UNITED STATES

FORM 10-K

(Mark One)

[X]	ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

or

[   ]	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission File No. 0-11438

6730 South Tucson Boulevard

(520) 746-1111

Securities registered pursuant to Section 12(g) of the Act:

     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 by check mark if disclosure of delinquent filers pursuant to item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of Registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.  [X]

      The aggregate market value of the voting stock held by non-affiliates of the Registrant based on the closing price as of January 31, 2000 was approximately $1,452,771,992.

      There were 55,697,731 shares of Burr-Brown Common Stock outstanding as of January 31, 2000.

Documents Incorporated by Reference

      Portions of the Registrant’s Proxy Statement for the Annual Meeting of Stockholders to be held on April 28, 2000 — Incorporated by reference into Part III.

TABLE OF CONTENTS

PART I

Item 1.  Business

Overview

      We are a global leader in the development, manufacturing and marketing of high performance analog and mixed signal integrated circuits. Through our proprietary design expertise and specialized application knowledge, we deliver more than 1,200 innovative products to 25,000 customers worldwide. We target high growth segments of the communications, consumer, computing and industrial markets.

      Our major customers are among the world’s leading electronics manufacturers, and include 3Com, Adtran, Agilent Technologies, Alcatel, Bosch, Cisco, Fujitsu, Hewlett Packard, Hitachi, Honeywell, IBM, Lucent, Matsushita, Motorola, NEC, Nokia, Nortel, Philips, Sega, Siemens, Sony, Toshiba and Yamaha.

The Semiconductor Industry

      Semiconductors (or integrated circuits) can be divided into three categories: analog, digital and mixed signal. Analog semiconductors condition and regulate “real world” signals such as temperature, speed, sound and electrical current. This information can be detected, measured and controlled using analog integrated circuits which represent these real-world properties by generating continuously varying voltages and currents. On the other hand, digital circuits such as memory devices and microprocessors behave as on and off switches expressed in binary code as 1’s and 0’s. Mixed-signal devices incorporate both analog and digital functions into a single chip and enable digital electronics to interface with real world analog phenomenon.

      The following table illustrates the flow of electronic signals from real-world phenomena through the digital computing process.

LOGO

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      Dataquest, a market research firm, estimates that in 2000 analog and mixed signal circuits will account for $28 billion of an expected $179 billion overall market for integrated circuits. The availability of low cost digital microprocessors and digital signal processing in the form of a cost-effective single chip has accelerated the digitization of consumer and industrial products. Increased digitization of these products has led to an increased use of computers as embedded processors to measure, control, monitor, or process electronic signals nearer or adjacent to the sensor that is detecting physical conditions. This, in turn, has created the need for analog and mixed signal products that enable digital computers, microprocessors, microcontrollers and digital signal processors (DSPs) to interact with electronic signals derived from physical or analog phenomena. Recently, the rapid growth of high-speed wired and wireless communication, digital audio and video consumer products, as well as the Internet and personal computing have accelerated demand for high-precision, high-speed analog and mixed signal products.

      The market for analog and mixed signal integrated circuits differs from the digital circuit market in several significant ways. Analog applications involve more complex signals than digital applications, with analog signals having continuous variations in resolution, speed, power, signal amplitude and other specifications. Competition in analog and mixed signal markets is based more on performance, functionality, quality and reliability than on price. Analog circuits generally have longer life cycles than digital circuits because customers frequently continue to use the same component through several generations of their products, which themselves have long life cycles. This results in more stable pricing and demand.

      In contrast to the design of digital circuits, analog product design innovation depends more on experienced engineers and less on computer-aided design tools. This results from the complexities inherent in designing circuits that process continuous signals. We believe that the limited pool of experienced analog designers creates a barrier to entry and serves as a competitive advantage to established analog companies. In addition, circuit design is more critical to the analog market than the relative size of the circuit, allowing analog manufacturers to utilize less costly manufacturing techniques. This reduces capital requirements and correspondingly increases return on invested capital.

      We believe that certain product segments within the analog semiconductor market will grow even faster than the overall semiconductor market in the coming years. Specific factors contributing to the rapid growth in demand for analog and mixed signal semiconductors in these segments include the need to improve the performance of emerging communications devices, extend battery lives, decrease power consumption, achieve higher levels of integration, increase portability and reduce size and cost. These trends increase the need for more complex, high-performance analog and mixed-signal semiconductors.

Strategy

      We pursue improved revenue growth and profitability by employing the following strategies:

      Target High Growth Emerging Markets. We focus on increasing penetration of the high growth segments of the communication, computing and consumer markets, including cellular handsets and base stations, fiber optic and broadband digital subscriber line (DSL) applications, personal digital assistants (PDAs), digital imaging for camcorders and digital still cameras, set top boxes and digital versatile disk (DVD) players. Within these target markets, we provide high performance products for applications with significant growth potential where our products are key elements of complex systems offered by market leading companies.

      Strengthen Leadership in Established Markets. In our established industrial markets, we focus on expanding our product line to offer solutions for substantially all of our customers’ analog circuit requirements. In addition, we will continue to work with our customers to develop products targeted at rapidly growing industrial and medical applications, including medical imaging, portable medical instruments, smart sensors, a/c motor control, automatic test equipment and portable instrumentation.

      Accelerate New Product Development. To capitalize on high growth markets and expand our position in our established markets, we continue

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Products

      We design and manufacture analog and mixed signal integrated circuits that detect, measure and control real world properties, such as temperature, pressure, speed, flow, humidity, sound and light. Our product strategy has been to concentrate on proprietary, high precision, high speed analog, data conversion, and integrated mixed signal circuits. We identify significant markets in which new or enhanced high performance products of this type are required. We then attempt to develop and supply complete solutions to address these markets.

