UNITED STATES
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 July 4, 1998
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 36,702,485 Shares
BURR-BROWN CORPORATION AND SUBSIDIARIES
INDEX
PART I. FINANCIAL INFORMATION Page #
Item 1 Financial Statements (Unaudited)
Consolidated Statements of Income, Three and Six
Months Ended July 4, 1998, and June 28, 1997 3
Consolidated Balance Sheets, July 4, 1998,
and December 31, 1997 4
Consolidated Statements of Cash Flows, Six
Months Ended July 4, 1998, and June 28, 1997 5
Notes to Consolidated Financial Statements 6
Item 2 Management's Discussion and Analysis of Financial
Condition and Results of Operations 9
PART II. OTHER INFORMATION
Item 4 Submission of Matters to a vote to Security
Shareholders 12
Item 6 Exhibits and Reports on Form 8-K 13
SIGNATURES
Signature Page 13
PART I. FINANCIAL INFORMATION
BURR-BROWN CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
(In thousands except share and per share amounts)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
Jul. 4, Jun. 28 Jul. 4, Jun. 28
1998 1997 1998 1997
<S> <C> <C> <C> <C>
Net Revenue $ 66,518 $62,505 $135,203 $117,277
% increase (decrease) in
revenue over prior year 6% 7% 15% (2%)
Cost of Goods Sold 31,997 31,237 65,084 58,637
Gross Margin 34,521 31,268 70,119 58,640
% of revenue 52% 50% 52% 50%
Expenses:
Research & Development 9,970 7,952 19,780 15,171
% of revenue 15% 13% 15% 13%
Sales, Marketing, General
and Administrative 12,343 13,071 24,474 24,617
% of revenue 19% 21% 18% 21%
Total Operating Expenses 22,313 21,023 44,254 39,788
% of revenue 34% 34% 33% 34%
Income from Operations 12,208 10,245 25,865 18,852
% of revenue 18% 16% 19% 16%
Interest Expense 108 113 201 215
Other (Income) Expense (789) (936) (1,748) (1,819)
Income Before Income Taxes 12,889 11,068 27,412 20,456
% of revenue 19% 18% 20% 17%
Provision for Income Taxes 3,455 3,321 7,812 6,137
Effective Tax Rate 27% 30% 28% 30%
Net Income $ 9,434 $ 7,747 $ 19,600 $ 14,319
% of revenue 14% 12% 14% 12%
Basic Earnings per
Common Share $ 0.26 $ 0.22 $ 0.54 $ 0.40
Shares used in basic per
share calculation (1) 36,660 35,974 36,554 35,887
Diluted Earnings per
Common Share $ 0.25 $ 0.20 $ 0.51 $ 0.38
Shares used in diluted per
share calculation (1) 38,505 37,905 38,434 37,706
<FN>
(1) Common share information reflects a 3
for 2 stock split effective March, 1998.
<FN>
See Notes to Consolidated Financial Statements.
</FN>
</TABLE>
BURR-BROWN CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Unaudited)
(In thousands of dollars)
<TABLE>
<CAPTION>
Jul. 4, Dec. 31,
1998 1997
<S> <C> <C>
ASSETS
Current Assets
Cash and Cash Equivalents $ 84,219 $ 54,284
Trade Receivables 61,037 55,689
Inventories 43,445 44,533
Deferred Income Taxes 7,892 7,973
Other 13,553 10,069
Total Current Assets 210,146 172,548
Long-Term Investments 26,103 44,767
Land, Buildings and Equipment
Land 4,146 3,418
Buildings and Improvements 25,586 25,690
Equipment 154,710 145,411
184,442 174,519
Less Accumulated Depreciation (100,860) (95,053)
83,582 79,466
Other Assets 2,455 2,607
$ 322,286 $299,388
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Notes Payable $ 14,535 $ 9,991
Accounts Payable 19,078 18,203
Accrued Expenses 4,923 4,678
Accrued Employee Compensation and
Payroll Taxes 5,677 9,299
Deferred Profit from Distributors 8,971 8,318
Income Taxes Payable 5,579 7,370
Current Portion of Long-Term Debt 713 672
Total Current Liabilities 59,476 58,531
Long-Term Debt 984 1,482
Deferred Income Taxes 3,966 3,774
Other Long-Term Liabilities 763 685
Stockholders' Equity
Preferred Stock - -
Common Stock 384 380
Additional Paid-In Capital 98,748 94,779
Retained Earnings 169,080 149,915
Accumulated Other Comprehensive
Income 428 1,381
Treasury Stock (11,543) (11,539)
-------- --------
257,097 234,916
-------- --------
$ 322,286 $ 299,388
<FN>
See Notes to Consolidated Financial Statements.
