ITEM 1. BUSINESS
GENERAL Burr-Brown Corporation (and its wholly-owned subsidiaries and majority-owned affiliated companies, "Burr-Brown" or the "Company") is primarily engaged in the design, manufacture and marketing of a broad line of proprietary, standard, high-performance, analog and mixed signal semiconductor components used in the processing of electronic signals. The Company's products are used primarily in medical and analytical instrumentation, process control systems, laboratory instrumentation, manufacturing automation, automatic test equipment, digital audio equipment, communications, imaging, computer peripherals and multimedia. The Company also offers a product line of system components which include personal computer data acquisition and signal processing products, data collection systems and data entry terminals. The Company was incorporated in Arizona in 1956 and reincorporated in Delaware in 1983. The Company's management and technical team has many years of experience in the design, manufacture and world-wide marketing of high performance analog and mixed signal semiconductor components and in solving customer problems in the markets served. This document contains forward looking statements which are subject to the risk factors set forth at the end of "Item I: Business".
THE INDUSTRY Integrated circuits may be divided into three categories: analog, digital and mixed signal. Digital circuits, which include memory devices and microprocessors, use many repetitive circuit elements that can each represent the two values ("1" and "0") required by the binary number system that serves as a basis for most computation. Analog circuits, on the other hand, are capable of representing infinite numbers of values with an output signal based on a continously varying input signal. These input signals typically represent "real world" phenomena such as temperature, pressure, position, light, sound and speed. Mixed signal circuits are circuits that employ both analog and digital signal processing techniques. Analog and mixed signal circuits are used in most electronic systems, with major markets for such circuits including computing, telecommunications and data communications, test and measurement, medical instrumentation, industrial process control, manufacturing automation, digital audio and automotive electronics. Typical analog circuits include signal amplifiers, instrumentation amplifiers, current transmitters, regulators, analog multipliers and isolation amplifiers. Typical mixed signal circuits include analog-to-digital and digital- to-analog converters. Recently, the rapid growth of the high speed and wireless communications, multimedia and portable computing, and digital audio markets have created important new growth opportunities for high performance analog and mixed signal products. Industry sources estimate that analog and mixed signal circuits accounted for 14% of the $128 billion market for semiconductors in 1995.
The market for, and design and production of, analog circuits differs from that of digital circuits in several important ways. In general, the market for analog circuits is more diverse than for digital circuits, with each application requiring different operating specifications for resolution, processing linearity, speed, power and amplitude capability. As a result, analog circuit markets generally have relatively smaller volume requirements per device. The markets for analog circuits are generally fragmented, and competition within those markets tends to depend less upon price and more upon performance, functionality, quality and reliability. Analog circuits designed for specified applications are often characterized by longer life cycles and more stable pricing compared to typical digital circuits. Computer-aided design and engineering tools, which have proliferated and enhanced the design effort for digital integrated circuits, are less effective for analog devices. Accordingly, analog circuit design has traditionally been highly dependent on the skills and experience of individual design engineers. Also, in contrast to digital circuits, the performance of analog circuits is more dependent on circuit design, circuit layout and the matching of circuit elements than on advanced capabilities in submicron manufacturing processes. Consequently, the production of high performance analog circuits typically requires less capital investment than the production of highly integrated digital circuits. Because analog circuits are found in most electronic systems, the growth in the use of digital systems across a broad range of applications has in turn fueled a growth in the demand for analog integrated circuits.
PRODUCTS The Company operates predominantly in one segment, the electronic component industry. The Company has various classes of products within that one segment.
The following table shows the approximate product line revenues as a percentage of total Company revenues:
PRODUCT LINE 1995 1994 Analog Integrated Circuits 42.4% 43.3 % 42.5 % Data Conversion Integrated Circuits 42.4% 37.8 % 40.6 % Power Conversion Products 9.5% 10.3 % 5.6 % Other 5.7% 8.6 % 11.3 %
Demand for analog circuits primarily has been driven by the need for increased productivity manifested as the need for lower cost, lower power, smaller size, greater functionality and high precision products. Semiconductor technology has provided many effective solutions to this demand. The availability of effective solutions has accelerated with the advent of more advanced digital processing. This has led to greater use of digital computers or processors to provide massive computational power to control processes and equipment and in general, to greater automation and productivity in industry. Since the early seventies, the availability of low cost digital microprocessors and later digital signal processing, in cost-effective single chip form, has enabled an acceleration of the trend toward digitization of systems. This has led to increased use of computers as imbedded 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 products that enable digital computers, microprocessors and microcontrols, and digital signal processors (DSP's) to interact with electronic signals derived from physical or analog phenomena. Burr-Brown designs and manufactures the integrated circuits which perform the analog signal conditioning and data conversion functions critical to this interaction.
Process control sensors generate continuously varying electronic signals, called analog or linear signals, which represent the physical phenomenon being measured or controlled. In many circumstances these analog signals are relatively weak and contaminated with a large amount of electrical noise. The Company's signal processing components are used to strengthen, filter, transmit and otherwise condition the signal. The resulting signal, still in analog form, must be converted into a digital signal before it can be processed by a computer. The Company's analog-to-digital circuits effect this conversion. After the digital signal is processed by the computer, it is often necessary to convert the digital signal back to analog form, and the Company's digital-to-analog circuits also accomplish this reverse conversion. The resulting analog signal controls the process.