      The following table illustrates certain of our products, their applications and selected customers in each of the principal markets we address.

      Once our products are designed into a customer’s product, they generally remain a part of that product throughout its life. Our experience has been that there is generally a two to four year period before the sales level of a standard product fully matures. The sales life of our products may extend from five to eight years or more once they have reached mature production volumes. Some of our integrated circuits are used in several generations of the same product. Once our components have been designed into a customer’s product, we are often a customer’s sole or primary source for that particular component.

      We sell both standard linear integrated circuits (SLICs), which can be used as precision building blocks across many applications, as well as application specific standard products (ASSPs), which are targeted to the

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Analog Integrated Circuits

      Analog signal processing integrated circuits are used to process and transmit analog data signals prior to conversion to digital signals and after conversion from digital signals. These components are used in communications equipment, automatic test equipment, analytical instruments, medical instruments and systems, industrial controls, personal computing and computer peripherals. Our analog circuits include operational, power, instrumentation, programmable gain and isolation amplifiers, current transmitters and other analog signal processing components.

     Operational Amplifiers

      The operational amplifier is the fundamental building block in analog and digital systems design. Operational amplifiers are used to detect and amplify weak (low level) analog signals. Our high performance operational amplifiers are generally capable of amplifying typical analog signals in the micro-volt range up to 100,000 times. In addition, operational amplifiers can perform mathematical functions such as integration and differentiation. These high performance amplifiers are required to treat signals generated in numerous applications, including satellite and cable TV systems, audio and video systems, robotics, magnetic resonance and computer-aided tomography (CAT) body scanning systems.

     Amplifier Based Products

      We manufacture a number of other amplifier based products, including instrumentation amplifiers, programmable gain amplifiers and isolation amplifiers. These products perform a variety of functions. Among other uses, these components permit the measurement of weak signals in the presence of unwanted “noise” and protection of sensitive instruments from the effects of transient, high-magnitude and potentially damaging voltages caused by sources such as lightning or the switching of high voltage equipment. These amplifiers are used in many diverse applications, including temperature measurement in industrial processes, protection of sensitive medical instruments and isolation of electrical power line disturbances and faults.

     Other Analog Signal Processing Components

      We manufacture a variety of other analog signal processing components, including mathematical function circuits, current transmitters and voltage-to-frequency converters. Mathematical function circuits are used when information sought can be effectively derived only through its algorithmic relationship to analog signals. Current transmitters send analog signal information from a process sensor to measurement or control equipment in the form of a current on the same wires that produce the power to the transmitter and sensor. Voltage-to-frequency converters convert process signal amplitude to a frequency, making the signal immune to electrical noise and permitting more efficient storage and processing of the information.

     Isolation Products

      Our isolation products include isolation amplifiers, isolated digital couplers and DC-to-DC voltage converters. These products are used in the industrial process control, communication and medical instrumentation markets, among others, to perform a variety of analog circuit functions while protecting people and equipment from potentially damaging voltages.

Mixed Signal Products

      Our mixed signal products are integrated circuit devices that contain both analog and digital circuits on a single integrated circuit. In most cases, these devices convert analog signals to digital form or convert digital

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     Precision Data Conversion Products

      The majority of our mixed signal components revenue is derived from moderate speed, high resolution and high accuracy converters. These general purpose converters are used primarily in process control instrumentation, electronic test instrumentation, automatic test systems, and communications systems. For example, in a robot controller the position of the robot arm must be precisely measured and manipulated. Analog signals from the robot’s position sensors are converted by an analog-to-digital (A/D) converter for computer processing. In turn, a digital-to-analog (D/A) converter converts the digital control signal from the computer to analog form to drive the actuators and motors to position the robot arm accurately.

     High Speed Data Conversion Products

      High speed converters are used in a variety of applications such as wireless communications systems, image processing, digital oscilloscopes, ultrasound, radar and sonar, as well as the front end of other advanced systems using digital signal processing (DSP) technology.

     Digital Audio and Video Products

      We also offer high precision, single chip, D/A converters, A/D converters, codecs and video signal processing devices for the digital audio and video market. Our pulse-code-modulated (PCM) product line plays an essential role in digital audio systems, such as compact disc (CD) players, that use laser technology to achieve high performance audio reproduction. Our components convert the digital signals for each stereo channel into audio. Several generations of products of this type have been developed and introduced for use in digital audio systems. Our presence in the CD market facilitated our early entry into the DVD and multimedia markets. Our PCM converters have now been designed into musical instruments, computer games, automobile sound systems, CD-ROMs for multimedia applications, set top box tuners for cable and satellite TV, DVD players and PC add-in cards. Our high speed A/ D converters are used in charge coupled device (CCD) imaging applications such as camcorders, digital cameras and scanners to convert the CCD analog signal to digital for processing in the system DSP. In addition, we make complete “front-end” video ASSPs, combining A/D converters with other circuitry to handle all the signal processing between the CCD sensor and the system’s digital processor.

Intelligent Instrumentation Inc.

      Through our majority-owned subsidiary, Intelligent Instrumentation, Inc., we also design, manufacture, and market a broad line of hardware and software products for the capture and sharing of real-time enterprise data. These products capture sensor-based data as well as human-entered data. Products include plug-in data acquisition boards, Ethernet-based data acquisition systems, network based data collection terminals and component terminals for machine interface. These products are widely used in a range of applications, including predictive maintenance, access control, time and attendance, material tracking, product test and resource planning.

