SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[X] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the quarterly period ended September 30, 1995
or
[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
Commission File Number 0-11438
BURR-BROWN CORPORATION
----------------------
(Exact name of registrant as specified in its charter)
Delaware 86-0445468
- - ------------------------ -----------------------
(State of Incorporation) (IRS Employer I.D. No.)
6730 South Tucson Boulevard
Tucson, Arizona 85706
---------------------------
(Address of principle executive offices)
(520) 746-1111
--------------
(Registrant's telephone number)
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 [X] No [ ]
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, not including shares held in treasury, as of the close of the
period covered by this report.
Common Stock, $0.01 par value 16,269,341 Shares
<PAGE>
BURR-BROWN CORPORATION AND SUBSIDIARIES
INDEX Page#
PART I. FINANCIAL INFORMATION
Item 1 Financial Statements
Consolidated Statements of Income, three and nine
months ended September 30, 1995 and October 1, 1994 3
Consolidated Statements of Financial Position,
September 30, 1995 and December 31, 1994 4
Consolidated Statements of Cash Flows, nine months
ended September 30, 1995 and October 1, 1994 5
Notes to Consolidated Financial Statements 6
Item 2 Management's Discussion and Analysis of
Financial Condition and Results of Operations 8
PART II. OTHER INFORMATION
Item 1 Legal Proceedings 10
Item 4 Submission of Matters to a Vote of Security Holders 10
Item 6 Exhibits and Reports on Form 8-K
(a) Exhibit 11: Computation of Consolidated
Earnings Per Share 11
(b) Reports on Form 8-K: The Company did not file
any reports on Form 8-K during the quarter
ended September 30, 1995
SIGNATURES
Signature Page 12
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<PAGE>
<TABLE>
PART I. FINANCIAL INFORMATION
BURR-BROWN CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
(In thousands except per share amounts)
<CAPTION>
Three Months Ended Nine Months Ended
Sep 30, Oct 1, Sep 30, Oct 1,
1995 1994 1995 1994
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Net Sales $70,218 $49,217 $199,359 $144,179
Cost of Sales 35,807 28,040 102,964 77,318
--------- --------- -------- ---------
Gross Profit 34,411 21,177 96,395 66,861
Expenses:
Research and Development 6,695 5,386 19,444 15,898
Selling, General and
Administrative 16,173 13,464 48,551 41,503
--------- -------- -------- --------
22,868 18,850 67,995 57,401
Income from Operations 11,543 2,327 28,400 9,460
Interest Expense (265) (424) (863) (1,467)
Other Income (Expense) 74 160 (428) (486)
--------- -------- -------- --------
Income before Income Taxes 11,352 2,063 27,109 7,507
Provision for Income Taxes 3,065 359 7,320 2,102
---------- -------- -------- --------
Net Income $ 8,287 $ 1,704 $19,789 $5,405
---------- -------- -------- --------
Earnings per Common Share $ 0.54 $ 0.12(1) $ 1.30 $ 0.37(1)
---------- -------- --------- --------
Shares Used in per Common
Share Calculation 15,417,000 14,521,500(1) 15,230,000 14,476,500(1)
---------- ---------- ---------- ----------
<FN>
See Notes to Consolidated Financial Statements.
(1) Common share information was restated to reflect a 3-for-2 stock split
effective May, 1995.
</FN>
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<PAGE>
BURR-BROWN CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
(In thousands of dollars)
<CAPTION>
Sep 30, Dec 31,
1995 1994
----------- -----------
(Unaudited)
<S> <C> <C>
ASSETS
Current Assets
Cash and Cash Equivalents $ 82,792 $ 9,925
Trade Receivables 53,436 39,642
Inventories 43,429 40,092
Deferred Income Taxes 3,567 331
Other Current Assets 4,039 2,182
-------- ----------
Total Current Assets 187,263 92,172
Land, Buildings and Equipment
Land 3,399 3,396
Buildings and Improvements 23,003 21,926
Equipment 94,470 84,133
-------- --------
120,872 109,455
Less Accumulated Depreciation (74,504) (68,072)
Projects in Progress 4,881 4,513
-------- ---------
51,249 45,896
Other Assets 5,731 4,940
-------- ---------
$244,243 $143,008
-------- ---------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Notes Payable $ 17,791 $ 16,964
Accounts Payable 17,016 12,747
Accrued Expenses 15,245 9,277
Accrued Employee Compensation and
Payroll Taxes 8,892 4,834
Income Taxes Payable 5,607 1,630
Current Portion of Long-Term Debt 1,154 1,097
--------- ----------
Total Current Liabilities 65,705 46,549
Long-Term Debt 1,945 1,839
Deferred Gain 2,993 4,116
Deferred Income Taxes 1,205 1,182
Other Long-Term Liabilities 2,054 1,700
Commitments and Contingencies
Stockholders' Equity
Preferred Stock - -
Common Stock 165 97
Additional Paid-In Capital 89,519 26,400
Retained Earnings 78,627 58,842
Equity Adjustment From Foreign
Currency Translation 3,677 3,504
Treasury Stock (1,647) (1,221)
--------- ---------
170,341 87,622
--------- ---------
$244,243 $143,008
--------- ---------
<FN>
See Notes to Consolidated Financial Statements.