The market requirements for analog signal processing and conversion products range from high performance industrial applications to high volume consumer applications. The Company's product strategy has been to concentrate on proprietary high precision, high performance analog, data conversion and integrated analog/digital (mixed signal) circuits. The Company identifies significant markets in which new or enhanced high performance products of this type are required. The Company then attempts to develop and supply as complete a function as is permitted by technological and cost constraints.
The Company's signal processing and data conversion products are generally designed into a customer's product and usually remain a part of that product throughout its life. The Company's experience has been that there is generally a four-year period before the sales level of its products fully matures, and the sales life of the products may extend to eight years or more. Once the Company's component has been designed into a customer's product, the relatively low volume, high performance characteristics of the component significantly deter potential competitors. As a result, the Company is often a customer's sole source for that particular component.
ANALOG INTEGRATED CIRCUITS Analog linear signal processing integrated circuits are used to process and transmit analog data signals prior to their conversion to digital signals. The Company's analog circuits include operational amplifiers, power amplifiers, instrumentation amplifiers, programmable gain amplifiers, isolation amplifiers, current transmitters and other analog signal processing components. These components are used in the construction of complete data acquisition systems, automatic test equipment, analytical instruments, medical instruments and systems, military equipment, industrial controls, computer peripherals and communications equipment.
OPERATIONAL AMPLIFIERS. Operational amplifiers are used to detect and amplify weak (low level) analog signals and are an integral part of most measurement and control systems. The operational amplifier is the fundamental
building block in analog systems design. In addition to amplification, it can perform mathematical functions such as integration and differentiation. The Company's high performance operational amplifiers are generally capable of amplifying typical analog signals in the micro-volt range up to 100,000 times and provide ultra-low drift, low bias current, low noise, high bandwidth and fast settling time. Certain models provide high voltage and high current operation for special applications. These high performance amplifiers are required to treat signals generated in numerous applications, including scramblers for satellite communications systems, robotics vision systems and magnetic resonance and computer-aided tomography (CAT) body scanning systems.
OTHER AMPLIFIERS. The Company manufactures a number of other amplifiers, including instrumentation amplifiers, programmable gain amplifiers and isolation amplifiers. These products perform a variety of functions related to the amplification and isolation of analog signals. Among other uses, these components permit the measurement of weak signals in the presence of unwanted "noise" and protect sensitive instruments from the effects of transient high-magnitude, potentially damaging voltages caused by sources such as lightning or the switching of high voltage equipment. These amplifiers are used in many diverse applications ranging from temperature measurement in industrial processes to the protection of sensitive medical instruments and to isolate electrical power line disturbances and faults.
OTHER SIGNAL PROCESSING AND TRANSMITTER COMPONENTS. The Company manufactures 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 mathematical 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 signals to a frequency, making the signal immune to electrical noise and permitting more efficient storage and processing of the information.
ISOLATION PRODUCTS. The Company's Isolation Product Division, which is operated by Burr-Brown's wholly- owned Scottish subsidiary, focuses on the design, development, manufacturing, and marketing of isolation amplifiers, isolated analog digital converters, bus transceivers and DC-to-DC converters. These products provide galvanic isolation of input and output signals and thereby achieve reduced circuit noise interference and prevent harm to people or equipment due to high voltage transients or current leakage. The product line utilizes optical, transformer and capacitive techniques to produce linear transfer functions between input and output. In certain products, isolated digital couplers are used in lieu of opto-couplers in the galvanic isolation of data signals. The isolation products are used in industrial process control, communication and in medical instrumentation.
DATA CONVERSION PRODUCTS The Company's Data Conversion Products Division focuses on the design, manufacturing and marketing of integrated circuit devices used to convert analog signals to digital form ("A/D converters") or to convert digital signals to analog form ("D/A converters"). This conversion is necessary in virtually all applications in which digital computers or processors measure and control the analog signals from a physical, "real world" process.
GENERAL PURPOSE CONVERSION PRODUCTS. The majority of the Company's mixed signal components revenue is derived from moderate speed, high resolution and high accuracy converters. These general purpose converters are used primarily in manufacturing 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 A/D converter for computer processing and, in turn, a D/A converter converts the digital control signal from the computer to analog form to drive the actuators and servo motors to position the robot arm accurately.
HIGH SPEED CONVERSION PRODUCTS. In the early 1980's, the Company began developing high speed, high resolution A/D and D/A converters at speeds substantially greater than general purpose products. These products utilize a unique combination of technologies and design expertise to achieve state-of- the-art performance. High speed converters are used in a variety of applications such as image processing, digital oscilloscopes, ultrasound, radar and sonar, as well as the front end of advanced systems using digital signal processing (DSP) technology. The Company believes that due to the unique combination of technologies involved, the high speed, high resolution data converter products have limited competition.
DIGITAL AUDIO PRODUCTS DIVISION (BURR-BROWN JAPAN). The Company's Digital Audio Products Division, which is operated by the Company's wholly-owned Japanese subsidiary, focuses on the design, manufacturing and marketing of high precision, single chip, digital-to- analog converters and analog-to-digital converters for the digital audio market. The Company believes that Burr-Brown was the first company to introduce such a product into this marketplace and is currently one of the largest merchant market suppliers of such devices worldwide. This product, a pulse-code-modulated ("PCM") conversion device, plays an essential role in digital audio systems, such as compact disc ("CD") players, that use laser technology to achieve improved audio reproduction performance. The Company's component converts the digital signals for each stereo channel into analog form. Several generations of products of this type have been developed and introduced for use in digital audio systems. Involvement in the CD market also helped the Company's early entry into the digital audio tape ("DAT") and multimedia markets. The Company believes that the technology developed for its digital audio D/A converter products enables the Company to develop products for other markets. Burr- Brown's PCM converters have now been designed into musical instruments, computer games, automobile sound systems, CD-ROMs for multimedia applications and set top box tuners for cable and satellite TV.