Research and Development

      The design of analog and mixed signal circuitry is highly dependent on the skills and experience of individual design engineers. We believe that our team of design engineers has developed extensive core strengths in high performance analog and mixed signal integrated circuits. To support our engineering teams, we continually invest in design engineering talent, engineering tools, production processes and test equipment. We maintain research and development facilities in Arizona, Oregon, Pennsylvania, the United Kingdom, Japan and Germany.

      We emphasize the development of proprietary standard and application specific products. Our product strategy is to identify markets in which the application of analog microelectronics technology may be used to

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      Our linear products division focuses on signal processing and power management products. The data product division develops data conversion products for medical, motor control and imaging applications. Our high speed product division targets communications applications. Our consumer product division designs products for audio, video and digital imaging applications. Our isolation products division develops power regulators and isolation products for computing and communications applications.

      We invest heavily in research and development to maintain our core design competency and accelerate new product output. We spent approximately $46 million, $40 million and $34 million for product and process development in 1999, 1998 and 1997 respectively, representing 15.8%, 15.5% and 13.5% of revenue in these periods. During this three-year period, we introduced 258 new products, including 92 during 1999.

Intellectual Property

      We seek to protect our products and wafer fabrication process technologies primarily through patents, trade secrecy measures, copyrights, mask work protection, trademark registrations, licensing restrictions, confidentiality agreements and other approaches designed to protect proprietary information. We own approximately 180 United States and international patents expiring from 2000 to 2018, and have applications for approximately 40 additional patents pending in the United States, as well as patents issued and pending in several other countries. Although we pursue a policy of maintaining a strong patent portfolio, we believe that our success depends primarily upon the experience and creative skills of our people rather than upon the ownership of patents. As is common in the semiconductor industry, from time to time we have been and may in the future be notified of claims regarding the possible infringement of patents issued to others, and similarly, we have on occasion notified others of possible infringements of our patents as we have deemed appropriate.

Sales and Marketing

      We sell our products in what we consider to be all major markets in the industrialized world through our direct sales force and through independent sales representatives and distributors. We maintain eight sales offices in the United States and have international sales subsidiaries in France, Germany, Italy, the Netherlands, Switzerland, the United Kingdom, Japan and Singapore. Our direct sales force is primarily focused on large corporate customers, while our independent sales representatives and distributors service the needs of our broad base of smaller clients. In particular, the direct sales force and field application engineers work with customers at the inception of a new product to identify specific applications. Most of our sales people hold engineering degrees and the balance have relevant engineering experience.

      Approximately 61% of our 1999 worldwide revenue was realized through third party distribution. In 1999, sales to one U.S. distributor and its related party accounted for approximately 15% of sales. Independent sales representatives sell our products in approximately 45 countries and the less significant domestic markets where we do not have a direct sales force.

      We sell our products to a diverse base of over 25,000 customers worldwide. We have maintained long-term relationships with major customers in the industrial process control, instrumentation and imaging markets. Currently, we are targeting our key corporate accounts for further penetration through joint collaboration on high volume, application specific products and incremental sales of standard circuits from our diverse product line. In 1999, our fifteen key corporate accounts generated approximately 20% of our total revenue. Sony, our largest end-customer, accounted for 5.8% of 1999 sales.

      Sales outside the United States accounted for approximately 61% of total revenues in 1999, 65% of total revenues in 1998, and 66% of total revenues in 1997. To support our international marketing organization, we have established product development, production, marketing and administrative functions in Scotland and

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Backlog

      Many of our products are standard items with a relatively short delivery cycle. Our backlog is generally scheduled for delivery within three months or less of order, although some portion may be scheduled for delivery four to twelve months into the future. As a result, the order backlog at the end of any specific quarter is not generally indicative of the level of sales to be expected in succeeding quarters. It is our policy to include in backlog only those orders that have firm scheduled delivery dates within one year. Our backlog as of December 31, 1999, 1998, and 1997, was approximately $79.6 million, $46.3 million and $56.5 million, respectively.

Manufacturing

      Our production of integrated circuits use internal process technologies, externally purchased wafer processing foundry services and purchased components that already incorporate the desired semiconductor manufacturing technology. We use several bipolar, complementary metal oxide semiconductor (CMOS) and bipolar CMOS processes that provide circuits for the analog and data conversion markets. We seek to optimize wafer production through a combination of in-house and outsourced fabrication facilities, utilizing third parties where more cost effective or efficient. Our internal facility is located in Tucson, Arizona.

      We conduct electrical testing of integrated circuits in both wafer and packaged forms. The combination of various specifications makes the test process for analog and mixed-signal devices particularly difficult. Test operations require the programming, maintenance, and use of sophisticated computer-based test systems and complex automatic handling systems. We have special screening and qualification programs when high reliability quality grades are required by customer specifications.

      We have integrated circuit assembly operations in Tucson. However, most of our assembly demand is met by using contract assembly companies located in Japan, Taiwan, Malaysia, Thailand and the Philippines. To achieve lower cost without compromising high performance, we have expanded our packaging capability to include low cost multi-chip module assembly in our Tucson manufacturing facility. Following assembly, we perform final testing, marking and inspection of the packaged units, utilizing outsourced service firms when cost effective.

      To maintain our reputation for producing high quality and reliable products, we have developed and implemented a quality program to focus on customer satisfaction. The program includes annual satisfaction reviews with customers to assess improvement priorities and competitor comparisons. The quality program also includes Quality System Certification (ISO9001), a comprehensive product/process reliability monitoring program, and a stringent qualification program for new products and processes.