</FN>
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<PAGE>
BURR-BROWN CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(In thousands of dollars)
<CAPTION>
Nine Months Ended
Sep 30, Oct 1,
1995 1994
--------- ---------
<S> <C> <C>
OPERATING ACTIVITIES:
Net Income $ 19,789 $ 5,405
Adjustments to Reconcile Net Income to
Net Cash Provided by Operating Activities:
Depreciation and Amortization 9,028 7,751
Amortization of Deferred Gain (1,123) (1,122)
Provision for Losses on Inventories 1,532 3,831
Credit for Deferred Income Taxes (3,219) (22)
Loss on Disposition of Equipment 396 156
Loss on Foreign Currency Transactions 108 77
Loss (Income) from Unconsolidated Affiliate 5 (69)
Changes in Operating Assets and Liabilities:
Increase in Trade Receivables (13,574) (3,160)
Increase in Inventories (4,813) (247)
Increase in Other Assets (2,626) (726)
Increase in Accounts Payable 4,467 3,118
Increase (Decrease) in Accrued Expenses and
Other Liabilities 14,147 (2,189)
-------- ---------
Net Cash Provided By Operating Activities 24,117 12,803
INVESTING ACTIVITIES:
Purchases of Land, Buildings and Equipment (13,949) (8,106)
Proceeds from Sale of Equipment 120 382
-------- --------
Net Cash Used in Investing Activities (13,829) (7,724)
FINANCING ACTIVITIES:
Proceeds from Short-Term and Long-Term Borrowings 1,097 17,315
Payments of Short-Term and Long-Term Borrowings (1,000) (18,024)
Proceeds from Capital Stock Activity, Net 62,757 10
-------- ---------
Net Cash Provided by (Used In) Financing
Activities 62,854 (699)
Effect of Exchange Rate Changes (275) (592)
--------- ---------
Increase in Cash and Cash Equivalents 72,867 3,788
Cash and Cash Equivalents at Beginning of Year 9,925 13,066
--------- ---------
Cash and Cash Equivalents at End of Nine Months $82,792 $16,854
--------- ---------
<FN>
See Notes to Consolidated Financial Statements.
</FN>
</TABLE>
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<PAGE>
BURR-BROWN CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. BASIS OF PRESENTATION
The consolidated financial statements included herein have been prepared
by the Company, without audit, pursuant to the rules and regulations of the
Securities and Exchange Commission. Certain information and footnote dis-
closures normally included in financial statements prepared in accordance
with generally accepted accounting principles have been condensed or omitted
pursuant to such rules and regulations. In the opinion of management, all
adjustments (consisting of normal recurring accruals) considered necessary
for a fair presentation have been included. Operating results for the quarter
and nine month period ended September 30, 1995, are not necessarily indica-
tive of the results to be expected for the year ending December 31, 1995.
For further information, refer to the consolidated financial statements and
footnotes thereto included in the Company's Annual Report on Form 10-K for
the year ended December 31, 1994, filed with the Securities and Exchange
Commission.
On April 21, 1995, the Company's Board of Directors declared a three-for-two
stock split in the form of a stock dividend to stockholders of record as of
May 5, 1995. Comparative period earnings per common share and shares used
in the per common share calculation have been adjusted to reflect this three-
for-two stock split.
2. INVENTORIES
Inventories consist of the following:
<TABLE>
<CAPTION>
Sep 30, Dec 31,
1995 1994
(000's) (000's)
--------- ---------
<S> <C> <C>
Raw Material $ 14,201 $ 14,334
Work-In-Process 19,031 15,062
Finished Goods 18,029 17,823
-------- --------
51,261 47,219
Valuation Reserve (7,832) (7,127)
-------- --------
$ 43,429 $ 40,092
-------- --------
</TABLE>
3. STOCKHOLDERS' EQUITY
On September 27, 1995, the Company received $61,513,000 from the sale of
1,750,000 shares of common stock. At September 30, 1995, these proceeds
were invested in preferred stock of municipal funds and short-term notes
of federal agencies. These investments are classified as available-for-
sale; the cost of these securities approximated their fair market value
at September 30, 1995.