SYSTEM PRODUCTS INTELLIGENT INSTRUMENTATION INC. Intelligent Instrumentation Inc. (III), a majority owned subsidiary, designs, manufactures and markets a broad line of data acquisition products, including plug-in boards, portable data acquisition systems, microterminals and supporting software for IBM- compatible PCs, as well as signal conditioning accessories for such systems. These products are applied worldwide for a wide range of industrial and scientific applications such as inventory control, package tracking, image pattern recognition and electro-medical systems. A key part of the data acquisition product line is the Visual DesignerTM software, a graphical development environment which enables users to design applications by connecting functional blocks, called icons, in a flow diagram. III also offers integrated data collection systems that not only collect data, but format and deliver that data to a customer's information system in real time. Representative customers include Mercedes Benz, Siemens, Nikon Koden, Novellus Systems and Xerox.
POWER CONVERTIBLES CORPORATION. Power Convertibles Corporation (PCC), a majority-owned affiliate of Burr- Brown, manufactures DC-to-DC converters and battery chargers used in cellular telephone applications. In 1995, PCC was responsible for about 9.5% of Burr- Brown revenues and approximately 3% of Burr-Brown profits. In 1996, Burr-Brown Corporation sold its interest in PCC in order to focus resources on the primary business of analog and mixed signal integrated circuits.
RESEARCH & DEVELOPMENT One of the important factors that distinguishes the analog integrated circuit business from the digital integrated circuit business is the importance of the contribution of innovative individual design engineers. Digital circuits have an exceptional amount of repetition of circuit elements and are highly dependent upon the ability to produce chips with very high circuit element density to minimize chip size and maximize speed. This type of wafer processing of extremely small dimensions leads to the need for state-of-the-art, comparatively costly capital investment in wafer fabrication facilities.
Analog circuits, on the other hand, require the ability to accurately match and place elements with respect to one another. In addition, analog circuits may require the ability to handle large voltages and currents and therefore, demand relatively large circuit element and spacing dimensions. Although these requirements place stringent processing requirements on an analog wafer fabrication facility, the necessary equipment and facilities are substantially less costly and longer lived than that which is required for digital circuit processing.
Designers of analog circuits must take into account complex interrelationships between the manufacturing process, the circuit elements, the packaging process and the customer's application, all of which may seriously affect the circuits' performance. The number of creative design engineers who have the training and the experience to handle these complexities is very limited. The Company's ability to compete depends heavily on its continued introduction of innovatively designed and cost effective new products. Therefore, the Company must continually invest in design engineering talent, engineering tools, production processes and test equipment.
The Company emphasizes the development of proprietary standard and application specific products. The Company's product strategy is to identify markets in which the application of microelectronics technology may be
used to provide competitive advantage for its customers through improved methods of precision in measuring, monitoring and controlling physical processes and conditions. Examples of these markets are: robotics, factory automation, process control, automatic test, medical instrumentation, computers, communications and digital audio. Within these markets, the Company selects specific applications in which the Company's unique design and processing technology may make an important contribution to its customers.
The Company spent approximately $25.7 million in 1995, $21.9 million in 1994 and $19.8 million in 1993 for product and process development. This represents an expenditure of approximately 9.6 percent, 11.3 percent and 11.7 percent of revenue in 1995, 1994 and 1993, respectively. (See "Management's Discussion and Analysis of Financial Condition and Results of Operations" in the Company's Annual Report to Shareholders, incorporated by reference to Item 7 of this report.)
PATENTS AND LICENSES The Company owns 118 United States patents expiring from 1996 to 2015, and has applications for 16 additional patents pending in the United States as well as patents issued and pending in several other countries. Although the Company pursues a policy of maintaining a strong patent portfolio, the Company believes that its success depends primarily upon the experience and creative skills of its people rather than upon the ownership of patents. As is common in the semiconductor industry, from time to time, the Company has been notified of claims regarding the possible infringement of patents issued to others, and similarly, the Company has on occasion notified others of possible infringements of its patents.
MARKETING Burr-Brown markets its products in all the major markets in the industrialized world through its direct sales force, independent sales representatives and distributors. Approximately 35% of 1995 worldwide revenue was realized through third party distribution.
In approximately 45 countries and the less significant domestic markets where the Company does not have a direct sales force, independent sales representatives sell all of the Company's products. The majority of the Company's sales people hold engineering degrees and the balance have relevant engineering experience.
The Company markets its line of component and system products to over 25,000 customers. The largest customer, a domestic distributor, accounted for approximately 9 percent of sales in 1995. Burr-Brown products are sold to original equipment manufacturers, systems assemblers and, to a lesser extent, manufacturing concerns which build their own test and process control systems. The Company's components are generally proprietary and are frequently "designed in" to its customers' products at the product development stage. Accordingly, the Company is often a customer's sole source for a particular component. Over 40 percent of the revenue in 1995 for analog and data conversion integrated circuits was for products introduced within the preceding five years. Representative major customers of the Company include Elsag Bailey, Hewlett-Packard, Matsushita Electric, Northern Telecom, Siemens, Sony, Toshiba, Mitsubishi, Alcatel, Nokia, Advantest, NEC, Fujitsu, Ericsson and Hughes Network Systems Inc..