      We maintain facilities in Europe and Japan to provide better service to our customers in these regions and to achieve an improved competitive position. In Europe, our product development and administrative site is located in Livingston, Scotland. This facility designs integrated circuits for sale in Europe and for export to other markets. In Japan, our Atsugi Technical Center, near Tokyo, performs product development, final product testing and quality and reliability testing for the digital audio and imaging product line for sale in Japan and export to other markets.

      The principal raw materials used in the manufacture of our monolithic integrated circuits are silicon wafers, chemicals and gases used in processing wafers, gold wire and ceramic, metal and epoxy packages that enclose the chip and provide the external connections for the circuit. Silicon wafers and other raw materials may be obtained from several suppliers. From time to time, particularly during periods of increased industry-wide demand, silicon wafers and other materials have been in short supply. As is typical in the industry, we allow for a significant period of lead time between order and delivery of raw materials. In addition, we sometimes enter into long term supplier-customer relationships with key suppliers of such materials to mitigate possible shortage problems.

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Competition

      We believe that competition in our industry is based primarily on design and process innovation, product performance and reliability, adherence to changing industry standards, marketing and distributing capability, technological change, availability of a broad range of specialized products, standard product availability and price. We believe that reliable performance, service and product innovation are more important than price for high performance circuits. Price is more of a competitive factor when an equivalent product is available from other sources.

      Our major competitors in the high performance analog integrated circuits market are Analog Devices, Linear Technology and Maxim Integrated Products. With respect to a more limited range of products, we also compete with Cirrus Logic, Conexant, Elantec Semiconductor, National Semiconductor, Intersil, ON Semiconductor, ST Microelectronics, Sipex Corporation and Texas Instruments. Our consumer product line competes with several U.S. and foreign manufacturers of D/ A converters for use in digital compact disc stereo systems and multimedia systems. These include Asahi Kasei, Cirrus Logic, Hitachi, Micro Linear, Mitsubishi, Philips Semiconductors, Sony Electronics, and Wolfson Microelectronics. Many of our competitors are larger and have greater financial and other resources than us.

Environmental Regulation

      Government regulations impose various controls on the discharge of certain chemicals and gases into the environment that we use to process semiconductors at our Tucson fabrication facility. We believe that our manufacturing processes conform to present environmental regulations, but future changes in these regulations could result in increased costs or impede our operating performance. We are currently eliminating lead from our semiconductor processes to comply with anticipated European regulations.

      Our Tucson, Arizona campus is part of the Tucson International Airport Superfund site. We have agreed with the United States Environmental Protection Agency (EPA) to implement site remediation actions pursuant to the provisions of a consent decree agreement with the EPA. We incurred approximately $60,000, $75,000 and $200,000 of remediation expense in 1999, 1998, and 1997, respectively.

      In addition, we have been named as a potentially responsible party (PRP), along with hundreds of other PRPs, at the OMEGA chemical Superfund site in Whittier, California. The PRPs are currently negotiating a consent decree with the EPA from remediation of that site. Due to our small volumetric contribution to the OMEGA site, we believe our responsibility for remediation costs should not have a material adverse impact on our operations.

Employees

      At December 31, 1999, we employed 1,522 people worldwide, including 931 employees in manufacturing and assembly, 265 employees in research and development, 216 in sales and marketing and 110 in management and administration. Many of our employees are highly skilled and our continued success will depend in part on our ability to attract and retain such employees, who are generally in great demand. At times, like other semiconductor manufacturers, we have had difficulty hiring engineering personnel. We have never experienced a work stoppage and we consider our employee relations to be good.

Item 2.  Properties

      We have manufacturing or technical facilities in Tucson, Arizona, Atsugi, Japan and Livingston, Scotland. In 1994, we established business units in these locations to bring greater focus to their respective served markets and accelerate new product development. Our major manufacturing and engineering facilities and administrative offices are located in eight company-owned buildings aggregating 304,775 square feet on our 33 acre site in Tucson, Arizona. We also own approximately 120 acres of land in Tucson which is being held for future expansion.

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      In December 1998, we purchased a 12,000 square foot building in Livingston, Scotland which houses product development and administrative offices. We also own approximately 20 acres of land in Livingston, Scotland. Our Atsugi Technical Center in Atsugi, Japan is a 44,500 square foot building which houses sales, product testing and research and development activities. We have a fifteen year lease on this facility which expires in 2001. Also, we have sales offices that lease space under agreements with varying terms.

Item 3.  Legal Proceedings

      From time to time, we are involved in legal proceedings of a character normally incident to our business, including various threatened and pending claims seeking damages from us. Such litigation includes claims related to employment, environmental, personal injury, contract, product liability and intellectual property matters. We do not believe that an adverse decision in any presently pending or threatened claim, or any amounts we would be required to pay by reason of the claim, would have a material adverse effect on our financial condition, cash flows, or results of operations.

Item 4.  Submission of Matters to a Vote of Security Holders

      We did not submit any matters to a vote of our shareholders in the fourth quarter of 1999.

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PART II

Item 5.  Market for the Registrant’s Common Equity and Related Stockholder Matters

      Our common stock has traded on the Nasdaq National Market under the symbol “BBRC” since March 1984. The following table lists the high and low per share sale prices for our common stock for the periods indicated, adjusted for stock splits:

      On February 8, 2000, the last reported bid price of our common stock on the Nasdaq National Market was $44 1/8 per share. As of January 31, 2000, we had approximately 810 stockholders of record and approximately 6,500 beneficial owners.

