and U.S. dollars)||April 3, 2021||March 28, 2020|
|Singapore Dollar||$||30.0 ||$||28.9 |
|Euro||28.6 ||33.5 |
|Indian Rupee||99.3 ||76.0 |
|British Pound||23.8 ||20.2 |
|Japanese Yen||— ||2.4 |
|Chinese Yuan||33.4 ||26.3 |
|$||215.1 ||$||187.3 |
As part of our strategy to reduce volatility of operating expenses due to foreign exchange rate fluctuations, we employ a hedging program with forward outlook of up to two years for major foreign-currency-denominated operating expenses. The outstanding forward currency exchange contracts expire at various dates through February 2023. The net unrealized gains, which approximate the fair market value of the forward currency exchange contracts, are expected to be recognized in the consolidated statements of income within the next two years.
Our investments in several of our wholly-owned subsidiaries are recorded in currencies other than the U.S. dollar. As the financial statements of these subsidiaries are translated at each quarter end during consolidation, fluctuations of exchange rates between the foreign currency and the U.S. dollar increase or decrease the value of those investments. These fluctuations are recorded within stockholders' equity as a component of accumulated other comprehensive income (loss). Other monetary foreign-denominated assets and liabilities are revalued on a monthly basis with gains and losses on revaluation reflected in net income. A hypothetical 10% favorable or unfavorable change in foreign currency exchange rates at April 3, 2021 and March 28, 2020 would have affected the annualized foreign-currency-denominated operating expenses of our foreign subsidiaries by less than $17.0 million for each year. In addition, a hypothetical 10% favorable or unfavorable change in foreign currency exchange rates compared to rates at April 3, 2021 and March 28, 2020 would have affected the value of foreign-currency-denominated cash and investments by less than $17.0 million as of each date.
ITEM 8.FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
CONSOLIDATED STATEMENTS OF INCOME
| ||Years Ended|
|(In thousands, except per share amounts)||April 3, 2021||March 28, 2020||March 30, 2019|
|Net revenues||$||3,147,599 ||$||3,162,666 ||$||3,059,040 |
|Cost of revenues:|
|Cost of products sold||966,604 ||1,025,234 ||955,868 |
|Amortization of acquisition-related intangibles||28,000 ||22,396 ||— |
|Total cost of revenues||994,604 ||1,047,630 ||955,868 |
|Gross margin||2,152,995 ||2,115,036 ||2,103,172 |
|Research and development||904,639 ||853,589 ||743,027 |
|Selling, general and administrative||483,749 ||432,308 ||398,416 |
|Amortization of acquisition-related intangibles||11,468 ||8,889 ||4,930 |
|Restructuring charges||— ||28,362 ||— |
|Total operating expenses||1,399,856 ||1,323,148 ||1,146,373 |
|Operating income||753,139 ||791,888 ||956,799 |
|Interest and other income (expense), net||(23,461)||42,096 ||11,533 |
|Income before income taxes||729,678 ||833,984 ||968,332 |
|Provision for income taxes||83,170 ||41,263 ||78,582 |
|Net income||$||646,508 ||$||792,721 ||$||889,750 |
|Net income per common share:|
|Basic||$||2.65 ||$||3.15 ||$||3.52 |
|Diluted||$||2.62 ||$||3.11 ||$||3.47 |
|Shares used in per share calculations:|
|Basic||244,257 ||251,732 ||252,762 |
|Diluted||247,229 ||254,943 ||256,434 |
See notes to consolidated financial statements.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
|(In thousands)||April 3, 2021||March 28, 2020||March 30, 2019|
|Net income||$||646,508 ||$||792,721 ||$||889,750 |
|Other comprehensive income, net of tax:|
|Net change in unrealized gains (losses) on available-for-sale securities||(228)||16,456 ||8,979 |
|Reclassification adjustment for (gains) on available-for-sale securities||(108)||(2,412)||(260)|
|Net change in unrealized (losses) gains on hedging transactions||15,574 ||(13,188)||(7,181)|
|Reclassification adjustment for losses (gains) on hedging transactions||(4,500)||2,923 ||5,603 |
|Cumulative translation adjustment, net||7,426 ||(646)||(4,441)|
|Other comprehensive income||18,164 ||3,133 ||2,700 |
|Total comprehensive income||$||664,672 ||$||795,854 ||$||892,450 |
See notes to consolidated financial statements.
CONSOLIDATED BALANCE SHEETS
|(In thousands, except par value amounts)||April 3, 2021||March 28, 2020|
|Cash and cash equivalents||$||1,438,528 ||$||1,777,703 |
|Short-term investments||1,640,371 ||489,513 |
Accounts receivable, net of allowances for doubtful accounts of $3,149 and $3,239 in 2021 and 2020, respectively
|285,214 ||273,028 |
|Inventories||311,085 ||304,340 |
|Prepaid expenses and other current assets||71,064 ||64,557 |
|Total current assets||3,746,262 ||2,909,141 |
|Property, plant and equipment, at cost:|
|Land||65,298 ||65,298 |
|Buildings||378,729 ||376,879 |
|Machinery and equipment||510,771 ||497,090 |
|Furniture and fixtures||49,389 ||50,048 |
|1,004,187 ||989,315 |
|Accumulated depreciation and amortization|