Sales outside the United States accounted for approximately 64 percent of total revenues in 1995, 62 percent of total revenues in 1994 and 64 percent of total revenue in 1993. (See the note labeled "Foreign Operations, Geographic and Segment Data" in "Notes to Consolidated Financial Statements" in the Company's Annual Report to Shareholders, incorporated by reference to Item 8 of this report.) To support its international marketing organization, the Company has established product development centers and manufacturing facilities in Scotland and Japan. The Company also has four product development centers at the corporate headquarters in Tucson, Arizona.
A large percentage of international sales are denominated in local currencies, and the Company's foreign revenues and net income are therefore subject to currency exchange rate fluctuations. However, the Company borrows funds in local currencies and purchases forward contracts to hedge its foreign currency exposure. Some of the Company's products are subject to export regulations and other international trading restrictions, but the Company has not experienced any material difficulties from these limitations. No assurance can be given, however, that such material difficulties will not be experienced in the future.
BACKLOG Burr-Brown's products are, generally, standard items with a relatively short delivery cycle. The Company's backlog is usually three months or less of sales although some portion may be scheduled for delivery four to twelve months into the future. Therefore, 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 the policy of the Company to include in backlog only those orders that have firm scheduled delivery dates. The Company's backlog as of December 31, 1995, 1994 and 1993, was approximately $62.3 million, $45.5 million and $31.4 million, respectively.
COMPETITION Burr-Brown estimates that it is among the top four manufacturers of high performance amplifiers and data conversion integrated circuits. The Company's major competitor in the high performance analog integrated circuits market is Analog Devices Inc., believed to be the largest supplier of these devices. Other competitors include Linear Technology Corporation and Maxim Integrated Products Inc.. With respect to a small number of products, the Company also competes with National Semiconductor Corporation, Harris Corporation, Motorola Inc., Texas Instruments Inc., Cirrus Logic Inc., Signal Processing Technologies, Datel Inc., Sipex Corporation and Unitrode Corporation.
The Company is not aware of any significant competition from foreign companies providing analog integrated circuits, personal computer instrumentation products and data collection products for the industrial and military markets; however, there can be no assurance that foreign competitors will not enter these markets in the future. The Company's PCM product line does compete with several U.S. and foreign manufacturers of digital audio (D/A) converters for use in digital compact disc stereo systems, and multimedia systems, including Analog Devices Inc., Cirrus Logic Inc., Asahi Kasei Micro, Sony Electronics Inc., Hitachi America Limited, Matsushita Electric Corporation of America, Mitsubishi Corporation and Philips Semiconductors. While some of these competitors have greater financial and marketing resources than Burr-Brown, none of them compete with the Company in all of its product areas.
The Company believes that competition with respect to component products is based primarily on design and process innovation, product performance and reliability, technical service, availability of a broad range of specialized products, standard product availability and secondarily, on price. The Company believes that reliable performance and service are more important than price when the Company is the sole source of a product. Price is more of a competitive factor when an equivalent product is available from other sources, as in the case of commodity products. Burr-Brown competes with this type of product only in limited areas.
Large semiconductor manufacturers have generally concentrated their product and marketing efforts on high volume, relatively low priced, general purpose components. The Company does not usually compete in these markets. Whereas most large semiconductor companies tend to generalize a component to achieve the broadest high volume usage possible, Burr-Brown follows a strategy of narrowly defining its products for application markets demanding very high, difficult to achieve performance. The Company believes that its products' high performance requirements and relatively low unit sales volumes will continue to make it impractical for larger semiconductor suppliers to market a broad line of competing products.
MANUFACTURING The Company's manufacturing technology has evolved substantially over the past two decades. Initially, the Company manufactured its products by assembling purchased resistors, transistors, diodes and other discrete components onto printed circuit boards. The Company has since migrated to integrated circuits, which required the development of semiconductor manufacturing technologies in its Tucson wafer fabrication facility. The Company can utilize its in- house process technology, purchase wafer processing foundry services or buy components already incorporating the necessary technology in order to meet customer needs. It must combine relatively diverse technologies to produce the integrated circuits necessary to meet the stringent performance requirements of its customers. For example, some of the Company's integrated circuit products combine high precision linear integrated circuit wafer fabrication processing with compatible laser-trimmed thin film technology and dielectric isolation (DI) wafer processing.
The Company offers several bipolar, CMOS and BiCMOS processes which provide circuits for the analog, data acquisition and PCM markets. Burr-Brown processes have the added capability of making high quality capacitors and trimmable resistors that enable the Company to manufacture high precision, cost effective products.
In addition to the processes at the Company's Tucson wafer fabrication facility, foundries are used for processes not available internally. Processes currently used include a variety of CMOS processes ranging from 3 microns to 0.6 microns for products such as single and dual analog-to-digital and digital- to-analog converters, a 2 micron BiCMOS process for PCM DAC's and ADC's, and a very high frequency bipolar process used for products such as video amplifiers.