      The payment of dividends on our common stock is within the discretion of our board of directors. Currently, we intend to retain earnings to finance the growth of our business. We have not paid cash dividends on our common stock and the board of directors does not expect to declare cash dividends on the common stock in the near future.

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Item 6.  Selected Financial Data

Five Year Financial Summary

(In thousands, except per share and employee amounts)

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Item 7.  Management’s Discussion and Analysis of Financial Conditions and Results of Operations

Overview

      We are a global leader in the development, manufacturing and marketing of high performance analog and mixed signal integrated circuits. Through our proprietary design expertise and specialized application knowledge, we deliver more than 1,200 innovative products to 25,000 customers worldwide. We target high growth segments of the communications, computing, consumer and industrial markets.

      The market for analog and mixed signal integrated circuits differs from the digital circuit market in several significant ways. Analog applications involve more complex signals than digital applications, with analog signals having continuous variations in resolution, speed, power, signal amplitude and other specifications. Competition in the analog and mixed signal markets is based more on performance, functionality, quality and reliability than on price. Analog circuits generally have longer life cycles than digital circuits because customers frequently continue to use the same component through several generations of their products, which themselves have long life cycles. This results in more stable pricing and demand, which decreases our earnings volatility.

      In contrast to the design of digital circuits, analog product design innovation depends more on experienced engineers and less on computer-aided design tools. This results from the complexities inherent in designing analog circuits that process continuous signals. Due to the limited pool of experienced analog designers, we believe our resident design expertise serves as a competitive advantage. In addition, circuit design is more important to the analog market than the relative size of the circuit. This allows us to use less costly manufacturing techniques, lowers our overall capital requirements and provides us with opportunities to increase our return on invested capital.

      With the transition to a new management team beginning in 1994, we broadened our target markets to encompass selected fast growing segments of the electronics industry, which include communications, digital consumer products and computing. In 1999, more than 59% of our revenue was derived from these segments compared to 46% in 1994. In order to support this strategy, we significantly increased our investment in research and development from 11.3% of revenue in 1994 to 15.8% of revenue in 1999. As a result, we have dramatically increased the introduction of new products from 28 in 1994 to 92 in 1999. At the same time, we have strengthened our position in our traditional industrial markets, which has provided us with a stable base of revenue that has partially insulated us from the cyclical nature of the semiconductor industry.

      We sell our products through our own sales force as well as through a network of manufacturer’s representatives and distributors. In 1999, 38.8% of revenue came from North America, 23.3% from Europe, 28.3% from Japan and 9.6% from Southeast Asia.

      We recognize revenue on sales to customers other than distributors when products are shipped. In the case of North American distributors, we defer recognition of revenue and cost of goods sold until the distributor has re-sold the product. For all international distributors other than Japan, we recognize revenue from sales to distributors at the time of sale, but reserve a portion of revenue and gross margin for sales returns. We recognize revenue and cost of goods sold upon sale to Japanese distributors.

      We sell both standard linear integrated circuits (SLICs), which can be used as precision building blocks across many applications, as well as application specific standard products (ASSPs), which are targeted to the unique requirements of emerging, high volume applications. In general SLICs take longer to reach peak

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      Our manufacturing approach combines and optimizes internal wafer fabrication at our facility in Tucson, Arizona with production from third party foundries for specialty processes unavailable internally or that are more economically produced externally. We produce approximately half of our wafers internally. We also outsource most of our product assembly and packaging and an increasing proportion of our testing requirements.

Results of Operations

      The following table sets forth certain financial data for the periods indicated expressed as a percentage of revenues:

     1999 Compared to 1998

      Revenue. Our revenue was $291.4 million in 1999, the highest in our history. This represents a 12.9% increase over revenue of $258.1 million in 1998. We increased revenue in all of our end-markets, with particularly strong growth in our newer communications, digital consumer and computing markets. Revenue from communications products grew by more than 37% over 1998, and computing revenue in 1999 grew by 86% over 1998 to $20.4 million. The increase in revenue in all of our end markets was attributable to an increase in the number of units sold while our prices generally remained stable. The increase in the number of units sold was attributable to increased demand for our existing products as well as market acceptance of new products introduced in recent years. Semiconductor products introduced in the five years preceding 1999 accounted for approximately 53% of our 1999 revenue. Semiconductor products introduced in the five years preceding 1998 accounted for approximately 50% of our 1998 revenue. We believe this growth reflects our strategy to target high growth applications within the largest segments of the electronics market.

      Gross Margin. Gross profit as a percentage of revenue, or gross margin, improved to 52.4% in 1999 from 51.4% in 1998. This improvement was driven by the increase in revenues discussed above combined with higher factory utilization and manufacturing cost reductions. In addition, favorable foundry wafer pricing allowed us to participate in higher volume applications without a negative impact on our gross margin.

      Research and Development. Research and development expenses reached $46 million in 1999, an increase of $6.1 million over 1998, and were 15.8% of revenue as compared to 15.5% in 1998. The increase was largely attributable to the hiring of additional engineers, development expenses related to new product introductions and capital expenditures for research and development equipment. As a result of our investment in research and development, we introduced 92 new products in 1999 and 87 in 1998. We anticipate that

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      Sales, Marketing, General and Administrative. Sales, marketing, general and administrative expenses decreased to $47.1 million in 1999 from $48.1 million in 1998. From 1998 to 1999, we reduced these expenses as a percentage of revenue from 18.6% to 16.2%. This reduction is primarily attributable to our ongoing consolidation of worldwide logistics, administrative and inventory functions as well as our adoption of a global information system. We achieved a reduction in overall selling costs through our use of third party distribution channels, which accounted for 61% of our sales in 1999, compared to 50% in 1998. Much of this increase occurred in Japan as the result of both economic recovery and the increased use of distributors in that region.