</FN>
</TABLE>
BURR-BROWN CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(In thousands of dollars)
<TABLE>
<CAPTION>
Six Months Ended
Jul. 4, Jun. 28,
1998 1997
<S> <C> <C>
OPERATING ACTIVITIES:
Net Income $ 19,600 $ 14,319
Adjustments to Reconcile Net Income to
Net Cash Provided by Operating Activities:
Depreciation and Amortization 7,965 6,381
Amortization of Deferred Gain - (748)
Provision for (Benefit from) (594)
Deferred Income Taxes 141
Increase (Decrease) in Deferred
Profit from Distributors 653 962
Other (116) (377)
Changes in Operating Assets and Liabilities:
(Increase) Decrease in Trade Receivables (6,844) (13,173)
(Increase) Decrease in Inventories 495 (1,144)
(Increase) Decrease in Other Assets (3,702) (3,383)
Increase (Decrease) in Accounts Payable 1,308 (1,832)
Increase (Decrease) in Accrued Expenses
and Other Liabilities (4,567) 1,484
Net Cash Provided By Operating Activities 14,933 1,895
INVESTING ACTIVITIES:
Purchases of Investments (8,596) (19,396)
Maturities of Investments 27,169 25,651
Purchases of Land, Buildings, and Equipment (12,430) (12,123)
Proceeds from Sale of Equipment 138 23
Net Cash Provided by (Used in) Investing
Activities 6,281 (5,845)
FINANCING ACTIVITIES:
Proceeds from Short-Term and Long-Term
Borrowings 5,606 -
Payments on Short-Term and Long-Term
Borrowings (308) (3,800)
Proceeds from (Payments for) Capital Stock
Activity, Net 3,534 1,859
Net Cash Provided By (Used In) Financing
Activities 8,832 (1,941)
Effect of Exchange Rate Changes (111) (19)
Increase (Decrease) in Cash and Cash
Equivalents 29,935 (5,910)
Cash and Cash Equivalents at Beginning of Year 54,284 38,433
Cash and Cash Equivalents at End of Six Months $ 84,219 $ 32,523
<FN>
See Notes to Consolidated Financial Statements.
</FN>
</TABLE>
BURR-BROWN CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(In thousands except per share amounts)
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 disclosures 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
three months and six months ended July 4, 1998, are not necessarily
indicative of the results to be expected for the year ending
December 31, 1998. 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, 1997, filed with the Securities and Exchange Commission.
2. EARNINGS PER SHARE
In 1997, the Financial Accounting Standards Board issued SFAS No.
128, Earnings per Share. SFAS No. 128 replaced the calculation of
primary and fully diluted earnings per share with basic and diluted
earnings per share. Unlike primary earnings per share, basic
earnings per share excludes any dilutive effects of options,
warrants and convertible securities. Diluted earnings per share is
very similar to the previously computed fully diluted earnings per
share. All earnings per share amounts for all periods have been
presented, and where appropriate, restated to conform to SFAS No.
128 requirements. References to share and per share amounts have
been restated to reflect a three-for-two stock split effective
April, 1997, as well as a three-for-two stock split declared on
February 23, 1998 and distributed on March 20, 1998 to stockholders
of record on March 6, 1998. Fractional shares were paid in cash to
those stockholders whose shares on the record date were not evenly
divisible by two.