The Company has integrated circuit assembly operations in Tucson and Scotland. In addition, much of the assembly demand is met by using contract assembly companies located in Japan, Taiwan, Malaysia, Korea, Thailand and the Philippines. To achieve lower cost without compromising high performance, the Company has expanded its monolithic capability to complement multi-chip module assembly in its Tucson manufacturing facility.
The Company utilizes proprietary laser trimming techniques to produce high performance bipolar integrated circuits and thin film resistors. This operation uses proprietary deposition technology and computer-controlled laser trimming techniques to achieve the desired high precision. Depending upon the performance requirements, integrated circuits may be packaged as single chip products; or combined on ceramic substrates with the Company's thin film resistors and purchased parts, such as discrete power devices, transformers and optical diodes to form hybrid integrated circuits.
The Company has developed and implemented a Quality Program focused on customer satisfaction. The program includes annual Satisfaction Reviews with customers to assess improvement priorities. The Quality Program also includes Quality System Certification (ISO9001), a comprehensive Product/Process Reliability Monitoring Program, and extensive Qualification Program for new products and processes. The Company has a reputation for high quality and highly reliable products as evidenced by the highest satisfaction rating reported by our customers for these factors.
To provide better service to its European and Japanese customers, and to achieve an improved competitive position, the Company maintains manufacturing and product development facilities in both areas. In Europe, a manufacturing and product development site is located in Livingston, Scotland. This facility designs and assembles integrated circuits for sale in Europe and for export to other markets. The Company's manufacturing plant in Scotland is certified to meet the requirements of the United Kingdom's Ministry of Defense specification BS9000. Subsequent to receiving this certification, the Company has qualified products to the United Kingdom's specification BS9450. In Japan, the Company's Atsugi Technical Center, near Tokyo, performs product development, final product testing and quality and reliability testing for the PCM product line for sale in Japan and export to other markets.
The principal raw materials used by the Company in the manufacture of its 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, the Company allows for a significant period of lead time between order and delivery of raw materials. In addition, the Company sometimes enters into long term supplier-customer relationships with key suppliers of such materials to mitigate possible shortage problems.
Government regulations impose various controls on the discharge of certain chemicals and gases into the environment that have been used in semiconductor processing. The Company believes that its manufacturing processes conform to present environmental regulations but there can be no assurance that future changes in such regulations will not result in increased costs or impede operating performance. The Company eliminated the use of ozone-depleting chemicals in the manufacturing process December 1, 1995.
The Company is continuing to implement the necessary actions for the site remediation as required under the provisions of the Consent Decree Agreement with the EPA. The cost for the implementation required in 1995 was approximately $106,000.
HUMAN RESOURCES At December 31, 1995, the Company employed 1,839 people worldwide, including 1,164 people in manufacturing and assembly, 255 people in research and development, 210 in sales and marketing and 210 in management and administration. (These numbers include 431 employees of Power Convertibles Corporation which was sold in the first quarter of 1996.) Many of the Company's employees are highly skilled and the Company's continued success will depend, in part, on its ability to attract and retain such employees, who are generally in great demand. At times, like other semiconductor manufacturers, the Company has had difficulty hiring engineering personnel. The Company has never experienced a work stoppage, no employees are represented by labor organizations, and the Company considers its employee relations to be very good.
RISK FACTORS The Company's quarterly and annual operating results are affected by a variety of factors that could materially and adversely affect net revenue, 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, the timing of new product introductions and fluctuations in manufacturing yields. 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. However, given the complexity and expense of designing and constructing a significant expansion of a semiconductor fabrication plant, during the construction of the additions, the Company's manufacturing yields could be materially and adversely impacted.
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. The Company is also subject to general geopolitical risks in connection with its international operations, such as political and economic instability and changes in diplomatic and trade relationships. 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.
The Company's success depends upon its ability to develop new analog and mixed signal 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. Due to the complexity and variety of products manufactured by the Company, the limited number of analog circuit designers and the limited effectiveness of computer- aided design systems in the design of analog circuits, there can be no assurance that the Company will be able to successfully develop and introduce new products on a timely basis. Although the Company seeks to design products that have the potential to become broadly accepted for high volume applications, there can be no
assurance that any products introduced by the Company will achieve such market success. The Company's failure to develop and introduce new products successfully could materially and adversely affect its business and operating results. The Company has targeted new markets in which it has relatively little experience, including the market niches for wireless applications for the communications industry, power management applications for the computing industry, and CD-ROM and PC sound applications for the digital audio industry. There can be no assurance that the Company's products will adequately meet the requirements of such new markets, or that the Company's products will achieve market acceptance.
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.
ITEM 2.

ITEM 2. PROPERTIES The Company's major manufacturing and engineering facilities and administrative offices are located in four company-owned buildings, aggregating 220,000 square feet, on its 18 acre site in Tucson, Arizona. The Company also leases approximately 88,800 square feet in Tucson. Approximately 28,000 square feet of this leased space is on short term contracts of two years or less. The major single building lease is for 61,000 square feet and will expire in March 1997. The aggregate current gross rental for all Tucson properties is approximately $552,000 per year. All leases have options for renewal. The Company also owns approximately 113 acres of land in Tucson which is being held in reserve for future expansion.
In Filderstadt, Germany, the Company's sales office occupies 30,000 square feet of space leased for a ten year period; this lease expires in 1999. The Company has the option to sublease and renew this lease for three to five years. The Company's Scottish manufacturing subsidiary leases a 32,000 square foot building on 6.65 acres in Livingston, Scotland for a 15 year period; this lease expires in 1997. The Company also owns approximately 20 acres of land in Livingston, Scotland. The Company's Atsugi Technical Center in Atsugi, Japan, is a 44,500 square foot building which houses sales, product testing and research and development activities; the Company has a fifteen year lease on this facility which expires in 2001.