      Operating Income. Operating income was $59.6 million in 1999, an increase of $15.0 million over 1998. This significant improvement was attributable to increased revenue, manufacturing efficiencies and cost reduction efforts which resulted in a decrease in overall operating expenses as a percentage of revenue to 31.9% in 1999 from 34.1% in 1998.

      Other Income. Other income was $3.0 million in 1999, and consisted primarily of net interest income on invested funds and the results of foreign currency transactions. In 1998, other income was $3.8 million.

      Provision for Income Taxes. Our effective tax rate was 27% in 1999, compared to 26% in 1998. This change resulted from our shift of certain production to offshore facilities, causing a decline in our foreign sales corporation benefit.

      Net Income. Net income for 1999 was $45.7 million. Net income increased approximately $9.9 million, which represents a 27.5% increase over 1998. The increase in net income was the result of our increased revenue, manufacturing efficiencies and cost reduction efforts. Net income represented 15.7% of 1999 revenue, compared to 13.9% in 1998. Diluted earnings per share reached $0.78 for 1999, a 25.8% increase over diluted earnings per share of $0.62 in 1998.

     1998 Compared to 1997

      Revenue. Revenue was $258.1 million in 1998, a 2.4% increase over 1997. Revenue in the U.S. and Europe increased from the prior year, while revenue from Asia declined. Revenue in Southeast Asia, excluding Japan, decreased marginally, reflecting the distressed economic climate in that region. A weakening Japanese Yen also resulted in lower revenue from Japan. In 1998, revenue from the newer communication, digital consumer, and computing markets accounted for 53% of our total revenue, exceeding for the first time revenue from the industrial market.

      Gross Margin. Gross margin improved to 51.4% in 1998 from 50.4% in 1997. The improvement was due primarily to an increased utilization of our manufacturing facilities and increased production levels, despite a shift in product mix towards higher volume products with lower average selling prices.

      Research and Development. Research and development expenses were $39.9 million, or 15.5% of revenue, in 1998, an increase of $5.9 million over 1997, reflecting an increase in product development activities.

      Sales, Marketing, General and Administrative. Sales, marketing, general and administrative expenses declined to $48.1 million, or 18.6% of revenue in 1998, from $49.5 million, or 19.6% of revenue, in 1997. This improvement was the result of consolidation of selling, logistics, and administrative activity in Europe and Japan and expanded use of third party distribution in all regions and improvements in administrative efficiency. The increased use of third-party distribution resulted both in increased revenue and reduced selling costs in 1998. Approximately 50% of our 1998 revenue was derived from third party distribution, up from 46% in 1997.

      Operating Income. Operating income was $44.7 million in 1998, or 17.3% of revenue, an increase from $43.6 million, or 17.3% of revenue, in 1997, due primarily to the factors described above.

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      Other Income. Other income was $3.8 million in 1998, and consisted primarily of net interest income on invested funds and the results of foreign currency transactions. Other income was $3.1 million in 1997.

      Provision for Income Taxes. Our 1998 effective tax rate was 26%, compared to 30% in 1997. The decrease was due to an increase in our foreign sales corporation benefit, increased tax credits, a further shift to tax advantaged investments and favorable Arizona tax legislation.

      Net Income. Net income was $35.9 million in 1998, up $3.2 million, or 9.8%, over 1997. Net income was 13.9% of 1998 revenue as compared to 13.0% of 1997 revenue. Diluted earnings per share were $.62 for 1998, 8.8% higher than diluted earnings per share of $.57 in 1997.

Selected Quarterly Results of Operations

      The following table sets forth a summary of our unaudited quarterly operating results for each of the eight quarters ended December 31, 1999 and the percentage of our revenue represented by each item in the respective quarters. This data has been derived from our unaudited interim financial statements which, in our opinion, have been prepared on substantially the same basis as the audited consolidated financial statements contained elsewhere in this Annual Report on Form 10K and include all normal recurring adjustments necessary for a fair presentation of the financial information for the periods presented. These unaudited quarterly results should be read in conjunction with our audited consolidated financial statements and the accompanying notes. The operating results in any quarter are not necessarily indicative of the results that may be expected for any future period.

				Quarter Ended
				Apr. 4,				July 4,				Oct. 3,				Dec. 31,				Apr. 3,				July 3,
				1998				1998				1998				1998				1999				1999
				(in millions)
Statement of Operations Data:
Revenue				$	68.7			$	66.5			$	61.2			$	61.7			$	61.0			$	68.2
Cost of goods sold					33.1				32.0				29.7				30.7				30.2				32.6
Gross profit					35.6				34.5				31.5				31.0				30.8				35.6
Operating expenses:
	Research and development				9.8				10.0				9.9				10.2				10.0				10.4
	Selling, marketing, general and administrative				12.1				12.3				12.2				11.4				11.1				11.7
		Total operating expenses			21.9				22.3				22.1				21.6				21.1				22.1
Operating income					13.7				12.2				9.4				9.4				9.7				13.5
Other income					0.9				0.7				1.1				1.1				0.6				0.6
Provision for income taxes					4.4				3.5				3.0				1.8				2.8				3.8
Net income				$	10.2			$	9.4			$	7.5			$	8.7			$	7.5			$	10.3
As a Percentage of Revenues:
Revenue					100.0	%			100.0	%			100.0	%			100.0	%			100.0	%			100.0	%
Cost of goods sold					48.2				48.1				48.5				49.7				49.5				47.9
Gross margin					51.8				51.9				51.5				50.3				50.5				52.1
Operating expenses:
	Research and development				14.3				15.0				16.2				16.5				16.5				15.3
	Selling, marketing, general and administrative				17.6				18.5				20.0				18.5				18.2				17.1
		Total operating expenses			31.9				33.5				36.2				35.0				34.7				32.4
Operating income					19.9				18.4				15.3				15.3				15.8				19.7
Other income					1.3				1.0				1.9				1.8				0.9				0.9
Provision for income taxes					6.4				5.2				4.9				2.9				4.5				5.5
Net income					14.8	%			14.2	%			12.3	%			14.2	%			12.2	%			15.1	%