Shares used in the per common share calculation for the three months
ended July 4, 1998 and June 28, 1997 are as follows:
Jul. 4, Jun. 28,
1998 1997
Weighted average common shares outstanding 36,660 35,974
Dilutive effect of stock options outstanding
using the Treasury Stock Method 1,845 1,931
Shares used in computed Diluted Earnings
Per Share 38,505 37,905
Shares used in the per common share calculation for the six months
ended July 4, 1998 and June 28, 1997 are as follows:
Jul. 4, Jun. 28,
1998 1997
Weighted average common shares outstanding 36,554 35,887
Dilutive effect of stock options outstanding
using the Treasury Stock Method 1,880 1,819
Shares used in computed Diluted Earnings
Per Share 38,434 37,706
3. COMPREHENSIVE INCOME
As of January 1, 1998, the Company adopted SFAS No. 130, Reporting
Comprehensive Income. SFAS No. 130 establishes new rules for the
reporting and display of comprehensive income and its components;
however, the adoption of this Statement had no impact on the
Company's net income or stockholders' equity. SFAS No. 130 requires
unrealized gains or losses on the Company's available-for-sale
securities and foreign currency translation adjustments, which prior
to adoption were reported separately in stockholders' equity, to be
included in Other Comprehensive Income. Prior year financial
statements have been reclassified to conform to the requirements of
SFAS No. 130.
The components of comprehensive income, net of related tax, for the
three months ended July 4, 1998 and June 28, 1997 are as follows:
Jul. 4, Jun. 28,
1998 1997
Net Income $9,434 $7,747
Unrealized gain/(loss)on investments (49) (143)
Foreign currency translation adjustments (228) 638
Comprehensive income $9,157 $8,242
The components of comprehensive income, net of related tax, for the
six months ended July 4, 1998 and June 28, 1997 are as follows:
Jul. 4, Jun. 28,
1998 1997
Net Income $19,600 $14,319
Unrealized gain/(loss)on investments (132) (434)
Foreign currency translation adjustments (821) (515)
Comprehensive income $18,647 $13,370
The components of accumulated other comprehensive income, net of
related tax, at July 4, 1998 and December 31, 1997 are as follows:
Jul. 4, Dec. 31,
1998 1997
Unrealized gain on investments $ 61 $ 193
Foreign currency translation adjustments 367 1,188
Accumulated other comprehensive income $ 428 $1,381
4. INVENTORIES
Inventories consist of the following:
Jul. 4, Dec. 31,
1998 1997
Raw Material $10,039 $9,608
Work-in-Process 19,500 22,719
Finished Goods 13,906 12,206
$43,445 $44,533
5. TAX RATE
The Company's effective income tax rate for 1998 decreased from 30%
to 28.5% during the second quarter. The decrease was mainly due to
the favorable effect of recently enacted Arizona tax legislation and
a projected increase in tax exempt investment income. The Company's
effective tax rate is lower than the U.S. statutory rate due to
benefits from tax exempt investment income, a foreign sales
corporation, and tax credits.
6. SEGMENT INFORMATION
In June 1997, the Financial Accounting Standards Board issued SFAS
No. 131, Disclosures about Segments of an Enterprise and Related
Information. SFAS No. 131 establishes standards for the way that
public business enterprises report information about operating
segments in annual financial statements and requires that those
enterprises report selected information about operating segments in
interim financial reports. It also establishes standards for
related disclosures about products and services, geographic areas,
and major customers. SFAS No. 131 is effective for financial
statements for fiscal years beginning after December 15, 1997, and
therefore the Company will adopt the new requirements retroactively
in 1998. Management has not completed its review of SFAS No. 131,
but does not anticipate that the adoption of this statement will
have a significant effect on the Company's reported segments.
7. FINANCIAL INSTRUMENTS
In June 1998, the Financial Accounting Standards Board issued SFAS
No. 133, Accounting for Derivative Instruments and Hedging
Activities, which is required to be adopted in years beginning after
June 15, 1999. The Statement permits early adoption as of the
beginning of any fiscal quarter after its issuance. The Company
expects to adopt the new Statement no later than January 1, 2000.
The Statement will require the Company to recognize all derivatives
on the balance sheet at fair value. Derivatives that are not hedges
must be adjusted to fair value through income. If the derivative is
a hedge, depending on the nature of the hedge, changes in the fair
market value of the derivatives will either be offset against the
change in fair value of the hedged assets, liabilities, or firm
commitments through earnings or recognized in other comprehensive
income until the hedged item is recognized in earnings. The
ineffective portion of a derivative's change in fair value will be
immediately recognized in earnings. The Company has not yet
determined what the effect of Statement 133 will be on the earnings
and financial position of the Company.
The Company may periodically enter into foreign currency option
contracts to offset certain probable, anticipated, but not firmly
committed foreign currency transactions related to the sales of
products. These foreign currency option contracts are designated
and effective as hedges of anticipated foreign currency sales
transactions, and accordingly, the premium costs are amortized over
the life of the option contract and any realized gains associated
with these contracts are deferred until such time as the underlying
transactions are recognized, at which time the realized gains are
recorded. As of July 4, 1998, the Company had two outstanding
foreign currency option contracts denominated in Yen with expiration
dates through December 1998.