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<PAGE>
4. FOREIGN CURRENCY FORWARD CONTRACTS
As a result of selling its products in overseas markets, the Company is
exposed to the effect of foreign exchange rate fluctuations. Along with
natural hedges performed by foreign currency payables, the Company has
purchased foreign currency forward contracts to minimize the effect of
fluctuating foreign currencies on its receivables. At September 30,1995,
and October 1, 1994, the Company had forward exchange contracts to
exchange various foreign currencies for U.S. dollars in the amount of
$11,525,000 and $8,723,000, respectively. The Company's forward contracts
at September 30, 1995, in Yen, Marks, and Pounds had a contractual amount
of $7,413,000, $3,484,000 and $628,000, respectively. The estimated fair
value at September 30, 1995, of these contracts was $11,257,000. The unreal-
ized loss of $268,000, which offsets an unrealized gain on net receivables,
has been reflected in the accompanying financial statements. Maturity dates
of the forward contracts at September 30, 1995, ranged from October 6, 1995,
to December 8, 1995.
5. TAX RATE
The effective tax rate for 1995 is expected to be 27%. The 1995 tax
rate is favorably impacted mainly by the utilization of tax credit
carryforwards.
6. CONTINGENCIES
The Company was involved in four ground water claims. The Company filed
a motion for a stipulated dismissal on August 14, 1995, for three of these
claims. The court order dismissing Burr-Brown without prejudice was
entered in all three cases on September 23, 1995. In the one remaining
case, based on investigations to date, management does not believe the
Company contributed to the alleged contamination and therefore is of the
opinion that the disposition of this claim will not result in any material
change in the Company's financial condition, results of operations or
liquidity.
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<PAGE>
BURR-BROWN CORPORATION AND SUBSIDIARIES
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
1995 third quarter sales of $70.2 million represents a 43% increase over 1994
third quarter sales of $49.2 million. Year-to-date sales of $199.4 million
were 38% greater than the $144.2 million for the same period in 1994. Signifi-
cant sales growth occurred in all geographic areas, with the largest increases
coming from Asia. All product areas experienced growth, particularly those
targeting the communication, computing and digital audio market. Exchange
rate movements, which had the effect of increasing revenue during the first
half of 1995, had a less favorable impact during the third quarter as the
dollar strengthened against most of the Company's functional currencies,
especially the Japanese Yen.
Bookings for the first nine months of 1995 were $220.8 million up 44% over
the same period a year ago. Third quarter bookings were $70.5 million or
25% higher than third quarter 1994. The year-to-date 1995 book to bill
ratio stands at 1.11 as compared to 1.07 for the same period in 1994.
Third quarter 1995 gross profit, at 49%, represents a 6 percentage point
improvement over that of third quarter 1994. Year-to-date gross profit, as
a percent of sales, improved by 2 percentage points over the same period
in 1994. Higher sales volume resulted in greater utilization of available
manufacturing capacity and increased manufacturing productivity.
Research and development expense of $6.7 million in the third quarter of 1995
reflects a 24% increase over third quarter 1994. Year-to-date research and
development expense of $19.4 million increased 22% or $3.5 million over the
$15.9 million for the same period in 1994. The Company's long-term strategy
is to increase this spending level, both in absolute dollars and as a
percentage of sales.
Selling, general and administrative expenses were reduced from 29% to 24% as
a percentage of sales, when comparing year-to-date 1994 and 1995. Year-to-
date selling, general and administrative expenses increased 17% from $41.5
million to $48.5 million over the same period in 1994. This was achieved by
controlling the expenses to grow slower than the growth in sales. Revenue
growth, increased volume through independent distributors and consolidation
of administrative expense in Europe all contributed to this improvement.
At $19.8 million, net income for the first nine months of 1995 was increased
by $14.4 million or 267% from the $5.4 million earned in the same period
during 1994. As a percentage of revenue, year-to-date net income improved
from 4% to 10%. Operating income year-to-date doubled from 7% to 14%
of sales. Higher revenue and gross profit and strict control of operating
expenses drove this dramatic improvement in profitability.
Year-to-date net income was also favorably impacted by a reduction in
interest and other expenses from $2 million in 1994 to $1.3 million in 1995
and from a reduction in the income tax rate from 28% to 27%. The 1995 tax
rate has been favorably impacted by the increased ability to utilize tax
credit carryforwards. As a result of past financial performance, the
Company maintains a deferred tax asset valuation allowance. A significant
reduction in this allowance is anticipated in 1995 due to higher utilization
of tax credit carryforwards and improved profitability. However, since the
future benefit of net deductible temporary differences and carryforwards are
not assured, the Company continues to provide a valuation allowance against
deferred tax assets.