[Additional columns below]

[Continued from above table, first column(s) repeated]

				Quarter Ended
				Oct. 2,				Dec. 31,
				1999				1999
				(in millions)
Statement of Operations Data:
Revenue				$	78.0			$	84.2
Cost of goods sold					36.6				39.2
Gross profit					41.4				45.0
Operating expenses:
	Research and development				12.6				12.9
	Selling, marketing, general and administrative				12.0				12.4
		Total operating expenses			24.6				25.3
Operating income					16.8				19.7
Other income					0.7				1.1
Provision for income taxes					4.7				5.6
Net income				$	12.8			$	15.2
As a Percentage of Revenues:
Revenue					100.0	%			100.0	%
Cost of goods sold					47.0				46.5
Gross margin					53.0				53.5
Operating expenses:
	Research and development				16.2				15.3
	Selling, marketing, general and administrative				15.3				14.8
		Total operating expenses			31.5				30.1
Operating income					21.5				23.4
Other income					0.9				1.2
Provision for income taxes					6.0				6.6
Net income					16.4	%			18.0	%

      Revenue began to decline in the second quarter of 1998 due to a cyclical downturn in the semiconductor industry and distressed economic conditions in Asia. Revenue began to rise in the second quarter of 1999 as

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Liquidity and Capital Resources

      Our cash, cash equivalents and investments increased by $43.1 million to $163.3 million as of December 31, 1999 from $120.3 million at December 31, 1998. The increase was due primarily to cash generated from operations. Working capital increased by $88.2 million to $229.6 million at December 31, 1999 from $141.4 million at December 31, 1998. During 1999, we generated approximately $70.8 million of net cash and cash equivalents from our operating activities compared with $42.1 million during 1998. This increased generation of cash and cash equivalents was mainly attributable to our higher revenue and improved gross and operating margins.

      Accounts receivable were $66.1 million at December 31, 1999, an increase of $11.4 million from $54.7 million at December 31, 1998. This 20.8% increase was due primarily to revenue growth during the year, particularly during the second half. Days sales outstanding decreased by 8.2 days to 70.6 days at December 31, 1999 from 78.8 days at December 31, 1998, due primarily to improved collections of accounts receivable in the fourth quarter of 1999.

      Inventories decreased by $2.5 million, or 4.8%, to $49.8 million at December 31, 1999 from $52.3 million at December 31, 1998. This decrease is due primarily to increased customer demand and shorter manufacturing cycle time, which allowed us to support higher sales with lower levels of inventory. Inventory turns in the fourth quarter of 1999 were approximately 3.1, up from 2.3 in the same period in 1998.

      Net deferred tax assets were $5.0 million at December 31, 1999, compared to $2.9 million at December 31, 1998 due to increases in inventory valuation reserves. Accounts payable and accrued expenses increased by $2.3 million, or 11.6%, to $22.1 million at December 31, 1999 as compared to $19.8 million at December 31, 1998, due primarily to a higher level of manufacturing activity. Deferred income increased by $1.4 million, or 15.4%, at December 31, 1999 as compared to $8.8 million at December 31, 1998, due primarily to increased billings to distributors.

      Capital expenditures totaled $24.8 million for 1999, or $1.7 million less than in 1998. The primary uses of capital spending in 1999 were modernization and standardization of manufacturing equipment, back-end capacity expansion required by increased unit volume, next generation technology development and development of information systems. Net property and equipment increased by $6.1 million to $98.3 million in 1999 from $92.2 million at December 31, 1998, primarily due to capital expenditures. We expect to make approximately $30 million to $35 million of capital expenditures during the next 12 months. We presently plan to finance these capital expenditures from working capital.

      At December 31, 1999, total debt was $20.1 million, of which $3.3 million was term debt. This represents a $1.3 million decrease in total debt over 1998. Most of this debt was issued in connection with our foreign operations and represents interest rate arbitrage in Japan. In addition to term debt, credit facilities of approximately $42.8 million, including overdraft credit facilities with both domestic and international banks, were available to us at December 31, 1999, of which approximately $16.8 million, or 39.2%, was utilized.

      Our current ratio improved to 4.34 in 1999 from 3.44 in 1998. Current ratio improvement was primarily due to increases in cash equivalents and short-term investments resulting from increased revenue, improved collection of accounts receivable, and the reclassification of $44.2 million in long-term investments to short-term investments due to maturities. Our debt-to-equity ratio declined in 1999 to .06 from .08 in 1998.

      We repurchased 250,000 shares of our common stock in 1999 at a cost of approximately $5.4 million. Our board of directors has approved the repurchase of up to 4.5 million shares of our common stock from time to time, pursuant to repurchase guidelines.