ITEM 3.

ITEM 3. LEGAL PROCEEDINGS
These four proceedings are the only litigation matters other than ordinary pending litigation:
a. Mary H. Yslava, et.al. v. Hughes Aircraft Company, CIV91-525-TUC-JMR, U.S. District Court filed on September 20, 1991.
b. Joe Ann Lanier, et.al. v. Hughes Aircraft Company, CIV92-564-TUC-JMR, U.S. District Court filed on March 7, 1994.
c. Arellano v. Hughes Aircraft Company, CIV94-718- TUC-ROS, U.S. District Court filed on January 9, 1995.
The Company, upon stipulation and court order dated September 23, 1995, was dismissed from these three cases.
d. Cordova v. Hughes Aircraft Company, 294158, Superior Court, State of Arizona, Pima County filed on January 13, 1992, is as follows: The plaintiffs are charging that they and their respective properties are damaged from the release of contaminants including Trichloroethylene (TCE) into the ground waters and they are asking for monetary damages. The Company spent the first year discussing a stipulated dismissal which was not granted. The Company has now requested the Superior Court to begin consideration for dismissal.
ITEM 4.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS No matters were submitted to a vote of the Company's security holders during the quarter ended December 31, 1995.
PART II
ITEM 5.

ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS The information required by this item appears in the 1995 Annual Report to Stockholders on page 24, which is included as Exhibit 13 to this report, and is incorporated herein by reference.
ITEM 6.

ITEM 6. SELECTED FINANCIAL DATA The information required by this item appears in the 1995 Annual Report to Stockholders on page 28, which is included as Exhibit 13 to this report, and is incorporated herein by reference.
ITEM 7.

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS AND RESULTS OF OPERATIONS The information appearing under the caption "Management's Discussion and Analysis of Financial Condition and Results of Operations" on pages 24, 25, 26 and 27 of the 1995 Annual Report to Stockholders which is included as Exhibit 13 to this report and is incorporated herein by reference.
ITEM 8.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA The financial statements and supplementary data required by this item appear in the 1995 Annual Report to Stockholders on pages 12 through 23, which is included as Exhibit 13 to this report and is incorporated herein by reference.
ITEM 9.

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE None PART III
ITEM 10.

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT The information regarding Directors and certain Executive Officers who are also Directors appearing under the caption "Election of Directors" on pages 4 and 5 in the Registrant's Proxy Statement for the 1996 Annual Meeting of Stockholders is incorporated herein by reference.
EXECUTIVE OFFICERS OF THE REGISTRANT At December 31, 1995, there were 3 individuals designated as executive officers by the Board of Directors. The following sets forth certain information with regard to the only executive officer of Burr-Brown who is not a Director:
JOHN L. CARTER (age 61) joined the Company in August 1993 as Executive Vice President, responsible for Components Operations and was then appointed Chief Financial Officer in July 1994. Prior to that, Mr. Carter served as a consultant to Burr-Brown. Before joining the Company, he served as President and CEO of Qualtronics, Inc.. From 1956 to 1987 he was with IBM in various manufacturing and general management positions, including General Manager of Tucson IBM operations.
ITEM 11.

ITEM 11. EXECUTIVE COMPENSATION The information, with respect to Executive Compensation, appearing under the caption "Executive Compensation and Other Information" on pages 7 through 10 of the Registrant's Proxy Statement for the 1996 Annual Meeting of Stockholders is incorporated herein by reference.
ITEM 12.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT The information appearing under the caption "Principal and Management Stockholders" on pages 2 and 3 of the Registrant's Proxy Statement for the 1996 Annual Meeting of Stockholders is incorporated herein by reference.
ITEM 13.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS None
PART IV
ITEM 14.

ITEM 14. EXHIBITS, FINANCIAL STATEMENTS, SCHEDULES AND REPORTS ON FORM 8-K
a(1) Financial Statements:
The following consolidated financial statements are incorporated by reference under Part II, Item 8, from the Registrant's 1995 Annual Report to Stockholders: PAGES OF 1995 ANNUAL REPORT TO STOCKHOLDERS INCORPORATED BY REFERENCE
Report of Ernst & Young LLP, Independent Auditors Consolidated Statements of Income for the years ended December 31, 1995, 1994 and 1993
Consolidated Statements of Changes in Stockholders' Equity for the years ended December 31, 1995, 1994 and 1993
Consolidated Balance Sheets at December 31, 1995, 1994 and 1993
Consolidated Statements of Cash Flows for the years ended December 31, 1995, 1994 and 1993
Notes to Consolidated Financial Statements 16-22
a(2) Financial Statement Schedules for the years ended: FORM 10-K December 31, 1995, 1994 and 1993: PAGE
Schedule II - Valuation and Qualifying Accounts All other schedules are omitted because they are not applicable or the required information is shown in the consolidated financial statements.
a(3) Exhibits
3.1 Restated Certificate of Incorporation of the Registrant. Incorporated by reference to Exhibit 3.1 of the Registrant's 10-K filing for the period ended December 31, 1987. Amendment to Restated Certificate of Incorporation dated September 20, 1995, filed herein.