BURR-BROWN CORPORATION AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS
The following discussion and analysis may contain forward-looking
statements that involve risks and uncertainties. Factors that might
cause actual results to differ from those currently anticipated
include, but are not limited to, those discussed under "Factors
Affecting Future Results."
RESULTS OF OPERATIONS
Net income for the second quarter of 1998 was $9.4 million or $.25
per diluted share. This compares to net income of $10.2 million or
$.27 per diluted share for the preceding quarter and to net income
of $7.7 million or $.20 per diluted share for the same quarter of
1997. Net income for the first six months of 1998 was $19.6 million
or $.51 per diluted share. This compares to $14.3 million or $.38
per diluted share for the same period in 1997.
Second quarter revenue at $66.5 million was up 6.4% over the second
quarter in 1997 but slightly down from the first quarter in 1998.
As compared to last quarter, sales into the domestic distribution
channel and into the Southeast Asian region declined most
significantly. This is consistent with observed industry
conditions. Given its concentration in the Southeast Asia region,
the digital audio product line accounted for much of the sequential
decline in revenue. For the first six months of 1998, revenue at
$135.2 million increased by 15.3% over the same period of last year.
With the exception of Japan, revenue from all regions increased
during this period.
Gross margin for the quarter was 51.9% of revenue, continuing a
trend of gross margin expansion. As compared to the prior quarter,
aggregate average selling prices increased during the second
quarter. Product mix was favorable due to lower digital audio sales
and lower sales into the distribution channel. During the second
quarter, capacity was increased in the Tucson factory. The wafer
fab began seven day operations and automatic test equipment was
added in the Tucson and Atsugi factories and at subcontractors.
Lower yields negatively impacted manufacturing cost. For the first
six months of 1998, gross margin was 51.9% of revenue compared to
50.0% for the same period in 1997. Mix continues to shift toward
higher volume products with lower average selling prices without
having an adverse effect on aggregate gross margin. This is
consistent with the Company's strategy to offer high performance
analog and mixed signal ICs for high volume, fast growing, emerging
applications. Gross margin improvements should be realized if there
is an acceleration of revenue growth.
Operating expense growth was actively constrained given the
uncertainty in demand. During the second quarter, hiring was
deferred and expenses not essential to increasing revenue, improving
customer service or new product development were postponed until
later in the year. Total operating expenses at $22.3 million were
only slightly above the prior quarter. Sales, Marketing and General
& Administrative (SMG&A) expenses increased by $212,000
sequentially. An increase in the momentum of the new product
development efforts caused Research and Development (R&D) expenses
to increase by $160,000 over the first quarter of 1998. At $44.3
million, operating expenses for the first six months of 1998
increased by 11.2% on a revenue increase of 15.3% over the same
period last year. During the first six months of 1998, R&D spending
increased by 30.4% while SMG&A spending declined. It is the
Company's intention to maintain investment in R&D at approximately
14% of revenue and to maintain SMG&A at 18% or less of revenue.
This reflects the Company's continuing strategy to maintain a
substantial level of R&D investment as the primary driver of revenue
growth, while maintaining SMG&A expenses at levels consistent with
industry practice.
Second quarter operating income of $12.2 million or 18.4% of
revenue, improved by 19.2% over the second quarter of 1997. This
improvement was due to operating leverage from increased revenue and
improved gross margin and partially offset by a modest increase in
operating expenses. As compared to the prior quarter, operating
income declined due to lower revenue. For the first six months of
1998, operating income increased by 37.2% on a revenue increase of
15.3% over the same period in 1997.
Other income, primarily interest income on invested cash, was
slightly unfavorable to the same period last year due to net costs
incurred in our foreign exchange hedging strategy. The net effect
of this strategy was an increase to net income of more than
$200,000. The full year 1998 tax rate is now expected to be 28.5% as
compared to the 1997 rate of 30%. This reduction is due to the
expanded use of tax advantaged investment instruments and recent,
favorable Arizona state tax legislation.