      We believe that our existing liquid resources, expected cash generated from operations and existing credit facilities, combined with our ability to borrow additional funds, will be adequate to meet our operating and capital requirements and obligations for at least the next 12 months.

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      We regularly explore strategic transactions in our industry, including the acquisition by purchase or merger of companies, operating assets or technologies. If we were to enter into and consummate a strategic acquisition of an existing company or of operating assets or technologies, we may be required to seek financing from borrowings under commercial credit facilities or from the public or private issuance of debt or equity securities. We cannot predict whether we would be able to obtain the financing on favorable terms necessary to complete any particular strategic acquisition. Any future equity financing will decrease existing stockholders’ equity percentage ownership and result in dilution.

Year 2000

      We have not experienced any significant Year 2000 disruptions, nor do we anticipate any significant problems in the future. We have spent approximately $15.8 million since 1994 to upgrade our information systems and to address Year 2000 compliance, including approximately $100,000 in the fourth quarter of 1999. We do not anticipate any significant additional expenditures for Year 2000 compliance.

Forward-Looking Statements and Risk Factors

      In addition to historical information, this Annual Report on Form 10-K contains statements relating to our future results. These statements include certain projections and business trends which are “forward-looking.” The words “believe,” “expert,” “anticipate,” and “project” and similar expressions identify forward-looking statements, which speak only as of the date the statement was made. Such forward-looking statements are within the meaning of that term in Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. These forward-looking statements include statements with respect to the growth of the semiconductor market, the growth of the communication, computing and consumer markets, the introduction of new products, the ability to develop application specific products with customers, the demand for analog and mixed signal products, competitive advantages resulting from our pool of experienced analog designers, the life cycle of our customers’ products, our ability to access working capital, our anticipated capital expenditures, the success of cost reduction strategies, the amount of future expenditures related to year 2000 remediation, the impact of foreign currency fluctuations, our product pricing levels and the impact of litigation on our business. We do not undertake to update or revise the forward-looking statements, whether as a result of new information, future events or otherwise.

      Actual results may differ materially from projected results as a result of certain risks and uncertainties. These risks and uncertainties include, without limitation, those described in Exhibit 99, “Risk Factors,” to this Annual Report on Form 10-K for the fiscal year ended December 31, 1999, as well as those set forth below and those detailed from time to time in our filings with the SEC or other public announcements:

	•	fluctuations in manufacturing, assembly and test yields;
	•	availability and utilization of manufacturing capacity;
	•	retention and recruitment of key management and technical personnel;
	•	successful development and timely introduction of new products;
	•	demand for and market acceptance of new and existing products;
	•	product obsolescence;
	•	global and market conditions, including, without limitation, the cyclical nature of the semiconductor industry and the markets related to our and our customers’ products;
	•	pricing pressures and other competitive factors;
	•	changes in product mix;
	•	our ability to develop and implement new technologies and to obtain protection of the related intellectual property;
	•	our labor relations and those of our customers and suppliers;
	•	our successful integration of potential acquisitions;
	•	risks related to our international business operations; and

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	•	other risks and uncertainties.

Item 7A.  Quantatative and Qualitative Disclosures About Market Risk

      We have not incurred significant debt, and our interest rate risk at December 31, 1999 relates primarily to our cash equivalents and short-term investments. At December 31, 1999, our cash equivalents and short-term investments had a fair value of $153.0 million, a weighted yield of 4.93%, and maturities at various times during 2000. Due to the short period of time until maturity, the potential impact of a 1% change in interest rates would not materially affect the fair value of our investments. We held no long-term investments at December 31, 1999.

      International markets accounted for a majority of our revenue in 1999. The resulting transactions have associated exchange rate fluctuation risk. Exchange rate fluctuations can also affect our reported revenue, as a significant portion of the sales of our international subsidiaries are denominated primarily in foreign currencies, but reported in the consolidated financial statements in U.S. dollars using weighted-average exchange rates. We attempt to minimize the impact of foreign currency exchange rate transactions through natural hedges afforded by our significant foreign operations and through the use of financial hedges in the form of forward contracts and option contracts. These contracts have historically been in three currencies: Japanese Yen, British Pounds and German Marks, although such contracts were exclusively in Japanese Yen in 1998 and 1999. The following summarizes outstanding foreign currency forward and option contracts at December 31, 1999. Such forward and purchased option contracts will settle through March 2000.

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Item 8.  Financial Statements and Supplementary Data

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

	Burr-Brown Corporation’s Consolidated Financial Statements as of and for the years ended December 31, 1999, 1998 and 1997:

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REPORT OF INDEPENDENT AUDITORS

Board of Directors

      We have audited the accompanying consolidated balance sheets of Burr-Brown Corporation and Subsidiaries as of December 31, 1999, 1998, and 1997, and the related consolidated statements of income, changes in stockholders’ equity, and cash flows for each of the three years in the period ended December 31, 1999. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits.

      We conducted our audits in accordance with auditing standards generally accepted in the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

      In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of Burr-Brown Corporation and Subsidiaries at December 31, 1999, 1998, and 1997, and the consolidated results of their operations and their cash flows for each of the three years in the period ended December 31, 1999, in conformity with accounting principles generally accepted in the United States.

	[Enrst & Young LLP SIG]

Tucson, Arizona

20

BURR-BROWN CORPORATION AND SUBSIDIARIES

See Notes to Consolidated Financial Statements.

21

BURR-BROWN CORPORATION AND SUBSIDIARIES