3.2 Restated By-laws of the Registrant dated October 21, 1994, incorporated by reference to Exhibit 3.2 of the Registrants 10-K filing for the period ended December 31, 1994.
4.1 Article Four of the Certificate of Incorporation of the Registrant. (Included in Exhibit 3.1).
4.2 Rights Agreement dated July 21, 1989, between the Registrant and Harris Trust (assigned by Valley National Bank of Arizona), incorporated by reference to Exhibit 4.2 of the Registrant's 10-K filing for the period ended December 31, 1989.
9.1 Voting Trust Agreement dated October 3, 1988, among Thomas R. Brown, Jr., individually, Sarah M. Brown Smallhouse, Mary B. Brown and Thomas R. Brown, Jr., as Trustee under the Last Will and Testament of Helen Mason Brown. Incorporated by reference to Exhibit 9.1 of the Registrant's 10-K filing for the period ended December 31, 1988. Amendment dated December 17, 1992, whereby John S. Anderegg, Jr. was appointed Successor Trustee. Incorporated by reference to Exhibit 9.1 of the Registrant's 10-K filing for the period ended December 31, 1993.
9.2 Voting Trust Agreement dated October 3, 1988, between Mary Buchanan Brown and Sarah M. Brown Smallhouse as Shareholders and Sarah M. Brown Smallhouse, Mary Buchanan Brown and David W. Richter as Co-trustees. Incorporated by reference to Exhibit 9.2 of the Registrant's 10-K filing for the period ended December 31, 1988. Amendment dated December 17, 1992, whereby John S. Anderegg, Jr. was appointed Co-trustee. Incorporated by reference to Exhibit 9.2 of the Registrant's 10-K filing for the period ended December 31, 1993.
9.3 Brown Management Limited Partnership Agreement dated November 11, 1988, among Thomas R. Brown, Jr., Mary B. Brown and Sarah B. Smallhouse. Incorporated by reference to Exhibit 9.3 of the Registrant's 10-K filing for the period ended December 31, 1988.
10.1 Agreement dated as of May 31, 1982, between Analog Devices, Inc. and Registrant (with certain confidential information deleted). Incorporated by reference to Exhibit 10.1 of the Registrant's Statement # 2-82045 dated February 24, 1983.
10.2 Registrant's Stock Bonus Plan. Incorporated by reference to Exhibit 10.7 of the Registrant's 10-K filing for the period ended December 31, 1987. Amendments thereof, dated June 27, 1989. Incorporated by reference to Exhibit 10.7 of the Registrant's 10-K filing for the period ended December 31, 1989. Amended July 23, 1993, to name John L. Carter as Co-trustee. Incorporated by reference to Exhibit 10.4 of the Registrant's 10-K filing for the period ended December 31, 1993. Amendment to Stock Bonus Plan dated 1995, filed herein.
10.3 Lease dated October 1, 1986, between Yugen Kaisha Kato Shoji and Registrant. Incorporated by reference to Exhibit 10.9 of the Registrant's 10-K filing for the period ended December 31, 1986.
10.4 Lease dated February 28, 1985, between Livingston Development Corporation and the Registrant as amended. Incorporated by reference to Exhibit 10.13 of the Registrant's 10-K filing for the period ended December 31, 1984.
10.5 Lease dated June 1, 1988, between EMBE Leasing Agency Ltd. and Registrant. Translation only incorporated by reference to Exhibit 10.19 of the Registrant's 10-K filing for the period ended December 31, 1988.
10.6 Stock Option Agreement dated June 26, 1984, between Intelligent Instrumentation, Inc. and the Registrant, as amended. Incorporated by reference to Exhibit 10.11 of the Registrant's 10-K filing for the period ended December 31, 1985.
10.7 Stock Purchase Agreement dated January 10, 1985, between Dataforth Corporation and the Registrant. Incorporated by reference to Exhibit 10.25 of the Registrant's 10-K filing for the period ended December 31, 1986.
10.8 Patent License Agreement dated January 15, 1987, between Linear Technology Corporation and Registrant. Incorporated by reference to Exhibit 10.26 of the Registrant's 10-K filing for the period ended December 31, 1986.
10.9 Burr-Brown Employee Retirement Plan dated January 1, 1988. Incorporated by reference to Exhibit 10.27 of the Registrant's 10-K filing for the period ended December 31, 1988. Replaced by the restated Burr-Brown Corporation Employee Retirement Plan which is dated as of the January 1, 1988, date of the original plan. Incorporated by reference to Exhibit 10.17 of the Registrant's 10-K filing for the period ended December 31, 1994. Amendment to Employee Retirement Plan dated January 1, 1995, filed herein.
10.10 Consent Decree filed with the United States District Court on March 13, 1990, between the United States of America on behalf of the Administrator of the United States Environmental Protection Agency (EPA) and Burr-Brown Corporation. Incorporated by reference to Exhibit 10.32 of the Registrant's 10-K filing for the period ended December 31, 1991.
10.11 Master Lease Agreement dated July 31, 1992, and amended September 23, 1992, between AT&T Commercial Finance Corporation and Burr-Brown Corporation. Incorporated by reference to Exhibit 10.37 of the Registrant's 10-K filing for the period ended December 31, 1992.
10.12 Master Lease Agreement Schedules dated July 31, 1992 and September 23, 1992, between AT&T Commercial Finance Corporation and Burr-Brown Corporation. Incorporated by reference to Exhibit 10.38 of the Registrant's 10-K filing for the period ended December 31, 1992.