As compared to last year, second quarter 1998 net income was up
21.8% on a 6.4% increase in revenue. Year to date, net income
increased by 36.9% on a revenue increase of 15.3%. The Company's
goal is to improve profit performance through continued gross margin
expansion, by continued constraint on SMG&A expenses and by revenue
growth. The Company's strategy is to achieve revenue growth through
R&D investments, increased penetration of traditional markets such
as industrial process control and test and instrumentation, and
expanded participation in new, emerging markets such as
communications, digital audio and video, and computing and
multimedia.
FOREIGN OPERATIONS
International markets constitute a majority source of the Company's
revenues. The resulting transactions have exchange rate fluctuation
risk associated with them. Exchange rate risk is reduced through
the natural hedges afforded by the Company's foreign operations,
dollar-based or dollar-indexed sales transactions whenever possible
and by the purchase of forward foreign exchange and option contracts
to hedge its foreign currency sales transactions with international
subsidiaries. In addition, the Company historically enters into
forward contracts and option contracts against anticipated foreign
exchange cash flows. These contracts have historically been in
three primary currencies: Japanese Yen, British Pounds and German
Marks. Exchange rate fluctuations can also affect the Company's
reported revenue to the extent that the international subsidiaries'
sales are in non-indexed foreign currencies but reported in the
consolidated financial statements in U.S. dollars using a weighted
average exchange rate. When compared to the first half of 1997, the
effect of foreign exchange rate changes had approximately a 4.1%
unfavorable impact on 1998 year to date revenue.
FINANCIAL CONDITION
The Company's balance sheet remains sound. At July 4, 1998, cash,
cash equivalents and investments increased by nearly $11.3 million
despite capital expenditures of $12.4 million and a $5.3 million
increase in accounts receivable.
Net inventories declined by $3.1 million or 6.6% during the quarter.
This decline was almost exclusively in externally purchased items.
Inventory of internally produced product increased as capacity and
output started to exceed demand. The inventory to sales ratio
declined to 65% from 68% last quarter, continuing a trend of
improving inventory utilization.
Accounts receivable days sales outstanding lengthened to 84 days
from 81 days in the preceding quarter. Much of this increase is
driven by non-linearity of shipments, especially in Asia.
Capital expenditures totaled $8.0 million for the second quarter and
$12.4 million year to date. A major portion of capital expenditures
target automatic test equipment, test handlers and other backend
assembly and test equipment. This is driven in large measure by the
mix shift to higher volume products and by the strategy to improve
assembly and test efficiency. This equipment will reduce the
capacity constraints which impacted first quarter, 1998 revenue.
Capital expenditures for the full 1998 year are expected to total
between $30 and $35 million.
At July 4, 1998, total debt was $16.2 million of which $1.7 million
was term debt. This represented a $4.1 million increase over total
debt at December 31, 1997. All of the term debt was held in Japan
and represented an interest rate arbitrage for the Company. In
addition to term debt, credit facilities of approximately $36.6
million, including overdraft credit facilities with both domestic
and international banks, were available to the Company. At July 4,
1998, $14.5 million was borrowed against such credit facilities, or
such credit facilities were 39.7% utilized. The current ratio
improved from 2.95:1 at December 31, 1997, to 3.53:1 at July 4,
1998. The debt-to-equity ratio increased slightly from .05 at
1997's fiscal year-end to .06 at 1998's second quarter-end.
Stockholder's equity increased by $22.2 million or 9.4% from
December 31, 1997 to July 4, 1998, and increased by $10.4 million or
4.2% from April 4, 1998 to July 4, 1998.
Given both the current cash position and available credit
facilities, Management believes the Company has sufficient capital
resources available to meet its requirements for the foreseeable
future.
YEAR 2000 ISSUE
The Company has commenced a Year 2000 date conversion project to
assess possible impact of Year 2000 Issues on its business.
However, the major operating internal software systems of the
Company are fairly new and therefore Year 2000 compliant. The
Company is looking at (a) its internal information and operating
systems, and (b) possible effects on the Company of third parties'
failure to fix their own Year 2000 Issues. A plan has been
formulated to convert other minor systems to be Year 2000 compliant.
The rest of the evaluation by the Company has not been completed and
expected future costs cannot be estimated at this time. There can
be no assurance that Year 2000 compliance issues will not have an
adverse affect on the Company's future operating results.