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<PAGE>
FOREIGN OPERATIONS
International markets constitute a majority of the Company's revenue.
The resulting transactions have exchange rate fluctuation risk
associated with them. To reduce the cash exchange rate risk the Company
purchases forward currency contracts to hedge its foreign currency net
accounts receivable due from international subsidiaries. The forward
contracts are in three primary currencies: Japanese Yen, British Pounds
and German Marks. Exchange rate fluctuations can also affect the
Company's reported revenue as the international subsidiaries' sales are
primarily in foreign currencies but reported in the consolidated financial
statements in U.S. dollars using a weighted average exchange rate. When
compared to the prior year rate, the exchange rates had a favorable impact
of approximately 8% on revenue year-to-date, while the third quarter impact
was a favorable 3%.
FACTORS AFFECTING FUTURE RESULTS
The Company's future operating results cannot necessarily be predicted based
on past performance, due to a number of factors affecting the Company and the
semiconductor industry. The semiconductor industry is influenced by rapidly
changing technology, the supply and price of raw materials, increased comp-
etition, price erosion, international monetary values and economic conditions
generally. The Company's future success also rests in its ability to make new
product introductions that are timely, achieve market acceptance and produce
acceptable margins. Although the Company believes it has adequate resources
to sustain its current operations, its financial results may be significantly
affected by the above and other factors.
FINANCIAL CONDITION
Cash and cash equivalents have increased by $73 million since December 31,
1994. Net cash provided by operations year-to-date of $24 million was
$11 million greater than was generated during the corresponding period of
1994, the result of increased sales and increasingly profitable operations.
On September 22, 1995, the Company completed a public sale of 1.75 million
shares of common stock resulting in proceeds to the Company of $61.5 million.
Proceeds from this sale will be used to meet the requirements of strong
market demand and other corporate purposes. This sale reflects management's
confidence in the profitable growth opportunities available within its
business and their continued commitment to provide the resources necessary
to pursue these opportunities.
Both of these actions have greatly increased the Company's financial
strength. As compared to 1994 year-end, the debt-equity ratio has
improved from .23 to .12 and the current ratio has improved from 1.98
to 2.85.
Despite improvements in manufacturing cycle times, net inventories
increased by $3 million or 8% over year-end 1994. The increase was
primarily in work-in-process inventory, the direct result of higher
levels of production activity to meet higer sales demands.
Significant progress has been achieved in reducing the inventory to
sales ratio over this period.
Expenditures on plant and equipment for the nine month period totaled
$14 million compared to $8 million for the same period a year ago. Capital
investments primarily target capacity expansion at selected bottleneck
points in the manufacturing process, improvements to manufacturing
productivity and an enterprise wide upgrade of information systems.
Total 1995 expenditures are anticipated to range between $22 million and
$26 million depending on timing of equipment receipts.
In addition to its outstanding term debt, the Company had approximately
$59 million in credit facilities available with domestic and overseas banks
at the end of the third quarter of 1995, of which approximately $18 million
or 31% was utilized. Given both the current cash position and available
credit facilities, management believes the Company continues to have
sufficient capital resources available to meet its requirements for the
foreseeable future.
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<PAGE>
FINANCIAL CONDITION (Cont'd)
The Company was involved in four ground water claims. Three toxic tort
cases filed in U.S. District Court on September 20, 1991, August 7, 1992,
and January 9, 1995, respectively, represented consolidations of individual
lawsuits that sought damages for contaminating ground water which was
subsequently pumped from public wells and consumed. On September 23, 1995,
a court order dismissing Burr-Brown without prejudice was entered in all
three cases. In the one remaining case, based on investigations to date,
management does not believe the Company contributed to the alleged contamin-
ation and therefore is of the opinion that the disposition of this claim
will not result in any material change in the Company's financial condition,
results of operations or liquidity.
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
With respect to the following three pending litigation matters, which have
been previously reported in the Form 10-K for the fiscal year ended Demcember
31, 1994, on August 14, 1995, motions for stipulated dismissal were filed.
The court order dismissing Burr-Brown without prejudice was entered in all
three cases on September 23, 1995.
a. Yslava et.al. versus Hughes Aircraft Company.
b. Lanier versus Hughes Aircraft Company.
c. Arellano versus Hughes Aircraft Company.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
a. A special Meeting of Shareholders was held September 15, 1995.
b. The shareholders approved an amendment to the Company's restated
Certificate of Incorporation to increase the authorized shares of
common stock from 20,000,000 shares to 40,000,000 shares.