10.13 Purchase Agreements dated July 31, 1992, and September 23, 1992, between AT&T Commercial Finance Corporation and Burr-Brown Corporation. Incorporated by reference to Exhibit 10.39 of the Registrant's 10-K filing for the period ended December 31, 1992.
10.14 Master Equipment Lease Agreement dated June 20, 1990, between General Electric Capital Corporation, formerly known as Ellco Leasing Corporation, and Burr-Brown Corporation. Incorporated by reference to Exhibit 10.44 of the Registrant's 10-K filing for the period ended December 31, 1992. Amendment dated December 21, 1994. Incorporated by reference to Exhibit 10.27 of the Registrant's 10-K filing for the period ended December 31, 1994.
10.15 Trust Agreement for Future Investment Trust dated October 12, 1993, between Burr-Brown Corporation and First Interstate Bank of Arizona. Incorporated by reference to Exhibit 10.37 of the Registrant's 10-K filing for the period ended December 31, 1993.
10.16 Burr-Brown Corporation's amended Stock Incentive Plan dated February 11, 1994, which replaces the Stock Incentive Plan dated February 11, 1993. Incorporated by reference to Exhibit 10.29 of the Registrant's 10-K filing for the period ended December 31, 1994.
10.17 Future Investment Trust Plan dated July 23, 1993, replaces the Burr-Brown Corporation Future Investment Trust dated February 24, 1987. Incorporated by reference to Exhibit 10.39 of the Registrant's 10-K filing for the period ended December 31, 1993. Replaced by the Future Investment Trust Plan dated December 20, 1994. Incorporated by reference to Exhibit 10.30 of the Registrant's 10-K filing for the period ended December 31, 1994. Amendments to Future Investment Trust dated January 1, 1995, and July 1, 1995, filed herein.
10.18 Cash Profit Sharing Plan dated April 21, 1995, filed herein.
10.19 Loan Agreement dated January 31, 1996, between Burr-Brown Corporation and First Interstate Bank of Arizona, N.A., filed herein.
11. Computation of per share earnings, filed herein.
13. Portions of the Annual Report to Shareholders for the year ended December 31, 1995, are expressly incorporated by reference to the Annual Report Form 10-K, filed herein.
21. Subsidiaries of the Registrant, filed herein.
23.1 Consent of Ernst & Young LLP, Independent Auditors, filed herein.
24.1 Power of Attorney, filed herein.
b. No reports of Form 8-K have been filed during the fourth quarter of 1995.
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: SYRUS P. MADAVI Date: March 20, 1996 Syrus P. Madavi President and Chief Executive Officer
POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints Syrus P. Madavi, his attorney-in-fact, with the power of substitution, for him in any and all capacities, to sign any amendments to this Report on Form 10-K, and to file the same, with the exhibits thereto and other documents in connection therewith, with the Securities and Exchange Commission, hereby ratifying and confirming all that said attorney-in- fact, or his substitute or substitutes, may do or cause to be done by virtue hereof.
Pursuant to the Requirements of the Securities and Exchange Act of 1934 this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.
NAME TITLE DATE
SYRUS P. MADAVI President and Chief March 20, 1996 Syrus P. Madavi Executive Officer
JOHN L. CARTER Executive Vice President March 20, 1996 John L. Carter and Chief Financial Officer (Principal Financial and Accounting Officer)
THOMAS R. BROWN, JR. Chairman of the Board March 20, 1996 Thomas R. Brown, Jr.
THOMAS J. TROUP Vice Chairman of the Board March 20, 1996 Thomas J. Troup
FRANCIS J. AGUILAR Director March 20, 1996 Francis J. Aguilar
JOHN ANDEREGG, JR. Director March 20, 1996 John Anderegg, Jr.
MARCELO A. GUMUCIO Director March 20, 1996 Marcelo A. Gumucio
BOB JENKINS Director March 20, 1996 Bob Jenkins
JAMES A. RIGGS Director March 20, 1996 James A. Riggs
EXHIBIT 21
BURR-BROWN CORPORATION AND SUBSIDIARIES
JURISDICTION NAME OF CORPORATION OF INCORPORATION
1. Burr-Brown International Holding Corporation Delaware
2. Burr-Brown Limited Scotland
3. Burr-Brown Japan Limited Japan
4. Burr-Brown International Limited United Kingdom
5. Burr-Brown International S.A. France
6. Burr-Brown International S.R.L. Italy
7. Burr-Brown International BV The Netherlands
8. Burr-Brown International GmbH Germany
9. Burr-Brown Research GesmbH Austria
10. Burr-Brown AG Switzerland
11. Burr-Brown Foreign Sales Corporation Barbados
12. Burr-Brown Europe Limited Scotland
13. Power Convertibles Corporation (fka Analog Microsystems, Inc.) Arizona
14. PCC de Mexico, S.A. de C.V. Mexico
15. Power Convertibles Ireland, Ltd. Ireland
16. Intelligent Instrumentation, Inc. Arizona
17. Intelligent Instrumentation Japan, KK Japan
18. Intelligent Instrumentation GmbH Germany
19. Intelligent Instrumentation Limited United Kingdom
20. Intelligent Instrumentation S.R.L. Italy
21. Intelligent Instrumentation S.A. France
22. Intelligent Instrumentation, Inc. Foreign Sales Corporation Barbados