FACTORS AFFECTING FUTURE RESULTS
The Company's quarterly and annual operating results are affected by
a variety of factors that could materially and adversely affect
revenue, net income, gross profit and profitability, including the
volume and timing of orders, changes in product mix, market
acceptance of the Company's and its customers' products, competitive
pricing pressures, fluctuations in foreign currency exchange rates,
economic conditions in the United States and international markets,
the timing of new product introductions, availability of wafers and
other materials and services, fluctuations in manufacturing yields
and the continued service of key management, employees and
providers. The Company has experienced significant fluctuations in
operating results in the past and may likely experience such
fluctuations in the future. The semiconductor market has
historically been cyclical and subject to significant economic
downturns at various times. Historically, average selling prices in
the semiconductor industry have decreased over the life of
particular products. If the Company is unable to introduce new
products with higher average selling prices or is unable to reduce
manufacturing costs to offset decreases in the prices of its
existing products, the Company's operating results will be adversely
affected. In addition, the Company is limited in its ability to
reduce costs quickly in response to any revenue shortfalls.
The fabrication of integrated circuits is a highly complex and
precise process. Manufacturing yields can be impacted by a variety
of factors, many of which are outside the Company's control. A
large portion of the Company's manufacturing costs are relatively
fixed and consequently the number of shippable die per wafer for a
given product is critical to the Company's results of operations. To
the extent the Company does not achieve acceptable manufacturing
yields or experiences product shipment delays, its financial
condition, cash flows, and results of operations would be materially
and adversely affected. To meet anticipated future demand and to
utilize a broader range of fabrication processes, the Company
intends to increase its manufacturing capacity at some future point.
Although the Company has internal capability to produce wafers for
many of its products, it is dependent on outside wafer fabs for a
significant portion of its wafer supply. As is typical in the
semiconductor industry, from time to time the Company has
experienced disruptions in the supply of processed wafers from
external fabs due to quality and yield problems and capacity
constraints. If these outside wafer foundries are not able to
produce required supplies of processed wafers conforming to the
Company's quality standards, the Company's business and
relationships with its customers for the quantities of products
produced by these foundries could be adversely affected. In
addition, the Company relies on domestic and international
subcontractors to perform assembly, packaging and testing services.
Disruption of these services could adversely affect the Company's
operations.
The Company desires to continue to expand its operations outside of
the United States and to enter additional international markets,
which will require significant management attention and financial
resources and subject the Company further to the risks of operating
internationally. These risks include unexpected changes in
regulatory requirements, delays resulting from difficulty in
obtaining export licenses for certain technology, tariffs, and other
barriers and restrictions and the burdens of complying with a
variety of foreign laws. In addition, because most of the Company's
international sales are denominated in foreign currencies, gains and
losses on the conversion to U.S. dollars of accounts receivable and
accounts payable arising from international operations may
contribute to fluctuations in the Company's operating results. A
substantial portion of the Company's revenue is attributable to
sales in Japan and Southeast Asia. There can be no assurance that
the recent economic instability in Japan and Southeast Asia will not
have a material adverse effect on the Company's business, financial
condition, cash flows or operating results, particularly to the
extent that this instability impacts the sales of products
manufactured by the Company's customers.
The Company has in the past been, and may in the future be, subject
to or initiate intellectual property litigation in the United States
or elsewhere, which can demand significant financial and management
resources. From time to time, third parties assert that the Company
is infringing intellectual property rights of such parties. There
can be no assurance that infringement claims by third parties will
not be asserted against the Company in the future or that such
assertions, if proven to be true, will not materially adversely
effect the Company's business, financial condition, cash flows or
operating results. Any litigation relating to the intellectual
property rights, whether or not determined in the Company's favor or
settled by the Company, would at a minimum be costly and could
divert the efforts and attention of the Company's management and
technical personnel, which could have a material adverse effect on
the Company's business, financial condition, cash flows or operating
results.
The Company's success depends upon its ability to develop new
products for existing and new markets, to introduce such products in
a timely manner and to have such products gain market acceptance.