Voting on this resolution were 12,868,330 shares for, 715,143 shares
against, 15,535 shares abstained, and 880,405 shares not voted.
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<PAGE>
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
Exhibit 11
BURR-BROWN CORPORATION AND SUBSIDIARIES
COMPUTATION OF CONSOLIDATED EARNINGS PER SHARE
(Unaudited)
Earnings per share are computed using the weighted average number of
shares outstanding plus incremental shares issuable upon exercise of
outstanding options under the treasury stock method.
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
Sep 30, Oct 1, Sep 30, Oct 1,
1995 1994(1) 1995 1994(1)
---------- ---------- ----------- ----------
<S> <C> <C> <C> <C>
INCOME:
Net Income $8,287,000 $1,704,000 $19,789,000 $5,405,000
PRIMARY EARNINGS PER SHARE:
Weighted Average Number of
Shares Outstanding 14,549,000 14,311,500 14,424,000 14,307,000
Net Effect of Dilutive Stock
Options Based on the Treasury
Stock Method Using the Average
Market Price of Common Stock 868,000 210,000 806,000 169,500
---------- --------- ---------- ---------
Common Stock and Common Stock
Equivalents 15,417,000 14,521,500 15,230,000 14,476,500
---------- ---------- ---------- ----------
Primary Earnings per Share $ 0.54 $ 0.12 $1.30 $ 0.37
---------- ---------- ---------- ----------
FULLY DILUTED EARNINGS PER SHARE:
Weighted Average Number of Shares
Outstanding 14,549,000 14,311,500 14,424,000 14,307,000
Net Effect of Dilutive Stock Options
Based on the Treasury Stock Method
Using the End of Period Market Price
of Common Stock, if Higher Than
Average 892,000 282,000 944,000 225,000
---------- ---------- ---------- ----------
Common Stock and Common
Stock Equivalents 15,441,000 14,593,500 15,368,000 14,532,000
---------- ---------- ---------- ----------
Fully Diluted Earnings
per Share $ 0.54 $ 0.12 $1.29 $ 0.37
---------- ---------- ---------- ----------
<FN>
(1) Common share information was restated to reflect a 3-for-2 stock split
effective May, 1995.
</FN>
</TABLE>
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<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
BURR-BROWN CORPORATION
______________________
(Registrant)
November 13, 1995 SYRUS P. MADAVI
_________________ ______________________
(Date) Syrus P. Madavi
President and Chief Executive Officer
JOHN L. CARTER
_______________________
John L. Carter
Executive Vice President and
Chief Financial Officer
- 13 -
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C> <C> <C>
<PERIOD-TYPE> 3-MOS 6-MOS 9-MOS
<FISCAL-YEAR-END> DEC-31-1995 DEC-31-1995 DEC-31-1995
<PERIOD-END> APR-01-1995 JUL-01-1995 SEP-30-1995
<CASH> 13,697 14,127 82,792
<SECURITIES> 0 0 0
<RECEIVABLES> 49,117 54,948 53,436
<ALLOWANCES> 0 0 0
<INVENTORY> 39,694 41,220 43,429
<CURRENT-ASSETS> 106,644 115,683 187,263
<PP&E> 121,201 124,385 125,753
<DEPRECIATION> 71,956 74,422 74,504
<TOTAL-ASSETS> 161,722 171,177 244,243
<CURRENT-LIABILITIES> 58,931 61,144 65,705
<BONDS> 3,488 2,924 3,099
<COMMON> 97 147 165
0 0 0
0 0 0
<OTHER-SE> 93,919 101,401 170,176
<TOTAL-LIABILITY-AND-EQUITY> 161,722 171,177 244,243
<SALES> 59,547 129,141 199,359
<TOTAL-REVENUES> 59,547 129,141 199,359
<CGS> 31,361 67,157 102,964
<TOTAL-COSTS> 31,361 67,157 102,964
<OTHER-EXPENSES> 21,523 45,629 68,423
<LOSS-PROVISION> 0 0 0
<INTEREST-EXPENSE> 283 598 863
<INCOME-PRETAX> 6,380 15,757 27,109
<INCOME-TAX> 1,723 4,255 7,320
<INCOME-CONTINUING> 0 0 0
<DISCONTINUED> 0 0 0
<EXTRAORDINARY> 0 0 0
<CHANGES> 0 0 0
<NET-INCOME> 4,657 11,502 19,789
<EPS-PRIMARY> .31 .76 1.30
<EPS-DILUTED> .31 .76 1.29