The development of new products is highly complex, and from time to
time the Company has experienced delays in developing and
introducing new products. Successful product development and
introduction depends on a number of factors, including proper new
product definition, timely completion of design and testing of new
products, achievement of acceptable manufacturing yields and market
acceptance of the Company's and its customers' products. Moreover,
successful product design and development is dependent on the
Company's ability to attract, retain and motivate qualified analog
design engineers, of which there is a limited number. There can be
no assurance that the Company will be able to meet these challenges
or adjust to changing market conditions as quickly and cost-
effectively as necessary to compete successfully. The
semiconductor industry is intensely competitive and is characterized
by price erosion, rapid technological change, product obsolescence
and heightened international competition in many markets. Many of
the Company's competitors have substantially greater financial,
technical, marketing, distribution, and other resources, broader
product lines and longer standing relationships with customers than
the Company. In the event of a downturn in the market for analog
circuits, companies that have broader product lines and longer
standing customer relationships may be in a stronger competitive
position than the Company. Competitors with greater financial
resources or broader product lines also may have more resources than
the Company to engage in sustained price reductions in the Company's
primary markets to gain market share.
PART II. OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY SHAREHOLDERS
a. The Annual Meeting of Shareholders was held April 24, 1998.
b. The following Directors were elected to serve until the next
Annual Meeting and until their successors are duly elected
and qualified. Total shares entitled to vote were 24,364,286
with 22,629,226 shares voted (93%).
The Directors are as follows:
NOMINEE FOR WITHHELD
Thomas R. Brown, Jr. 22,588,923 40,303
Syrus P. Madavi 22,590,493 38,733
John S. Anderegg, Jr. 22,585,895 43,331
Francis J. Aguilar 22,588,623 40,603
Marcelo A. Gumucio 22,589,368 39,858
c. The shareholders approved an amendment to the Company's 1993
Stock Incentive Plan to increase the authorized shares by an
additional 3,000,000 shares.
Voting on this resolution were 11,492,911 shares for,
9,492,794 shares against, and 11,157 shares not voted.
d. The shareholders approved the 1998 Employee Stock Purchase
Plan.
Voting on this resolution were 20,946,858 shares for, 32,264
shares against, and 17,740 shares not voted.
e. The shareholders approved the selection of Ernst & Young LLP
as independent auditors for the Company for
the ensuing fiscal year.
Voting on this resolution were 22,610,262 shares for, 10,257
shares against, and 8,707 shares not voted.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
a. Exhibits
27. Financial Data Schedule.
b. Reports on Form 8-K: The Company did not file any
reports on Form 8-K during the quarter ended July 4, 1998.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the
Securities and 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
By: J. SCOTT BLOUIN
J. Scott Blouin
Chief Financial Officer
Principal Accounting Officer
Date: August 17, 1998
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
YEAR-TO-DATE CONSOLIDATED STATEMENT OF INCOME, CONSOLIDATED BALANCE
SHEETS, AND CONSOLIDATED STATEMENTS OF CASH FLOWS FOUND ON PAGES
3,4,5 RESPECTIVELY, ON THE COMPANY'S FORM 10-Q FOR THE CURRENT
PERIOD ENDED AND THE PREVIOUS PERIOD ENDED, ARE LISTED BELOW IN
TABULAR FORMAT AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<S> <C> <C>
<PERIOD-TYPE> 3-MOS 6-MOS
<FISCAL-YEAR-END> DEC-31-1998 DEC-31-1998
<PERIOD-END> APR-4-1998 JUL-4-1998
<CASH> 71,941 84,219
<SECURITIES> 32,679 26,103
<RECEIVABLES> 59,934 61,119
<ALLOWANCES> 892 958
<INVENTORY> 51,158 50,320
<CURRENT-ASSETS> 198,262 210,146
<PP&E> 178,177 184,442
<DEPRECIATION> 98,476 100,860
<TOTAL-ASSETS> 313,161 322,286
<CURRENT-LIABILITIES> 60,761 59,476
<BONDS> 0 0
0 0
0 0
<COMMON> 382 384
<OTHER-SE> 246,298 256,713
<TOTAL-LIABILITY-AND-EQUITY> 313,161 322,286
<SALES> 68,685 135,203
<TOTAL-REVENUES> 68,685 135,203
<CGS> 33,087 65,084
<TOTAL-COSTS> 33,087 65,084
<OTHER-EXPENSES> 10,260 20,691
<LOSS-PROVISION> (127) 58
<INTEREST-EXPENSE> 93 201
<INCOME-PRETAX> 14,523 27,412
<INCOME-TAX> 4,357 7,812
<INCOME-CONTINUING> 10,166 19,600
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 10,166 19,600
<EPS-PRIMARY> 0.28 0.54
<EPS-DILUTED> 0.27 0.51
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